SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

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

House Bill No, 4189

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 still 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 twelve 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 approval of this bill is eamestly requested

RUFU; RODRIGUEZ

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SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES }
First Regular Session

HOUSE OF REPRESENTATIVES

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

House Bill No. __41 89

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 Gross Distribution
Income derived from the distribution business granted under the Distribution Utility's
legislative franchise. Said tax shall be in lieu of all 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 local 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 to 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 consultation
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 Repealing Clause — All laws, acts, decrees, executive orders, including the relevant
provisions of the National Internal Revenue Code, as amended, the Local Government
Code, as amended or parts thereof which are contrary to and inconsistent with this Act are
hereby repealed, amended or modified accordingly.


SEC. 6 Effectivity - This Act shall take effect within fifteen (15) days after its publication in at
least two (2) newspapers of general circulation.

Approved,