WHAT IS TAXATION
physical, intellectual, and social well-being;
Tio v. Videogram Regulatory Board
Doctrines:
Taxation; security against oppressive taxation – The power to impose taxes is one so
unlimited in force and so searching in extent, that the courts scarcely venture to declare
that it is subject to any restrictions whatever, except such as rest in the discretion of
the authority which exercises it. In imposing a tax, the legislature acts upon its
constituents. This is, in general, a sufficient security against erroneous and oppressive
taxation.
Taxation as a revenue and regulatory measure – The tax imposed by the DECREE is
not only a regulatory but also a revenue measure prompted by the realization that
earnings of videogram establishments of around P600 million per annum have not
been subjected to tax, thereby depriving the Government of an additional source of
revenue. . . . The levy of the 30% tax is for a public purpose. It was imposed primarily
to answer the need for regulating the video industry, particularly because of the
rampant film piracy, the flagrant violation of intellectual property rights, and the
proliferation of pornographic video tapes. And while it was also an objective of the
DECREE to protect the movie industry, the tax remains a valid imposition.
FACTS: Valentin Tio is a videogram establishment operator adversely affected by
Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory
Board".
P.D. No. 1987 provides for the levy of a tax over each cassette sold (Sec. 134) and a
30% tax on the gross receipts of a videogram establishment, payable to the local
government (Sec. 10). The rationale for this decree is set forth in its
preambulatory/whereas clauses to wit:
1. WHEREAS, the proliferation and unregulated circulation of videograms including,
among others, videotapes, discs, cassettes ... have greatly prejudiced the operations of
moviehouses and theaters, and have caused a sharp decline in theatrical attendance by
at least forty percent (40%) and a tremendous drop in the collection of [taxes] thereby
resulting in substantial losses estimated at P450 Million annually in government
revenues;
2. WHEREAS, videogram(s) establishments collectively earn around P600 Million
per annum from rentals, sales and disposition of videograms, and such earnings have
not been subjected to tax, thereby depriving the Government of approximately P180
Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram establishments have also
affected the viability of the movie industry, ...;
5. WHEREAS, proper taxation of the activities of videogram establishments will not
only alleviate the dire financial condition of the movie industry ..., but also provide an
additional source of revenue for the Government, and at the same time rationalize the
heretofore uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram features
constitutes a clear and present danger to the moral and spiritual well-being of the youth
and impairs the mandate of the Constitution for the State to support the rearing of the
youth for civic efficiency and the development of moral character and promote their
8. WHEREAS, in the face of these grave emergencies corroding the moral values of
the people and betraying the national economic recovery program, bold emergency
measures must be adopted with dispatch; (emphasis supplied and certain passages
omitted)
ISSUES:
The petioner, among others, raised the following issues:
1. Whether or not the imposition of the 30% tax is a rider and the same is not germane
to the subject matter of the law.
2. Whether or not there is undue delegation of power and authority; and
HELD:
1. No, the tax is not a rider and is germane to the purpose and subject of the law.
The Constitutional requirement that "every bill shall embrace only one subject which
shall be expressed in the title thereof" is sufficiently complied with if the title be
comprehensive enough to include the general purpose which a statute seeks to achieve.
It is not necessary that the title express each and every end that the statute wishes to
accomplish. The requirement is satisfied if all the parts of the statute are related, and
are germane to the subject matter expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and title.
Reading section 10 of P.D. No. 1987 closely, one can see that the foregoing provision
is allied and germane to, and is reasonably necessary for the accomplishment of, the
general object of the law, which is the regulation of the video industry through the
Videogram Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for regulation
it is simply one of the regulatory and control mechanisms scattered throughout the
decree.
Aside from revenue collection, tax laws may also be enacted for the purpose of
regulating an activity. At the same time, the videogram industry is also an untapped
source of revenue which the government may validly tax. All of this is evident from
preambulatory clauses nos. 2, 5, 6 and 8, quoted in part above.
The levy of the 30% tax is also for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because of the rampant
film piracy, the flagrant violation of intellectual property rights, and the proliferation
of pornographic video tapes. And while it was also an objective of the law to protect
the movie industry, the tax remains a valid imposition.
2. No. There was no undue delegation of law making authority.
Petitioner was concerned that Section 11 of P.D. No. 1987 stating that the videogram
board (Board) has authority to "solicit the direct assistance of other agencies and units
of the government and deputize, for a fixed and limited period, the heads or personnel
of such agencies and units to perform enforcement functions for the Board" is an undue
delegation of legislative power.
