Publishing Budget Circular No. 289 and Finance Circular No. 2-78, the Subject Matter of which are the Guidelines, Instructions and Rules and Regulations on the Implementation of Section 23 of Presidential Decree No. 1177 and Opinion No. 133, S. 1977 of the Secretary of Justice

November 7, 1978 REVENUE MEMORANDUM CIRCULAR NO. 095-78 SUBJECT : Publishing Budget Circular No. 289 and Finance Circular No. 2-78, the Subject Matter of which are the Guidelines, Instructions and Rules and Regulations on the Implementation of Section 23 of Presidential Decree No. 1177 and Opinion No. 133, S. 1977 of the Secretary of Justice TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, quoted hereunder is the joint Budget Circular No. 289 and Finance Circular No. 2-78: "Republic of the Philippines BUDGET COMMISSION Manila BUDGET CIRCULAR NO. 289 AND FINANCE CIRCULAR NO. 2-78 TO : All Units of Government, including Government-owned or Controlled Corporations and Others Concerned. SUBJECT : Guidelines, Instructions and Rules and Regulations on the Implementation of Section 23, Presidential Decree No. 1177. The following rules and regulations are hereby issued pursuant to Section 89 of Presidential Decree No. 1177 governing tax and duty exemptions of all units of government, including government-owned or controlled corporations as provided under Section 23 of the said Decree: 1. All units of government, including government-owned or controlled corporations, entitled to and qualified for the tax and duty exemptions under subsisting laws are governed by these rules and regulations. 2. Income taxes, import duties, and all other fees, taxes and charges due the national government as imposed by revenue laws, are covered by this Circular. 3. All government units including government-owned or controlled corporations, shall be liable for all forms of taxes, duties, fees and other charges due the national government, including those imposed under Sections 113-190 of the National Internal Revenue Code, as amended, and Section 101 of the Tariff and Customs Code, as amended. These payments shall accrue to the General Fund. 4. All units of government, including government-owned or controlled corporations, which are exempted by law from the payment of taxes, duties and fees shall be entitled to either a tax subsidy or payments constituting equity contribution as may be determined in accordance with paragraph 8 hereof, chargeable to the "General Fund Adjustments" provided by the General Appropriations Decree. However, in the case of importations, the tax subsidy or contributions equity shall be granted only if the commodity/goods involved are not locally available or highly essential as determined by both the Budget Commission and the Department of Finance. 5. Revenue-collecting agencies of government shall assess the government unit/corporation for the full amount of taxes, duties, fees and other charges and shall require all such government unit/corporations to comply with standard policy and procedure in the assessment and collection of amounts due the National Government. 6. Any unit of government, including government-owned or controlled corporations, who are entitled to either a subsidy or equity contribution shall not be required to pay cash or equivalent. The revenue-collecting agencies shall instead issue a "payment compliance certificate" indicating the nature of the assessment and amount due. These Certificates shall be compiled and summarized by the revenue agencies and forwarded at the end of each quarter to the Budget Commission as part of Work and Financial Plan. However, government units, including government-owned or controlled corporations which import commodities/goods that are locally available shall pay the taxes, duties and fees due thereon. 7. The Work and Financial Plan shall be the basis for the preparation of an Advice Allotment which shall be issued to the Bureau of Treasury, chargeable to the "General Fund Adjustments." The Bureau of Treasury shall record the release simultaneously as Income of the General Fund and shall sub-allot the same to the individual government/unit/corporation concerned. 8. The sub-allotment to individual government unit/corporation shall be recorded as an investment of the national government in the capital stock of the corporation or as a subsidy. For this purpose, the Secretary of Finance shall classify government-owned or controlled corporations in two categories: the first to consist of established corporations which shall take up the amounts as equity inputs, and the second to consist of the developing corporations which shall take up the amounts as subsidy. 9. No actual remittances of cash or cash instruments by the Bureau of Treasury shall be made in the process and the subsidy or equity contribution involved shall be effected through journal vouchers or their equivalent. 10. This Circular hereby amends Department Order No. 6-78 issued by the Department of Finance accordingly. 11. These rules and regulations shall take effect immediately. (SGD.) CESAR VIRATA (SGD.) JAIME C. LAYA Secretary of Finance Acting Commissioner of the Budget May 9, 1978" "OPINION NO. 133, S. 1977 November 23, 1977 The Deputy Executive Director and Officer-in-Charge National Tax Research Center First BF Condominium Building Aduana St., Intramuros, Manila Sir: This refers to your request for opinion on certain questions concerning the implementation of Section 23 of P.D. No. 1177 (otherwise known as "The Budget Reform Decree of 1977"), which reads: "Sec. 23. Tax and Duty Exemptions . All units of government, including government-owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws: Provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due: Provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund" Particularly, your questions are: 1. Did the above-mentioned provisos of PD 1177 (referring to section 23, supra) repeal the charters of government-owned or controlled corporations such that even those with tax exemption provisos are now required to pay the taxes and other impositions imposed by existing revenue laws? Yes 2. For a government-owned or controlled corporation to be entitled to subsidy provided in said section 23, is it necessary that said entities must be enjoying tax exemption privileges at the time PD 1177 took effect? No I think section 23, supra , has the effect of withdrawing from government-owned or controlled corporations the tax exemptions granted in their respective charters. For I see this provision as a clear and unequivocal expression of the legislative intent to subject all units of government including government-owned or controlled corporations to the payment of all taxes, duties and fees imposed under revenue laws. Therefore, the charter of any government corporation which provides for the exemption of the particular corporation from any tax, duty or fee should to the extent of the imposition of the exemption be deemed repealed by P.D. No. 1177. This is in consonance with the rule that prior special laws (the tax exemption provision in the charter) may be repealed by implication upon the enactment of a later general statute (P.D. No. 1177) where the legislative intent to effectuate a repeal is unequivocably expressed (Sutherland, Statutes and Statutory Constitution, Vol. 1, p. 487). In this connection, it might interest you to know that this Office has been reliably informed by the Department of Finance that said department is already enforcing the provisions of the Tariff and Customs Code against all government-owned or controlled corporations, regardless of whether or not they have been enjoying exemptions under their respective charters. As to query No. 2, I think that any government corporation which is exempt by law from tax or duty may ask for the subsidy mentioned in the first proviso of section 23, supra . And considering that P.D. No. 1177 is aimed at the "institutionalization of budgetary innovations of the New Society" (see its title and 4th preambulatory clause) and is designed to regulate the national budgeting process (see 1st, 2nd, 3rd preambulatory clauses), there would be no reason for differentiating between government corporations which were already enjoying the tax exemption privileges at the time said P.D. took effect and those which are later granted such exemption, for purposes of carrying out the abovestated purposes of the decree. Indeed, these purposes would not be realized, but on the contrary would be defeated, by an interpretation which would limit the operation of the proviso in question to the former. Accordingly, the second query is answered in the negative. Please be guided accordingly. Very truly yours, (SGD.) VICENTE ABAD SANTOS Secretary of Justice All internal revenue officers and others concerned with the enforcement of internal revenue laws, are hereby enjoined to be guided accordingly and to give this circular as wide a publicity as possible. cdt EFREN I. PLANA Acting Commissioner