President Rodrigo Roa Duterte (File photo)
MANILA – To ensure stable power rates in the country, President Rodrigo R. Duterte has ordered the reduction and condonation of real property taxes earlier slapped on some independent power producers (IPPs).
Duterte on Thursday inked Executive Order (EO) 126, which reduces and condones real property taxes and penalties assessed on power generation facilities of IPPs under Build-Operate-Transfer (BOT) contracts with government-owned and -controlled corporations (GOCCs).
Republic Act (RA) 7160 or the Local Government Code of 1991 states that the President “may, when public interest requires, condone or reduce the real property tax and interest for any year in any province, city, or municipality within the Metropolitan Manila area."
Duterte signed EO 126, as he expressed concern over the possibility that a substantial portion of real property taxes being charged against IPPs may trigger massive direct liabilities on the part of GOCCs.
The order intends to consolidate the government’s fiscal efforts, stabilize energy prices, and avoid 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 and 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,” it said.
The reduction and condonation cover all liabilities for real property tax, including any special levies accruing to the Special Education Fund for 2020, on property, machinery, and equipment actually and directly used by IPPs for the production of electricity under a BOT scheme and similar contracts, according to EO 126.
The new EO also covers similar deals under Power Purchase Agreements, Energy Conversion Agreements, or other contractual agreements with GOCCs assessed by local government units (LGUs) and other entities authorized to impose real property tax for all years up to 2020.
"(All liabilities for real property tax) are hereby 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 said property, machinery, and equipment depreciated at the rate of 2 percent per annum, less any amounts already paid by the IPPs," it read.
Under the EO, all interests and penalties on such deficiency real property tax liabilities are condoned and concerned IPPs are relieved from payment.
EO 126 provides that 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.
All concerned state departments and offices, including relevant GOCCs and LGUs, are directed to strictly comply with EO 126.
“All rules and regulations, or parts thereof, which are inconsistent with the provisions of this Order are hereby revoked, amended or modified accordingly,” it noted. "If any provision of this Order is declared invalid or unconstitutional, the other provisions unaffected thereby shall remain valid and subsisting.”
EO 126 takes effect immediately upon publication in the Official Gazette or a newspaper of general circulation. (PNA)
