SC orders BIR to refund P58-M tax paid by San Miguel Corp.

MANILA, Philippines—The Supreme Court today (Tuesday) affirmed the decision of the Court of Tax Appeals ordering the government to refund P58-million tax paid by San Miguel Corporation.

In a 9-page decision dated Nov. 23 but was released to the public today, the high court’s First Division said the Bureau of Internal Revenue (BIR) committed an invalid interpretation of tax laws.

The BIR, in their petition for review before the Supreme Court argued that under the Tax Reform Act of 1997, for three years’ effectivity of Republic Act 8240 or the National Internal Revenue Code, the excise tax from any brand of fermented liquor shall not be lower than the tax due on Oct. 1, 1996. In the case of Red Horse beer, one of SMC’s products, the applicable tax rate was P7.07 per liter which was higher than the rate of P6.15 per liter imposed under the Tax Reform Act of 1997.

But the CTA, to which the SC affirmed, ruled the rate of excise tax that may be collected from SMC’s Red Horse brand after the 3-year period should be P6.89 per liter only, the figure arrived at after adding 12 percent to the rate of P6.15 percent imposed under the NIRC.

The case stemmed after SMC was assessed and paid P2,286,488,861.58 to the BIR for 323,407,194 liters of Red Horse Beer products computed on the tax rate of P7.07 per liter rate for the period of June 1, 2004 to December 31, 2004. SMC argued the BIR invalidly interpreted the law because they are entitled to a much lower rate thus it filed a claim for refund or tax credit amount worth more than P58-million.

Due to the BIR’s failure to act on the claim, SMC elevated the case to the Court of Tax Appeals who ruled in their favor. Thus the case went to the Supreme Court.