1.
shares registered in the names of private persons and acquired with
REPUBLIC OF THE PHILIPPINES, represented by the
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG),
petitioner, vs. COCOFED, et al. and BALLARES, et al.,1 EDUARDO
M. COJUANGCO, JR. and the SANDIGANBAYAN (First Division),
respondents.
REPUBLIC v. COCOFED, G.R. No. 147062-64, December 14,
2001 (Coconut levy funds are prima facie public funds which should be
subjected to COA audit)
Facts:
The PCGG issued and implemented numerous sequestrations, freeze
orders and provisional takeovers of allegedly ill-gotten companies,
assets and properties, real or personal. Among the properties
sequestered by the Commission were shares of stock in the United
Coconut Planters Bank (UCPB) registered in the names of the alleged
“one million coconut farmers,” the so-called Coconut Industry
Investment Fund companies (CIIF companies) and Private Respondent
Eduardo Cojuangco Jr. In connection with the sequestration of the said
UCPB shares, the PCGG, on July 31, 1987, instituted an action for
reconveyance, reversion, accounting, restitution and damages docketed
as Case No. 0033 in the Sandiganbayan.
On November 15, 1990, upon Motion of Private Respondent
COCOFED, the Sandiganbayan issued a Resolution lifting the
sequestration of the subject UCPB shares on the ground that herein
private respondents – in particular, COCOFED and the so-called CIIF
companies – had not been impleaded by the PCGG as parties-
defendants in its July 31, 1987 Complaint for reconveyance, reversion,
accounting, restitution and damages.
This Sandiganbayan Resolution was challenged by the PCGG in a
Petition for Certiorari docketed as GR No. 96073 in this Court.
Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the
holding of elections for the Board of Directors of UCPB. However, the
PCGG applied for and was granted by this Court a Restraining Order
enjoining the holding of the election. Subsequently, the Court lifted the
Restraining Order and ordered the UCPB to proceed with the election of
its board of directors. Furthermore, it allowed the sequestered shares to
be voted by their registered owners.
On February 23, 2001, “COCOFED, et al. and Ballares, et al.” filed the
“Class Action Omnibus Motion” referred to earlier in Sandiganbayan
Civil Case Nos. 0033-A, 0033-B and 0033-F, asking the court a quo:
“1. To enjoin the PCGG from voting the UCPB shares of stock registered
in the respective names of the more than one million coconut farmers;
and
“2. To enjoin the PCGG from voting the SMC shares registered in the
names of the 14 CIIF holding companies including those registered in
the name of the PCGG.”
Issue:
Who may vote the sequestered UCPB shares while the main case for
their reversion to the State is pending in the Sandiganbayan?
Ruling:
This Court holds that the government should be allowed to continue
voting those shares inasmuch as they were purchased with coconut levy
funds – funds that are prima facie public in character or, at the very least,
are “clearly affected with public interest.”
General Rule: Sequestered Shares Are Voted by the Registered Holder
At the outset, it is necessary to restate the general rule that the
registered owner of the shares of a corporation exercises the right and
the privilege of voting. (Sec. 24, BP 68) This principle applies even to
shares that are sequestered by the government, over which the PCGG
as a mere conservator cannot, as a general rule, exercise acts of
dominion. On the other hand, it is authorized to vote these sequestered
allegedly ill-gotten wealth, if it is able to satisfy the two-tiered
test devised by the Court in Cojuangco v. Calpo (G.R. No. 115352, June
10, 1993) and PCGG v. Cojuangco Jr., (133197, Jan. 27, 1999) as
follows:
(1) Is there prima facie evidence showing that the said shares are ill-
gotten and thus belong to the State?
(2) Is there an imminent danger of dissipation, thus necessitating their
continued sequestration and voting by the PCGG, while the main issue
is pending with the Sandiganbayan?
Sequestered Shares Acquired with Public Funds Are an Exception
From the foregoing general principle, the Court in Baseco v. PCGG
(“Baseco”) and Cojuangco Jr. v. Roxas, G.R. No. 91925, April 16, 1991)
(“Cojuangco-Roxas”) has provided two clear “public character”
exceptions under which the government is granted the authority to vote
the shares:
(1) Where government shares are taken over by private persons or
entities who/which registered them in their own names, and
(2) Where the capitalization or shares that were acquired with public
funds somehow landed in private hands.
The exceptions are based on the common-sense principle that legal
fiction must yield to truth; that public property registered in the names of
non-owners is affected with trust relations; and that the prima facie
beneficial owner should be given the privilege of enjoying the rights
flowing from the prima facie fact of ownership.
The “public character” test was reiterated in many subsequent cases;
most recently, in Antiporda v. Sandiganbayan. (G.R. No. 116941, May
31, 2001) Expressly citing Cojuangco-Roxas, this Court said that in
determining the issue of whether the PCGG should be allowed to vote
sequestered shares, it was crucial to find out first whether these were
purchased with public funds, as follows:
“It is thus important to determine first if the sequestered corporate shares
came from public funds that landed in private hands.” In short, when
sequestered shares registered in the names of private individuals or
entities are alleged to have been acquired with ill-gotten wealth, then the
two-tiered test is applied. However, when the sequestered shares in the
name of private individuals or entities are shown, prima facie, to have
been (1) originally government shares, or (2) purchased with public
funds or those affected with public interest, then the two-tiered test does
not apply. Rather, the public character exceptions in Baseco v. PCGG
and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote
the shares.
UCPB Shares Were Acquired With Coconut Levy Funds
In the present case before the Court, it is not disputed that the money
used to purchase the sequestered UCPB shares came from the Coconut
Consumer Stabilization Fund (CCSF), otherwise known as the coconut
levy funds. This fact was plainly admitted by private respondent’s
counsel, Atty. Teresita J. Herbosa, during the Oral Arguments held on
April 17, 2001 in Baguio City. Indeed in Cocofed v. PCGG, this Court
categorically declared that the UCPB was acquired “with the use of the
Coconut Consumers Stabilization Fund in virtue of Presidential Decree
No. 755, promulgated on July 29, 1975.”
Coconut Levy Funds Are Affected With Public Interest
Having conclusively shown that the sequestered UCPB shares were
purchased with coconut levies, we hold that these funds and shares are,
at the very least, “affected with public interest.” The Resolution issued
by the Court on February 16, 1993 in Republic v. Sandiganbayan (G.R.
No. 96073, stated that coconut levy funds were “clearly affected with
public interest”; thus, herein private respondents – even if they are the
registered shareholders – cannot be accorded the right to vote them. We
quote the said Resolution in part, as follows:
“The coconut levy funds being ‘clearly affected with public interest, it
follows that the corporations formed and organized from those funds,
and all assets acquired therefrom should also be regarded as ‘clearly
affected with public interest.’”
“The utilization and proper management of the coconut levy funds,
raised as they were by the State’s police and taxing powers, are certainly
the concern of the Government. It cannot be denied that it was the
welfare of the entire nation that provided the prime moving factor for the
imposition of the levy. It cannot be denied that the coconut industry is
one of the major industries supporting the national economy. It is,
therefore, the State’s concern to make it a strong and secure source not
only of the livelihood of a significant segment of the population but also
of export earnings the sustained growth of which is one of the
imperatives of economic stability. The coconut levy funds are clearly
affected with public interest. Until it is demonstrated satisfactorily that
they have legitimately become private funds, they must prima facie and
by reason of the circumstances in which they were raised and
accumulated be accounted subject to the measures prescribed in E.O.
Nos. 1, 2, and 14 to prevent their concealment, dissipation, etc., which
measures include the sequestration and other orders of the PCGG
complained of.” (Italics supplied)
To repeat, the foregoing juridical situation has not changed. It is still the
truth today: “the coconut levy funds are clearly affected with public
interest.”
To stress, the two-tiered test is applied only when the sequestered asset
in the hands of a private person is alleged to have been acquired with
ill-gotten wealth. Hence, in PCGG v. Cojuangco, we allowed Eduardo
Cojuangco Jr. to vote the sequestered shares of the San Miguel
Corporation (SMC) registered in his name but alleged to have been
acquired with ill-gotten wealth. We did so on his representation that he
had acquired them with borrowed funds and upon failure of the PCGG
to satisfy the “two-tiered” test. This test was, however, not applied to
sequestered SMC shares that were purchased with coco levy funds.
In the present case, the sequestered UCPB shares are confirmed to
have been acquired with coco levies, not with alleged ill-gotten wealth.
Hence, by parity of reasoning, the right to vote them is not subject to the
“two-tiered test” but to the public character of their acquisition, which per
Antiporda v. Sandiganbayan cited earlier, must first be determined.
Coconut Levy Funds Are Prima Facie Public Funds
To avoid misunderstanding and confusion, this Court will even be more
categorical and positive than its earlier pronouncements: the coconut
levy funds are not only affected with public interest; they are, in fact,
prima facie public funds. Public funds are those moneys belonging to
the State or to any political subdivision of the State; more specifically,
taxes, customs duties and moneys raised by operation of law for the
support of the government or for the discharge of its obligations.
(Beckner v. Commonwealth, 5 SE2d 525, Nov. 20, 1939) Undeniably,
coconut levy funds satisfy this general definition of public funds, because
of the following reasons:
1. Coconut levy funds are raised with the use of the police and taxing
powers of the State.
2. They are levies imposed by the State for the benefit of the coconut
industry and its farmers.
3. Respondents have judicially admitted that the sequestered shares
were purchased with public funds.
4. The Commission on Audit (COA) reviews the use of coconut levy
funds.
