BAGUIO CITY—Malacañang is reviewing an executive order that exempts independent power plant operators from real estate taxes, Budget Secretary Florencio Abad said here on Thursday.
Executive Order No. 173 was supposed to discourage Pagbilao town in Quezon province from auctioning off a power plant after its owners refused to heed a Supreme Court ruling that it was not exempt from property taxes, Abad said.
Budget Secretary Florencio “Butch” Abad. INQUIRER.net PHOTO
The directive, issued on Oct. 31, reduces and condones the real property taxes, as well as interest obligations or penalties, of private power generation facilities which have build-operate-transfer contracts with state corporations.
During a good governance forum held here on Thursday, Nueva Vizcaya Gov. Ruth Padilla said EO 173 may now prevent her province from collecting P174 billion in property taxes from the CE (California Energy) Casecnan multipurpose irrigation project in the province.
The CE Casecnan Water and Energy Corp. operates a dam and a hydroelectric facility that straddles Nueva Vizcaya’s Alfonso Castañeda town and Pantabangan town in Nueva Ecija province.
“I think there is room—before it becomes a serious problem—for discussions with the executive regarding that order,” Abad said.
He said the order was a result of what happened in Pagbilao.
“The Pagbilao project [operated at the time by Mirant Pagbilao Corp.] was granted an exemption from real property taxes when the contract [with the National Power Corp.] was signed but subsequently the Supreme Court ruled it was not exempt from taxes. The local government was collecting P4 billion… and when the company refused to pay, they had the plant put up for auction,” Abad said.
The directive, he said, was a way to avoid situations where local governments auction off power facilities that fail to pay taxes “because it creates some fear on our investors.”
EO 173 states that “various local governments have taken the position that independent power producers (IPPs) operating within their territories which are not GOCCs (government-owned and -controlled corporations) are not entitled to the exemptions or privileges of GOCCs with respect to real property taxes on their property, machinery and equipment used in the generation and distribution of electric power, and have threatened enforcement action against the IPPs, including the levy and sale at public auction of the affected properties.”
The IPPs’ real property taxes, according to EO 173, are “obligations [that] have been contractually assumed by the GOCCs and carries the full faith of the national government.”
It said the forcible collection of the real property taxes by local governments “will trigger massive direct liabilities on the part of National Power Corp.” and “may increase the cost of electricity.” Vincent Cabreza, Inquirer Northern Luzon