Professional Documents
Culture Documents
TAXATION i. Inherent
Defines the POWER by which the sovereign raises The power to tax is an attribute of sovereignty
revenue to defray necessary expenses of government. It is a and is inherent in the State. It is a power
WAY of apportioning the cost of government among those who emanating from necessity because it imposes
in some measure are privileged to enjoy its benefits and must a necessary burden to preserve the state’s
bear its burden. sovereignty.
ISSUE
Whether petitioner is exempted from payment of taxes or not
NPC v. CITY OF CABANATUAN; G.R. No. 149110
RULING
No. Taxation is the rule and exemption is the exception. Thus,
MCIAA v. MARCOS; G.R. No. 120082 the exemption may be withdrawn at the pleasure of the taxing
authority. The only exception to this rule is where the
exemption was granted to private parties based on material
FACTS consideration of a mutual nature, which then becomes
Mactan Cebu International Airport Authority was created by contractual and is thus covered by the non-impairment clause
virtue of RA 6958 to manage the Mactan International Airport of the Constitution.
and the Lahug Airport. Since the time of its creation, petitioner
MCIAA enjoyed the privilege of exemption from payment of The general rule, as laid down in Section 133 of the LGC is
realty taxes. In Section 14 of its Charter provides that “the that the taxing powers of LGUs cannot extend to the levy of,
Authority shall be exempt from realty taxes imposed by the inter alia, “taxes, fees and charges of any kind on the National
National Government or any of its political subdivisions, Government, its agencies, and instrumentalities, and LGUs.”
agencies and instrumentalities.” However, pursuant to Section 232, provinces, cities and
municipalities in the Metro Manila Area MAY impose real
In 1994, however, the Office of the Treasurer of the City of property taxes except on inter alia, real property owned by the
Cebu demanded payment for realty taxes on several parcels of Republic of the Philippines or any of its political subdivisions
land belonging to petitioner. Petitioner objected to such except when the beneficial use thereof has been granted for
demand, citing Sec. 14. It asserted that it is an instrumentality consideration or otherwise, to a taxable person (Sec. 234a).
of the government which performs governmental functions,
citing Sec. 133 of the Local Government Code which puts As to tax exemptions/incentives granted to or presently
limitations on the taxing powers of local government units. Sec. enjoyed by natural or juridical persons, including GOCCs,
133, LGC provides that the exercise of the taxing powers of
provinces, cities, municipalities and barangays shall not extend GENERAL RULE: Tax exemptions or incentives are withdrawn
to the levy of... taxes, fees or charges of any kind on the upon the effectivity of the LGC
National government, its agencies and instrumentalities and
local government units. EXCEPTION: Those granted to local water districts,
cooperatives duly registered under RA 6938, non-stock and
The Respondent City refused to cancel and set aside the realty non-profit hospitals and educ institutions, and unless otherwise
tax account, insisting that the MCIAA is a GOCC whose tax provided in the LGC. This latter proviso could refer to Section
exemption privilege has been withdrawn by virtue of Sections 234 enumerating the properties exempt from real property tax.
193 and 234 of the LGC. Sec. 193 provides that tax The last paragraph of Section 234 further qualifies the
exemptions or incentives granted to or presently enjoyed by all retention of the exemption insofar as real property taxes are
persons, whether natural or juridical, including GOCCs except concerned by limiting the retention only to those enumerated
local water districts, cooperatives duly registered under RA therein; all others not included in the enumeration therefore
6938, non-stock and non-profit hospitals and educational lost the privilege upon the effectivity of the LGC. Even as to
institutions are hereby withdrawn upon the effectivity of this real property owned by the Rep. Of the Philippines or any of its
Code. Section 234 meanwhile provides that exemption from political subdivisions covered by item (a) of the first paragraph
payment of real property tax previously granted to or presently of Section 234, the exemption is withdrawn if the beneficial use
enjoyed by all persons, whether natural or juridical, including of such property has been granted to a taxable person for
GOCCs are hereby withdrawn upon the effectivity of the LGC. consideration or otherwise.
Because the City of Cebu was about to issue a warrant of levy Since the last paragraph of Section 234 unequivocally
against the properties of MCIAA, the latter was compelled to withdrew, upon the effectivity of the LGC, exemptions from
pay its tax account under protest. MCIAA likewise filed a payment of real property taxes granted to natural or juridical
petition for declaratory relief with the RTC of Cebu, contending persons, including government-owned or controlled
that the taxing powers of local government units do not extend corporations, except as provided in the said section, and the
to the levy of taxes or fees of any kind on an instrumentality of petitioner is, undoubtedly, a government-owned corporation, it
the national government. MCIAA insisted that while it is indeed necessarily follows that its exemption from such tax granted it
a GOCC, it nontheless stands on the same footing as an by its charter has been withdrawn.
agency or instrumentality of the national government by the
very nature of its powers and functions. The City however
maintained that MCIAA is not an instrumentality of the ‣ C.N. HODGES v. MUNICIPAL
government but merely a GOCC performing proprietary BOARD; G.R. No. L-18129
functions, and hence, the exemptions granted to it were
deemed withdrawn by virtue of Secs. 193 and 234 of the LGC.
ii. Legislative
The trial court dismissed the petition. MR denied. Hence this
petition. Petitioner asserts that although it is a GOCC, it is Power to Tax is inherently legislative in nature
mandated to perform functions in the same category as an and character because it can only be
instrumentality of the government. An instrumentality of the exercised through the enactment of law.
Government is one created to perform governmental functions
primarily to promote certain aspects of the economic life of the
Legislature determines the coverage, object,
people. Petitioner further contends that being an
instrumentality of the National Government, respondent City of nature, extent and situs.
Cebu has no power nor authority to impose realty taxes upon it
in accordance with Sec. 133 of the LGC. In Basco v. PAGCOR, Taxes are grant of the people who are taxed,
the SC said the local governments have no power to tax and the grant must be made by the immediate
representative of the people, there it must of capital because gross income, unlike net income, is not
remain and be exercised. "realized gain."
CHAMBER claims that the MCIT under Section 27(E) of RA b. Grant of Exemption
8424 is unconstitutional because it is highly oppressive,
arbitrary and confiscatory which amounts to deprivation of
GOMEZ v. PALOMAR; G.R. No. L-23645
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 FACTS: Petitioner Benjamin Gomez mailed a letter at the post
expenditures, such as administrative and interest expenses office in San Fernando, Pampanga. It did not bear the special
which are equally necessary to produce gross income, were anti-TB stamp required by the RA 1635. It was returned to the
not taken into account. Thus, pegging the tax base of the MCIT petitioner. Petitioner now assails the constitutionality of the
to a corporation’s gross income is tantamount to a confiscation statute claiming that RA 1635 otherwise known as the Anti-TB
Stamp law is violative of the equal protection clause because it
constitutes mail users into a class for the purpose of the tax JOHN HAY PEOPLE’S ALTERNATIVE COALITION v. LIM;
while leaving untaxed the rest of the population and that even G.R. No. 119775
among postal patrons the statute discriminatorily grants
exemptions. The law in question requires an additional 5
centavo stamp for every mail being posted, and no mail shall Facts:
be delivered unless bearing the said stamp.
On August 16, 1993, BCDA entered into a Memorandum
ISSUE: of Agreement and Escrow Agreement with private respondents
Is the Anti-TB Stamp Law unconstitutional, for being allegedly Tuntex (B.V.I.) Co., Ltd (TUNTEX) and Asiaworld
violative of the equal protection clause? Internationale Group, Inc. (ASIAWORLD), private corporations
registered under the laws of the British Virgin Islands,
HELD: preparatory to the formation of a joint venture for the
No. It is settled that the legislature has the inherent power to development of Poro Point in La Union and Camp John Hay as
select the subjects of taxation and to grant exemptions. This premier tourist destinations and recreation centers.
power has aptly been described as "of wide range and
flexibility." Indeed, it is said that in the field of taxation, more The Baguio City government meanwhile passed a
than in other areas, the legislature possesses the greatest number of resolutions in response to the actions taken by
freedom in classification. The reason for this is that BCDA as owner and administrator of Camp John Hay.
traditionally, classification has been a device for fitting tax
programs to local needs and usages in order to achieve an The issuance of Proclamation No. 420 spawned the present
equitable distribution of the tax burden. petition[17] for prohibition, mandamus and declaratory relief
which was filed on April 25, 1995 challenging, in the main, its
The classification of mail users is based on the ability to pay, constitutionality or validity as well as the legality of the
the enjoyment of a privilege and on administrative Memorandum of Agreement and Joint Venture Agreement
convenience. Tax exemptions have never been thought of as between public respondent BCDA and private
raising revenues under the equal protection clause. respondents TUNTEX and ASIAWORLD.
Issue: W/N the Collector of Internal Revenue correctly CIR v. PINEDA; G.R. L-22734
disallowed the P75,000.00 deduction claimed by Algue
as legitimate business expenses in its income tax FACTS:
returns
Atanasio Pineda died, survived by his wife, Felicisima
Ruling: Bagtas, and 15 children, the eldest of whom is Atty.
Manuel Pineda. Estate proceedings were had in Court
Taxes are the lifeblood of the government and so should so that the estate was divided among and awarded to
be collected without unnecessary hindrance, made in the heirs. Atty Pineda's share amounted to about
accordance with law. P2,500.00. After the estate proceedings were closed, the
BIR investigated the income tax liability of the estate for
RA 1125: the appeal may be made within thirty days the years 1945, 1946, 1947 and 1948 and it found that
after receipt of the decision or ruling challenged . During the corresponding income tax returns were not filed.
the intervening period, the warrant was premature and Thereupon, the representative of the Collector of Internal
could therefore not be served. Revenue filed said returns for the estate issued an
Originally, CIR claimed that the 75K promotional fees to assessment and charged the full amount to the
be personal holding company income, but later on inheritance due to Atty. Pineda who argued that he is
conformed to the decision of CTA. There is no dispute liable only to extent of his proportional share in the
that the payees duly reported their respective shares of inheritance.
the fees in their income tax returns and paid the
corresponding taxes thereon. CTA also found, after ISSUE:
examining the evidence, that no distribution of dividends Can BIR collect the full amount of estate taxes from an
was involved CIR suggests a tax dodge, an attempt to heir's inheritance.
evade a legitimate assessment by involving an
imaginary deduction. Algue Inc. was a family corporation HELD:
where strict business procedures were not applied and Yes. The Government can require Atty. Pineda to pay
immediate issuance of receipts was not required. at the the full amount of the taxes assessed. The reason is that
the Government has a lien on the P2,500.00 received by
him from the estate as his share in the inheritance, for stock does not necessarily imply that petitioner is no engage
unpaid income taxes for which said estate is liable. By din business.
virtue of such lien, the Government has the right to
subject the property in Pineda's possession to satisfy the (2) YES. One of the most significant provisions of the LGC is
the removal of the blanket exclusion of instrumentalities and
income tax assessment. After such payment, Pineda will agencies of the National Government from the coverage of
have a right of contribution from his co-heirs, to achieve local taxation. Although as a general rule, LGUs cannot impose
an adjustment of the proper share of each heir in the taxes, fees, or charges of any kind on the National
distributable estate. All told, the Government has two Government, its agencies and instrumentalities, this rule now
ways of collecting the tax in question. One, by going admits an exception, i.e. when specific provisions of the LGC
after all the heirs and collecting from each one of them authorize the LGUs to impose taxes, fees, or charges on the
the amount of the tax proportionate to the inheritance aforementioned entities. The legislative purpose to withdraw
received; and second, is by subjecting said property of tax privileges enjoyed under existing laws or charter is clearly
the estate which is in the hands of an heir or transferee manifested by the language used on Sec. 137 and 193
categorically withdrawing such exemption subject only to the
to the payment of the tax due. This second remedy is the exceptions enumerated. Since it would be tedious and
very avenue the Government took in this case to collect impractical to attempt to enumerate all the existing statutes
the tax. The Bureau of Internal Revenue should be providing for special tax exemptions or privileges, the LGC
given, in instances like the case at bar, the necessary provided for an express, albeit general, withdrawal of such
discretion to avail itself of the most expeditious way to exemptions or privileges. No more unequivocal language could
collect the tax as may be envisioned in the particular have been used.
provision of the Tax Code above quoted, because taxes
are the lifeblood of government and their prompt and
certain availability is an imperious need. VERA v. FERNANDEZ; G.R. No. L-31364
NPC v. CITY OF CABANATUAN; G.R. No. 149110 FACTS: The BIR filed on July 29, 1969 a motion for allowance
of claim and for payment of taxes representing the estate's tax
Facts: deficiencies in 1963 to 1964 in the intestate proceedings of
Luis Tongoy. The administrator opposed arguing that the claim
NAPOCOR, a government-owned and controlled corporation, was already barred by the statute of limitation, Section 2 and
is tasked to undertake the “development of hydroelectric Section 5 of Rule 86 of the Rules of Court which provides that
generations of power and the production of electricity from all claims for money against the decedent, arising from
nuclear, geothermal, and other sources, as well as, the contracts, express or implied, whether the same be due, not
transmission of electric power on a nationwide basis.” due, or contingent, all claims for funeral expenses and
expenses for the last sickness of the decedent, and judgment
For many years now, NAPOCOR sells electric power to the for money against the decedent, must be filed within the time
resident Cabanatuan City, posting a gross income of limited in the notice; otherwise they are barred forever.
P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance
No. 165-92, the respondent assessed the petitioner a franchise ISSUE: Does the statute of non-claims of the Rules of Court
tax amounting to P808,606.41, representing 75% of 1% of the bar the claim of the government for unpaid taxes?
former’s gross receipts for the preceding year.
HELD: No. The reason for the more liberal treatment of claims
Petitioner, whose capital stock was subscribed and wholly paid for taxes against a decedent's estate in the form of exception
by the Philippine Government, refused to pay the tax from the application of the statute of non-claims, is not hard to
assessment. It argued that the respondent has no authority to find. Taxes are the lifeblood of the Government and their
impose tax on government entities. Petitioner also contend that prompt and certain availability are imperious need. (CIR vs.
as a non-profit organization, it is exempted from the payment Pineda, 21 SCRA 105). Upon taxation depends the
of all forms of taxes, charges, duties or fees in accordance with Government ability to serve the people for whose benefit taxes
Sec. 13 of RA 6395, as amended. are collected. To safeguard such interest, neglect or omission
of government officials entrusted with the collection of taxes
The respondent filed a collection suit in the RTC of should not be allowed to bring harm or detriment to the people,
Cabanatuan City, demanding that petitioner pay the assessed in the same manner as private persons may be made to suffer
tax, plus surcharge equivalent to 25% of the amount of tax and individually on account of his own negligence, the presumption
2% monthly interest. Respondent alleged that petitioner’s being that they take good care of their personal affairs. This
exemption from local taxes has been repealed by Sec. 193 of should not hold true to government officials with respect to
RA 7160 (Local Government Code). The trial court issued an matters not of their own personal concern. This is the
order dismissing the case. On appeal, the Court of Appeals philosophy behind the government's exception, as a general
reversed the decision of the RTC and ordered the petitioner to rule, from the operation of the principle of estoppel.
pay the city government the tax assessment.
Issues:
Whether or not NAPOCOR is excluded from the coverage of MCIAA v. MARCOS; G.R. No. 120082
the franchise tax simply because its stocks are wholly owned
by the National Government and its charter characterized is as FACTS
a ‘non-profit organization’. Mactan Cebu International Airport Authority was created by
virtue of RA 6958 to manage the Mactan International Airport
Whether or not NAPOCOR’s exemption from all forms of taxes and the Lahug Airport. Since the time of its creation, petitioner
is repealed by the provisions of the Local Government Code MCIAA enjoyed the privilege of exemption from payment of
(LGC) realty taxes. In Section 14 of its Charter provides that “the
Held: Authority shall be exempt from realty taxes imposed by the
National Government or any of its political subdivisions,
(1) NO. To stress, a franchise tax is imposed based not on the agencies and instrumentalities.”
ownership but on the exercise by the corporation of a privilege
to do business. The taxable entity is the corporation which In 1994, however, the Office of the Treasurer of the City of
exercises the franchise, and not the individual stockholders. By Cebu demanded payment for realty taxes on several parcels of
virtue of its charter, petitioner was created as a separate and land belonging to petitioner. Petitioner objected to such
distinct entity from the National Government. It can sue and be demand, citing Sec. 14. It asserted that it is an instrumentality
sued under its own name, and can exercise all the powers of a of the government which performs governmental functions,
corporation under the Corporation Code. To be sure, the citing Sec. 133 of the Local Government Code which puts
ownership by the National Government of its entire capital limitations on the taxing powers of local government units. Sec.
133, LGC provides that the exercise of the taxing powers of
provinces, cities, municipalities and barangays shall not extend GENERAL RULE: Tax exemptions or incentives are withdrawn
to the levy of... taxes, fees or charges of any kind on the upon the effectivity of the LGC
National government, its agencies and instrumentalities and
local government units. EXCEPTION: Those granted to local water districts,
cooperatives duly registered under RA 6938, non-stock and
The Respondent City refused to cancel and set aside the realty non-profit hospitals and educ institutions, and unless otherwise
tax account, insisting that the MCIAA is a GOCC whose tax provided in the LGC. This latter proviso could refer to Section
exemption privilege has been withdrawn by virtue of Sections 234 enumerating the properties exempt from real property tax.
193 and 234 of the LGC. Sec. 193 provides that tax The last paragraph of Section 234 further qualifies the
exemptions or incentives granted to or presently enjoyed by all retention of the exemption insofar as real property taxes are
persons, whether natural or juridical, including GOCCs except concerned by limiting the retention only to those enumerated
local water districts, cooperatives duly registered under RA therein; all others not included in the enumeration therefore
6938, non-stock and non-profit hospitals and educational lost the privilege upon the effectivity of the LGC. Even as to
institutions are hereby withdrawn upon the effectivity of this real property owned by the Rep. Of the Philippines or any of its
Code. Section 234 meanwhile provides that exemption from political subdivisions covered by item (a) of the first paragraph
payment of real property tax previously granted to or presently of Section 234, the exemption is withdrawn if the beneficial use
enjoyed by all persons, whether natural or juridical, including of such property has been granted to a taxable person for
GOCCs are hereby withdrawn upon the effectivity of the LGC. consideration or otherwise.
Because the City of Cebu was about to issue a warrant of levy Since the last paragraph of Section 234 unequivocally
against the properties of MCIAA, the latter was compelled to withdrew, upon the effectivity of the LGC, exemptions from
pay its tax account under protest. MCIAA likewise filed a payment of real property taxes granted to natural or juridical
petition for declaratory relief with the RTC of Cebu, contending persons, including government-owned or controlled
that the taxing powers of local government units do not extend corporations, except as provided in the said section, and the
to the levy of taxes or fees of any kind on an instrumentality of petitioner is, undoubtedly, a government-owned corporation, it
the national government. MCIAA insisted that while it is indeed necessarily follows that its exemption from such tax granted it
a GOCC, it nontheless stands on the same footing as an by its charter has been withdrawn.
agency or instrumentality of the national government by the
very nature of its powers and functions. The City however
PBCOM v. CIR; G.R. No. 112024
maintained that MCIAA is not an instrumentality of the
government but merely a GOCC performing proprietary
FACTS:
functions, and hence, the exemptions granted to it were
deemed withdrawn by virtue of Secs. 193 and 234 of the LGC.
Petitioner PBCom filed its first and second quarter income tax
returns, reported profits, and paid income
The trial court dismissed the petition. MR denied. Hence this
taxes amounting to P5.2M in 1985. However, at the end of the
petition. Petitioner asserts that although it is a GOCC, it is
year PBCom suffered losses so that when it filed
mandated to perform functions in the same category as an
its Annual Income Tax Returns for the year-ended December
instrumentality of the government. An instrumentality of the
31, 1986, the petitioner likewise reported a net
Government is one created to perform governmental functions
loss of P14.1 M, and thus declared no tax payable for the year.
primarily to promote certain aspects of the economic life of the
In 1988, the bank requested from CIR for a tax
people. Petitioner further contends that being an
credit and tax refunds representing overpayment of taxes.
instrumentality of the National Government, respondent City of
Pending investigation of the respondent CIR,
Cebu has no power nor authority to impose realty taxes upon it
petitioner instituted a Petition for Review before the Court of
in accordance with Sec. 133 of the LGC. In Basco v. PAGCOR,
Tax Appeals (CTA). CTA denied its petition for tax
the SC said the local governments have no power to tax
credit and refund for failing to file within the prescriptive period
instrumentalities of the National Gov't like PAGCOR, which has
to which the petitioner belies arguing the
a dual role (its role to regulate gambling casinos is
Revenue Circular No.7-85 issued by the CIR itself states that
governmental, placing it in the category of an agency or
claim for overpaid taxes are not covered by the
instrumentality of the Government which should be exempt
two-year prescriptive period mandated under the Tax Code.
from local taxes. Petitioner thus concludes that there is a
distinction in the LGC between a GOCC performing gov't
ISSUE:
functions as against one performing merely proprietary ones,
Is the contention of the petitioner correct? Is the revenue
and it is clear from Secs. 133 and 234, LGC that the legislature
circular a valid exemption to the NIRC?
meant to exclude instrumentalities of the national government
from the taxing powers of LGUs.
HELD:
No. The relaxation of revenue regulations by RMC 7-85 is not
ISSUE
warranted as it disregards the two-year
Whether petitioner is exempted from payment of taxes or not
prescriptive period set by law.
Basic is the principle that "taxes are the lifeblood of the
RULING
nation." The primary purpose is to generate funds for
No. Taxation is the rule and exemption is the exception. Thus,
the State to finance the needs of the citizenry and to advance
the exemption may be withdrawn at the pleasure of the taxing
the common weal. Due process of law under the
authority. The only exception to this rule is where the
Constitution does not require judicial proceedings in tax cases.
exemption was granted to private parties based on material
This must necessarily be so because it is upon
consideration of a mutual nature, which then becomes
taxation that the government chiefly relies to obtain the means
contractual and is thus covered by the non-impairment clause
to carry on its operations and it is of utmost
of the Constitution.
importance that the modes adopted to enforce the collection of
taxes levied should be summary and interfered
The general rule, as laid down in Section 133 of the LGC is
with as little as possible.
that the taxing powers of LGUs cannot extend to the levy of,
From the same perspective, claims for refund or tax credit
inter alia, “taxes, fees and charges of any kind on the National
should be exercised within the time fixed by law
Government, its agencies, and instrumentalities, and LGUs.”
because the BIR being an administrative body enforced to
However, pursuant to Section 232, provinces, cities and
collect taxes, its functions should not be unduly
municipalities in the Metro Manila Area MAY impose real
delayed or hampered by incidental matters.
property taxes except on inter alia, real property owned by the
Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted for
CIR v. CEBU PORTLAND CEMENT; G.R. L-29059
consideration or otherwise, to a taxable person (Sec. 234a).
the burden is on the taxpayer to prove the validity of the LORENZO v. POSADAS; G.R. L-43082
claimed deduction
In this case, Algue Inc. has proved that the payment of FACTS: Thomas Hanley died, leaving a will and a
the fees was necessary and reasonable in the light of considerable amount of real and personal properties.
the efforts exerted by the payees in inducing investors Proceedings for the probate of his will and the settlement and
and prominent businessmen to venture in an distribution of his estate were begun in the CFI of Zamboanga.
experimental enterprise and involve themselves in a new The will was admitted to probate.
business requiring millions of pesos. Taxes are what we The CFI considered it proper for the best interests of the estate
pay for civilization society. Without taxes, the to appoint a trustee to administer the real properties which,
under the will, were to pass to nephew Matthew ten years after
government would be paralyzed for lack of the motive
the two executors named in the will was appointed trustee.
power to activate and operate it. Hence, despite the Moore acted as trustee until he resigned and the plaintiff
natural reluctance to surrender part of one's hard earned Lorenzo herein was appointed in his stead.
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 During the incumbency of the plaintiff as trustee, the defendant
respond in the form of tangible and intangible benefits Collector of Internal Revenue (Posadas) assessed against the
intended to improve the lives of the people and enhance estate an inheritance tax, together with the penalties for
their moral and material values. Taxation must be deliquency in payment. Lorenzo paid said amount under
exercised reasonably and in accordance with the protest, notifying Posadas at the same time that unless the
amount was promptly refunded suit would be brought for its
prescribed procedure. If it is not, then the taxpayer has a recovery. Posadas overruled Lorenzo’s protest and refused to
right to complain and the courts will then come to his refund the said amount. Plaintiff went to court. The CFI
succor dismissed Lorenzo’s complaint and Posadas’ counterclaim.
Both parties appealed to this court.
GOMEZ v. PALOMAR; G.R. No. L-23645
ISSUE:
FACTS:
(e) Has there been delinquency in the payment of the
Petitioner Benjamin Gomez mailed a letter at the inheritance tax?
post office in San Fernando, Pampanga. It did HELD: The judgment of the lower court is accordingly
not bear the special anti-TB stamp required by modified, with costs against the plaintiff in both instances
the RA 1635. It was returned to the petitioner. YES
Petitioner now assails the constitutionality of the The defendant maintains that it was the duty of the executor to
pay the inheritance tax before the delivery of the decedent’s
statute claiming that RA 1635 otherwise known property to the trustee. Stated otherwise, the defendant
as the Anti-TB Stamp law is violative of the equal contends that delivery to the trustee was delivery to the cestui
protection clause because it constitutes mail que trust, the beneficiary in this case, within the meaning of the
first paragraph of subsection (b) of section 1544 of the Revised
users into a class for the purpose of the tax while Administrative Code. This contention is well taken and is
leaving untaxed the rest of the population and sustained. A trustee is but an instrument or agent for the cestui
that even among postal patrons the statute que trust
discriminatorily grants exemptions. The law in
question requires an additional 5 centavo stamp
for every mail being posted, and no mail shall be The appointment of Moore as trustee was made by the trial
delivered unless bearing the said stamp. court in conformity with the wishes of the testator as expressed
in his will. It is true that the word “trust” is not mentioned or
used in the will but the intention to create one is clear. No
ISSUE: Is the Anti-TB Stamp Law particular or technical words are required to create a
unconstitutional, for being allegedly violative of testamentary trust. The words “trust” and “trustee”, though apt
the equal protection clause? for the purpose, are not necessary. In fact, the use of these
two words is not conclusive on the question that a trust is SEC. 1544. When tax to be paid. — The tax fixed in this article
created. ” To constitute a valid testamentary trust there must shall be paid:
be a concurrence of three circumstances: (a) In the second and third cases of the next preceding section,
before entrance into possession of the property.
(b) In other cases, within the six months subsequent to the
death of the predecessor; but if judicial testamentary or
(1) Sufficient words to raise a trust; intestate proceedings shall be instituted prior to the expiration
of said period, the payment shall be made by the executor or
administrator before delivering to each beneficiary his share.
(2) a definite subject; The instant case does[not] fall under subsection (a), but under
subsection (b), of section 1544 above-quoted, as there is here
no fiduciary heirs, first heirs, legatee or donee. Under the
subsection, the tax should have been paid before the delivery
(3) a certain or ascertain object; statutes in some jurisdictions
of the properties in question to Moore as trustee.
expressly or in effect so providing.” (b) Should the inheritance tax be computed on the basis of the
value of the estate at the time of the testator’s death, or on its
value ten years later?
There is no doubt that the testator intended to create a trust.
He ordered in his will that certain of his properties be kept If death is the generating source from which the power of the
together undisposed during a fixed period, for a stated estate to impose inheritance taxes takes its being and if, upon
purpose. The probate court certainly exercised sound the death of the decedent, succession takes place and the
judgment in appointmening a trustee to carry into effect the right of the estate to tax vests instantly, the tax should be
provisions of the will measured by the value of the estate as it stood at the time of
the decedent’s death, regardless of any subsequent
contingency value of any subsequent increase or decrease in
As the existence of the trust was already proven, it results that value
the estate which plaintiff represents has been delinquent in the
payment of inheritance tax and, therefore, liable for the
payment of interest and surcharge provided by law in such (c) In determining the net value of the estate subject to tax, is it
cases. proper to deduct the compensation due to trustees?
Whatever may be the time when actual transmission of the D. Objectives & Purposes
inheritance takes place, succession takes place in any event at
the moment of the decedent’s death. The time when the heirs
legally succeed to the inheritance may differ from the time i. Revenue
when the heirs actually receive such inheritance. ” Thomas
Hanley having died on May 27, 1922, the inheritance tax ii. Non-Revenue (Sumptuary)
accrued as of the date.
The levy of the 30% tax is for a public purpose. It was In 1989, COA sent a letter to Caltex, directing it to remit its
imposed primarily to answer the need for regulating the video collection to the Oil Price Stabilization Fund (OPSF), excluding
industry, particularly because of the rampant film piracy, the that unremitted for the years 1986 and 1988, of the additional
flagrant violation of intellectual property rights, and the
tax on petroleum products authorized under the PD 1956.
proliferation of pornographic video tapes. And while it was also
an objective of the DECREE to protect the movie industry, the Pending such remittance, all of its claims for reimbursement
tax remains a valid imposition. from the OPSF shall be held in abeyance. The grant total of its
unremitted collections of the above tax is P1,287,668,820.
In fine, petitioner has not overcome the presumption of validity Caltex submitted a proposal to COA for the payment and the
which attaches to a challenged statute. We find no clear recovery of claims. COA approved the proposal but prohibited
violation of the Constitution which would justify us in Caltex from further offsetting remittances and reimbursements
pronouncing Presidential Decree No. 1987 as unconstitutional
for the current and ensuing years. Caltex moved for
and void.
reconsideration but was denied. Hence, the present petition.
WHEREFORE, the instant Petition is hereby dismissed.
ISSUE:
Appelant in this case Walter Lutz in his capacity as the Judicial RULING:
Administrator of the intestate of the deceased Antonio Jayme
Ledesma, seeks to recover from the Collector of the Internal No. Taxation is no longer envisioned as a measure merely to
Revenue the total sum of fourteen thousand six hundred sixty raise revenue to support the existence of government. Taxes
six and forty cents (P 14, 666.40) paid by the estate as taxes,
may be levied with a regulatory purpose to provide means for
under section 3 of Commonwealth Act No. 567, also known as
the Sugar Adjustment Act, for the crop years 1948-1949 and the rehabilitation and stabilization of a threatened industry
1949-1950. Commonwealth Act. 567 Section 2 provides for an which is affected with public interest as to be within the police
increase of the existing tax on the manufacture of sugar on a power of the State.
graduated basis, on each picul of sugar manufacturer; while PD 1956, as amended by EO 137, explicitly provides that the
source of OPSF is taxation. A taxpayer may not offset taxes respondent claimed for refund in the amount of Php150, 193.
due from the claims he may have against the government.
Taxes cannot be subject of compensation because the Issue:
government and taxpayer are not mutually creditors and Whether or not the 20% discount granted by the respondent to
debtors of each other and a claim for taxes is not such a debt, qualified senior citizens may be claimed as tax credit or as
demand,, contract or judgment as is allowed to be set-off. deduction from gross sales
Hence, COA decision is affirmed except that Caltex’s claim for
reimbursement of underrecovery arising from sales to the Ruling:
National Power Corporation is allowed. “Tax credit” is explicitly provided for in Sec4 of RA 7432. The
discount given toSenior citizens is a tax credit, not a deduction
from the gross sales of the establishment concerned. The tax
PAL v. EDU; G.R. No. L-41383 credit that is contemplated under this Act is a form of
justcompensation, not a remedy for taxes that were
FACTS: erroneously or illegally assessed andcollected. In the same
The Philippine Airlines (PAL) is a corporation engaged in the vein, prior payment of any tax liability is a pre-condition before
air transportation business under a legislative franchise, Act ataxable entity can benefit from tax credit. The credit may be
No. 42739. Under its franchise, PAL is exempt from the availed of upon payment, ifany. Where there is no tax liability
payment of taxes.
or where a private establishment reports a net loss forthe
Sometime in 1971, however, Land Transportation
Commissioner Romeo F. Elevate (Elevate) issued a regulation period, the tax credit can be availed of and carried over to the
pursuant to Section 8, Republic Act 4136, otherwise known as next taxable year.
the Land and Transportation and Traffic Code, requiring all tax
exempt entities, among them PAL to pay motor vehicle
registration fees. CARLOS SUPERDRUG v. DSWD; G.R. No. 166494
Despite PAL's protestations, Elevate refused to
register PAL's motor vehicles unless the amounts imposed FACTS:
under Republic Act 4136 were paid. PAL thus paid, under Petitioners are domestic corporations and proprietors operating
protest, registration fees of its motor vehicles. After paying pharmacies in the Philippines.Public respondents, on the other
under protest, PAL through counsel, wrote a letter dated May hand, include the DSWD, DOH, DOF, DOJ, and the DILG,
19,1971, to Land Transportation Commissioner Romeo Edu specifically tasked to monitor the drugstores’ compliance with
(Edu) demanding a refund of the amounts paid. Edu denied the the law; promulgate the implementing rules and regulations for
request for refund. Hence, PAL filed a complaint against Edu the effective implementation of the law; and prosecute and
and National Treasurer UbaldoCarbonell (Carbonell). revoke the licenses of erring drugstore establishments.
Petitioners posit that the tax deduction scheme contravenes vii. Supreme
Article III, Section 9 of the Constitution, which provides that:
"private property shall not be taken for public use without just
compensation." CHURCHILL v. CONCEPCION; G.R. No. L-75697
Respondents maintain that the tax deduction scheme is a Section 100 of Act No. 2339, imposed an annual tax
legitimate exercise of the State’s police power. of P4 per square meter upon "electric signs, billboards, and
spaces used for posting or displaying temporary signs, and all
ISSUE: signs displayed on premises not occupied by buildings." This
section was subsequently amended by Act No. 2432, by
Whether the legally mandated 20% senior citizen discount is reducing the tax on such signs, billboards, etc., to P2 per
an exercise of police power or eminent domain. square meter or fraction thereof. The taxes imposed by Act No.
2432, as amended, were ratified by the Congress of the United
RULING: States.
