House OKs tax bill granting tax incentives for energy efficiency projects

Published November 17, 2018, 2:14 PM

by Patrick Garcia

By Charissa Luci-Atienza

The House committee on ways and means has approved the tax provision of a bill granting incentives to energy efficiency and conservation projects.

Members of Congress and Senate joins together for a joint special session on the extension of Martial Law in Mindanao at the House of Representatives on Saturday. (Jansen Romero / MANILA BULLETIN)
(Jansen Romero / MANILA BULLETIN)

The panel, chaired by Nueva Ecija Rep. Estrellita Suansing, approved an unnumbered substitute bill seeking to institutionalize energy efficiency and conservation and enhance the efficient use of energy.

The substitute bill grants the following incentives to a duly certified energy-efficient project: income tax holiday for its first six years of commercial operations and additional investments; a zero-percent VAT rate on purchases of local supply of goods, properties and services needed for development, construction and installation of plant facilities as well as on the process of developing energy efficiency projects, including but not limited to, the services performed by subcontractors and/or contractors; and a tax and duty exemption on imported capital equipment within the first 10 years of an issuance by the Department of Energy (DOE).

The incentives shall be available to all proponents of duly certified projects for a period of 15 years from the passage of the bill.

The substitute bill provides that at the end of the period, the grant of incentives may be suspended or canceled upon a joint recommendation by the DOE and the Board of Investments that the incentives are no longer required to ensure the financial viability of efficiency investments.

1-CARE party-list Rep. Carlos Roman Uybarreta laments that the Philippines is the only member-state of the Association of Southeast Asian Nations (ASEAN) that has yet to pass an energy efficiency and conservation law.

“Vietnam had their law on economical and efficient use of energy enacted in 2010. Thailand had their own version enacted in 2017, Singapore in 2012, Indonesia in 2007, and Malaysia in 2001,” he said.

“Reduction on VAT (value-added tax) on import tax on energy efficiency equipment is widely used in developing countries. Several energy policies and measures incorporate not only fiscal but tax-based incentives,” he noted.

Uybarreta said tax incentives will definitely yield high returns for the government.

“For every peso that we will give, as far as incentive is concerned, it will go back to the government more than two times… For every P1 that the government will give as an incentive, it will amount to P2.05 investment to this country. And that investment will translate to P11.64 in energy savings. Not to mention that the investment will also have a cascading effect as far as employment and other related industries are concerned,” he said.

The tax incentives will also result in higher net earnings for industry stakeholders and therefore higher taxable incomes, he said.

“That P1 will translate to an increase of net earnings of P10.52. Pag tumaas ang kita ng kompanya nang ganyan kalaki, ibig lang sabihin tataas rin yung taxable income ng ahensya or industriya na ganun. The increase in taxable income of end-users will also be at P10.52. The increase in tax revenue for the government will be P2.31,” Uybarreta said.