Policy group lauds Duterte signing of coal tax hike in TRAIN

MANILA, 19 December 2017 -- A policy group lauded President Rodrigo Duterte for signing into law today the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which raises the excise tax on coal from its current rate of ten pesos (P10) per metric ton to P50 up to P150 per metric ton over the next three years.

“The historic coal tax hike is a courageous start even if the playing field remains biased towards expensive, polluting, subsidized coal. We intend to work harder to ensure real competition prevails in the power sector,” said Red Constantino, executive director of the Institute for Climate and Sustainable Cities.

“Signing into law the excise tax increase on coal is an act of leadership by the Duterte government, despite efforts by the House to dilute the administration's intention to transition to a more efficient, clean energy-powered modern economy,” he added.

The Philippines imports 75% of its coal supply, 70% of which comes from Indonesia and 15% from Australia, while most of the 25% domestic coal comes from the Consunji-led Semirara Mining and Power Corporation [1].

The Senate version of TRAIN, now Republic Act No. 10963, included a repeal of the 12% value added tax (VAT) exemption for both local and imported coal. However, the VAT repeal for local coal was suddenly removed in the bicam-approved version.

The P10 coal excise tax rate has remained unchanged since 1988, while the local industry has been exempted from paying excise tax since 1976, according to government data, according to a briefer from the Senate ways and means committee.

According to Constantino, the coal tax increase sends the right signals to the investment community. The deflationary nature of renewable energy coupled with competition and increasingly attractive fossil gas prices will further degrade the fortunes of expensive, polluting coal in the Philippines.

“Regulatory agencies and the banking and finance communities are now on notice. The stranding of at least a trillion pesos worth of new build coal plant assets is imminent, and the coal tax will only accelerate this trend. Coal today has become the costly, unreliable, marginal alternative while clean energy has become the mainstream investment option,” he said.

“None of this would have been possible without the leadership of Finance Secretary Sonny Dominguez and Undersecretary Karl Chua. They worked hard to see through the vision of a modern economy working with Senators Joel Villanueva, Miguel Zubiri, and Loren Legarda,” he added.

Notes to the editor

The Institute for Climate and Sustainable Cities is a Philippine-based policy group working on climate and energy policies for climate vulnerable countries.

[1] For more information on the Philippine's coal use and the imminent stranding of coal plant assets, go to http://icsc.ngo/strandedcoal.

 

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