The possibility of restructuring the current energy tax schedule is worth exploring to generate additional revenues for the government, according to a report published by a state-run think tank.
The National Tax Research Center’s latest tax research journal, Impact of COVID-19 on the energy tax collection, said this is also an important measure to improve energy efficiency to prevent the mounting energy crisis that the country may experience in the years to come.
“Likewise, given that the energy tax has been in place for more than 40 years now and has a low tax base, it may be deemed necessary to make it more responsive and relevant to present conditions,” the report said.
An energy tax is levied on every residential customer’s monthly electric power consumption of electric power utilities of more than 650 kilowatt-hour (kWh) pursuant to Batas Pambansa Bilang 36 issued in 1979.
According to the report, the said tax is a market-based instrument that serves as a tool to discourage excessive electric power usage. Presently, the energy tax rate is progressive based on the monthly electric consumption.
Residents with monthly electric consumption not over 650 kWh within Metro Manila are exempt from the payment of the energy tax, while those with greater than 650 kWh are subject to the said tax.
“It is worth mentioning that the energy tax rates schedule has been in place for more than 40 years now. The rates or tariffs (inclusive of the energy tax) may not deter electricity use, whether from an efficient or inefficient perspective,” the report said.
“Also, the energy tax structure has a narrow tax base because a large portion, or 94.4 percent, of residents have consumption lower than 650 kWh per month in the typical month of April 2021, thus are exempt from the energy tax,” it added.
The tax research journal said it is of “best interest” to revisit the present structure of the energy tax to take into consideration the need to raise additional revenue for the government and as an important measure to improve energy efficiency.
