Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-75697
June 18, 1987
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.
Nelson Y. Ng for petitioner.
The City Legal Officer for respondents City Mayor and City Treasurer.
MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other
videogram operators adversely affected. It assails the constitutionality of Presidential Decree No. 1987 entitled
"An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram
industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, 1985 and
took effect on April 10, 1986, fifteen (15) days after completion of its publication in the Official Gazette.
On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No.
1994 amended the National Internal Revenue Code providing, inter alia:
SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for playback,
regardless of length, an annual tax of five pesos; Provided, that locally manufactured or imported blank video
tapes shall be subject to sales tax.
On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and
Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter
collectively referred to as the Intervenors, were permitted by the Court to intervene in the case, over petitioner's
opposition, upon the allegations that intervention was necessary for the complete protection of their rights and
that their "survival and very existence is threatened by the unregulated proliferation of film piracy." The
Intervenors were thereafter allowed to file their Comment in Intervention.
The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others, videotapes,
discs, cassettes or any technical improvement or variation thereof, 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 sales, contractor's specific, amusement and other 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, particularly the more than 1,200 movie houses and theaters throughout the country, and occasioned
industry-wide displacement and unemployment due to the shutdown of numerous moviehouses and theaters;
4. WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to create an
environment conducive to growth and development of all business industries, including the movie industry which
has an accumulated investment of about P3 Billion;
5. WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the dire
financial condition of the movie industry upon which more than 75,000 families and 500,000 workers depend for
their livelihood, but also provide an additional source of revenue for the Government, and at the same time
rationalize the heretofore uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear and
present danger to the moral and spiritual well-being of the youth, and impairs the mandate of the Constitution for
the State to support the rearing of the youth for civic efficiency and the development of moral character and
promote their physical, intellectual, and social well-being;
7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant
malpractices which have flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people and betraying the
national economic recovery program, bold emergency measures must be adopted with dispatch; ... (Numbering of
paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:
1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government is a
RIDER and the same is not germane to the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due
process clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by
Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a nuisance, which it is not.
We shall consider the foregoing objections in seriatim.
1. 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. An act having a single general subject, indicated in the title, may contain any number of

provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general
subject, and may be considered in furtherance of such subject by providing for the method and means of carrying
out the general object." The rule also is that the constitutional requirement as to the title of a bill should not be so
narrowly construed as to cripple or impede the power of legislation. It should be given practical rather than
technical construction.
Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without
merit. That section reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to the
contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case
may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or
audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the
other fifty percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED, That in
Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila
Commission.
xxx
xxx
xxx
The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the
general object of the DECREE, 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. The express purpose of the DECREE to include taxation of the video industry in order to regulate and
rationalize the heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra.
Those preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which
is the creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes expressed
in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the
title or that the latter be an index to the body of the DECREE.
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in
restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it
regulates, discourages, or even definitely deters the activities taxed. 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.
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. It is an end-user tax, imposed on retailers
for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or
borne by the movie industry which the theater-owners pay to the government, but which is passed on to the
entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax
that is imposed uniformly on all videogram operators. 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.
The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax
was to favor one industry over another. It is inherent in the power to tax that a state be free to select the subjects
of taxation, and it has been repeatedly held that "inequities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional limitation". Taxation has been made the implement of
the state's police power. At bottom, the rate of tax is a matter better addressed to the taxing legislature.
3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former
President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the judgment of the
President ... , there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasang
Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that
in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees,
orders, or letters of instructions, which shall form part of the law of the land." In refutation, the Intervenors and
the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that
grave emergencies corroding the moral values of the people and betraying the national economic recovery
program necessitated bold emergency measures to be adopted with dispatch. Whatever the reasons "in the
judgment" of the then President, considering that the issue of the validity of the exercise of legislative power
under the said Amendment still pends resolution in several other cases, we reserve resolution of the question
raised at the proper time.
4. Neither can it be successfully argued that the DECREE contains an 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.
5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one
which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law

required at the time of the commission of the offense." It is petitioner's position that Section 15 of the DECREE in
providing that:
All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the
effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in the
videogram business and to register with the BOARD all their inventories of videograms, including videotapes,
discs, cassettes or other technical improvements or variations thereof, before they could be sold, leased, or
otherwise disposed of. Thereafter any videogram found in the possession of any person engaged in the videogram
business without the required proof of registration by the BOARD, shall be prima facie evidence of violation of the
Decree, whether the possession of such videogram be for private showing and/or public exhibition.
raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of
any videogram cannot be presented and thus partakes of the nature of an ex post facto law.
The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al.
... it is now well settled that "there is no constitutional objection to the passage of a law providing that the
presumption of innocence may be overcome by a contrary presumption founded upon the experience of human
conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People vs.
Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS,
639-641). And the "legislature may enact that when certain facts have been proved that they shall be prima facie
evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational
connection between the facts proved and the ultimate facts presumed so that the inference of the one from proof
of the others is not unreasonable and arbitrary because of lack of connection between the two in common
experience".
Applied to the challenged provision, there is no question that there is a rational connection between the fact
proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the
fact that the prima facie presumption of violation of the DECREE attaches only after a forty-five-day period
counted from its effectivity and is, therefore, neither retrospective in character.
6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of
existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While
the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that
public welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy;
the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and
unreviewed video tapes containing pornographic films and films with brutally violent sequences; and losses in
government revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video
establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are
required to engage in business. The enactment of the Decree since April 10, 1986 has not brought about the
"demise" of the video industry. On the contrary, video establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed. In the last analysis, what petitioner basically questions is the necessity,
wisdom and expediency of the DECREE. These considerations, however, are primarily and exclusively a matter of
legislative concern. Only congressional power or competence, not the wisdom of the action taken, may be the
basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the
main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere.
There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a
coordinate branch, the judiciary would substitute its own. If there be adherence to the rule of law, as there ought
to be, the last offender should be courts of justice, to which rightly litigants submit their controversy precisely to
maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged
provision likewise insofar as there may be objections, even if valid and cogent on its wisdom cannot be sustained.
In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute. We find no
clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as
unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. L-19824, L-19825 and 19826
July 9, 1966
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
BACOLOD-MURCIA MILLING CO., INC., MA-AO SUGAR CENTRAL CO., INC., and TALISAY-SILAY
MILLING COMPANY, defendants-appellants.
Meer, Meer and Meer, Enrique M. Fernando and Emma Quisumbing-Fernando for defendantsappellants.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio Torres and
Solicitor Ceferino Padua, for plaintiff-appellee.
REGALA, J.:
This is a joint appeal by three sugar centrals, Bacolod Murcia Milling Co., Inc., Ma-ao Sugar Central Co., Inc., and
Talisay-Silay Milling Co., sister companies under one controlling ownership and management, from a decision of
the Court of First Instance of Manila finding them liable for special assessments under Section 15 of Republic Act
No. 632.
Republic Act No. 632 is the charter of the Philippine Sugar Institute, Philsugin for short, a semi-public
corporation created for the following purposes and objectives:

(a) To conduct research work for the sugar industry in all its phases, either agricultural or industrial, for the
purpose of introducing into the sugar industry such practices or processes that will reduce the cost of production,
increase and improve the industrialization of the by-products of sugar cane, and achieve greater efficiency in the
industry;
(b) To improve existing methods of raising sugar cane and of sugar manufacturing;
(c) To insure a permanent, sufficient and balanced production of sugar and its by-products for local consumption
and exportation;
(d) To establish and maintain such balanced relation between production and consumption of sugar and its byproducts, and such marketing conditions therefor, as well insure stabilized prices at a level sufficient to cover the
cost of production plus a reasonable profit;
(e) To promote the effective merchandising of sugar and its by-products in the domestic and foreign markets so
that those engaged in the sugar industry will be placed on a basis of economic security; and
(f) To improve the living and economic conditions of laborers engaged in the sugar industry by the gradual and
effective correction of the inequalities existing in the industry. (Section 2, Rep. Act 632)
To realize and achieve these ends, Sections 15 and 16 of the aforementioned law provide:
Sec. 15. Capitalization. To raise the necessary funds to carry out the provisions of this Act and the purposes of
the corporation, there shall be levied on the annual sugar production a tax of TEN CENTAVOS [P0.10] per picul of
sugar to be collected for a period of five (5) years beginning the crop year 1951-1952. The amount shall be borne
by the sugar cane planters and the sugar centrals in the proportion of their corresponding milling share, and said
levy shall constitute a lien on their sugar quedans and/or warehouse receipts.
Sec. 16. Special Fund. The proceeds of the foregoing levy shall be set aside to constitute a special fund to be
known as the "Sugar Research and Stabilization Fund," which shall be available exclusively for the use of the
corporation. All the income and receipts derived from the special fund herein created shall accrue to, and form
part of the said fund to be available solely for the use of the corporation.
The specific and general powers of the Philsugin are set forth in Section 8 of the same law, to wit:
Sec. 3. Specific and General Powers. For carrying out the purposes mentioned in the preceding section, the
PHILSUGIN shall have the following powers:
(a) To establish, keep, maintain and operate, or help establish, keep, maintain, and operate one central
experiment station and such number of regional experiment stations in any part of the Philippines as may be
necessary to undertake extensive research in sugar cane culture and manufacture, including studies as to the
feasibility of merchandising sugar cane farms, the control and eradication of pests, the selected and propagation
of high-yielding varieties of sugar cane suited to Philippine climatic conditions, and such other pertinent studies
as will be useful in adjusting the sugar industry to a position independent of existing trade preference in the
American market;
(b) To purchase such machinery, materials, equipment and supplies as may be necessary to prosecute successfully
such researches and experimental work;
(c) To explore and expand the domestic and foreign markets for sugar and its by-products to assure mutual
benefits to consumers and producers, and to promote and maintain a sufficient general production of sugar and
its by-products by an efficient coordination of the component elements of the sugar industry of the country;
(d) To buy, sell, assign, own, operate, rent or lease, subject to existing laws, machineries, equipment, materials,
merchant vessels, rails, railroad lines, and any other means of transportation, warehouses, buildings, and any
other equipment and material to the production, manufacture, handling, transportation and warehousing of sugar
and its by-products;
(e) To grant loans, on reasonable terms, to planters when it deems such loans advisable;
(f) To enter, make and execute contracts of any kind as may be necessary or incidental to the attainment of its
purposes with any person, firm, or public or private corporation, with the Government of the Philippines or of the
United States, or any state, territory, or persons therefor, or with any foreign government and, in general, to do
everything directly or indirectly necessary or incidental to, or in furtherance of, the purposes of the corporation;
(g) To do all such other things, transact all such business and perform such functions directly or indirectly
necessary, incidental or conducive to the attainment of the purposes of the corporation; and
(h) Generally, to exercise all the powers of a Corporation under the Corporation Law insofar as they are not
inconsistent with the provisions of this Act.
The facts of this case bearing relevance to the issue under consideration, as recited by the lower court and
accepted by the appellants, are the following:
x x x during the 5 crop years mentioned in the law, namely 1951-1952, 1952-1953, 1953-1954, 1954-1955 and
1955-1956, defendant Bacolod-Murcia Milling Co., Inc., has paid P267,468.00 but left an unpaid balance of
P216,070.50; defendant Ma-ao Sugar Central Co., Inc., has paid P117,613.44 but left unpaid balance of
P235,800.20; defendant Talisay-Silay Milling Company has paid P251,812.43 but left unpaid balance of
P208,193.74; and defendant Central Azucarera del Danao made a payment of P49,897.78 but left unpaid balance
of P48,059.77. There is no question regarding the correctness of the amounts paid and the amounts that remain
unpaid.
From the evidence presented, on which there is no controversy, it was disclosed that on September 3, 1951, the
Philippine Sugar Institute, known as the PHILSUGIN for short, acquired the Insular Sugar Refinery for a total
consideration of P3,070,909.60 payable, in accordance with the deed of sale Exhibit A, in 3 installments from the
process of the sugar tax to be collected, under Republic Act 632. The evidence further discloses that the
operation of the Insular Sugar Refinery for the years, 1954, 1955, 1956 and 1957 was disastrous in the sense that
PHILSUGIN incurred tremendous losses as shown by an examination of the statements of income and expenses
marked Exhibits 5, 6, 7 and 8. Through the testimony of Mr. Cenon Flor Cruz, former acting general manager of
PHILSUGIN and at present technical consultant of said entity, presented by the defendants as witnesses, it has
been shown that the operation of the Insular Sugar Refinery has consumed 70% of the thinking time and effort of
the PHILSUGIN management. x x x .
Contending that the purchase of the Insular Sugar Refinery with money from the Philsugin Fund was not
authorized by Republic Act 632 and that the continued operation of the said refinery was inimical to their

interests, the appellants refused to continue with their contributions to the said fund. They maintained that their
obligation to contribute or pay to the said Fund subsists only to the limit and extent that they are benefited by
such contributions since Republic Act 632 is not a revenue measure but an Act which establishes a "Special
assessments." Adverting to the finding of the lower court that proceeds of the said Fund had been used or applied
to absorb the "tremendous losses" incurred by Philsugin in its "disastrous operation" of the said refinery, the
appellants herein argue that they should not only be released from their obligation to pay the said assessment but
be refunded, besides, of all that they might have previously paid thereunder.
The appellants' thesis is simply to the effect that the "10 centavos per picul of sugar" authorized to be collected
under Sec. 15 of Republic 632 is a special assessment. As such, the proceeds thereof may be devoted only to the
specific purpose for which the assessment was authorized, a special assessment being a levy upon property
predicated on the doctrine that the property against which it is levied derives some special benefit from the
improvement. It is not a tax measure intended to raise revenues for the Government. Consequently, once it has
been determined that no benefit accrues or inures to the property owners paying the assessment, or that the
proceeds from the said assessment are being misapplied to the prejudice of those against whom it has been
levied, then the authority to insist on the payment of the said assessment ceases.
On the other hand, the lower court adjudged the appellants herein liable under the aforementioned law, Republic
Act 632, upon the following considerations:
First, Subsection d) of Section 3 of Republic Act 632 authorizes Philsugin to buy and operate machineries,
equipment, merchant vessels, etc., and any other equipment and material for the production, manufacture,
handling, transportation and warehousing of sugar and its by-products. It was, therefore, authorized to purchase
and operate a sugar refinery.
Secondly, the corporate powers of the Philsugin are vested in and exercised by a board of directors composed of 5
members, 3 of whom shall be appointed upon recommendation of the National Federation of Sugar Cane Planters
and 2 upon recommendation of the Philippine Sugar Association. (Sec. 4, Rep. Act 632). It has not been shown
that this particular provision was not observed in this case. Therefore, the appellants herein may not rightly claim
that there had been a misapplication of the Philsugin funds when the same was used to procure the Insular Sugar
Refinery because the decision to purchase the said refinery was made by a board in which the applicants were
fully and duly represented, the appellants being members of the Philippine Sugar Association.
Thirdly, all financial transactions of the Philsugin are audited by the General Auditing Office, which must be
presumed to have passed upon the legality and prudence of the disbursements of the Fund. Additionally, other
offices of the Government review such transactions as reflected in the annual report obliged of the Philsugin to
prepare. Among those offices are the Office of the President of the Philippines, the Administrator of Economic
Coordination and the Presiding Officers of the two chambers of Congress. With all these safeguards against any
imprudent or unauthorized expenditure of Philsugin Funds, the acquisition of the Insular Sugar Refinery must be
upheld in its legality and propriety.
Fourthly, it would be dangerous to sanction the unilateral refusal of the appellants herein to continue with their
contribution to the Fund for that conduct is no different "from the case of an ordinary taxpayer who refuses to
pay his taxes on the ground that the money is being misappropriated by Government officials." This is taking the
law into their own hands.
Against the above ruling of the trial court, the appellants contend:
First. It is fallacious to argue that no mismanagement or abuse of corporate power could have been committed by
Philsugin solely because its charter incorporates so many devices or safeguards to preclude such abuse. This
reasoning of the lower court does not reconcile with that actually happened in this case.
Besides, the appellants contend that the issue on hand is not whether Philsugin abused or not its powers when it
purchased the Insular Sugar Refinery. The issue, rather, is whether Philsugin had any power or authority at all to
acquire the said refinery. The appellants deny that Philsugin is possessed of any such authority because what it is
empowered to purchase is not a "sugar refinery but a central experiment station or perhaps at the most a sugar
central to be used for that purpose." (Sec. 3[a], Rep. Act 632) For this distinction, the appellants cite the case of
Collector vs. Ledesma, G.R. No. L-12158, May 27, 1959, in which this Court ruled that
We are of the opinion that a "sugar central," as that term is used in Section 189, applies to "a large mill that
makes sugar out of the cane brought from a wide surrounding territory," or a sugar mill which manufactures
sugar for a number of plantations. The term "sugar central" could not have been intended by Congress to refer to
all sugar mills or sugar factories as contended by respondent. If respondent's interpretation is to be followed,
even sugar mills run by animal power (trapiche) would be considered sugar central. We do not think Congress
ever intended to place owners of (trapiches) in the same category as operators of sugar centrals.
That sugar mills are not the same as sugar centrals may also be gleaned from Commonwealth Act No. 470
(Assessment Law). In prescribing the principle governing valuation and assessment of real property. Section 4 of
said Act provides
"Machinery permanently used or installed in sugar centrals, mills, or refineries shall be assessed."
This clearly indicates that "Sugar centrals" are not the same as "sugar mills" or "sugar refineries."
Second. The appellants' refusal to continue paying the assessment under Republic Act 632 may not rightly be
equated with a taxpayer's refusal to pay his ordinary taxes precisely because there is a substantial distinction
between a "special assessment" and an ordinary tax. The purpose of the former is to finance the improvement of
particular properties, with the benefits of the improvement accruing or inuring to the owners thereof who, after
all, pay the assessment. The purpose of an ordinary tax, on the other hand, is to provide the Government with
revenues needed for the financing of state affairs. Thus, while the refusal of a citizen to pay his ordinary taxes
may not indeed be sanctioned because it would impair government functions, the same would not hold true in the
case of a refusal to comply with a special assessment.
Third. Upon a host of decisions of the United States Supreme Court, the imposition or collection of a special
assessment upon property owners who receive no benefit from such assessment amounts to a denial of due
process. Thus, in the case of Norwood vs. Baer, 172 US 269, the ruling was laid down that

As already indicated, the principle underlying special assessments to meet the cost of public improvements is that
the property upon which they are imposed is peculiarly benefited, and therefore, the panels do not, in fact, pay
anything in excess of what they received by reason of such improvement.
unless a corresponding benefit is realized by the property owner, the exaction of a special assessment would be
"manifestly unfair" (Seattle vs. Kelleher 195 U.S. 351) and "palpably arbitrary or plain abuse" (Gast Realty
Investment Co. vs. Schneider Granite Co., 240 U.S. 57). In other words, the assessment is violative of the due
process guarantee of the constitution (Memphis vs. Charleston Ry v. Pace, 282 U.S. 241).
We find for the appellee.
The nature of a "special assessment" similar to the case at bar has already been discussed and explained by this
Court in the case of Lutz vs. Araneta, 98 Phil. 148. For in this Lutz case, Commonwealth Act 567, otherwise
known as the Sugar Adjustment Act, levies on owners or persons in control of lands devoted to the cultivation of
sugar cane and ceded to others for a consideration, on lease or otherwise
a tax equivalent to the difference between the money value of the rental or consideration collected and the
amount representing 12 per centum of the assessed value of such land. (Sec. 3).
Under Section 6 of the said law, Commonwealth Act 567, all collections made thereunder "shall accrue to a
special fund in the Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall
be paid out only for any or all of the following purposes or to attain any or all of the following objectives, as may
be provided by law." It then proceeds to enumerate the said purposes, among which are "to place the sugar
industry in a position to maintain itself; ... to readjust the benefits derived from the sugar industry ... so that all
might continue profitably to engage therein; to limit the production of sugar to areas more economically suited to
the production thereof; and to afford laborers employed in the industry a living wage and to improve their living
and working conditions.
The plaintiff in the above case, Walter Lutz, contended that the aforementioned tax or special assessment was
unconstitutional because it was being "levied for the aid and support of the sugar industry exclusively," and
therefore, not for a public purpose. In rejecting the theory advanced by the said plaintiff, this Court said:
The basic defect in the plaintiff's position in his assumption that the tax provided for in Commonwealth Act No.
567 is a pure exercise of the taxing power. Analysis of the Act, and particularly Section 6, will show that the tax is
levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar
industry. In other words, the act is primarily an exercise of the police power.
This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation,
sugar occupying a leading position among its export products; that it gives employment to thousands of laborers
in fields and factories; that it is a great source of the state's wealth, is one, of the important sources to foreign
exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of
currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general welfare.
Hence, it was competent for the Legislature to find that the general welfare demanded that the sugar industry
should be stabilized in turn; and in the wide field of its police power, the law-making body could provide that the
distribution of benefits therefrom be readjusted among its components, to enable it to resist the added strain of
the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U.S. 52, 59 L. Ed. 835; Johnson vs. State ex
rel. Marey, 99 Fla. 1311, 128 So. 853; Marcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121)
As stated in Johnson vs. State ex rel. Marcy, with reference to the citrus industry in Florida
"The protection of a large industry constituting one of the great source of the state's wealth and therefore
directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such
an extent by public interests as to be within the police power of the sovereign." (128 So. 857).
Once it is conceded, as it must that the protection and promotion of the sugar industry is a matter of public
concern, it follows that the Legislature may determine within reasonable bounds what is necessary for its
protection and expedient for its promotion. Here, the legislative discretion must be allowed full play, subject only
to the test of reasonableness; and it is not contended that the means provided in Section 6 of the law (above
quoted) bear no relation to the objective pursued or are oppressive in character. If objective and methods are
alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution
and attainment. Taxation may be made the implement of the state's police power. (Great Atl. & Pac. Tea Co. vs.
Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. vs. Butler, 297 U.S. 1, 80 L. Ed. 477; M'cullock vs. Maryland, 4
Wheat. 316, 4 L. Ed. 579).
On the authority of the above case, then, We hold that the special assessment at bar may be considered as
similarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of
taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general welfare
of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully
resist.
Besides, under Section 2(a) of the charter, the Philsugin is authorized "to conduct research work for the sugar
industry in all its phases, either agricultural or industrial, for the purpose of introducing into the sugar industry
such practices or processes that will reduce the cost of production, ..., and achieve greater efficiency in the
industry." This provision, first of all, more than justifies the acquisition of the refinery in question. The case
dispute that the operation of a sugar refinery is a phase of sugar production and that from such operation may be
learned methods of reducing the cost of sugar manufactured no less than it may afford the opportunity to
discover the more effective means of achieving progress in the industry. Philsugin's experience alone of running a
refinery is a gain to the entire industry. That the operation resulted in a financial loss is by no means an index
that the industry did not profit therefrom, as other farms of a different nature may have been realized. Thus, from
its financially unsuccessful venture, the Philsugin could very well have advanced in its appreciation of the
problems of management faced by sugar centrals. It could have understood more clearly the difficulties of
marketing sugar products. It could have known with better intimacy the precise area of the industry in need of
the more help from the government. The view of the appellants herein, therefore, that they were not benefited by
the unsuccessful operation of the refinery in question is not entirely accurate.
Furthermore, Section 2(a) specifies a field of research which, indeed, would be difficult to carry out save through
the actual operation of a refinery. Quite obviously, the most practical or realistic approach to the problem of what

"practices or processes" might most effectively cut the cost of production is to experiment on production itself.
And yet, how can such an experiment be carried out without the tools, which is all that a refinery is?
In view of all the foregoing, the decision appealed from is hereby affirmed, with costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-7859
December 22, 1955
WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio Jayme
Ledesma, plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.
Ernesto J. Gonzaga for appellant.
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres
and Solicitor Felicisimo R. Rosete for appellee.
REYES, J.B L., J.:
This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed
by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the threat to
our industry by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffe Act, and
the "eventual loss of its preferential position in the United States market"; wherefore, the national policy was
expressed "to obtain a readjustment of the benefits derived from the sugar industry by the component elements
thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential
position in the United States market and the imposition of the export taxes."
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on
a graduated basis, on each picul of sugar manufactured; while section 3 levies on owners or persons in control of
lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise
a tax equivalent to the difference between the money value of the rental or consideration collected and the
amount representing 12 per centum of the assessed value of such land.
According to section 6 of the law
SEC. 6. All collections made under this Act shall accrue to a special fund in the Philippine Treasury, to be known
as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out only for any or all of the following
purposes or to attain any or all of the following objectives, as may be provided by law.
First, to place the sugar industry in a position to maintain itself, despite the gradual loss of the preferntial
position of the Philippine sugar in the United States market, and ultimately to insure its continued existence
notwithstanding the loss of that market and the consequent necessity of meeting competition in the free markets
of the world;
Second, to readjust the benefits derived from the sugar industry by all of the component elements thereof the
mill, the landowner, the planter of the sugar cane, and the laborers in the factory and in the field so that all
might continue profitably to engage therein;
Third, to limit the production of sugar to areas more economically suited to the production thereof; and
Fourth, to afford labor employed in the industry a living wage and to improve their living and working conditions:
Provided, That the President of the Philippines may, until the adjournment of the next regular session of the
National Assembly, make the necessary disbursements from the fund herein created (1) for the establishment and
operation of sugar experiment station or stations and the undertaking of researchers (a) to increase the
recoveries of the centrifugal sugar factories with the view of reducing manufacturing costs, (b) to produce and
propagate higher yielding varieties of sugar cane more adaptable to different district conditions in the
Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the buying quality of denatured alcohol
from molasses for motor fuel, (e) to determine the possibility of utilizing the other by-products of the industry, (f)
to determine what crop or crops are suitable for rotation and for the utilization of excess cane lands, and (g) on
other problems the solution of which would help rehabilitate and stabilize the industry, and (2) for the
improvement of living and working conditions in sugar mills and sugar plantations, authorizing him to organize
the necessary agency or agencies to take charge of the expenditure and allocation of said funds to carry out the
purpose hereinbefore enumerated, and, likewise, authorizing the disbursement from the fund herein created of
the necessary amount or amounts needed for salaries, wages, travelling expenses, equipment, and other sundry
expenses of said agency or agencies.
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma,
seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under
section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and
void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a
public purpose for which a tax may be constitutionally levied. The action having been dismissed by the Court of
First Instance, the plaintiffs appealed the case directly to this Court (Judiciary Act, section 17).
The basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth Act No.
567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6 (heretofore quoted in
full), will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power.
This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation,
sugar occupying a leading position among its export products; that it gives employment to thousands of laborers
in fields and factories; that it is a great source of the state's wealth, is one of the important sources of foreign
exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of
currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general welfare.
Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry

should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the
distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of
the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson vs. State ex
rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121).
As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida
The protection of a large industry constituting one of the great sources of the state's wealth and therefore
directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such
an extent by public interests as to be within the police power of the sovereign. (128 Sp. 857).
Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of public
concern, it follows that the Legislature may determine within reasonable bounds what is necessary for its
protection and expedient for its promotion. Here, the legislative discretion must be allowed fully play, subject only
to the test of reasonableness; and it is not contended that the means provided in section 6 of the law (above
quoted) bear no relation to the objective pursued or are oppressive in character. If objective and methods are
alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution
and attainment. Taxation may be made the implement of the state's police power (Great Atl. & Pac. Tea Co. vs.
Grosjean, 301 U. S. 412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4
Wheat. 316, 4 L. Ed. 579).
That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint;
indeed, it appears rational that the tax be obtained precisely from those who are to be benefited from the
expenditure of the funds derived from it. At any rate, it is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly held that "inequalities which result from a singling out
of one particular class for taxation, or exemption infringe no constitutional limitation" (Carmichael vs. Southern
Coal & Coke Co., 301 U. S. 495, 81 L. Ed. 1245, citing numerous authorities, at p. 1251).
From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization
Act, now in question, should be exclusively spent in aid of the sugar industry, since it is that very enterprise that
is being protected. It may be that other industries are also in need of similar protection; that the legislature is not
required by the Constitution to adhere to a policy of "all or none." As ruled in Minnesota ex rel. Pearson vs.
Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil where it is most felt, it is not to
be overthrown because there are other instances to which it might have been applied;" and that "the legislative
authority, exerted within its proper field, need not embrace all the evils within its reach" (N. L. R. B. vs. Jones &
Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893).
Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to
experimental stations to seek increase of efficiency in sugar production, utilization of by-products and solution of
allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations,
without any part of such money being channeled directly to private persons, constitutes expenditure of tax money
for private purposes, (compare Everson vs. Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).
The decision appealed from is affirmed, with costs against appellant. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-31092
February 27, 1987
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
JOHN GOTAMCO & SONS, INC. and THE COURT OF TAX APPEALS, respondents.
YAP, J.:
The question involved in this petition is whether respondent John Gotamco & Sons, Inc. should pay the 3%
contractor's tax under Section 191 of the National Internal Revenue Code on the gross receipts it realized from
the construction of the World Health Organization office building in Manila.
The World Health Organization (WHO for short) is an international organization which has a regional office in
Manila. As an international organization, it enjoys privileges and immunities which are defined more specifically
in the Host Agreement entered into between the Republic of the Philippines and the said Organization on July 22,
1951. Section 11 of that Agreement provides, inter alia, that "the Organization, its assets, income and other
properties shall be: (a) exempt from all direct and indirect taxes. It is understood, however, that the Organization
will not claim exemption from taxes which are, in fact, no more than charges for public utility services; . . .
When the WHO decided to construct a building to house its own offices, as well as the other United Nations
offices stationed in Manila, it entered into a further agreement with the Government of the Republic of the
Philippines on November 26, 1957. This agreement contained the following provision (Article III, paragraph 2):
The Organization may import into the country materials and fixtures required for the construction free from all
duties and taxes and agrees not to utilize any portion of the international reserves of the Government.
Article VIII of the above-mentioned agreement referred to the Host Agreement concluded on July 22, 1951 which
granted the Organization exemption from all direct and indirect taxes.
In inviting bids for the construction of the building, the WHO informed the bidders that the building to be
constructed belonged to an international organization with diplomatic status and thus exempt from the payment
of all fees, licenses, and taxes, and that therefore their bids "must take this into account and should not include
items for such taxes, licenses and other payments to Government agencies."

The construction contract was awarded to respondent John Gotamco & Sons, Inc. (Gotamco for short) on
February 10, 1958 for the stipulated price of P370,000.00, but when the building was completed the price
reached a total of P452,544.00.
Sometime in May 1958, the WHO received an opinion from the Commissioner of the Bureau of Internal Revenue
stating that "as the 3% contractor's tax is an indirect tax on the assets and income of the Organization, the gross
receipts derived by contractors from their contracts with the WHO for the construction of its new building, are
exempt from tax in accordance with . . . the Host Agreement." Subsequently, however, on June 3, 1958, the
Commissioner of Internal Revenue reversed his opinion and stated that "as the 3% contractor's tax is not a direct
nor an indirect tax on the WHO, but a tax that is primarily due from the contractor, the same is not covered by . . .
the Host Agreement."
On January 2, 1960, the WHO issued a certification state 91 inter alia,:
When the request for bids for the construction of the World Health Organization office building was called for,
contractors were informed that there would be no taxes or fees levied upon them for their work in connection
with the construction of the building as this will be considered an indirect tax to the Organization caused by the
increase of the contractor's bid in order to cover these taxes. This was upheld by the Bureau of Internal Revenue
and it can be stated that the contractors submitted their bids in good faith with the exemption in mind.
The undersigned, therefore, certifies that the bid of John Gotamco & Sons, made under the condition stated
above, should be exempted from any taxes in connection with the construction of the World Health Organization
office building.
On January 17, 1961, the Commissioner of Internal Revenue sent a letter of demand to Gotamco demanding
payment of P 16,970.40, representing the 3% contractor's tax plus surcharges on the gross receipts it received
from the WHO in the construction of the latter's building.
Respondent Gotamco appealed the Commissioner's decision to the Court of Tax Appeals, which after trial
rendered a decision, in favor of Gotamco and reversed the Commissioner's decision. The Court of Tax Appeal's
decision is now before us for review on certiorari.
In his first assignment of error, petitioner questions the entitlement of the WHO to tax exemption, contending
that the Host Agreement is null and void, not having been ratified by the Philippine Senate as required by the
Constitution. We find no merit in this contention. While treaties are required to be ratified by the Senate under
the Constitution, less formal types of international agreements may be entered into by the Chief Executive and
become binding without the concurrence of the legislative body. The Host Agreement comes within the latter
category; it is a valid and binding international agreement even without the concurrence of the Philippine Senate.
The privileges and immunities granted to the WHO under the Host Agreement have been recognized by this
Court as legally binding on Philippine authorities.
Petitioner maintains that even assuming that the Host Agreement granting tax exemption to the WHO is valid and
enforceable, the 3% contractor's tax assessed on Gotamco is not an "indirect tax" within its purview. Petitioner's
position is that the contractor's tax "is in the nature of an excise tax which is a charge imposed upon the
performance of an act, the enjoyment of a privilege or the engaging in an occupation. . . It is a tax due primarily
and directly on the contractor, not on the owner of the building. Since this tax has no bearing upon the WHO, it
cannot be deemed an indirect taxation upon it."
We agree with the Court of Tax Appeals in rejecting this contention of the petitioner. Said the respondent court:
In context, direct taxes are those that are demanded from the very person who, it is intended or desired, should
pay them; while indirect taxes are those that are demanded in the first instance from one person in the
expectation and intention that he can shift the burden to someone else. (Pollock vs. Farmers, L & T Co., 1957 US
429, 15 S. Ct. 673, 39 Law. Ed. 759.) The contractor's tax is of course payable by the contractor but in the last
analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by the
contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax. And it is an indirect tax on the
WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO. In the last
analysis it is the WHO that will pay the tax indirectly through the contractor and it certainly cannot be said that
'this tax has no bearing upon the World Health Organization.
Petitioner claims that under the authority of the Philippine Acetylene Company versus Commissioner of Internal
Revenue, et al., 3 the 3% contractor's tax fans directly on Gotamco and cannot be shifted to the WHO. The Court
of Tax Appeals, however, held that the said case is not controlling in this case, since the Host Agreement
specifically exempts the WHO from "indirect taxes." We agree. The Philippine Acetylene case involved a tax on
sales of goods which under the law had to be paid by the manufacturer or producer; the fact that the
manufacturer or producer might have added the amount of the tax to the price of the goods did not make the
sales tax "a tax on the purchaser." The Court held that the sales tax must be paid by the manufacturer or
producer even if the sale is made to tax-exempt entities like the National Power Corporation, an agency of the
Philippine Government, and to the Voice of America, an agency of the United States Government.
The Host Agreement, in specifically exempting the WHO from "indirect taxes," contemplates taxes which,
although not imposed upon or paid by the Organization directly, form part of the price paid or to be paid by it.
This is made clear in Section 12 of the Host Agreement which provides:
While the Organization will not, as a general rule, in the case of minor purchases, claim exemption from excise
duties, and from taxes on the sale of movable and immovable property which form part of the price to be paid,
nevertheless, when the Organization is making important purchases for official use of property on which such
duties and taxes have been charged or are chargeable the Government of the Republic of the Philippines shall
make appropriate administrative arrangements for the remission or return of the amount of duty or tax.
(Emphasis supplied).
The above-quoted provision, although referring only to purchases made by the WHO, elucidates the clear
intention of the Agreement to exempt the WHO from "indirect" taxation.
The certification issued by the WHO, dated January 20, 1960, sought exemption of the contractor, Gotamco, from
any taxes in connection with the construction of the WHO office building. The 3% contractor's tax would be
within this category and should be viewed as a form of an "indirect tax" On the Organization, as the payment
thereof or its inclusion in the bid price would have meant an increase in the construction cost of the building.

Accordingly, finding no reversible error committed by the respondent Court of Tax Appeals, the appealed decision
is hereby affirmed.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26521
December 28, 1968
EUSEBIO VILLANUEVA, ET AL., plaintiff-appellee,
vs.
CITY OF ILOILO, defendants-appellants.
Pelaez, Jalandoni and Jamir for plaintiff-appellees.
Assistant City Fiscal Vicente P. Gengos for defendant-appellant.
CASTRO, J.:
Appeal by the defendant City of Iloilo from the decision of the Court of First Instance of Iloilo declaring illegal
Ordinance 11, series of 1960, entitled, "An Ordinance Imposing Municipal License Tax On Persons Engaged In
The Business Of Operating Tenement Houses," and ordering the City to refund to the plaintiffs-appellees the sums
of collected from them under the said ordinance.
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, imposing license tax fees as
follows: (1) tenement house (casa de vecindad), P25.00 annually; (2) tenement house, partly or wholly engaged in
or dedicated to business in the streets of J.M. Basa, Iznart and Aldeguer, P24.00 per apartment; (3) tenement
house, partly or wholly engaged in business in any other streets, P12.00 per apartment. The validity and
constitutionality of this ordinance were challenged by the spouses Eusebio Villanueva and Remedies Sian
Villanueva, owners of four tenement houses containing 34 apartments. This Court, in City of Iloilo vs. Remedios
Sian Villanueva and Eusebio Villanueva, L-12695, March 23, 1959, declared the ordinance ultra vires, "it not
appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to
the City of Iloilo by its Charter."
On January 15, 1960 the municipal board of Iloilo City, believing, obviously, that with the passage of Republic Act
2264, otherwise known as the Local Autonomy Act, it had acquired the authority or power to enact an ordinance
similar to that previously declared by this Court as ultra vires, enacted Ordinance 11, series of 1960, hereunder
quoted in full:
AN ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS ENGAGED IN THE BUSINESS OF
OPERATING TENEMENT HOUSES
Be it ordained by the Municipal Board of the City of Iloilo, pursuant to the provisions of Republic Act No. 2264,
otherwise known as the Autonomy Law of Local Government, that:
Section 1. A municipal license tax is hereby imposed on tenement houses in accordance with the schedule of
payment herein provided.
Section 2. Tenement house as contemplated in this ordinance shall mean any building or dwelling for renting
space divided into separate apartments or accessorias.
Section 3. The municipal license tax provided in Section 1 hereof shall be as follows:
I.
Tenement houses:
(a)
Apartment house made of strong materials
P20.00 per door p.a.
(b)
Apartment house made of mixed materials
P10.00 per door p.a.
II
Rooming house of strong materials
P10.00 per door p.a.
Rooming house of mixed materials
P5.00 per door p.a.
III.
Tenement house partly or wholly engaged in or dedicated to business in the following streets: J.M. Basa,
Iznart, Aldeguer, Guanco and Ledesma from Plazoleto Gay to Valeria. St.
P30.00 per door p.a.
IV.
Tenement house partly or wholly engaged in or dedicated to business in any other street
P12.00 per door p.a.
V.
Tenement houses at the streets surrounding the super market as soon as said place is declared
commercial
P24.00 per door p.a.
Section 4. All ordinances or parts thereof inconsistent herewith are hereby amended.
Section 5. Any person found violating this ordinance shall be punished with a fine note exceeding Two Hundred
Pesos (P200.00) or an imprisonment of not more than six (6) months or both at the discretion of the Court.
Section 6 This ordinance shall take effect upon approval.
ENACTED, January 15, 1960.
In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five tenement houses,
aggregately containing 43 apartments, while the other appellees and the same Remedios S. Villanueva are
owners of ten apartments. Each of the appellees' apartments has a door leading to a street and is rented by either
a Filipino or Chinese merchant. The first floor is utilized as a store, while the second floor is used as a dwelling of
the owner of the store. Eusebio Villanueva owns, likewise, apartment buildings for rent in Bacolod, Dumaguete
City, Baguio City and Quezon City, which cities, according to him, do not impose tenement or apartment taxes.
By virtue of the ordinance in question, the appellant City collected from spouses Eusebio Villanueva and
Remedios S. Villanueva, for the years 1960-1964, the sum of P5,824.30, and from the appellees Pio Sian Melliza,

Teresita S. Topacio, and Remedios S. Villanueva, for the years 1960-1964, the sum of P1,317.00. Eusebio
Villanueva has likewise been paying real estate taxes on his property.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended complaint,
respectively, against the City of Iloilo, in the aforementioned court, praying that Ordinance 11, series of 1960, be
declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact, and
unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the
equal protection clause of the Constitution," and that the City be ordered to refund the amounts collected from
them under the said ordinance.
On March 30, 1966,1 the lower court rendered judgment declaring the ordinance illegal on the grounds that (a)
"Republic Act 2264 does not empower cities to impose apartment taxes," (b) the same is "oppressive and
unreasonable," for the reason that it penalizes owners of tenement houses who fail to pay the tax, (c) it
constitutes not only double taxation, but treble at that and (d) it violates the rule of uniformity of taxation.
The issues posed in this appeal are:
1. Is Ordinance 11, series of 1960, of the City of Iloilo, illegal because it imposes double taxation?
2. Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes?
3. Is Ordinance 11, series of 1960, oppressive and unreasonable because it carries a penal clause?
4. Does Ordinance 11, series of 1960, violate the rule of uniformity of taxation?
1. The pertinent provisions of the Local Autonomy Act are hereunder quoted:
SEC. 2. Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and municipal
districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation
or business, or exercising privileges in chartered cities, municipalities or municipal districts by requiring them to
secure licences at rates fixed by the municipal board or city council of the city, the municipal council of the
municipality, or the municipal district council of the municipal district; to collect fees and charges for services
rendered by the city, municipality or municipal district; to regulate and impose reasonable fees for services
rendered in connection with any business, profession or occupation being conducted within the city, municipality
or municipal district and otherwise to levy for public purposes, just and uniform taxes, licenses or fees; Provided,
That municipalities and municipal districts shall, in no case, impose any percentage tax on sales or other taxes in
any form based thereon nor impose taxes on articles subject to specific tax, except gasoline, under the provisions
of the National Internal Revenue Code; Provided, however, That no city, municipality or municipal district may
levy or impose any of the following:
(a) Residence tax;
(b) Documentary stamp tax;
(c) Taxes on the business of persons engaged in the printing and publication of any newspaper, magazine, review
or bulletin appearing at regular intervals and having fixed prices for for subscription and sale, and which is not
published primarily for the purpose of publishing advertisements;
(d) Taxes on persons operating waterworks, irrigation and other public utilities except electric light, heat and
power;
(e) Taxes on forest products and forest concessions;
(f) Taxes on estates, inheritance, gifts, legacies, and other acquisitions mortis causa;
(g) Taxes on income of any kind whatsoever;
(h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for
the driving thereof;
(i) Customs duties registration, wharfage dues on wharves owned by the national government, tonnage, and all
other kinds of customs fees, charges and duties;
(j) Taxes of any kind on banks, insurance companies, and persons paying franchise tax; and
(k) Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance
companies.
A tax ordinance shall go into effect on the fifteenth day after its passage, unless the ordinance shall provide
otherwise: Provided, however, That the Secretary of Finance shall have authority to suspend the effectivity of any
ordinance within one hundred and twenty days after its passage, if, in his opinion, the tax or fee therein levied or
imposed is unjust, excessive, oppressive, or confiscatory, and when the said Secretary exercises this authority the
effectivity of such ordinance shall be suspended.
In such event, the municipal board or city council in the case of cities and the municipal council or municipal
district council in the case of municipalities or municipal districts may appeal the decision of the Secretary of
Finance to the court during the pendency of which case the tax levied shall be considered as paid under protest.
It is now settled that the aforequoted provisions of Republic Act 2264 confer on local governments broad taxing
authority which extends to almost "everything, excepting those which are mentioned therein," provided that the
tax so levied is "for public purposes, just and uniform," and does not transgress any constitutional provision or is
not repugnant to a controlling statute. Thus, when a tax, levied under the authority of a city or municipal
ordinance, is not within the exceptions and limitations aforementioned, the same comes within the ambit of the
general rule, pursuant to the rules of expressio unius est exclusio alterius, and exceptio firmat regulum in casibus
non excepti.
Does the tax imposed by the ordinance in question fall within any of the exceptions provided for in section 2 of
the Local Autonomy Act? For this purpose, it is necessary to determine the true nature of the tax. The appellees
strongly maintain that it is a "property tax" or "real estate tax," and not a "tax on persons engaged in any
occupation or business or exercising privileges," or a license tax, or a privilege tax, or an excise tax. Indeed, the
title of the ordinance designates it as a "municipal license tax on persons engaged in the business of operating
tenement houses," while section 1 thereof states that a "municipal license tax is hereby imposed on tenement
houses." It is the phraseology of section 1 on which the appellees base their contention that the tax involved is a
real estate tax which, according to them, makes the ordinance ultra vires as it imposes a levy "in excess of the
one per centum real estate tax allowable under Sec. 38 of the Iloilo City Charter, Com. Act 158."

It is our view, contrary to the appellees' contention, that the tax in question is not a real estate tax. Obviously, the
appellees confuse the tax with the real estate tax within the meaning of the Assessment Law, which, although not
applicable to the City of Iloilo, has counterpart provisions in the Iloilo City Charter. A real estate tax is a direct tax
on the ownership of lands and buildings or other improvements thereon, not specially exempted, and is payable
regardless of whether the property is used or not, although the value may vary in accordance with such factor.
The tax is usually single or indivisible, although the land and building or improvements erected thereon are
assessed separately, except when the land and building or improvements belong to separate owners. It is a fixed
proportion of the assessed value of the property taxed, and requires, therefore, the intervention of assessors. It is
collected or payable at appointed times, and it constitutes a superior lien on and is enforceable against the
property subject to such taxation, and not by imprisonment of the owner.
The tax imposed by the ordinance in question does not possess the aforestated attributes. It is not a tax on the
land on which the tenement houses are erected, although both land and tenement houses may belong to the same
owner. The tax is not a fixed proportion of the assessed value of the tenement houses, and does not require the
intervention of assessors or appraisers. It is not payable at a designated time or date, and is not enforceable
against the tenement houses either by sale or distraint. Clearly, therefore, the tax in question is not a real estate
tax.
"The spirit, rather than the letter, or an ordinance determines the construction thereof, and the court looks less to
its words and more to the context, subject-matter, consequence and effect. Accordingly, what is within the spirit is
within the ordinance although it is not within the letter thereof, while that which is in the letter, although not
within the spirit, is not within the ordinance." It is within neither the letter nor the spirit of the ordinance that an
additional real estate tax is being imposed, otherwise the subject-matter would have been not merely tenement
houses. On the contrary, it is plain from the context of the ordinance that the intention is to impose a license tax
on the operation of tenement houses, which is a form of business or calling. The ordinance, in both its title and
body, particularly sections 1 and 3 thereof, designates the tax imposed as a "municipal license tax" which, by
itself, means an "imposition or exaction on the right to use or dispose of property, to pursue a business,
occupation, or calling, or to exercise a privilege."
"The character of a tax is not to be fixed by any isolated words that may be employed in the statute creating it,
but such words must be taken in the connection in which they are used and the true character is to be deduced
from the nature and essence of the subject." The subject-matter of the ordinance is tenement houses whose
nature and essence are expressly set forth in section 2 which defines a tenement house as "any building or
dwelling for renting space divided into separate apartments or accessorias." The Supreme Court, in City of Iloilo
vs. Remedios Sian Villanueva, et al., L-12695, March 23, 1959, adopted the definition of a tenement house as "any
house or building, or portion thereof, which is rented, leased, or hired out to be occupied, or is occupied, as the
home or residence of three families or more living independently of each other and doing their cooking in the
premises or by more than two families upon any floor, so living and cooking, but having a common right in the
halls, stairways, yards, water-closets, or privies, or some of them." Tenement houses, being necessarily offered for
rent or lease by their very nature and essence, therefore constitute a distinct form of business or calling, similar
to the hotel or motel business, or the operation of lodging houses or boarding houses. This is precisely one of the
reasons why this Court, in the said case of City of Iloilo vs. Remedios Sian Villanueva, et al., supra, declared
Ordinance 86 ultra vires, because, although the municipal board of Iloilo City is empowered, under sec. 21, par. j
of its Charter, "to tax, fix the license fee for, and regulate hotels, restaurants, refreshment parlors, cafes, lodging
houses, boarding houses, livery garages, public warehouses, pawnshops, theaters, cinematographs," tenement
houses, which constitute a different business enterprise, are not mentioned in the aforestated section of the City
Charter of Iloilo. Thus, in the aforesaid case, this Court explicitly said:
"And it not appearing that the power to tax owners of tenement houses is one among those clearly and expressly
granted to the City of Iloilo by its Charter, the exercise of such power cannot be assumed and hence the
ordinance in question is ultra vires insofar as it taxes a tenement house such as those belonging to defendants."
The lower court has interchangeably denominated the tax in question as a tenement tax or an apartment tax.
Called by either name, it is not among the exceptions listed in section 2 of the Local Autonomy Act. On the other
hand, the imposition by the ordinance of a license tax on persons engaged in the business of operating tenement
houses finds authority in section 2 of the Local Autonomy Act which provides that chartered cities have the
authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or
exercising privileges within their respective territories, and "otherwise to levy for public purposes, just and
uniform taxes, licenses, or fees."
2. The trial court condemned the ordinance as constituting "not only double taxation but treble at that," because
"buildings pay real estate taxes and also income taxes as provided for in Sec. 182 (A) (3) (s) of the National
Internal Revenue Code, besides the tenement tax under the said ordinance." Obviously, what the trial court refers
to as "income taxes" are the fixed taxes on business and occupation provided for in section 182, Title V, of the
National Internal Revenue Code, by virtue of which persons engaged in "leasing or renting property, whether on
their account as principals or as owners of rental property or properties," are considered "real estate dealers"
and are taxed according to the amount of their annual income.
While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of the National Internal
Revenue Code as real estate dealers, and still taxable under the ordinance in question, the argument against
double taxation may not be invoked. The same tax may be imposed by the national government as well as by the
local government. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect to
the same occupation, calling or activity by both the State and a political subdivision thereof.
The contention that the plaintiffs-appellees are doubly taxed because they are paying the real estate taxes and
the tenement tax imposed by the ordinance in question, is also devoid of merit. It is a well-settled rule that a
license tax may be levied upon a business or occupation although the land or property used in connection
therewith is subject to property tax. The State may collect an ad valorem tax on property used in a calling, and at
the same time impose a license tax on that calling, the imposition of the latter kind of tax being in no sense a
double tax.

"In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed
twice when it should be taxed but once; both taxes must be imposed on the same property or subject-matter, for
the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing
district, during the same taxing period, and they must be the same kind or character of tax." It has been shown
that a real estate tax and the tenement tax imposed by the ordinance, although imposed by the same taxing
authority, are not of the same kind or character. At all events, there is no constitutional prohibition against double
taxation in the Philippines. It is something not favored, but is permissible, provided some other constitutional
requirement is not thereby violated, such as the requirement that taxes must be uniform."
3. The appellant City takes exception to the conclusion of the lower court that the ordinance is not only
oppressive because it "carries a penal clause of a fine of P200.00 or imprisonment of 6 months or both, if the
owner or owners of the tenement buildings divided into apartments do not pay the tenement or apartment tax
fixed in said ordinance," but also unconstitutional as it subjects the owners of tenement houses to criminal
prosecution for non-payment of an obligation which is purely sum of money." The lower court apparently had in
mind, when it made the above ruling, the provision of the Constitution that "no person shall be imprisoned for a
debt or non-payment of a poll tax." It is elementary, however, that "a tax is not a debt in the sense of an obligation
incurred by contract, express or implied, and therefore is not within the meaning of constitutional or statutory
provisions abolishing or prohibiting imprisonment for debt, and a statute or ordinance which punishes the nonpayment thereof by fine or imprisonment is not, in conflict with that prohibition." Nor is the tax in question a poll
tax, for the latter is a tax of a fixed amount upon all persons, or upon all persons of a certain class, resident
within a specified territory, without regard to their property or the occupations in which they may be engaged.
Therefore, the tax in question is not oppressive in the manner the lower court puts it. On the other hand, the
charter of Iloilo City empowers its municipal board to "fix penalties for violations of ordinances, which shall not
exceed a fine of two hundred pesos or six months' imprisonment, or both such fine and imprisonment for each
offense." In Punsalan, et al. vs. Mun. Board of Manila, supra, this Court overruled the pronouncement of the
lower court declaring illegal and void an ordinance imposing an occupation tax on persons exercising various
professions in the City of Manila because it imposed a penalty of fine and imprisonment for its violation.
4. The trial court brands the ordinance as violative of the rule of uniformity of taxation.
"... because while the owners of the other buildings only pay real estate tax and income taxes the ordinance
imposes aside from these two taxes an apartment or tenement tax. It should be noted that in the assessment of
real estate tax all parts of the building or buildings are included so that the corresponding real estate tax could
be properly imposed. If aside from the real estate tax the owner or owners of the tenement buildings should pay
apartment taxes as required in the ordinance, then it will violate the rule of uniformity of taxation.".
Complementing the above ruling of the lower court, the appellees argue that there is "lack of uniformity" and
"relative inequality," because "only the taxpayers of the City of Iloilo are singled out to pay taxes on their
tenement houses, while citizens of other cities, where their councils do not enact a similar tax ordinance, are
permitted to escape such imposition."
It is our view that both assertions are undeserving of extended attention. This Court has already ruled that
tenement houses constitute a distinct class of property. It has likewise ruled that "taxes are uniform and equal
when imposed upon all property of the same class or character within the taxing authority." The fact, therefore,
that the owners of other classes of buildings in the City of Iloilo do not pay the taxes imposed by the ordinance in
question is no argument at all against uniformity and equality of the tax imposition. Neither is the rule of equality
and uniformity violated by the fact that tenement taxes are not imposed in other cities, for the same rule does not
require that taxes for the same purpose should be imposed in different territorial subdivisions at the same time.
So long as the burden of the tax falls equally and impartially on all owners or operators of tenement houses
similarly classified or situated, equality and uniformity of taxation is accomplished. The plaintiffs-appellees, as
owners of tenement houses in the City of Iloilo, have not shown that the tax burden is not equally or uniformly
distributed among them, to overthrow the presumption that tax statutes are intended to operate uniformly and
equally.
5. The last important issue posed by the appellees is that since the ordinance in the case at bar is a mere
reproduction of Ordinance 86 of the City of Iloilo which was declared by this Court in L-12695, supra, as ultra
vires, the decision in that case should be accorded the effect of res judicata in the present case or should
constitute estoppel by judgment. To dispose of this contention, it suffices to say that there is no identity of
subject-matter in that case and this case because the subject-matter in L-12695 was an ordinance which dealt not
only with tenement houses but also warehouses, and the said ordinance was enacted pursuant to the provisions
of the City charter, while the ordinance in the case at bar was enacted pursuant to the provisions of the Local
Autonomy Act. There is likewise no identity of cause of action in the two cases because the main issue in L-12695
was whether the City of Iloilo had the power under its charter to impose the tax levied by Ordinance 11, series of
1960, under the Local Autonomy Act which took effect on June 19, 1959, and therefore was not available for
consideration in the decision in L-12695 which was promulgated on March 23, 1959. Moreover, under the
provisions of section 2 of the Local Autonomy Act, local governments may now tax any taxable subject-matter or
object not included in the enumeration of matters removed from the taxing power of local governments. Prior to
the enactment of the Local Autonomy Act the taxes that could be legally levied by local governments were only
those specifically authorized by law, and their power to tax was construed in strictissimi juris.
ACCORDINGLY, the judgment a quo is reversed, and, the ordinance in question being valid, the complaint is
hereby dismissed. No pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-4376
May 22, 1953
ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,
vs.

THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY MAYOR, all
of the City of Manila, respondents-appellees.
Teotimo A. Roja for appellants.
City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.
BAUTISTA ANGELO, J.:
This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of
the City of Manila on March 24, 1950.
The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor
vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator
of the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called
property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila;
(2) said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation.
The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a
property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p)
of Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does
it constitute double taxation.
The issues having been joined, the Court of First Instance of Manila sustained the validity of the ordinance and
dismissed the petition. Hence this appeal.
The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by
section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax motor
and other vehicles operating within the City of Manila the provisions of any existing law to the contrary
notwithstanding." It is contended that this power is broad enough to confer upon the City of Manila the power to
enact an ordinance imposing the property tax on motor vehicles operating within the city limits.
In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the Motor Vehicles
Law, as amended, (Act No. 3992) which has a bearing on the power of the municipal corporation to impose tax on
motor vehicles operating in any highway in the Philippines. The pertinent provisions are contained in section 70
(b) which provide in part:
No further fees than those fixed in this Act shall be exacted or demanded by any public highway, bridge or ferry,
or for the exercise of the profession of chauffeur, or for the operation of any motor vehicle by the owner thereof:
Provided, however, That nothing in this Act shall be construed to exempt any motor vehicle from the payment of
any lawful and equitable insular, local or municipal property tax imposed thereupon. . . .
Note that under the above section no fees may be exacted or demanded for the operation of any motor vehicle
other than those therein provided, the only exception being that which refers to the property tax which may be
imposed by a municipal corporation. This provision is all-inclusive in that sense that it applies to all motor
vehicles. In this sense, this provision should be construed as limiting the broad grant of power conferred upon the
City of Manila by its Charter to impose taxes. When section 18 of said Charter provides that the City of Manila
can impose a tax on motor vehicles operating within its limit, it can only refers to property tax as a different
interpretation would make it repugnant to the Motor Vehicle Law.
Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance Levying a Property
Tax on All Motor Vehicles Operating Within the City of Manila", and that in its section 1 it provides that the tax
should be 1 per cent ad valorem per annum. It also provides that the proceeds of the tax "shall accrue to the
Streets and Bridges Funds of the City and shall be expended exclusively for the repair, maintenance and
improvement of its streets and bridges." Considering the wording used in the ordinance in the light in the
purpose for which the tax is created, can we consider the tax thus imposed as property tax, as claimed by
respondents?
While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities, the rule should
not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is
in effect an excise or a license tax. Thus, it has been held that "If a tax is in its nature an excise, it does not
become a property tax because it is proportioned in amount to the value of the property used in connection with
the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by
property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act,
enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise." (26 R. C. L., 35-36.) It
has also been held that
The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and
from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which
it is described, or by the mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded,
even though nominally and in form it is a license or occupation tax; and, on the other hand, if the tax is levied
upon persons on account of their business, it will be construed as a license or occupation tax, even though it is
graduated according to the property used in such business, or on the gross receipts of the business. (37 C.J., 172)
The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valorem
yet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with
the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the
streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent,
for the reason that, under said Act, municipal corporation already participate in the distribution of the proceeds
that are raised for the same purpose of repairing, maintaining and improving bridges and public highway (section
73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for the
same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license fee
although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to.
It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our
Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila.
It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it
distinguish between a motor vehicle registered in the City of Manila and one registered in another place but
occasionally comes to Manila and uses its streets and public highways. The distinction is important if we note

