FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES. )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo 8. Rodriguez, Jr.

House Bill No. 4436

EXPLANATORY NOTE

One of the policies stated in Republic Act 9136 or the EPIRA Law is to ensure
the quality, reliability, security and affordability of the supply of electric power.

However, until today, the Filipino people are stiil looking for this affordable
electricity that the law promises. And one of the reasons for this high cost of
electricity is the taxes that the government imposes.

Prior to the enactment of Republic Act 9337, which further amended the
National Internal Revenue Code (NIRC), electric, gas and water utilities were subject
to a franchise tax at the rate of two percent (2%) on gross receipts under Section
119 of the NIRC, as amended. RA 9337 removed electric utilities from the franchise
tax regime and subjected the same to the twetve percent (12%) value added tax.

This imposition of the 12% VAT increased the cost of electricity which led the
electric companies to pass on this additional cost to the consumers which means
higher electricity bills.

This bill therefore seeks to revert to the previous system where franchise tax
is being required of distribution utilities not only to allow the industry players to enjoy
a more equitable tax regime. More importantly, the imposition of a franchise tax
which is directly absorbed by the franchisee will free the consumers from shouldering
additional pass on charges.

In view of the foregoing, immediate approvat of this bill is eamestly requested.

RuBUS B. RO} UEZ

MAXIMO B. RODRIGUEZ, JR.


FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES: )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr,

4436

House Bill No.

AN ACT
IMPOSING A UNIFORM FRANCHISE TAX ON DISTRIBUTION UTILITIES
ENJOYING LEGISLATIVE FRANCHISE IN LIEU OF ANY AND ALL TAXES
COLLECTED BY THE GOVERNMENT WITH THE END IN VIEW OF REDUCING
THE COST OF ELECTRICITY BORNE BY CONSUMERS

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Declaration of Policy ~ It is hereby declared the policy of the State to
Promote the public interest by ensuring the affordability and steady supply of
electricity to the end-users.

SEC. 2 Franchise Tax on Distribution Utility Grantee — Distribution utilities shall pay a
franchise tax equivalent to three percent (3%) of a distribution utility's Grass
Distribution Income derived from the distribution business granted under the
Distribution Utility's legislative franchise. Said tax shall be in lieu of ail taxes, such as
income tax, value added tax, business taxes, licenses, and any and all taxes, duties,
fees, and charges of any kind, nature or description levied, established or collected
by any government authority whatsoever, whether focal or national, on its franchise,
rights, privileges, receipts wheeling charges, revenues and profits and upon its
machineries, equipment, supplies, meters, poles, wires, transformers, insulators,
capacitors, transportation equipment, substations, facilities, and all other real and
personal property actually used or intended for use by the Distribution Utility to
provide electric power distribution services ta the consumers: Provided, That the
Distribution Utility Grantee, its successor or assigns, shall be liable to pay the same
taxes on its real estate, buildings and other real property not actually used nor
intended to provide distribution services under its franchise to distribute electric
power, as other persons or corporations are now or hereafter may be required by law
to pay.

SEC, 3 Gross Distribution Income — Gross Distribution Income shall mean gross
income derived by a Distribution Utility from all its income less all transmission and
generation charges on the distributed electricity which are passed on to the
consumers and excluding all universal charges imposed under Republic Act No.


9136 as well as charges determined by Energy Regulatory Commission to be
passed on to the consumers.

SEC. 4 Implementing Rules and Regulations - The Secretary of Finance, in
consuttation with the Secretary of Energy, shall promulgate and publish the
necessary rules and regulations within thirty (30) days for the effective enforcement
of the provisions of this Act.

SEC. 5 Repeating Clause — All laws, acts, decrees, executive orders, including the
relevant provisions of the National Intemal Revenue Cade, as amended, the Local
Goverment Code, as amended or parts thereof which are contrary to and
inconsistent with this Act are hereby repealed, amended or modified accordingly.

Dubiication in at (east two (2) newspapers of general circulation, .

Approved,