PHILIPPINE AMUSEMENT AND GAMING CORPORATION VS. BUREAU OF INTERNAL REVENUE

ISSUE:

Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from the enumeration of GOCCs exempt from the payment of corporate income tax?

HELD:

YES. The original exemption of PAGCOR from corporate income tax was not made pursuant to a valid classification based on substantial distinctions so that the law may operate only on some and not on all. Instead, the same was merely granted due to the acquiescence of the House Committee on Ways and Means to the request of PAGCOR.

The argument that the withdrawal of the exemption also violates the non-impairment clause will not hold since any franchise is subject to amendment, alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from payment of indirect taxes and as such its purchases remain not subject to VAT, reiterating the rule laid down in the Acesite case.