Bureau of Local Government Finance Opinion

November 7, 2003 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred, thru the Provincial Assessor of Camarines Sur, to the Municipal Assessor, Pili, same province, the within sub-joined letters dated February 6 and June 26, 2003 of the Municipal Treasurer, said municipality, in effect requesting clarification on whether the real properties owned by the Social Security System (SSS) located thereat which are being occupied/tenanted for dwelling purposes by private persons or individuals, are exempt from the payment of real property tax, in line with the ruling issued by this Bureau under its 1st Indorsement dated June 17, 1997, which reads in part, as follows: "The tax exemption privilege therefore of the SSS shall continue unless expressly and specifically revoked, provided, however, that: (1) the beneficial use of the subject properties has not been let for consideration or otherwise to a taxable person pursuant to Section 234(a) of the Code; and (2) the acquired or foreclosed properties and assets not yet titled in the name of SSS shall be declared as taxable." The request of the Municipal Treasurer was made in view of the opinion rendered by the Provincial Legal Officer of Camarines Sur, and the rebuttal made by Atty. Amador M. Monteiro, Senior Vice President, Legal and Collection, SSS, East Ave., Diliman, Quezon City, as embodied under his letter dated January 9, 2003, which are both quoted in part, below: Opinion of the Provincial Legal Officer : "Presuming Arguendo that SSS indeed owns said properties, the exemption would not apply because the beneficial use thereof has been granted to private persons or individuals. Basic is the principle that taxation is the rule and exemption is the exception. Therefore any claim for tax exemption is strictly construed against the claimant. The SSS has not shown a clear eligibility for exemption, hence said properties being occupied/tenanted for dwelling purposes and not for the beneficial use of` the System but by private persons or individuals are subject to tax. "Lastly, Section 234 of the Local Government Code clearly provides that, "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by all persons, whether natural or juridical including all Government-Owned or Controlled Corporation are hereby WITHDRAWN upon the effectivity of this Code. "The provision of Sec. 16 of RA 1161 (SSS Law) claiming exemption from tax is superseded by the above-quoted provision of law which impliedly withdrew the said exemption of the SSS." Letter of the Senior Vice President-SSS : "It bears emphasis that . . . the SS Law does not contain qualification whatsoever in providing for the exemption of SSS and all its assets and properties from any tax, assessment, fee or charge. Hence, when the legislature exempted the SSS from payment of any tax, assessment or charge on all its properties without distinction, what it intended was a broad application of such mandate regardless of whether such properties are actually used by the SSS or by private persons. `If the law makes no distinction, neither should the court' ( People vs. Evangelista , 253 SCRA 764). `Where the law makes no distinctions, one does not distinguish' ( Ramirez vs. Court of Appeals , 248 SCRA 590). IcESDA "To interpret therefore the word `properties' in . . . Sec. 16 of the SS Law to mean only the `properties' actually being used by the SSS in its operation would defeat the intention of the legislature as heretofore stated and it would run counter to the established principles of statutory construction to give effect rather than defeat the intention of the legislature. . . . "With respect to the opinion that the tax exemption privilege of SSS has been withdrawn under the last paragraph of the Local Government Code, the same is devoid of factual and legal bases. "xxx xxx xxx. "It is therefore clear that the SSS enjoys exemption from the payment of all kinds of taxes including real property taxes on all its properties whether these are being used by the SSS or by other persons." The first issue to be resolved, therefore, is a clarification on whether SSS' real properties remain exempt upon the effectivity of R.A. No. 7160, also known as the Local Government Code of 1991. Your attention is invited to Section 16 of Presidential Decree (P.D.) No. 24. "AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED ELEVEN HUNDRED AND SIXTY ONE, AS AMENDED, OTHERWISE KNOWN AS 'THE SOCIAL SECURITY ACT OF 1954," which took effect on October 19, 1972, and Section 14 of P.D. No. 735, further amending the SSS charter which took effect on June 27, 1975, which provide, as follows: Section 16 of P.D. No. 24 : "SEC. 16. Exemption from Tax, Legal Process and Lien . All laws to the contrary notwithstanding, the SSS and all its assets , all contributions collected and all accruals thereto and income therefrom as well as all benefit payments and all papers