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| The following article first appeared in BusinessWorld and was emailed to us by the author. The E-Vat on Electricity By Dean de la Paz Senate Minority Leader Aquilino Pimentel and Senator Mar Roxas were right all along. The opposition to E-Vat on electricity spans the political spectrum as wide as it impacts deeply into economic multipliers embedding where it has no business and bloating costs to subsidize Gloria Arroyo�s expense account. Utilizing Eng. Mon Ramirez�s brief treatise analyzing its misuse as well as other published data, we realize how we are at once victimized by spins and yarns and the Energy Department�s misapplication of VAT. Senator Pimentel questioned its constitutionality and Sen. Roxas had reservations on its application at the topmost portion of a production chain were it wreaks the most havoc. Unfortunately, both were overwhelmed by the toxic spins of DOE�s yarn that it would have little effect on tariffs. Add here a dose of trapo bureaucracies and a peppered court. An analysis by electrical engineering topnotcher Ramirez however proves both right as he unbundles our electricity bill and identifies where the VAT is not only misapplied but by its mere presence inflicts an economic injustice. It is difficult to believe that the gatekeepers at the Energy Department do not comprehend the folly they boldly endorsed. So to pry open little minds and assist the incompetent understand, let us go into specifics. One anomaly is where Ramirez observes consumers shoulder the franchise tax burdens of service providers such as distribution utilities. This is aggravated as government imposes an E-Vat on those. Two aspects are important here. Though often a common albeit inequitable practice, as a consumer is passed the franchise taxes of a service provider, he, in effect, is taxed the liability. To apply a consumption tax on passed-on franchise taxes as does the E-Vat, effectively collects a non-consumptive franchise tax on consumers. On his Meralco bill, Ramirez notes �Meralco was awarded the franchise but it is us who pay the tax on its franchise, and the government taxes our payment for the franchise tax.� It seems energy authorities have miscomprehended the nature of VAT. It is to be applied on the value of an input and not on just any cost component, especially not on a tax a franchise holder should be carrying. Ramirez further notes that �we pay a tax of 6.52% on the systems loss charge�. Systems loss is the electricity lost from pilferage or technical and administrative inefficiencies. Initially borne by the service provider and passed on to consumers, they are neither raw material nor input costs. Rather, they are spawned by self-created inefficiencies and are by no means consumed. They appear in our bill because these are passed on. But by taxing system�s losses at the consumer level as does E-Vat, the consumer is again doubly taxed for an anomaly already suffered through electricity paid for but neither received nor enjoyed. Again here is a misapplication of the E-Vat. One that serves neither the interests of the distributor nor the consumer. Instead, the aberration serves the interests of a deficit-cursed government, and where one is especially insatiable, energy sycophants might just be so inclined to suck up rather than correct the misapplication. Ramirez also notes that consumers donate Php 0.1125/kwh as a subsidy to others whose consumption allows them discounts ranging from 20% to 50%. Here applying E-Vat makes the least sense as the consumer is penalized for helping correct an economic imbalance. Subsidies occur where there are economic inefficiencies and economies of scale penalize consumption falling below economic quantities. Hucksterism has re-named subsidies as �lifeline rates� supposedly granted by service providers though the amount is donated by and ultimately charged on consumers. Again E-Vat is misapplied. The donation is charged a VAT even as the economic inefficiency, those �lifeline rates�, are neither inputs nor consumable by the entity paying the E-Vat. In other words, the consumer coerced to correct inefficiencies is additionally taxed for it. If this is not an injustice, then what is? Aggravated by ridiculous standards in determining the �lifeline� subsidies where in one instance the government uses an overly simplistic household minimum of two 20 watt bulbs and a 150 watt radio to measure demand, while simultaneously differentiating according to geographic and cooperative-based criteria, the misapplication of E-Vat on subsidies turns predatory. See where, following the logic of intellectually-challenged officials the lifeline rates stipulated for Meralco is a 50% discount for those who consume 50 kwh per month or less and 5% discount for those who consume from 91 to 100 kwh per month. Match this relatively broader range against a slim 5 kwh per month band in the Visayas where Visayan Electric (VECO) offers a 35% discount for consumption of 50 kwh per month or less and 10% on 55 kwh per month and up. Go to any other utility�s lifeline discount band and you will find a different kind of formula. Davao closely resembles Meralco�s with a 10 kwh/month difference while Cebu has lower minimums following Ilocos Norte. Comparing each, it is apparent that the DOE, as the industry�s policy-making body has not rationalized a studied lifeline policy and when these inequities are set against an imposition of E-Vat, the resulting tax disparities indica te haphazard taxation at best and a clueless DOE at worst. Worsened by another misapplication of the VAT on a non-input value such as the Currency Exchange Rate Adjustment (CERA), it behooves us to ask why a VAT is imposed on currency devaluations as it is on subsidies. Where is the value of a devaluation that it should be taxed? Are we simply imposing E-Vat on anything and everything? We really should have listened to Senators Pimentel and Roxas when they warned of E-Vat �s abuse. At the end of the day it is not surprising that the public feels energy officials have been lying all along about the effects of E-Vat. It is either that or they do not know their own tax arithmetic and are unaware they have been lying. When one is unaware that one is stupid, now that�s really pathetic.***** |