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Bobby Lock
PART IV- LOCAL AND REAL PROPERTY TAXATION
Republic Act No. 7160, Local Government Code (LGC) of 1991, as amended Implementing Rules and Regulations of the LGC
LOCAL TAXATION
I.
PRELIMINARY MATTERS
A. Power to Tax of Local Government Units
1. Sec. 5 Art. X, 1987 Constitution (compare with 1935 and
1973 provisions)
2. Sec. 129, LGC
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The ordinance in question (Ordinance No. 27) comes within the
second power of a municipality.
Mactan Cebu International Airport Authority vs. Marcos GR No.
120082, Sept. 11, 1996
As a general rule, 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 who are to pay it. Nevertheless, effective limitations
thereon may be imposed by the people through their Constitutions. Our
Constitution, for instance, provides that the rule of taxation shall be
uniform and equitable and Congress shall evolve a progressive system
of taxation. So potent indeed is the power that it was once opined that
the power to tax involves the power to destroy.
Verily, taxation is a destructive power which interferes with the
personal and property rights of the people and takes from them a
portion of their property for the support of the government. Accordingly,
tax statutes must be construed strictly against the government and
liberally in favor of the taxpayer. But since taxes are what we pay for
civilized society, or are the lifeblood of the nation, the law frowns
against exemptions from taxation and statutes granting tax exemptions
are thus construed stricissimi juris against the taxpayer and liberally in
favor of the taxing authority. A claim of exemption from tax payments
must be clearly shown and based on language in the law too plain to
be mistaken. Elsewise stated, taxation is the rule, exemption therefrom
is the exception. However, if the grantee of the exemption is a political
subdivision or instrumentality, the rigid rule of construction does not
apply because the practical effect of the exemption is merely to reduce
the amount of money that has to be handled by the government in the
course of its operations.
The power to tax is primarily vested in the Congress; however,
in our jurisdiction, it may be exercised by local legislative bodies, no
longer merely by virtue of a valid delegation as before, but pursuant to
direct authority conferred by Section 5, Article X of the Constitution.
Under the latter, the exercise of the power may be subject to such
guidelines and limitations as the Congress may provide which,
however, must be consistent with the basic policy of local autonomy.
Manila Electric Company vs. Province of Laguna GR No. 131359,
May 5, 1999
Prefatorily, it might be well to recall that local governments do
not have the inherent power to tax except to the extent that such
power might be delegated to them either by the basic law or by statute.
Presently, under Article X of the 1987 Constitution, a general
delegation of that power has been given in favor of local government
units.
Under the regime of the 1935 Constitution no similar delegation
of tax powers was provided, and local government units instead
derived their tax powers under a limited statutory authority. Whereas,
then, the delegation of tax powers granted at that time by statute to
local governments was confined and defined (outside of which the
power was deemed withheld), the present constitutional rule (starting
with the 1973 Constitution), however, would broadly confer such tax
powers subject only to specific exceptions that the law might prescribe.
Under the now prevailing Constitution, where there is neither a
grant nor a prohibition by statute, the tax power must be deemed to
exist although Congress may provide statutory limitations and
guidelines. The basic rationale for the current rule is to safeguard the
viability and self sufficiency of local government units by directly
granting them general and broad tax powers. Nevertheless, the
fundamental law did not intend the delegation to be absolute and
unconditional; the constitutional objective obviously is to ensure that,
while the local government units are being strengthened and made
more autonomous, the legislature must still see to it that (a) the
taxpayer will not be over-burdened or saddled with multiple and
unreasonable impositions; (b) each local government unit will have its
fair share of available resources; (c) the resources of the national
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government will not be unduly disturbed; and (d) local taxation will be
fair, uniform, and just.
Indicative of the legislative intent to carry out the Constitutional
mandate of vesting broad tax powers to local government units, the
Local Government Code has effectively withdrawn, under Section 193
thereof, tax exemptions or incentives theretofore enjoyed by certain
entities. This law states: Section 193. Withdrawal of Tax Exemption
Privileges.Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons, whether
natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered
under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of
this Code. (Italics supplied for emphasis)
In the recent case of the City Government of San Pablo, etc., et
al. vs. Hon. Bienvenido V. Reyes, et al., the Court has held that the
phrase in lieu of all taxes have to give way to the peremptory
language of the Local Government Code specifically providing for the
withdrawal of such exemptions, privileges, and that upon the
effectivity of the Local Government Code all exemptions except only as
provided therein can no longer be invoked by MERALCO to disclaim
liability for the local tax. In fine, the Court has viewed its previous
rulings as laying stress more on the legislative intent of the amendatory
law whether the tax exemption privilege is to be withdrawn or not
rather than on whether the law can withdraw, without violating the
Constitution, the tax exemption or not.
While the Court has not too infrequently, referred to tax
exemptions contained in special franchises as being in the nature of
contracts and a part of the inducement for carrying on the franchise,
these exemptions, nevertheless, are far from being strictly contractual
in nature. Contractual tax exemptions, in the real sense of the term and
where the nonimpairment clause of the Constitution can rightly be
invoked, are those agreed to by the taxing authority in contracts, such
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Act No. 3259 effectively works to grant or delegate to local
governments of Congress inherent power to tax the franchisees
properties belonging to the second group of properties indicated
above, that is, all properties which, exclusive of this franchise, are not
actually and directly used in the pursuit of its franchise. As may be
recalled, the taxing power of local governments under both the 1935
and the 1973 Constitutions solely depended upon an enabling law.
Absent such enabling law, local government units were without
authority to impose and collect taxes on real properties within their
respective territorial jurisdictions. While Section 14 of Rep. Act No.
3259 may be validly viewed as an implied delegation of power to tax,
the delegation under that provision, as couched, is limited to
impositions over properties of the franchisee which are not actually,
directly and exclusively used in the pursuit of its franchise. Necessarily,
other properties of Bayantel directly used in the pursuit of its business
are beyond the pale of the delegated taxing power of local
governments. In a very real sense, therefore, real properties of
Bayantel, save those exclusive of its franchise, are subject to realty
taxes. Ultimately, therefore, the inevitable result was that all realties
which are actually, directly and exclusively used in the operation of its
franchise are exempted from any property tax. Bayantels franchise
being national in character, the exemption thus granted under
Section 14 of Rep. Act No. 3259 applies to all its real or personal
properties found anywhere within the Philippine archipelago.
With the LGCs taking effect on January 1, 1992, Bayantels
exemption from real estate taxes for properties of whatever kind
located within the Metro Manila area was, by force of Section 234 of
the Code, expressly withdrawn. But, not long thereafter, however, or on
July 20, 1992, Congress passed Rep. Act No. 7633 amending
Bayantels original franchise. Worthy of note is that Section 11 of Rep.
Act No. 7633 is a virtual reenacment of the tax provision, i.e., Section
14, of Bayantels original franchise under Rep. Act No. 3259. Stated
otherwise, Section 14 of Rep. Act No. 3259 which was deemed
impliedly repealed by Section 234 of the LGC was expressly revived
under Section 14 of Rep. Act No. 7633. In concrete terms, the realty
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mentions two kinds of taxes which cannot be imposed by local
government units, namely: excise taxes on articles enumerated under
the National Internal Revenue Code [(NIRC)], as amended; and
taxes, fees or charges on petroleum products.
[i]n case of doubt, any tax ordinance or revenue measure shall
be construed strictly against the local government unit enacting it, and
liberally in favor of the taxpayer.
