DOJ Opinion No. 026, s. 2003

DOJ OPINION NO. 026 , s. 2003 April 23, 2003 Secretary Jose Isidro N. Camacho Department of Finance Manila Sir : This refers to the request for opinion of that Department on the following issues involving the Philippine Amusement and Gaming Corporation (PAGCOR), a government-owned or controlled corporation (GOCC) created under Presidential Decree No. 1869 1 , as amended, and the applicability of the provisions of Republic Act No. 7656 2 , viz : 1. Whether or not the National Government (NG) can collect dividends from PAGCOR based on the latter's net earnings pursuant to R.A. No. 7656 notwithstanding the existence of laws requiring NG/GOCC sharing from the gross earnings of PAGCOR; and 2. Whether or not PAGCOR's income can be distributed to its host cities or be set aside for the President's Social Fund, upon the discretion of the PAGCOR Board and of the Office of the President, respectively, and whether said distribution can be treated equally with other NG sharing for purposes of determining the applicability of R.A. No. 7656. Section 3 of R.A. No. 7656 requires all GOCCs to remit at least fifty percent (50%) of their annual net earnings to the National Government while Section 12 of P.D. No. 1869, as amended, mandates that after deducting five percent from PAGCOR's aggregate gross earnings as franchise tax, the National Government shall have a share of 50% of PAGCOR's gross earnings, or 60%, if its gross earnings be less than P150 million. The request, it appears, stemmed from the claim and argument of PAGCOR, alleged to be one of the highest income-generating GOCCs, that the National Government share from its gross earnings already constitutes dividend payment and that the distribution of its net income is governed by different laws and/or upon the discretion of the PAGCOR Board and of the President, as the case may be. It is, however, the view of the Department of Finance (DOF) that P.D. No. 1869, as amended, and R.A. No. 7656 are two different laws that should be treated and applied separately; that since the declaration of dividends is based on net earnings and not on the net winnings, PAGCOR's remaining net income may still be subject to R.A. No. 7656 pursuant to the provisions of Sections 3(e) and 4 of the Revised Implementing Rules and Regulations (IRR) of R.A. No. 7656. DOF mentions certain GOCCs, e . g ., Manila International Airport Authority (MIAA), PHIVIDEC Industrial Authority (PIA) and Public Estates Authority (PEA), which, although already mandated to remit a certain percentage of their gross operating income or net income as share of the National Government, still remit dividends to the latter. DOF, by way of reference, also alludes to this Department's Opinion No. 50, s. 1995, which opined, on an essentially similar issue, that: . . . (T)he provisions of R.A. No. 7656 and R.A. No. 7279 (Public Estates Authority Charter) should be harmonized and given effect. The profit distribution under R.A. No. 7279 should be followed and thereby a minimum of 50% should be deducted, from the annual net income of the PEA for remittance to the NHA (National Housing Authority). Thereafter, dividends corresponding to 50% (not the entire amount) of the remaining balance of the annual net earnings of the PEA should be declared and remitted to the National Government under R.A. No. 7656. The first issue is resolved in the affirmative. Sections 3 and 4 of R.A. No. 7656, insofar as material, respectively provide, to wit: SEC. 3. Dividends . All government-owned or -controlled corporations shall declare and remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National Government . This section shall also apply to those government-owned or -controlled corporations whose profit distribution is provided by their respective charters or by special law, but shall exclude those enumerated in Section 4 hereof : . . . SEC. 4. Exemptions . The provisions of the preceding section notwithstanding, government-owned or -controlled corporations created or organized by law to administer real or personal properties or funds held in trust for the use and the benefit of its members, shall not be covered by this Act . . . (emphasis supplied) Upon the other hand, Section 12 of P.D. No. 1869 (PAGCOR Charter), as amended by P.D. No. 1993 3 , provides: SEC. 12. Special Condition of Franchise . After deducting five (5%) percent as Franchise Tax, the fifty (50%) percent share of the government in the aggregate gross earnings of the Corporation from this Franchise, or 60% if the aggregate gross earnings be less than P150,000,000.00, shall, immediately