Basco vs. PAGCOR (G.R. No. 91649) - Digest

Facts:

Petitioner is seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter -- PD 1869, because it is allegedly contrary to morals, public policy and order, and because it constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila Cit government’s right to impose taxes and license fees, which is recognized by law. For the same reason, the law has intruded into the local government’s right to impose local taxes and license fees. This is in contravention of the constitutionally enshrined principle of local autonomy.

Issue:

Whether or not Presidential Decree No. 1869 is valid.

Ruling:

1. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Their charter or statute must plainly show an intent to confer that power, otherwise the municipality cannot assume it. Its power to tax therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the “inherent power to tax.”

The Charter of Manila is subject to control by Congress. It should be stressed that “municipal corporations are mere creatures of Congress”, which has the power to “create and abolish municipal corporations” due to its “general legislative powers”. Congress, therefore, has the power of control over the Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power.

2. The City of Manila’s power to impose license fees on gambling, has long been revoked by P.D. No. 771 and vested exclusively on the National Government. Therefore, only the National Government has the power to issue “license or permits” for the operation of gambling.

3. Local governments have no power to tax instrumentalities of the National Government. PAGCOR is government owned or controlled corporation with an original charter, P.D. No. 1869. All of its shares of stocks are owned by the National Government. PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local Government.

4. Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. No. 1869. 

Article 10, Section 5 of the 1987 Constitution:

“Each local government unit shall have the power to create its own source of revenue and to levy taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government.”

SC said this is a pointless argument. The power of the local government to “impose taxes and fees” is always subject to “limitations” which Congress may provide by law. Besides, the principle of local autonomy under the 1987 Constitution simply means “decentralization.” It does not make local governments sovereign within the state.

Wherefore, the petition is DISMISSED.