A.

Taxes Defined

1. Commissioner of Internal Revenue (CIR) vs Algue, Inc. L-28896 Feb. 17, 1998

What is Taxation? It is said that taxes are what we pay for civilization society. Without taxes, the government would
be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his
share in the running of the government. The government for its part, is expected to respond in the form of tangible
and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method
of exaction by those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes
that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a
right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may
still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

Lifeblood Doctrine. 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.

2. CIR vs Tokyo Shipping Co., Ltd G.R. No. 68252

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to
minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax
collector kill the "hen that lays the golden egg." And, in order to maintain the general public's trust and confidence in
the Government this power must be used justly and not treacherously.

3. BPI Family Savings Bank v CA G.R. No 122480

Strictissimi Juris
Respondents claim that Tax Refunds are in the nature of tax exemptions and thus, must be strictly construed against
the claimant.

Here, BPI was able to establish their claim, though it may have failed to strictly comply with the rules of procedure.
But the Court could not disregard the cold, undisputed fact that BPI suffered losses in 1990 and it could not have
applied the amount claimed as tax credits.

Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted,
should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense
of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so
must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must
lead by its own example of honor, dignity and uprightness.

4. De Borja vs Gella, L-18330, July 31, 1963

The law is explicit that in order that a certificate may be used in payment of an obligation the same must be subsisting
at the time of its approval even if we hold that a tax partakes of this character, neither can it be contended that
appellee can compel the government to accept the alleged certificates of indebtedness in payment of his real estate
taxes under proviso No. 2 abovequoted also for the reason that in order that such payment may be allowed the tax
must be owed by the applicant himself.This is the correct implication that may be drawn from the use by the law of
the words "his taxes". Verily, the right to use the backpay certificate in settlement of taxes is given only to the
applicant and not to any holder of any negotiable certificate to whom the law only gives the right to have it discounted
by a Filipino citizen or corporation under certain limitations.

5. Philippine Airlines vs Secretary of Finance G.R. 115852 October 30, 1995

Do regressive taxes (such as VAT) go against the constitutional mandate in sec. 28(1), Art. VI of the 1987
Constitution?
NO. The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What
it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has
been interpreted to mean simply that "direct taxes are . . . to be preferred and as much as possible, indirect taxes
should be minimized." Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system.
Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the
proclamation of Art. VIII, sec. 17(1) of the 1973 Constitution from which the present Art. VI, sec. 28(1) was taken.
Sales taxes are also regressive.

Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid
them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the
regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, §3, amending
§102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4, amending §103 of the
NIRC).

On the other hand, the transactions which are subject to the VAT are those which involve goods and services which
are used or availed of mainly by higher income groups. These include real properties held primarily for sale to
customers or for lease in the ordinary course of trade or business, the right or privilege to use patent, copyright, and
other similar property or right, the right or privilege to use industrial, commercial or scientific equipment, motion
picture films, tapes and discs, radio, television, satellite transmission and cable television time, hotels, restaurants
and similar places, securities, lending investments, taxicabs, utility cars for rent, tourist buses, and other common
carriers, services of franchise grantees of telephone and telegraph.

Whether the enactment of R.A. No. 7716 conforms with the procedure prescribed by sec. 24, Art. VI of the
Constitution.

YES. The power of the Senate to propose amendments must be understood to be full, plenary and complete "as on
other Bills." Thus, because revenue bills are required to originate exclusively in the House of Representatives, the
Senate cannot enact revenue measures of its own without such bills. After a revenue bill is passed and sent over to it
by the House, however, the Senate certainly can pass its own version on the same subject matter. This follows from
the coequality of the two chambers of Congress.

The power of the Senate to propose or concur with amendments is apparently without restriction. It would seem that
by virtue of this power, the Senate can practically re-write a bill required to come from the House and leave only a
trace of the original bill.

B. Importance of Taxes

6. Philippine Bank of Communications vs CIR, G.R. 119024

Basic is the principle that taxes are the lifeblood of the nation. The primary purpose is to generate funds for the State
to finance the needs of the citizenry and to advance the common weal. Due process of law under the Constitution
does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that
the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance
that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as
little as possible.

7. Sunio et al vs NLRC G.R. No. 57767

PRINCIPLE: Taxes are PERSONAL to the taxpayer.

Ruling: No, a corporation’s tax delinquency cannot, for instance, be enforced against its stockholders because not
only would this run counter to the principle that taxes are personal, but it would run counter to the principle that taxes
are personal, but it would also not be in accord with the rule that a corporation is vested by law with a personality that
is separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it
may be related.
It is basic that a corporation is invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it may be related. Mere 4

ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself sufficient ground for disregarding the separate corporate personality. Petitioner5
Sunio, therefore, should not have been made personally answerable for the payment of private respondents' back
salaries.

