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A. GENERAL PRINCIPLES

City Trasurer, The City Assessor and the City Mayor of the

While it is true that the first part of Ordinance No. 6537,

I. Concept, Nature and Characteristics of Taxation and

City of Manila

which requires that the alien

 

Taxes

While as a rule an ad valorem tax is a property tax, and

to secure an employment permit, is regulatory in

1.

Commissioner of Internal Revenue v. Cebu Portland

this rule is supported by

character, the second part which

Cement Company and Court of Tax AppealsThe argument that the assessment cannot as yet be enforced because it

some authorities, the rule should not be taken in its absolute sense if the nature and

requires the payment of P50.00 as employee's fee is not regulatory but a revenue

is

still being contested loses sight of the urgency of the

purpose of the tax as gathered from the context show that

measure. There is no logic or justification in exacting

need to collect taxes as "the lifeblood of the government."

it is in effect an excise or

P50.00 from aliens who have

If

the payment of taxes could be postponed by simply

a license tax. The character of the tax as a property tax or

been cleared for employment. It is obvious that the

questioning their validity, the machinery of the state

a license or occupation tax must be

purpose of the ordinance is to

would grind to a halt and all government functions would

determined by its incidents, and from the natural and legal

raise money under the guise of regulation.

be

paralyzed.

effect of the language

9. Compania General de Tabacos de Filipinas v. City of

 

employed in the act or ordinance, and not by the name by

 

Manila

2. Commissioner of Internal Revenue v. Algue Inc., and

which it is described, or

A

license fee is a legal concept quite distinct from tax; the

CTA

by

the mode adopted in fixing its amount. If it is clearly a

former is imposed in the

Taxes are the lifeblood of the government and so should be

property tax, it will be so

exercise of police power for purposes of regulation, while

collected without

regarded, even though nominally and in form it is a license

the latter is imposed

unnecessary hindrance. On the other hand, such collection

or

occupation tax; and, on

under the taxing power for the purpose of raising

should be made in

the other hand, if the tax is levied upon persons on account

revenues. Both a license fee and

accordance with the law, and any arbitrariness will negate

of

their business, it will

a

tax may be imposed on the same business or occupation,

the very reason for government itself. Without taxes, the

be

construed as a license or occupation tax, even though it

or

for selling the same

government would be paralyzed for lack of the motive to

is

graduated according to

article, this not being in violation of the rule against double

activate and operate it. Hence, despite the natural

the property used in such business, or on the gross

taxation.

reluctance to surrender part of one’s hard earned income

receipts of the business.

 

10.

American Mail Lines v. City of Basilan

to

the taxing authorities, every person who is able to must

5.

Esso Standard Eastern, Inc. (formerly, Standard-Vacuum

The power to regulate as an exercise of police power does

contributehis share in the running of the government. The

Oil

Company) v The

not include the power to

government for its part is expected to respond in the form

of tangible and intangible benefits intended to improve the

lives of the people and enhance their moral and material values. This “symbiotic” relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.

3. C. N. Hodges v The Municipal Board Of The City Of

Commissioner of Internal Revenue

A margin fee is imposed by the State in the exercise of its

police power and not the power of taxation. A margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve.

A tax is a levy for the purpose of providing revenue for

government operations.

impose fees for revenue purposes. Fees for purely regulatory purposes may only be

of sufficient amount to include the expenses of issuing the

license and the cost of the necessary inspection or police surveillance.

11. Osmeña vs. Orbos

Hence, it seems clear that while the funds collected may

be referred to as taxes,

Iloilo, et al.

paid, such additional prohibition is not be considered a tax,

6.

Progressive Development Corp. v. Quezon City

they are exacted in the exercise of the police power of the

a

An ordinance imposing a sales tax, which has an additional

If

the generating of revenue is the primary purpose and

State. Moreover, that the

provision prohibiting the registration of the objects of the sale thereof, unless the tax impost has been

for the same is merely

regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax.

7.

Philippine Airlines, Inc. v. Edu

OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as

coercive measure to make the enforcement of the contemplated sales tax more

a

Accordingly, a charge of a fixed sum which bears no relation at all to the cost of

"trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA

effective.

inspection and regulation may be held to be a tax rather

12.

Republic vs. Bacolod-Murcia Milling Co.

Taxes are the lifeblood of the government. It is imperative that the power to impose them to be clothed with the implied authority to

than an exercise of the police power.

The protection of a large industry constituting one of the great source of the state's wealth and therefore directly or indirectly affecting the

devise ways and means

If

the purpose is primarily revenue, or if revenue is, at

welfare of so great a portion

to accomplish their collection in the most effective manner.

least, one of the real and

of the population of the State is affected to such an extent

Without this implied

substantial purposes, then the exaction is properly called a

by public interests as to be

power the end of government may falter or fail.

tax. Such is the case of

within the police power of the sovereign.

II.

Classification and Distinctions

motor vehicle registration fees. Fees may be properly

The levy for the Philsugin Fund is not so much an exercise

4.

Association of Customs Brokers Inc. and G. Manlapit v

regarded as taxes even though

of

the power of taxation,

The Municipal Board, The

they also serve as an instrument of regulation.

nor the imposition of a special assessment, but, the

8.

Villegas vs. Hiu Chiong Tsai Pao Ho

exercise of the police power for

the general welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist.

13. Victorias Milling Co., Inc. v. Municipality of Victorias

The designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Thus, "when no police inspection, supervision, or regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated

sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is strong that the power of taxation, and not the police power, is being exercised."

14. Lutz v. Araneta

Analysis of the Act will show that the tax is levied with a regulatory purpose, to

provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation. Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain.

15. PCGG v. Cojuanco

Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on this definition, a tax has three elements, namely:

a) it is an enforced

proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into these elements The coconut levy funds -- like the sugar levy and the oil stabilization funds, as well as the monies generated by the On-line Lottery System -- are funds exacted by the State. Being enforced contributions, they are prima facie public funds.III. Limitations on the Power of Taxation 16. Pascual v. Secretary of Public Works and Communications The right of the legislature to appropriate funds is correlative with its right to tax, under the constitutional provision against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose as appropriation for state funds can be made for other than a public purpose.

17. John Osmeña v. Oscar Orbos

For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard — limits of which are sufficiently determinate or determinable — to which the delegate must conform.

18. Pepsi-Cola Bottling Company v. Municipality of Tanauan

Double taxation, in general, is not forbidden by our fundamental law. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same

jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality.

19. Social Security System v. City of Bacolod and Reynaldo

When the legislature exempted lands and buildings owned by the government from payment of said taxes, what it intended was a broad and comprehensive application of such mandate, regardless of whether such property is devoted to governmental

or proprietary purpose. It is axiomatic that when public property is involved, exemption is the rule and taxation, the exception

20. Sea-Land Service, Inc. v. Court of Appeals

Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption

is the exception. Any interpretation that would give it an expansive construction to encompass an exemption from taxation would be unwarranted.

21. Commissioner of Internal Revenue v. Mitsubishi Metal

Corporation Laws granting exemption from tax are construed strictissimi juris against the

taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus petitioners have failed to discharge.

22. Thirty-First Infantry Post Exchange and First Lieutenant

David L. Hardee v. Juan Posadas

The sale of merchandise through the post exchanges to the individuals of the United States Army and Navy are not goods sold and delivered directly to the United States Army or Navy for the actual use or issue by the Army or Navy and are therefore, not exempt from the payment of the internal revenue tax imposed by the law. 23. Commissioner of Internal Revenue v. Marubeni Corporation

A tax amnesty is a general pardon or intentional

overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation

of a revenue or tax law. It partakes of an absolute

forgiveness or waiver by the

government of its right to collect what is due it and to give

tax evaders who wish to

relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never favored nor presumed in law. If granted, the terms of the amnesty, like that of a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority. 24. William Reagan, Etc. v. Commissioner of Internal Revenue The Philippines being independent and sovereign, its authority may be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies must submit to its terms.

25. Conrado L. Tiu vs. Court of Appeals

The Constitution does not require absolute equality among residents. It is enough

that all persons under like circumstances or conditions are

Authority

27.

Coconut Oil Refiners Association, Inc. vs. Hon Ruben

the existence of any of the conditions specified by

produce and sell copra, the latter merely sell copra. The

by

this framers and other government agencies involved in

given the same privileges

Congress. This is a duty which

its

implementation, even

and required to follow the same obligations. In short, a classification based on valid

cannot be evaded by the President. 31. MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS,

under the past administration. The legislative process started long before the signing

and reasonable standards does not violate the equal

INC. vs. DEPARTMENT OF

when the data were gathered, proposals were weighed and

protection clause. 26. John Hay Peoples Alternative Coalition v. Bases Conversion Development

FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL

the

measure were drafted, revised and finalized. 3) To justify the nullification of a law. there must be a clear and unequivocal breach

final wordings of the

The nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local

There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former

Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently.

the Constitution, not a doubtful and argumentative

implication and not merely rely upon newspaper articles which are actually hearsay and have evidentiary value 4) The distinction of the customs brokers from the other professionals who are subject to occupation tax under the Local Tax Code is

of

based upon material differences, in that the activities of customs brokers (like

36.

Villegas v. Hiu Chiong Tsai Pao Ho

governments may pass ordinances

32.

COMMISSIONER OF INTERNAL REVENUE vs. HON.

those of stock, real estate

on exemption only from local taxes.

COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO

of notice, of hearing, and of publication must be observed.

and immigration brokers) partake more of a business, rather than a profession and

Torres The mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance

CORPORATION In a legislative rule (as opposed to interpretative), due observance of the requirements

were thus subjected to the percentage tax .35. ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue et al.

unconstitutional for espousing

33.

THE COMMISSIONER OF INTERNAL REVENUE vs.

Taxpayers may be classified into different categories. To

unfair competition. 28. The Province Of Abra vs. Honorable Harold M. Hernando It has been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris.

LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike. The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violative of the equal protection clause.

repeat, it is enough that the classification must rest upon substantial distinctions that make real differences. There is ample justification then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional and business income.

29.

Arturo M. Tolentino vs.The Secretary of Finance and

34. KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN

Although the equal protection clause of the Constitution does not forbid classification,

The Commisioner of Internal Revenue The VAT is not a license tax. It is not a tax on the exercise

NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA

it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of

of a privilege, much less a

vs. HON. BIENVENIDO TAN, as Commissioner of Internal

the

particular legislation.

constitutional right. It is imposed on the sale, barter, lease

Revenue

37.

Villanueva v. City of Iloilo

or exchange of goods or

1) The 1987 Constitution mentions a specific date when

A

license tax may be levied upon a business 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

the President loses her power to legislate. If the framers of said Constitution had intended to terminate the exercise of legislative powers by the President at the beginning of the term of office

occupational though the land or property used in connection therewith is subject to property tax. The rule of equality and uniformity is not violated by the fact that tenement taxes are not imposed in

tax or subject it to general

of the members of Congress, they should have so stated

other cities, for the same rule does not require that taxes

regulation is not to violate its freedom under the

(but did not) in clear and

for

the same purpose

Constitution.30. Abakada Guro Party List vs. The Honorable

unequivocal terms.

should be imposed in different territorial subdivisions at

Executive Secretary Eduardo Ermita

2) It appears that a comprehensive study of the VAT had

the

same time. So long

It is the ministerial duty of the President to immediately impose the 12% rate upon

been extensively discussed

as the burden of the tax falls equally and impartially on all owners or operators of

tenement houses similarly classified or situated, equality and uniformity of taxation is accomplished.

38. Pepsi-Cola Bottling Co. of the Philippines, Inc v. City of

Butuan When the intention to limit the application of the ordinance

to those merchandise brought into the City from outside thereof is apparent, the tax partakes the nature of an import duty, which is beyond defendant's authority to impose by express provision of law.

39. Ormoc Sugar Co. v. Treasurer of Ormoc CityOrmoc

Sugar Co. v. Treasurer of Ormoc City The classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance should not be

singular and exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff, for the coverage of the tax.

40. Lutz v. Araneta

If objectives and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made with the implement of the state’s police power. Inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.41. Association of Customs Broker Inc. vs. The Municipal Board While the ordinance in question refers to property tax and it is fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem

tax to circumvent the prohibition above adverted to. Also, the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. It does not

distinguish between a motor vehicle for hire and one which

is purely for private use.

Neither does it distinguish between a motor vehicle registered in the City of Manila

nor one registered in another place but occasionally comes to Manila and uses its streets and public highways. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution.

42. Eastern Theatrical Co., Inc., et al. vs. Alfonso

Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation; and the theater companies cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. The fact that somehow places of amusement are

not taxed while others, like the ones herein, are taxed is no argument at all against the equality and uniformity of the tax imposition.

43. Churchill vs. Concepcion

Uniformity in taxation means that all taxable articles or

kinds of property, of the same class, shall be taxed at the same rate. It does not mean that lands, chattels,

securities, incomes, occupations, franchises, privileges, necessities, and luxuries shall all be assessed at the same rate. The rule does not require taxes to be graded according to the value of the subject(s) upon which they are imposed, especially those levied as privilege or occupation taxes.

44. Philippine Trust Company vs. A.L. Yatco

A tax is considered uniform when it operates with the same

force and effect in every place where the subject may be found. The rule of

uniformity does not call for perfect uniformity or perfect equality, because this is hardly attainable.

45. Meralco vs. Province of Laguna

Local Governments do not have the inherent power to tax except to the extent that such power might be delegated to them either by the basic law or by statute. Presently, Under Article X of the 1987 Constitution, a general delegation of that

power has been given in favor of the Local Government Units (LGU).

46. Province of Misamis Oriental v. Cagayan Electric Power

and Light Company Inc. A special and local statute applicable to a particular case is not repealed by a later

statute which is general in its terms, provisions and application even if the terms of

the general act are broad enough to include the cases in the special law unless there

is manifest intent to repeal or alter the special law.47.

Cagayan Electric Power & Light Co. Inc. v. CIR The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest so requires.

48. Lealda v. CIR

It seems clear, therefore, that the intention of the

legislature was to impose upon the grantee and his successors in interest, the obligation to pay the same franchise tax imposed upon other grantees or franchise holders at the time Act 2475 was enacted.

49. J. Casanovas vs. JNO S. Hord

The concessions can be cancelled only by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as

requisites for their retention in the laws under which they were granted.

50. American Bible Society vs. City of Manila

A tax on the income of one who engages in religious

activities is different from a tax

on property used or employed in connection with those activities. It is one thing

to impose a tax on the income or property of a preacher,

and another to exact a tax for him for the privilege of delivering a sermon. The power

to tax the exercise of a

privilege is thepower to control or suppress its enjoyment.

51. Abra Valley College vs. Aquino

Reasonable emphasis has always been made that the exemption extends to facilities

which are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence.

52. Commissioner of Internal Revenue vs. Bishop of the

Missionary District of the Philippines The following requisites must concur in order that a taxpayer may claim exemption under the law:(1) the imported articles must have been donated; (2) the done must

be duly incorporated or established international civic organization, religious or

in a statute stated in a language too clear to be mistaken. Verba legis non est

just and uniform taxes. The ordinance in question (Ordinance No. 27) comes within

charitable society, or institution for civic religious or charitable purposes; and (3)

recedendum — where the law does not distinguish, neither should we.

the second power of a municipality.61. Villanueva, Et Al., v City of Iloilo

the articles so imported must have been donated for the

The bare allegation alone that one is a non-stock, non-

In

order to constitute double taxation in the objectionable

use of the organization,

profit educational institution

or

prohibited sense the

society or institution or for free distribution and not for barter, sale or hire.

is insufficient to justify its exemption from the payment of income tax. It must prove

same property must be taxed twice when it should be taxed but once; both taxes

53. Lladoc vs. Commissioner of Internal Revenue

Imposition of the gift tax was valid, under Section 22(3) Article VI of the Constitution

contemplates exemption only from payment of taxes assessed on such properties as

Property taxes contra distinguished from Excise taxes The imposition of the gift tax on the property used for religious purpose is not a violation

of the Constitution. A

gift tax is not a property by way of gift inter vivos.

54. Herrera v. Quezon City Board of Assessment Appeals

Where rendering charity is its primary object, and the funds derived from payments

made by patients able to pay are devoted to the benevolent purposes of the

institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent character. The exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment

of said purposes.55. Bishop of Nueva Segovia vs. Provincial

Board of Ilocos Norte The exemption in favor of the convent in the payment of land tax refers to the home of the priest who presides over the church and who has to take care of himself in order to discharge his duties. The exemption includes not only the land actually occupied

by the Church but also the adjacent ground destined to the ordinary incidental uses

of man.

56. Commissioner of Internal Revenue v. Court of Appeals

and YMCA Rental income derived by a tax-exempt organization from the lease of its properties,

real or personal, is not exempt from income taxation, even if such income is exclusively used for the accomplishment of its objectives.

A claim of statutory exemption from taxation should be

manifest and unmistakable from the language of the law on which it is based. Thus, it must expressly be granted

with substantial evidence that (1) it falls under the classification non-stock, nonprofit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes.

57. Lung Center of the Philippines v. Quezon City

What is meant by actual, direct and exclusive use of the property for charitable

purposes is the direct and immediate and actual application of the property itself to

the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. III. Situs of Taxation and Double Taxation

58. Republic Bank, Petitioner, Vs. Court Of Tax Appeals And

The Commissioner Of

Internal Revenue, Respondents It is clear from the statutes then in force that there was no double taxation involved -- one was a penalty and the other was a tax. At any rate, we have upheld the validity of double taxation. The payment of 1/10 of 1% is a penalty as the primary purpose involved is regulation, while the payment of 1% for the same violation is a tax for the generation of revenue which is the primary purpose in this instance.

