7. THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY TREASURER OF QUEZON CITY, DR. VICTOR B.

ENRIGA
vs. BAYAN TELECOMMUNICATIONS, INC.,

PETITIONER: The government of Quezon City, pursuant to the taxing power vested on local government units,
imposed a real property tax on all real properties in Quezon City and, reiterated the withdrawal of exemption from
real property tax. Bayantel seeks the exclusion of its real properties in the city from the roll of taxable real properties
stating the exemption granted to it in its original franchise.

RULING: The legislative intent expressed in the phrase "exclusive of this franchise" cannot be construed other than
distinguishing between two (2) sets of properties, be they real or personal, owned by the franchisee, namely, (a)
those actually, directly and exclusively used in its radio or telecommunications business, and (b) those properties
which are not so used. It is worthy to note that the properties subject of the present controversy are only those
which are admittedly falling under the first category.

To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or delegate to local governments
of Congress’ inherent power to tax the franchisee’s properties belonging to the second group of properties indicated
above, that is, all properties which, "exclusive of this franchise," are not actually and directly used in the pursuit of
its franchise. As may be recalled, the taxing power of local governments under both the 1935 and the 1973
Constitutions solely depended upon an enabling law. Absent such enabling law, local government units were without
authority to impose and collect taxes on real properties within their respective territorial jurisdictions. While Section
14 of Rep. Act No. 3259 may be validly viewed as an implied delegation of power to tax, the delegation under that
provision, as couched, is limited to impositions over properties of the franchisee which are not actually, directly and
exclusively used in the pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the pursuit
of its business are beyond the pale of the delegated taxing power of local governments. In a very real sense,
therefore, real properties of Bayantel, save those exclusive of its franchise, are subject to realty taxes. Ultimately,
therefore, the inevitable result was that all realties which are actually, directly and exclusively used in the operation
of its franchise are "exempted" from any property tax.

Bayantel’s franchise being national in character, the "exemption" thus granted under Section 14 of Rep. Act No. 3259
applies to all its real or personal properties found anywhere within the Philippine archipelago. . In concrete terms,
the realty tax exemption heretofore enjoyed by Bayantel under its original franchise, but subsequently withdrawn
by force of Section 234 of the LGC, has been restored by Section 14 of Rep. Act No. 7633.

While the system of local government taxation has changed with the onset of the 1987 Constitution, the power of
local government units to tax is still limited

8. SMART COMMUNICATIONS v. CITY OF DAVAO

PETITIONER: Smart argues that the imposition of the local franchise tax by the City of Davao would violate the
constitutional prohibition against impairment of contracts. The franchise, according to petitioner, is in the nature of
a contract between the government and Smart.

RULING: There is no violation of Article III, Section 10 of the 1987 Philippine Constitution. The franchise of Smart
does not expressly provide for exemption from local taxes. Absent the express provision on such exemption under
the franchise, we are constrained to rule against it. The "in lieu of all taxes" clause in Section 9 of R.A. No. 7294
leaves much room for interpretation. Due to this ambiguity in the law, the doubt must be resolved against the grant
of tax exemption.

Moreover, Smart’s franchise was granted with the express condition that it is subject to amendment, alteration, or
repeal. As held in Tolentino v. Secretary of Finance:
It is enough to say that the parties to a contract cannot, through the exercise of prophetic discernment, fetter the
exercise of the taxing power of the State. For not only are existing laws read into contracts in order to fix obligations
as between parties, but the reservation of essential attributes of sovereign power is also read into contracts as a
basic postulate of the legal order. The policy of protecting contracts against impairment presupposes the
maintenance of a government which retains adequate authority to secure the peace and good order of society.

In truth, the Contract Clause has never been thought as a limitation on the exercise of the State’s power of taxation
save only where a tax exemption has been granted for a valid consideration.

9. QUEZON CITY and THE CITY TREASURER OF QUEZON CITY v. ABS-CBN BROADCASTING CORPORATION

PETITIONER: Petitioners argue that the "in lieu of all taxes" provision in ABS-CBN's franchise does not expressly
exempt it from payment of local franchise tax. They contend that a tax exemption cannot be created by mere
implication and that one who claims tax exemptions must be able to justify his claim by clearest grant of organic
law or statute. Quezon City insisted that the claim of the respondent for refund of the local franchise tax must fail
because of the absence of a prior written claim for it.

RTC ruled that the imposition of the local franchise tax was an impairment of ABS-CBN's contract with the
government. The imposition of another franchise on the corporation by the local authority would constitute an
impairment of the former's charter, which is in the nature of a private contract between it and the government.

RULING: Taxes are what civilized people pay for civilized society. They are the lifeblood of the nation. Thus, statutes
granting tax exemptions are construed stricissimi juris against the taxpayer and liberally in favor of the taxing
authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken.
Otherwise stated, taxation is the rule, exemption is the exception.26 The burden of proof rests upon the party
claiming the exemption to prove that it is in fact covered by the exemption so claimed. 27 He who claims an exemption
from his share of common burden must justify his claim that the legislature intended to exempt him by unmistakable
terms. For exemptions from taxation are not favored in law, nor are they presumed. They must be expressed in the
clearest and most unambiguous language and not left to mere implications. The "in lieu of all taxes" provision in the
franchise of ABS-CBN does not expressly provide what kind of taxes ABS-CBN is exempted from. It is not clear
whether the exemption would include both local, whether municipal, city or provincial, and national tax. What is
clear is that ABS-CBN shall be liable to pay three (3) percent franchise tax and income taxes under Title II of the NIRC.
But whether the "in lieu of all taxes provision" would include exemption from local tax is not unequivocal.