Congress has the constitutional authority to impose limitations
on the power to tax of local government units, and Section 133 of the
LGC is one such limitation. Indeed, the provision is the explicit
statutory impediment to the enjoyment of absolute taxing power by
local government units, not to mention the reality that such power is a
delegated power. To cite one example, under Section 133(g), local
government units are disallowed from levying business taxes on
business enterprises certified to by the Board of Investments as
pioneer or non-pioneer for a period of six (6) and (4) four years,
respectively from the date of registration.
Assuming that the LGC does not, in fact, prohibit the imposition
of business taxes on petroleum products, we would agree that the IRR
could not impose such a prohibition. With our ruling that Section 133(h)
does indeed prohibit the imposition of local business taxes on
petroleum products, however, the RTC declaration that Article 232 was
invalid is, in turn, itself invalid. Even absent Article 232, local
government units cannot impose business taxes on petroleum
products. If anything, Article 232 merely reiterates what the LGC itself
already provides, with the additional explanation that such prohibition
was in line with existing national policy.
4. Procedure for Approval of and Effectivity of Tax Ordinances
(Sec. 187)
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same businesses or occupation" on which "fixed internal revenue
privilege taxes" are regularly imposed by the Government.
Double taxation has been otherwise described as "direct
duplicate taxation". For double taxation to exist, the same property
must be taxed twice, when it should be taxed but once. Double
taxation has been also def ined as taxing the same person twice by the
same jurisdiction for the same thing (Cf. Manila Motor Co., Inc. v.
Ciudad de Manila, 72 Phil. 336). In the case at bar, plaintiff's argument
on double taxation does not inspire assent. First. The two taxes cover
two different objects. Section 1 of the ordinance taxes a person
operating sugar centrals or engaged in the manufacture of centrifugal
sugar. While under Section 2, those taxed are the operators of sugar
refinery mills. One occupation or business is different from the other.
Second. The disputed taxes are imposed on occupation or business.
Both taxes are not on sugar. The amount thereof depends on the
annual output capacity of the mills concerned, regardless of the actual
sugar milled. Plaintiff's argument perhaps could make out a point if the
object of taxation here were the sugar it produces, not the business of
producing it.
II. GENERAL PROVISIONS
A. Scope of taxing powers (Sec. 128)
B. Fundamental Principles (Sec. 130)
C. Definitions (Sec. 131)
D. Common Limitations
1. Income Tax
(1) Correlate with Sec. 143 (f)
2. Documentary Stamp Tax
3. Transfer Taxes
(1) Correlate with Sec. 135
4. Customs Duties
5. Taxes, Fees and Charges (TFC) on Goods Passing
Through the Territorial Jurisdiction of LGUs
(1) Correlate with Sec. 155
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Under Section 131 (y) of RA No. 7160, wharfage is defined as
a fee assessed against the cargo of a vessel engaged in foreign or
domestic trade based on quantity, weight, or measure received and/or
discharged by vessel. It is apparent that a wharfage does not lose its
basic character by being labeled as a service fee for police
surveillance on all goods.
Unpersuasive is the contention of respondent that petitioner
would unjustly be enriched at the formers expense. Though the rules
thereon apply equally well to the government, for unjust enrichment to
be deemed present, two conditions must generally concur: (a) a
person is unjustly benefited, and (b) such benefit is derived at
anothers expense or damage. In the instant case the benefits from the
use of the municipal roads and the wharf were not unjustly derived by
petitioner. Those benefits resulted from the infrastructure that the
municipality was mandated by law to provide. There is no unjust
enrichment where the one receiving the benefit has a legal right or
entitlement thereto, or when there is no causal relation between ones
enrichment and the others impoverishment.
6. TFC on products sold by marginal farmers of fishermen
(1) Definition of Marginalized Fishermen (Sec. 122)
City of Cebu vs. IAC 144 SCRA 710
Fish is an agricultural product and an inspection fee is not
allowed to be imposed thereon under the Local Tax Code, whether in
its original form or not.The aforequoted provision prohibits a local
government from imposing an inspection fee on agricultural products
and fish is an agricultural product. Contrary to the claim of petitioners,
under Section 102 of City Ordinance No. 1 a fisherman selling his fish
within the city has to pay the inspection fee of P0.03 for every kilo of
fish sold. Furthermore, the imposition of the tax will definitely restrict
the free flow of fresh fish to Cebu City because the price of fish will
have to increase.
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ensues should the alternative interpretation prevail all but strengthens
this position.
The language of Section 133(h) makes plain that the prohibition
with respect to petroleum products extends not only to excise taxes
thereon, but all taxes, fees and charges. The earlier reference in
paragraph (h) to excise taxes comprehends a wider range of subjects
of taxation: all articles already covered by excise taxation under the
NIRC, such as alcohol products, tobacco products, mineral products,
automobiles, and such nonessential goods as jewelry, goods made of
precious metals, perfumes, and yachts and other vessels intended for
pleasure or sports. In contrast, the later reference to taxes, fees and
charges pertains only to one class of articles of the many subjects of
excise taxes, specifically, petroleum products. While local
government units are authorized to burden all such other class of
goods with taxes, fees and charges, excepting excise taxes, a
specific prohibition is imposed barring the levying of any other type of
taxes with respect to petroleum products.
Province of Bulacan vs. CA GR No. 126232, November 27, 1998
In any case, the remaining issues raised by petitioner are
likewise devoid of merit, a province having no authority to impose
taxes on stones, sand, gravel, earth and other quarry resources
extracted from private lands.
The Court of Appeals erred in ruling that a province can impose
only the taxes specifically mentioned under the Local Government
Code. As correctly pointed out by petitioners, Section 186 allows a
province to levy taxes other than those specifically enumerated under
the Code, subject to the conditions specified therein. This finding,
nevertheless, affords cold comfort to petitioners as they are still
prohibited from imposing taxes on stones, sand, gravel, earth and
other quarry resources extracted from private lands. The tax imposed
by the Province of Bulacan is an excise tax, being a tax upon the
perfor-mance, carrying on, or exercise of an activity.
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is not for a public purpose, just and uniform because the police do
nothing but count the number of cassava sacks shipped out.
However, the tax imposed under the ordinance can be stricken down
on another ground. According to Section 2 of the abovementioned Act,
the tax levied must be for public purposes, just and uniform (Italics
supplied.) As correctly held by the trial court, the so-called police
inspection fee levied by the ordinance is unjust and unreasonable.
Pelizloy Realty Corp., vs. Province of Benguet, GR No. 183137,
April 10, 2013
In Commissioner of Internal Revenue v. Citytrust Investment
Phils., Inc., 503 SCRA 398 (2006), the Supreme Court defined
percentage tax as a tax measured by a certain percentage of the
gross selling price or gross value in money of goods sold, bartered or
imported; or of the gross receipts or earnings derived by any person
engaged in the sale of services. Also, Republic Act No. 8424,
otherwise known as the National Internal Revenue Code (NIRC), in
Section 125, Title V, lists amusement taxes as among the (other)
percentage taxes which are levied regardless of whether or not a
taxpayer is already liable to pay value-added tax (VAT).
Amusement taxes are fixed at a certain percentage of the gross
receipts incurred by certain specified establishments. Thus, applying
the definition in CIR v. Citytrust and drawing from the treatment of
amusement taxes by the NIRC, amusement taxes are percentage
taxes as correctly argued by Pelizloy. However, provinces are not
barred from levying amusement taxes even if amusement taxes are a
form of percentage taxes. Section 133 (i) of the LGC prohibits the levy
of percentage taxes except as otherwise provided by the LGC.
