July 5, 2024 - The National Food Authority (NFA) has secured a victory in the Supreme Court, with the high court ruling that its properties are exempt from real property tax.
The decision, penned by Associate Justice Amy C. Lazaro-Javier, nullified notices of delinquency issued by Tagum City, Davao del Norte, demanding over P2 million in real property taxes from the NFA.
The NFA, tasked with managing the country's rice buffer stock, argued it qualified as a government instrumentality exempt from such taxes. The Supreme Court agreed, citing the agency's role in ensuring national rice inventory and supporting disaster relief efforts.
The case stemmed from a 2008 application for tax exemption filed by the NFA based on legal opinions classifying it as a government instrumentality following a 2006 Supreme Court decision. Despite follow-up appeals, Tagum City issued delinquency notices in 2016.
Lower courts initially sided with the city government. However, the Supreme Court reversed these rulings, highlighting the established principle that taxing government property essentially transfers funds between government entities.
The decision underscores the legal distinction between government-owned and controlled corporations and government instrumentalities. The Court reiterated that for an agency to be classified as the latter, it must perform essential government functions and possess operational autonomy.
The NFA's role in maintaining rice reserves and its independent operations under the Department of Agriculture met these criteria, the Court explained.
This decision reinforces the tax-exempt status of government instrumentalities' properties, as long as they are used for public service. The ruling strengthens the NFA's capacity to fulfill its mandate of ensuring national food security.