NR0214:Scrap IPP contracts, impose direct taxes on IPPs

Mula sa Tanggapan ni Anakpawis Rep. Crispin Beltran
News Release February 14, 2005
House of Representatives, South Wing Rm 602
931-6615 Ina Alleco R. Silverio, Chief of Staff
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Solon says VAT reduction to 6% not enough; tax IPPs directly as they will only pass VAT on to consumers and scrap their onerous contracts

Anakpawis Representative Crispin Beltran today said that the House Committee on Ways and Means' proposals to lower the value added tax (VAT) rate from 10 percent to six percent on processed foods, as well to lower the VAT on power generation and petroleum were not enough. "Even a 1 percent VAT is already a burden on consumers, given the plunging real value of the peso." He also said if the independent power producers (IPPs) were going to taxed, the IPPs will most certainly pass on the costs to consumers."

This was the veteran labor leader turned lawmaker's comment on Rep. Jesli Lapus' proposal to lower the VAT to be imposed on IPPs from 12 to 6 percent. "The IPPs are using the infamous The Electric Power Industry Reform Act of 2000 (EPIRA) to legalize not their only on its onerous take-or-pay contracts, but to justify their imposition of taxes on their profits. But regardless of how big or small the new taxes will be levied on consumers, the IPPs will only pass them on the public," he said.

Beltran said that the Macapagal-Arroyo administration should, once and for all rescind the contracts with these IPPs that that cost the government P83 billion losses in 2002 alone. "Its appalling that the IPPs continue to be pampered -- given specific government guarantees which in turn result to debts of half a trillion for NAPOCOR, P200 billion of which are to be absorbed by the government.

Onerous provisions in these onerous IPP contracts include take-or-pay provisions, ensuring IPPs of payment for the full capacity of a plant even if NAPOCOR only used 35% of the power generated and foreign exchange guarantees which required NAPOCOR to absorb fluctuations in the peso-dollar exchange rates.

Beltran said imposing the VAT on the IPPs will only increase the already exorbitant electricity. Estimates of rate increases resulting from the VAT proposal range from 2 to 10%. Electricity rates have already gone up by 25-30% since December 2003.

"Instead of implementing a regressive pass-on tax such as the VAT on the IPPs, Congress should tax these IPPs directly. It's also high-time that the EPIRA be reviewed because the basis for the calls for its junking have already been established," he said. According to him, it is the EPIRA that ensures that IPPs keep their profits and consumers pay for these VAT increases. Beltran has already spearheaded the filing of HB 2531 repealing EPIRA.

"It remains infuriating the way the national government is using its budgetary woes to justify its attacks on the welfare of the poor; especially when one realizes that these woes are the government's own doing, an inevitable result of the demented economic policies it implements. The government should focus on going after the big-time tax evaders and the personal and business taxes of the rich, instead of taxing the poor," he said.


In the meantime, Beltran said that imposing the VAT on petroleum products will also be disastrous. He said that the public should not rest easy or trust the House on its statement that LPG will still be exempted from VAT. "I wouldn't trust the proponents of these regressive tax measures as far as I can throw them,' he said. Beltran said that with the VAT, LPG prices can increase from P385 to about P420 per cylinder.

He asserted that the oil cartel can be directly taxed, but it shouldn't be made to pay the VAT or any similar tax such as a 'gross sales tax' because they will only pass these on to consumers.#