DOJ Opinion No. 097, s. 2014

DOJ OPINION NO. 097, s. 2014 December 10, 2014 Mr. Jorge V. Sarmiento President & Chief Operating Officer Philippine Amusement and Gaming Corporation PAGCOR House, 1330 Roxas Boulevard Ermita, Metro Manila Dear Mr. Sarmiento : This refers to your request for opinion, forwarded to this Department by the Office of the Government Corporate Counsel (OGCC) via its 18 November 2014 letter, on whether the request of Mr. Takashiro Usui, Group CEO of Aruze Gaming Macau Limited (AGML), for the reversal of the 25% discount on the original price of the 398 units of slot machines that the Philippine Amusement and Gaming Corporation (PAGCOR) purchased from AGML may be given due course. The request, it appears, stemmed from the procurement and importation by PAGCOR, through direct contracting under Republic Act No. 9184, 1 from AGML of said slot machines at the price amounting to US$10,920,710.00, of which approximately US$605,060.00 had already been remitted by PAGCOR as of August 2013, representing the 19 monthly payments, with the balance US$10,315,650.00 expected to be recovered by June 2014. It also appears that in order to expedite collection, AGML proposed to amend the terms of payment, which included the offer of "25% discount on the remaining balance of payment" and the balance after the 25% discount to be payable in 12 monthly installment; that the said offer of discount was accepted/approved by the PAGCOR Board of Directors on October 22, 2013; that in response to the request of PAGCOR for opinion, the OGCC issued an Opinion (No. 20, s. 2014), dated February 11, 2014, stating that PAGCOR need not subject its suppliers to withholding tax on the ground of the latter's income tax exemption under P.D. No. 1869, as amended; and that PAGCOR's Accounting Department, however, continued to deduct 1% from the amount due AGML citing Bureau of Internal Revenue (BIR) Revenue Memorandum Circular No. 33-2013. Further, it appears that on August 26, 2014, AGML wrote PAGCOR raising the issue of withholding tax on payments made by PAGCOR claiming that, not being a licensed local supplier and the transaction being one of pure importation of electronic gaming machines from Macau, the corporate income tax under the National Internal Revenue Code (NIRC) finds no application; that AGML also requested the release of the June 2014 payment due it to avoid recognizing bad debts even as it offered to reverse the 25% discount granted to PAGCOR in October 2013 and bear the 30% final withholding tax if the tax issue is not settled immediately; and that OGCC, thereafter, issued a Supplemental Opinion advising PAGCOR to comply with RMC 33-2013 pending resolution by the Supreme Court of the Motion for Clarification earlier filed by it in the case commenced by it against the BIR. With regret, we have to decline to grant the opinion requested. It must be stressed, at the outset, that the resolution of the issue raised would inevitably require this Department to pass upon the issue subject of the Motion for Clarification filed in connection with the case pending before the Supreme Court. The Secretary of Justice, however, has consistently refrained from rendering opinion or giving legal advice on matters that are pending before the Supreme Court for to do so would not only be improper but also impractical since the ruling of this Department has no binding effect upon the courts. 2 AHEDaI Said opinion could likewise be construed as an unwarranted intrusion into the exercise of judicial powers and functions pertaining to a separate and coordinate branch of government and could subject this Department to criticism for violation of the independence of the judiciary. 3 Besides, even if we want to assist you on your request, we cannot. The rationale is because the resolution of your query would undeniably require an interpretation not only of the two issuances (RMC 33-2013 and RMO No. 23-2014) of the BIR relative thereto, but also of the provisions of the NIRC, including Section 27 (c) thereof, as amended by R.A. No. 9377, which are well within the jurisdiction of the Bureau of Internal Revenue, the government agency designated to implement the same. Pursuant to settled practice and precedents, the Secretary of Justice does not render opinion or express any comment on questions involving the interpretation or application of duly issued administrative rules and regulations, unless requested by the promulgating agency, since such matters are best left to the determination of the said agency by reason of its knowledge of the specific intent and purposes of the issuance and the extent of the application thereof. 4 Moreover, being essentially advisory in nature, the opinion of the Secretary of Justice need not bind the BIR, if that be its pleasure. As the government agency primarily responsible for the implementation, administration and enforcement of the National Internal Revenue Code, the said Bureau may, if it so decides, formally adopts the position it takes on the issues raised and assume responsibility therefor. 5 Furthermore, it is must be admitted that we cannot pass upon the issue herein raised without taking a look into the pertinent provisions of R.A. No. 9184. Unfortunately, however, the interpretation and application of the provisions of the Government Procurement and Reform Act (R.A. No. 9184) and its Implementing Rules and Regulations (IRR) fall within the mandate of the Government Procurement Policy Board (GPPB). The law gave the GPPB a broad legal mandate to "protect national interest in all matters affecting public procurement" (Sec. 63 [a], R.A. No. 9184). Vested with rule-making power (Sec. 63 [b], supra ), the GPPB has the competence and primary jurisdiction to apply and interpret the rules in resolving the issue, taking into account the policy repercussions of addressing the question involved. 6 Finally, the issue raised involves the substantive rights of a private party, i.e. , the AGML. Since the opinion of the Secretary of Justice is merely advisory in nature, such opinion would not be binding upon the private parties who may be adversely affected thereby and who may, in all probability, take issue therewith and contest the same before the courts. As a matter of policy, therefore, the Secretary of Justice has consistently refrained from rendering opinion on questions that are justiciable in nature or can be the subject of litigation before the courts. 7 TDcEaH Please be advised accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Department of Justice Footnotes 1. The Government Procurement Reform Act. 2. Sec. of Justice Op. No. 10, s. 2010. 3. Ibid. , Nos. 108, 98, 65 & 19, s. 2012. 4. Id. , No. 14, s. 2012; No. 45, s. 2011. 5. Id. , Nos. 14 & 3, s. 2012; Nos. 11, 10 & 1, s. 2011. 6. Id. , No. 75, s. 2012; No. 35, s. 2011. 7. Id. , Nos. 15, 9 & 7, s. 2012; Nos. 57, 56 & 54, s. 2011.