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    PAL V Sec of Finance

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    Michael Harding
    This case involved a challenge by Philippine Airlines (PAL) to the constitutionality of Republic Act No. 7716, which amended the National Internal Revenue Code to widen the tax base of the Value-Added Tax (VAT) by removing exemptions. PAL claimed its franchise under Presidential Decree No. 1590 exempted it from all taxes except a 2% franchise tax. The Supreme Court upheld the constitutionality of the amendment, finding that withdrawing exemptions to expand the VAT base was fairly embraced by the title of the Act. The title expressed the purpose of restructuring the VAT system, and withdrawing exemptions was one way to widen the tax base as stated.

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    PAL V Sec of Finance

    Uploaded by

    Michael Harding
    610 views2 pages
    This case involved a challenge by Philippine Airlines (PAL) to the constitutionality of Republic Act No. 7716, which amended the National Internal Revenue Code to widen the tax base of the Value-Added Tax (VAT) by removing exemptions. PAL claimed its franchise under Presidential Decree No. 1590 exempted it from all taxes except a 2% franchise tax. The Supreme Court upheld the constitutionality of the amendment, finding that withdrawing exemptions to expand the VAT base was fairly embraced by the title of the Act. The title expressed the purpose of restructuring the VAT system, and withdrawing exemptions was one way to widen the tax base as stated.

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    PAL v Sec of Finance

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    This case involved a challenge by Philippine Airlines (PAL) to the constitutionality of Republic Act No. 7716, which amended the National Internal Revenue Code to widen the tax base of the Value-Added Tax (VAT) by removing exemptions. PAL claimed its franchise under Presidential Decree No. 1590 exempted it from all taxes except a 2% franchise tax. The Supreme Court upheld the constitutionality of the amendment, finding that withdrawing exemptions to expand the VAT base was fairly embraced by the title of the Act. The title expressed the purpose of restructuring the VAT system, and withdrawing exemptions was one way to widen the tax base as stated.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    610 views2 pages

    PAL V Sec of Finance

    Uploaded by

    Michael Harding
    This case involved a challenge by Philippine Airlines (PAL) to the constitutionality of Republic Act No. 7716, which amended the National Internal Revenue Code to widen the tax base of the Value-Added Tax (VAT) by removing exemptions. PAL claimed its franchise under Presidential Decree No. 1590 exempted it from all taxes except a 2% franchise tax. The Supreme Court upheld the constitutionality of the amendment, finding that withdrawing exemptions to expand the VAT base was fairly embraced by the title of the Act. The title expressed the purpose of restructuring the VAT system, and withdrawing exemptions was one way to widen the tax base as stated.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    PAL v.

    Sec of Finance
    GR No. 115852; 30 October 1995

    F A C T S: The Value-Added Tax [VAT] is levied on the sale, barter or exchange of goods and
    properties as well as on the sale or exchange of services. It is equivalent to 10% of the gross
    selling price or gross value in money of goods or properties sold, bartered or exchanged or of the
    gross receipts from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax
    base of the existing VAT system and enhance its administration by amending the National
    Internal Revenue Code.

    These are various suits for certiorari and prohibition challenging the constitutionality of RA
    7716:

    In the case at bar, PAL attacks the formal validity of Republic Act No. 7716. PAL contends that it
    violates Art. VI, Section 26[1] which provides that "Every bill passed by Congress shall embrace
    only one subject which shall be expressed in the title thereof." It is contended that neither H. No.
    11197 nor S. No. 1630 provided for removal of exemption of PAL transactions from the payment
    of the VAT and that this was made only in the Conference Committee bill which became
    Republic Act No. 7716 without reflecting this fact in its title.

    The title of Republic Act No. 7716 is:

    AN ACT RESTRUCTURING THE VALUE-ADDED TAX [VAT] SYSTEM, WIDENING ITS TAX
    BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING
    AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
    CODE, AS AMENDED, AND FOR OTHER PURPOSES.

    Furthermore, section 103 of RA 7716 states the following:

    Section 103. Exempt Transactions.- The following shall be exempt from the value-added tax:

    [q] Transactions which are exempt under special laws, except those granted under Presidential
    Decree Nos. 66, 529, 972, 1491, 1590.

    The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is
    concerned.

    Philippine Airlines [PAL] claims that its franchise under P.D. No. 1590 which makes it liable for
    a franchise tax of only 2% of gross revenues "in lieu of all the other fees and charges of any kind,
    nature or description, imposed, levied, established, assessed or collected by any municipal, city,
    provincial, or national authority or government agency, now or in the future," cannot be
    amended by Rep. Act No. 7716 as to make it [PAL] liable for a 10% value-added tax on revenues,
    because Sec. 24 of P.D. No. 1590 provides that PAL's franchise can only be amended, modified
    or repealed by a special law specifically for that purpose.

    I S S U E: Whether or not this amendment of Section 103 of the NIRC is fairly embraced in the
    title of Republic Act No. 7716, although no mention is made therein of P. D. No. 1590

    H E L D: The court ruled in in the affirmative. The title states that the purpose of the statute is
    to expand the VAT system, and one way of doing this is to widen its base by withdrawing some
    of the exemptions granted before. To insist that P. D. No. 1590 be mentioned in the title of the
    law, in addition to Section 103 of the NIRC, in which it is specifically referred to, would be to
    insist that the title of a bill should be a complete index of its content.

    The constitutional requirement that every bill passed by Congress shall embrace only one
    subject which shall be expressed in its title is intended to prevent surprise upon the members of
    Congress and to inform the people of pending legislation so that, if they wish to, they can be
    heard regarding it. If, in the case at bar, petitioner did not know before that its exemption had
    been withdrawn, it is not because of any defect in the title but perhaps for the same reason other
    statutes, although published, pass unnoticed until some event somehow calls attention to their
    existence.

    Republic Act No. 7716 expressly amends PAL's franchise [P. D. No. 1590] by specifically
    excepting from the grant of exemptions from the VAT PAL's exemption under P. D. No. 1590.
    This is within the power of Congress to do under Art. XII, Section 11 of the Constitution, which
    provides that the grant of a franchise for the operation of a public utility is subject to
    amendment, alteration or repeal by Congress when the common good so requires.

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