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TAXATION
author. These materials are authorized for the use only of
Reviewees who have attended the author’s lectures on Taxation
and others he has personally authorized. Unauthorized users shall
LOCAL GOVERNMENT TAXATION, REAL PROPERTY TAXATION, not be prosecuted but SHALL BE SUBJECT TO THE LAW OF
TARIFF AND CUSTOMS KARMA SUCH THAT THEY WILL NEVER PASS THE BAR OR
Based on the SYLLABUS FOR THE 2015 BAR WOULD BE UNHAPPY IN LIFE for stealing the intellectual
EXAMINATION IN TAXATION property of the author.
Prepared by
III. LOCAL GOVERNMENT CODE OF 1991,
Abelardo T. Domondon
AB, BSC, LLB, MA, LLM, DCL (Cand.). as amended
Lawyer-CPA-Customs Broker
A. Local government taxation
“CASE NOTES FOR THE 2015 BAR”. “CASE NOTES
FOR THE 2015 BAR” are digests or doctrines enunciated in 1. Fundamental principles. The fundamental principles
selected cases up to September 22, 2015 that may be the source governing the taxing powers of LGUs as laid out in Section 130 of
of Bar Questions in Taxation for the 2015 Bar. The actual Bar the LGC, are:
questions may not be formulated in the same manner as the “CASE a. Taxation shall be uniform in each LGU.
NOTES”. However, the doctrines tested in the Bar would in all b. Taxes, fees, charges and other impositions shall:
probability be included in these Notes. The CASE NOTES should 1) be equitable and based as far as practicable on
be used as supplementary reading to other materials on Taxation the taxpayer's ability to pay;
written by Prof. Domondon, such as his Books on Taxation and the 2) be levied and collected only for public purposes;
“Cut and Paste” notes. 3) not be unjust, excessive, oppressive, or
The reader should note that the scope of the CASE NOTES confiscatory;
include cases beyond the March 31, 2015 cut-off. It is the 4) not be contrary to law, public policy, national
observation of the author that there were certain instances in the economic policy, or in the restraint of trade.
past where Bar questions were drawn from cases decided after the c. The collection of local taxes, fees, charges and other
cut-off. This is especially true where there is merely a reiteration of impositions shall in no case be let to any private person.
doctrines. d. The revenue collected pursuant to the provisions of
the LGC shall inure solely to the benefit of, and be subject to the
If pressed for time, the author suggests that the reader disposition by, the LGU levying the tax, fee, charge or other
should focus his attention on the following: imposition unless otherwise specifically provided by the LGC.
 Nice to know e. Each LGU shall, as far as practicable, evolve a
 Should know progressive system of taxation. (Pelizloy Realty Corporation v. The
 Must know Province of Benguet, G.R. No. 183137, April 10, 2013, 695 SCRA 491
It is further suggested that the reader should browse those cited in Film Development Council of the Philippines v. Colon Heritage
Realty Corporation, etc., G.R. No. 203754, and companion case, June 16,
without stars. 2015, numbering supplied)
a) Principle of local fiscal autonomy, defined. Fiscal
autonomy was defined as “the power [of LGUs] to create their own
sources of revenue in addition to their equitable share in the
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national taxes released by the national government, as well as the basic policy of local autonomy, Congress enacted the LGC, Book II
power to allocate their resources in accordance with their own of which governs local taxation and fiscal matters and sets forth the
priorities. It extends to the preparation of their budgets, and local guidelines and limitations for the exercise of this power. (Film
officials in turn have to work within the constraints thereof.” Development Council of the Philippine, supra)
(Pimentel v. Aguirre, G.R. No. 132988, July 19, 2000, 336 SCRA 201 cited c) Tests to determine validity of ordinances. As
in Film Development Council of the Philippines v. Colon Heritage Realty jurisprudence indicates, the tests are divided into
Corporation, etc., G.R. No. 203754, and companion case, June 16, 2015) 1) the formal (i.e., whether the ordinance was
b) Historical antecedents of local fiscal autonomy. enacted within the corporate powers of the LGU and whether
With the adoption of the 1973 Constitution, and later the 1987 it was passed in accordance with the procedure prescribed by
Constitution, municipal corporations were granted fiscal autonomy law), and
via a general delegation of the power to tax. (Film Development 2) the substantive (i.e., involving inherent merit,
Council of the Philippines v. Colon Heritage Realty Corporation, etc., G.R. like the conformity of the ordinance with the limitations under
No. 203754, and companion case, June 16, 2015 with a note to See the Constitution and the statutes, as well as with the
Manila Electric Company v. Province of Laguna, G.R. No. 131359, May 5,
requirements of fairness and reason, and its consistency with
1999, 306 SCRA 750)
public policy). [Ferrer, Jr. v. City Mayor Bautista, et al., G.R. No.
Section 5, Article XI of the 1973 Constitution gave LGUs the 210551, June 30, 2015 citing Legaspi v. City of Cebu, G.R. No.
“power to create its own sources of revenue and to levy taxes, 159110, December 10, 2013, 711 SCRA 771, 785, arrangement and
subject to such limitations as may be provided by law.” This numbering supplied]
authority was further strengthened in the 1987 Constitution, through Alternative statement of the tests. For an
the inclusion in Section 5, Article X thereof of the condition that ordinance to be valid though,
“[s]uch taxes, fees, and charges shall accrue exclusively to local 1) it must not only be within the corporate powers
governments.” of the LGU to enact and
Accordingly, under the present Constitution, where there is 2) must be passed according to the procedure
neither a grant nor a prohibition by statute, the tax power of prescribed by law,
municipal corporations must be deemed to exist although Congress 3) it should also conform to the following
may provide statutory limitations and guidelines . [Film Development requirements: (a) not contrary to the Constitution or any
Council of the Philippine, supra with a note to see The City Government of statute; (b) not unfair or oppressive; (c) not partial or
Quezon City, et al. v. Bayan Telecommunications, Inc., G.R. No.162015,
discriminatory; (d) not prohibit but may regulate trade; (e)
March 6, 2006, 484 SCRA 169 (The Court has taken stock of the fact that
by virtue of Section 5, Article X of the 1987 Constitution, local general and consistent with public policy; and (f) not
governments are empowered to levy taxes.)] unreasonable. [Ferrer, Jr., supra citing Legaspi v. City of Cebu,
The basic rationale for the current rule on local fiscal G.R. No. 159110, December 10, 2013, 711 SCRA 771, 784-785;
White Light Corp., et al. v. City of Manila, 596 Phil. 444, 459 (2009);
autonomy is the strengthening of LGUs and the safeguarding of Social Justice Society (SJS), et al. v. Hon. Atienza, Jr., 568 Phil.
their viability and self-sufficiency through a direct grant of general 658 (2008)., at 699-700; and See City of Manila v. Hon. Laguio, Jr.,
and broad tax powers. Nevertheless, the fundamental law did not 495 Phil. 289, 307-308 (2005), arrangement and letters supplied,
intend the delegation to be absolute and unconditional. The Arabic numerals in the original]
legislature must still see to it that (a) the taxpayer will not be over- d) Ordinance must pass the test of constitutionality,
burdened or saddled with multiple and unreasonable impositions; otherwise it is void. An ordinance must pass muster under the
(b) each LGU will have its fair share of available resources; (c) the test of constitutionality. [Ferrer, Jr. v. City Mayor Bautista, et al., G.R.
resources of the national government will not be unduly disturbed; No. 210551, June 30, 2015 citing City of Manila v. Hon. Laguio, Jr., 495
and (d) local taxation will be fair, uniform, and just. [Film Phil. 289, 308 (2005)] If not, it is void. [Ferrer, Jr., supra citing Tan v.
Development Council of the Philippine, supra with a note to see Manila Pereña, 492 Phil. 200, 221 (2005)]
Electric Company, supra) Ordinance should uphold the principle of the supremacy of
In conformity to the dictate of the fundamental law for the the Constitution. (Ferrer, Jr.., supra citing City of Manila v. Hon. Laguio,
legislature to “enact a local government code which shall provide Jr., supra)
for a more responsive and accountable local government structure e) Local ordinances must not contravene national
instituted through a system of decentralization,” consistent with the statutes. It is a fundamental principle that municipal ordinances
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are inferior in status and subordinate to the laws of the state. An exercise of these delegated powers with the view of making each
ordinance in conflict with a state law of general character and LGU a fully functioning subdivision of the State subject to the
statewide application is universally held to be invalid. The principle constitutional and statutory limitations.”
is frequently expressed in the declaration that municipal authorities, Specifically, with regard to the power of taxation, it is
under a general grant of power, cannot adopt ordinances which indubitably the most effective instrument to raise needed revenues
infringe the spirit of a state law or repugnant to the general policy of in financing and supporting myriad activities of the LGUs for the
the state. In every power to pass ordinances given to a municipality, delivery of basic services essential to the promotion of the general
there is an implied restriction that the ordinances shall be consistent welfare and the enhancement of peace, progress, and prosperity of
with the general law. [Batangas CATV, Inc. v. Court of Appeals, 482 the people. [Ferrer, Jr., supra citing Legaspi v. City of Cebu, G.R. No.
Phil. 544 (2004) cited in Ferrer, Jr. v. City Mayor Bautista, et al., G.R. No. 159110, December 10, 2013, 711 SCRA 771, 785]
210551, June 30, 2015] b) Extent of the delegation. The fundamental law did
f) Rationale why ordinances should not contravene a not intend the delegation to be absolute and unconditional; the
stature. The rationale of the requirement that the ordinances constitutional objective obviously is to ensure that, while the local
should not contravene a statute is obvious. Municipal governments government units are being strengthened and made more
are only agents of the national government. Local councils exercise autonomous, the legislature must still see to it that (a) the taxpayer
only delegated legislative powers conferred on them by Congress will not be over-burdened or saddled with multiple and
as the national lawmaking body. The delegate cannot be superior to unreasonable impositions; (b) each local government unit will have
the principal or exercise powers higher than those of the latter. It is its fairshare of available resources; (c) the resources of the national
a heresy to suggest that the local government units can undo the government will not be unduly disturbed; and (d) local taxation will
acts of Congress, from which they have derived their power in the be fair, uniform, and just. .” [Ferrer, Jr. v. City Mayor Bautista, et al., G.R.
first place, and negate by mere ordinance the mandate of the No. 210551, June 30, 2015 citing MERALCO v. Province of Laguna, 366
statute. [Justice Isagani Cruz (ret.), in Magtajas vs. Pryce Properties Phil. 428, 434-435 (1999)
Corp., Inc., cited in Ferrer, Jr. v. City Mayor Bautista, et al., G.R. No. Subject to the provisions of the LGC and consistent with the
210551, June 30, 2015] basic policy of local autonomy, every LGU is now empowered and
g) Local tax ordinance must be reasonable. An authorized to create its own sources of revenue and to levy taxes,
ordinance carries with it the presumption of validity. The question of fees, and charges which shall accrue exclusively to the local
reasonableness though is open to judicial inquiry. (Victorias Milling government unit as well as to apply its resources and assets for
Co., Inc. v. Municipality of Victorias, G.R. No. L-21183, September 27, productive, developmental, or welfare purposes, in the exercise or
1968) furtherance of their governmental or proprietary powers and
functions. (Ferrer, Jr., supra with a note to see LGC, Secs. 18 and 129)
2. Nature and source of taxing power The relevant provisions of the LGC which established the
parameters of the taxing power of the LGUs are as follows:
a) The power of taxation of LGUs is merely a 1) Section 130. The fundamental principles (Sec. 130)
delegated power. LGUs are able to legislate only by virtue of a 2) Sec. 133. Common Limitations on the Taxing Powers
valid delegation of legislative power from the national legislature; of Local Government Units
they are mere agents vested with what is called the power of 3) Sec. 151. Scope of Taxing Powers
subordinate legislation. [Ferrer, Jr. v. City Mayor Bautista, et al., G.R. 4) Sec. 186. Power To Levy Other Taxes, Fees or
No. 210551, June 30, 2015 citing City of Manila v. Hon. Laguio, Jr., 495 Charges. (Ferrer, Jr., supra)
Phil. 289, 337 (2005)]
c) LGUs do not have the inherent power to tax. At the
“Congress enacted the LGC as the implementing law for the outset, it must be emphasized that although the power to tax is
delegation to the various LGUs of the State’s great powers, namely: inherent in the State, the same is not true for LGUs because
the police power, the power of eminent domain, and the power of although the mandate to impose taxes granted to LGUs is
taxation. The LGC was fashioned to delineate the specific categorical and long established in the 1987 Philippine Constitution,
parameters and limitations to be complied with by each LGU in the the same is not all encompassing as it is subject to limitations as
explicitly stated in Section 5, Article X of the 1987 Constitution, viz.:
SECTION 5. Each local government unit shall have the power to
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create its own sources of revenues and to levy taxes, fees, and d) “Paradigm shift” from exclusive Congressional
charges subject to such guidelines and limitations as the Congress power to direct grant of taxing power to local legislative bodies.
may provide, consistent with the basic policy of local autonomy. The power to tax is no longer vested exclusively on Congress; local
Such taxes, fees, and charges shall accrue exclusively to the local legislative bodies are now given direct authority to levy taxes, fees
governments. (Batangas City, et al. v. Pilipinas Shell Petroleum and other charges pursuant to Article X, section 5 of the 1987
Corporation, G.R. No. 187631, July 8, 2015) Constitution. (Batangas Power Corporation v. Batangas City, et al. G. R.
It is already well-settled that although the power to tax is No. 152675, and companion case, April 28, 2004 citing National Power
inherent in the State, the same is not true for the LGUs to whom the Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003)
power must be delegated by Congress and must be exercised Local government legislation, “is not regarded as a transfer
within the guidelines and limitations that Congress may provide. of general legislative power, but rather as the grant of authority to
(Batangas City, et al., supra citing City of Manila, et al. v. Hon. Colet, et al. prescribe local regulations, according to immemorial practice,
G.R. Nos. 120051, December 10, 2014 and companion cases) subject, of course, to the interposition of the superior in cases of
The power to tax “is an attribute of sovereignty,” and as such, necessity.” (People v. Vera, 65 Phil. 56)
inherent in the State. Such, however, is not true for provinces, The basic rationale for the current rule is to safeguard the
cities, municipalities and barangays as they are not the sovereign; viability and selfsufficiency of local government units by directly
rather, there are mere “territorial and political subdivisions of the granting them general and broad tax powers. (Ferrer, Jr. v. City
Republic of the Philippines.” (Pelizloy Realty Corporation v. The Mayor Bautista, et al., G.R. No. 210551, June 30, 2015)
Province of Benguet, cited in City of Manila, supra, in turn cited in e) Relationship between the taxing power of the local
Batangas City, et al., supra) government units and the national government. Municipal
It is settled that a municipal corporation unlike a sovereign corporations owe their origin to, and derive their powers and rights
state is clothed with no inherent power of taxation. The charter or wholly from the legislature. It breathes into them the breath of life,
statute must plainly show an intent to confer that power or the without which they cannot exist. As it creates, so it may destroy. As
municipality, cannot assume it. (Ferrer, Jr. v. City Mayor Bautista, et it may destroy, it may abridge and control. Unless there is some
al., G.R. No. 210551, June 30, 2015) constitutional limitation on the right, the legislature might, by a
Indeed, LGUs have no inherent power to tax except to the extent single act, and if we can suppose it capable of so great a folly and
that such power might be delegated to them either by the basic law so great a wrong, sweep from existence all of the municipal
or by the statute. [Ferrer, Jr., supra citing MERALCO v. Province of corporations in the State, and the corporation could not prevent it.
Laguna, 366 Phil. 428, 433 (1999); Film Development Council of the
The Supreme Court stated that it knows of no limitation on the right
Philippines v. Colon Heritage Realty Corporation, etc., G.R. No. 203754,
and companion case, June 16, 2015 citing Manila Electric Company v. so far as to the corporation themselves are concerned. They are, so
Province of Laguna, G.R. No. 131359, May 5, 1999, 306 SCRA 750] to phrase it, the mere tenants at will of the legislature.
“Under the now prevailing Constitution, where there is neither This basic relationship between the national legislature and
a grant nor a prohibition by statute, the tax power must be deemed the local government units has not been enfeebled by the new
to exist although Congress may provide statutory limitations and provisions in the Constitution strengthening the policy of local
guidelines. The basic rationale for the current rule is to safeguard autonomy. Without meaning to detract from that policy, the
the viability and self sufficiency of local government units by Supreme Court confirmed that Congress retains control of the local
directly granting them general and broad tax powers. Nevertheless, government units although in significantly reduced degree now than
the fundamental law did not intend the delegation to be absolute under our previous Constitutions. The power to create still includes
and unconditional; the constitutional objective obviously is to the power to destroy. The power to grant still includes the power to
ensure that, while the local government units are being withhold or recall. True, there are certain notable innovations in the
strengthened and made more autonomous, the legislature must still Constitution, like the direct conferment on the local government
see to it that (a) the taxpayer will not be over-burdened or saddled units of the power to tax, which cannot now be withdrawn by mere
with multiple and unreasonable impositions; (b) each local statute.
government unit will have its fair share of available resources; (c) By and large, however, the national legislature is still the
the resources of the national government will not be unduly principal of the local government units, which cannot defy its will or
disturbed; and (d) local taxation will be fair, uniform, and just.” (Id. at modify or violate it. [Justice Isagani Cruz (ret.), in Magtajas vs. Pryce
434-435)
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Properties Corp., Inc., cited in Ferrer, Jr. v. City Mayor Bautista, et al., G.R. prescribed by Section 151 in relation to Section 137 of the LGC
No. 210551, June 30, 2015] which expressly provides that notwithstanding any exemption
f) Taxing power of the local government is limited. granted by any law or other special law, the City or a province may
The taxing power of local governments is limited in the sense that impose a franchise tax. It must be noted that Section 137 of the
Congress can enact legislation granting tax exemptions. LGC does not prohibit grant of future exemptions.
While the system of local government taxation has changed The Supreme Court in a series of cases has sustained the
with the onset of the 1987 Constitution, the power of local power of Congress to grant tax exemptions over and above the
government units to tax is still limited. power of the local government’s delegated power to tax. (Quezon
While the power to tax by local governments may be City, et al., v. ABS-CBN Broadcasting Corporation, G. R. No. 166408,
exercised by local legislative bodies, no longer merely by virtue of a October 6, 2008 citing City Government of Quezon City, et al. v. Bayan
valid delegation as before, but pursuant to direct authority conferred Telecommunications, Inc., G.R. No. 162015, March 6, 2006, 484 SCRA 16)
by Section 5, Article X of the Constitution, the basic doctrine on “Indeed, the grant of taxing powers to local government units
local taxation remains essentially the same, “the power to tax is under the Constitution and the LGC does not affect the power of
[still] primarily vested in the Congress.” (Quezon City, et al., v. ABS- Congress to grant exemptions to certain persons, pursuant to a
CBN Broadcasting Corporation, G. R. No. 166408, October 6, 2008 citing declared national policy. The legal effect of the constitutional grant
City Government of Quezon City, et al. v. Bayan Telecommunications, to local governments simply means that in interpreting statutory
Inc., G.R. No. 162015, March 6, 2006, 484 SCRA 169 in turn referring to provisions on municipal taxing powers, doubts must be resolved in
Mactan Cebu International Airport Authority, v. Marcos, G.R. No. 120082, favor of municipal corporations.” [Ibid., referring to Philippine Long
September 11, 1996, 261 SCRA 667, 680, italics supplied) Distance Telephone Company, Inc. (PLDT) vs. City of Davao]
g) Further amplification by Bernas of the local i) Interpretation of power to tax of LGUs. The power
government’s power to tax. “What is the effect of Section 5 on when granted is to be construed in strictissimi juris. Any doubt or
the fiscal position of municipal corporations ? Section 5 does not ambiguity arising out of the term used in granting that power must
change the doctrine that municipal corporations do not possess be resolved against the municipality. Inferences, implications,
inherent powers of taxation. What it does is to confer municipal deductions – all these – have no place in the interpretation of the
corporations a general power to levy taxes and otherwise create taxing power of a municipal corporation. (Ferrer, Jr. v. City Mayor
sources of revenue. They no longer have to wait for a statutory Bautista, et al., G.R. No. 210551, June 30, 2015 citing MERALCO v.
grant of these powers. The power of the legislative authority Province of Laguna, 366 Phil. 428, 433 (1999)]
relative to the fiscal powers of local governments has been reduced j) Criteria for distinguishing between a tax and an
to the authority to impose limitations on municipal powers. imposition under police power. The Supreme Court held that “if
Moreover, these limitations must be “consistent with the basic the generating of revenue is the primary purpose and regulation is
policy of local autonomy.” The important legal effect of Section 5 is merely incidental, the imposition is a tax; but if regulation is the
thus to reverse the principle that doubts are resolved against primary purpose, the fact that incidentally revenue is also obtained
municipal corporations. Henceforth, in interpreting statutory does not make the imposition a tax.” [Smart Communications, Inc. v.
provisions on municipal fiscal powers, doubts will be resolved in Municipality of Malvar, Batangas, G.R. No. 204429, February 18, 2014,
favor of municipal corporations. It is understood, however, that 716 SCRA 677, 695 citing Progressive Development Corporation v.
taxes imposed by local government must be for a public purpose, Quezon City, 254 Phil. 635, 646 (1989), and in turn cited in Ferrer, Jr. v.
uniform within a locality, must not be confiscatory, and must be City Mayor Bautista, et al., G.R. No. 210551, June 30, 2015]
within the jurisdiction of the local unit to pass.” (Quezon City, et al., v. The Supreme Court reiterated that the purpose and effect of
ABS-CBN Broadcasting Corporation, G. R. No. 166408, October 6, 2008 the imposition determine whether it is a tax or a fee, and that the
citing City Government of Quezon City, et al. v. Bayan lack of any standards for such imposition gives the presumption
Telecommunications, Inc., G.R. No. 162015, March 6, 2006, 484 SCRA that the same is a tax. (Smart Communications, Inc., supra)
169) k) Designation in the ordinance does not decide
h) Reconciliation of the local government’s authority whether the imposition is a license fee or a tax. The Supreme
to tax and the Congressional general taxing power. Congress Court accordingly say that the designation given by the municipal
has the inherent power to tax, which includes the power to grant tax authorities does not decide whether the imposition is properly a
exemptions. On the other hand, the power of local governments, license tax or a license fee. The determining factors are the
such as provinces and cities for example Quezon City, to tax is
6
purpose and effect of the imposition as may be apparent from the To successfully invoke the exercise of police power as the
provisions of the ordinance. Thus, “[w]hen no police inspection, rationale for the enactment of the Ordinance, and to free it from the
supervision, or regulation is provided, nor any standard set for the imputation of constitutional infirmity, not only must it appear that the
applicant to establish, or that he agrees to attain or maintain, but interests of the public generally, as distinguished from those of a
any and all persons engaged in the business designated, without particular class, require an interference with private rights, but the
qualification or hindrance, may come, and a license on payment of means adopted must be reasonably necessary for the
the stipulated sum will issue, to do business, subject to no accomplishment of the purpose and not unduly oppressive upon
prescribed rule of conduct and under no guardian eye, but individuals. It must be evident that no other alternative for the
according to the unrestrained judgment or fancy of the applicant accomplishment of the purpose less intrusive of private rights can
and licensee, the presumption is strong that the power of taxation, work. A reasonable relation must exist between the purposes of the
and not the police power, is being exercised.” [Smart police measure and the means employed for its accomplishment,
Communications, Inc., . v. Municipality of Malvar, Batangas, G.R. No. for even under the guise of protecting the public interest, personal
204429, February 18, 2014, 716 SCRA 677, citing Victorias Milling Co., rights and those pertaining to private property will not be permitted
Inc. v. Municipality of Victorias, etc., 134 Phil. 180, 194 (1968) in turn cited to be arbitrarily invaded. (Ferrer, Jr., supra citing City of Manila, supra)
in Ferrer, Jr., v. City Mayor Bautista, et al., G.R. No. 210551, June 30,
As with the State, LGUs may be considered as having
2015]
properly exercised their police power only if there is a lawful subject
l) Police power liberally construed . The provisions
and a lawful method or, to be precise, if the following requisites are
related thereto are liberally interpreted to give more powers to
met: (1) the interests of the public generally, as distinguished from
LGUs in accelerating economic development and upgrading the
those of a particular class, require its exercise and (2) the means
quality of life for the people in the community. [Ferrer, Jr. v. City
Mayor Bautista, et al., G.R. No. 210551, June 30, 2015 citing LGC, Sec. 5 employed are reasonably necessary for the accomplishment of the
(c)] purpose and not unduly oppressive upon individuals. [Ferrer, Jr.,
Wide discretion is vested on the legislative authority to supra citing Social Justice Society (SJS), et al., supra at 702]
determine not only what the interests of the public require but also Lacking a concurrence of these two requisites, the police
what measures are necessary for the protection of such interests measure shall be struck down as an arbitrary intrusion into private
since the Sanggunian is in the best position to determine the needs rights – a violation of the due process clause. [Ferrer, Jr., supra citing
City of Manila, supra at 312-313; See also White Light Corp., et al. v. City
of its constituents. [Ferrer, Jr., supra citing Social Justice Society (SJS), of Manila, 596 Phil. 444, 467 (2009)]
et al. v. Hon. Atienza, Jr. 568 Phil. 658, 703 (2008)]
The main purpose of Ordinance No. 18 is to regulate certain
m) Limitations on the exercise of police power.
construction activities of the identified special projects, which
Though broad and far-reaching, police power is subordinate to
includes “cell sites” or telecommunications towers. Thus, the fees
constitutional limitations and is subject to the requirement that its
imposed in Ordinance No. 18 are primarily regulatory in nature, and
exercise must be reasonable and for the public good. [Ferrer, Jr. v.
City Mayor Bautista, et al., G.R. No. 210551, June 30, 2015 citing City of not primarily revenue-raising. They are not taxes. While the fees
Manila v. Hon. Laguio, Jr., 495 Phil. 289, 308 (2005)] may contribute to the revenues of the Municipality, this effect is
The police power granted to local government units must merely incidental. (Smart Communications, Inc., v. Municipality of
always be exercised with utmost observance of the rights of the Malvar, Batangas, G.R. No. 204429, February 18, 2014)
people to due process and equal protection of the law. Such power  n) Garbage fees are collected under the general
cannot be exercised whimsically, arbitrarily or despotically as its welfare clause. In the United States of America, it has been held
exercise is subject to a qualification, limitation or restriction that the authority of a municipality to regulate garbage falls within
demanded by the respect and regard due to the prescription of the its police power to protect public health, safety, and welfare. [ Ferrer,
Jr., supra with a note to see Ennis v. City of Ray, 595 N.W. 2d 305 (1999)
fundamental law, particularly those forming part of the Bill of
and Village of Winside v. Jackson, 553 N.W. 2d 476 (1996) ]
Rights. Individual rights, it bears emphasis, may be adversely
As opined, the purposes and policy underpinnings of the
affected only to the extent that may fairly be required by the
police power to regulate the collection and disposal of solid waste
legitimate demands of public interest or public welfare. Due process
are: (1) to preserve and protect the public health and welfare as
requires the intrinsic validity of the law in interfering with the rights
well as the environment by minimizing or eliminating a source of
of the person to his life, liberty and property. x x x x
disease and preventing and abating nuisances; and (2) to defray
7
costs and ensure financial stability of the system for the benefit of  q) Quezon City Ordinance No. SP-2095 that
the entire community, with the sum of all charges marshalled and imposes a Socialized Housing Tax (SHT) equivalent to 0.5% on
designed to pay for the expense of a systemic refuse disposal the assessed value of land in excess of Php100,000.00 is valid.
scheme. [Ferrer, Jr., supra with a note to see Jacobson v. Solid Waste This special assessment is the same tax referred to in R.A. No.
Agency of Northwest Nebraska (SWANN), 653 N.W. 2d 482 (2002); Ennis 7279 or the “Urban Development and Housing Act of 1992 (UDHA).
v. City v. City of Ray, 595 N.W. 2d 305 (1999); and City of Hobbs v. The SHT is one of the sources of funds for urban
Chesport, Ltd., 76 N.M. 609 (1966)] development and housing program.
A municipality has an affirmative duty to supervise and Under the UDHA, socialized housing shall be the primary
control the collection of garbage within its corporate limits. [Ferrer, strategy in providing shelter for the underprivileged and homeless.
Jr., supra with a note to see Jacobson v. Solid Waste Agency of Northwest
The LGU or the NHA, in cooperation with the private developers
Nebraska (SWANN), 653 N.W. 2d 482 (2002)]
and concerned agencies, shall provide socialized housing or
The LGC specifically assigns the responsibility of regulation
resettlement areas with basic services and facilities such as potable
and oversight of solid waste to local governing bodies because the
water, power and electricity, and an adequate power distribution
Legislature determined that such bodies were in the best position to
system, sewerage facilities, and an efficient and adequate solid
develop efficient waste management programs. (Ibid.) To impose on
waste disposal system; and access to primary roads and
local governments the responsibility to regulate solid waste but not
transportation facilities. The provisions for health, education,
grant them the authority necessary to fulfill the same would lead to
communications, security, recreation, relief and welfare shall also
an absurd result.” (Ibid.)
be planned and be given priority for implementation by the LGU
In this jurisdiction, pursuant to Section 16 of the LGC and in
and concerned agencies in cooperation with the private sector and
the proper exercise of its corporate powers under Section 22 of the
the beneficiaries themselves.
same, the Sangguniang Panlungsod of Quezon City, like other local
In coordination with the NHA, the LGUs shall provide
legislative bodies, is empowered to enact ordinances, approve
relocation or resettlement sites with basic services and facilities and
resolutions, and appropriate funds for the general welfare of the city
access to employment and livelihood opportunities sufficient to
and its inhabitants. (Ferrer, Jr., supra citing LGC, Sec. 458)
meet the basic needs of the affected families. Clearly, the SHT
The general welfare clause is the delegation in statutory form
charged by the Quezon City Government is a tax which is within its
of the police power of the State to LGUs. [Batangas CATV, Inc. v.
Court of Appeals 482 Phil. 544, 561 (2004)] power to impose. Aside from the specific authority vested by
o) Impositions for collection of garbage are fees. Section 43 of the UDHA, cities are allowed to exercise such other
“Charges” refer to pecuniary liability, as rents or fees against powers and discharge such other functions and responsibilities as
persons or property, while “Fee” means a charge fixed by law or are necessary, appropriate, or incidental to efficient and effective
ordinance for the regulation or inspection of a business or activity. provision of the basic services and facilities which include, among
[Ferrer, Jr., supra citing LGC, Sec. 131 (g) and (l)] others, programs and projects.
The fee imposed for garbage collections under is a charge For the purpose of undertaking a comprehensive and
fixed for the regulation of an activity. (Ferrer, Jr., supra) continuing urban development and housing program, the disparities
 p) Limitation upon collection of garbage fees. between a real property owner and an informal settler as two
Nonetheless, although a special charge, tax, or assessment may be distinct classes are too obvious and need not be discussed at
imposed by a municipal corporation, it must be reasonably length. The differentiation conforms to the practical dictates of
commensurate to the cost of providing the garbage service. [Ferrer, justice and equity and is not discriminatory within the meaning of
Jr. v. City Mayor Bautista, et al., G.R. No. 210551, June 30, 2015 with a the Constitution. (Ferrer, Jr. v. City Mayor Bautista, et al., G.R. No.
note to See Ennis v. City of Ray, 595 N.W. 2d 305 (1999) and Town of 210551, June 30, 2015)
Eclectic v. Mays, 547 So. 2d 96 (1989)] Notably, the public purpose of a tax may legally exist even if
To pass judicial scrutiny, a regulatory fee must not produce the motive which impelled the legislature to impose the tax was to
revenue in excess of the cost of the regulation because such fee favor one over another. [Ferrer, Jr., supra with a note to see Tio v.
will be construed as an illegal tax when the revenue generated by Videogram Regulatory Board, 235 Phil. 198, 206 (1987)]
the regulation exceeds the cost of the regulation. [Ferrer, Jr., with a It is inherent in the power to tax that a State is free to select
note to see Iroquois Properties v. City of East Lansing, 408 N.W. 2d 495 the subjects of taxation. (Ibid.) Inequities which result from a
(1987)]
8
singling out of one particular class for taxation or exemption The tax credit to be granted shall be equivalent to the
infringe no constitutional limitation. (Ibid.) total amount of the special assessment paid by the property
Further, the reasonableness of Ordinance No. SP-2095 owner, which shall be given as follows:
cannot be disputed. It is not confiscatory or oppressive since the tax 1. 6th year - 20%
being imposed therein is below what the UDHA actually allows. As 2. 7th year - 20%
pointed out by Quezon City, while the law authorizes LGUs to 3. 8th year - 20%
collect SHT on lands with an assessed value of more than 4. 9th year - 20%
P50,000.00, the questioned ordinance only covers lands with an 5. 10h year - 20%
assessed value exceeding P100,000.00. Even better, on certain Furthermore, only the registered owners may avail of the tax
conditions, the ordinance grants a tax credit equivalent to the total credit and may not be continued by the subsequent property owners
amount of the special assessment paid beginning in the sixth (6th) even if they are buyers in good faith, heirs or possessor of a right in
year of its effectivity. Far from being obnoxious, the provisions of whatever legal capacity over the subject property.
the subject ordinance are fair and just. (Ferrer, Jr., supra) The avowed purpose of the ordinance is to implement the
 r) Illustration of a valid enactment under the provisions of Rep. Act No. 7279, the Urban Development and
power of taxation as an implement of police power. On October Housing Act (UDHA). In short to provide funds for the acquisition
17, 2011,Quezon City Council enacted Ordinance No. SP-2095, S- and development of relocation sites for informal settlers in slum
2011, or the Socialized Housing Tax of Quezon City, (SHT) Section areas resulting to urban development.
3 of which provides: Is the ordinance valid ?
“SECTION 3. IMPOSITION. A special assessment SUGGESTED ANSWER: Yes. The ordinance imposing is the
equivalent to one-half percent (0.5%) on the assessed value Socialized Housing Tax of Quezon City, (SHT) is valid.
of land in excess of One Hundred Thousand Pesos The tax is not a pure exercise of taxing power or merely to
(Php100,000.00) shall be collected by the City Treasurer raise revenue; it is levied with a regulatory purpose. The levy is
which shall accrue to the Socialized Housing Programs of the primarily in the exercise of the police power for the general welfare
Quezon City Government. The special assessment shall of the entire city. It is greatly imbued with public interest.
accrue to the General Fund under a special account to be Removing slum areas in Quezon City is not only beneficial to
established for the purpose. the underprivileged and homeless constituents but advantageous to
Effective for five (5) years, the Socialized Housing Tax the real property owners as well. The situation will improve the
(SHT) shall be utilized by the Quezon City Government for value of the their property investments, fully enjoying the same in
the following projects: (a) land purchase/land banking; (b) view of an orderly, secure, and safe community, and will enhance
improvement of current/existing socialized housing facilities; the quality of life of the poor, making them law-abiding constituents
(c) land development; (d) construction of core houses, and better consumers of business products. [Ferrer, Jr. v. City Mayor
sanitary cores, medium-rise buildings and other similar Bautista, et al., G.R. No. 210551, June 30, 2015 citing City of Manila v.
structures; and (e)financing of public-private partnership Hon. Laguio, Jr., 495 Phil. 289, 308 (2005)]
agreement of the Quezon City Government and National s) Double taxation, defined. There is double taxation
Housing Authority (NHA) with the private sector. when the same taxpayer is taxed twice when he should be taxed
Under certain conditions, a tax credit shall be enjoyed only once for the same purpose by the same taxing authority within
by taxpayers regularly paying the special assessment: the same jurisdiction during the same taxing period, and the taxes
SECTION 7. TAX CREDIT. Taxpayers dutifully paying are of the same kind or character. Double taxation is obnoxious.
the special assessment tax as imposed by this ordinance (Nursery Care Corporation, et al., v. Acevedo, etc., et al, G.R. No.
180651, July 30, 2014)
shall enjoy a tax credit. The tax credit may be availed of only
after five (5) years of continue[d] payment. Further, the t) Elements of double taxation. For double taxation to
taxpayer availing this tax credit must be a taxpayer in good take place, the two taxes must be imposed on the same subject
standing as certified by the City Treasurer and City Assessor. matter, for the same purpose, by the same taxing authority, within
the same jurisdiction, during the same taxing period; and the taxes
must be of the same kind or character. Because Section 21 of the
Revenue Code of Manila imposed the tax on a person who sold
9
goods and services in the course of trade or business based on a HELD: Yes. Double taxation means taxing the same
certain percentage of his gross sales or receipts in the preceding property twice when it should be taxed only once; that is, "taxing the
calendar year, while Section 15 and Section 17 likewise imposed same person twice by the same jurisdiction for the same thing."
the tax on a person who sold goods and services in the course of It is obnoxious when the taxpayer is taxed twice, when it
trade or business but only identified such person with particularity, should be but once. Otherwise described as "direct duplicate
namely, the wholesaler, distributor or dealer (Section 15), and the taxation," the two taxes must be imposed on the same subject
retailer (Section 17), all the taxes – being imposed on the privilege matter, for the same purpose, by the same taxing authority, within
of doing business in the City of Manila in order to make the the same jurisdiction, during the same taxing period; and the taxes
taxpayers contribute to the city’s revenues – were imposed on the must be of the same kind or character.
same subject matter and for the same purpose. (Nursery Care Using the aforementioned test, there is indeed double
Corporation, et al., v. Acevedo, etc., et al, G.R. No. 180651, July 30, taxation since the petitioners are subjected to the taxes under both
2014) Sections 14 and 21 of Tax Ordinance No. 7794, since these are
u) Example of double taxation in its strict sense being imposed: (1) on the same subject matter – the privilege of
which violates the concept of equal protection because there doing business in the City of Manila; (2) for the same purpose – to
is discrimination. An ordinance imposing a tax on centrifugal make persons conducting business within the City of Manila
sugar produced and exported only by a specific sugar company and contribute to city revenues; (3) by the same taxing authority –
not upon those produced and exported by other sugar companies respondent City of Manila; (4) within the same taxing jurisdiction –
was declared null and void. (Ormoc Sugar Co. v. Treasurer of Ormoc within the territorial jurisdiction of the City of Manila; (5) for the
City, 22 SCRA 603) The law is discriminatory singling out for taxation same taxing periods – per calendar year; and (6) of the same kind
a specific company only. or character – a local business tax imposed on gross sales or
v) Illustration of double taxation that is obnoxious. receipts of the business. (City of Manila v. Coca-Cola Bottlers
The City of Manila assessed and collected taxes from the individual Philippines, Inc., G.R. No. 181845, August 4, 2009, 595 SCRA 299 and
establishments pursuant to Section 15 (Tax on Wholesalers, G.R. No. 167283, February 10, 2010. which has been reiterated in
Distributors, or Dealers) and Section 17 (Tax on Retailers) of the Swedish Match Philippines, Inc. v. The Treasurer of the City of Manila,
Revenue Code of Manila. At the same time, the City of Manila G.R. No. 181277, July 3, 2013, 700 SCRA 428, 439-442 both cited in
imposed additional taxes upon the same establishments pursuant to Nursery Care Corporation, et al., v. Acevedo, etc., et al, G.R. No. 180651,
July 30, 2014)
Section 21 of the Revenue Code of Manila, as amended, as a
Section 143 of the LGC, is the very source of the power of
condition for the renewal of their respective business licenses for
municipalities and cities to impose a local business tax, and to
the year 1999. Section 21 of the Revenue Code of Manila stated:
which any local business tax imposed by City of Manila must
To comply with the City of Manila’s assessment of taxes
conform. It is apparent from a perusal thereof that when a
under Section 21, the establishments paid under protest the
municipality or city has already imposed a business tax on
amounts demanded corresponding to the first quarter of 1999. A
manufacturers, etc. of liquors, distilled spirits, wines, and any other
request for refund of the taxes paid under protest was denied by the
article of commerce, pursuant to Section 143(a) of the LGC, said
City Treasurer, and a motion for reconsideration was likewise
municipality or city may no longer subject the same manufacturers,
denied.
etc.to a business tax under Section 143(h) of the same Code.
The establishments then filed their respective petitions for
Section 143(h) may be imposed only on businesses that are subject
certiorari in the Regional Trial Court (RTC) in Manila which were
to excise tax, VAT, or percentage tax under the NIRC, and that are
then consolidated in one branch.
"not otherwise specified in preceding paragraphs." In the same way,
The RTC dismissed the consolidated petitions after which the
businesses such as respondent’s, already subject to a local
matter was appealed to the Court of Appeals which denied the
business tax under Section 14 of Tax Ordinance No. 7794 [which is
appeal.
based on Section 143(a) of the LGC], can no longer be made liable
The establishments then appealed to the Supreme Court. Is
for local business tax under Section 21 of the same Tax Ordinance
there double taxation when the City imposed additional taxes
[which is based on Section 143(h) of the LGC. (Ibid.)
pursuant to Section 21 of the Revenue Code of Manila ?
w) Imposition of garbage fee is not double taxation.
A garbage fee is not a tax hence its imposition is not double
10
taxation. (Ferrer, Jr. v. City Mayor Bautista, et al., G.R. No. 210551, June (b) With the added burden of devolution, it is
30, 2015) even more imperative for government entities to share
In Georgia, U.S.A., assessments for garbage collection in the requirements of development, fiscal or
services have been consistently treated as a fee and not a tax. otherwise, by paying taxes or other charges due from
[Ferrer, Jr., supra citing Monticello, Ltd. v. City of Atlanta, 499 S.E. 2d 157 them.
(1998)] In another U.S. case, the garbage fee was considered as a This is so as doubtless, the power to tax is the
"service charge" rather than a tax as it was actually a fee for a most effective instrument to raise needed revenues to
service given by the city which had previously been provided at no finance and support myriad activities of the local
cost to its citizens. [Ferrer, Jr., supra citing Martin v. City of Trussville, government units for the delivery of basic services
376 So. 2d 1089 (1979)] essential to the promotion of the general welfare and
the enhancement of peace, progress, and prosperity of
a) Grant of local taxing power under the local the people. (National Power Corporation, supra)
government code (ii) Withdrawal of tax exemption is not to be
construed as prohibiting future grants of tax
(i) Power is merely delegated. Local exemptions. Philippine Long Distance Telephone Company,
governments do not have the inherent power to tax except to Inc., v. City of Davao, et al., etc., G.R. No. 143867, August
the extent that such power might be delegated to them either 22, 2001, upheld the authority of the City of Davao, a local
by the basic law or by statute. Presently, under Article X of government unit, to impose and collect a local franchise tax
the 1987 Constitution, a general delegation of that power has because the Local Government has withdrawn all tax
been given in favor of local government units. (Manila Electric exemptions previously enjoyed by all persons and authorized
Company v. Province of Laguna, G.R. No. 131359, May 5, 1999) local government units to impose a tax on business enjoying
a franchise tax notwithstanding the grant of tax exemption to
b) Authority to prescribe penalties for tax them.
violations Also reiterated was the doctrine enunciated in
Philippine Airlines, Inc. v. Edu, 164 SCRA 320, that the
c) Authority to grant local tax exemptions withdrawal of a tax exemption should not be construed as
prohibiting future grants of exemption from all taxes. Indeed,
d) Withdrawal of exemptions the grant of taxing powers to local government units under
the Local Government Code does not affect the power of
(i) Rationale for the withdrawal of tax Congress to grant exemptions to certain persons, pursuant to
exemptions. The grant of exemptions to government-owned a declared national policy. The legal effect of the
or controlled corporations and all other units of government constitutional grant to local governments simply means that
were that in interpreting statutory provisions on municipal taxing
(a) such privilege resulted in serious tax base powers, doubts must be resolved in favor of municipal
erosion and distortions in the tax treatment of similarly corporations.
situated enterprises. (Mactan Cebu International Airport
cited in National Power Corporation v. City of Cabanatuan, e) Authority to adjust local tax rates
G. R. No. 149110, April 9, 2003)
The intention of the law, in withdrawing the tax (i) Rationale for the authority to adjust local tax
exemptions, is to broaden the tax base of local rates. One of the characteristic of a sound tax system is
government units to assure them of substantial fiscal adequacy This means that the tax system must be
sources of revenue. [Philippine Rural Electric able to provide sufficient revenues in order to meet the
Cooperatives Association, Inc. (PHILRECA) v. The legitimate objects of government.
Secretary , Department of Interior and Local Government,
Stated otherwise, the taxes collected must be able to
403 SCRA 558 (2003)]
finance government expenditures and their variations.
11
[Abakada Guro Party List (Formerly AASJS), etc., v, Ermita, et al.,
G. R. No.168056, September 1, 2005 citing Chavez v. Ongpin, 4. Scope of taxing power. The taxing power of cities,
G.R. No. 76778, June 6, 1990, 186 SCRA 331, 338]
municipalities and municipal districts may be used (1) upon any
Without the authority to adjust local tax rates, local person engaged in any occupation or business, or exercising any
governments may find it difficult to meet the ever increasing privilege therein; (2) for services rendered by those political
demands for more public services. This in turn would result subdivisions or rendered in connection with any business,
not only to a violation of the fiscal adequacy concept but may profession or occupation being conducted therein, and (3) to levy,
likewise impinge upon the lifeblood theory of taxation. for public purposes just and uniform taxes, licenses or fees .
(ii) Authority to adjust rate for special (Philippine Match Co., Ltd. v. City of Cebu, G.R. No. L-30745, January 18,
education fund. Setting the rate of the additional levy for 1978)
the special education fund at less than 1% is within the taxing
power of local government units. It is consistent with the 5. Specific taxing power of Local Government Units
guiding constitutional principle of local autonomy. It was well
within the power of the Sangguniang Panlalawigan of a) Taxing powers of provinces
Palawan to enact an ordinance providing for additional levy
on real property tax for the special education fund at the rate
(i) Tax on transfer of real property
of 0.5% rather than at 1%. (Demaala v. Commission on Audit,
etc., G.R. No. 199752, February 17, 2015) ownership
(ii) Tax on business of printing and
f) Residual taxing power of local governments publication

g) Authority to issue local tax ordinances (iii) Franchise tax

3. Local taxing authority 1) Transferee liable for local franchise


tax. A transferor who was required to transfer its
a) Power to create revenues exercised through facilities including its nationwide franchise by operation
Local Government Units of law is not subject to the payment of franchise tax
delinquencies incurred after the transfer. (National
Power Corporation v. Provincial Government of Bataan, et
b) Procedure for approval and effectivity of tax al., G.R. No. 180654, April 21, 2014)
ordinances 2) The withdrawal of a tax exemption
should not be construed as prohibiting future
(i) Publication requirement. It is clear under grants of exemption from all taxes. (Philippine Long
Sec. 188 of R.A. No. 7160 and Art. 277 of its implementing Distance Telephone Company, Inc., v. City of Davao, et al.,
rules that the requirement of publication is mandatory and etc., G. R. No. 143867, August 22, 2001)
leaves no choice. The use of the word "shall" in both 3) Tax exemptions in franchises are
provisions is imperative, operating to impose a duty that may always subject to withdrawal. A legislative
be enforced (Coca-Cola Bottlers Phil., Inc. v. City of Manila, G.R. franchise is granted with the express condition that it is
No. 156252, June 27, 2006) subject to amendment, alteration, or repeal. (1987
(ii) Public hearing must be conducted. It is Constitution, Art. XII, Sec. 11)
categorical, therefore, that a public hearing be held prior to It is enough to say that the parties to a contract
the enactment of an ordinance levying taxes, fees, or cannot, through the exercise of prophetic discernment,
charges; and that such public hearing be conducted as fetter the exercise of the taxing power of the State. For
provided under Section 277 of the Implementing Rules and not only are existing laws read into contracts in order
Regulations of the Local Government Code. (Ongsuco v. to fix obligations as between parties, but the
Malones, G.R. No. 182065, October 27, 2009) reservation of essential attributes of sovereign power
12
is also read into contracts as a basic postulate of the Is such contention meritorious ?
legal order. The policy of protecting contracts against SUGGESTED ANSWER: No. Philippine Long
impairment presupposes the maintenance of a Distance Telephone Company, Inc., v. City of Davao, et
government which retains adequate authority to secure al., etc., G. R. No. 143867, August 22, 2001, upheld the
the peace and good order of society. (Smart authority of the City of Davao, a local government unit,
Communications, Inc. v. The City of Davao, etc., et al., G. R. to impose and collect a local franchise tax because the
No. 155491, September 16, 2008) Local Government Code has withdrawn all tax
NOTES AND COMMENTS: Philippine Long exemptions previously enjoyed by all persons and
Distance Telephone Company, Inc., v. City of Davao, et al., authorized local government units to impose a tax on
etc., G. R. No. 143867, August 22, 2001 made the
business enjoying a franchise tax notwithstanding the
observation that since Smart’s franchise was granted after the
effectivity of the Local Government Code that its tax grant of tax exemption to them.
exemption privilege was reinstated. However, Smart 7) “In lieu of all taxes” in the franchise of
Communications, Inc. v. The City of Davao, etc., et al., G. R. ABS-CBN does not exempt it from local franchise
No. 155491, September 16, 2008 is explicit in its holding taxes. It does not expressly provide what kind of taxes
that Smart is not entitled to a tax exemption. ABS-CBN is exempted from. It is not clear whether
4) When withdrawal of a tax exemption the exemption would include both local, whether
impairs the obligation of contracts. The Contract municipal, city or provincial, and national tax. Whether
Clause has never been thought as a limitation on the the “in lieu of all taxes provision” would include
exercise of the State’s power of taxation save only exemption from local tax is not unequivocal.
where a tax exemption has been granted for a valid The right to exemption from local franchise tax
consideration. (Smart Communications, Inc. v. The City of must be clearly established and cannot be made out of
Davao, etc., et al., G. R. No. 155491, September 16, 2008) inference or implications but must be laid beyond
citing Tolentino v. Secretary of Finance, G. R. No. 115455, reasonable doubt. Verily, the uncertainty in the “in lieu
August 25, 1994, 235 SCRA 630, 685) The author opines of all taxes” provision should be construed against
that since practically all franchises granted to ABS-CBN. ABS-CBN has the burden to prove that it is
telecommunications companies are similarly worded in fact covered by the exemption so claimed but has
that the above doctrine finds application to the others) failed to do so. (Quezon City, et al., v. ABS-CBN
5) The primary reason for the withdrawal of Broadcasting Corporation, G. R. No. 166408, October 6,
tax exemption privileges granted to government 2008)
owned and controlled corporations and all other NOTES AND COMMENTS: This is practically the
units of government was that such privilege resulted to same holding in an earlier case involving another
serious tax base erosion and distortions in the tax telecommunications company Smart Communications, Inc.
treatment of similarly situated enterprises, hence v. The City of Davao, etc., et al., G. R. No. 155491,
September 16, 2008. The author opines that since
resulting in the need for these entities to share in the
practically all franchises granted to telecommunications
requirements of development, fiscal or otherwise, by companies are similarly worded that the above doctrine
paying the taxes and other charges due them. (Philippine finds application to the others.)
Ports Authority v. City of Iloilo, G. R. No. 109791, July 14, 8) “In lieu of all taxes” refers to national
2003)
internal revenue taxes and not to local taxes. The
6) National Power Corporation (NPC) is of
“in lieu of all taxes” clause applies only to national
the insistence that it is not subject to the payment of
internal revenue taxes and not to local taxes. As
franchises taxes imposed by the Province of Isabela
appropriately pointed out in the separate opinion of
because all of its shares are owned by the Republic of
Justice Antonio T. Carpio in a similar case involving a
the Philippines. It is thus, an instrumentality of the
demand for exemption from local franchise taxes:
National Government which is exempt from local
[T]he "in lieu of all taxes" clause in Smart's
taxation. As such it is not a private corporation engaged
franchise refers only to taxes, other than income tax,
in “business enjoying franchise”
13
imposed under the National Internal Revenue Code. with the abolition of the franchise tax on
The "in lieu of all taxes" clause does not apply to local broadcasting companies with yearly gross
taxes. The proviso in the first paragraph of Section 9 receipts exceeding Ten Million Pesos. The clause
of Smart's franchise states that the grantee shall “in lieu of all taxes” does not pertain to VAT or any
"continue to be liable for income taxes payable under other tax. It cannot apply when what is paid is a tax
Title II of the National Internal Revenue Code." Also, other than a franchise tax. Since the franchise tax on
the second paragraph of Section 9 speaks of tax the broadcasting companies with yearly gross receipts
returns filed and taxes paid to the "Commissioner of exceeding ten million pesos has been abolished, the
Internal Revenue or his duly authorized representative “in lieu of all taxes” clause has now become functus
in accordance with the National Internal Revenue officio, rendered inoperative. (Quezon City, et al., v. ABS-
Code." Moreover, the same paragraph declares that CBN Broadcasting Corporation, G. R. No. 166408, October
the tax returns "shall be subject to audit by the Bureau 6, 2008)
of Internal Revenue." Nothing is mentioned in Section NOTES AND COMMENTS: This is practically the
9 about local taxes. The clear intent is for the "in lieu same holding in an earlier case involving another
telecommunications company. Smart Communications, Inc.
of all taxes" clause to apply only to taxes under the
v. The City of Davao, etc., et al., G. R. No. 155491,
National Internal Revenue Code and not to local taxes. September 16, 2008. The author opines that since
Even with respect to national internal revenue taxes, practically all franchises granted to telecommunications
the "in lieu of all taxes" clause does not apply to companies are similarly worded that the above doctrine
income tax. finds application to the others.)
If Congress intended the "in lieu of all taxes"
clause in Smart's franchise to also apply to local taxes, (iv) Tax on sand, gravel and other quarry
Congress would have expressly mentioned the services
exemption from municipal and provincial taxes.
Congress could have used the language in Section (v) Professional tax
9(b) of Clavecilla's old franchise, as follows:
x x x in lieu of any and all taxes of any kind,
(vi) Amusement tax
nature or description levied, established or collected
by any authority whatsoever, municipal, provincial or
(a) Grant of amusement tax reward
national, from which the grantee is hereby expressly
incentive under RA 9167: not a tax exemption.
exempted, x x x. (Emphasis supplied).
Without question, Congress has the power to grant
However, Congress did not expressly exempt
exemptions over the power of LGUs to impose taxes.
Smart from local taxes. Congress used the "in lieu of [Film Development Council of the Philippines v. Colon
all taxes" clause only in reference to national internal Heritage Realty Corporation, etc., G.R. No. 203754, and
revenue taxes. The only interpretation, under the rule companion case, June 16, 2015 with a note to see The City
on strict construction of tax exemptions, is that the "in Government of Quezon City, et al. v. Bayan
lieu of all taxes" clause in Smart's franchise refers only Telecommunications, Inc., G.R. No. 162015, March 6, 2006,
to national and not to local taxes. [Smart 484 SCRA 169 (For sure, in Philippine Long Distance
Communications, Inc. v. The City of Davao, etc., et al., G. R. Telephone Company, Inc. (PLDT) vs. City of Davao, this
No. 155491, September 16, 2008 citing Philippine Long Court has upheld the power of Congress to grant
Distance Telephone Company, Inc. v. City of Davao, 447 exemptions over the power of local government units to
Phil. 571, 594 (2003)] impose taxes. There, the Court wrote: Indeed, the grant of
NOTES AND COMMENTS: The author opines taxing powers to local government units under the
that the above finds application to all telecommunications Constitution and the LGC does not affect the power of
companies. Congress to grant exemptions to certain persons, pursuant
9) The “in lieu of all taxes” clause in the to a declared national policy. The legal effect of the
constitutional grant to local governments simply means that
franchise of ABS-CBN has become functus officio in interpreting statutory provisions on municipal taxing
14
powers, doubts must be resolved in favor of municipal which shall entitle their producers to an incentive
corporations.)] equivalent to the amusement tax imposed and
This amusement tax reward, however, is not, a collected on the graded films by cities and
tax exemption. municipalities in Metro Manila and other highly
Exempting a person or entity from tax is to urbanized and independent component cities in the
relieve or to excuse that person or entity from the Philippines pursuant to Sections 140 to 151 of
burden of the imposition. Here, however, it cannot be Republic Act No. 7160, the Local Government Code.
said that an exemption from amusement taxes was On January 2009 FDCP sent demand letters for
granted by Congress to the producers of graded films. unpaid amusement tax reward (with 5% surcharge for
It should be noted that the burden of paying the each month of delinquency) due to the producers of
amusement tax in question is on the proprietors, the Grade “A” or “B” films to cinema proprietors and
lessors, and operators of the theaters and cinemas operators in Cebu City. Colon Heritage Realty Corp.
that showed the graded films. Simply put, both the (Colon Heritage), operator of the Oriente theater, were
burden and incidence of the amusement tax are borne given ten (10) days from receipt thereof to pay the
by the proprietors, lessors, and operators, not by the aforestated amounts to FDCP. The demand, however,
producers of the graded films. The transfer of the fell on deaf ears.
amount to the film producers is actually a monetary Meanwhile, FDCP received letters from various
reward given to them for having produced a graded movie producers inquiring on the status of its
film, the funding for which was taken by the national receivables for tax rebates in Cebu cinemas for all
government from the coffers of the covered LGUs. their A and B rate films or requesting the immediate
Without a doubt, this is not an exemption from remittance of its amusement tax rewards for its graded
payment of tax. (Film Development Council of the films for different years. Because of the persistent
Philippines v. Colon Heritage Realty Corporation, supra) refusal of the proprietors and cinema operators to
(b) Improper exercise of legislative power remit the said amounts as FDCP demanded, on one
limiting the power of LGUs to dispose of hand, and Cebu City’s assertion of a claim on the
amusement taxes. Sometime in 1993, the City of amounts in question, the city finally filed on May 18,
Cebu, in its exercise of its power to impose 2009 before the RTC, Branch 14 a petition for
amusement taxes under Section 140 of the Local declaratory relief with application for a writ of
Government Code (LGC) anchored on the preliminary injunction. The City sought the
constitutional policy on local autonomy, passed City declaration of Secs. 13 and 14 of RA 9167 as invalid
Ordinance No. LXIX otherwise known as the “Revised and unconstitutional. RTC Branch 14 then declared
Omnibus Tax Ordinance of the City of Cebu (tax Secs. 13 and 14 of RA 9167 unconstitutional..
ordinance).” Similarly, Colon Heritage filed before RTC
Sections 42 and 43, Chapter XI thereof require Branch 5, a civil case seeking to declare Secs. 14 of
proprietors, lessees or operators of theatres, cinemas, RA 9167 as unconstitutional. Branch 5 ruled that the
concert halls, circuses, boxing stadia, and other pl whole of RA 9167 is unconstitutional.
aces of amusement, to pay an amusement tax Are Secs. 13 and 14 of RA 9167 truly
equivalent to thirty percent (30%) of the gross receipts unconstitutional ? Explain.
of admission fees to the Office of the City Treasurer of SUGGESTED ANSWER: Yes. Both Secs. 13
Cebu City. and 14 are unconstitutional for being violative of the
On June 7, 2002, Congress passed RA 9167, fiscal autonomy principle enunciated by the
creating the Film Development Council of the Constitution.
Philippines (FDCP) and abolishing the Film Local fiscal autonomy includes the power of
Development Foundation of the Philippines, Inc. and LGUs to allocate their resources in accordance with
the Film Rating Board. Secs. 13 and 14 of RA 9167 their own priorities. By earmarking the income on
provided for the tax treatment of certain graded films
15
amusement taxes imposed by the LGUs in favor of
FDCP and the producers of graded films, the c) Taxing powers of municipalities
legislature appropriated and distributed the LGUs’
funds––as though it were legally within its control–– (i) Tax on various types of businesses
under the guise of setting a limitation on the LGUs’
exercise of their delegated taxing power. (a) Illustration of generalia specialibus
This, undoubtedly, is a usurpation of the latter’s non derogant. It is likewise irrefutable that the
exclusive prerogative to apportion their funds, an specific exemption provided under Section 133 of the
impermissible intrusion into the LGUs’ constitutionally- LGC prevails over Section 143 of the same Code.
protected domain which puts to naught the guarantee The omnibus grant of power to LGUs under
of fiscal autonomy to municipal corporations enshrined Section 143(h) of the LGC cannot overcome the
in our basic law. specific exception or exemption in Section 133(h) of
This is in clear contravention of the the same Code. This is in accord with the rule on
constitutional command that taxes levied by LGUs statutory construction that specific provisions must
shall accrue exclusively to said LGU and is repugnant prevail over general ones. A special and specific
to the power of LGUs to apportion their resources in provision prevails over a general provision irrespective
line with their priorities. of their relative positions in the statute.
It is a basic precept that the inherent legislative Generalia specialibus non derogant. Where
powers of Congress, broad as they may be, are limited there is in the same statute a particular enactment and
and confined within the four walls of the Constitution. also a general one which in its most comprehensive
[Film Development Council of the Philippines v. Colon sense would include what is embraced in the former,
Heritage Realty Corporation, etc., G.R. No. 203754, and
the particular enactment must be operative, and the
companion case, June 16, 2015 with a note to see Social
Justice Society (SJS) v. Dangerous Drugs Board, citing general enactment must be taken to affect only such
Government v. Springer, 50 Phil. 259 (1927), (As early as cases within its general language as are not within the
1927, in Government v. Springer, the Court has defined, in provisions of the particular enactment. [Petron
the abstract, the limits on legislative power in the following Corporation v. Mayor Tiangco, et al., 574 Phil. 620, 636
wise: Someone has said that the powers of the legislative (2008) citing City of Manila, et al. v. Hon. Colet, et al., G.R.
department of the Government, like the boundaries of the Nos. 120051, and companion cases, December 10, 2014]
ocean, are unlimited. In constitutional governments,
however, as well as governments acting under delegated (ii) Ceiling on business tax impossible on
authority, the powers of each of the departments x x x are
limited and confined within the four walls of the constitution
municipalities within Metro Manila
or the charter, and each department can only exercise such (iii) Tax on retirement on business
powers as are necessarily implied from the given powers. (iv) Rules on payment of business tax
The Constitution is the shore of legislative authority against (v) Fees and charges for regulation &
which the waves of legislative enactment may dash, but licensing
over which it cannot leap.)]
Accordingly, whenever the legislature exercises
its power to enact, amend, and repeal laws, it should (vi) Situs of tax collected
do so without going beyond the parameters wrought by d) Taxing powers of barangays
the organic law. (Film Development Council of the e) Common revenue raising powers
Philippines, supra) (i) Service fees and charges
(ii) Public utility charges
(vii) Tax on delivery truck/van (iii) Toll fees or charges
f) Community tax
b) Taxing powers of cities
16
6. Common limitations on the taxing powers of LGUs Article 232 defines with more particularity the capacity of a
municipality to impose taxes on businesses. However, it admits of
a) Illustrative case of prohibition to tax petroleum certain exceptions, specifically, that businesses engaged in the
products. Pilipinas Shell Petroleum Corporation (Shell) operates production, manufacture, refining, distribution or sale of oil,
an oil refinery and depot in Tabangao, Batangas City, which gasoline, and other petroleum products, shall not be subject to any
manufactures and produces petroleum products that are distributed local tax imposed by Article 232. (Petron, supra)
nationwide. The amount being collected as Mayor Permit Fees is invalid
On February 20, 2002, Batangas City, sent a notice of
assessment to Shell demanding the payment of P92,373,720.50 7. Collection of business tax
and P312,656,253.04 as business taxes for its manufacture and
distribution of petroleum products and the amount of a) Tax period and manner of payment
P4,299,851.00 as Mayor’s Permit Fee based on the gross sales of
its Tabangao Refinery. The assessment was allegedly pursuant of b) Accrual of tax
Section 134 of the LGC of 1991 and Section 23 of its Batangas City c) Time of payment
Tax Code of 2002.
Shell filed a protest on April 17, 2002 contending among d) Penalties on unpaid taxes, fees or charges
others that it is not liable for the payment of the local business tax
either as a manufacturer or distributor of petroleum products. It (i) Imposition of a surcharge. As understood
further argued that the Mayor’s Permit Fees are exorbitant, from the common and usual meaning of the conjunction
confiscatory, arbitrary, unreasonable and not commensurable with “and,” the words “tax due” and “unpaid” are inseparable.
the cost of issuing a license. Hence, when the taxpayer does not pay its tax due for a
Rule on the validity of the impositions. particular year, then a surcharge is applied on the full amount
SUGGESTED ANSWER: The imposition of the local of the tax due. However, when the taxpayer makes a partial
business tax is invalid. payment of the tax due, the surcharge is applied only on the
Indisputably, the power of LGUs to impose business taxes balance or the part of the tax due that remains unpaid.
derives from Section 134 of the LGC. However, the same is subject (National Power Corporation v. City of Cabanatuan, etc., G.R. No.
to the explicit statutory impediment provided for under Section 177332, October 01, 2014)
133(h) of the same Code which prohibits LGUs from imposing (ii) Nature of a surcharge. The surcharge is a civil
“taxes, fees or charges on petroleum products.” It can, therefore, be penalty imposed once for late payment of a tax. Contrast this
deduced that although petroleum products are subject to excise tax, with the succeeding provisions on interest, which was
the same is specifically excluded from the broad power granted to imposable at the rate not exceeding 2% per month of the
LGUs under Section 143(h) of the LGC to impose business taxes. unpaid taxes until fully paid. The fact that the interest charge
Strictly speaking, as long as the subject matter of the taxing is made proportionate to the period of delay, whereas the
powers of the LGUs is the petroleum products per se or even the surcharge is not, clearly reveals the legislative intent for the
activity or privilege related to the petroleum products, such as different modes in their application. Indeed, both the
manufacturing and distribution of said products, it is covered by the surcharge and interest are imposable upon failure of the
said limitation and thus, no levy can be imposed. [Petron Corporation taxpayer to pay the tax on the date fixed in the law for its
v. Mayor Tiangco, et al., 574 Phil. 620, 636 (2008) cited in Batangas City, payment. (National Power Corporation v. City of Cabanatuan, etc.,
et al. v. Pilipinas Shell Petroleum Corporation, G.R. No. 187631, July 8, G.R. No. 177332, October 01, 2014)
2015)
(iii) Purpose of imposing a surcharge. The
Article 232(h) of the Implementing Rules and Regulations surcharge is imposed to hasten tax payments and to punish
(IRR) of the LGC of 1991 states:, that in line with existing for evasion or neglect of duty, while interest is imposed to
national policy, any business engaged in the production, compensate the State “for the delay in paying the tax and for
manufacture, refining, distribution or sale of oil, gasoline, and the concomitant use by the taxpayer of funds that rightfully
other petroleum products shall not be subject to any local tax should be in the government’s hands.” (National Power
imposed in this Article.
17
Corporation v. City of Cabanatuan, etc., G.R. No. 177332, October scheme. (Coca-Cola Bottlers Philippines, Inc. v. City of Manila,
01, 2014) etc., G.R. No. 197561, April 7, 2014)
(iv) Authority to impose a surcharge. Section
168 of the Local Government Code categorically provides 9. Civil remedies by the LGU for collection of revenues
that the local government unit may impose a surcharge not
exceeding 25% of the amount of taxes, fees, or charges not a) Local government’s lien for delinquent taxes,
paid on time and an interest at the rate not exceeding two fees or charges
percent (2%) per month of the unpaid taxes, fees or charges
including surcharges, until such amount is fully paid but in no
b) Civil remedies, in general
case shall the total interest on the unpaid amount or portion
thereof exceed thirty-six (36) months. (National Power
Corporation v. City of Cabanatuan, etc., G.R. No. 177332, October (i) Administrative action
01, 2014)
(v) Surcharge must not be confiscatory. The (a) Ways recovering illegally collected tax.
City's yearly imposition of the 25% surcharge, resulted in an Under the first option, any tax on income that is paid in
aggregate penalty that is way higher than the taxpayer’s excess of the amount due the government may be
basic tax liabilities. refunded, provided that a taxpayer properly applies for the
A surcharge regardless of how it is computed is refund. On the other hand, the second option works by
already a deterrent. While it is true that imposing a higher applying the refundable amount against the tax liabilities of
amount may be a more effective deterrent, it cannot be done the petitioner in the succeeding taxable years. Hence,
in violation of law and in such a way as to make it instead of moving for the issuance of a writ of execution
confiscatory. (National Power Corporation v. City of Cabanatuan, relative to the aforesaid decision, petitioner should have
etc., G.R. No. 177332, October 01, 2014) merely requested for the approval of the City of Manila in
implementing the tax refund or tax credit, whichever is
e) Authority of treasurer in collection and appropriate. In other words, no writ was necessary to cause
inspection of books the execution thereof, since the implementation of the tax
refund will effectively be a return of funds by the City of
8. Taxpayer’s remedies Manila in favor of petitioner while a tax credit will merely
serve as a deduction of petitioner’s tax liabilities in the
future. (Coca-Cola Bottlers Philippines, Inc. v. City of Manila, et al.,
a) Periods of assessment and collection of local G.R. No. 197561, April 7, 2014)
taxes, fees or charges (b) Procedure for tax sales strictly
observed. There could be no presumption of the
b) Protest of assessment regularity of any administrative action which resulted
in depriving a taxpayer of his property through a tax
c) Claim for refund of tax credit for erroneously sale. This is an exception to the rule that
or illegally collected tax, fee or charge administrative proceedings are presumed to be
regular. This jurisprudential tenor clearly demonstrates
(i) No automatic offsetting between excess that the burden to prove compliance with the validity of
payments with tax liability. The absolute freedom that the the proceedings leading up to the tax delinquency sale
taxpayer seeks to automatically credit tax payments against is incumbent upon the buyer or the winning bidder,
tax liabilities for a succeeding taxable year, can easily give which, in this case, is Agojo. This is premised on the
rise to confusion and abuse, depriving the government of rule that a sale of land for tax delinquency is in
authority and control over the manner by which the taxpayers derogation of property and due process rights of the
credit and offset their tax liabilities, not to mention the registered owner. In order to be valid, the steps
resultant loss of revenue to the government under such a required by law must be strictly followed. Agojo must
18
be reminded that the requirements for a tax Province of Cebu.” Upon its creation, petitioner enjoyed
delinquency sale under the LGC are mandatory. Strict exemption from realty taxes.
adherence to the statutes governing tax sales is On September 11, 1996, however, the Supreme Court
imperative not only for the protection of the taxpayers, rendered a decision in Mactan-Cebu International Airport
but also to allay any possible suspicion of collusion Authority v. Marcos (the 1996 MCIAA case) declaring that
between the buyer and the public officials called upon upon the effectivity of Republic Act No. 7160 (The Local
to enforce the laws. (Corporate Strategies Development Government Code of 1991), MCIAA was no longer exempt
Corp., et al., v. Agojo, G.R. No. 208740, November 19, from real estate taxes. As a result, Cebu City demanded from
2014) MCIAA the payment of real property taxes. MCIAA paid
some of the demanded real [property taxes but refused to
(ii) Judicial action pay some more because of the Department of Justice
opinion that it is exempt. Cebu City , through its City
B. Real property taxation Treasurer, then issued Notices of Levy on 18 sets of real
properties of MCIAA after which the properties were sold at
1. Fundamental principles public auction. The properties were forfeited in favor of the
Cebu City because of the absence of bidders. The
corresponding Certificates of Sale of Delinquent Property
2. Nature of real property tax were issued to Cebu City.
Is MCIAA subject to real property taxes ? Explain.
a) The special education fund may be set below 1%. SUGGESTED ANSWER: No. MCIAA is an
Setting the rate of the additional levy for the special education fund instrumentality of the government; thus, its properties
at less than 1% is within the taxing power of local government actually, solely and exclusively used for public purposes,
units. consisting of the airport terminal building, airfield, runway,
It is consistent with the guiding constitutional principle of taxiway and the lots on which they are situated, are not
local autonomy. It was well within the power of the Sangguniang subject to real property tax and Cebu City is not justified in
Panlalawigan of Palawan to enact an ordinance providing for collecting taxes from MCIAA over said properties. (Mactan-
additional levy on real property tax for the special education fund at Cebu International Airport Authority (MCIAA) v. City of Lapu-Lapu,
the rate of 0.5% rather than at 1%. (Demaala v. Commission on Audit, et al., G.R. No. 181756, June 15, 2015)
etc., G.R. No. 199752, February 17, 2015)  (ii) PEZA and its lessees not subject to real
property taxation. PEZA is an instrumentality of the
3. Imposition of real property tax national government, that cannot be taxed by local
government units.
a) Power to levy real property tax Although a body corporate vested with some corporate
powers, the PEZA is not a government-owned or controlled
b) Exemption from real property tax corporation taxable for real property taxes. The PEZA's
predecessor, the EPZA, was declared non-profit in character
 (i) Mactan-Cebu International Airport Authority with all its revenues devoted for its development,
(MCIAA) is an instrumentality of the government exempt improvement, and maintenance. Consistent with this non-
from real property taxes. Mactan-Cebu International profit character, the EPZA was explicitly declared exempt
Airport Authority (MCIAA) was created by Congress on July from real property taxes under its charter.
31, 1990 under Republic Act No. 6958 to "undertake the Even the PEZA's lands and buildings whose beneficial
economical, efficient and effective control, management and use have been granted to other persons may not be taxed
supervision of the Mactan International Airport in the with real property taxes. The PEZA may only lease its lands
Province of Cebu and the Lahug Airport in Cebu City x x x and buildings to PEZA-registered economic zone enterprises
and such other airports as may be established in the and entities. These PEZA-registered enterprises and entities,
19
which operate within economic zones, are not subject to real (ii) Interests on unpaid real property tax
property taxes. (City of Lapu-Lapu v. Philippine Economic Zone (iii) Condonation of real property tax
Authority, G.R. No. 184203, November 26, 2014, and its e) Remedies of LGUs for collection of real
companion case)
property tax
4. Appraisal and assessment of real property tax (i) Issuance of notice of delinquency for
real property tax payment
a) Rule on appraisal of real property at fair (ii) Local government’s lien
market value (iii) Remedies in general
b) Declaration of real property (iv) Resale of real estate taken for taxes,
c) Listing of real property in assessment rolls fees or charges
d) Preparation of schedules of fair market value (v) Further levy until full payment of amount
(i) Authority of assessor to take evidence due
(ii) Amendment of schedule of fair market 6. Refund or credit of real property tax
value a) Payment under protest
e) Classes of real property b) Repayment of excessive collections
f) Actual use of property as basis of assessment
g) Assessment of real property 7. Taxpayer’s remedies
(i) Assessment levels
(ii) General revisions of assessments and a) Contesting an assessment of value of real
property classification property
(i) In case of an illegal assessment where the
(iii) Date of effectivity of assessment or
assessment was issued without authority, exhaustion of
reassessment administrative remedies is not necessary and the taxpayer
may directly resort to judicial action. The taxpayer shall file a
(iv) Assessment of property subject to back complaint for injunction before the Regional Trial Court to
taxes enjoin the local government unit from collecting real property
(v) Notification of new or revised taxes. The party unsatisfied with the decision of the Regional
assessment Trial Court shall file an appeal, not a petition for certiorari,
h) Appraisal and assessment of machinery before the Court of Tax Appeals, the complaint being a local
5. Collection of real property tax tax case decided by the Regional Trial Court. The appeal
a) Date of accrual of real property tax and shall be filed within fifteen (15) days from notice of the trial
court’s decision. In this case, the petition for injunction filed
special levies before the Regional Trial Court of Pasay was a local tax case
b) Collection of tax originally decided by the trial court in its original jurisdiction.
(i) Collecting authority Since the PEZA assailed a judgment, not an interlocutory
(ii) Duty of assessor to furnish local order, of the Regional Trial Court, the PEZA’s proper remedy
treasurer with assessment rolls was an appeal to the Court of Tax Appeals. ( City of Lapu-Lapu
(iii) Notice of time for collection of tax v. Philippine Economic Zone Authority, and companion case, G.R.
c) Periods within which to collect real property No. 184203, G.R. NO. 187583, November 26, 2014)
(ii) Three (3) modes of appeal from RTC
tax
decisions. Under the Rules of Court, there are three modes
d) Special rules on payment of appeal from Regional Trial Court decisions.
(i) Payment of real property tax in 1) The first mode is through an ordinary
installments appeal before the Court of Appeals where the decision
20
assailed was rendered in the exercise of the Regional (i) Appeal to the Local Board of
Trial Court’s original jurisdiction. Ordinary appeals are Assessment Appeals
governed by Rule 41, Sections 3 to 13 of the Rules of (ii) Appeal to the Central Board of
Court. In ordinary appeals, questions of fact or mixed Assessment Appeals
questions of fact and law may be raised. [City of Lapu-
Lapu v. Philippine Economic Zone Authority, G.R. No. (iii) Effect of payment of tax
184203, November 26, 2014, and its companion case citing b. Payment of real property tax under protest
Rules of Court, Rule 41, Sec. 2 (a)] (i) File protest with local treasurer
2) The second mode is through a petition for (ii) Appeal to the Local Board of
review before the Court of Appeals where the decision Assessment Appeals
assailed was rendered by the Regional Trial Court in (iii) Appeal to the Central Board of
the exercise of its appellate jurisdiction. Rule 42 of the
Assessment Appeals
Rules of Court governs petitions for review before the
Court of Appeals. In petitions for review under Rule 42,
questions of fact, of law, or mixed questions of fact (iv) Appeal to the CTA
and law may be raised. [City of Lapu-Lapu, supra citing
Rules of Court, Rule 41, Sec. 2(b)] (a) Appeals from decisions of the Central
3) The third mode is through an appeal by Board of Assessment Appeals. In fine, if a taxpayer is
certiorari before this court under Rule 45 where only not satisfied with the decision of the CBAA or the RTC,
questions of law shall be raised. [City of Lapu-Lapu, as the case may be, the taxpayer may file, within thirty
supra citing Rules of Court, Rule 41, Sec. 2(c)] (30) days from receipt of the assailed decision, a
(iii) When a refund case is a question of law and petition for review with the CTA pursuant to Section
when a question of fact. The proper interpretation of the 7(a) of R.A. 9282. In cases where the question
provisions on tax refund that does not call for an examination involves the amount of the tax or the correctness
of the probative value of the evidence presented by the thereof, the appeal will be pursuant to Section 7(a)(5)
parties-litigants is a question of law. [Fortune Tobacco of R.A. 9282. When the appeal comes from a judicial
Corporation v. Commissioner of Internal Revenue, G. R. No. remedy which questions the authority of the local
192024, July 1, 2015 citing Crisolo v. CA, 160-A Phil. 1085, 1091- government to impose the tax, Section 7(a)(3) of R.A.
1092 (1975)]. 9282 applies. Thereafter, such decision, ruling or
Conversely, it may be said that if the appeal resolution may be further reviewed by the CT A En
essentially calls for the re-examination of the probative value Banc pursuant to Section 2, Rule 4 of the Revised
of the evidence presented by the appellant, the same raises Rules of the CTA. (National Power Corporation v.
a question of fact. Municipal Government of Navotas, et al., G.R. No. 192300,
Often repeated is the distinction that there is a November 24, 2014)
question of law in a given case when doubt or difference (b) Disposition of improper appeals fled
arises as to what the law is on a certain state of facts; there is with the Court of Appeals. An improper appeal
a question of fact when doubt or difference arises as to the before the Court of Appeals is dismissed outright and
truth or falsehood of alleged facts. [Fortune Tobacco shall not be referred to the proper court.
Corporation, supra citing Atlas Consolidated Mining and An appeal erroneously taken to the Court of
Development Corporation v. CIR, 551 Phil. 519, 559 (2007)]. Appeals shall not be transferred to the appropriate
Verily, the sufficiency of a claimant’s evidence and the court but shall be dismissed outright.
determination of the amount of refund are questions of fact An appeal under Rule 41 taken from the
[Fortune Tobacco Corporation, supra citing Commissioner of Regional Trial Court to the Court of Appeals raising
Internal Revenue v. Manila Electric Company, 561 Phil. 500, 511
only questions of law shall be dismissed, issues purely
(2007)] which are for the judicious determination by the CTA
of law not being reviewable by said court. Similarly, an
of the evidence on record. appeal by notice of appeal instead of by petition for
21
review from the appellate judgment of a Regional Trial more prudent cause of action for the court to excuse a
Court shall be dismissed. (City of Lapu-Lapu v. Philippine technical lapse and afford the parties a review of the
Economic Zone Authority, G.R. No. 184203, November 26, case to attain the ends of justice, rather than dispose
2014, and its companion case citing Rules of Court, Rule of the case on technicality and cause grave injustice to
50, Sec. 2) the parties, giving a false impression of speedy
disposal of cases while actually resulting in more
(v) Appeal to the Supreme Court delay, if not a miscarriage of justice.
Similar to Municipality of Pateros, we opt to
(a) Disposition of erroneous appeals by relax the rules in this case. The PEZA operates or
certiorari filed directly with the Supreme Court. otherwise administers special economic zones all over
With respect to appeals by certiorari directly filed the country. Resolving the substantive issue of
before the Supreme Court but which raise questions whether the PEZA is taxable for real property taxes will
of fact, paragraph 4(b) of Circular No. 2-90 dated clarify the taxing powers of all local government units
March 9, 1990 states that this court "retains the option, where special economic zones are operated. This
in the exercise of its sound discretion and considering case, therefore, should be decided on the merits. (City
the attendant circumstances, either itself to take of Lapu-Lapu v. Philippine Economic Zone Authority, G.R.
cognizance of and decide such issues or to refer them No. 184203, November 26, 2014, and its companion case)
to the Court of Appeals for determination."
The Supreme Court once said that, "cannot IV. TARIFF AND CUSTOMS CODE OF 1978,
tolerate ignorance of the law on appeals." [Indoyon, Jr.
v. Court of Appeals, G.R. No. 193706, March 12, 2013, 693
as amended
SCRA 201, 207 [Per C.J. Sereno, En Banc in turn citing
citing Ybañez v. Court of Appeals, 323 Phil. 643 (1996) [Per A. Tariff and duties, defined. "Customs duties" is "the
J. Francisco, Third Division] cited in City of Lapu-Lapu v. name given to taxes on the importation and exportation of
Philippine Economic Zone Authority, G.R. No. 184203, commodities, the tariff or tax assessed upon merchandise imported
November 26, 2014, and its companion case] The from, or exported to, a foreign country. (Nestle Philippines, Inc. v.
Supreme Court went on further to say t is not the Court of Appeals, G.R. No. 134114, July 06, 2001)
court’s task to determine for litigants their proper
remedies under the Rules. (Id. at 207–208) B. General rule: all imported articles are subject to
(b) Despite wrong appeal, the Supreme duty
Court considering the important questions
involved may take cognizance of a petition for 1. Importation by the government taxable
review on certiorari in the interest of justice. While
it is true that rules of procedure are intended to
promote rather than frustrate the ends of justice, and
C. Purpose for imposition. The government imposes tariff
while the swift unclogging of the dockets of the courts or customs duties on articles that are imported into or exported
is a laudable objective, it nevertheless must not be from the Philippines for the following reasons:
met at the expense of substantial justice. a. Main purpose. Revenue raising: to raise revenues for
The Court has allowed some meritorious cases the support of the government;
to proceed despite inherent procedural defects and b. Secondary purposes: Protective purposes.
lapses. This is in keeping with the principle that rules 1) To protect local customers and domestic
of procedure are mere tools designed to facilitate the manufacturers, as well as Philippine products from undue
attainment of justice, and that strict and rigid competition posed by foreign made products.
application of rules which should result in technicalities 2) They may likewise be imposed to protect
that tend to frustrate rather than promote substantial domestic industries and producers from increased imports
justice must always be avoided. It is a far better and which inflict or could inflict serious injury on them.
22
transfer of the articles to the exporting vessel or
D. Flexible tariff clause. Customs duties may be increased, aircraft;
reduced or even removed by the President of the Philippines (c) the imported articles are directly
for the purpose of protecting consumers. The standard “in the transferred from the vessel or aircraft designated as
interest of the national economy, general welfare and/or national a constructive warehouse to the exporting vessel or
security” within which the President may exercise the authority aircraft and
under Sec. 401 of the Tariff and Customs Code is not limited to the (d) an irrevocable domestic letter of credit,
“protection of local industries” but may also include the “protection bank guaranty or bond in an amount equal to the
of the consumer” who after all constitute the very great bulk of the ascertained duties, taxes and other charges is
population. submitted to the Collector (unless it appears in the
Custom duties are very much likely taxes which are imposed bill of lading, invoice, manifest or satisfactory
for both revenue raising and for regulatory purposes. (Garcia v. evidence that the articles are destined for
Executive Secretary, et al., 211 SCRA 227) transshipment). (Commissioner of Customs v. Court of
Tax Appeals, G.R. Nos. 171516-17, February 13, 2009)
E. Requirements of importation b) When importation is terminated. Importation is
terminated only upon the payment of duties, taxes and other
1. Beginning and ending of importation charges upon the articles, or secured to be paid, at the port of entry
and the legal permit for withdrawal shall have been granted.
a) When importation begins. Section 1202 of Payment of the duties, taxes, fees and other charges must be in
the Tariff and Customs Code provides that importation begins full. (Papa v. Mago, G.R. No. L-27360, February 28, 1968)
when the carrying vessel or aircraft enters the jurisdiction of
the Philippines with intention to unload therein. It is clear 2. Obligations of importer
from the provision of the law that mere intent to unload is
sufficient to commence an importation and "intent," being a a) Cargo manifest
state of mind, is rarely susceptible of direct proof, but must
ordinarily be inferred from the facts, and therefore can only b) Import entry
be proved by unguarded, expressions, conduct and
circumstances generally. (Feeder International Line, Pte., Ltd. v. (i) Entry, defined. The term "entry" in Customs
Court of Appeals, G.R. No. 94262, May 31, 1991) law has a triple meaning. It means (1) the documents filed at
(i) Exception to the above rule. Under the Customs house; (2) the submission and acceptance of
Section 1202 of the TCCP, importation takes place the documents; and (3) the procedure of passing goods
when merchandise is brought into the customs through the Customs house. (Jardeleza v. People, G.R. No.
territory of the Philippines with the intention of 165265, February 06, 2006)
unloading the same at port. An exception to this rule
is transit cargo entered for immediate exportation c) Declaration of correct weight or value
which may be allowed under Section 2103 of the d) Liability for payment of duties
TCCP when the following concur:
(a) there is a clear intent to export e) Liquidation of duties. A liquidation is the final
the article as shown in the bill of lading, computation and ascertainment by the collector of the duties on
invoice, cargo manifest or other satisfactory imported merchandise, based on official reports as to the quantity,
evidence; character, and value thereof, and the collector’s own finding as to
(b) the Collector must designate the vessel the applicable rate of duty; it is akin to an assessment of internal
or aircraft wherein the articles are laden as a revenue taxes under the National Internal Revenue Code where the
constructive warehouse to facilitate the direct tax liability of the taxpayer is definitely determined. (Pilipinas Shell
23
Petroleum Corporation v. Commissioner of Customs, G. R. No. 176380,
June 18, 2009) 2. Other fraudulent practices
f) Keeping of records a) Fraudulent practices against customs
revenue. Sec. 3602 enumerates the various fraudulent
F. Importation in violation of the tariff and customs practices against customs revenue, such as the entry of
code imported or exported articles by means of any false or
fraudulent invoice, statement or practice; the entry of goods
1. Smuggling. at less than the true weight or measure; or the filing of any
false or fraudulent entry for the payment of drawback or
a) Concept of Sec. 3601. Section 3601 of the refund of duties. [Bureau of Customs v. The Honorable
TCC was designed to supplement the existing provisions of Devanadera, etc., et al., G.R. No. 193253, September 8, 2015)
citing Jardeleza v. People, 517 Phil. 179 at 201-203, (2006)]
the TCC against the means leading up to smuggling, which
might render it beneficial by a substantive and criminal b) Fraud under the customs laws. The fraud
statement separately providing for the punishment of contemplated by law must be intentional fraud, consisting of
smuggling. The law was intended not to merge into one and deception, willfully and deliberately dared or resorted to in
the same offense all the many acts which are classified and order to give up some right. The offender must have acted
punished by different penalties, penal or administrative, but knowingly and with the specific intent to deceive for the
to legislate against the overt act of smuggling itself. purpose of causing financial loss to another; even false
This is manifested by the use of the words representations or statements or omissions of material facts
“fraudulently” and “contrary to law” in the law. Smuggling is come within fraudulent intent.
committed by any person who: (1) fraudulently imports or The fraud envisaged in the law includes the
brings into the Philippines any article contrary to law; (2) suppression of a material fact which a party is bound in good
assists in so doing any article contrary to law; or (3) receives, faith to disclose. Fraudulent nondisclosure and fraudulent
conceals, buys, sells or in any manner facilitate the concealment are of the same genre.
transportation, concealment or sale of such goods after Fraudulent concealment presupposes a duty to
importation, knowing the same to have been imported disclose the truth and that disclosure was not made when
contrary to law. opportunity to speak and inform was present, and that the
The phrase “contrary to law” in Section 3601 qualifies party to whom the duty of disclosure as to a material fact was
the phrases “imports or brings into the Philippines” and due was thereby induced to act to his injury. Fraud is not
“assists in so doing,” and not the word “article.” The law confined to words or positive assertions; it may consist as
penalizes the importation of any merchandise in any manner well of deeds, acts or artifice of a nature calculated to
contrary to law. mislead another and thus allow one to obtain an undue
The word “law” includes regulations having the force advantage. [Bureau of Customs v. The Honorable Devanadera,
etc., et al., G.R. No. 193253, September 8, 2015) citing Jardeleza
and effect of law, meaning substantive or legislative type v. People, 517 Phil. 179 at 201-203, (2006)]
rules as opposed to general statements of policy or rules of
agency, organization, procedures or positions. An inherent
G. Classification of goods
characteristic of a substantive rule is one affecting individual
rights and obligations; the regulation must have been
promulgated pursuant to a congressional grant of quasi- 1. Taxable importation
legislative authority; the regulation must have been
promulgated in conformity to with congressionally-imposed 2. Prohibited importation
procedural requisites. [Jardeleza v. People, 517 Phil. 179 (2006)]
cited in Bureau of Customs v. The Honorable Devanadera, etc., et a) Disposition of prohibited imports. Prohibited
al., G.R. No. 193253, September 8, 2015)] importations are subject to forfeiture whether the importation
24
is direct or indirect such as when the shipper and the a) Dumping duties
consignee are one and the same person. (Paterok v. Bureau of b) Countervailing duties
Customs, G.R. Nos. 90660-61, January 21, 1991) c) Marking duties
Although the illegally imported articles may not be
d) Retaliatory/discriminatory duties
absolutely prohibited, but only qualifiedly prohibited under
Sec. 102 (K) of the Tariff and Customs Code, for it may be
imported subject to certain conditions, it is nonetheless e) Safeguard
prohibited and is a contraband (Comm. of Customs vs. CTA
& Dichoco, L-33471, Jan. 31, 1972), and the legal effects of (i) Safeguard measures, defined. These are
the importation of qualifiedly prohibited articles are the same the emergency measures, including tariffs, to protect
as those of absolutely prohibited articles. (Auyong Hian v. CTA, domestic industries and producers from increased imports
G.R. No. L-28782, September 12, 1974) which inflict or could inflict serious injury on them. [ Southern
Cross Cement Corporation v. Cement Manufacturers Association of
the Philippines, et al., G.R. No. 158540, August 3, 2005 citing
3. Conditionally-free importation Tanada v. Angara, 338 Phil. 546, 556; 272 SCRA 18, 40 (1997),
note 2at p. 69]
H. Classification of duties Other safeguard measures may include tariff rate
quotas or quantitative restrictions on the importation of a
1. Ordinary/regular duties product into the country.
(ii) Authority to impose safeguard measures.
a) Ad valorem; methods of valuation Secretary of Agriculture, if the article in question is an
agricultural product; or the Secretary of Trade and Industry, if
(i) Transaction value the article is a non-agricultural product who “shall apply a
(ii) Transaction value of identical goods general safeguard measure upon, and only upon, a positive
(iii) Transaction value of similar goods final determination of the Tariff Commission.” (Sec. 5, Rep.
Act No. 8800 cited in Southern Cross Cement Corporation v.
(iv) Deductive value Cement Manufacturers Association of the Philippines, et al., G.R.
(v) Computed value No. 158540, August 3, 2005)
(vi) Fallback value Congress has designated the Tariff Commission as its
agent in the determination of whether to impose safeguard
b) Specific measures and the Secretaries could act only in the light of
such determination. (Southern Cross Cement Corporation,
supra)
2. Special duties. Rationale or purpose for imposing the
special customs duties. The special customs duties are imposed
for the protection of consumers and manufacturers, as well as I. Remedies
Philippine products from undue competition posed by foreign made
products. (These special customs duties are provided for under the 1. Government
Tariff and Customs Code and include anti-dumping duties, the
countervailing duties, the marking duty and the discriminatory duties.) a) Administrative/extrajudicial
They may likewise be imposed to protect domestic industries
and producers from increased imports which inflict or could inflict
(i) Search, seizure, forfeiture, arrest
serious injury on them. (These special customs duties include the
additional tariffs imposed as safeguard measures under the Safeguard
Measures Act, Southern Cross Cement Corporation v. Cement  (a) Nature of seizure and forfeiture
Manufacturers Association of the Philippines, et al., G.R. No. 158540, proceedings. It is quite clear that seizure and
August 3, 2005 the motion for reconsideration) forfeiture proceedings under the tariff and customs
laws are not criminal in nature as they do not result in
25
the conviction of the offender nor in the declaration, affidavit, invoice, letter or paper;
imposition of the penalty provided for in section and (c) an intention on the part of the
3601 of the Code. As can be gleaned from Section importer/consignee to evade the payment of
2533 of the code, seizure proceedings, such as those the duties due. (Republic v. CTA, G.R. No.
instituted in this case, are purely civil and 139050, October 02, 2001)
administrative in character, the main purpose of which (iii) Fraud must be present in
is to enforce the administrative fines or forfeiture forfeiture. To support forfeiture, there must
incident to unlawful importation of goods or their be fraud on the part of the importer to evade
deliberate possession. (People v. Court of First Instance payment of the duties due. Fraud is never
of Rizal, G.R. No. L-41686, November 17, 1980) presumed. It must be proved. Failure of fraud
A forfeiture proceeding is in the nature of a is a bar to forfeiture. (Farm Implement and
proceeding in rem, i.e., directed against the res or Machinery v. Com. Of Customs, G.R. No. L-22212,
imported articles and entails a determination of the August 30, 1968 citing Kasilag v. Rodriguez, 69
legality of their importation. In this proceeding, it is in Phil. 217, and other cases; The Commissioner of
Customs, et al., v. New Frontier Sugar Corporation,
legal contemplation the property itself which commits
G.R. No. 163055, June 11, 2014) REASON:
the violation and is treated as the offender, without
reference whatsoever to the character or conduct of Forfeiture is a harsh measure and should be
the owner. (Transglobe International, Inc. v. Court of resorted to, only with extra care. All doubts,
Appeals, G.R. No. 126634, January 25, 1999) therefore, should be resolved in favor of the
(i) Articles subject to forfeiture. taxpayer. (Rivera v. Mison, CTA Case No. 4479,
Dec. 24, 1993)
The Tariff and Customs law subjects to
forfeiture any article which is removed (iv) The fraud contemplated by law
contrary to law from any public or private must be actual not constructive. It must be
warehouse under customs supervision, or intentional fraud, consisting of deception
released irregularly from Customs custody. willfully and deliberately done or resorted to in
Before forfeiture proceedings are instituted the order to induce another to give up some right.
law requires the presence of probable cause; (Hon. Farolan, Jr. et c., v. Court of Tax Appeals, et
al., 217 SCRA 298; The Commissioner of Customs,
once established, the burden of proof is shifted et al., v. New Frontier Sugar Corporation, G.R. No.
to the claimant. (Carrara Marble Phil., Inc. v. 163055, June 11, 2014))
Commissioner of Customs, G.R. No. 129680, It must amount to intentional wrong-
September 01, 1999)
doing with the sole object of avoiding tax.
In order to warrant forfeiture, it is not (Aznar v. Court of Tax Appeals, 58 SCRA 543)
necessary that the vessel or aircraft must itself (v) Due process in seizure and
carry the contraband. There is nothing in the forfeiture cases. In administrative proceed-
law that so requires. (Llamado v. Commissioner ings, such as those before the BOC, technical
of Customs, G.R. No. L-28809, May 16, 1983)
rules of procedure and evidence are not
(ii) Requisites for forfeiture cases.
strictly applied and administrative due process
The requisites for the forfeiture of goods under
cannot be fully equated with due process in its
Section 2530(f), in relation to (1) (3-5), of the
strict judicial sense. The essence of due
Tariff and Customs Code are: (a) the wrongful
process is simply an opportunity to be heard
making by the owner, importer, exporter or
or, as applied to administrative proceedings,
consignee of any declaration or affidavit, or
an opportunity to explain one's side or an
the wrongful making or delivery by the same
opportunity to seek reconsideration of the
person of any invoice, letter or paper — all
action or ruling complained of. (El Greco Ship
touching on the importation or exportation of Manning and Management Corporation v.
merchandise; (b) the falsity of such
26
Commissioner of Customs, G.R. No. 177188, Bureau even in the absence of any warrant of
December 04, 2008) seizure or detention. (Papa v. Mago, G.R. No. L-
(vii) Shifting of burden of proof. 27360, February 28, 1968)
Once probable cause has been shown for the (ii) RTCs have no jurisdiction.
institution of forfeiture proceedings, the burden Regional trial courts are devoid of any
of proof is upon claimant to establish that he fell competence to pass upon the validity or
within the purview of the exception. The legal regularity of seizure and forfeiture proceedings
presumption in Section 5(j), Rule 131 of the conducted by the BOC and to enjoin or
Rules of Court and Article 541 of the Civil Code otherwise interfere with these
are of a general character and cannot prevail proceedings. Regional trial courts are precluded
over the specific provisions of the Tariff and from assuming cognizance over such matters
Customs Code. (Acting Commissioner. of Customs even through petitions for certiorari, prohibition
v. CTA, G.R. No. 62636, April 27, 1984) or mandamus. (Subic Bay Metropolitan Authority v.
(v) Criminal liability not settled Rodriguez, G.R. No. 160270, April 23, 2010)
through payment of fine. Settlement of the Even if the seizure by the Collector of
case by payment of the fine or redemption of Customs were illegal, which has yet to be
the forfeited property, prior to the filing of the proven, we have said that such act does not
criminal action, does not extinguish the deprive the Bureau of Customs of jurisdiction
offender's criminal liability under Section 3601 thereon. The allegations of petitioners regarding
of the Tariff and Customs Code. (People v. the propriety of the seizure should properly be
Desiderio, G.R. No. L-20805, November 29, 1965) ventilated before the Collector of Customs. (Jao
 (b) Exclusive jurisdiction of the v. Court of Appeals, G.R. No. 104604, 111223,
Bureau of Customs over seizure and forfeiture October 06, 1995)
proceedings. it is well settled that the Collector of (c) Illustrative cases:
Customs has exclusive jurisdiction over seizure and (i) NFSC is a Japan-based company
forfeiture proceedings, and regular courts cannot who sells raw sugar. However, NFSC was
interfere with his exercise thereof or stifle or put it at charged by violation of the Joint Order by the
naught. Commissioner Customs. The court ruled that
The Collector of Customs sitting in seizure and NFSC did not violate the order and such was in
forfeiture proceedings has exclusive jurisdiction to good faith. The Court ruled that the onus
hear and determine all questions touching on the probandi to establish the existence of fraud is
seizure and forfeiture of dutiable goods. Regional trial lodged with the Bureau of Customs which
courts are devoid of any competence to pass upon the ordered the forfeiture of the imported goods.
validity or regularity of seizure and forfeiture Fraud is never presumed. It must be proved.
proceedings conducted by the BOC and to enjoin or Failure of proof of fraud is a bar to forfeiture.
otherwise interfere with these proceedings. Regional The reason is that forfeitures are not favored in
trial courts are precluded from assuming cognizance law and equity. The fraud contemplated by law
over such matters even through petitions for certiorari, must be intentional fraud, consisting of
prohibition or mandamus. (Agriex Co., Ltd., v. Hon. deception willfully and deliberately done or
Villanueva, etc., G.R. No. 158150, September 10, 2014) resorted to in order to induce another to give up
(i) When customs acquire some right. Absent fraud, the Bureau of
jurisdiction. It is settled that the Bureau of Customs cannot forfeit the shipment in its favor.
Customs acquires exclusive jurisdiction over (The Commissioner of Customs, et al. v. New
imported goods for purposes of enforcing the Frontier Sugar Corporation, G.R. No. 163055, June
Customs laws, from the moment the goods are 11, 2014)
actually in possession and control of said
27
(ii) Agriex Co. foreign corporation taxes and duties. (Commissioner of Customs v. Oilink
alleges that the Bureau of Customs exclusive International Corporation, G.R. No. 161759, July 2, 2014)
original jurisdiction over actual and physical (b) CTA en banc should first review
possession of foreign shipments and thus RTC decision of division. Before the CTA En Banc could
has no jurisdiction over such. The court ruled take cognizance of the petition for review concerning a
that it is well settled that the Collector of case falling under its exclusive appellate jurisdiction,
Customs has exclusive jurisdiction over seizure the litigant must sufficiently show that it sought prior
and forfeiture proceedings, and regular courts reconsideration or moved for a new trial with the
cannot interfere with his exercise thereof or concerned CTA division. Procedural rules are not to be
stifle or put it at naught. The Collector of trifled with or be excused simply because their non-
Customs sitting in seizure and forfeiture compliance may have resulted in prejudicing a party's
proceedings has exclusive jurisdiction to hear substantive rights. (Commisioner of Customs v. Marina
and determine all questions touching on the Sales, Inc., G.R. No. 183868, November 22, 2010)
seizure and forfeiture of dutiable goods. (i) Supreme Court has no
Regional trial courts are devoid of any jurisdiction without CTA en banc’s decision.
competence to pass upon the validity or The Bureau of Customs (BOC) committed
regularity of seizure and forfeiture proceedings procedural missteps and the decision of the CTA
conducted by the BOC and to enjoin or division has become final. The Supreme Court
otherwise interfere with these proceedings. is without jurisdiction to review decisions
Regional trial courts are precluded from rendered by a division of the CTA but the
assuming cognizance over such matters even decision of the CTA en banc. Under Sec. 9 of
through petitions for certiorari, prohibition or RA 9282, a party affected by the ruling or
mandamus. (Agriex Co., Ltd., v. Hon. Villanueva, decision of a division of the CTA may file an MR
etc., et al., G.R. No. 158150, September 10, 2014) within 15 days. Sec. 11 of RA 9282 provides that
if the MR is denied, a petition for review is filed
b) Judicial with the CTA en banc. From an adverse ruling or
decision from the CTA en banc, the appeal by
(i) Rules on appeal including jurisdiction way of petition for review on certiorari under
Rule 45 is filed with the Supreme Court. Thus
(a) Exhaustion of administrative remedies the Supreme Court has no jurisdiction to review
not an iron-clad rule. The Commissioner of Customs the decision of a division of the CTA.
(Commissioner of Customs v. Gelmart Industries, 579
posits that only when the ensuing decision of the
SCRA 272)
Collector and then the adverse decision of the
(ii) CTA has no jurisdiction over
Commissioner of Customs would it be proper for Oilink
decisions of Collectors of Customs. It should
to seek judicial relief from the CTA. The Court ruled
be stressed that the CTA has no jurisdiction to
that the principle of non-exhaustion of administrative
review by appeal, decisions of the customs
remedies was not an iron-clad rule because there were
collector. [Commissioner of Internal Revenue v.
instances in which the immediate resort to judicial Court of Tax Appeals (Second Division), et al., G.R.
action was proper. As the records indicate, the No. 207843, July 15, 2015 with a note to see Lopez
Commissioner of Customs already decided to deny the & Sons, Inc. v. CTA, 100 Phil. 850, 856-857 (1957)]
protest by Oilink and stressed then that the demand to The TCC prescribes that a party
pay was final. In that instance, the exhaustion of adversely affected by a ruling or decision of the
administrative remedies would have been an exercise customs collector may protest such ruling or
in futility because it was already the Commissioner of decision upon payment of the amount due and,
Customs demanding the payment of the deficiency if aggrieved by the action of the customs
28
collector on the matter under protest, may have necessary to give justice to the parties. [Bureau of
the same reviewed by the COC. It is only after Customs, supra Villaflores v. Ram System Services, Inc.,
the COC shall have ruled on the matter that it 530 Phil. 749, 763 (2006)]
may be elevated to the Court of Tax Appeals. (e) Courts have jurisdiction to rule on
(Ibid.) validity of administrative issuances. “The
(c) Rationale for automatic review. determination of whether a specific rule or set of rules
Without the automatic review by the Commissioner of issued by an administrative agency contravenes the
Customs and the Secretary of Finance, a collector in law or the constitution is within the jurisdiction of the
any of our country's far-flung ports, would have regular courts. Indeed, the Constitution vests the
absolute and unbridled discretion to determine whether power of judicial review or the power to declare a law,
goods seized by him are locally produced, hence, not treaty, international or executive agreement,
dutiable, or of foreign origin, and therefore subject to presidential decree, order, instruction, ordinance, or
payment of customs duties and taxes. His decision, regulation in the courts, including the regional trial
unless appealed by the aggrieved party (the owner of courts. This is within the scope of judicial power, which
the goods), would become final with no one the wiser includes the authority of the courts to determine in an
except himself and the owner of the goods. (Yaokasin v. appropriate action the validity of the acts of the
Commissioner of Customs, G.R. No. 84111, December 22, political departments.” [Commissioner of Customs v.
1989) Hypermix Feeds Corporation , G.R. No. 179579, February 1,
(d) Courts may look into jurisdiction even 2012, 664 SCRA 666, 672, citing Smart Communications,
if not raised in the pleadings. Although the question Inc. v. National Telecommunications Commission, 456 Phil.
of jurisdiction over the subject matter was not raised at 145, 158-159 (2003) both cited in The Philippine American
Life and General Insurance Company v. The Secretary of
bench by either of the parties, the Court will first
Finance, et al., G.R. No. 210987 , November 24, 2014]
address such question before delving into the
(f) Illustrative case of an instance where
procedural and substantive issues of the instant
the Court of Appeals should have dismissed a tax
petition. After all, it is the duty of the courts to consider
case. A collection suit for unpaid taxes and customs
the question of jurisdiction before they look into other
duties in the aggregate amount of P46,844,385.00
matters involved in the case, even though such
filed by the Bureau of Customs (BOC) against
question is not raised by any of the parties. (Bureau of
Mitsubishi Motors Philippines Corporation (Mitsubishi)
Customs v. The Honorable Devanadera, etc., et al., G.R.
No. 193253, September 8, 2015 citing 20 Am. Jur. 2d, before the Regional Trial Court (RTC). It was alleged
Courts, §92, 1965) that from 1997 to 1998, Mitsubishi was able to secure
Courts are bound to take notice of the limits of tax credit certificates (TCCs) from various
their authority and, even if such question is neither transportation companies; after which, it made several
raised by the pleadings nor suggested by counsel, they importations and utilized said TCCs for the payment of
may recognize the want of jurisdiction and act various customs duties and taxes in the aggregate
accordingly by staying pleadings, dismissing the amount of P46,844,385.00. However, a post-audit
action, or otherwise noticing the defect, at any stage of investigation of the Department of Finance revealed
the proceedings. [Bureau of Customs, supra citing Ace that the TCCs were fraudulently secured with the use
Publications, Inc. v. Commissioner of Customs, 120 Phil. of fake commercial and bank documents. A demand to
143, 149 (1964), in turn citing 15 C.J. 852] pay the duties and taxes covered by the TCCs was
Besides, issues or errors not raised by the unavailing so the suit was filed.
parties may be resolved by the Court where, as in this Initially, the RTC dismissed the collection case
case, the issue is one of jurisdiction; it is necessary in due to the continuous absences of the BOC’s counsel
arriving at a just decision; and the resolution of the during trial. On appeal to the Court of Appeals (CA),
issues raised by the parties depend upon the the said case was reinstated and trial on the merits
determination of the unassigned issue or error, or is continued before the RTC.
29
A motion for Demurrer to Evidence was filed by instrumentality of the Government, in relation to
Mitsubishi which was granted. BOC’s motion for Section 5(5), Article VIII thereof, vesting upon it the
reconsideration was denied. power to promulgate rules concerning practice and
The BOC appealed the RTC decision to the CA. procedure in all courts, the Supreme Court thus
Instead of dismissing the appeal outright, the CA declared that the CA's original jurisdiction over a
referred the records of the collection case to the CTA petition for certiorari assailing the DOJ resolution in a
for proper disposition considering that the preliminary investigation involving tax and tariff
government stands to lose the amount of offenses was necessarily transferred to the CTA
P46,844,385.00 in taxes and customs duties which can pursuant to Section 7 of R.A. No. 9282, and that such
then be used for various public works and projects. petition shall be governed by Rule 65 of the Rules of
Was the CA correct in referring the records to Court, as amended. Accordingly, it is the CTA, not the
the CTA ? Explain with reasons. CA, which has jurisdiction over the petition for
SUGGESTED ANSWER: No. The CA was not certiorari assailing the DOJ resolution of dismissal of
correct. the BOC's complaint-affidavit against private
Sec. 7, Republic Act No. (RA) 1125, as respondents for violation of the TCCP. (Bureau of
amended by RA 9282 and Section 3, Rule 4 of the Customs v. The Honorable Devanadera, etc., et al., G.R.
Revised Rules of the Court of Tax Appeals, similarly No. 193253, September 8, 2015)
provide that The CTA shall exercise exclusive
appellate jurisdiction in tax collection cases over 2. Taxpayer
appeals from the judgments, resolutions or orders of
the Regional Trial Courts in tax collection cases a) Protest
originally decided by them in their respective territorial
jurisdiction. (i) When customs protest applicable. The
The CA has no jurisdiction over BOC’s appeal; requirement of a prior protest as an exclusive remedy in
hence, it cannot perform any action on the same protestable cases applies only to a situation, “whereby
except to order its dismissal pursuant to Section 2, liability for duties, taxes, fees and other charges are
Rule 50 of the Rules of Court. Therefore, the act of the determined.”
CA in referring BOC’s wrongful appeal before it to the This necessarily refers to a situation where a particular
CTA under the guise of furthering the interests of shipment has arrived and there is a dispute between the
substantial justice is blatantly erroneous, and thus, importer and the Collector as to the correct determination of
stands to be corrected. (Mitsubishi Motors Philippines duties, taxes, fees and other charges. That is why the law
Corporation v. Bureau of Customs, G.R. No. 209830, June requires the importer to file a protest, “at the time when
17, 2015) payment of the amount claimed to be due the government is
(g) The Court of Tax Appeals (CTA), not made or within fifteen (15) days thereafter. (Philippines
Court of Appeal (CA) has jurisdiction to review Phosphate Fertilizer Corporation v. Commissioner of Customs, CTA
through a petition for certiorari the DOJ Case No. 4994, August 4, 1995)
resolution in preliminary investigations involving (ii) No protest, no refund rule. The claim for
tax and tariff offenses. Concededly, there is no clear refund of customs duties in protestable cases may be
statement under R.A. No. 1125, the amendatory R.A. foreclosed by failure to file a written protest . (Nestle
No. 9282, let alone in the Constitution, that the CTA Philippines, Inc. v. Court of Appeals, 413 Phil. 106)
has original jurisdiction over a petition for certiorari.
By virtue of Section 1, Article VIII of the 1987 b) Abandonment
Constitution, vesting judicial power in the Supreme
Court and such lower courts as may be established by (i) Entry must be made within the
law, to determine whether or not there has been a reglementary period otherwise goods deemed
grave abuse of discretion on the part of any branch or abandoned. Both the Import Entry Declaration (IED)
30
and Import Entry and Internal Revenue Declaration
(IEIRD) should be filed within 30 days from the date of
discharge of the last package from the vessel or
aircraft (Chevron Philippines, Inc. v. Commr., G.R. No.
178759, August 11, 2008), otherwise deemed abandoned
and goods ipso facto becomes government property.
(R.V. Marzan Freight, Inc. v. Court of Appeals, et al., G. R.
No.128064, March 4, 2004)
(ii) Jurisdiction of District Collector of
Customs over abandonment proceedings which a
regular court could not exercise. A trial court is
incompetent to pass upon and nullify
(a) the seizure of the cargo in the
abandonment proceedings; and
(b) the declaration made by the District
Collector of Customs that the cargo was abandoned
and ipso facto owned by the government.
A trial court likewise has no jurisdiction to
resolve the issue of whether or not the importer was
the owner of the cargo before it was gutted by fire.
The District Collector of Customs did not lose
jurisdiction over the abandonment proceedings. The
loss of the cargo did not extinguish his incipient
jurisdiction in the said proceedings, nor render functus
officio his declaration that the subject shipment had
been abandoned. (R.V. Marzan Freight, Inc. v. Court of
Appeals, et al., G. R. No.128064, March 4, 2004)

c) Abatement and refund

ADVANCE CONGRATULATIONS
AND SEE YOU IN COURT