This is not a delegation of the power to legislate but merely a conferment of authority
or discretion as to its execution, enforcement, and implementation. "The true
distinction is between the delegation of power to make the law, which necessarily
involves a discretion as to what it shall be, and conferring authority or discretion as to
its execution to be exercised under and in pursuance of the law. The first cannot be
done; to the latter, no valid objection can be made." Besides, in the very language of
the decree, the authority of the Board to solicit such assistance is for a "fixed and
limited period" with the deputized agencies concerned being "subject to the direction
and control of the Board."
The petition was DISMISSED.
CIR v. Algue Inc.
Facts:
·Algue Inc. is a domestic corp engaged in engineering, construction and other allied
activities
·On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency
income taxes from 1958-1959, amtg to P83,183.85
·A letter of protest or reconsideration was filed by Algue Inc on Jan 18
·On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its
counsel, Atty. Guevara, who refused to receive it on the ground of the pending protest
·Since the protest was not found on the records, a file copy from the corp was produced
and given to BIR Agent Reyes, who deferred service of the warrant
·On April 7, Atty. Guevara was informed that the BIR was not taking any action on
the protest and it was only then that he accepted the warrant of distraint and levy earlier
sought to be served
·On April 23, Algue filed a petition for review of the decision of the CIR with the
Court of Tax Appeals
·CIR contentions:
-the claimed deduction of P75,000.00 was properly disallowed because it was not an
ordinary reasonable or necessary business expense
-payments are fictitious because most of the payees are members of the same family
in control of Algue and that there is not enough substantiation of such payments
·CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in
the form of promotional fees. These were collected by the Payees for their work in the
creation of the Vegetable Oil Investment Corporation of the Philippines and its
subsequent purchase of the properties of the Philippine Sugar Estate Development
Company.
Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by Algue as legitimate business expenses in its income tax returns
Ruling:
·Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance, made in accordance with law.
·RA 1125: the appeal may be made within thirty days after receipt of the decision or
ruling challenged
·During the intervening period, the warrant was premature and could therefore not be
served.
·Originally, CIR claimed that the 75K promotional fees to be personal holding
company income, but later on conformed to the decision of CTA
·There is no dispute that the payees duly reported their respective shares of the fees in
their income tax returns and paid the corresponding taxes thereon. CTA also found,
after examining the evidence, that no distribution of dividends was involved
·CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving
an imaginary deduction
·Algue Inc. was a family corporation where strict business procedures were not applied
and immediate issuance of receipts was not required. at the end of the year, when the
books were to be closed, each payee made an accounting of all of the fees received by
him or her, to make up the total of P75,000.00. This arrangement was understandable
in view of the close relationship among the persons in the family corporation
·The amount of the promotional fees was not excessive. The total commission paid by
the Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After
deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from
the transaction. The amount of P75,000.00 was 60% of the total commission. This was
a reasonable proportion, considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil Investment Corporation to the
actual purchase by it of the Sugar Estate properties.
·Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the
ordinary and necessary expenses paid or incurred during the taxable year in carrying
on any trade or business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered xxx
·the burden is on the taxpayer to prove the validity of the claimed deduction
·In this case, Algue Inc. has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by 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.
·Taxes are what we pay for civilization society. Without taxes, the government would
be paralyzed for lack of the motive power to activate and operate it. Hence, despite the
natural reluctance to surrender part of one's hard earned income to the taxing
authorities, every person who is able to must contribute his share in the running of the
government. The 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
·Taxation must be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then
come to his succor
Algue Inc.’s appeal from the decision of the CIR was filed on time with the CTA in
accordance with Rep. Act No. 1125. And we also find that the claimed deduction by
Algue Inc. was permitted under the Internal Revenue Code and should therefore not
have been disallowed by the CIR
NATURE OF TAXATION
Luzon Stevedoring Corp. v. CTA
FACTS: Luzon Stevedoring Corp imported various engine parts and other equipment
for tugboat repair and maintenance in 1961 and 1962. It paid the assessed
compensation tax under protest. Unable to secure a tax refund from the Commissioner
for the amount of P33,442.13, it filed a petition for review with the Court of Tax
Appeals. The CTA denied the petition as well as the motion for reconsideration filed
thereafter. Hence, this petition.
