President Ferdinand R. Marcos Jr. granted tax cuts and penalty condonation to Independent Power Producers (IPP) operating under the Build-Operate-Transfer (BOT) with government-owned or -controlled corporations (GOCCs) to ensure their continued operations.
Under Executive Order (EO) No. 36, which was issued on Tuesday through Executive Secretary Lucas P. Bersamin, Marcos said the IPPs’ real property tax (RPT), including levies accruing to the Special Education Fund on property, machinery, and equipment used for power production under BOT and similar schemes for calendar year 2023, will be reduced.
The reduction will be equivalent to tax due if computed based on the assessment level of 15 percent of the fair market value of the said property, machinery and equipment, depreciated at the rate of 2 percent per annum, less any amount already paid by the IPPs.
The issuance also condoned all interests and penalties on such deficiency RPT liabilities.
The President said RPT payments made by the IPPs over and above the reduced amount would be applied to their RPT liabilities in succeeding years.
The issuance was in response to threats issued by some local government units (LGU) against the affected IPPs, which will result in the levy and sale, at public auction, of affected properties.
“Various local government units have taken the position that Independent Power Producers operating in their territories are not entitled to exemptions and privileges enjoyed by government owned or controlled corporations with respect to real property taxes on their property machinery and equipment used in the generation and distribution of electric power,” Marcos said.
If the IPPs are unable to settle the RPTs and are forced to shut down their operations, the Chief Executive said, it would entail substantial losses to the government, force the public to resort to more costly electric power source alternatives, and cause rotating power outages.
He also explained a substantial portion of the RPTs from IPPs has been contractually assumed by National Grid Corporation of the Philippines/Power Sector Assets and Liabilities Management Corporation under the BOT scheme and therefore can be charged to the National Government.