Coal tax hike to bring in additional P2B

The higher coal taxes under the recently approved first tax reform package will generate P2 billion in revenues in the first year of implementation, over six times more than the yearly take under prevailing rates, Department of Finance officials said.

Finance Undersecretary Karl Kendrick T. Chua told reporters last week that at the present rate of P10 per metric ton, the excise tax on coal generates only P300 million a year. “It’s small,” he said.

The bicameral committee on tax reform increased the tax rates on coal to P50 per metric ton next year, P100 per metric ton in 2019, and P150 per ton in 2020.

Finance Secretary Carlos G. Dominguez III noted that the revenues to be generated from higher coal tax rates were just a fraction of total industry profit.

“You have to take a look at P2 billion in an industry that is how much, what is the total sales of power companies?” Dominguez pointed out.

At present, power generation uses 80 percent of coal in the country, while the rest are for nonpower activities such as cement manufacturing, Chua said.

The civil society group Action for Economic Reforms (AER), however, raised concerns over the retention of the exemption from value-added tax (VAT) of local coal.

“Failure to repeal the tax exemption on local coal undermines the country’s international standing as said exemption violates the World Trade Organization rules on discrimination and most-favored nation treatment,” the AER said in a statement last week.