1. CITY OF MILWAUKEE v.

MILWAUKEE & SUBURBAN TRANSPORT CORPORATION

6 Wis. 2d 299 (1959)
TAXATION, DEFINED:
"The power by which the sovereign raises revenue to defray the necessary expenses of
government. Taxation is merely a way of apportioning the cost of government among those who
in some measure are privileged to enjoy its benefits and must bear its burdens. The purpose of
taxation on the part of government is to provide funds or property with which to promote the
general welfare and protection of its citizens... "
FACTS:
The M&S Transport Corp. is formerly a company that offers railway transportation. After the
invention of cars/automobiles, the railway/track is sought to be repaved as streets, and widened,
to accommodate the tire-wheeled transportation (trackless trolleys). The City of Milwaukee
adopted 'concersion ordinances' that would burden the transport company to pay "license fees".
Thee M&S Transport Corporation agreed by entering into a contract. The city undertook to repave
and widen streets and bear the expense of the obligation, formerly that of the company. The city
also obligated itself to prohibit parking of automobiles along portions of the routes.
The trial court reasoned that the fees did not constitute a tax for revenue but, rather, compensation
for the costs assumed and services rendered by the city. It took judicial notice of the fact that the
city has been put to the expense of acquiring property for off-street parking, and that the
ordinances reveal substantial benefits proceeding to the company and a concurring disadvantage
and expense to the city.
ISSUE:
Whether the "license fees" exacted under these ordinances constitute a tax for revenue (Taxation
Power) or a charge for regulation (Police Power) or a contract.
RULING:
The "license fees" exacted by the City of Milwaukee constitute a tax for revenue, not a charge for
regulation.
There is a sharp distinction between a municipal license for revenue and one for regulation under
the police power. The proceedings may be the same in the two cases, though the purpose is
essentially different. If the purpose is regulation the imposition ordinarily is an exercise of the
police power - looking toward the health, morals, safety, or general welfare of the community;
while if the purpose is revenue the imposition is an exercise of the taxing power and is a tax.
We do not read out of these ordinances the same evidence of expense and disadvantage to the
city that the trial court did. The city agreed to restore the track zone and where expenses for
repairs or supervision were anticipated, the company in fact agrred to pay a lump sum of money.
The basic argument of the city on appeal is that the ordinances in question are binding contracts
entered into between the city and the company, and that the legislature has no power to impair
the obligation of such contracts. It is well established that the control of streets and highways is a
governmental function. The reason for this is that `the highways belong to the state,' and are
subject to its control and regulation.
It is undisputed that a municipal corporation has no inherent power to grant a franchise or license
to use the streets and that its authority is limited to that conferred upon it expressly or by
implication by the state constitution or the legislature. A contract to which a municipal corporation
is a party, relating to a public and governmental matter, may, however, be revoked by the
legislature with the consent of the other party without thereby violating the right of the
municipality.'"

2. Case: Mactan Cebu International Airport Authority v. Marcos GR No. 120082, Sept. 11,
1996
Facts: Mactan Cebu International Airport Authority (MIAA) was created by virtue of RA No. 6958.
The law mandated that MIAA shall encourage, promote and develop international and domestic
air traffic in Central Visayas and Mindanao Regions as a means of making the regions centers of
international trade and tourism and as a means to accelerate the development of transportation
and communication in the country; and to upgrade the services and facilities of the airports and
to formulate internationally acceptable standards of airport accommodation and service. MIAA
enjoyed the privilege of exemption from payment of realty taxes as provided in Section 14 of the
Charter (Note: exempt from realty taxes imposed by National Government or any of its political
subdivisions, agencies and instrumentalities). The OIC of the Office of the Treasurer of Cebu City,
however, demanded payment for realty taxes on several parcels of land belonging to MIAA
located in Barrio Apas, Kasambagan and Lahug in the total amount of P2,229,078.79. Petitioner
contended that the demand for payment is baseless and unjustified, citing Section 14 of RA 6958
and Section 133 of the Local Government Code putting limitations on the taxing powers of the
local government units on instrumentalities of the national government performing governmental
functions. Cebu City refused to cancel and set aside the realty tax account of MIAA for it insists
that MIAA is a GOCC whose tax exemption privilege has been withdrawn by virtue of Section 193
(GOCCs are taxable) and 234 (realty taxes exemption are withdrawn from the GOCCs) of the
LGC. The City issued a warrant of levy against the properties of MIAA, thus it paid its tax account
under protest and filed a Petition of Declaratory Relief with the RTC of Cebu and contended that
the taxing powers of the LGU do not extend to the levy of taxes of any kind of instrumentality of
the national government. Cebu City remained firm that MIAA is a GOCC and not an
instrumentality. The RTC dismissed the petition, ruling that the tax exemption of GOCCs under
the New LGC is repealed thus it is safe to infer that the tax exemption has been expressly
repealed.

Issue: Whether or not MIAA must pay realty taxes to the City of Cebu under the New LGC?
Ruling: Yes. The SC established that MIAA can stand in the same footing as an agency or
instrumentality but it must show that the parcels of land are any of those enumerated in Section
234 of the New LGC either by virtue of ownership, character, or use of the property. Congress did
not even expanded the scope of the exemption in Section 234 to include real property owned by
other instrumentalities or agencies of the government, including GOCCs whose charter provided
an exemption. The power to tax is the most effective instrument to raise needed revenues to
finance and support myriad activities of the LGU for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the
people. The withdrawal of tax exemption privileges granted to GOCCs and other units of
government were such that privilege resulted in serious tax base erosion and distortions in the
tax treatment of similarly situated enterprises, and there was a need for this entities to share in
the requirements of the development, fiscal, or otherwise by paying the taxes and other charges
due from them. The MCIAA cannot claim that it was never a taxable person under its charter for
its exemption was only with respect to the realty taxes, a conclusive proof of the legislative intent
to make it a taxable person subject to all taxes except real property tax.

3. MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY v. HON. FERDINAND J.

MARCOS
G.R. No. 120082, September 11, 1996
FACTS:
According to Section 14 of the Mactan Cebu International Airport Authority’s (MCIAA)
charter, it is exempt from tax imposed by the National Government or any of its political
subdivisions, agencies, and instrumentalities. On October 1994, Eustaquio Cesa (OIC of the
Office of the City Treasurer – Cebu) demanded that MCIAA pay realty taxes imposed on parcels
of land owned by MCIAA. The realty taxes amounted to P2,229,078.79. MCIAA contended that
they are exempt from paying realty taxes under Section 14 of RA 6958 and that under the Local
Government Code, it is an instrumentality of the government performing governmental functions.
MCIAA also said that Section 122 of the Local Government Code limits the taxing power of LGUs.
However, the City of Cebu countered that MCIAA is a government-controlled corporation whose
tax exemption has been withdrawn by Section 193 and 234 of the LGC. As a result, MCIAA was
compelled to pay realty taxes under protest then filed a petition for declaratory relief with the RTC
of Cebu. The RTC dismissed the petition because the LGC expressly cancelled the tax exemption
of GOCCs. MCIAA filed a motion for reconsideration, but it was also denied.
ISSUE:
Whether the City of Cebu has the power to impose realty taxes on MCIAA and its properties.
RULING:

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found only in
the responsibility of the legislature which imposes the tax on the constituency who are to pay it.
Nevertheless, effective limitations thereon may be imposed by the people through their
Constitutions. Our Constitution, for instance, provides that the rule of taxation shall be uniform
and equitable, and Congress shall evolve a progressive system of taxation. Accordingly, 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 taxpayers and liberally in favor of the taxing authority. A
claim of exemption from tax payment must be clearly shown and based on language in the law
too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the
exception. However, if the grantee of the exemption is a political subdivision or instrumentality,
the rigid rule of construction does not apply because the practical effect of the exemption is merely
to reduce the amount of money that has to be handled by the government in the course of its
operations.

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before,
but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the
latter, the exercise of the power may be subject to such guidelines and limitations as the Congress
may provide which, however, must be consistent with the basic policy of local autonomy.

There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from
the payment of realty taxes imposed by the National Government or any of its political
subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and
exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of the
taxing authority. The only exception to this rule is where the exemption was granted to private
parties based on material consideration of a mutual nature, which then becomes contractual and
is thus covered by the non-impairment clause of the Constitution.

The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise by
local government units of their power to tax, the scope thereof or its limitations, and the exemption
from taxation.

4. G.R NO 167330
September 18,2009
Philippine Health Care Providers v. CIR
Facts:
PHCP is an entity engaged in the operation and maintenance of health services for the
sick people. CIR on the other hand is a government body responsible for collecting taxes. On
January 27,2000; CIR sent a demand letter to PHCP demanding PHCP to pay deficiency VAT as
well as deficiency documentary stamp tax (DST) for the years 1996-1997 ( as mandated by sec
185 of the 1997 tax code of the Philippines).
PHCP filed a petition for review in the court of tax appeals with the prayer of exempting
itself from paying those said taxes, of which the Court of Tax appeals partially granted the
complaint and only excluded the payment of the DST.
CIR appealed the case to the CA which ruled in favor of CIR, which led the case to be
appealed to the SC.
Issue:
Whether PHCP should be exempted form paying the DST as mandated by sec 185 of the
1997 tax code.
Held:
Yes. PHCP should be exempted from paying the DST because it is not an insurance
company, PHCP is an entity with the primary purpose of providing health services for the sick.
Sec 185 of the Tax code of the Philippines requiring the payment of documentary stamp tax, is
imposed only on a company engaged in the business of fidelity bonds and other insurance
policies. Petitioner as a health maintenance organization, is a service provider and not an
insurance company.
The two entities differ in such a way that a HMO’s concern is more on the distribution of
health care services. Unlike an insurance company which is mainly concerned of the risk and loss
of its insured, thereby indemnifying the latter in case of any contingent events.
5. Sison vs Ancheta
GR No. L-59431, 25 July 1984

Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero M. Sison, as
taxpayer, alleges 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 said provision as
arbitrary amounting to class legislation, oppressive and capricious in character. It therefore
violates both the equal protection and due process clauses of the Constitution as well asof the
rule requiring uniformity in taxation.

