Payment Under Protest

It is said that there are two things we cannot escape from: death and taxation. Not even the mob boss Al Capone could run away from the long reach of the law with respect to tax. The police could not bring the mob boss to jail for murder and other crimes but soon learned that he did not pay his taxes. The most popular mob boss was jailed, not for killing his enemies or swindling but for non-payment of taxes. Tax being the main source of revenue, the government will do everything within its power to extract this “life blood” from those liable to pay it. This power to tax has been delegated to local government units in order to finance its programs, projects, and overall operation and most of the principles of taxation in the national level also apply. In the imposition of taxes, there are instances where the tax payers do not approve the computation of their taxes. In an instance like this, the local assessor or treasurer will not entertain any protest if no payment has been made. This is called “payment under protest” which is one of the subjects of a case involving the National Power Corporation (NPC) and the province of Quezon.

NPC vs Quezon

Mirant Pagbilao Corporation took over from NPC the operation of a power plant located at Pagbilao, Quezon. Quezon demanded from Mirant the payment of the unpaid real property tax on the properties of the plant. NPC filed a protest before the Local Assessment Board claiming that said properties are exempted from the payment of real property taxes under the local government code. The case reached the Supreme Court but was dismissed. The NPC filed a motion for reconsideration saying that it is the real owner of the properties being taxed and Mirant is only the beneficial user and being a government corporation, NPC is exempted from the payment of real property taxes.

Not Exempted

One of the main issues here is the personality of NPC with respect to its filing of the case. Mirant is operating the plant under the build-operate-transfer scheme as agreed upon. The Court said “Legal interest is defined as interest in property or a claim cognizable at law, equivalent to that of a legal owner who has legal title to the property.” (G.R. No. 171586, January 25, 2010). NPC clearly does not have the required interest to file the case. Another matter that seals NPC’s fate is the fact that it did not pay its tax liability first before filing its protest. “Since Napocor was simply questioning the correctness of the assessment, it should have first complied with Section 252, particularly the requirement of payment under protest. Napocors failure to prove that this requirement has been complied with thus renders its administrative protest under Section 226 of the LGC without any effect. No protest shall be entertained unless the taxpayer first pays the tax.” The dismissal of NPC’s protest before the Local Board of Assessment Appeals (LBAA) was thus correct since any protest in the assessment by the assessor cannot be entertained without paying first the tax. Only upon said payment can the assessor act on the protest and if the taxpayer is unsatisfied, he can file the appeal before the LBAA. This NPC did not do. It directly filed an appeal before the LBAA without payment and without a decision from the assessor to appeal. NPC’s move was premature.


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