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SCOPE AND NATURE OF TAXATION

Petitioners also argue that the increase to 12%, as well as the 70% limitation on the creditable
MCIAA VS. MARCOS 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
FACTS: arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on
Mr. Cesa, Officer-in-Charge, Office of the Treasurer of the City of Cebu, demanded payment progressive taxation, among others. "
for realty taxes on several parcels of land belonging to the petitioner, Mactan Cebu
International Airport Authority (MCIAA). ISSUE: Whether or not R.A. No. 9337 is unconstitutional
MCIAA, however, objected, claiming it as baseless and unjustified, and that they are
exempted from taxes pursuant to R.A. No. 6958 (the R.A. which created the MCIAA). But, HELD: "Since there is no question that the revenue bill exclusively originated in the House of
Cebu city refused to cancel and set aside MCIAA’s realty tax account, insisting that MCIAA is Representatives, the Senate was acting within its constitutional power to introduce
not an instrumentality of the government, but merely a government-owned or controlled amendments to the House bill when it included provisions in Senate Bill No. 1950 amending
corporation, and GOCC’s are no longer exempted as per the new Local Government Code. corporate income taxes, percentage, and excise and franchise taxes.
But the trial court dismissed the petition.
MCIAA continued to assert that although it’s a GOCC, it is still mandated to perform functions Mounting budget deficit, revenue generation, inadequate fiscal allocation for education,
in the same category as an instrumentality of the Government. Thus, this petition. increased emoluments for health workers, and wider coverage for full value-added tax
benefits are the reasons why Republic Act No. 9337 (R.A. No. 9337) was enacted. Reasons,
ISSUE: W/N MCIAA is exempt from paying taxes. the wisdom of which, the Court even with its extensive constitutional power of review, cannot
probe.
HELD: "NO. The Supreme Court held that the power to tax is an attribute of sovereignty. It is
inherent in the State. As an incident of sovereignty, the power to tax has been described as It has been said that taxes are the lifeblood of the government. In this case, it is just an
“unlimited in its range, acknowledging in its very nature no limits, so that security against its enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind
abuse is to be found only in the responsibility of the legislature which imposes the tax on the nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for
constituency who are to pay it.” the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a
law as unconstitutional simply because of its yokes.
Added to that, although the power to tax is primarily vested in the Congress; however, based
on Article X, Section 5 of the 1987 Constitution, it may be exercised by local legislative bodies UNDERLYING THEORY AND BASIS
directly.
71 Amjur 2nd 346-347
In the case at bar, MCIAA cannot allege that Cebu city cannot tax them simply because they
are a GOCC since under both the LGC and the Constitution, they are not exempt from paying The existence of government is a necessity; it cannot continue without means to pay its
tax and Cebu city has the power to tax them. expenses; and for those means it has the right to compel all citizens and property within its
limits to contribute.
ABAKADA VS. ERMITA The state demands and receives taxes so that it may be enabled to carry its
mandates into effect and perform thefunctions of government. The citizen pays from his
FACTS: ABAKADA GURO Party List, et al., filed a petition for prohibition o questioning the property the portion demanded, in order that he may, by means thereof, be secured in the
constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and enjoyment of the benefits of organized society. The general levy of taxes is understood to
108, respectively, of the National Internal Revenue Code (NIRC). exact contributions in return for the general benefits of government, and it promises nothing to
the person taxed beyond what maybe anticipated from an administration of the laws for
Section 4 imposes a 10% VAT on sale of goods and properties; individual protection and the general public good.
Section 5 imposes a 10% VAT on importation of goods; and Although the duty to pay taxes by the individual is founded in his participation in the
Section 6 imposes a 10% VAT on sale of services and use or lease of properties. benefits arising from the expenditure, it does not mean that a man’s property cannot be taxed
unless some benefit to him personally can be pointed out.
Procedural issues raised by petitioners are the legality of the bicameral proceedings,
exclusive origination of revenue measures and the power of the Senate concomitant thereto. CIR VS. ALGUE
Also, an issue was raised with regard to the undue delegation of legislative power to the
President to increase the rate of value-added tax to 12%.
NPC VS. CABANATUAN CITY  Hanley’s will provides the following: his money will be given to his nephew, Matthew
Hanley, as well as the real estate owned by him. It further provided that the property
FACTS: Pursuant to an ordinance, Cabanatuan city, herein respondent-city, assessed the will only be given ten years after Thomas Hanley’s death.
National Power Corporation’s (NPC), herein petitioner-corporation, franchise tax to  Thus, in the testamentary proceedings, the Court of First Instance of Zamboanga
P808,606.41. It is the 75% of the 1% of NPC’s gross receipts for the preceding year. appointed P.J.M. Moore as trustee of the estate. Moore took oath of office on March
10, 1924, and resigned on Feb. 29, 1932. Pablo Lorenzo was appointed in his
However, NPC claimed that they are not taxable due to the fact that their capital stead.
stock was subscribed and paid wholly by the Philippine Government. Added to that, they  Juan Posadas, Collector of Internal Revenue, assessed inheritance tax against the
argued that Cabanatuan city has no authority to impose tax since not only Cabanatuan city estate amounting to P2,057.74 which includes penalty and surcharge. He filed a
has no power, but government entities are exempted from the payment of all forms of taxes, motion in the testamentary proceedings so that Lorenzo will be ordered to pay the
charges, duties, or fees, in accordance with Section13 of R.A. No. 6395 (NPC’s Charter). amount due. Lorenzo paid the amount in protest after CFI granted Posadas’ motion.