ISSUE: Is the Corporation exempt from compensation tax?
RULING: No. As the power of taxation is a high prerogative of sovereignty, the
relinquishment of such is never presumed and any reduction or diminution thereof
with respect to its mode or its rate, must be strictly construed, and the same must be
couched in clear and unmistakable terms in order that it may be applied. The
corporation’s tugboats do not fall under the categories of passenger or cargo vessels
to avail of the exemption from compensation tax in Section 190 of the Tax Code. It
may be further noted that the amendment of Section 190 of Republic Act of 3176 was
intended to provide incentives and inducements to bolster the shipping industry and
not in the business of stevedoring, in which the corporation is engaged in.
Thus, Luzon Stevedoring Corp is not exempt from compensation tax under Section
190, and is thus not entitled to refund.
THEORIES/BASIS OF TAXATION
CIR v. Pineda
FACTS: BIR investigated the income tax liability of Anastacio Pineda’s estate for the
years 1945, 1946, 1947, and 1948 and it found that the corresponding income tax
return were not filed. This resulted to a P760.28 deficiency income tax for 1945 and
1946 and real estate dealer’s fixed tax for the 4th quarter of 1946 and for the whole
year 1947. Manuel Pineda, eldest son of Anastacio, received the assessment. He
contested the same alleging that only a proportionate part should be his liability. CTA
ruled that Pineda is liable only for taxes corresponding to his share in the estate. Hence,
the present petition.
ISSUE: Whether the Government can require Manuel Pineda to pay the full amount
of the tax assessed
RULING: Yes. As a holder of property belonging to the estate, Pineda is liable for the
tax up to the amount of the property in his possession. The BIR is given the discretion
to avail of the most expeditious way to collect the tax. This is, of course, without
prejudice to Pineda’s right of contribution for his co-heirs. Put simply, the Supreme
Court held that the rule on solidarity applies to taxes because it is not an ordinary
contract. Two persons liable for payment of estate tax:
Executor or administrator;
Heirs up to the extent of their inheritance.
SIMBIOTIC RELATIONSHIP DOCTRINE
BENEFITS PROTECTION THEORY
Vera v. Fernandez
FACTS: The motion for allowance of claim and for payment of taxes dated May 28,
1969 was filed on June 3, 1969 for the collection of the indebtedness to the government
of the late Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80.
The administrator opposed the motion solely on the ground that the claim was barred
under Section 5, Rule 86 of the Rules of Court. Jose Fernandez dismissed the motion
for allowance of claim filed by the Regional director of the BIR, being the judge of
the Court of First Instance.
ISSUE: Whether the statute of non-claims Section 5, Rule 86 of the Rule of Court bars
claim of the government for unpaid taxes, still within the period of limitation
prescribed in Section 331 and 332 of the National Internal Revenue Code
RULING: No. Section 5, Rule 86 of the Rules of Curt makes no mention of claims for
monetary obligation of the decedent created by law, such as taxes which is entirely of
different character from the claims enumerated, such as “all claims for money against
the decedent arising from contract, express or implied, whether the same be due, or
contingent, all claim for funeral expenses and expenses for the last sickness of the
decedent and judgment for money against the decedent.” Under the familiar rule of
statutory construction, the mention of one thing implies the exclusion of another thing
not mentioned.
Lutz v. Araneta
FACTS: Appelant in this case Walter Lutz in his capacity as the Judicial Administrator
of the intestate of the deceased Antonio Jayme Ledesma, seeks to recover from the
Collector of the Internal Revenue the total sum of fourteen thousand six hundred sixty
six and forty cents (P 14, 666.40) paid by the estate as taxes, under section 3 of
Commonwealth Act No. 567, also known as the Sugar Adjustment Act, for the crop
years 1948-1949 and 1949-1950. Commonwealth Act. 567 Section 2 provides for an
increase of the existing tax on the manufacture of sugar on a graduated basis, on each
picul of sugar manufacturer; while section 3 levies on the owners or persons in control
of the land devoted tot he cultivation of sugarcane and ceded to others for
consideration, on lease or otherwise - "a tax equivalent to the difference between the
money value of the rental or consideration collected and the amount representing 12
per centum of the assessed value of such land. It was alleged 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 purpose for which a tax may
be constitutionally levied. The action was dismissed by the CFI thus the plaintiff
appealed directly to the Supreme Court.
ISSUE: Whether or not the tax imposition in the Commonwealth Act No. 567 are
unconstitutional.
