President Rodrigo Duterte on Friday reduced real property taxes as well as interest and penalties on power generation facilities of Independent Power Producers (IPP) under Build-Operate-Transfer (BOT) contract with state-run corporations to prevent losses across sectors.
This is provided for under Executive Order 157, which states that all real property tax liabilities of these IPPs for 2021, including any special levy accruing to the Special Education Fund on property, machinery and equipment actually and directly used by IPPs for the production of electricity under a BOT scheme and similar contracts whether denominated Power Purchase Agreements, Energy Conversion Agreements or other contractual agreements with state-run corporations assessed by local government units and other entities authorized to impose real property tax for all years up to 2021, are reduced to an amount based on an assessment level of fifteen percent 15% of the fair market value of said property, machinery and equipment and depreciated at the rate of 2% yearly, less any amount already paid by the IPPs.
Likewise, EO 157 provides that all real property tax payments made by the IPPs over and above the reduced amount will be applied to their real property tax liabilities for the succeeding years.
The President argued that EO 157 is necessary given that various LGUs have taken the position that IPPs operating within their territories are not entitled to exemptions and privileges of state-run corporations with respect to real property tax on their property, machinery and equipment used in the generation and distribution of electric power, and have threatened enforcement action against such IPPs, including the levy and sale at public auction of the affected properties.
This position, the President said, prompted LGUs to assess real property taxes on the machineries and equipment of various IPPs operating within their respective jurisdictions, at the maximum assessment level of 80%, based on Section 218 of the Local Government Code.
“The collection of the subject real property taxes at the maximum level assessed by local government units LGUs) will trigger massive direct liabilities on the part of the NPC/PSALM, thereby threatening their financial stability, the government’s fiscal consolidation efforts, the stability of energy prices, and may even trigger further cross-defaults and significant economic losses across all sectors,” the EO read.
“The closure or non-operation of these IPPs 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 EO added.
While IPPs are the taxable entities liable to pay the real property taxes, the President said that a substantial portion of the real property taxes being charged to them has already been contractually assumed by the state-run National Power Corporation (NPC) and or Power Sector Assets and Liabilities Management Corporation (PSALM) under a Build-Operate-Transfer scheme and similar contracts, and as such, carry the full faith and credit of the national government.
“All concerned departments, agencies and instrumentalities of the government, including relevant GOCCs (government owned and controlled corporations) and LGUs, are hereby directed to strictly comply with this Order. Any violation of this Order shall be dealt with in accordance with civil service laws and regulations,” the EO added. —LBG, GMA News
Duterte lowers real property tax rates for independent power producers
Source: News Panda Philippines
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