Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

FIFTEENTH CONGRESS
‘Third Regular Session

3416 \

HOUSE BILL ‘No.

Introduced by Rep. TEDDY A, CASINO

EXPLANATORY NOTE

The Philippines currently has (1) the highest electriciry rates in Asia; (2) prices of oil and petroleum
products that behave wildly and uncontrollably siace the industry was deregulated; and (3) water
service rates that have spiraled upward due to the onset of privatization in the late 1990s

As of 2011, the Philippines had the highest cost of electricity in Asia with an average retail rate of
18.1 US cents per kilowatt-hour, easing out Japan that had 17.9 US cents per kilowatt-hour. The
irrationally high electricity rates have driven off investors, stunted the growth of micro-, small and
medium enterprises, and burdened both residential and industtial power consumers with artificial
power shortages and manipulative schemes to farther jack up prices in generation, transmission and
discribution,

Crude oil and petroleum products are sensitive commodities since its prices ditectly affect the cost
of almost all other commodities and services such as food, housing, social services and
transportation, Despite the rollbacks in the prices of fuel and cooking gas, pump prices this year,
fuel is allegedly overpriced by P1.84 per liter for diesel and by P4.40 for gasoline due to the sezies of
ptice hikes until mid-April of 2012,

As a result of the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) in
1996, water rates in Metro Manila drastically ineteased by 357.6 % for Maynilad and by 414.4% for
Manila Water in a span of only a decade, between August 1997 and January 2007. Water rates in
Metro Manila and most of the country’s cities and provinces are high und continue to increase due
to increasing fees and tariffs over the years.

Itis woefully wrong for the government to let prices of the aforementioned vital services and
commodities uncontrollably go upwards, and to levy a high tax rate — the 12-percent vahue added tax
(WAT) in particular — on the same services and commodities that are passed on to consumers from,
all sectors and walks of life.

When prices of electricity, oil and watet are hiked, the sufferings inflicted on the people and the
domestic economy ate heightened. The goverment, instead of easing the burden of its citizens,


helps exacerbate these sufferings since every spike in prices of the aforementioned services and
commodities earns the State billions of unjust windfall taxes.

There should in fact be no taxes on vital services and sensitive commodities. If these are to be taxes
have to be levied, government should keep these to a minimum on electricity, oil and petroleum
products and water,

A reduction of the VAT to a 6 percent rate on electricity, water services, and oil and petroleum
products will provide relief to the domestic economy and the Filipino people. ‘The 50 perceat
teduction of the VA'L rate will bring down prices of oil products by as much three (3) pesos per
liter, electricity rates by at least 38 centavos per kilowatt hour (kWh) for lifeline electricity users and
at least 50 pesos in the bills of residential water users.

The government is awash with revenues. In its 2011 yearend fiscal report, government has in fact
been able co increase its revenues. For the full year of 2011, revenue collections reached P1.36
trillion or a 12.6 percent growth compared to the 2010 figure of P1,21 million,

The collections of the Bureau of [nternal Revenue (BIR) were recorded at P924.1 billion and the
Bureau of Customs (BOC) at P265.1 billion, or a growth of 12 percent and 2 percent, respectively,
for the year 2011 compared to 2010. On the other hand, the Bureau of Treasury registered an
income of P75.2 billion while other offices posted an income of P95.4 billion,

Yer, there is still a shortfall in collections of the BIR by P15.8 billion and the BOC by P54.9 hillion.
The State can even raise more revenues hy hitting its collection targets, widening its fight against tax
evasion and smuggling of the biggest business magnates, and raising tariff rates on imported
products that are killing local producers, manufacturers and businesses.

The reduced VAT tate can definitely be offset by (1) increased government efforts to plug the
leakages in collection of the VA'I itself and other taxes; (2) the increased reveaues from the
mment’s “off-budget” agencies such as the Philippine Amusement and Gaming Corp.
@ AGCOR), Philippine Charity Sweepstakes Office (PCSO), the Malampaya project, and GOCCs
among others, are included in the programming of che State’s national budget. The 2012 revenue
targets of Pageor (P45 billion), PCSO (P31 billion) and the Malampaya project (P43 billion) are more
than enough to cover for whatever reduction in the VAT rate is enacted for electricity, oil and water.

{n fact, this measure is in line with government's duty to serve as it will give economic relief to the
Filipino people bludgconed by years of price hikes in oil, electricity and water as it will give them a
litle more money in the pocket for food, tuition, health care and savings.

In view of the foregoing, the immediate passage of this Bill is camestly sought.