Issue: Whether or not the assailed provision violates the equal protection and due process
clauses of the Constitution while also violating the rule that taxes must be uniform and equitable.

Held: The petition is without merit.

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 unconsitutional taint.
On equal protection - it 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 unattainable." When the problem of classification became of issue, the Court said:
"Equality and uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed the same rate. The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation..." As provided by this Court, where "the
differentation" 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."

6. Tio vs Videogram Regulatory Board, 151 SCRA 208

Facts:
On September 1, 1986, Valentino on his own behalf and purportedly on behalf of other videogram
operators adversely affected, filed a petition assailing the constitutionality of Presidential Decree
No. 1987 entitled “ An Act Creating the Videogram Regulatory Board” with broad powers to
regulate and supervise the videogram industry. The rationale behind the enactment of the
aforesaid Decree may be summarized in its 8th whereas clause stating that grave emergencies
orrodimg the moral values of the people and betraying the national economic recovery program
necessitate the adoption of bold measures with dispatch. On October 23, 1986, the Greater
Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association
of the Philippines, and Philippine Motion Pictures Producers Association were permitted by the
Supreme Court to intervene in the case over Tio’s opposition upon the allegations that intervention
was necessary for the complete protection of their rights and that their “survival and very existence
is threatened by the unregulated proliferation of film piracy”.
Issues:
1. Whether or not the imposition of the 30% tax is a rider and the same not germane to the subject
matter of the law
2. Whether or not the tax imposed is harsh, confiscatory, oppressive and in violation of the due
process of the constitution
Rulings:
1. No, the tax is not a rider and is germane to the purpose and subject if the law. The Constitutional
requirement that “ every bill shall embrace only one subject which shall be expressed in the title
thereof” is sufficiently complied with if the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. In addition, the requirement is satisfied if all the parts
of the statute are related and germane to the subject matter expressed in the title.
2. No, the tax imposed is not harsh, confiscatory oppressive and in violation of the due process
of the constitution. It is axiomatic that a tax does not cease to be valid merely because it regulates,
discourages, or even definitely deters the activities taxed. In addition, the tax imposed is also a
revenue measure.
7. Arturo Tolentino v. Secretary of Finance and Commissioner of Internal Revenue
G.R. No. 115455; October 30, 1995

FACTS: The Philippine Press Institute, Inc. (PPI) contends that by removing the exemption of the
press from the VAT while maintaining those granted to others, the law discriminates against the
press. At any rate, it is averred, “even nondiscriminatory taxation of constitutionally guaranteed
freedom is unconstitutional”, citing in support of the case of Murdock v. Pennsylvania. Chamber
of Real Estate and Builders Associations, Invc., (CREBA), on the other hand, asserts that R.A.
No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or exempt
without reasonable basis and (3) violates the rule that taxes should be uniform and equitable and
that Congress shall “evolve a progressive system of taxation”.
ISSUE: Whether or not, based on the aforementioned grounds of the petitioners, the Expanded
Value-Added Tax Law should be declared unconstitutional.

RULING: No. With respect to the first contention, it would suffice to say 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. Indeed, in withdrawing the exemption, the law merely
subjects the press to the same tax burden to which other businesses have long ago been subject.
The PPI asserts that it does not really matter that the law does not discriminate against the press
because “even nondiscriminatory taxation on constitutionally guaranteed freedom is
unconstitutional.” The Court was speaking in that case (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. 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.

Anent the first contention of CREBA, it has been held in an early case that even though such
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, nor can it be said that
it impairs the obligation of any existing contract in its true legal sense. It is next pointed out that
while Section 4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products,
food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of
real property which is equally essential. The sale of food items, petroleum, medical and veterinary
services, etc., which are essential goods and services was already exempt under Section 103,
pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in error in claiming
that R.A. No. 7716 granted exemption to these transactions while subjecting those of petitioner
to the payment of the VAT. Finally, it is contended that R.A. No. 7716 also violates Art. VI, Section
28(1) which provides that “The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation”. Nevertheless, equality and uniformity of taxation mean
that all taxable articles or kinds of property of the same class be taxed at the same rate. The
taxing power has the authority to make reasonable and natural classifications for purposes of
taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to
all persons, firms, and corporations placed in similar situation. Furthermore, 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.” The mandate to
Congress is not to prescribe, but to evolve, a progressive tax system.
8. ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., petitioners,
vs.
COURT OF TAX APPEALS and CIR, respondents.
G.R. No. L-25043 April 26, 1968

Facts:
Antonio, Eduardo and Jose Roxas, brothers and at the same time partners of the Roxas
y Compania, inherited from their grandparents several properties which included a 19,000
hectares of agricultural land located at Nasugbu , Batangas. After the WWII, the tenants
expressed their desire to purchase the farmland they have been tilting and occupying for
generations. With the help of the Government, they persuaded the Roxas siblings to sell 13,500
hectares for the amount of P2,079,048.47 plus P300,000.00 for survey and subdivision expenses.
The tenants, however, did not have enough funds, so the Roxas siblings agreed to a purchase
by installment and contracted with the Government to pay its loan from the proceeds of the yearly
amortizations paid by the farmers.
In 1953 and 1955 Roxas y Cia. derived from said installment payments a net gain of
P42,480.83 and P29,500.71. Fifty percent of said net gain was reported for income tax purposes
as gain on the sale of capital asset held for more than one year pursuant to Section 34 of the Tax
Code.
Subsequently, the CIR demanded from the brothers the payment of deficiency income
taxes resulting from the sale, 100% of the profits derived therefrom was taxed. The Commissioner
of Internal Revenue contends that Roxas y Cia. could be considered a real estate dealer because
it engaged in the business of selling real estate. The business activity alluded to was the act of
subdividing the Nasugbu farm lands and selling them to the farmers-occupants on installment.The
brothers protested the assessment but the same was denied. On appeal, the Court of Tax Appeals
sustained the assessment. Hence, they appealed to the Supreme Court.

Issue:
Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100%
taxable?

Ruling:
No. It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers
who tilled them for generations was not only in consonance with, but more in obedience to the
request and pursuant to the policy of our Government to allocate lands to the landless. It was the
bounden duty of the Government to pay the agreed compensation after it had persuaded Roxas
y Cia. to sell its haciendas, and to subsequently subdivide them among the farmers at very
reasonable terms and prices. However, the Government could not comply with its duty for lack of
funds. Obligingly, Roxas y Cia. shouldered the Government's burden, went out of its way and sold
lands directly to the farmers in the same way and under the same terms as would have been the
case had the Government done it itself. For this magnanimous act, the municipal council of
Nasugbu passed a resolution expressing the people's gratitude.
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. It does not conform with the sense of justice in the
instant case for the Government to persuade the taxpayer to lend it a helping hand and later on
to penalize him for duly answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence,
pursuant to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the
gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.

9. Commissioner of Internal Revenue

v.
Algue Inc. and the Court of Tax Appeals
G.R. No. L-28896, February 17, 1988

“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.”

FACTS:
Algue Inc. on January 1965 received a letter from the Commission of Internal Revenue
assessing a total amount of PhP 83,183.85 as delinquency income taxes. Algue Inc. filed a letter
of protest which requested a reconsideration. On March 12, 1965, a warrant of distraint and levy
was presented to Algue Inc., but BIR did not take action on the protest. Algue filed a petition for
review with the Commission of Internal Revenue with the Court of Tax Appeals. Commissioner of
Internal Revenue contends that the claimed deduction of PhP 75,000.00 was properly disallowed
because it was not an ordinary reasonable or necessary business expense. However, the Court
of Tax Appeals sees it differently because it agreed with Algue Inc. because the amount had been
legitimately paid by the company. Commissioner of Internal Revenue claims that the payments of
the company were fictitious because the payees are members of the same family in control of
Algue and that the payment was for promotional fees.

ISSUE:
 Whether the Collector of Internal Revenue correctly disallowed PhP 75,000.00
deduction claimed by Algue Inc.

RULING:

The Supreme Court agrees with the Court of Tax Appeals and states that the amount of
promotional fees was not excessive. Sec. 30 of the Tax Code states that the deductions from
gross income is allowed in general – all 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 rendered. Most of the payees were not in the regular
employ of Algue nor were they controlling stockholders. Taxes are what we pay for civilization
society. Without taxes, the government would be paralyzed for lack of motive power to activate
and operate it. 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, on 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.

Taxation is a requirement in all democratic regimes that it be exercised reasonably and in

accordance with the procedure. If not then the taxpayer has a right to complain the courts will
then come to his succor. The tax collector may be stopped in his tracts if the taxpayer can
demonstrate that the law has not been observed.
The appealed decision of the Court of Tax Appeal is hereby affirmed.

10. Commissioner of Internal Revenue v. Pilipinas Shell petroleum Corporation

GR No. 197945, July 9, 2018
Dicang JOSEPH B.

Facts:
Respondents Pilipinas Shell Petroleum Corporation (Shell) and Petron Corporation
(Petron) are domestic corporations engaged in the production of petroleum products and are duly
registered with the Board of Investments (BOI) under the Omnibus Investments Code of 1987.
Respondents separately sold bunker oil and other fuel products to other BOT-registered entities
engaged in the export of their own manufactured goods (BOI export entities). These BOT-
registered export entities used Tax Credit Certificates (TCCs) originally issued in their name to
pay for these purchases.
To proceed with this mode of payment, the BOT-registered export entities executed Deeds of
Assignment in favor of respondents, transferring the TCCs to the latter. Subsequently, the
Department of Finance (DOF), through its One Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center (DOF Center), approved the Deeds of Assignment.
In its collection letters of the petitioner dated April 22, 1998 (1998 Collection Letters) addressed
to respondents' respective presidents, the BIR pointed out that respondents partly paid for their
excise tax liabilities during the Covered Years using TCCs issued in the names of other
companies; invalidated respondents' tax payments using said TCCs; and requested respondent
Shell and respondent Petron to pay their delinquent tax liabilities
Issue: Whether the petitioner's attempts to collect the alleged deficiency excise taxes from
respondents are valid.
Rulling: Petitioner's attempts to collect the alleged deficiency excise taxes from respondents are
void and ineffectual because (a) the Issues regarding the transferred TCCs' validity, respondents'
qualifications as transferees of said TCCs, and respondents' use of the TCCs to pay for their
excise tax liabilities for the Covered Years, had already been settled with finality in the 2007 Shell
Case and 2010 Petron Case, and could no longer be re-litigated on the ground of res judicata in
the concept of conclusiveness of judgment; (b) petitioner's resort to summary administrative
remedies without a valid assessment was not in accordance with the prescribed procedure and
was in violation of respondents' right to substantive due process; and (c) none of petitioner's
collection efforts constitute a valid institution of a judicial remedy for collection of taxes without an
assessment, and any such judicial remedy is now barred by prescription.
WHEREFORE, premises considered, the Court DENIES the petition of the Commissioner of
Internal Revenue in G.R. No. 197945 and AFFIRMS the Decision dated February 22, 2011 and
Resolution dated July 27, 2011 of the Court of Tax Appeals en banc in CTA En Banc Case No.
535.
SO ORDERED.
11. CIR vs. Nippon Express Phils.,
771 SCRA 27

FACTS
Respondent Nippon Express (Phils.) Corporation is a domestic corporation primarily
engaged in the international and domestic air and sea freight, distribution and unloading of
general cargoes and all kinds of goods and merchandise, and the operation of container depots,
warehousing, and packing facilities. It is a Value-Added Tax-registered entity and as such, it filed
its quarterly VAT returns for the years 2002 and 2003, respectively. Accordingly, during this
period, it has incurred an input VAT from its zero-rated sales amounting to P28, 405, 167.60, from
which only P3, 760, 660.74 was applied as tax credit. As a consequence, Nippon claimed a
refundable excess input VAT, otherwise known as an unutilized input VAT, of P24, 644, 506.86,
through an administrative claim for refund filed before the Bureau of Internal Revenue (BIR). A
day later, Nippon filed a judicial claim for tax refund by way of a petition for review before the
Court of Tax Appeals (CTA). Petitioner Commissioner of Internal Revenue (CIR) thereafter
contested that the amounts being claimed by Nippon as unutilized input VAT were not properly
documented hence must be denied.

The CTA Division partially granted Nippon’s claim for tax refund but reduced the same to
only P2,614, 296.84, contending that Nippon failed to show that the recipients of its services were
nonresidents doing business outside the Philippines; thus, Nippon’s purported sales could not
qualify as zero-rated sales. The CTA likewise ordered the CIR to issue a tax credit certificate to
Nippon. However, prior to its receipt of the decision of the CTA partially granting its refund claim,
Nippon filed a motion to withdraw, considering that the BIR has already acted on its administrative
claim and has thereby issued a tax credit certificate. According to the BIR, Nippon should receive
a tax refund of P21, 675, 128.91, clearly worth P19,060,832.07 larger than that determined by the
CTA. The CTA granted the motion to withdraw despite having already decided on Nippon’s claim
for tax refund, citing Section 3 of Rule 50 which allows withdrawal in the discretion of the court.
The CIR opposed the CTA in granting Nippon’s motion to withdraw, hence this petition.

ISSUE: May the CIR assail the validity of the Tax Credit Certificate issued by its subordinate in
the BIR?

RULING
Yes. Clearly, the interest of the government, and, more significantly, the public, will be
greatly prejudiced by the erroneous grant of refund – at a substantial amount at that – in favor of
Nippon. Hence, under these circumstances, the CTA Division should not have granted the motion
to withdraw.

The CIR is not estopped from assailing the validity of the Tax Credit Certificate which was
issued by her subordinates in the BIR. In matters of taxation, the government cannot be estopped
by the mistakes, errors or omissions of its agents for upon it depends the ability of the government
to serve the people for whose benefit taxes are collected. Citing the case of Visayas Geothermal
Power Company vs. CIR, taxes are the nation’s lifeblood through which government agencies
continue to operate and with which the State discharges its functions for the welfare of its
constituents. Therefore, estoppel does not apply to the government, especially on matters of
taxation.
12. CIR v Dash Engineering Philippines, Inc., GR No. 154145, December 11, 2013

FACTS: Dash Engineering Philippines, Inc. (DEPI) is a duly-registered corporation duly

registered authorized to do business in the Philippines as an ecozone IT export enterprise. It is
also a VAT-registered entity engaged in the export sales of computer-aided engineering and
design.

DEPI filed its monthly and quarterly value-added tax (VAT) returns for the period from January 1,
2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund representing
unutilized input VAT attributable to its zero-rated sales. Because Commissioner of Internal
Revenue (CIR) failed to act upon the said claim, respondent was compelled to file a petition for
review with the CTA on May 5, 2005.

CIR argues that the judicial claim was filed out of time because DEPI failed to comply with the 30-
day period referred to in Section 112(D) (now subparagraph C) of the NIRC, where such
prescribed periods in Section 112 is mandatory and jurisdictional. While DEPI claims that such
periods are merely directory, and that the petition was filed on time because it was made after the
lapse of the 120-day period and within the two-year period referred to in Section 229.

ISSUE: Whether the 120+30-day period under Section 112 mandatory and jurisdictional?

HELD: YES.

The Court has held time and again that taxes are the lifeblood of the government and,
consequently, tax laws must be faithfully and strictly implemented as they are not intended to be
liberally construed. Petitioner CIR is entirely correct in its assertion that compliance with the
periods provided for in Sec 112 is indeed mandatory and jurisdictional. The right to appeal to the
CTA from a decision or "deemed a denial" decision of the Commissioner is merely a statutory
privilege, not a constitutional right. The exercise of such statutory privilege requires strict
compliance with the conditions attached by the statute for its exercise.

(Explanation: Although respondent filed its administrative claim with the BIR on August 9, 2004
before the expiration of the two-year period in Section l 12(A), it undoubtedly failed to comply with
the 120+ 30-day period in Section l l 2(D) (now subparagraph C) which requires that upon the
inaction of the CIR for 120 days after the submission of the documents in support of the claim,
the taxpayer has to file its judicial claim within 30 days after the lapse of the said period. The 120
days granted to the CIR to decide the case ended on December 7, 2004. Thus, DEPI had 30 days
therefrom, or until January 6, 2005, to file a petition for review with the CTA. Unfortunately, DEPI
only sought judicial relief on May 5, 2005 when it belatedly filed its petition to the CT A, despite
having had ample time to file the same, almost four months after the period allowed by law. As a
consequence of DEPI's late filing, the CTA did not properly acquire jurisdiction over the claim.)

13. G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., v. THE COMMISSIONER OF INTERNAL REVENUE
and THE COURT OF TAX APPEALS
FACTS:
 The Philippine Guaranty Co., Inc., a domestic insurance company, entered into
reinsurance contracts with foreign insurance companies not doing business in the Philippines.
Thereafter, the PGCI agreed to cede to the foreign reinsurers a portion of the premiums on
insurance it has originally underwritten in the Philippines, in consideration for the assumption by
the foreign insurers of the liability on an equivalent portion of the risks insured. These reinsurance
contracts were signed by PGCI in Manila and by the foreign reinsurers outside the Philippines.
The total premiums ceded to the foreign reinsurers are: P842,466.71 in 1953, and
P721,471.85 in 1954. These premiums were excluded by PGCI from its gross income when it
filed its income tax returns for 1953 and 1954. It also did not withhold or pay tax on them.
On a letter dated April 13, 1959, the Commissioner of Internal Revenue assessed against
Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance premiums the amount of
230,673 and 234,364 for 1953 and 1954, respectively.
PGCI protested the assessment on the ground that reinsurance premiums ceded to
foreign reinsurers not doing business in the Philippines are not subject to withholding tax. Its
protest was denied and it appealed to the Court of Tax Appeals.
The Court on Tax Appeals affirmed the decision with modification on the amount payable.
It held that PGCI shall pay the respective sums of P202,192.00 and P173,153.00 or the total sum
of P375,345.00 as withholding income taxes for the years 1953 and 1954, plus the statutory
delinquency penalties thereon, with costs.
PGCI appealed to the Supreme Court arguing that the reinsurance premiums in question
did not constitute income from sources within the Philippines because the foreign reinsurers did
not engage in business in the Philippines, nor did they have office here.
ISSUE:
Whether reinsurance premiums ceded to foreign reinsurers not doing business in the
Philippines are subject to withholding tax.
HELD:
Yes, Section 24 of the Tax Code subjects foreign corporations to tax on their income from
sources within the Philippines. The reinsurance premiums were income created from the
undertaking of the foreign reinsurance companies to reinsure PGCI against liability for loss under
original insurances. Hence, such undertaking took place in the Philippines. These insurance
premiums, thus, came from sources within the Philippines, therefore subject to corporate income
tax. Furthermore, such provision provides that a foreign corporation is not required to engage in
business in the Philippines in subjecting its income to tax. It suffices that the activity creating the
income is performed or done in the Philippines. What is controlling is not the place of business
but the place of activity that created an income.
The power to tax 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 improvement 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.
 The Supreme Court affirmed the decision appealed from, and ordered the PGCI to pay to
the CIR the sums of P202,192.00 and P173,153.00, or a total amount of P375,345.00.

15. FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES v. COLON HERITAGE REALTY

CORPORATION, G.R. No. 203754, June 16, 2015

FACTS:
In 1993, the City of Cebu, in the exercise of its power to impose amusement tax under the
Local Government Code (LGC) in accordance with the Constitutional policy on local autonomy,
passed City Ordinance No. LXIX or the Revised Omnibus Tax Ordinance of the City of Cebu (tax
ordinance). The tax ordinance mandated proprietors, lessees or operators of theatres, cinemas,
concert halls, circuses, boxing stadia, and other places of amusement to pay an amusement tax
equivalent to 30% of the gross receipts of admission fees to the City Treasurer.
Meanwhile, on June 7, 2002, Congress passed RA 9167 creating the Film Development
Council of the Philippines (FDCP). Under Section 13 of the law, producers of graded “A” and “B”
films shall be entitled to an incentive equivalent to the amusement tax imposed and collected by
cities and municipalities in Metropolitan Manila and highly urbanized and independent component
cities. Producers of graded “A” films will receive 100% of the amusement tax which may otherwise
accrue to the cities and municipalities; whereas, producers of graded “B” films will receive 65% of
the amusement tax and the remaining 35% shall accrue to the funds of the FDCP. Section 14, on
the other hand, provided that the proprietors, operators, or lessees of theatres or cinemas shall
withheld the deducted amusement tax and remits it to the FDCP which shall reward the same to
the producers.
From the time RA 9167 took effect, all but the City of Cebu complied. Hence, the FDCP
through the Solicitor General sent demand letters for the unpaid amusement tax rewards on
January 2009 to the cinema proprietors and operators in Cebu City. The demands, however, were
unheeded. Meanwhile, the government of the City of Cebu also asserted its claim over the
amounts demanded by the FDCP. Therefore the City filed on May 18, 2009 before RTC Branch
14 a petition for declaratory relief with application for a writ of preliminary injunction. The petition
sought the declaration of Sections 13 and 14 of RA 9167 as invalid and unconstitutional. Similarly,
Colon Heritage Realty Corporation filed before RTC Branch 5 a case against FDCP seeking to
declare Section 14 of RA 9167 as unconstitutional.
The trial court (RTC Branch 14) ruled that Sections 13 and 14 of RA 9167 violated Section
5, Article X of the 1987 Constitution. Similarly, Branch 5 also ruled that Section 14 was
unconstitutional. Both trial courts held that Sections 13 and 14 were contrary to the basic policy
in local autonomy that all taxes, fees, and charges imposed by Local Government Units (LGU)
shall accrue exclusively to the LGU as enshrined in Section 5, Article X of the 1987 Constitution.

ISSUES:
(1) Whether or not the trial courts (RTC Branches 5 and 14) gravely erred in declaring
Secs. 13 and 14 of RA 9167 invalid for being unconstitutional.
(2) Whether or not the grant of amusement tax reward incentive is a tax exemption.

RULING:
[1. The Court ruled that RA 9167 violates local fiscal autonomy.]
The Supreme Court upheld the trial courts rulings. Based on the authority provided by
the provisions of the LGC, the City of Cebu passed its Revised Omnibus Tax Ordinance in 1993.
Then, after almost a decade of cities reaping benefits from this imposition, Congress, through RA
9167, amending the LGC, among others, transferred this income from the cities and municipalities
to petitioner FDCP, which proceeds will ultimately be rewarded to the producers of graded films.
For FDCP, the amendment (RA 9167) is a valid legislative manifestation of the intention
to remove from the grasp of the taxing power of the covered LGUs all revenues from amusement
taxes on graded “A” or “B” films which would otherwise accrue to the LGUs. An evaluation of the
provisions in question, however, compels the Court to disagree. The Court held that the
challenged provision reveals that the power to impose amusement taxes was NOT removed
from the covered LGUs. In other words, per RA 9167, covered LGUs still have the power to levy
amusement taxes, albeit at the end of the day, they will derive no revenue therefrom. As a matter
of fact, it is only through the exercise by the LGU of said power that the funds to be used for the
amusement tax reward can be raised. Without said imposition, the producers of graded films will
receive nothing from the owners, proprietors and lessees of cinemas operating within the territory
of the covered LGU.
The Court believed that such provisions are in clear contravention of the constitutional
command that taxes levied by LGUs shall accrue exclusively to said LGU and is repugnant
to the power of LGUs to apportion their resources in line with their priorities. Through the
application and enforcement of Section 14 of RA 9167, the income from the amusement taxes
levied by the covered LGUs did not and will under no circumstance accrue to them, not even
partially, despite being the taxing authority. Congress, therefore, clearly overstepped its
plenary legislative power, the amendment being violative of the fundamental law’s
guarantee on local autonomy.

[2. Grant of amusement tax reward incentive: not a tax exemption.]

The amusement tax reward is not, as the lower court posited, a tax exemption.
Exempting a person or entity from tax is to relieve or to excuse that person or entity from the
burden of the imposition. Here, however, it cannot be said that an exemption from amusement
taxes was granted by Congress to the producers of graded films. Take note that the burden of
paying the amusement tax in question is on the proprietors, lessors, and operators of the theatres
and cinemas that showed the graded films.
Simply put, both the burden and incidence of the amusement tax are borne by the
proprietors, lessors, and operators, not by the producers of the graded films. The transfer of the
amount to the film producers is actually a monetary reward given to them for having produced a
graded film, the funding for which was taken by the national government from the coffers of the
covered LGUs. Without a doubt, this is not an exemption from payment of tax.

16. PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant
appellees
G.R. No. L-31156 February 27, 1976 69 SCRA 460
FACTS:
Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of Republic
Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue
delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as
"municipal production tax" of the Municipality of Tanauan, Leyte, null and void. Ordinance 23
levies and collects from soft drinks producers and manufacturers a tax of one-sixteenth (1/16) of
a centavo for every bottle of soft drink corked, and Ordinance 27 levies and collects on soft drinks
produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE
CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the
undue delegation of authority, appellant contends that it allows double taxation, and that the
subject ordinances are void for they impose percentage or specific tax.

ISSUE: Are the contentions of the appellant tenable?

RULING:
No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an
essential and inherent attribute of sovereignty, belonging as a matter of right to every independent
government, without being expressly conferred by the people. It is a power that is purely
legislative and which the central legislative body cannot delegate either to the executive or judicial
department of the government without infringing upon the theory of separation of powers. The
exception, however, lies in the case of municipal corporations, to which, said theory does not
apply. Legislative powers may be delegated to local governments in respect of matters of local
concern. By necessary implication, the legislative power to create political corporations for
purposes of local self-government carries with it the power to confer on such local governmental
agencies the power to tax.

Also, there is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. It must be observed that the delegating authority
specifies the limitations and enumerates the taxes over which local taxation may not be exercised.
The reason is that the State has exclusively reserved the same for its own prerogative. Moreover,
double taxation, in general, is not forbidden by our fundamental law, so that double taxation
becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity or by the same jurisdiction for the same purpose, but not in a case where one
tax is imposed by the State and the other by the city or municipality.

On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales,
or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not)
and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered
solely for purposes of determining the tax rate on the products, but there is not set ratio between
the volume of sales and the amount of the tax.

17. PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC. v. CITY OF BUTUAN

FACTS
Pepsi Cola assails Municipal Order No. 110 as amended by Municipal Order No. 122, both
series of 1960. It sought to collect the sums it had paid to the City of Butuan under protest and to
prevent the enforcement of the municipal order.
Its warehouse in the City of Butuan served as a storage for its products the “Pepsi-Cola”
soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of
Agusan. On August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was
subsequently amended by Ordinance No. 122 and became effective November 28, 1960.
The ordinance, as amended, imposed a tax on any person, association, etc., of P0.10 per
case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4,926.63 from
August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961.
The tax only applied to sales by agents of consignees of outside dealers while sales by local
dealers were exempted.

ISSUES
Whether or not the disputed ordinance is null and void because:
(1) it partakes of the nature of an import tax;
(2) it amounts to double taxation; NO MERIT
(3) it is excessive, oppressive and confiscatory; NO MERIT
(4) it is highly unjust and discriminatory; and
(5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an
unconstitutional delegation of legislative powers. NO MERIT

RULING
Yes, the tax levied is null and void because it is discriminatory. The tax was violative of
the uniformity requirement of the Constitution because only sales by agents and consignees of
outside dealers were subject to the tax. The uniformity essential to the valid exercise of the power
of taxation does not require identity or equality under all circumstances or negate the authority to
classify the objects of taxation.

