Senator Francis “Chiz” Escudero said on Thursday, January 8 that electricity sales should be exempt from the 12-percent value-added tax (VAT).

Escudero made the remark as he acknowledged Executive Secretary Ralph Recto’s recent statement cautioning against proposals to revert the expanded VAT to 10 percent due to the government’s P1.6-trillion debt.

But the senator said this targeted relief in the power sector will have immediate impact and ease the burden of household and businesses without undermining fiscal stability under Senate Bill No. 496, a bill which he filed last year and is now pending before the Committees on Ways and Means and Energy. 

Compared to some proposed legislation, Escudero said SB No. 496 does not reduce VAT across the board but instead zeroes in on electricity, a sector where relief is most urgently needed.

“While broad tax cuts may strain government revenues, lifting the tax on electricity is a fiscally responsible choice,” Escudero said. 

“It balances social equity with economic necessity, ensuring that families and industries feel relief without compromising our ability to service debt, among others,” he said.

Escudero noted that electricity costs in the Philippines remain among the highest in Asia, inflating the prices of goods and services. 

But under his proposal, transactions that shall be exempt from VAT will include the sale of electricity by generation, transmission and distribution companies and electric cooperatives; and services of franchise grantees of electric utilities.

Escudero said SB 496 primarily seeks to address the high electricity cost by exempting electricity sale from VAT.

“Such tax relief can lower operating costs of industries and businesses, temper inflation, and increase disposable household income while generating revenue through increased economic activity and consumption,” he pointed out.

Moreover, he said removing VAT on electricity is a direct anti-inflationary measure because every peso saved on power bills translates to more affordable goods and stronger competitiveness. 

“This is a targeted strike against inflation, not a blanket reduction that risks fiscal imbalance,” the lawmaker said.

Escudero said Secretary Recto is right to be cautious about calls for across-the-board cuts especially when it comes to proposals to,revert EVAT to 10 percent, “but my measure is different.” 

“It is surgical, not sweeping. It addresses one of the most pressing pain points of our economy while respecting fiscal realities,” he said.