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.
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.

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.

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.)

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.