59. Procter and Gamble Philippines Manufacturing Corp. vs.

Municipality of Jagna For double taxation to exist, the same property must be taxed twice, when it should be taxed but once. Double taxation has also been defined as taxing the same person twice by the same jurisdiction for the same thing. Surely, a tax on plaintiff's products

is different from a tax on the privilege of storing copra in a bodega situated within the territorial boundary of defendant municipality.

60. PEPSI-COLA BOTTLING COMPANY OF THE PHIILIPPINES,

INC. vs. MUNICIPALITY OF TANAUAN Municipalities are empowered to impose, not only municipal license taxes upon persons engaged in any business or occupation but also to levy for public purposes,

must be imposed on the same property or subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax

62. Victorias Milling Co. v Municipality of Victoria

For double taxation to exist, "the same property must be taxed twice, when it should

be taxed but once." Double taxation has also been "defined

as taxing the same person

twice by the same jurisdiction for the same thing." 63. Compania General De Tabacos De Filipinas v City of Manila, Et Al

Both a license fee and a tax may be imposed on the same business or occupation,

or for selling the same article, this not being in violation of

the rule against double taxation.

64. Province of Bulacan v Court of Appeals

A province may not levy excise taxes on articles already

taxed by the National Internal Revenue Code. IV. Forms of Escape from Taxation 65. Delpher Trades Corporation v. IAC and Hydro Pipes Philippines By changing the nature of their ownership from

unincorporated to incorporated form, petitioners were able to save on inheritance tax.

66. Heng Tong Textiles Co., Inc. v. CIR

An attempt to minimize one's tax does not necessarily constitute fraud. It is a settled

principle that a taxpayer may diminish his liability by any means which the law permits.

67. CIR v. The Estate of Benigno Toda, Jr.

Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e. the payment of less than that known by the taxpayer to be legally due, or the nonpayment of tax when it is shown that a tax is due; (2) an accompanying state of mind

which is described as being “evil,” in “bad faith,” “willfull,”

or “deliberate and not

accidental”; and (3) a course of action or failure of action which is unlawful.

In cases of fraudulent returns, false returns with intent to

evade tax, and failure to

file a return, the period within which to assess tax is ten years from discovery of the fraud, falsification or omission, as the case may be.

A corporation has a juridical personality distinct and

separate from the persons owning or composing it. Thus, the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa. V. Exemption from Taxation 68. Davao Gulf Lumber Corporation v. CIR

Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. Any exemption from the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied therefrom.69. Philippine Acetylene Inc. vs. Commissioner of Internal Revenue The tax imposed by section 186 of the National Internal Revenue Code is a tax on the manufacturer or producer and not a tax on the purchaser. The purchaser does not pay the tax. He pays or may pay the seller more for the goods because of the seller's obligation, but that is all and the amount added because of the tax is paid to get the goods and for nothing else. 70. Commissioner of Internal Revenue v. Court of Appeals, Court of Tax Appeals, and Ateneo de Manila University Private respondent is mandated by law to undertake research activities to maintain its university status and it occasionally accepts sponsorship

for unfunded IPC research

projects from international organizations, private foundations and governmental agencies. The funds received by private respondent are not given in the concept of

a fee or price in exchange for the performance of a service

or delivery of an object.

Rather, the amounts are in the nature of an endowment or donation given by IPC's benefactors solely for the purpose of sponsoring or funding the research with no strings attached which are tax-exempt. 71. Caltex Philippines, Inc. v. Commission on Audit, Commissioner Bartolome Fernandez and Commissioner Alberto Cruz Tax exemptions as a general rule are construed strictly against the grantee and liberally in favor of the taxing authority. The burden of proof rests upon the party

claiming exemption to prove that it is in fact covered by the exemption so claimed. The party claiming exemption must therefore be expressly mentioned in the exempting law or at least be within its purview by clear legislative intent.

72. Luzon Stevedoring Corp. v. Court of Tax Appeals,

Commissioner of Internal

Revenue In order that the importations of tugboats may be declared exempt from the compensating tax, the following requirements must be complied with: (1) the engines and spare parts must be used by the importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing navigation. The amendatory provisions of R.A. 3176 limit tax exemption from the compensating tax to imported items to be used by the importer himself as operator of passenger and/or cargo vessel.

73. National Development Company v. Commissioner Of

Internal Revenue Tax exemptions cannot be merely implied but must be categorically and unmistakably

expressed. Any doubt concerning this question must be resolved in favor of the taxing power.

74. Manila Electric Company v. Misael P. Vera

One who claims to be exempt from the payment of a

particular tax must do so under clear and unmistakable terms found in the statute. Tax exemptions are strictly construed against the taxpayer.

75. Ernesto M. Maceda v. Hon. Catalino Macaraig, Jr., et al.

The National Power Corporation under the provisions of its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity. 76. Commissioner Of Internal Revenue v. John Gotamco & Sons, Inc. and The Court of Tax Appeals Direct taxes are those that are demanded from the very

person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else.

77. COMMISSIONER OF INTERNAL REVENUE vs. COURT OF

APPEALS Under Section 27 of the NIRC, the income from any property of exempt organizations,

as well as that arising from any activity it conducts for profit is taxable. The phrase “any of their activities conducted for profit” does not qualify the word “properties”. This makes income from the property of the organization taxable, regardless of how the income is used- whether for profit of for lofty non-profit purposes. On the other

hand, Article VI, Section 28 of paragraph 3 of the Constitution, failed to prove by substantial evidence that: 1) it falls under the classification non-stock, non-profit educational institution; and 2) the income it seeks to be exempted from taxation is actually, directly and exclusively for educational purposes.

78. DAVID G. NITAFAN vs. COMMISSIONER OF INTERNAL

REVENUE The payment of income tax, which is applicable to all

income earners, by Justices and Judges does not fall within the constitutional protection against decrease of their salaries during their continuance in office.

79. THE PROVINCE OF ABRA vs. HONORABLE HAROLD M.

HERNANDO To be exempt under the Constitution, lands, buildings and improvements of religious

and charitable institutions must not only be exclusively but also actually and directly used for religious and charitable purposes.

80. COMMISSIONER OF INTERNAL REVENUE vs. MITSUBISHI

METAL CORPORATION Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption

is the exception. The taxability of a party cannot be blandly glossed over on the basis of a supposed “broad, pragmatic analysis” alone without substantial supportive evidence. VI. Exemption from Taxation

81. 31st Infantry Post Exchange v. Posadas

Whenever a state engages in a business which is of a private nature, that business is not withdrawn from the taxing power of the Nation, or, conversely stated, whenever the National Government permits an organization under its

control to engage in a business which is of a private nature, that business is not withdrawn from the taxing power of the state.

82. PLDT v. City of Davao

The tax exemption must be expressed in the statute in clear language that leaves no

doubt of the intention of the legislature to grant such

88.

Basco vs. PAGCOR

93.

Commissioner of Internal Revenue v. Court of Appeals

exemption. And, even if it is

The states have no power by taxation or otherwise, to

government. The power to tax which

or

creation of the very entity which has the inherent power

Well-entrenched is the rule that rulings and circulars, rules

granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority

retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry

and regulations promulgated by the Commissioner of Internal Revenue would have no retroactive

83.

Laws granting exemption from tax are construed

Sea Land Services, Inc. v. CA

into execution the powers vested in the federal

application if to so apply them would be prejudicial to the taxpayers.

strictissimi juris against the

was called as the "power to destroy" cannot be allowed to

94.

CIR vs. Lingayen Gulf Electric Power Co., Inc.

taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption

defeat an instrumentality

The power of the Legislature to alter, amend, or repeal any franchise is always

is the exception.84. MERALCO v. Province of Laguna

to

wield it.

deemed reserved.

Under the now prevailing Constitution, where there is

89.

Republic of the Philippines v. Intermediate Appellate

95. ABS-CBN Broadcasting Corporation v. Court of Tax

neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The

Court

The rule is that in case of doubt, tax statutes are to be construed strictly against the Government and liberally in favor of expressly and clearly

Appeals Rulings or circulars promulgated by the CIR have no retroactive application where to so apply them would be prejudicial to taxpayers.

basic rationale for the current

declares.

96.

Philippine Bank of Communications v. Commissioner of

rule is to safeguard the viability and self-sufficiency of local

90.

Commissioner of internal Revenue v. Court of Appeals

Internal Revenue

government units by directly granting them general and broad tax powers.

A

overlooking by the State of its

tax amnesty, being a general pardon or intentional

Administrative issuances are merely interpretations and not expansions of the

85.

Tiu vs. Court of Appeals

authority to impose penalties on persons otherwise guilty

provisions of law, thus, in case of inconsistency, the law

The constitutional right to equal protection of the law is not

of

evasion or violation of a

prevails over them.

violated by an executive

revenue or tax law, partakes of an absolute forgiveness or

Administrative agencies have no legislative power.

order, issued pursuant to law, granting tax and duty

waiver by the Government

VIII. POWER TO TAX INVOLVES POWER TO DESTROY

incentives only to businesses and

of

its right to collect what otherwise would be due it, and in

97.

Commissioner of Internal Revenue vs. Tokyo Shipping

residents within the “secured area” of the Subic Special

this sense, prejudicial

Co., Ltd.

Economic Zone and denying them to those who live within the Zone but outside such

thereto, particularly to give tax evaders, who wish to relent and are willing to reform

The power of taxation is sometimes called also the power to destroy. Therefore it

“fenced-in” territory. A

a

chance to do so and thereby become a part of the new

should be exercised with caution to minimize injury to the

classification based on valid and reasonable standards does not violate the equal

society with a clean slate.VII. NATURE, CONSTRUCTION, APPLICATION & SOURCES OF TAX

proprietary rights of a taxpayer.

protection clause.

 

LAWS

98.

Reyes vs. Almanzor

86. Mactan Cebu International Airport vs. Marcos

The law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. However, if the grantee of the exemption is a political

subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations.

87. Commissioner of Internal Revenue vs. Robertson

Although the laws granting tax exemptions must be construed in strictissimi juris against the taxpayer, and that the burden of proof is with the person or entity given the exemption. The court, however, will not deem itself authorized to depart from the plain meaning of the tax exemption provision, so explicit in terms and so searching in extent.

91. Hilado v. Collector of Internal Revenue

It is a legal maxim, that excepting that of a political nature,

‘Law once established continues until changed by some competent legislative power. It is not changed merely by change of sovereignty.’ “It seems too clear for serious argument that an administrative officer cannot

change a law enacted by Congress. A regulation that is merely an interpretation of the statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal revenue does not preclude or estop the government from collecting a tax which is legally due.”

92. Misamis Oriental of Coco Traders, inc. v. Department

of Finance Secretary

The Commissioner of Internal Revenue is not bound by the ruling of his predecessors. 7 To the contrary, the overruling of decisions is inherent in the interpretation of laws.

The power to tax is not the power to destroy while the

Supreme Court sits.

99. Commissioner of Internal Revenue vs. Algue

Taxes are, indeed, the lifeblood of the nation but the exercise of taxation must be done reasonably and through the prescribed procedure. IX. SET-OFF OF TAXES 100. Philex Mining Corp. vs. Commissioner of Internal Revenue Taxes cannot be the subject for compensation for simple reason that the government and the tax payer are not mutual creditors and debtors of each other. 101. Francia v. Intermediate Appellate Court There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.

102. Commissioner of Internal Revenue v. Itogon-Suyoc

acts being questioned involve disbursement of public funds

deemed as petitioner's last act, since failure to comply with

Mines, Inc.

upon the theory that the

it

would lead to the

The National Internal Revenue Code provides that interest upon the amount

expenditure of public funds by an officer of the state for the purpose of administering

distraint and levy of respondent's properties, as indicated therein.

determined as a deficiency shall be assessed and shall be

an

unconstitutional act constitutes a misapplication of such

112.

Surigao Electric, Co., Inc. and Arturo Lumanlan v.

paid upon notice and

funds, which may be

Municipality of Surigao

demand from the Commissioner of Internal Revenue at the

enjoined at the request of a taxpayer.

A

municipal government or a municipal corporation such as

specified. It is made clear,

107.

Lozada v. Commission on Elections

the Municipality of

however, in an earlier provision found in the same section

A

taxpayer’s suit may be allowed only when an act

Surigao is a government entity recognized, supported and

that if in any preceding

complained of, which may include

utilized by the National

year, the taxpayer was entitled to a refund of any amount

a

legislative enactment of statute, involves the illegal

Government as a part of its government machinery and

due as tax, such amount, if

expenditure of public money.B. TAX LAWS & REGULATIONS

functions; a municipal

not yet refunded, may be deducted from the tax to be paid.

108.

The essence of the principle of the “most-favored nation”

Commissioner of Internal Revenue v. S.C. Johnson

government actually functions as an extension of the national government and,

103.

Under the above circumstances, both the claim of the Government for inheritance

Domingo v. Garlitos

1290 of the Civil Code, and both debts are extinguished to

clause is to allow the taxpayer in one state to avail more liberal provisions granted in another tax treaty

therefore, it is an instrumentality of the latter; and by express provisions of Section 14(e) of Act 2677, an instrumentality of the national

taxes and the claim of the intestate for services rendered

to

which the country of residence of such taxpayer is also a

government is exempted from

have already become overdue and demandable is well as fully liquidated.

party provided that the subject matter of taxation is the same as that in the

the jurisdiction of the PSC except with respect to the fixing of rates. This exemption

Compensation, therefore, takes

tax treaty under which the

is

even clearer in Section 13(a).

place by operation of law, in accordance with the provisions of Articles 1279 and

taxpayer is liable. Tax refunds are in the nature of tax exemptions and they are regarded as in derogation

would be to erode the term "government entities" of its

meaning if we are to reverse the Public Service Commission and to hold that a

It

incontestable. 114. Commissioner of Internal Revenue v.

the concurrent amount.

of

sovereign authority and to be construed strictissimi juris

municipality is to be considered

104. Republic of the Philippines v. Mambulao Lumber Company Appellant and appellee are not mutually creditors and debtors of each other. Consequently, the law on compensation is inapplicable. With respect to the forest charges which the defendant Mambulao Lumber

against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify hi claim by the clearest grant of organic or statute law. C. TAX REMEDIES

outside its scope. 113. Yabes vs. Flojo Court of Tax Appeals has exclusive jurisdiction over complaints involving an assessment made by a Commissioner which has not yet become final and

Company has paid to the

109. St. Stephen’s Association and St. Stephen’s Girls

Algue

government, they are in the coffers of the government as taxes collected, and the

School v. The Collector of Internal Revenue

Deductions on gross income includes all the ordinary and necessary expenses paid

government does not owe anything, crystal clear that the Republic of the Philippines

The period for appeal to the respondent court in this case must be computed from

or incurred during the taxable year in carrying on any trade or business, including

and the Mambulao Lumber Company are not creditors and debtors of each other, because compensation refers to mutual debts.

the time petitioners received the decision of the respondent Collector of Internal Revenue on the disputed assessment, and not from the

reasonable allowance for salaries or other compensation for personal services actually rendered.

a

X. TAXPAYER SUIT

time they received said

115.

Commissioner of Internal Revenue v. Union Shipping

105.

Anti-Graft League of the Philippines v. San Juan

assessment.

Corporation and the CTA

the funds, it can neither be physically nor legally liable or

In order to constitute a taxpayer’s suit, two requisites must

110.

Advertising Associates, Inc. v. Court of Appeals and

If an individual or corporation is not in the actual

be met. First, public funds are disbursed by a political subdivision or

instrumentality and in doing so, a

CIR

The petition for review was filed on time. The reviewable decision is that contained

possession, custody, or control of

obligated to pay the socalled withholding tax on income.

law is violated or some irregularity is committed. Second,

in

Commissioner Plana's letter of May 23, 1979 and not the

116.

Philippine Journalists, Inc v. Commissioner of Internal

the petitioner is directly

warrants of distraint.

Revenue

affected by the alleged ultra vires act.

111.

Commissioner of Internal Revenue v. Isabela Cultural

The appellate jurisdiction of the CTA is not limited to cases

106.

Joya v. Presidential Commission on Good Governance

Corporation

which involve decisions

Not every action filed by a taxpayer can qualify to challenge the legality of official acts done by the government. A taxpayer's suit can prosper only if the governmental

The Final Notice Before Seizure should be considered as a denial of respondent’s request for reconsideration of the disputed assessment. The Notice should be

of the Commissioner of Internal Revenue on matters relating to assessments or refunds. It gives the CTA the jurisdiction to determine if the warrant of distraint and

levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected.

117. CIR v. Philippine Global Communications, Inc.

The law prescribed a period of three years from the date the return was actually

filed or from the last date prescribed by law for the filing of such return, whichever came later, within which the BIR may assess a national internal revenue tax. The three-year period for collection of the assessed tax began to run on the date the assessment notice had been released, mailed or sent by the BIR.

118. RCBC v Commissioner of Internal Revenue

As provided under section 228, Such assessment may be

protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.

119. Ocean Wireless Network v. Commissioner of Internal

Revenue

In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioner’s request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. ; Moreover, the general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank.

120. Fishwealth v. Commissioner of Internal Revenue

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable. PART II. A. LOCAL TAXATION

121. Lung Center of the Philippines vs. Quezon City

The portions of the land leased to private entities as well as those parts of the hospital

leased to private individuals are not exempt from such taxes. On the other hand, the

portions of the land occupied by the hospital and portions

of the hospital used for its

patients, whether paying or non-paying, are exempt from real property taxes.