Thus, they refused to pay the tax assessment.  He claimed that the inheritance tax should have been assessed after 10 years. He
asked for a refund but Posadas declined to do so.
Thus, Cabanatuan city filed a collection suit demanding that NPC pay the assessed  The latter counterclaimed for the additional amount of P1,191.27 which represents
tax due, plus a surcharge equivalent to 25% of the amount of tax, and 2% monthly interest. interest due on the tax and which was not included in the original assessment.
Although, NPC continued to aver that they are exempt from paying such. However, CFI dismissed this counterclaim. It also denied Lorenzo’s claim for refund
against Posadas. Hence, both appealed.
The trial court, however, dismissed the case. ISSUES:
The RTC of Cabanatuan ruled that tax exemption privileges granted to NPC 1. When does the inheritance tax accrue and when must it be satisfied?
subsists even when the Local Government Code has already been passed since: (1) NPC’s 2. Should the inheritance tax be computed on the basis of the value of the estate at the
Charter is a particular law and it may not be repealed by a general law (which in this case is time of the testator's death, or on its value ten years later?
the LGC); (2) it is only an implied repeal, which is not favored; and (3) local governments have 3. In determining the net value of the estate subject to tax, is it proper to deduct the
no power to tax instrumentalities of the national government. compensation due to trustees?
Thus, such was elevated to the Court of Appeals. But the CA reverse the trial court’s 4. What law governs the case at bar? Should the provisions of Act No. 3606 favorable
decision. to the tax-payer be given retroactive effect?
NPC, however, continued to aver that their charter, being a valid exercise of police 5. Whether the estate was delinquent in paying the inheritance tax and therefore liable
power, should prevail over the LGC. for the P1,191.27 that Posadas is asking for?
Thus, this petition.
ISSUE: W/N NPC is exempt from paying tax. HELD:
HELD: 1. The instant case does fall under subsection (a), but under subsection (b), of section
"NO. The Supreme Court reiterated that taxes are the lifeblood of the government 1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or donee.
(lifeblood doctrine), for without taxes, the government can neither exist nor endure. The Under the subsection, the tax should have been paid before the delivery of the
exercise of taxing power derives its source from the very existence of the State whose social properties in question to P. J. M. Moore as trustee on March 10, 1924.
contract with its citizen obliges to promote public interest and common good. The theory 2. We hold that a transmission by inheritance is taxable at the time of the
behind the exercise of the power to tax emanates from necessity (necessity theory); without predecessor's death, notwithstanding the postponement of the actual possession or
taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of enjoyment of the estate by the beneficiary, and the tax measured by the value of the
the people. property transmitted at that time regardless of its appreciation or depreciation. (See
Thenceforth, the power to tax is no longer vested exclusively on Congress; local Sec. 1544 [b])
legislative bodies are now given direct authority to levy taxes, fees, and other charges, 3. A trustee, no doubt, is entitled to receive a fair compensation for his services
pursuant to Article X, Section 5 of the 1987 Constitution. (Barney vs. Saunders, 16 How., 535; 14 Law. ed., 1047). But from this it does not
In the case at bar, it shows that Cabanatuan city indeed has the power to tax NPC follow that the compensation due him may lawfully be deducted in arriving at the net
as per the new LGC. value of the estate subject to tax. There is no statute in the Philippines which
requires trustees' commissions to be deducted in determining the net value of the
LORENZO VS. POSADAS estate subject to inheritance tax
FACTS: 4. The law at the time (May27, 1922) was section 1544 above-mentioned, as amended
 "On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and by Act No. 3031, which took effect on March 9, 1922 and not Act No. 3606 went into
considerable amount of real and personal properties. effect on January 1, 1930. It is well-settled that inheritance taxation is governed by
the statute in force at the time of the death of the decedent (26 R. C. L., p. 206; 4 claims, we must hold that the plaintiff is liable only in the sum of P1,191.27 the amount stated
Cooley on Taxation, 4th ed., p. 3461). The taxpayer can not foresee and ought not in the counterclaim.
to be required to guess the outcome of pending measures.
The defendant Collector of Internal Revenue maintains, however, that ADDITIONAL NOTES:
certain provisions of Act No. 3606 are more favorable to the taxpayer than those of Even though there was no express mention of the word “trust” in the will, the court of first
Act No. 3031, that said provisions are penal in nature and, therefore, should operate instance was correct in appointing a trustee because no particular or technical words are
retroactively in conformity with the provisions of article 22 of the Revised Penal required to create a testamentary trust (69 C.J.,p. 711). The requisites of a valid testamentary
Code. trust are:
Revenue laws, generally, which impose taxes collected by the means ordinarily sufficient words to raise a trust,
resorted to for the collection of taxes are not classed as penal laws, although there 1. a definite subject,
are authorities to the contrary. Article 22 of the Revised Penal Code is not 2. a certain or ascertained object.
applicable to the case at bar, and in the absence of clear legislative intent, we
cannot give Act No. 3606 a retroactive effect. PURPOSE OF TAXATION
5. The mere fact that the estate of the deceased was placed in trust did not remove it GENERAL, FISCAL, REVENUE
from the operation of our inheritance tax laws or exempt it from the payment of the
inheritance tax. The corresponding inheritance tax should have been paid on or CIR VS. ALGUE
before March 10, 1924, to escape the penalties of the laws. This is so for the reason PAL VS. EDU
already stated that the delivery of the estate to the trustee was in esse delivery of TOLENTINO VS. SEC. OF FINANCE
the same estate to the cestui que trust, the beneficiary in this case. A trustee is but
an instrument or agent for the cestui que trust.
