Malacañang said Tuesday, September 15, that the government is not considering imposing a new tax to make up for an estimated ₱10 billion in annual VAT collections that could be lost following the removal of VAT on allowable electricity system-loss charges.
Communications Undersecretary and Palace Press Officer Claire Castro said the administration plans to address the potential revenue gap through stronger tax collection and other ongoing reforms instead of introducing another levy.
“Sa ngayon ay wala pong napag-uusapan kung mayroong pang dagdag na buwis na ipapataw, dahil hindi po iyan ang concern sa ngayon ng pamahalaan,” Castro said.
The Bureau of Internal Revenue formally removed VAT on allowable system-loss charges on Monday, September 14, under Memorandum Circular No. 97-2026. The exemption applies only to charges within the limit prescribed by the Energy Regulatory Commission.
Under the new policy, the allowable system-loss charge will be treated as a government-mandated charge and excluded from gross sales for VAT purposes. As a result, it will no longer be covered by output VAT or creditable withholding tax on VAT.
The BIR clarified, however, that the exclusion applies only for VAT purposes and does not cover income tax or the corresponding creditable withholding tax.
Castro said the government expects to offset the possible annual revenue reduction through improved tax administration and collection, VAT reforms involving digital services, implementation of the CREATE MORE law and other revenue measures.
She stressed that the immediate goal of removing VAT from allowable system-loss charges is to help reduce electricity costs for consumers rather than immediately seek a replacement source of revenue.
“Ang layunin po kasi ng polisiya na ito na alisin ang VAT sa allowable system loss charges ay hindi para maisip agad kung paano mapupunan iyong maaaring mawala,” Castro said.
President Ferdinand Marcos Jr. has previously called for the elimination of the system-loss charge itself, beyond simply removing VAT from the allowable charges. Such a proposal would require amendments to the Electric Power Industry Reform Act, or EPIRA.
Castro said Congress has already held hearings on the issue and lawmakers are aware that removing the system-loss charge remains among the President’s priorities.