BIR Ruling [DA-331-97]

October 9, 1997 BIR RULING [DA-331-97] Secretary Mina T. Gabor Department of Tourism Manila M a d a m : This has reference to your opinion dated December 20, 1996 that the Philippine Tourism Authority (PTA) and the Philippine Convention and Visitors Corporation (PCVC), pursuant to their respective charters, are still entitled to the direct remittance of their respective shares from the proceeds of the value-added tax (VAT) on hotel room tax relative to House Resolution No. 110, entitled "Resolution Urging the President to Direct the Concerned Agencies of the Government to Give Full Support to the Development and Promotion of the Tourism Industry in the Country". It is your opinion that VAT being a tax likewise on hotel room occupancy at the rates now obtaining merely supplanted the hotel room tax as previously provided under Section 113 of the Tax Code, and being subject to the sharing provisions of their respective charters, the same has to be shared equally by the PTA and the PCVC, to be remitted in the manner provided under existing laws. Contrary to your views, however, the Secretary of Finance opined that the claim of the PTA in the proceeds of the hotel room taxes has no legal basis because a portion of the tax proceeds assigned to PTA under P.D. No. 189 was effectively repealed by P.D. 564 dated May 11, 1973 which explicitly provides that the operating expenses of the Authority shall be funded from: (a) the proceeds from travel tax; (b) the proceeds from all fees and other charges, as well as rentals and other income which the Authority is authorized to impose, collect and/or earn; and (c) the drawings upon the capital of the Authority. Furthermore, he stated that the fact that the financial statements of the PTA shows that the Authority is no longer receiving any portion of the revenues from hotel room taxes is an implied admission to its non-entitlement to the tax. On the other hand, he said that records would show that from 1987-1994, PCVC had been enjoying its annual subsidy representing fifty percent (50%) of the annual collection of the hotel room tax amounting to P363.75M by virtue of Executive Order No. 120-A dated July 20, 1987. Thus, the claim of the House Resolution that PCVC has not been receiving its share from the proceeds of the hotel room tax is not true. We have taken cognizance of the fact that the Honorable Secretary has already commented on the subject House Resolution No. 110 and we hereby concur with his opinion that Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law, does not retain the revenue sharing provisions which were previously observed for percentage taxes, such as the hotel room tax, viz. : "Following the one-fund concept, the hotel room tax, travel tax and percentage taxes on stock transactions are national impositions and therefore should accrue to the General Fund. The Department believes that PTA and PCVC just like any government entities, should justify their need for financial support in the form of regular appropriations, equity infusion, or grant of subsidy. The PTA and PCVC should not be excluded from this process. This is to ensure a more effective control in the efficient utilization of government funds subject to the review and control of the Legislature. In other words, granting arguendo that PTA and PCVC are still entitled to their respective shares in the proceeds of the hotel room tax, they are not entitled to an automatic remittance of their supposed shares in the pie because hotel room tax, being now taxable under the "VAT on sale of services", is a national imposition and following the one-fund concept rule, collections of the Bureau from the services rendered by hotels and motels and similar establishments should accrue to the General Fund first before anybody can get its supposed share. And just like any other government entity, PTA and PCVC should justify their needs for financial support in the form of regular appropriations subject to the review and control of the Legislature. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue