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BIR goes after Meralco over P4-B withholding tax liability
Posted: 7:43 PM | May 22, 2005
Michelle V. Remo
Inquirer News Service
THE BUREAU of Internal Revenue is going after the Manila Electric Co. to collect over P4 billion worth of withholding taxes.
Meralco's multibillion-peso tax liability arose after the Supreme Court earlier ordered the power firm to refund P30.302 billion to its customers, who availed themselves of the power firm's services from February 1994 to May 2003.
Commercial and industrial customers of Meralco accounted for P18.668 billion of the total amount refunded, while residential clients accounted for the rest.
BIR Deputy Commissioner Kim Henares said the refund given to commercial and industrial clients of Meralco would be treated as company income, subject to corporate income tax.
In accordance with the Tax Code, she said, Meralco is obligated to withhold at least 25 percent of the income of its corporate clients arising from the refund, and then remitting the withheld taxes to the government.
The BIR recently issued Revenue Regulation No. 8-2005, which provides the guidelines for the payment of taxes related to the Meralco refund. Under the revenue regulation, Meralco, in giving the refund, should withhold 25 percent from its active clients, and 35 percent from companies that have already terminated their contracts with the power firm.
Based on the P18.668 billion worth of refund to Meralco's commercial and industrial clients, and using the minimum 25-percent withholding tax for estimation, the power firm owes the BIR at least P4.667 billion in withholding taxes.
The revenue regulation also stressed that a company that is entitled to a refund should pay the corresponding income tax, since the refund is considered income. The refund shall be subject to the 35-percent corporate income tax.
The amount of taxes already withheld by Meralco from the company shall, however, be deducted from its income tax liability.
For instance, if a firm would be refunded P1 million, Meralco should withhold P250,000 based on the 25-percent withholding tax rate. Then, based on the 35-percent corporate income tax, the company would be liable for P350,000 worth of income tax. But the P250,000 already withheld by Meralco should be deducted from the firm's income tax liability, therefore making it liable to remit only P100,000 to the BIR.
In April 2003, the Supreme Court ordered Meralco to refund its customers after ruling that the power firm should have increased its rates by only P0.017 per kilowatt-hour, instead of the P0.184 it actually implemented from February 1994 to May 2003.
Meralco implemented the P0.184 increase after the petition for the rate hike was approved by the Energy Regulatory Commission. But the ERB later on ordered the refund after getting a recommendation from the Commission on Audit that income taxes paid by Meralco should not be part of its operating expenses that are used as a basis for determining rate adjustment.
Under the order of the Energy Regulatory Commission (formerly ERB), Meralco should first refund its residential customers followed by the commercial and industrial. Meralco is scheduled to finish refunding its residential clients this year and begin refunding its commercial and industrial clients.
Meralco says it will assist BIR in tax collection
Posted: 11:19 PM | May 23, 2005
Inquirer News Service
THE Manila Electric Co. (Meralco) on Monday denied an Inquirer report that it owed the Bureau of Internal Revenue (BIR) P4 billion in withholding taxes.
"Meralco merely serves the role of a withholding agent in the collection of taxes arising from the refund, and that the tax due will come from companies that will receive the said refund," said Elpi Cuna Jr., Meralco vice president for corporate communications.
"The refund of our corporate clients will be treated as part of their company income and, that being the case, it is obvious that it is not Meralco's income that is under scrutiny and is subject to tax here," Cuna said in a statement.
Also it is not true that the BIR is running after Meralco for unpaid taxes, Cuna said.
"Our company is even helping the BIR in its task of tax collection," he said. "In fact, the bureau has issued a regulation requiring Meralco to withhold 25-percent tax on refunds for industrial and commercial customers with active accounts. Refunds, meanwhile, for customers in the same class but with terminated accounts would be subject to 32-percent tax. Hence, there is no intended delay on the part of Meralco in remitting to the BIR taxes yet to be withheld."
Cuna also said the company had been consistently cited as one of the biggest corporate income tax payers.
Meralco has filed with the BIR a claim for refund or tax credit of over P7 billion, representing excess payments of income tax for the taxable years 1994-1998 and 2000-2001.
This is because of the company's reduced revenues for the stated years, following the Supreme Court's refund order. The income tax Meralco originally paid to the BIR for the said years was actually much more than the income tax actually due as a result of lower revenues.
