Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. 5155

Introduced by Hon. Giorgidi B. Aggabao

EXPLANATORY NOTE.

Contrary to expectations, the Electric Power Industry Act of 2001 has not
served to lower the cost of electricity countrywide. Today, the Philippines has
acquired the dubious distinction of having the highest power rate in the region,
even surpassing Japan.

One chief reason for this is the tax component of the power rate. The
VAT, collected pursuant to R.A. 9337, has demonstrably increased power rate
by 12%, with the tax being borne wholly by the consumer. This is lawfully
permissible because VAT, by its nature, is a pass-on indirect tax. Thus the Vat
on generation, transmission and distribution charges are shifted to consumers
as a matter of course.

Reverting to the original regime of imposing a franchise tax on electric
distribution utilities may lessen Lhe power cost to consumers. This is because
a franchise lax is a direct tax the burden of which cannot be transferred to
consumers. The tax incident lies exclusively on (he distribution utilities that
cannot be devolved.

A tax rate of 3% of gross reccipts is reasonable. It should be adequate to
compensate for the revenue loss of the government, as a result of foregoing the
VAT on distribution charges.

In view of the foregoing, immediate approval of this bill is earnestly

sought.

——e

GIORGIDI BVAGGABAO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon Cily
FIFTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO___5155

Introduced by Hon. Giorgidi B. Aggabao

AN ACT IMPOSING A UNIFORM FRANCHISE TAX ON DISTRIBUTION
UTILITIES IN LIEU OF ANY AND ALL TAXES COLLECTED BY THE
NATIONAL AND LOCAL GOVERNMENT

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.

Section 2. Franchise Tax On Distribution Utility Game. -
Distribution utilities shall pay a franchise tax equivalent to three (3%) of a
distribution utility’s Gross Receipt derived from the distribution business
granted under the 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 ail 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 machinerics, 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 new or hereafter may be
required by law to pay.



Section 3. Gross Receipt. - Gross Receipt means the total amount of money
or its equivalent representing the amount of distribution charge billed to the
consumer, including any service fees in connection therewith, and deposits and
advanced payments actually or constructively received during the taxable
quarter for the services performed or to be performed for another person:
provided, that the following shall not form part of the gross receipts in the
computation of the franchise tax:

1. Systems Joss being charged on the sale of electricity by generation,

transmission, and distribution companies,

2. Sale of electricity by distribution utilities to marginalized consumers
whose monthly electric consumption does not exceed one hundred
kilowatt hours (100 kwh);

. Lifeline subsidy charge paid by non-lifeline consumers on the sale of
electricity by distribution utilities;

. The gencration charge;

. The transmission charge;

. The universal charge; and

. The distribution charge on the sale of electricity by electric
cooperatives duly registered with the Cooperative Development
Authorily or the Nationa) Electrification Administration

Nous

Section 4. 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
modifies accordingly.

Section 5. 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.

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

Approved,