Beruflich Dokumente
Kultur Dokumente
Facts
Maryland (P) enacted a statute imposing a tax on all banks operating in Maryland
not chartered by the state. The statute provided that all such banks were
prohibited from issuing bank notes except upon stamped paper issued by the
state. The statute set forth the fees to be paid for the paper and established
penalties for violations.
The Second Bank of the United States was established pursuant to an 1816 act
of Congress. McCulloch (D), the cashier of the Baltimore branch of the Bank of
the United States, issued bank notes without complying with the Maryland law.
Maryland sued McCulloch for failing to pay the taxes due under the Maryland
statute and McCulloch contested the constitutionality of that act. The state court
found for Maryland and McCulloch appealed.
Issues
1.
The Bank of the United States has a right to establish its branches within any
state. The States have no power, by taxation or otherwise, to impede or in any
manner control any of the constitutional means employed by the U.S.
government to execute its powers under the Constitution. This principle does not
extend to property taxes on the property of the Bank of the United States, nor to
taxes on the proprietary interest which the citizens of that State may hold in this
institution, in common with other property of the same description throughout the
State.
SISON VS ANCHETA
Sison assails the validity of BP 135 w/c further amended Sec 21 of the National
Internal Revenue Code of 1977. The law provides that thered be a higher tax
impost against income derived from professional income as opposed to regular
income earners. Sison, as a professional businessman, and as taxpayer alleges
that by virtue thereof, he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his
profession vis-a-vis those which areimposed upon fixed income or salaried
individual taxpayers. He characterizes the above section as arbitrary amounting
to class legislation, oppressive and capricious in character. There is a
transgression of both the equal protection and due process clauses of the
Constitution as well as of the rule requiring uniformity in taxation.
ISSUE: Whether the imposition of a higher tax rate on taxable net income
derived from business or profession than on compensation is constitutionally
infirm.
HELD: The SC ruled against Sison. The power to tax, an inherent prerogative,
has to be availed of to assure the performance of vital state functions. It is the
source of the bulk of public funds. Taxes, being the lifeblood of the government,
their prompt and certain availability is of the essence. According to the
Constitution: The rule of taxation shall be uniform and equitable. However, the
rule of uniformity does not call for perfect uniformity or perfect equality, because
this is hardly attainable. 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. Where the differentiation complained of
conforms to the practical dictates of justice and equity it is not discriminatory
within the meaning of this clause and is therefore uniform. There is quite a
similarity then to the standard of equal protection for all that is required is that the
tax applies equally to all persons, firms and corporations placed in similar
situation.
What misled Sison is his failure to take into consideration the distinction between
a tax rate and a tax base. There is no legal objection to a broader tax base or
taxable income by eliminating all deductible items and at the same time reducing
the applicable tax rate. Taxpayers may be classified into different categories. In
the case of the gross income taxation embodied in BP 135, the discernible basis
Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to
the parish priest of Victorias, Negros Occidental; the amount spent for the
construction of a new Catholic Church in the locality,m as intended. In1958, MB
Estate filed the donors gift tax return. In 1960, the Commissioner issued an
assessment for donees gift tax against the parish. The priest lodged a protest to
the assessment and requested the withdrawal thereof.
Issue: Whether the Catholic Parish is tax exempt.
Held: The phrase exempt from taxation should not be interpreted to mean
exemption from all kinds of taxes. The exemption is only from the payment of
taxes assessed on such properties as property taxes as contradistinguished from
excise taxes. A donees gift tax is not a property tax but an excise tax imposed on
the transfer of property by way of gift inter vivos. It does not rest upon general
ownership, but an excise upon the use made of the properties, upon the exercise
of the privilege of receiving the properties. The imposition of such excise tax on
property used for religious purpose do not constitute an impairment of the
Constitution.
The tax exemption of the parish, thus, does not extend to excise taxes.
