Philippine Senate Imposes Value-Added Tax on Power Sector, Despite Opposition

Strategic Insights -

The Philippine Senate passed a motion to impose value-added tax (VAT) on the power sector, despite opposition from Senator Miriam Defensor Santiago, who argued that it would lead to higher power rates. The bill, sponsored by Senator Ralph Recto, was approved with a vote of 11-9, with Santiago, along with Senators Mar Roxas and Juan Ponce Enrile, dissenting. The Senate also approved the raising of corporate income tax from 32% to 35% for the next four years and the lifting of the exemption of domestic airlines and shipping companies.

Key Takeaways:

  • The Philippine Senate voted 11-9 to impose VAT on the power sector, with Senator Miriam Defensor Santiago leading the opposition.
  • The bill, sponsored by Senator Ralph Recto, will require generation, transmission, and distribution companies to pass on the VAT to consumers, potentially leading to higher power rates.
  • The Senate also approved the raising of corporate income tax from 32% to 35% for the next four years.
  • The exemption of domestic airlines and shipping companies from value-added tax was lifted.
  • The bill will now be reconciled with the version passed by the Lower House, which wants to raise the VAT rate from 10% to 12%.
  • The VAT bill is expected to be signed into law by President Gloria Macapagal-Arroyo by the end of the month.
  • Senate President Franklin Drilon and Senate Majority Leader Francis Pangilinan met with House Majority Leader Prospero Nograles to discuss the bicameral committee conference, which will convene either on Thursday or Friday.

Statistics:

  • The Philippine Senate voted 11-9 to impose VAT on the power sector.
  • The VAT rate for the power sector will remain at 10%, pending reconciliation with the Lower House.
  • Raising corporate income tax will increase tax revenue by P24.6 billion over the next four years (Source: Senator Ralph Recto's committee report).
  • The number of jobs that will be created by the tourism industry, which will benefit from the lifting of the VAT exemption for domestic airlines and shipping companies, is not available.
  • The number of days left before the VAT bill is expected to be signed into law by President Gloria Macapagal-Arroyo is unclear.

Sources:

  • "Senate approving two bills, imposing VAT on power rates for the next four years" by Philippine News Agency (PNA) on April 13, 2006.
  • Committee Report No. 43 by Senator Ralph Recto's Committee on Ways and Means.
  • Senate Resolution No. 641 by Senator Miriam Defensor Santiago.