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common carriers by air, land or water, except as provided in this
Code[.] Section 133(j) of the LGC clearly and unambiguously
proscribes LGUs from imposing any tax on the gross receipts of
transportation contractors, persons engaged in the transportation of
passengers or freight by hire, and common carriers by air, land, or
water. Yet, confusion arose from the phrase unless otherwise provided
herein, found at the beginning of the said provision. The City of Manila
and its public officials insisted that said clause recognized the power of
the municipality or city, under Section 143(h) of the LGC, to impose tax
on any business subject to the excise, value-added or percentage tax
under the National Internal Revenue Code, as amended. And it was
pursuant to Section 143(h) of the LGC that the City of Manilaand its
public officials enacted, approved, and implemented Section 21(B)
11. Taxes on premiums
12. TFC for registration of motor vehicles and issuance of
licenses for driving
(1) Correlate with Sec. 458 (3)(vi) of the LGC and Art.
99(a)(3)(vi) of the IRR of the LGC
LTO vs. City of Butuan GR No. 131512, January 20, 2000
The Department of Transportation and Communications
(DOTC), through the LTO and the LTFRB, has since been tasked with
implementing laws pertaining to land transportation. The LTO is a line
agency under the DOTC whose powers and functions, pursuant to
Article III, Section 4 (d) [1], of R.A. No. 4136, otherwise known as Land
Transportation and Traffic Code, as amended, deal primarily with the
registration of all motor vehicles and the licensing of drivers thereof.
The LTFRB, upon the other hand, is the governing body tasked by
E.O. No. 202, dated 19 June 1987, to regulate the operation of public
utility or for hire vehicles and to grant franchises or certificates of
public convenience (CPC). Finely put, registration and licensing
functions are vested in the LTO while franchising and regulatory
responsibilities had been vested in the LTFRB.
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15. TFC on the National Government, its agencies and
instrumentalities and LGUs
Philippine Fisheries Devt Authority vs. CA GR No. 169836, GR No.
July 31, 2007
The MIAA case held that unlike GOCCs, instrumentalities of the
national government, like MIAA, are exempt from local taxes pursuant
to Section 133(o) of the Local Government Code. This exemption,
however, admits of an exception with respect to real property taxes.
Applying Section 234(a) of the Local Government Code, the Court
ruled that when an instrumentality of the national government grants to
a taxable person the beneficial use of a real property owned by the
Republic, said instrumentality becomes liable to pay real property tax.
Thus, while MIAA was held to be an instrumentality of the national
government which is generally exempt from local taxes, it was at the
same time declared liable to pay real property taxes on the airport
lands and buildings which it leased to private persons. It was held that
the real property tax assessments and notices of delinquencies issued
by the City of Pasay to MIAA are void except those pertaining to
portions of the airport which are leased to private parties.
The real property tax assessments issued by the City of Iloilo
should be upheld only with respect to the portions leased to private
persons. In case the Authority fails to pay the real property taxes due
thereon, said portions cannot be sold at public auction to satisfy the tax
delinquency. In Chavez v. Public Estates Authority, 384 SCRA 152 it
was held that reclaimed lands are lands of the public domain and
cannot, without Congressional fiat, be subject of a sale, public or
private.
Mactan Cebu International Airport Authority vs. Marcos GR No.
120082, Sept. 11, 1996
Section 133 of the LGC prescribes the common limitations on
the taxing powers of local government units. Needless to say, the last
item (item 0 of Sec. 133 of the LGC) is pertinent to this case. The
taxes, fees or charges referred to are of any kind; hence, they
include all of these, unless otherwise provided by the LGC. The term
taxes is well understood so as to need no further elaboration,
especially in light of the above enumeration. The term fees means
charges fixed by law or ordinance for the regulation or inspection of
business or activity, while charges are pecuniary liabilities such as
rents or fees against persons or property.
An agency of the Government refers to any of the various
units of the Government, including a department, bureau, office,
instrumentality, or government-owned or controlled corporation, or a
local government or a distinct unit therein; while an instrumentality
refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a
charter. This term includes regulatory agencies, chartered institutions
and government-owned and controlled corporations.
Accordingly, the position taken by the petitioner is untenable.
Reliance on Basco vs. Philippine Amusement and Gaming Corporation
is unavailing since it was decided before the effectivity of the LGC.
Besides, nothing can prevent Congress from decreeing that even
instrumentalities or agencies of the Government performing
governmental functions may be subject to tax. Where it is done
precisely to fulfill a constitutional mandate and national policy, no one
can doubt its wisdom.
MIAA vs. CA GR No. 155650, July 20, 2006
A government instrumentality like MIAA falls under Section
133(o) of the Local Government Code, which states: SEC. 133.
Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following: x x x x (o) Taxes, fees or
charges of any kind on the National Government, its agencies and
instrumentalities and local government units. (Emphasis and italics
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supplied) Section 133(o) recognizes the basic principle that local
governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power
subject to such guidelines and limitations as the Congress may
provide.
Section 133(o) recognizes the basic principle that local
governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power
subject to such guidelines and limitations as the Congress may
provide. When local governments invoke the power to tax on national
government instrumentalities, such power is construed strictly against
local governments. The rule is that a tax is never presumed and there
must be clear language in the law imposing the tax. Any doubt whether
a person, article or activity is taxable is resolved against taxation. This
rule applies with greater force when local governments seek to tax
national government instrumentalities. Another rule is that a tax
exemption is strictly construed against the taxpayer claiming the
exemption. However, when Congress grants an exemption to a
national government instrumentality from local taxation, such
exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.: The
reason for the rule does not apply in the case of exemptions running to
the benefit of the government itself or its agencies. In such case the
practical effect of an exemption is merely to reduce the amount of
money that has to be handled by government in the course of its
operations. For these reasons, provisions granting exemptions to
government agencies may be construed liberally, in favor of non
taxliability of such agencies. There is, moreover, no point in national
and local governments taxing each other, unless a sound and
compelling policy requires such transfer of public funds from one
government pocket to another.
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real property owned by the Republic loses its tax exemption only if the
beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person. MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the
Local Government Code. Thus, even if we assume that the Republic
has granted to MIAA the beneficial use of the Airport Lands and
Buildings, such fact does not make these real properties subject to real
estate tax.
By express mandate of the Local Government Code, local
governments cannot impose any kind of tax on national government
instrumentalities like the MIAA. Local governments are devoid of power
to tax the national government, its agencies and instrumentalities. The
taxing powers of local governments do not extend to the national
government, its agencies and instrumentalities, [u]nless otherwise
provided in this Code as stated in the saving clause of Section 133.
The saving clause refers to Section 234(a) on the exception to the
exemption from real estate tax of real property owned by the Republic.
The minoritys theory violates Section 133(o) of the Local
Government Code which expressly prohibits local governments from
imposing any kind of tax on national government instrumentalities.
Section 133(o) does not distinguish between national government
instrumentalities with or without juridical personalities. Where the law
does not distinguish, courts should not distinguish. Thus, Section
133(o) applies to all national government instrumentalities, with or
without juridical personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a juridical person,
but whether it is a national government instrumentality under Section
133(o) of the Local Government Code. Section 133(o) is the specific
provision of law prohibiting local governments from imposing any kind
of tax on the national government, its agencies and instrumentalities.
