Tan v Del Rosario

Facts:

1. Two consolidated cases assail the validity of RA 7496 or the
Simplified Net Income Taxation Scheme ("SNIT"), which amended
certain provisions of the NIRC, as well as the Rules and Regulations
promulgated by public respondents pursuant to said law.

2. Petitioners posit that RA 7496 is unconstitutional as it
allegedly violates the following provisions of the Constitution:

-Article VI, Section 26(1) Every bill passed by the Congress shall
embrace only one subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of taxation.
- Article III, Section 1 No person shall be deprived of . . . property
without due process of law, nor shall any person be denied the equal
protection of the laws.

3. Petitioners contended that public respondents exceeded their rule-
making authority in applying SNIT to general professional partnerships.
Petitioner contends that the title of HB 34314, progenitor of RA 7496, is
deficient for being merely entitled, "Simplified Net Income Taxation
Scheme for the Self-Employed and Professionals Engaged in the Practice of
their Profession" (Petition in G.R. No. 109289) when the full text of the
title actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-
Employed and Professionals Engaged In The Practice of Their Profession,
Amending Sections 21 and 29 of the National Internal Revenue Code,' as
amended. Petitioners also contend it violated due process.

5. The Solicitor General espouses the position taken by public
respondents.
6. The Court has given due course to both petitions.

ISSUE: Whether or not the tax law is unconstitutional for violating
due process

NO. The due process clause may correctly be invoked only when there is
a clear contravention of inherent or constitutional limitations in the
exercise of the tax power. No such transgression is so evident in herein
case.

1. Uniformity of taxation, like the concept of equal protection, merely
requires that all subjects or objects of taxation, similarly situated, are to
be treated alike both in privileges and liabilities. Uniformity does not
violate classification as long as: (1) the standards that are used therefor
are substantial and not arbitrary, (2) the categorization is germane to
achieve the legislative purpose, (3) the law applies, all things being
equal, to both present and future conditions, and (4) the classification
applies equally well to all those belonging to the same class.

2. What is apparent from the amendatory law is the legislative intent to
increasingly shift the income tax system towards the schedular
approach in the income taxation of individual taxpayers and to maintain,
by and large, the present global treatment on taxable corporations. The
Court does not view this classification to be arbitrary and inappropriate.

ISSUE 2: Whether or not public respondents exceeded their
authority in promulgating the RR

No. There is no evident intention of the law, either before or after the
amendatory legislation, to place in an unequal footing or in significant
variance the income tax treatment of professionals who practice their
respective professions individually and of those who do it through a
general professional partnership.



Tan v. Del Rosario (Due Process)
Sec.1 Art 3 Constitution
Facts: Petitioners challenge the constitutionality of RA 7496 aka
Simplified Net Income Taxation Scheme (SNIT) under Arts VI secs. 26
and 28, and III sec. 1 No person shall be deprived of . . . property
without due process of law, nor shall any person be denied the equal
protection of the laws. Essentially, petitioners argue that general
professional partnerships and general partnerships/corporations must
be uniformly taxed.

Issue: WON the changes in the tax schedules present in RA 7496
and the different treatment in Professional Partnerships and
Corporations and Partnerships, are unconstitutional.

Held: No. Petitioner gives a fairly extensive discussion on the merits of
the law, illustrating, in the process, what he believes to be an imbalance
between the tax liabilities of those covered by the amendatory law and
those who are not. With the legislature primarily lies the discretion to
determine the nature (kind), object (purpose), extent (rate), coverage
(subjects) and situs (place) of taxation. This court cannot freely delve
into those matters which, by constitutional fiat, rightly rest on legislative
judgment. Of course, where a tax measure becomes so unconscionable
and unjust as to amount to confiscation of property, courts will not
hesitate to strike it down, for, despite all its plenitude, the power to tax
cannot override constitutional proscriptions. The due process clause
may correctly be invoked only when there is a clear contravention of
inherent or constitutional limitations in the exercise of the tax power. No
such transgression is so evident to us.


