Churchill v Concepcion (1916)

Churchill v Concepcion
GR No 11572, September 22, 1916

FACTS:
Section 100 of Act 2339 imposed an annual tax of P4 per square meter upon electric signs, billboards, and spaces used for posting
or displaying temporary signs, and all signs displayed on premises not occupied by buildings. The section was amended by Act
2432, reducing the tax to P2 per square meter. Francis A. Churchill and Stewart Tait, co-partners in Mercantile Advertising
Agency, owned a billboard to which they were taxes at P104. The tax was paid under protest. Churchill and Tait instituted the
action to recover the amount.

ISSUE:
Is the statute and the tax imposed void for lack of uniformity?

RULING:
No, the tax is valid.

UNIFORMITY IN TAXATION MEANS THAT ALL TAXABLE ARTICLES OR KINDS OF PROPERTY, OF THE SAME
CLASS, SHALL BE TAXED AT THE SAME RATE. It does not mean that all lands, chattels, securities, incomes, occupations,
franchises, privileges, necessities, and luxuries shall all be assessed at the same rate. DIFFERENT ARTICLES MAY BE TAXED
AT DIFFERENT AMOUNTS PROVIDED THE RATE IS UNIFORM ON THE SAME CLASS EVERYWHERE, WITH ALL
PEOPLE, AT ALL TIMES.
Herein, the Act imposes a tax of P2 per square meter or a fraction thereof upon every electric sign, billboard, etc. Wherever found
in the Philippine Islands. The rule of taxation upon such signs is uniform throughout the islands. The rule does not require taxes to
be graded according to the value of the subjects upon which they are imposed, especially those levied as privilege or occupation
taxes.

SISON VS ANCHETA

GR No. L-59431, 25 July 1984

Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero M. Sison, as taxpayer, alleges that "he would be unduly
discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis
those which are imposed upon fixed income or salaried individual taxpayers. He characterizes said provision as arbitrary amounting to
class legislation, oppressive and capricious in character. It therefore violates both the equal protection and due process clauses of the Constitution
as well asof the rule requiring uniformity in taxation.

Issue: Whether or not the assailed provision violates the equal protection and due process clauses of the Constitution while also violating the rule
that taxes must be uniform and equitable.

Held: The petition is without merit.

On due process - it is undoubted that it may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious
example is where it can be shown to amount to the confiscation of property from abuse of power. Petitioner alleges arbitrariness but his mere
allegation does not suffice and there must be a factual foundation of such unconsitutional taint.

On equal protection - it suffices that the laws operate equally and uniformly on all persons under similar circumstances, both in the privileges
conferred and the liabilities imposed.

On the matter that the rule of taxation shall be uniform and equitable - this requirement is met when the tax operates with the same force and
effect in every place where the subject may be found." Also, :the rule of uniformity does not call for perfect uniformity or perfect equality, because
this is hardly unattainable." When the problem of classification became of issue, the Court said: "Equality and uniformity in taxation means that
all taxable articles or kinds of property of the same class shall be taxed the same rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation..." As provided by this Court, where "the differentation" 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.
Case Digest: Chamber of Real Estate and Builders v. Executive Secretary, et al.

G.R.No.160756: March 9, 2010

FACTS: Petitioner is an association of real estate developers and builders in the Philippines.It impleaded former Executive Secretary
Alberto Romulo, then acting Secretary of Finance Juanita D. Amatong and then Commissioner of Internal Revenue Guillermo
Parayno, Jr. as respondents. Petitioner assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations
and creditable withholding tax (CWT) on sales of real properties classified as ordinary assets. Section 27(E) of RA 8424 provides for
MCIT on domestic corporations and is implemented by RR 9-98. Petitioner argues that the MCIT violates the due process clause because it
levies income tax even if there is no realized gain. Petitioner also seeks to nullify Sections 2.57.2(J) (as amended by RR 6-2001) and 2.58.2 of
RR 2-98, and Section 4(a)(ii) and (c)(ii) of RR 7-2003, all of which prescribe the rules and procedures for the collection of CWT on the sale of
real properties categorized as ordinary assets.

Petitioner contends that these revenue regulations are contrary to law for two reasons:

first, they ignore the different treatment by RA 8424 of ordinary assets and capital assets and

second, respondent Secretary of Finance has no authority to collect CWT, much less, to base the CWT on the gross selling price or fair market
value of the real properties classified as ordinary assets.

Petitioner also asserts that the enumerated provisions of the subject revenue regulations violate the due process clause because, like the MCIT,
the government collects income tax even when the net income has not yet been determined. They contravene the equal protection clause as
well because the CWT is being levied upon real estate enterprises but not on other business enterprises, more particularly those in the
manufacturing sector.

ISSUES:

Whether or not the imposition of the MCIT on domestic corporations is unconstitutional?

Whether or not the imposition of CWT on income from sales of real properties classified as ordinary assets under RRs 2-98, 6-2001 and 7-
2003, is unconstitutional?

Whether or not this Court should take cognizance of the present case?

HELD:The petition is dismissed.

POLITICAL LAW: constitutionality of MCIT Petitioner claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because it is
highly oppressive, arbitrary and confiscatory which amounts to deprivation of property without due process of law.It explains that
gross income as defined under said provision only considers the cost of goods sold and other direct expenses; other major
expenditures, such as administrative and interest expenses which are equally necessary to produce gross income, were not taken
into account.[31]Thus, pegging the tax base of the MCIT to a corporations gross income is tantamount to a confiscation of capital
because gross income, unlike net income, is not realized gain. The Court disagress.

Taxes are the lifeblood of the government.Without taxes, the government can neither exist nor endure. The exercise of taxing power derives its
source from the very existence of the State whose social contract with its citizens obliges it to promote public interest and the common good.

Taxation is an inherent attribute of sovereignty.It is a power that is purely legislative.Essentially, this means that in the legislature primarily lies
the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation.It has the authority
to prescribe a certain tax at a specific rate for a particular public purpose on persons or things within its jurisdiction.In other words, the
legislature wields the power to define what tax shall be imposed, why it should be imposed, how much tax shall be imposed, against whom (or
what) it shall be imposed and where it shall be imposed.
As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in its very nature no limits, so that the principal check
against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its constituency who are to pay
it.Nevertheless, it is circumscribed by constitutional limitations.At the same time, like any other statute, tax legislation carries a presumption of
constitutionality.

The constitutional safeguard of due process is embodied in the fiat [no] person shall be deprived of life, liberty or property without due process
of law.

Income means all the wealth which flows into the taxpayer other than a mere return on capital.Capital is a fund or property existing at one
distinct point in time while income denotes a flow of wealth during a definite period of time.Income is gain derived and severed from capital. For
income to be taxable, the following requisites must exist: (1) there must be gain; (2) the gain must be realized or received and (3)the gain must
not be excluded by law or treaty from taxation.

Certainly, an income tax is arbitrary and confiscatory if it taxes capital because capital is not income.In other words, it is income, not capital,
which is subject to income tax.However, the MCIT is not a tax on capital.

The MCIT is imposed on gross income which is arrived at by deducting the capital spent by a corporation in the sale of its goods,i.e., the cost of
goodsand other direct expenses from gross sales.Clearly, the capital is not being taxed.

Furthermore, the MCIT is not an additional tax imposition. It is imposedin lieuofthe normal net income tax, and only if the normal income tax is
suspiciously low.The MCIT merely approximates the amount of net income tax due from a corporation, pegging the rate at a very much reduced
2% and uses as the base the corporations gross income.

The United States has a similar alternative minimum tax (AMT) system which is generally characterized by a lower tax rate but a broader tax
base.Since our income tax laws are of American origin, interpretations by American courts of our parallel tax laws have persuasive effect on the
interpretation of these laws.Although our MCIT is not exactly the same as the AMT, the policy behind them and the procedure of their
implementation are comparable. American courts have also emphasized that Congress has the power to condition, limit or deny deductions
from gross income in order to arrive at the net that it chooses to tax.This is because deductions are a matter of legislative grace.

Absent any other valid objection, the assignment of gross income, instead of net income, as the tax base of the MCIT, taken with the reduction
of the tax rate from 32% to 2%, is not constitutionally objectionable.

Moreover, petitioner does not cite any actual, specific and concrete negative experiences of its members nor does it present empirical data to
show that the implementation of the MCIT resulted in the confiscation of their property.

In sum, petitioner failed to support, by any factual or legal basis, its allegation that the MCIT is arbitrary and confiscatory.The Court cannot strike
down a law as unconstitutional simply because of its yokes. Taxation is necessarily burdensome because, by its nature, it adversely affects
property rights. The party alleging the laws unconstitutionality has the burden to demonstrate the supposed violations in understandable terms.

On the other hand, RR 9-98, in declaring that MCIT should be imposed whenever such corporation has zero or negative taxable income, merely
defines the coverage of Section 27(E).This means that even if a corporation incurs a net loss in its business operations or reports zero income
after deducting its expenses, it is still subject to an MCIT of 2% of its gross income.This is consistent with the law which imposes the MCIT on
gross income notwithstanding the amount of the net income.But the law also states that the MCIT is to be paid only if it is greater than the
normal net income.Obviously, it may well be the case that the MCIT would be less than the net income of the corporation which posts a zero or
negative taxable income.

The withholding tax system is a procedure through which taxes (including income taxes) are collected. Under Section 57 of RA 8424, the types
of income subject to withholding tax are divided into three categories: (a) withholding of final tax on certain incomes; (b) withholding of creditable
tax at source and (c) tax-free covenant bonds.

TAXATION LAW: authority of the secretary f finance

The Secretary of Finance is granted, under Section 244 of RA 8424, the authority to promulgate the necessary rules and regulations for the
effective enforcement of the provisions of the law.Such authority is subject to the limitation that the rules and regulations must not override, but
must remain consistent and in harmony with, the law they seek to apply and implement. It is well-settled that an administrative agency cannot
amend an act of Congress. It has been recognized that the method of withholding tax at source is a procedure of collecting income tax which is
sanctioned by our tax laws.The withholding tax system was devised for three primary reasons: first, to provide the taxpayer a convenient
manner to meet his probable income tax liability; second, to ensure the collection of income tax which can otherwise be lost or substantially
reduced through failure to file the corresponding returns and third, to improve the governments cash flow.This results in administrative savings,
prompt and efficient collection of taxes, prevention of delinquencies and reduction of governmental effort to collect taxes through more
complicated means and remedies.

Respondent Secretary has the authority to require the withholding of a tax on items of income payable to any person, national or juridical,
residing in the Philippines.Such authority is derived from Section 57(B) of RA 8424 The questioned provisions of RR 2-98, as amended, are well
within the authority given by Section 57(B) to the Secretary,i.e., the graduated rate of 1.5%-5% is between the 1%-32% range; the withholding
tax is imposed on the income payable and the tax is creditable against the income tax liability of the taxpayer for the taxable year.

POLITICAL LAW: constitutionality of RR 2-98 as amended

Under RR 2-98, the tax base of the income tax from the sale of real property classified as ordinary assets remains to be the entitys net income
imposed under Section 24 (resident individuals) or Section 27 (domestic corporations) in relation to Section 31 of RA 8424,i.e.gross income less
allowable deductions.The CWT is to be deducted from the net income tax payable by the taxpayer at the end of the taxable year.Precisely,
Section 4(a)(ii) and (c)(ii) of RR 7-2003 reiterate that the tax base for the sale of real property classified as ordinary assets remains to be the net
taxable income

Accordingly, at the end of the year, the taxpayer/seller shall file its income tax return and credit the taxes withheld (by the withholding
agent/buyer) against its tax due.If the tax due is greater than the tax withheld, then the taxpayer shall pay the difference.If, on the other hand,
the tax due is less than the tax withheld, the taxpayer will be entitled to a refund or tax credit.Undoubtedly, the taxpayer is taxed on its net
income.

The use of the GSP/FMV as basis to determine the withholding taxes is evidently for purposes of practicality and convenience.Obviously, the
withholding agent/buyer who is obligated to withhold the tax does not know, nor is he privy to, how much the taxpayer/seller will have as its net
income at the end of the taxable year.Instead, said withholding agents knowledge and privity are limited only to the particular transaction in
which he is a party.In such a case, his basis can only be the GSP or FMV as these are the only factors reasonably known or knowable by him in
connection with the performance of his duties as a withholding agent.

RR 2-98 imposes a graduated CWT on income based on the GSP or FMV of the real property categorized as ordinary assets. On the other
hand, Section 27(D)(5) of RA 8424 imposes a final tax and flat rate of 6% on the gain presumed to be realized from the sale of a capital asset
based on its GSP or FMV.This final tax is also withheld at source.
As previously stated, FWT is imposed on the sale of capital assets. On the other hand, CWT is imposed on the sale of ordinary assets.The
inherent and substantial differences between FWT and CWT disprove petitioners contention that ordinary assets are being lumped together
with, and treated similarly as, capital assets in contravention of the pertinent provisions of RA 8424.

The fact that the tax is withheld at source does not automatically mean that it is treated exactly the same way as capital gains.As
aforementioned, the mechanics of the FWT are distinct from those of the CWT. The withholding agent/buyers act of collecting the tax at the time
of the transaction by withholding the tax due from the income payable is the essence of the withholding tax method of tax collection.

Section 57(A) expressly states that final tax can be imposed on certain kinds of income and enumerates these as passive income.

