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QUESTION 66 MCQ TAXATION BAR EXAM 2012

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1 QUESTION 66 MCQ TAXATION BAR EXAM 2012 on Sat Nov 10, 2012 7:00 am

taxconsultantdavao


Reclusion Perpetua
66.
The Manila International Airport Authority (MIAA) is exempt from real
property tax. Which statement below is NOT correct?
a)
MIAA is not a government-owned or controlled
corporation because it is not organized as a stock or nonstock
corporation;

b)
MIAA is a government instrumentality vested with
corporate powers and performing essential public
services;

c)
MIAA is not a taxable entity because the real property is
owned by the Republic of the Philippines and the
beneficial use of such property has not been granted to a
private entity;

d)
MIAA is. a government-owned or controlled corporation
because it is required to meet the test of economic
viability.

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2 Re: QUESTION 66 MCQ TAXATION BAR EXAM 2012 on Sat Nov 10, 2012 7:02 am

taxconsultantdavao


Reclusion Perpetua
SUPREME COURT DECIDED CASE ITO.

Manila International Airport Authority (MIAA) v. Court of Appeals,G.R. No. 155650, July 20, 2006, 495 SCRA 591, 615.


In Manila International Airport Authority (MIAA) v. Court of Appeals,[9] the Court made a distinction between a GOCC and an instrumentality. Thus:



Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:



SEC. 2. General Terms Defined. – x x x



(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x (Emphasis supplied)



A government-owned or controlled corporation must be “organized as a stock or non-stock corporation.” MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares.



x x x x



Section 3 of the Corporation Code defines a stock corporation as one whose “capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x.” MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.



MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as “one where no part of its income is distributable as dividends to its members, trustees or officers.” A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.



Section 88 of the Corporation Code provides that non-stock corporations are “organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers.” MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.



Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation.[10] (Emphasis supplied)
[i][u]



Last edited by taxconsultantdavao on Sat Nov 10, 2012 7:07 am; edited 1 time in total

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3 Re: QUESTION 66 MCQ TAXATION BAR EXAM 2012 on Sat Nov 10, 2012 7:03 am

taxconsultantdavao


Reclusion Perpetua


KAYA ANG INCORRECT STATEMENT DITO IS STATEMENT D .

ITO ANG STATEMENT D na incorrect:


d)
MIAA is. a government-owned or controlled corporation
because it is required to meet the test of economic
viability.
[u]

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4 Re: QUESTION 66 MCQ TAXATION BAR EXAM 2012 on Sat Nov 10, 2012 7:05 am

taxconsultantdavao


Reclusion Perpetua
Please also read the case of :

PHILIPPINE FISHERIES G.R. No. 169836 JUly 2007 case.
DEVELOPMENT AUTHORITY,
vs.
COURT OF APPEALS, OFFICE OF
THE PRESIDENT, DEPARTMENT
OF FINANCE and the CITY OF
ILOILO,

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5 Re: QUESTION 66 MCQ TAXATION BAR EXAM 2012 on Sat Nov 10, 2012 7:06 am

taxconsultantdavao


Reclusion Perpetua
Thus, for an entity to be considered as a GOCC, it must either be organized as a stock or non-stock corporation. Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has capital stock divided into shares, and (2) that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation. As for non-stock corporations, they must have members and must not distribute any part of their income to said members.[11]



On the basis of the parameters set in the MIAA case, the Authority should be classified as an instrumentality of the national government. As such, it is generally exempt from payment of real property tax, except those portions which have been leased to private entities.



In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among the instrumentalities of the national government. Thus –



Some of the national government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas, Philippine Rice Research Institute, Laguna Lake Development Authority, Fisheries Development Authority, Bases Conversion Development Authority, Philippine Ports Authority, Cagayan de Oro Port Authority, San Fernando Port Authority, Cebu Port Authority, and Philippine National Railways.



Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has a capital stock but it is not divided into shares of stocks.[12] Also, it has no stockholders or voting shares. Hence, it is not a stock corporation. Neither it is a non-stock corporation because it has no members.



The Authority is actually a national government instrumentality which is defined as an agency of the national government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter.[13] When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.



Thus, the Authority which is tasked with the special public function to carry out the government’s policy “to promote the development of the country’s fishing industry and improve the efficiency in handling, preserving, marketing, and distribution of fish and other aquatic products,” exercises the governmental powers of eminent domain,[14] and the power to levy fees and charges.[15] At the same time, the Authority exercises “the general corporate powers conferred by laws upon private and government-owned or controlled corporations.”[16]



The MIAA case held[17] that unlike GOCCs, instrumentalities of the national government, like MIAA, are exempt from local taxes pursuant to Section 133(o) of the Local Government Code. This exemption, however, admits of an exception with respect to real property taxes. Applying Section 234(a) of the Local Government Code, the Court ruled that when an instrumentality of the national government grants to a taxable person the beneficial use of a real property owned by the Republic, said instrumentality becomes liable to pay real property tax. Thus, while MIAA was held to be an instrumentality of the national government which is generally exempt from local taxes, it was at the same time declared liable to pay real property taxes on the airport lands and buildings which it leased to private persons. It was held that the real property tax assessments and notices of delinquencies issued by the City of Pasay to MIAA are void except those pertaining to portions of the airport which are leased to private parties. Pertinent portions of the decision, reads:

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