ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY

G.R. No. 168056 September 1, 2005

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED
VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF
THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER OF
INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent.

Facts:
Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337 particularly
Sections 4, 5 and 6, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code
(NIRC). These questioned provisions contain a uniform proviso authorizing the President, upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any
of the following conditions have been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been
satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds
two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent
(1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. They
further argue that VAT is a tax levied on the sale or exchange of goods and services and cannot be included
within the purview of tariffs under the exemption delegation since this refers to customs duties, tolls or tribute
payable upon merchandise to the government and usually imposed on imported/exported goods. They also said
that the President has powers to cause, influence or create the conditions provided by law to bring about the
conditions precedent. Moreover, they allege that no guiding standards are made by law as to how the Secretary
of Finance will make the recommendation. They claim, nonetheless, that any recommendation of the Secretary
of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter, such
that, ultimately, it is the President who decides whether to impose the increased tax rate or not.

Issues:

1. Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and Article VI,
Section 26 (2) of the Constitution.
2. Whether or not there was an undue delegation of legislative power in violation of Article VI Sec 28 Par 1
and 2 of the Constitution.
3. Whether or not there was a violation of the due process and equal protection under Article III Sec. 1 of the
Constitution.
Discussions:

1. Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is required by the
Constitution to “originate exclusively” in the House of Representatives, but Senate has the power not only
to propose amendments, but also to propose its own version even with respect to bills which are required
by the Constitution to originate in the House. the Constitution simply means is that the initiative for filing
revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as they are from the
districts, the members of the House can be expected to be more sensitive to the local needs and problems.
On the other hand, the senators, who are elected at large, are expected to approach the same problems
from the national perspective. Both views are thereby made to bear on the enactment of such laws.
2. In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to
inquire whether the statute was complete in all its terms and provisions when it left the hands of the
legislature so that nothing was left to the judgment of any other appointee or delegate of the legislature.
3. The equal protection clause under the Constitution means that “no person or class of persons shall be
deprived of the same protection of laws which is enjoyed by other persons or other classes in the same
place and in like circumstances.”

Rulings:

1. R.A. No. 9337 has not violated the provisions. The revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its constitutional power to introduce amendments to the
House bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes,
percentage, excise and franchise taxes. Verily, Article VI, Section 24 of the Constitution does not contain
any prohibition or limitation on the extent of the amendments that may be introduced by the Senate to the
House revenue bill.
2. There is no undue delegation of legislative power but only of the discretion as to the execution of a law.
This is constitutionally permissible. Congress does not abdicate its functions or unduly delegate power
when it describes what job must be done, who must do it, and what is the scope of his authority; in our
complex economy that is frequently the only way in which the legislative process can go forward.
3. Supreme Court held no decision on this matter. The power of the State to make reasonable and natural
classifications for the purposes of taxation has long been established. Whether it relates to the subject of
taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of
assessment, valuation and collection, the State’s power is entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or
arbitrariness.
LUNG CENTER OF THE PHILIPPINES VS QUEZON CITY
Posted by kaye lee on 5:15 PM
G.R. No. 144104, June 29, 2004 [Constitutional Law - Article
VI: Legislative Department; Taxation ]

FACTS:
Petitioner is a non-stock, non-profit entity established by virtue
of PD No. 1823, seeks exemption from real property taxes when
the City Assessor issued Tax Declarations for the land and the
hospital building. Petitioner predicted on its claim that it is a
charitable institution. The request was denied, and a petition
hereafter filed before the Local Board of Assessment Appeals of
Quezon City (QC-LBAA) for reversal of the resolution of the
City Assessor. Petitioner alleged that as a charitable institution,
is exempted from real property taxes under Sec 28(3) Art VI of
the Constitution. QC-LBAA dismissed the petition and the
decision was likewise affirmed on appeal by the Central Board
of Assessment Appeals of Quezon City. The Court of Appeals
affirmed the judgment of the CBAA.

ISSUE:
1. Whether or not petitioner is a charitable institution within the
context of PD 1823 and the 1973 and 1987 Constitution and
Section 234(b) of RA 7160.

2. Whether or not petitioner is exempted from real property

taxes.

