DOJ Opinion No. 040, s. 1996

DOJ OPINION NO. 040 , s. 1996 April 22, 1996 Secretary Roberto F. De Ocampo Department of Finance Manila Sir : This has reference to your request for opinion as to when the Expanded Value-Added Tax (EVAT) may be levied, assessed and collected on those sectors mentioned under Section 17 of Republic Act No. 7716 (An Act Restructuring The Value-Added Tax [EVAT] System, Widening Its Tax Base and Enhancing Its Administration, And For These Purposes, Amending And Repealing The Relevant Provisions Of The National Internal Revenue Code, As Amended, And For Other Purposes). cdlex You state that Republic Act No. 7716 became effective on January 1, 1996 after the Temporary Restraining Order (TRO) which suspended the imposition of the EVAT was lifted; that Section 20, paragraph 3 of the said Act delays by two (2) years the imposition of the EVAT on the sectors mentioned under Section 17, in particular the actors, singers athletes, financial intermediaries not performing quasi-banking functions, freight service agencies and operators of sports facilities for amateur players; that due to the delayed implementation of the EVAT Law on account of the TRO it is your understanding that the applicability of the EVAT on the abovementioned sectors will follows two years after the lifting of the TRO or from January 1, 1996; that some lawyers at the Bureau of Internal Revenue (BIR), however, are of the opinion that "the reference point should be the original effectivity date of the law in June 1994, which implies that the EVAT shall become applicable on these sectors on June 1996"; hence, the instant request for "clarification" from this Department. The pertinent provisions of R.A. No. 7716 read as follows: "SEC. 17. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services . The value-added tax shall be levied, assessed and collected on the following, two (2) year after the effectivity of this Act : (a) Services performed in the exercise of profession or calling subject to the professional tax under the Local Government Code or Republic Act No. 7160, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage director; and professional athletes; (b) Services rendered by banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions; (c) Freight services rendered by international cargo vessels; and (d) The lease or use of sports facilities and equipment by amateur players, as provided under Republic Act No. 6847, except sports facilities and equipment which are exclusively or mainly for the private use of shareholders or members of the club or organization which owns or operates such sports facilities and equipment. Prior to their inclusion in the coverage of the value-added tax, the above services shall continue to pay the applicable tax prescribed under the present provisions of the National Internal Revenue Code, as amended. However, when public interest so requires, the President, taking into account the impact on the prices of goods and services, may upon the recommendation of the Secretary of Finance, exclude any of the above services from the coverage of the value-added tax : Provided, however , That in the event of the exclusion of any of the above services, the existing applicable tax under the provisions of the National Internal Revenue Code, as amended, shall continue to be paid on the service so excluded". SEC. 20. Repealing Clauses. xxx xxx xxx "Unless otherwise excluded by the President pursuant to Section 17 hereof, Sections 119 and 120 of the National Internal Revenue Code shall be repealed upon the expiration of two (2) years from the effectivity of this Act. During the period that the freight services rendered by international cargo vessels are not covered by the value-added tax imposed under this Act, said services shall pay a tax at a rate of three per centum (3%) of their quarterly gross receipts derived from outgoing cargoes. xxx xxx xxx "SEC. 21. This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation whichever comes earlier. Approved:May 5, 1994." Pursuant to Section 21, the EVAT law "shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation whichever comes earlier" Said law was published in the Malaya and Manila Bulletin on May 12, 1994 and on June 5, 1994, and was published in the August 1, 1994 issue of the Official Gazette. Indubitably, the EVAT law became effective on June 20, 1994 , or fifteen (15) days after its publication in the Manila Bulletin on June 5, 1994, as provided for in Section 21, above-quoted. The effectivity of the EVAT law was, however, suspended by the filing of several petitions for certiorari and prohibition questioning its constitutionality and the subsequent issuance by the Supreme Court of a TRO pending resolution of the issues raised therein. The EVAT law was ready for immediate implementation after the dismissal of the petitions and consequent lifting of the TRO, the exact date, as you state, being January 1, 1996. However, and with respect to the items covered by Section 17 thereof, the EVAT law shall apply to these items two years thereafter, that is, on January 1, 1998. While technically, the EVAT law may be said to be effective fifteen days following the completion of its publication as required under Section 21 thereof, however, the word "effective" means "in actual operation" (14 Words and Phrases, p. 150, citing Woods v. Reilly, Tex. Civ. App. 211 S.W. 2d 169, 170), and it is a fact that the EVAT law did not become operative on the date of its supposed effectivity on June 20, 1994 in view of the TRO issued by the Supreme Court in the petitions earlier mentioned. It has been held that where an injunction issued by a circuit court erroneously prevented the law from taking effect on the date fixed therein, the law shall be deemed suspended during this period and will become effective when the judgment of the Supreme Court holding the act valid shall become final (Wiseman v. Philipps, 84 S.W. 2d 91, 97). This ruling applies foursquare to the instant case. In this case, the issuance of the TRO by the Supreme Court stalled the implementation of R.A. No. 7716. It became operative after the rendition by the Supreme Court of its final judgment upholding the constitutionality of the EVAT Law. It bears emphasis that a final order or judgment is one which finally disposes the merits of a case leaving nothing more to be done by the Court in respect thereto except to proceed with the execution of the judgment (Johnson v. City of Rockford, 169 N. E. 2d 534, 536, 26 III. App. 2d 133; also Enriquez vs. Court of Appeals, 202 SCRA 287). Moreover, a close reading of Section 17 of R.A. No. 7716, specifically the last paragraph thereof which provides, that"[w]hen public interest so requires, the President taking into account the impact on the prices of goods and services, may, upon the recommendation of the Secretary of Finance, exclude any of the above services from the coverage of the value-added tax . . .", indicates that the sectors enumerated therein are treated by the Legislature as goods and services of special character which are to be covered by, or excluded from the coverage of, the EVAT law only after an assessment of its "impact on the prices of goods and services". The period of assessment provided by law is two (2) years from the effectivity of the law, the word "effectivity" clearly referring to the date it will become operative, for only when it becomes in actual operation may its impact on the prices of goods and services be assessed. Considering, therefore, the special nature and character of the goods and services mentioned in Section 17 and the evident purpose of the law in delaying the application thereof to such goods and services, there is no gainsaying that to levy, assess and collect the EVAT on such goods and services two (2) years after January 1, 1996, instead of January 1, 1994, would be more in keeping with the spirit and intent of the law. Time and again the Supreme Court has ruled that between two statutory interpretations, that which better serves the purposes of the law should prevail (Salenillas vs. Court of Appeals, 169 SCRA 829, 835). In the light of the foregoing, we agree with your position that the EVAT law will become applicable to those sectors mentioned in Section 17 of R.A. No. 7716 on January 1, 1998, or two years from January 1, 1996. cdll Very truly yours, (SGD.) TEOFISTO T. GUINGONA, JR. Secretary