Philippine Amusement and Gaming Corporation v. Bureau of Internal Revenue
REITERATIONFacts
The Antecedents: The Philippine Amusement and Gaming Corporation (PAGCOR) operates under Presidential Decree (PD) No. 1869 (its Charter), which grants it a franchise to operate casinos. Section 13(2)(a) of the Charter provides that PAGCOR shall pay a 5% franchise tax on gross revenue from gaming operations 'in lieu of all kinds of taxes.' Conversely, Section 14(5) specifies that income from 'related services' (shows, entertainment, etc.) shall be considered separate and subject to income tax. Republic Act (RA) No. 9337 subsequently amended the National Internal Revenue Code (NIRC), removing PAGCOR from the list of Government-Owned or Controlled Corporations (GOCCs) exempt from corporate income tax. Procedural History: In a previous case (G.R. No. 172087, 2011), the Supreme Court upheld the constitutionality of RA No. 9337's removal of PAGCOR's exemption but voided the imposition of Value-Added Tax (VAT). Following this, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 33-2013, which subjected all of PAGCOR's income—both from gaming and related services—to both the 5% franchise tax and the corporate income tax. PAGCOR filed a 'Motion for Clarification' in the original case, which the Court re-docketed as a new petition for certiorari under Rule 65. The Petition: PAGCOR argues that RMC No. 33-2013 is an erroneous interpretation of the 2011 Decision. It contends that its gaming income remains subject only to the 5% franchise tax under its special Charter, which was not repealed by RA No. 9337. It further argues that only its income from related services should be subject to corporate income tax, and that subjecting the same income to both taxes constitutes an illegal expansion of the law.
Issue(s)
Whether PAGCOR's tax privilege of paying 5% franchise tax in lieu of all other taxes with respect to its gaming income was repealed by RA No. 9337. Whether PAGCOR's gaming income is subject to both 5% franchise tax and corporate income tax. Whether PAGCOR's income from related services is subject to both corporate income tax and 5% franchise tax.
Ruling
The Petition is GRANTED. The Court ORDERS the respondent Bureau of Internal Revenue to cease and desist the implementation of RMC No. 33-2013 insofar as it imposes: (1) corporate income tax on PAGCOR's income derived from its gaming operations; and (2) franchise tax on PAGCOR's income from other related services.
Ratio Decidendi
On Issue 1: The Court held that PAGCOR's income from gaming operations is subject only to the 5% franchise tax. This is because PD No. 1869 is a special law that provides a specific tax regime for PAGCOR's gaming activities, stating the franchise tax is 'in lieu of all kinds of taxes.' RA No. 9337, being a general law amending the NIRC, did not expressly repeal Section 13(2)(a) of PD No. 1869. The withdrawal of the income tax exemption in RA No. 9337 only applied to the general exemption previously granted under Section 27(C) of the NIRC. Since the gaming income's tax-exempt status exists independently in the Charter, it remains unaffected by the general amendment to the NIRC. On Issue 2: The Court clarified that gaming income is not subject to corporate income tax. Applying the principle of 'Lex Specialis Derogat Legi Generali,' the special charter prevails over the general tax code. The Court noted that if the legislature had intended to withdraw the tax exemption for gaming income, it should have amended PD No. 1869 expressly in RA No. 9487 or mentioned it in the repealing clause of RA No. 9337. Because the repealing clause of RA No. 9337 specifically mentioned other special laws but omitted PAGCOR's Charter, the exemption for gaming income stands. Therefore, the BIR's attempt to impose corporate income tax on these specific earnings is without legal basis. On Issue 3: Income from related services is subject to corporate income tax but not the franchise tax. Section 14(5) of PD No. 1869 explicitly excludes such income from the 5% franchise tax base, considering it separate income. While RA No. 8424 previously provided a general exemption for PAGCOR, RA No. 9337 effectively withdrew that exemption. Consequently, the original tax liability for related services under the Charter was merely reinstated by the enactment of RA No. 9337. The BIR committed grave abuse of discretion by attempting to impose the franchise tax on these related services, as the Charter itself forbids it.
Main Doctrine
The Court established that the withdrawal of a general tax exemption under the National Internal Revenue Code (NIRC) does not automatically repeal a specific tax privilege granted under a special charter. Specifically, the Philippine Amusement and Gaming Corporation's (PAGCOR) 5% franchise tax 'in lieu of all taxes' for gaming operations remains valid because Republic Act (RA) No. 9337 did not expressly repeal the relevant sections of Presidential Decree (PD) No. 1869. This follows the principle that a special law prevails over a general law, regardless of the dates of passage, unless there is a clear legislative intent to repeal the special law. Consequently, PAGCOR's income is bifurcated: gaming income is subject to franchise tax, while related services income is subject to corporate income tax.