Transco Franchise
Chances for the approval of HB 4882 or the bill granting a franchise of the National Transmission Corporation (Transco) by the end of the year are getting slimmer as the proposed legislation lays idle on second reading in the Senate. The government is in deadlock with prospective investors on the issue of privatization. Potential investors insist the Transco franchise bill should be passed first before any bidding takes place to assure their immunity from political maneuverings. The government, however, is also adamant in its position to determine a winning bidder before any franchise is approved. There had been two consecutive failures in bidding thus far, and time is running out – with an immediate threat of a power shortage in the Visayas and Mindanao regions.
The Transco bill will grant the winning bidder the authority to install, operate, and maintain a transmission system and power grid, including the transmission of electricity, through high voltage interconnected transmission lines throughout the Philippines.
Amid the delay in the approval of the Transco franchise, the government has initiated discussions for the negotiated sale of the Transco franchise to energy firm Singapore Power, which has expressed its intention to operate the franchise. According to the rules of Transco privatization, a negotiated sale can be undertaken if the bidding fails twice.
Supreme Court decisions
The Supreme Court asked the Commission on Elections (COMELEC) to produce the contract it had with MegaPacific Consortium for the automation of the 2004 polls during the oral argument for the petition filed by Information Technology Foundation of the Philippines (ITFP). COMELEC failed to produce any document that would assail the contention of ITFP that the contract between COMELEC and the winning bidder for the supply of the counting machines is void because of irregularities in the bidding process. Failure of the COMELEC to uphold the integrity of the poll automation contract with the MegaPacific Consortium would cast serious doubts on the credibility of the second phase of the poll modernization program of COMELEC.
Meanwhile, in a 31-page decision of the Supreme Court en banc, the highest tribunal has ordered with finality the re-opening of the Kuratong Baleleng case against Senator Panfilo Lacson. Contrary to the contention of Sen. Lacson, the Supreme Court asserted that the prescribed period with which the case could be re-opened has not yet lapsed. The Supreme Court voted 8-4-2 in favor of re-opening the case on 7 October 2003. Chief Justice Hilario Davide, Jr. and Justices Artemio Panganiban, Adolfo Azcuna, Romeo Callejo, Josue Bellosillo, Leonardo Quisumbing, Conchita Carpio-Morales, and Alicia Austria-Martinez voted against Lacson. Justices Reynato Puno, Jose Vitug, Consuelo Ynares-Santiago, and Angelina Sandoval-Gutierrez dissented with the majority opinion while Justices Antonio Carpio and Dante Tinga abstained. Justice Renato Corona is on leave. Consequently, the case has been re-assigned to Branch 81 of the Quezon City Regional Trial Court under Judge Maria Theresa Yadao.
Senator Lacson is charged with the multiple murder of the 11 members of the Kuratong Baleleng kidnap-for-ransom group in 1995. Once the court releases a warrant of arrest, Senator Lacson could be held without bail. Consequently, the parliamentary immunity of Senator Lacson will not be able to shield him because the offense thrown against him is not bailable.
Terminating zero-VAT privilege of IPPs
HB 5242 terminates the zero-rated VAT privilege of independent power producers (IPPs) by deleting a paragraph of Section 6 under RA 9136 (Electric Power Industry Reform Act of 2001). Hence, subjecting the sales of generated power by generation companies to 10% VAT. IPPs, however, will be qualified to avail of tax credits or refund if the input tax exceeds the output tax assessed. The House approved HB 5242 on second reading last 8 September. The counterpart version at the Senate (SB 2140) which proposes to further amend other sections of RA 9136, however, maintains the VAT zero-rated privilege. SB 2140 is still pending second reading.
Clarifying the tax exemption of OBUs and FCDUs
The House approved HB 5246 on second reading last 8 September. The bill clarifies the tax exemption of offshore banking units (OBUs) and foreign currency deposit units (FCDUs). The measure amends Sections 27 and 28 of the Internal Revenue Code of 1997. Taxation of FCDUs and OBUs was governed by PDs 1034 and 1035, then amended through PDs 1158-A, 1173, and EO 37. Under these decrees, FCDUs and OBUs were subject only to a final withholding tax of 10% on gross onshore income in lieu of taxes or in exchange for exemption from all taxes.
But with the enactment of RA 8424 (Tax Reform Act of 1997), the phrases “in lieu of all taxes” and “exemption from all taxes” had been omitted. Tax administrators presumed this as a change in taxation. Upon review of the deliberations in Congress, there was no legislative intent to expand the taxation of FCDUs and OBUs beyond the 10% final withholding tax. According to Rep. Julio A. Ledesma IV, chairman of the Committee on Ways and Means, loss of the tax exemption may render the operations of FCDUs and OBUs unsustainable. The Senate has not deliberated on its version (SB 2452) yet.
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