Bureau of Local Government Finance Opinion

April 11, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned to the Provincial Assessor of Leyte, Tacloban City, the within preceding Indorsement dated May 16, 1996, requesting confirmation of the opinion rendered by the Corporate Legal Counsel, Philippine Tourism Authority (PTA), that McArthur Park and Beach Resort, a subsidiary of the PTA, located at Palo, that province, is exempt from the payment of both real property taxes and business taxes. The abovementioned request was prompted by the 1st Indorsement dated March 21, 1996 of the Municipal Treasurer, said municipality, informing that "should there be no action regarding this matter, the municipality will lose an annual revenue of P300,000.00 from both business and realty taxes plus a potential revenue from realty tax estimated at P200,000.00 beginning . . . 1997." In the attached Memorandum dated January 30, 1996, the Corporate Legal Counsel of PTA claims that, being a subsidiary of the PTA, McArthur Park and Beach Resort is exempt from the payment of both business and realty taxes in line with Opinion No. 63, series of 1993, issued on May 13, 1993, by the Department of Justice, the pertinent portion of which is quoted hereunder: "It is relevant to observe that under P.D. No. 564, as amended by P.D. 1400, the PTA enjoys certain incentives in the form of tax exemption privileges, the pertinent provision of which reads: 'Section 11-A. Authority's Exemption from Taxes . In furtherance and effective implementation of the policy enumerated in Section 1 of the Decree, the Authority is hereby declared exempt: (a) From the payment of all taxes, duties, fees, charges, costs and service fees in any court or administrative proceedings in which it may be a party, to the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities; (b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses imposed by the National Government, or its political subdivisions, instrumentalities or agencies; and xxx xxx xxx." Section 234 of R.A. No. 7160, which specifically repealed PD 464 under Section 534 thereof, withdrew the real property tax "exemption . . . previously granted to, or presently enjoyed by, . . . all government-owned or-controlled corporations." The issue to be resolved, therefore, is whether or not PTA falls under the category of a government-owned or -controlled corporation whose tax exemption privilege was withdrawn under the provisions of R.A. No. 7160. EDATSC In this connection, attached is a copy of Memorandum Order No. 153 dated January 29, 1988 of the Office of the President which reveals that PTA is among the Government-Owned and/or Controlled Corporations to be monitored by the Government Corporate Monitoring and Coordinating Committee, (GCMCC). Clearly, PTA falls under the category of a government-owned or-controlled corporation and, as such, its real property tax exemption privilege was, therefore, among those withdrawn under the aforecited pertinent portion of Sec. 234 of R.A. No. 7160, which is in line with the ruling embodied under the 2nd Indorsement dated February 22, 1993 of the Department of Finance, (copy also enclosed), stating: "that beginning January 1, 1992, government-owned and/or controlled corporations are already taxable under the provisions of the new law, R.A. No. 7160." Likewise, a similar case has been resolved by the Supreme Court in the case of the Mactan Cebu International Airport Authority (G.R. No. 120082), dated September 11, 1996, wherein a Decision and Order of the Regional Trial Court (RTC) of Cebu, Branch 20 under Civil Case No. CEB 16900 was affirmed, the dispositive portion of the said decision is quoted hereunder: "Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the foregoing disquisitions, it had already become, even if it conceded to be an 'agency' or 'instrumentality' of the Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner. cCAIES "Accordingly. the position taken by the petitioner is untenable. Reliance on Basco vs . Philippine Amusement and Gaming Corporation is unavailing since it was decided before the effectivity of the LGC. Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom." With regard to the claim that the said park/beach resort is exempt from the payment of business taxes, fees and other impositions, attention is invited to the provisions of Section 193 of R.A. No. 7160, which reads as follows: "Section 193. Withdrawal of Tax Exemption Privileges . Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all person, whether natural or juridical, including government.-owned or controlled corporations, except local water districts, cooperatives duly registered under RA No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code." Relatedly, the tax exemption privileges or incentives of government-owned or controlled corporations from the payment of local taxes, fees or charges and other impositions imposed by local government units should, likewise, no longer be granted upon the effectivity of R.A. No. 7160. In view of all the foregoing, this Bureau holds that the McArthur Park and Beach Resort, although a subsidiary of the PTA, a government-owned or-controlled corporation, is subject to the payment of both the real property tax and the local taxes, such as business and amusement taxes, including fees or charges, and impositions imposed by provinces, cities and municipalities, beginning January 1, 1992, the effectivity of the Local Government Code of 1991. Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director