Francis A. Churchill and Stewart Tait, copartners
The 20% senior citizen discount is an exercise of police doing business under the firm name and style of the Mercantile
power. Advertising Agency, owners of a sign or billboard containing an
area of 52 square meters constructed on private property in the
It may not always be easy to determine whether a challenged city of Manila were taxes thereon was P104. The tax was paid
governmental act is an exercise of police power or eminent under protest and the plaintiffs having exhausted all their
domain. The judicious approach, therefore, is to look at the administrative remedies instituted the present action under
nature and effects of the challenged governmental act and section 140 of Act No. 2339 against the Collector of Internal
decide on the basis thereof. Revenue to recover back the amount thus paid. From a
judgment dismissing the complaint upon the merits, with costs,
The 20% discount is intended to improve the welfare of senior the plaintiffs appealed.
citizens who, at their age, are less likely to be gainfully
employed, more prone to illnesses and other disabilities, and, Issue:
thus, in need of subsidy in purchasing basic commodities. It
serves to honor senior citizens who presumably spent their WON the statute and the tax imposed is void for lack of
lives on contributing to the development and progress of the uniformity; constitutes double taxation.
nation.
Ruling:
In turn, the subject regulation affects the pricing, and, hence,
the profitability of a private establishment. No. Sec. 5 of the Philippine Bill declared “that the rule
of taxation in said Islands shall be uniform”.
The subject regulation may be said to be similar to, but with
substantial distinctions from, price control or rate of return on Uniformity in taxation means that all taxable articles or
investment control laws which are traditionally regarded as kinds of property, of the same class, shall be taxed at the same
police power measures. rate. It does not mean that lands, chattels, securities, incomes,
occupations, franchises, privileges, necessities, and luxuries,
The subject regulation differs there from in that (1) the discount shall all be assessed at the same rate. Different articles may
does not prevent the establishments from adjusting the level of be taxed at different amounts, provided the rate is uniform on
prices of their goods and services, and (2) the discount does the same class everywhere, with all people, and at all times.
not apply to all customers of a given establishment but only to The statute under consideration imposes a tax of P2
the class of senior citizens. Nonetheless, to the degree per square meter or fraction thereof upon every electric sign,
material to the resolution of this case, the 20% discount may bill-board, etc., wherever found in the Philippine Islands. Or in
be properly viewed as belonging to the category of price other words, "the rule of taxation" upon such signs is uniform
regulatory measures which affect the profitability of throughout the Islands.
establishments subjected thereto. On its face, therefore, the
subject regulation is a police power measure.
The rule, which we have just quoted from the
Philippine Bill, does not require taxes to be graded according
to the value of the subject or subjects upon which they are
imposed, especially those levied as privilege or occupation
E. Object taxes. We can hardly see wherein the tax in question
constitutes double taxation. The fact that the land upon which
the billboards are located is taxed at so much per unit and the
i. Person billboards at so much per square meter does not constitute
"double taxation."
expenses from gross sales. Clearly, the capital is not being
CREBA VS ROMUULO taxed.
FACTS:
Furthermore, the MCIT is not an additional tax imposition. It is
Chamber of Real Estate and Builders' Associations, Inc. imposed in lieu of the normal net income tax, and only if the
(CHAMBER) is questioning the constitutionality of Sec 27 (E) normal income tax is suspiciously low.
of RA 8424 and the revenue regulations (RRs) issued by the
Bureau of Internal Revenue (BIR) to implement said provision
and those involving creditable withholding taxes (CWT). [CWT The MCIT merely approximates the amount of net income tax
issues will not be discussed] due from a corporation, pegging the rate at a very much
reduced 2% and uses as the base the corporation’s gross
income.
CHAMBER 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 CHAMBER failed to support, by any factual or legal basis, its
ordinary assets. Chamber argues that the MCIT violates the allegation that the MCIT is arbitrary and confiscatory. It does
due process clause because it levies income tax even if there not cite any actual, specific and concrete negative experiences
is no realized gain. of its members nor does it present empirical data to show that
the implementation of the MCIT resulted in the confiscation of
their property.
MCIT scheme: (Section 27 (E). [MCIT] on Domestic
Corporations.)
A corporation, beginning on its fourth year of operation, is Taxation is necessarily burdensome because, by its nature, it
assessed an MCIT adversely affects property rights. The party alleging the law’s
of 2% of its gross income when such MCIT is greater than the unconstitutionality has the burden to demonstrate the
normal corporate income tax imposed under Section 27(A) supposed violations in understandable terms.
(Applying the 30% tax
rate to net income). If the regular income tax is higher than the
MCIT, the corporation does not pay the MCIT. 2. NO. 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).
Any excess of the MCIT over the normal tax shall be carried
forward and credited against the normal income tax for the
three immediately succeeding taxable years. 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
The Secretary of Finance is hereby authorized to suspend the income. This is consistent with the law which imposes the
imposition of the [MCIT] on any corporation which suffers MCIT on gross income notwithstanding the amount of the net
losses on account of prolonged labor dispute, or because of income.
force majeure, or because of legitimate business reverses.
Congress has the power to condition, limit or deny deductions
from gross income in order to arrive at the net that it chooses
The term ‘gross income’ shall mean gross sales less sales to tax. This is because deductions are a matter of legislative
returns, discounts and allowances and cost of goods sold. grace. The assignment of gross income, instead of net income,
"Cost of goods sold" shall include all business expenses as the tax base of the MCIT, taken with the reduction of the tax
directly incurred to produce the merchandise to bring them to rate from 32% to 2%, is not constitutionally objectionable.
their present location and use.
HELD:
Cases:
1. NO. MCIT is not violative of due process. The MCIT is not a
Roxas vs. CTA, 23 SCRA 276- The power of taxation includes
tax on capital. The MCIT is imposed on gross income which is
arrived at by deducting the capital spent by a corporation in the the power to destroy if it is used validly as an implement of the
sale of its goods, i.e., the cost of goods and other direct police power of the state. If it is used solely for the purpose of
raising revenue, it does not include the power to destroy.
petitioner‘s claim for refund has already been included as part
and parcel of the P172,477.00 which the petitioner
Standard Oil Co. vs. Posadas, 55 Phil 715- While ordinarily the automatically applied as tax credit for the succeeding taxable
government does not tax its own political subdivisions or its year 1990. Petitioner filed a Motion for Reconsideration which
was denied by respondent Court on March 10,1994.Petitioner
other entities, it may, however, do so by providing for it filed a Petition for Review dated April 3, 1994with the Courtof
explicitly. Appeals.
Issue: Issue:
1. Is the gain derived from the sale of the Nasugbu farm lands ISSUE:
an ordinary gain, hence 100% taxable?
Whether or not the imposition of taxes is invalid in
2. Is Roxas y Cia. liable for the payment of the fixed tax on real
the promulgation of PD NO. 1987
estate dealers?
RULING:
Ruling:
1. No. It should be borne in mind that the sale of the NO. The Constitutional requirement that "every bill
farmlands to the very farmers who tilled them for generations shall embrace only one subject which shall be
was not only in consonance with, but more in obedience to the expressed in the title thereof" is sufficiently
request and pursuant to the policy of our Government to complied with if the title be comprehensive enough
allocate lands to the landless.
to include the general purpose which a statute
In order to maintain the general public’s trust and seeks to achieve. It is not necessary that the title
confidence in the Government this power must be used justly express each and every end that the statute wishes
and not treacherously. It does not conform with the sense of to accomplish. The requirement is satisfied if all the
justice for the Government to persuade the taxpayer to lend it a parts of the statute are related, and are germane to
helping hand and later on penalize him for duly answering the
urgent call. the subject matter expressed in the title, or as long
as they are not inconsistent with or foreign to the
In fine, Roxas cannot be considered a real estate general subject and title. An act having a single
dealer and is not liable for 100% of the sale. Pursuant to general subject, indicated in the title, may contain
Section 34 of the Tax Code, the lands sold to the farmers are
capital assets and the gain derived from the sale thereof is
any number of provisions, no matter how diverse
capital gain, taxable only to the extent of 50%. they may be, so long as they are not inconsistent
with or foreign to the general subject, and may be
considered in furtherance of such subject by
providing for the method and means of carrying out
the general object." The rule also is that the (WON there is a transgression of both the equal protection and
due process clauses of the Constitution as well as of the rule
constitutional requirement as to the title of a bill requiring uniformity in taxation)
should not be so narrowly construed as to cripple or
impede the power of legislation. It should be given Held: No. Petition dismissed
practical rather than technical construction.
The need for more revenues is rationalized by the
government's role to fill the gap not done by public enterprise
Petitioner also submits that the thirty percent in order to meet the needs of the times. It is better equipped to
(30%) tax imposed is harsh and oppressive, administer for the public welfare.
confiscatory, and in restraint of trade. However, it is
The power to tax, an inherent prerogative, has to be availed of
beyond serious question that a tax does not cease to assure the performance of vital state functions. It is the
to be valid merely because it regulates, source of the bulk of public funds.
discourages, or even definitely deters the activities
taxed. The power to impose taxes is one so The power to tax is an attribute of sovereignty and the
unlimited in force and so searching in extent, that strongest power of the government. There are restrictions,
however, diversely affecting as it does property rights, both the
the courts scarcely venture to declare that it is due process and equal protection clauses may properly be
subject to any restrictions whatever, except such as invoked, as petitioner does, to invalidate in appropriate cases a
rest in the discretion of the authority which revenue measure. If it were otherwise, taxation would be a
exercises it. In imposing a tax, the legislature acts destructive power.
upon its constituents. This is, in general, a sufficient The petitioner failed to prove that the statute ran counter to the
security against erroneous and oppressive Constitution. He used arbitrariness as basis without a factual
taxation. foundation. This is merely to adhere to the authoritative
doctrine that where the due process and equal protection
clauses are invoked, considering that they are not fixed rules
The levy of the 30% tax is for a public purpose. It but rather broad standards, there is a need for proof of such
was imposed primarily to answer the need for persuasive character as would lead to such a conclusion.
regulating the video industry, particularly because
of the rampant film piracy, the flagrant violation of It is undoubted that the due process clause may be invoked
where a taxing statute is so arbitrary that it finds no support in
intellectual property rights, and the proliferation of
the Constitution. An obvious example is where it can be shown
pornographic video tapes. And while it was also an to amount to the confiscation of property. That would be a clear
objective of the DECREE to protect the movie abuse of power.
industry, the tax remains a valid imposition.
It has also been held that where the assailed tax measure is
beyond the jurisdiction of the state, or is not for a public
In fine, petitioner has not overcome the purpose, or, in case of a retroactive statute is so harsh and
presumption of validity which attaches to a unreasonable, it is subject to attack on due process grounds.
challenged statute. We find no clear violation of the
Constitution which would justify us in pronouncing For equal protection, the applicable standard to determine
whether this was denied in the exercise of police power or
Presidential Decree No. 1987 as unconstitutional eminent domain was the presence of the purpose of hostility or
and void.WHEREFORE, the instant Petition is unreasonable discrimination.
hereby dismissed.
It suffices then that the laws operate equally and uniformly on
all persons under similar circumstances or that all persons
must be treated in the same manner, the conditions not being
SISON v. ANCHETA; G.R. No. L-59431 different, both in the privileges conferred and the liabilities
Facts: imposed. Favoritism and undue preference cannot be allowed.