that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred
from the word "operating" used therein. The word "operating" denotes a connotation which is akin to a
registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the
registration fees. There is no pretense that the ordinance equally applies to motor vehicles who come to Manila
for a temporary stay or for short errands, and it cannot be denied that they contribute in no small degree to the
deterioration of the streets and public highway. The fact that they are benefited by their use they should also be
made to share the corresponding burden. And yet such is not the case. This is an inequality which we find in the
ordinance, and which renders it offensive to the Constitution.
Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.
EN BANC
[G.R. No. L-9167. September 27, 1956.]
WE WA YU, Plaintif-Appellee, vs. CITY OF LIPA, Defendant-Appellant.
DECISION
BAUTISTA ANGELO, J.:
Plaintif is the owner and manager of a gasoline station located in the City of Lipa where gasoline, kerosene, oil
and the like are sold. He paid under protest to the city treasurer during the period from October 24, 1952 to
September 30, 1953 the aggregate sum P733.84 as taxes levied under Ordinance No. 457-A, as amended by
Ordinance No. 462, imposing one-tenth (1/10) centavo per liter on the sale of gasoline and one-half (1/2) centavo
per liter on the sale of alcohol, gas, or petroleum that may be made in any store or establishment within the city.
To recover the amount pain on the ground that the two ordinances are ultra vires, he brought the present action
in the Court of First Instance of Batangas. The City of Lipa put up the defense that the ordinances are valid
because they were enacted pursuant to the power granted to it by its Charter, Republic Act No. 162.
The parties submitted a joint motion for judgment on the pleadings, and on May 27, 1954, the court rendered
judgment declaring the ordinances ultra vires and ordering Defendant to reimburse to Plaintif the amount of
P733.84 and such other fees as Plaintif may have paid after the filing of the complaint. Defendant took the case
directly to this Court.
Ordinance No. 457-A, as amended by Ordinance No. 462, of the City of Lipa, provides in section 1 as follows:
SECTION 1. There is hereby imposed a tax of one tenth (1/10) centavo per liter on the sale of gasoline and
one-half (1/2) centavo per liter on the sale of alcohol, gas, petroleum, or all of any kindered type of combustible
liquid made in any store or establishment by any person or entity within the City of Lipa.
The above ordinances were enacted pursuant to section 15, paragraph (p), of Republic Act No. 162, otherwise
known as Charter of the City of Lipa, which reads:
SEC. 15. General powers and duties of the Board. Except as otherwise provided by law, and subject to the
conditions and limitations thereof, the Municipal Board shall have the following legislative powers:
(p) To tax, fix the license fee for, regulate the business and fix the location of, match factories, blacksmith shops,
foundries, steam boilers, lumber yards, shipyards, the storage and sale of gunpowder, tar, pitch, resin, coal, oil,
gasoline, benzine, turpentine, hemp, cotton, nitroglycerine, petroleum, or any of the products thereof, and of all
other highly combustible or explosive materials, and other establishments likely to endanger the public safety or
give rise to conflagrations or explosions, and, subject to the rules and regulations issued by the Director of Health
in accordance with law, tanneries, renderies, tallow chandleries, embalmers, and scrap factories.
It is clear from the above that the City of Lipa is given the power and authority (1) to tax, (2) to fix the license fee
for, (3) to regulate the business, and (4) to fix the location of the storage and sale of oil, gasoline and the like. In
other words, it is given the power to tax, fix the license fee for, or regulate the business affecting match factories,
blacksmith shops, foundries, steam boilers, lumber yards, shipyards, the storage and the sale of oil, gasoline,
petroleum and the like. It does not possess the power to impose a tax on specific articles, which may take the
form of specific tax. In order that such power may be exercised, the grant must be clear. It cannot be implied for
the reason that a municipal corporation, unlike a sovereign state, does not possess inherent power of taxation.
It is settled that a municipal corporation, unlike a sovereign state, is clothed with no statute must plainly show an
intent to confer that power or the municipality cannot assume it. And the power when granted is to be construed
strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved
against the municipality. Inferences, implications, deductions all these have no place in the interpretation of
the taxing power of a municipal cooperations. [Icard vs. City Council of Baguio and the City of Baguio, 48 Off.
Gaz., (Supp. 11) 320; Medina, et al. vs. City of Baguio, 48 Off, Gaz., No. 11, 4769].
The question now to be determined is: Do the ordinances impose merely a tax on the business of selling and
storing oil, gasoline, or petroleum, or a specific tax on the article therein enumerated?
We are inclined to uphold the latter view for the reason that the tax, which they seek to collect, is imposed by
some standard of weight or measurement and not regardless of it. Thus, the tax imposed is 1/10 centavo per
liter on the sale of gasoline and 1/2 centavo per liter on the sale of alcohol, gas, or petroleum. And it has been
held that A tax which imposes a specific sum by the head or number, or some standard of weight or
measurement, and which requires no assessment beyond a listing and classification of the objects to be taxed, is
a specific tax (61 C.J., 74). It is the sense that the tax on manufactured oils and other fuels is imposed by the
National Internal Revenue Code (section 142, Commonwealth Act No. 466, as amended by section 11, Republic
Act No. 56). The tax is considered a specific tax if the amount is imposed per liter of volume capacity. It is
therefore plain that the enactment of the ordinances in question is ultra vires.
There is a marked parallelism between the case of Medina, et al. vs. City of Baguio, supra and the present case.
In the Medina case we said:
An examination of section 2553 (c), of the Revised Administration Code, as amended, will reveal that the power
given to the City of Baguio to tax, to license and to regulate only refers to the business of the taxpayer and not to
the articles used in said business. This is clearly inferred from a reading of said section and from the concluding
sentence appearing therein, to wit, and such other businesses, trades and occupations as may be established or
practiced in the City. One reason for this undoubtedly is the fact that under section 142 of the Internal Revenue
Code (Commonwealth Act No. 466, as amended by the Republic Act No. 39), most of the products mentioned in

the charter, particularly gasoline and oil, are already specifically taxed, and under section 361 of said code, the
City of Baguio gets a share of 20 per cent of the amount of specific tax collected. At any rate, the charter of the
City of Baguio does not show plainly an intent to confer that power upon the City of Baguio and, following the
rule already adverted to, this doubt or ambiguity must be resolved against the city. An indication of the legislative
intent on this matter is Commonwealth Act No. 472 which confers general authority upon municipal councils to
levy taxes, subject to certain limitations, wherein it was specifically provided that the general authority so
conferred shall not include percentage taxes and taxes on specified articles. In other words, the power to levy a
percentage tax or a specified tax has been expressly withheld. It is, therefore, our considered opinion that
Ordinance No. 100 is ultra vires and has no force and effect.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.
Paras, C.J. Padilla, Montemayor, Labrador, Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ., concur.
RESOLUTION
February 25, 1957
In G.R. No. L-9167, We Wa Yu vs. City of Lipa, acting in the motion for reconsideration filed by Appellant, the
Court adopted the following resolution:
Considering that on June 14, 1956 Congress enacted Republic Act No. 1435 providing in section 4 that Municipal
boards of councils may, notwithstanding the provisions of sections one hundred and forty-two and one hundred
and forty-five of the National Internal Revenue Code, as hereinabove amended, levy an additional tax of not
exceeding twenty-five per cent of the rates fixed in said sections, on manufactured oils sold or distributed within
the limits of the city of municipality;
Considering that the tax imposed by the ordinances in question does not go beyond the limit of twenty-five per
cent of the rates prescribed in section 142 and 145 of the National Internal Revenue Code;
Considering that revenue acts, retroactively applied, are not open to the objection that they infringe upon the due
process of law clause of the Constitution (Republic of the Philippines vs. Angelina Oasan, et al., supra, p. 934);
The decision of this Court dated September 27, 1956 is hereby modified by reversing the decision appealed from
and dismissing the case, without costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 81311 June 30, 1988
KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C.
DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA, petitioners,
vs.
HON. BIENVENIDO TAN, as Commissioner of Internal Revenue, respondent.
G.R. No. 81820 June 30, 1988
KILUSANG MAYO UNO LABOR CENTER (KMU), its officers and affiliated labor federations and
alliances, petitioners,
vs.
THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL
REVENUE, and SECRETARY OF BUDGET, respondents.
G.R. No. 81921 June 30, 1988
INTEGRATED CUSTOMS BROKERS ASSOCIATION OF THE PHILIPPINES and JESUS B. BANAL,
petitioners,
vs.
The HON. COMMISSIONER, BUREAU OF INTERNAL REVENUE, respondent.
G.R. No. 82152 June 30, 1988
RICARDO C. VALMONTE, petitioner,
vs.
THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF INTERNAL REVENUE
and SECRETARY OF BUDGET, respondent.
Franklin S. Farolan for petitioner Kapatiran in G.R. No. 81311.
Jaime C. Opinion for individual petitioners in G.R. No. 81311.
Banzuela, Flores, Miralles, Raeses, Sy, Taquio and Associates for petitioners in G.R. No 81820.
Union of Lawyers and Advocates for Peoples Right collaborating counsel for petitioners in G.R. No 81820.
Jose C. Leabres and Joselito R. Enriquez for petitioners in G.R. No. 81921.
PADILLA, J.:
These four (4) petitions, which have been consolidated because of the similarity of the main issues involved
therein, seek to nullify Executive Order No. 273 (EO 273, for short), issued by the President of the Philippines on
25 July 1987, to take effect on 1 January 1988, and which amended certain sections of the National Internal
Revenue Code and adopted the value-added tax (VAT, for short), for being unconstitutional in that its enactment is
not allegedly within the powers of the President; that the VAT is oppressive, discriminatory, regressive, and
violates the due process and equal protection clauses and other provisions of the 1987 Constitution.
The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have failed to
show justification for the exercise of its judicial powers, viz. (1) the existence of an appropriate case; (2) an
interest, personal and substantial, of the party raising the constitutional questions; (3) the constitutional question
should be raised at the earliest opportunity; and (4) the question of constitutionality is directly and necessarily
involved in a justiciable controversy and its resolution is essential to the protection of the rights of the parties.
According to the Solicitor General, only the third requisite that the constitutional question should be raised at
the earliest opportunity has been complied with. He also questions the legal standing of the petitioners who, he
contends, are merely asking for an advisory opinion from the Court, there being no justiciable controversy for
resolution.

Objections to taxpayers' suit for lack of sufficient personality standing, or interest are, however, in the main
procedural matters. Considering the importance to the public of the cases at bar, and in keeping with the Court's
duty, under the 1987 Constitution, to determine wether or not the other branches of government have kept
themselves within the limits of the Constitution and the laws and that they have not abused the discretion given
to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions.
But, before resolving the issues raised, a brief look into the tax law in question is in order.
The VAT is a tax levied on a wide range of goods and services. It is a tax on the value, added by every seller, with
aggregate gross annual sales of articles and/or services, exceeding P200,00.00, to his purchase of goods and
services, unless exempt. VAT is computed at the rate of 0% or 10% of the gross selling price of goods or gross
receipts realized from the sale of services.
The VAT is said to have eliminated privilege taxes, multiple rated sales tax on manufacturers and producers,
advance sales tax, and compensating tax on importations. The framers of EO 273 that it is principally aimed to
rationalize the system of taxing goods and services; simplify tax administration; and make the tax system more
equitable, to enable the country to attain economic recovery.
The VAT is not entirely new. It was already in force, in a modified form, before EO 273 was issued. As pointed out
by the Solicitor General, the Philippine sales tax system, prior to the issuance of EO 273, was essentially a single
stage value added tax system computed under the "cost subtraction method" or "cost deduction method" and was
imposed only on original sale, barter or exchange of articles by manufacturers, producers, or importers.
Subsequent sales of such articles were not subject to sales tax. However, with the issuance of PD 1991 on 31
October 1985, a 3% tax was imposed on a second sale, which was reduced to 1.5% upon the issuance of PD 2006
on 31 December 1985, to take effect 1 January 1986. Reduced sales taxes were imposed not only on the second
sale, but on every subsequent sale, as well. EO 273 merely increased the VAT on every sale to 10%, unless zerorated or exempt.
Petitioners first contend that EO 273 is unconstitutional on the Ground that the President had no authority to
issue EO 273 on 25 July 1987.
The contention is without merit.
It should be recalled that under Proclamation No. 3, which decreed a Provisional Constitution, sole legislative
authority was vested upon the President. Art. II, sec. 1 of the Provisional Constitution states:
Sec. 1. Until a legislature is elected and convened under a new Constitution, the President shall continue to
exercise legislative powers.
On 15 October 1986, the Constitutional Commission of 1986 adopted a new Constitution for the Republic of the
Philippines which was ratified in a plebiscite conducted on 2 February 1987. Article XVIII, sec. 6 of said
Constitution, hereafter referred to as the 1987 Constitution, provides:
Sec. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened.
It should be noted that, under both the Provisional and the 1987 Constitutions, the President is vested with
legislative powers until a legislature under a new Constitution is convened. The first Congress, created and
elected under the 1987 Constitution, was convened on 27 July 1987. Hence, the enactment of EO 273 on 25 July
1987, two (2) days before Congress convened on 27 July 1987, was within the President's constitutional power
and authority to legislate.
Petitioner Valmonte claims, additionally, that Congress was really convened on 30 June 1987 (not 27 July 1987).
He contends that the word "convene" is synonymous with "the date when the elected members of Congress
assumed office."
The contention is without merit. The word "convene" which has been interpreted to mean "to call together, cause
to assemble, or convoke," is clearly different from assumption of office by the individual members of Congress or
their taking the oath of office. As an example, we call to mind the interim National Assembly created under the
1973 Constitution, which had not been "convened" but some members of the body, more particularly the
delegates to the 1971 Constitutional Convention who had opted to serve therein by voting affirmatively for the
approval of said Constitution, had taken their oath of office.
To uphold the submission of petitioner Valmonte would stretch the definition of the word "convene" a bit too far. It
would also defeat the purpose of the framers of the 1987 Constitutional and render meaningless some other
provisions of said Constitution. For example, the provisions of Art. VI, sec. 15, requiring Congress to convene
once every year on the fourth Monday of July for its regular session would be a contrariety, since Congress would
already be deemed to be in session after the individual members have taken their oath of office. A portion of the
provisions of Art. VII, sec. 10, requiring Congress to convene for the purpose of enacting a law calling for a
special election to elect a President and Vice-President in case a vacancy occurs in said offices, would also be a
surplusage. The portion of Art. VII, sec. 11, third paragraph, requiring Congress to convene, if not in session, to
decide a conflict between the President and the Cabinet as to whether or not the President and the Cabinet as to
whether or not the President can re-assume the powers and duties of his office, would also be redundant. The
same is true with the portion of Art. VII, sec. 18, which requires Congress to convene within twenty-four (24)
hours following the declaration of martial law or the suspension of the privilage of the writ of habeas corpus.
The 1987 Constitution mentions a specific date when the President loses her power to legislate. If the framers of
said Constitution had intended to terminate the exercise of legislative powers by the President at the beginning of
the term of office of the members of Congress, they should have so stated (but did not) in clear and unequivocal
terms. The Court has not power to re-write the Constitution and give it a meaning different from that intended.
The Court also finds no merit in the petitioners' claim that EO 273 was issued by the President in grave abuse of
discretion amounting to lack or excess of jurisdiction. "Grave abuse of discretion" has been defined, as follows:
Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction (Abad Santos vs. Province of Tarlac, 38 Off. Gaz. 834), or, in other words, where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent
and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act
at all in contemplation of law. (Tavera-Luna, Inc. vs. Nable, 38 Off. Gaz. 62).
Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic
manner by reason of passion or personal hostility. It appears that a comprehensive study of the VAT had been

extensively discussed by this framers and other government agencies involved in its implementation, even under
the past administration. As the Solicitor General correctly sated. "The signing of E.O. 273 was merely the last
stage in the exercise of her legislative powers. The legislative process started long before the signing when the
data were gathered, proposals were weighed and the final wordings of the measure were drafted, revised and
finalized. Certainly, it cannot be said that the President made a jump, so to speak, on the Congress, two days
before it convened."
Next, the petitioners claim that EO 273 is oppressive, discriminatory, unjust and regressive, in violation of the
provisions of Art. VI, sec. 28(1) of the 1987 Constitution, which states:
Sec. 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of
taxation.
The petitioners" assertions in this regard are not supported by facts and circumstances to warrant their
conclusions. They have failed to adequately show that the VAT is oppressive, discriminatory or unjust. Petitioners
merely rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the
nullification of a law. there must be a clear and unequivocal breach of the Constitution, not a doubtful and
argumentative implication.
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. The court, in City of Baguio
vs. De Leon, said:
... In Philippine Trust Company v. Yatco (69 Phil. 420), Justice Laurel, speaking for the Court, stated: "A tax is
considered uniform when it operates with the same force and effect in every place where the subject may be
found."
There was no occasion in that case to consider the possible effect on such a constitutional requirement where
there is a classification. The opportunity came in Eastern Theatrical Co. v. Alfonso (83 Phil. 852, 862). Thus:
"Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for
purposes of taxation; . . ." About two years later, Justice Tuason, speaking for this Court in Manila Race Horses
Trainers Assn. v. de la Fuente (88 Phil. 60, 65) incorporated the above excerpt in his opinion and continued;
"Taking everything into account, the differentiation against which the plaintiffs complain conforms to the
practical dictates of justice and equity and is not discriminatory within the meaning of the Constitution."
To satisfy this requirement then, all that is needed as held in another case decided two years later, (Uy Matias v.
City of Cebu, 93 Phil. 300) is that the statute or ordinance in question "applies equally to all persons, firms and
corporations placed in similar situation." This Court is on record as accepting the view in a leading American case
(Carmichael v. Southern Coal and Coke Co., 301 US 495) that "inequalities which result from a singling out of one
particular class for taxation or exemption infringe no constitutional limitation." (Lutz v. Araneta, 98 Phil. 148,
153).
The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public, which are not
exempt, at the constant rate of 0% or 10%.
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engage in
business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are
consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products,
spared as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.
The Court likewise finds no merit in the contention of the petitioner Integrated Customs Brokers Association of
the Philippines that EO 273, more particularly the new Sec. 103 (r) of the National Internal Revenue Code,
unduly discriminates against customs brokers. The contested provision states:
Sec. 103. Exempt transactions. The following shall be exempt from the value-added tax:
xxx xxx xxx
(r) Service performed in the exercise of profession or calling (except customs brokers) subject to the occupation
tax under the Local Tax Code, and professional services performed by registered general professional
partnerships;
The phrase "except customs brokers" is not meant to discriminate against customs brokers. It was inserted in
Sec. 103(r) to complement the provisions of Sec. 102 of the Code, which makes the services of customs brokers
subject to the payment of the VAT and to distinguish customs brokers from other professionals who are subject to
the payment of an occupation tax under the Local Tax Code. Pertinent provisions of Sec. 102 read:
Sec. 102. Value-added tax on sale of services. There shall be levied, assessed and collected, a value-added tax
equivalent to 10% percent of gross receipts derived by any person engaged in the sale of services. The phrase
sale of services" means the performance of all kinds of services for others for a fee, remuneration or
consideration, including those performed or rendered by construction and service contractors; stock, real estate,
commercial, customs and immigration brokers; lessors of personal property; lessors or distributors of
cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; and
similar services regardless of whether or not the performance thereof call for the exercise or use of the physical
or mental faculties: ...
With the insertion of the clarificatory phrase "except customs brokers" in Sec. 103(r), a potential conflict between
the two sections, (Secs. 102 and 103), insofar as customs brokers are concerned, is averted.
At any rate, the distinction of the customs brokers from the other professionals who are subject to occupation tax
under the Local Tax Code is based upon material differences, in that the activities of customs brokers (like those
of stock, real estate and immigration brokers) partake more of a business, rather than a profession and were thus
subjected to the percentage tax under Sec. 174 of the National Internal Revenue Code prior to its amendment by
EO 273. EO 273 abolished the percentage tax and replaced it with the VAT. If the petitioner Association did not
protest the classification of customs brokers then, the Court sees no reason why it should protest now.
The Court takes note that EO 273 has been in effect for more than five (5) months now, so that the fears
expressed by the petitioners that the adoption of the VAT will trigger skyrocketing of prices of basic commodities
and services, as well as mass actions and demonstrations against the VAT should by now be evident. The fact that
nothing of the sort has happened shows that the fears and apprehensions of the petitioners appear to be more

imagined than real. It would seem that the VAT is not as bad as we are made to believe.
In any event, if petitioners seriously believe that the adoption and continued application of the VAT are prejudicial
to the general welfare or the interests of the majority of the people, they should seek recourse and relief from the
political branches of the government. The Court, following the time-honored doctrine of separation of powers,
cannot substitute its judgment for that of the President as to the wisdom, justice and advisability of the adoption
of the VAT. The Court can only look into and determine whether or not EO 273 was enacted and made effective as
law, in the manner required by, and consistent with, the Constitution, and to make sure that it was not issued in
grave abuse of discretion amounting to lack or excess of jurisdiction; and, in this regard, the Court finds no
reason to impede its application or continued implementation.
WHEREFORE, the petitions are DISMISSED. Without pronouncement as to costs.
SO ORDERED.