Duterte gives power producers real property tax break
MANILA, Philippines — President Rodrigo Duterte has reduced the real property taxes and condoned penalties assessed on power generation facilities of independent power producers under build-operate-transfer deals with government-owned and controlled corporations (GOCCs) to prevent what he called "significant economic losses."
The real property tax and penalty relief was contained in Executive Order No. 117 signed by Duterte last July 24. The president issued a similar executive order in August 2019.
The policy is in line with a provision of the Local Government Code which states that the president may condone or reduce the real property tax and interest for any year in any province, city or municipality within Metro Manila when public interest requires.
Duterte noted that under the Local Government Code of 1991, GOCCs engaged in electricity generation and transmission enjoy a number of exemptions and privileges, including a real property tax assessment level of ten percent on all its lands, buildings, machineries and other improvements.
The GOCCs' machinery and equipment that are actually, directly, and exclusively used in the generation and transmission of electric power and those that are used for pollution control and environmental protection are also exempted from the tax.
Various local government units (LGUs) have declared that IPPs operating within their territories that are not GOCCs are not entitled to the exemptions and privileges.
These LGUs, Duterte noted, "have threatened enforcement action" against the IPPs, including the levy and sale at public auction of affected properties.
"Since a substantial portion of RPT (real property tax) being charged have been contractually assumed by the National Power Corporation/Power Sector Assets and Liabilities Management Corporation and carry the full faith and credit of the national government, the collection of the subject RPT by the LGUs concerned will trigger massive direct liabilities on the part of such GOCCs," the president said.
Such liabilities, Duterte added, would threaten the financial stability of the two GOCCs, the government's fiscal consolidation efforts, and the stability of energy process and "may even trigger further cross defaults and significant economic losses across all sectors."
"As the operations of affected IPPs contribute largely to tax revenues for the national government and LGUs, and provide grid capacity of around 3,100 megawatts, their closure or non-operation will entail substantial losses to the government and force resort to more costly electric power source alternatives or the implementation of rotating power outages," the President said in the order.
The order covers all liabilities for real property tax on property, machinery, and equipment actually and directly used by IPPs for electricity production under a build-operate-transfer scheme and similar contracts with GOCCs and assessed by LGUs and other entities that can impose the tax for all years up to 2019.
It also covers any special levies accruing to the special education fund for 2019.
Liabilities for real property tax were reduced to an amount equivalent to the tax due if computed based on an assessment level of 15 percent of the fair market value of the property, machinery, and equipment depreciated at the rate of two percent per annum, less any amounts already paid by the IPPs.
"All interests and penalties on such deficiency RPT liabilities are hereby condoned and the concerned IPPs are relieved from payment thereof," Duterte said.
All real property tax payments made by the IPPs over and above the reduced amount shall be applied to their real property tax liabilities for the succeeding years.
Duterte directed all concerned departments, agencies and government instrumentalities and LGUs to strictly comply with the order.
"Any violation of this order shall be dealt with in accordance with civil service laws and regulations," he said.
- Latest
- Trending
