Power of ZAMBOECOZONE to Dispose of Its Properties to Private Individuals without Payment of Taxes

DOJ OPINION NO. 045 , s. 2007 July 25, 2007 Hon. Georgina P. Yu Chairman and Administrator Zamboanga Special Economic Zone Authority San Ramon, Zamboanga City Madam : This has reference to your request for confirmation of your opinion that the Zamboanga Special Economic Zone Authority (AUTHORITY, for brevity) has the power to dispose of properties, real and/or personal, located within the Zamboanga Special Economic Zone (ZAMBOECOZONE, for brevity) to private individuals without payment of taxes attendant to regular sale and/or personal property. The request, it appears, is raised in connection with the provisions of Republic Act 7903 1 which pertinently read, to wit: Section 7. Powers and Functions of the ZamboEcozone Authority . The ZamboEcozone Authority shall have the following functions: xxx xxx xxx (k) to adopt, alter, use a corporate seal; make contracts, lease, own or otherwise dispose of personal or real property ; sue and be sued; and otherwise carry out its functions and duties as provided for in this Act; xxx xxx xxx Section 8. Non profit character of the ZamboEcozone Authority . The ZamboEcozone Authority shall be non-profit and shall devote the use of its returns from capital investments, as well as excess revenues from its operations, for the development, improvement and maintenance and other related expenditures of the ZamboEcozone Authority to pay its indebtedness and obligations and in furtherance and effective implementation of the policy provided in this Act. In consonance with this, the ZamboEcozone Authority is hereby declared exempt from the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or administrative proceedings in which it may be a party . DHcESI xxx xxx xxx. 2 You state that the AUTHORITY, a government-owned and controlled corporation, mandated by Republic Act 7903, is being developed into a decentralized, self-sustaining agro-industrial, commercial, financial, investment and tourist center and Freeport with suitable retirement and residential areas; and that in implementation of its mandate, the ZAMBOECOZONE is presently developing a retirement and residential resort dubbed as "Mar Y Monte Tropical Retirement and Residential Resort with Health and Wellness Center" aggressively promoting the same to Koreans, Japanese, Taiwanese, Chinese, Singaporeans, Fil-Americans and Fil-Canadians, some of whom are currently living outside the ZAMBOECOZONE. You also say that the AUTHORITY believes that, pursuant to the above-quoted provisions, it can validly dispose real and/or personal properties to private individuals without the need to pay taxes. Hence, the request. Well settled is the rule that where "a statute is clear and plain or readily understandable by any ordinary reader thereof, there is absolutely no room for interpretation or construction, only for application." 3 This plain meaning rule, or verba legis , derived from the 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. 4 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. 5 The provisions of R.A. No. 7903, quoted earlier, are clear and categorical not only on the power of the AUTHORITY to dispose real and/or personal property, i.e . land within the ZAMBOECOZONE, but also on its exemption privileges. Both power and privileges are, however, not absolute but are subject to limitations. In the exercise of its power " dominium " (which refers to lands held by the State in its proprietary character), the exploitation and use of lands and other natural resources, including their disposition, are limited by the Constitution, 6 specifically Section 10, Article XII thereof which provides: Section 10. The congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum , of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. CDTSEI In the grant of rights, privileges, and concessions covering national economy and patrimony, the State shall give preference to qualified Filipinos. The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities. In Manila Prince Hotel vs. GSIS, 267 SCRA 408 , the Supreme Court, interpreting the above-quoted constitutional provision, which is also known as the Filipino First Policy , stated that this provision is a positive command which is complete in itself and needs no further guidelines or implementing rules or laws for its operation; that it is per se enforceable; and that it means precisely that the Filipinos should be preferred, and when the Constitution declares that a right exists in certain specified circumstances, an action may be maintained to enforce such right. 7 Furthermore, Section 20 of the Implementing Rules and Regulations of RA 7903, insofar as material, reads, viz. : xxx xxx xxx General Land Use Plan The AUTHORITY shall draw up and publish a general land use plan specifying the general uses and economic activities to be promoted for different areas of the ZAMBOECOZONE and shall enforce said plan subject to such revisions as the AUTHORITY may deem necessary or appropriate to accomplish the policies and objectives of the Act. xxx xxx xxx On the matter of tax exemption privileges, Section 8 of RA 7903, is equally clear that the exemption applies only in connection with " any court or administrative proceedings in which the AUTHORITY may be a party ." Consequently, the privilege cannot be availed of in cases involving sale of real property. Like the provision on the power of the AUTHORITY to dispose real/personal property, the provision on the grant of exemption is also unequivocal enough as to require an interpretation. Additionally, cardinal rule in tax exemption is that it must be strictly construed such that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention 8 or simply put, the exemption must be clearly shown and based on language in the law too plain to be mistaken . 9 In the instant case, the claimed exemption is clearly not supported by the subject statutory provision. Please be guided accordingly. SHAcID Very truly yours, (SGD.) RAUL M. GONZALEZ Secretary Footnotes 1. Entitled: An Act Creating A Special Economic Zone and Free Port in the City of Zamboanga Creating for this Purpose the Zamboanga City Special Economic Zone Authority, Appropriating Funds Therefor, and for other Purposes. 2. Stress supplied. 3. Cebu Portland Cement Co. vs. Municipality of Naga , 24 SCRA 708 (1968); Luz J. Henson vs. IAC , G.R. No. L-72456, February 19, 1987. 4. Globe-Mackay Cable and Radio Corporation vs. NLRC , 206 SCRA 701,711. 5. Also, PNB vs. Garcia , 388 SCRA 485,491. 6. Outline Reviewer in Political Law, Antonio Eduardo B. Nachura, Sr., 2002, page 295. 7. Outline Reviewer in Political Law, Antonio Eduardo B. Nachura, Sr. 2002, page 296. 8. Surigao Consolidated Mining Co., Inc., vs. Collector of Internal Revenue, et al. , L-14878, Dec. 26, 1963. 9. Davao Gulf Lumber Corp., vs. CIR, et al. , G.R. No. 117359, July 23, 1998.