The Bureau of Internal Revenue has been stopped from enforcing its regulation subjecting the revenues of state-owned Philippine Amusement and Gaming Corporation to corporate tax.
The Supreme Court voided the BIR’s Revenue Memorandum Circular 33-2013 that could have taxed the revenues Pagcor gained from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and other related operations.
“It would be the height of injustice to impose franchise tax upon petitioner [PAGCOR] for its income from other related services without basis,” the SC ruled in a decision penned by Associate Justice Diosdado Peralta.
The tribunal made the ruling even as it clarified its 2011 decision that upheld the constitutionality of Republic Act 9337, which amended Section 27(c) of the National Internal Revenue Code and excluded PAGCOR from entities exempted from paying corporate income tax.
The SC pointed out that RA 9337 did not amend the PAGCOR charter, which subjects only its income from gaming operations to the five-percent franchise tax while its income from operation of other related services to income tax only.
According to the Court, Congress would have stated if it really intended to remove PAGCOR’s tax benefits under its charter.
“If no provision or amendment is stated in the franchise to effect the provisions of the general law (in this case RA 9337), it cannot be said that the same is the intent of the lawmakers, for repeal of laws by implication is not favored,” the high court stressed.
“In this regard, we agree with petitioner that if the lawmakers had intended to withdraw petitioner’s (PAGCOR) tax exemption of its gaming income, then [its charter] should have been amended expressly,” it added.
The SC said the BIR committed grave abuse of discretion when it issued RMC 33-2013 subjecting PAGCOR’s income from gaming operations and other related services to corporate income tax and five percent franchise tax.
“Such act constitutes an overreach on the part of the respondent [BIR] which should be immediately struck down, lest grave injustice results,” the SC ruled.
The BIR issued the assailed RMC 33-2013, believing it was consistent with the 2011 ruling of the SC.
In that ruling, the high court held that RA 9337 did not violate the equal protection clause because the legislative records showed that the exemption of PAGCOR from paying corporate income tax was due to its request, which was granted by the Congress’ Committee on Ways and Means.