Petitioners challenged the constitutionality of Section 1 of For the principle is that equal protection and security shall be
Batas Pambansa Blg. 135. It amended given to every person under circumstances, which if not
Section 21 of the National Internal Revenue Code of 1977, identical are analogous. If law be looks upon in terms of
which provides for rates of tax on citizens or residents on (a) burden or charges, those that fall within a class should be
taxable compensation income, (b) taxable net income, (c) treated in the same fashion, whatever restrictions cast on
royalties, prizes, and other winnings, (d) interest from bank some in the group equally binding on the rest.
deposits and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements, (e) The equal protection clause is, of course, inspired by the noble
dividends and share of individual partner in the net profits of concept of approximating the ideal of the laws's benefits being
taxable partnership, (f) adjusted gross income. available to all and the affairs of men being governed by that
serene and impartial uniformity, which is of the very essence of
Petitioner as taxpayer alleged that "he would be unduly the idea of law.
discriminated against by the imposition of higher rates of tax
upon his income arising from the exercise of his profession vis- The equality at which the 'equal protection' clause aims is not a
a-vis those which are imposed upon fixed income or salaried disembodied equality. The Fourteenth Amendment enjoins 'the
individual taxpayers." He characterizes the above section as equal protection of the laws,' and laws are not abstract
arbitrary amounting to class legislation, oppressive and propositions. They do not relate to abstract units A, B and C,
capricious in character. but are expressions of policy arising out of specific difficulties,
addressed to the attainment of specific ends by the use of
For petitioner, therefore, there is a transgression of both the specific remedies. The Constitution does not require things
equal protection and due process clauses of the Constitution which are different in fact or opinion to be treated in law as
as well as of the rule requiring uniformity in taxation. though they were the same.
The OSG prayed for dismissal of the petition due to lack of Lutz v Araneta- it is inherent in the power to tax that a state be
merit. free to select the subjects of taxation, and it has been
repeatedly held that 'inequalities which result from a singling
Issue: Whether the imposition of a higher tax rate on taxable out of one particular class for taxation, or exemption infringe no
net income derived from business or profession than on constitutional limitation.
compensation is constitutionally infirm.
Petitioner- kindred concept of uniformity- Court- Philippine The statute under consideration imposes a tax of P2
Trust Company- The rule of uniformity does not call for perfect per square meter or fraction thereof upon every electric sign,
uniformity or perfect equality, because this is hardly attainable bill-board, etc., wherever found in the Philippine Islands. Or in
other words, "the rule of taxation" upon such signs is uniform
Equality and uniformity in taxation means that all taxable throughout the Islands.
articles or kinds of property of the same class shall be taxed at The rule, which we have just quoted from the
the same rate. The taxing power has the authority to make Philippine Bill, does not require taxes to be graded according
reasonable and natural classifications for purposes of taxation to the value of the subject or subjects upon which they are
imposed, especially those levied as privilege or occupation
There is quite a similarity then to the standard of equal taxes. We can hardly see wherein the tax in question
protection for all that is required is that the tax "applies equally constitutes double taxation. The fact that the land upon which
to all persons, firms and corporations placed in similar the billboards are located is taxed at so much per unit and the
situation" billboards at so much per square meter does not constitute
"double taxation."
There was a difference between a tax rate and a tax base.
There is no legal objection to a broader tax base or taxable
income by eliminating all deductible items and at the same
CREBA v. ROMULO
time reducing the applicable tax rate.
FPA remits its collection to Far East Bank and Trust Company
i. Inherent Limitations who applies to the payment of corporate debts of Planters
Products Inc. (PPI)
a. Public Purpose
After the Edsa Revolution, FPA voluntarily stopped the
imposition of the P10 levy. Upon return of democracy, Fertiphil
The proceeds of the tax must be used a. for the support of the demanded a refund but PPI refused. Fertiphil filed a complaint
for collection and damages against FPA and PPI with the RTC
State or b. for some recognized objects of government or
on the ground that LOI No. 1465 is unjust, unreaonable
directly to promote the welfare of the community. oppressive, invalid and unlawful resulting to denial of due
process of law.
Cases: FPA answered that it is a valid exercise of the police power of
Pascual vs. Sec. of Public Works, 110 Phil 331- The legislature the state in ensuring the stability of the fertilizing industry in the
country and that Fertiphil did NOT sustain damages since the
is without power to appropriate public revenues for anything
burden imposed fell on the ultimate consumers.
but a public purpose.
Valentin Tio vs. Videogram Regulatory Board, 151 SCRA 208- RTC and CA favored Fertiphil holding that it is an exercise of
the power of taxation ad is as such because it is NOT for
The public purpose of a tax may legally exist even if the motive public purpose as PPI is a private corporation.
which impelled the legislature to impose the tax was to favor
one industry over another. ISSUE:
(MANOSCA v. CA; G.R. No. 106440) 1. Yes. In private suits, locus standi requires a litigant to be a
"real party in interest" or party who stands to be benefited or
Facts: injured by the judgment in the suit. In public suits, there is the
right of the ordinary citizen to petition the courts to be freed
Petitioners inherited a piece of land when the parcel was
ascertained by the NHI to have been the birth site of Felix Y. from unlawful government intrusion and illegal official action
Manalo, the founder of Iglesia Ni Cristo, it passed Resolution subject to the direct injury test or where there must be
No. 1, declaring the land to be a national historical landmark. personal and substantial interest in the case such that he has
Petitioners moved to dismiss the complaint on the main thesis sustained or will sustain direct injury as a result. Being a mere
that the intended expropriation was not for a public purpose procedural technicality, it has also been held that locus standi
and, incidentally, that the act would constitute an application of
public funds, directly or indirectly, for the use, benefit, or may be waived in the public interest such as cases of
support of Iglesia ni Cristo, a religious entity, contrary to the transcendental importance or with far-reaching implications
provision of Section 29(2), Article VI, of the 1987 Constitution. whether private or public suit, Fertiphil has locus standi.
c. Non-Delegation
YES.
(ii) Delegation to LGUs
The said foreign military bases are not to be Article X, Section 5. Each local government unit shall
considered a foreign soil or territory for purposes of income tax have the power to create its own sources of revenues
legislation. Philippine jurisdictional rights including the power to and to levy taxes, fees and charges subject to such
tax are preserved. The Philippines is independent and guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such
sovereign, its authority may be exercised over its entire
taxes, fees, and charges shall accrue exclusively to the
domain. There is no portion thereof that is beyond its power. local governments.
Within its limits, its decrees are supreme, its commands
paramount. Its laws govern therein, and everyone to whom it (ii) Tax Issuances
applies must submit to its terms. That is the extent of its
Legislative Rule
jurisdiction, both territorial and personal. On the other hand,
Interpretative Rule
there is nothing in the Military Bases Agreement that lends
support to Reagan’s assertion. CIR v. FORTUNE TOBACCO; G.R. Nos. 167274-75
We thus manifest fealty to a pronouncement made ABAKADA v. ERMITA; G.R. No. 168056
time and time again that the law does not look with favor on tax
FACTS:
exemptions and that he who would seek to be thus privileged RA 9337, an act amending certain sections of the National
must justify it by words too plain to be mistaken and too Internal Revenue Code of 1997, is questioned by petitioners
for being unconstitutional. Procedural issues raised by
categorical to be misinterpreted.
petitioners are the legality of the bicameral proceedings,
exclusive origination of revenue measures and the power of
the Senate concomitant thereto. Also, an issue was raised with
MERALCO v. YATCO; G.R. No. 45697 regard to the undue delegation of legislative power to the
President to increase the rate of value-added tax to 12%.
Petitioners also argue that the increase to 12%, as well as the
FACTS:
70% limitation on the creditable input tax, the 60- month
Meralco entered into an insurance contract with a new york amortization on the purchase or importation of capital goods
based insurance company. Yatco, the Commissioner of exceeding P1,000,000.00, and the 5% final withholding tax by
Internal Revenue, levied taxes on the premium paid. Meralco government agencies, is arbitrary, oppressive, and
paid under protest alleging that the Philippines had no confiscatory, and that it violates the constitutional principle on
progressive taxation, among others.
jurisdiction.
ISSUE:
Issues:
Whether the CIR exceeded his powers in taxing Meralco’s paid Whether or not there is a violation of Article VI, Section 24 of
premium the Constitution.
Whether or not there is undue delegation of legislative power in
violation of Article VI Sec 28(2) of the Constitution. The Philippines renounces war as an instrument
of national policy, adopts the generally accepted
Whether or not there is a violation of the due process and principles of international law as part of the law of
equal protection of the Constitution.
the land and adheres to the policy of peace,
Ruling: equality, justice, freedom, cooperation, and amity
No, the revenue bill exclusively originated in the House of with all nations.
Representatives, the Senate was acting within its constitutional
power to introduce amendments to the House bill when it ii. Government Exemption
included provisions in Senate Bill No. 1950 amending
corporate income taxes, percentage, and excise and franchise
taxes. BOARD OF ASSESSMENT APPEALS v. CTA; G.R. No.
18125
No, there is no undue delegation of legislative power but only
of the discretion as to the execution of a law. This is FACTS:
constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job National Waterworks and Sewerage Authority (NWSA), a
must be done, who must do it, and what is the scope of his public corporation owned by the Government of the Philippines
authority; in our complex economy that is frequently the only as well as all property comprising waterworks and sewerage
way in which the legislative process can go forward. In this systems placed under it, took over the Cabuyao-Sta. Rosa-
case, it is not a delegation of legislative power but a delegation Biñan Waterworks System in 1956. It was assessed by the
of ascertainment of facts upon which enforcement and Provincial Assessor of Laguna, for purposes of real estate
administration of the increased rate under the law is taxes, on the real properties owned by Cabuyao Waterworks.
contingent. The respondent protested claiming it is exempted from the
payment of real estate taxes in view of the nature and kind of
No, the power of the State to make reasonable and natural said property and functions and activities of petitioner. The
classifications for the purposes of taxation has long been petitioner denied the protest arguing that such real properties
established. Whether it relates to the subject of taxation, the are subject to real estate tax because although said properties
kind of property, the rates to be levied, or the amounts to be belong to the Republic of the Philippines, the same holds it, not
raised, the methods of assessment, valuation and collection, in its governmental, political or sovereign capacity, but in a
the State’s power is entitled to presumption of validity. As a private, proprietary or patrimonial character, which, allegedly,
rule, the judiciary will not interfere with such power absent a is not covered by the exemption contained in section 3(a) of
clear showing of unreasonableness, discrimination, or Republic Act No. 470.
arbitrariness.
ISSUE:
MIAA is Not a Government-Owned or Controlled ISSUE: Whether the MCIAA is exempted from realty taxes.
Corporation. The Airport Lands and Buildings of MIAA are
RULING:
property of public dominion and therefore owned by the State
or the Republic of the Philippines. No one can dispute that Tax statutes are construed strictly against the government and
properties of public dominion mentioned in Article 420 of the liberally in favor of the taxpayer. But since taxes are paid for
Civil Code, like “roads, canals, rivers, torrents, ports and civilized society, or are the lifeblood of the nation, the law
bridges constructed by the State,” are owned by the State. The frowns against exemptions from taxation and statutes granting
tax exemptions are thus construed strictissimi juris against the
term “ports” includes seaports and airports. The MIAA Airport
taxpayer and liberally in favor of the taxing authority.
Lands and Buildings constitute a “port” constructed by the A claim of exemption from tax payments must be clearly shown
State. and based on language in the law too plain to be mistaken.
Taxation is the rule, exemption therefrom is the exception.
