Duterte orders reduction, condonation of real property taxes of IPPs

MANILA, Philippines—President Rodrigo Duterte has ordered the reduction and condonation of real property taxes and penalties imposed on power generation facilities of independent power producers (IPPs) under Build-Operate-Transfer (BOT) contracts with government-owned and controlled corporations (GOCCs).

Duterte signed Executive Order No. 88 signed on Tuesday, a copy of which was released to the media only on Friday, ordering the reduction and condonation of all liabilities for real property tax, including any special levies accruing to the Special Education Fund for calendar year 2018 on property, machinery and equipment actually used by IPPs for the production of electricity under a BOT scheme and similar contracts.

The order reduces the liabilities to an amount equivalent to the tax due if computed tax based on an 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 year, less any amounts already paid by the IPPs.

All real property tax payments made by the IPPs over and above the reduced amount under the EO will be applied to their real property tax liabilities for the succeeding years.

In his order, Duterte said the collection of real property taxes by local government units will trigger “massive direct liabilities” on the part of the GOCCs, “thereby threatening their financial stability, the government’s fiscal consolidation efforts and stability of energy prices, and may even trigger cross-defaults and significant economic losses across sectors.”