DUTERTE SLASHES RPT BURDEN of IPPS to SHIELD NG from FISCAL Load

PResident Duterte has issued a new executive order (eo) granting tax relief to power generating facilities of independent power producers (IPP) under a Build-operatetransfer (BOT) scheme, in a bid to shield the national government from the domino impact of the fiscal burden that will be assumed by the state corporate sector.

in his two-page eo 126, Duterte declared a reduction in all real property taxes (RPT), including special levies accruing to the Special education Fund, for calendar year (cy) 2020— on property, machinery, and equipment actually and directly used by ipps for the electricity under a BOT scheme and similar contracts with government-owned-or-controlled corporations (Gocc)—as assessed by local government units and other entities imposing Rpts for all years up to cy 2020.

the reduction will be equivalent to the tax due if computed based on an assessment level of 15 percent of fair market value of said property, machinery and equipment depreciated at the rate of 2 percent per annum, less any amount paid by the ipps.

“All interests and penalties on such deficiency RPT liabilities are hereby condoned and the concerned ipps are relieved from payment thereof,” Duterte said.

Paid Rpts made by ipps over and above the reduced amount as what is prescribed in eo 126 will be applied in the RPT for succeeding years.

Domino effect

Duterte said concerned government offices, which will violate his new issuance, would face sanctions in accordance with civil service laws and regulations.

he explained he issued eo 126 since some local government units (LGU) have opted to impose tax including RPT for ipps, which serve as source of large tax revenues by the national government.

the said Rpts for ipps are contractually assumed by the National Power corporation/ Power Sector Assets and Liabilities Management corporation and therefore shouldered by the national government.

“the collection of RPT by the LGUS concerned will trigger massive direct liabilities on the part of Gocc, thereby threatening the financial stability, the government’s fiscal consolidation efforts, the stability of prices, and may even trigger further cross-defaults and and significant economic losses across all sectors,” Duterte explained.

he also said it could cause more costly electric power or the implementation of rotating power outages if the ipps could not afford the Rpts imposed by LGUS.

eo 126 took effect last thursday after it was signed by President Duterte.