Philippine Health Insurance Corporation's Share in the Excise Tax on Tobacco Products

June 13, 2001 BIR RULING NO. 023-01 Department of Finance Roxas Boulevard Corner Vito Cruz Street Manila 1004 Attention: Mr . Gil S . Beltran Assistant Secretary Gentlemen : This refers to your letter dated February 2, 2000 requesting this Office's position on the matter of the Philippine Health Insurance Corporation's (PHIC) claim of its share in the excise tax on tobacco products under Republic Act No. 7875 ("An Act Creating the National Health Insurance Program") pursuant to RA No. 7654, otherwise known as "An Act Revising the Excise Tax Base." The bases of PHIC's request are the following pertinent provisions: Section 3, paragraph 2 of R.A. No. 7654 which reads as follows: " Provided likewise that twenty-five percent (25%) of the increment in total revenue collected under this Act in 1995 shall be collected and segregated as Trust Fund to be disbursed solely for funding the National Health Insurance Program as may be hereafter mandated by law." The foregoing was also reiterated in Section 46 of R.A. No. 7875 ("An Act Creating the National Health Insurance Program and Establishing the Philippine Health Insurance Corporation") which reads as follows: " Starting 1995 and thereafter, twenty-five percent (25%) of the increment in total revenue collected under R A 76 54 shall be appropriated in the General Appropriations Act solely for National Health Insurance Fund ." In its letter to Director Ma. Teresa S. Habitan, Fiscal Policy & Planning Office, DOF, PHIC has likewise represented that on the basis of the foregoing provision, an annual certification is being issued by the BIR as to the total incremental revenues collected pursuant to RA 7660 (Documentary Stamp Tax) and RA 7654 (Excise Tax); that, however, per latest report dated August 23, 1999, said certification did not mention the PHIC's share from the excise tax as it was expressly viewed that the provision under the aforesaid Act was repealed by the passage of RA 8240; that PHIC asked for a legal opinion from the Office of the Government Corporate Council (OGCC) if the passage of RA 8240 resulted in the express or implied repeal of Section 46 of Republic Act 7875 and Section 3 of Republic Act 7654; and that in its Opinion No. 521 dated December 14, 1999, the OGCC opined as follows: "We have examined the provisions of Republic Ac t No. 82 40 and it is our opinion that the foregoing did not repeal by implication Section 46 of Republic Act. No. 7 875 nor Section 3 of R.A. 7 654 which grants the continuing appropriation equivalent to 25% of the incremental revenues from excise taxes in favor of the National Health Insurance Fund. Thus, as we previously stated, R A 82 40 merely amended particular and specific provisions of the National Revenue Code prescribing the kind and amount of taxes to be imposed on tobacco and alcohol products. While Section 8 of s aid Ac t provides that 15% of the incremental revenue collected shall be allocated for comparative programs and projects for tobacco production, this is not inconsistent nor irreconcilable with Section 46 of R.A. 7 875 or Section 3 of R.A. 7 654 as these merely provide additional allocations of incremental revenues to another sector or industry. Otherwise stated, the mere fact that Section 8 of R. A. 8 240 grants to the tobacco production industry 15% of the incremental revenues does not necessarily mean that the previous allocations to the Philhealth's other sectors have been abolished." In reply, please be informed that the allocation for the funding of the National Health Insurance Program (NHIP) of twenty five percent (25%) of the increment in total revenue collected from excise taxes on tobacco products is mandated under Section 46, Article XI on Appropriation of R.A. No. 7875 pertinent portion of which provides as follows: "SEC. 46. Subsequent Appropriations . Starting 1995 and thereafter, twenty-five percent (25%) of the increment in total revenue collected under Republic Act No . 7654 shall be appropriated in the General Appropriations Act solely for the National Health Insurance Fund . ASTIED "In addition, starting 1996 and thereafter, twenty-five percent (25%) of the incremental revenue from the incremental revenue from the increase in the documentary stamp taxes under Republic A ct 76 60 shall likewise be appropriated solely for the said fund." (Emphasis supplied.) This in effect, extended the coverage of the provisions beyond 1995 as embodied in RA No. 7654, to wit: "SEC. 3. . . . " Provided , likewise , That twenty-five percent (25%) of the increment in total revenue collected under this Act in 1995 shall be collected and segregated as a trust fund to be disbursed solely for funding the National Health Insurance Program as may be hereafter mandated by law. "SEC. 4. The incremental revenue collected under this Act shall be excluded from the revenue base as provided under Republic Act No . 