Tuesday May 24, 8:11 AM
PHILIPPINES PRESS: Meralco Denies Owing PHP4B In Taxes
MANILA (Dow Jones)--Manila Electric Co. (MERB.PH), or Meralco, said it doesn't owe the Bureau of Internal Revenue PHP4 billion in withholding taxes, Philippine Daily Inquirer reports.
"Meralco merely serves the role of a withholding agent in the collection of taxes arising from the refund, and that the tax due will come from companies that will receive the said refund," said Elpidio Cuna, Meralco's vice president for corporate communications.
"The refund of our corporate clients will be treated as part of their company income and, that being the case, it is obvious that it is not Meralco's income that is under scrutiny and is subject to tax here," he added.
Meralco issued the statement after the same newspaper reported Monday that the tax agency is going after the country's largest power distributor to collect over PHP4 billion in withholding taxes, which arose after the Supreme Court earlier ordered the utility to refund PHP30.302 billion to customers who used the utility's services from February 1994 to May 2003.
Meralco says to withhold corporate taxes for BIR
Posted: 1:11 PM | May 24, 2005
MANILA Electric Co. (Meralco) said it would withhold taxes on behalf of the Bureau of Internal Revenue (BIR) for taxes arising from the refund of overcharges to Meralco's commercial and industrial customers.
The refund program is the result of a Supreme Court ruling directing Meralco to return to its customers amounts by which they have been overcharged since 1994.
The company expects the total amount of the refunds to reach more than 30 billion pesos, of which 18.67 billion pesos would be paid to commercial and industrial clients.
In a statement, Meralco vice president for corporate communications Elpi Cuna said the BIR has issued a revenue regulation requiring Meralco to withhold a 25 percent tax on refunds due to industrial and commercial customers with active accounts.
Meanwhile, refunds for customers in the same class but whose accounts are already terminated would be subjected to a 32 percent tax.
"There is no intended delay on the part of Meralco in remitting to the BIR taxes yet to be withheld," Cuna added.
Not meaning to give a commentary, but wouldn't MER get in trouble w/ the BIR for what they're gonna do, therefore affecting their bottomline?
Perhaps you have confused the term withold Yamada. In this case, Meralco will collect the taxes for the BIR. They aren't liable for anything. In fact, the BIR should be thankful to Meralco for helping them do their job.
It's just like your employer witholding part of your salary to pay to the BIR. In this case, Meralco is acting like the employer, witholding the salary/refund due to the BIR. The employee/company will only get part of his salary/refund because part of it goes to the BIR.
I must have confused that with the other news item w/ Meralco where they are asking for a refund from the BIR w/ all those refunds they've been giving. Through their eyes, since they've been ordered by the courts to refund what they overcharged, they should then also get their overpaid taxes during those times they were overcharging.
BIR says that the time to ask for those overpayments have long lapsed so they shouldn't be entitled to any refund anymore.
I thought that in retaliation for this kind of response they got from BIR, they will withhold any payment to BIR as a kind of offsetting.
UPDATE) THE MANILA Electric Co (Meralco) said it has filed a new petition with the Energy Regulatory Commission (ERC) to increase tariffs by an average 0.1476 peso per kilowatthour (kWh).
In a statement, Meralco said the new petition replaces the previous one, which it withdrew recently.
The proposed rate adjustment is 0.012 peso higher than the 0.1358 per kWh increase the electricity distributor was seeking through a previous petition filed with the ERC in October 2003.
Meralco earlier decided to withdraw the other rate hike petition because it was computed based on its return on rate base, a measure of profitability.
The ERC has adopted a so-called performance based rate-making system, an internationally accepted rate-setting methodology.
Meralco expects to be in red this year on weak power sales
The Manila Electric Co. (Meral-co) expects to be in the red again this year if sales continue to be weak for the rest of the year.
The utility reported an average drop of 0.2% in sales for the first five months due to the slowdown in consumption brought about by the weak economy. If the "flat" trend continues, officials said the company may expect another nega-tive impact on its income by the end of the year.
"We see a general business slowdown as a challenge to sales," Chairman and Chief Executive Manuel M. Lopez told stockholders during the annual meeting yester-day.
In a separate conference with the media, President and Chief Operating Officer Jesus P. Francisco said however the slowdown in sales can be felt only in residential areas, noting booming sales in the com-mercial areas.
In the first quarter this year, Meralco reported P1.71 billion in losses.
The power distributor also posted a net loss of P2.61 billion in 2004 due to provisioning for proba-ble losses against a net income of P1.267 billion in 2003.
The provision for probable losses was booked in the event of a final and executory adverse deci-sion on the unbundling rate case pending before the Supreme Court. This translates to roughly P500 million in monthly loss, Meralco said.
