ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES

MARANAN AND LORENZO SANCHEZ, petitioners, vs. PHILIPPINE

AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent
G.R. No. 91649, May 14,1991
Paras, J.

Facts: The Philippine Amusements and Gaming Corporation (PAGCOR)

was created in 1977 by Presidential Decree 1067-A, and was
granted a franchise under PD 1067-B to establish, operate and
maintain gambling casinos on land or water within the territorial
jurisdiction of the Philippines.

PAGCORs operation was a success, hence in 1978, PD 1399 was

passed which expanded its power. In 1983, PAGCORs charter was
updated through PD 1869, and its charter provides that PAGCOR
shall regulate and centralize all games of chance authorized by
existing franchise or permitted by law, and was given a territorial
jurisdiction all over the Philippines. Under its charters repealing
clause, all laws, decrees, executive orders, rules and regulations
inconsistent therewith, are accordingly repealed, amended or
modified. Furthermore, Section 13 par. 2 of PD 1869 states that
PAGCOR is exempted from paying any tax of any kind or form,
income or otherwise, as well as fees, charges or levies of whatever
nature, whether national or local.

Atty. Humberto Basco and several other lawyers assailed the

validity of the law creating PAGCOR. They claimed that PD 1869
was unconstitutional because (1) it violates the equal protection
clause as it legalizes PAGCOR-conducted gambling, and, (2) it
violates the local autonomy clause of the constitution, as it forced
cities like Manila to waive its right to impose taxes and legal fees
as far as PAGCOR is concerned.

Issue/s: Whether or not PD 1869 is unconstitutional and its exemption

clause violates the principle of local autonomy.

Ruling: The Court held that PD 1869 is constitutional and does not violate
the principle of local autonomy. Section 5, Article 10 of the 1987
Constitution provides:

Each local government unit shall have the power to create its
own source of revenue and to levy taxes, fees, and other
charges subject to such guidelines and limitation as the
congress may provide, consistent with the basic policy on
local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government.
 A close reading of the above provision does not violate local
autonomy (particularly on taxing powers) as it was clearly stated
that the taxing power of LGUs are subject to such guidelines and
limitation as Congress may provide.

The City of Manila, being a mere Municipal Corporation has no

inherent right to impose taxes. The Charter of the City of Manila is
subject to control by Congress. It was stressed that municipal
corporations are mere creatures of Congress which has the power
to create and abolish municipal corporations due to its general
legislative powers. Congress, therefore, has the power of control
over Local governments. The power of LGUs to impose taxes and
fees is always subject to limitation provided by Congress. And if
Congress can grant the City of Manila the power to tax certain
matters, it can also provide for exemptions or even take back the
power.

Further, local governments have no power to tax instrumentalities

of the National Government. PAGCOR is a government owned or
controlled corporation with an original charter, PD 1869. All of its
shares of stocks are owned by the National Government. PAGCOR
also has a dual role, to operate and to regulate gambling casinos.
The latter role is governmental, which places it in the category of
an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might
be burdened, impeded or subjected to control by a mere Local
government.

The principle of Local autonomy does not make local governments

sovereign within the state; the principle of local autonomy within
the constitution simply means decentralization. It cannot be an
imperium in imperio it can only act intra sovereign, or as an arm
of the National Government. The National Government is supreme
over local governments. As such, mere creatures of the State
cannot defeat national policies using the power to tax as a tool
for regulation. The power to tax cannot be allowed to defeat an
instrumentality of the very entity that has the inherent power to
wield it.

The principle of local autonomy does not make LGUs sovereign

within a state, it simply means decentralization.

Doctrine Supremacy of the National Government over Local

of the Governments.
Case:
Every law has in its favor the presumption of constitutionality,
unless a clear and unequivocal breach of the Constitution is
shown.

Submitted by: For:

GIRLY G. DELA PEA ATTY. MARIVIC

ESTRADA-RIMANDO
Student, LLB 1 Local Government Law