Maceda v Macaraig

Facts:

The petition seeks to nullify certain decisions, orders, ruling, and resolutions of the respondents (Macaraig et. al) for exempting the National Power Corporation (NPC) from indirect tax and duties. Commonwealth Act 120 created NPC as a public corporation. RA 6395 revised the charter of NPC and provided in detail the exemption of NPC from all taxes, duties and other charges by the government. There were many resolutions and decisions that followed after RA 6395 which talked about the exemption and non-exemption from taxes of NPC.

Issue:

Whether or not NPC is really exempt from indirect taxes

Held:

Yes. NPC is a non-profit public corporation created for the general good and welfare of the people. From the very beginning of its corporate existence, NPC enjoyed preferential tax treatment to enable it to pay its debts and obligations. From the changes made in the NPC charter, the intention to strengthen its preferential tax treatment is obvious. The tax exemption is intended not only to insure that the NPC shall continue to generate electricity for the country but more importantly, to assure cheaper rates to be paid by consumers.

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Some Notes on Direct and Indirect Taxes:
Direct Taxes – those which a taxpayer is directly liable on the transaction or business it engages in. Examples are: custom duties, ad valorem taxes paid by oil companies for importation of crude oil

Indirect Taxes – paid by persons who can shift the burden upon someone else.

Examples are: ad valorem taxes that oil companies pay to BIR upon removal of petroleum products from its refinery can be shifted to its buyer, like the NPC

Dissenting Opinion of Justice Sarmiento: The fact that NPC has been tasked with the enormous undertaking to improve the quality of life, is no reason, to include indirect taxes, within the coverage of its preferential tax treatment. The deletion of “indirect taxes” as stated in one of the assailed orders (PD 938), is significant, because if said law truly intends to exempt NPC from indirect taxes, it would have said so specifically.