7171 . (Emphasis supplied.) As clarified in Section 8 of Revenue Regulations No. 1-94 implementing the aforecited RA 7654 revising the excise tax base, the 25% of the incremental revenue to be generated under and by virtue of the aforequoted RA 7654 shall be allocated and segregated as a trust fund to be disbursed solely for the funding of the NHIP. Moreover, the aforesaid incremental revenue has been declared to be excluded from the revenue base as provided under R.A. No. 7171. Stated differently, the allocation of the 25% of the incremental revenue from excise taxes solely for the funding of the NHIP as provided for under RA No. 7654 and RA 7875 is a separate and distinct allocation from that of the 15% granted to Virginia tobacco producing provinces under RA No. 7171 as reiterated in Section 8 of R.A. 8240, to wit: "SEC. 8. Fifteen percent (15%) of the incremental revenue collected from the excise tax on tobacco products under this Act shall be allocated and divided among the provinces producing burley and native tobacco in accordance with the volume of tobacco leaf production. "xxx xxx xxx" Clearly, R.A. 7654 merely revised the excise tax base on tobacco products, thus, amending for the purpose then Section 142 of the Tax Code, as amended. This effectively generated an incremental revenue from which the 25% allocation for the NHIP was appropriated. On the other hand, R.A. No. 8240 amended then Sections 138, 139, 140 and 142 of the Tax Code, as amended, among others, the excise tax on tobacco products from ad valorem to specific. From the increment therewith, a fifteen percent (15%) was allocated for the special support fund for Virginia tobacco producing provinces mentioned in RA 7171. In the process, there have been different allocations intended for both programs, i.e., for special financial support for Virginia tobacco producing provinces and the funding of the NHIP. It is noted, at the inception of both projects and the subsequent promulgation of the corresponding Act providing for their separate allocations, that there has been no declaration or provision, express or implied, in both laws that would constitute deletion, alteration or modification of the already existing allocation intended for the other. Thus, as in R.A. 7171, the 15% allocation for the beneficiary provinces using the existing excise tax base on locally manufactured Virginia-type tobacco has already been provided. The subsequent revision of said excise tax base under R.A. 7654 the original allocation under R.A. 7171 continued to be effective as provided for under Sec. 4 the aforesaid R.A. 7654, thus "SEC. 4. The incremental revenue collected under this Act shall be excluded from the revenue base as provided under Republic A ct. No. 7 171. Accordingly, since the foregoing provision (later reiterated under RA 7875) was never intended to cancel the allocation provided for the beneficiary provinces under RA 7171, such that the 15% allocation for the provinces under RA 8240 should not, absent any provision abolishing the 15% allocation to the former, be construed to have any effect on the former. Conversely, it would seem that the enactment of RA 8240 incorporating only the 15% allocation for beneficiary provinces did not abolish the 25% allocation granted to NHIP under RA 7654. Moreover, this Office holds that the allocation of 25% of the incremental revenue of the excise taxes on tobacco products for the NHIP under RA 7654 and later reiterated in RA 7875 was meant to be a continuing appropriation. The rationale is that RA 8424, which is a general law, does not affect the continuing appropriation granted to the NHIP considering that at the inception of the NHIP, RA 7654, which is a special law, specifically declares that the source of the allocation intended for it is excluded from the revenue base provided under RA 7171. Hence, the effect of RA No. 8424, specifically Sections 288(B) and 289 of the 1997 Tax Code, which considers only the incremental revenue allocations under RA 8240 and did not mention the allocations granted by RA 7654 and later institutionalized under RA 7875, strongly points out that the allocation of twenty-five (25%) of the incremental revenue under RA 7654 for NHIP remains effective and subsisting. Verily, this Office holds that there are no inconsistencies with respect to the provisions of the aforementioned Acts, i.e., RA 7171 reiterated in Sec. 8 of RA 8240 and Sec. 3 of RA 7654 and institutionalized by RA 7875 considering that the provisions merely provided for an additional but continuing appropriation. Neither can this Office take cognizance of any theory that since RA 8424, for the purpose, has specifically reiterated only the allocations for the beneficiary provinces pursued under RA 7171 and RA 8240, it has effectively abolished the allocations intended for the NHIP. The matter with respect to the continuity of the appropriation for NHIP has been specifically set in RA 7875. Well settled is the rule that an implied repeal is one which takes place when a new law contains some provisions which are contrary to, but do not expressly repeal those of a former. Much as we want to give import to the provisions of RA 8424 and therefore, to construe that allocation intended for NHIP has been repealed by its passage, this Office is constrained to hold so. It has been a constant holding in this jurisdiction that repeals by implication are not favored and will not be so declared unless it be manifested that the legislature so intended. ( Martin , p . 171 citing Villegas vs. Subido , No . L-31711 , Sep . 30, 1971 ). The implication must be clear, necessary, irresistible and free from any reasonable doubt; (82 C.J.S. pp. 479, 485, 486) Finally, as mandated under RA 7875, from the time of its promulgation in 1995 and thereafter, there shall be a 25% allocation from the increment generated under RA 7654 which shall be appropriated solely for the NHIP. The increment generated by virtue of RA 7654 has been tacked up to that of the increment generated pursuant to RA 8240. In view thereof, this Office has to certify as to net increment which could be the proper basis of the share of the NHIP for the purpose of setting aside the 25% allocation in the General Appropriations Act. cIECTH Very truly yours, (SGD.) REN G . BAEZ Commissioner of Internal Revenue