The obligation to pay taxes rests not upon the privileges enjoyed by, or the NON-REVENUE, SPECIAL OR REGULATORY
protection afforded to, a citizen by the government but upon the necessity of money
for the support of the state (Dobbins vs. Erie Country, supra). For this reason, no OSMENA VS. ORBOS
one is allowed to object to or resist the payment of taxes solely because no personal
benefit to him can be pointed out. FACTS:
That taxes must be collected promptly is a policy deeply intrenched in our tax "President Ferdinand Marcos issued P.D. 1956 creating a special account in general fund,
system. Thus, no court is allowed to grant injunction to restrain the collection of any designated as the Oil Price Stabilization Fund (OPSF) to reimburse oil companies for the cost
internal revenue tax. It results that the estate which plaintiff represents has been increases in crude oil and imported petroleum products resulting from exchange rate
delinquent in the payment of inheritance tax and, therefore, liable for the payment of adjustments and increases in the world market prices of crude oil. President Corazon Aquino
interest and surcharge provided by law in such cases. promulgated E.O. 137 expanding the grounds for reimbursement to oil companies for possible
The delinquency in payment occurred on March 10, 1924, the date when cost under recovery incurred as a result of the reduction of domestic prices of petroleum
Moore became trustee. The interest due should be computed from that date and it is products. In March 31, 1991, the status of the OPSF showed a “Terminal Fund Balance
error on the part of the defendant to compute it one month later. The provisions Deficit” of some Php 12.877 Billion. To abate the worsening deficit, the Energy Regulatory
cases is mandatory (see and cf. Lim Co Chui vs. Posadas, supra), and neither the Board (ERB) issued an order on December 10, 1990, approving the increase in pump prices
Collector of Internal Revenue or this court may remit or decrease such interest, no of petroleum products and such shall have covered the OPSF deficit within six (6) months.
matter how heavily it may burden the taxpayer.
Senator John Osmeña assails the constitutionality of paragraph 1(c) of P.D. 1956, as
LIABILITIES (P28,904.19 as the net value of the estate subject to inheritance tax) amended by E.O. 137 for “being an undue and invalid delegation of legislative power to the
Energy Regulatory Board.” Petitioner argues that “the monies collected purusant to P.D. 1956
P 1,434.24 Primary tax as amended, must be treated as a ‘Special Fund’, not as a ‘trust account’ or a ‘trust fund’, and
P. 724.88 Surcharge of 25 per cent on both the tax and interest, and also that ""if a special tax is collected for a specific purpose the revenue generated therefrom shall
P. 10.00 the compromise sum fixed by the defendant (Exh. 29) 'be treated as a special fund' to be used only for the purpose indicated, and not channeled to
P 3,634.43 Grand Total another government objective."" 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
As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is State, although the use thereof is limited to the special purpose/objective for which it was
legally due from the estate. This last sum is P390.42 more than the amount demanded by the created."" It thus appears that the challenge posed by the petitioner is premised primarily on
defendant in his counterclaim. But, as we cannot give the defendant more than what he the view that the powers granted to the ERB under P.D. 1956 as amended, partake of the
nature of the taxation power of the state. The Solicitor General observes that the ""argument these measures comply with the constitutional description of a "special fund." Indeed, the
rests on the assumption that the OPSF is a form of revenue measure drawing from a special practice is not without precedent.
tax to be expended for a special purpose."" The petitioner's perceptions are, in the Court's
view, not quite correct." CALTEX VS. COA

ISSUE: WON the nature of P.D. 1956 is Police Power or Taxation Power of the State
HELD: Principles of a sound tax system
It is an exercise of Police Power. To address this critical misgiving in the position of the
petitioner on these issues, the Court recalls its holding in Valmonte v. Energy Regulatory CHAVEZ VS. ONGPIN
Board, et al.
“The OPSF is a 'Trust Account' which was established 'for the purpose of minimizing the FACTS
frequent price changes brought about by exchange rate adjustment and/or changes in world  "EXECUTIVE ORDER No. 73
market prices of crude oil and imported petroleum products. The fact that the world market Title: PROVIDING FOR THE COLLECTION OF REAL PROPERTY TAXES BASED
prices of oil, measured by the spot market in Rotterdam, vary from day to day is of judicial ON THE 1984 REAL PROPERTY VALUES, AS PROVIDED FOR UNDER
notice. Freight rates for hauling crude oil and petroleum products from sources of supply to SECTION 21 OF THE REAL PROPERTY TAX CODE,
the Philippines may also vary from time to time. The exchange rate of the peso vis-a-vis the
U.S. dollar and other convertible foreign currencies also changes from day to day. These SECTION 1. Real property values as of December 31, 1984 as determined by the
fluctuations in world market prices and in tanker rates and foreign exchange rates would in a local assessors during the latest general revision of assessments shall take effect
completely free market translate into corresponding adjustments in domestic prices of oil and beginning January 1, 1987 for purposes of real property tax collection.
petroleum products with sympathetic frequency.
