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69 SCRA 460 Taxation Delegation to Local
Governments Double Taxation

FACTS: Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In
September 1962, the Municipality approved Ordinance No. 23 which 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.
In December 1962, the Municipality also approved Ordinance No. 27 which 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 of volume
Pepsi Cola assailed the validity of the ordinances as it alleged that they constitute
double taxation in two instances: a) double taxation because Ordinance No. 27 covers
the same subject matter and impose practically the same tax rate as with Ordinance
No. 23, b) double taxation because the two ordinances impose percentage or specific
Pepsi Cola also questions the constitutionality of Republic Act 2264 which allows for
the delegation of taxing powers to local government units; that allowing local
governments to tax companies like Pepsi Cola is confiscatory and oppressive.
The Municipality assailed the arguments presented by Pepsi Cola. It argued, among
others, that only Ordinance No. 27 is being enforced and that the latter law is an
amendment of Ordinance No. 23, hence there is no double taxation.
ISSUE: Whether or not there is undue delegation of taxing powers. Whether or not
there is double taxation.
HELD: No. There is no undue delegation. The Constitution even allows such
delegation. Legislative powers may be delegated to local governments in respect of
matters of local concern. By necessary implication, the legislative power to create
political corporations for purposes of local self-government carries with it the power
to confer on such local governmental agencies the power to tax. Under the New
Constitution, local governments are granted the autonomous authority to create their
own sources of revenue and to levy taxes. Section 5, Article XI provides: Each
local government unit shall have the power to create its sources of revenue and to levy
taxes, subject to such limitations as may be provided by law. Withal, it cannot be
said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the
legislative power to enact and vest in local governments the power of local taxation.
There is no double taxation. The argument of the Municipality is well taken. Further,
Pepsi Colas assertion that the delegation of taxing power in itself constitutes double
taxation cannot be merited. 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 unlike in other jurisdictions. 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.