The Senate approved on third and final reading its version of the Duterte government’s banner Tax Reform and Acceleration and Inclusion bill, sending it one step closer to its target implementation by January 1, 2018.
It faces a tough road in the ongoing bicameral conference committee, however, as the Senate and house versions of the bill differ quite profoundly on certain provisions. These include the tax rates on automobiles, sugar-sweetened beverages, and fuel, in which the senate version is lower, as well as taxes on mining, coal, and cosmetic procedures, which only the senate version imposes.
Congress has calendared bicam sessions until Dec. 5, with the Department of Finance eyeing the final submission of the bill to Malacañang by mid December.
It’s an tight timeline, all things considered. More so when, as Senate Minority Leader Franklin Drilon rightly observed, that the bicam would prove to be the “real battleground” for the passage of the contentious piece of legislation.
For his part, Senate President Pro Tempore Ralph Recto said the senate’s role is to “lessen the [bill’s] impact on consumers,” as the looming excise tax on coal, diesel, and bunker fuel is expected to have an impact on just about every commodity and service in the market.
According to the Department of Energy, as of 2015, 80 percent of the country’s coal consumption goes to power generation, 15 percent to cement manufacturing, with the remainder to the rest of industry. Coal-fired power plants accounted for nearly half of the generated capacity across the country at 48 percent as of 2016.
This means that any movement in the excise tax on coal, no matter how seemingly insignificant, would result in higher generation charge and would no doubt impact distribution utilities depending on how much they are sourcing from coal. This is further aggravated by the corresponding increase in VAT because coal is levied 12 percent in VAT.
With half of the country’s gross generation, the impact of increasing the excise tax on coal to P100/MT will translate to an additional P0.02/kWh from around a fifth of a centavo at the current level of P10/MT. Increasing the excise tax to P200/MT will result in an add-on of P0.04/kWh, while at P300/MT the increase will be around P0.07/kWh. This means the tax hike will be directly passed on to consumers in the form of a P4.78-hike in the electric bill of an average consumer who consume 200 kWh or less per month.
These figures don’t even constitute the most distressing scenario. Some electric utilities and cooperatives, especially those outside Metro Manila, are completely supplied by coal plants and will thus bear the full impact of the increase in excise tax. Compared to the rest of the country, the impact to an electric utility or cooperative with a 100-percent coal supply will be an additional P0.05/kWh in 2018, P0.09/kWh in 2019 and P0.14/kWh in 2020. For a household consuming 200 kWh, this translates to an additional P10 in 2018, P18 in 2019, and P28 in 2020 on their monthly electric bill.
The scenario is even more dire in Mindanao, a region already plagued with rotating brownouts and high power rates. Compared to the Luzon and Visayas grids, which get less than 5 percent of their power from oil-fired plants, price increases may be higher in Mindanao since oil accounts for around 20 percent of power generation in the grid.
In particular, consumers of 11 electric cooperatives that participated in the Mindanao Modular Generator Sets Program may also experience price increases thanks to a deal involving an estimated 241 MW of additional capacity from modular generator sets that use diesel or bunker fuel.
Will, the public like health agenda behind the so-called sweet tax, the extra taxes disincentivize the use of coal? Environmentalists will certainly applaud but the Philippines is already a step ahead of some 124 countries in terms of environmental sustainability despite the use of coal as a major fuel source for power generation, at least according to UN-accredited global energy body World Energy Council.
Worse, these taxes are alongside higher excise tax on diesel and bunker for power generation, increases in the FIT allowance, and Universal Charge, all unduly burdening the consumer, whose welfare the TRAIN Bill supposedly had in mind. This contradiction, among others, perhaps reveals the real agenda behind this landmark legislation. It’s really all about raising government revenue.
We are always at the receiving end of government policies. I pray that the Senators and Congressmen participating in the bicam debates will be compassionate and defend the side of the millions ordinary consumers who will feel the inflationary effects of TRAIN.