Privileges That May Be Granted to Hanjin Heavy Industries and Construction Co., Ltd.

DOJ OPINION NO. 063, s. 2008 September 18, 2008 Secretary Cerge M. Remonde Presidential Management Staff Office of the President Malacaang, Manila Sir : This has reference to the instruction of the President for an opinion on "whether the Hanjin Heavy Industries and Construction Co., Ltd. (Hanjin) shall be accorded with all the privileges, benefits, advantages or exemptions granted to business establishments or industries operating within any economic zones in the country". The request, it appears, was precipitated by the issuance of Proclamation No. 1485, dated April 11, 2008, declaring PHIVIDEC Industrial Estate (PIE), in Misamis Oriental, where Hanjin is expected to operate, as a special economic zone. The subject presidential issuance, insofar as pertinent, provides that an area situated inside Phividec Industrial Estate, located at the Municipalities of Villanueva and Tagoloan, Province of Misamis Oriental is "create(d) and designate(d), subject to the provisions of Republic Act No. 7916, as amended . . . as a Special Economic Zone". Indubitably, the resolution of the issue raised would necessarily require a look into the pertinent provisions of the said R.A. No. 7916, otherwise known as the Special Economic Zone Act of 1995, as amended, thus: HAaScT Sec. 2. Declaration of Policy . It is the declared policy of the government to translate into practical realities the following State policies and mandates in the 1987 Constitution, namely: (a) " The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments ." (Sec. 20, Art. II) (b) "The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive." (Sec. 12, Art. XII) In pursuance of these policies, the government shall actively encourage, promote, induce and accelerate a sound and balanced industrial, economic and social development of the country . . . through measures that shall effectively attract legitimate and productive foreign investments. xxx xxx xxx Sec. 4. Definition of Terms . For purposes of this Act, the following definitions shall apply to the following terms: (a) "Special economic zones (SEZ)" hereinafter referred to as the ECOZONES, are selected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist/recreational, commercial, banking, investment and financial centers. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones, and tourist/recreational centers. xxx xxx xxx Sec. 24. Exemption from Taxes Under the National Internal Revenue Code . Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government. . . . . (stress supplied) Traversing the issue raised, in the light of the above-quoted provisions of R.A. No. 7916, it appears undeniable that Hanjin, a business enterprise expected to operate within the ECOZONE-declared PIE, may be extended all the benefits and incentives including tax exemptions given to business firms operating in special economic zones. Nothing is best settled in statutory interpretation than the rule or doctrine that when the law is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. The reason is because when the law is clear, interpretation does not apply only application (Pascual vs. Pascual-Bautista, 207 SCRA 561, 568) (Sec. of Justice Op. No. 51, s. 2007). This doctrine is based 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. ( Ibid. , Nos. 48 & 47, s. 2007) Indeed, the legislative intent is clear from the provisions of the "Special Economic Zone Act of 1995" that there is no need for any interpretation. Moreover, while the rule is that tax exemptions 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 or, simply put, the exemption is clearly shown and based on the language in the law too plain to be mistaken ( Id. , No. 45), Section 24 of R.A. No. 7916, earlier quoted provision is categorical enough to establish the true intent of the law. Besides, the fact that the legislature used negative, prohibitory words is significant. The rationale is because, unlike affirmative words which are considered directory (McGee vs. Republic , 94 Phil. 820), negative and prohibitory words are regarded as mandatory (see also Fule vs. Court of Appeals, 162 SCRA 446; 82 C.J.S. [Statutes] 377). Your query is, thus, answered accordingly. Very truly yours, (SGD.) RAUL M. GONZALEZ Secretary