122. Philippine Rural Electric Cooperatives vs. The Secretary, Department of Interior and Local Government The withdrawal by the Local Government Code under Sections 193 and 234 of the

tax exemptions previously enjoyed by petitioners does not impair the obligations

of the borrower, the lender or the beneficiary under loan

agreements as in fact, no taxation exemption is granted taxation exemption is

granted therein.

123. City Assessor of Cebu City vs. Association of Benevola

de Cebu

The Chong Hua Hospital Medical Arts Center building should be classified as “commercial” and should not be imposed the commercial level of 35% as it is not

operated primarily for profit but as an integral part of CHH. The CHHMAC, with operations being devoted for the benefit of the CHH’s patients, should be accorded the 10% special assessment.

124. City Government of San Pablo vs. Hon. Bienvenido

Reyes The franchise tax under the LGC is imposable despite any

exemption enjoyed under special laws. Hence, in the absence of any provision of the Code to the contrary, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn. 125. First Philippine Industrial Corporation v. Court of Appeals

A "common carrier" is exempted from business tax as

provided for in Section 133 (j), of the Local Government Code. It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against

common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal Revenue Code.

To tax petitioner again

on its gross receipts in its transportation of petroleum

business would defeat the

purpose of the Local Government Code.

126. Manila Electric Company vs. Province of Laguna

Where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines.

127. Philippine Basketball Asscoiation vs. Court of Appeals

The government can never be in estoppel particularly in

matters involving taxes. It is an established rule that erroneous application and enforcement of the law by public officers do not preclude subsequent correct application of the statute and the Government is never estopped by mistake or error on the part of its agents.

128. MIAA vs Court of Appeals and the City of Parañaque

Real Properties owned by Republic of the Philippines are exempt from real estate tax. An instrumentality of the government is likewise exempt from local taxation.129. Province of Bulacan vs. Court of Appeals The preemption on taxation refers to an instance wherein the National Government

elects to tax a particular area, impliedly withholding from the local government the delegated power to tax the same field.

130. Drilon v. Lim

Section 187 authorizes the Secretary of Justice to review

only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Such is an act not of control but of mere supervision. B. REAL PROPERTY TAXATION

131. Davao Sawmill Co. v. Castillo

It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on

the land by the latter to be returned to the lessee on the expiration or abandonment of the lease.

132. City of Baguio v. Busuego

While the GSIS may be exempt from real estate tax, the exemption does not cover property belonging to it "where the beneficial use thereof has been granted for

consideration or otherwise to a taxable person."

133. Reyes, et al. v. Almanzor

It is declared that the first Fundamental Principle to guide

the appraisal and assessment of real property for taxation purposes is that the property must be

"appraised at its current and fair market value." By no strength of the imagination

can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions.

134. Pecson vs. Court of Appeals

Notices of the sale of the public auction may be sent to the delinquent taxpayer,

either (i) at the address as shown in the tax rolls or property tax record cards of the

municipality or city where the property is located or (ii) at his residence, if known

to such treasurer or barrio captain.

135. Mathay, Jr. v. Macalincag

Section 9 of P.D. 921 is specific and mandatory. The Schedule of Values that will serve as the basis for the appraisal and assessment for taxation purposes of real

properties located within the Metropolitan Area shall be prepared jointly by the City Assessors of the Districts created under Section one hereof, with the City Assessor

of Manila acting as Chairman.136. Patalinghug vs. Court of

Appeals

A tax declaration is not conclusive of the nature of the

property for zoning purposes.

A property may have been declared by its owner as

residential for real estate taxation purposes but it may well be within a commercial zone. A discrepancy may thus exist in the determination of the nature of property for real

estate taxation purposes visa-vis the determination of a property for zoning purposes.

137. Ty, et. al. Vs. Trampe

RA 7160 (LGC) and PD 921 are compatible laws and can be

harmonized in order to achieve the objective that real estate tax should not unduly burden the taxpayer and at the same time encouraging local government units to

consolidate or coordinate their efforts, services and resources. Thus new schedule of values and assessments within Metro Manila must be jointly agreed by the city, municipal assessors within the Assessment Districts.

138. Talento vs. Escalada

Generally, even pending on appeal the LBAA, CBAA or the courts may not supend

the collection of taxes, only a payment under protest may stay an impending levy, however, under certain conditions provided under the Rules of Procedure of the LBAA and the ammendments made by RA 9282, the collection of taxes may be suspended pending the resolution of an appeal.

139. FELS Energy vs. Province of Batangas

First; should a taxpayer wish to question the assessment

made by the city, provincial or municipal assessor, the proper recourse would be to appeal before the Local Board of Assessment Appeals within 60 days from receipt of assessment. Second; movable property such as barges may be considered real property subject to real

property tax depending on the nature of their use. Lastly; taxation is the rule and excemption is the exception, thus strict construction against excemptions. 140. Mactan Cebu International Airport Authority vs. Marcos The Local Government Code's excemptions found in Sec.

133 of the LGC is the general

provision for excemption but this is further refined by Sec.

232 and 234, the objective

of which is to limit those who may enjoy the privilege of excemption and to increase those that can be taxed by the local government in order to maximize their income to attain fiscal autonomy. When there is doubt as to whether an entity is excempt or

not, the rule is that the law shall be strictly interpreted against exemption.

141. Sesbreño v. Central Board of Assessment Appeals

Petitioner failed to pay under protest the tax assessed against his property. This is a violation of Section 64 of Presidential Decree No. 464 20 which requires that, before a court may entertain any suit assailing the validity of a tax assessment, the taxpayer must first pay under protest the tax assessed against him. As a rule, no issue may be raised on appeal unless it has been brought before the lower tribunal for its consideration. 21 The Court has held in several cases, however, that an appellate court has an inherent authority to review unassigned errors (1) which are closely related to an error properly raised, or (2) upon which the determination of the error properly assigned is dependent, or (3) where the Court finds that consideration of

them is necessary in arriving at a just decision of the case.142. Lopez v. City of Manila Should the taxpayers question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. 7160. Then, he must request the annotation of the phrase "paid under protest" and accordingly appeal to the Board of Assessment Appeals by filing a petition under oath together with copies of the tax declarations and affidavits or documents to support his appeal. The reduced assessment levels multiplied by the schedule of fair market values of real properties, provided by Manila Ordinance No. 7894, resulted to decrease in taxes.

To that extent, the ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the value of the real properties subject to tax. The lower taxes will ease, in part, the economic predicament of the low and middleincome groups of taxpayers.

143. Cagayan Robina Sugar Milling Co. v. Court of Appeals

Section 28 must be read in consonance with Section 3 (n) [8] of the said law, which

defines "market value." Under the latter provision, the LBAA and CBAA were not precluded from adopting various approaches to value determination, including adopting the APT "floor bid price" for petitioner's properties. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. 144. Light Rail Transit Authority v. Central Board of Assessment Appeals The Light Rail Transit Authority and the Metro Transit Organization function as

service-oriented business entities, which provide valuable transportation facilities to the paying public. In the absence, however, of any express grant of exemption in their favor, they are subject to the payment of real property taxes. C. TARIFF & CUSTOMS LAWS

145. Jao v. Court of Appeals

The estate of an inhabitant of the Philippines shall be settled or letters of

administration granted in the proper court located in the province where the decedent resides at the time of his death.

146. Transglobe International v. Court of Appeals

Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods

and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. The fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up same right. 147. Acting Commissioner of Customs v. Court of Appeals In all proceedings taken for the seizure and/or forfeiture of any vehicle, vessel, aircraft, beast or articles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first shown for the institution of such proceedings and that seizure and/or forfeiture was made under the circumstances and in the manner described in the preceding sections of this Code148. Chevron v. Commissioner of Bureau of Customs Under the relevant provisions of the TCC (Sec 205, 1301, 1802), both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft. When the importer fails to file the entry within the said period, he "shall be deemed to have renounced all his interests and property rights" to the importations and these shall be considered impliedly abandoned in favor of the government.Part I: General Principles Concept, Nature and Characteristics of Taxation and Taxes Commissioner of Internal Revenue v. Cebu Portland Cement Company and Court of Tax Appeals [G.R. No. L-29059. December 15, 1987] Digest by: ALVIAR, Joyce B PONENTE: Cruz, J. FACTS:

By virtue of a decision of the CTA rendered on June 21, 1961, as modified on appeal by the SC on February 27, 1965, the CIR was ordered to refund to the Cebu Portland Cement Co. the amount of P359,408.92, representing overpayments of ad valorem taxes on cement produced and sold by it after October1957. On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for writ of execution to enforce the said judgment.

The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P4,789,278.85 plus 28% surcharge. On April 22, 1968, CTA granted the motion, holding that the alleged sales tax liability of Cebu Portland was still being questioned and therefore could not be set-off against the refund. In his petition to review the said resolution, the CIR claims that the refund should be charged against the deficiency of the private respondent on the sales of cement under Sec. 186 of the Tax Code, which is a manufactured and not a mineral product and therefore not exempt from sales tax. The petitioner also denies that the sale tax assessments have already prescribed because the prescriptive period should be counted from the filing of the sales tax returns, which had not yet been done by the private respondent. Cebu Portland questioned the assessed tax based also on Article 186 of the Tax Code, and on jurisprudence contending that cement was adjudged a mineral and not a manufactured product; and thusly they were not liable for their alleged tax deficiency. Thereby, petitioner filed this petition for review. ISSUE:

Whether or not assessment of taxes can be enforced (set- off against the deficiency sales tax of Cebu Portland) even if there is a case contesting it. HELD:

The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as “the lifeblood of PAGE 1the government.” If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception in RA 1125 , the Tax Code provides that injunction is not available to restrain collection of tax. Thereby, we hold that the respondent Court of Tax Appeals erred in its order. The Tax Code provides:

Sec. 291. Injunction not available to restrain collection of tax. — No court shall have authority to grant an injunction to restrain the collection of any national

internal revenue tax, fee or charge imposed by this Code. To require the CIR to actually refund to the Cebu Portland the amount of the judgment debt, which he will later have the right to distrain for payment of its sales tax liability is in our view an Idle ritual. PAGE 2 Commissioner of Internal Revenue v. Algue Inc., and CTA [G.R. No. L-28896. February 17, 1988] Digest by: ALVIAR, Joyce B PONENTE: Cruz, J. FACTS:

Algue, Inc., is a domestic corporation engaged in engineering, construction and other allied activities. Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. A sale transpired for which Algue received as agent a commission of P126,000.00, and from this commission a P75,000 promotional fees were paid to certain individuals (Guevara, et. al. organizers of the VOICP). The payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon, there was no distribution if dividends involved. In 1965, Algue received an assessment from the Commissioner of Internal Revenue in the amount of P83,183.85 as delinquency income tax for years 1958 and 1959. Algue filed a protest or request for reconsideration which was not acted upon by the Bureau of Internal Revenue. The counsel of Algue had to accept the warrant of distraint and levy. Algue filed a petition for review with the Court of Tax Appeals. it claimed the 75,000 promotional fees are to be deductible from their tax which the CIR disallowed. ISSUE:

Whether or not the Collector of Internal Revenue acted correctly in disallowing the P75,000 deduction claimed by Algue as a legitimate business expenses in its income tax returns. HELD:

CIR is incorrect. The burden is on the taxpayer to prove the validity of the claimed deduction. In the present case however, we find that the onus has been discharged satisfactorily by Algue. Algue has proves that the payment of fees was necessary and reasonable in light of the effort of the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of

pesos. This was no mean feat and should be, as it was, to be

In 1960, the Municipal Board of Iloilo City enacted

tax has been paid. It also expressly required that the payment of the municipal tax shall be

percentage tax on sales or other taxes in any form based thereon nor impose

Hence, The City of Iloilo is empowered (a) to impose

sufficiently recompensed.

a

requirement for registration and transfer of ownership.

judgment with the Court of First Instance of Iloilo assailing

PAGE 5taxes on articles subject to specific tax, except

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should be made in accordance with the law, and any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparent conflicting interest of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common

C.N. Hodges (Hodges), engaged in buying and selling of second hand motor vehicles in the city, filed a petition for declaratory

the ordinance as invalid for being passed in excess of the authority conferred by law upon the Municipal Board. The CFI rendered a decision which upheld that portion in the Ordinance, imposing

gasoline, under the provisions of the national internal revenue code:

Municipal licenses, taxes or fees upon any person engaged in any occupation or business, or exercising any privilege in the City; (b) to regulate and impose reasonable fees for services rendered or conducted within the City, and (c) to levy for public purposes just and

good may be realized. It is said

of

sales tax of ½ of 1% of the selling price, but considered

uniform taxes, licenses, or fees. It would

that taxes are what we pay for a civilized society. Without taxes, the government would be paralyzed for lack of the motive to activate and operate it. Hence, despite the natural reluctance to

invalid that portion prohibiting registration of the sale/transfer unless such tax has not been paid. ISSUE:

also appear that municipalities and municipal districts are prohibited from imposing any percentage tax on sales or other taxes in any form on articles subject to specific tax, except

surrender part of one’s hard earned

1.

Whether or not the City of Iloilo is empowered to impose

gasoline, under the provisions of the National Internal

income to the taxing authorities, every person who is able

the tax.

Revenue Code. The tax in question is

to must contribute his share in the

2.

Whether or not the condition prohibiting the registration

in the form of percentage tax on the proceeds of the sale

PAGE 3running of the government. The government for its

of

motor vehicles unless

of a motor vehicle. The prohibition

part, is expected to respond in the form of tangible and intangible benefits intended to improve the

the tax impost has been paid is invalid. HELD:

against such tax as mentiones, refer only to municipalities and municipal districts and does

lives of the people and enhance

1.

Section 2 of Republic Act No. 2264, known as the Local

not comprehend chartered cities like the City of Iloilo.

their moral and material values. This “symbiotic” relationship is the rationale of taxation and

Autonomy Act pursuant to which the ordinance in question was approved by the

2. CFI undoubtedly had in mind the provisions of Section 2(h) of Republic Act No. 2264

should dispel the erroneous notion that it is an arbitrary method of exaction by those in the

Municipal Board of the City of Iloilo, provides in part:

which prohibits a chartered city from imposing a tax on the registration of motor vehicles

seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. Otherwise, the taxpayer has a right to complain and the courts will then come to his succor. For all the power vested in the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has been in this case, that the law has not been observed. PAGE 4 C. N. Hodges v The Municipal Board Of The City Of Iloilo, et al. [G.R. No. L-29059. December 15, 1987] Digest by: ALVIAR, Joyce B PONENTE: Bautista Angelo, J. FACTS:

Ordinance No. 33, pursuant to the

SEC. 2. Taxation.— Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges in chartered cities, municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city, the municipal council of the municipality, or the municipal district council of the municipal district; to collect fees and charges for services rendered by the city, municipality or municipal district; to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation being conducted within the city, municipality or municipal district and otherwise

and the issuance of all kinds of licenses or permits for the driving thereof, which is one of the exceptions constituting a restriction on the taxation power granted by said Act to a city, municipality or municipal district. But the requirement of the ordinance cannot be considered a tax, for the same is merely a coercive measure to make the enforcement of the contemplated sales tax more effective. Well-settled is the principle that taxes are imposed for the support of the government in return for the general advantage and protection which the government affords to taxpayers and their. Taxes are the lifeblood of the government. It is imperative that the power to impose them to be clothed with the implied authority to devise ways and means to accomplish their collection in the most effective manner. Without this implied power the end of government may falter or fail. PAGE 6Part I: General Principles Classification and Distinctions Association of Customs Brokers Inc. and G.

provisions of Republic Act No. 2264, known as the Local Autonomy Act requiring the payment

to

levy for public purposes, just and uniform taxes, licenses

Manlapit v The

of sales tax of ½ of 1% of the selling price of any motor

or

fees; Provided,

Municipal Board, The City Trasurer, The City Assessor and

vehicle and prohibiting the registration of the sale involving said vehicle in the Motor Vehicles Office of the City of Iloilo unless the

That municipalities and municipal districts shall, in no case, impose any

the City Mayor of the City of Manila [G.R. No. L-28896. February 17, 1988] Digest by: ALVIAR, Joyce B

PONENTE: Bautista Angelo, J. FACTS:

The Municipal Board of Manila passed ordinance No. 3379 which imposes a property tax that is within the power of the City under its revised charter. The ordinance was passed by the Municipal Board under the authority conferred by section 18 of RA 409, which confers upon the municipal board the power “to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding. “The plaintiff, an association composed of all brokers and public service operators of Motor Vehicles in the City of Manila filed this petition for declaratory relief challenging the validity of the ordinance on the following grounds; that while it levies a so-called property tax, it is in reality a license fee

which is beyond the power of the board to impose; that the said ordinance goes against the rule on uniformity of taxation; and, that the said imposition constitutes double taxation. ISSUE:

1. What is the Character of an ad valorem tax?

2. Whether or not the ordinance infringes on the uniformity of taxes as ordained by the Constitution. HELD:

1. As a rule an ad valorem tax is a property tax, and supported by some authorities, however it should not be taken in its absolute sense, if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been held that “If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise.” The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied upon

persons on account of their business, it will be construed as a license or occupation tax, even though it is graduated according to the property used in such business, or on the gross receipts of the business. PAGE 72. YES, The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution. The Motor Vehicle Law (Section 70[b]) provides that no fees may be exacted or demanded for the operation of any motor vehicle other than those therein provided , the only exception being that which refers to property tax which may be imposed by municipal corporations. While the ordinance refers to property tax and it is fixed ad valorem, it is merely levied on motor vehicles operating within the city of Manila with the main purpose of raising funds to be expanded exclusively for the repair, maintenance and improvement of streets and bridges in said city. Because of this, the ordinance in question merely imposes a license fee although under the cloak of being an ad valorem tax to circumvent the prohibition provided by the Motor Vehicle Law. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word “operating” used. The word “operating” is akin to a registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary purposes, and it cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution. PAGE 8 Esso Standard Eastern, Inc. (formerly, Standard- Vacuum Oil Company) v The Commissioner of Internal Revenue [G.R. No. L-29059. December 15, 1987] Digest by: ALVIAR, Joyce B. PONENTE: : Cruz, J. FACTS:

