Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No. 1584

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO.

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

EXPLANATORY NOTE

When Congress enacted the Electric Power Industry Reform Act (EPIRA)
in 2001, it envisioned to restructure and deregulate the power sector industry and
make it more competitive. Though laudable in its objectives, it has become
apparent that some of the objectives of the EPIRA were not met, hence, the
constant rise in the cost of electricity. To make matters worse, power producers
and distributors were levied unreasonable taxes which only forced them to
transfer the burden to the consumers.

It is significant to note that while gas and water utilities are subject to a
fixed franchise tax of two percent (2%) on gross receipts, electric distributors are
subjected to the twelve percent (12%) value-added tax. Unfortunately, this policy
has placed consumers at a disadvantage since power industry players simply
shift the tax to the end-users in the form of additional cost.

This Bill intends to correct this anomaly by imposing the standard two
(2%) franchise tax on water and gas utilities to electric distributors. It is hoped


that this amendment will help reduce the cost of electricity and ease somewhat
the burden of all consumers.

In view of the foregoing, the immediate passage of the bill is earnestly

sought
fir bry
DIOSDADO AL ARROYO. GLORIA wacapacal ARROYO
Second District, Camarines Sur cond District, Pampanga

v


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No. 1584

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

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

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 Grantee. —-
Notwithstanding any law to the contrary, all public utilities engaged in the
business of distributing electricity shall be charged a uniform franchise tax
equivalent to three percent (3%) of the 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.

SECTION 3. Gross Distribution Income. — Gross Distribution Income refers
to 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.

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
modified 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 general circulation.

Approved,