Noy cuts IPP payment for real property taxes

MANILA, Philippines – President Aquino signed on Friday an executive order that reduces the amount independent power producers (IPPs) will be paying for real property taxes in local government units where they operate.

Aquino signed Executive Order (EO) 173 that decreases “to an amount equivalent to the tax due if computed based on an assessment level of 15 percent of the fair market value” the property and machinery of IPPs that are operating under the build-operate-transfer (BOT) scheme.

These IPPs – which are under BOT contracts with government-owned and controlled corporations (GOCCs) – shall enjoy a reduced tax rate if their machinery and equipment are “depreciated at the rate of two percent per annum, less any amounts that have been paid for by IPPs.”

“All fines, penalties and interests on such deficiency real property tax liabilities are also hereby condoned and the concerned IPPs are relieved from payment thereof,” a portion of the two-page order read.

EO 173 covers “all liabilities” assessed by LGUs and other entities authorized to impose real property tax, for all years up to 2014.”

The order is based on Section 277 of the Local Government Code of 1991 (RA 7160) which authorizes the President to make a reduction or condonation of real property taxes “when public interest so requires.”

This power can be applied “for any year in any province or city or a municipality within the Metro Manila area.”

Prior to this EO, GOCCs – under Section 234 of the Local Government Code – have been enjoying exemptions and privileges with respect to real property taxes, including an assessment of 10 percent on all its buildings, machineries and other improvements.

But LGUs have protested these privileges, particularly those which are not GOCCs in the first place.

Local chief executives like governors and mayors, according to the EO, have “threatened an enforcement action” against the IPPs, including the levy and sale at public auction of the affected properties.