Dispute between BLGF and PPA Affecting Supreme Court Ruling on Real Estate Taxes

DOJ OPINION NO. 028 , s. 2005 July 6, 2005 Oscar M. Sevilla General Manager Philippine Ports Authority Marsman Bldg., 22 Muelle de San Francisco South Harbor, Port Area, Manila Sir : This refers to your letter seeking a ruling/position on a dispute or controversy between the Bureau of Local Government Finance (BLGF) of the Department of Finance (DOF) and the Philippine Ports Authority (PPA) affecting a ruling of the Supreme Court on real estate taxes. You state that, on July 14, 2003 the Supreme Court in the case of Philippine Ports Authority (PPA) versus City of Iloilo (G.R. No. 109791) rendered a decision which among others, upheld the right of the City of Iloilo to impose real estate taxes on the warehouse of PPA, computed from the last quarter of 1984 to December 1986. Consequently, on October 8, 2003, the BLGF issued BLGF Memorandum Circular No. 17-2003; making PPA liable to pay real estate property tax to the City of Iloilo and all local government units similarly situated. aSATHE Based on said issuance, there has been an avalanche of assessments and demands from the local government units against the PPA for the payment of real estate taxes. It is your view that BLGF Memorandum Circular No. 17-2003 contained policy pronouncements that are outside the contemplation of Supreme Court ruling on PPA vs . City of Iloilo . Hence this request for a ruling or position from this Department. With regret, we have to decline rendition of a ruling/position on the subject matter of your request considering that any ruling/position thereon would be tantamount to a review of the above-mentioned Supreme Court ruling/decision wherein the Court stated that: xxx xxx xxx "Petitioner, however, seeks to be excused from liability for taxes by invoking the pronouncement in Basco v. PAGCOR ( Basco ) quoted hereunder: PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR, should be and actually is exempt from local taxes . Otherwise, its operation might be burdened, impeded or subject to control by a mere Local government. [Emphasis supplied] Petitioner points out that its exercise of regulatory functions as decreed by its charter places it within the category of an 'agency or instrumentality of the government,' which, according to Basco , is beyond the reach of local taxation. Reliance in the abovecited case is unavailing considering that P.D. 1931 was never raised therein, and given that the issue in said case focused on the constitutionality of P.D. 1869, the charter of PAGCOR. The said decision did not absolutely prohibit local governments from taxing government instrumentalities. In fact we stated therein: The power of local government to 'impose taxes and fees' is always subject to 'limitations' which Congress may provide by law. Since P.D. 1869 remains an 'operative' law until 'amended, repealed or revoked'. . . its 'exemption clause' remains an exemption to the exercise of the power of local governments to impose taxes and fees. Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos , where the Basco case was similarly invoked for tax exemption, we stated: '[N]othing 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.' The fact that tax exemptions of government-owned or controlled corporations have been expressly withdrawn by the present Local Government Code clearly attests against petitioner's claim of absolute exemption of government instrumentalities from local taxation. SIHCDA Petitioner also contends that the term 'government-owned or controlled corporations' referred in P.D. 1931 covers only those not performing governmental functions. This argument is without legal basis for it reads into the law a distinction that is not there. It runs contrary to the clear intent of the law to withdraw from all units of the government, including government-owned or controlled corporations, their exemptions from taxes. Had it been otherwise, the law would have said so. Moreover, the trial court correctly pointed out that if indeed petitioner were not subject to local taxation, petitioner's charter would not have specifically provided for its exemption from the payment of real property tax. Its exemption therein therefore proves that it was only an exception to the general rule of taxability of petitioner. Given that said privilege was withdrawn by subsequent law, petitioner's claim for exemption from real property taxes for the entire assessed period fails." xxx xxx xxx The Secretary of Justice has no revisory or appellate authority over courts. (Secretary of Justice Op. No. 19, s. 1981; No. 72, s. 1998). It is likewise significant to note that in our Opinion No. 23, s. 1978 (reiterated in Opinion No. 130, s. 1984) we stated that P.D. No 242 vests in the Department of Justice the power to adjudicate only disputes between or among agencies and offices of the National Government , including government-owned or controlled corporations. We emphasized that the said decree "neither expressly nor impliedly includes disputes between or among municipal corporations or in which any local government entity is a party . If there had been any intention to include such disputes within the ambit of the Decree, municipal corporations would have been expressly mentioned in the law, in the same manner that government-owned or controlled corporations are expressly mentioned therein." ESCDHA Considering that, as you stated there have been an avalanche of assessments and demands from the local government units against PPA for payment of real estate taxes, any ruling/position that this Department may render on this matter will necessarily affect the concerned local government units which made the said assessments/demands against PPA for payment of real estate taxes. Aside from what has been stated in our earlier opinion, Section 66, Chapter 14, Book IV of the Administrative Code of 1987, likewise provides that the said Chapter does not apply to disputes involving the Congress, the Supreme Court, the Constitutional Commissions, and local governments . Very truly yours, (SGD.) RAUL M. GONZALEZ Secretary