FUNDAMENTALS OF TAXATION
ABAN: Tax is the power of the sovereign through its law making body to raise
revenues to defray the necessary expenses of the government
- inherent power of the sovereign exercised through the legislature to impose
burdens upon subjects and objects within its jurisdiction for the purpose of
raising revenues to carry out the legitimate objects of the government. It is
a mode of raising revenue for public purposes.
- It is the power by which the sovereign raises revenue to defray the expenses
of the government. It is a way of apportioning the cost of government among
those who in some measure are privileged to enjoy its benefits and must
bear its burden.
Nature and Characteristics
1) Inherent
Pepsi vs Municipality of Tanauan
G.R. No. L-31156 February 27, 1976
Pepsi-Cola Bottling Company commenced a complaint with preliminary
injunction to declare Section 2 of Republic Act No. 2264. 1 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, series of 1962, of the municipality
of Tanauan, Leyte, null and void.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on
September 25, 1962, levies and collects "from soft drinks producers and
manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle
of soft drink corked." 2
Municipal Ordinance No. 27, which was approved on October 28, 1962,
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." 4
RTC dismissed the complaint and upheld the constitutionality of Sec. 2 of RA 2264
and the municipal ordinances. Hence, the appeal.
ISSUEs:
1. Is Section 2, Republic Act No. 2264 an undue delegation of power,
confiscatory and oppressive?
2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose
percentage or specific taxes?
3. Are Ordinances Nos. 23 and 27 unjust and unfair?
HELD:
1. 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. 6 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. 7 This is sanctioned by immemorial
practice. 8 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. 9 Under the
New Constitution, local governments are granted the autonomous authority
to create their own sources of revenue and to levy taxes. Section 5, Article
XI provides: "Each local government unit shall have the power to create its
sources of revenue and to levy taxes, subject to such limitations as may be
provided by law." Withal, it cannot be said that Section 2 of Republic Act No.
2264 emanated from beyond the sphere of the legislative power to enact
and vest in local governments the power of local taxation.
The plenary nature of the taxing power thus delegated, would not
suffice to invalidate the said law as confiscatory and oppressive. In
delegating the authority, the State is not limited the exact measure of that
which is exercised by itself. When it is said that the taxing power may be
delegated to municipalities and the like, it is meant that there may be
delegated such measure of power to impose and collect taxes as the
legislature may deem expedient. Thus, municipalities may be permitted to
tax subjects which for reasons of public policy the State has not deemed
wise to tax for more general purposes. 10 This is not to say though that the
constitutional injunction against deprivation of property without due process
of law may be passed over under the guise of the taxing power, except when
the taking of the property is in the lawful exercise of the taxing power, as
when PUJO
(1) the tax is for a public purpose;
(2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of
the government levying the tax; and
(4) in the assessment and collection of certain kinds of taxes notice
and opportunity for hearing are provided. 11
Due process is usually violated where the tax imposed is for a private as
distinguished from a public purpose; a tax is imposed on property outside
the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods
are used in assessing and collecting taxes. But, a tax does not violate the
due process clause, as applied to a particular taxpayer, although the purpose
of the tax will result in an injury rather than a benefit to such taxpayer. Due
process does not require that the property subject to the tax or the amount
of tax to be raised should be determined by judicial inquiry, and a notice and
hearing as to the amount of the tax and the manner in which it shall be
apportioned are generally not necessary to due process of law. 12
DELEGATED AUTHORITY NOT UNCONSTITUTIONAL ON THE
THEORY OF DOUBLE TAXATION. 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. 13 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, since
We have not adopted as part thereof the injunction against double taxation
found in the Constitution of the United States and some states of the
Union. 14 Double taxation becomes obnoxious only where the taxpayer is
taxed twice for the benefit of the same governmental entity 15 or by the
same jurisdiction for the same purpose, 16 but not in a case where one tax
is imposed by the State and the other by the city or municipality.
2. ORDINANCE 27 IMPLIEDLY REPEALED ORDINANCE 23, NO
DOUBLE TAXATION. The plaintiff-appellant submits that Ordinance No. 23
and 27 constitute double taxation, because these two ordinances cover the
same subject matter and impose practically the same tax rate. The thesis
proceeds from its assumption that both ordinances are valid and legally
enforceable. This is not so. The intention of the Municipal Council of Tanauan
in enacting Ordinance No. 27 was to substitute prior Ordinance No. 23, thus
operating as an implied repeal. Even the Provincial Fiscal, counsel for
defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27,
series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter
are inconsistent with the provisions of the former."