Sison v. Ancheta (Due Process)
(Sec 1, Art III, Consti)
Facts: In a suit for declaratory relief and probation, Sison assails the
validity of BP 135 w/c further amended Sec 21 of the National Internal
Revenue Code of 1977. The law provides that thered be a higher tax
impost against income derived from professional income as opposed to
regular income earners. Sison, as a professional businessman, and as
taxpayer alleges that by virtue thereof, he would be unduly
discriminated against by the imposition of higher rates of tax upon his
income arising from the exercise of his profession vis-a-vis those which
are imposed upon fixed income or salaried individual taxpayers. He
characterizes the above section as arbitrary amounting to class
legislation, oppressive and capricious in character. There is a
transgression of both the equal protection and due process clauses of
the Constitution as well as of the rule requiring uniformity in taxation.

Issue: Whether the imposition of a higher tax rate on taxable net income
derived from business or profession than on compensation is
constitutionally infirm.

Held: No.

The Constitution as the fundamental law overrides any legislative or
executive act that runs counter to it. In any case therefore where it can
be demonstrated that the challenged statutory provision - as petitioner
here alleges - fails to abide by its command, then this Court must so
declared and adjudge it null.

It is undoubted that the due process clause may be invoked where a
taxing statute is so arbitrary that it finds no support in the Constitution.
An obvious example is where it can be shown to amount to the
confiscation of property. That would be a clear abuse of power. It then
becomes the duty of this Court to say that such an arbitrary act
amounted to the exercise of an authority not conferred. That properly
calls for the application of the Holmes dictum. It has also been held that
where the assailed tax measure is beyond the jurisdiction of the state, or
is not for a public purpose, or, in case of a retroactive statute is so harsh
and unreasonable, it is subject to attack on due process grounds.

Now for equal protection. The applicable standard to avoid the charge
that there is a denial of this constitutional mandate whether the assailed
act is in the exercise of the police power or the power of eminent domain
is to demonstrate "that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by the
spirit of hostility, or at the very least, discrimination that finds to
support in reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons
must be treated in the same manner, the conditions not being different,
both in the privileges conferred and the liabilities imposed.

In the case at bar, petitioner failed to make a case that the challenged
law was constitutionally infirm because the classifications were valid for
tax purposes, and it is not arbitrary and confiscatory.
American Bible Society v. City of Manila (Religious
Freedom)
(Sec. 5, Art. III, Consti)
Facts:
In the course of its ministry, American Bible Societys Philippine agency
has been distributing and selling bibles and/or gospel portions thereof
(since 1898, but except during the Japanese occupation) throughout the
Philippines and translating the same into several Philippine dialects. On
29 May 1953, the acting City Treasurer of the City of Manila informed
the Society that it was conducting the business of general merchandise
since November1945, without providing itself with the necessary
Mayors permit and municipal license, in violation of Ordinance 3000, as
amended, and Ordinances 2529, 3028 and 3364, and required the
Society to secure, within 3 days, the corresponding permit and license
fees ,together with compromise covering the period from the 4th
quarter of 1945 to the 2nd quarter of 1953, in the total sum of
P5,821.45.

Plaintiff Bible Society challenges the Citys imposition of license fees and
refuses to pay taxes on the bible it sold in the region.

Plaintiff further tried to establish that it never made any profit from the
sale of its bibles, which are disposed of for as low as one third of the cost,
and that in order to maintain its operating cost it obtains substantial
remittances from its New York office and voluntary contributions and
gifts from certain churches, both in the United States and in the
Philippines, which are interested in its missionary work. Defendant
retorts, however, that they do obtain profit from selling the bibles.

Issue: Whether tax imposition and a fee (Ordinances Nos. 2529 and
3000 respectively) on activities religious in characters and on religious
materials are tantamount to religious censorship and abridgment by the
state.

Held: Ordinance No. 2529 which taxes the sale of assorted merchandise
does not apply to the sale of religious materials in the exercise of the
right to freedom of religion. The right to enjoy freedom of the press and
religion occupies a preferred position as against the constitutional right
of property owners. Otherwise, those who can tax the exercise of this
religious practice can make its exercise so costly as to deprive it of the
resources necessary for its maintenance. Those who can tax the
privilege of engaging in this form of missionary evangelism can close all
its doors to all those who do not have a full purse. Spreading religious
beliefs in this ancient and honorable manner would thus be denied the
needy.

