Senator Loren Legarda has urged government agencies to reassess the value-added tax (VAT) applied to electricity charges amid a significant rise in inflation.
Inflation accelerated to 7.2% in April 2026, up from 4.1% in March, primarily due to rising food, transportation, and utility expenses.
Legarda highlighted that some electricity charges are not actual income for utility companies but rather pass-through fees for government mandates, which should be exempt from VAT.
She stated, "Electricity consumers are already contributing to government causes through these subsidies and charges. It is unfair to tax them on amounts that do not form part of the utility’s income."
In light of these concerns, Legarda has filed Senate Bill No. 1963, which aims to clarify that certain pass-through and statutory charges should not be included in the VAT base.
Key Charges Under Review
Among the charges under scrutiny are the Generation and Transmission Charges, as well as subsidies for low-income households and senior citizens. These costs do not constitute utility income and therefore should not be taxed.
Legarda referenced a previous BIR memorandum that exempted specific charges, suggesting a need for consistent application of these rules.
Broader VAT Exemptions Proposed
Additionally, she has introduced a measure aimed at expanding VAT exemptions for basic residential electricity consumption, recognizing the essential nature of electricity for families.
This proposal stipulates that VAT relief would apply to residential users, based on a threshold to be determined by relevant agencies.
Legarda emphasized the need for fair taxation that does not burden families with excessive costs for basic necessities.
In our current conditions, fair taxation means not taxing basic necessities beyond what ordinary families can bear.
Senator Loren Legarda