be set aside and shall accrue to the General fund to finance the priority infrastructure development projects and to finance the restoration of damaged or destroyed facilities due to calamities . (emphasis supplied) The clear and explicit language of the above-quoted provisions of R.A. No. 7656 leaves no room for doubt. All GOCCs, including those whose profit distribution is provided by their respective charters or by special law , are mandated to declare and to remit at least 50% of their annual net earnings to the National Government. Section 12 of P.D. No. 1869, as amended, which sets aside 50% of PAGCOR's gross earnings or 60% if its aggregate gross earnings be less than P150,000,000.00 for the General Fund to finance priority infrastructure development projects, among others, unequivocably comes within the purview of "profit distribution" provided by a charter as adverted to in Section 3 of R.A. No. 7656. By specific and express mandate of the latter law (R.A. No. 7656), PAGCOR, would still be covered thereby. Likewise, while Section 4 of R.A. No. 7656 provides for those exempt from the application of Section 3 thereof, it is evident that PAGCOR does not fall within the enumerated exemptions. Expressio unius est exclusio alterius : where a statute, like R.A. No. 7656, enumerates those exempted from its application, it is to be construed as excluding from its effect those not expressly mentioned. 4 Moreover, as explained in the earlier cited Opinion No. 50, s. 1995, of this Department: Aside from the literal meaning of the language of Section 3 of R.A. No. 7656, it is also a settled rule of statutory construction that repeals by implications are not favored unless the repugnancy is not only irreconcilable but also clear and convincing. ( Maceda v . Executive Secretary, 197 SCRA 771, 800 [May 31, 1990] ). Moreover, a statute general in character as to its terms and applications should not be construed as repealing a special or specific enactment unless the legislative purpose to do so is manifest ( Commissioner of Internal Revenue vs . Court of Appeals, 207 SCRA 487 [1992] ). Consequently, statutes must be construed as to harmonize the apparent conflicts and to give effect to all the provisions whenever possible ( The Philippine American Management Co . , Inc . v . The Philippine American Management Employees Assoc . , 49 SCRA 194 ; Jalandoni vs . Endaya, 55 SCRA 261 ). Finally, Executive Order No. 399, s. 1990 5 , Section 2 of which provides that the E.O. shall not apply to, among others, government-owned or controlled corporations whose profit distribution is provided for by their respective charters or by special law, and which could have been the basis of PAGCOR's claim for exemption from the coverage of R.A. No. 7656, has been expressly repealed by Section 9 of R . A . No . 7656 . Section 3 of R.A. No. 7656 now expressly provides that all government-owned or controlled corporations, including those whose profit distribution is provided for by their respective charters, are required to remit 50% of their net earnings to the National Government. It bears emphasis that the purposes of the mandatory sharing under the two laws are different. R.A. No. 7656 requires all government-owned or controlled corporations to share their profits with the National Government in consideration of the large amounts of equity that the National Government has in such corporations. Like any investor, the National Government "must receive returns on his (its) investments in the form of dividends". 6 On the other hand, the mandatory 50% share of the National Government in the gross earnings of PAGCOR was imposed under Section 12 of P.D. No. 1869 as a special condition of the franchise given to PAGCOR by the Government to operate gambling casinos, clubs, etc. within the territorial jurisdiction of the Republic of the Philippines. Clearly, the share of the National Government under R.A. No. 7656 is in the nature of profit which accrues to the National Government as investor in government-owned or controlled corporations, whereas, in P.D. No. 1869, the share of the National Government is in the nature of royalties for the privilege granted by it to the franchise holder to engage in gambling operations. With reference to the second query, it is believed that the PAGCOR Board can, upon its discretion, distribute its income to its host cities or set aside a portion thereof for the President's Social Fund. Earlier, pursuant to Section 1 of P.D. No. 1632 7 , casino host cities had specific allocations from the government's share in the income of PAGCOR. This provision on entitlement was, however, not retained in Section 12 of P.D. No. 1869, as amended. Hence, as previously opined by this Department: The failure of Section 12 of P.D. No. 1869 to retain the provision regarding the share of a city or municipality other than Metro Manila in the gross earnings of casinos located in their respective areas as previously provided in P.D. No. 1632, is indicative of the intent of the law to discontinue the direct and exclusive privilege of host cities or municipalities to receive their aforestated share. 