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MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY v. FERDINAND J. MARCOS

FACTS:

The Mactan Cebu International Airport Authority (MCIAA) is a government agency created by Republic Act No. 6958. It is tasked with the control, management, and supervision of the Mactan International Airport and other airports in the Province of Cebu. MCIAA is also granted tax exemption privileges under Section 14 of its Charter.

In October 1994, the City of Cebu demanded payment of realty taxes from MCIAA for several parcels of land. MCIAA objected, citing its exemption from realty taxes under Section 14 of its Charter and Section 133 of the Local Government Code. The City, however, argued that the tax exemption privilege of MCIAA had been withdrawn by Sections 193 and 234 of the Local Government Code that took effect in January 1992.

The RTC dismissed MCIAA's petition, stating that the Local Government Code expressly withdrew tax exemptions of government-owned and controlled corporations after its effectivity on January 1, 1992.

The petitioner, a government-owned or controlled corporation mandated to operate and manage the Mactan-Cebu International Airport and promote the development of the Central Visayas and Mindanao regions, claimed that its real properties assessed by the City Government of Cebu are exempted from paying realty taxes under RA 6958. However, the respondent argued that the provisions of RA 7160, the New Local Government Code of 1991, repealed the tax exemption granted to the petitioner under RA 6958.

The petitioner asserts that it is vested with government powers and functions in the same category as an instrumentality or agency of the government, and therefore exempt from local taxes.

The petitioner, BIR Employees Cooperative (BIRESCO), is a cooperative organized and existing under the laws of the Philippines. It was granted a Certificate of Tax Exemption by the Bureau of Internal Revenue (BIR), exempting it from the payment of income tax and real property tax. However, in 1998, the City of Cebu issued a tax assessment against BIRESCO for the payment of real property taxes. The assessment was based on Section 234 of the Local Government Code (LGC), which withdrew the exemption privilege of government-owned or controlled corporations, including cooperatives, from the payment of real property tax.

BIRESCO filed a petition with the Regional Trial Court (RTC) of Cebu City, seeking to declare the tax assessment void. The RTC ruled in favor of BIRESCO, declaring that the tax assessment was void and that BIRESCO was exempt from the payment of real property tax.

The City of Cebu appealed the RTC decision to the Court of Appeals (CA), which reversed the decision of the RTC and declared that BIRESCO was liable to pay real property tax. BIRESCO then filed a petition for review before the Supreme Court, challenging the decision of the CA.

Pursuant to Section 131 of the Local Government Code, the Provincial Government of Bulacan enacted an ordinance imposing fees for goods carried over and/or loaded and unloaded on piers/wharves within its territorial jurisdiction. Petitioners, who own piers in the said province, challenged the constitutionality of the ordinance, alleging that it violated the principle of non-delegation of legislative power and the rule of uniformity of taxation. They argued that the imposition of fees on their piers was beyond the power of the local government unit and that it discriminated against them since it did not apply to other piers. The Court of Appeals affirmed the constitutionality of the ordinance.

ISSUES:

  1. Whether the Mactan Cebu International Airport Authority (MCIAA) is an "instrumentality of the Government" and thereby exempt from local government unit (LGU) taxation under the Local Government Code (LGC) of 1991.

  2. Whether the real property owned by MCIAA is exempt from real property taxes levied by the respondent City of Cebu pursuant to Republic Act No. 6958 and Sections 193 and 234 of the Local Government Code.

RULING:

  1. On the Status as an Instrumentality of the Government

    The Supreme Court ruled that MCIAA is not exempt from real property taxation by LGUs. Although MCIAA can be regarded as an instrumentality of the government, this status does not grant it absolute exemption from taxes, particularly real property taxes. The LGC expressly allows local government units to levy real property taxes unless specifically exempted by law. Because the LGC's Section 234 withdraws exemptions previously afforded to government-owned and controlled corporations such as MCIAA, its claims to exemption were deemed invalid.

  2. On the Exemption From Property Taxes

    The Court established that any exemption MCIAA enjoyed under its charter, including exemptions from real property taxes, was effectively repealed by Sections 193 and 234 of the LGC. The provisions of the LGC prevail over the exemptions previously granted under RA 6958 (creating MCIAA). Thus, the real properties owned by MCIAA are subject to real property taxes imposed by the LGUs, such as the City of Cebu.

PRINCIPLES:

  • Taxation is the rule, and exemption from taxation is the exception.

  • Local government units are empowered to levy taxes under the LGC unless expressly exempted by law.

  • Government-owned and controlled corporations, unless specifically exempted by statutes under the LGC, are subject to the taxing powers of local government units.

  • Exemptions from taxation granted to government entities can be withdrawn by a subsequent law, like the LGC, unless the exemption is based on a contract impairing the obligation of which is prohibited by the Constitution.

  • The principle of local autonomy under the Constitution allows local governments to levy taxes to meet their necessities and serve the community.