3. AN INCREASE IN THE TAX ALONE WOULD NOT SUPPORT THE
CLAIM THAT THE TAX IS OPPRESSIVE, UNJUST AND
CONFISCATORY. The tax of one (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity on all softdrinks, produced or manufactured, or an
equivalent of 1- centavos per case, 23 cannot be considered unjust and
unfair. Municipal corporations are allowed much discretion in
determining the rates of imposable taxes. This is in line with the
constitutional policy of according the widest possible autonomy to local
governments in matters of local taxation, an aspect that is given expression
in the Local Tax Code (PD No. 231, July 1, 1973). Unless the amount is so
excessive as to be prohibitive, courts will go slow in writing off an ordinance
as unreasonable. 27 Reluctance should not deter compliance with an
ordinance such as Ordinance No. 27 if the purpose of the law to further
strengthen local autonomy were to be realized. Municipalities are
empowered to impose, not only municipal license taxes upon persons
engaged in any business or occupation but also to levy for public purposes,
just and uniform taxes. The ordinance in question (Ordinance No. 27) comes
within the second power of a municipality.
Constitutionality of Section 2 of Republic Act No. 2264, otherwise known as
the Local Autonomy Act, as amended, is hereby upheld and Municipal
Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962, re-
pealing Municipal Ordinance No. 23, same series, is hereby declared of valid
and legal effect.
Tio vs Videogram Regulatory Board
FACTS: Valentin Tio is a videogram operator challenged 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
(BOARD). The decree was later amended by the NIRC thereby imposing a tax to
be collected equivalent to 30% on the gross receipts payable to the local
government. Among other grounds, he contends that such imposition is harsh,
confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due
process clause of the constitution.
In the whereas clauses, one of the intentions of the decree is to alleviate the dire
financial condition of the movie industry and at the same time provide an additional
source of revenue for the government.
ISSUE: w/n the 30% tax imposition is harsh, oppressive, and confiscatory? NO. it
was imposed primarily to answer the need for regulating video industry,
particularly rampant film piracy and flagrant violation of intellectual property rights.
HELD:
A TAX DOES NOT CEASE TO BE VALID MERELY BECAUSE IT REGULATES,
DISCOURAGES, OR EVEN DEFINITELY DETERS THE ACTIVITIES
TAXED. The power to impose taxes is one so unlimited in force and so
searching in extent, that the courts scarcely venture to declare that it is
subject to any restrictions whatever, except such as rest in the discretion
of the authority which exercises it. 9 In imposing a tax, the legislature acts
upon its constituents. This is, in general, a sufficient security against erroneous
and oppressive taxation.
THE TAX IMPOSED BY THE DECREE IS NOT ONLY A REGULATORY BUT
ALSO A REVENUE MEASURE prompted by the realization that earnings of
videogram establishments of around P600 million per annum have not been
subjected to tax, thereby depriving the Government of an additional source of
revenue. It is an end-user tax, imposed on retailers for every videogram they make
available for public viewing. It is similar to the 30% amusement tax imposed or
borne by the movie industry which the theater-owners pay to the government, but
which is passed on to the entire cost of the admission ticket, thus shifting the tax
burden on the buying or the viewing public. It is a tax that is imposed uniformly
on all videogram operators.
THE LEVY OF THE 30% TAX IS FOR A PUBLIC PURPOSE. It was imposed
primarily to answer the need for regulating the video industry, particularly because
of the rampant film piracy, the flagrant violation of intellectual property rights, and
the proliferation of pornographic video tapes. And while it was also an objective of
the DECREE to protect the movie industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist even if the motive which impelled the
legislature to impose the tax was to favor one industry over another. 11 It is
inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that "inequities which result from a
singling out of one particular class for taxation or exemption infringe no
constitutional limitation". 12 Taxation has been made the implement of the state's
police power.13
At bottom, the rate of tax is a matter better addressed to the taxing legislature.
The power to tax involves the power to destroy Marshall Doctrine
The power to tax is not the power to destroy while the court sits Holmes
Doctrine
Philippine Health Care vs CIR
FACTS: Phil. Health Care (PHC) is a domestic corporation whose primary
purpose is [t]o establish, maintain, conduct and operate a prepaid group practice
health care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide for
the administrative, legal, and financial responsibilities of the organization.
On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent
PHC a formal demand letter and the corresponding assessment notices demanding
the payment of deficiency taxes, including surcharges and interest, for the taxable
years 1996 and 1997 in the total amount of P224m. The deficiency [documentary
stamp tax (DST)] assessment was imposed on PHCs health care agreement with
the members of its health care program pursuant to Section 185 of the 1997 Tax
Code.
Petitioner protested the assessment. CIR claimed that PHCs health care
agreement was a contract of insurance subject to DST under Section 185 of the
1997 Tax Code.
CA: petitioners health care agreement was in the nature of a non-life insurance
contract subject to DST. Respondent is ordered to pay the deficiency Documentary
Stamp Tax.
ISSUE: Was petitioner, as a Health Maintenance Organization, subject to
Documentary Stamp Tax? No.