RULING:
1. Yes. The Court hold that the petitioner is a charitable
institution within the context of the 1973 and 1987 Constitution.
Under PD 1823, the petitioner is a non-profit and non-stock
corporation which, subject to the provisions of the decree, is to
be administered by the Office of the President with the Ministry
of Health and the Ministry of Human Settlements. The purpose
for which it was created was to render medical services to the
public in general including those who are poor and also the rich,
and become a subject of charity. Under PD 1823, petitioner is
entitled to receive donations, even if the gift or donation is in the
form of subsidies granted by the government.

2. Partly No. Under PD 1823, the lung center does not enjoy any
property tax exemption privileges for its real properties as well
as the building constructed thereon.
The property tax exemption under Sec. 28(3), Art. VI of the
Constitution of the property taxes only. This provision was
implanted by Sec.243 (b) of RA 7160.which provides that in
order to be entitled to the exemption, the lung center must be
able to prove that: it is a charitable institution and; its real
properties are actually, directly and exclusively used for
charitable purpose. Accordingly, the portions occupied by the
hospital used for its patients are exempt from real property taxes
while those leased to private entities are not exempt from such
taxes.
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CIR v Gotamco (1987)

CIR v Gotamco
GR No L-31092, February 27, 1987

FACTS:
The World Health Organization (WHO) decided to construct a building to house its offices, as well as the other
United
Nations Offices in Manila. Inviting bids for the construction of the building, the WHO informed the bidders of its tax
exemptions. The contract was awarded to John Gotamco and sons. The Commissioner opined that a 3% contractor’s
tax should be due from the contractor. The WHO issued a certification that Gotamco should be exempted, but the
Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the Court ruled in favor of Gotamco.

ISSUE:
Is Gotamco liable for the tax?

RULING:
No. Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them;
while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention
that he can shift the burden to someone else.

Herein, the contractor’s tax is payable by the contractor but it is the owner of the building that shoulders the burden of
the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Such tax is an
“indirect tax” on the organization, as the payment thereof or its inclusion in the bid price would have meant an
increase in the construction cost of the building.

Hence, WHO’s exemption from “indirect taxes” implies that Gotamco is exempt from contractor’s tax.
Abra Valley College vs Aquino (G.R. No. L-39086)
Posted: July 25, 2011 in Case Digests

0
FACTS: Petitioner, an educational corporation and institution of higher learning duly incorporated with the Securities and

Exchange Commission in 1948, filed a complaint to annul and declare void the “Notice of Seizure’ and the “Notice of Sale” of its

lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31. Said “Notice

of Seizure” by respondents Municipal Treasurer and Provincial Treasurer, defendants below, was issued for the satisfaction of the

said taxes thereon.

The parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. The trial court

ruled for the government, holding that the second floor of the building is being used by the director for residential purposes and

that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not

being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for review

on certiorari with prayer for preliminary injunction before the Supreme Court, by filing said petition on 17 August 1974.

ISSUE: Whether or not the lot and building are used exclusively for educational purposes.

HELD: Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes

for cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used

exclusively for religious, charitable or educational purposes.ﾝ Reasonable emphasis has always been made that the exemption

extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. The use of the

school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the case at bar, the lease

of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be considered

incidental to the purpose of education. The test of exemption from taxation is the use of the property for purposes mentioned in the

Constitution.

The decision of the CFI Abra (Branch I) is affirmed subject to the modification that half of the assessed tax be returned to the

petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes (leased) and the

second floor being used as incidental to education (residence of the director).

Province of Abra vs Harold
Hernando
The Province of Abra sought to tax the properties of the Roman Catholic Bishop, Inc. of Bangued.
Judge Harold Hernando dismissed the petition of Abra without hearing its side. Hernando ruled
that there “is no question that the real properties sought to be taxed by the Province of Abra are
properties of the respondent Roman Catholic Bishop of Bangued, Inc.” Likewise, there is no dispute
that the properties including their produce are actually, directly and exclusively used by the Roman
Catholic Bishop of Bangued, Inc. for religious or charitable purposes.”
ISSUE: Whether or not the properties of the church (in this case) is exempt from taxes.
HELD: No, they are not tax exempt. It is true that the Constitution provides that “charitable
institutions, mosques, and non-profit cemeteries” are required that for the exemption of “lands,
buildings, and improvements,” they should not only be “exclusively” but also “actually” and
“directly” used for religious or charitable purposes. The exemption from taxation is not favored and
is never presumed, so that if granted it must be strictly construed against the taxpayer. However, in
this case, there is no showing that the said properties are actually and directly used for religious or
charitable uses.