5. The Bureau of Internal Revenue (BIR), with the acquiescence of
private respondents, has treated them as public funds.
6. The very laws governing coconut levies recognize their public
character.
We shall now discuss each of the foregoing reasons (among others),
any one of which is enough to show their public character.
xxx
3. Respondents Judicially Admit That the Levies Are Government
Funds.
Equally important as the fact that the coconut levy funds were raised
through the taxing and police powers of the State is respondents’
effective judicial admission that these levies are government funds. As
shown by the attachments to their pleadings, respondents concede that
the Coconut Consumers Stabilization Fund (CCSF) and the Coconut
Investment Development Fund “constitute government funds x x x for
the benefit of coconut farmers.”
4. The COA Audit Shows the Public Nature of the Funds.
Under COA Office Order No. 86-9470 dated April 15, 1986, the COA
reviewed the expenditure and use of the coconut levies allocated for the
acquisition of the UCPB. The audit was aimed at ascertaining whether
these were utilized for the purpose for which they had been intended.
Because these funds have been subjected to COA audit, there can be
no other conclusion than that they are prima facie public in character.
Having shown that the coconut levy funds are not only affected with
public interest, but are in fact prima facie public funds, this Court
believes that the government should be allowed to vote the questioned
shares, because they belong to it as the prima facie beneficial and true
owner.
In sum, we hold that the Sandiganbayan committed grave abuse of
discretion in grossly contradicting and effectively reversing existing
jurisprudence, and in depriving the government of its right to vote the
sequestered UCPB shares which are prima facie public in character.
The Petition is hereby GRANTED and the assailed Order SET ASIDE.
The PCGG shall continue voting the sequestered shares until
Sandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F are finally
and completely resolved.
Facts: Immediately after the 1986 EDSA Revolution, then President
Corazon C. Aquino issued Executive Orders 1, 5 2 6 and 14. On the
explicit premise that vast resources of the government have been
amassed by former President Ferdinand E. Marcos, his immediate
family, relatives, and close associates both here and abroad, the
Presidential Commission on Good Government (PCGG) was created by
Executive Order 1 to assist the President in the recovery of the ill-gotten
wealth thus accumulated whether located in the Philippines or abroad.
Executive Order 2 stated that the ill-gotten assets and properties are in
the form of bank accounts, deposits, trust accounts, shares of stocks,
buildings, shopping centers, condominiums, mansions, residences,
estates, and other kinds of real and personal properties in the
Philippines and in various countries of the world. Executive Order 14, on
the other hand, empowered the PCGG, with the assistance of the Office
of the Solicitor General and other government agencies, inter alia, to file
and prosecute all cases investigated by it under EOs 1 and 2. Pursuant
to these laws, the PCGG issued and implemented numerous
sequestrations, freeze orders and provisional takeovers of allegedly ill-
gotten companies, assets and properties, real or personal.
Among the properties sequestered by the Commission were shares of
stock in the United Coconut Planters Bank (UCPB) registered in the
names of the alleged “one million coconut farmers,” the so-called
Coconut Industry Investment Fund companies (CIIF companies) and
Eduardo Cojuangco Jr. In connection with the sequestration of the said
UCPB shares, the PCGG, on 31 July 1987, instituted an action for
reconveyance, reversion, accounting, restitution and damages (Case
0033) in the Sandiganbayan. On 15 November 1990, upon Motion of
COCOFED, the Sandiganbayan issued a Resolution lifting the
sequestration of the subject UCPB shares on the ground that
COCOFED and the so-called CIIF companies had not been impleaded
by the PCGG as parties-defendants in its 31 July 1987 Complaint for
reconveyance, reversion, accounting, restitution and damages. The
Sandiganbayan ruled that the Writ of Sequestration issued by the
Commission was automatically lifted for PCGG’s failure to commence
the corresponding judicial action within the six-month period ending on
2 August 1987 provided under Section 26, Article XVIII of the 1987
Constitution. The anti-graft court noted that though these entities were
listed in an annex appended to the Complaint, they had not been named
as parties-respondents. The Sandiganbayan Resolution was challenged
by the PCGG in a Petition for Certiorari (GR 96073) in the Supreme
Court. Meanwhile, upon motion of Cojuangco, the anti-graft court
ordered the holding of elections for the Board of Directors of UCPB.
However, the PCGG applied for and was granted by this Court a
Restraining Order enjoining the holding of the election. Subsequently,
the Court lifted the Restraining Order and ordered the UCPB to proceed
with the election of its board of directors. Furthermore, it allowed the
sequestered shares to be voted by their registered owners. The victory
of the registered shareholders was fleeting because the Court, acting on
the solicitor general’s Motion for Clarification/Manifestation, issued a
Resolution on 16 February 1993, declaring that “the right of COCOFED,
et. al. to vote stock in their names at the meetings of the UCPB cannot
be conceded at this time. That right still has to be established by them
before the Sandiganbayan. Until that is done, they cannot be deemed
legitimate owners of UCPB stock and cannot be accorded the right to
vote them.” On 23 January 1995, the Court rendered its final Decision in
GR 96073, nullifying and setting aside the 15 November 1990
Resolution of the Sandiganbayan which lifted the sequestration of the
subject UCPB shares.
A month thereafter, the PCGG — pursuant to an Order of the
Sandiganbayan — subdivided Case 0033 into eight Complaints (Cases
0033-A to 0033-H). Six years later, on 13 February 2001, the Board of
Directors of UCPB received from the ACCRA Law Office a letter written
on behalf of the COCOFED and the alleged nameless one million
coconut farmers, demanding the holding of a stockholders’ meeting for
the purpose of, among others, electing the board of directors. In
response, the board approved a Resolution calling for a stockholders’
meeting on 6 March 2001 at 3 p.m. On 23 February 2001, “COCOFED,
et al. and Ballares, et al.” filed the “Class Action Omnibus Motion” in
Sandiganbayan Civil Cases 0033-A, 0033-B and 0033-F, asking the
Sandiganbayan to enjoin the PCGG from voting the UCPB shares of
stock registered in the respective names of the more than one million
coconut farmers; and to enjoin the PCGG from voting the SMC shares
registered in the names of the 14 CIIF holding companies including
those registered in the name of the PCGG. On 28 February 2001, the
Sandiganbayan, after hearing the parties on oral argument, issued the
Order, authorizing COCOFED, et. al. and Ballares, et. al. as well as
Cojuangco, as are all other registered stockholders of the United
Coconut Planters Bank, until further orders from the Court, to exercise
their rights to vote their shares of stock and themselves to be voted upon
in the United Coconut Planters Bank (UCPB) at the scheduled
Stockholders’ Meeting on 6 March 2001 or on any subsequent
continuation or resetting thereof, and to perform such acts as will
normally follow in the exercise of these rights as registered stockholders.
The Republic of the Philippines represented by the PCGG filed the
petition for certiorari.
Issue: Whether the PCGG can vote the sequestered UCPB shares.
Held: The registered owner of the shares of a corporation exercises the
right and the privilege of voting. This principle applies even to shares
that are sequestered by the government, over which the PCGG as a
mere conservator cannot, as a general rule, exercise acts of dominion.
On the other hand, it is authorized to vote these sequestered shares
registered in the names of private persons and acquired with allegedly
ill-gotten wealth, if it is able to satisfy the two-tiered test devised by the
Court in Cojuangco v. Calpo and PCGG v. Cojuangco Jr. Two clear
“public character” exceptions under which the government is granted the
authority to vote the shares exist (1) Where government shares are
taken over by private persons or entities who/which registered them in
their own names, and (2) Where the capitalization or shares that were
acquired with public funds somehow landed in private hands. The
exceptions are based on the common-sense principle that legal fiction
must yield to truth; that public property registered in the names of non-
owners is affected with trust relations; and that the prima facie beneficial
owner should be given the privilege of enjoying the rights flowing from
the prima facie fact of ownership. In short, when sequestered shares
registered in the names of private individuals or entities are alleged to
have been acquired with ill-gotten wealth, then the two-tiered test is
applied. However, when the sequestered shares in the name of private
individuals or entities are shown, prima facie, to have been (1) originally
government shares, or (2) purchased with public funds or those affected
with public interest, then the two-tiered test does not apply. Rather, the
public character exceptions in Baseco v. PCGG and Cojuangco Jr. v.
Roxas prevail; that is, the government shall vote the shares. Herein, the
money used to purchase the sequestered UCPB shares came from the
Coconut Consumer Stabilization Fund (CCSF), otherwise known as the
coconut levy funds. The sequestered UCPB shares are confirmed to
have been acquired with coco levies, not with alleged ill-gotten wealth.
As the coconut levy funds are not only affected with public interest, but
are in fact prima facie public funds, the Court believes that the
government should be allowed to vote the questioned shares, because
they belong to it as the prima facie beneficial and true owner. The
Sandiganbayan committed grave abuse of discretion in grossly
contradicting and effectively reversing existing jurisprudence, and in
depriving the government of its right to vote the sequestered UCPB
shares which are prima facie public in character.
2.
PASEO REALTY & DEVELOPMENT CORPORATION, petitioner,
vs. COURT OF APPEALS, COURT OF TAX APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents.
Facts:
Petitioner filed a its Income Tax Return (ITR) for the calendar year 1989.
He later filed with respondent CTA for a refund of excess creditable
taxes withholding (CTW) and income taxes for the years 1989 and 1990
in the aggregate amount of 147, 036.15.
Respondent Commissioner (CIR) filed an Answer stating some
defenses. The Court rendered decision in favor of the petitioner.