RULING: Yes, the Supreme Court held that the fact that sugar production is one of
the greatest industry of our nation, sugar occupying a leading position among its export
products; that it gives employment to thousands of laborers in the fields and factories;
that it is a great source of the state's wealth, is one of the important source of foreign
exchange needed by our government and is thus pivotal in the plans of a regime
committed to a policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general welfare. Hence it was
competent for the legislature to find that the general welfare demanded that the sugar
industry be stabilized in turn; and in the wide field of its police power, the law-making
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.
The subject 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 a valid exercise of police power.
OBJECTIVE/PURPOSESS OF TAXATION
Bagatsing v. Ramirez
FACTS: In 1974, the Municipal Board of Manila enacted Ordinance 7522, regulating
the operation of public markets and prescribing fees for the rentals of stalls and
providing penalties for violation thereof. The Federation of Manila Market Vendors
Inc. assailed the validity of the ordinance, alleging among others the noncompliance
to the publication requirement under the Revised Charter of the City of Manila. CFI-
Manila declared the ordinance void. Thus, the present petition.
ISSUE: What law should govern the publication of a tax ordinance, the Revised City
Charter, which requires publication of the ordinance before its enactment and after its
approval, or the Local Tax Code, which only demands publication after approval? Is
the ordinance valid?
RULING:
The Local Tax Code prevails. There is no question that the Revised Charter of the City
of Manila is a special act since it relates only to the City of Manila whereas the Local
Tax Code is a general law because it applies universally to all local governments. The
fact that one is special and the other general creates a presumption that the special is
to be considered as remaining an exception of the general, one as a general law of the
land, the other as the law of a particular case. However, the rule readily yields to a
situation where the special statute refers to a subject in general, which the general
statute treats in particular. The Revised Charter of the City prescribes a rule for the
publication of “ordinance” in general, while the Local Tax Code establishes a rule for
the publication of “ordinance levying or imposing taxes fees or other charges” in
particular.
The ordinance is valid.
STAGES IN THE PROCESS OF TAXATION
Tolentino v. Sec. of Finance
Facts:
- House of Rep. filed House Bill 11197 (An Act Restructuring the VAT System to
Widen its Tax Base and Enhance its Admin., Amending for these Purposes…)
- Upon receipt of Senate, Senate filed another bill completely different from that of
the House Bill
- Senate finished debates on the bill and had the 2nd and 3rd reading of the Bill on the
same day
- Bill was deliberated upon in the Conference Committee and become enrolled bill
which eventually became the EVAT law.
Procedural Issue:
(1) WoN RA 7716 originated exclusively from the House of Rep. in accordance with
sec 24, art 6 of Consti
(2) WoN the Senate bill violated the “three readings on separate days” requirement of
the Consti
(3) WoN RA 7716 violated sec 26(1), art 6 - one subject, one title rule.
NOTE: This case was filed by PAL because before the EVAT Law, they were exempt
from taxes. After the passage of EVAT, they were already included. PAL contended
that neither the House or Senate bill provided for the removal of the exemption from
taxes of PAL and that it was inly made after the meeting of the Conference Committee
w/c was not expressed in the title of RA 7166
Held:
(1) YES. Court said that it is not the law which should originate from the House of
Rep, but the revenue bill which was required to originate from the House of Rep. The
inititiative must ocme from the Lower House because they are elected in the district
level – meaning they are expected to be more sensitive to the needs of the locality.
Also, a bill originating from the Lower House may undergo extensive changes while
in the Senate. Senate can introduce a separate and distinct bill other than the one the
Lower House proposed. The Constitution does not prohibit the filing in the Senate of
a substitute bill in anticipation of its receipt of the House bill, so long as action by
Senate is withheld pending the receipt of the House bill.
(2) NO. The Pres. certified that the Senate bill was urgent. Presidential certification
dispensed the requirement not only of printing but also reading the bill in 3 separate
days. In fact, the Senate accepted the Pres. certification
(3) No. Court said that the title states that the purpose of the statute is to expand the
VAT system and one way of doing this is to widen its base by withdrawing some of
the exemptions granted before. It is also in the power of Congress to amend, alter,
repeal grant of franchises for operation of public utility when the common good so
requires.
One subject rule is intended to prevent surprise upon Congress members and inform
people of pending legislation. In the case of PAL, they did not know of their situation
not because of any defect in title but because they might have not noticed its
publication until some event calls attention to its existence.