HELD:
the language of Section 185, it is evident that two requisites must concur before
the DST can apply, namely:
(1) the document must be a policy of insurance or an obligation in the
nature of indemnity and
(2) the maker should be transacting the business of accident, fidelity,
employers liability, plate, glass, steam boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance (except life, marine, inland, and fire
insurance).
A HEALTH CARE AGREEMENT IS NOT AN INSURANCE CONTRACT
CONTEMPLATED UNDER SECTION 185 OF THE NIRC OF 1997
Section 185. Stamp tax on fidelity bonds and other insurance policies. On all
policies of insurance or bonds or obligations of the nature of indemnity
for loss, damage, or liability made or renewed by any person, association or
company or corporation transacting the business of accident, fidelity, employers
liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other
branch of insurance (except life, marine, inland, and fire insurance), xxxx
(Emphasis supplied)
TAX STATUTES ARE STRICTLY CONSTRUED AGAINST THE TAXING
AUTHORITY. This is because taxation is a destructive power which interferes with
the personal and property rights of the people and takes from them a portion of
their property for the support of the government. Hence, tax laws may not be
extended by implication beyond the clear import of their language, nor their
operation enlarged so as to embrace matters not specifically provided. The fact
that the NIRC contained no specific provision on the DST liability of health care
agreements of HMOs at a time they were already known as such, belies any
legislative intent to impose it on them.
THE POWER TO TAX IS THE POWER TO DESTROY
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 is to pay it. So potent indeed is the power
that it was once opined that the power to tax involves the power to destroy.
DST WAS HIGHLY OPPRESSIVE. IT IS NOT THE PURPOSE OF THE GOVT
TO THROTTLE PRIVATE BUSINESS. Petitioner claims that the assessed DST to
date which amounts to P376 million is way beyond its net worth of P259 million.
Respondent never disputed these assertions. Given the realities on the ground,
imposing the DST on petitioner would be highly oppressive. It is not the purpose
of the government to throttle private business. On the contrary, the government
ought to encourage private enterprise. Petitioner, just like any concern organized
for a lawful economic activity, has a right to maintain a legitimate business. [56] As
aptly held in Roxas, et al. v. CTA, et al. :
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.
Legitimate enterprises enjoy the constitutional protection not to be taxed out of
existence. Incurring losses because of a tax imposition may be an acceptable
consequence but killing the business of an entity is another matter and should not
be allowed. It is counter-productive and ultimately subversive of the nations thrust
towards a better economy which will ultimately benefit the majority of our people.
CIR vs. SM PRIME HOLDINGS
GR 183505. February 26, 2010
FACTS:
SM Prime Holdings and First Asia Realty Development Corporation are engaged in
the business of operating cinema houses, among others.
The BIR assessed and demanded from SM Prime and FIRST ASIA VAT deficiency
on its cinema sales. Both protested.
CIR: Granted.
The activity of showing cinematographic films is not a service covered
by VAT under the NIRC of 1997 as amended, but an activity subject to
amusement tax under the LGC of 1991.
Consistent with the States policy to have a viable, sustainable and
competitive theater and film industry, the national government should
be precluded from imposing its own business tax in addition to that
already imposed and collected by local government units.
CTA En Banc: Affirmed.
And since the showing or exhibition of motion pictures, films or movies
by cinema operators or proprietors is not among the enumerated
activities in Section 108 of the NIRC, then gross receipts derived by
cinema/ theater operators or proprietors from admission tickets in
showing motion pictures, film or movie are not subject to VAT.
ISSUE:
WON THE GROSS RECEIPTS DERIVED BY OPERATORS OR PROPRIETORS
OF CINEMA/THEATER HOUSES FROM ADMISSION TICKETS ARE
SUBJECT TO VAT. No.
HELD:
The enumeration of the sale or exchange of services subject to VAT is not
exhaustive. The words, including, similar services, and shall likewise include,
indicate that the enumeration in Section 108 of the NIRC is by way of example
only.
Tracking down the history of the law:
1. Historically, the activity of showing motion pictures, films or movies by
cinema/theater operators or proprietors has always been considered
as a form of entertainment subject to amusement tax.
2. Prior to the Local Tax Code, all forms of amusement tax were
imposed by the national government.
3. When the Local Tax Code was enacted, amusement tax on admission
tickets from theaters, cinematographs, concert halls, circuses and
other places of amusements were transferred to the local
government.
4. Under the NIRC of 1977, the national government imposed amusement
tax only on proprietors, lessees or operators of cabarets, day and
night clubs, Jai-Alai and race tracks.
5. The VAT law was enacted to replace the tax on original and
subsequent sales tax and percentage tax on certain services.
6. When the VAT law was implemented, it exempted persons
subject to amusement tax under the NIRC from the coverage
of VAT.