The CTA denied ESSO’s claims for refund of overpaid income taxes of P102,246.00

for 1959 and P434,234.93for 1960 in CTA Cases No. 1251 and 1558 respectively. In CTA Case No.1251, ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleum concessions. This claim was disallowed by the respondent Commissioner of Internal Revenue on the ground that the expenses should be capitalized and might be written off as a loss only when a “dry hole” should result. ESSO then filed an amended return where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells and claimed as ordinary and necessary expenses the margin fees paid to the Central Bank on profit remittances to its New York head office. In another CTA Case, the CIR assessed ESSO a deficiency income tax for the year 1960 arising from the disallowance of the margin fees paid by ESSO to the Central Bank on its profit remittances to its New York head office. ESSO settled the same by applying as tax credit its overpayment on its income tax in 1959 and paying under protest the remaining amount. The CIR denied the claims for refund of the overpayment of its 1959 and 1960 income taxes, holding that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. ESSO appealed to the CTA and sought the refund, contending that the margin fees were deductible from gross income either as a tax or as an ordinary and necessary business expense, which was also denied. ISSUE:

Whether or not the margin fees were deductible from gross income as a tax or an ordinary and necessary business expense. HELD:

The margin fee was imposed by the State in the exercise of its police power and not the power of taxation. In citing two previous cases the Court held that a margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve. In Caltex (Phil.) Inc. v. Acting Commissioner of Customs, the Court stated: “A margin levy on foreign exchange is a form of exchange control or restriction designed to discourage imports and encourage exports, and ultimately, ‘curtail any excessive demand upon the international reserve’ in order to stabilize the currency. By its nature, the margin levy is part of the rate of exchange as fixed by the government.“ Moreover, it has been settled that a tax is levied to

provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our country’s international reserves. In Chamber of Agriculture and Natural Resources of the Philippines v. Central Bank, The same idea was expressed, though in connection with a different levy: we do not PAGE 9find merit in the argument that the 20% retention of exporter’s foreign exchange constitutes an export tax. A tax is a levy for the purpose of providing revenue for government operations, while the proceeds of the 20% retention, are applied to strengthen the Central Bank’s international reserve. The margin fees are not ordinary and necessary business expenses. Esso contends that such remittance was an expenditure necessary and proper for the conduct of its corporate affairs. The Court citing a case, laid down the rules on the deductibility of business expenses, thus: “ the law allowing expenses as deduction from gross income for purposes of the income tax is Section 30(a) of the National Internal Revenue which allows a deduction of ‘all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.’ An item of expenditure, in order to be deductible under this section of the statute, must fall squarely within its language. We come, then, to the statutory test of

deductibility where it is axiomatic that to be deductible as

a business expense, three conditions

are imposed, namely: (1) the expense must be ordinary and necessary, (2) it must be paid or

incurred within the taxable year, and (3) it must be paid or incurred in carrying on a trade or business. In addition, not only must the taxpayer meet the business test, he must substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed. Ordinarily, an expense will be considered ‘necessary’ where the expenditure is appropriate and helpful in the development of the taxpayer’s business. It is ‘ordinary’ when

it connotes a payment which is normal in relation to the

business of the taxpayer and the surrounding circumstances. Assuming that the expenditure

is ordinary and necessary in the

operation of the taxpayer’s business, the answer to the question as to whether the expenditure is an allowable deduction as a business expense must be determined from the nature of the expenditure itself, depends on the extent and permanency of the work accomplished by the expenditure.

The Court held that CTA was correct in saying that the margin fees are not expenses in

connection with the production or earning of petitioner’s incomes in the Philippines.‘ Since the margin fees in question were incurred for the remittance of funds to petitioner’s Head Office

in New York, a separate and distinct income taxpayer from

the branch in the Philippines,

for its disposal abroad, it can never be said therefore that the margin fees were appropriate and helpful in the development of petitioner’s business in the Philippines exclusively or were incurred for purposes proper to the conduct of the affairs of petitioner’s branch in the Philippines exclusively or for the purpose of realizing a profit or of minimizing a loss in the Philippines exclusively.“ ESSO has not shown that the remittance to the head office of part of its profits was made in furtherance of its own trade or business.

It is clear that ESSO, having assumed an expense properly

attributable to its head office, cannot now claim this as an ordinary and necessary

expense paid or incurred in carrying on its own trade or business. PAGE 10Progressive Development Corp. v. Quezon City [G.R. No. L-36081. April 24, 1989] Digest by: ARBAS, Andrei Christopher G. PONENTE: Feliciano, J.

FACTS:

On 24 December 1969, the City Council of respondent Quezon City adopted Ordinance No. 7997, Series of 1969, otherwise known as the Market Code of Quezon City, which provided that privately owned and operated public markets shall submit monthly to the Treasurer’s Office, a

certified list of stallholders showing the amount of stall fees or rentals paid daily by each stallholder and shall pay 10% of the gross receipts from stall rentals to the City as supervision fee. Failure to submit said list and to pay the corresponding amount within the period prescribed shall subject the operator to the penalties provided in this Code including revocation of permit to operate. The Market Code was thereafter amended by Ordinance No. 9236 on 23 March 1972, which imposed

a five percent (5 %) tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. On 15 July 1972, petitioner Progressive Development Corporation, owner and operator of

a public market known as the “Farmers Market & Shopping

Center” filed a Petition for Prohibition with Preliminary Injunction against respondent before the then Court of First Instance of Rizal on

the ground that the supervision fee or license tax imposed by the above-mentioned ordinances is in reality a tax on income which respondent may not impose, the same being expressly prohibited by Republic Act No. 2264, as amended. In its Answer, respondent contended that it had authority to enact the questioned ordinances, maintaining that the tax on gross receipts imposed therein is not a tax on income but one imposed for the enjoyment of the privilege to engage in a particular trade or business which was within the power of respondent to impose. On 21 October 1972, the lower court dismissed the petition, ruling 3 that the questioned imposition is not a tax on income, but rather a privilege tax or license fee which local governments, like respondent, are empowered to impose and collect. Having failed to obtain reconsideration of said decision, petitioner came to us on the present Petition for Review. ISSUE:

Whether or not the tax imposed by respondent on gross receipts of stall rentals is properly characterized as partaking of the nature of an income tax. HELD:

NO. The tax imposed by respondent is a license fee. The term “tax” frequently applies to all kinds of exactions of monies which become public funds. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while PAGE 11the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and

regulation may be held to be a tax rather than an exercise of the police power. The “Farmers’ Market and Shopping Center” being a public market in the’ sense of a market open to and inviting the patronage of the general public, even though privately owned, petitioner’s operation thereof required a license issued by the respondent City, the issuance of which, applying the standards set forth above, was done principally in the exercise of the respondent’s police power. The operation of a privately owned market is as equivalent to or quite the same as the operation of a government-owned market; both are established for the rendition of service to the general public, which warrants close supervision and control by the respondent City for the protection of the health of the public. The Supreme Court held that the five percent (5%) tax imposed in Ordinance No. 9236 constitutes, not a tax on income, not a city income tax (as distinguished from the national income tax imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which the petitioner is engaged. PAGE 12Philippine Airlines, Inc. v. Edu [G.R. No. L-41383. August 15, 1988] Digest by: ARBAS, Andrei Christopher G. PONENTE: Gutierrez, Jr., J. FACTS:

The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the payment of taxes. On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not been paying motor vehicle registration fees. Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. LTO refused to register the PAL’s motor vehicles unless the amounts imposed under Republic Act 4136 were paid. Under protest, PAL paid the registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter to respondent LTO Commissioner Edu demanding a refund of the amounts paid invoking that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its

legislative franchise. Respondent denied the request for refund on the ground that motor vehicle registration fees are regulatory exceptional and not revenue measures and therefore, do not come within the exemption granted to PAL under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal. Respondents filed a motion to dismiss alleging that the complaint states no cause of action because registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The trial court rendered a decision dismissing the PAL’s complaint. From this judgment, PAL appealed to the Court of Appeals which certified the case to us. ISSUE:

Whether or not motor vehicle registration fees partakes nature a kind of tax. HELD:

YES. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle registration fees. It is quite apparent that vehicle registration fees were originally simple exceptional PAGE 13intended only for rigidly purposes in the exercise of the State’s police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without changing the earlier deputy. of registration payments as “fees,” their nature has become that of “taxes.” In view of the foregoing, the Supreme Court ruled that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.

PAGE 14Villegas vs. Hiu Chiong Tsai Pao Ho [G.R. No. 29646. November 10, 1978] Digest by: ARBAS, Andrei Christopher G. PONENTE: Fernandez, J. FACTS:

Ordinance No. 6537 was passed by the Municipal Board of Manila and signed by the herein petitioner Mayor Antonio J. Villegas of Manila on March 27, 1968. The ordinance prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons employed in the diplomatic or consular missions of foreign countries, or in the technical assistance programs of both the Philippine Government and any foreign government, and those working in their respective households, and members of religious orders or congregations, sect or denomination, who are not paid monetarily or in kind. Violations of the ordinance is punishable by an imprisonment of not less than three (3) months to six (6) months or fine of not less than P100.00 but not more than P200.00 or both such fine and imprisonment, upon conviction. On May 4, 1968, private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition with the Court of First Instance of Manila, praying for the issuance of the writ of preliminary injunction and restraining order to stop the enforcement of Ordinance No. 6537 as well as for a judgment declaring said Ordinance No. 6537 null and void on the ground that it is discriminatory and violative of the rule of the uniformity in taxation. Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared null and void on the ground that it violated the rule on uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or revenue measures and that Ordinance No. 6537 is not a tax or revenue measure but is an exercise of the police power of the state, it being principally a regulatory measure in nature. ISSUE:

Whether or not the required employment permit is a form of tax. HELD:

YES. The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its principal purpose is regulatory in nature has no merit. While it is true that the

first part which requires that the alien shall secure an employment permit from the Mayor involves the exercise of discretion and judgment in the processing and approval or disapproval

paid the license fees aforesaid, the sales taxes paid by it under the three ordinances mentioned heretofore is an overpayment made by mistake, and therefore refundable.

Whether or not both a license fee and a tax may be

PAGE 18American Mail Lines v. City of Basilan [G.R. No. 12647. May 31, 1961] Digest by: ARBAS, Andrei Christopher G. PONENTE: Dizon J.

of

applications for employment permits and therefore is

The City, on the other hand, contends that, for the permit

FACTS:

regulatory in character the second part which requires the payment of P50.00 as employee’s fee is not regulatory but a revenue measure. There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation. PAGE 15The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the

issued to it granting proper authority to “conduct or engage in the sale of alcoholic beverages, or liquors” Tabacalera is subject to pay the license fees prescribed by Ordinance No. 3358, aside from the sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816. The City of Manila contended that Tabaclera is not entitled to a refund. ISSUE:

imposed on the same business or occupation. HELD:

On September 12, 1955 the City Council of Basilan City enacted Ordinance No. 180, Series of 1955, stating that “any foreign vessel engaged in coastwise trade which may anchor at any open bay, channel, or any loading point within the territorial waters of the City of Basilan for the purpose of loading or unloading logs or passengers and other cargoes shall pay an anchorage fee of P.005 per registered gross ton of the vessel for the first 24 hours provided that maximum charge shall not exceed P75.00 per day.” As the city treasurer assessed and attempted to collect anchorage fees prescribed in

Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having

YES. The term “tax” applies, generally speaking, to all kinds of exactions which become public funds. The term is often loosely used to include

the aforesaid amendatory ordinance, the company filed the present action for Declaratory Relief to have the courts determine its validity.

reasonable relation to the subject of the particular legislation. The same amount of P50.00

a

levies for revenue as well as levies for regulatory purposes. Thus license fees are commonly

Respondents argued that the ordinance in question was validly enacted in the exercise

is

being collected from every employed alien whether he is

called taxes. Legally speaking, however,

of the city’s police power and that the fees imposed therein

casual or permanent, part time or full time or whether he is a lowly employee or a highly paid

license fee is a legal concept quite distinct from tax; the former is imposed in the exercise of

are for purely regulatory purposes. ISSUE:

executive. PAGE 16Compania General de Tabacos de Filipinas v. City

police power for purposes of regulation, while the latter is imposed under the taxing power

Whether or not the anchorage fees were for regulatory purposes.

of

Manila

for the purpose of raising revenues

HELD:

[G.R. No. 16619. June 29, 1963] Digest by: ARBAS, Andrei Christopher G. PONENTE: Dizon J. FACTS:

Ordinance No. 3358 is clearly one that prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcoholic beverages, having been

NO. The fees required are extended for revenue purposes. It has been held that the power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes.

Tabacalera, as a duly licensed first class wholesale and retail liquor dealer paid the City the fixed license fees prescribed by Ordinance No.

enacted by the Municipal Board of Manila pursuant to its charter power to fix license fees on, and regulate, the sale of intoxicating liquors, whether

Fees for purely regulatory purposes may only be of sufficient amount to include the expenses of issuing the license and the cost of

3358 for the years 1954 to 1957, inclusive, and, as a wholesale and retail dealer of general merchandise, it also paid the sales taxes required by Ordinances Nos. 3634, 3301, and 3816.

imported or locally manufactured. PAGE 17The license fees imposed by it are essentially for purposes of regulation, and are justified, considering that the sale of intoxicating liquor is,

the necessary inspection or police surveillance, taking into account not only the expense of direct regulation but also incidental expenses. The fees have no proper or reasonable relation to the cost

In

its sworn statements of wholesale, retail, and grocery

potentially at least, harmful to public health

of issuing the permits and

sales of general merchandise from the third quarter of 1954 to the second quarter of 1957, inclusive, Tabacalera included

and morals, and must be subject to supervision or regulation by the state and by cities and municipalities authorized to act in the premises.

the cost of inspection or surveillance. The fee imposed on foreign vessels, 1/2 centavo per registered gross ton for the first 24 hours and which shall

its

liquor sales of the same period, and it is not denied that

On the other hand, it is clear that Ordinances Nos. 3634,

not exceed P75.00 per day, exceeds

of

the taxes it paid on all its sales

3301, and 3816 impose taxes

even the harbor fee imposed by the National Government,

of

general merchandise, the sum of P15,280.00 subject to

on the sales of general merchandise, wholesale or retail,

which is only P50.00 for foreign

the action represents the tax corresponding to the liquor sales aforesaid.

and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to

vessels. Respondent’s contention that the questioned ordinance was enacted in the exercise

Tabacalera filed an action for refund based on the theory that, in connection with

tax dealers for the sale of such merchandise.

of its power of taxation makes it obvious that the fees imposed are not merely regulatory.

its

liquor sales, it should pay the license fees prescribed by

Both a license fee and a tax may be imposed on the same

PAGE 19Osmeña v. Orbos

Ordinance No. 3358 but not the municipal sales taxes imposed by Ordinances Nos. 3634, 3301, and 3816; and since it already

business or occupation, or for selling the same article, this not being in violation of the rule against double taxation.

[G.R. No. 99886. March 31, 1993] Digest by: AUMENTADO, Adrian F. PONENTE: Narvasa J.

FACTS:

treatment given it by E.O. 137. It is segregated from the

what the law refers to as a “trust liability account,” the

appropriation made by law (1987) Constitution, Article VI,

23(1).

On October 10, 1984, President Ferdinand Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price

Petitioner argues, among others, that “the

general fund; and while it is placed in

fund nonetheless remains subject to

Sec. 29 (3), lifted from the 1935 Constitution, Article VI, Sec.

Stabilization Fund (OPSF). It was

the

scrutiny and review of the COA. The Court is satisfied

PAGE 21Republic v. Bacolod-Murcia Milling Co., Inc., et al

designed to reimburse oil companies for cost increases in

that

these measures comply with the

[G.R. No. L-19824. July 9, 1966]

crude oil and imported petroleum products resulting from exchange rate adjustments and

constitutional description of a “special fund.” Indeed, the practice is not without precedent.

Digest by: AUMENTADO, Adrian F. PONENTE: Regala J.

from increases in the world market

PAGE 20Also of relevance is this Court’s ruling in relation to

FACTS:

prices of crude oil.

the

sugar stabilization fund the nature of

The three sugar centrals are sister companies under single

Later, the OPSF was reclassified into a “trust liability

which is not far different from the OPSF. In Gaston v.

ownership and management.

account,” by virtue of Executive

Republic Planters Bank, this Court upheld

They were required to pay 10 centavos per picul of sugar

Order (E.O.) 1024, and ordered released from the National

the

legality of the sugar stabilization fees and explained

collected for 5 crop years under Sec.

Treasury to the Ministry of Energy.

their nature and character, viz.:

15 of RA 632.

President Corazon C. Aquino, amending PD 1956,

The

stabilization fees collected are in the nature of a tax,

The sugar tax was levied to create Philsugin (Philippine

promulgated Executive Order No. 137,

which is within the

 

Sugar Institute), to conduct

expanding the grounds for reimbursement to oil companies for possible cost under recovery

power of the State to impose for the promotion of the sugar industry (Lutz

research and development for sugar and sugar by-products for the benefit, development and

incurred due to the reduction of domestic prices of

v. Araneta, 98 Phil.