However, CIR filed a Motion for Reconsideration (MFR) alleging that the
amount sought to be refunded “has already been included in the 172,
447 which the petitioner applied as tax credit for the succeeding taxable
year 1990.
Upon the respondent Court (RC) dismissed the petition, the petitioner
filed MFR which was denied by the RC. Thus, petitioner filed a petition
for Review before the CA. The appellate court held that petitioner is not
entitled to a refund because it appears that the latter did not specify the
amount to be refunded and the amount to be applied as tax credit to the
succeeding taxable year, but only marked an “X” to the box indicating
“to be applied as tax credit to the succeeding taxable year” when the
latter filed its income tax return for the year 1989.
The Office of the Solicitor General (OSG) filed a Comment that the
claimed refund was to be applied against its tax liability for 1990.
Petitioner filed a Reply that the issue is not whether the 54,104 was
included as tax credit to be applied against its 1990 income tax liability
but whether the same amount was actually applied as tax credit for
1990.
The OSG filed a Rejoinder that petitioner’s 1989 tax return shows that
the latter included 1988 excess credit which had already been
segregated for refund and specified that the full amount of Php 172,
479.00 be considered as its tax credit for 1990. The OSG further
contended that the remaining tax credit for 1989 should be the excess
credit to be applied against its 1990 tax liability. Hence, petitioner ask
for a refund of its CTW in 1989 because it had been applied against its
1990 tax due.
Issue:
Whether or not the petitioner should be refunded. WON the alleged
excess taxes paid by Paseo Realty in 1989 should be refunded or
credited against its tax liabilities in 1990?
Ruling:
No. The grant of refund is founded on the assumption that the tax return
is valid. Without the tax return, it is error to grant a refund since it would
be impossible to determine whether the proper taxes have been
assessed and paid.
In this case, petitioner did not present evidence to prove that its claimed
refund had already been automatically credited against its 1990 tax
liability. The burden of proof to establish the factual basis of claim for tax
credit or refund lies on the claimant. Tax refunds are construed strictly
against the taxpayer.
Under the provision, the taxpayer is allowed three (3) options if the sum
of its quarterly tax payments made during the taxable year is not equal
to the total tax due for that year:
pay the balance of the tax still due;
carry-over the excess credit; or
be credited or refunded the amount period.
3.
CHAMBER OF REAL ESTATE AND BUILDERS’ ASSOCIATIONS,
INC., petitioner, vs. THE HON. EXECUTIVE SECRETARY
ALBERTO ROMULO, THE HON. ACTING SECRETARY OF
FINANCE JUANITA D. AMATONG, and THE HON. COMMISSIONER
OF INTERNAL REVENUE GUILLERMO PARAYNO, JR.,
respondents.
FACTS:
CREBA assails the imposition of the minimum corporate income tax
(MCIT) as being violative of the due process clause as it levies income
tax even if there is no realized gain. They also question the creditable
withholding tax (CWT) on sales of real properties classified as ordinary
assets stating that (1) they ignore the different treatment of ordinary
assets and capital assets; (2) the use of gross selling price or fair market
value as basis for the CWT and the collection of tax on a per transaction
basis (and not on the net income at the end of the year) are inconsistent
with the tax on ordinary real properties; (3) the government collects
income tax even when the net income has not yet been determined; and
(4) the CWT is being levied upon real estate enterprises but not on other
enterprises, more particularly those in the manufacturing sector.
ISSUE:
Are the impositions of the MCIT on domestic corporations and CWT
on income from sales of real properties classified as ordinary assets
unconstitutional?
HELD:
NO. MCIT does not tax capital but only taxes income as shown by the
fact that the MCIT is arrived at by deducting the capital spent by a
corporation in the sale of its goods, i.e., the cost of goods and other
direct expenses from gross sales. Besides, there are sufficient
safeguards that exist for the MCIT: (1) it is only imposed on the 4th year
of operations; (2) the law allows the carry forward of any excess MCIT
paid over the normal income tax; and (3) the Secretary of Finance can
suspend the imposition of MCIT in justifiable instances.
The regulations on CWT did not shift the tax base of a real estate
business’ income tax from net income to GSP or FMV of the property
sold since the taxes withheld are in the nature of advance tax payments
and they are thus just installments on the annual tax which may be due
at the end of the taxable year. As such the tax base for the sale of real
property classified as ordinary assets remains to be the net taxable
income and the use of the GSP or FMV is because these are the only
factors reasonably known to the buyer in connection with the
performance of the duties as a withholding agent.
Neither is there violation of equal protection even if the CWT is levied
only on the real industry as the real estate industry is, by itself, a class
on its own and can be validly treated different from other businesses.
Facts: Petitioner Chamber of Real Estate and Builders’ Associations,
Inc. (CREBA), an association of real estate developers and builders in
the Philippines, questioned the validity of Section 27(E) of the Tax Code
which imposes the minimum corporate income tax (MCIT) on
corporations.
Under the Tax Code, a corporation can become subject to the MCIT at
the rate of 2% of gross income, beginning on the 4th taxable year
immediately following the year in which it commenced its business
operations, when such MCIT is greater than the normal corporate
income tax. If the regular income tax is higher than the MCIT, the
corporation does not pay the MCIT.
CREBA argued, among others, that the use of gross income as MCIT
base amounts to a confiscation of capital because gross income, unlike
net income, is not realized gain.
CREBA also sought to invalidate the provisions of RR No. 2-98, as
amended, otherwise known as the Consolidated Withholding Tax
Regulations, which prescribe the rules and procedures for the collection
of CWT on sales of real properties classified as ordinary assets, on the
grounds that these regulations:
Ø Use gross selling price (GSP) or fair market value (FMV) as basis for
determining
the income tax on the sale of real estate classified as ordinary assets,
instead of the entity’s net taxable income as provided for under the Tax
Code;
Ø Mandate the collection of income tax on a per transaction basis,
contrary to the Tax Code provision which imposes income tax on net
income at the end of the taxable period;
Ø Go against the due process clause because the government collects
income tax even when the net income has not yet been determined; gain
is never assured by mere receipt of the selling price; and
Ø Contravene the equal protection clause because the CWT is being
charged upon real estate enterprises, but not on other business
enterprises, more particularly, those in the manufacturing sector, which
do business similar to that of a real estate enterprise.
Issues: (1) Is the imposition of MCIT constitutional? (2) Is the imposition
of CWT on income from sales of real properties classified as ordinary
assets constitutional?
Held: (1) Yes. The imposition of the MCIT is constitutional. An income
tax is arbitrary and confiscatory if it taxes capital, because it is income,
and not capital, which is subject to income tax. However, MCIT is
imposed on gross income which is computed by deducting from gross
sales the capital spent by a corporation in the sale of its goods, i.e., the
cost of goods and other direct expenses from gross sales. Clearly, the
capital is not being taxed.
Various safeguards were incorporated into the law imposing MCIT.
Firstly, recognizing the birth pangs of businesses and the reality of the
need to recoup initial major capital expenditures, the MCIT is imposed
only on the 4th taxable year immediately following the year in which the
corporation commenced its operations.
Secondly, the law allows the carry-forward of any excess of the MCIT
paid over the normal income tax which shall be credited against the
normal income tax for the three immediately succeeding years.
Thirdly, since certain businesses may be incurring genuine repeated
losses, the law authorizes the Secretary of Finance to suspend the
imposition of MCIT if a corporation suffers losses due to prolonged labor
dispute, force majeure and legitimate business reverses.
(2) Yes. Despite the imposition of CWT on GSP or FMV, the income tax
base for sales of real property classified as ordinary assets remains as
the entity’s net taxable income as provided in the Tax Code, i.e., gross
income less allowable costs and deductions. The seller shall file its
income tax return and credit the taxes withheld by the withholding agent-
buyer against its tax due. If the tax due is greater than the tax withheld,
then the taxpayer shall pay the difference. If, on the other hand, the tax
due is less than the tax withheld, the taxpayer will be entitled to a refund
or tax credit.
The use of the GSP or FMV as basis to determine the CWT is for
purposes of practicality and convenience. The knowledge of the
withholding agent-buyer is limited to the particular transaction in which
he is a party. Hence, his basis can only be the GSP or FMV which figures
are reasonably known to him.
Also, the collection of income tax via the CWT on a per transaction basis,
i.e., upon consummation of the sale, is not contrary to the Tax Code
which calls for the payment of the net income at the end of the taxable
period. The taxes withheld are in the nature of advance tax payments by
a taxpayer in order to cancel its possible future tax obligation. They are
installments on the annual tax which may be due at the end of the
taxable year. The withholding agent-buyer’s act of collecting the tax at
the time of the transaction, by withholding the tax due from the income
payable, is the very essence of the withholding tax method of tax
collection.
On the alleged violation of the equal protection clause, the taxing power
has the authority to make reasonable classifications for purposes of
taxation. Inequalities which result from singling out a particular class for
taxation, or exemption, infringe no constitutional limitation. The real
estate industry is, by itself, a class and can be validly treated differently
from other business enterprises.
What distinguishes the real estate business from other manufacturing
enterprises, for purposes of the imposition of the CWT, is not their
production processes but the prices of their goods sold and the number
of transactions involved. The income from the sale of a real property is
bigger and its frequency of transaction limited, making it less
cumbersome for the parties to comply with the withholding tax scheme.
On the other hand, each manufacturing enterprise may have tens of
thousands of transactions with several thousand customers every month
involving both minimal and substantial amounts.
4.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CEBU
PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS,
respondents.
FACTS: By virtue of a decision of the CTA, as modified on appeal by the
Supreme Court, the CIR was ordered to refund to Cebu Portland
Cement Company the amount of P 359,408.98, representing
overpayments of ad valorem taxes on cement produced and sold by it.
