Dispute Over Real Property Tax (RPT) for Independent Power Producers (IPPs)
- Some local government units (LGUs) argue IPPs, which are not GOCCs, are ineligible for GOCC tax exemptions.
- LGUs have threatened enforcement actions such as levy and property auction against IPPs for RPT dues.
Financial and Economic Implications of RPT Collection on IPPs
- Much of the RPT is contractually assumed by the National Power Corporation or Power Sector Assets and Liabilities Management Corporation, backed by the National Government’s full faith and credit.
- LGUs’ collection efforts may impose significant direct liabilities on GOCCs, jeopardizing financial stability and fiscal consolidation aims.
- Potential consequences include unstable energy prices, economic losses, cross-defaults, and adverse effects on various sectors.
Importance of IPPs to National and Local Governments and Energy Grid Stability
- IPPs substantially contribute to national and local tax revenues.
- They provide approximately 3,100 megawatts of grid capacity.
- Closure or non-operation of IPPs could lead to substantial government losses, costly alternative power sources, or rotating power outages.
Presidential Authority to Condone or Reduce Real Property Taxes
- Section 277 of RA No. 7160 authorizes the President to condone or reduce RPT and interest when public interest warrants.
- Section 17, Article VII of the 1987 Constitution vests the President with control over executive departments and offices.
Reduction and Condonation of RPT Liabilities (Section 1)
- RPT liabilities for calendar year 2019 on property, machinery, and equipment used by IPPs under Build-Operate-Transfer (BOT) or similar contracts with GOCCs are reduced.
- Tax dues recalculated based on 15% assessment level of the fair market value, depreciated at 2% per annum.
- Interests and penalties on unpaid RPT liabilities are fully condoned.
- IPPs are relieved from paying such interests and penalties.
Application of Overpayments to Future Liabilities (Section 2)
- Any RPT payments exceeding the reduced amounts will be credited against future RPT liabilities.
Mandatory Compliance by Government Entities (Section 3)
- All government departments, agencies, GOCCs, and LGUs must comply strictly with this Order.
- Non-compliance will be sanctioned under civil service laws and regulations.
Repeal of Inconsistent Rules (Section 4)
- Any rules or regulations contradictory to the Order are revoked, amended, or modified accordingly.
Separability Clause (Section 5)
- Invalidity or unconstitutionality of any provision does not affect the validity of the other provisions.
Effectivity (Section 6)
- The Order takes effect immediately upon publication in a newspaper of general circulation.