The saving clause in Section 133 refers to the exception to the
exemption in Section 234(a) of the Code, which makes the national
government subject to real estate tax when it gives the beneficial
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limitations on such taxing power in Section 133, then local
governments can impose any kind of tax on the national government,
its agencies and instrumentalitiesa gross absurdity.
MIAA vs. City of Pasay GR No. 163072, April 2, 2009
MIAA is not a government-owned or controlled corporation but
a government instrumentality which is exempt from any kind of tax
from the local governments. Indeed, the exercise of the taxing power of
local government units is subject to the limitations enumerated in
Section 133 of the Local Government Code. Under Section 133(o) of
the Local Government Code, local government units have no power to
tax instrumentalities of the national government like the MIAA. Hence,
MIAA is not liable to pay real property tax for the NAIA Pasay
properties.
City of Davao City vs. RTC GR No. 127383, August 18, 2005
The Court, in ruling MCIAA non-exempt from realty taxes,
considered that Section 133 qualified the exemption of the National
Government, its agencies and instrumentalities from local taxation with
the phrase unless otherwise provided herein. The Court then
considered the other relevant provisions of the Local Government
Code.
Section 133 was not intended to be so absolute a prohibition on
the power of LGUs to tax the National Government, its agencies and
instrumentalities, as evidenced by these cited provisions which
otherwise provided. But what was the extent of the limitation under
Section 133? This is how the Court, in a discussion of far-reaching
consequence, defined the parameters in Mactan: The foregoing
sections of the LGC speak of: (a) the limitations on the taxing powers
of local government units and the exceptions to such limitations; and
(b) the rule on tax exemptions and the exceptions thereto. The use of
exceptions or provisos in these sections, as shown by the following
clauses: (1) unless otherwise provided herein in the opening
paragraph of Section 133; (2) Unless otherwise provided in this Code
in Section 193; (3) not hereafter specifically exempted in Section 232;
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(To be discussed together with Secs.232 and 234 on Real Property
Tax)
III. TAXING AND OTHER REVENUE RASING POWERS OF LGUS
A. Provinces
1. Local Transfer Tax (Sec. 135)
2. Business Tax on Printing and Publication (Sec. 136)
3. Franchise Tax (Sec. 137)
NPC vs. City of Cabanatuan GR No. 149110, April 9, 2003
Section 131 (m) of the LGC defines a franchise as a right or
privilege, affected with public interest which is conferred upon private
persons or corporations, under such terms and conditions as the
government and its political subdivisions may impose in the interest of
the public welfare, security and safety. On the other hand, section 131
(d) of the LGC defines business as trade or commercial activity
regularly engaged in as means of livelihood or with a view to profit.
Petitioner claims that it is not engaged in an activity for profit, in as
much as its charter specifically provides that it is a non-profit
organization.
In its specific sense, a franchise may refer to a general or
primary franchise, or to a special or secondary franchise. The former
relates to the right to exist as a corporation, by virtue of duly approved
articles of incorporation, or a charter pursuant to a special law creating
the corporation. The right under a primary or general franchise is
vested in the individuals who compose the corporation and not in the
corporation itself. On the other hand, the latter refers to the right or
privileges conferred upon an existing corporation such as the right to
use the streets of a municipality to lay pipes of tracks, erect poles or
string wires. The rights under a secondary or special franchise are
vested in the corporation and may ordinarily be conveyed or
mortgaged under a general power granted to a corporation to dispose
of its property,except such special or secondary franchises as are
charged with a public use.
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In its decision dated January 20, 1999, the RTC held that
pursuant to the in lieu of all taxes provision contained in Section 8 of
R.A. No. 7966, ABS-CBN is exempt from the payment of the local
franchise tax. The RTC further pronounced that ABS-CBN shall instead
be liable to pay a franchise tax of 3% of all gross receipts in lieu of all
other taxes. On this score, the RTC ruling is flawed. In keeping with the
laws that have been passed since the grant of ABS-CBNs franchise,
the corporation should now be subject to VAT, instead of the 3%
franchise tax.
City of Iriga vs. Camarines Sur III Electric Cooperative, Inc., GR
No. 192945, September 5, 2012
The power of the local government units to impose and collect
taxes is derived from the Constitution itself which grants them the
power to create its own sources of revenues and to levy taxes, fees
and charges subject to such guidelines and limitation as the Congress
may provide. This explicit constitutional grant of power to tax is
consistent with the basic policy of local autonomy and decentralization
of governance. With this power, local government units have the fiscal
mechanisms to raise the funds needed to deliver basic services to their
constituents and break the culture of dependence on the national
government. Thus, consistent with these objectives, the LGC was
enacted granting the local government units, like petitioner, the power
to impose and collect franchise tax.
In National Power Corporation v. City of Cabanatuan, 401
SCRA 259 (2003), the Court declared that a franchise tax is a tax on
the privilege of transacting business in the state and exercising
corporate franchises granted by the state. It is not levied on the
corporation simply for existing as a corporation, upon its property or its
income, but on its exercise of the rights or privileges granted to it by
the government. It is within this context that the phrase tax on
businesses enjoying a franchise in Section 137 of the LGC should be
interpreted and understood.
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one must refer to the prior enumeration of theaters, cinematographs,
concert halls and circuses with artistic expression as their common
characteristic. Professional basketball games do not fall under the
same category as theaters, cinematographs, concert halls and
circuses as the latter basically belong to artistic forms of entertainment
while the former caters to sports and gaming.
Untenable is the contention that income from the cession of
streamer and advertising spaces to VEI is not subject to amusement
tax. The questioned proviso may be found in Section 1 of PD 1456
which states: SECTION 1. Section 268 of the National Internal
Revenue Code of 1977, as amended, is hereby further amended to
read as follows: Sec. 268. Amusement taxes.There shall be
collected from the proprietor, lessee or operator of cockpits, cabarets,
night or day clubs, boxing exhibitions, professional basketball games,
Jai-Alai, race tracks and bowling alleys, a tax equivalent to: x x x x x x
x x x of their gross receipts, irrespective of whether or not any amount
is charged or paid for admission. For the purpose of the amusement
tax, the term gross receipts embraces all the receipts of the proprietor,
lessee or operator of the amusement place. Said gross receipts also
include income from television, radio and motion picture rights, if any.
(A person, or entity or association conducting any activity subject to the
tax herein imposed shall be similarly liable for said tax with respect to
such portion of the receipts derived by him or it.) (italics ours) The
foregoing definition of gross receipts is broad enough to embrace the
cession of advertising and streamer spaces as the same embraces all
the receipts of the proprietor, lessee or operator of the amusement
place. The law being clear, there is no need for an extended
interpretation.
Pelizloy Realty Corp., vs. Province of Benguet, GR No. 183137,
April 10, 2013
Evidently, Section 140 of the LGC carves a clear exception to
the general rule in Section 133 (i). Section 140 expressly allows for the
imposition by provinces of amusement taxes on the proprietors,
lessees, or operators of theaters, cinemas, concert halls, circuses,
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Ericsson Telecommunication vs. City of Pasig GR No. 176667,
November 22. 2007
The above provision specifically refers to gross receipts which
is defined under Section 131 of the Local Government Code, as
follows: x x x x (n) Gross Sales or Receipts include the total amount
of money or its equivalent representing the contract price,
compensation or service fee, including the amount charged or
materials supplied with the services and the deposits or advance
payments actually or constructively received during the taxable quarter
for the services performed or to be performed for another person
excluding discounts if determinable at the time of sales, sales return,
excise tax, and value-added tax (VAT); x x x x The law is clear. Gross
receipts include money or its equivalent actually or constructively
received in consideration of services rendered or articles sold,
exchanged or leased, whether actual or constructive.
