RA 9335: SC Upholds Attrition Act of 2005 Anew

sc.judiciary.gov.ph

The Supreme Court, voting unanimously, upheld the constitutionality of RA 9335, the Attrition Act of 2005, enacted to optimize the revenue-generation capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

RA 9335 also intends to encourage BIR and BOC officials and employees to exceed their revenue targets by providing a system of rewards and sanctions through the creation of a Rewards and Incentives Fund and a Revenue Performance Evaluation Board and covers all BIR and BOC officials with at least six months of service, regardless of employment status.

In a 24-page decision penned by Justice Martin S. Villarama, Jr., the Court dismissed for lack of merit the petition for certiorari and prohibition of the Bureau of Customs Employees Association (BOCEA).

“It must be noted that this is not the first time the constitutionality of R.A. No. 9335 and its IRR are being challenged. The Court already settled the majority of the same issued raised by BOCEA in our decision in Abakada, which attained finality on September 17, 2008. As such, our ruling therein is worthy of reiteration in this case,” the Court held.

The Court ruled that RA 9335 “read and appreciated in its entirety, is complete in all its essential terms and conditions, and that it contains sufficient standards as to negate BOCEA’s supposition of undue delegation of legislative power to the Board.”

On the argument that RA 9335 violates the equal protection clause, the Court reiterated its jurisprudence in Abakada where it held: “With respect to RA 9335, its expressed public policy is the optimization of the revenue-generation capability and collection of the BIR and the BOC. Since the subject of the law is the revenue-generation capability and collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should logically pertain to the said agencies….Both the BIR and the BOC are bureaus under the [Department of Finance] DOF. They principally perform the special function of being the instrumentalities through which the State exercises one of its great inherent functions – taxation. Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence, the classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands of equal protection.”

Likewise, the Court reiterated that RA 9335 does not violate the security of tenure of officials and employees of the BIR and the BOC. The Court ruled that a BIR or BOC official or employee in this case cannot be arbitrarily removed from the service without according him his constitutional right to due process as no less than RA 9355 in accordance with the 1986 Constitution guarantees this.    
   
Furthermore, the Court ruled that RA 9335 is not a bill of attainder. A bill of attainder, the Court explained, is a legislative act which inflicts punishment on individuals or members of a particular group without a judicial trial. The Court held that RA 9335 does not possess the elements of a bill of attainder nor seek to inflict punishment without a judicial trial but merely lays down the grounds for the termination of a BIR or BOC official or employee and provides for the consequences thereof. The democratic processes are followed and the constitutional rights of the concerned employee are amply protected.

Lastly, the Court held that BOCEA’s petition was “replete with allegations of defects and anomalies in allocation, distribution and receipt of rewards. While BOCEA intimates that it intends to curb graft and corruption in the BOC in particular and in the government in general which is nothing but noble, these intentions do not actually pertain to the constitutionality of R.A. No. 9335 and its IRR, but rather in the faithful implementation thereof. R.A. No. 9335 itself does not tolerate these pernicious acts of graft and corruption.” (GR No. 181704, Bureau of Customs Employees Association v. Sec. Teves, December 6, 2011)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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Taxation: Coco Levy Funds are Taxes, Investment of Public Funds

SC: Government Owns SMC Shares Bought from Coco Levy Funds

sc.judiciary.gov.ph

The Supreme Court, voting unanimously, affirmed the Sandiganbayan ruling that re-conveyed to the government shares in San Miguel Corporation (SMC) in the aggregate amount of P1.656 billion bought using coconut levy funds and registered in the names of the Coconut Industry Investment Fund (CIIF) and its holding companies.

In a 106-page decision penned by Justice Presbitero J. Velasco, Jr., the Court denied the consolidated petitions of the Philippine Coconut Producers Federation Inc. (COCOFED), et al. and Danilo S. Ursua, former COCOFED officer, assailing certain issuances by the anti-graft court that, among others, declared the coco levy fund-bought SMC shares as public funds.

“Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut levy funds – funds, which have been established to be public in character – it goes without saying that these acquired corporations and assets ought to be regarded and treated as government assets. Being government properties, they are accordingly owned by the Government, for the coconut industry pursuant to currently existing laws,” the Court ruled.

It held: “We sustain the ruling of the Sandiganbayan…that the CIIF companies and the CIIF block of SMC shares are public funds necessary owned by the Government. We, however, modify the same in the following wise: These shares shall belong to the Government, which shall be used only for the benefit of the coconut farmers and for the development of the coconut industry.”

The six CIIF Oil Mills were acquired by United Coconut Planters Bank (UCPB) using coconut levy funds. On the other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF Oil Mills. These 14 CIIF holding companies used borrowed funds from the UCPB to acquire the SMC shares in the aggregate amount of P1.656 billion.

The High Court also upheld the Sandiganbayan’s jurisdiction over the case at bar which was in the nature of a recovery of ill-gotten wealth case. It held that since these cases deal with the recovery of sequestered shares, property, or business enterprises claimed, as alleged in the corresponding basic complaints, to be ill-gotten assets of President of President Marcos, his cronies, and nominees, recovery of these assets “falls within the unquestionable jurisdiction of the Sandiganbayan.”

Citing COCOFED v. PCGG, the Court stressed that it has “already decided that the sequestered shares are prima facie ill-gotten wealth rendering the issue of the validity of their sequestration and of the jurisdiction of the Sandiganbayan over the case beyond doubt.”