7. When the Local Tax Code was repealed by the LGC of 1991, the local
government continued to impose amusement tax on admission tickets
from theaters, cinematographs, concert halls, circuses and other places
of amusements.
8. Amendments to the VAT law have been consistent in
exempting persons subject to amusement tax under the NIRC
from the coverage of VAT.
9. Only lessors or distributors of cinematographic films are included in the
coverage of VAT.
THESE REVEAL THE LEGISLATIVE INTENT NOT TO IMPOSE VAT ON
PERSONS ALREADY COVERED BY THE AMUSEMENT TAX. This holds true
even in the case of cinema/theater operators taxed under the LGC of 1991
precisely because the VAT law was intended to replace the percentage tax
on certain services. The mere fact that they are taxed by the local government
unit and not by the national government is immaterial. The Local Tax Code, in
transferring the power to tax gross receipts derived by cinema/theater
operators or proprietor from admission tickets to the local government,
did not intend to treat cinema/theater houses as a separate class. No
distinction must, therefore, be made between the places of amusement taxed by
the national government and those taxed by the local government.
To hold otherwise would impose an unreasonable burden on cinema/theater
houses operators or proprietors, who would be paying an additional 10% VAT on
top of the 30% amusement tax imposed by Section 140 of the LGC of 1991, or a
total of 40% tax. Such imposition would result in injustice, as persons taxed under
the NIRC of 1997 would be in a better position than those taxed under the LGC of
1991. We need not belabor that A LITERAL APPLICATION OF A LAW MUST
BE REJECTED IF IT WILL OPERATE UNJUSTLY OR LEAD TO ABSURD
RESULTS. Thus, we are convinced that the legislature never intended to include
cinema/theater operators or proprietors in the coverage of VAT.
On this point, it is apropos to quote the case of Roxas v. Court of Tax Appeals, to
wit:
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.
REPUBLIC vs. CAGUIOA
GR 168584. October 15, 2007
NO INJUNCTION PRINCIPLE
FACTS:
Pursuant to RA 72273 or the Bases Conversion and Development Act of 1992,
several domestic corporations (private respondents) doing business at Subic
Special Economic and Freeport Zone (SBF), applied for and were granted
Certificates of Registration and Tax Exemption by the Subic Bay Metropolitan
Authority (SBMA).
These certificates allowed them to engage in the business either of trading,
retailing or wholesaling, import and export, warehousing, distribution and/or
transshipment of general merchandise, including alcohol and tobacco products,
and uniformly granted them tax exemptions for such importations.
Congress subsequently passed RA 9334 which among others provides that:
The provision of any special or general law to the contrary notwithstanding,
the importation of cigars and cigarettes, distilled spirits, fermented liquors
and wines into the Philippines, even if destined for tax and duty free shops,
shall be subject to all applicable taxes, duties, charges, including excise taxes
due thereon. This shall apply to cigars and cigarettes, distilled spirits,
fermented liquors and wines brought directly into the duly chartered or
legislated freeports of the Subic Economic Freeport Zone, created under
Republic Act No. 7227
Thus, the BIR Commissioner requested then Customs Commissioner to
immediately collect the excise tax due on imported alcohol and tobacco products
brought to the Duty Free Philippines (DFP) and Freeport zones.
The PR requested for a reconsideration of the directives on the imposition of duties
and taxes, particularly excise taxes, on their shipments of cigars, cigarettes, wines
and liquors. Still, they were not allowed to file any warehousing entry for their
shipments.
The PR filed a special civil action for declaratory relief to have certain provisions of
RA 9334 declared as unconstitutional. Alleging that great and irreparable loss
and injury would befall them as a consequence of the imposition of taxes on
alcohol and tobacco products brought into the SBF, they prayed for the issuance
of a writ of preliminary injunction and/or TRO and preliminary mandatory
injunction to enjoin the directives of the CIR.
The CIR argued that:
1. Tax exemptions are not presumed and even when granted, are
strictly construed against the grantee.
2. Courts are enjoined from issuing a writ of injunction and/or
TRO on the grounds of an alleged nullity of a law, ordinance or
administrative regulation or circular or in a manner that would
effectively dispose of the main case. Taxes, they stressed, are the
lifeblood of the government and their prompt and certain
availability is an imperious need. They maintained that greater
injury would be inflicted on the public should the writ be granted.
The court a quo granted the writ of preliminary injunction.
ISSUE:
WON THE GRANT OF THE WRIT OF PRELIMINARY INJUNCTION IS
PROPER. No
HELD:
RA 7227 granted PR exemption from local and national taxes, including excise
taxes, on their importations of general merchandise, for which reason they enjoyed
tax-exempt status until the effectivity of RA 9334. By subsequently enacting R.A.
No. 9334, however, Congress expressed its intention to withdraw PRs tax
exemption privilege on their importations of cigars, cigarettes, distilled spirits,
fermented liquors and wines.