Under Article 420 of the Civil Code, the MIAA Airport Lands However, if the grantee of the exemption is a political
subdivision or instrumentality, the rigid rule of construction
and Buildings are properties of public dominion and thus
does not apply because the practical effect of the exemption is
owned by the State or the Republic of the Philippines. The merely to reduce the amount of money that has to be handled
Airport Lands and Buildings are devoted to public use because by the government in the course of its operations.
they are used by the public for international and domestic
travel and transportation. The fact that the MIAA collects Further, since taxation is the rule and exemption therefrom the
exception, the exemption may be withdrawn at the pleasure of
terminal fees and other charges from the public does not
the taxing authority. The only exception to this rule is where the
remove the character of the Airport Lands and Buildings as exemption was granted to private parties based on material
properties for public use. The charging of fees to the public consideration of a mutual nature, which then becomes
does not determine the character of the property whether it is contractual and is thus covered by the non-impairment clause
of public dominion or not. Article 420 of the Civil Code defines of the Constitution.
property of public dominion as one “intended for public use.”
MCIAA is a “taxable person” under its Charter (RA 6958), exception applies only if the beneficial use of real property
and was only exempted from the payment of real property owned by the Republic is given to a taxable entity.
taxes. The grant of the privilege only in respect of this tax
is conclusive proof of the legislative intent to make it a
taxable person subject to all taxes, except real property Finally, the Airport Lands and Buildings of MIAA are properties
tax. devoted to public use and thus are properties of public
dominion. Properties of public dominion are owned by the
Since Republic Act 7160 or the Local Government Code (LGC) State or the Republic.
expressly provides that “All general and special laws, acts, city
charters, decrees [sic], executive orders, proclamations and As properties of public dominion owned by the Republic, there
administrative regulations, or part of parts thereof which are is no doubt whatsoever that the Airport Lands and Buildings
inconsistent with any of the provisions of this Code are hereby are expressly exempt from real estate tax under Section 234(a)
repealed or modified accordingly.” of the Local Government Code. This Court has also
repeatedly ruled that properties of public dominion are not
With that repealing clause in the LGC, the tax exemption subject to execution or foreclosure sale.
provided for in RA 6958 had been expressly repealed by the
provisions of the LGC. Therefore, MCIAA has to pay the Petitioner’s properties that are actually, solely and exclusively
assessed realty tax of its properties effective after January 1, used for public purpose, consisting of the airport terminal
1992 until the present. building, airfield, runway, taxiway and the lots on which they
are situated, EXEMPT from real property tax imposed by the
City of Lapu-Lapu.
MCIAA v. CITY OF LAPU-LAPU; G.R. No. 181756
VOID all the real property tax assessments, including the
additional tax for the special education fund and the penalty
MIAA is not a government-owned or controlled corporation interest, as well as the final notices of real property tax
under Section 2(13) of the Introductory Provisions of the delinquencies, issued by the City of Lapu-Lapu on petitioner’s
Administrative Code because it is not organized as a stock or properties, except the assessment covering the portions that
non-stock corporation. Neither is MIAA a government-owned or petitioner has leased to private parties.
controlled corporation under Section 16, Article XII of the 1987
Constitution because MIAA is not required to meet the test of
economic viability. MIAA is a government instrumentality NULL and VOID the sale in public auction of 27 of petitioner’s
vested with corporate powers and performing essential public properties and the eventual forfeiture and purchase of the said
services pursuant to Section 2(10) of the Introductory properties by respondent City of Lapu-Lapu. We likewise
Provisions of the Administrative Code. declare VOID the corresponding Certificates of Sale of
Delinquent Property issued to respondent City of Lapu-Lapu.
As a government instrumentality, MIAA is not subject to any
kind of tax by local governments under Section 133(o) of the ii. Constitutional Limitations
Local Government Code. The exception to the exemption in
Section 234(a) does not apply to MIAA because MIAA is not a
taxable entity under the Local Government Code. Such
a. Uniformity and Equality of Taxation; Sec. 28(1), Art.
VI
The rule of taxation shall be uniform and equitable (Sec.28 The law, however, may validly further classify such property
(1), Art.III, 1987 Constitution). according to their assessed value and levy different rates, and
consequently, different amounts of tax on the basis of such
The tax is uniform when it operates with the same force and value;
effect in every place where the subject of it is found.
"Uniformity" means all property belonging to the same class Section 28 (c), Article VI of the Constitution provides that “the
shall be taxed alike. It does not signify an intrinsic, but simply a rule of taxation shall be uniform and equitable.”
geographic, uniformity (Churchill & Tait vs. Conception, 34
Phil. 969). Uniformity does not require the same treatment; it The concept of uniformity in taxation implies that all taxable
simply requires reasonable basis for classification. articles or properties of the same class shall be taxed at the
same rate. It requires the uniform application and operation,
without discrimination, of the tax in every place where the
Application subject of the tax is found. It does not, however, require
absolute identity or equality under all circumstances, but
In the following cases, the uniformity requirement is not subject to reasonable classification.
violated:
The concept of equity in taxation requires that the
(a) Where a statute imposes a tax of P2.50 a square meter or apportionment of the tax burden be, more or less, just in the
fraction thereof on every billboard or sign anywhere in the light of the taxpayer’s ability to shoulder the tax burden and, if
country (Churchill vs. Concepcion, 10 Phil.381 1908.) warranted, on the basis of the benefits received from the
government. Its cornerstone is the taxpayer’s ability to pay.
(b) Where a license tax is imposed upon hotels and the
amount required to be paid is graduated by the number of
CHURCHILL v. CONCEPCION; G.R. No. 11572 – billboards
rooms which may be devoted to the accommodation of the
public (St. Louis vs. Bircher,7 Mo. App.169; US vs. Sumulong,
30 Phil.381 1915.) FACTS:
Section 100 of Act 2339 imposed an annual tax of P4 per
(c) Where those with different incomes are made to pay square meter upon electric signs, billboards, and spaces used
different rates of tax because in this case the incomes are for posting or displaying temporary signs, and all signs
considered as belonging to different classes; displayed on premises not occupied by buildings. The section
was amended by Act 2432, reducing the tax to P2 per square
(d) Where residential houses, regardless of their assessed
value, are considered for purposes of taxation as belonging to meter. Francis A. Churchill and Stewart Tait, co-partners in
one class (i.e., residential property and made subject to the Mercantile Advertising Agency, owned a billboard to which they
same rate (e.g., 2% of assessed value) but different amounts were taxes at P104. The tax was paid under protest. Churchill
of tax depending on their value; and Tait instituted the action to recover the amount.
SISON v. ANCHETA; G.R. No. L-59431 - compensation and
ISSUE: business income
Is the statute and the tax imposed void for lack of uniformity? Facts: Section 1 of BP Blg 135 amended the Tax Code and
petitioner Antero M. Sison, as taxpayer, alleges that "he would
RULING: be unduly discriminated against by the imposition of higher
No, the tax is valid. rates of tax upon his income arising from the exercise of his
profession vis-a-vis those which are imposed upon fixed
Uniformity in taxation means that all taxable articles or kinds of income or salaried individual taxpayers. He characterizes said
property, of the same class, shall be taxed at the same rate. It provision as arbitrary amounting to class legislation,
does not mean that all lands, chattels, securities, incomes, oppressive and capricious in character. It therefore violates
occupations, franchises, privileges, necessities, and luxuries both the equal protection and due process clauses of the
shall all be assessed at the same rate. Different articles may Constitution as well asof the rule requiring uniformity in
be taxed at different amounts provided the rate is uniform on taxation.
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.
Issue: Whether BP 135 violates the due process and equal
Wherever found in the Philippine Islands. The rule of taxation
protection clauses, and the rule on uniformity in 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 Held:
levied as privilege or occupation taxes.
There is a need for proof of such persuasive character as
would lead to a conclusion that there was a violation of the due
PHILIPPINE TRUST COMPANY v. YATCO; G.R. Nos. L-
process and equal protection clauses. Absent such showing,
46255, 46256, 46259 and 46277 - banks, exemption gov’t the presumption of validity must prevail. Equality and uniformity
instrumentality 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.
A tax is considered uniform when it operates with the same
force and effect in every place where the subject may be
found. (State v. Railroad Tax Cases, 92 U.S. 575, 595, 612, 23 Where the differentitation conforms to the practical dictates of
Law. ed. 363, 373.) Section 1499 of the Revised Administrative justice and equity, similar to the standards of equal protection,
Code, as amended, applies uniformly to, and operates on, all it is not discriminatory within the meaning of the clause and is
banks in the Philippines without distinction and discrimination, therefore uniform.
and if the National City Bank of New York is exempted from its
operation because it is a federal instrumentality subject only to
the authority of Congress, that alone could have the effect of Taxpayers may be classified into different categories, such as
rendering it violative of the rule of uniformity. 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
In every well-regulated and enlightened state or government, practically no overhead expense, while professionals and
certain descriptions of property and also certain institutions are businessmen have no uniform costs or expenses
exempt from taxation, but these exemptions have never been necessaryh to produce their income. There is ample
regarded as disturbing the rules of taxation, even where the
justification to adopt the gross system of income taxation to
fundamental law had ordained that it should be uniform. (Des
compensation income, while continuing the system of net
Moines Bank v. Fairweather, 263 U.S. 103,118). The rule of income taxation as regards professional and business income.
uniformity does not call for perfect uniformity or perfect
equality, because this is hardly
attainable.chanroblesvirtualawlibrary chanrobles virtual law
library VILLEGAS v. HIU TSIONG TSAI PAO HO; G.R. No. L-29646)
There was no declaration, either express or implied, that Held: The ordinance’s purpose is clearly to raise money under
section 1499 is unconstitutional and the guise of regulation by exacting P50 from aliens who have
void.chanroblesvirtualawlibrary chanrobles virtual law li brar y
Consequently, respondents' arguments for a liberal ORMOC SUGAR v. TREASURER; G.R. No. L-23794
construction of RA 7227 in favor of tax exemptions and Facts:
incentives to business enterprises in the John Hay SEZ must
necessarily fail. As the Court, speaking through Justice The Municipal Board of Ormoc City passed Ordinance No. 4
Mendoza in the recent case of PLDT v. city of Davao, has imposing “on any and all productions of centrifugal sugar milled
occasion to stress: at the Ormoc Sugar Company, Inc., in Ormoc City a municipal
tax equivalent to one per centum (1%) per export sale to USA
"Along with the police power and eminent domain, TAXATION and other foreign countries.” Payments for said tax were made,
is one of the three necessary attributes of sovereignty. under protest, by Ormoc Sugar Company, Inc. Ormoc Sugar
Consequently, statutes in derogation of sovereignty, such as Company, Inc. filed before the Court of First Instance of Leyte
those containing exemption from taxation, should be strictly a complaint against the City of Ormoc as well as its Treasurer,
construed in favor of the state. A state cannot be stripped of Municipal Board and Mayor alleging that the ordinance is
this most essential power by doubtful words and of this highest unconstitutional for being violative of the equal protection
attribute of sovereignty by ambiguous language." clause and the rule of uniformity of taxation. The court
rendered a decision that upheld the constitutionality of the
Necessarily, respondents' arguments, dependent as they are ordinance. Hence, this appeal.
on a liberal construction of tax exemptions, also fail.
Issue:
Public respondents' argument that tax exemptions are
"inherent" in the term "special economic zone" stands the Whether or not constitutional limits on the power of taxation,
concept on its head and cannot be accepted. The tax exempt specifically the equal protection clause and rule of uniformity of
character of an SEZ proceeds from the statutory provisions taxation, were infringed?
expressly conferring such exemptions, not vice versa. The tail
does not wag the dog. Held:
Issue:
Facts: Whether or not the issuing and selling of commemorative
Tolentino et al is questioning the constitutionality of stamps is constitutional?
