IN A bid to deter increases in power rates, President Rodrigo Duterte has ordered the reduction of the real property taxes earlier slapped on independent power producers (IPPs) dealing with government-owned and -controlled corporations (GOCCs).
Duterte signed on August 14 Executive Order (EO) 88, which reduces and condones real property taxes and penalties assessed on power generation facilities of IPPs under Build-Operate-Transfer (BOT) contracts with GOCCs.
Citing a provision of the Local Government Code, EO 88 provides 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."
The reduction and condonation covers all liabilities for real property tax, including any special levies accruing to the Special Education Fund for calendar year 2018, on property, machinery and equipment actually used by IPPs for the production of electricity under a BOT scheme and similar contracts.
EO 88 also includes similar contracts under power purchase agreements, energy conversion agreements or other contractual agreements with GOCCs which were assessed by local government units (LGUs), and other entities authorized to impose real property tax for all years up to 2018.
"(They) are hereby reduced to an amount equivalent to the due computed tax 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 two percent per annum, less any amounts already paid by the IPPs," the order read.
"All interests on such deficiency real property tax liabilities are also hereby condoned and concerned IPPs are relieved from payment," it added.
EO 88 likewise notes 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.
The order was issued after concerns were raised on the that a substantial portion of real property taxes being charged against the IPPs may prompt massive direct liabilities onthe part of GOCCs.
The EO, which should take effect immediately upon publication in a newspaper, is issued to consolidate government fiscal efforts, ensure the stability of energy prices and avoid triggering cross-default and significant losses across sectors.
All concerned government entities, including relevant GOCCs and LGUs, are ordered to strictly comply with the EO.
"If any provision of this Order is declared invalid or unconstitutional, the other provisions unaffected thereby shall remain valid and subsisting," the EO stressed.
Palace released a copy of EO 88 just on Friday, August 16. (Ruth Abbey Gita/SunStar Philippines)