When respondent moved for a writ of execution, petitioner opposed on
the ground that the private respondent had an outstanding sales tax
liability to which the judgment debt had already been credited. In fact, it
was stressed, there was still a balance owing on the sales taxes in the
amount of P 4,789,279.85 plus 28% surcharge. The CTA granted the
CIR’s motion.
The CIR claims that the refund should be charged against the tax
deficiency of the private respondent on the sales of cement under
Section 186 of the Tax Code. His position is that cement is a
manufactured and not a mineral product and therefore not exempt from
sales taxes. The petitioner also denies that the sales tax assessments
have already prescribed because the prescriptive period should be
counted from the filing of the sales tax returns, which had not yet been
done by the private respondent.
Meanwhile, the private respondent disclaims liability for the sales taxes,
on the ground that cement is not a manufactured product but a mineral
product. As such, it was exempted from sales taxes. Also, the alleged
sales tax deficiency could not as yet be enforced against it because the
tax assessment was not yet final, the same being still under protest and
still to be definitely resolved on the merits. Besides, the assessment had
already prescribed, not having been made within the reglementary five-
year period from the filing of the tax returns.
ISSUE: Whether or not sales tax was properly imposed upon private
respondent.
HELD: Yes, because cement has always been considered a
manufactured product and not a mineral product. This matter was
extensively discussed and categorically resolved in Commissioner of
Internal Revenue v. Republic Cement Corporation, decided on August
10, 1983, stating that cement qua cement was never considered as a
mineral product within the meaning of Section 246 of the Tax Code,
notwithstanding that at least 80% of its components are minerals, for the
simple reason that cement is the product of a manufacturing process
and is no longer the mineral product contemplated in the Tax Code (i.e.;
minerals subjected to simple treatments) for the purpose of imposing
the ad valorem tax.
The argument that the assessment cannot as yet be enforced because
it is still being contested loses sight of the urgency of the need to collect
taxes as "the lifeblood of the government." If the payment of taxes could
be postponed by simply questioning their validity, the machinery of the
state would grind to a halt and all government functions would be
paralyzed.
5.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE,
INC., and THE COURT OF TAX APPEALS, respondents.
FACTS: Algue, Inc., a domestic corporation engaged in engineering,
construction and other allied activities. Philippine Sugar Estate
Development Company had earlier appointed Algue as its agent,
authorizing it to sell its land, factories and oil manufacturing process.
[There was a sale for which] Algue received as agent a commission of
P126,000.00, and it was from this commission that the P75,000.00
promotional fees were paid to the aforenamed individuals. The payees
duly reported their respective shares of the fees in their income tax
returns and paid the corresponding taxes thereon, and there was no
distribution of dividends was involved.
[Algue claimed the 75,000 to be deductible from their tax, to which the
CIR disallowed.]
ISSUE: Whether or not the Collector of Internal Revenue correctly
disallowed the P75,000.00 deduction claimed by private respondent
Algue as legitimate business expenses in its income tax returns.
HELD: NO – CIR is not correct. The burden is on the taxpayer to prove
the validity of the claimed deduction. In the present case, however, we
find that the onus has been discharged satisfactorily. The private
respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing
investors and prominent businessmen to venture in an experimental
enterprise and involve themselves in a new business requiring millions
of pesos. This was no mean feat and should be, as it was, sufficiently
recompensed.
Taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance. On the other hand, such collection
should be made in accordance with law as any arbitrariness will negate
the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the
taxpayers so that the real purpose of taxation, which is the promotion of
the common good, may be achieved.
It is said that taxes are what we pay for civilization society. Without taxes,
the government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing authorities,
every person who is able to must contribute his share in the running of
the government. The government for its part, is expected to respond in
the form of tangible and intangible benefits intended to improve the lives
of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the
seat of power.
But even as we concede the inevitability and indispensability of taxation,
it is a requirement in all democratic regimes that it be exercised
reasonably and in accordance with the prescribed procedure. If it is not,
then the taxpayer has a right to complain and the courts will then come
to his succor. For all the awesome power of the tax collector, he may
still be stopped in his tracks if the taxpayer can demonstrate, as it has
here, that the law has not been observed.
6.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT
OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN’S
CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC.,
respondents.
In 1980, YMCA earned an income of 676,829.80 from leasing out a
portion of its premises to small shop owners, like restaurants and
canteen operators and 44,259 from parking fees collected from non-
members. On July 2, 1984, the CIR issued an assessment to YMCA for
deficiency taxes which included the income from lease of YMCA’s real
property. YMCA formally protested the assessment but the CIR denied
the claims of YMCA. On appeal, the CTA ruled in favor of YMCA and
excluded income from lease to small shop owners and parking fees.
However, the CA reversed the CTA but affirmed the CTA upon motion
for reconsideration.
ISSUE: Whether the rental income of YMCA is taxable
RULING:
Yes. The exemption claimed by YMCA is expressly disallowed by the
very wording of then Section 27 of the NIRC which mandates that the
income of exempt organizations (such as the YMCA) from any of their
properties, real or personal, be subject to the tax imposed by the same
Code. While the income received by the organizations enumerated in
Section 26 of the NIRC is, as a rule, exempted from the payment of tax
in respect to income received by them as such, the exemption does not
apply to income derived from any of their properties, real or personal or
from any of their activities conducted for profit, regardless of the
disposition made of such income.
Digest #2
Facts:
The main question in this case is: “is the income derived from rentals of
real property owned by Young Men’s Christian Association of the
Philippines (YMCA) – established as “a welfare, educational and
charitable non-profit corporation” – subject to income tax under the NIRC
and the Constitution? In 1980, YMCA earned an income of P676,829
from leasing out a portion of its premises to small shop owners, like
restaurants and canteen operators and P44k form parking fees.
Issue: Whether or not the rental income of the YMCA taxable
Ruling:
Yes. The exemption claimed by the YMCA is expressly disallowed by
the very wording of the last paragraph of then Sec. 27 of the NIRC; court
is duty-bound to abide strictly by its literal meaning and to refrain from
resorting to any convoluted attempt at construction. The said provision
mandates that the income of exempt organizations (such as YMCA)
from any of their properties, real or personal, be subject to the tax
imposed by the same Code. Private respondent is exempt from the
payment of property tax, but nit income tax on rentals from its property.
7.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
FORTUNE TOBACCO CORPORATION, respondent.
Facts: Fortune Tobacco Corporation ("Fortune Tobacco"), engaged in
the manufacture of different brands of cigarettes, registered
"Champion," "Hope," and "More" cigarettes. BIR classified them as
foreign brands since they were listed in the World Tobacco Directory as
belonging to foreign companies. However, Fortun changed the names
of 'Hope' to 'Hope Luxury'and 'More' to 'Premium More,' thereby
removing the said brands from the foreign brand category.
A 45% Ad Valorem taxes were imposed on these brands. Then Republic
Act ("RA") No. 7654 was enacted – 55% for locally manufactured foreign
brand while 45% for locally manufactured brands. 2 days before the
effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC
37-93"), was issued by the BIR saying since there is no showing who
the real owner/s are of Champion, Hope and More, it follows that the
same shall be considered locally manufactured foreign brand for
purposes of determining the ad valorem tax - 55%. BIR sent via telefax a
copy of RMC 37-93 to Fortune Tobacco addressed to no one in
particular. Then Fortune Tobacco received, by ordinary mail, a certified
xerox copy of RMC 37-93. CIR assessed Fortune Tobacco for ad
valorem tax deficiency amounting to P9,598,334.00.
Fortune Tobacco filed a petition for review with the CTA. 8 CTA upheld
the position of Fortune. CA affirmed.
Issue: WON it was necessary for BIR to follow the legal requirements
when it issued its RMC
Held. YES. CIR may not disregard legal requirements in the exercise of
its quasi-legislative powers which publication, filing, and prior hearing.
When an administrative rule is merely interpretative in nature, its
applicability needs nothing further than its bare issuance for it gives no
real consequence more than what the law itself has already prescribed.
BUT when, upon the other hand, the administrative rule goes beyond
merely providing for the means that can facilitate or render least
cumbersome the implementation of the law but substantially increases
the burden of those governed, the agency must accord, at least to those
directly affected, a chance to be heard, before that new issuance is given
the force and effect of law.
RMC 37-93 cannot be viewed simply as construing Section 142(c)(1) of
the NIRC, as amended, but has, in fact and most importantly, been
made in order to place "Hope Luxury," "Premium More" and "Champion"
within the classification of locally manufactured cigarettes bearing
foreign brands and to thereby have them covered by RA 7654 which
subjects mentioned brands to 55% the BIR not simply interpreted the
law; verily, it legislated under its quasi-legislativeauthority. The due
observance of the requirements of notice, of hearing, and of publication
should not have been then ignored.
8.
JOSE B. L. REYES and EDMUNDO A. REYES, petitioners, vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in
their capacities as appointed and Acting Members of the
CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H.
NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in
their capacities as appointed and Acting Members of the BOARD
OF ASSESSMENT APPEALS of Manila; and NICOLAS CATIIL, in
his capacity as City Assessor of Manila, respondents.
FACTS: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are
owners of parcels of land situated in Tondo and Sta. Cruz Districts, City
of Manila, which are leased and entirely occupied as dwelling sites by
tenants. Said tenants were paying monthly rentals not exceeding three
hundred pesos (P300.00) in July, 1971.
On July 14, 1971, the National Legislature enacted Republic Act No.
