Pagcor Vs Bir

G.R. No.
215427 December 10, 2014 Issue: WON the RMC issued by the BIR is constitutional
Held:
PHILIPPINE AMUSEMENT AND GAMING CORPORATION
(PAGCOR), Petitioner, NO, in our Decision dated March 15, 2011, the Court have already declared
vs. PAGCOR’s income tax liability in view of the withdrawal of its tax privilege
THE BUREAU OF INTERNAL REVENUE, represented by JOSE MARIO
under R.A. No. 9337. However, the Court made no distinction as to which
BUNAG, in his capacity as Commissioner of the Bureau of Internal
Revenue, and JOHN DOE and JANE DOE, who are Promulgated: income is subject to corporate income tax, considering that the issue raised
persons acting for, in behalf or under the authority of therein was only the constitutionality of Section 1 of R.A. No. 9337, which
respondent, Respondents. excluded PAGCOR from the enumeration of GOCCs exempted from
corporate income tax.
Facts: For clarity, it is worthy to note that under P.D. 1869, as amended, PAGCOR’s
PAGCOR is subject to income tax only with respect to its operation of related income is classified into two: (1) income from its operations conducted under
services. Accordingly, the income tax exemption ordained under Section its Franchise, pursuant to Section 13(2) (b) thereof (income from gaming
27(c) of R.A. No. 8424 clearly pertains only to petitioner’s income from operations); and (2) income from its operation of necessary and related
operation of related services. For clarity, it is worthy to note that under P.D. services under Section 14(5) thereof (income from other related services). In
1869, as amended, PAGCOR’s income is classified into two: (1) income from the RMC, BIR further classified the aforesaid income.
its operations conducted under its Franchise, pursuant to Section 13(2) (b) Under P.D. 1869, as amended, PAGCOR is subject to income tax only with
thereof (income from gaming operations); and (2) income from its operation respect to its operation of related services. Accordingly, the income tax
of necessary and related services under Section 14(5) thereof (income from exemption ordained under Section 27(c) of R.A. No. 8424 clearly pertains
other related services). only to petitioner’s income from operation of related services. Such income
Under P.D. 1869, as amended, PAGCOR is subject to income tax only with tax exemption could not have been applicable to petitioner’s income from
respect to its operation of related services. Accordingly, the income tax gaming operations as it is already exempt therefrom under P.D. 1869. There
exemption ordained under Section 27(c) of R.A. No. 8424 clearly pertains was no need for Congress to grant tax exemption to petitioner with respect to
only to petitioner’s income from operation of related services. its income from gaming operations as the same is already exempted from all
taxes of any kind or form, income or otherwise, whether national or local,
The Bureau of Internal Revenue (BIR) issued a Revenue Memorandum under its Charter, save only for the five percent (5%) franchise tax. The
Circular (RMC) No. 33-2013 on April 17, 2013 pursuant to a decision exemption attached to the income from gaming operations exists
regarding the present parties dated March 15, 2011 and the Resolution dated independently from the enactment of R.A. No. 8424. To adopt an assumption
May 31, 2011, which clarifies the income tax and franchise tax Due from the otherwise would be downright ridiculous, if not deleterious, since petitioner
Philippine Amusement and Gaming Corporation (PAGCOR), its Contractees would be in a worse position if the exemption was granted (then withdrawn)
and Licensees. The RMC stated that PAGCOR is no longer exempt from than when it was not granted at all in the first place.
corporate income tax as it has been effectively omitted from the list of
government-owned or controlled corporations (GOCCs) that are exempt from
income tax. Accordingly, PAGCOR’s income from its operations and
licensing of gambling casinos, gaming clubs and other similar recreation or
amusement places, gaming pools, and other related operations, are subject
to corporate income tax under the NIRC. Further, PAGCOR is also subjected
to a franchise tax of five percent (5%) of the gross revenue or earnings it
derives from its operations and licensing of gambling casinos.
PAGCOR filed a Motion for Clarification alleging that RMC No. 33-2013 is an
erroneous interpretation and application of the aforesaid decision.

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