Case Summary (G.R. No. 120082)
Demand for Realty Taxes and Protest
On October 11, 1994, the City Treasurer demanded P2,229,078.79 in realty taxes on multiple MCIAA land parcels in Lahug, Cebu City. MCIAA paid under protest, invoking its charter exemption and Section 133(o) of the Local Government Code, which prohibits local taxes on the national government and its instrumentalities.
Trial Court Decision and Reasoning
The RTC dismissed MCIAA’s declaratory relief petition, holding that RA 7160 repealed inconsistent tax exemptions, including Section 14 of RA 6958, via its general repeal clause (Section 534) and specific withdrawal provisions (Sections 193, 234). The court emphasized the Code’s policy of genuine local autonomy and resource decentralization.
Petitioner’s Arguments on Instrumentality and Section 133
MCIAA argued it functions as a national government instrumentality—citing its governmental roles, attachment to the Department of Transportation and Communication, and Basco v. PAGCOR (1991)—and thus enjoys immunity from local taxation under Section 133(o).
Respondent’s Counterarguments on LGU Taxing Power
The City of Cebu contended that MCIAA, as a government-owned corporation performing proprietary functions, falls within the withdrawal of exemptions in Sections 193 and 234 of the Code. It noted Section 234 makes no distinction between proprietary and governmental GOCCs.
Legal Framework: Power to Tax and Statutory Interpretation
Taxation is an incident of sovereignty; exemptions are exceptions and strictly construed against the taxpayer. The 1987 Constitution vests taxing powers in Congress and local governments (Article X, Section 5), subject to uniformity and equity (Article VI, Section 28).
Local Government Code Provisions on Taxing Powers and Exemptions
- Section 133 lists common limitations on LGU taxing powers, including immunity for the national government, its agencies, and instrumentalities.
- Section 232 authorizes real property tax.
- Section 234 enumerates specific real property tax exemptions and withdraws all others upon effectivity.
- Section 193 generally withdraws all tax exemptions enjoyed by GOCCs, except certain entities.
- Section 192 allows LGUs to grant tax incentives by ordinance.
Analysis of Sections 133, 232, and 234 in Relation to MCIAA
Although Section 133(o) broadly bars local taxes on national instrumentalities, its “unless otherwise provided” qualifier is governed by Sections 232 and 234. These provisions permit real property tax on government-owned lands not specifically exempted, and explicitly withdraw prior exemptions for GOCCs except as enumerated.
Ownership Transfer Under RA 6958 and Taxable Person Status
Section 15 of RA 6958 transferred airport lands and facilities in full ownership to MCIAA, making it the legal owner. Its charter granted only real property tax exemption, implying GOCC status as a taxable person for all other taxes. The Local Government Code’s with
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Facts and Background
- The Mactan Cebu International Airport Authority (MCIAA) was created by Republic Act No. 6958, Section 3, to manage and supervise Mactan International Airport and Lahug Airport, and to encourage and develop international and domestic air traffic in Central Visayas and Mindanao.
- Section 14 of RA 6958 granted MCIAA exemption from realty taxes imposed by the National Government or any of its political subdivisions, agencies, or instrumentalities.
- On October 11, 1994, Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of Cebu City, demanded realty tax payments totaling ₱2,229,078.79 for numerous parcels of land in Lahug, Cebu City.
- MCIAA paid under protest and filed a Petition for Declaratory Relief (Civil Case No. CEB-16900) on December 29, 1994, asserting continued exemption from local real property taxes.
Procedural History
- RTC Branch 20, Cebu City, rendered a decision on March 22, 1995, dismissing MCIAA’s petition and holding that RA 7160 (the Local Government Code of 1991) repealed its charter exemption.
- The trial court denied MCIAA’s motion for reconsideration on May 4, 1995.
- MCIAA elevated the case to the Supreme Court under Rule 45, G.R. No. 120082, raising pure questions of law regarding the taxing power of local government units and the scope of GOCC tax exemptions.
Statutory Provisions Involved
- Republic Act No. 6958, Section 14: grants MCIAA realty tax exemption.
- Local Government Code (RA 7160):
• Section 133(o) – “taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units” are beyond local taxing power;
• Section 193 – withdrawal of tax exemptions and incentives granted to all persons, including GOCCs, except specified exceptions, upon effectivity of the Code;
• Section 232 – provinces and cities may levy annual ad valorem real property tax “not hereafter specifically exempted”;
• Section 234 – enumerates real property tax exemptions and withdraws all previously granted exemptions to persons, natural or juridical, including GOCCs, “except as provided herein.” - MCIAA Charter, Section 15: transfers all airport lands and facilities from the Republic to MCIAA, conveying ownership and capitalizing the Authority.
Issues Presented
- Wh