6359 prohibiting for one year from its effectivity, an increase in monthly
rentals of dwelling units or of lands on which another's dwelling is
located, where such rentals do not exceed three hundred pesos
(P300.00) a month but allowing an increase in rent by not more than
10% thereafter.
On October 12, 1972, Presidential Decree No. 20 amended R.A. No.
6359 by making absolute the prohibition to increase monthly rentals
below P300.00 and by indefinitely suspending the aforementioned
provision of the Civil Code, excepting leases with a definite period.
Consequently, the Reyeses were precluded from raising the rentals and
from ejecting the tenants thereof.
The City Assessor of Manila assessed the value of the Reyeses property
on the schedule of market values duly reviewed by the Secretary of
Finance. The revision entailed an increase to the tax rates and the
petitioners averred that the reassessment imposed upon them greatly
exceeded the annual income derived from their properties.
ISSUE: WON income approach is the method to be used in the tax
assessment and not the comparable sales approach.
HELD: The income approach and not the comparable sales approach
must be used.
“By no strength of the imagination can the market value of properties
covered by P.D. No. 20 be equated with the market value of properties
not so covered. The former has naturally a much lesser market value in
view of the rental restrictions.
In the case at bar, not even the factors determinant of the assessed
value of subject properties under the "comparable sales approach" were
presented by the public respondents, namely: (1) that the sale must
represent a bonafide arm's length transaction between a willing seller
and a willing buyer and (2) the property must be comparable property.
Nothing can justify or support their view as it is of judicial notice that for
properties covered by P.D. 20 especially during the time in question,
there were hardly any willing buyers. As a general rule, there were no
takers so that there can be no reasonable basis for the conclusion that
these properties were comparable with other residential properties not
burdened by P.D. 20.”
9.
RENATO V. DIAZ and AURORA MA. F. TIMBOL, petitioners, vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF
INTERNAL REVENUE, respondents.
Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed
this petition for declaratory relief[33][1] assailing the validity of the
impending imposition of value-added tax (VAT) by the Bureau of Internal
Revenue (BIR) on the collections of tollway operators.
Petitioners claim that, since the VAT would result in increased toll fees,
they have an interest as regular users of tollways in stopping the BIR
action. Additionally, Diaz claims that he sponsored the approval of
Republic Act 7716 (the 1994 Expanded VAT Law or EVAT Law) and
Republic Act 8424 (the 1997 National Internal Revenue Code or the
NIRC) at the House of Representatives. Timbol, on the other hand,
claims that she served as Assistant Secretary of the Department of
Trade and Industry and consultant of the Toll Regulatory Board (TRB)
in the past administration.
Petitioners allege that the BIR attempted during the administration of
President Gloria Macapagal-Arroyo to impose VAT on toll fees. The
imposition was deferred, however, in view of the consistent opposition
of Diaz and other sectors to such move. But, upon President Benigno C.
Aquino III’s assumption of office in 2010, the BIR revived the idea and
would impose the challenged tax on toll fees beginning August 16, 2010
unless judicially enjoined.
Petitioners hold the view that Congress did not, when it enacted the
NIRC, intend to include toll fees within the meaning of “sale of services”
that are subject to VAT; that a toll fee is a “user’s tax,” not a sale of
services; that to impose VAT on toll fees would amount to a tax on public
service; and that, since VAT was never factored into the formula for
computing toll fees, its imposition would violate the non-impairment
clause of the constitution.
On August 13, 2010 the Court issued a temporary restraining order
(TRO), enjoining the implementation of the VAT. The Court required the
government, represented by respondents Cesar V. Purisima, Secretary
of the Department of Finance, and Kim S. Jacinto-Henares,
Commissioner of Internal Revenue, to comment on the petition within 10
days from notice.[34][2] Later, the Court issued another resolution
treating the petition as one for prohibition.[35][3]
On August 23, 2010 the Office of the Solicitor General filed the
government’s comment.[36][4] The government avers that the NIRC
imposes VAT on all kinds of services of franchise grantees, including
tollway operations, except where the law provides otherwise; that the
Court should seek the meaning and intent of the law from the words
used in the statute; and that the imposition of VAT on tollway operations
has been the subject as early as 2003 of several BIR rulings and
circulars.[37][5]
The government also argues that petitioners have no right to invoke the
non-impairment of contracts clause since they clearly have no personal
interest in existing toll operating agreements (TOAs) between the
government and tollway operators. At any rate, the non-impairment
clause cannot limit the State’s sovereign taxing power which is generally
read into contracts.
Finally, the government contends that the non-inclusion of VAT in
the parametric formula for computing toll rates cannot exempt tollway
operators from VAT. In any event, it cannot be claimed that the rights
of tollway operators to a reasonable rate of return will be impaired by the
VAT since this is imposed on top of the toll rate. Further, the imposition
of VAT on toll fees would have very minimal effect on motorists using
the tollways.
In their reply[38][6] to the government’s comment, petitioners point out
that tollway operators cannot be regarded as franchise grantees under
the NIRC since they do not hold legislative franchises. Further, the BIR
intends to collect the VAT by rounding off the toll rate and putting any
excess collection in an escrow account. But this would be illegal since
only the Congress can modify VAT rates and authorize its
disbursement. Finally, BIR Revenue Memorandum Circular 63-2010
(BIR RMC 63-2010), which directs toll companies to record an
accumulated input VAT of zero balance in their books as of August 16,
2010, contravenes Section 111 of the NIRC which grants entities that
first become liable to VAT a transitional input tax credit of 2% on
beginning inventory. For this reason, the VAT on toll fees cannot be
implemented.
Issue: May toll fees collected by tollway operators be subject to VAT?
YES.
(1) VAT is imposed on “all kinds of services” and tollway operators who
are engaged in constructing, maintaining, and operating expressways
are no different from lessors of property, transportation contractors, etc.
(2) Not only do they fall under the broad term under (1) but also come
under those described as “all other franchise grantees” which is not
confined only to legislative franchise grantees since the law does not
distinguish. They are also not a franchise grantee under Section 119
which would have made them subject to percentage tax and not VAT.

(3) Neither are the services part of the enumeration under Section 109
on VAT-exempt transactions.
(4) The toll fee is not a user’s tax and thus it is permissible to impose a
VAT on the said fee. The MIAA case does not apply and the Court
emphasized that toll fees are not taxes since they are not assessed by
the BIR and do not go the general coffers of the government. Toll fees
are collected by private operators as reimbursement for their costs and
expenses with a view to a profit while taxes are imposed by the
government as an attribute of its sovereignty. Even if the toll fees were
treated as user’s tax, the VAT can not be deemed as a ‘tax on tax’ since
the VAT is imposed on the tollway operator and the fact that it might
pass-on the same to the tollway user, it will not make the latter directly
liable for VAT since the shifted VAT simply becomes part of the cost to
use the tollways.
(5) The assertion that the VAT imposed is not administratively feasible
given the manner by which the BIR intends to implement the VAT (i.e.,
rounding off the toll rates and putting any excess collection in an escrow
account) is not enough to invalidate the law. Non-observance of the
canon of administrative feasibility will not render a tax imposition invalid
“except to the extent that specific constitutional or statutory limitations
are impaired”.
10.
VALENTIN TIO doing business under the name and style of OMI
ENTERPRISES, petitioner, vs. VIDEOGRAM REGULATORY
BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION,
CITY MAYOR and CITY TREASURER OF MANILA, respondents.
DOCTRINES:
Validity of law; title of bill – The Constitutional requirement that "every
bill shall embrace only one subject which shall be expressed in the title
thereof" is sufficiently complied with if the title be comprehensive enough
to include the general purpose which a statute seeks to achieve. It is not
necessary that the title express each and every end that the statute
wishes to accomplish. The requirement is satisfied if all the parts of the
statute are related, and are germane to the subject matter expressed in
the title, or as long as they are not inconsistent with or foreign to the
general subject and title.
Taxation; security against oppressive taxation – The power to impose
taxes is one so unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any restrictions
whatever, except such as rest in the discretion of the authority which
exercises it. In imposing a tax, the legislature acts upon its constituents.
This is, in general, a sufficient security against erroneous and
oppressive taxation.
Taxation as a revenue and regulatory measure – The tax imposed by
the DECREE is not only a regulatory but also a revenue measure
prompted by the realization that earnings of videogram establishments
of around P600 million per annum have not been subjected to tax,
thereby depriving the Government of an additional source of revenue. .
. . The levy of the 30% tax is for a public purpose. It was imposed
primarily to answer the need for regulating the video industry, particularly
because of the rampant film piracy, the flagrant violation of intellectual
property rights, and the proliferation of pornographic video tapes. And
while it was also an objective of the DECREE to protect the movie
industry, the tax remains a valid imposition.
Undue delegation of legislative power – The grant in Section 11 of the
DECREE of authority to the BOARD to "solicit the direct assistance of
other agencies and units of the government and deputize, for a fixed and
limited period, the heads or personnel of such agencies and units to
perform enforcement functions for the Board" is not a delegation of the
power to legislate but merely a conferment of authority or discretion as
to its execution, enforcement, and implementation. "The true distinction
is between the delegation of power to make the law, which necessarily
involves a discretion as to what it shall be, and conferring authority or
discretion as to its execution to be exercised under and in pursuance of
the law. The first cannot be done; to the latter, no valid objection can be
made." Besides, in the very language of the decree, the authority of the
BOARD to solicit such assistance is for a "fixed and limited period" with
the deputized agencies concerned being "subject to the direction and
control of the BOARD." That the grant of such authority might be the
source of graft and corruption would not stigmatize the DECREE as
unconstitutional. Should the eventuality occur, the aggrieved parties will
not be without adequate remedy in law.
