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Duterte issues EO condoning property taxes, fines on IPPs

Duterte issues EO condoning property taxes, fines on IPPs

MANILA, Philippines — President Duterte has issued an executive order that allows the reduction and condonation of real property taxes and the interests and penalties assessed on the power generation facilities of independent power producers (IPPs) under the build-operate-transfer scheme with government-owned and controlled corporations (GOCCs).

In signing EO 126, Duterte noted that various local government units (LGUs) have taken the stance that IPPs operating within their territories, which are not GOCCs, are not entitled to the exemptions and privileges given to GOCCs with respect to RPT on their property, machinery and equipment used in the generation and distribution of electric power.

As such, Malacañang noted that since a substantial portion of the RPT being assessed has been contractually assumed by the National Power Corp./Power Sector Assets and Liabilities Management Corp. and carry the full faith and credit of the national government, the collection of RPT by the LGUs concerned will trigger massive direct liabilities on the part of such GOCCs.

Such would threaten their financial stability, the EO said. Imposing RPTs would have a domino effect on 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 added.

The closure or non-operation of the IPPs will entail substantial losses to the government and resort to more costly electric power source alternatives or the implementation of rotating power outages, the EO added.

In protecting public interest, Duterte ordered the condonation or reduction of the RPT and interest for any year in any province or city of a municipality within the metropolitan Manila area.

The President reduced the liabilities for RPT under the concerned sectors 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 two percent per annum.

“All interests and penalties on such deficiency RPT liabilities are hereby condoned and the concerned IPPs are relieved from payment thereof,” Duterte said in his two-page EO signed March 4 this year.