But domestic prices which vary from day to day or even only from week to week would result  Chavez, owner of some number of parcels of land challenges the constitutionality of
in a chaotic market with unpredictable effects upon the country's economy in general. The EO 73, which accelerated the application of the general revision of assessments to
OPSF was established precisely to protect local consumers from the adverse consequences January 1, 1987 thereby mandating an excessive increase in the assessment for
that such frequent oil price adjustments may have upon the economy . Thus, the OPSF real property taxes by 100% to 400% on improvements and up to 100% on land.
serves as a pocket, as it were, into which a portion of the purchase price of oil and petroleum  Intervenor Realty Owners Association of the Phil (ROAP) also challenged the
products paid by consumers as well as some tax revenues are inputted and from which constitutionality of EO 73 and additionally alleges that PD 464 is unconstitutional as
amounts are drawn from time to time to reimburse oil companies, when appropriate situations it imposes an additional 1% tax on all property owners, that the General Revision of
arise, for increases in, as well as under recovery of, costs of crude importation. The Assessments does not meet the requirements of due process as regards
OPSF is thus a buffer mechanism through which the domestic consumer prices of oil and publication, notice of hearing, opportunity to be heard and insofar authorizes
petroleum products are stabilized, instead of fluctuating every so often, and oil companies are replacement costs of buildings, which is not provided in PD 464, but only in the
allowed to recover those portions of their costs which they would not otherwise recover given administrative regulation of the Department of Finance. Lastly, that the Joint Local
the level of domestic prices existing at any given time. To the extent that some tax revenues Assessment/Treasury Regulations No. 2-86 2 is even more oppressive and
are also put into it, the OPSF is in effect a device through which the domestic prices of unconstitutional as it imposes successive increase of 150% over the 1986 tax. "
petroleum products are subsidized in part.
It appears to the Court that the establishment and maintenance of the OPSF is well within ISSUE: Whether EO 73 imposes unreasonable increase in real property taxes, thus, should
that pervasive and non-waivable power and responsibility of the government to secure, the be declared unconstitutional.
physical and economic survival and well-being of the community, that comprehensive
sovereign authority we designate as the police power of the State. The stabilization, and HELD:
subsidy of domestic prices of petroleum products and fuel oil — clearly critical in importance Negative. The attack on Executive Order No. 73 has no legal basis as the general
considering, among other things, the continuing high level of dependence of the country on revision of assessments is a continuing process mandated by Section 21 of Presidential
imported crude oil — are appropriately regarded as public purposes." Decree No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as
constitutionally infirm. However, Chavez failed to raise any objection against said decree. It
Hence, it seems clear that while the funds collected may be referred to as taxes, they are was ROAP, the intervenor, which questioned the constitutionality thereof.
exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special Furthermore, Presidential Decree No. 464 furnishes the procedure by which a tax
fund is plain from the special treatment given it by E.O. 137. It is segregated from the general assessment may be questioned:
fund; and while it is placed in what the law refers to as a "trust liability account," the fund Within sixty days from the date of receipt of the, written notice of assessment, any owner who
nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that doubts the assessment of his property, may appeal to the Local Board of Assessment
Appeals. In case the, owner or administrator of the property or the assessor is not satisfied sell 13,500 hectares to the Government for distribution to actual occupants for a priceof
with the decision of the Local Board of Assessment Appeals, he may, within thirty days from P2,079,048.47 plus P300,000.00 for survey and subdivision expenses.
the receipt of the decision, appeal to the Central Board of Assessment Appeals. The decision It turned out however that the Government did not have funds to cover the purchase
of the Central Board of Assessment Appeals shall become final and executory after the lapse price, and so a special arrangement was made for the Rehabilitation Finance Corporation to
of fifteen days from the date of receipt of the decision. advance to Roxas y Cia the amount of P1,500,000.00 as loan. Collateral for such loan were
Chavez argues further that the unreasonable increase in real property taxes brought the lands proposed to be sold to the farmers. Under the arrangement, Roxas y Cia allowed
about by Executive Order No. 73 amounts to a confiscation of property repugnant to the the farmers to buy the lands for the same price but by installment, and contracted with the
constitutional guarantee of due process, invoking the cases of Ermita-Malate Hotel, et al. v. Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly
Mayor of Manila (G.R. No. L-24693, July 31, 1967, 20 SCRA 849) and Sison v. Ancheta, et al. amortizations paid by the farmers.
(G.R. No. 59431, July 25, 1984, 130 SCRA 654). The reliance on these two cases is certainly
misplaced because the due process requirement called for therein applies to the ""power to The CIR demanded from Roxas y Cia the payment of deficiency income taxes
tax."" Executive Order No. 73 does not impose new taxes nor increase taxes. resulting from the inclusion as income of Roxas y Cia of the unreported 50% of the net profits
Indeed, the government recognized the financial burden to the taxpayers that will result for 1953 and 1955 derived from the sale of the Nasugbu farm lands to the tenants, and the
from an increase in real property taxes. Hence, Executive Order No. 1019 was issued on April disallowance of deductions from grossincome of various business expenses and contributions
18, 1985, deferring the implementation of the increase in real property taxes resulting from the claimed by Roxas y Cia and the Roxas brothers.
