Gov’t should lower taxes on indigenous sources of energy

BLURBAL THRUSTS

06/19/2008

With the price of crude oil reaching ridiculous heights in the international market in the past few months, there is a definite need for government to now reconsider its decision to tax natural gas which we have plenty of and which, if we produce enough of it, could lessen our insane dependence on these Opec officials who are bleeding the whole world dry.

Under the present set-up, the government collects taxes equivalent to P0.04 centavos per kilowatt hour for power generated by imported coal, up to P0.70 centavos for geothermal gas and a staggering P1.30 for natural gas.

Sen. Alan Peter Cayetano hit the nail on the head in saying Mrs. Arroyo had failed to implement a provision of the Electric Power Industry Reform Act (Epira) which called for a uniform implementation of taxes for both renewable and non-renewable energy sources.

At a recent hearing of the Senate Energy Committee, Cayetano pointed out Section 35 of Epira allows Mrs. Arroyo to implement a uniform tax or levy for all power sources — coal and indigenous energy sources.

Cayetano said the President, by using this prerogative, could at the wave of her almighty pen immediately bring down electricity rates. So it is now entirely up to her if she so desires, not having to resort to mere palliatives and stop-gap measures like the P500 handouts to millions of Meralco customers which are clearly intended to generate pogi points for her unpopular administration..

Section 35 is as follows: “The President of the Philippines shall reduce the royalties, returns and taxes collected for the exploitation of all indigenous sources of energy, including but not limited to, natural gas and geothermal.”

The objective here is to achieve parity in the existing tax rates for imported coal, crude oil, bunker fuel and other fuels.

Due to the glaring disparity in the taxes levied on fuel sources, investors would rather build coal-fired power plants which are so much more expensive and cause pollution, rather than plants devoted to harness wind, solar, geothermal power and bio-fuels.

It was pointed out that Epira calls for a zero tax on oil and power, but Congress in effect amended Epira when it legislated upon the prodding of Malacañang the Expanded value-added tax law imposing 12-percent tax on oil and power.

“Pursuant to the objective of lowering electricity rates to end users, sales of generated power by generation companies shall be value-added tax (VAT) or zero rated,” Cayetano quoted from Epira.

The economy is in danger of stalling as the purchasing power of the people continues to weaken due to continued oil prices hikes. Consumers are getting squeezed as pump prices have more than doubled in the last three to four years, and OFW incomes have diminished by P10 to P15 per dollar.

By suspending the VAT on oil and power, the President will be “reflating” the economy and preventing an inflationary spiral. This is the right thing to do. What the government will lose in doing away with VAT on oil and power will certainly return a thousand-fold in the form of increased consumer spending.

The government, in effect, through its distorted tax policies, is encouraging the use of foreign fuels (and creating jobs in foreign countries) rather than help in developing domestic sources of fuel.

Indonesia, Malaysia, Thailand have hardly any royalty or tax on domestic sources of fuel. They even go a step further by subsidizing consumption of local fuels.

The Filipino consumer has always been told that the price of their electricity is one of the highest in Asia, second only to economic superpower Japan. Well, the ball is now in the hands of Malacañang. Let’s see what it does with it.