It is true that the uniformity essential to the valid exercise of the power of taxation does
not require identity or equality under all circumstances, or negate the authority to classify the
objects of taxation.5 The classification made in the exercise of this authority, to be valid, must,
however, be reasonable6 and this requirement is not deemed satisfied unless: (1) it is based upon
substantial distinctions which make real differences; (2) these are germane to the purpose of the
legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present; and (4) the classification applies
equally all those who belong to the same class.

If its purpose was merely to levy a burden upon the sale of soft drinks or carbonated
beverages, there is no reason why sales thereof by sealers other than agents or consignees of
producers or merchants established outside the City of Butuan should be exempt from the tax.

18. HON. EXEC. SEC. v. SOUTHWING HEAVY INDUSTRIES, et al.

G.R. No. 164171
FACTS:
On December 12, 2002, President Arroyo issued EO 156 entitled “Providing for a comprehensive
industrial policy and directions for the motor vehicle development program and its implementing
guidelines,” which prohibits the importation into the country, inclusive of the Special Economic
and Freeport Zone or the Subic Bay Freeport (SBF or Freeport), of used motor vehicles, subject
to a few exceptions. Southwing Heavy Industries, Inc. was one of the entities that instituted a
declaratory relief case, seeking the declaration of the unconstitutionality of Article 2, Sec. 3.1 of
EO 156. Additionally, Southwing Heavy Industries also sought that judgment be rendered: (1)
directing the government officials involved to allow the importation of used motor vehicles; (2)
ordering the Land Transportation Office and its subordinates inside the Subic Special Economic
Zone to process the registration of the imported used motor vehicles; and (3) in general, to allow
the unimpeded entry and importation of used motor vehicles subject only to the payment of the
required customs duties. The RTC of Olongapo City held that such provision constitutes an
unlawful usurpation of legislative power vested by the Constitution with Congress. The petitioners
appealed to the CA, but the CA denied the petition and sustained the finding of the RTC.
ISSUE: Whether or not the President’s act of issuing the EO constitutes unlawful usurpation of
the power of the Congress vested by the Constitution.
HELD:
No. Delegation of legislative powers to the President is permitted in Section 28(2) of Article VI of
the Constitution. It provides:
(2) The Congress may, by law, authorize the President to fix within specified limits, and
subject to such limitations and restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts within the framework of
the national development program of the Government.

Such delegation confers upon the President quasi-legislative power, which may be defined as the
authority delegated by the law-making body to the administrative body to adopt rules, and
regulations intended to carry out the provisions of the law and implement legislative policy. To be
valid, an administrative issuance, such as an executive order, must comply with the following
requisites:
(1) Its promulgation must be authorized by the legislature;

(2) It must be promulgated in accordance with the prescribed procedure;

(3) It must be within the scope of the authority given by the legislature; and

(4) It must be reasonable.

EO 156 satisfied the 1st and 2nd requisites of a valid administrative order, but failed to satisfy the
3rd and 4th requisites because it exceeded the scope of its application by extending the
prohibition to the Freeport, which RA 7227 considers to some extent, a foreign territory – when
the scope should be limited to the domestic industry. Moreover, to apply the proscription to the
Freeport would not serve the purpose of the EO. Hence, Art. 2, Sec. 3.1 of EO 356 is declared
VALID insofar as it applies to the Philippine territory outside the presently fenced-in former Subic
Naval Base area and VOID with respect to its application to the secured fenced-in former Subic
Naval Base area.

19. CENON CERVANTES V. AUDITOR GENERAL

G.R. No. L-4043, May 26, 1952
FACTS: Cenon Cervantes served in 1949 as the general manager of the National Abaca and
other Fibers Corporation (NAFCO). In the same year, the NAFCO Board of Directors granted 400
pesos per month as allowance to Cervantes as general manager of NAFCO. However, the
allowance as granted was disapproved by the Control Committee of the Government Enterprises
Council under Executive Order no. 93 upon recommendation by the NAFCO auditor and
concurrence by NAFCO auditor general. The disapproval was based on two grounds. First, it
violates the charter of NAFCO limiting manager’s salary to only 15,000 pesos a year. Second,
NAFCO is in a precarious financial condition.
Cervantes argued before the Court that Executive Order no. 93 is void because it is based on
R.A. no 51 which constitutes undue delegation of legislative power to the executive by providing
as one of the powers of the Control Committee, the power to pass upon the program of activities
and the yearly budget of expenditures approved by the directors of the corporation.
ISSUE: Whether Executive Order no. 93 is void because it is based on a law which constitutes
undue and illegal delegation of legislative power to the executive branch
HELD: NO. R.A. No. 51 is constitutional. It is not illegal delegation of legislative power to the
executive as argued by Cervantes but a mandate for the President to streamline all GOCC’s
operation. Executive Order 93 is valid because it is based on a valid law.
The rule is that so long as the Legislature "lays down a policy and a standard is established by
the statute" there is no undue delegation. Republic Act No. 51 in authorizing the President of the
Philippines, among others, to make reforms and changes in government-controlled corporations,
lays down a standard and policy that the purpose shall be to meet the exigencies attendant upon
the establishment of the free and independent government of the Philippines and to promote
simplicity, economy and efficiency in their operations. The standard was set and the policy fixed.
The President had to carry the mandate. This he did by promulgating the executive order in
question which does not constitute an undue delegation of legislative power.

20. Maceda vs Macaraig (1991)

FACTS:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the
development of hydraulic power and the production of power from other sources. RA 358 granted
NAPOCOR tax and duty exemption privileges. RA 6395 revised the charter of the NAPOCOR,
tasking it to carry out the policy of the national electrification and provided in detail NAPOCOR’s
tax exceptions. PD 380 specified that NAPOCOR’s exemption includes all taxes, etc. imposed
“directly or indirectly.” PD 938 dated May 27, 1976 further amended the aforesaid provision by
integrating the tax exemption in general terms under one paragraph.

ISSUE:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the enactment of
PD 938 on May 27, 1976 which amended PD 380 issued on January 11, 1974
RULING:

No, it is still exempt.

NAPOCOR is a non-profit public corporation created for the general good and welfare, and wholly
owned by the government of the Republic of the Philippines. From the very beginning of the
corporation’s existence, NAPOCOR enjoyed preferential tax treatment “to enable the corporation
to pay the indebtedness and obligation” and effective implementation of the policy
Enunciated in Section 1 of RA 6395.

From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be
interpreted liberally to enhance the tax-exempt status of NAPOCOR.

It is recognized that the rule on strict interpretation does not apply in the case of exemptions in
favor of government political subdivision or instrumentality. In the case of property owned by the
state or a city or other public corporations, the express exception should not be construed with
the same degree of strictness that applies to exemptions contrary to the policy of the state, since
as to such property “exception is the rule and taxation the exception.”

21. Commissioner of Internal Revenue vs. Central Luzon Drug Corporation

G.R. No. 159647 April 15, 2005

Facts: Respondents operated six drugstores under the business name Mercury Drug. From
January to December 1996 respondent granted 20% sales discount to qualified senior citizens on
their purchases of medicines pursuant to RA 7432 for a total of ₱ 904,769.

Respondent filed its annual Income Tax Return for taxable year 1996 declaring therein net losses.
Respondent also filed with petitioner a claim for tax refund/credit of ₱ 904,769.00 allegedly arising
from the 20% sales discount. Unable to obtain affirmative response from petitioner, respondent
elevated its claim to the Court of Tax Appeals. The court dismissed the same but upon
reconsideration, the latter reversed its earlier ruling and ordered petitioner to issue a Tax Credit
Certificate in favor of respondent citing that Sec. 229 of RA 7432 deals exclusively with illegally
collected or erroneously paid taxes but that there are other situations which may warrant a tax
credit/refund.

CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required neither a tax liability
nor a payment of taxes by private establishments prior to the availment of a tax credit. Moreover,
such credit is not tantamount to an unintended benefit from the law, but rather a just compensation
for the taking of private property for public use.

Issue:
May respondent, despite incurring a net loss, still claim the 20% sales discount as a tax credit?

Ruling: Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining
a 20% discount on their purchase of medicine from any private establishment in the country. The
latter may then claim the cost of the discount as a tax credit. Such credit can be claimed even if
the establishment operates at a loss.

A tax credit generally refers to an amount that is “subtracted directly from one’s total tax liability.”
It is an “allowance against the tax itself” or “a deduction from what is owed” by a taxpayer to the
government.

A tax credit should be understood in relation to other tax concepts. One of these is tax deduction
– which is subtraction “from income for tax purposes,” or an amount that is “allowed by law to
reduce income prior to the application of the tax rate to compute the amount of tax which is due.”
In other words, whereas a tax credit reduces the tax due, tax deduction reduces the income
subject to tax in order to arrive at the taxable income. A tax credit is used to reduce directly the
tax that is due, there ought to be a tax liability before the tax credit can be applied. Without that
liability, any tax credit application will be useless. There will be no reason for deducting the latter
when there is, to begin with, no existing obligation to the government. However, as will be
presented shortly, the existence of a tax credit or its grant by law is not the same as the availment
or use of such credit. While the grant is mandatory, the availment or use is not. If a net loss is
reported by, and no other taxes are currently due from, a business establishment, there will
obviously be no tax liability against which any tax credit can be applied. For the establishment to
choose the immediate availment of a tax credit will be premature and impracticable.