Without necessarily passing upon the validity of the withdrawal of the tax
exemption privileges of PR, it behooves this Court to state certain basic principles
and observations that should throw light on the propriety of the issuance of the
writ of preliminary injunction in this case.
First. Every presumption must be indulged in favor of the constitutionality of a
statute.
Second. THERE IS NO VESTED RIGHT IN A TAX EXEMPTION, MORE SO
WHEN THE LATEST EXPRESSION OF LEGISLATIVE INTENT RENDERS ITS
CONTINUANCE DOUBTFUL. Being a mere statutory privilege, a tax exemption
may be modified or withdrawn at will by the granting authority.
To state otherwise is to limit the taxing power of the State, which is unlimited,
plenary, comprehensive and supreme. The power to impose taxes is one so
unlimited in force and so searching in extent, it is subject only to restrictions
which rest on the discretion of the authority exercising it.
Third. As a general rule, TAX EXEMPTIONS ARE CONSTRUED STRICTISSIMI
JURIS AGAINST THE TAXPAYER AND LIBERALLY IN FAVOR OF THE
TAXING AUTHORITY. The burden of proof rests upon the party claiming
exemption to prove that it is in fact covered by the exemption so claimed. In case
of doubt, non-exemption is favored.
Fourth. A TAX EXEMPTION CANNOT BE GROUNDED UPON THE
CONTINUED EXISTENCE OF A STATUTE WHICH PRECLUDES ITS CHANGE
OR REPEAL. Flowing from the basic precept of constitutional law that no law is
irrepealable, Congress, in the legitimate exercise of its lawmaking powers, can
enact a law withdrawing a tax exemption just as efficaciously as it may grant the
same under Section 28(4) of Article VI of the Constitution. There is no gainsaying
therefore that Congress can amend Section 131 of the NIRC in a manner it sees
fit, as it did when it passed RA 9334.
Fifth. The rights granted under the Certificates of Registration and Tax Exemption
of PR are not absolute and unconditional as to constitute rights in esse those
clearly founded on or granted by law or is enforceable as a matter of law.
Sixth. Whatever right may have been acquired on the basis of the Certificates of
Registration and Tax Exemption must yield to the States valid exercise of police
power. It is well to remember that taxes may be made the implement of the police
power.

Seventh. As a rule, COURTS SHOULD AVOID ISSUING A WRIT OF

PRELIMINARY INJUNCTION WHICH WOULD IN EFFECT DISPOSE OF THE
MAIN CASE WITHOUT TRIAL. This rule is intended to preclude a prejudgment
of the main case and a reversal of the rule on the burden of proof since by issuing
the injunctive writ, the court would assume the proposition that petitioners are
inceptively duty bound to prove.

Eighth. A court may issue a writ of preliminary injunction only when the petitioner
assailing a statute has made out a case of unconstitutionality or invalidity strong
enough, in the mind of the judge, to overcome the presumption of validity, in
addition to a showing of a clear legal right to the remedy sought.

Ninth. The feared injurious effects of the imposition of duties, charges and
taxes on imported cigars, cigarettes, distilled spirits, fermented liquors and wines
on PRs businesses cannot possibly outweigh the dire consequences that
the non-collection of taxes, not to mention the unabated smuggling inside the SBF,
would wreak on the government. Whatever damage would befall PR must perforce
take a back seat to the pressing need to curb smuggling and raise revenues for
governmental functions.

Recalling this Courts pronouncements in Olalia v. Hizon that:

x x x [T]here is no power the exercise of which is more delicate, which

requires greater caution, deliberation and sound discretion, or more
dangerous in a doubtful case, than the issuance of an injunction. It is the
strong arm of equity that should never be extended unless to cases of great
injury, where courts of law cannot afford an adequate or commensurate
remedy in damages.

Every court should remember that an injunction is a limitation upon the

freedom of action of the defendant and should not be granted lightly or
precipitately. It should be granted only when the court is fully satisfied that
the law permits it and the emergency demands it.

It cannot be overemphasized that any injunction that restrains the

collection of taxes, which is the inevitable result of the suspension of the
implementation of the assailed Section 6 of R.A. No. 9334, is a limitation
upon the right of the government to its lifeline and means.

The power to tax emanates from necessity; without taxes, government cannot
fulfill its mandate of promoting the general welfare and well-being of the people.
That the enforcement of tax laws and the collection of taxes are of paramount
importance for the sustenance of government has been repeatedly observed.
Taxes being the lifeblood of the government that should be collected
without unnecessary hindrance, every precaution must be taken not to
unduly suppress it.

Whether this Court must issue the writ of prohibition, suffice it to stress that being
possessed of the power to act on the petition for declaratory relief, public
respondent can proceed to determine the merits of the main case. To halt the
proceedings at this point may be acting too prematurely and would not be in
keeping with the policy that courts must decide controversies on the merits.
