High Court rejects Napocor appeal to exempt partner from property taxes

MANILA, Philippines - The Philippine Supreme Court dismissed a petition filed by the National Power Corp. (Napocor) that sought to stop its partner from paying real-estate taxes to the Pagbilao, Quezon government. Napocor is not the proper party to contest the local government’s real property tax assessment of its partner, Mirant, since it didn’t have the requisite “legal interest," the High Court’s Second Division said in a 17-page decision. The dismissal also affirmed a February 2006 Court of Tax Appeals decision, which expressed the same sentiment. Mirant, an independent power producer and Napocor’s private partner, reportedly owes P1.5 billion in real property taxes to the Pagbilao government. The tax liability was incurred from 1997 to 2000. In 1991, Napocor and Mirant signed an agreement that required the latter to construct and finance a coal-fired thermal power plant to convert fuel into electricity in Pagbilao. Under the same agreement, Napocor would supply the fuel and buy the electricity generated by Mirant. The facility would be owned by Napocor after 25 years. Despite being a government-owned and controlled corporation (GOCC), Napocor is not exempt, the Supreme Court said in the same ruling. Napocor, the country’s largest power producer, is disallowed from enjoying tax exemptions under Section 234 (c) of the Local Government Code. The said provision exempts GOCCs from paying taxes on equipment being used to supply and distribute water and/or generate and transmit electricity. The liability for taxes generally rests on the owner of the real property at the time the tax accrues, the court said. Moreover, although unpaid realty taxes are attached to the property, these can be directly charged to the person or entity that uses or possesses the property regardless of ownership. “We find it essentially wrong to allow the NPC to assume in its BOT (build-operate-transfer) contracts the liability of the other contracting party for taxes that the government can impose on that other party, and at the same time allow NPC to turn around and say that no taxes should be collected because the NPC is tax-exempt as a GOCC," the Supreme Court said. Napocor is not the owner nor does it possess the facility and its equipment because “its ownership of the plant will only happen after the lapse of the 25-year period," the same ruling said. Concurring with the decision were Associate Justices Leonardo Quisumbing, Conchita Carpio-Morales, Minita Chico-Nazario, and Teresta Leonardo-de Castro. - GMANews.TV