Meanwhile, the company has yet to look into the impact of the value-added tax (VAT) on their financial statements, particularly on sales. "We’re neutral on that issue. It remains to be seen what-ever the effect would be on the consumption of customers," Mr. Francisco said.
The company is also awaiting the decision of the Energy Regu-latory Commission (ERC) on the adjustment of the lifeline rate scheme to mitigate the impact of the VAT on marginalized sector. Meralco has committed to filing a petition this week on the modified lifeline rates.
Lifeline customers are those who consume not more than 100 kilowatt-hours monthly. They also enjoy discounts of as much as 50%.
Around 36% of Meralco’s total customers belong to this group.
Meralco overbilling again, says Nasecor
By Riza Recio
Saturday, 07 02, 2005
Residential consumers are being overbilled in the supply and metering charge of the Manila Electric Co. (Meralco) based on the computations of consumer advocacy group National Association of Electricity Consumers for Reforms (Nasecor).
Monthly Meralco bills show commercial and industrial customers are charged a flat rate of P655.33 for supply and P317.74 for metering regardless of monthly electric consumption but residential customers are billed a supply charge of 52.71 centavos per kilowatthour (kwh) and metering charge of 24.35 centavos per kwh which means that as their consumption in kilowatt-hour increases, their payments, also, increase, according to Nasecor.
On top of this, they are charge a fixed monthly metering charge P5, it added.
The group said under this distorted rate, retail competition is not possible, especially in light of the one megawatt threshold under Section 36 of the Electric Power Industry Reform Act (Epira).
At 1 MW or 1 million kilowatthours per month, applying the current National Power Corp. generation rate at P4.40 per kwh, the customer will be paying P4.4 million a month.
“No new company will be encouraged to compete with Meralco as it will have to raise P440,000 or 10 percent of the P4.4M as a security deposit with the Wholesale Electricity Spot Market for this one customer alone while his expected revenue is only P973.07 a month by adding P655.33 and P317.74,” Nasecor president Pete Ilagan said.
He believes the industrial and commercial rates are understated to make the rate discouraging and unattractive to new suppliers to allow the distribution utility to maintain its stranglehold on this huge market.
Under the Epira, retail competition will be introduced in the electricity industry as the government believes it will drive the electricity prices down. The competition will start with those who are using a monthly consumption of 1 MW. Competition will later on be implemented to other customers using less than 1 MW.
The consumer group pointed out that it is unfair and unjust for the over 3.6 million residential customers to carry a far bigger share of the supply and metering costs than the 11,125 industrial customers and 353,348 commercial customers.
Using the 2003 Meralco sales of 23.8B kwh, Meralco residential customers could have paid some P6.716 billion for supply and metering, while the industrial and commercial customers combined paid only P4.03 billion.
Employees of the Manila Electric Co. (Meralco) have sought the intervention of labor officials over non-wage issues the Lopez-led firm’s management supposedly has continually failed to address.
The Meralco Employees and Workers Association (MEWA), representing about 1,526 rank and file workers, and the Firstline Association of Meralco Employees, the firm’s union for supervisors, asked the National Conciliation and Mediation Board (NCMB) to compel the utility to abide with the provisions of bargaining agreements with the unions.
A union normally asks for preventive mediation to settle disputes and issues they encounter with management to pre-empt the possibility of a declaration a strike.
A preliminary conference was conducted yesterday between the two parties and another conference was scheduled by the NCMB on July 12 to thresh out the disputes.
MEWA President Roy A. Bautista, in an earlier letter to the company, complained that despite numerous letters and meetings with officials management failed to resolve them.
Among the disputed benefits include the non-payment of meal and lodging allowances of substation crew on provincial assignments; interests pegged on educational loans; amendments to the retirement plan for new hires and future hires; the conversion of monthly rice allocation into cash for new hires and future hires; and the conversion of excess sick leave and vacation leave credits into cash.
The MEWA is seeking the immediate grant of allowances for all substation crews sent outside Metro Manila while the Meralco management is insisting on keeping the present policy, although it had promised to review the demands.
The union also wants management to scrap the 7.8% annual interest pegged on educational loans given to rank and file employees and grant the commodity rice allowance instead of giving it in cash.
The Meralco management on the other insists the 7.8% interest will continue until the firm has recovered from its dire financial position even as it has maintained a new policy that took effect early last year which instead gave members a P960 per month equivalent in lieu of their commodity allowance. -- Rommer M. Balaba
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