GR 210689; (November, 2017) (Digest)
G.R. No. 210689 & G.R. Nos. 210704 & 210725, November 22, 2017
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. COMMISSIONER OF INTERNAL REVENUE, et al., and consolidated cases.
FACTS
The Philippine Amusement and Gaming Corporation (PAGCOR), a government instrumentality created under P.D. No. 1869, received from the Commissioner of Internal Revenue (CIR) a Formal Letter of Demand and Assessment Notices for deficiency income tax, Value-Added Tax (VAT), and Fringe Benefit Tax for taxable years 2005 and 2006, totaling approximately ₱5.9 billion. PAGCOR protested, arguing its tax exemption under its franchise, which states it shall pay only a 5% franchise tax “in lieu of all kinds of taxes.” The CIR contended that Republic Act No. 9337 , effective July 1, 2005, amended the National Internal Revenue Code (NIRC) by removing PAGCOR from the list of GOCCs exempt from income tax, thereby making it liable for corporate income tax. PAGCOR filed a petition for review with the Court of Tax Appeals (CTA).
ISSUE
The core issue is whether PAGCOR is liable for deficiency income tax and VAT for the taxable years 2005 and 2006, considering the interplay between its franchise under P.D. No. 1869 and the amendments introduced by R.A. No. 9337 to the NIRC.
RULING
The Supreme Court ruled that PAGCOR is liable for deficiency income tax but not for VAT for the years in question. The legal logic hinges on the principle that a later, general law does not impliedly repeal an earlier, special law unless the intent to repeal is clear and manifest. P.D. No. 1869 is a special law granting PAGCOR a specific tax regime—a 5% franchise tax in lieu of all other taxes. However, R.A. No. 9337 , which amended Section 27(C) of the NIRC by removing PAGCOR from the list of tax-exempt GOCCs, is a clear and express legislative act intended to withdraw PAGCOR’s income tax exemption. The Court found this express amendment to be a valid and specific revocation of that particular exemption. Therefore, for taxable years starting July 1, 2005, PAGCOR became subject to ordinary corporate income tax under the NIRC, in addition to its 5% franchise tax, as the “in lieu of all taxes” clause could no longer shield it from income tax.
Regarding VAT, the Court ruled PAGCOR remains exempt. The VAT law ( R.A. No. 9337 ) did not contain any provision expressly withdrawing PAGCOR’s exemption from indirect taxes like VAT. The franchise’s “in lieu of all taxes” privilege, being a special grant, was not impliedly repealed by the general VAT provisions. Thus, the 5% franchise tax continues to be in lieu of VAT and other indirect taxes. The CTA’s computations, which applied the franchise tax as a credit against gross income tax liability, were upheld as correct. The assessments were modified accordingly.