revised real property assessments, from January 1, 1985 to January 1, 1988. For the reason that Roxas y Cia subdivided its Nasugbu farm lands and sold them
The issuance of Executive Order No. 73 which changed the date of implementation to the farmers on installment, the Commissioner considered the partnership as engaged in the
of the increase in real property taxes from January 1, 1988 to January 1, 1987 and therefore business of real estate, hence, 100% of the profits derived therefrom was taxed. The Roxas
repealed Executive Order No. 1019, also finds ample justification in its ""whereas' clauses. brothers protested the assessment butinasmuch as said protest was denied, they instituted an
The other allegation of ROAP that Presidential Decree No. 464 is unconstitutional, is not appeal in the CTA which sustained the assessment. Hence, this appeal.
proper to be resolved in the present petition. As stated at the outset, the issue here is limited
to the constitutionality of Executive Order No. 73. ISSUE: WON Roxas y CIa liable for the payment of deficiency income for the sale of Nasugbu
We agree with the observation of the Office of the Solicitor General that without farmlands.
Executive Order No. 73, the basis for collection of real property taxes win still be the 1978
revision of property values. Certainly, to continue collecting real property taxes based on HELD: NO. The proposition of the CIR cannot be favorably accepted in this isolated
valuations arrived at several years ago, in disregard of the increases in the value of real transaction with its peculiar circumstances in spite of the fact that there were hundreds of
properties that have occurred since then, is not in consonance with a sound tax system. Fiscal vendees. Although they paid for their respective holdings in installment for a period of 10
adequacy, which is one of the characteristics of a sound tax system, requires that sources of years, it would nevertheless not make the vendor Roxas y Cia a real estate dealer during the
revenues must be adequate to meet government expenditures and their variations. 10-year amortization period.
It should be borne in mind that the sale of the Nasugbu farm lands to the very
DIAZ VS. SEC. OF FINANCE farmers who tilled them for generations was not only inconsonance with, but more in
obedience to the request and pursuant to the policy of our Government to allocate lands to the
COMPARISON WITH POLICE POWER AND EMINENT DOMAIN landless. It was the bounden duty of the Government to pay the agreed compensation after it
had persuaded Roxas y Cia to sell its haciendas, and to subsequently subdivide them among
ROXAS VS. CTA the farmers at very reasonable terms and prices.
FACTS: However, the Government could not comply with its duty for lack of funds.
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their Obligingly, Roxas y Cia shouldered the Government's burden, went out of its way and sold
grandchildren by hereditary succession several properties. To manage the above-mentioned lands directly to the farmers in the same way and under the same terms as would have been
properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a the case had the Government done it itself. For this magnanimous act, the municipal council
partnership called Roxas y Compania. of Nasugbu passed are solution expressing the people's gratitude. In fine, Roxas y Cia cannot
At the conclusion of the WW2, the tenants who have all been tilling the lands in be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of
Nasugbu for generations expressed their desire to purchase from Roxas y Cia the parcels the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the
which they actually occupied. For its part, the Government, in consonance with the sale thereof is capital gain, taxable only to the extent of 50%.
constitutional mandate to acquire big landed estates andapportion them among landless
tenants-farmers, persuaded the Roxas brothers to part with their landholdings. Conferences
were held with the farmers in the early part of 1948 and finally the Roxas brothers agreed to
TANADA VS. ANGARA granting the same privilege and immunities to the Philippines, its officials and its citizens. A
portion of sovereignty may be waived without violating the Constitution, based on the rationale
Brief Background: The Philippines joined WTO as a founding member with the goal, of that the Philippines ""adopts the generally accepted principles of international law as part of
improving ""Philippine access to foreign markets, especially its major trading partners, the law of the land and adheres to the policy of . . . cooperation and amity with all nations.
through the reduction of tariffs on its exports, particularly agricultural and industrial
products."" The President also saw in the WTO the opening of ""new opportunities for the LTO VS. CITY OF BUTUAN
services sector, (the reduction of) costs and uncertainty associated with exporting FACTS:
and (the attraction of) more investments into the country. "The City of Butuan asserts that one of the salient provisions introduced by the Local
Government Code is in the area of local taxation which allows LGUs to collect registration
FACTS: fees or charges along with, in its view, the corresponding issuance of all kinds of licenses or
On April 15, 1994, the Philippine Government, as represented by then Secretary of permits for the driving of tricycles. Relying on the said provisions of the LGC, the Sangguniang
DTI Rizalino Navarro, signed in Marrakesh, Morocco, the Final Act Embodying the Results of Panglungsod of Butuan passed an ordinance entitled, ""An Ordinance Regulating the
the Uruguay Round of Multilateral Negotiations. Thereafter, the Philippine Senate received a Operation of Tricycles-for-Hire, providing mechanism for the issuance of Franchise,
letter from the President of the Philippines, stating among others that ""the Uruguay Round Registration and Permit, and imposing Penalties for Violations thereof and for other
Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article Purposes."" The ordinance provided for, among other things, the payment of franchise fees for
VII of the Constitution.” the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees
The members of the Philippine Senate received another letter from the President of for the issuance of a permit for the driving thereof. Petitioner LTO explains that one of the
the Philippines stating that ""the Uruguay Round Final Act, the Agreement Establishing the functions of the national government that, indeed, has been transferred to local government
World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding units is the franchising authority over tricycles-for-hire of the Land Transportation Franchising
on Commitments in Financial Services are hereby submitted to the Senate for its concurrence and Regulatory Board (""LTFRB"") but not, it asseverates, the authority of LTO to register all
pursuant to Section 21, Article VII of the Constitution.” motor vehicles and to issue to qualified persons of licenses to drive such vehicles. In order to
The same was subsequently adopted. The present petition was then filed, assailing settle the variant positions of the parties, the City of Butuan, represented by its City Mayor
the constitutionality of the Agreement entered into by the Government. Petitioners are arguing, filed with the trial court a petition for ""prohibition, mandamus, injunction with a prayer for
among others, that the provisions of the WTO agreement limits/impairs the Philippine preliminary restraining order ex-parte"" seeking the declaration of the validity of the ordinance.
