Remove tax on tax to ease burden of consumers

My consumer advocacy group Laban Konsyumer Inc. (LKI) and myself continue to fight for lower prices in all products and services, and included here is the cost of power, and the removal of Value Added Taxes or VAT on taxes.

We have done our study on the imposition of VAT on certain tax-related electric rate components, i.e., local franchise tax (LFT) and real property tax (RPT). The main issue here is that the imposition of VAT on a tax is effectively a tax on a tax. However, BIR's position is that LFT and RPT are levied on the DU, which just pass on said costs to the consumers. Hence, LFT and RPT should be considered part of the DU's Gross Receipts in computing the VAT.

Let’s look at the BIR Revenue Regulation No. 16-2005, which is the IRR of RA No. 9337. RR 16-2005 defines the gross receipts of distribution utilities as, “Total amount charged by distribution companies and electric cooperatives for distribution and supply of electricity, and related electric service. The universal charge passed on and collected by distribution companies and electric cooperatives shall be excluded from the computation of the Gross Receipts.” Thus, given the way the definition is written, all rate components of the electric bill become VAT-able, except for the Universal Charges.