B. Nature of the Taxing Power

8. MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY vs. HON. FERDINAND J. MARCOS,

Doctrine: Taxation is a destructive power which interferes with the personal and property rights of the people and
takes from them a portion of their property for the support of the government. Tax statutes must be construed strictly
against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or
are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions
are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of
exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken

MCIAA is a taxable person. the petitioner cannot claim that it was never a taxable person under its Charter. It was
only exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is
conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the
foregoing disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of the
Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of
exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner.

9. Luzon Stevedoring Corp vs CTA et al, L-30232

The court laid the rule that the power of taxation is a high prerogative of sovereignty, therefore its
relinquishment is never presumed. Any reduction of diminution thereof, with respect to its rate, must be
strictly construed. In short, any claim for exemption must be strictly construed against the taxpayer.

Other info:
This Court has laid down the rule that "as the power of taxation is a high prerogative of sovereignty, the
relinquishment is never presumed and any reduction or dimunition thereof with respect to its mode or its rate,
must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may
be applied." More specifically stated, the general rule is that any claim for exemption from the tax statute should
be strictly construed against the taxpayer.

D. Purposes and Objectives of Taxation

10. Caltex Philippines Inc vs COA GR. No 92585
DOCTRINE:
A taxpayer may not offset taxes due from the claims that he may have against the government.

It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes
cannot be subject of compensation because the government and taxpayer are not mutually creditors and debtors of
each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. The oil
industry is greatly imbued with public interest as it vitally affects the general welfare.

11. Osmena vs Orbos G.R No 99886

DOCTRINE: To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that
the legislature determines matter of principle and lays down fundamental policy.

"Where the standards set up for the guidance of an administrative officer and the action taken are in fact
recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the
judgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative
functions."

The stabilization fees collected are in the nature of a tax, which is within the power of the State to impose for
the promotion of the sugar industry (Lutz v. Araneta, 98 Phil. 148). . . . The tax collected is not in a pure exercise
of the taxing power. It is levied with a regulatory purpose, to provide a means for the stabilization of the
sugar industry. The levy is primarily in the exercise of the police power of the State (Lutz v. Araneta, supra).

F. Scope of the Legislative Taxing Power

 12. Churchill, et al vs Concepcion, 34 Phil 969

A tax is uniform when it operates with the same force and effect in every place where the subject of it is found.
Uniformity does not signify an intrinsic, but simply a geographical, uniformity, and such uniformity is therefore the only
uniformity which is prescribed by the Constitution. A tax is uniform, within the constitutional requirement, when it
operates with the same force and effect in every place where the subject of it is found. "Uniformity," as applied to the
constitutional provision that all taxes shall be uniform, means that all property belonging to the same class shall be
taxed alike. (Various US Jurisprudence)

What is the Scope of the Legislature’s Taxing Power? The power to impose taxes is one so unlimited in force and
so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except
such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every
object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in case of
failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is
more pervading, and at no point does the power of the government affect more constantly and intimately all the
relations of life than through the exactions made under it." (Clooey)

13. CIR vs Lingayen Gulf Electric Power Co, Inc L-23771 August 4, 1968

A tax is uniform when it operates with the same force and effect in every place where the subject of it is found.
Uniformity means that all property belonging to the same class shall be taxed alike The Legislature has the inherent
power not only to select the subjects of taxation but to grant exemptions. Tax exemptions have never been deemed
violative of the equal protection clause. 1 It is true that the private respondents municipal franchises were obtained
under Act No. 667 2 of the Philippine Commission, but these original franchises have been replaced by a new
legislative franchise, i.e. R.A. No. 3843. As correctly held by the respondent court, the latter was granted subject to
the terms and conditions established in Act No. 3636, 3 as amended by C.A. No. 132. These conditions Identify the
private respondent's power plant as falling within that class of power plants created by Act No. 3636, as amended.
The benefits of the tax reduction provided by law (Act No. 3636 as amended by C.A. No. 132 and R.A. No. 3843)
apply to the respondent's power plant and others circumscribed within this class. R.A-No. 3843 merely transferred the
petitioner's power plant from that class provided for in Act No. 667, as amended, to which it belonged until the
approval of R.A- No. 3843, and placed it within the class falling under Act No. 3636, as amended. Thus, it only
effected the transfer of a taxable property from one class to another.

14. Bisaya Land Transportation Co. vs. Collector of Internal Revenue, 105 Phil 1338
Second, income tax returns contain a statement of the taxpayer's income for a given year. The taxpayer is not
supposed to declare in said returns that he has purchased or received "from without the Philippines", commodities or
merchandise that are subject to the compensating tax. Generally, such purchases are not "income," and, hence, have
no place in income tax returns.

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