RA 7716 otherwise known as the Expanded Value Added Tax
(EVAT) Law. Tolentino averred that this revenue bill did not Held/Reason:
exclusively originate from the House of Representatives as The Court said YES, the issuing and selling of commemorative
required by Section 24, Article 6 of the Constitution. Even stamps by the respondent does not contemplate any favor
though RA 7716 originated as HB 11197 and that it passed the upon a particular sect or church, but the purpose was only ‘to
3 readings in the HoR, the same did not complete the 3 advertise the Philippines and attract more tourist’ and the
readings in Senate for after the 1st reading it was referred to government just took advantage of an event considered of
the Senate Ways & Means Committee thereafter Senate international importance, thus, not violating the Constitution on
passed its own version known as Senate Bill 1630. Tolentino its provision on the separation of the Church and State.
averred that what Senate could have done is amend HB 11197 Moreover, the Court stressed that ‘Religious freedom, as a
by striking out its text and substituting it w/ the text of SB 1630 constitutional mandate is not inhibition of profound reverence
in that way “the bill remains a House Bill and the Senate for religion and is not denial of its influence in human affairs’.
version just becomes the text (only the text) of the HB”. Emphasizing that, ‘when the Filipino people ‘implored the aid of
Tolentino and co-petitioner Roco [however] even signed the Divine Providence’, they thereby manifested reliance upon Him
said Senate Bill. who guides the destinies of men and nations. The elevating
influence of religion in human society is recognized here as
Issue: Whether or not EVAT originated in the House of elsewhere. In fact, certain general concessions are
Representatives. indiscriminately accorded to religious sects and
denominations.’
Held:
By a 9-6 vote, the SC rejected the challenge, holding
that such consolidation was consistent with the power of the
g. Power to Tax of Local Government Units; Sec. 5, Art.
Senate to propose or concur with amendments to the version
originated in the HoR. What the Constitution simply means, XI
according to the 9 justices, is that the initiative must come from
the HoR. Note also that there were several instances before MCIAA v. MARCOS; G.R. No. 120082
where Senate passed its own version rather than having the FACTS
HoR version as far as revenue and other such bills are Mactan Cebu International Airport Authority was created by
concerned. This practice of amendment by substitution has virtue of RA 6958 to manage the Mactan International Airport
always been accepted. The proposition of Tolentino concerns and the Lahug Airport. Since the time of its creation, petitioner
a mere matter of form. There is no showing that it would make MCIAA enjoyed the privilege of exemption from payment of
a significant difference if Senate were to adopt his over what realty taxes. In Section 14 of its Charter provides that “the
has been done. Authority shall be exempt from realty taxes imposed by the
National Government or any of its political subdivisions,
agencies and instrumentalities.”
ABAKADA v. ERMITA; G.R. No. 168056
In 1994, however, the Office of the Treasurer of the City of
Cebu demanded payment for realty taxes on several parcels of
e. Prohibition against Imprisonment for Non- land belonging to petitioner. Petitioner objected to such
Payment of Poll Tax; Sec 20, Art. III demand, citing Sec. 14. It asserted that it is an instrumentality
of the government which performs governmental functions,
Prohibition against imprisonment for non- citing Sec. 133 of the Local Government Code which puts
payment of poll tax limitations on the taxing powers of local government units. Sec.
133, LGC provides that the exercise of the taxing powers of
provinces, cities, municipalities and barangays shall not extend
No person shall be imprisoned for debt or non-
to the levy of... taxes, fees or charges of any kind on the
payment of poll tax. [Section 20, Article III, National government, its agencies and instrumentalities and
Constitution] local government units.
The non-imprisonment rule applies to non- The Respondent City refused to cancel and set aside the realty
payment of poll tax which is punishable only by tax account, insisting that the MCIAA is a GOCC whose tax
a surcharge, but not to other violations like exemption privilege has been withdrawn by virtue of Sections
193 and 234 of the LGC. Sec. 193 provides that tax
falsification of community tax certificate and
exemptions or incentives granted to or presently enjoyed by all
non-payment of other taxes. persons, whether natural or juridical, including GOCCs except
local water districts, cooperatives duly registered under RA
Poll tax is a tax of fixed amount imposed on 6938, non-stock and non-profit hospitals and educational
residents within a specific territory regardless institutions are hereby withdrawn upon the effectivity of this
of citizenship, business or profession. Example Code. Section 234 meanwhile provides that exemption from
payment of real property tax previously granted to or presently
is community tax.
enjoyed by all persons, whether natural or juridical, including
GOCCs are hereby withdrawn upon the effectivity of the LGC.
f. Non-Appropriation for the Benefit of
Any Religion; Sec. 29(2); Art. VI Because the City of Cebu was about to issue a warrant of levy
against the properties of MCIAA, the latter was compelled to
AGLIPAY v. RUIZ; G.R. No. L-45459 pay its tax account under protest. MCIAA likewise filed a
petition for declaratory relief with the RTC of Cebu, contending
that the taxing powers of local government units do not extend
Facts: to the levy of taxes or fees of any kind on an instrumentality of
the national government. MCIAA insisted that while it is indeed necessarily follows that its exemption from such tax granted it
a GOCC, it nontheless stands on the same footing as an by its charter has been withdrawn.
agency or instrumentality of the national government by the
very nature of its powers and functions. The City however NPC v. CITY OF CABANATUAN; G.R. No. 149110
maintained that MCIAA is not an instrumentality of the
government but merely a GOCC performing proprietary Facts:
functions, and hence, the exemptions granted to it were
deemed withdrawn by virtue of Secs. 193 and 234 of the LGC. NAPOCOR, a government-owned and controlled corporation,
is tasked to undertake the “development of hydroelectric
The trial court dismissed the petition. MR denied. Hence this generations of power and the production of electricity from
petition. Petitioner asserts that although it is a GOCC, it is nuclear, geothermal, and other sources, as well as, the
mandated to perform functions in the same category as an transmission of electric power on a nationwide basis.”
instrumentality of the government. An instrumentality of the
Government is one created to perform governmental functions For many years now, NAPOCOR sells electric power to the
primarily to promote certain aspects of the economic life of the resident Cabanatuan City, posting a gross income of
people. Petitioner further contends that being an P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance
instrumentality of the National Government, respondent City of No. 165-92, the respondent assessed the petitioner a franchise
Cebu has no power nor authority to impose realty taxes upon it tax amounting to P808,606.41, representing 75% of 1% of the
in accordance with Sec. 133 of the LGC. In Basco v. PAGCOR, former’s gross receipts for the preceding year.
the SC said the local governments have no power to tax
instrumentalities of the National Gov't like PAGCOR, which has Petitioner, whose capital stock was subscribed and wholly paid
a dual role (its role to regulate gambling casinos is by the Philippine Government, refused to pay the tax
governmental, placing it in the category of an agency or assessment. It argued that the respondent has no authority to
instrumentality of the Government which should be exempt impose tax on government entities. Petitioner also contend that
from local taxes. Petitioner thus concludes that there is a as a non-profit organization, it is exempted from the payment
distinction in the LGC between a GOCC performing gov't of all forms of taxes, charges, duties or fees in accordance with
functions as against one performing merely proprietary ones, Sec. 13 of RA 6395, as amended.
and it is clear from Secs. 133 and 234, LGC that the legislature
meant to exclude instrumentalities of the national government The respondent filed a collection suit in the RTC of
from the taxing powers of LGUs. Cabanatuan City, demanding that petitioner pay the assessed
tax, plus surcharge equivalent to 25% of the amount of tax and
ISSUE 2% monthly interest. Respondent alleged that petitioner’s
Whether petitioner is exempted from payment of taxes or not exemption from local taxes has been repealed by Sec. 193 of
RA 7160 (Local Government Code). The trial court issued an
RULING order dismissing the case. On appeal, the Court of Appeals
No. Taxation is the rule and exemption is the exception. Thus, reversed the decision of the RTC and ordered the petitioner to
the exemption may be withdrawn at the pleasure of the taxing pay the city government the tax assessment.
authority. The only exception to this rule is where the
exemption was granted to private parties based on material Issues:
consideration of a mutual nature, which then becomes Whether or not NAPOCOR is excluded from the coverage of
contractual and is thus covered by the non-impairment clause the franchise tax simply because its stocks are wholly owned
of the Constitution. by the National Government and its charter characterized is as
a ‘non-profit organization’.
The general rule, as laid down in Section 133 of the LGC is
that the taxing powers of LGUs cannot extend to the levy of, Whether or not NAPOCOR’s exemption from all forms of taxes
inter alia, “taxes, fees and charges of any kind on the National is repealed by the provisions of the Local Government Code
Government, its agencies, and instrumentalities, and LGUs.” (LGC)
However, pursuant to Section 232, provinces, cities and Held:
municipalities in the Metro Manila Area MAY impose real
property taxes except on inter alia, real property owned by the (1) NO. To stress, a franchise tax is imposed based not on the
Republic of the Philippines or any of its political subdivisions ownership but on the exercise by the corporation of a privilege
except when the beneficial use thereof has been granted for to do business. The taxable entity is the corporation which
consideration or otherwise, to a taxable person (Sec. 234a). exercises the franchise, and not the individual stockholders. By
virtue of its charter, petitioner was created as a separate and
As to tax exemptions/incentives granted to or presently distinct entity from the National Government. It can sue and be
enjoyed by natural or juridical persons, including GOCCs, sued under its own name, and can exercise all the powers of a
corporation under the Corporation Code. To be sure, the
GENERAL RULE: Tax exemptions or incentives are withdrawn ownership by the National Government of its entire capital
upon the effectivity of the LGC stock does not necessarily imply that petitioner is no engage
din business.
EXCEPTION: Those granted to local water districts,
cooperatives duly registered under RA 6938, non-stock and (2) YES. One of the most significant provisions of the LGC is
non-profit hospitals and educ institutions, and unless otherwise the removal of the blanket exclusion of instrumentalities and
provided in the LGC. This latter proviso could refer to Section agencies of the National Government from the coverage of
234 enumerating the properties exempt from real property tax. local taxation. Although as a general rule, LGUs cannot impose
The last paragraph of Section 234 further qualifies the taxes, fees, or charges of any kind on the National
retention of the exemption insofar as real property taxes are Government, its agencies and instrumentalities, this rule now
concerned by limiting the retention only to those enumerated admits an exception, i.e. when specific provisions of the LGC
therein; all others not included in the enumeration therefore authorize the LGUs to impose taxes, fees, or charges on the
lost the privilege upon the effectivity of the LGC. Even as to aforementioned entities. The legislative purpose to withdraw
real property owned by the Rep. Of the Philippines or any of its tax privileges enjoyed under existing laws or charter is clearly
political subdivisions covered by item (a) of the first paragraph manifested by the language used on Sec. 137 and 193
of Section 234, the exemption is withdrawn if the beneficial use categorically withdrawing such exemption subject only to the
of such property has been granted to a taxable person for exceptions enumerated. Since it would be tedious and
consideration or otherwise. impractical to attempt to enumerate all the existing statutes
providing for special tax exemptions or privileges, the LGC
Since the last paragraph of Section 234 unequivocally provided for an express, albeit general, withdrawal of such
withdrew, upon the effectivity of the LGC, exemptions from exemptions or privileges. No more unequivocal language could
payment of real property taxes granted to natural or juridical have been used.
persons, including government-owned or controlled
corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it
MIAA v. CA; G.R. No. 155650 void for being contrary to public policy. Essential public
Facts: services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale. This will happen
MIAA received Final Notices of Real Estate Tax Delinquency if the City of Parañaque can foreclose and compel the auction
from the City of Parañaque for the taxable years 1992 to 2001. sale of the 600-hectare runway of the MIAA for non-payment of
MIAA’s real estate tax delinquency was estimated at P624 real estate tax.
million. The City of Parañaque, through its City Treasurer,
issued notices of levy and warrants of levy on the Airport
Lands and Buildings. The Mayor of the City of Parañaque h. Veto Power of the President; Sec. 27(2), Art. VI
threatened to sell at public auction the Airport Lands and
Buildings should MIAA fail to pay the real estate tax i. Due Process; Sec. 1, Art. III
delinquency.
