Interpretation of Sec. 277 of RA 7160 Re: Condonation or Reduction of Tax by the President of the Phil.

DOJ OPINION NO. 009 , s. 2011 February 15, 2011 Secretary Cesar V. Purisima Department of Finance Roxas Blvd. corner P. Ocampo St. Manila 1004 Dear Secretary Purisima : This pertains to your request for confirmatory opinion on the issues stated therein relating to the interpretation of the provision of Section 277 of Republic Act No. 7160, otherwise known as the "Local Government Code of 1991", which reads, thus: AcICTS "SEC. 277. Condonation or Reduction of Tax by the President of the Philippines. The President of the Philippines may, when public interest so requires, condone or reduce the real property tax and interest for any year in any province or city or municipality within the Metropolitan Manila Area." Specifically, you want us to confirm that 1. Under Section 277 of the Local Government Code, the President has broad powers to condone or reduce real property taxes (and any associated interest) after determining that the public interest so requires; and 2. The President's power to condone or reduce real property taxes is direct and immediate such that, following the exercise of such power, nothing more need to be done in order to effect such condonation or reduction. The request, it appears, precipitated from the warrant of levy issued by the province of Quezon on the machineries and equipment of the Pagbilao power plant currently being operated by Team Energy, in order to collect unpaid real property taxes and interest totaling approximately P6.1 billion, and the supposed auction sale thereof scheduled, as published, on 26 January 2011. 1 You aver that should Quezon Province proceed with the auction sale, it would trigger provisions in the Energy Conversion Agreement between Team Energy 2 and PSALM 3 which would eventually require the government 4 to pay Team Energy, at once, all the fees it would have earned had the auction sale not taken place, until the end of the cooperation period in 2025, which amount is estimated to be up to P101 billion. You also allege that an auction sale could likewise trigger large financial obligations for both PSALM and Therma Luzon Inc., the administrator of the energy actually generated by the Pagbilao plant, which liabilities, you claim, would definitely also throw into disarray the government's plans to continue the privatization of power-generating plants, specially the remaining IPP 5 plants. STIHaE Moreover, you reveal that while the most immediate concern is the impact of real property taxes on IPP plants, similar issues are facing other vital public infrastructure project undertaken through PPP, 6 such as the Northern Luzon Expressway, operated by Manila North Tollway Corp., and the national electric transmission grid, owned by National Transmission Corp. and operated by National Grid Corp. In support of the request for confirmation, you advance that the presidential prerogative to condone or reduce real property taxes has been exercised on at least two previous occasions, i.e. , by then President Corazon C. Aquino, through Executive Order No. 42, 7 dated 22 August 1986, and by former President Joseph E. Estrada, via Memorandum 8 dated 25 February 1999, and that the exercise of said executive power has, to your knowledge, never been questioned before the courts. Although, in line with settled policy and precedents, the Secretary of Justice does not pass upon issues which, as in this case, not only involve the interpretation of the provisions of the Local Government Code 9 vis--vis the legality/validity of an action of a local government unit which can be judicial in nature, 10 but also concern the review of a duly executed contract or agreement, 11 we shall take exception thereto, it appearing that the issues raised relate to the exercise of that Department's legally mandated powers and functions. Basic is the rule in statutory interpretation that when the law is clear, plain and free from ambiguity, it must be given its literal meaning without attempted interpretation ( Ramos vs. Court of Appeals , 108 SCRA 728, 733). Known as the plain meaning rule, or verba legis , this rule, which was derived from the maxim index animi sermo est (speech is the index of intention), rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude a different construction (see also, PNB vs. Garcia , 388 SCRA 485, 491). The rationale is because the legislature is presumed to know the meaning of the words, to have used the words advisedly, and to have expressed its intent by the use of such words as are found in the statute. Verba legis non est recedendum , or from the words of a statute there should be no departure ( Globe-Mackay Cable and Radio Corporation vs. NLRC , 206 SCRA 701, 711). 12 Applied to the issues raised, the subject provision of the Local Government Code is clear and categorical as to the power of the President to condone or reduce real property tax and interest such that there is no longer any room for interpretation only application. 13 CSEHcT Moreover, such power of the President is, by express mandate of the law, subject only to the limitation that it is exercised "when public interest so requires." In the case of Caltex Philippines, Inc. vs. Commission on Audit , 14 reiterated in the more recent case of Chevron Philippines, Inc. vs. Bases Conversion and Development Authority , "public interest" has been described as "vitally affecting the general welfare." Otherwise stated, when the general welfare is at stake, the President may legally and effectively exercise the powers granted him under Section 277 of the Local Government Code. The exercise of this power requires no concurrent action from either or both of the other two branches of government as the Code itself expressly recognized the existence of said executive power. The foregoing considered, both issues are resolved in the affirmative. Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. Moved to February 9, 2011. 2. The successor-in-interest of Hopewell, the original Independent Power Producer (IPP). 3. Power Sector Assets and Liabilities Management Corporation, the successor-in-interest of National Power Corporation (NAPOCOR). 4. Through PSALM. 5. Independent Power Producer. 6. Public-Private Partnership. 7. Entitled, "Proclaiming a One-Time Real Property Tax Amnesty Subject to Certain Conditions"; Amended on December 24, 1986. 8. Condoning, pursuant to Sec. 277 of the Local Government Code, all real property tax liabilities, including fines, penalties and interests, of the Public Estates Authority with the Cities of Pasay, Paraaque and Las Pias up to and until December 31, 1999. 9. Sec. of Justice Op. Nos. 55 & 46, s. 2010; No. 61, s. 2009. 10. Ibid. , Nos. 53 & 51, s. 2010. 11. Id. , Nos. 50, 29 & 14, s. 2010. 12. Id. , Nos. 54, 52 & 39, s. 2010; 41, 27 & 17, s. 2009. 13. See also, Pascual vs. Pascual-Bautista , 207 SCRA 561, 568; Baranda vs. Gustilo , 165 SCRA 757, 770, citing cases. 14. 208 SCRA 726, 756.