MANILA, Philippines — The Philippine government issued Executive Order No. 36 on Tuesday to reduce real property taxes (RPT) of Independent Power Producers (IPP).
IPPs are private companies generating electricity to sell to the government or other companies.
Under a Build-Operate-Transfer (BOT) scheme contract with government-owned or -controlled corporations (GOCCs), IPPs will be taxed less in terms of their land, buildings and machineries.
A BOT scheme is where a contractor shoulders the construction, financing and operation of an infrastructure facility. In this case, real property taxes of IPPs are placed upon power-generating and -distributing machinery and equipment.
Assessing the RPT is the local government unit’s (LGU) responsibility as per the executive order. LGUs also believed that IPPs within their jurisdiction are not entitled to exemptions and privileges provided to GOCCs, as far as RPTs are concerned.
Under the BOT scheme, the National Power Corp./Power Sector Assets and Liabilities Management Corp. contractually assumes a “substantial portion” of the RPT of IPPs.
IPPs therefore “carry the full faith and credit of the national government,” the executive order reads.
They will then only have to pay 15% of the depreciated fair market value of all machinery and equipment used to operate power plants.
Since the executive order said 2% will be deducted each year, a P100 million fair market value will become P98 million instead. The RPT liability to be paid is 15% of P98 million, which is only P13.6 million in taxes instead of P15 million.
The executive order further stated that if a tax-paying IPP shuts down or ceases operations, the concerned LGU loses funds and will be forced to purchase more costly sources of electricity. —Intern, Dominique Nicole Flores