FACTS:
Valentin Tio is a videogram establishment operator adversely affected
by Presidential Decree No. 1987 entitled "An Act Creating the
Videogram Regulatory Board".
P.D. No. 1987 provides for the levy of a tax over each cassette sold
(Sec. 134) and a 30% tax on the gross receipts of a videogram
establishment, payable to the local government (Sec. 10). The rationale
for this decree is set forth in its preambulatory/whereas clauses to wit:
1. WHEREAS, the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes ...
have greatly prejudiced the operations of moviehouses and theaters,
and have caused a sharp decline in theatrical attendance by at least
forty percent (40%) and a tremendous drop in the collection of [taxes]
thereby resulting in substantial losses estimated at P450 Million annually
in government revenues;
2. WHEREAS, videogram(s) establishments collectively earn around
P600 Million per annum from rentals, sales and disposition of
videograms, and such earnings have not been subjected to tax, thereby
depriving the Government of approximately P180 Million in taxes each
year;
3. WHEREAS, the unregulated activities of videogram establishments
have also affected the viability of the movie industry, ...;
5. WHEREAS, proper taxation of the activities of videogram
establishments will not only alleviate the dire financial condition of the
movie industry ..., but also provide an additional source of revenue for
the Government, and at the same time rationalize the heretofore
uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene
videogram features constitutes a clear and present danger to the moral
and spiritual well-being of the youth [READ: PORN], and impairs the
mandate of the Constitution for the State to support the rearing of the
youth for civic efficiency and the development of moral character and
promote their physical, intellectual, and social well-being;
8. WHEREAS, in the face of these grave emergencies corroding the
moral values of the people [AGAIN, READ: PORN] and betraying the
national economic recovery program, bold emergency measures must
be adopted with dispatch; (emphasis supplied and certain passages
omitted)
ISSUES:
The petioner, among others, raised the following issues:
1. Whether or not the imposition of the 30% tax is a rider and the same
is not germane to the subject matter of the law.
2. Whether or not there is undue delegation of power and authority; and
HELD:
1. No, the tax is not a rider and is germane to the purpose and subject
of the law.
The Constitutional requirement that "every bill shall embrace only one
subject which shall be expressed in the title thereof" is sufficiently
complied with if the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not necessary that the
title express each and every end that the statute wishes to
accomplish. The requirement is satisfied if all the parts of the statute are
related, and are germane to the subject matter expressed in the title, or
as long as they are not inconsistent with or foreign to the general subject
and title.
Reading section 10 of P.D. No. 1987 closely, one can see that the
foregoing provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the law,
which is the regulation of the video industry through the Videogram
Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool
for regulation it is simply one of the regulatory and control mechanisms
scattered throughout the decree.
Aside from revenue collection, tax laws may also be enacted for the
purpose of regulating an activity. At the same time, the videogram
industry is also an untapped source of revenue which the government
may validly tax. All of this is evident from preambulatory clauses nos. 2,
5, 6 and 8, quoted in part above.
The levy of the 30% tax is also for a public purpose. It was imposed
primarily to answer the need for regulating the video industry, particularly
because of the rampant film piracy, the flagrant violation of intellectual
property rights, and the proliferation of pornographic video tapes. And
while it was also an objective of the law to protect the movie industry,
the tax remains a valid imposition.
2. No. There was no undue delegation of law making authority.
Petitioner was concerned that Section 11 of P.D. No. 1987 stating that
the videogram board (Board) has authority to "solicit the direct
assistance of other agencies and units of the government and deputize,
for a fixed and limited period, the heads or personnel of such agencies
and units to perform enforcement functions for the Board" is an undue
delegation of legislative power.
This is not a delegation of the power to legislate but merely a conferment
of authority or discretion as to its execution, enforcement, and
implementation. "The true distinction is between the delegation of power
to make the law, which necessarily involves a discretion as to what it
shall be, and conferring authority or discretion as to its execution to be
exercised under and in pursuance of the law. The first cannot be done;
to the latter, no valid objection can be made." Besides, in the very
language of the decree, the authority of the Board to solicit such
assistance is for a "fixed and limited period" with the deputized agencies
concerned being "subject to the direction and control of the Board."
The petition was DISMISSED.
11 – same with case no. 3
CHAMBER OF REAL ESTATE AND BUILDERS’ ASSOCIATIONS,
INC., petitioner, vs. THE HON. EXECUTIVE SECRETARY
ALBERTO ROMULO, THE HON. ACTING SECRETARY OF
FINANCE JUANITA D. AMATONG, and THE HON. COMMISSIONER
OF INTERNAL REVENUE GUILLERMO PARAYNO, JR.,
respondents.
12.
G.R. No. 159647. April 15, 2005.*
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
CENTRAL LUZON DRUG CORPORATION, respondent.
Facts:
Respondents operated six drugstores under the business name Mercury
Drug. From January to December 1996 respondent granted 20% sales
discount to qualified senior citizens on their purchases of medicines
pursuant to RA 7432 for a total of ₱ 904,769.
On April 15, 1997, respondent filed its annual Income Tax Return for
taxable year 1996 declaring therein net losses. On Jan. 16, 1998
respondent filed with petitioner a claim for tax refund/credit of ₱
904,769.00 allegedly arising from the 20% sales discount. Unable to
obtain affirmative response from petitioner, respondent elevated its
claim to the Court of Tax Appeals. The court dismissed the same but
upon reconsideration, the latter reversed its earlier ruling and ordered
petitioner to issue a Tax Credit Certificate in favor of respondent citing
CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug Corp. vs. CIR)
citing that Sec. 229 of RA 7432 deals exclusively with illegally collected
or erroneously paid taxes but that there are other situations which may
warrant a tax credit/refund.
CA affirmed Court of Tax Appeal's decision reasoning that RA 7432
required neither a tax liability nor a payment of taxes by private
establishments prior to the availment of a tax credit. Moreover, such
credit is not tantamount to an unintended benefit from the law, but rather
a just compensation for the taking of private property for public use.
Issue: Whether or not respondent, despite incurring a net loss, may still
claim the 20% sales discount as a tax credit.
Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the
privilege of obtaining a 20% discount on their purchase of medicine from
any private establishment in the country. The latter may then claim the
cost of the discount as a tax credit. Such credit can be claimed even if
the establishment operates at a loss.
A tax credit generally refers to an amount that is “subtracted directly from
one’s total tax liability.” It is an “allowance against the tax itself” or “a
deduction from what is owed” by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One
of these is tax deduction – which is subtraction “from income for tax
purposes,” or an amount that is “allowed by law to reduce income prior
to the application of the tax rate to compute the amount of tax which is
due.” In other words, whereas a tax credit reduces the tax due, tax
deduction reduces the income subject to tax in order to arrive at the
taxable income.
A tax credit is used to reduce directly the tax that is due, there ought to
be a tax liability before the tax credit can be applied. Without that liability,
any tax credit application will be useless. There will be no reason for
deducting the latter when there is, to begin with, no existing obligation
to the government. However, as will be presented shortly, the existence
of a tax credit or its grant by law is not the same as the availment or use
of such credit. While the grant is mandatory, the availment or use is not.
If a net loss is reported by, and no other taxes are currently due from, a
business establishment, there will obviously be no tax liability against
which any tax credit can be applied. For the establishment to choose
the immediate availment of a tax credit will be premature and
impracticable.
13.
CARLOS SUPERDRUG CORP., doing business under the name
and style “Carlos Superdrug,” ELSIE M. CANO, doing business
under the name and style “Advance Drug,” Dr. SIMPLICIO L. YAP,
JR., doing business under the name and style “City Pharmacy,”
MELVIN S. DELA SERNA, doing business under the name and
style “Botica dela Serna,” and LEYTE SERV-WELL CORP., doing
business under the name and style “Leyte Serv-Well Drugstore,”
petitioners, vs. DEPARTMENT OF SOCIAL WELFARE and
DEVELOPMENT (DSWD), DEPARTMENT OF HEALTH (DOH),
DEPARTMENT OF FINANCE (DOF), DEPARTMENT OF JUSTICE
(DOJ), and DEPARTMENT OF INTERIOR and LOCAL
GOVERNMENT (DILG), respondents.
FACTS:
Petitioners are domestic corporations and proprietors operating
drugstores in the Philippines.
Public respondents, on the other hand, include the DSWD, DOH, DOF,
DOJ, and the DILG, specifically tasked to monitor the
drugstores’ compliance with the law; promulgate the implementing rules
and regulations for the effective implementation of the law; and
prosecute and revoke the licenses of erring drugstore establishments.
President Gloria Macapagal-Arroyo signed into law R.A. No. 9257
otherwise known as the “Expanded Senior Citizens Act of 2003.”
Sec. 4(a) of the Act states that The senior citizens shall be entitled to the
following: (a) the grant of twenty percent (20%) discount from all
establishments relative to the utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers, and
purchase of medicines in all establishments for the exclusive use or
enjoyment of senior citizens, including funeral and burial services for the
death of senior citizens;
Petitioners assert that Section 4(a) of the law is unconstitutional because
it constitutes deprivation of private property. Compelling drugstore
owners and establishments to grant the discount will result in a loss of
profit and capital because according to them drugstores impose a mark-
up of only 5% to 10% on branded medicines, and the law failed to
provide a scheme whereby drugstores will be justly compensated for the
discount.
ISSUE: WON RA 9257 is constitutional.
