By Ruth Abbey Gita-Carlos | Philippine News Agency
President Ferdinand R. Marcos Jr. has ordered the reduction of real property taxes (RPT) slapped on independent power producers (IPP) for 2025 to prevent defaults and economic losses that could affect electricity supply and the government’s fiscal stability.
Executive Order (EO) 106, inked by Marcos on Nov. 28, reduces and condones RPTs and penalties assessed on power generation facilities of IPPs under a build-operate-transfer (BOT) scheme and similar contracts with government-owned and -controlled corporations (GOCCs).
All liabilities for the IPP’s RPTs, including any special levies accruing to the Special Education Fund on property, machinery, and equipment used by IPPs for power production under BOT and similar schemes for the calendar year 2025, will be reduced, according to EO 106.
The reduction is equivalent to the tax due if computed based on an assessment level of 15% of the fair market value of said property, machinery, and equipment, depreciated at the rate of 2% per annum, less any amount already paid by the IPPs.
EO 106 also condones all interests and penalties on the deficiency RPT liabilities of the concerned IPPs.
All RPT payments made by the IPPs over and above the reduced amount will be applied to their RPT liabilities for succeeding years.
The collection of the subject RPTs for 2025 was assessed at the maximum assessment level of 80% by concerned local government units, pursuant to Section 218 of Republic Act (RA) 7160 or the Local Government Code of 1991.
The Department of Finance (DOF) has warned that the collection of RPTs for this year “will trigger massive direct liabilities” on the part of the National Power Corporation (NAPOCOR)/Power Sector Assets and Liabilities Management Corp. (PSALM).
The DOF has also cautioned that it may threaten the NAPOCOR/PSALM’s financial stability, the government’s fiscal consolidation efforts, and the stability of energy prices, adding that it may also result in further cross-defaults and significant economic losses across all sectors.
Under RA 7160, GOCCs engaged in the generation and transmission of electricity enjoy exemptions and privileges with respect to RPTs.
These include an assessment level of 10% on all its lands, buildings, machinery, and other improvements, as well as an exemption for all machinery and equipment used in the generation and transmission of electric power and machinery and equipment used for pollution control and environmental protection.
Based on EO 106, various LGUs have taken the position that IPPs operating within their respective jurisdictions are not entitled to exemptions and privileges enjoyed by GOCCs with respect to RPTs and have threatened enforcement action against IPPs, including the levy and sale at public auction of affected properties.
While IPPs are liable to pay the RPTs, a substantial portion of the tax charged has been contractually assumed by the NAPOCOR/PSALM under a BOT scheme and similar contracts, carrying the full faith and credit of the national government.
“As the operations of affected IPPs provide an estimated grid capacity of 1,085 megawatts, their closure or non-operation will entail substantial losses to the government and force the public to resort to more costly electric power source alternatives or rotating power outages,” the EO warned.
Under Section 277 of the Local Government Code of 1991, the President may, when public interest so requires, condone or reduce the real property tax and interest for any province or city, or a municipality within the Metropolitan Manila Area.
EO 106 directs the Department of the Interior and Local Government (DILG), in coordination with the DOF, to monitor the compliance of concerned LGUs.
The DOF is also mandated to submit a progress report on the implementation within six months from the effectivity of the Order.
EO 106, which was made public on Wednesday, takes effect immediately upon publication in the Official Gazette or in a newspaper of general circulation.
