Republic Of The Philippines
House of Representatives
Quezon City
FIFTEENTH CONGRESS.

House Bill No. 451 4

Introduced by 1 CARE Party List Representatives
Hon. Michael Angelo C. Rivera and Hon. Salvador P. Cabaluna Ill

EXPLANATORY NOTE

Congress enacted the Electric Power Industry Reform Act (EPIRA) in 2001 with
the objective of establishing a more competitive and responsive electricity deemed to
provide better services to the public at affordable and competitive prices, To achieve
this goal, the law provided for the restructuring and deregulation of the power industry.

However, ten (10) years after the passage of the EPIRA Law, it became evident
that some provisions of the law could not be property enforced which, contrary to its

ive, led to a continuing increase in the cost of electricity that has become more
burdensome on the part of the consumers.

Prior to the enactment of Republic Act 9337, which further amended the National
Intemal 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. The amendments embodied in RA 9337 freed the electric utilities
from the franchise tax regime and subjected the same to the twelve percent (12%) value
added tax.

Under the present system, however, where the power industry players are
required to pay ordinary income tax as well as the 12% VAT, consumers are placed at a
disadvantage as the energy companies simply passed on them the cost of paying said
taxes.

This bill therefore seeks to modify and simplify the taxing system for the
distribution utilities to franchise tax not only to allow the industry players to enjoy a more
equitable tax regime but aiso to spare the end consumers fram shouldering additional
pass on charges in the form of different taxes.

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

aie -

HON. MICHAEL ANGELO C. RIVERA HON, SALVADOR P. CABALUNA Il
Representative, 1CARE Party List Representftive, 1CARE Party List


Republic Of The Philippines
House of Representatives
Quezon City

FIFTEENTH CONGRESS

House BillNo._s A544

Introduced by 1 CARE Party List Representatives
Hon. Michael Angelo C. Rivera and Hon. Salvador P. Cabaluna lil

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 Phitippines
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. — A distribution utility
shall pay a franchise tax equivalent to three percent (3%) of its Gross Distribution
Revenue derived from the distribution business granted under the distribution utility's
legistative franchise. Said tax shall be in lieu of all taxes, such as income tax, value
added tax, business tax, licenses, and any and all taxes, duties, fees, and charges of
any kind nature or description levied, established or collected by any govemment
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 properties actually
used or intended for use by the Distribution Utility to provide electric 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 electric distribution services

under its franchise, as other persons or corporations are now or hereafter required by
law to pay.

SECTION 3. Gross Distribution Revenue. - Gross Distribution Revenue shall
mean gross receipts derived by a Distribution Utility from alll its revenues excluding all
transmission and generation charges on the distributed electricity which are passed on
to the consumers and all universal charges imposed under Republic Act No. 9136 as
well as all other charges to be passed on to the consumers as determined and
approved by the Energy Regulatory Commission (ERC),

SECTION 4. Share of the Local Government Units (LGUs). A percentage share
from the three (3%) franchise tax levied to the distribution utilities shall be allocated by
the National Government to the Local Government Units (LGUs) in accordance with the
Implementing Rules and Regulations approved by the President of the Philippines.

The implementing rules and regulations shall be promulgated by the Department
of Finance (DOF) in consultation with the Local Govemment Units within one (1) year
from the effectivity of this act.

SECTION 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.
SECTION 6. 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 7. Effectivity — This Act shall take effect fifteen (15) days after its

publication in at least two (2) newspapers of general circulation.

Approved.

We

MICHAEL ANGELO C. RIVERA SALVADQR P. CABALUNA III
Principal Author Pridcipal Author