DoF, DoE rule out suspending VAT on power consumption

THE Department of Finance (DoF) and the Department of Energy (DoE) on Friday rejected a proposal to suspend value-added tax (VAT) on power consumption as a relief measure during the pandemic.

“Suspending VAT is not a good option at this time because we need funds,” Finance Undersecretary Bayani H. Agabin told Senators Friday.

“VAT is actually a progressive tax, those who use electricity more will be paying more VAT,” he added.

Mr. Agabin was participating in the Joint Congressional Energy Commission hearing on the impact of coronavirus disease 2019 (COVID-19) on the power sector.

Energy Secretary Alfonso G. Cusi said VAT collection is vital in funding government measures in response to the COVID-19.

“Mahirap kung ngayon tayo mag-su-suspend ng VAT. Paano natin mapa-fund ang ating requirements? Wala na tayong mapagkukunan ng pera (It would be difficult to suspend VAT at this time. How can we pay for our needs if we have no funding sources),” Mr. Cusi said at the same hearing.

The Senate Tax Study and Research Office (STSRO) had proposed to suspend VAT on utilities, and Senator Risa N. Hontiveros-Baraquel was seeking the two departments’ positions on the proposal.

“Tingin niyo may option ang gobyerno na i-suspend ang imposition ng VAT habang nag-re-recover pa ang bansa (Can the government suspend VAT while the economy is recovering?)?” Ms. Hontiveros-Baraquel asked.

In a May 17 memorandum, the STSRO said the suspension of VAT on utilities could provide “immediate short-term relief and ample financial breathing space.”

The STSRO said other Southeast Asian countries have also resorted to VAT relief measures to ease the burden of the COVID-19 crisis.

Indonesia granted an advance VAT refund for April to September for manufacturers and export-oriented firms, while Vietnam deferred VAT for businesses and households for five months. — Charmaine A. Tadalan