THE removal of the 12-percent value-added tax (VAT) on system loss charges will cost the government some P10 billion annually, a Cabinet official said on Tuesday.
“I think it’s P10 billion,” Finance Secretary Frederick Go told reporters.
In a bid to lower costs for consumers, the Energy Regulatory Commission (ERC) last month ruled that allowable system loss charges are not part of the gross sales of power firms for VAT purposes.
“The exclusion will apply prospectively following the publication of the resolution and upon the effectivity of the appropriate confirmatory issuance from the BIR (Bureau of Internal Revenue),” the ERC said.
Go said the tax bureau was awaiting the ERC policy decision, after which “we will process it accordingly.”
President Ferdinand Marcos Jr. has called for the removal of system loss charges and the attendant VAT from power bills to lower the cost of electricity for consumers.
Under the existing regulatory framework, power firms are allowed to recover part of system losses — electricity generated but lost during delivery due to technical and other issues — from consumers.