The tax collected is not in a

improvement of the sugar industry. Philsugin acquired the

petroleum products, the amount of the under recovery being left for determination by the Ministry of Finance.

pure exercise of the taxing power. It is levied with a regulatory purpose, to

provide a means for the stabilization of the sugar industry. The levy is primarily in

Insular Sugar Refinery and lost a lot of money Appellants stopped paying the levy because they said that the purchase was

monies collected pursuant to P.D. 1956, as

the

exercise of the

unauthorized by RA 632. They maintained that their

amended, must be treated as a ‘SPECIAL FUND,’ not as a

police power of the State (Lutz v. Araneta, supra).

obligation to contribute or pay to the

‘trust account’ or a ‘trust fund,’ and

xxx

xxx xxx

said Fund subsists only to the limit and extent that they

that “if a special tax is collected for a specific purpose, the revenue generated therefrom shall ‘be treated as a special fund’ to be used only for the purpose indicated, and not channeled to another government objective.” Further, that since “a ‘special fund’ consists of monies

The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose — that of “financing the growth and development of the sugar industry and all its components, stabilization

are benefited by such contributions since Republic Act 632 is not a revenue measure but an Act which establishes a “Special assessments.” As such, the proceeds thereof may be devoted only to the specific purpose for which the assessment was authorized, a special

collected through the taxing power of a State, such

of

the domestic market including the foreign market.” The

assessment being a levy upon property

amounts belong to the State, although the

fact

that the State

predicated on the doctrine that the property against which

use thereof is limited to the special purpose/objective for which it was created.”

has taken possession of moneys pursuant to law is sufficient to constitute

it is levied derives some special benefit from the improvement. It is not a tax measure

The petitioner does not suggest that a “trust account” is illegal per se, but maintains that the monies collected, which form part of the OPSF,

them state funds, even though they are held for a special purpose. Having been levied for a special purpose, the revenues collected

intended to raise revenues for the Government. Consequently, once it has been determined that no benefit accrues or inures to

should be maintained in a special

are

to be treated as

the property owners paying the assessment, or that the

account of the general fund for the reason that the Constitution so provides, and because they

special fund, to be, in the language of the statute, “administered in trust” for

a

proceeds from the said assessment are being misapplied to the prejudice of those against whom it

are, supposedly, taxes levied for a special purpose. He

the

purpose intended. Once the purpose has been fulfilled

has been levied, then the authority

assumes that the Fund is formed from

or

abandoned, the

 

to insist on the payment of the said assessment ceases.

a tax undoubtedly because a portion thereof is taken from

balance if any, is to be transferred to the general funds of

ISSUE:

collections of ad valorem taxes and

the

Government.

Whether or not the appellants may refuse to continue

the increases thereon.

That is the essence of the trust intended.

paying the assessment under

ISSUE:

The

character of the Stabilization Fund as a special kind of

Republic Act 632?

What is the nature and character of the OPSF?

fund

HELD:

HELD:

is

emphasized by the fact that the funds are deposited in

No. The nature of a “special assessment” similar to the

While the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special

the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an

case at bar has already been discussed and explained by this Court in the case of Lutz vs. Araneta, 98 Phil. 148. For in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar Adjustment Act, levies on

owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise The plaintiff in the above case, Walter Lutz, contended that the aforementioned tax or special assessment was unconstitutional because it was being “levied for the aid and support of the sugar industry exclusively,” and therefore, not for a public purpose. In rejecting the theory advanced by the said plaintiff, this Court said:

sugar central and a sugar refinery within the jurisdiction of defendant municipality. The trial court rendered its judgment declaring that the ordinance in question refers to license taxes or fees. Both plaintiff and defendant directly appealed to the Supreme Court. ISSUE:

Was Ordinance No. 1, series of 1956, passed as a regulatory enactment or as a revenue measure? HELD:

revenues,” in contrast to the former which are imposed “in the exercise of police power for purposes of regulation.” We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Thus, “when no police inspection, supervision, or regulation is provided, nor

Plaintiff, Walter Lutz, in his capacity as Judicial

Whether or not the imposition of the taxes are valid?

Yes. The basic defect in the plaintiff’s position is his

PAGE 22The basic defect in the plaintiff’s position in his assumption that the tax

A

municipality is authorized to impose three kinds of

any standard set for the applicant to establish, or that he

provided for in Commonwealth Act No. 567 is a pure

licenses: (1) license for regulation

agrees to attain or maintain, but any

exercise of the taxing power. Analysis of the Act, and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other

of useful occupations or enterprises; (2) license for restriction or regulation of non-useful occupations or enterprises; and (3) license for revenue. 12 The first two easily fall within the broad police power granted under the general welfare clause. 13 The third class, however,

and all persons engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the unrestrained

words, the act is

is

for revenue purposes. It is not a license fee, properly

judgment or fancy of the applicant and licensee, the

primarily an exercise of the police power. We hold that the special assessment at bar may be considered as similarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist.

speaking, and yet it is generally so termed. It rests on the taxing power. That taxing power must be expressly conferred by statute upon the municipality. Because of the purpose of solving the financial difficulty of the low rates imposed by the

municipality which deprives the barrios, sitios and rural areas of the essential and necessary services and facilities, the present imposition must be treated as a levy for revenue purposes.

presumption is strong that the power of taxation, and not the police power, is being exercised.” PAGE 25Lutz v. Araneta [G.R. No. L-7859. December 22, 1955] Digest by: AUMENTADO, Adrian F. PONENTE: Reyes J. FACTS:

Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from the

PAGE 23Victorias Milling Co., Inc. v. Municipality of Victorias [G.R. No. L-21183. September 27, 1968]

quick glance at the big amount of maximum annual tax

set forth in the ordinance, P40,000.00 for sugar centrals, and P40,000.00 for sugar refineries, will readily convince one that the tax

A

Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948- 1949 and 1949-1950; alleging that such tax is

Digest by: AUMENTADO, Adrian F. PONENTE: Sanchez J. FACTS:

This case calls into question the validity of Ordinance No. 1, series of 1956, of the Municipality of Victorias, Negros Occidental. The disputed ordinance imposed license taxes on operators of sugar centrals and sugar refineries. Such changes were: with respect to sugar centrals, by increasing the rates of municipal

really a revenue tax. And then, we read in the ordinance

nothing which would as much as indicate that the tax imposed is merely for police inspection, supervision or regulation. We should not hang so heavy a meaning on the use of the term “municipal license tax”.

is

This does not necessarily connote the idea that the tax is imposed — as the lower court would PAGE 24want it — to mean a revenue measure in the guise

unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff’s opinion is not a public purpose for which a tax may be constitutionally levied. ISSUE:

HELD:

assumption that the tax provided

license taxes; and as to sugar refineries, by increasing the

of

a license tax. For really, this runs counter

for in Commonwealth Act No. 567 is a pure exercise of the

rates of municipal license taxes

to

the declared purpose to make money. Besides, the term

taxing power. The tax is levied

as well as the range of graduated schedule of annual output capacity. The production of plaintiff Victorias Milling Co., Inc. in both its sugar central

“license tax” has not acquired a fixed meaning. It is often “used indiscriminately to designate impositions exacted for the exercise

with regulatory purpose; such is to provide means for the rehabilitation and stabilization of the sugar industry. The act is primarily an exercise of

and its sugar refinery located in

of

various privileges.” It does not refer solely to a license

police power, and not a pure exercise

the Municipality of Victorias comes within these items.

for

regulation. In many instances,

of taxing power. As sugar production is one of the great

Plaintiff filed suit below to ask for

it

refers to “revenue-raising exactions on privileges or

industries of the Philippines, and

judgment declaring Ordinance No. 1, series of 1956, null and void. The plaintiff contends that the ordinance is discriminatory since it singles out plaintiff, which is the only operator of a

activities.” On the other hand, license fees are commonly called taxes. But, legally speaking, the latter are “for the purpose of raising

that its’ promotion, protection and advancement redounds greatly to the general welfare. The legislature found that the general welfare demands that the industry should be stabilized, and

provided that the distribution of benefits therefrom be readjusted among its component to enable it to resist the added strain of the increase in tax that it had to sustain. PAGE 26PCGG v. Cojuanco [G.R. Nos. 147062-64. December 14, 2001] Digest by: AUMENTADO, Adrian F. PONENTE: Panganiban J. FACTS:

The PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal. Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank(UCPB) registered in the names of the alleged “one million coconut farmers,” the so-called Coconut Industry Investment Fund companies (CIIF companies) and Private Respondent Eduardo Cojuangco Jr. On January 23, 1995, the trial court rendered its

final Decision nullifying and setting aside the Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares. ISSUE:

Are the Coconut Levy Funds raised through the State’s police and taxing powers? HELD:

Yes. Coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on this definition,

a tax has three elements, namely: a) it is an enforced proportional contribution from persons

and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power

of the State.

Even if the money is allocated for a special purpose and raised by special means, it

is still public in character. In the case before us, the funds

were even used to organize and

finance State offices.

It cannot be denied that the coconut industry is one of the

major industries supporting

the national economy. It is, therefore, the State’s concern

to make it a strong and secure

source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability. The coconut levy funds constitute state funds even though they may be held for a special public purpose. Such coconut levy funds -- like the sugar levy and the oil stabilization funds, as well as the monies generated by the On-line Lottery System -- are funds exacted by the State. Being enforced contributions, they are prima facie public funds. PAGE 27Part I: General Principles Limitations on the Power of TaxationPascual v. Secretary of Public Works and Communications [G.R. No. L-10405. December 29, 1960] Digest by: AVILA, Alyssa Daphne M. PONENTE: Concepcion, J. FACTS:

Republic Act No. 920, the act appropriating funds for public works was enacted in 1953 containing an item for the construction, reconstruction and improvement of Pasig feeder road terminals which were not yet constructed within Antonio subdivision owned by Sen. Jose Zulueta. Zulueta donated said parcels of land to the government five months after the enactment of R.A. No. 920 on the condition that if the government violates such condition, the lands would revert to Zulueta. The provincial governor of Rizal questioned the validity of the donation and the unconstitutionality of the item in R.A. No. 920, it being for a public purpose. ISSUE:

Whether or not the appropriation was made for a public purpose. HELD:

No. The right of the legislature to appropriate funds is correlative with its right to tax, under the constitutional provision against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose as appropriation for state funds can be made for other than a public purpose. The validity of a statute depends upon the powers of Congress at the time of its passage not upon events or acts performed subsequent thereto, unless the latter consist an amendment of the organic law, removing with retrospective operation the constitutional limitation infringed by said statute. Herein, inasmuch as the land on which the projected feeder roads were to be

constructed belonged to Sen. Zulueta at the time of R.A. No. 920 was passed by Congress and the disbursement of said fund became effective pursuant to Sec.13 of the law, the result is that the appropriation sought a private purpose, hence, null and void. PAGE 28John Osmeña v. Oscar Orbos [G.R. No. 99886. March 31, 1993] Digest by: AVILA, Alyssa Daphne M. PONENTE: Narvasa, C.J. FACTS:

Presidential Decree No. 1956 created a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF) which was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a “trust liability account,” in virtue of E.O. 1024 and ordered released from the National Treasury to the Ministry of Energy. The same Executive Order also authorized the investment of the fund in government securities, with the earnings from such placements accruing to the fund. President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost under recovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the under recovery being left for determination by the Ministry of Finance. The petition further avers that the creation of the trust fund violates Section 29(3), Article VI of the Constitution. The petitioner argues that “the monies collected pursuant to P.D. 1956, as amended, must be treated as a ‘SPECIAL FUND,’ not as a ‘trust account’ or a ‘trust fund,’ and that “if a special tax is collected for a specific purpose, the revenue generated therefrom shall ‘be treated as a special fund’ to be used only for the purpose indicated, and not channeled to another government objective.”10 Petitioner further points out that since “a ‘special fund’ consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created.” ISSUE:

Whether or not there was undue delegation of legislative power. HELD:

The Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, Sec. 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. What petitioner would wish is the fixing of some definite, quantitative restriction, or “a specific limit on how much to tax.” The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is PAGE 29to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard — limits of which are sufficiently determinate or determinable — to which the delegate must conform. The standard, as the Court has already stated, may even be implied. In that light, there can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable standard which guides the exercise of the power granted to the ERB. By the same token, the proper exercise of the delegated power may be tested with ease. It seems obvious that what the law intended was to permit the additional imposts for as long as there exists a need to protect the general public and the petroleum industry from the adverse consequences of pump rate fluctuations. Where the standards set up for the guidance of an administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the judgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative functions. PAGE 30Pepsi-Cola Bottling Company v. Municipality of Tanauan

[G.R. No. L-31156. February 27, 1976] Digest by: AVILA, Alyssa Daphne M. PONENTE: Martin, J. FACTS:

Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of Republic Act No. 2264. Otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void. Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects “from soft drinks producers and manufacturers a tai of one sixteenth (1/16) of a centavo for every bottle of soft drink corked.” For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during the month. On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects “on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity.” For the purpose of computing the taxes due, the person, fun company, partnership, corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month. The tax imposed in both Ordinances Nos. 23 and 27 is denominated as “municipal production tax”. ISSUE:

Whether or not ordinances No. 23 and 27 constitute double taxation. HELD:

There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since we have not adopted as part thereof the injunction against double

taxation found in the Constitution of the United States and some states of the Union. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality. Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. Plaintiff-appellant in its brief admitted that defendants- appellees are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the PAGE 31plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief “that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the provisions of the former.” PAGE 32Social Security System v. City of Bacolod and Reynaldo [G.R. No. L-35726. July 21, 1982] Digest by: AVILA, Alyssa Daphne M. PONENTE: Escolin, J. FACTS:

Petitioner is a government agency whose primary function is to develop, establish gradually and perfect a social security system which shall be equitable to the needs of the Philippines throughout the Philippines. For its failure to pay realty taxes, respondent city levied upon petitioner‘s lands and building and later declared such properties forfeited in the city‘s favor. Petitioner argued that being a government- owned and controlled corporation, it is exempt from payment of real estate taxes. The trial court ruled that properties of petitioner are not exempt since there is no law which exempts said entity from taxes and it also does not fall under the provisions of Section 29 of the Charter of the City of Bacolod which exempt from taxation lands and buildings owned by the government and those used exclusively for religious, charitable, scientific, or educational purposes and not for profit. The court a quo

restricted the scope of the exemption exclusively to those government agencies, entities and instrumentalities exercising governmental or sovereign functions. It relied on a previous ruling that a government agency performing ministrant functions is not included in the term

Government of the Republic of the Philippines || for

purposes of exemption from the legal fees provided for in Rule 130 of the Rules of Court. ISSUE:

Whether the properties of the Social Security System is exempted from payment of real estate taxes. HELD:

Yes. There can be no question that a government owned or controlled corporation is subject to payment of the legal fees provided for in Rule 130 of the Rules of Court. However, the subject of inquiry in the case at bar is not whether a government corporation exercising ministrant or proprietary function, such as petitioner SSS, is exempt from the payment of legal fees, but whether the properties in question, which are concededly owned by the government, are exempt from realty taxes. Under Section 29 of the Charter of the City of Bacolod, they are so exempt. Said section does not contain any qualification whatsoever in providing for the exemption from real estate taxes of “lands and buildings owned by the Commonwealth or Republic of Philippines.” Hence, when the legislature exempted lands and buildings owned by the government from payment of said taxes, what it intended was a broad and comprehensive application of such mandate, regardless of whether such property is devoted to governmental or proprietary purpose. What is decisive is that the properties possessed by the SSS, albeit devoted to private or proprietary purpose, are in fact owned by the government of the Philippines. As such they are exempt from realty taxes. It is axiomatic that when public property is involved, exemption is the rule and taxation, the exception. PAGE 33Sea-Land Service, Inc. v. Court of Appeals [G.R. No. 122605. April 30, 2001] Digest by: AVILA, Alyssa Daphne M. PONENTE: Pardo, J. FACTS:

Sea-Land is an American international shipping company licensed by the SEC to do business in the Philippines entered into a contract with the US Government to transport military household goods and effects of US military personnel assigned to the Subic Naval

Base. From the aforesaid contract, Sea-Land derived an income for the taxable year 1984 amounting to P58,006,207.54. During the taxable year in question, Sea-Land filed with the Bureau of Internal Revenue (BIR) the corresponding corporate Income Tax Return (ITR) and paid the income tax due thereon of 1.5% as required in Section 25 (a) (2) of the National Internal Revenue Code (NIRC) in relation to Article 9 of the RP-US Tax Treaty, amounting to P870,093.12. Claiming that it paid the aforementioned income tax by mistake, a written claim for refund was filed with the BIR on 15 April 1987. However, before the said claim for refund could be acted upon by the CIR, petitioner-appellant filed a petition for review with the CTA to judicially pursue its claim for refund and to stop the running of the two-year prescriptive period under the then Section 243 of the NIRC. CTA denied Sea-Land ‘s claim for refund of the income tax it paid in 1984. Such decision was then affirmed by the Court of Appeals. ISSUE:

Whether or not the income that petitioner derived from services in transporting the household goods and effects of U. S. military personnel falls within the tax exemption provided in Article XII, paragraph 4 of the RP-US Military Bases Agreement. HELD:

No. The Supreme Court denied the petition of tax for the refund. The RP-US Military Bases Agreement provides: No national of the United States, or corporation organized under the laws of the United States, resident in the United States, shall be liable to pay income tax in the Philippines in respect of any profits derived under a contract made in the United States with the government of the United States in connection with the construction, maintenance, operation and defense of the bases, or any tax in the nature of a license in respect of any service or work for the United States in connection with the construction, maintenance, operation and defense of the bases. Under Article XII (4) of the RP–US Military Bases Agreement, the Philippine Government agreed to exempt from payment of Philippine income tax nationals of the United States, or corporations organized under the laws of the United States, residents in the United States in respect of any profit derived under a contract made in the United States with the Government of the United States in connection with the construction, maintenance, operation

and defense of the bases.

