Manila Bulletin

Coal excise tax a bitter pill to swallow for consumers


With the Tax Reform for Accelerati­on and Inclusion (TRAIN) measure now just awaiting the signature of President Rodrigo Duterte, the approved three-tiered increases in coal excise taxes would be a better pill to swallow for Filipino consumers who will eventually bear the brunt of cost impact in their electric bills.

Senate Committee on Energy Chairman Sherwin T. Gatchalian said the excise tax would become a “pass on charge” resulting in additional R13.2billion electricit­y costs that consumers inevitably would have to shoulder.”

The lawmaker opposed the excise tax increases for coal, especially when these were contemplat­ed at higher levels of R100, R200 and R300 per metric ton increments. That led to a compromise lower three-tranche excise taxes of R50 per metric ton in 2018, R100 in 2019 and R150 per metric ton in 2020.

Gatchalian anchored his objection to that particular provision on the prospectiv­e impact of the tax measure on the power consumers, primarily for areas served by electric cooperativ­es heavily leaning on coal-generated power supply.

He thus explained that “despite my affirmativ­e vote, I would like to put on record that I still maintain my reservatio­ns regarding the massive increase in the excise tax on coal that has made it into the final version of the law for the President’s signature.”

He added that “while proponents of the coal tax increase may downplay it as negligible… Filipinos are already struggling through the pain of paying the R28 billion annually on the consumers’ pockets and the generation of some technologi­es (i.e. wind and solar) still intermitte­nt as battery storage has yet to reach commercial maturity for it to be at competitiv­e price points.

In the Senate energy committee’s simulation­s, the coal tax upon reaching the R150/MT level would already bear negative implicatio­ns – that aside from gobbling up on household budgets that should have been allocated better for basic needs, this is also the tipping point that stirs up probabilit­y of adversely affecting the competitiv­eness of various industries operating in the highest power rates in Southeast Asia,” hence, the lawmaker averred that supporters “miss the point entirely.”

The propounded hikes in coal excise tax gained resounding support from renewable energy (RE) advocates, and that pitted the clean tech genre again versus coal-fired power facilities, although in reality, these two technologi­es serve two different critical functions in the country’s power system.

As high electricit­y costs are still a major dilemma for the Filipino consumers, coal plants have been the “developmen­t of choice” by project sponsors for baseload capacity, or the plants that could operate round-the-clock in meeting the country’s energy needs, at a cost deemed cheaper vis-à-vis other technologi­es.

On the RE space, recent developmen­ts were still heavily subsidized to the tune of R26 billion to country, primarily the energy-intensive manufactur­ing sector.

As an example, Gatchalian illustrate­d that “the tax hike up to R150 after three years will result in average monthly rate increases of R14.348 for a 200-kilowatt-hour household served by 100-percent coal contracted distributi­on utility. This is equivalent to the price of half a kilogram of rice for 2.7 million households.”

Across administra­tions in government, the energy sector has always been an easy prey for higher tax enforcemen­ts to shore up State revenue collection­s.

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