The right to exemption from local franchise tax must be clearly established and cannot be made out of inference or
implications but must be laid beyond reasonable doubt. Verily, the uncertainty in the "in lieu of all taxes" provision
should be construed against ABS-CBN. ABS-CBN has the burden to prove that it is in fact covered by the exemption
so claimed. ABS-CBN miserably failed in this regard.

10. AMERICAN BIBLE SOCIETY v CITY OF MANILA

PETITIONER: AMERICAN BIBLE SOCIETY contends that Ordinances Nos. 3000 and 2529 , as respectively amended,
requiring necessary Mayor's permit and municipal license, are unconstitutional and illegal in so far as its society is
concerned, because they provide for religious censorship and restrain the free exercise and enjoyment of its religious
profession, to wit: the distribution and sale of bibles and other religious literature to the people of the Philippines.

RULING:

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the freedom of religious
profession and worship. "Religion has been spoken of as a profession of faith to an active power that binds and
elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of his relations to His
Creator and to the obligations they impose of reverence to His being and character, and obedience to His Will
(Davis vs. Beason, 133 U.S., 342). The constitutional guaranty of the free exercise and enjoyment of religious
profession and worship carries with it the right to disseminate religious information. Any restraints of such right can
only be justified like other restraints of freedom of expression on the grounds that there is a clear and present danger
of any substantive evil which the State has the right to prevent". (Tañada and Fernando on the Constitution of the
Philippines, Vol. 1, 4th ed., p. 297). In the case at bar the license fee herein involved is imposed upon appellant for
its distribution and sale of bibles and other religious literature:

a.) Ordinance 2529

- It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was
in some instances a little bit higher than the actual cost of the same but this cannot mean that appellant
was engaged in the business or occupation of selling said "merchandise" for profit. For this reason we
believe that the provisions of City of Manila Ordinance No. 2529, as amended, cannot be applied to
appellant, for in doing so it would impair its free exercise and enjoyment of its religious profession and
worship as well as its rights of dissemination of religious beliefs.
b.) Ordinance 3000
- With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit
before any person can engage in any of the businesses, trades or occupations enumerated therein, We
do not find that it imposes any charge upon the enjoyment of a right granted by the Constitution, nor
tax the exercise of religious practices. In the case of Coleman vs. City of Griffin, 189 S.E. 427, this point
was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or otherwise,
circulars, handbooks, advertising, or literature of any kind, whether said articles are being delivered free,
or whether same are being sold within the city limits of the City of Griffin, without first obtaining written
permission from the city manager of the City of Griffin, shall be deemed a nuisance and punishable as an
offense against the City of Griffin, does not deprive defendant of his constitutional right of the free exercise
and enjoyment of religious profession and worship, even though it prohibits him from introducing and
carrying out a scheme or purpose which he sees fit to claim as a part of his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, however inapplicable to
said business, trade or occupation of the plaintiff. As to Ordinance No. 2529 of the City of Manila, as amended, is
also not applicable, so defendant is powerless to license or tax the business of plaintiff Society.

11. ARTURO M. TOLENTINO v THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE

PETITIONER: Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the sales
are used to subsidize the cost of printing copies which are given free to those who cannot afford to pay so that to
tax the sales would be to increase the price, while reducing the volume of sale

RULING: The Court was speaking in Murdock v. Pennsylvania of a license tax, which, unlike an ordinary tax, is mainly
for regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its
right. Hence, although its application to others, such those selling goods, is valid, its application to the press or to
religious groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and
pamphlets, is unconstitutional.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange
of services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to
burden the exercise of its right any more than to make the press pay income tax or subject it to general regulation
is not to violate its freedom under the Constitution.
 the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No. 7716, although fixed
in amount, is really just to pay for the expenses of registration and enforcement of provisions such as those relating
to accounting in §108 of the NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT does
not excuse it from the payment of this fee because it also sells some copies. At any rate whether the PBS is liable for
the VAT must be decided in concrete cases, in the event it is assessed this tax by the Commissioner of Internal
Revenue.

12. PHILIPPINE PRESS INSTITUTE, INC v HON. LIWAYWAY V. CHATO

PETITIONER: PPI contented that there is an unconstitutional abridgment of press freedom because of the imposition
of the VAT on the gross receipts of newspapers from advertisements and on their acquisition of paper, ink and
services for publication.

RULING: The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation.
Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence,
although its application to others, such those selling goods, is valid, its application to the press or to religious groups,
such as the Jehovah’s Witnesses, in connection with the latter’s sale of religious books and pamphlets, is
unconstitutional. As the U.S. Supreme Court put it, “it is one thing to impose a tax on income or property of a
preacher. It is quite another thing to exact a tax on him for delivering a sermon.”

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment
is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.