Passive income generated by the taxpayers assets. These assets can be in the form of real properties that return rental income, shares of stock
in a corporation that earn dividends or interest income received from savings.

On the other hand, Section 57(B) provides that the Secretary can require a CWT on income payable to natural or juridical persons, residing in
the Philippines.There is no requirement that this income be passive income.If that were the intent of Congress, it could have easily said so.

Indeed, Section 57(A) and (B) are distinct.Section 57(A) refers to FWT while Section 57(B) pertains to CWT.The former covers the kinds of
passive income enumerated therein and the latter encompassesany income other than those listed in 57(A).Since the law itself makes
distinctions, it is wrong to regard 57(A) and 57(B) in the same way.

To repeat, the assailed provisions of RR 2-98, as amended, do not modify or deviate from the text of Section 57(B).RR 2-98 merely implements
the law by specifying what income is subject to CWT.It has been held that, where a statute does not require any particular procedure to be
followed by an administrative agency, the agency may adopt any reasonable method to carry out its functions.Similarly, considering that the law
uses the general term income, the Secretary and CIR may specify the kinds of income the rules will apply to based on what is feasible.In
addition, administrative rules and regulations ordinarily deserve to be given weight and respect by the courts in view of the rule-making authority
given to those who formulate them and their specific expertise in their respective fields.
DIAZ VS SECRETARY OF FINANCE

Issues: May toll fees collected by tollway operators be subject to VAT?

YES.

(1) VAT is imposed on “all kinds of services” and tollway operators who are engaged in constructing, maintaining, and operating expressways
are no different from lessors of property, transportation contractors, etc.

(2) Not only do they fall under the broad term under (1) but also come under those described as “all other franchise grantees” which is not
confined only to legislative franchise grantees since the law does not distinguish. They are also not a franchise grantee under Section 119
which would have made them subject to percentage tax and not VAT.

(3) Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions.

(4) The toll fee is not a user’s tax and thus it is permissible to impose a VAT on the said fee. The MIAA case does not apply and the
Court emphasized that toll fees are not taxes since they are not assessed by the BIR and do not go the general coffers of the government. Toll
fees are collected by private operators as reimbursement for their costs and expenses with a view to a profit while taxes are imposed by the
government as an attribute of its sovereignty. Even if the toll fees were treated as user’s tax, the VAT can not be deemed as a ‘tax on tax’
since the VAT is imposed on the tollway operator and the fact that it might pass-on the same to the tollway user, it will not make the
latter directly liable for VAT since the shifted VAT simply becomes part of the cost to use the tollways.

(5) The assertion that the VAT imposed is not administratively feasible given the manner by which the BIR intends to implement the VAT (i.e.,
rounding off the toll rates and putting any excess collection in an escrow account) is not enough to invalidate the law. Non-observance of the
canon of administrative feasibility will not render a tax imposition invalid “except to the extent that specific constitutional or statutory limitations
are impaired”.

When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latter's use of the tollway facilities over which the operator
enjoys private proprietary rights that its contract and the law recognize. In this sense, the tollway operator is no different from the service
providers under Section108 who allow others to use their properties or facilities for a fee.

Tollway operators are franchise grantees and they do not belong to exceptions that Section 119 spares from the payment of VAT. The word
"franchise" broadly covers government grants of a special righto do an act or series of acts of public concern. Tollway operators are, owing to
the nature and object of their business, "franchise grantees." The construction, operation, and maintenance of toll facilities on public
improvements are activities of public consequence that necessarily require a special grant of authority from the state.

A tax is imposed under the taxing power of the government principally for the purpose of raising revenues to fund public expenditures. Toll fees,
on the other hand, are collected by private tollway operators as reimbursement for the costs and expenses incurred in the construction,
maintenance and operation of the tollways, as well as to assure them a reasonable margin of income. Although toll fees are charged for the use
of public facilities, therefore, they are not government exactions that can be properly treated as a tax. Taxes may be imposed only by the
government under its sovereign authority, toll fees may be demanded by either the government or private individuals or entities, as an attribute
of ownership.
SOUTHERN LUZON DRUG CORPORATION, Petitioner, vs. THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT, et al.
Respondents

