LGU Position on Independent Power Producers (IPPs) and RPT Assessment
- Various local government units (LGUs) take the position that Independent Power Producers (IPPs) operating within their jurisdictions do not qualify for the same RPT exemptions and privileges as GOCCs.
- LGUs have assessed RPT on IPPs' machinery and equipment at the maximum level of 80%, pursuant to Section 218 of RA No. 7160.
- LGUs have threatened enforcement actions including levy and public auction of IPPs' properties for unpaid RPT.
Contractual Assumption of RPT by National Government Entities
- While IPPs are liable for RPT, a substantial portion of these taxes has been contractually assumed by the National Power Corporation (NPC) or Power Sector Assets and Liabilities Management Corporation (PSALM) under Build-Operate-Transfer (BOT) schemes.
- Such contractual liabilities carry the full faith and credit of the National Government.
Financial and Economic Implications of Full RPT Collection
- Collection of RPT at the maximum 80% rate as assessed by LGUs threatens the financial stability of NPC/PSALM.
- It may jeopardize governmental fiscal consolidation, cause energy price instability, trigger cross-defaults on contracts, and produce widespread economic losses.
- Closure or non-operation of IPPs could result in substantial government losses and necessitate resorting to costlier electricity sources or power outages.
Presidential Authority to Reduce and Condone RPT Liabilities
- Section 277 of RA No. 7160 authorizes the President to condone or reduce real property taxes and interest/penalties when public interest requires.
- Section 117, Article VII of the 1987 Philippine Constitution grants the President control over all executive departments and agencies.
Reduction and Condonation Provisions for CY 2021 RPT Liabilities (Section 1)
- All real property tax liabilities for calendar year 2021 on property, machinery, and equipment directly used by IPPs under BOT or similar contracts assessed by LGUs are reduced.
- The tax base is recalculated at 15% assessment level on the fair market value depreciated at 2% annually.
- Previously paid amounts are credited against this reduced tax liability.
- All interest and penalties on the deficiency RPT are fully condoned, and IPPs are relieved from paying these.
Application of Excess Payments to Future Liabilities (Section 2)
- Any RPT payments made by IPPs exceeding the reduced amount under Section 1 shall be credited towards their RPT liabilities for succeeding years.
Mandatory Compliance by Government Entities (Section 3)
- All relevant government departments, agencies, instrumentalities, GOCCs, and LGUs are ordered to strictly comply with this directive.
- Violations of this Order are subject to disciplinary action under civil service laws and regulations.
Repeal and Amendment of Inconsistent Rules (Section 4)
- Any existing rules, regulations, or parts thereof inconsistent with the provisions of this Order are revoked, amended, or modified accordingly.
Separability Clause (Section 5)
- If any provision of this Order is declared invalid or unconstitutional, the remaining provisions shall continue to be valid and enforceable.
Effectivity of the Order (Section 6)
- This Order takes effect immediately upon publication in a newspaper of general circulation.