July 18, 2018, 6:23 pm
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Coal tax beneficial over the long term

Despite gaining a lot of criticisms from various sectors, the imposition of  higher  excise tax on coal will help the country in the long run as it sends a “strong policy signal” to investors, according to the Institute for Climate and Sustainable Cities (ICSC).

“It helps correct market outcomes and injects a degree of parity in a playing incredibly in favor of coal. Four decades virtually free from taxes has made coal artificially cheap. Coal subsidies are staggering and now the dominance of coal has begun to erode. The coal tax also sends a strong policy signal to all investors,” said Redentor Constantino, ICSC executive director.

Constantino said  the move will also allow the country “to transition to more affordable, more reliable and certainly truly cleaner energy” as it will also result in “more jobs and a more modern economy and a future defined by real competition.”

 “Four decades virtually with zero taxes and now it’s P0.15 per kg. This is nothing compared to the P2 per liter increase they want to slap on diesel and the P1 increase per kg of LPG (liquefied petroleum gas),” Constantino added.

 He said  with the impending coal excise tax increase, the Philippines may be able to keep up with its commitment to the Paris Agreement and reduce carbon emissions up to 70 percent by 2030.

The House of Representatives and the Senate last week agreed on a compromise tax rate of P150 per metric ton on coal, divided into tranches over the next three years upon its enactment. 

The increase would be P50 per metric ton in 2018, P100 in 2019, and P150 in 2020 compared to the original Senate version that proposed a P100, P200, P300 tax schedule.

There had been strong reservations  against any increase in coal tax as this would result to higher electricity cost.

Sen. Sherwin Gatchalian said the tax hike of up to P150 after three years will result in an average monthly rate increase of P14.348 for a household using 200 kilowatt-hours assuming that household is  served by a 100-percent coal contracted distribution utility (DU).

“This is equivalent to the price of half a kilogram of rice for 2.7 million households (served purely by coal contract DUs)1,” Gatchalian said.

Gatchalian also claimed that while proponents of the coal tax increase may downplay the tax’ impact as negligible, the Philippines currently has the highest power rates in Southeast Asia.

 Energy Secretary Alfonso Cusi also said a hike on excise tax will hamper the country’s ability to attract manufacturing investments. - J. Macapagal
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