CANONS OF TAXATION
PRINCIPLES OF A GOOD TAX SYSTEM
DIFFERENCE BETWEEN POWER TO TAX AND THE 2 INHERENT
POWERS OF THE STATE
Sison v. Ancheta
Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision
(Section 1) unduly discriminated against him by the imposition of higher rates upon
his income as a professional, that it amounts to class legislation, and that it transgresses
against the equal protection and due process clauses of the Constitution as well as the
rule requiring uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal protection clauses, and the
rule on uniformity in taxation.
Held: There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection clauses.
Absent such showing, the presumption of validity must prevail. 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
differentitation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the clause
and is therefore uniform. Taxpayers may be classified into different categories, such
as recipients of compensation income as against professionals. Recipients of
compensation income are not entitled to make deductions for income tax purposes as
there is no practically no overhead expense, while professionals and businessmen have
no uniform costs or expenses necessaryh to produce their income. There is ample
justification 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.
Tio v. Videogram
Bagatsing v. Ramirez
NAPOCOR v. Province of Albay
FACTS: The province of Albay sought to sell Napocor properties in order for the
proceeds to be applied to the real property taxes Napocor allegedly owned the Albay
provincial government. Napocor opposed alleging that it was immune from taxes
citing Resolution 17-87 of the Fiscal Incentives Review Board (FIRB).
ISSUE: Whether the granting of exemption by the FIRB constituted undue delegation
of taxing power
RULING: Yes, it is undue delegation. It has no authority to impose taxes or revoke
existing ones, which, after all, under the constitution, only the legislature may
accomplish.
Maceda v. Macaraig
FACTS: On November 3, 1986, Commonwealth Act No. 120 created the NPC as a
public corporation to undertake the development of hydraulic power and the
production of power from other sources.
Effective March 10, 1987, Executive Order No. 93 once again withdrew all tax and
duty incentives granted to government and private entities which had been restored
under Presidential Decree Nos. 1931 and 1955 but it gave the authority to FIRB to
restore, revise the scope and prescribe the date of effectivity of such tax and/or duty
exemptions.
On June 24, 1987 the FIRB issued Resolution No. 17-87 restoring NPC's tax and duty
exemption privileges effective March 10, 1987. On October 5, 1987, the President,
through respondent Executive Secretary Macaraig, Jr., confirmed and approved FIRB
Resolution No. 17-87.
Though the issues raised was resolved by the Supreme Court in G.R. No. 88291, the
issues was again brought to the Supreme Court for the second time by the petitioner
in G.R. No. 88291.
ISSUE: Whether or not the powers conferred upon the FIRB by Section 2(a), (b), and
(c) and (4) of Executive Order No. 93 "constitute undue delegation of legislative power
and is, therefore, unconstitutional.”
RULING: No.
With the growing complexities of modern life and the many technical fields of
governmental functions, as in matters pertaining to tax exemptions, delegation of
legislative powers has become the rule and non-delegation the exception. The
legislature may not have the competence, let alone the interest and the time, to provide
direct and efficacious solutions to many problems attendant upon present day
undertakings. The legislature could not be expected to state all the detailed situations
wherein the tax exemption privilege would be restored. The task may be assigned to
an administrative body like the Fiscal Incentives Review Board (FIRB).
When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive
and Legislative powers. Thus, there was no power delegated to her, rather it was she
who was delegating her power. She delegated it to the FIRB, which, for purposes of
E.O No. 93 (S'86), is a delegate of the legislature. Clearly, she was not sub-delegating
her power.
And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the
policy to be carried out 85 and it fixed the standard to which the delegate had to
conform in the performance of his functions, 86 both qualities having been enunciated
by this Court in Pelaez vs. Auditor General. 87
For delegation to be constitutionally valid, the law must be complete in itself and must
set forth sufficient standards.
Certain aspects of the taxing process that are not really legislative in nature are vested
in administrative agencies. In this case, there really is no delegation, to wit: a) power
to value property; b) power to assess and collect taxes; c) power to perform details of
computation, appraisement or adjustment; among others.
There is no double taxation. The argument of the Municipality is well taken. Further,
Pepsi Cola’s 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.

Pepsi Cola Bottling Company v. Municipality of Tanauan CONSTITUTIONAL LIMITATIONS

FACTS: Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In *see reviewer
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 capacity.”
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
taxes.
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.