Question & AnswerQ&A (EXECUTIVE ORDER NO. 117)
It concerns the reduction and condonation of real property taxes (RPT) and interest/penalties assessed on the power generation facilities of Independent Power Producers (IPPs) under Build-Operate-Transfer (BOT) contracts with government-owned or -controlled corporations (GOCCs).
Sections 218(d) and 234 of Republic Act No. 7160 (Local Government Code of 1991).
GOCCs enjoy an assessment level of 10% on all their lands, buildings, machineries, and other improvements, as well as exemption for machinery and equipment directly and exclusively used in the generation and transmission of electric power and for pollution control and environmental machinery and equipment.
Some LGUs consider IPPs, which are not GOCCs, not entitled to the same RPT exemptions and privileges enjoyed by GOCCs regarding property, machinery, and equipment used in the generation and distribution of electric power, leading to enforcement threats including property levy and auction.
Collection could result in massive direct liabilities for GOCCs like the National Power Corporation, jeopardize their financial stability, the government's fiscal consolidation, energy price stability, and cause economic losses and cross-defaults.
They contribute significantly to tax revenues for the National Government and LGUs, provide around 3,100 megawatts of grid capacity, preventing closures or outages that would cause economic losses and more costly power alternatives.
Section 277 of Republic Act No. 7160 authorizes the President to condone or reduce the RPT and interest for any year in provinces, cities, or municipalities within the Metropolitan Manila Area when public interest so requires.
RPT liabilities for 2019 on property, machinery, and equipment used directly by IPPs are reduced to an amount equivalent to tax computed at 15% assessment level of fair market value, depreciated at 2% per annum, less amounts already paid; with all interests and penalties on deficiency condoned.
Excess payments above the reduced amount will be credited towards their RPT liabilities for succeeding years.
All government departments, agencies, instrumentalities, including GOCCs and LGUs, are directed to comply strictly with the Order, and violations will be subject to appropriate civil service laws and regulations.
They are revoked, amended, or modified accordingly as stated in Section 4.
Section 5 provides the separability clause, stating unaffected provisions remain valid and subsisting if any part is declared invalid or unconstitutional.
Immediately upon its publication in a newspaper of general circulation as per Section 6.