22. SECRETARY OF FINANCE CESAR B. PURISIMA AND COMMISSIONER OF INTERNAL

REVENUE KIM S. JACINTO-HENARES vs. REPRESENTATIVE CARMELO F. LAZATIN
AND ECOZONE PLASTIC ENTERPRISES CORPORATION
G.R. No. 210588 November 29, 2016

Facts: Secretary of Finance Cesar V. Purisima, pursuant to his authority to interpret tax laws and
upon the recommendation of petitioner Commissioner of Internal Revenue (CIR) Kim S. Jacinto-
Henares, signed Revenue Regulation (RR) 2-2012 on February 17, 2012 in response to reports
of smuggling of petroleum and petroleum products.
The RR requires the payment of value-added tax (VAT) and excise tax on the importation of all
petroleum and petroleum products coming directly from abroad and brought into the
Philippines, including Freeport and economic zones (FEZs).It then allows the refund of any VAT
or excise tax paid if the taxpayer proves that the petroleum previously brought in has been sold
to a duly registered FEZ locator and used pursuant to the registered activity of such locator. An
FEZ locator must first pay the required taxes upon entry into the FEZ of a petroleum product, and
must thereafter prove the use of the petroleum product.

Carmelo F. Lazatin, in his capacity as Pampanga First District Rep, filed a petition for prohibition
and injunction against the petitioners to annul and set aside RR 2-2012. Lazatin posits that RA
9400 treats the Clark Special Economic Zone and Clark Freeport Zone (Clark FEZ) as a separate
customs territory and allows tax and duty-free importations of raw materials, capital and
equipment into the zone. Thus, the imposition of VAT and excise tax, even on the importation of
petroleum products into FEZs, directly contravenes the law.

The RTC declared RR 2-2012 unconstitutional. RR 2-2012 violates RA 9400 because it imposes
taxes that, by law, are not due in the first place. Since RA 9400 clearly grants tax and duty-free
incentives to Clark FEZ locators, a revocation of these incentives by an RR directly contravenes
the express intent of the Legislature. In effect, the petitioners encroached upon the prerogative to
enact, amend, or repeal laws, which the Constitution exclusively granted to Congress.

Issue: Whether RR 2-2012 is valid and constitutional

Ruling: RR 2-2012 is invalid and unconstitutional because: a) it illegally imposes taxes upon FEZ
enterprises, which, by law, enjoy tax-exempt status, and b) it effectively amends the law (i.e., RA
7227, as amended by RA 9400) and thereby encroaches upon the legislative authority reserved
exclusively by the Constitution for Congress.
The respondents argued that the power to enact, amend, or repeal laws belong exclusively to
Congress. In passing RR 2-2012, petitioners illegally amended the law - a power solely vested on
the Legislature. The court agrees with the respondents.

The power of the petitioners to interpret tax laws is not absolute. The rule is that regulations may
not enlarge, alter, restrict, or otherwise go beyond the provisions of the law they administer;
administrators and implementors cannot engraft additional requirements not contemplated by the
legislature. It is worthy to note that RR 2-2012 does not even refer to a specific Tax Code provision
it wishes to implement. While it purportedly establishes mere administration measures for the
collection of VAT and excise tax on the importation of petroleum and petroleum products, not
once did it mention the pertinent chapters of the Tax Code on VAT and excise tax.
As RR 2-2012, an executive issuance, attempts to withdraw the tax incentives clearly accorded
by the legislative to FEZ enterprises, the *petitioners have arrogated upon themselves a power
reserved exclusively to Congress, in violation of the doctrine of separation of powers.

23. ABAKADA GURO PARTY LIST (FORMERLY AASJAS) OFFICERS SAMSON S.

ALCANTARA AND ED VINCENT S. ALBANO V. THE HONORABLE EXECUTIVE
SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF
FINANCE CESAR PURISIMA, G.R. NO. 168056, SEPTEMBER 01, 2005
Facts: On May 24, 2005, RA No. 9337 was signed into law, which will became effective on July
1, 2005. This law seeks to amend the provisions on National Internal Revenue Code. However,
before its effectivity, ABAKADA Guro Party List, et al., filed a petition for prohibition on May 27,
2005.
The petitioners alleged that Sections 4, 5, and 6 of RA 9337, amending Sections 106, 107,
and 108 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.
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 1⁄2%)
Likewise, Pimentel, Jr., et al., and Escudero, et al. contend in common that Sections 4, 5 and 6
of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving the
President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition
is met, constitutes undue delegation of the legislative power to tax.

Issue: Whether Secs. 4-6 of RA 9337 is unconstitutional as it constitutes an undue delegation of

the legislative power to tax.

Ruling: No, there is no undue delegation. The powers which Congress is prohibited from
delegating are those which are strictly, or inherently and exclusively, legislative. Purely legislative
power, which can never be delegated, has been described as the authority to make a complete
law – complete as to the time when it shall take effect and as to whom it shall be applicable – and
to determine the expediency of its enactment.
The case before the Court is not a delegation of legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and administration of the increase rate under the
law is contingent. The legislature has made the operation of the 12% rate effective January 1,
2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation
of the 12% rate upon factual matters outside of the control of the executive. Thus, it is the
ministerial duty of the President to immediately impose the 12% rate upon the existence of any of
the conditions specified by Congress. This is a duty which cannot be evaded by the President.
The legislative does not abdicate its functions when it describes what job must be done, who is
to do it, and what is the scope of his authority. For a complex economy, that may be the only way
in which the legislative process can go forward. A distinction has rightfully been made between
delegation of power to make the laws which necessarily involves a discretion as to what it shall
be, which constitutionally may not be done, and delegation of authority or discretion as to its
execution to be exercised under and in pursuance of the law, to which no valid objection can be
made.
57. Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
G.R. No. 159647 April 15, 2005 (Added case)

Facts: The City of Baguio has enacted the following ordinances:

1. No. 6-v, providing among other things for an amusement tax of P0.20 for every person entering
a night club licensed to do business in the city;
2. No. 11-V, providing for a property tax on motor vehicles kept and operated in the city;

Petitioner, a resident of the City of Baguio is holder of a municipal license for the operation of a
night club called "El Club Monaco. " As owner and operator of said night club, he has to pay to
the National Government an amusement tax on its total gross receipts and to the City of Baguio
the annual license fee provided for in said Ordinance No. 6-V.

But in addition to said amusement tax and license fee, he has also been required to pay the
amusement tax imposed in that same ordinance, which amounted to the total sum of P254,80 for
the first quarter of 1946. This sum he paid under protest.
As owner of a six-passenger automobile for private use a Chevrolet Ford or Sedan kept and
operated in the City of Baguio petitioner has already paid the sum of P37 as registration fee for
1946 under the Revised Motor Vehicle Law. But pursuant to Ordinance No. 11-V of said city he
would also have to pay in addition an annual property tax of P15 on the same automobile.

Issue: The whole case boils down to this question: Is the City of Baguio empowered to levy a
property tax on motor and an amusement tax on night clubs?

Ruling: It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent
power of taxation. The charter or statute must plainly show an intent to confer that power or the
municipality, cannot assume it. And the power when granted is to be construed in strictissimi juris.
Any doubt or ambiguity that power must be resolved against the municipality. Inferences,
implications, deductions all these have no place in the interpretation of the taxing power of a
municipal corporation.
As the lower court has correctly interpreted it this provision simply means that the city of Baguio
may impose taxes only in those cases specifically provided in any law. In other words for authority
to levy a tax on specific subjects one must look elsewhere in the statute book. For had the
provision been meant as a blanket authority to levy taxes, their would have been no need for the
phrase "as provided by law." The insertion of that phrase be speaks the legislative intent to have
the city exercise the law may provide.
There is of course no question as to the authority of the City of Baguio to collect a license fee on
dance halls and night clubs such authority being specifically given by section 260 of the Internal
Revenue Code . As a matter of fact petitioner has been paying such license fee without objection
or protest. But what is objected to is the tax of P0.20 for every person entering those amusement
places as provided for in Ordinance No. 6-V and this tax is apart and distinct from the license fee,
for the ordinance itself says that it shall be in addition to the latter. This tax is not authorized by
any Act of the Legislature. It is therefore beyond the power of the City of Baguio. to levy.

24. ENGRACIO FRANCIA

v.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ
G.R. No. L-67649 June 28, 1988

Facts:
Engracio Francia is the registered owner of a residential lot situated at Barrio San Isidro, now
District of Sta. Clara, Pasay City, Metro Manila. On October 15, 1977, a portion of his property
was expropriated by the national government for the amount of P4,116.00.
Since 1963 up to 1977, Francia failed to pay his real estate taxes. Thus, on December 5, 1977,
his property was sold at public auction by the City Treasurer of Pasay City to satisfy a tax
delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property. On March 3,
1979, Francia received a notice of hearing for the cancellation of his TCT and the issuance of a
new one in the name of Ho Hernandez.
On March 20, 1979, Francia filed a complaint to annul the auction sale. He later amended his
complaint on January 24, 1980. On April 23, 1981, the lower court dismissed the amended
complaint and ordered the issuance of a new Transfer Certificate of Title in favor of the defendant
Ho Fernandez over the parcel of land, and the plaintiff to pay defendant Ho Fernandez the sum
of P1,000.00 as attorney's fees.
The Intermediate Appellate Court affirmed the decision of the lower court in toto.
Francia filed a Petition for review before the Supreme Court arguing that respondent intermediate
appellate court committed a grave error of law in not holding petitioner's obligation to pay
P2,400.00 for supposed tax delinquency was set-off by the amount of P4,116.00 which the
government is indebted to the former.

