Escudero pushes VAT exemption on electricity to ease costs without hurting fiscal stability

Senator Francis “Chiz” Escudero is proposing to exempt electricity sales from the 12-percent value-added tax (VAT), saying the measure would provide immediate relief to households and businesses while maintaining fiscal stability.

Escudero explained that the proposal, contained in Senate Bill No. 476, offers a targeted approach to easing economic pressures, particularly in the power sector, without resorting to broad tax cuts that could weaken government revenues.

The senator acknowledged the recent statement of Executive Secretary Ralph Recto, who warned against reverting the expanded VAT rate to 10 percent due to the government’s ₱1.6-trillion debt. However, Escudero stressed that his proposal is fundamentally different, as it focuses solely on electricity rather than reducing VAT across all sectors.

“While broad tax cuts may strain government revenues, lifting the tax on electricity is a fiscally responsible choice. It balances social equity with economic necessity, ensuring that families and industries feel relief without compromising our ability to service debt, among others,” Escudero said.

The veteran legislator noted that electricity costs in the Philippines remain among the highest in Asia, inflating the prices of goods and services. He urged his colleagues to hasten the deliberation of Senate Bill No. 476, which he filed last year and now pending before the Committees on Ways and Means and Energy.

Under the proposed measure, VAT exemption would apply to the sale of electricity by generation, transmission, and distribution companies, electric cooperatives, and to services rendered by franchise holders of electric utilities.

According to Escudero, exempting electricity from VAT could help lower production costs for industries and businesses, curb inflation, and increase household disposable income. He added that increased economic activity and consumption could offset revenue losses.

The Sorsogon lawmaker also described the proposal as a direct anti-inflation measure. “Every peso saved on electricity bills helps make goods more affordable and strengthens our competitiveness,” he said. “This is a focused response to inflation, not a sweeping policy that could disrupt fiscal balance.”

Escudero reiterated that his bill should not be confused with proposals to roll back the expanded VAT rate. “Secretary Recto is right to be cautious about broad tax cuts,” he said. “My proposal is surgical, not sweeping. It targets one of the economy’s most pressing pain points while respecting fiscal realities.”