VERA FILES FACT CHECK: Roque wrongly claims cash, other gifts to Olympic gold medalist Hidilyn Diaz not exempt from donor’s tax

The cash prizes and other incentives given by business executives and private companies to Hidilyn Diaz, the Philippines’ first ever Olympic gold medalist, are subject to donor’s tax, according to Palace Spokesman Harry Roque. This is false.

STATEMENT

In a July 31 statement, Roque said:

“The donations given to our athletes are excluded from the computation of the athletes’ gross income under the Tax Code. This, however, presupposes that the donors have already paid the donor’s tax.”

Source: Office of the Presidential Spokesperson (PCOO), On exempting Filipino athletes’ winnings and prizes from tax payment, July 31, 2021

Apart from the Tax Code, he also cited an amendment in the Tax Reform for Acceleration and Inclusion (TRAIN) law enacted in 2017, which lowered the donor tax rate to 6% in excess of P250,000.

Citing a July 29 clarification from the Bureau of Internal Revenue (BIR) on Diaz’s winnings, the Palace spokesperson asserted that while the 1997 Tax Code exempts national athletes from paying taxes on their winnings, those who provide additional incentives to them must pay a donor’s tax.

Roque issued the clarification to correct a wrong claim two days prior that Congress needed to legislate a measure to exempt winnings in sports competitions such as the Olympics. (See VERA FILES FACT SHEET: Drilon wrong in claiming PNoy-era law exempted athletes’ winnings from tax payments)

In his July 29 press briefing. Roque said:

“…Pero alam ko rin po bilang abogado para magkaroon ng tax exemption, kinakailangan po ng batas. So, baka kinakailangan ng mga senador at mga kongresista ang gumawa ng ganiyang batas.”

(But what I know, as a lawyer, to have tax exemption, there needs to be a law on it. So, maybe our senators and congressmen need to draft such a law.)

Source: PTV Philippines Official Youtube Channel, WATCH: Press briefing with Presidential Spokesperson Harry Roque, watch from 1:08:26 to 1:08:35, July 29, 2021

FACT

Republic Act (RA) 7549, signed on May 22, 1992 by then-president Corazon Aquino, exempts private donors of cash incentives awarded to national athletes from paying the donor’s tax.

When sought to clarify BIR’s July 29 statement that Roque had cited, lawyer Larry Barcelo, BIR assistant commissioner for legal service, told VERA Files Fact Check in an Aug. 17 phone interview that the provision exempting cash gifts and other incentives from the payment of donor’s tax “would appear” to have been “impliedly repealed” because it was not carried in the 1997 Tax Code. However, he said it is unlikely that the “implied repeal” will apply to Diaz’s donors because the BIR favors “express repeal.”

Barcelo’s explanation, however, runs counter to jurisprudence dating back to 1948 which established that general laws cannot repeal or modify special laws. The 1997 Tax Code and Republic Act No. 10963, known as the TRAIN law, are general laws, while RA 7549 is a special law devoted to awards and incentives granted to national athletes winning in sports competitions.

The 1948 Supreme Court (SC) ruling said that a “special law is not regarded as having been amended or repealed by a general law unless the intent to repeal or alter is manifest.” Quoting a previous decision, the high court reiterated that lawmakers are expected to “have known the existing laws on the subject and not have enacted conflicting statutes.”

The SC resolved a similar issue in 2018 on whether or not the 1997 Tax Code, as amended by the Value Added Tax (VAT) Reform Law (RA No. 9337), can implicitly repeal a specific provision of Presidential Decree (PD) No. 972. PD No. 972, signed on July 28, 1976, is a special law that provides tax exemption, except income tax, to coal operating contractors (COCs) partnered with the government.

The high court ruled that since “the repealing clause of RA No. 9337, a general law, did not provide for the express repeal of PD No. 972, a special law,” such COCs remain exempt from paying VAT.

It said:

“It is a fundamental rule in statutory construction that a special law cannot be repealed or modified by a subsequently enacted general law in the absence of any express provision in the latter law to that effect. A special law must be interpreted to constitute an exception to the general law in the absence of special circumstances warranting a contrary conclusion.”

Source: Supreme Court of the Philippines, COMMISSIONER OF INTERNAL REVENUE, PETITIONER, V. SEMIRARA MINING CORPORATION, RESPONDENT, Dec. 8, 2018

The same principle was cited in a July 2000 SC decision that said, “It is well settled that repeals of laws by implication are not favored and that courts must generally assume their congruent application.”

While saying that “in (the BIR) jurisdiction, implied repeal is not favored, only express repeal,” Barcelo, however, said that what applies to Diaz’s case is Section 32, B3 of the Tax Code, which exempts gifts and incentives only from the computation of the gross income of national athletes.

Barcelo said:

“The following items shall not be included in gross income and shall be exempt from taxation: the value of property acquired by gift, bequest, devise or descent.

‘Yon, so exempt na siya (Hidilyn Diaz). Kasi yung property na ‘yan na subject na ng donor’s tax sa Title III ng Tax Code… Ang liable doon, ‘yung donors.”

(There, so she (Hidilyn Diaz) is exempted [from paying income tax] because such properties [donated by private entities] are subject to the donor’s tax under Title III of the Tax Code. Those liable for that are the donors.)

Source: Phone interview with VERA Files, Aug.17, 2021

After a long discourse, the BIR lawyer said: “In so far as the donations to Hidilyn (is concerned), it appears that this (implied repeal) will not apply. These are the prizes and awards granted in local and international sports competitions coming from the entity or organization that undertook that event or organized that event. So, it looks like this will also not apply to those donating to Hidilyn coming from the private entities here in the Philippines. So, that’s likely how it will be treated.”