MANILA, Oct. 31 (PNA) — President Benigno S. Aquino III on Friday issued an executive order reducing and condoning the real property taxes being paid by independent power producers (IPPs) working with government-owned and -controlled corporations (GOCCs).
The President issued Executive Order 173, entitled “Reduction and Condonation of Real Property Taxes and Interest/Penalties Assessed on the Power Generation Facilities of Independent Power Producers Under Build-Operate-Transfer Contracts with Government-Owned and/or Controlled Corporations,” to prevent an increase in the cost of power.
Based on the Executive Order (EO), the government condones all liabilities for real property tax on property, machinery and equipment (including special levies accruing to the Special Education Fund) directly used by IPPs for the production of electricity under Build-Operate-Transfer contracts with GOCCs assessed by local government units (LGUs) and other entities authorized to impose real property tax, for all years up to 2014.
The real property taxes will be 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 property, machinery and equipment depreciated at the rate of two percent per annum, excluding any amount already paid by the IPPs.
“All fines, penalties and interests on such deficiency real property tax liabilities are also hereby condoned and the concerned IPPs are relieved from payment thereof,” the EO said.
All concerned departments and agencies of the government, including GOCCs and LGUs, are ordered to strictly comply with the EO, which takes effect immediately upon its publication in a newspaper of general circulation.
Under Section 234 of Republic Act No. 7160 or the Local Government Code of 1991, GOCCs engaged in the generation and transmission of electricity enjoy a number of exemptions and privileges with respect to real property taxes.
This includes an assessment level of 10 percent on all its lands, buildings, machinery and other improvements.
However, LGUs believe that IPPs operating within their jurisdiction, which are not GOCCs, are not entitled to the exemptions or privileges of GOCCs with respect to real property taxes on property, machinery and equipment used in the generation of power.
The payment of real property taxes by the affected IPPs, some of whose obligations have been contractually assumed by government-owned corporations, threatens the financial stability of the GOCCs, the government’s fiscal consolidation efforts, and the stability of energy prices. (PNA)