Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City, Metro Manila

FIFTEENTH CONGRESS
FIRST REGULAR SESSION

HOUSE BILL NO. _4470

Introduced by Honorable Janette L. Garin, M.D.

EXPLANATORY NOTE

Ten years ago, the Electric Power Industry Reform Act (EPIRA) was passed
into law with the aim of providing better and affordable electricity to the consuming
public. ‘This was envisioned to be possible through the reformation and deregulation of
the power industry.

However, after several years of implementation of the EPIRA Law, it appears
that its objective which is to provide chesper and affordable electricity to the consumers
cannot be attained because some provisions are unresponsive and impractical

Today, instead of cheaper electricity for the consuming public, it becomes
otherwise. The taxes which were paid by the industry players in the power sector is
unreasonable, which encouraged unabated transfer of burden to the consumers.

Due to the amendments of the National Internal Revenue Code, specifically, by
RA 9337, electric utilities are now subjected to value added tax. The nature of the tax
being an indirect tax, the burden to pay the same is pessed on to the consuming public.

In view therefore, the instant bifl 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 but more importantly, franchise tax as a
direct tax, will unburden the consumers from shouldering additional pass on charges.

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

sawerre nian, M.D.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS,
FIRST REGULAR SESSION

HOUSE BILL NO. _4470

Introduced by Honorable Janette L. Garin, M.D.

AN ACT IMPOSING A UNIFORM FRANCHISE TAX ON
DISTRIBUTION UTILITIES ENJOYING LEGISLATIVE
FRANCHISE IN LIEU OF ANY AND ALL TAXES
COLLECTED BY THE 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 electric consumers.

SEC. 2. Franchise Tax On Distribution Utility Grantee. - Distribution utilities
shall pay a franchise tax equivalent to three percent (3%) of the distribution
utility’ s Gross Distribution Income derived from the distribution business granted
under the Distribution Utility’ s legislative franchise. Said tax shal) be in tieu 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 clectric power distribution services to. the
consumers: Provided, That the Distribution Utility Grantee, its successors 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. Repealing Clause. All laws, acts, decrees, executive orders, including
the relevant provisions of the National Intemal 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. 5. Implementing Rules and Regulations. - The Secretary of Finance,
in consultation with the Secretary of Energy, shell promulgate and publish the
necessary rules and regulations within thirty (30) days for the effective enforcement
of the provisions of this Act.

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,