G.R. No. 158885 - FORT BONIFACIO DEVELOPMENT        CORPORATION, Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, REGIONAL DIRECTOR, REVENUE REGION No. 8, BIR; and CHIEF, ASSESSMENT DIVISION, REVENUE REGION No. 8, BIR, Respondents.

 

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G.R. No. 170680 - FORT BONIFACIO DEVELOPMENT     CORPORATION, Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE and REVENUE DISTRICT OFFICER, REVENUE DISTRICT No. 44, TAGUIG and PATEROS, BUREAU OF INTERNAL REVENUE, Respondents.                         

                                                                    

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DISSENTING OPINION

 

CARPIO, J.:

 

         I vote to grant the motion for reconsideration filed by the Commissioner of Internal Revenue.

 

         The decision dated 2 April 2009 grants to petitioner a tax credit or refund of  P347,741,695.74 when petitioner never in fact paid a single centavo of tax to the Bureau of Internal Revenue.  A tax credit or tax refund requires that a previous tax was paid by the taxpayer.  There can be no tax credit or refund if no prior tax was paid.  In this case, the decision dated 2 April 2009 grants to petitioner hundreds of millions in tax credit or refund without the taxpayer ever having paid any previous tax to the government.  Who will bear this burden of tax credit or refund? It is all taxpayers in this country except, of course, petitioner.  What makes petitioner so privileged?

 

 

 

         The Constitution mandates that “the rule of taxation shall be uniform and equitable.”[1]  There is certainly neither uniformity nor equity if this Court grants petitioner a  P347,741,695.74 tax credit or refund when all other taxpayers seeking a tax credit or refund must first show prior payment of a tax, or at least the existence of a law imposing the tax for which a credit or refund is sought.

 

         The transitional input tax credit was placed in the tax law to pave the smooth transition from the non-VAT to the VAT system.  This input VAT works by deducting previously paid taxes from the output VAT liability in subsequent transactions involving the same product.  The term “transitional” was placed to distinguish this from an ordinary input tax.

 

         In 1995, when petitioner bought the Global City land from the national government, the sale was under a tax-free transaction and without any VAT component.  Being tax-exempt, the national government did not pass on any previous input business tax, whether in the form of sales tax or VAT, to petitioner as part of the purchase price.   

 

         The 8% transitional input tax credit in Section 105 presumes that a previous tax was paid, whether or not it was actually paid.  Such presumption assumes the existence of a law imposing the tax presumed to have been paid.  This can be inferred from the provision that a taxpayer is “allowed input tax on his beginning inventory xxx equivalent to 8% xxx, or the actual value-added tax paid xxx, whichever is higher.”  The transitional input tax  requires a transaction where a tax has been imposed by law.  Otherwise, the presumption that the tax has been paid will have no basis.  Without any VAT or other input business tax imposed by law on real properties at the time of the sale in the present case, the 8% transitional input tax cannot be presumed to have been paid. 

         Also, even before real estate dealers became subject to VAT under RA 7716, improvements on the land were already subject to VAT.  However, since the land itself was not subject to VAT or to any input tax prior to RA 7716, the land then could not be considered part of the beginning inventory under Section 105.  Thus, the 8% transitional input tax should apply only to improvements on land and not on the land itself.  

 

         To repeat, at the time of the sale by the government of the Global City land in 1995, there was no VAT on the sale of land.  In addition, the government, as seller, was not subject to VAT.  Even if the sale transaction happens today with the VAT on real properties already in existence, and petitioner subsequently resells the land, petitioner will still not be entitled to any input tax credit.  This is because the sale by the national government of government-owned land is not subject to VAT.[2]   Petitioner cannot now claim any input tax credit if it buys the same land today, and resells the same the following day. 

 

         Thus, if a real estate dealer like petitioner cannot claim an input tax today on its purchase of government land, when VAT on real properties is already in effect, then all the more petitioner cannot claim any input tax for its 1995 purchase of government land when the E-VAT law was still inexistent and petitioner had not yet been subjected to VAT.

        

         Accordingly, I vote to GRANT the Motion for Reconsideration.

 

 

 

                                                                               ANTONIO T. CARPIO

                                                                           Associate Justice

 


[1]Section 28, Article VI, Constitution.

[2]Under Section 105 of the present NIRC, the person liable for the payment of value-added tax is “any person who, in the course of trade or business, sells goods or properties.” In Section 22 of the same statute, the term “person” is defined as an individual, a trust, estate, or corporation. The national government does not fall under any of the enumerated entities. It is neither an individual or a corporation which comes under the purview of the law. 

 

      Neither can it be said that the national government, in selling the Global City land, is engaged in “trade or business.” The phrase “in the course of trade or business” as defined in Section 105, means the regular conduct or pursuit of a commercial or an economic activity. In this case, the objective of RA 9227 is to use the proceeds from the sale of portions of Fort Bonifacio to finance military-related activities and provide housing loan assistance. Accordingly, the national government, as the seller with these policies in mind, does not fall under the definition “engaged in the regular conduct or pursuit of an economic activity.”

 

      Thus, not being expressly included in the tax law as one liable for value-added tax, the national government is exempt therefrom.