Philippine National Railways (2)

December 21, 2007 FIRB RESOLUTION NO. 021-07 SUBJECT MATTER : Philippine National Railways (2) WHEREAS, the Philippine National Railways (PNR) is a state-owned railway system, organized under the Department of Transportation and Communications (DOTC) as an attached agency, and is also a part of the Strong Republic Transit System (SRTS) and an overall public transport system in the metropolis; STaAcC WHEREAS, the PNR had experienced serious operational problems and financial difficulties in the past, thus resulting in its not being able to pay its tax obligations to the Bureau of Internal Revenue (BIR) which accumulated from January 1996 to December 2006; WHEREAS, Section 80 of the National Internal Revenue Code (NIRC) and its implementing Revenue Regulations hold the employer, the PNR, liable for the withholding and unremitted taxes on its employees' salaries and other transactions entered into by it, as a result of its operations; HSaEAD WHEREAS, the PNR does not still have the financial capacity to assume the said tax liability without further impairing its railway operations; WHEREAS, Section 14 of the General Appropriations Act which is the enabling provision for the tax subsidy to government-owned and -controlled corporations (GOCCs) such as the PNR does not specify whether the taxes to be covered by said tax subsidy have to be direct tax liabilities of the GOCCs; NOW, THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, to approve the application for tax subsidy of the PNR in the amount of P206,001,556.06 only, exclusive of interests, penalties and compromise payments, broken down as follows: I. Expanded Withholding Tax Year Amount of Tax 1996 941,583.78 1997 2,359,061.20 1998 1,327,658.94 1999 8,676,414.55 2000 821,700.00 2001 2,747,795.85 2002 3,993,890.22 2003 1,148,430.73 2004 2,770,734.40 2005 2,156,287.83 2006 3,555,315.18 Total P30,498,872.68 =========== II. Withholding Tax on Compensation Year Amount of Tax 1996 10,461,550.00 1997 15,883,600.00 1998 17,386,350.00 1999 14,295,792.28 2000 12,743,359.60 2001 12,921,844.46 2002 19,824,100.23 2003 20,008,452.62 2004 19,305,425.10 2005 17,090,130.93 2006 15,582,078.16 Total P175,502,683.38 ============ Grand Total P206,001,556.06 ============ Provided, however, That the grant of the aforementioned tax subsidy shall be without prejudice to any criminal liabilities on the part of the PNR, pursuant to Section 272 of the NIRC: Provided, further, That the availment of such tax subsidy shall be in accordance with the terms and conditions of Section 14 of the 2007 General Appropriations Act, subject to the availability of funds therefor, pursuant to the terms and conditions of the Rules and Regulations to Implement the Subsidy Provision under Executive Order No. 93. THcaDA should not be taken as a precedent (SGD.) GIL P. MONTALBO Director Department of Budget only to the extent of what is due to NA for the account of PNR in accordance with the NIRC (SGD.) ELMER C. HERNANDEZ Undersecretary Department of Trade and Industry Not endorsed. This involves a policy issue that should have been discussed by the Board. This is precedent setting . . . other GOCCs may invoke (SGD.) MARGARITA R. SONGCO Deputy Director-General National Economic and Development Authority (SGD.) JAMES H. ROLDAN Assistant Commissioner Bureau of Internal Revenue (SGD.) ANGELITO G. URSABIA Director Bureau of Customs (SGD.) LINA D. ISORENA Executive Director Head, FIRB Secretariat National Tax Research Center (SGD.) GIL S. BELTRAN Undersecretary of Finance Presiding Officer FIRB