G in NGCP: Grid or Greed?
There’s a news article that came out in a national broadsheet entitled “Why, the NGCP executive wonders, did making money become so ‘demonized’? It was quoting the ‘sentiment’ of National Grid Corporation of the Philippines assistant vice president Cynthia Alabanza after her appearance in the Senate Committee on Energy chaired by Senator Raffy Tulfo.” Apparently, Senator Tulfo pounded the NGCP executives on its huge profits for its investors (State Grid of China, Henry Sy Jr., and Robert Coyuito, Jr.) and giving a very high percentage of its net income as dividends (return on equity of about 36 percent and a dividend payout of about 90 percent) leaving little for reinvestments. Do the senators have the basis to “demonized” the way NGCP makes money? Consider the following facts: In the Year 2015, the cash dividends declared and paid to NGCP shareholders amounts to P21 billion while the total electricity consumption for the same year is at 82.413 billion kilowatt hours. With that as a benchmark, it shows that NGCP shareholders directly pocket about P0.25 per kwh consumed by the public or 25 percent of the whole transmission charge collected (for P1.00 transmission charge per kilowatt hour). Despite these multi-billion pesos yearly cash dividend payout among the three owners, Filipino consumers still suffer from blackouts and delays in more than a dozen of projects, including the Visayas Mindanao Interconnection Project. The senators found out too that NGCP has been allowed to collect transmission charges from projects that have not been completed yet when ERC during the time of Chairman Agnes Devanadera authorized NGCP to increase its income ceiling from P43 billion in 2019 to P47.1 billion in 2020. While other corporations in the energy sector are subjected to the usual tax and are facing competition, Republic Act 9511 or the NGCP Franchise Law granted NGCP exemption from income tax and any and all taxes, duties, fees, and charges of any kind, in lieu of the 3 percent franchise tax. What that meant in practical terms is that the national government is foregoing about P7 billion to P10 billion in annual tax revenues. Consider the following matrix: In the years 2007 and 2008 when TransCo was operating the transmission grid, it paid the national government a total amount of taxes worth almost P19 billion. In the years 2010 and 2011 when NGCP took over TransCo in the operations of the transmission business, it paid the total amount of taxes in the amount of only P4.45 billion. A difference of about P14.55 billion in 2 years! Moreover, the NGCP franchise law had the effect of exempting NGCP from taxes that had nothing to do with the operations, maintenance, and development of the transmission grid. (Per BIR Ruling No. 019-2009 dated 14 October 2009) These include the following: The 20 percent Final Withholding Tax or FWT on interest income is derived from Philippine currency bank deposits and yields from deposit substitutes, trust funds, and similar arrangements derived from sources within the Philippines; The 7 ½ percent FWT on interest income, and yield from deposit substitutes, trust funds, similar arrangements, and other transactions with Offshore Banking Units and depository banks under the expanded foreign currency deposit system; and The documentary stamp tax imposed under Sections 179 and 180 of the Tax Reform Act of 1997, on those deposits, deposit substitutes, trust funds, and similar instruments. While TransCo, a government-owned and controlled corporation, is subjected to ALL taxes imposed by the national government up to this date, NGCP was granted exemption from ALL taxes (save for the 3 percent franchise tax) including interest income on all kinds of deposits and yields on such deposits. All of these are taken together in the context of the national government granting a private entity the monopoly of the national transmission business which is now earning a gross income of more than P44 billion annually, and that has declared and paid a total cash dividend to its shareholders of about P230.8 billion from 2009 to 2021, these exemptions are truly excessive and unconscionable. The post G in NGCP: Grid or Greed? appeared first on Daily Tribune......»»