 CIR vs. SANTOS
GR 119252. August 18, 1997
FACTS:
Guild of Philippine Jewelers, Inc., is an association of Filipino jewelers
engaged in the manufacture of jewelers and allied undertakings. Among its
members are Hans Brumann, Inc., Miladay Jewels Inc., Mercelles, Inc., Solid Gold
International Traders inc., Diagem Trading Corporation, and Jewelry by Marco &
Co., Inc.
The BIR issued a mission order to conduct surveillance, monitoring, and
inventory of all imported articles of Hans Brumann, Inc., and place the same
under preventive embargo. They informed the establishment that they were
going to make an inventory of the articles involved to see if the proper taxes
thereon have been paid.
The BIR officers requested the establishment not to sell the articles until it can be
proven that the necessary taxes thereon have been paid. Accordingly, Mr. Hans
Brumann, the owner of the establishment, signed a receipt for Goods, Articles, and
Things Seized under Authority of the NIRC, acknowledging that the articles
inventoried have been seized and left in his possession, and promising not to
dispose of the same without authority of the CIR pending investigation.
Marco and Jewelry By Marco & Co., Inc. filed a petition for declaratory
relief with writ of preliminary injunction and/or TRO against the CIR praying that
Sections 126, 127(a) and (b) and 150 (a) of the NIRC and Hdg. No 71.01, 71.02,
71.03 and 71.04, Chapter 71 of the Tariff and Customs Code of the Philippines be
declared unconstitutional and void, and that the CIR and Customs be prevented or
enjoined from issuing mission orders and other orders of similar nature.
RTC assumed jurisdiction and held that CTA has no jurisdiction to declare a statute
unconstitutional much less issue writs. It also made a holding that there exists an
justiciable controversy between the parties. it also ruled that the laws in question
are confiscatory and oppressive comparing the tax rates with that of the other
countries thereby ruling that the LAWS ARE INOPERATIVE AND WITHOUT
FORCE AND EFFECT in so far as private respondents are concerned. It also
declared the law to be violative of Art. III, Sec. 1 of the Constitution.
The petitioners now assail the decision rendered by the public respondent,
contending that the latter has no authority to pass judgment upon the taxation
policy of the government. In addition, the petitioners impugn the decision in
question by asserting that there was no showing that the tax laws on jewelry are
confiscatory and destructive of private respondent's proprietary rights.
CIR contends that:
1. RTC has no authority to pass judgment upon the taxation policy of the
government.
2. There was no showing that the tax laws on jewelry are confiscatory
and destructive of MARCO et als proprietary rights.
ISSUE: W/N RTC Judge encroached upon matters properly falling within the
province of legislative functions? YES
HELD:
RTC Judge encroached upon matters properly falling within the province of
legislative functions. In citing as basis for his decision unproven comparative
data pertaining to differences between tax rates of various Asian
countries, and concluding that the jewelry industry in the Philippines suffers as a
result, the respondent judge took it upon himself to supplant legislative policy
regarding jewelry taxation. In advocating the abolition of local tax and duty on
jewelry simply because other countries have adopted such policies, the respondent
judge overlooked the fact that such matters are not for him to decide. There are
reasons why jewelry, a non-essential item, is taxed as it is in this
country, and these reasons, deliberate upon by our legislature, are
beyond the reach of judicial questioning.
The trial court is not the proper forum for the ventilation of the issues raised by
MARCO et al. The arguments they presented focus on the wisdom of the
provisions of law which they seek to nullify. RTC can only look into the validity of
a provision, that is, whether or not it has been passed according to the procedures
laid down by law, and thus cannot inquire as to the reasons for its existence.
Granting arguendo that the MARCO et al may have provided convincing arguments
why the jewelry industry in the Philippines should not be taxed as it is, it is to the
legislature that they must resort to for relief, since with the legislature
primarily lies the discretion to determine the NOECS
1) nature (kind),
2) object (purpose),
3) extent (rate),
4) coverage (subjects) and
5) situs (place) of taxation. This Court cannot freely delve into those
matters which, by constitutional fiat, rightly rest on legislative
judgment.
It should be pointed out that in imposing the aforementioned taxes and duties, the
State, acting through the legislative and executive branches, is exercising its
sovereign prerogative. It is inherent in the power to tax that the State be
free to select the subjects of taxation, and it has been repeatedly held
that inequalities which result from singling out of one particular class
for taxation, or exemption, infringe no constitutional limitation.
