MANILA, Philippines — The Supreme Court upheld Friday the decision of the Bureau of Internal Revenue (BIR) to impose a 12 percent value-added tax (VAT) on toll paid by motorists for the use of the South Luzon Expressway (SLEx), the North Luzon Expressway (NLEx), and the Subic-Clark-Tarlac Expressway (SCTex).
In a decision written by Justice Roberto A. Abad, the SC said that the BIR commissioner did not usurp his prerogative or expand the coverage of the VAT law when he 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 toll is 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 former Nueva Ecija Rep. Renato V. Diaz, who was co-author of the E-VAT Law, and former Trade Assistant Secretary Aurora Ma. F. Timbol.
Diaz and Timbol challenged the imposition of VAT on toll by the Department of Finance (DoF) through the BIR.
At first, the DoF and the BIR questioned the petition filed by Diaz and Timbol claiming that the SC has no jurisdiction over petitions for declaratory relief.
But setting aside procedural technicalities, the SC decided to rule on the petition since the VAT on toll has far-reaching implications on motorists and the public.
“To dismiss the petition and resolve the issues later, after the challenged VAT has been imposed, could cause more mischief both to the tax-paying public and the government. A belated declaration of nullity of the BIR action would make any attempt to refund to the motorists what they paid an administrative nightmare with no solution,” the SC said.
With the SC decision, commuters called on the BIR to withdraw its plan to impose VAT on toll, saying doing so will only pave the way for another round of fare hikes in public utility vehicles (PUVs).
Elvira Media, president of the National Council for Commuter Protection (NCCP), said the Aquino administration should reconsider its plan to tax tollway operations as it will not only burden motorists using expressways, but also commuters who ride PUVs plying routes that are linked by the six operational tollways in Luzon.
Despite the SC ruling, Medina said the government has the choice not to burden commuters by withdrawing its plan to impose VAT on toll, which she said will likely be a ground for PUV operators to seek fare hike anew. Previous fare hikes were approved mainly because of increasing prices of petroleum products.
“Government has no control over oil price hikes but it has control over the plan to impose VAT on toll. If the Aquino administration really considers the public as its boss, BIR should withdraw its plan to impose VAT on toll so that fare rates will not increase again,” Medina said.
If government cannot help but tax expressway users to generate revenues, Medina said it should “exempt PUVs from the coverage of VAT on toll at the least” in deference to commuters already burdened by the successive fare hikes implemented early this year.
“But in the long term, government should be creative in generating funds for its operations. It should make plans other than extracting money from taxpayers, who are already burdened by the rising cost of basic goods and services and dismayed with the failed petition to increase minimum wage rate,” she added.
Medina said she will meet Senator Ralph Recto, author of the Expanded VAT Law enacted in 2005, to discuss what legal remedy is available to prevent the imposition of VAT on toll. Recto and incumbent Senate President Juan Ponce Enrile said BIR’s move to impose VAT on toll is illegal and has no basis.
“The SC’s interpretation of the law should not contradict that of the author. NCCP will go back to the author of the law and plan what to do next from there,” she said.
The VAT on toll should have been implemented on August 16, 2010 if not for the TRO that the SC issued against it. With the SC’s ruling, public consultations on the looming toll increase will be revived by the TRB. (With a report from Kris Bayos)
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