DOJ Opinion No. 070, s. 1999

DOJ OPINION NO. 070 , s. 1999 September 6, 1999 Director General Lilia De Lima Philippine Economic Zone Authority Roxas Blvd., corner San Luis St. Pasay City M a d a m : Reference is made to a request for this Department to render an opinion on the issue on whether or not the Philippine Economic Zone Authority (PEZA) is liable to pay the real property taxes assessed by the City of Lapu-Lapu. It is stated that the basis upon which the local government of Lapu-Lapu City made an assessment of real property taxes are Sections 193, 234 and 534 of the Local Government Code of 1991 (R.A. No. 7160), which in effect made a sweeping withdrawal of tax exemption privileges, thereby granting local government units the power to collect realty taxes. It is PEZA's position that it is not liable to pay realty taxes, as it is exempt, being a government agency exercising governmental functions, and pursuant to Presidential Decree No. 66, which granted EPZA (now PEZA) tax exemptions, specifically, exemption from local taxes as stated in Section 21, paragraph (b) of said presidential decree. The pertinent provisions of Republic Act No. 7160 (1991), otherwise known as the Local Government Code read as follows: "SECTION 193. Withdrawal of Tax Exemption Privileges . Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations except local water districts, corporations duly registered under R.A. No. 6938, non-stock and non-profits hospitals and educational institutions are hereby withdrawn upon the effectivity of this Code. xxx xxx xxx "SECTION 234. Exemption from Real Property Tax . The following are exempted from payment of the real property tax: xxx xxx xxx Except as provided herein, any exemption from payment of real property tax previously granted to, or previously enjoyed by all persons, whether natural or juridical, including all government owned or controlled corporations are hereby withdrawn upon the effectivity of this Code". "SECTION 534. Repealing Clause . xxx xxx xxx (f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly." On the other hand, the provisions of P.D. No. 66, R.A. No. 7916 (1995) and E.O. No. 282 (1995) read insofar as pertinent, viz: "SECTION 2. Creation of an Export Processing Zone Authority . To carry out the above policy, there is hereby created a body corporate to be known as the Export Processing Zone Authority, hereinafter referred to as the Authority, which shall be under the direct supervision of the Office of the President. The functions of the Authority are hereby declared governmental."(P.D. No. 66) xxx xxx xxx "SECTION 21. Non-profit Character of the Authority; Exemption from Taxes . . . . In consonance therewith, the Authority is hereby declared exempt : xxx xxx xxx (b) From all taxes, franchise taxes, realty taxes and all kinds of taxes and licenses to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities;" (P.D. No. 66). "SECTION 11. The Philippine Economic Zone Authority (PEZA) Board . xxx xxx xxx The existing Export Processing Zone Authority (EPZA) created under Presidential Decree No. 66 shall evolve into the PEZA in accordance with the guidelines and regulations set forth in an executive order issued for this purpose" (R.A. No. 7916). "SECTION 1. Assumption of EPZA's Powers and Functions of PEZA . All the powers, functions and responsibilities of EPZA as provided under its Charter, Presidential Decree No. 66, as amended, insofar as they are not inconsistent with the powers, functions and responsibilities of the PEZA, as mandated under Republic Act No. 7916, shall hereafter be assumed and exercised by the PEZA. Henceforth, the EPZA shall be referred to as the PEZA" (R.A. No. 7916). EPZA (now PEZA) under its Charter, P.D. No. 66 was declared exempt from payment of taxes, including realty taxes to be paid to the National Government, its provinces, cities and municipalities and other government agencies and instrumentalities. The said exemption was granted in consonance with its mandate to devote and use its returns from its capital investments and excess revenues from operations for its development, maintenance and operation, to pay its indebtedness and obligations (see Section 21) and to implement the policy of the government to encourage and promote foreign commerce (see Section 1). It bears stress that Section 21 of P.D. No. 66 specifically exempted EPZA (the Authority) from payment of local taxes. R.A. No. 7916, otherwise known as "The Special Economic Zone Act of 1995", created the PEZA and provided for the evolution of EPZA into PEZA, a body corporate attached to the Department of Trade and Industry. While the same law granted certain tax exemptions and fiscal incentives to business establishments operating within the ecozones, it is silent on realty tax exemption previously enjoyed by EPZA under P.D. No. 66, which was however, withdrawn upon the effectivity of the Local Government Code. It is worthy to note that Section 24 of R.A. No. 7916 states that: ". . . 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. This five percent (5%) shall be charged and distributed as follows: (a) Three percent (3%) to the national government; (b) One percent (1%) to the local government units affected by the declaration of the ECOZONE;. . ." The above-quoted exemption only applies to enterprises under PEZA. It did not exempt PEZA from local taxation as distinguished from the exemption granted to EPZA under P.D. No. 66. In enacting a statute, the legislature is presumed to have been aware of, and have taken into account, prior laws on the subject of legislation (Statutory Construction by Ruben Agpalo p. 194). Furthermore, exemptions from taxation are not favored in law, nor are they presumed. They must be expressed in clearest and most unambiguous language and not left to mere implications (Commissioner of Internal Revenue v. Visayan Electric Co., 23 SCRA 715 [1968]). Although PEZA's functions are governmental and should therefore be exempted from local taxes, P.D. No. 66 on the contrary, expressly provided that the exemptions in Section 21 "may however be entirely or partially lifted by the President of the Philippines upon recommendation of the Secretary of Finance . . . if the President shall find the Authority to be self-sustaining and financially capable by then to pay such taxes, customs duties and other charges, after providing for debt service requirements of the Authority and its projected capital and operating expenditures (see Section 21, paragraph 2). With the enactment of R.A. No. 7160 or the Local Government Code, it is believed that PEZA is no longer exempt from payment of realty taxes. cdpr The power to collect realty taxes has been granted to a local government unit and that power has to be interpreted liberally in its favor (The Local Government Code of 1991, The Key to National Development by Aquilino Q. Pimentel, Jr., p. 20). Moreover, in the case of Mactan Cebu International Airport Authority vs. Marcos (261 SCRA 667) cited in this Department's Opinion No. 72, s. 1998 the Supreme Court held that "[s]ince the last paragraph of Section 234 (Exemptions from Real Property Tax) unequivocably withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemptions from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn." dctai Please be guided accordingly. Very truly yours, (SGD.) JUSTICE SERAFIN R. CUEVAS Secretary