Diaz vs. Secretary of Finance (2011)

Jun 18th, 2015
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Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for declaratory relief assailing the validity of the impending imposition of value-added tax (VAT) by the Bureau of Internal Revenue (BIR) on the collections of tollway operators. Court treated the case as one of prohibition.

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Diaz vs. Secretary of Finance (2011)Ruling: YESFacts:When a tollway operator takes a toll fee from a motorist, the fee is inPetitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed thispetition for declaratory relief assailing the validity of the impendingimposition of value-added tax (VAT) by the Bureau of InternalRevenue (BIR) on the collections of tollway operators. Court treated thecase as one of prohibition.effect for the latter's use of the tollway facilities over which the operatorenjoys private proprietary rights that its contract and the law recognize. Inthis sense, the tollway operator is no different from the service providersunder Section 108 who allow others to use their properties or facilities for afee.Tollway operators are franchise grantees and they do not belong toPetitioners hold the view that Congress did not, when it enacted theexceptions that Section 119 spares from the payment of VAT. The wordNIRC, intend to include toll fees within the meaning of "sale of"franchise" broadly covers government grants of a special right to do an actservices" that are subject to VAT; that a toll fee is a "user's tax,"or series of acts of public concern. Tollway operators are, owing to the naturenot a sale of services; that to impose VAT on toll fees wouldamount to a tax on public service; and that, since VAT was neverfactored into the formula for computing toll fees, its imposition wouldviolate the non-impairment clause

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