Privileges and Tax Exemptions Granted to Airlines with Congressional Franchise

DOJ OPINION NO. 080, s. 2008 December 9, 2008 Deputy Executive Director Porvenir P. Porciuncula Officer-In-Charge Civil Aeronautics Board Old MIA Road, Pasay City Sir : This refers to your request for clarification and guidance as regards the privileges and tax exemptions granted in the Congressional franchise granted to a number of airlines operating in the Philippines. You state that Presidential Decree No. 1590, which granted Philippine Airlines (PAL) a Congressional franchise to operate International and Domestic Transportation Services for a period of fifty (50) years from June 11, 1978, also granted said airline the following tax privileges, which, insofar as pertinent to the query, provides: "Section 13. . . . xxx xxx xxx The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature or description, imposed, levied, established, assessed, or collected by any municipal, city, provincial or national authority or government agency, now or in the future, including but not limited to the following: DHECac xxx xxx xxx." Likewise, you state that the Congressional franchise granted to other airlines, while not containing the specific provisions on tax privileges as stated above, contains a provision extending the same benefit to these airlines, to wit: "In the event any competing individual, partnership and corporation receive and enjoys tax privileges which tend to place the grantee herein at any disadvantage, then such provisions shall be deemed part hereof and operate equally in favor of the grantee". On the other hand, it is stated that your Office does not collect or charge fees from the airlines in view of the above-quoted provisions in their franchise which is contrary to the clear and express provision found in Section 51 1 of Republic Act No. 776. 2 It is thus your view that the privileges granted to airlines with Congressional franchise should be limited to taxes or duties on importation of aviation fuel and equipment and should not extend to administrative fees or filing fees which are in exchange for the services rendered by your Office in the discharge of its functions. Although, in line with well settled precedents, the Secretary of Justice, as Attorney General, does not pass upon issues which, as in this case, do not only affect the substantive rights of private parties, i.e., the affected airline firms, hence, justiciable in nature, 3 but raised by subordinate officials who should have consulted first their chief or head of office who may competently resolve the issue without seeking assistance from another office, 4 we shall take exception thereto considering that the issue is raised in connection with the implementation of a provision of the Charter of that Office. We resolve the query in the negative. The basic rule in statutory construction is that when the words and phrases of a statute are clear and unequivocal, their meaning must be determined from the language employed and the statute must be taken to mean exactly what it says. Words of a statute will be interpreted in their natural, plain and ordinary acceptation and signification, unless it is evident that the legislature intended a technical or special legislative meaning to those words. 5 The language used, and the clear and unequivocal intention of the Legislature when it enacted PAL's franchise is that the tax that it will pay is to answer for all other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature or description, that any municipal, city, provincial or national authority or government agency may impose. These include administrative fees that may be collected by any government agency in the conduct of the airline business. Further, being later laws, P.D. No. 1590 and the other airline franchises enacted by Congress, is the latest expression of the legislative will and therefore controlling over R.A. No. 776. Parenthetically, it may be of importance to note that Section 1, Article III of the 1987 Constitution which insofar as pertinent provides that ". . ., nor shall any person be denied the equal protection of the laws". This is commonly referred to as the equal protection clause which has been described in the following manner: ESacHC "The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of inequality, . . . . It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, reasonable grounds exists for making a distinction between those who fall within such class and those who do not." 6 In enacting the Congressional franchises of airlines, it was the intention of Congress to level the playing field in the airline industry for all airline franchise holders. This is true with respect to both taxes and privileges being enjoyed by airlines with Congressional franchises. Likewise, the "most favored treatment clause", by virtue of which holders of similar airline Congressional franchise, were able to enjoy the same benefits granted to PAL, this Office had, on several occasions opined, to wit: "The basic idea of the aforesaid clause is "fair play", such that a rival firm will not gain an undue or unfair advantage over the other in the pursuit of their respective competing business. In other words, the purpose of the said clause is to place the holder thereof on an equal footing with its rival enterprise by not giving such competitors undue advantage." 7 By placing the franchise holders in equal footing, it gives them the opportunity to have free competition such that if a certain advantage, privilege or favor is given to a certain airline franchise holder, it must also be enjoyed by another airline franchise holder. This is necessary so as not to violate the "equal protection clause" of the 1987 Constitution. Please be guided accordingly. Very truly yours, (SGD.) RAUL M. GONZALEZ Secretary Footnotes 1. SEC. 51. Other Fees. When any act of service has been performed or rendered by the Civil Aeronautics Board under the provisions of this Act for which no fee has been fixed by law, such fees shall be collected as may from time to time be prescribed by the Civil Aeronautics Administration or the Civil Aeronautics Board, as the case may be: Provided, however, That those to be prescribed by the Civil Aeronautics Administration shall be with the approval of the Department Head. DHESca 2. An Act to Reorganize the Civil Aeronautics Board and the Civil Aeronautics Administration. June 20, 1952. 3. Secretary of Justice Opinion No. 23, 19 & 8, current series. 4. Ibid., No. 12, 9 & 7, current series. 5. Id., No. 41, s. 2006 citing cases. 6. Ichong vs. Hernandez, 101 Phil. 1155, 1164 (1957). 7. Op cit., No. 20, current series; No. 37, s. 2006. TCcIaA