8 This, notwithstanding, the PAGCOR Board may, in its discretion, still allocate and distribute to its host cities "the earnings of the corporation" in the exercise of its powers under Section 7 of P.D. No. 1869 which provides: SEC. 7. Powers, Functions and Duties of the Board of Directors . The Board shall have the following powers, functions and duties: a) To allocate and distribute, with the approval of the Office of the President of the Philippines, the earnings of the corporation earmarked to finance infrastructure and socio-civic projects; b) To designate the commercial bank that shall act as the depository bank of the corporation and/or trustee of the funds of the Corporation; c) To prepare and approve at the beginning of each calendar year the budget that may be necessary under any franchise granted to it, to insure the smooth operation of the corporation ; and to evaluate and approve budgets submitted to it by other corporations or entities with which it might have any existing contractual arrangement; d) To submit to the office of the President of the Philippines before the end of February of each year a list of all the infrastructure and/or socio-civic projects that might have been financed from the corporation's earnings, and to submit such periodic or other reports as may be required of it from time to time; and e) To perform such other powers, functions and duties as may be directed and authorized by the President of the Philippines or as may be necessary or proper for the accomplishment of its purposes and objectives . (Emphasis supplied) Since such allocation/s are no longer legally mandated ( i . e . not specifically provided for by law), the allocation/s shall be in accordance with PAGCOR's own guidelines on the disposition of its funds. The same discussion applies to PAGCOR's allocation for the President's Social Fund. As to whether such allocations can be treated equally with other National Government sharing for purposes of determining the applicability of R.A. No. 7656, we invite attention to Section 2(d) of said Act which defines "net earnings" as follows: (d) "Net earnings" shall mean income derived from whatever source, whether exempt or subject to tax, net or deductions allowed under Section 29 of the National Internal Revenue Code, as amended, and income tax and other taxes paid thereon, but in no case shall any reserve for whatever purpose be allowed as a deduction from net earnings. The dividend share of the National Government pursuant to Section 3 of R.A. No. 7656 should be determined taking into account the aforequoted definition of "net earnings" in the same Act. cTEICD Please be guided accordingly. Very truly yours, (SGD.) SIMEON A. DATUMANONG Secretary Footnotes 1. Consolidating and Amending Presidential Decree Nos. 1967-A, 1067-B, 1067-C, 1399 and 1632 Relative to the Franchise and Powers of the Philippine Amusement and Gaming Corporation [PAGCOR]. 2. An Act Requiring Government-Owned or Controlled Corporations to Declare Dividends Under Certain Conditions to the National Government, and for Other Purposes. 3. Amending Section Twelve of Presidential Decree No. 1869 Consolidating and Amending Presidential Decree Nos. 1967-A, 1067-B, 1067-C, 1399 and 1632 Relative to the Franchise and Powers of the Philippine Amusement and Gaming Corporation [PAGCOR]. 4. Lerum vs. Cruz , 87 Phil. 652; Empire Insurance Company vs. Rufino , 90 SCRA 437. 5. Increasing the Rate of Cash Dividends to be Declared by Government-Owned or Controlled Corporations Subject to Certain Exceptions. 6. Sponsorship speech of Sen. Herrera for S.B. No. 1168, later enacted into law as R.A. No. 7656. 7. Amending Sections Three and Four of Presidential Decree No. 1067-B dated January 1, 1977, Entitled "Granting the Philippine Amusement and Gaming Corporation a Franchise to Establish, Operate, and Maintain Gambling Casinos on Land or Water Within the Territorial Jurisdiction of the Republic of the Philippines" as Amended by Presidential Decree No. 1399 dated June 2, 1978. 8. Secretary of Justice Opn. No. 133, s. 1988.