sovereignty, specifically the Legislative power vested in the Congress. The court ruled in favor of the City of Butuan, hence this petition.
ISSUE: Whether or not the WTO agreement is unconstitutional? ISSUE: Whether or not the LTO has the power to register, tricycles in particular, as well as to
issue licenses for the driving thereof, has likewise devolved to local government units and that
HELD: No, the court held that the WTO agreement did not violate the economic nationalism it may be properly tax.
mandated by the Constitution, thus it upheld its validity. The Constitution did not intend to
pursue an isolationist policy. It did not shut out foreign investments, goods and services in the HELD: The Department of Transportation and Communications, through the LTO and the
development of the Philippine economy. While the Constitution does not encourage the LTFRB, has since been tasked with implementing laws pertaining to land transportation. The
unlimited entry of foreign goods, services and investments into the country, it does not prohibit SC ruled that the registration and licensing functions are vested in the LTO while franchising
them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning and regulatory responsibilities are vested in the LTFRB. Under the Local Government Code,
only on foreign competition that is unfair. certain functions of the DOTC were transferred to the LGUs, thus LGUs indubitably now have
the power to regulate the operation of tricycles-for-hire and to grant franchises for the
The court likewise held that the WTO agreement DOES NOT impair Philippine operation thereof.
sovereignty. While sovereignty has traditionally been deemed absolute and all-encompassing
on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to "To regulate" means to fix, establish, or control; to adjust by rule, method, or
by the Philippines, expressly or impliedly, as a member of the family of nations. By their established mode; to direct by rule or restriction; or to subject to governing principles or laws.
inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their A franchise is defined to be a special privilege to do certain things conferred by government
voluntary act, nations may surrender some aspects of their state power in exchange for on an individual or corporation, and which does not belong to citizens generally of common
greater benefits granted by or derived from a convention or pact. After all, states, like right. On the other hand, ""to register"" means to record formally and exactly, to enroll, or to
individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, enter precisely in a list or the like, and a ""driver's license"" is the certificate or license issued
they also commonly agree to limit the exercise of their otherwise absolute rights. The by the government which authorizes a person to operate a motor vehicle.
Philippines, in entering a treaty, effectively agreed to limit the exercise of its sovereign powers The devolution of the functions of the DOTC, performed by the LTFRB, to the LGUs,
of taxation, eminent domain and police power. The underlying consideration in this partial as so aptly observed by the Solicitor General, is aimed at curbing the alarming increase of
surrender of sovereignty is the reciprocal commitment of the other contracting states in accidents in national highways involving tricycles. It has been the perception that local
governments are in good position to achieve the end desired by the law-making body because deliveries of latches stored in the city are subject to the sales tax imposed by the ordinance.
of their proximity to the situation that can enable them to address that serious concern better Thereafter, the company filed this present complaint, praying that the ordinance be declared
than the national government. It may not be amiss to state, nevertheless, that under the Local void insofar as it taxed the deliveries of matches outside of Cebu City, that the city be ordered
Government Code, the power of LGUs to regulate the operation of tricycles and to grant to refund to the company the said sum of P12,844.61 as excess sales tax paid, and that the
franchises for the operation thereof is still subject to the guidelines prescribed by the DOTC. In city treasurer be ordered to pay damages. The trial court however, sustained the tax on the
compliance therewith, the Department of Transportation and Communications issued sales of matches booked and paid for in Cebu City although the matches were shipped
""Guidelines to Implement the Devolution of LTFRBs Franchising Authority over Tricycles-For- directly to customers outside of the city. It held that the said sales were consummated in Cebu
Hire to Local Government units pursuant to the Local Government Code.” City because delivery to the carrier in the city is deemed to be a delivery to the customers
outside of the city. But the trial court invalidated the tax on transfers of matches to salesmen
The reliance made by respondents on the broad taxing power of local government assigned to different agencies outside of the city and on shipments of matches to provincial
units, under the Local Government Code, is tangential. Police power and taxation, along with customers pursuant to the instructions of the newsmen It ordered the defendants to refund to
eminent domain, are inherent powers of sovereignty which the State might share with local the plaintiff the sum of P8,923.55 as taxes paid out the said out-of-town deliveries with legal
government units by delegation given under a constitutional or a statutory fiat. All these rate of interest from the respective dates of payment.