HELD:
YES. The law is a legitimate exercise of police power which, similar to
the power of eminent domain, has general welfare for its object. Police
power is not capable of an exact definition, but has been purposely
veiled in general terms to underscore its comprehensiveness to meet all
exigencies and provide enough room for an efficient and flexible
response to conditions and circumstances, thus assuring the greatest
benefits. Accordingly, it has been described as the most essential,
insistent and the least limitable of powers, extending as it does to all the
great public needs. It is [t]he power vested in the legislature by the
constitution to make, ordain, and establish all manner of wholesome and
reasonable laws, statutes, and ordinances, either with penalties or
without, not repugnant to the constitution, as they shall judge to be for
the good and welfare of the commonwealth, and of the subjects of the
same.
For this reason, when the conditions so demand as determined by the
legislature, property rights must bow to the primacy of police power
because property rights, though sheltered by due process, must yield to
general welfare.
Police power as an attribute to promote the common good would be
diluted considerably if on the mere plea of petitioners that they will suffer
loss of earnings and capital, the questioned provision is invalidated.
Moreover, in the absence of evidence demonstrating the alleged
confiscatory effect of the provision in question, there is no basis for its
nullification in view of the presumption of validity which every law has in
its favor.
Given these, it is incorrect for petitioners to insist that the grant of the
senior citizen discount is unduly oppressive to their business, because
petitioners have not taken time to calculate correctly and come up with
a financial report, so that they have not been able to show properly
whether or not the tax deduction scheme really works greatly to their
disadvantage.
In treating the discount as a tax deduction, petitioners insist that they will
incur losses. However,petitioner’s computation is clearly flawed.
For purposes of reimbursement, the law states that the cost of the
discount shall be deducted from gross income, the amount of income
derived from all sources before deducting allowable expenses, which
will result in net income. Here, petitioners tried to show a loss on a per
transaction basis, which should not be the case. An income statement,
showing an accounting of petitioners sales, expenses, and net profit (or
loss) for a given period could have accurately reflected the effect of the
discount on their income. Absent any financial statement, petitioners
cannot substantiate their claim that they will be operating at a loss
should they give the discount. In addition, the computation was
erroneously based on the assumption that their customers consisted
wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on
income, not on the amount of the discount.
While the Constitution protects property rights, petitioners must accept
the realities of business and the State, in the exercise of police power,
can intervene in the operations of a business which may result in an
impairment of property rights in the process.
14.
MANILA MEMORIAL PARK, INC. and LA FUNERARIA PAZ-SUCAT,
INC., petitioners, vs. SECRETARY OF THE DEPARTMENT OF
SOCIAL WELFARE AND DEVELOPMENT and THE SECRETARY
OF THE DEPARTMENT OF FINANCE, respondents.
Facts:
Petitioners emphasize that they are not questioning the 20% discount
granted to senior citizens but are only assailing the constitutionality of
the tax deduction scheme prescribed under RA 9257 and the
implementing rules and regulations issued by the DSWD and the DOF
Petitioners posit that the tax deduction scheme contravenes Article III,
Section 9 of the Constitution, which provides that: "[p]rivate property
shall not be taken for public use without just compensation."...
petitioners cite
Central Luzon Drug Corporation,[12] where it was ruled that the 20%
discount privilege constitutes taking of private property for public use
which requires the payment of just compensation
Issues:
WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS
IMPLEMENTING RULES AND REGULATIONS, INSOFAR AS THEY
PROVIDE THAT THE TWENTY PERCENT (20%) DISCOUNT TO
SENIOR CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY
THE PRIVATE ESTABLISHMENTS, ARE INVALID AND
UNCONSTITUTIONAL.
Ruling:
The Petition lacks merit.
The validity of the 20% senior citizen discount and tax deduction scheme
under RA 9257, as an exercise of police power of the State, has already
been settled in Carlos Superdrug Corporation.
The permanent reduction in their total revenues is a forced subsidy
corresponding to the taking of private property for public use or benefit.
This constitutes compensable taking for which petitioners would
ordinarily become entitled to a just compensation.
A tax deduction does not offer full reimbursement of the senior citizen
discount. As such, it would not meet the definition of just compensation.
Having said that, this raises the question of whether the State, in
promoting the health and welfare of a special group of citizens, can
impose upon private establishments the burden of partly subsidizing a
government program.
The Court believes so.
As a form of reimbursement, the... law provides that business
establishments extending the twenty percent discount to senior citizens
may claim the discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the
power of eminent domain, has general welfare for its object.
For this reason, when the conditions so demand as determined by the
legislature, property rights must bow to the primacy of police power
because property rights, though sheltered by due process, must yield to
general welfare.
Police power as an attribute to promote the common good would be
diluted considerably if on the mere plea of petitioners that they will suffer
loss of earnings and capital, the questioned provision is invalidated.
Given these, it is incorrect for petitioners to insist that the grant of the
senior citizen discount is unduly oppressive to their business, because
petitioners have not taken time to calculate correctly and come up with
a financial report, so that they have not been able to... show properly
whether or not the tax deduction scheme really works greatly to their
disadvantage.
We, thus, found that the 20% discount as well as the tax deduction
scheme is a valid exercise of the police power of the State.
The 20% discount is intended to improve the welfare of senior citizens
who, at their age, are less likely to be gainfully employed, more prone to
illnesses and other disabilities, and, thus, in need of subsidy in
purchasing basic commodities.
the 20% discount is a regulation affecting the ability of private
establishments to price their products and services relative to a special
class of individuals, senior citizens, for which the Constitution affords
preferential concern... it does... not purport to appropriate or burden
specific properties, used in the operation or conduct of the business of
private establishments, for the use or benefit of the public, or senior
citizens for that matter
The subject regulation may be said to be similar to, but with substantial
distinctions from, price control or rate of return on investment control
laws which are traditionally regarded as police power measures.[77]
These laws generally regulate public... utilities or industries/enterprises
imbued with public interest in order to protect consumers from exorbitant
or unreasonable pricing as well as temper corporate greed by controlling
the rate of return on investment of these corporations... considering that
they have a monopoly... over the goods or services that they provide to
the general public.
On its face, therefore, the subject regulation is a police power measure.
The obiter in Central Luzon Drug Corporation,[78] however, describes
the 20% discount as an exercise of the power of eminent domain and
the tax credit, under the previous law, equivalent to the amount of
discount given as the just compensation... therefor.
It presupposes that the subject regulation, which impacts the pricing
and, hence, the profitability of a private establishment, automatically
amounts to a deprivation of property without due process of law.
If this were so,... then all price and rate of return on investment control
laws would have to be invalidated because they impact, at some level,
the regulated establishment's profits or income/gross sales, yet there is
no provision for payment of just compensation
The obiter is, thus, at odds with the settled doctrine... that the State can
employ police power measures to regulate the pricing of goods and
services, and, hence, the profitability of business establishments in
order to pursue legitimate State objectives for the common good,
provided that the regulation does not go too far as to... amount to
"taking."
Principles:
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain
the use of liberty and property for public welfare.[58] The only limitation
is that the restriction imposed should be reasonable, not oppressive.
"property rights of individuals may be subjected to restraints and
burdens in... order to fulfill the objectives of the government.
The State "may interfere with personal liberty, property, lawful
businesses and occupations to promote the general welfare [as long as]
the interference [is] reasonable and not arbitrary.
Eminent domain, on the other hand, is the inherent power of the State
to take or appropriate private property for public use.
private property shall not be taken without due process of law and the...
payment of just compensation
In the exercise of police power, a property right is impaired by
regulation,[65] or the use of property is merely prohibited, regulated or
restricted[66] to promote public welfare.
payment of just compensation is not required.
in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the
payment of just compensation therefor.
Normally, the title to and possession of the property are transferred to
the... expropriating authority.
15. – no found
16.
G.R. No. 159796 July 17, 2007
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and
ENVIRONMENTALIST CONSUMERS NETWORK, INC.
(ECN), petitioners
vs
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY
COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC),
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP
(SPUG), and PANAY ELECTRIC COMPANY INC.
(PECO),respondents.
FACTS:
On June 8, 2001 Congress enacted RA 9136 or the Electric Power
Industry Act of 2001. Petitioners Romeo P. Gerochi and company assail
the validity of Section 34 of the EPIRA Law for being an undue
delegation of the power of taxation. Section 34 provides for the
imposition of a “Universal Charge” to all electricity end users after a
period of (1) one year after the effectively of the EPIRA Law. The
universal charge to be collected would serve as payment for government
debts, missionary electrification, equalization of taxes and royalties
applied to renewable energy and imported energy, environmental
charge and for a charge to account for all forms of cross subsidies for a
period not exceeding three years. The universal charge shall be
collected by the ERC on a monthly basis from all end users and will then
be managed by the PSALM Corp. through the creation of a special trust
fund.
ISSUE:
Whether or not there is an undue delegation of the power to tax on the
part of the ERC
HELD:
No, the universal charge as provided for in section 34 is not a tax but an
exaction of the regulatory power (police power) of the state. The
universal charge under section 34 is incidental to the regulatory duties
of the ERC, hence the provision assailed is not for generation of revenue
and therefore it cannot be considered as tax, but an execution of the
states police power thru regulation.
Moreover, the amount collected is not made certain by the ERC, but by
the legislative parameters provided for in the law (RA 9136) itself, it
therefore cannot be understood as a rule solely coming from the ERC.
The ERC in this case is only a specialized administrative agency which
is tasked of executing a subordinate legislation issued by congress;
which before execution must pass both the completeness test and the
sufficiency of standard test. The court in appreciating Section 34 of RA
9136 in its entirety finds the said law and the assailed portions free from
any constitutional defect and thus deemed complete and sufficient in
form.
