18 April 2005
The Freedom from Debt Coalition reiterates its long-standing call for the immediate cancellation of the Casecnan contract, including other onerous IPP contracts.
Casecnan reportedly failed to pay the provincial government a total of P229 million in real property taxes (RPTs) in 2003. Further, the company allegedly failed to remit an estimated P10 million in national wealth tax since Casecnan started commercial operations in December 2001.
Moves made by the Nueva Vizcaya Provincial Government to levy and even close down the Casecnan plant confirms that IPPs â?" including Casecnan â?" are more of a bane to Filipinos, rather than a boon as the government claims them to be.
A stench of hypocrisy permeates: while government scrambles for ways to stop huge financial losses and to raise revenues, it pampers big multinational corporations by providing them with generous fiscal incentives and even reimbursing their tax payments.
The government then turns to its people instead, and squeezes them dry of their hard-earned money through regressive taxes like the value-added tax.
In 2002, the governmentâ?Ts Inter-agency IPP Review Committee tagged Casecnan as one of the five onerous contracts because of its high power cost and a complicated tax structure that resulted in high taxes reimbursible by the National Irrigation Administration (NIA).
Casecnanâ?Ts original contract required NIA to reimburse the company US$52 million in taxes from 1995 to 2001. But with Casecnanâ?Ts 48-percent internal rate of return, NIA will have to reimburse the company a whopping US$879 million in taxes. This huge amount and the governmentâ?Ts unwillingness to pay resulted in an international arbitration that ended in a settlement.
The governmentâ?Ts financial bleeding should have ended right there, if only government cancelled the Casecnan contract. But instead of upholding the public interest by cancelling the contract, the government chose to settle with Casecnan in 2003.
The Settlement Agreement, in fact, proved to be an unconscionable burden over and above the original contract. Specifically, the settlement exempts Casecnan from paying RPTs, and directs NIA to reimburse the firm of any taxes it pays. If the Nueva Vizcaya government continues pressing Casecnan to pay RPTs, the company can do so under protest but will be eventually reimbursed by the National Government.
In addition to this appalling situation, the Supplemental Agreement also directs NIA to pay Casecnan US$115 million and P40 million as the â?oSettlement Amount,â? of which US$7.7 million and the whole P40 million are taxes that NIA should reimburse Casecnan since December 2001.
Adding everything up, the government stands to lose a total of P6.5 billion (US$1 = PhP54) in tax reimbursements for Casecnan alone.
Aside from government losses due to tax reimbursements, Casecnanâ?Ts power supply â?" the most expensive power cost among all IPP contracts â?" commits Napocor to take-or-pay 19 million kWh at US$0.1650 or PhP8.91 per kWh a month, whether or not electricity is generated. Napocor records show that from December 2001 up to late 2002, Casecnan has only delivered a monthly average of 65% of the contracted 19 million kWh.
Despite the shortfall, Napocor continues to pay the full cost, amounting to P2 billion annually for contracted energy. This situation, compounded by similar practices by other IPPs, has worsened Napocorâ?Ts financial bleeding.
If the government genuinely wants to plug the economic hemorrhage and plug its losses, it should address the issue by cancelling the onerous IPP contracts â?" starting with the Casecnan contract.