2) Legislative
1) Non-delegation Principle
2) Exceptions
a. LGUs
Section 5, Article 10 (1987 Constitution). Each LGU shall have
the power to create its own sources of revenues and to levy
taxes, fees and charges subject to such guidelines and limitations
as Congress may provide consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively
to the local governments.
b. President
c. Administrative Bodies
d. People at large
ABAKADA VS ERMITA
Mounting budget deficit, revenue generation, inadequate fiscal allocation for
education, increased emoluments for health workers, and wider coverage for full
value-added tax benefits these are the reasons why Republic Act No. 9337 (R.A.
No. 9337) was enacted.
Before R.A. No. 9337 took effect, ABAKADA GURO PARTY LIST, et al., filed a
petition for prohibition. They question the constitutionality of Sections 4, 5 and 6
of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of
goods and properties, Section 5 imposes a 10% VAT on importation of goods, and
Section 6 imposes a 10% VAT on sale of services and use or lease of properties.
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 %).
ABAKADA argue that the law is unconstitutional, as it constitutes abandonment by
Congress of its exclusive authority to fix the rate of taxes under Article VI, Section
28(2) of the 1987 Philippine Constitution.
SEN. AQUILINO Q. PIMENTEL, JR., et al., filed a petition for certiorari likewise
assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of the President to increase
the VAT rate to 12%, on the ground that it amounts to an undue delegation of
legislative power, petitioners also contend that the increase in the VAT rate to 12%
contingent on any of the two conditions being satisfied violates the due process
clause embodied in Article III, Section 1 of the Constitution, as it imposes an unfair
and additional tax burden on the people, in that: (1) the 12% increase is
ambiguous because it does not state if the rate would be returned to the original
10% if the conditions are no longer satisfied; (2) the rate is unfair and
unreasonable, as the people are unsure of the applicable VAT rate from year to
year; and (3) the increase in the VAT rate, which is supposed to be an incentive
to the President to raise the VAT collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal adequacy.
They further claim that the inclusion of a stand-by authority granted to the
President by the Bicameral Conference Committee is a violation of the no-
amendment rule upon last reading of a bill laid down in Article VI, Section 26(2)
of the Constitution.
OSG contend that R.A. No. 9337 enjoys the presumption of constitutionality and
petitioners failed to cast doubt on its validity.
Respondents also refute petitioners argument that the increase to 12%, as well as
the 70% limitation on the creditable input tax, the 60-month amortization on the
purchase or importation of capital goods exceeding P1,000,000.00, and the 5%
final withholding tax by government agencies, is arbitrary, oppressive, and
confiscatory, and that it violates the constitutional principle on progressive
taxation, among others.
Finally, respondents manifest that R.A. No. 9337 is the anchor of the governments
fiscal reform agenda. A reform in the value-added system of taxation is the core
revenue measure that will tilt the balance towards a sustainable macroeconomic
environment necessary for economic growth.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106,
107 and 108 of the NIRC, violate the following provisions of the
Constitution: a. Article VI, Section 28(1), and b. Article VI, Section 28(2)
The VAT is a tax on spending or consumption. It is levied on the sale, barter,
exchange or lease of goods or properties and services. Being an indirect tax on
expenditure, the seller of goods or services may pass on the amount of tax paid
to the buyer,[9] with the seller acting merely as a tax collector. The burden of VAT
is intended to fall on the immediate buyers and ultimately, the end-consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the
transaction or business it engages in, without transferring the burden to someone
else. Examples are individual and corporate income taxes, transfer taxes, and
residence taxes.
NO UNDUE DELEGATION OF LEGISLATIVE POWER
Petitioners ABAKADA GURO Party List, et al., 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.
The assailed provisions read as follows:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended
to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties.
(A) Rate and Base of Tax. There shall be levied, assessed and collected on
every sale, barter or exchange of goods or properties, a value-added tax
equivalent to ten percent (10%) of the gross selling price or gross value in
money of the goods or properties sold, bartered or exchanged, such tax to
be paid by the seller or transferor: provided, 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 %).
SEC. 5. Section 107 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. There shall be levied, assessed and collected on every
importation of goods a value-added tax equivalent to ten percent (10%)
based on the total value used by the Bureau of Customs in determining tariff
and customs duties, plus customs duties, excise taxes, if any, and other
charges, such tax to be paid by the importer prior to the release of such
goods from customs custody: Provided, That where the customs duties are
determined on the basis of the quantity or volume of the goods, the value-
added tax shall be based on the landed cost plus excise taxes, if any:
provided, further, 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 %).
SEC. 6. Section 108 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties
(A) Rate and Base of Tax. There shall be levied, assessed and collected, a
value-added tax equivalent to ten percent (10%) of gross receipts derived
from the sale or exchange of services: provided, 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 %). (Emphasis supplied)
Petitioners allege that the grant of the stand-by authority to the President to
increase the VAT rate is a virtual abdication by Congress of its exclusive power to
tax because such delegation is not within the purview of Section 28 (2), Article VI
of the Constitution, which provides:
The Congress may, by law, authorize the President to fix within specified
limits, and 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.
