PHILIPPINE President Ferdinand R. Marcos, Jr. ordered a reduction of real property taxes on independent power producers (IPP) for 2025, warning that full assessments could trigger defaults, strain state finances and disrupt power supply.
Executive Order (EO) No. 106, issued on Nov. 28 and published on Wednesday, lowers this year’s property-tax liabilities of IPPs —including special education fund charges — operating under build-operate-transfer and similar contracts with government-owned firms.
Taxes will now be based on 15% of fair market value, depreciated 2% annually, minus any payments already made.
The directive also wipes out all interest and penalties on unpaid obligations, with excess payments credited to future liabilities.
The order cites longstanding disputes between local governments and IPPs over whether the producers qualify for preferential tax treatment under the Local Government Code of 1991, which grants state-run power entities a 10% assessment rate and exemptions for machinery used in power generation and transmission. Some LGUs have threatened enforcement actions such as property auctions.
Though IPPs are technically liable for the taxes, the National Power Corp. (Napocor) and the Power Sector Assets and Liabilities Management Corp. (PSALM) have contractually assumed a significant share, backed by the National Government.
The Finance Department warned that collecting taxes at the maximum 80% assessment could saddle the two agencies with massive obligations, undermine fiscal-consolidation efforts, destabilize electricity prices and trigger broader economic losses.
Affected IPPs supply about 1,085 megawatts to the grid, and any disruption could force higher-cost power purchases or rolling outages, according to the EO.
Mr. Marcos invoked Section 277 of the Local Government Code, which allows tax reductions in the public interest, and directed the Interior department to ensure LGU compliance, with the Finance department required to report back within six months. — Chloe Mari A. Hufana