With respect to Ordinance No. 3000, as amended, which requires the
obtaining of the Mayor's permit before any person can engage in any of
the businesses, trades or occupations enumerated therein, We do not
find that it imposes any charge upon the enjoyment of a right granted by
the Constitution, nor tax the exercise of religious practices. The fee does
not deprive ABS of his constitutional right of the free exercise and
enjoyment of religious profession and worship, even though it prohibits
him from introducing and carrying out a scheme or purpose which he
sees fit to claim as a part of his religious system.

The ordinance (3000) is not applicable to the Society, as its business,
trade or occupation is not particularly mentioned in Section 3 of the
Ordinance, and the record does not show that a permit is required
therefor under existing laws and ordinances for the proper supervision
and enforcement of their provisions governing the sanitation, security
and welfare of the public and the health of the employees engaged in the
business of the Society.


















Tolentino vs. Secretary of Finance

FACTS

RA 7716, otherwise known as the Expanded Value-Added Tax Law, is an
act that seeks to widen the tax base of the existing VAT system and
enhance its administration by amending the National Internal Revenue
Code. There are various suits questioning and challenging the
constitutionality of RA 7716 on various grounds.

Tolentino contends that RA 7716 did not originate exclusively from the
House of Representatives but is a mere consolidation of HB. No. 11197
and SB. No. 1630 and it did not pass three readings on separate days on
the Senate thus violating Article VI, Sections 24 and 26(2) of the
Constitution, respectively.

Issue: W/N RA 7716 violates press freedom and religious liberty. NO

Held:
Claims of press freedom and religious liberty.We have held that, as a
general proposition, the press is not exempt from the taxing power of
the State and that what the constitutional guarantee of free press
prohibits are laws which single out the press or target a group belonging
to the press for special treatment or which in any way discriminate
against the press on the basis of the content of the publication, and R.A.
No. 7716 is none of these.

Now it is contended that by removing the exemption of the press from
the VAT while maintaining those granted to others, the law
discriminates against the press. At any rate, it is averred, "even non-
discriminatory taxation of constitutionally guaranteed freedom is
unconstitutional."

With respect to the first contention, it would suffice to say that since the
law granted the press a privilege, the law could take back the privilege
anytime without offense to the Constitution. The reason is simple: by
granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative.

Indeed, in withdrawing the exemption, the law merely subjects the press
to the same tax burden to which other businesses have long ago been
subject. It is thus different from the tax involved in the cases invoked by
the PPI. The license tax in Grosjean v. American Press Co. was found to
be discriminatory because it was laid on the gross advertising receipts
only of newspapers whose weekly circulation was over 20,000, with the
result that the tax applied only to 13 out of 124 publishers in Louisiana.
These large papers were critical of Senator Huey Long who controlled
the state legislature which enacted the license tax. The censorial
motivation for the law was thus evident.

On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota
Comm'r of Revenue, the tax was found to be discriminatory because
although it could have been made liable for the sales tax or, in lieu
thereof, for the use tax on the privilege of using, storing or consuming
tangible goods, the press was not. Instead, the press was exempted from
both taxes. It was, however, later made to pay a special use tax on the
cost of paper and ink which made these items "the only items subject to
the use tax that were component of goods to be sold at retail." The U.S.
Supreme Court held that the differential treatment of the press "suggests
that the goal of regulation is not related to suppression of expression,
and such goal is presumptively unconstitutional." It would therefore
appear that even a law that favors the press is constitutionally suspect.

Nor is it true that only two exemptions previously granted by E.O. No.
273 are withdrawn "absolutely and unqualifiedly" by R.A. No. 7716.
Other exemptions from the VAT, such as those previously granted to
PAL, petroleum concessionaires, enterprises registered with the Export
Processing Zone Authority, and many more are likewise totally
withdrawn, in addition to exemptions which are partially withdrawn, in
an effort to broaden the base of the tax.