or documents which may be required in connection with the operation or execution of this Act shall be exempt from any tax , assessment, fee, charge or customs or import duty; and all benefit payments made by the SSS shall likewise be exempt from all kinds of taxes, fees or charges, and shall not be liable to attachment, garnishment, levy or seizure by or under any legal or equitable process whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the covered employee to the SSS." (Emphasis supplied) Section 14 of P.D. No. 735 : "SEC. 14. Section sixteen of the same Act is further amended to read as follows: 'SEC. 16. Exemption from tax, legal process and lien . . . . . No tax measure hereafter enacted shall apply to the SSS, unless it expressly revokes the declared policy of the state in Section 2 hereof granting tax-exemption to the SSS. Any tax assessment against, and still unpaid by the SSS shall be null and void.'" Evidently, the real property tax exemption of the SSS was clarified with the issuance of its amendatory law, P.D. No. 24, in 1972. Likewise, seemingly to safeguard the declared policy of the State mandated under Section 2 thereof, another amendatory law P.D. No. 735 was issued in 1975. Said Section 2 of the SSS charter (R.A. 1161, as amended by P.D. No. 24) provides, to wit: "SEC. 2. Declaration of Policy . It is the policy of the Republic of the Philippines to establish, develop, promote and perfect a sound and viable tax exempt social security service suitable to the needs of the people throughout the Philippines, which shall provide to covered employees and their families protection against the hazards of disability, sickness, old age and death, with a view to promoting their well-being in the spirit of social justice ." (Emphasis ours) This Bureau, therefore, agrees with the opinion rendered by Atty. Monteiro that SSS maintains its real property tax-exempt status even after the effectivity of R.A. No. 7160. However, on the issue of the subject real properties of SSS, the beneficial use of which are being let to private persons, for consideration or otherwise, this Bureau believes otherwise. EDIaSH Granting arguendo, that there was no distinction made under the SSS Law with regard to its assets, particularly real properties, this Bureau believes that nowhere in its mandate, that in furtherance of its main purpose, the real properties owned by SSS shall be let to private or taxable persons and still be exempt from all kinds of taxes, fees or charges. This would violate the principle of " inclusio unius est exclusio alterius " (what is not included is deemed excluded). It is therefore more logical to conclude that what was exempted under the said special law (SSS charter) are those real properties which are actually, directly and exclusively used for the operation in the achievement of its existence. R.A. No. 7160, a general law, however, specifically provides for the limitations of the said exemption granted to SSS' real properties from real property tax when the beneficial use thereof has been granted for consideration or otherwise to a taxable person, and those acquired or foreclosed properties and assets not yet titled in the name of SSS. Moreover, Supreme Court (SC) Decision (No. L-35726), entitled: "SOCIAL SECURITY SYSTEM vs. CITY OF BACOLOD and MIGUEL REYNALDO as CITY TREASURER OF BACOLOD CITY" cited by Atty. Monteiro, the Court held, thus: ". . . . What is decisive is that the properties possessed by the SSS, albeit devoted to private or proprietary purpose, are in fact owned by the government of the Philippines . As such they are exempt from realty taxes. It is axiomatic that when public property is involved, exemption is the rule and taxation, the exception." (Emphasis supplied) In another SC Decision (G.R. No. 120082), in the case of "MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. HON. FERDINAND J. MARCOS, et al.," the term "Government of the Republic of the Philippines" is considered synonymous with the term "Republic of the Philippines." In view hereof, this Bureau is of the opinion that the SSS does not fall under the category of government-owned or controlled corporations. Hence, we further believe that its real property tax exemption provided for under its charter remains covered by the exemption proviso of Section 234(a) of the said Code (R.A. No. 7160) which provides below: "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;" (Emphasis ours) In view of the foregoing, this Bureau maintains its stand embodied under our abovementioned 1st Indorsement dated June 17, 1997, The subject real properties of SSS located thereat which, as submitted by the Municipal Treasurer of Pili, are being occupied/tenanted for dwelling purposes by private persons or individuals for consideration or otherwise, should be included in the "Taxable" roll of real properties. Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA Executive Director