The High Court further held that Sandiganbayan did not err when it struck down the constitutionality of Sections 1 and 2 of PD 755, Art. III, Sec. 5 of PD 961 and Art. III, Sec. 5 of PD 1468. Section 2 of PD 755 effectively authorized the Philippine Coconut Administration (PCA) to utilize portions of the Coconut Consumers Stabilization Fund (CCSF) to pay the financial commitment of the farmers to acquire UCPB and to deposit portions of the CCSF levies with UCPB interest free. A similar provision can be found in the other assailed sections. The Court held that the Sandiganbayan may pass upon the constitutionality of the above sections stressing “the present controversy cannot be peremptorily resolved without going into the constitutionality of these in particular.”


The High Court reiterated that the coconut levy funds are in the nature of taxes and can only be used for public purpose. Consequently, they cannot be used to purchase shares of stocks to be given for free to private individuals.

“We have ruled time and again that taxes are imposed only for a public purpose. They cannot be used for purely private purposes or for the exclusive benefit of private persons. The coconut levy funds were sourced from forced exactions decreed under PD 232, 276, and 582, among others, with the end-goal of developing the entire coconut industry,” the Court held. It added: “Clearly, to hold therefore, even by law, that the revenues received from the imposition of the coconut levies to be used purely for private purposes to be owned by private individuals in their private capacity and for their benefit, would contravene the rationale behind the imposition of taxes or levies.”

Citing Republic v. COCOFED, the Court also reiterated that the coconut levy funds are not only affected with public interest but are prima facie public funds.

“In sum, not only were the challenged presidential issuances unconstitutional for decreeing the distribution of the shares of stock for free to the coconut farmers and, therefore, negating the public purpose declared by PD 276, i.e., to stabilize the price of edible oil and to protect the coconut industry. They likewise reclassified, nay treated, the coconut levy fund as private fund to be disbursed and/or invested for the benefit of private individuals in their private capacities, contrary to the original purpose for which the fund was created,” the Court held.

The assailed purchase of UCPB shares of stocks using the coconut levy funds presents a classic example of an investment of public funds. The conversion of these special public funds into private funds by allowing private individuals to own them in their private capacities is something else, it noted.

The High Court likewise ruled that the COCOFED, et al. and Ursua were not deprived of their right to be heard nor their right to speedy trial violated contrary to their claims. (GR Nos. 177857-58, COCOFED v. Republic; GR No. 178193, Ursua v. Republic, January 24, 2012)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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SC: Angeles University Foundation Not Entitled to a Refund for Payment of Building Permit and Real Property Taxes

06 July 2012 - The Supreme Court affirmed the ruling of the Court of Appeals (CA) that Angeles University Foundation is not entitled to a refund for the payment of its building permit and locational clearance fees as well as real property taxes amounting to P 826,662.99, which it had paid under protest.

Earlier, the CA had reversed the decision of the Regional Trial Court of Angeles City, Branch 57 declaring Angeles University Foundation exempt from payment of building permit and other fees and ordering the City of Angeles to refund the same with interest at the legal rate. Angeles University Foundation sought for a refund on the ground that the building permit and other fees are really taxes considering they are used to generate revenue; and Sec. 193 of the Local Government Code of 1991 which provides that non-stock and non-profit educational institutions, such as itself, are exempt from payment of these types of taxes.

In the 16-page decision penned by Justice Martin S. Villarama, Jr., the Court's First Division unanimously held that CA committed no reversible error in finding Angeles University Foundation liable to pay the protested permit and fees since the exemption from payment of regulatory fees was not among the incentives granted it under RA 6055 (An Act To Provide For The Conversion Of Educational Institutions From Stock Corporations To Non-Profit Foundations, Directing The Government Service Insurance System, The Social Security System And The Development Bank Of The Philippines To Assist In Such Conversion, And For Other Purposes) when it was promulgated in August 4, 1969 and the Local Government Code of 1991.

The Court stressed that exemption of “other charges” to include the payment of building permits and  locational clearance fees as claimed by the Angeles University Foundation is improper because Sec. 8 of RA 6055 is qualified by the words “imposed by the Government on all property used exclusively for the educational activities of the foundation.” In effect, building fees are not impositions on property but instead are  regulatory impositions on the activity the government regulates. A charge of a fixed sum is an exercise of police power if the purpose is primarily to regulate, even though revenue is generated incidentally.

The Court also ruled that for exemption from real property tax under Sec. 234(b) of the Local Government Code of 1991 to apply, the real property must “actually, directly, and exclusively used for... educational purposes”.

As clarified in Lung Center of the Philippines v. Quezon City, what is meant by actual, direct, and exclusive use of the property is direct and immediate and actual application of the property itself to the purpose of which the charitable institution is organized. The use of the income from the real property is not determinative for tax exempt purposes. The Court found Angeles University Foundation was not entitled to a refund for its payment of real property tax because it was not able to prove that its real property is actually, directly, and exclusively used for educational purposes. It held that the land of  Angeles University Foundation was correctly assessed  for real property taxes for the taxable period during which the land is not being devoted soly for the latter's educational activities.

source: sc.judiciary.gov.ph 
reference case: Angeles University v. City of Angeles, et. al., GR No. 189999 (June 27, 2012)