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is to require PAGCOR to pay corporate income tax. However, nowhere in R.A. No. 9337 is it provided that
PAGCOR can be subjected to VAT. Thus, the provision of RR No. 16-2005, which the respondent BIR issued
to implement the VAT law, subjecting PAGCOR to 10% VAT is invalid for being contrary to R.A. No. 9337.
(Philippine Amusement and Gaming Corporation vs. BIR, G.R. No. 172087, March 15, 2011)
With the passage of Republic Act No. (RA) 9337, the Philippine
A m u s e m e n t a n d G a m i n g C o r p o r a t i o n ( PA G C O R ) h a s b e e n excluded from the list
of government-owned and controlled corporations (GOCCs) that are exempt from tax
under Section27(c) of the Tax Code; PAGCOR is now subject to corporate income tax. The
Supreme Court (SC) held that the omission of PAGCOR from the list of tax-exempt GOCCs by RA
9337 does not violate the right to equal protection of the laws under Section1, Article III of the
Constitution, because PAGCORs
exemptionf r o m p a y m e n t o f c o r p o r a t e i n c o m e t a x w a s n o t b a s e d o n classifi cation
showing substantial distinctions; rather, it wasgranted upon the corporations own request to be
exempted from corporate income tax. Legislative records likewise reveal that the
legislative intention is to require PAGCOR to pay corporate income tax.
With regard to the issue that the removal of PAGCOR from the exempted list violates the nonimpairment clause contained in Section 10, Article III of the Constitution which provides that no law
impairing the obligation of contracts shall be passed the SC explained that following its
previous ruling in the case of Manila Electric Company v. Province of Laguna 366 Phil.
428(1999), this does not apply. Franchises such as that granted to PAGCOR partake of the nature
of a grant, and is thus beyond the purview of the non-impairment clause of the Constitution. As
regards the liability of PAGCOR to VAT, the SC finds Section4 . 1 0 8 3 o f Re v e n u e Re g u l a t i o n s N o . ( R R ) 1 6 - 2 0 0 5 , w h i c h subjects PAGCOR and its licensees and
franchisees to VAT, null and void for being contrary to the National Internal Revenue Code (NIRC),
as amended by RA 9337.
According to the SC, RA 9337 does not contain any provision that subjects PAGCOR to
VAT. Instead, the SC finds support to the VAT exemption of PAGCOR under Section 109(k) of the Tax
C o d e , w h i c h p r o v i d e s t h a t t r a n s a c t i o n s e x e m p t u n d e r international
agreements to which the Philippines is a signatory or under special laws [except Presidential Decree No.
(PD) 529] are exempt from VAT. Considering that PAGCORs charter, i.e., PD1869 which grants
PAGCOR exemption from taxes is a special law, it is exempt from payment of VAT. Accordingly, the
S C h e l d t h a t t h e B I R e x c e e d e d i t s a u t h o r i t y i n s u b j e c t i n g PAGCOR to VAT, and
thus declared RR 16-05 null and void insofar as it subjects PAGCOR to VAT for being contrary to the
NIRC, as amended by RA 9337. [Philippine Amusement and
G a m i n g C o r p o r a t i o n ( PA G C O R ) v. t h e B u r e a u o f I n t e r n a l Revenue (BIR), et. al., GR 172087,
March 15, 2011.