It is obvious that the transport or shipment of household

goods and effects of U. S.

PAGE 34military personnel is not included in the term

construction, maintenance, operation and

defense of the bases. Neither could the performance of this service to the U. S. government be interpreted as directly related to the defense and security of the Philippine territories. When the law speaks in clear and categorical language, there is no reason for interpretation or construction, but only for application. Any interpretation that would give it an expansive construction to encompass petitioner‘s exemption from taxation would be unwarranted. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. The avowed purpose of tax exemption is some public benefit or interest, which the lawmaking body considers sufficient to offset the monetary loss entailed in the grant of the exemption. The hauling or transport of household goods and personal effects of U. S. military personnel would not directly contribute to the defense and security of the Philippines. PAGE 35Commissioner of Internal Revenue v. Mitsubishi Metal Corporation [G.R. No. L-54908. January 22, 1990] Digest by: BAUTISTA, Cecille Catherine A. PONENTE: Regalado, J. FACTS:

On April 17, 1970, Atlas Consolidated Mining and Development Corporation (Atlas) entered into a Loan and Sales Contract with Mitsubishi Metal Corporation (Mitsubishi), a Japanese corporation licensed to engage in business in the Philippines, for projected expansion of the productive capacity of the former’s mines in Toledo, Cebu. Under the contract, Mitsubishi agreed to extend a loan to Atlas ‘in the amount of $20,000,000.00, United States currency, for the installation of a new concentrator for copper production. Atlas, in turn undertook to sell to Mitsubishi all the copper concentrates produced from said machine for a period of fifteen (15) years.

In order to comply with its obligation, Mitsubishi applied for

a loan with the

Export-Import Bank of Japan [Eximbank] which was approved on May 26, 1970 in the sum of¥4,320,000,000.00, at about the same time as the approval of its loan for ¥2,880,000,000.00 from a consortium of Japanese banks. Pursuant to the contract between Atlas and Mitsubishi, interest payments were made by the former to the latter totalling P13,143,966.79 for the years 1974 and 1975. The corresponding 15% tax thereon in the amount of P1,971,595.01 was withheld pursuant to Section 24 (b) (1) and Section 53 (b) (2) of the National Internal Revenue Code, as amended by Presidential Decree No. 131, and duly remitted to the Government. On March 5, 1976, private respondents filed a claim for tax credit requesting that the sum of P1,971,595.01 be applied against their existing and future tax liabilities. The petitioner not having acted on the claim for tax credit, private respondents filed a petition for review with respondent court. While said case was still pending before the tax court, the corresponding 15% tax on the amount of P439,167.95 on the P2,927,789.06 interest payments for the years 1977 and 1978 was withheld and remitted to the Government. Atlas again filed a claim for tax credit with the petitioner, repeating the same basis for exemption. Respondent Court in both cases ordered petitioner to grant a tax credit in favor of Atlas. ISSUE:

Whether or not Mitsubishi is a mere conduit of Eximbank which will then be considered as the creditor whose investments in the Philippines on loans are exempt from taxes under the code HELD:

No. The loan and sales contract between Mitsubishi and Atlas does not contain any direct or inferential reference to Eximbank whatsoever. The agreement is strictly between Mitsubishi as creditor in the contract of loan and Atlas as the seller of the copper concentrates. MITSUBISHI secured such loans in its own independent capacity as a private entity and not PAGE 36as a conduit of the consortium of Japanese banks or the EXIMBANK of Japan. While the loans were secured by MITSUBISHI primarily “as a loan to and in consideration for importing copper concentrates from ATLAS,” the fact remains that it was a loan by EXIMBANK of Japan to MITSUBISHI and not to ATLAS. Thus, the transaction between MITSUBISHI and EXIMBANK of Japan was a distinct and separate contract from that entered into by MITSUBISHI and ATLAS.

It is too settled a rule in this jurisdiction that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed, which onus petitioners have failed to discharge. Significantly, private respondents are not even among the entities which, under Section 29 (b) (7) (A) of the tax code, are entitled to exemption and which should indispensably be the party in interest in this case. PAGE 37Thirty-First Infantry Post Exchange and First Lieutenant David L. Hardee vs Juan Posadas, Jr., Collector of Internal Revenue [G.R. No. 33403. September 4, 1930] Digest by: BAUTISTA, Cecille Catherine A. PONENTE: Malcolm, J. FACTS:

Thirty-first Infantry Post Exchange, is a post exchange constituted in accordance with the Army Regulations and the laws of the United States, with its place of business in the Cuartel de España in the City of Manila, P. I. It is an agency within the United States Army, under the control of the officers of the Army which is designed for the accommodation, convenience, and assistance of the personnel of the Army. All of the goods sold to and purchased by the plaintiff Exchange are intended for resale to and are in fact resold, as they have been in the past, to the officers, soldiers and the civilian employees of the Army, and their families. The defendant and his predecessors in that office have collected from the merchants who made the sales of the commodities, goods, wares, and merchandise to the plaintiff Exchange, taxes at the rate of one and one-half per centum on the gross value in money of the commodities, goods, wares, and merchandise, sold by them to the plaintiff Exchange. petitioner to grant a tax credit in favor of Atlas. ISSUE:

Whether or not a tax may be levied by the Government of the Philippine Islands on sales made by merchants to Post Exchanges of the United States Army in the Philippines HELD:

The Court, citing the case of Walter E. Olsen vs Rafferty, ruled that the sale of merchandise through the post exchanges to the individuals of the United States Army and

Navy are not goods sold and delivered directly to the United States Army or Navy for the actual use or issue by the Army or Navy and are therefore, not exempt from the payment of the internal revenue tax imposed by the law. Since no law of the Congress forbids the taxation of merchants who deal with Army Post Exchanges, and since the Congress has legalized the applicable law, and in doing so has granted no immunity from taxation to merchants who deal with Army Post Exchanges, the Congress has permitted such transactions with Army Post Exchanges, on the assumption that Post Exchanges are agencies of the United States, to be taxed by the Philippine Government. It must be understood, however, that the waiver must be clear, and that every well grounded doubt should be resolved in favor of the exemption. PAGE 38Commissioner of Internal Revenue v. Marubeni Corporation [G.R. No. 33403. September 4, 1930] Digest by: BAUTISTA, Cecille Catherine A. PONENTE: Puno, J. FACTS:

Respondent Marubeni Corporation is a foreign corporation organized and existing under the laws of Japan duly registered to engage in such business in the Philippines and maintains a branch office in Manila. Petitioner found respondent to have undeclared income from two (2) contracts in the Philippines in 1984. Respondent then received a letter from petitioner assessing it for several deficiency taxes including surcharges and interests. Respondent filed two (2) petitions for review with the Court of Tax Appeals, the first questioning the deficiency income, branch profit remittance and contractor’s tax assessments and the second questioning the deficiency commercial broker’s assessment. On August 2, 1986, Executive Order (E.O.) No. 412 declaring a one-time amnesty covering unpaid income taxes for the years 1981 to 1985 was issued. Taxpayers who wished to avail of said amnesty should file the necessary documents before October 31, 1986. In accordance with the terms of E.O. No. 41, respondent filed its tax amnesty return dated October 30, 1986. On November 17, 1986, the scope and coverage of E.O. No. 41 was expanded by Executive Order (E.O.) No. 64. In addition to the income tax amnesty granted by E.O. No. 41 for the years 1981 to 1985, E.O. No. 64 included estate and donor’s taxes under Title III and the

tax on business under Chapter II, Title V of the National Internal Revenue Code, also covering the years 1981 to 1985. Under E.O. No. 64, those taxpayers who already filed their amnesty return under E.O. No. 41, as amended, could avail themselves of the benefits, immunities and privileges under the new E.O. by filing an amended return and paying an additional 5% on the

increase in net worth to cover business, estate and donor’s tax liabilities. On December 15, 1986, respondent filed a supplemental tax amnesty return under the benefit of E.O. No. 64 and paid a further amount of P1,445,637.00 to the BIR equivalent to five percent (5%) of the increase of its net worth between 1981 and 1986. On July 29, 1996, the Court of Tax Appeals rendered a decision stating that respondent had properly availed of the tax amnesty under E.O. Nos. 41 and 64 and declared the deficiency taxes subject of said case as deemed cancelled and withdrawn. ISSUE:

Whether or not respondent is covered by the tax amnesties HELD:

Yes. Section 4 of E.O. No. 41 enumerates which taxpayers cannot avail of the amnesty granted thereunder, viz:

“Sec. 4. Exceptions. — The following taxpayers may not avail themselves of the PAGE 39amnesty herein granted:

a) Those falling under the provisions of Executive Order

Nos. 1, 2 and 14;

b) Those with income tax cases already filed in Court as of

the effectivity hereof; The point of reference is the date of effectivity of E.O. No. 41. E.O. No. 41 took effect on August 22, 1986. CTA Case No. 4109 questioning the 1985 deficiency income, branch profit remittance and contractor’s tax assessments was filed by respondent with the Court of Tax Appeals on September 26, 1986. When E.O. No. 41 became effective on August 22, 1986, CTA Case No. 4109 had not yet been filed in court. Respondent corporation did not fall under the said exception in Section 4 (b), hence, respondent was not disqualified from availing of the amnesty for income tax under E.O. No. 41. The difficulty lies with respect to the contractor’s tax assessment and respondent’s availment of the amnesty under E.O. No. 64. E.O. No. 64 expanded the coverage of E.O. No. 41 by including estate and donor’s taxes and tax on business. When E.O. No. 64 took effect

on November 17, 1986, it did not provide for exceptions to the coverage of the amnesty for business, estate and donor’s taxes. By virtue of Section 8

of E.O. No. 64, the provisions of E.O.

No. 41 not contrary to or inconsistent with the amendatory act were reenacted in E.O. No. 64.

Thus, Section 4 of E.O. No. 41 on the exceptions to amnesty coverage also applied to E.O. No. 64.

With respect to Section 4 (b) in particular, this provision excepts from tax amnesty coverage

a taxpayer who has “income tax cases already filed in

court as of the effectivity hereof.” In view of the amendment introduced by E.O. No. 64, Section 4 (b) cannot be construed to refer

to E.O. No. 41 and its date of effectivity. The general rule is

that an amendatory act operates prospectively. While an amendment is generally construed as becoming a part of the original

act as if it had always been contained therein,10 it may not be given a retroactive effect unless

it is so provided expressly or by necessary implication and

no vested right or obligations of contract are thereby impaired.11 E.O. Nos. 41 and 64 are tax amnesty issuances. A tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law. It partakes of an absolute forgiveness or

waiver by the government of its right to collect what is due

it and to give tax evaders who wish

to relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption, is never

favored nor presumed in law. If granted, the terms of the amnesty, like that of a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority. For the right of taxation is inherent in government. The State cannot strip itself of the most essential power of taxation by doubtful words. He who claims an exemption (or an amnesty) from the common burden must justify his claim by the clearest grant of organic or state law.

It cannot be allowed to exist upon a vague implication. If a

doubt arises as to the intent of the legislature, that doubt must be resolved in favor of the state. PAGE 40William Reagan, Etc. v. Commissioner of Internal Revenue [G.R. No. L-26379. December 27, 1969] Digest by: BAUTISTA, Cecille Catherine A. PONENTE: Fernando, J. FACTS:

Petitioner William C. Reagan, at one time a civilian employee of an American

corporation providing technical assistance to the United States Air Force in the Philippines, disputes the payment of the income tax assessed on him by respondent Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile to a member of the United States Marine Corps, the transaction having taken place at the Clark Field Air Base at Pampanga. He contends that in legal contemplation the sale was made outside Philippine territory and therefore beyond our jurisdictional power to tax. ISSUE:

Whether or not the sale was in legal contemplation “outside the Philippines” and thus beyond our jurisdiction to tax HELD:

No. Nothing is better settled than that the Philippines being independent and sovereign, its authority may be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of its sovereignty. The contention that Clark Air Force is foreign soil or territory for purposes of income tax legislation is clearly without support in law. There is nothing in the Military Bases Agreement that lends support to such an assertion. It has not become foreign soil or territory. This country’s jurisdictional rights therein, certainly not excluding the power to tax, have been preserved. PAGE 41Conrado L. Tiu v. Court of Appeals [G.R. No. 127410. January 20, 1999] Digest by: BAUTISTA, Cecille Catherine A. PONENTE: Panganiban, J. FACTS:

On March 13, 1992 RA 7227 entitled “An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes” was passed. Section 12 of said law created the Subic Special Economic Zone and granted thereto special privileges. On June 10, 1993, then President Fidel V. Ramos issued Executive Order No. 97 (EO 97), clarifying the application of the tax and duty incentives and subsequently issued on June

19, 1993 Executive Order No. 97-A (EO 97-A), specifying that “The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and dutyfree area in the SSEFPZ [Subic Special Economic and Free Port Zone].” Petitioners assailed the constitutionality of EO 97-A for allegedly being violative of their right to equal protection of the laws. ISSUE:

Whether or not Executive Order No. 97-A violates the equal protection clause of the Constitution [Specifically the issue is whether the provisions of Executive Order No. 97-A confining the application of R.A. 7227 within the secured area and excluding the residents of the zone outside of the secured area is discriminatory or not] HELD:

The constitutional rights to equal protection of the law is not violated by an executive order, issued pursuant to law, granting tax and duty incentives only to the bussiness and residents within the “secured area” of the Subic Special Econimic Zone and denying them to those who live within the Zone but outside such “fenced- in” territory. The Constitution does not require absolute equality among residents. It is enough that all persons under like circumstances or conditions are given the same privileges and required to follow the same obligations. In short, a classification based on valid and reasonable standards does not violate the equal protection clause. Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class. PAGE 42John Hay Peoples Alternative Coaliton v. Bases Conversion Development Authority [G.R. No. 127410. January 20, 1999] Digest by: BONAVENTE, Arianne PONENTE: Carpio-Morales FACTS:

The Bases Conversion and Development Act of 1992 set out the policy of the government to accelerate the sound and balanced conversion into alternative productive uses of the former military bases under the 1947 Philippines- United States of America Military Bases Agreement, namely, the Clark and Subic military reservations as well as their extensions

including the John Hay Station (Camp John Hay or the camp) in the City of Baguio. R.A. No. 7227 likewise created the Subic Special Economic [and Free Port] Zone (Subic SEZ) which granted the Subic SEZ incentives ranging from tax and duty-free importations, exemption of businesses therein from local and national taxes, to other hallmarks of a liberalized financial and business climate. It also expressly gave authority to the President to create through executive proclamation, subject to the concurrence of the local government units directly affected, other Special Economic Zones (SEZ) in the areas covered respectively by the Clark military reservation, the Wallace Air Station in San Fernando, La Union, and Camp John Hay. BCDA entered into a Memorandum of Agreement and Escrow Agreement with private respondents Tuntex (B.V.I.) Co., Ltd (TUNTEX) and Asiaworld Internationale Group, Inc. (ASIAWORLD) preparatory to the formation of a joint venture for the development of Poro Point in La Union and Camp John Hay as premier tourist destinations and recreation centers. They executed a Joint Venture Agreement whereby they bound themselves to put up a joint venture company known as the Baguio International Development and Management Corporation which would lease areas within Camp John Hay and Poro Point for the purpose of turning such places into principal tourist and recreation spots, as originally envisioned by the parties under their Memorandum of Agreement. On July 5, 1994 then President Ramos issued Proclamation No. 420, the title of which was earlier indicated, which established a SEZ on a portion of Camp John Hay and which reads as follows:

Sec. 3. Investment Climate in John Hay Special Economic Zone. – Pursuant to Section 5(m) and Section 15 of Republic Act No. 7227, the John Hay Poro Point Development Corporation shall implement all necessary policies, rules, and regulations governing the zone, including investment incentives, in consultation with pertinent government departments. Among others, the zone shall have all the applicable incentives of the Special Economic Zone under Section 12 of Republic Act No. 7227 and those applicable incentives granted in the Export Processing Zones, the Omnibus Investment Code of

1987, the Foreign Investment Act of 1991, and new investment laws that may hereinafter be enacted. PAGE 43Petitioners argue that nowhere in R. A. No. 7227 is there a grant of tax exemption to SEZs yet to be established in base areas, unlike the grant under Section 12 thereof of tax exemption and investment incentives to the therein established Subic SEZ. The grant of tax exemption to the John Hay SEZ, petitioners conclude, thus contravenes Article VI, Section 28 (4) of the Constitution which provides that “No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress.” Respondents contend that by extending to the John Hay SEZ economic incentives similar to those enjoyed by the Subic SEZ which was established under R.A. No. 7227, the proclamation is merely implementing the legislative intent of said law to turn the US military bases into hubs of business activity or investment. the laws. PAGE 44 ISSUE:

Whether Proclamation No. 420 is constitutional by providing for national and local tax exemption within and granting other economic incentives to the John Hay Special Economic Zone. HELD:

No. It is clear that under Section 12 of R.A. No. 7227 it is only the Subic SEZ which was granted by Congress with tax exemption, investment incentives and the like. There is no express extension of the aforesaid benefits to other SEZs still to be created at the time via presidential proclamation. The deliberations of the Senate confirm the exclusivity to Subic SEZ of the tax and investment privileges accorded it under the law. Moreover the nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may pass ordinances on exemption only from local taxes. The challenged grant of tax exemption would circumvent the Constitution’s imposition

that a law granting any tax exemption must have the concurrence of a majority of all the

unmistakable from the language of the

removal of goods from the territory of the Subic Special Economic Zone to the other parts of

Philippine laws. On June 19, 1993, Executive Order No. 97-A was issued,

members of Congress. In the same vein, the other kinds of privileges extended to the John Hay SEZ are by tradition and usage for Congress to legislate

the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

“Further Clarifying the Tax and Duty-Free Privilege Within the Subic Special Economic and Free Port Zone.” The relevant

upon.