The PPI says that the discriminatory treatment of the press is
highlighted by the fact that transactions, which are profit oriented,
continue to enjoy exemption under R.A. No. 7716. An enumeration of
some of these transactions will suffice to show that by and large this is
not so and that the exemptions are granted for a purpose. As the
Solicitor General says, such exemptions are granted, in some cases, to
encourage agricultural production and, in other cases, for the personal
benefit of the end-user rather than for profit. The exempt transactions
are:

(a) Goods for consumption or use which are in their original state
(agricultural, marine and forest products, cotton seeds in their original
state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and
poultry feeds) and goods or services to enhance agriculture (milling of
palay, corn, sugar cane and raw sugar, livestock, poultry feeds, fertilizer,
ingredients used for the manufacture of feeds).
(b) Goods used for personal consumption or use (household and
personal effects of citizens returning to the Philippines) or for
professional use, like professional instruments and implements, by
persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be
used for manufacture of petroleum products subject to excise tax and
services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary
services, and services rendered under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international
agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding
P500,000.00.

The PPI asserts that it does not really matter that the law does not
discriminate against the press because "even non-discriminatory
taxation on constitutionally guaranteed freedom is unconstitutional."
PPI cites in support of this assertion the following statement in Murdock
v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The
protection afforded by the First Amendment is not so restricted. A
license tax certainly does not acquire constitutional validity because it
classifies the privileges protected by the First Amendment along with
the wares and merchandise of hucksters and peddlers and treats them
all alike. Such equality in treatment does not save the ordinance.
Freedom of press, freedom of speech, freedom of religion are in
preferred position.

The Court was speaking in that case of a license tax, which, unlike
an ordinary tax, is mainly for regulation. Its imposition on the press
is unconstitutional because it lays a prior restraint on the exercise
of its right. Hence, although its application to others, such those
selling goods, is valid, its application to the press or to religious
groups, such as the Jehovah's Witnesses, in connection with the
latter's sale of religious books and pamphlets, is unconstitutional.
As the U.S. Supreme Court put it, "it is one thing to impose a tax on
income or property of a preacher. It is quite another thing to exact
a tax on him for delivering a sermon."

A similar ruling was made by this Court in American Bible Society v. City
of Manila, which invalidated a city ordinance requiring a business
license fee on those engaged in the sale of general merchandise. It was
held that the tax could not be imposed on the sale of bibles by the
American Bible Society without restraining the free exercise of its right
to propagate.

The VAT is, however, different. It is not a license tax. It is not a tax
on the exercise of a privilege, much less a constitutional right. It is
imposed on the sale, barter, lease or exchange of goods or properties or
the sale or exchange of services and the lease of properties purely for
revenue purposes. To subject the press to its payment is not to burden
the exercise of its right any more than to make the press pay income tax
or subject it to general regulation is not to violate its freedom under the
Constitution.

Additionally, the Philippine Bible Society, Inc. claims that although it
sells bibles, the proceeds derived from the sales are used to subsidize
the cost of printing copies which are given free to those who cannot
afford to pay so that to tax the sales would be to increase the price, while
reducing the volume of sale. Granting that to be the case, the resulting
burden on the exercise of religious freedom is so incidental as to make it
difficult to differentiate it from any other economic imposition that
might make the right to disseminate religious doctrines costly.
Otherwise, to follow the petitioner's argument, to increase the tax on the
sale of vestments would be to lay an impermissible burden on the right
of the preacher to make a sermon.

On the other hand the registration fee of P1,000.00 imposed by Sec.107
of the NIRC, as amended by Sec. 7 of R.A. No. 7716, although fixed in
amount, is really just to pay for the expenses of registration and
enforcement of provisions such as those relating to accounting in 108
of the NIRC. That the PBS distributes free bibles and therefore is not
liable to pay the VAT does not excuse it from the payment of this fee
because it also sells some copies. At any rate whether the PBS is liable
for the VAT must be decided in concrete cases, in the event it is assessed
this tax by the Commissioner of Internal Revenue.