FIFTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )

HOUSE OF THE REPRESENTATIVES

HB,No__5185

introduced by HONORABLE VICTOR F. ORTEGA

EXPLANATORY NOTE

This bill seeks to clarify the legislative intent of Congress that toll fees
on our expressways are not subject to the Value Added Tax (VAT).

Toll fees on our expressways are already a user's tax. To impose
VAT an toll fees is to impose tax on tax. This is against the Constitution
and public interest.

The issue of whether toll fees on our expressways is subject to the
VAT is still pending in the Supreme Court. A petition, G.R. 93007 was filed
by Former Congressman Renato V. Diaz of Nueva Ecija and Atty. Aurora
Timbol before the Supreme Court questioning the implementation of VAT
on toll fees on our expressways.

Based on the Congressional records we have examined, VAT on toil
fees was not included in the deliberations of the Expanded VAT law in
1994. The legislators did not expand the coverage to cover toll fees since
the basis of the expanded coverage was from a list of items recommended
by the Department of Finance and the BIR. The contention of the DOF and
BIR is that it is included in the general definition of “sale of services” and
operation of toll expressways is an executive franchise.

To allow a tax burden to our people without a clear imposition of
Congress sets a very bad precedent. ‘The power to tax is the power to
destroy.” It is the essence of democracy that there should be no taxation
without representation. As provided by our constitution, ail taxes must be
proposed and approved by Congress. To expand the scope of taxation
purely on interpretation upon review of the law, seventeen (17) years since
it was passed in 1994, is definitely not acceptable to our people. The DoF
and BIR should defer any implementation until Congress has settied and
clarified this issue. President Noynoy Aquino should intervene by deferring
implementation of VAT on tolls and allow the democratic process to be
followed.


To save the public from the detrimental effects of unjust
implementation of “tax on tax” and to settle the issue, we are proposing
Congress to clearly stipulate that toll fees paid in our various expressways,
is not subject to Value Added Tax (VAT)

We, therefore, strongly urge the immediate passage of this Bill.



FIFTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )

HOUSE OF THE REPRESENTATIVES

HB.No___ 5185

Introduced by HONORABLE VICTOR F. ORTEGA

AN ACT
AMENDING SECTIONS 108 AND 109 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER
PURPOSES TO EXCLUDE TOLL FEES FROM VAT

Be it enacted by the House of Representatives and the Senate of the
Philippines in the Congress assembled:

Section. 1. Section 108 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 108. Value-added Tax on Sale of Services and Use or Lease
of Properties. —

(A) Rate and Base of Tax. — There shall be levied, assessed,
and collected a value-added tax equivalent to ten percent
(10%) of gross receipts derived from the sale or exchange of
services, including the use or lease of properties: Provided,
That the President, upon the recommendation of the Secretary
of Finance, shail, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%), after any of the

- following conditions has been satisfied:

{i) Vaiue-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds
two and four-fifth percent (2 4/5%);or

(ii) National government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1
Ye%)

“The phrase ‘sale or exchange of services’ means the

performance of all kinds of services in the Philippines for
others for a fee, remuneration or consideration, including
those performed or rendered by construction and service


contractors; stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether
personal or real; warehousing services; lessors or
distributors of cinematographic films; persons engaged in
mitling; processing, manufacturing or tepacking goods for
others; proprietors, operators or keepers of hotels,
motels, rest-houses, pension houses, inns, resorts;
proprietors or operators of restaurants, refreshment
parlors, cafes and other eating places, including clubs
and caterers; dealers in securities; lending investors;
transportation contractors on their transport of goods or
cargoes, including persons who transport gaods or
cargoes for hire and other domestic common carriers by
land relative to their transport of goods or cargoes;
common carriers by air and sea relative to their transport
of passengers, goods or cargoes from one place in the
Philippines to another place in the Philippines; sales of
electricity by generation companies, transmission, and
distribution companies; services of franchise grantees of
electric utilities, telephone and telegraph, radio and
television broadcasting and all other franchise grantees
except those under Section 119 of this code, TOLLWAY
OPERATORS, and non-life insurance companies (except
their crop insurances), including surety, fidelity, indemnity
and bonding companies; and similar services regardless
of whether or not the performance thereof calls for the
exercise or use of the physical and mental faculties. The
phrase ‘sale or exchange of services’ shall likewise
include:

“Xxx.”
SEC. 2. Section 109 of the same Code, as amended, is hereby further

amended by inserting a new sub-section (F) and re-number the succeeding
sub-sections fo read as follows:

“SEC. 109. Exempt Transactions. — (1) Subject to the provisions of
subsection (2) hereof, the following transactions shall be exempt from
the value-added tax:

“Xo;

(F) SERVICES RENDERED BY TOLLWAY OPERATORS;

(G) Services by agricultural contract growers and milling for
others of palay into rice, com into grits, and sugar cane into raw

sugar,
Xxx.”


Sec. 3. Repealing Clause. ~ All laws, presidential decrees and issuances,
executive orders, rules, and regulations or parts thereof inconsistent with
the provisions of this Act are hereby repealed or modified accordingly.

Sec. 4, Separability Clause — Hf, for any reason or reasons, any part of the
provision of this Act shall be held unconstitutional or invalid, other parts or
provisions hereof which are not affected thereby shall continue to be in full
force and effect.

Sec. 5. Effectivity. — This Act shall take effect fifteen (15) days after its
publication in two (2) national newspapers of general circulation. The
publication shail not be later than seven (7) days after the approval hereof.

HON. BESE Llocn

Eno Str asprm Ir, Wo be SACHS

2hof offs} E su, AST DISTRI (docoS SOR.

SUeAnN

Le at .* - ay e
GENE ii a8)
Lrof Bas? PIGHAn — Na QoN,
Pt

V2 rr


Sec. 3. Repealing Clause. ~ All laws, presidential decrees and issuances,
executive orders, rules, and regulations or parts thereof inconsistent with
the provisions of this Act are hereby repealed or modified accordingly.

Sec. 4. Separability Clause — if, for any reason or reasons, any part of the
provision of this Act shall be held unconstitutional or invalid, other Parts or
provisions hereof which are not affected thereby shall continue to be in full
force and effect.

Sec. 5. Effectivity. — This Act shall take effect fifteen (15) days after its.
publication in two (2) national newspapers of general circulation. The
publication shail not be later than seven (7) days after the approval hereof.

HON. a Mon

Erg Strospn Jr. yay cbic\ Sioa

2ho offst FE sun 787 Di (doce Sup.



ag

Le,
LONE Dist: Phegre Biacl am
er spate
Mgr tose a eect eg
3 ‘i .
eS
GFRHALAN
x ack aby Ue? bileGeS Bigger
taal Baa

Geta Soot

He Dist Manica

“fey “Phe iaT F
wipaaamene oC <
1f- a

g } =
A Eleanet 0 Bulut -beghing

Outring LO APAYAS



EL wi BD dood

UE Ppaie .) Chiguée-

ie 7 feo Gees

i) Visliet

es ae
% ek

“pig, sy Prwibansorrorn) Abhi —

<7 LAA) OL Sun. Cite

BiEB ev Deno 7a _ tee
At fen Dred Vaan .

Ree ol wera 6-7 Bed
PMY Porn Wer hy bat

2 Baie. Dil Sue hr -/+—~

NASER ©.PAVEA DAMA)
ne PLES A KAYOSYO BRTIUST
iy Bik Det Bopeal
AT Usk, Gam Sur ,

ae ee
ence

Ve, Ee

78t dre Fi —

ticle byt Jo
1. Costa), Boucle,



LDA nt BS
ANA CRISTINA S/RUAN - GO CESAR Vs SARPHEATLO
dec BOR Z rate, Calan daarnr

Roper "A BATOCAGE
[Ako Bice

ieee

UIT ee Seve

ane Ort — Or. mdo,

Z -y i
(a on masa caersnly ¢, NET,

A? (AAR CAT Ty) fy. APP CO
i
LV CME \Gccenturre soe hevtmercer
LOGMU CLTG~ Cente, [PreeT OUT.
4
TEP TORRE BE

=, ,

Sd BS Ay. Oe
PAD BINT AEB. OK-

Wi a

Mt. END
rt be
eM PR Ca

Lee Dkr, VES compas