The case at bar is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals which dismissed the petition for prohibition
filed by Southern Luzon Drug Corporation (petitioner) against the Department of Social Welfare and Development , the National Council for the
Welfare of Disabled Persons (now National Council on Disability Affairs or NCDA), the Department of Finance and the Bureau of Internal
Revenue (collectively, the respondents), which sought to prohibit the implementation of Section 4(a) of Republic Act (R.A.) No. 9257, otherwise
known as the "Expanded Senior Citizens Act of 2003" and Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled Persons,"
particularly the granting of 20% discount on the purchase of medicines by senior citizens and persons with disability (PWD), respectively, and
treating them as tax deduction. which dismissed the petition for prohibition filed by Southern Luzon Drug Corporation (petitioner) against the
Department of Social Welfare and Development , the National Council for the Welfare of Disabled Persons (now National Council on Disability
Affairs or NCDA), the Department of Finance and the Bureau of: Internal Revenue (collectively, the respondents), which sought to prohibit the
implementation of Section 4(a) of Republic Act (R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act of 2003" and Section 32
of R.A. No. 9442, which amends the "Magna Carta for Disabled Persons," particularly the granting of 20% discount on the purchase of
medicines by senior citizens and persons with disability (PWD),: respectively, and treating them as tax deduction due to the reason that claiming
it affects the profitability of their business.

The petitioner is a domestic corporation engaged in the business of drugstore operation in the Philippines while the respondents are
government' agencies, office and bureau tasked to monitor compliance with R.A. Nos. 9257 and 9442, promulgate implementing rules and
regulations for their effective implementation, as well as prosecute and revoke licenses of erring establishments.

iSSUES:

3. Whether or not the 20% Sales Discount for Senior Citizens PWDs does not violate the petitioner’s right to equal

protection of the law

4. Whether or not the definitions of Disabilities and PWDs are vague and violates the petitioners right to due process of law

RULING:

1. Yes. Prohibition may be filed to question the constitutionality of a law. Generally, the office of prohibition is to prevent the unlawful and
oppressive exercise of authority and is directed against proceedings that are done without or in excess of jurisdiction, or with grave abuse of
discretion, there being no appeal or other plain, speedy, and adequate remedy in the ordinary course of law. It is the remedy to prevent inferior
courts, corporations, boards, or persons from usurping or exercising a jurisdiction or power with which they have not been vested by the law. This
is, however, not the lone office of an action for prohibition. In Diaz, et al. v. The Secretary of Finance, et al., prohibition was also recognized as a
proper remedy to prohibit or nullify acts of executive officials that amount to usurpation of legislative authority. And, in a number of jurisprudence,
prohibition was allowed as a proper action to assail the constitutionality of a law or prohibit its implementation.

2. No. The Court agrees that the ruling in Carlos Superdrug does not constitute stare decisis to the instant case, not because of the petitioner's
submission of financial statements which were wanting in the first case, but because it had the good sense of including questions that had not
been raised or deliberated in the former case of Carlos Superdrug, i.e., validity of the 20% discount granted to PWDs, the supposed vagueness
of the provisions of R.A. No. 9442 and violation of the equal protection clause.

3. Yes. The subject laws do not violate the equal protection clause. The equal protection clause is not infringed by legislation which applies only
to those persons falling within a specified class. If the groupings are characterized by substantial distinctions that make real differences, one class
may be treated and regulated differently from another." For a classification to be valid, (1) it must be based upon substantial distinctions, (2) it
must be germane to the purposes of the law, (3) it must not be limited to existing conditions only, and (4) it must apply equally to all members of
the same class.

4. No. The definitions of "disabilities" and "PWDs" are clear and unequivocal. Section 4(a) of R.A. No. 7277, the precursor of R.A. No. 94421
defines "disabled persons" as follows:
(a) Disabled persons are those suffering from restriction or different abilities, as a result of a mental, physical or sensory impairment, to perform
an activity in the manner or within the range considered normal for a human being[.]

On the other hand, the term "PWDs" is defined in Section 5.1 of the IRR of R.A. No. 9442 as follows:
5.1. Persons with Disability are those individuals defined under Section 4 of [R.A. No.] 7277 [or] An Act Providing for the Rehabilitation, Self-
Development and Self-Reliance of Persons with Disability as amended and their integration into the Mainstream of Society and for Other Purposes.
This is defined as a person suffering from restriction or different abilities, as a result of a mental, physical or sensory impairment, to perform an
activity in a manner or within the range considered normal for human being. Disability shall mean (1) a physical 1or mental impairment that
substantially limits one or more psychological, physiological or anatomical function of an individual or activities of such individual; (2) a record of
such an impairment; or (3) being regarded as having such an impairment.

In view of the foregoing disquisition, Section 4(a) of Republic Act No. 9257 and Section 32 of Republic Act No. 9442 are hereby declared
CONSTITUTIONAL.