Forms of Escape from Taxation

Ernesto M. Maceda vs. Hon. Catalino Macaraig, Jr.

G.R. No. 88291, June 8, 1993

FACTS:
Petitioner sought to nullify certain decisions, orders, rulings, and resolutions of
respondents Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs and the Fiscal Incentives Review Board for exempting the
National Power Corporation from indirect tax and duties.

RA 358, RA 6395 and PD 380 expressly granted NPC exemptions from all taxes
whether direct or indirect. In 1984, however, PD 1931 and EO 93 withdrew all tax
exemptions granted to all GOCCs including the NPC but granted the President and/or the
Minister of Finance by recommendation of the FIRB the power to restore certain tax
exemptions. Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty
exemption privileges of the NPC.

Among other arguments, petitioner submits that PD 1931 did not have any effect or
did it change NPC's status. Since it had already lost all its tax exemptions privilege with the
issuance of PD 1177 seven years earlier than that of PD 1931 and EO 93, there were no tax
exemptions to be withdrawn which could later be restored by the Minister of Finance upon
the recommendation of the FIRB. Consequently, FIRB resolutions were all illegally issued
since FIRB acted beyond their statutory authority by creating and not merely restoring the
tax exempt status of NPC.

ISSUE:
Is NPC exempt from tax?

RULING:
Yes. NAPOCOR is a non-profit public corporation created for the general good and
welfare, and wholly owned by the government of the Republic of the Philippines. From the
very beginning of the corporation’s existence, NAPOCOR enjoyed preferential tax treatment
“to enable the corporation to pay the indebtedness and obligation” and effective
implementation of the policy enunciated in Section 1 of RA 6395.

The Court rules that when PD 1931 basically reenacted in its Section 1 the provisions
of Section 23, PD 1177 on withdrawal of tax exemption privileges of all GOCC's said Section
1 of PD 1931 was deemed to be a continuation PD 1177, although such continuation, on the
subsidy scheme for former tax exempt GOCCs had been expressly repealed by Section 2 with
its institution of the FIRB recommendation of partial/total restoration of tax exemption
privileges.

The NPC tax privileges withdrawn by Section 1. PD 1931, were, therefore, the same
NPC tax exemption privileges withdrawn by Section 23, PD 1177. NPC could no longer obtain
a subsidy for the taxes it had to pay. It could, however, under PD 1931, ask for a total
restoration of its tax exemption privileges, which, it did, and the same were granted by the
Minister of Finance.

Consequently, contrary to petitioner's submission, the FIRB Resolutions were legally

and validly issued by the FIRB pursuant to PD 1931. FIRB did not create NPC's tax exemption
status but merely restored it. It should be noted that NPC was not asking to be granted tax
exemption privileges for the first time. It was just asking that its tax exemption privileges be
restored. It is for these reasons that, at least in NPC's case, the recommendation and approval
of NPC's tax exemption privileges under the FIRB Resolutions are valid.

Further, in the case of the tax exemption restoration of NPC, there is no other
comparable entity — not even a single public or private corporation — whose rights would
be violated if NPC's tax exemption privileges were to be restored.