Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

3428

House Bill No.

Introduced by HONORABLE DANILO E. SUAREZ

EXPLANATORY NOTE

It is of common knowledge that we desperately need more road and railway
projects, especially since these greatly facilitate in decongesting heavily-saturated urban
areas and in triggering development in rural areas. As such, the contribution of these
types of projects to economic growth is universally accepted. Among other desired
undertakings, these projects are imperative for national progress.

However, it is to be admitted that these projects require massive capital outlay,
which the government can ill-afford at this time. Notwithstanding the various fiscal and
non-fiscal incentives granted under Republic Act No. 6957, as amended by Republic Act
No. 7718, otherwise known as the “BOT Law’, it appears that government has been
encountering obstacles in attracting even financially-sound multinational companies to
underwrite road and railway projects. Thus, it is submitted that government should be
willing to do more than just offering the BOT incentives, by lessening the burden of
companies that have shown willingness to undertake these projects.

Among the concems that the private sector has raised are the local government
taxes (‘LGT’) and real property taxes ("RPT") imposed by local government units
(‘LGUs’) pursuant to the Local Government Code of 1991 (‘LGC’). It has been argued
that the immense benefits to be derived from Private Sector Infrastructure and
Development Projects, as defined in the BOT Law, more than compensate for the lost
revenues that would otherwise accrue to the LGUs from the collection of local
government taxes (‘LGTs") and real property taxes (“RPTs’).

In this regard, the foregoing concerns raised by the private sector appear to be
reasonable. In fact, we are aware that there may be as there are in fact some LGUs that,
want to lessen (if not altogether remove) the LGT and RPT liabilities of those
undertaking projects under the BOT Law. However, the Bureau of Local Government
Finance — Department of Finance (‘BLGF-DOF") has taken the following positions that
have effectively deterred LGUs from passing the appropriate ordinances granting LGC
and/or RPT incentives and/or exemptions even if they wanted to do so: z

a) Section 192 may only be exercised in cases of natural calamities,
civil disturbance, general failure of crops, or adverse economic
conditions (citing the Implementing Rules and Regulations of the
Lcc);

b) Section 192 only applies to LGT, and not to RPT, and that Section
234 of the LGC provides an exclusive list of RPT-exempis
persons/parties.

Thus, with respect to BOT projects involving roads and railways that would in fact
be transferred to the government no later than the end of the concession period


therefore, this bill seeks to: (a) clarify that LGUs could pass the appropriate ordinances
granting LGC incentives and/or exemptions even if they wanted to do so and (b) exempt
Said projects from RPT.

The approval of this bill is thus earnestly requested.

Cohowey

DANILO E, SUAREZ
Representative
Third District, Quezon Province


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

343

House Bill No.

Introduced by HONORABLE DANILO E. SUAREZ

AN ACT FURTHER AMENDING REPUBLIC ACT NO. 7160, OTHERWISE KNOWN
AS THE LOCAL GOVERNMENT CODE OF 1991 IN ORDER TO: (A) AUTHORIZE
LOCAL GOVERNMENT UNITS TO GRANT TAX EXEMPTION PRIVILEGES FOR
PRIVATE SECTOR INFRASTRUCTURE AND DEVELOPMENT PROJECTS
INVOLVING ROADS AND RAILWAYS THAT WILL BE TRANSFERRED TO THE
GOVERNMENT AND (B) EXEMPT SAID PROJECTS FROM REAL PROPERTY
TAXES, AND FOR OTHER PURPOSES.

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

Section 1, Notwithstanding any law to the contrary, all local government units
may, throughordinances duly approved, grant tax exemptions, incentives or relief for
Private Sector Infratructure and Development Projects involving roads and railways as
defined under the Republic Act No. 6957, as amended, which would in fact be
transferred to the govemment no later than the end of the concession period therefor.
For this purpose, Section 192, Cahpter 5, Title One, book II of Republic Act 7160, as
amended, otherwise known as the Local Government code of 1991, is hereby amended
to read as follows:

“Authority to Grant Tax Exemption Privileges — Local government
units may through ordinances duly approved, grant tax exemptions,
incentives or reliefs for, among others, Private Sector Infrastructure
and Development Projects involving roads and railways as defined
under Republic Act No. 6957, as amended, which would in fact be
transferred to the government no later than the end of the -
concession period therefor , as well as in cases of natural
calamities, civil disturbances, general failure of crops, adverse
economic conditions, or other similar situations.”

Section 2. Notwithstanding any law to the contrary, all components of Private
Sector Infrastructure and Developments Projects involving roads and railways as defined
under Republic Act No, 6957, as amended, which would in fact be transferred to the
government no later than the end of the concession period therefore, are hereby
exempted from the payment of real property tax. For this purpose, Section 234, Chapter


4, Title Two Book II of Republic Act No. 7160, as amended, otherwise known as the
Local Government Code of 1991, is hereby amended to read as follows:

“SEC. 234. Exemptions from Real Property Tax ~ The following
are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, nonprofit
or religious cemeteries and all lands, buildings and
improvements actually, directly and exclusively
used for religious, charitable or educational
purposes;

© All machineries and equipment that are actually,
directly and exclusively used by local water districts
and government-owned or controlled corporations
engaged in the supply and distribution of water
and/or generation and transmission of electric

power,

@) All real property owned by duly registered
cooperatives as provided for under RA No. 6938;

©) Machinery and equipment used for pollutions
control and environmental protection; and

0) All components of Private Sector Infrastructur

and Development Projects involving roads and
railways, as defined under Republic Act No.
6957, as amended, which would in fact_be
transferred to the government no later than the
end of the concession period therefore.

Except as provided herein, any exemption from payment of real
property tax previously granted to, or presently enjoyed by all
persons, whether natural or juridical, including all government
‘owned or controlled corporations are hereby withdrawn upon the
effectivity of this Code.”

Section 3. The Department of Finance shall promulgate the rules and regulations
necessary to effectively implement the provisions of this Act.

Section 4. All laws, presidential decrees, executive orders, other executive issuances,
or parts thereof, which are inconsistent with this Act are hereby repealed, amended or
modified accordingly.

Sec. 6. Effectivity. - This Act shall take effect fifteen (15) days after its publication in at
least two (2) newspapers of general circulation.

Approved.