Supreme Court asked to stop toll VAT in NLEX, SLEX

MANILA, Philippines - The Supreme Court (SC) was asked yesterday to stop the collection of value-added tax on toll fees in the North and South Luzon Expressways, which is set to start on Aug. 16.

This developed as Malacañang said yesterday that the implementation of the 12 percent VAT on toll fees will push through as scheduled.

In a petition, former Nueva Ecija first district Rep. Renato Diaz and former Trade assistant secretary Aurora Ma. Timbol asked the High Court to enjoin the Bureau of Internal Revenue (BIR) and the Toll Regulatory Board (TRB) from implementing the new tax measure.

Petitioners argued that the imposition of VAT on toll fees is unconstitutional and can be considered as an “invasion of legislative powers.”

They stressed that toll fees are not included in the coverage of sale of services subject to VAT. Diaz is the principal author of Republic Act 8424 (Comprehensive Tax Reform Act of 1997) and one of the co-authors and sponsors of RA 7716 (Expanded VAT Law).

“If the lawmakers did not include toll fees as subject to VAT, the BIR, therefore, should not by implication nor interpretation expand what the legislators enumerated under the law. To include matters which the legislators did not intend to include is considerably dangerous, as it is, in effect, invading the legislative field,” stated the petition.

Furthermore, the former lawmaker stressed that the Court, in the case of Manila International Airport Authority vs. Court of Tax Appeals, City of Parañaque et al, has ruled that toll fees are called “user’s tax.”

Diaz explained that since the Court has ruled that toll fees are “user’s tax,” it only follows that the imposition of a VAT on a user’s tax is in effect imposing a tax on a tax, and not a tax of on sale of services.

“There can be no VAT if there is no sale of services. In the case at bar, the service being provided to the public is to use a road constructed under a BOT (build-operate-transfer) arrangement. The construction of roads and highways is primarily the role of the State. Thus, to impose VAT on a user’s tax is tantamount to a tax on public services. This is certainly violative of the provisions of the Constitution that taxes must be equitable,” Diaz argued.

Timbol, on the other hand, stressed that the rights and benefits of investments acquired in good faith by the private sector partners of government shall be impaired by the impending VAT on toll fees.

One of the principal writers and initiators of the Consumer Code of the Philippines and a former consultant of the TRB Toll Operating Agreements (TOAs) and Supplemental Toll Operating Agreements (STOAs) between the government and its private sector partners, Timbol explained that adding 12 percent on the toll fee will adversely affect the rate of recovery of the government’s private partners in the tollway projects.

She said agreements between the government and its private partners on toll projects require the computation of the toll fees that may be collected by operators and VAT has never been included in any of these computations.

“In sum, whatever additional revenues the BIR may collect as VAT on toll fees may only be used to compensate the private investors for the violation of the contracts between them and the government,” she said.

Malacañang said yesterday that while the implementation of VAT on toll fees will start next week, the Aquino government will continue to study what options it has in relation to this concern. – With Delon Porcalla, Marvin Sy