FACTS: Petitioner Philex Mining Corp. assails the decision of the Court
of Appeals affirming the Court of Tax
Appeals decision ordering it to pay the amount of P110.7 M as excise
tax liability for the period from the 2nd
quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest
from 1994 until fully paid pursuant to
Sections 248 and 249 of the Tax Code of 1977. Philex protested the
demand for payment of the tax liabilities
stating that it has pending claims for VAT input credit/refund for the
taxes it paid for the years 1989 to 1991 in
the amount of P120 M plus interest. Therefore these claims for tax
credit/refund should be applied against the
tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis
claims of tax refund of the petitioner?
HELD: No. Philex's claim is an outright disregard of the basic principle
in tax law that taxes are the lifeblood of the
government and so should be collected without unnecessary
hindrance. Evidently, to countenance Philex's
whimsical reason would render ineffective our tax collection system.
Too simplistic, it finds no support in law or in
jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax
liabilities on the ground that it has a
pending tax claim for refund or credit against the government which
has not yet been granted.Taxes cannot be
subject to compensation for the simple reason that the government
and the taxpayer are not creditors and
debtors of each other. There is a material distinction between a tax and
debt. Debts are due to the Government
in its corporate capacity, while taxes are due to the Government in its
sovereign capacity. xxx 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.
CIR vs CA
Don Andres Soriano (American), founder of A. Soriano Corp. (ASC) had a total
shareholdings of 185,154 shares. Broken down, the shares comprise of 50,495
shares which were of original issue when the corporation was founded and
134,659 shares as stock dividend declarations. So in 1964 when Soriano died,
half of the shares he held went to his wife as her conjugal share (wifes
legitime) and the other half (92,577 shares, which is further broken down to
25,247.5 original issue shares and 82,752.5 stock dividend shares) went to the
estate. For sometime after his death, his estate still continued to receive stock
dividends from ASC until it grew to at least 108,000 shares.
In 1968, ASC through its Board issued a resolution for the redemption of shares
from Sorianos estate purportedly for the planned Filipinization of ASC.
Eventually, 108,000 shares were redeemed from the Soriano Estate. In 1973, a
tax audit was conducted. Eventually, the Commissioner of Internal Revenue
(CIR) issued an assessment against ASC for deficiency withholding tax-atsource. The CIR explained that when the redemption was made, the estate
profited (because ASC would have to pay the estate to redeem), and so ASC
would have withheld tax payments from the Soriano Estate yet it remitted no
such withheld tax to the government.
ASC averred that it is not duty bound to withhold tax from the estate because it
redeemed the said shares for purposes of Filipinization of ASC and also to
reduce its remittance abroad.
ISSUE: Whether or not ASCs arguments are tenable.
HELD: No. The reason behind the redemption is not material. The proceeds from
a redemption is taxable and ASC is duty bound to withhold the tax at source. The
Soriano Estate definitely profited from the redemption and such profit is taxable,
and again, ASC had the duty to withhold the tax. There was a total of 108,000
shares redeemed from the estate. 25,247.5 of that was original issue from the
capital of ASC. The rest (82,752.5) of the shares are deemed to have been from
stock dividend shares. Sale of stock dividends is taxable. It is also to be noted
that in the absence of evidence to the contrary, the Tax Code presumes that
every distribution of corporate property, in whole or in part, is made out of
corporate profits such as stock dividends.
It cannot be argued that all the 108,000 shares were distributed from the capital
of ASC and that the latter is merely redeeming them as such. The capital cannot
be distributed in the form of redemption of stock dividends without violating the
trust fund doctrine wherein the capital stock, property and other assets of the
corporation are regarded as equity in trust for the payment of the corporate
creditors. Once capital, it is always capital. That doctrine was intended for the
protection of corporate creditors.
CHAVEZ VS PCGG
G.R. No. 130716 December 9, 1998
FACTS
including the so-called Marcosgold hoard.Chavez assailed the validity of the General and
Supplemental Agreement executed by thegovernment (through PCGG) and the Marcos heirs
on December 28,1993.Item No. 2 of the General Agreement states that the assets of the
PRIVATE PARTY (Marcosheirs) shall be net of and exempt from, any form of taxes due the
Republic of the Philippines.
