DOJ Opinion No. 040, s. 1990

DOJ OPINION NO. 040 , s. 1990 March 7, 1990 Mr. Conrado A. Limcaoco, Jr. Network General Manager People's Television 4 Quezon City Sir : This has reference to your request to the Department of Finance for exemption from customs duties and taxes, including the value-added tax, of forthcoming equipment assistance from the French government. It appears that the People's Television 4 is planning to upgrade its facilities to strengthen its capability as a nationwide development broadcasting network; that the said project was approved by the ICC Technical Committee and the NEDA Board; that the project cost consists of P248 million as French Government assistance and a Philippine Government counterpart of P94,505,445; that one of the requirements of the project is a provision for exemption from customs duties and taxes, including the value-added tax, of equipment covered by the assistance; and that upon your request, the Department of Finance made a commitment to exempt from custom duties and taxes the proposed importation of French equipment for the project. You now seek the "support" of this Department to your request for tax and duty exemption in view, it appears, of the Department of Finance's suggestion that our Office be consulted on "the legal implications on the proposed provisions of the agreement in the light of the provisions of the New Constitution." We shall refrain from passing upon the legal propriety of the grant of the tax and duty exemption in question since the Department of Finance has already ruled favorably thereon and settled precedents forbid us from reviewing the official actuations of a co-equal and coordinate department of government (Secretary of Justice Opns. No. 66, s. 1972; No. 99, s. 1978; and No. 204, s. 1989). We shall instead limit ourselves to examining the validity of such exemption in the light of the following provision of the 1987 Constitution, which is pertinent to the issue at hand, to wit: "No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of Congress." (Sec. 29[1], Art. VI). We believe that the foregoing constitutional provision is not an obstacle to the grant of exemption from the payment of taxes and customs duties on the equipment to be imported pursuant to an agreement between the French and Philippine governments. The exemption from customs duties for such importation is based upon the last paragraph of Section 105 of the Tariff and Customs Code, which provides: "The provisions of general and special laws, including those granting franchises, to the contrary notwithstanding, there shall be no exemptions whatsoever from the payment of customs duties except those provided for in this Code; those granted to government agencies, instrumentalities or government-owned or controlled corporations with existing contracts, commitments, agreements, or obligations (requiring such exemption) with foreign countries ; international institutions, associations or organizations entitled to exemption pursuant to agreements or special laws; and those that may be granted by the President upon prior recommendation of the National Economic and Development Authority in the interest of national economic development." (Italics supplied) prcd The said Code remains valid and subsisting, in accordance with Section 3, Article XVIII of the charter, which reads: "All existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked." It is true that the aforequoted constitutional provision requires that the existing laws, decrees and executive issuances should not be "inconsistent with this Constitution". But we believe that this phrase refers to the substantive provision of the charter and not to procedural matters, such as Section 29[1] of Article VI, supra , which prescribes a manner in which a tax exemption statute should be enacted. Verily, it could not have been the intention of the constitutional framers to require the examination of all extant laws granting tax exemptions to determine whether or not they were adopted by a majority of the members of the previous legislatures. The said constitutional procedure should apply only to grants of tax-exempt privileges by Congress under the present charter. As for the exemption of the subject importation from the value-added tax, this particular exemption appears to have been grounded upon Section 103 of the National Internal Revenue Code, as amended, which insofar as pertinent reads : "The following shall be exempt from the value-added tax: xxx xxx xxx (u) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory;" It is noted that the aforestated provision of law was incorporated in the Tax Code, pursuant to E.O. No. 273 dated July 25, 1987. While the said E.O. was issued after the effectivity of the Constitution, and, therefore, is not covered by the transitory provision in Section 3, Article XVIII of the fundamental law, abovequoted, still we are of the view that the tax exemption provisions of E.O. No. 273 are likewise valid and subsisting. The reason is that the procedural requirement prescribed in Section 29[1], Article VI, as previously observed, should apply only to those exemptions granted by the Congress. For obvious reasons, it has no relevance to tax exemption legislations issued by the President in the exercise of her legislative authority under Section 6, Article XVIII of the charter. prcd Please be guided accordingly. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary