E-VAT on
Electricity: Short-circuiting the People’s Interest
At an average of 70
centavos per kwh and a total sale of about 24 billion kwh, electricity
users in the Meralco franchise area will be contributing to the government
a total of P17 billion every year. The government collects additional
billions from the more than 120 electric utilities and electric coops in
the country. It should be obvious why the Arroyo administration just have
to impose the tax on power.
By Mon Ramirez
Contributed to Bulatlat
Upon the passage of the Value Added Tax
(VAT) law, the Arroyo administration assured the public that the
imposition of VAT on power will have very minimal impact on our electric
bill. True to its form, the Arroyo administration has been caught lying
again with the latest electric bill.
Taxed items are in abundance in the new
electric bill. Clearly itemized are the E-VAT on the generation,
transmission, system loss and power act reduction charges, which ranges
from 6.44 percent to 7.96 percent. Hidden under the item “VAT for dist &
subs” is the 10 percent E-VAT on the other charges - distribution, supply,
retail customer, metering system, lifeline rate subsidy, interclass
subsidy, Current Exchange Rate Adjustment (CERA), and local franchise tax.
Possibly afraid of pushing its luck too far, the Arroyo administration has
not yet taxed the two remaining cost items, namely, our forced
contributions to the missionary electricity and environmental funds, which
are in reality taxes disguised as contributions.
The table below are the actual charges and
VAT for a consumption of 138 kwh:
|
Kwh consumption,
kwh |
138 |
|
|
|
Cost items |
Rate |
Total |
VAT |
1 |
Generation charge |
4.7564 |
656.38 |
42.27 |
2 |
Transmission
charge |
0.7716 |
106.48 |
7.40 |
3 |
Systems loss
charge |
0.7349 |
101.42 |
6.61 |
4 |
Power Act
Reduction |
-0.1140 |
-15.73 |
-1.25 |
5 |
Distribution
charge |
0.5729 |
79.06 |
7.91 |
6 |
Supply charge |
0.5271 |
72.74 |
7.27 |
7 |
Retail customer
charge |
5 |
5.00 |
0.50 |
8 |
Metering system
charge |
0.2435 |
33.60 |
3.36 |
9 |
Lifeline rate
subsidy |
0.1125 |
15.53 |
1.55 |
10 |
Interclass subsidy |
-0.2139 |
-29.52 |
-2.95 |
11 |
CERA (applied on
distribution, Item #5) |
11.87% |
9.38 |
0.94 |
12 |
Local franchise
tax (applied to Items 1 to 11) |
0.57% |
5.90 |
0.59 |
13 |
VAT for dist &
subs (sum of VAT for items #5 to #12): P19.17 |
10.00% |
|
|
14 |
Missionary |
0.0373 |
5.15 |
|
15 |
Environmental fund |
0.0025 |
0.35 |
|
16 |
VAT backbilling |
|
|
17.38 |
17 |
Franchise tax
backbilling |
|
-19.04 |
|
|
|
|
|
|
|
TOTAL BILL AMOUNT |
|
1,026.70 |
91.58 |
|
TOTAL CURRENT AMOUNT |
|
1,118.28 |
|
|
Effective power
rate,
Pesos per kwh |
|
8.10 |
Up from P7.82 of
previous month |
|
Evat |
|
9% |
|
|
EVAT per kwh |
|
0.66 |
pesos/kwh |
The strange thing about the latest
electric bill is that after slapping the electricity users with a local
franchise tax of 0.57 percent on all the cost items, the Arroyo
administration proceeds to impose a VAT on that tax! Meralco was awarded
the franchise and enjoys the profit from it but it is the consumers who
pay the tax on Meralco’s franchise; and the government taxes the payment
for the franchise tax. Consumers reluctantly pay their electric bills only
because they do not want to live in darkness, at least for now.
The EVAT has increased the residential
electric bill by 9 percent.The E-VAT for customers in the 101-200 kwh
category is 66 centavos per kwh. That is just another way of saying that
to exercise their basic right to use electricity they have to pay the
Arroyo administration 66 centavos per kwh. For customers in the 201-300
kwh category, it is 72 centavos. It is higher for those consuming more.
There are a few interesting items in the
way the government, through the Energy Regulatory Commission (ERC),
applied the EVAT on power.
For example, consumers are charged the
systems loss, an amount consumers pay for electricity lost by Meralco
because of pilferage and technical and administrative inefficiency. Some
people steal electricity, government allows Meralco to make the honest
customers pay for the loss, and the government joins in by taxing the same
honest customers who have been made to pay by Meraco for the theft by
other people to the tune of 6.52 percent of the systems loss. One’s faith
in justice is certainly tested to the limit when one realizes what is
going on here.
Customers donate
Customers pay – or, more accurately,
donate - the 11.25 centavos per kwh lifeline rate subsidy to enable
Meralco to give discounts ranging from 20 percent to 50 percent to poorer
customers without Meralco losing money yet looking good before them
because it does not say it collects from other customers to give to the
poor. The funny thing is that even this forced generosity is taxed 10
percent. The Arroyo government just cannot resist the temptation to
collect more money from electricity users, yet donations by wealthy people
and rich corporations are tax-deductible.
The government also collects a 10 percent
tax from electricity consumers on the CERA which is another tax item that
is difficult to understand. Electric utilities borrow money or buy spare
parts and materials abroad, and the CERA is an automatic cost-recovery
formula that allows them to pass on to their customers the additional cost
whenever the peso depreciates. Currently the CERA is 11.87 percent of the
distribution charge. The government imposes the 10 percent EVAT on the
CERA charge. Why should customers be charged a 10 percent tax on the CERA
when they are even paying the cost of peso depreciation passed on to them
by Meralco? They are already helping the company recover their losses from
peso devaluation, yet we are taxed in the process.
But there are two bright spots in this
EVAT thing. For example, consumers enjoy a discount of 21.39 centavos per
kwh called inter-class subsidy as mandated by EPIRA which should have been
removed last October 2005. Meralco promptly recovers the discount by
collecting from its commercial and industrial customers. Residential
consumers also enjoy a power act reduction discount of 11.40 centavos per
kwh, a loss which Napocor absorbs as mandated by EPIRA. The people at ERC
automatically imposes a 10 percent tax on both items..
Fortunately for consumers, the laws of
mathematics are strictly observed by the computers at Meralco. Since each
item is preceded by minus signs, the result of the 10 percent
multiplication process on each item is also negative; consumers therefore
pay a negative tax, which in the real world translates to an additional
discount. Computer algorithm gives customers a few joys in this new year.
Did the ERC people miss this? Congress should enact more laws that confuse
the ERC people and benefit the people.
How much will the government earn from the
VAT? At an average of 70 centavos per kwh and a total sale of about 24
billion kwh, electricity users in the Meralco franchise area will be
contributing to the government a total of P17 billion every year. The
government collects additional billions from the more than 120 electric
utilities and electric coops in the country. It should be obvious why,
despite the strong protests from the people, the Arroyo administration
just have to impose the tax on power.
Meantime, some people hope that the money
taken from almost empty pockets are spent wisely by the government, a
phenomenon that has not been seen for a long, long time. But sometimes
miracles reportedly happen once in a great while. Bulatlat
BACK TO
TOP ■
PRINTER-FRIENDLY VERSION ■
COMMENT
© 2006 Bulatlat
■
Alipato Publications
Permission is granted to reprint or redistribute this article, provided
its author/s and Bulatlat are properly credited and notified.