Revenue Regulations No. 16-2005 dated September 1, 2005
defined and gave examples of constructive receipt, to wit: SEC. 4.
108-4. Definition of Gross Receipts.x x x Constructive receipt
occurs when the money consideration or its equivalent is placed at the
control of the person who rendered the service without restrictions by
the payor. The following are examples of constructive receipts: (1)
deposit in banks which are made available to the seller of services
without restrictions; (2) issuance by the debtor of a notice to offset any
debt or obligation and acceptance thereof by the seller as payment for
services rendered; and (3) transfer of the amounts retained by the
payor to the account of the contractor. There is, therefore, constructive
receipt, when the consideration for the articles sold, exchanged or
leased, or the services rendered has already been placed under the
control of the person who sold the goods or rendered the services
without any restriction by the payor.
Gross revenue covers money or its equivalent actually or
constructively received, including the value of services rendered or
articles sold, exchanged or leased, the payment of which is yet to be
received. This is in consonance with the International Financial
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where the provisions on business taxation relevant to this petition may
be found.
City of Manila vs. Coca Cola Bottlers, GR No. 181845, August 4,
2009
Petitioners obstinately ignore the exempting proviso in Section
21 of Tax Ordinance No. 7794, to their own detriment. Said exempting
proviso was precisely included in said section so as to avoid double
taxation. Double taxation means taxing the same property twice when
it should be taxed only once; that is, taxing the same person twice by
the same jurisdiction for the same thing. It is obnoxious when the
taxpayer is taxed twice, when it should be but once. Otherwise
described as direct duplicate taxation, the two taxes must be imposed
on the same subject matter, for the same purpose, by the same taxing
authority, within the same jurisdiction, during the same taxing period;
and the taxes must be of the same kind or character. Using the
aforementioned test, the Court finds that there is indeed double
taxation if respondent is subjected to the taxes under both Sections 14
and 21 of Tax Ordinance No. 7794, since these are being imposed: (1)
on the same subject matterthe privilege of doing business in the City
of Manila; (2) for the same purposeto make persons conducting
business within the City of Manila contribute to city revenues; (3) by
the same taxing authority petitioner City of Manila; (4) within the
same taxing jurisdictionwithin the territorial jurisdiction of the City of
Manila; (5) for the same taxing periodsper calendar year; and (6) of
the same kind or charactera local business tax imposed on gross
sales or receipts of the business.
The distinction petitioners attempt to make between the taxes
under Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The
Court revisits Section 143 of the LGC, the very source of the power of
municipalities and cities to impose a local business tax, and to which
any local business tax imposed by petitioner City of Manila must
conform. It is apparent from a perusal thereof that when a municipality
or city has already imposed a business tax on manufacturers, etc. of
liquors, distilled spirits, wines, and any other article of commerce,
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subject to x x x value-added x x x tax under the National Internal
Revenue Code, as amended, the rate of tax shall not exceed two
percent (2%) of gross sales or receipts of the preceding calendar year
from the lease of goods or properties. Hence, the 10% tax rate
imposed by Ordinance No. 9503-2005 clearly violates Section 143(h)
of the Local Government Code.
(1) Catch all provision Sec. 143 (h)
(2) Rates of Tax within Metropolitan Manila (Sec. 144)
(3) Retirement of Business (Sec. 145)
Mobil Phils. vs. City Treasurer of Makati GR No. 154092, July 14,
2005
Prefatorily, it is necessary to distinguish between a business tax
vis--vis an income tax. Business taxes imposed in the exercise of
police power for regulatory purposes are paid for the privilege of
carrying on a business in the year the tax was paid. It is paid at the
beginning of the year as a fee to allow the business to operate for the
rest of the year. It is deemed a prerequisite to the conduct of business.
Income tax, on the other hand, is a tax on all yearly profits arising from
property, professions, trades or offices, or as a tax on a persons
income, emoluments, profits and the like. It is tax on income, whether
net or gross realized in one taxable year. It is due on or before the 15th
day of the 4th month following the close of the taxpayers taxable year
and is generally regarded as an excise tax, levied upon the right of a
person or entity to receive income or profits.
For the year 1998, petitioner paid a total of P2,262,122.48 to
the City Treasurer of Makati as business taxes for the year 1998. The
amount of tax as computed based on petitioners gross sales for 1998
is only P1,331,638.84. Since the amount paid is more than the amount
computed based on petitioners actual gross sales for 1998, petitioner
upon its retirement is not liable for additional taxes to the City of
Makati. Thus, we find that the respondent erroneously treated the
assessment and collection of business tax as if it were income tax, by
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account of the payments made by the company to the municipality
pursuant to the tax ordinance. This contention is incorrect for even if
payment was so made on any particular sales, uncertainty on the
applicability of the ordinance to future sales would still remain.
Phil. Match vs. City of Cebu L-30745 Jan. 1888, 197778
The city can validly tax the sales of matches to customers
outside of the city as long as the orders were booked and paid for in
the companys branch office in the city. Those matches can be
regarded as sold in the city, as contemplated in the ordinance,
because the matches were delivered to the carrier in Cebu City.
Generally, delivery to the carrier is delivery to the buyer. A different
interpretation would defeat the tax ordinance in question or encourage
tax evasion through the simple expedient of arranging for the delivery
of the matches at the outskirts of the city although the purchases were
effected and paid for in the companys branch office in the city. The
municipal board of Cebu City is empowered to provide for the levy and
collection of taxes for general and special purposes in accordance with
law.
The taxing power of cities, municipalities and municipal districts
may be used (1) upon any person engaged in any occupation or
business, or exercising any privilege therein; (2) for services rendered
by those political subdivisions or rendered in connection with any
business, profession or occupation being conducted therein, and (3) to
levy, for public purposes, just and uniform taxes, licenses or fees.
Iloilo bottlers vs. City of Iloilo GR No. 52019 Aug. 18, 1988
(compare with current LGC provisions and IRR provisions on rolling
stores)
This Court has always recognized that the right to manufacture
implies the right to sell/distribute the manufactured products [See
Central Azucarera de Don Pedro v. City of Manila and Sarmiento, 97
Phil. 627 (1955); Caltex (Philippines), Inc. v. City of Manila and
Cudiamat, G.R. No. L-22764, July 28, 1969, 28 SCRA 840, 843.]
Hence, for tax purposes, a manufacturer does not necessarily become
engaged in the separate business of selling simply because it sells the
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sold at Pavia. They served as selling units. They were what were
called, until recently, rolling stores. The delivery trucks were therefore
much the same as the stores and warehouses under the second
marketing system. Iloilo Bottlers, Inc. thus falls under the second
category above. That is, the corporation was engaged in the separate
business of selling or distributing softdrinks, independently of its
business of bottling them.
The tax imposed under Ordinance No. 5 is an excise tax. It is a
tax on the privilege of distributing, manufacturing or bottling softdrinks.
Being an excise tax, it can be levied by the taxing authority only when
the acts, privileges or businesses are done or performed within the
jurisdiction of said authority [Commissioner of Internal Revenue v.
British Overseas Airways Corp. and Court of Tax Appeals, G.R. Nos.