PEPSI-COLA v. MUNICIPALITY OF TANAUAN; G.R. No. L-
MIAA filed a petition sought to restrain the City of Parañaque 31156
from imposing real estate tax on, levying against, and
auctioning for public sale the Airport Lands and Buildings. DOCTRINE:
The City of Parañaque contended that Section 193 of the Local municipalities may be permitted to tax subjects which for
Government Code expressly withdrew the tax exemption reasons of public policy the State has not deemed wise to tax
privileges of “government-owned and-controlled corporations” for more general purposes.
upon the effectivity of the Local Government Code. Thus,
This is not to say though that the constitutional injunction
MIAA cannot claim that the Airport Lands and Buildings are
against deprivation of property without due process of law may
exempt from real estate tax
be passed over under the guise of the taxing power, except
when the taking of the property is in the lawful exercise of the
MIAA argued that Airport Lands and Buildings are owned by
taxing power, as when (1) the tax is for a public purpose; (2)
the Republic. The government cannot tax itself. The reason for
the rule on uniformity of taxation is observed; (3) either the
tax exemption of public property is that its taxation would not person or property taxed is within the jurisdiction of the
inure to any public advantage, since in such a case the tax government levying the tax; and (4) in the assessment and
debtor is also the tax creditor. collection of certain kinds of taxes notice and opportunity for
hearing are provided.
Issue:
Due process is usually violated where the tax imposed is for a
Whether or not the City of Parañaque can impose real tax, levy private as distinguished from a public purpose; a tax is
against and auction for public sale the Airport Lands and imposed on property outside the State, i.e., extraterritorial
Buildings. taxation; and arbitrary or oppressive methods are used in
assessing and collecting taxes.
Held:
But, a tax does not violate the due process clause, as applied
MIAA is Not a Government-Owned or Controlled to a particular taxpayer, although the purpose of the tax will
Corporation. The Airport Lands and Buildings of MIAA are result in an injury rather than a benefit to such taxpayer.
property of public dominion and therefore owned by the State
or the Republic of the Philippines. No one can dispute that Due process does not require that the property subject to the
properties of public dominion mentioned in Article 420 of the tax or the amount of tax to be raised should be determined by
judicial inquiry, and a notice and hearing as to the amount of
Civil Code, like “roads, canals, rivers, torrents, ports and
the tax and the manner in which it shall be apportioned are
bridges constructed by the State,” are owned by the State. The
generally not necessary to due process of law.
term “ports” includes seaports and airports. The MIAA Airport
Lands and Buildings constitute a “port” constructed by the
State.
CIR v. CA; G.R. No. 119761
Under Article 420 of the Civil Code, the MIAA Airport Lands
and Buildings are properties of public dominion and thus In this case, the court declared that:
owned by the State or the Republic of the Philippines. The
Airport Lands and Buildings are devoted to public use because In order that there shall be a just enforcement of rules and
regulations, in conformity with the basic element of due
they are used by the public for international and domestic
process, the following procedures are hereby prescribed for
travel and transportation. The fact that the MIAA collects the drafting, issuance and implementation of the said Revenue
terminal fees and other charges from the public does not Tax Issuances:
remove the character of the Airport Lands and Buildings as
properties for public use. The charging of fees to the public (1) This Circular shall apply only to (a) Revenue Regulations;
does not determine the character of the property whether it is (b) Revenue Audit Memorandum Orders; and (c) Revenue
of public dominion or not. Article 420 of the Civil Code defines Memorandum Circulars and Revenue Memorandum Orders
bearing on internal revenue tax rules and regulations.
property of public dominion as one “intended for public use.”
FACTS: ISSUE:
Does CA 703 cover taxes paid before its enactment as the
Petitioners JBL Reyes et al. owned a parcel of land in Tondo
which are leased and occupied as dwelling units by tenants plaintiff maintains and the courts below held, or does it refer,
who were paying monthly rentals of not exceeding P300. as the City Treasurer believes, only to taxes which were still
Sometimes in 1971 the Rental Freezing Law was passed unpaid?
prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling units where rentals do not exceed RULING:
three hundred pesos (P300.00), so that the Reyeses were
precluded from raising the rents and from ejecting the tenants.
The law is clear that it applies to “taxes and penalties due and
In 1973, respondent City Assessor of Manila re-classified and payable”, i.e. taxes owed and owing. The remission of
reassessed the value of the subject properties based on the taxes due and payable to the exclusion of taxes already
schedule of market values, which entailed an increase in the collected does not constitute unfair discrimination.
corresponding tax rates prompting petitioners to file a
Memorandum of Disagreement averring that the The taxpayers who paid their taxes before liberation and those
reassessments made were "excessive, unwarranted, who had not were not on the same footing on the need of
inequitable, confiscatory and unconstitutional"
considering that the taxes imposed upon them greatly material relief.
exceeded the annual income derived from their Taxpayers who had been in arrears in their obligation would
properties. have to satisfy their liability with genuine currency, while the
taxes paid during the occupation had been satisfied in
They argued that the income approach should have been used Japanese War Notes, many of them at a time when those
in determining the land values instead notes were well-nigh worthless. To refund those taxes with
restored currency would unduly enrich many of the payers at a
greater expense to the people at large. Trial Court dismissed the complaint
NO. The SC held that it violates the equal protection clause for Chapter 60 of the Revised Administrative Code, the
it taxes only sugar produced and exported by petitioner and Municipal Board of the City of Manila is empowered to tax and
none other. Even though petitioner, at the time of the fix the license fees on retail dealers engaged in the sale of
enactment of the ordinance, was the only sugar central in books
Ormoc, the classification should have been in terms applicable
to future conditions as well. The taxing ordinance should not be Sec. 18(o) of RA 409: to tax and fix the license fee on dealers
singular and exclusive as to exclude any subsequently in general merchandise, including importers and indentors,
established sugar central, of the same class as petitioner, for except those dealers who may be expressly subject to the
the coverage of the tax. payment of some other municipal tax. Further, Dealers in
general merchandise shall be classified as (a) wholesale
Though, petitioner can be refunded, they are not entitled to dealers and (b) retail dealers. For purposes of the tax on retail
interest because the taxes were not arbitrarily collected as the dealers, general merchandise shall be classified into four main
ordinance provided a sufficient basis to preclude arbitrariness, classes: namely (1) luxury articles, (2) semi-luxury articles, (3)
the same being then presumed constitutional until declared essential commodities, and (4) miscellaneous articles. A
otherwise. separate license shall be prescribed for each class but where
commodities of different classes are sold in the same
establishment, it shall not be compulsory for the owner to
secure more than one license if he pays the higher or highest
rate of tax prescribed by ordinance. Wholesale dealers shall
k. Religious Freedom & Non-Establishment of pay the license tax as such, as may be provided by ordinance
Religion; Sec. 5, Art. III
The only difference between the 2 provisions is the limitation
as to the amount of tax or license fee that a retail dealer has to
AMERICAN BIBLE SOCIETY v. CITY OF MANILA; G.R. No. L-
pay per annum
9637
As held in Murdock vs. Pennsylvania, The power to impose a
Facts: license tax on the exercise of these freedoms provided for in
the Bill of Rights, is indeed as potent as the power of
American Bible Society is a foreign, non-stock, non-profit, censorship which this Court has repeatedly struck down. It is
religious, missionary corporation duly registered and doing not a nominal fee imposed as a regulatory measure to defray
business in the Philippines through its Philippine agency the expenses of policing the activities in question. It is in no
established in Manila in November, 1898 City of Manila is a way apportioned. It is flat license tax levied and collected as a
municipal corporation with powers that are to be exercised in condition to the pursuit of activities whose enjoyment is
conformity with the provisions of Republic Act No. 409, known guaranteed by the constitutional liberties of press and religion
as the Revised Charter of the City of Manila American Bible and inevitably tends to suppress their exercise. That is almost
Society has been distributing and selling bibles and/or gospel uniformly recognized as the inherent vice and evil of this flat
portions throughout the Philippines and translating the same license tax.
into several Philippine dialect.
City Treasurer of Manila informed American Bible Society that Further, the case also mentioned that the power to tax the
it was violating several Ordinances for operating without the exercise of a privilege is the power to control or suppress its
necessary permit and license, thereby requiring the corporation enjoyment. Those who can tax the exercise of this religious
to secure the permit and license fees covering the period from practice can make its exercise so costly as to deprive it of the
4Q 1945-2Q 1953 To avoid closing of its business, American resources necessary for its maintenance. Those who can tax
Bible Society paid the City of Manila its permit and license fees the privilege of engaging in this form of missionary evangelism
under protest American Bible filed a complaint, questioning the can close all its doors to all those who do not have a full purse
constitutionality and legality of the Ordinances 2529 and 3000,
and prayed for a refund of the payment made to the City of Under Sec. 27(e) of Commonwealth Act No. 466 or the
Manila. They contended: National Internal Revenue Code, Corporations or
associations organized and operated exclusively for religious,
They had been in the Philippines since 1899 and were not charitable, . . . or educational purposes, . . .: Provided,
required to pay any license fee or sales tax it never made any however, That the income of whatever kind and character from
profit from the sale of its bibles any of its properties, real or personal, or from any activity
conducted for profit, regardless of the disposition made of such
City of Manila prayed that the complaint be dismissed, income, shall be liable to the tax imposed under this Code shall
reiterating the constitutionality of the Ordinances in question not be taxed
Such determination is said to be in lieu of all taxes and
The price asked for the bibles and other religious pamphlets assessments of whatever nature imposed by any national or
was in some instances a little bit higher than the actual cost of local authority on earnings, receipts, income and privilege of
the same but this cannot mean that American Bible Society generation, distribution and sale of electric current. However,
was engaged in the business or occupation of selling said the claim for refund was denied by Governor Jose D. Lina
"merchandise" for profit relying on a more recent law, i.e. RA 7160 than the old decree
invoked by MERALCO. The RTC further denied a complaint for
Therefore, the Ordinance cannot be applied for in doing so it refund for the same and upheld the validity of the provincial
would impair American Bible Society’s free exercise and ordinance.
enjoyment of its religious profession and worship as well as its
rights of dissemination of religious beliefs. ISSUE: W/N the franchise tax imposed under the Ordinance
violates the non-impairment clause and Sec 1 of PD 551; W/N
Wherefore, and on the strength of the foregoing MERALCO is exempted from taxation under the LGC or Local
considerations, We hereby reverse the decision appealed Tax Code; thus, should be taxed under PD 551.
from, sentencing defendant return to plaintiff the sum of
P5,891.45 unduly collected from it RULE:
FACTS:
RULING:
No. First, the Court held that the President had authority to
issue EO 273 as it was provided in the Provisional constitution
that the President shall have legislative powers.