ISSUE:
W/N the compromise agreement entered into by the PCGG and the Marcos heirs
whichcommitting to exempt from all forms of taxes the properties to be retained by the Marcos
heirs isvalid.
HELD:
The petition is GRANTED. The General and Supplemental Agreement dated December
28, 1993, which PCGG and the Marcos heirs entered into are hereby declared NULL AND
VOIDfor being contrary to law and the Constitution.Under Item No. 2 of the General
Agreement, the PCGG commits to exempt from all forms of
taxes the properties to be retained by the Marcos heirs. This is a clear violation of
theConstruction. The power to tax and to grant tax exemptions is vested in the Congress and,
to a
certain extent, in the local legislative bodies. Section 28 (4), Article VI of the
Constitution,specifically provides: "No law granting any tax exemption shall be passed without
theconcurrence of a majority of all the Member of the Congress." The PCGG has absolutely
nopower to grant tax exemptions, even under the cover of its authority to
compromise ill-gottenwealth cases.Even granting that Congress enacts a law exempting
the Marcoses form paying taxes on theirproperties, such law will definitely not pass the test of
the equal protection clause under the Billof Rights. Any special grant of tax exemption in favor
only of the Marcos heirs will constitute
class legislation. It will also violate the constitutional rule that "taxation shall be uniform
andequitable."Neither can the stipulation be construed to fall within the power of the
commissioner of internalrevenue to compromise taxes. Such authority may be exercised only
when (1) there is
reasonable doubt as to the validity of the claim against the taxpayer, and (2) the
taxpayer'sfinancial position demonstrates a clear inability to pay. Definitely, neither
requisite is present inthe case of the Marcoses, because under the Agreement they are
effectively conceding thevalidity of the claims against their properties, part of which they will be
allowed to retain. Nor canthe PCGG grant of tax exemption fall within the power of the
commissioner to abate or cancel atax liability. This power can be exercised only when (1) the
tax appears to be unjustly or
excessively assessed, or (2) the administration and collection costs involved do not justify
thecollection of the tax due. In this instance, the cancellation of tax liability is done even before
th
(iii)] in relation to the RP-West Germany Tax Treaty [Article 12 (2) (b)] (Petition
for Review [filed with the Court of Appeals]
The RP-US Tax Treaty states that:
1) Royalties derived by a resident of one of the Contracting States from sources
within the other Contracting State may be taxed by both Contracting States.
2) However, the tax imposed by that Contracting State shall not exceed.
a) In the case of the United States, 15 percent of the gross amount of the
royalties, and
b) In the case of the Philippines, the least of:
(i) 25 percent of the gross amount of the royalties;
(ii) 15 percent of the gross amount of the royalties, where the royalties are paid
by a corporation registered with the Philippine Board of Investments and
engaged in preferred areas of activities; and
(iii) the lowest rate of Philippine tax that may be imposed on royalties of the
same kind paid under similar circumstances to a resident of a third State.
The RP-Germany Tax Treaty provides:
(2) However, such royalties may also be taxed in the Contracting State in which
they arise, and according to the law of that State, but the tax so charged shall not
exceed:
b) 10 percent of the gross amount of royalties arising from the use of, or the right
to use, any patent, trademark, design or model, plan, secret formula or process,
or from the use of or the right to use, industrial, commercial, or scientific
equipment, or for information concerning industrial, commercial or scientific
experience.
For as long as the transfer of technology, under Philippine law, is subject to
approval, the limitation of the tax rate mentioned under b) shall, in the case of
royalties arising in the Republic of the Philippines, only apply if the contract giving
rise to such royalties has been approved by the Philippine competent authorities.
The Commissioner did not act on said claim for refund. Private respondent
S.C. Johnson & Son, Inc. (S.C. Johnson) then filed a petition for review before
the Court of Tax Appeals (CTA).The Court of Tax Appeals rendered its decision in
favor of S.C. Johnson and ordered the Commissioner of Internal Revenue to
Ruling:.