65773-74, April 30, 1987, 149 SCRA 395, 410.] Specifically, the situs of
The act of distributing, bottling or manufacturing softdrinks must be
within city limits, before an entity engaged in any of the activities may
be taxed in Iloilo City.
(a) With Branch or Sales Outlet
(b) No Branch Sales or Outlet
(c) With Factories, Project Offices, Plants and
Plantations
(d) Plantation Located at a place other than the
place where factory is located
(e) Two (2) or more factories, project offices, plants
or plantations in different localities
(f) See also IRR for rules on rolling stores (See Art.
243 of the IRR of the LGC)
(6) Fees and Charges (Sec. 147)
(7) Others (Sec. 148 and Sec. 149)
C. Cities (Sec. 151)
D. Barangay
1. Tax on retailers (Sec. 152 a)
2. Service Fees or Charges (Sec. 152 b)
3. Barangay Clearance (Sec. 152 c)
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2. Authority to Adjust Tax Rates (Sec. 191)
Alabang Supermarket Corporation vs. City of Muntinlupa, CTA EB
Case No. 386 February 12, 2009 *
(read also case decided by the CTA Division)*
3. Authority to Grant Tax Exemptions (Sec. 192)
4. Withdrawal of Tax Exemption Privileges (Sec. 193)
PLDT vs. City of Davao GR No. 143867, August 22, 2001
The trial court held that, under these provisions, all exemptions
granted to all persons, whether natural and juridical, including those
which in the future might be granted, are withdrawn unless the law
granting the exemption expressly states that the exemption also
applies to local taxes. We disagree. Sec. 137 does not state that it
covers future exemptions. In Philippine Airlines, Inc. v. Edu, where a
provision of the Tax Code enacted on June 27, 1968 (R.A. 5431)
withdrew the exemption enjoyed by PAL, it was held that a subsequent
amendment of PALs franchise, exempting it from all other taxes except
that imposed by its franchise, again entitled PAL to exemption from the
date of the enactment of such amendment. The Tax Code provision
withdrawing the tax exemption was not construed as prohibiting future
grants of exemptions from all taxes.
Indeed, the grant of taxing powers to local government units
underthe Constitution and the LGC does not affect the power of
Congress to grant exemptions to certain persons, pursuant to a
declared national policy. The legal effect of the constitutional grant to
local governments simply means that in interpreting statutory
provisions on municipal taxing powers, doubts must be resolved in
favor of municipal corporations.
The tax exemption must be expressed in the statute in clear
language that leaves no doubt of the intention of the legislature to
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3.
4.
5.
6.
7.
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Cagayan Electric Power and Light Co., Inc., vs. City of Cagayan
de Oro, GR No. 191761, November 14, 2012.
CEPALCO ignored our ruling in Reyes v. Court of Appeals on
the mandatory nature of the statutory periods: Clearly, the law requires
that the dissatisfied taxpayer who questions the validity or legality of a
tax ordinance must file his appeal to the Secretary of Justice, within 30
days from effectivity thereof. In case the Secretary decides the appeal,
a period also of 30 days is allowed for an aggrieved party to go to
court. But if the Secretary does not act thereon, after the lapse of 60
days, a party could already proceed to seek relief in court. These three
separate periods are clearly given for compliance as a prerequisite
before seeking redress in a competent court. Such statutory periods
are set to prevent delays as well as enhance the orderly and speedy
discharge of judicial functions. For this reason the courts construe
these provisions of statutes as mandatory. A municipal tax ordinance
empowers a local government unit to impose taxes. The power to tax
is the most effective instrument to raise needed revenues to finance
and support the myriad activities of local government units for the
delivery of basic services essential to the promotion of the general
welfare and enhancement of peace, progress, and prosperity of the
people. Consequently, any delay in implementing tax measures would
be to the detriment of the public. It is for this reason that protests over
tax ordinances are required to be done within certain time frames. In
the instant case, it is our view that the failure of petitioners to appeal to
the Secretary of Justice within 30 days as required by Sec. 187 of R.A.
7160 is fatal to their cause.
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foregoing, it is evident that Tax Ordinance No. 7988 is null and void as
said ordinance was published only for one day in the 22 May 2000
issue of the Philippine Post in contravention of the unmistakable
directive of the Local Government Code of 1991.
3. Periods of Assessment and Collection (Sec. 194)
4. Protest of Assessment (Sec. 195)
San Juan vs. Castro GR No. 174617, December 27, 2007
Under Section 195 of the Local Government Code which is
quoted immediately below, a taxpayer who disagrees with a tax
assessment made by a local treasurer may file a written protest
thereof: SECTION 195. Protest of Assessment.When the local
treasurer or his duly authorized representative finds that the correct
taxes, fees, or charges have not been paid, he shall issue a notice of
assessment stating the nature of the tax, fee, or charge, the amount
deficiency, the surcharges, interests and penalties. Within sixty (60)
days from the receipt of the notice of assessment, the taxpayer may
file a written protest with the local treasurer contesting the assessment;
otherwise, the assessment shall become final and executory. The local
treasurer shall decide the protest within sixty (60) days from the time of
its filing. If the local treasurer finds the protest to be wholly or partly
meritorious, he shall issue a notice cancelling wholly or partially the
assessment. However, if the local treasurer finds the assessment to be
wholly or partly correct, he shall deny the protest wholly or partly with
notice to the taxpayer. The taxpayer shall have thirty (30) days from
the receipt of the denial of the protest or from the lapse of the
sixty-day (60) period prescribed herein within which to appeal
with the court of competent jurisdiction, otherwise the
assessment becomes conclusive and unappealable. (Emphasis
and italics supplied) That petitioner protested in writing against the
assessment of tax due and the basis thereof is on record as in fact it
was on that account that respondent sent him the above-quoted July
15, 2005 letter which operated as a denial of petitioners written
protest. Petitioner should thus have, following the earlier above-quoted
Section 195 of the Local Government Code, either appealed the
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that no court shall have the authority to grant an injunction to restrain
the collection of any national internal revenue tax, fee or charge
imposed by the code. An exception to this rule obtains only when in the
opinion of the Court of Tax Appeals (CTA) the collection thereof may
jeopardize the interest of the government and/or the taxpayer.
The situation, however, is different in the case of the collection
of local taxes as there is no express provision in the LGC prohibiting
courts from issuing an injunction to restrain local governments from
collecting taxes. Thus, in the case of Valley Trading Co., Inc. v. Court of
First Instance of Isabela, Branch II, 171 SCRA 501 (1989), cited by the
petitioner, we ruled that: Unlike the National Internal Revenue Code,
the Local Tax Code does not contain any specific provision prohibiting
courts from enjoining the collection of local taxes. Such statutory lapse
or intent, however it may be viewed, may have allowed preliminary
injunction where local taxes are involved but cannot negate the
procedural rules and requirements under Rule 58.
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more was left to the GSIS except its right to receive full payment of the
purchase price.
Thus under this provision, while the GSIS may be exempt from
real estate tax the exemption does not cover property belonging to it
where the beneficial use thereof has been granted for consideration or
otherwise to a taxable person. There can be no doubt that under the
provisions of the contract in question, the purchaser to whose
possession the property had been transferred was granted beneficial
use thereof. It follows on the strength of the provision Sec. 40(a) of PD
464 that the said property is not exempt from the real property tax.
While this decree just cited was still inexistent at the time the taxes at
issue were assessed on the herein appellant, indeed its above quoted
provision sheds light upon the legislative intent behind the provision of
Commonwealth Act 186, pertaining to exemption of the GSIS from
taxes.
NPC vs. Province of Quezon, GR No. 171586, July 15, 2009
The liability for taxes generally rests on the owner of the real
property at the time the tax accrues. This is a necessary consequence
that proceeds from the fact of ownership. However, personal liability for
realty taxes may also expressly rest on the entity with the beneficial
use of the real property, such as the tax on property owned by the
government but leased to private persons or entities, or when the tax
assessment is made on the basis of the actual use of the property. In
either case, the unpaid realty tax attaches to the property but is
directly chargeable against the taxable person who has actual
and beneficial use and possession of the property regardless of
whether or not that person is the owner.
In Cario v. Ofilado (217 SCRA 206 [1993]), we declared that
legal interest should be an interest that is actual and material, direct
and immediate, not simply contingent or expectant. The concept of the
directness and immediacy involved is no different from that required in
motions for intervention under Rule 19 of the Rules of Court that allow
one who is not a party to the case to participate because of his or her
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liable for taxes. The contractual assumption of tax liability must be
supplemented by an interest that the party assuming the liability had
on the property; the person from whom payment is sought must have
also acquired the beneficial use of the property taxed. In other words,
he must have the use and possession of the propertyan element that
was missing in Napocors case.
We further stated that the tax liability must be a liability that
arises from law, which the local government unit can rightfully and
successfully enforce, not the contractual liability that is enforceable
only between the parties to the contract. In the present case, the
Province of Quezon is a third party to the BOT Agreement and could
thus not exact payment from Napocor without violating the principle of
relativity of contracts. Corollarily, for reasons of fairness, the local
government units cannot be compelled to recognize the protest of a
tax assessment from Napocor, an entity against whom it cannot
enforce the tax liability.
Legal interest is defined as interest in property or a claim
cognizable at law, equivalent to that of a legal owner who has legal title
to the property. Given this definition, Napocor is clearly not vested with
the requisite interest to protest the tax assessment, as it is not an entity
having the legal title over the machineries. It has absolutely no solid
claim of ownership or even of use and possession of the machineries,
as our July 15, 2009 Decision explained.
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5. Assessment
6. Assessed Value
E. Appraisal of Real Property (Sec. 201)
Sesbreno v. CBAA, 270 SCRA 263
F. Declaration of Real Property
1. By Owner or Administrator (Sec. 202)
2. In case improvements are made (Sec. 203)
3. By Assessor (Sec. 204)
4. Notification of Transfer of Real Property Ownership (Sec.
208)
G. Assessment of Real Property
1. Preparation of Schedule of Fair Market Values (Sec. 212)
H. Condonation of RPT
1. Condonation and Reduction of RPT (Sec. 276)
2. Condonation or Reduction of RPT by President (Sec. 277)
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Lung Center of the Philippines vs. QC 433 SCRA 119
(2) Sec. 4(3), Art. XIV
Fels Energy, Inc. vs. Province of Batangas GR No. 168557,
February 16, 2007
Philippine Fisheries Devt Authority vs. CA GR No. 169836, GR No.
July 31, 2007
The Court rules that the Authority is not a GOCC but an
instrumentality of the national government which is generally exempt
from payment of real property tax. However, said exemption does not
apply to the portions of the IFPC which the Authority leased to private
entities. With respect to these properties, the Authority is liable to pay
real property tax. Nonetheless, the IFPC, being a property of public
dominion cannot be sold at public auction to satisfy the tax
delinquency.
On the basis of the parameters set in the MIAA case, the
Authority should be classified as an instrumentality of the national
government. As such, it is generally exempt from payment of real
property tax, except those portions which have been leased to private
entities.
Mactan Cebu International Airport Authority vs. Marcos GR No.
120082, Sept. 11, 1996
Since taxation is the rule and exemption therefrom the
exception, the exemption may be withdrawn at the pleasure of the
taxing authority, the only exception being where the exemption was
granted to private parties based on material consideration of a mutual
nature, which then becomes contractual and thus covered by the nonimpairment clause of the ConstitutionThere can be no question that
under Section 14 of R.A. No. 6958 the petitioner is exempt from the
payment of realty taxes imposed by the National Government or any of
its political subdivisions, agencies, and instrumentalities. Nevertheless,
since taxation is the rule and exemption therefrom the exception, the
exemption may thus be withdrawn at the pleasure of the taxing
authority. The only exception to this rule is where the exemption was
granted to private parties based on material consideration of a mutual
nature, which then becomes contractual and is thus covered by the
nonimpairment clause of the Constitution.
Since the last paragraph of Section 234 unequivocally
withdrew, upon the effectivity of the LGC, exemptions from payment of
real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in
the said section, and the petitioner is, undoubtedly, a governmentowned corporation, it necessarily follows that its exemption from such
tax granted it in Section 14 of its Charter, R.A. No. 6958, has been
withdrawn. Any claim to the contrary can only be justified if the
petitioner can seek refuge under any of the exceptions provided in
Section 234, but not under Section 133, as it now asserts, since, as
shown above, the said section is qualified by Sections 232 and 234.
The justification for this restricted exemption in Section 234(a)
seems obvious: to limit further tax exemption privileges, especially in
light of the general provision on withdrawal of tax exemption privileges
in Section 193 and the special provision on withdrawal of exemption
from payment of real property taxes in the last paragraph of Section
234. These policy considerations are consistent with the State policy to
ensure autonomy to local governments and the objective of the LGC
that they enjoy genuine and meaningful local autonomy to enable them
to attain their fullest development as selfreliant communities and make
them effective partners in the attainment of national goals. The power
to tax is the most effective instrument to raise needed revenues to
finance and support myriad activities of local government units for the
delivery of basic services essential to the promotion of the general
welfare and the enhancement of peace, progress, and prosperity of the
people. It may also be relevant to recall that the original reasons for the
withdrawal of tax exemption privileges granted to government-owned
and controlled corporations and all other units of government were that
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such privilege resulted in serious tax base erosion and distortions in
the tax treatment of similarly situated enterprises, and there was a
need for these entities to share in the requirements of development,
fiscal or otherwise, by paying the taxes and other charges due from
them.
Moreover, the petitioner cannot claim that it was never a
taxable person under its Charter. It was only exempted from the
payment of real property taxes. The grant of the privilege only in
respect of this tax is conclusive proof of the legislative intent to make it
a taxable person subject to all taxes, except real property tax.
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the governmental powers of eminent domain, police authority and the
levying of fees and charges. At the same time, MIAA exercises all the
powers of a corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this Executive
Order.
Likewise, when the law makes a government instrumentality
operationally autonomous, the instrumentality remains part of the
National Government machinery although not integrated with the
department framework. The MIAA Charter expressly states that
transforming MIAA into a separate and autonomous body will make
its operation more financially viable.
The Airport Lands and Buildings of MIAA are property of public
dominion and therefore owned by the State or the Republic of the
Philippines. The Civil Code provides: ARTICLE 419. Property is either
of public dominion or of private ownership. ARTICLE 420. The
following things are property of public dominion: (1) Those
intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character; (2) Those which belong to the State,
without being for public use, and are intended for some public service
or for the development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended
for public use or for public service, shall form part of the patrimonial
property of the State.
No one can dispute that properties of public dominion
mentioned in Article 420 of the Civil Code, like roads, canals, rivers,
torrents, ports and bridges constructed by the State, are owned
by the State. The term ports includes seaports and airports. The
MIAA Airport Lands and Buildings constitute a port constructed by
the State. Under Article 420 of the Civil Code, the MIAA Airport Lands
and Buildings are properties of public dominion and thus owned by the
State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use
because they are used by the public for international and domestic
travel and transportation. The fact that the MIAA collects terminal fees
and other charges from the public does not remove the character of
the Airport Lands and Buildings as properties for public use. The
operation by the government of a tollway does not change the
character of the road as one for public use. Someone must pay for the
maintenance of the road, either the public indirectly through the taxes
they pay the government, or only those among the public who actually
use the road through the toll fees they pay upon using the road. The
tollway system is even a more efficient and equitable manner of taxing
the public for the maintenance of public roads. The charging of fees to
the public does not determine the character of the property whether it
is of public dominion or not. Article 420 of the Civil Code defines
property of public dominion as one intended for public use. Even if
the government collects toll fees, the road is still intended for public
use if anyone can use the road under the same terms and conditions
as the rest of the public. The charging of fees, the limitation on the kind
of vehicles that can use the road, the speed restrictions and other
conditions for the use of the road do not affect the public character of
the road.
The Airport Lands and Buildings of MIAA are devoted to public
use and thus are properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are outside the commerce of
man. The Court has ruled repeatedly that properties of public dominion
are outside the commerce of man. As early as 1915, this Court already
ruled in Municipality of Cavite v. Rojas that properties devoted to public
use are outside the commerce of man, thus: According to article 344 of
the Civil Code: Property for public use in provinces and in towns
comprises the provincial and town roads, the squares, streets,
fountains, and public waters, the promenades, and public works of
general service supported by said towns or provinces.
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Again in Espiritu v. Municipal Council, the Court declared that
properties of public dominion are outside the commerce of man: x x x
Town plazas are properties of public dominion, to be devoted to public
use and to be made available to the public in general. They are outside
the commerce of man and cannot be disposed of or even leased by
the municipality to private parties. While in case of war or during an
emergency, town plazas may be occupied temporarily by private
individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary
occupation or use must also cease, and the town officials should see
to it that the town plazas should ever be kept open to the public and
free from encumbrances or illegal private constructions. (Emphasis
supplied) The Court has also ruled that property of public dominion,
being outside the commerce of man, cannot be the subject of an
auction sale. Properties of public dominion, being for public use, are
not subject to levy, encumbrance or disposition through public or
private sale. Any encumbrance, levy on execution or auction sale of
any property of public dominion is void for being contrary to public
policy. Essential public services will stop if properties of public
dominion are subject to encumbrances, foreclosures and auction sale.
This will happen if the City of Paraaque can foreclose and compel the
auction sale of the 600-hectare runway of the MIAA for non-payment of
real estate tax.
Before MIAA can encumber the Airport Lands and Buildings,
the President must first withdraw from public use the Airport Lands and
Buildings. Sections 83 and 88 of the Public Land Law or
Commonwealth Act No. 141, which remains to this day the existing
general law governing the classification and disposition of lands of the
public domain other than timber and mineral lands, provide: x x x
Thus, unless the President issues a proclamation withdrawing the
Airport Lands and Buildings from public use, these properties remain
properties of public dominion and are inalienable. Since the Airport
Lands and Buildings are inalienable in their present status as
properties of public dominion, they are not subject to levy on execution
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TAXATION II- Compilation of doctrines based on the syllabus of Atty. Bobby Lock
granted the beneficial use of such land area for a consideration to a
taxable person and therefore such land area is subject to real estate
tax. In Lung Center of the Philippines v. Quezon City, 433 SCRA 119,
138 (2004), the Court ruled: Accordingly, we hold that the portions of
the land leased to private entities as well as those parts of the hospital
leased to private individuals are not exempt from such taxes. On the
other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or
nonpaying, are exempt from real property taxes.
MIAA vs. City of Pasay GR No. 163072, April 2, 2009
A close scrutiny of the definition of government-owned or
controlled corporation in Section 2(13) will show that MIAA would not
fall under such definition. MIAA is a government instrumentality that
does not qualify as a government-owned or controlled corporation. As
explained in the 2006 MIAA case: A government-owned or controlled
corporation must be organized as a stock or non-stock corporation.
MIAA is not organized as a stock or non-stock corporation. MIAA is not
a stock corporation because it has no capital stock divided into shares.
MIAA has no stockholders or voting shares. x x x
The airport lands and buildings of MIAA are properties of public
dominion intended for public use, and as such are exempt from real
property tax under Section 234(a) of the Local Government Code.
However, under the same provision, if MIAA leases its real property to
a taxable person, the specific property leased becomes subject to real
property tax. In this case, only those portions of the NAIA Pasay
properties which are leased to taxable persons like private parties are
subject to real property tax by the City of Pasay.
Provincial Assessor of Marinduque vs. CA GR No. 170532, April
4, 2009
NPC vs. Province of Quezon, GR No. 171586, July 15, 2009
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TAXATION II- Compilation of doctrines based on the syllabus of Atty. Bobby Lock
International Airport Authority, the airport lands and buildings MIAA
administers belong to the Republic of the Philippines, which makes
MIAA a mere trustee of such assets. No less than the Administrative
Code of 1987 recognizes a scenario where a piece of land owned by
the Republic is titled in the name of a department, agency, or
instrumentality.
Thus read together, the provisions allow the Republic to grant
the beneficial use of its property to an agency or instrumentality of the
national government. Such grant does not necessarily result in the loss
of the tax exemption. The tax exemption the property of the Republic
or its instrumentality carries ceases only if, as stated in Sec. 234(a) of
the LGC of 1991, beneficial use thereof has been granted, for a
consideration or otherwise, to a taxable person. GSIS, as a
government instrumentality, is not a taxable juridical person under Sec.
133(o) of the LGC. GSIS, however, lost in a sense that status with
respect to the Katigbak property when it contracted its beneficial use to
MHC, doubtless a taxable person. Thus, the real estate tax
assessment of PhP 54,826,599.37 covering 1992 to 2002 over the
subject Katigbak property is valid insofar as said tax delinquency is
concerned as assessed over said property.
City of Pasig vs. Republic, GR No. 185023 dated August 24, 2011
Republic vs. City of Paranaque, GR No. 191109 dated July 28,
2012
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TAXATION II- Compilation of doctrines based on the syllabus of Atty. Bobby Lock
3. Payment under Protest (Sec. 252)
5. Assessment Appeals
(1) Appeal with the LBAA (Sec. 226)
NPC vs. Province of Quezon, GR No. 171586, July 15, 2009 same
Nor will NPC find solace in its claim that it utilizes all the power
plants generated electricity in supplying the power needs of its
customers. Based on the clear wording of the law, it is the machineries
that are exempted from the payment of real property tax, not the water
or electricity that these machineries generate and distribute.
Even the NPCs claim of beneficial ownership is unavailing. The
test of exemption is the use, not the ownership of the machineries
devoted to generation and transmission of electric power. The nature
of the NPCs ownership of these machineries only finds materiality in
resolving the NPCs claim of legal interest in protesting the tax
assessment on Mirant. As we discussed above, this claim is inexistent
for tax protest purposes.
NPC vs. Province of Quezon, GR No. 171586, January 25, 2010
(Resolution) same
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TAXATION II- Compilation of doctrines based on the syllabus of Atty. Bobby Lock
(3) Appeal to the CBAA (Sec. 229)
(4) Appeal to the CTA En Banc
(5) Effect of Appeal on Payment of RPT (Sec. 231)
Page 39 of 39