DOJ Opinion No. 100, s. 1988

DOJ OPINION NO. 100 , s. 1988 May 18, 1988 Sec. Vicente R. Jayme Department of Finance Manila Sir : This has reference to your request for "opinion on the legality of subsidy grant by the (Fiscal Incentives Review Board ["FIRB"]) after Congress has already convened". It is informed "that the grant of subsidy instead of tax and duty exemptions is precisely intended to achieve fiscal transparency on the part of the government and to avoid problems of leakages and abuses which characterize, tax and duty exemptions"; that the government has already set aside the Tax Expenditures Fund ("TEF") under the 1988 General Appropriations Act in the amount of P4.2 Billion from which the subsidy may be drawn; and that the FIRB has approved subsidy grants prior to the convening of Congress. prLL You opine that the FIRB's authority to grant subsidy "is quite apart from [its] power to restore tax and duty exemption" which was held unconstitutional by this Department in its Opn. No. 77, series 1987; and that said ruling "did not make any reference to the subsidy granting power of the FIRB." The legal basis for the grant of subsidy is Section 2 (e) of Executive Order No. 93 which states: "The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, is hereby authorized to: xxx xxx xxx "e) formulate and submit to the President for approval, a complete system for the grant of subsidies to deserving beneficiaries, in lieu of or in combination with the restoration of tax and duty exemptions or preferential treatment in taxation, indicating the source of funding therefor, eligible beneficiaries and the terms and conditions for the grant thereof, taking into consideration the international commitments of the Philippines and the necessary precautions such that the grant of subsidies does not become the basis for countervailing action." Under the foregoing provision of law, the FIRB is mandated to formulate a complete system for the grant of subsidies to deserving beneficiaries and thereafter, to submit the system to the President for approval. Needless to observe, the FIRB can implement the subsidy system only after it has been given presidential imprimatur. Under Joint Circular No. 4-87 dated April 1, 1987 issued by the Secretary of Finance, the Secretary of Budget and Management, and the Chairman of the Commission on Audit, a subsidy "refers to the expenditure chargeable against the TEF in favor of government entities to cover taxes and duties due the national government" (Sec. 2.6), while the TEF "refers to the fund provided in the General Appropriations Act to cover subsidy support for qualified beneficiaries (Sec. 2.1). FIRB's task, in this regard, is to determine whether a government or other entity is eligible for a subsidy by issuing to such entity a Certificate of Entitlement of Subsidy (Sec. 6.3). In arriving at such determination, it is understood that the FIRB shall use the criteria provided in the subsidy system which it formulated and which is subsequently approved by the President. It is thus clear from the foregoing that the FIRB's role in the operation of the tax subsidy system envisioned in E.O. No. 93 is limited only to determining which government or other entity shall be entitled to charge its tax and duty liabilities to the TEF and such determination shall be made in accordance with the guidelines and standards set by the President. In legal contemplation, therefore, it is the Congress and the President that are vested with the subsidy-granting authority inasmuch as it is the former which appropriates the funds for the subsidy, and it is the latter who determines the qualifications of those entitled to such subsidy. This subsidy-granting authority is merely implemented by the FIRB. While there may be an element of delegation of legislative authority in this case, it is well-settled that the power to ascertain the facts and circumstances under which the law shall apply may be validly delegated (Calalang vs. Williams, 70 Phil. 726). Finally, we agree with your view that the power to grant subsidies is distinct from the power to restore tax exemptions since, as pointed out by an eminent authority, a subsidy is a legislative grant of money and not a form of taxation (Cooley, Taxation, 4th Ed., Vol. 1, p. 77). Accordingly, we find no legal objection to the practice of the FIRB in the grant of tax subsidies under E.O. No. 93, even after Congress has already convened, provided that the funds therefor have already been appropriated by the legislature and that the President has approved the guidelines for this grant to deserving beneficiaries. LexLib Very truly yours, (SGD.) SEDFREY A. ORDOEZ Secretary of Justice