PRESIDENT Rodrigo Duterte has issued an executive order allowing the reduction of the real property taxes of the independent power producers with Build-Operate-Transfer contracts and the condonation of their penalties.
He issued the order despite earlier criticizing the previous administration for doing the same.
Executive Secretary Salvador Medialdea signed Executive Order 19 on April 27 but released it only on Thursday night.
The order allows the condonation of the real property tax liabilities for 2015 and 2016 “on property, machinery and equipment actually and directly used by the IPPs for the production of electricity” under the BOT scheme and other similar contracts with government-owned and -controlled corporations.
Under the new EO, the real property taxes of the IPPs will be reduced “to an amount equivalent to the tax due if the computed based on an assessment level of 15 percent of the fair market value of the said property, machinery and equipment depreciated at a rate of two percent per annum, less any amounts paid by the IPPs.”
“All interests on such deficiency real property tax liabilities are also hereby condoned and the concerned IPPs are relieved from payment thereof,” the EO says.
The order says the payment of such taxes “will trigger massive direct liabilities” on the part of the National Power Corp. and the Power Sector Assets and Liabilities Management Corp. and will threaten their financial stability, the government’s fiscal consolidation, the stability of energy prices and will trigger cross-defaults.
The previous administration had issued Executive Order 173 in 2014, which restrained all local government units from imposing real property taxes and penalties on power plant operators that are under contract with the National Power Corp.
The measure aimed to shield the IPPs from being assessed real property taxes by a number LGUs that do not recognize the tax exemptions extended by state-run Napocor under their BOT contracts.
Malacañang then took the position that real property taxes had been contractually assumed by Napocor.
Aquino likewise issued Executive Order 27 in 2011 condoning a portion of the P6 billion in back taxes owed by the Pagbilao Power Station in Quezon, which supplies energy to almost a tenth of Luzon, to save it from an auction.
The local government of Pagbilao and the provincial government of Quezon had pressured Team Energy Corp., the power plant owner, to pay real estate taxes, penalties, and other back taxes from 1997 to 2010 amounting to P6 billion.
That move, however, did not sit well with Duterte, who said last September that he would run after oligarchs and reverse the condonation for real property taxes and penalties on power plant operators that are under contract with National Power Corp.