DOJ Opinion No. 001, s. 1980

DOJ OPINION NO. 001 , s. 1980 2nd Indorsement January 2, 1980 Respectfully returned to the Acting General Manager, Metropolitan Waterworks and Sewerage System (MWSS), his within request for clarification regarding the tax exemption privileges of MWSS under its charter (R.A. No. 6234, as amended) vis a vis the provisions of P.D. No. 1177, otherwise known as the Budget Reform Decree of 1977, as interpreted in Opinion No. 133, Series of 1977, of this Ministry. You cite two provisions of the MWSS Charter [secs. 9-(b) and 18] which grant tax exemptions to the corporation and you advance the view that section 2 of P.D. No. 1777 had the effect of withdrawing the tax exemption granted under section 18 but not that granted under section 9-(b), above-cited. And so we take it that specifically, it is on this question that you now seek clarification from us. Subject to the extended discussion hereunder, we are of the opinion that both of the tax exemption privileges granted to MWSS in the two cited provisions of its Charter, R.A. No. 6234, as amended, have in effect been withdrawn by virtue of section 23 of P.D. No. 1177, as the latter is a statute of later enactment which unequivocally and clearly subjects all units of government including government corporations to all taxes/duties/fees imposed under revenue laws and therefore the MWSS charter should, to the extent of the grant of the exemptions, be deemed repealed by P.D. No. 1177, However, MWSS may, pursuant to the first proviso of section 23, supra ,ask for a subsidy from the General Fund in the exact amount of the taxes/duties it would have to pay as a result of the withdrawal of the exemptions. Section 23 of P.D. No. 1177 provides insofar as is pertinent: "All units of government-owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws: Provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due: Provided, further that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditures of the General Fund." On the other hand, the following provisions of R.A. No. 6234 contain the grant of tax exemption privileges of MWSS: "SEC. 9. Authority to Incur Indebtedness and Issue Bonds; Their conditions, Privileges Exceptions; Sinking Funds; Guarantee xxx xxx xxx "(b) Foreign Loans ... "The loans, credits and indebtedness contracted under this subsection and the payments of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services by the System, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import restrictions previously and at present imposed and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions." (Emphasis supplied.) "SEC. 18. Non-Profit Character of the System, Exemption from all Taxes, Duties, Fees, Imposts and Other Charges by Government and Governmental Instrumentalities xxx xxx xxx "To enable the System to pay its indebtedness and obligations and the furtherance and effective implementation of the policy enumerated in Section one of this Act, the System is hereby declared exempt: "(a) From the payment of all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities, municipalities including the taxes, duties, fees, imposts, and other charges provided for under the Tariff and Customs Code of the Philippines, Republic Act Numbered Nineteen Hundred Thirty-Seven, as amended and further amended by Presidential Decree No. 34, dated October 27, 1972, and costs and service fees in any court or administrative proceedings in which it may be a party; "(b) From all income taxes, franchise taxes and realty taxes to be paid in the National Government, its provinces, cities, municipalities and other Government agencies and instrumentalities; and "(c) From all imposts, duties, compensating taxes, and advance sales tax, and wharfage fees on import of foreign goods required for its operations and projects." Interpreting Section 23 of P.D. No. 1177, supra, this Ministry stated in Opinion No. 133, series of 1977; "I think section 23, supra , has the effect of withdrawing from government-owned or controlled corporations the tax exemptions granted in their respective charters. For I see this provision as a clear and unequivocal expression of the legislative intent to subject all units of government including government-owned or controlled corporations to the payment of all taxes, duties and fees imposed under revenue of laws. Therefore, the charter of any government corporation which provides for the exemption of the particular corporation from any tax, duty or fee should to the extent of the imposition of the exemption be deemed repealed by P.D. No. 1177. This is in consonance with the rule that prior special laws (the tax exemption provision in the charter) may be repealed by implication upon the enactment of a later general statute (P.D. No. 1177) where the legislative intent to effectuate a repeal is unequivocably expressed (Sutherland, Statutes and Statutory Constitution ,Vol. I, p. 487)." LexLib We find no cause to depart from the position taken in the cited opinion, as above-quoted, Accordingly, we hereby reiterate the same, considering it applicable to the MWSS. In other words, sections 9-(b) and 18 of the MWSS Charter, insofar as they grant to said entity exemption from taxes, fees, imposts and other charges, must be deemed repealed by P.D. No. 1177; hence, it must have to pay the taxes, duties and fees referred to in the two cited exemption provisions of its charter. Nonetheless, it should be emphasized that under the first proviso of section 23 of P.D. No. 1177, "the organizations otherwise exempted by law from . . . taxes/duties may ask for a subsidy from the General Fund in the exact amount of the taxes/duties due." In Opinion No. 133, supra , it was also ruled that "any government corporation which is exempt by law from tax or duty" may ask for the aforesaid subsidy; and that the objectives of P.D. No. 1177 which are the "institutionalization of the budget innovations of the New Society" and "to regulate the national budgetary process" would be defeated by an interpretation which would allow differentiation among such corporations so as to limit the operation of subject proviso only to some of them. Thus, the MWSS, like all other entities similarly situated, is entitled to the benefits of said proviso, and may ask for a subsidy from the General Fund equal in amount to the taxes/duties/fees it will have to pay by reason of the withdrawal of its tax exemption privileges pursuant to P.D. 1177. We may add that this is a confirmation of the Government Corporate Counsel's view expressed in Opinion No. 60, series of 1979. Please guided accordingly. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice