[G.R. No. L-9408.  October 31, 1956.
] Internal Revenue demanded from him the payment of the sum of
EMILIO Y. HILADO, Petitioner, vs. THE COLLECTOR OF
INTERNAL REVENUE and THE COURT OF TAX APPEALS,
Respondents.
FACTS:
1. Petitioner claimed in his 1951 income tax return the deduction
of the sum of P12,837.65 as a loss consisting in a portion of his
war damage claim which had been duly approved by the
Philippine War Damage Commission under the Philippine
Rehabilitation Act of 1946 but which was not paid and never
been paid pursuant to a notice served upon him by said
Commission that said part of his claim will not be paid until the
United States Congress should make further appropriation. He
claims that said amount of P12,837.65 represents a “business
asset” within the meaning of said Act which he is entitled to
deduct as a loss in his return for 1951.
2. March 31, 1952- Petitioner filed his income tax return for 1951
with the treasurer of Bacolod City wherein he claimed the
amount of P12,837.65 as a deductible item from his gross
income pursuant to General Circular No. V-123 issued by the
Collector of Internal Revenue. This circular was issued pursuant
to certain rules laid down by the Secretary of Finance
3. An assessment notice demanding the payment of P9,419 was
sent to Petitioner, who paid the tax in monthly installments, the
last payment having been made on January 2, 1953
4. August 30, 1952- the Secretary of Finance, through the Collector
of Internal Revenue, issued General Circular No. V-139, which
not only revoked and declared void his general Circular No. V-
123 but laid down the rule that losses of property which
occurred during the period of World War II from fires, storms,
shipwreck or other casualty, or from robbery, theft, or
embezzlement are deductible in the year of actual loss or
destruction of said property.
5. The amount of P12,837.65 was disallowed as a deduction from
the gross income of Petitioner for 1951 and the Collector of
P3,546 as deficiency income tax for said year.
6. When the petition for reconsideration filed by Petitioner was
denied, he filed a petition for review with the Court of Tax
Appeals. In due time, this court rendered decision affirming the
assessment made by Respondent Collector of Internal Revenue.
This is an appeal from said decision
ISSUE #1: Whether or not claim for losses of property during the war
period for the year 1950 may be deducted from the income tax of the
petitioner for 1951 as declared in the circular issued by the Secretary of
Finance
HELD. NO.
A. First, assuming that said amount represents a portion of the 75%
of his war damage claim which was not paid, the same would
not be deductible as a loss in 1951 because the last installment
he received from the War Damage Commission, together with
the notice that no further payment would be made on his claim,
was in 1950. In the circumstance, said amount would at most be
a proper deduction from his 1950 gross income.
B. Said amount cannot be considered as a “business asset” which
can be deducted as a loss in contemplation of law because its
collection is not enforceable as a matter of right, but is
dependent merely upon the generosity and magnanimity of the
U. S. government. There was absolutely no law under which
Petitioner could claim compensation for the destruction of his
properties during the battle for the liberation of the Philippines.
The payments of claims by the War Damage Commission
merely depended upon its discretion to be exercised in the
manner it may see fit, but the non-payment of which cannot give
rise to any enforceable right,
a. The Philippine Rehabilitation Act which authorized the
payment by the United States Government of war losses
suffered by property owners in the Philippines was
passed only on August 30, 1946, long after the losses
were sustained. It cannot be said therefore, that the
property owners had any conclusive assurance during
the years said losses were sustained, that the
compensation was to be paid therefor. As diligent
 property owners, they should adopt the safest alternative
by considering such losses deductible during the year
when they were sustained
C. Petitioner’s contention that during the last war and as a
consequence of enemy occupation in the Philippines “there was
no taxable year” within the meaning of our internal revenue laws
because during that period they were unenforceable, is without
merit. It is well known that our internal revenue laws are not
political in nature and as such were continued in force
during the period of enemy occupation and in effect were
actually enforced by the occupation government. As a matter
of fact, income tax returns were filed during that period and
income tax payment were effected and considered valid and
legal. Such tax laws are deemed to be the laws of the
occupied territory and not of the occupying enemy.