~ eeepc
TEDDY A. CASINO

Bayan Muna Party-List


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
Third Regular Session

6418
HOUSE BILL No. _°*

Introduced by Rep. TEDDY A. CASINO

AN ACT
REDUCING THE VALUE ADDED TAX (VAT) RATE ON PETROLEUM PRODUCTS,
ELECTRICITY AND WATER SERVICES TO SIX PERCENT, AMENDING FOR THE
PURPOSE REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE TAX REFORM
ACT OF 1997, AS AMENDED BY REPUBLIC ACT NO. 9337, AND FOR OTHER
PURPOSES

Be it enacied by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION L Short Title. -'Uhis Act shall be known as the “Value Added Tax (VAT) Rate
Reduction on Oil, Electricity and Water Services Act of 2012,”

SECTION 2. Declaration of policy. ~The State shall abide by its duty to render the best fruits of
democracy to its citizens, Hence, its bound to follow Article VI Section 28 (1) of the Constitution
that states that “The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.” This Act is a viable and logical step at reducing the impact of the
regressive Value Added Tax (VAT).

SECTION 3. Definition of Terms, - For the purposes of this Act and its implementation, the
terms herein are defined as follow

a Electricity — includes the sale of electricity by generation, transmission, and distribution
companies and electric cooperatives; the services of franchise grantees of electricity utilities,
and the sale or importation of machinery and equipment directly used in the generation,
transmission, and distribution of electricity:

b. Oil— covers the sale, importation and distribution of petroleum products and raw materials
in the manufacture thereof, and

Water - the sale of water services by concessionaires and the transactions of the
Metropolitan Water and Sewerage System (MWSS), Local Water Districts (WDs) and other
water utilities owned, controlled, maintained, managed or operated by Local Government
Units (LGUs) and the sale or importation of machinery and equipment directly used in the
delivery of water services.


SECTION 4. Section 106 of the National Internal Revenue Code, as amended by Republic Act
No. 9337, is hereby further amended to read as follows:

"SEC.

106, Value-Added ‘Tax on Sale of Goods or Properties. -

SECIION 106, (© (3). THE FOLLOWING SALES BY VAI-REGISIERED PERSONS
SHALI. BE SUBJECT TO A SIX PERCENT (6 °%) RATE: ELECTRICITY, OIL AND

SECTION 5. Section 107 of the National Internal Revenue Code, as amended by Republic Act No.
9337, is hereby further amended to read as follows:

“SEC, 107. Value-Added Tax on Importation of Goods. -

SECTION 107. (A) (1) THE FOLLOWING SALES BY VAT-REGISTERED PERSONS
SHALL BE SUBJECI'110 A SIX PERCENT (6 %) RATE: TRICITY, OIL AND
WATER,

SECTION 6. Section 108 (A) of the National Internal Reveaue Code, as amended by Republic
Act No, 9337, is hereby further amended to read as follows:

“SEC, 108, Value-added Tax on Sale of Services and Use or Lease of Properties. —

"(A) Rate and Baw of Tax. - There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties, a value-added tax equivalent to ten percent (10° o) of the
gross selling price ot gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor: Provided, That the President, upon
the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the
rate of value-added tax to twelve percent (12%), after any of the following conditions has
been satisfied:

“() xxx
“Gi xxx

“The phrase 'sale or exchange of services’ means the performance of all kinds of services ia
the Philippines for others for a fee, remuneration of consideration, including those
performed or rendered by construction and service contractors; stock, real estate,
commercial, customs and immigration brokers; lessors of property, whether personal ot real;
warehousing services; lessors or distributors of cinematographic films; persons engaged in
milling, processing, manufacturing or repacking goods for others; proprietors, operators o
keepers of hotels, motels, rest-houses, pension houses, ins, resorts; proprietors ot operators
of restaurants, refreshment parlors, cafes and other eating places, including clubs and
caterers; dealets in securities; lending investors; transportation contractors on their transport


of goods or cargoes, including persons who mansport goods or cargoes for hire and other
domestic common cattiers by land relative to their transport of goods or cargoes; common
carriers by air and sca relative to their transport of passengers, goods or cargoes from one
place in che Philippines to another place in the Philippines; sales of [electricity by generation
companies, transmission, and distribution companies; services of franchise grantees of
electric utilities] telephone and telegraph, radio and television broadcasting and all other
franchise grantees except those under Section 119 of this Code and non-life insurance
companies (except theit crop insurances), including surety, fidelity, indemnity and bonding
companies; and similar services regardless of whether or not the performance thereof calls
for the exercise of use of the physical or mental faculties. ‘Ihe phrase ‘sale or exchange of
services’ shall likewise include:

SECTION 108. (C). THE FOLLOWING SALES BY VAT-REGISTERED PERSONS
SHALL BE SUBJECT TO A SIX PERCENT (6%) RATE: STRIGITY, OU. AND
WATER.

SECTION 7. Severability. — ‘Ihe provisions of this Act are declared to be severable, and if any
provision, word, phrase, or clause of this Act or the application thereof to any person or entity shall
be held invalid, such invalidity shall not affect the validity of the remaining portions of this Ac.

SECTION 8. Repealing Clause, ~ All laws, presidential decrees, executive orders, presidential
proclamations, rules and regulations or parts thereof inconsistent with this Act ate hereby repealed
or modified accordingly.

SECTION 9. Effectivity. —‘Vhis Act shall take effect after fifteen (15) days from publicacion in at
least two (2) newspapers of general circulation.

Approved,