[4]

provisions read, as follows:

Contrary to public respondents’ suggestions, the claimed statutory exemption of the John Hay SEZ from taxation should be manifest and

The provision of existing laws, rules and regulations

to the contrary notwithstanding, no taxes, local and national, shall be imposed within the Subic Special

(c)

SECTION 1. On Import Taxes and Duties – Tax and duty-

SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured Area of the Subic Special Economic and Free Port Zone:

Economic Zone. In lieu of paying taxes, three percent

1.1

The Secured Area consisting of the presently

law on which it is based; it must be expressly granted in a statute stated in a language too clear to be mistaken. Tax exemption cannot be implied as it

must be categorically and unmistakably expressed. If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption and incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227.Coconut Oil Refiners Association, Inc. vs. Hon Ruben Torres [G.R. No. 132527. July 29, 2005] Digest by:BONAVENTE, Arianne PONENTE: Azcuna, J. FACTS:

On March 13, 1992, Republic Act No. 7227 was enacted, providing for, among other

(3%) of the gross income earned by all businesses and enterprises within the Subic Special Ecoomic Zone shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the development of municipalities outside the City of Olangapo and the Municipality of Subic, and other municipalities contiguous to the base areas. On April 3, 1993, President Fidel V. Ramos issued Executive

fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for

sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.

things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. Among the salient provisions are as follows:

SECTION 12. Subic Special Economic Zone. — The abovementioned zone shall be subject to the following policies:

Order No. 80, which declared, among others, that Clark shall have all the applicable incentives granted to the Subic Special Economic and Free Port Zone under Republic Act No. 7227. Pursuant to the directive under Executive Order No. 80, the BCDA passed Board PAGE 45Resolution No. 93-05-034 on May 18, 1993, allowing the tax and duty-free sale at retail of consumer goods imported via Clark for consumption

Residents of the SSEFPZ living outside the

Secured Area can enter the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, these residents can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US$100 per month

1.2.

(a)

Within the framework and subject to the mandate

outside the CSEZ. On June 10, 1993, the

per person. Only residents age 15 and over are entitled to this privilege.

and limitations of the Constitution and the pertinent provisions of the Local Government Code, the Subic Special

Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments;

President issued Executive Order No. 97, “Clarifying the Tax and Duty Free Incentive Within the Subic Special Economic Zone Pursuant to R.A. No. 7227.” Said issuance in part states, thus:

free importations shall apply only to raw materials, capital goods and equipment brought in by business enterprises into the

Filipinos not residing within the SSEFPZ can enter

the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, they can purchase and bring out [of] the Secured Area to other parts of the Philippine territory consumer items worth

1.3.

(b)

The Subic Special Economic Zone shall be operated

SSEZ. Except for these items, importations of other goods

not exceeding US$200 per year per person. Only Filipinos

and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or

into the SSEZ, whether by business enterprises or resident individuals, are subject to taxes and duties under relevant Philippine laws. The exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of the Philippine territory shall be subject to duties and taxes under relevant

age 15 and over are entitled to this privilege. Petitioners assail the $100 monthly and $200 yearly tax- free shopping privileges granted by the aforecited provisions respectively to SSEZ residents living outside the Secured Area of the SSEZ and to Filipinos aged 15 and over

residing outside the SSEZ. PAGE 46ISSUE:

Whether or not the assailed issuances are unconstitutional, illegal and void for being an exercise of executivelawmaking, contrary to RA No. 7227 and in violation of the Constitutional provisions, particularly the equal protectionclause, prohibition of unfair competition and combinations in restraint of trade, and preferential use of Filipino labor,domestic materials and locally produced goods? HELD:

On the issue of executive legislation, petitioners contend that the wording of RA No. 7227 clearly limits the grant of tax incentives to the importation of raw materials, capital and equipment only. Hence, they claim that the assailed issuances constitute executive legislation for invalidly granting tax incentives in the importation of consumer goods such as those being sold in the duty-free shops, in violation of the letter and intent of RA No. 7227. The Court held that Section12 of RA No. 7227 clearly does not restrict the duty-free importation only to ‘raw materials, capital and equipment. To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the ‘free flow of goods or capital within, into, and out of the zones’ is insured. The phrase ‘tax and duty-free importations of raw materials, capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. Moreover, the records of the Senate containing the discussion of the concept of ‘special economic zone in Section 12 (a)of Republic Act No. 7227 show the legislative intent that consumer goods entering the SSEZ which satisfy the needs of the zone and are consumed there are not subject to duties and taxes in accordance with Philippine laws. However, the second sentences of paragraphs 1.2 and 1.3 of EO No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section12 of RA No. 7227. Said Section clearly provides that exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and

Tariff Code and other relevant tax laws of the Philippines. On the other hand, insofar as the CSEZ is concerned, the case for an invalid exercise of executive legislation is tenable. While Section 12 of RA No. 7227 expressly provides for the grant of incentives to the SSEZ, it fails to make any similar grant in favor of other economic zones, including the CSEZ. Tax and dutyfree incentives being in the nature of tax exemptions, the basis thereof should be categorically and unmistakably expressed from the language of the statute. Consequently, in the absence of any express grant of tax and duty-free privileges to the CSEZ in RA No. 7227, there would be no legal basis to uphold the questioned portions of two issuances: Section 5 of Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05-034, which both pertain to

the CSEZ. On the issue on equal protection, it is an established principle of constitutional law that the guaranty of the equal protection of the laws is not violated by a legislation based on

a reasonable classification. Classification, to be valid, must (1) rest on substantial distinction, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class. In this case, the Court found that there’s real and substantial distinction between residents within the secured area and those living within the economic zone but outside the fenced-off area. A significant distinction between the two PAGE 47groups is that enterprises outside the zones maintain their businesses within Philippine customs territory, while private respondents and the other duly-registered zone enterprises operate within the so-called ‘separate customs territory. The classification is also germane to the purpose of RA No. 7227 because its purpose is to convert the lands formerly occupied by the US military bases into economic or industrial areas.

In furtherance of such objective,

Congress deemed it necessary to extend economic incentives to the establishments within the zone to attract and encourage foreign and local investors. The classification, moreover, is not limited to the existing conditions when the law was promulgated, but to future conditions as well, inasmuch as the law envisioned the former military reservation to ultimately develop into a self-sustaining investment center. And, lastly, the classification applies equally to all retailers found within the ‘secured area. On the issue of unfair competition the Court held that

the mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition. Said constitutional prohibition cannot hinder the Legislature from using tax incentives as a tool to pursue RA No. 7227 policies of developing the SSEZ into a self-sustaining entity that will generate employment and attract foreign and local investment. Lastly, on the issue of preferential use of Filipino labor, materials and goods, the Court held that this Constitutional provision did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine economy. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair Furthermore, Executive Department, with its subsequent issuance of Executive Order Nos. 444 and 303, has already provided certain measures to prevent that unfair competition. The petition is PARTLY GRANTED. Section 5 of Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05-034 are hereby declared NULL and VOID and are accordingly declared of no legal force and effect. All portions of Executive Order No. 97-A are valid and effective, except the second sentences in paragraphs 1.2 and 1.3of said Executive Order, which are hereby declared INVALID. PAGE 48The Province Of Abra vs. Honorable Harold M. Hernando [G.R. No. L-49336. August 31, 1981] Digest by: BONAVENTE, Arianne PONENTE: Fernando, J.:

FACTS:

The Province of Abra sought to tax the properties of the Roman Catholic Bishop, Inc. of Bangued. Judge Hernando dismissed the petition of Abra without hearing its side. Hernando ruled that there “is no question that the real properties sought to be taxed by the Province of Abra are properties of the respondent Roman Catholic Bishop of Bangued, Inc.” Likewise, there is no dispute that the properties including their produce are actually, directly and exclusively used by the Roman Catholic Bishop of Bangued, Inc. for religious or charitable purposes.” “The proper remedy of the petitioner is appeal and not this special civil action. ISSUE:

Whether or not the properties of the church (in this case) is exempt from taxes. HELD:

The petition must be granted.

certain parcels of land owned by it, are that they are used

primarily on the lack of jurisdiction, as the validity of a tax

The addition of the word “exclusively” in the Philippine

All bills appropriating public funds, revenue or tariff bills,

1.

Respondent Judge would not have erred so grievously

“actually, directly and exclusively” as

Constitution and the decision

had he merely compared the provisions of the present Constitution with that appearing in the 1935 Charter on the tax exemption of “lands, buildings, and improvements.” There is a marked difference. Under the 1935 Constitution: “Cemeteries, churches, and parsonages or convents appurtenant

is

sources of support of the parish priest and his helpers and also of private respondent Bishop. In the motion to dismiss filed on behalf of petitioner Province of Abra, the objection was based

assessment may be questioned before the Local Board of Assessment Appeals and not with

to drop the phrase “as on other Bills” in the American version, according to petitioners, shows the intention of the framers of our Constitution to restrict the Senate’s power to propose amendments to revenue bills. Petitioner Tolentino contends that the word “exclusively” was inserted to modify “originate” and “the words ‘as in any

thereto, and all lands, buildings, and improvements used

a court. There was also mention of

other bills’ (sic) were eliminated so as

exclusively for religious, charitable,

a lack of a cause of action, but only because, in its view,

to show that these bills were not to be like other bills but

or educational purposes shall be exempt from taxation.” The present Constitution added “charitable institutions, mosques, and non-profit cemeteries” and required that for the exemption of “:lands, buildings, and improvements,” they should not only be “exclusively” but also “actually and “directly” used for religious or

declaratory relief is not proper, as there had been breach or violation of the right of government to assess and collect taxes on such property. It clearly appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding the case immediately in favor of private respondent, respondent Judge

must be treated as a special kind.” The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935 Constitution originally provided for a unicameral

charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration.

failed to abide by the constitutional command of procedural due process. The petition is granted and the resolution of June 19, 1978

National Assembly. When it was decided in 1939 to change to a bicameral legislature, it became necessary to provide for the procedure for

Reliance on past decisions would have sufficed were the

set aside. Respondent

lawmaking by the Senate and the House

words “actually” as well as “directly”

Judge, or who ever is acting on his behalf, is ordered to

of Representatives. The work of proposing amendments to

not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation. According to Commissioner of Internal Revenue v. Guerrero: “From 1906, in Catholic Church v. Hastings to 1966, in Esso Standard Eastern, Inc. v. Acting Commissioner of Customs, it has been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an

hear the case on the merit. PAGE 50Arturo M. Tolentino vs.The Secretary of Finance and The Commisioner of Internal Revenue [G.R. No. 115455. October 30, 1995] Digest by: BONAVENTE, Arianne PONENTE: Mendoza, J.:

FACTS:

Tolentino et al is questioning the constitutionality of RA 7716 otherwise known as the Expanded Value Added Tax (EVAT) Law. Tolentino averred that this revenue bill did not exclusively originate from the House of Representatives as required by Section 24, Article

the Constitution was done by the National Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assembly’s lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the following provision:

bills of local application, and private bills shall originate exclusively in the Assembly, but the Senate may propose or concur with amendments. In case of disapproval by PAGE 51the Senate of any such bills, the Assembly may repass the same by a two-thirds

exempting provision should be construed strictissimi juris.” In Manila Electric Company v. Vera, a 1975 decision, such

6

3

of the Constitution. Even though RA 7716 originated as HB 11197 and that it passed the

vote of all its members, and thereupon, the bill so repassed shall be deemed

principle was reiterated, reference being made to Republic Flour Mills, Inc. v. Commissioner of Internal Revenue; Commissioner of Customs v. Philippine Acetylene Co. & CTA; and Davao Light and Power Co., Inc. v. Commissioner of Customs.

readings in the HoR, the same did not complete the 3 readings in Senate for after the 1st reading it was referred to the Senate Ways & Means Committee thereafter Senate passed its

own version known as Senate Bill 1630. Tolentino averred

enacted and may be submitted to the President for corresponding action. In the event that the Senate should fail to finally act on any such bills, the Assembly may, after thirty days from the opening of the

2.

Petitioner Province of Abra is therefore fully justified in

that what Senate could have done

next regular session

invoking the protection

is

it

amend HB 11197 by striking out its text and substituting

of the same legislative term, reapprove the same with a

of procedural due process. If there is any case where proof

w/ the text of SB 1630 in that

vote of two-thirds of

is necessary to demonstrate that PAGE 49there is compliance with the constitutional provision that allows an exemption, this is it. Instead, respondent Judge accepted at its face the

way “the bill remains a House Bill and the Senate version just becomes the text (only the text) of the HB”. Tolentino and co-petitioner Roco [however] even signed the said Senate Bill.

all the members of the Assembly. And upon such reapproval, the bill shall be deemed enacted and may be submitted to the President for corresponding

allegation of private respondent. All that

ISSUE:

action.

was alleged in the petition for declaratory relief filed by

Whether or not EVAT originated in the HoR.

This is the history of Art. VI, §18 (2) of the 1935

private respondents, after mentioning

HELD:

Constitution, from which Art. VI, §24 of

The contention has no merit.

the present Constitution was derived. It explains why the word “exclusively” was added to the

those selling goods, is valid, its application to the press or

in the monthly amortizations to be paid because of the 10% VAT. The additional amount, it

Petitioners ABAKADA GURO Party List, et al. question the constitutionality of Sections

That the President, upon the recommendation of the

American text from which the framers of the Philippine Constitution borrowed and why the phrase “as on other Bills” was not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments must be understood to be full, plenary and complete “as on other Bills.” Thus, because revenue bills are required to originate exclusively in the House of Representatives, the Senate cannot enact revenue

is pointed out, is something that the buyer did not anticipate at the time he entered into the PAGE 52contract. The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall “evolve a progressive system of taxation.” The constitutional provision has been interpreted to mean simply that “direct

4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon recommendation of

measures of its own without such bills.

taxes are

to be preferred [and] as much as possible,

the Secretary of Finance, to raise

After a revenue bill is passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same subject matter. This follows from the coequality of the two chambers of Congress. 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

indirect taxes should be minimized.” (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, §17(1) of the 1973 Constitution from which the present Art.

FACTS:

the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have been satisfied, to wit:

Secretary of Finance, shall, effective January 1, 2006, raise the rate of value- added tax to twelve percent (12%), after any of the following conditions has been satisfied:

prior restraint on the exercise of its right. Hence, although its application to others, such

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.”

VI, §28(1) was taken. Sales taxes are also regressive. We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have in fact taken the extraordinary step of enjoining its enforcement pending resolution of these cases. We have now come to the conclusion that the law suffers from none of the infirmities attributed to it by petitioners and that its enactment by the other branches of the government does not constitute a grave

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 ½%). Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes

A

similar ruling was made by this Court in American Bible

abuse of discretion. Any question as

under Article VI, Section 28(2) of the

Society v. City of Manila, 101 Phil. 386 (1957) 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.

to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally responsible, remembering that, as Justice Holmes has said, “legislators are the ultimate guardians of the liberties and welfare of the people in quite as great a degree as are the courts.” (Missouri, Kansas & Texas Ry. Co. v. May, 194 U.S. 267, 270, 48 L. Ed. 971, 973

1987 Philippine Constitution. Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to 12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also contend that the increase in the VAT rate to 12% contingent on any of the two conditions being satisfied violates the due process clause

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

(1904)). It is not right, as petitioner in G.R. No. 115543 does in arguing that we should enforce the public accountability of legislators, that those who took part in passing the law in question by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the flush of enactment. This Court does not sit as a third

embodied in Article III, Section 1 of the Constitution, as it imposes an unfair and additional tax burden on the people, in that: (1) the 12% increase is ambiguous because it does not state if the rate would be returned to the original 10% if the conditions are no longer satisfied; (2) the rate is unfair and unreasonable,

is

not to burden the exercise of its

branch of the legislature, much less

as the people are unsure of the applicable VAT rate from

right any more than to make the press pay income tax or

exercise a veto power over legislation.

year to year; and (3) the increase in

subject it to general regulation is not

PAGE 53Abakada Guro Party List vs. The Honorable

the VAT rate, which is supposed to be an incentive to the

to

violate its freedom under the Constitution.

Executive Secretary Eduardo Ermita

President to raise the VAT collection

It

is claimed that the application of the tax to existing

[G.R. No. 168056. September 1, 2005]

to at least 2 4/5 of the GDP of the previous year, should

contracts of the sale of real property by installment or on deferred payment basis would result in substantial increases

Digest by: BONAVENTE, Arianne PONENTE: Austria-Martinez, J.:

only be based on fiscal adequacy. Petitioners further claim that the inclusion of a stand-by authority granted to the

President by the Bicameral Conference Committee is a violation of the “no-amendment rule” upon last reading of a bill laid down in Article VI, Section 26(2) of the Constitution. PAGE 54Thereafter, a petition for prohibition was filed by the Association of Pilipinas Shell Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337:

1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on depreciable goods shall be amortized over a 60- month period, if the acquisition, excluding the VAT components, exceeds One Million Pesos (P1,

000,000.00);

2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of input tax to be credited against the output tax; and 3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final withholding tax on gross payments of goods and services, which are subject to 10% VAT under Sections 106 (sale of goods and properties) and 108 (sale of services and use or lease of properties) of the NIRC. Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive, excessive, and confiscatory. According to petitioners, the contested sections impose limitations on the amount of input tax that may be claimed. Petitioners also argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process of law. Petitioners further contend that like any other property or property right, the input tax credit may be transferred or disposed of, and that by limiting the same, the government gets to tax a profit or value-added even if there is no profit or value- added. Petitioners also believe that these provisions violate the constitutional guarantee of equal protection of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several transactions with the government, is not based on real and substantial differences to meet a valid classification.

Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI, Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output tax ratio that will suffer the consequences thereof for it wipes out whatever

meager margins the petitioners make. Governor Enrique T. Garcia filed a petition for certiorari and prohibition, alleging unconstitutionality of the law on the ground that the limitation on the creditable input tax

in effect allows VAT-registered establishments to retain a

portion of the taxes they collect,

thus violating the principle that tax collection and revenue should be solely allocated for public purposes and expenditures. Petitioner Garcia further claims that allowing these establishments to pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the Constitution. The Office of the Solicitor General (OSG) filed a Comment

in behalf of respondents.

PAGE 55Preliminarily, respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners failed to cast doubt on its validity. Relying on the case of Tolentino vs. Secretary of Finance, respondents argue that the

procedural issues raised by petitioners, i.e., legality of the bicameral proceedings, exclusive origination of revenue measures and the power of the Senate concomitant thereto, have already been settled. With regard to the issue of undue delegation of legislative power to the President, respondents contend that the law is complete and leaves no discretion to the President but to increase the rate to 12% once any of the two conditions provided therein arise. Respondents also refute petitioners’ argument that the increase to 12%, as well as the 70% limitation on the creditable input tax, the 60- month amortization on the purchase or importation of capital goods exceeding P1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on progressive taxation, among others. Finally, respondents manifest that R.A. No. 9337 is the anchor of the government’s fiscal reform agenda. A reform in the value-added system of taxation is the core revenue measure that will tilt the balance towards

a sustainable macroeconomic environment necessary for economic growth.

PAGE 56 ISSUE:

Whether or not the questioned provisions of R.A. No. 9337 are unconstitutional. HELD:

Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is a virtual abdication by Congress of its exclusive power to tax because such delegation is not within the purview of Section 28 (2), Article VI of the Constitution, which provides: “The Congress may, by law, authorize the President to fix within specified limits, and may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the government.” The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the President does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the legislature itself.PAGE 57 The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the law effectively nullified the President’s power of control over the Secretary of Finance by mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. The Court cannot also subscribe to the position of petitioners Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase “upon the recommendation of the Secretary of Finance.” Neither does the Court find

persuasive the submission of petitioners Escudero, et al. that any recommendation by the Secretary of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter. In the absence of any provision providing for a return to the 10% rate, which in this case the Court finds none, petitioners’ argument is, at best, purely speculative. There is no basis for petitioners’ fear of a fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is that where the provision of the law is clear and unambiguous, so that there is no occasion for the court’s seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or subtraction. Petitioners claim that the contested sections impose limitations on the amount of input tax that may be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited against the output tax. Petitioners’ argument is not absolute. It assumes that the input tax exceeds 70% of the output tax, and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still creditable. Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding, petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional. Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461, 168463, and 168730, are hereby dismissed.MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC. vs. DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL [G.R. No. 108524. November 10, 1994] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: Mendoza, J.:

FACTS:

Petitioner are engaged in the buying and selling of copra in Misamis Oriental. They seek to nullify Revenue Memorandum Circular No. 47-91 and enjoin the collection by respondent revenue officials of the Value Added Tax (VAT) on the sale of copra by members of petitioner organization. They allege that prior to the issuance of the assailed Revenue Memorandum, which

implemented VAT Ruling 190-90, copra was classified as agricultural food product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at all stages of production or distribution. However, respondent Commissioner of Internal Revenue issued the circular in question, classifying copra as an agricultural non-food product and declaring it “exempt from VAT only if the sale is made by the primary producer pursuant to Section 103(a) of the Tax Code, as amended.” The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed when copra was classified as an agricultural food product under §103(b) of the NIRC. Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of the equal protection clause of the Constitution because while coconut farmers and copra producers are exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of traders and dealers. ISSUE:

Whether there was violation of the equal protection clause. HELD:

No. There is a material or substantial difference between coconut farmers and copra producers, on the one hand, and copra traders and dealers, on the other. The former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the differential treatment of persons so long as there is a reasonable basis for classifying them differently. PAGE 58COMMISSIONER OF INTERNAL REVENUE vs. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION [G.R. No. 119761. August 29, 1996] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: VITUG, J. FACTS:

On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over “Champion,” “Hope,” and “More” cigarettes. The Commissioner of Internal Revenue Bienvenido A. Tan, Jr. classify them as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of ‘Hope’ to ‘Hope Luxury’ and ‘More’ to ‘Premium More,’

thereby removing the said brands from the foreign brand category. Proof was also submitted

to the Bureau (of Internal Revenue [‘BIR’]) that ‘Champion’

was an original Fortune Tobacco Corporation register and therefore a local brand.” Ad Valorem taxes were imposed on these

brands.

A bill, which later became Republic Act (“RA”) No. 7654

was enacted. In effect, a revenue memorandum circular was issued which stated that the aforesaid brands of cigarettes, viz: “HOPE,” “MORE” and “CHAMPION” being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes. The CTA ruled that the Revenue Memorandum Circular reclassifying the brands of cigarettes, viz: “HOPE,” “MORE” and “CHAMPION” being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that

when R.A. No. 7654 took effect on July 3, 1993, the brands

in question were not CURRENTLY

CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of the Tax Code, as amended

by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the case may be. ISSUE:

1. Whether there was violation of due process in the

issuance of the circular.

2. Whether the circular is discriminatory (violation of

uniformity in taxation). HELD:

1. Yes, there was violation of due process. Being a

legislative rule (as opposed to

interpretative), due observance of the requirements of notice, of hearing, and of publication should not have been then ignored.

It has been observed that one of the problem areas

bearing on compliance with Internal PAGE 59Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is due notice, due compliance therewith may not be reasonably expected. And most importantly, their strict enforcement could possibly suffer from legal infirmity in the light of the constitutional provision on “due process of law” and the essence of the Civil Code provision concerning effectivity of laws, whereby due notice is a basic requirement.

In order that there shall be a just enforcement of rules and regulations, in conformity with the basic element of due process, the following procedures are hereby prescribed for the drafting, issuance and implementation of the said Revenue Tax Issuances:

(a) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on internal revenue tax rules and regulations. (b) Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances shall not begin to be operative until after due notice thereof may be fairly presumed. Due notice of the said issuances may be fairly presumed only after the following procedures have been taken. 2. Yes, there was no uniformity. The assailed RMC 37-93 would only apply to “Hope Luxury,” “Premium More” and “Champion” cigarettes and that other cigarettes bearing foreign brands have not been similarly included within the scope of the circular. PAGE 60THE COMMISSIONER OF INTERNAL REVENUE vs. LINGAYEN GULF ELECTRIC POWER CO., INC. and THE COURT OF TAX APPEALS [G.R. No. L-23771. August 4, 1988] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: SARMIENTO, J. FACTS:

The respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan, pursuant to the municipal franchise granted it by their respective municipal councils, under Resolution Nos. 14 and 25 of June 29 and July 2, 1946, respectively. On February 24, 1948, the President of the Philippines approved the franchises granted to the private respondent. On November 21, 1955, the Bureau of Internal Revenue (BIR) assessed against and demanded from the private respondent the total amount of P19,293.41 representing deficiency franchise taxes and surcharges. Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963, granting to the private respondent a legislative franchise for the operation of the

electric light, heat, and power system in the same municipalities of Pangasinan which states that no other tax and/or licenses other than the franchise tax of two per centum on the gross receipts as provided for in the original franchise shall be collected from the grantee.

The petitioner submits that the said law is unconstitutional insofar as it provides for the payment by the private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby discriminatory and violative of the rule on uniformity and equality of taxation. ISSUE:

1. Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the “uniformity and equality of taxation” clause of the Constitution.

2. If the abovementioned Section 4 of R.A. No. 3843 is

valid, whether or not it could be given retroactive effect so as to render uncollectible the taxes in question which were assessed before its enactment. HELD:

1. No violation of uniformity and equality of taxation. A tax

is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed violative of the equal protection clause. It is true that the PAGE 61private respondents municipal franchises were obtained under Act No. 667 of the Philippine Commission, but these original franchises have been replaced by a new legislative franchise, i.e. R.A. No. 3843. As correctly held by the respondent court, the latter was granted subject to the terms and conditions established in Act No. 3636, as amended by C.A. No. 132. These conditions identify the private respondent’s power plant as falling within that class of power plants created by Act No. 3636, as amended. The benefits of the tax reduction provided by law (Act No. 3636 as amended by C.A. No. 132 and R.A. No. 3843) apply to the respondent’s power plant and others circumscribed within this class. R.A-No. 3843 merely transferred the petitioner’s power plant from that class provided for in Act No. 667, as amended, to which it

belonged until the approval of R.A- No. 3843, and placed it within the class falling under Act No. 3636, as amended. Thus, it only effected the transfer of a taxable property from one class to another. Furthermore, the 5% franchise tax rate provided in Section 259 of the Tax Code was never intended to have a universal application. The said Section 259 of the Tax Code expressly allows the payment of taxes at rates lower than 5% when the charter granting the franchise of a grantee, like the one granted to the private respondent under Section 4 of R.A. No. 3843,

precludes the imposition of a higher tax. R.A. No. 3843 did not only fix and specify a franchise tax of 2% on its gross receipts, but made it “in lieu of any and all taxes, all laws to the contrary notwithstanding,” thus, leaving no room for doubt regarding the legislative intent. “Charters or special laws granted and enacted by the Legislature are in the nature of private contracts. They do not constitute a part of the machinery of the general government. They are usually adopted after careful consideration of the private rights in relation with resultant benefits to

the State

the Legislature is directed to the facts and circumstances which the act or charter is intended to meet. The Legislature consider and make provision for all the circumstances of a particular case.” In view of the foregoing, SC finds no reason to disturb the respondent court’s ruling upholding the constitutionality of the law in question. 2. Yes. In the instant case, Act No. 3843 provides that

“effective

original franchise was granted, no other tax and/or licenses other than the franchise tax

shall be

collected, any provision to the contrary notwithstanding.” Republic Act No. 3843 therefore specifically provided for the retroactive effect of the law. PAGE 62KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA vs. HON. BIENVENIDO TAN, as Commissioner of Internal Revenue [G.R. No. 81311. June 30, 1988] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: PADILLA, J. FACTS:

of two per centum on the gross receipts

in passing a special charter the attention of

upon the date the

There are four petitions which seek to nullify Executive Order No. 273 issued by the

President which amended certain sections of the National Internal Revenue Code and adopted

PAGE 633. No. The petitioners’ assertions in this regard are not supported by facts and

oppressive and capricious in character. For petitioner, therefore, there is a transgression of

Whether the assailed law is discriminatory.

the value-added tax for being unconstitutional in that its enactment is not alledgedly within the powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due process and equal protection clauses and other provisions of the 1987 Constitution.

1. Whether the President had no authority to issue EO 273.

circumstances to warrant their conclusions. They have failed to adequately show that the VAT is oppressive, discriminatory or unjust. Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a law. there

both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation. ISSUE:

HELD:

ISSUE:

must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative

No. Taxpayers may be classified into different categories. To repeat, it is enough that

Ordinance No. 6537 was passed by the Municipal Board of

2. Whether there was grave abuse of discretion on the part

implication.

the classification must rest upon substantial distinctions

of the President. 3. Whether EO 273 is oppressive, discriminatory, unjust and regressive.

No. At any rate, the distinction of the customs brokers

from the other professionals who are subject to occupation tax under the Local Tax

4.

The validity of Section I of Batas Pambansa Blg. 135 is

that make real differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible

4.

Whether EO 273 unduly discriminates against customs

Code is based upon material differences,

basis of classification is the susceptibility of the income to

brokers.

in that the activities of customs brokers (like those of

the application of generalized rules

 

HELD:

stock, real estate and immigration

removing all deductible items for all taxpayers within the

1. Yes, under both the Provisional and the 1987 Constitutions, the President is vested with legislative powers until a legislature under a new Constitution is convened. The first Congress, created and elected under the 1987 Constitution, was convened on 27 July 1987. Hence, the enactment of EO 273 on 25 July 1987, two (2) days before Congress convened on 27 July 1987, was within the President’s constitutional power and authority to legislate. The 1987 Constitution mentions a specific date when the President loses her power to legislate. If the framers of said Constitution had intended to terminate the exercise of legislative powers

by the President at the beginning of the term of office of the members of Congress, they should have so stated (but did not) in clear and unequivocal terms. The Court has not power to rewrite the Constitution and give it a meaning different from that intended.

brokers) partake more of a business, rather than a profession and were thus subjected to the percentage tax under Sec. 174 of the National Internal Revenue Code prior to its amendment by EO 273. EO 273 abolished the percentage tax and replaced it with the VAT. If the petitioner Association did not protest the classification of customs brokers then, the Court sees no reason why it should protest now. PAGE 64ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue et al. [G.R. No. L-59431. July 25, 1984] Digest by: CABATU, RICKY BOY VILLALUZ PONENTE: PADILLA, J. FACTS:

questioned due to constitutional infirmities. The assailed provision further amends Section 21 of the National Internal

class and fixing a set of reduced tax rates to be applied to all of them. Taxpayers who are recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers are e not entitled to make deductions for income tax purposes because they are in the same situation more or less. On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. There is ample justification then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as

2.

No grave abuse if discretion. Petitioners have failed to

Revenue Code of 1977, which provides for rates of tax on

regards professional and business income.

show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic manner by reason of passion or personal hostility. It appears that a comprehensive study of the VAT had been extensively discussed by this framers and other government agencies involved in its implementation, even under the past administration. The signing of E.O. 273 was merely the last stage in the exercise of her (Pres. Aquino) legislative powers. The legislative process started long before the signing when the data were gathered, proposals were weighed and the final wordings of the measure were drafted, revised and finalized. Certainly, it cannot be said that the President made a jump, so to speak, on the Congress, two days before it convened.

citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted gross income. Petitioner 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 sction as arbitrary amounting to class legislation,

PAGE 65Villegas v. Hiu Chiong Tsai Pao Ho [G.R. No. L-29646. November 10, 1978] Digest by: DE GUZMAN, Pristine B. PONENTE: Fernandez, J. FACTS:

Manila on February 22, 1968 and signed by the herein petitioner Mayor Antonio J. Villegas of Manila on March 27, 1968. Section 1 of said Ordinance No. 6537 prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00. Hiu Chiong Tsai Pao questioned the validity of the ordinance on the ground that it is

discriminatory and violative of the rule of uniformity in taxation. On the other hand, petitioner

Mayor Villegas argues that Ordinance No. 6537 did not violate the rule on uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or revenue measures and that Ordinance No. 6537 is not a tax or revenue measure but is an exercise of the police power

and unlimited delegation of power to allow or prevent an activity per se lawful. PAGE 67Villanueva v. City of Iloilo [G.R. No. L-26521. December 28, 1968] Digest by: DE GUZMAN, Pristine B. PONENTE: CASTRO, J. FACTS:

estate taxes and tenement taxes are not of the same character. 2. YES. The lower court has interchangeably denominated the tax in question as a tenement tax or an apartment tax. Called by either name, it is not among the exceptions listed in Section 2 of the Local Autonomy Act. The imposition by the ordinance of a license tax on

In 1960, Ordinance 110 was passed in Butuan. It was later

of

the state, it being principally a regulatory measure in

On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86. The

persons engaged in the business of operating tenement

nature.

Supreme Court, however, declared the ordinance ultra

houses finds authority in Section 2

ISSUE:

vires. On January 15, 1960 the municipal

of the Local Autonomy Act which provides that chartered

Whether or not Ordinance No. 6537 is null and void on the ground that it violated

board of Iloilo City, believing that with the passage of Republic Act 2264, otherwise known as

cities have the authority to impose municipal license taxes or fees upon persons engaged in

the rule on uniformity of taxation. HELD:

the Local Autonomy Act, it had acquired the authority or power to enact an ordinance similar

any occupation or business, or PAGE 68exercising privileges within their respective

YES. While it is true that the first part which requires that the alien shall secure an employment permit from the Mayor involves the exercise

to that previously declared by the Supreme Court as ultra vires, enacted Ordinance 11, series of 1960, imposing municipal license tax on persons

territories, and “otherwise to levy for public purposes, just and uniform taxes, licenses, or fees.” 3. NO. The ordinance is not violative of the rule of

of

discretion and judgment in

engaged in the business of operating

uniformity in taxation. The Supreme

the processing and approval or disapproval of applications for employment permits and

tenement houses in accordance with the schedule of payment provided by therein.

Court has already ruled that tenement houses constitute a distinct class of property. It has

therefore is regulatory in character the second part which requires the payment of P50.00 as employee’s fee is not regulatory but a revenue measure. There is no logic or justification

Villanueva and the other apartment owners from whom, the city collected license taxes by virtue of Ordinance 11 aver that the said ordinance is unconstitutional for RA 2264 does

likewise ruled that “taxes are uniform and equal when imposed upon all property of the same class or character within the taxing authority.” The fact, therefore, that the owners of other

in

exacting P50.00 from aliens who have been cleared for

not empower cities to impose apartment taxes; that the

classes of buildings in the City of Iloilo do not pay the taxes

employment. It is obvious that the purpose of the ordinance is to raise money under the guise

same is oppressive and unreasonable for it penalizes those who fail to pay the apartment taxes;

imposed by the ordinance in question is no argument at all against uniformity and

of

The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among

regulation.

that it constitutes not only double taxation but treble taxation; and, that it violates uniformity of taxation. ISSUE:

equality of the tax imposition. Neither is the rule of equality and uniformity violated by the fact that tenement taxes are not imposed in other cities, for the same rule does not require that

individual aliens who are required to

1.

Whether or not the ordinance constitutes double