Issue:
Whether or not the tax delinquency of Francia has been extinguished by legal compensation.

Ruling:
No. By legal compensation, obligations of persons, who in their own right are reciprocally debtors
and creditors of each other, are extinguished (Art. 1278, Civil Code). The circumstances of the
case do not satisfy the requirements provided by Article 1279
A person cannot refuse to pay a tax on the ground that the government owes him an amount
equal to or greater than the tax being collected. The collection of a tax cannot await the results of
a lawsuit against the government.
Taxes are not in the nature of contracts between the party and party but grow out of duty to, and
are the positive acts of the government to the making and enforcing of which, the personal consent
of individual taxpayers is not required
Internal revenue taxes cannot be the subject of compensation because government and taxpayer
are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a
"claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off."

25. EMILIO Y. HILADO, PETITIONER, VS. THE COLLECTOR OF INTERNAL REVENUE AND
THE COURT OF TAX APPEALS, RESPONDENTS; G.R. No. L-9408, October 31,
1956;Bautista Angelo J
Facts:
On March 31, 1952, petitioner filed his income tax return for 1951 with the treasurer of Bacolod
City wherein he claimed, among other things, 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. On the basis of said return, 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.
Meanwhile, on 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. The deduction was disallowed and the CIR demanded from him P3,546 as deficiency
income tax for said year. The petition for reconsideration filed by petitioner was denied so he filed
a petition for review with the CTA. The SC affirmed the assessment made by the CIR. Hence,
this appeal.
Issues:1. Whether Hilado can claim compensation during the war; and
2. Whether the internal revenue laws can be enforced during the war.
Ruling:
1. No. 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, according to petitioner,
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. In the second place, 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. As of the end of 1945,
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. And under the Philippine
Rehabilitation Act of 1946, the payments of claims by the War Damage Commission merely
depended upon its discretion to be exercised in the manner it may see it, but the non-payment of
which cannot give rise to any enforceable right.
2. Yes. 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.

26.Planters Products, Inc. v. FertiPhil Corp., G.R. No. 166006, 14 March 2008
Facts: Planters Product Inc (PPI) and Fertiphil Corp. were corporation engaged in importation and
distribution of fertilizers, pesticides and other agricultural chemicals. On June 3, 1985, President
Marcos issued LOI No. 1465 wherein it directed Fertilizer and Pesticide Authority (FPA) to add in
its pricing formula an additional capital contribution of not less than 10 peso per bag to be collected
from those engaged in distribution and importation of fertilizers, pesticides and agricultural
chemicals. In accordance with LOI 1465, the capital contribution shall be collected in favor of PPI
and the collection of it will be continued until PPI will be viable. However, after the 1986 revolution,
FPA voluntarily stopped collecting the capital contribution from Fertiphil Corp. After which,
Fertiphil questioned the constitutionality of LOI No. 1465 assailing that it was not for public
purpose and demanded for a refund of the capital contribution the have paid.
Issue: Whether LOI No. 1465 constitutes a valid legislation pursuant to the exercise of taxation
for public purpose?
Ruling:
No, the levy imposed under LOI No. 1465 was not for a public purpose. First, the LOI expressly
provided that the levy be imposed to benefit PPI, a private company. The purpose is explicit from
Clause 3 of the law. Second, the LOI provides that the imposition of the ₱10 levy was conditional
and dependent upon PPI becoming financially "viable." This suggests that the levy was actually
imposed to benefit PPI. Third, the RTC and the CA held that the levies paid under the LOI were
directly remitted and deposited by FPA to Far East Bank and Trust Company, the depositary bank
of PPI. Fourth, the levy was used to pay the corporate debts of PPI. Thus, PPI shall not profit from
an unconstitutional law. Justice and equity dictate that PPI must refund the amounts paid by
Fertiphil.

27. HON. RAMON D. BAGATSING, ET AL. v. HON. PEDRO A. RAMIREZ and the
FEDERATION OF MANILA MARKET VENDORS, INC.
74 SCRA 306 December 17, 1976

FACTS: On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN
ORDINANCE REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING
FEES FOR THE RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION
THEREOF AND FOR OTHER PURPOSES." Ramon D. Bagatsing, approved the ordinance on
June 15, 1974.

On February 17, 1975, Federation of Manila Market Vendors, Inc. filed before the Court of First
Instance of Manila, presided over by Judge Ramirez, seeking the declaration of nullity of
Ordinance No. 7522. Ramirez rendered its decision on August 29, 1975, declaring the nullity of
Ordinance No. 7522 of the City of Manila on the primary ground of non-compliance with the
requirement of publication under the Revised City Charter.

Aside from non-compliance with the publication requirement, the Federation of Manila Market
Vendors, Inc. bewails that the market stall fees imposed in the disputed ordinance are diverted to
the exclusive private use of the Asiatic Integrated Corporation since the collection of the fees had
been let by the City of Manila to the corporation in a “Management and Operating Contract.”

ISSUE: Does the delegation of the collection of taxes to a private entity (Asiatic Integrated
Corporation) invalidates a tax ordinance and defeats its public purpose?
RULING: No. The assumption is saddled on erroneous premise. The fees collected do not go
direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the
corporation but for the purpose of raising revenues for the city. That is the object it serves. The
entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So
long as the purpose is public, it does not matter whether the agency through which the money is
dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object
for which the fund is raised. It is not dependent on the nature or character of the person or
corporation whose intermediate agency is to be used in applying it. The people may be taxed for
a public purpose, although it be under the direction of an individual or private corporation.

28. GOMEZ v. PALOMAR (GR No. L-23645, October 29, 1968 / 25 SCRA 827)

FACTS:

Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando, Pampanga
which did not bear the special anti-TB stamp required by the RA 1635 otherwise known as the
Anti-Tuberculosis Stamp Law. The law in question requires an additional 5 centavo stamp for
every mail being posted, and no mail shall be delivered unless bearing the said stamp. As a
consequence, it was returned to the petitioner.

Petitioner now assails the constitutionality of the statute claiming that RA 1635 is violative
of the equal protection clause because it constitutes mail users into a class for the purpose of the
tax while leaving untaxed the rest of the population and that even among postal patrons the statute
discriminatorily grants exemptions.

The petitioner further argues that the tax in question is invalid, first, because it is not levied
for a public purpose as no special benefits accrue to mail users as taxpayers, and second,
because it violates the rule of uniformity in taxation.

ISSUES:
1. Whether the Anti-TB Stamp Law unconstitutional, for being allegedly violative of the equal
protection clause?
2. Whether the tax in question is invalid for not being levied for a public purpose?
3. Whether the tax in question in violates the rule of uniformity in taxation by the infringement
by the imposition of a flat rate rather than a graduated tax?

HELD:
1. No. It is settled that the legislature has the inherent power to select the subjects of taxation
and to grant exemptions. This power has aptly been described as "of wide range and
flexibility." Indeed, it is said that in the field of taxation, more than in other areas, the
legislature possesses the greatest freedom in classification. The reason for this is that
traditionally, classification has been a device for fitting tax programs to local needs and
usages in order to achieve an equitable distribution of the tax burden.

The classification of mail users is based on the ability to pay, the enjoyment of a
privilege and on administrative convenience. Tax exemptions have never been thought of
as raising revenues under the equal protection clause.

2. No. If by public purpose the petitioner means benefit to a taxpayer as a return for what he
pays, then it is sufficient answer to say that the only benefit to which the taxpayer is
constitutionally entitled is that derived from his enjoyment of the privileges of living in an
organized society, established and safeguarded by the devotion of taxes to public
purposes. Any other view would preclude the levying of taxes except as they are used to
compensate for the burden on those who pay them and would involve the abandonment
of the most fundamental principle of government — that it exists primarily to provide for
the common good.

According to the trial court, the money raised from the sales of the anti-TB stamps
is spent for the benefit of the Philippine Tuberculosis Society, a private organization,
without appropriation by law. But as the Solicitor General points out, the Society is not
really the beneficiary but only the agency through which the State acts in carrying out what
is essentially a public function. The money is treated as a special fund and as such need
not be appropriated by law.
 3. No. A tax need not be measured by the weight of the mail or the extent of the service
rendered. We have said that considerations of administrative convenience and cost afford
an adequate ground for classification. The same considerations may induce the legislature
to impose a flat tax which in effect is a charge for the transaction, operating equally on all
persons within the class regardless of the amount involved.