Under Article 24 of the RP-West Germany Tax Treaty, the Philippine tax
paid on income from sources within the Philippines is allowed as a credit against
German income and corporation tax on the same income. In the case of royalties
for which the tax is reduced to 10 or 15 percent according to paragraph 2 of
Article 12 of the RP-West Germany Tax Treaty, the credit shall be 20% of the
gross amount of such royalty. To illustrate, the royalty income of a German
resident from sources within the Philippines arising from the use of, or the right to
use, any patent, trade mark, design or model, plan, secret formula or process, is
taxed at 10% of the gross amount of said royalty under certain conditions. The
rate of 10% is imposed if credit against the German income and corporation tax
on said royalty is allowed in favor of the German resident. That means the rate of
10% is granted to the German taxpayer if he is similarly granted a credit against
the income and corporation tax of West Germany. The clear intent of the
matching credit is to soften the impact of double taxation by different
jurisdictions.
The RP-US Tax Treaty contains no similar matching credit as that
provided under the RP-West Germany Tax Treaty. Hence, the tax on royalties
under the RP-US Tax Treaty is not paid under similar circumstances as those
obtaining in the RP-West Germany Tax Treaty. Therefore, the most favored
nation clause in the RP-West Germany Tax Treaty cannot be availed of in
interpreting the provisions of the RP-US Tax Treaty.5
The rationale for the most favored nation clause, the concessional tax rate
of 10 percent provided for in the RP-Germany Tax Treaty should apply only if the
taxes imposed upon royalties in the RP-US Tax Treaty and in the RP-Germany
Tax Treaty are paid under similar circumstances. This would mean that private
respondent must prove that the RP-US Tax Treaty grants similar tax reliefs to
residents of the United States in respect of the taxes imposable upon royalties
earned from sources within the Philippines as those allowed to their German
counterparts under the RP-Germany Tax Treaty.
The RP-US and the RP-West Germany Tax Treaties do not contain similar
provisions on tax crediting. Article 24 of the RP-Germany Tax Treaty expressly
allows crediting against German income and corporation tax of 20% of the gross
amount of royalties paid under the law of the Philippines. On the other hand,
Article 23 of the RP-US Tax Treaty, which is the counterpart provision with
respect to relief for double taxation, does not provide for similar crediting of 20%
of the gross amount of royalties paid.
Since the RP-US Tax Treaty does not give a matching tax credit of 20
percent for the taxes paid to the Philippines on royalties as allowed under the
RP-West Germany Tax Treaty, private respondent cannot be deemed entitled to
the 10 percent rate granted under the latter treaty for the reason that there is no
payment of taxes on royalties under similar circumstances.
OF
PUBLIC
WORKS
331
"A law appropriating the public revenue is invalid if the public advantage or
benefit, derived from such expenditure, is merely incidental in the promotion of a
particular enterprise."
FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory
relief, with injunction, upon the ground that RA No. 920, which apropriates funds
for public works particularly for the construction and improvement of Pasig
feeder road terminals. Some of the feeder roads, however, as alleged and as
contained in the tracings attached to the petition, were nothing but projected and
planned subdivision roads, not yet constructed within the Antonio Subdivision,
belonging to private respondent Zulueta, situated at Pasig, Rizal; and which
projected feeder roads do not connect any government property or any important
premises to the main highway. The respondents' contention is that there is public
purpose because people living in the subdivision will directly be benefitted from
the construction of the roads, and the government also gains from the donation
of the land supposed to be occupied by the streets, made by its owner to the
government.
ISSUE: Should incidental gains by the public be considered "public purpose" for
the purpose of justifying an expenditure of the government?
HELD: No. It is a general rule that the legislature is without power to appropriate
public revenue for anything but a public purpose. It is the essential character of
the direct object of the expenditure which must determine its validity as
justifying a tax, and not the magnitude of the interest to be affected nor the
degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental to the public
or to the state, which results from the promotion of private interest and the
prosperity of private enterprises or business, does not justify their aid by the use
public
money.
The test of the constitutionality of a statute requiring the use of public funds is
whether the statute is designed to promote the public interest, as opposed to the
furtherance of the advantage of individuals, although each advantage to
individuals might incidentally serve the public.