inherent powers are for a public purpose and legislative in nature but the similarities just about
end there. The basic aim of police power is public good and welfare. Taxation, in its case, The trial court characterized the tax on the other two transactions as a ""storage
focuses an the power of government to raise revenue in order to support its existence and tax"" and not a sales tax. It assumed that the sales were consummated outside of the city and,
carry out its legitimate objectives. Although correlative to each other in many respects, the hence, beyond the city's taxing power. The city did not appeal from that decision. The
grant of one does not necessarily carry with it the grant of the other. The two powers are, by company appealed from that portion of the decision upholding the tax on sales of matches to
tradition and jurisprudence, separate and distinct powers, varying in their respective concepts, customers outside of the city but which sales were booked and paid for in Cebu City, and also
character, scopes and limitations. To construe the tax provisions of Section 133(1) from the dismissal of its claim for damages against the city treasurer.
indistinctively would result in the repeal to that extent of LTO's regulatory power which
evidently has not been intended. WHEREFORE, the assailed decision which enjoins the Land ISSUE: Whether or not the City of Cebu can tax sales of matches which were perfected and
Transportation Office from requiring the due registration of tricycles and a license for the paid for in Cebu City but the matches were delivered to customers outside of the City.
driving thereof is REVERSED and SET ASIDE.
HELD:
YES. The court held that the appeal is devoid of merit bemuse the city can validly
PHIL. MATCH CO. VS. CEBU tax the sales of matches to customers outside of the city as long as the orders were booked
FACTS: and paid for in the company's branch office in the city. Those matches can be regarded as
"Philippine Match Co. is engaged in the business of manufacturing matches. sold in the city, as contemplated in the ordinance, because the matches were delivered to the
Petitioner is assailing the legality of the tax collected by the City of Cebu on its deliveries carrier in Cebu City. Generally, delivery to the carrier is delivery to the buyer. A different
outside the city. Pursuant to Ordinance No. 279 of Cebu City, it imposes a sales tax of one interpretation would defeat the tax ordinance in question or encourage tax evasion through the
percent (1%) on the gross sales, receipts or value of commodities sold, bartered, exchanged simple expedient of arranging for the delivery of the matches at the out. skirts of the city
or manufactured in the city in excess of P2,000 a quarter. It is further provided therein that for through the purchase were effected and paid for in the company's branch office in the city.
purposes of the tax, ""all deliveries of goods or commodities stored in the City of Cebu, or if
not stored are sold"" in that city, ""shall be considered as sales"" in the city and shall be Applying that jurisdictional test to the instant case, it is at once obvious that sales of
taxable. Hence, it would seem that under the tax ordinance sales of matches consummated matches to customers outside oil Cebu City, which sales were booked and paid for in the
outside of the city are taxable as long as the matches sold are taken from the company's company's branch office in the city, are subject to the city's taxing power. The instant case is
stock stored in Cebu City. The company paid under protest to the city the sum of P12,844.61 easily distinguishable from the Shell Company case where the price of the oil sold was paid
as one percent sales tax on those three classes of out-of-town deliveries of matches for the outside of the municipality of Sipocot, the entity imposing the tax.
second quarter of 1961 to the second quarter of 1963.
On the other hand, the ruling in Municipality of Jose Panganiban, Province of
The company in its letter of April 15, 1961 to the city treasurer sought the refund of Camarines Norte vs. Shell Company of the Philippines, Ltd., L-18349, July 30, 1966, 17
the sales tax paid for out-of-town deliveries of matches. It invoked Shell Company of the SCRA 778 that the place of delivery determines the taxable situs of the property to be taxed
Philippines, Ltd. vs. Municipality of Sipocot, Camarines Sur, 105 Phil. 1263. In that case sales cannot properly be invoked in this case. Republic Act No. 1435, the law which enabled the
of oil and petroleum products effected outside the territorial limits of Sipocot, were held not to Municipality of Jose Panganiban to levy the sales tax involved in that case, specifies that the
be subject to the tax imposed by an ordinance of that municipality. The city treasurer, tax may be levied upon oils ""distributed within the limits of the city or municipality"", meaning
however, denied the request. His stand is that under section 9 of the ordinance all out-of-town the place where the oils were delivered. That feature of the Jose Panganiban case
distinguished it from this case. The sales in the instant case were in the city and the matches LUTZ VS. ARANETA
sold were stored in the city. The fact that the matches were delivered to customers, whose FACTS:
places of business were outside of the city, would not place those sales beyond the city's This case was initiated in the Court of First Instance of Negros Occidental to test the legality of
taxing power. Those sales formed part of the merchandising business being assigned on by the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment
the company in the city. In essence, they are the same as sales of matches fully Act.
consummated in the city.
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency,
Matalin vs. Malabang due to the threat to our industry by the imminent imposition of export taxes upon sugar as
provided in the Tydings-McDuffe Act, and the ""eventual loss of its preferential position in the
FACTS: United States market""; wherefore, the national policy was expressed ""to obtain a
Municipal Council of Malabang, Lanao Del Sur enacted Municipal Ordinance No. readjustment of the benefits derived from the sugar industry by the component elements
45-46. The ordinance made it unlawful for any person, company or group of persons to ship thereof"" and ""to stabilize the sugar industry so as to prepare it for the eventuality of the loss
cassava starch or flour out of Malabang without paying the Municipal Treasurer the of its preferential position in the United States market and the imposition of the export taxes.""
corresponding fee fixed by the ordinance. It imposed a police inspection fee of Php 0.30 per
sack of cassava starch or flour to be paid by the shipper before the same is transported Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio
outside the municipality. Anyone violating the ordinance is liable for a fine of not less than Php Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of
100.00 but not more than Php 1,000.00 and pay Php 1.00 per sack of flour being illegally P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-
shipped out or to suffer imprisonment of 20 days. 1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the
aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public
The validity of the ordinance was challenged by the Matalin Coconut, Inc. in a petition for purpose for which a tax may be constitutionally levied. The action having been dismissed by
declaratory relief filed against the Municipal Council, Municipal Mayor and the Municipal the Court of First Instance, the plaintiff appealed the case directly to the SC.
