Clarification on the Provision on Franchise Tax under R.A. No. 8407

DOJ OPINION NO. 057, s. 2007 October 10, 2007 Hon. Rolando G. Andaya, Jr. Secretary Department of Budget and Management Malacaang, Manila Sir : This has reference to your request for a clarification of the provision of Section 12, Republic Act (R.A.) No. 8407, which pertinently provides, to wit: SEC. 12. Franchise Tax . In consideration of the franchise, the grantee shall pay into the National Treasury a franchise tax equal to twenty-five per centum (25%) of its gross earnings from the horse races authorized to be held under this franchise which is equivalent to the eight and one-half per centurn (8 1/2%) of the total wager fund or gross receipts on the sale of betting tickets during the racing day as mentioned in Section 8 hereof, allotted as follows: SITCEA xxx xxx xxx "(b) Five per centum (5%) for the province or city/municipality where the racetrack is located; "(c) Seven per centurn (7%) for the municipal hospital where the racetrack is located; xxx xxx xxx Specifically, you raise the following questions: DCASEc 1) Is the Provincial Government where the city/municipality belongs to also entitled to a share in the Five per centum (5%) VAT and not only the city/municipality where the racetrack is located? If yes, how much and how would the VAT share be distributed between them? 2) Does 12 (c) only refer to hospitals that are owned, managed and operated by a municipality where the racetrack is located to the exclusion of other hospitals situated in the same municipality which are owned, managed and operated by the province? Is the city or province that owns or manages the hospital entitled also to a share from the Seven per centum (7%) VAT? If yes, how much and how would it be distributed among them? CaTSEA The queries, it appears, are raised in connection with the Joint Circular that your Department in coordination with the Department of Finance, is drafting, to provide guidelines and procedures for the release of the shares of local government units (LGUs) from the Value Added Tax (VAT) collected from race track operations of the Manila Jockey Club, Inc. (MJCI) and the Philippine Racing Club, Inc. (PRCI), pursuant to R.A. Nos. 8407 and 7953, respectively. This Department regrets that it has to decline rendition of the opinion requested. First of all, the issues raised affect the substantive rights of private parties, particularly, the Manila Jockey Club, Inc. as well as the province or city/municipality where the racetrack is located and the municipal hospital situated therein, upon which this Department's opinion has no binding force and which might, in all probability, contest such opinion before all courts if it turns out to be adverse to their interests. This Department does not render opinion or give legal advice on matters that are justiciable or which may be the subject of a judicial controversy. 1 acTDCI Secondly, the Philippine Racing Commission (PRC) is the agency tasked with the enforcement of laws, rules and regulations. 2 By law and settled precedents, the Secretary of Justice refrains from expressing his views on matters that fall within the primary jurisdiction of another office or agency, in this case the PRC, over which, he exercises no revisory authority, unless requested by the office or agency concerned. This time-honored policy is dictated not only by practical considerations but also out of due respect and deference for the competence and expertise of the office or agency having primary jurisdiction to resolve the matters and for its familiarity with the policy repercussions of the issues, not to mention, the logical recognition of the lawful exercise of an authority conferred by law. 3 This is especially true where the agency that has jurisdiction over the issue has yet to express his/her views thereon. Considering the mandate of the law, they should first be accorded opportunity to express its views on the issue, which is clearly within its policy-sphere and jurisdiction, as said office is better situated not only to translate and explain the legislative intent and policy behind the law, but also to give proper meaning to such intent and policy. It is recommended that the queries should be addressed to the Philippine Racing Commission. IATSHE Please be guided accordingly. Very truly yours, (SGD.) AGNES VST DEVANADERA Acting Secretary Footnotes 1. Secretary of Justice Opinion No. 31, s. 2005. 2. Section 2. R.A. No. 8407. Authority of the Philippine Racing Commission and the Games and Amusements Board. The races to be conducted by the grantee shall be under the supervision and regulation of the Philippine Racing Commission, which shall enforce the laws, rules and regulations governing horse racing, including the framing and scheduling of races, the construction and safety of the racetrack, the allocation of prizes of winning horses, and the security of racing as provided in Presidential Decree No. 420, as amended: Provided, that the Games and Amusements Board shall continue to supervise and regulate betting in horse races as provided in Sections 6, 8, 11, 15 and 24 of RA. No. 309, as amended. 3. Secretary of Justice Opinion No. 76, s. 2006, citing opinions.