Cebu vs Mactan (261 SCRA 667)

Mactan Cebu International Airport Authority vs City of Cebu
261 SCRA 667 [GR No. 120082 September 11, 1996]

Facts: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958 mandated to principally undertake the economical, efficient and effective control, management and supervision of the MCIAA in the province of Cebu and the Lahug airport in Cebu City, and such other airports as may be established in the province of Cebu. Since the time of its creation, petitioners MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with section 14 of its charter:

Sec 14 Tax Exemptions – The authority shall be exempt from realty taxes imposed by the national government or any of its political subdivisions, agencies and instrumentalities.

On October 11, 1994, however, Mr. Eustaquio B. Cesa, demanded payment for realty taxes on several parcels of land belonging to the petitioner, located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the total amount of Php2,229,078.79. Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the aforecited in section 14 of RA 6958 which exempts it from payment of realty taxes. It was also asserted that it is an instrumentality of the government performing governmental functions, citing section 133 of the local government code of 1991 which puts limitations on the taxing power of local government code.

Issue: Whether or not MCIAA is exempt from realty taxes.

Held: Yes. As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledge in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed by the people through their constitutions. Our constitution, for instance, provides that the rule of taxation shall be uniform and equitable and congress shall evolve a progressive system of taxation. So potent indeed is the power that it was once opined that the power to tax involves the power to destroy. Verily, taxation is a destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government. Accordingly, tax statutes must be construed strictly against the government liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, as are the life blood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption there from is the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of taxation.

The petitioner cannot claim that it was never a taxable person under its charter. It was only exempted from the payment of real property taxes. It was only exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes except real property tax.

Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the foregoing disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of the government, a taxable person for such purpose in view of the withdrawal in the last paragraph of section 234 of exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned or controlled corporations, section 193 of the LGC prescribes the general rule, viz, they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under RA 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to section 234 which enumerates the properties exempt from real property tax. But the last paragraph of section 234 further qualifies the retention of the exemption in so far as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Morever, as to even on real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise.

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