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THE
Supreme Court (SC) Monday declared local governments are
not authorized to impose business taxes on oil companies
or other entities engaged in the sale of petroleum
products.
With
this, the Court’s Second Division granted the petition
filed by Petron Corp. seeking to set aside the ruling of
Branch 74 of the Regional Trial Court (RTC) in Malabon
that upheld the legality of the assessment for
deficiency taxes issued by the
Navotas City
government against the oil company in the amount of
P10.2 million.
The SC
also made permanent the temporary restraining order it
issued on August 4, 2003, enjoining
Navotas City
from closing Petron’s depot and interfering in its
operations for its failure to pay the supposed
deficiency taxes.
In its
26-page decision penned by Associate Justice Dante Tinga,
the SC gave credence to the argument of Petron that
Section 133 (h) of the Local Government Code (LGC)
enjoins local governments from levying business taxes on
petroleum products.
The said
provision states that, “the exercise of the taxing
powers of province, cities, municipalities and barangay
shall not extend to the levy of…excise taxes on articles
enumerated under the National Internal Revenue Code [NIRC],
as amended, and taxes, fees, or charges on petroleum
products.”
The
court noted that the language of Section 133 (h) makes
plain that the prohibition with respect to the petroleum
products “extends not only to excise taxes thereon, but
all taxes, fees and charges.”
It
explained that earlier reference in paragraph (h) to
excise taxes comprehends a wider range of subjects of
taxation like all the articles already covered by excise
taxation under the NIRC, such as alcohol products,
tobacco products, mineral products, automobiles, goods
made of precious metals, perfumes, and yatch’s and other
vessels intended for pleasure or sports.
Concurring with the ruling were Associate Justices
Leonardo Quisumbing, Conchita Carpio Morales, Arturo
Brion and Presbitero Velasco Jr.
It
further held that if local governments were authorized
to impose business taxes on manufacturers and retailers
of petroleum products, their expected losses would be
passed on to the consumers, “triggering the chain of
increases that accompany the increase in oil prices.”
Court
records showed that Petron, which maintains a depot or
bulk plant at the Novatas Fishport Complex in Navotas,
received a letter from respondent Navotas Mayor Tobias
Tiangco, wherein the firm was assessed taxes covering
its sale of diesel from 1997 to 2001.
The
Navotas city government demanded payment of P10.2
million representing Petron’s “deficiency taxes.”
Petron
filed with Navotas a letter-protest to the notice of
assessment pursuant to Section 195 of the Code. It
argued that it was exempt from local business taxes in
view of Article 232 of the Implementin Rules of the LGC
as well as the ruling of the Bureau of Local Government
Finance of the Department of Finance.
Owing to
the denial of its protest, Petron filed with the RTC in
Malabon a complaint for cancellation of assessment for
deficiency taxes with prayer for the issuance of a
temprorary restraining order and preliminary injunction.
On May
5, 2003, the RTC in Malabon rendered its decision
dismissing Petron’s complaint and ordering the payment
of the assessed amount.
After 11
days, Petron received a closure order from Tiangco,
directing it to cease and desist from operating the bulk
plant, prompting it to elevate the case to the SC. |