29. WENCESLAO PASCUAL v. SECRETARY OF PUBLIC WORKS +

GR No. L-10405, Dec 29, 1960

FACTS:
An item of Republic Act No. 920, which appropriates P85,000 for the construction,
reconstruction, repair, extension and improvement of projected feeder roads, believed to be a
private streets of a private subdivision was questioned by the Petitioner, Governor Wenceslao
Pascual, in his capacity as taxpayer. Pascual alleged that the appropriation of such construction
with public funds is illegal and, therefore, void ab initio for it would greatly enhance or increase
the value of the aforementioned subdivision and will relieve the Owner- Respondent, Jose Zulueta
(who, at the time of the passage and approval of said Act, was a member of the Senate of the
Philippines) from burden of constructing his subdivision streets or roads. He contends that the
continuous construction of said projected feeder roads being undertaken by the Bureau of Public
Highways, unless restrained by the court, will allow the respondent to execute, comply with, follow
and implement the illegal provision of law, "to the irreparable damage, detriment and prejudice
not only to the petitioner but to the Filipino nation." He then instituted an action for declaratory
relief, with injunction enjoining parties respondent from making and securing any new and further
releases on the aforesaid item of Republic Act No. 920 and from making any further payments
out of said illegally appropriated funds. Respondents moved to dismiss the petition upon the
ground that petitioner had "no legal capacity to sue", and that the petition did "not state a cause
of action". He also contends that the donation of the property made to the government few months
after the enforcement of the law is beneficial not only to the government but also to those residents
of the subdivision.
Lower court dismissed the case and dissolved the writ of preliminary injunction. Hence
this appeal.
ISSUE: Whether the appropriation item under R.A 920 is constitutional.
RULING:
"Generally, under the express or implied provisions of the constitution, public funds may
be used only for a public purpose. The right of the legislature to appropriate funds is correlative
with its right to tax, and, under constitutional provisions against taxation except for public purposes
and prohibiting: the collection of a tax for one purpose and the devotion thereof to another
purpose, no appropriation of state funds can be made for other than a public purpose. * * *
Referring to the P85,000.00 appropriation for the projected feeder roads in question, the
legality thereof depended upon whether said roads were public or private property when the bill,
which, later on, became Republic Act No. 920, was passed by Congress, or, when said bill was
approved by the President and the disbursement of said sum became effective, or on June 20,
1953 (see section 13 of said Act). Inasmuch as the land on which the projected feeder roads were
to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought
a private purpose, and, hence, was null and void.
"In the determination of the degree of interest essential to give the requisite standing to
attack the constitutionality of a statute the general rule is that not only persons individually
affected, but also taxpayers, have sufficient interest in preventing the illegal expenditure of
moneys raised by taxation and may therefore question llw constitutionality of statutes requiring
expenditure of public moneys." (11 Am. Jur. 761; italics supplied.)

30. WALTER LUTZ, as Judicial Administrator of the Intestate of the deceased Antonio
Jayme Ledesma Vs. ANTONIO ARANETA, as collector of Internal Revenue, G.R No. L-7856.
December 22, 1955
FACTS:
Walter Lutz in his capacity as the Judicial Administrator of the intestate of the deceased Antonio
Jayme Ledesma, seeks to recover from the Collector of the Internal Revenue the total sum of P
14, 666.40 paid by the estate as taxes, under section 3 of Commonwealth Act No. 567, also
known as the Sugar Adjustment Act, for the crop years 1948-1949 and 1949-1950.

Commonwealth Act. 567 Section 2 provides for an increase of the existing tax on the manufacture
of sugar on a graduated basis, on each picul of sugar manufacturer; while section 3 levies on the
owners or persons in control of the land devoted to the cultivation of sugarcane and ceded to
others for consideration, on lease or otherwise - "a tax equivalent to the difference between the
money value of the rental or consideration collected and the amount representing 12 per centum
of the assessed value of such land. It was alleged that such tax is unconstitutional and void, being
levied for the aid and support of the sugar industry exclusively, which in Lutz’ opinion is not a
public purpose for which a tax may be constitutionally levied. The action was dismissed by the
CFI thus Lutz appealed directly to the Supreme Court.
ISSUE:Whether or not the tax imposition in the Commonwealth Act No. 567 is unconstitutional.
RULING:
Yes, the Supreme Court held that the fact that sugar production is one of the greatest industry of
our nation, sugar occupying a leading position among its export products; that it gives employment
to thousands of laborers in the fields and factories; that it is a great source of the state's wealth,
is one of the important source of foreign exchange needed by our government and is thus pivotal
in the plans of a regime committed to a policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general welfare. Hence it was competent for the
legislature to find that the general welfare demanded that the sugar industry be stabilized in turn;
and in the wide field of its police power, the law-making body could provide that the distribution of
benefits therefrom be readjusted among its components to enable it to resist the added strain of
the increase in taxes that it had to sustain.
The subject tax is levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is primarily a valid exercise
of police power.

31. Menorca, Adrianne Shane M.

Ferrer vs. Bautista 760 SCRA 65
G.R. No. 210551, June 30, 2015

Facts: The City of Quezon passed two ordinances, the first one was the Socialized Housing Tax
of QC allowing the imposition of special assessment (1/2 of the assessed valued of land in excess
of P100k) and the second one was Ordinance No. SP-2235, S-2013 on Garbage Collection Fees
imposing fees depending on the amount of the land or floor area).

Jose Ferrer, as a registered owner of a property in Quezon City questioned the validity of the city
ordinances.

According to Ferrer:
The city has no power to impose the tax, the SHT violates the rule on equality because it burdens
real property owners with expenses to provide funds for the housing of informal settlers. The SHT
is confiscatory or oppressive.Also, he assails the validity of the garbage fees imposition because:
It violates the rule on double taxation.It violates the rule on equality because the fees are collected
from only domestic households and not from restaurants, food courts, fast food chains, and other
commercial dining places that spew garbage much more than residential property owners.

Issue: WON the ordinances were valid.

Ruling: 1st ordinance: Socialized Housing Tax of Quezon City is VALID.

Cities have the power to tax

It must be noted that local government units such as cities has the power to tax. The collection
for the socialized housing tax is valid. It must be noted that the collections were made to accrue
to the socialized housing programs and projects of the city.

The imposition was for a public purpose (exercise of power of taxation + police power)
In this case, there was both an exercise of the power to tax (primary) and police power (incidental).
Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless
constituents but advantageous to the real property owners as well.

The situation will improve the value of the their property investments, fully enjoying the same in
view of an orderly, secure, and safe community, and will enhance the quality of life of the poor,
making them law-abiding constituents and better consumers of business products.

There is no violation of the rule on equality

Note: There is a substantial distinction between: real property owner and an informal settler. In
fact, the Supreme Court said that the disparity is so obvious. It is inherent in the power to tax that
a State is free to select the subjects of taxation. Inequities which result from a singling out of one
particular class for taxation or exemption infringe no constitutional limitation.

All these requisites are complied with: An ordinance based on reasonable classification does not
violate the constitutional guaranty of the equal protection of the law. The requirements for a valid
and reasonable classification are: (1) it must rest on substantial distinctions; (2) it must be
germane to the purpose of the law; (3) it must not be limited to existing conditions only; and (4) it
must apply equally to all members of the same class.

The ordinance is not oppressive or confiscatory

The ordinance is also not oppressive since the tax rate being imposed is consistent with the UDHA
(Urban Development and Housing Act of 1992). While the law authorizes LGUs to collect SHT on
properties with an assessed value of more than P50,000.00, the questioned ordinance only
covers properties with an assessed value exceeding P100,000.00. As well, the ordinance
provides for a tax credit equivalent to the total amount of the special assessment paid by the
property owner beginning in the sixth (6th) year of the effectivity of the ordinance.

2nd ordinance: The imposition of garbage fee is INVALID.

Note: There was no violation of double taxation but there was a violation of the rule on equity.

There is no violation of double taxation: the garbage fees are not taxes
In Progressive Development Corporation v. Quezon City, the Court declared that:
"if the generating of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is
also obtained does not make the imposition a tax."

Contention of Ferrer: that the imposition of garbage fee is tantamount to double taxation because
garbage collection is a basic and essential public service that should be paid out from property
tax, business tax, transfer tax, amusement tax, community tax certificate, other taxes, and the
IRA of the Quezon City Government. All these are valid taxes. The garbage fees are license fees

Footnote: In order to constitute double taxation in the objectionable or prohibited sense the same
property must be taxed twice when it should be taxed but once; both taxes must be imposed on
the same property or subject-matter, for the same purpose, by the same State, Government, or
taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and
they must be the same kind or character of tax.

There is a violation of the rule on equality: no substantial distinction

There is no substantial distinction between an occupant of a lot, on one hand, and an occupant
of a unit in a condominium, socialized housing project or apartment, on the other hand.
Most likely, garbage output produced by these types of occupants is uniform and does not vary
to a large degree; thus, a similar schedule of fee is both just and equitable.

The garbage fees or rates are unjust and inequitable

A resident of a 200 sq. m. unit in a condominium or socialized housing project has to pay twice
the amount than a resident of a lot similar in size; unlike unit occupants, all occupants of a lot with
an area of 200 sq. m. and less have to pay a fixed rate of Php100.00; and the same amount of
garbage fee is imposed regardless of whether the resident is from a condominium or from a
socialized housing project.

The classifications are not germane to the purpose of the ordinance

The declared purpose is: "promoting shared responsibility with the residents to attack their
common mindless attitude in over-consuming the present resources and in generating waste."

Instead of simplistically categorizing the payee into land or floor occupant of a lot or unit of a
condominium, socialized housing project or apartment, respondent City Council should have
considered factors that could truly measure the amount of wastes generated and the appropriate
fee for its collection. Factors include, among others, household age and size, accessibility to
waste collection, population density of the barangay or district, capacity to pay, and actual
occupancy of the property.
SC:
→ Validity of Socialized Housing Tax of Quezon City is upheld.
→ Ordinance No. SP-2235, S-2013, which collects an annual garbage fee on all domestic
households in Quezon City, is unconstitutional and illegal.