The evil sought to be prevented

The President of the Republic of the Philippines himself has endorsed a presidential candidate for the upcoming 2016 National Elections. Although the official campaign period has not yet commenced, such endorsement is a sign the national elections is very imminent. Amidst all the issues surrounding the national elections, partisan political activity is a matter of great importance not only for politicians, but also for the general public.

Partisan political activity has been consistently defined by Philippine laws and jurisprudence as: “An act designed to promote the election or defeat of a particular candidate to a public office.” Basically, it is any act of soliciting votes and/or undertaking any campaign for or against a candidate. Among the numerous prohibitions under the law with regard to partisan political activity is that concerning the express power of a corporation to make reasonable donations. By virtue of Section 36 Paragraph 9 of the Corporation Code (B.P. Blg. 68), corporations, both foreign and domestic, cannot make contributions in aid of any political party or candidate, or for purposes of partisan political activity.

In relation thereto, Section 94 (a) of B.P. Blg. 881 otherwise known as the Omnibus Election Code, defines contribution as “a gift, donation, subscription, loan, advance or deposit of money or anything of value, or a contract, promise or agreement to contribute, whether or not legally enforceable, made for the purpose of influencing the results of the elections.” Section 95 of the same Code provides an itemized list of prohibited contributions. Some of which are those made by juridical persons that are operators of a public utility or in possession of or exploiting any natural resources of the nation; holders of contracts or sub-contracts to supply the government with goods or services; and grantees of franchises, incentives, exemptions, allocations or similar privileges or concessions by the government.

In enacting the above-mentioned provisions of law, the legislature highlights the significance of contributions for purposes of partisan political activity so much so that any candidate who solicited or received any contribution under Section 95 of the Omnibus Election Code may be disqualified from continuing as a candidate, or if he has been elected, from holding the office. In connection with this, the Supreme Court in the recent case of Ejercito v. COMELEC pointed out a US Supreme Court ruling that upheld a law imposing a $1,000 limitation on political contributions by individuals and groups to candidates and authorized campaign committees. According to the US Supreme Court, the primary interest served by such restriction is the prevention of corruption and the appearance of corruption created by the possible coercive influence of large financial contributions on the candidates and their actions, especially if elected to office.

Hence, it is of no surprise the Securities and Exchange Commission (SEC) en banc through Opinion No. 15-08 dated July 27 has declared Section 95 of the Omnibus Election Code, which enumerates the juridical entities prohibited from making political contributions, did not amend nor repeal Section 36 Paragraph (9) of the Corporation Code proscribing both domestic and foreign corporations from giving donations in aid of any political party or candidate or for purposes of partisan political activity. According to the SEC, the two laws must be harmonized because neither one is an impediment to the effectivity and enforcement of the other. They are of the opinion the enumeration under the Omnibus Election Code is actually an emphasis of the blanket prohibition in the Corporation Code because the former is very specific with regard to the industry and/or activities of a corporation. If at all, the combination of the two laws is a more effective deterrent against the evil sought to be prevented – corruption and the appearance of corruption.

Ruth V. Ricardo is a supervisor from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

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