Collect toll VAT – SC

MANILA, Philippines — The Supreme Court (SC) Thursday said the Bureau of Internal Revenue (BIR) can collect the 12-percent value-added tax (VAT) on the toll paid by motorists for the use of the country’s expressway starting Saturday, October 1.

Speaking for the SC, Court Administrator Jose Midas P. Marquez said there is no legal impediment in the collection of the VAT on toll despite an appeal on the decision handed down last July 19.

BIR Commissioner Kim Jacinto Henares had earlier said that only the SC or a new law can stop the collection of VAT on toll.

Marquez said the SC had ruled that the BIR can collect VAT on toll after the High Court lifted the temporary restraining order (TRO) it issued last year.

“With the lifting of the TRO, the VAT on toll can now be imposed notwithstanding the pendency of a motion for reconsideration,” he said.

With the implementation of the 12-percent VAT, Henares said the BIR expects P2.3 billion to P3 billion revenue per year.

Earlier, the SC had been asked to reinstate the TRO on the imposition of VAT on toll.

But Marquez said the motion filed by former Nueva Ecija Rep. Renato Diaz and former Department of Trade and Industry Undersecretary Aurora Maria Timbol was not taken up last Tuesday owing to the suspension of public and private offices due to the typhoon.

“Eventually,” he said, “the motion would be taken up by the SC and a ruling has to be handed down but in the meantime, the BIR can collect the VAT on toll.”

Last July, the SC ruled that the 12-percent VAT may be imposed on toll for the use of the expressways.

In a decision written by Justice Roberto A. Abad, the SC said that the BIR did not usurp his prerogative or expand the coverage of the VAT law when it sought the imposition of VAT on toll.

“The VAT on franchise grantees has been in the statute books since 1994 when Republic Act No. 7716 or the Expanded Value-Added Tax law was passed. It is only now, however, that the executive has earnestly pursued the VAT imposition against tollway operators,” it stressed.

The SC pointed out that “what the government seeks to tax here are fees collected from tollways that are constructed, maintained, and operated by private tollway operators at their own expense under the build, operate, and transfer scheme that the government has adopted for expressways.”

“Thus, the seller remains directly and legally liable for payment of the VAT, but the buyer bears the burden since the amount of VAT paid by the former is added to the selling price. Once shifted, the VAT ceases to be a tax and simply becomes part of the cost that the buyer must pay in order to purchase the good, property or service,” it said.

The SC also said that “VAT on tollway operations cannot be a tax on tax even if tolls were deemed as a ‘user’s tax’…” since “VAT is assessed against the tollway operator’s gross receipts and not necessarily on the toll fees.”

With the ruling, the SC denied the petition filed by Diaz and Timbol.

In their pleading, Diaz said that as principal author of Republic Act No. 8424 or the “Comprehensive Tax Reform Act of 1997 and co-author of RA 7716 or the Expanded VAT Law, he has openly stated not only to the government agencies concerned but also in the media that toll fees are not included in the coverage of sale of services subject to VAT.

He also said that no less than the SC had ruled that tolls are not called “user’s tax.”

Diaz and Timbol pointed out that tolls are excluded from Section 105 of RA 8424 and that toll operators are also excluded from Section 108 of said law.

They said the SC overlooked the fact that Section 108 of RA 8424 is not a stand-alone provision since it has to be connected with Section 105 of the same law.

According to them, Section 105 states that “any person who in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services and any person who imports goods shall be subject to the Value Added Tax (VAT) imposed in Sections 106 to 108 of this Code.”

“The government or its designated agencies already get a share of the toll collected, the rest is applied as a payment interest on the amount financed, cost of maintenance and project cost. This is based on the formula in a Concession Agreement. Any excess derived from the collection is treated as income of the private entity pursuant to its agreement with the government and duly taxed under the income tax law,” they said.

“It is therefore, absurd to consider toll operation a sale of services or a lease of the government land because such government land is considered by law as part of public dominion which is beyond the commerce of man thus, cannot be sold or leased,” they added.

Thus, they said, “to allow public respondents (Department of Finance and the BIR) to unilaterally subject all franchises to VAT will open the floodgates for the illegal exaction of VAT on activities which were never intended to be VATable by Congress in the first place. Unquantifiable damage will result from not putting limits to the rule making power of administrative bodies such as the BIR in introducing unlawful and unwarranted changes many years after a law is implemented.” (With a report from Leonard D. Postrado)

Source: MB