a. ‘Law once established continues until changed by
some competent legislative power. It is not changed
merely by change of sovereignty. ‘There can be no
break or interregnun in law. From the time the law
comes into existence with the first-felt corporateness of
a primitive people it must last until the final
disappearance of human society. Once created, it
persists until a change takes place, and when changed it
continues in such changed condition until the next
change and so forever. Conquest or colonization is
impotent to bring law to an end; inspite of change of
constitution, the law continues unchanged until the new
sovereign by legislative act creates a change.’“
b. “Conquest or colonization is impotent to bring law to
an end; in spite of changes of constitution, the law
continues unchanged until the new sovereign by
legislative act creates a change”
ISSUE #2: Whether or not General Circular No. V-139 cannot be given
retroactive effect because that would affect and obliterate the vested
right acquired by Petitioner under the previous circular
HELD: NO. General Circular No. V-123, having been issued on a wrong
construction of the law, cannot give rise to a vested right that can be
invoked by a taxpayer. The reason is obvious; a vested right cannot
spring from a wrong interpretation. This is too clear to require
elaboration.
Wherefore, the decision appealed from is affirmed Without
pronouncement as to costs.
ANTERO M. SISON, JR., petitioner, vs. RUBEN B. ANCHETA,
Acting Commissioner, Bureau of Internal Revenue
Facts:
• Petitioners challenged the constitutionality of Section 1 of
Batas Pambansa Blg. 135. It amended Section 21 of
the National Internal Revenue Code of 1977.
• Petitioner as taxpayer alleged that "he would be unduly
discriminated against by the imposition of higher rates of tax
upon his income arising from the exercise of his profession vis-
a-vis those which are imposed upon   fixed income   or
salaried   individual   taxpayers." He characterizes the above
section as arbitrary amounting to class legislation, oppressive
and capricious in character.
• For petitioner, therefore, there is a transgression of both
the   equal protection   and   due process clauses of   the
Constitution   as well as of the rule requiring   uniformity   in
taxation.
• The OSG prayed for dismissal of the petition due to lack of
merit.
Issue: WON the assailed provision violates the equal
protection and due process clause of the Constitution while also
violating the rule that taxes must be uniform and equitable.
Held: Negative. The petition is without merit.
• The SC ruled against Sison. 
• The power to tax, an inherent prerogative, has to be availed of to
assure the performance of vital state functions. It is the source of
 the bulk of public funds. To paraphrase a recent decision, taxes
being the lifeblood of the government, their prompt and certain
availability is of the essence.
• On due process: it is undoubted that it may be invoked where a
taxing statute is so arbitrary that it finds no support in the
Constitution. An obvious example is where it can be shown to
amount to the confiscation of property from abuse of power.
Petitioner alleges arbitrariness but his mere allegation does not
suffice and there must be a factual foundation of such
unconstitutional taint.
• On equal protection: it is suffices that the laws operate equally
and uniformly on all persons under similar circumstances, both
in the privileges conferred and the liabilities imposed.
• On the matter that the rule of taxation shall be uniform and
equitable- this requirement is met when the tax operates with
the same force and effect in every place where the subject
may be found.
• “Also, the rule of uniformity does not call for perfect uniformity
or perfect equality, because this is hardly attainable.”
• "Equality and uniformity in taxation means that all taxable
articles or kinds of property of the same class shall be taxed at
the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation.”
• The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation. Where “the
differentiation” complained of “conforms to the practical
dictates of justice and equity” it “is not discriminatory within the
meaning of this clause and is therefore uniform.” There is quite a
similarity then to the standard of equal protection for all that is
required is that the tax “applies equally to all persons, firms and
corporations placed in similar situation.
• WHEREFORE, the petition is dismissed. Costs against
petitioner.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
MANUEL B. PINEDA, as one of the heirs of deceased
ATANASIO PINEDA, respondent.
G.R. No. L-22734 September 15, 1967; BENGZON, J.P., J
Facts:
Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and
15 children, the eldest of whom is Manuel B. Pineda, a lawyer.
The estate was divided among the heirs and Manuel B. Pineda's
share amounted to about P2,500.00. After the estate proceedings
were closed, the BIR investigated the income tax liability of the
estate for the years 1945, 1946, 1947 and 1948 and it found that
the corresponding income tax returns were not filed. The
representative of the Collector of Internal Revenue filed said
returns for the estate and issued an assessment. Manuel B.
Pineda, who received the assessment, contested the same. He
appealed to the Court of Tax Appeals alleging that he was
appealing "only that proportionate part or portion pertaining to
him as one of the heirs." The Court of Tax Appeals rendered
judgment holding Manuel B. Pineda liable for the payment
corresponding to his share of the taxes. The Commissioner of
Internal Revenue has appealed to the SC and has proposed to
hold Manuel B. Pineda liable for the payment of all the taxes
found by the Tax Court to be due from the estate instead of only
for the amount of taxes corresponding to his share in the estate.
Manuel B. Pineda opposes the proposition on the ground that as
an heir he is liable for unpaid income tax due the estate only up
to the extent of and in proportion to any share he received.
Issue: Can BIR collect the full amount of estate taxes from an heir's
inheritance
Ruling:
Yes. The Government can require Atty. Pineda to pay the full
amount of the taxes assessed. Pineda is liable for the assessment
as an heir and as a holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually answerable for the
part of the tax proportionate to the share he received from the
inheritance. His liability, however, cannot exceed the amount of
his share. As a holder of property belonging to the estate,
Pineda is liable for he tax up to the amount of the property in his
possession. The reason is that the Government has a lien on the
 P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes a for which said estate is
liable.
All told, the Government has two ways of collecting the tax in
question. One, by going after all the heirs and collecting from
each one of them the amount of the tax proportionate to the
inheritance received. Another remedy, is by subjecting said
property of the estate which is in the hands of an heir or
transferee to the payment of the tax due, the estate. This second
remedy is the very avenue the Government took in this case to
collect the tax. The Bureau of Internal Revenue should be given,
in instances like the case at bar, the necessary discretion to avail
itself of the most expeditious way to collect the tax as may be
envisioned in the particular provision of the Tax Code above
quoted, because taxes are the lifeblood of government and their
prompt and certain availability is an imperious need. And as
afore-stated in this case the suit seeks to achieve only one
objective: payment of the tax. The adjustment of the respective
shares due to the heirs from the inheritance, as lessened by the
tax, is left to await the suit for contribution by the heir from
whom the Government recovered said tax.
THE PHILIPPINE GUARANTY CO., INC., PETITIONER, VS.
THE COMMISSIONER OF INTERNAL REVENUE AND
THE COURT OF TAX APPEALS, RESPONDENTS;
G.R. No. L-22074, April 30, 1965; REYES, J.B.L., J
Facts:
The Philippine Guaranty Co., Inc., a domestic insurance company,
entered into reinsurance contracts with foreign insurance
companies not doing business in the Philippines, thereby ceding
to the foreign reinsurers a portion of the premiums on insurances
it has originally underwritten in the Philippines. Philippine
Guaranty Co., Inc. ceded to the foreign reinsurers the premiums
for 1953 and 1954. Said premiums were excluded by Philippine
Guaranty Co., Inc. from its gross income when it filed its income
tax returns for 1953 and 1951. Furthermore, it did not withhold
or pay tax on them. Consequently, the Commissioner of Internal
Revenue assessed Philippine Guaranty Co., Inc. against
withholding tax on the ceded reinsurance premiums. Philippine
Guaranty Co., Inc. protested the assessment on the ground that
the premiums are not subject to tax for the premiums did not
constitute income from sources within the Philippines because
the foreign reinsurers did not engage in business in the
Philippines,and CIR's previous rulings did not require insurance
companies to withhold income tax due from foreign companies.
ISSUE: Are insurance companies required to withhold tax on
reinsurance premiums ceded to foreign insurance companies?
Ruling:
Yes. The reinsurance contracts however show that the transactions or
activities that constituted the undertaking to reinsure Philippine
Guaranty Co., Inc. against losses arising from the original
insurances in the Philippines were performed in the Philippines.
The reinsurance premiums were income created from the
undertaking of the foreign reinsurance companies to reinsure
Philippine Guaranty Co., Inc. against liability for loss under
original insurances. Such undertaking, as explained above, took
place in the Philippines. These insurance premiums therefore
came from sources within the Philippines and, hence, are subject
to corporate income tax.
The power to lax is an attribute of sovereignty. It is a power
emanating from necessity. It is a necessary burden to preserve
the State's sovereignty and a means to give the citizenry an army
to resist an aggression, a navy to defend its shores from
invasion, a corps of civil servants to serve, public improvements
designed for the enjoyment of the citizenry and those which
come within the State's territory, and facilities and protection
which a government is supposed to provide. Considering that the
reinsurance premiums in question were afforded protection by
the government and the recipient foreign reinsurers exercised
rights and privileges guaranteed by our laws, such reinsurance
 premiums and reinsurers should share the burden of maintaining
the state.
C O M M I S S I O N E R O F I N T E R N A L R E V E N U E v.
ALGUE, INC.
17 Feb 1988 Cruz, J. G.R. No. L-28896
topic: “Taxation” and “tax” defined
summary: Commissioner alleged that a P75k deduction made by
Algue, supposedly paid for promotional fees, was actually a tax
dodge. SC held that Algue sufficiently discharged its burden of
proving that the deduction was valid.
nature: Appeal from the decision of the CTA which ruled in favor of
Algue, Inc.
FACTS:
• Algue, Inc. is a corporation engaged in engineering,
construction, and other allied activities.
• Jan. 14, 1965 – Algue received a letter from the
Commissioner assessing it with delinquency taxes from
1958-59, totaling P83,183.85. Algue filed a letter of protest/
request for consideration at the office of the Commissioner. It
was stamp-received on the same day.
o This was based on a P75,000 deduction made by
Algue, which the latter claims was paid for
promotional fees, from services rendered in the
creation of the Vegetable Oil Investment Corporation
of the Phils. and its subsequent purchase of the
properties of the Phil. Sugar Estate Development Co.
(for which Algue received a commission of
P125,000).
o The 5 payees of the P75,000 duly reported their
respective shares of the fees in their ITRs and paid the
corresponding taxes thereon. No distribution of
dividends was done.
• Mar. 12 – a warrant of distraint and levy was presented to
Algue’s counsel, Atty. Guevara, who refused to receive it
because of the pending protest. The protest could not be found
in the dockets. Atty. Guevara gave a photostat to BIR agent
Reyes, who deferred service of the warrant.
• Apr. 7 – Atty. Guevara was finally informed that the BIR was
not taking any action on the protest. He then accepted the
warrant.
• Apr. 23 (16 days later), Algue filed a petition for review with
the CTA.
COMMISSIONER ARGUES: The payments are fictitious because
most of the payees are members of the same family in control of
Algue. There was no indication was made as to how such payments
were made, whether by check or in cash, and there is not enough
substantiation of such payments. In short, this is a tax dodge, an
attempt to evade a legitimate assessment by invoking an imaginary
deduction.
[Procedural] W/N the appeal was seasonably filed ⇒YES.
• Under RA 1125, the appeal may be made within 30 days from
receipt of the challenged ruling.
• While a warrant of distraint and levy is proof of the finality of
the assessment, there is a special circumstance in the case at
bar: Algue filed a letter of protest, which was apparently not
taken into account before the warrant was issued.
• As the CTA correctly noted, the protest was not pro forma and
was based on strong legal considerations, thus it had the effect
of suspending the reglementary period.
[Substantive] W/N the P75,000 was properly deducted by Algue
⇒YES.
• Algue’s president and its accountant testified that the
payments were not made in lump sum, but periodically and in
different amounts as each payee’s need arose. This was a
family corporation; strict business procedures were not
applied, and the issuance of receipts was not required.
• Even so, at the end of the year, each payee made an
accounting of all the fees received, to make up the total of
P75,000. This amount for promotional fees is not excessive. It
was only 60% of the total commission; Algue still had a
balance of P50,000 as clear profit from the transaction.
• CTA’s finding is in accord with the following provisions:
o Tax Code, Sec. 30. Deductions from gross income. In
computing net income, there shall be allowed as
deductions: “All the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on
 any trade or business, including a reasonable allowance
for salaries or other compensation for personal services
actually rendered…”
o Revenue Regulations No. 2, Sec. 70(1): “Among the
ordinary and necessary expenses paid or incurred in
carrying on any trade or business may be included a
reasonable allowance for salaries or other compensation
for personal services actually rendered. The test of
deductibility in the case of compensation payments is
whether they are reasonable and are, in fact, payments
purely for service. This test and its practical application
may be further stated and illustrated as follows:
“Any amount paid in the form of compensation, but not
in fact as the purchase price of services, is not
deductible. (a) An ostensible salary paid by a
corporation may be a distribution of a dividend on stock.
This is likely to occur in the case of a corporation
having few stockholders, practically all of whom draw
salaries. If in such a case the salaries are in excess of
those ordinarily paid for similar services, and the
excessive payment correspond or bear a close
relationship to the stockholdings of the officers of
employees, it would seem likely that the salaries are not
paid wholly for services rendered, but the excessive
payments are a distribution of earnings upon the stock.”
• It is worth noting that most of the payees were not in the
regular employ of Algue, nor were they its controlling
stockholders.
• The burden is on the taxpayer to prove the validity of the
claimed deduction. In this case, the onus has been charged
satisfactorily. Algue has proved that the payment of the fees
was necessary and reasonable in the light of the efforts
exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise.
• Taxes are what we pay for civilized society. Without taxes,
the government would be paralyzed for lack of the motive
power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hardearned income to the
taxing authorities, every person who is able to must contribute
his share in the running of the government.
o The government, for its part, is expected to respond in
the form of tangible and intangible benefits intended
to improve the lives of the people and enhance their
moral and material values. This symbiotic
relationship is the rationale of taxation and should
dispel the erroneous notion that it is an arbitrary
method of exaction by those in the seat of power.
o Even as we concede the inevitability and
indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably
and in accordance with the prescribed procedure. If it
is not, then the taxpayer has a right to complain and
the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be
stopped in his tracks if the taxpayer can demonstrate,
as it has here, that the law has not been observed.
Opening statement of this ponencia: Taxes are the lifeblood of the
government and so should be collected without unnecessary
hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason
for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so
that the real purpose of taxation, which is the promotion of the
common good, may be achieved.
Lorenzo vs. Posadas
64 Phil 353
Facts:
On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will
and considerable amount of real and personal properties. Hanley’s
will provides the following: his money will be given to his nephew,
Matthew Hanley, as well as the real estate owned by him. It further
provided that the property will only be given ten years after Thomas
Hanley’s death. Thus, in the testamentary proceedings, the Court of
First Instance of Zamboanga appointed P.J.M. Moore as trustee of the
estate. Moore took oath of office on March 10, 1924, and resigned on
Feb. 29, 1932. Pablo Lorenzo was appointed in his stead. Juan
Posadas, Collector of Internal Revenue, assessed inheritance tax
against the estate amounting to P2,057.74 which includes penalty and
surcharge. He filed a motion in the testamentary proceedings so that
Lorenzo will be ordered to pay the amount due. Lorenzo paid the
amount in protest after CFI granted Posadas’ motion. He claimed that
the inheritance tax should have been assessed after 10 years. He asked
for a refund but Posadas declined to do so. The latter counterclaimed
for the additional amount of P1,191.27 which represents interest due
on the tax and which was not included in the original assessment.
However, CFI dismissed this counterclaim. It also denied Lorenzo’s
claim for refund against Posadas. Hence, both appealed.
ISSUES :Whether the estate was delinquent in paying the inheritance.
Whether the inheritance tax be computed from its value ten
years later.
HELD:
Yes. It was delinquent because according to Sec. 1544 (b) of the
Revised Administrative Code, payment of the inheritance tax shall be
made before delivering to each beneficiary his share. it does not
follow that the obligation to pay the tax arose as of the date. This
payment should have been made before March 10, 1924, the date
when P.J.M. Moore formally assumed the function of trustee.
Although the property was only to be given after 10 years from the
death of Hanley, the court considered that delivery to the trustee is
delivery to cestui que trust, the beneficiary within the meaning of Sec.
1544 (b).
**
SEC. 1543. Exemption of certain acquisitions and transmissions. —
The following shall not be taxed:
(b) The transmission or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the trustees.
**
SEC. 1544. When tax to be paid. — The tax fixed in this article shall
be paid:
(a) In the second and third cases of the next preceding section, before
entrance into possession of the property.
**
NO. The accrual of the inheritance tax is distinct from the obligation
to pay the same.
Acording to article 657 of the Civil Code, “the rights to the
succession of a person are transmitted from the moment of his death.”
“In other words”, said Arellano, C. J., “. . . the heirs succeed
immediately to all of the property of the deceased ancestor. The
property belongs to the heirs at the moment of the death of the
ancestor as completely as if the ancestor had executed and delivered
to them a deed for the same before his death.”
Whatever may be the time when actual transmission of the inheritance
takes place, succession takes place in any event at the moment of the
decedent’s death. The time when the heirs legally succeed to the
inheritance may differ from the time when the heirs actually receive
such inheritance. ” Thomas Hanley having died on May 27, 1922, the
inheritance tax accrued as of the date. The accrual of the inheritance
tax is distinct from the obligation to pay the same.
· NCC 657: “the rights to the succession of a person are
transmitted from the moment of his death.” “In other words... the
heirs succeed immediately to all of the property of the deceased
ancestor. The property belongs to the heirs at the moment of the death
of the ancestor as completely as if the ancestor had executed and
delivered to them a deed for the same before his death.”
· Whatever may be the time when actual transmission of the
inheritance takes place, succession takes place in any event at the
moment of the decedent’s death. The time when the heirs legally
succeed to the inheritance may differ from the time when the heirs
actually receive such inheritance. ” Thomas Hanley having died on
May 27, 1922, the inheritance tax accrued as of the date
From the fact, however, that Thomas Hanley died on May 27, 1922, it
does not follow that the obligation to pay the tax arose as of the date.
The time for the payment on inheritance tax is clearly fixed by section
1544 of the Revised Administrative Code as amended by Act No.
3031, in relation to section 1543 of the same Code.
RATIONALE:
Taxes are essential to the very existence of the government. The
obligation to pay taxes rests upon the privileges enjoyed by, or the
protection afforded to, a citizen by the government but upon the
necessity o money for the support of the state. For this reason, none is
allowed to object to or resist the payment of the taxes solely because
no personal benefits to him can be pointed out.
That taxes should be collected promptly is a policy deeply intrenched
in our tax system. Thus no court is allowed to grant injunction (to
restrain the collection of taxes).
In this case, the collection of inherent tax/tax should not be left to the
will of private individual, because result would be disastrous. )e.g
testators may provide that their estates not to be delivered years after,
in which this case, is 10 years after.)
PHILIPPINE AIRLINES, INC. v. EDU
G.R. No. L- 41383, August 15, 1988
FACTS:
The Philippine Airlines (PAL) is a corporation engaged in the air
transportation business under a legislative franchise, Act No. 42739.
Under its franchise, PAL is exempt from the payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner
Romeo F. Elevate (Elevate) issued a regulation pursuant to Section 8,
Republic Act 4136, otherwise known as the Land and Transportation
and Traffic Code, requiring all tax exempt entities, among them PAL
to pay motor vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor
vehicles unless the amounts imposed under Republic Act 4136 were
paid. PAL thus paid, under protest, registration fees of its motor
vehicles. After paying under protest, PAL through counsel, wrote a
letter dated May 19,1971, to Land Transportation Commissioner
Romeo Edu (Edu) demanding a refund of the amounts paid, invoking
Calalang vs.Lorenzo where it was held that motor vehicle registration
fees are in reality taxes from thepayment of which PAL is exempt by
virtue of its legislative franchise. Edu denied the request for refund.
Hence, PAL filed a complaint against Edu and National Treasurer
Ubaldo Carbonell (Carbonell).
ISSUE: Whether or not motor vehicle registration fees are
considered as taxes
SC ruled that motor vehicles registration fees are TAXES.
Fees may be regarded as taxes even though they also serve as
instruments of regulation. It is possible for an exaction to be both a
tax and a regulation. License fees and charges, looked to as a source
of revenue as well as a means of regulation. The money collected
under the motor vehicle law is not intended for the expenditures of
the motor vehicle office but accrue to the funds for the construction
and maintenance of the public roads, streets, and bridges. As the fees
are not collected for regulatory purpose as an incident to the
enforcement of regulational governing operation of motor vehicles on
public highways, but to provide revenue with which the government
is to construct and maintain public highways for everyone’s use, they
are taxes, not merely fees. If the purpose is primarily revenue, or if
revenue is, at least, one of the real and substantial purposes, then the
exaction is properly called a tax. Such is the case of motor vehicle
registration fees. The motor vehicle registration fees are actually taxes
intended for additional revenues of the government and where the
amount collected eventually finds its way into the treasuryof the
branch of the government.