Facts:
EPIRA
Universal Charge... respondent Panay Electric Company, Inc. (PECO)
charged petitioner Romeo P. Gerochi and all other... end-users with the
Universal Charge as reflected in their respective electric bills starting
from the month of July 2003.[17]
The power to tax is strictly a... legislative function and as such, the
delegation of said power to any executive or administrative agency like
the ERC is unconstitutional, giving the same unlimited authority
The assailed provision clearly provides that the Universal Charge is to
be determined, fixed and... approved by the ERC, hence leaving to the
latter complete discretionary legislative authority.
Universal Charge has the characteristics of a tax and is collected to fund
the operations of the NPC.
Unlike a tax which is imposed to provide income for public purposes,
such as support of the government, administration of the law, or
payment of public expenses, the... assailed Universal Charge is levied
for a specific regulatory purpose, which is to ensure the viability of the
country's electric power industry.
Respondents Department of Energy (DOE), ERC, and NPC, through the
Office of the Solicitor General (OSG), share the same view that the
Universal Charge is not a tax because it is levied for a specific regulatory
purpose, which is to ensure the viability of the country's electric... power
industry, and is, therefore, an exaction in the exercise of the State's
police power
Within six (6) months from the effectivity of this Act, promulgate and
enforce, in accordance with law, a National Grid Code and a Distribution
Code which shall include, but not limited to the followin
Issues:
Universal Charge imposed under Sec. 34 of the EPIRA is a tax... undue
delegation of legislative power to tax... power of taxation from the police
power.
Ruling:
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA,
the State's police power, particularly its regulatory dimension, is invoked.
it can be gleaned that the assailed Universal Charge is not a tax, but an
exaction in the exercise of the State's police power. Public welfare is
surely promoted.
The Court finds that the EPIRA, read and appreciated in its entirety, in
relation to Sec. 34 thereof, is complete in all its essential terms and
conditions, and that it contains sufficient standards.
the law is complete and passes the first test for valid delegation of
legislative power.
we therefore hold that there is no undue delegation of legislative power
to the ERC.
every law has in its favor the presumption of constitutionality, and to
justify its nullification, there must be a clear and unequivocal breach of
the Constitution and not one that is doubtful, speculative, or
argumentative
Principles:
The power to tax is an incident of sovereignty and is unlimited in its
range, acknowledging in its very nature no limits, so that security against
its abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency that is to pay... it.
police power is the power of the state to promote public welfare by
restraining and regulating the use of liberty and property.
, police power grants a wide panoply of instruments through which the
State, as parens patriae, gives effect to a host of its regulatory powers.[
The conservative and pivotal distinction between these two powers rests
in the purpose for which the charge is made
If generation of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax... but if regulation is the primary
purpose, the fact... that revenue is incidentally raised does not make the
imposition a tax.[36]... it is a well-established doctrine that the taxing
power may be used as an implement of police power.
17. – not found
18.
Planters Product V. Fertiphil Corp. (2008)
Lessons Applicable: Bet. private and public suit, easier to file public
suit, Apply real party in interest test for private suit and direct injury test
for public suit, Validity test varies depending on which inherent power
Laws Applicable:
FACTS:
President Ferdinand Marcos, exercising his legislative powers, issued
LOI No. 1465 which provided, among others, for the imposition of a
capital recovery component (CRC) on the domestic sale of all grades of
fertilizers which resulted in having Fertiphil paying P 10/bag sold to the
Fertilizer and Perticide Authority (FPA).
FPA remits its collection to Far East Bank and Trust Company who
applies to the payment of corporate debts of Planters Products Inc. (PPI)
After the Edsa Revolution, FPA voluntarily stopped the imposition of the
P10 levy. Upon return of democracy, Fertiphil demanded a refund but
PPI refused. Fertiphil filed a complaint for collection and damages
against FPA and PPI with the RTC on the ground that LOI No. 1465 is
unjust, unreaonable oppressive, invalid and unlawful resulting to denial
of due process of law.
FPA answered that it is a valid exercise of the police power of the state
in ensuring the stability of the fertilizing industry in the country and that
Fertiphil did NOT sustain damages since the burden imposed fell on the
ultimate consumers.
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 public purpose as PPI is
a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather
the police power
Held:
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 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 from unlawful government
intrusion and illegal official action subject to the direct injury test or
where there must be personal and substantial interest in the case such
that he has sustained or will sustain direct injury as a result. Being a
mere procedural technicality, it has also been held that locus standi may
be waived in the public interest such as cases of transcendental
importance or with far-reaching implications whether private or public
suit, Fertiphil has locus standi.
2. As a seller, it bore the ultimate burden of paying the levy which made
its products more expensive and harm its business. It is also of
paramount public importance since it involves the constitutionality of a
tax law and use of taxes for public purpose.
3. Yes. Police power and the power of taxation are inherent powers of
the state but distinct and have different tests for validity. Police power
is the power of the state to enact the legislation that may interfere with
personal liberty on property in order to promote general welfare. While,
the power of taxation is the power to levy taxes as to be used for public
purpose. The main purpose of police power is the regulation of a
behavior or conduct, while taxation is revenue generation. The lawful
subjects and lawful means tests are used to determine the validity of a
law enacted under the police power. The power of taxation, on the other
hand, is circumscribed by inherent and constitutional limitations.
In this case, it is for purpose of revenue. But it is a robbery for the State
to tax the citizen and use the funds generation for a private
purpose. Public purpose does NOT only pertain to those purpose which
are traditionally viewed as essentially governmental function such
as building roads and delivery of basic services, but also includes those
purposes designed to promote social justice. Thus, public money may
now be used for the relocation of illegal settlers, low-cost housing and
urban or agrarian reform.
19.
FACTS
Respondent Quezon City Council enacted an ordinance, Socialized
Housing Tax of Quezon City, which will collect 0.5% on the assessed
value of land in excess of Php 100,000.00. This shall accrue to the
Socialized Housing Programs of the Quezon City Government. The
special assessment shall go to the General Fund under a special
account to be established for the purpose. On the other hand, Ordinance
No. SP-2235 and S-2013 was enacted collecting garbage fees on
residential properties which shall be deposited solely and exclusively in
an earmarked special account under the general fund to be utilized for
garbage collections. Petitioner, a Quezon City property owner,
questions the validity of the said ordinances.
ISSUES
one over another. Further, the reasonableness of Ordinance No. SP-
2095 cannot be disputed. It is not confiscatory or oppressive since the
tax being imposed therein is below what the UDHA actually allows. Even
better, on certain conditions, the ordinance grants a tax credit.
2. No. Pursuant to Section 16 of the LGC and in the proper exercise of
its corporate powers under Section 22 of the same, the Sangguniang
Panlungsod of Quezon City, like other local legislative bodies, is
empowered to enact ordinances, approve resolutions, and appropriate
funds for the general welfare of the city and its inhabitants. In this regard,
the LGUs shall share with the national government the responsibility in
the management and maintenance of ecological balance within their
territorial jurisdiction. The Ecological Solid Waste Management Act of
2000, affirms this authority as it expresses that the LGUs shall be
primarily responsible for the implementation and enforcement of its
provisions. Necessarily, LGUs are statutorily sanctioned to impose and
collect such reasonable fees and charges for services rendered. The fee
imposed for garbage collections under Ordinance No. SP-2235 is a
charge fixed for the regulation of an activity as provided by the same. As
opposed to petitioner’s opinion, the garbage fee is not a tax. Hence, not
being a tax, the contention that the garbage fee under Ordinance No.
SP-2235 violates the rule on double taxation must necessarily fail.
20.
Facts:
Chavez, owner of some number of parcels of land challenges the
constitutionality of EO 73, which increased the assessment for real
property taxes. Intervenor RealtyOwners Association of the Phil (ROAP)
also challenged the constitutionality of EO 73
and EO 464, the latter order having been the basis for the enactment of
EO 73.
Issue: Whether EO 73 imposes unreasonable increase in real property
taxes, thus, should
be declared unconstitutional.
Held:
Negative. The attack on Executive Order No. 73 has no legal basis as
the general revision of assessments is a continuing process mandated
by Section 21 of Presidential Decree No. 464. If at all, it is Presidential
Decree No. 464 which should be challenged as constitutionally infirm.
However, Chavez failed to raise any objection against said
decree. It was ROAP, the intervenor, which questioned the
constitutionality thereof. To continue collecting real property taxes based
on valuations arrived at several years ago, in disregard of the increases
in the value of real properties that have occurred since then, is not in
consonance with a sound tax system. Fiscal adequacy, which is one of
the characteristics of a sound tax system, requires that sources of
revenues must be adequate to meet government expenditures and their
variations.

1. Whether the Socialized Housing Tax is valid.

2. Whether the ordinance on Garbage Fee violates the rule on double

taxation.

RULING

1. The SHT is valid. The tax is within the power of Quezon City
Government to impose. LGUs may be considered as having properly
exercised their police power only if there is a lawful subject and a lawful
method. Herein, the tax is not a pure exercise of taxing power or merely
to raise revenue; it is levied with a regulatory purpose. The levy is
primarily in the exercise of the police power for the general welfare of
the entire city. It is greatly imbued with public interest. On the question
of inequality, the disparities between a real property owner and an
informal settler as two distinct classes are too obvious and need not be
discussed at length. The differentiation conforms to the practical dictates
of justice and equity and is not discriminatory within the meaning of the
Constitution. Notably, the public purpose of a tax may legally exist even
if the motive which impelled the legislature to impose the tax was to favor