Treasurer. Alleging that the ordinance is not only ultra vires, being violative of R.A. 2264, but
also unreasonable, oppressive and confiscatory, the petitioner prayed that the ordinance be ISSUE: WON the tax provided for in CA No. 567 a valid exercise of police power.
declared null and void ab initio and the Municipal Treasurer be ordered to refund the amounts
paid by petitioner. Petitioner also prayed that a preliminary injunction be issued enjoining HELD: YES. The Court can take judicial notice of the fact that sugar production is one of the
respondents from enforcing the ordinance. The preliminary injunction was denied by the trial great industries of our nation, sugar occupying a leading position among its export products. It
court; instead the Municipal Treasurer was allowed ordered to allow payment of taxes gives employment to thousands of laborers in fields and factories. It is a great source of the
imposed by the ordinance under protest. state's wealth, is one of the important sources of foreign exchange needed by our
government, and is thus pivotal in the plans of a regime committed to a policy of currency
After the promulgation of the decision, the Trial Court issued a writ of preliminary mandatory stability. Its promotion, protection and advancement, therefore redounds greatly to the general
injunction, upon motion of petitioner, requiring the respondent Municipal Treasurer to deposit welfare. Hence it was competent for the legislature to find that the general welfare demanded
with the Philippine National Bank, Iligan Branch, in the name of the Municipality of Malabang, that the sugar industry should be stabilized in turn; and in the wide field of its police power, the
whatever amounts the petitioner had already paid or shall pay pursuant to the ordinance in lawmaking body could provide that the distribution of benefits therefrom be readjusted among
question up to and until final termination of the case; the deposit was not to be withdrawn from its components to enable it to resist the added strain of the increase in taxes that it had to
the said bank without any order from the court. On motion for reconsideration by sustain.
respondents, the writ was subsequently modified on July 20, 1967, to require the deposit only
of amounts paid from the effectivity of the writ up to and until the final termination of the suit. The protection of a large industry constituting one of the great sources of the state's wealth
and therefore directly or indirectly affecting the welfare of so great a portion of the population
ISSUE: WON the Municipal Ordinance is a valid exercise of Police Power. of the State is affected to such an extent by public interests as to be within the police power of
the sovereign.
HELD:
Once it is conceded, as it must, that the protection and promotion of the sugar industry is a
matter of public concern, it follows that the Legislature may determine within reasonable
bounds what is necessary for its protection and expedient for its promotion. Here, the
legislative discretion must be allowed fully play, subject only to the test of reasonableness;
and it is not contended that the means provided in section 6 of the law (above quoted) bear no
relation to the objective pursued or are oppressive in character. If objective 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 the implement of the state's
police power.

NTC VS. CA
FACTS:
"NTC served on the PLDT the following assessment notices and demands for payment:
1. Supervision and regulation fee under Section 40 (e) of the PSA for the year 1988
2. Permit fee under Section 40 (f) of the PSA for the approval of the protestants increase of its
authorized capital stock; and
3. Permit fees under Section 40 (g) of the PSA in connection with the Commissions decisions
in NTC Cases Nos. 86-13 and 87-008 respectively, approving the Protestants equity
participation in the Fiber Optic Interpacific Cable systems and X-5 Service Improvement and
Expansion Program.
The PLDT challenged the aforesaid assessments, theorizing inter alia that:
(a) The assessments were being made to raise revenues and not as mere reimbursements for
actual regulatory expenses in violation of the doctrine in (PLDT vs. PSC)
(b) The assessment under Section 40 (e) should only have been on the basis of the par
values of private respondents outstanding capital stock;
(c) Petitioner has no authority to compel private respondents payment of the assessed fees
under Section 40 (f) for the increase of its authorized capital stock since petitioner did not
render any supervisory or regulatory activity and incurred no expenses in relation thereto.
NTC rendered a decision denying the protest of PLDT for lack of merit. CA modified the NTC
decision changing the basis of the computation of supervision and regulation fees under Sec.
40 (f) of the PSA.

ISSUE: WON NTC may impose supervision and regulation fees under Section 40 (f) of Public
Service Act.

HELD:
YES. Such fees are imposed by the legislature itself. It bears stressing that it is not the NTC
that imposed such a fee but the legislature itself.
Since Congress has the power to exercise the State inherent powers of Police Power,
Eminent Domain and Taxation, the distinction between police power and the power to tax,
which could be significant if the exercising authority were mere political subdivisions (since
delegation by it to such political subdivisions of one power does not necessarily include the
other), would not be of any moment when, as in the case under consideration. Congress itself
exercises the power. All that is to be done would be to apply and enforce the law when
sufficiently definitive and not constitutionally infirm. The law in point is clear and categorical.
There is no room for construction. It simply calls for application. In PLDT vs PSC, the basis for
computation of the fee to be charged by NTC on PLDT, is the capital stock subscribed or paid
and not, alternatively, the property and equipment.

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