G.R. No. 252965 /G.R. No. 254102, December 7, 2021
SAINT WEALTH LTD., AS REPRESENTED BY DAVID BUENAVENTURA & ANG LAW OFFICES, PETITIONER, VS. BUREAU OF INTERNAL REVENUE, HEREIN REPRESENTED BY HON. CAESAR R. DULAY, IN HIS CAPACITY AS COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE, AND JOHN DOES AND JANE DOES, AS PERSONS ACTING FOR, IN BEHALF, OR UNDER THE AUTHORITY OF RESPONDENTS, RESPONDENTS. [AND] MARCO POLO ENTERPRISES LIMITED, MG UNIVERSAL LINK LIMITED, OG GLOBAL ACCESS LIMITED, PRIDE FORTUNE LIMITED, VIP GLOBAL SOLUTIONS LIMITED, AG INTERPACIFIC RESOURCES LIMITED, WANFANG TECHNOLOGY MANAGEMENT LTD., IMPERIAL CHOICE LIMITED, BESTBETINNET LIMITED, RIESLING CAPITAL LIMITED, GOLDEN DRAGON EMPIRE LTD., ORIENTAL GAME LIMITED, MOST SUCCESS INTERNATIONAL GROUP LIMITED, AND HIGH ZONE CAPITAL INVESTMENT GROUP LIMITED, PETITIONERS, VS. THE SECRETARY OF FINANCE, IN THE PERSON OF CARLOS G. DOMINGUEZ III AND THE COMMISSIONER OF INTERNAL REVENUE IN THE PERSON OF CAESAR R. DULAY, RESPONDENTS.

FACTS

The consolidated cases involve petitions challenging the constitutionality of certain provisions of Republic Act No. 11494 , or the “Bayanihan to Recover As One Act” (Bayanihan 2), and related revenue issuances by the Bureau of Internal Revenue (BIR) concerning the taxation of Philippine Offshore Gaming Operators (POGOs). The petitioners are offshore gaming licensees. The assailed provisions of Bayanihan 2 (Sections 11(f) and (g)) imposed a 5% franchise tax on the gross gaming receipts or earnings derived from gaming operations by offshore gaming licensees. The petitioners argued, among other things, that these tax provisions were unconstitutional riders violating the “one subject, one title” rule. They also contended that offshore-based POGO licensees should not be subject to Philippine taxes as they are not doing business in the Philippines.

ISSUE

Whether the consolidated petitions should be granted, specifically on the grounds that: (1) the tax provisions in Republic Act No. 11494 (Bayanihan 2) are unconstitutional riders violating the “one subject, one title” rule; and (2) offshore-based POGO licensees are not doing business in the Philippines and thus not subject to the 5% franchise tax.

RULING

The Dissenting Opinion of Justice Leonen voted to DENY the consolidated petitions. The opinion held that:
1. The petitions were rendered moot by the passage of Republic Act No. 11590 , which subsequently amended the National Internal Revenue Code and codified the 5% franchise tax on POGO operations.
2. The assailed issuances are not unconstitutional. Republic Act No. 11494 enjoys a presumption of constitutionality, which the petitioners did not overcome.
3. Bayanihan 2 does not violate the “one subject, one title” rule. The title of the law, which includes providing funds for COVID-19 response, is broad enough to encompass the tax provisions on POGOs, as these provisions are germane to raising revenue for the statute’s purpose.
4. The 5% franchise tax is not a new tax. It was originally imposed by Presidential Decree No. 1869 on franchise holders of the Philippine Amusement and Gaming Corporation (PAGCOR). The BIR’s revenue circulars (RMC Nos. 102-17 and 78-2018) merely interpreted and clarified this existing tax measure and did not encroach on legislative power.
5. Offshore-based POGO licensees are doing business in the Philippines. By obtaining licenses from PAGCOR, entering into contracts with local agents, and setting up game servers in the country, they engage in continuous commercial dealings within the Philippines. Their activities are consummated here, making them subject to Philippine taxation. The tax is levied on the exercise of the privilege granted by the Philippine license, not merely on income.