Tolentino vs. Secretary of Finance
GR 115455 Oct. 30 1995
FACTS:
Arturo Tolentino et al (petitioners) are questioning the
constitutionality of RA 7716 otherwise known as the Expanded Value
Added Tax (EVAT) Law. RA 7716 seeks to widen the tax base of the
existing VAT system and enhance its administration by amending the
National Internal Revenue Code (NIRC). Herein, various petitioners
seek to declare RA 7166 as unconstitutional.
• PAL contends that the amendment by the RA 7716 of its franchise
by the withdrawal of the exemption from the VAT is not expressed
in the title of the law. NOTE: This case was filed by PAL because
before the EVAT Law, they were exempt from taxes. After the
passage of EVAT, they were already included.
• PPI (Philippine Press Institute) contends that by removing the
exemption of the press from the VAT while maintaining those
granted to others, the law discriminates against the press.
Referring to license tax. Petitioner claims that R.A. violates their
press freedom having removed them from the exemption to pay
VAT.
• PBS (Philippine Bible Society), petitioner, also claims that R.A.
violates their religious liberty, having removed them from the
exemption to pay VAT.
• CREBA (Chamber of Real Estate and Builders Association),
petitioner, contends that R.A. (1) impairs the obligation of
contracts [because the application of the extended tax to existing
contracts would result to substantial increase in the monthly
amortization to be paid, that the buyer did not anticipate at the
time he entered into the contract.]
• CREBA also questions the constitutionality of the R.A.
contending that it violates the rule that taxes should be (2)
uniform and equitable and that the (3) VAT is regressive which is
against the constitutional provision that the Congress shall
“evolve a progressive system of taxation”.
ISSUE: Whether the following contentions are meritorious.
HELD:
No.
• PAL: Court held that it is unnecessary to include such thing in the
title since it is already in the title that the law seeks to amend the
provisions of the NIRC (including PAL’s exemption provision:
section 103) in order to widen the base of the VAT. And that a
sufficient notice had been give of the pendency of these bills in
Congress before they were enacted into a law.
• PPI & PBS: Court held that since the law granted the press a
privilege, the law could take back the privilege anytime without
offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its
sovereign prerogative.
• In withdrawing the exemption, the law merely subjects the press • Those which are subject to VAT are those goods and services
to the same tax burden to which other businesses have long ago which are availed mainly by the higher income groups (example:
been subject. It is thus different from the tax invoked by the PPI. real properties, patent, copyright, etc.)
• License tax is discriminatory in some cases, if license tax is
what’s imposed to the press and religious groups, it is
unconstitutional because it lays a prior restraint on the exercise of
their right. Unlike ordinary tax, license tax is mainly for
regulation, a tax on the exercise of their privilege.
• License tax is, however, different from VAT. It’s not a tax on the
exercise of their right nor a constitutional right. VAT is imposed
on the sale, barter, lease, exchange of goods, or properties or the
sale, barter, lease, or exchange of goods or properties or the sale
of exchange of services and the lease of properties purely for
revenue purposes.
• CREBA #1: Court held that even though taxation may affect
particular contracts, as it may increase the debt of one person and
lessen the security of another, or may impose additional burdens
upon one class and release the burdens of another, still the tax
must be paid unless prohibited by the Constitution.
• Contracts must also be understood as having been made in
reference to the possible exercise of the rightful authority of the
government and no obligation of contract can extend to the defeat
of that authority.
• CREBA #2: Equality and uniformity of taxation means that all
taxable articles and kinds of property of the same class be taxed at
the same rate. And the VAT was already provided years ago, R.A.
merely expands the base of the tax.
• CREBA #3: The court held that the Constitution that does not
really prohibit the imposition of indirect taxes, like VAT, which
are regressive. What it simply provides is that Congress shall
“evolve a progressive system of taxation” which has been
interpreted that “direct taxes are to be preferred, indirect taxes
should be minimized”, but not avoided entirely.
• The law minimizes the regressive effects of the VAT by imposing
zero rate for certain transactions and granting exemptions to other
transactions.