They argue that the VAT is a tax levied on the sale, barter or exchange of goods
and properties as well as on the sale or exchange of services, which cannot be
included within the purview of tariffs under the exempted delegation as the latter
refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on goods or merchandise imported or exported
The principle of separation of powers ordains that each of the three great branches
of government has exclusive cognizance of and is supreme in matters falling within
its own constitutionally allocated sphere. A logical corollary to the doctrine of
separation of powers is the principle of non-delegation of powers.
With respect to the Legislature, Section 1 of Article VI of the Constitution provides
that the Legislative power shall be vested in the Congress of the Philippines which
shall consist of a Senate and a House of Representatives. 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.
Nonetheless, the general rule barring delegation of legislative powers is subject to
the following recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of
Article VI of the Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2)
of Article VI of the Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
The legislature may delegate to executive officers or bodies the power to
determine certain facts or conditions, or the happening of contingencies, on which
the operation of a statute is, by its terms, made to depend, but the legislature
must prescribe sufficient standards, policies or limitations on their authority. While
the power to tax cannot be delegated to executive agencies, details as to the
enforcement and administration of an exercise of such power may be left to them,
including the power to determine the existence of facts on which its operation
depends.
THERE IS NO 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.
NO DISCRETION WOULD BE EXERCISED BY THE PRESIDENT. Highlighting
the absence of discretion is the fact that the word shall is used in the common
proviso. The use of the word shall connotes a mandatory order. Its use in a
statute denotes an imperative obligation and is inconsistent with the idea of
discretion.
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. Inasmuch as the law specifically
uses the word shall, the exercise of discretion by the President does not come into
play. It is a clear directive to impose the 12% VAT rate when the specified
conditions are present. The time of taking into effect of the 12% VAT rate is based
on the happening of a certain specified contingency, or upon the ascertainment of
certain facts or conditions by a person or body other than the legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party
List, et al. that the law effectively nullified the Presidents power of control over the
Secretary of Finance by mandating the fixing of the tax rate by the President upon
the recommendation of the Secretary of Finance. The Court cannot also subscribe
to the position of petitioners Pimentel, et al. that the word shall should be
interpreted to mean may in view of the phrase upon the recommendation of the
Secretary of Finance. Neither does the Court find persuasive the submission of
petitioners Escudero, et al. that any recommendation by the Secretary of Finance
can easily be brushed aside by the President since the former is a mere alter ego
of the latter.
In the present case, in making his recommendation to the President on the
existence of either of the two conditions, the Secretary of Finance is not acting as
the alter ego of the President or even her subordinate. In such instance, he is not
subject to the power of control and direction of the President. He is acting as the
agent of the legislative department, to determine and declare the event upon
which its expressed will is to take effect. The Secretary of Finance becomes the
means or tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and information and
has a much broader perspective to properly evaluate them. His function is to
gather and collate statistical data and other pertinent information and verify if any
of the two conditions laid out by Congress is present. His personality in such
instance is in reality but a projection of that of Congress. Thus, being the agent of
Congress and not of the President, the President cannot alter or modify or nullify,
or set aside the findings of the Secretary of Finance and to substitute the judgment
of the former for that of the latter.
Congress simply granted the Secretary of Finance the authority to ascertain the
existence of a fact, namely, whether by December 31, 2005, the value-added tax
collection as a percentage of Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (24/5%) or the national government deficit as
a percentage of GDP of the previous year exceeds one and one-half percent (1%).
If either of these two instances has occurred, the Secretary of Finance, by
legislative mandate, must submit such information to the President. Then the 12%
VAT rate must be imposed by the President effective January 1, 2006. There is no
undue delegation of legislative power but only of the discretion as to the execution
of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who
must do it, and what is the scope of his authority; in our complex economy that is
frequently the only way in which the legislative process can go forward.
THE 12% INCREASE VAT RATE DOES NOT IMPOSE AN UNFAIR AND
UNNECESSARY ADDITIONAL TAX BURDEN
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the
two conditions set forth therein are satisfied, the President shall increase the VAT
rate to 12%. The provisions of the law are clear. It does not provide for a return
to the 10% rate nor does it empower the President to so revert if, after the rate is
increased to 12%, the VAT collection goes below the 24/5 of the GDP of the
previous year or that the national government deficit as a percentage of GDP of
the previous year does not exceed 1%.
Thus, in the absence of any provision providing for a return to the 10% rate, which
in this case the Court finds none, petitioners argument is, at best, purely
speculative. There is no basis for petitioners fear of a fluctuating VAT rate because
the law itself does not provide that the rate should go back to 10% if the conditions
provided in Sections 4, 5 and 6 are no longer present. The rule is that where the
provision of the law is clear and unambiguous, so that there is no occasion for the
court's seeking the legislative intent, the law must be taken as it is, devoid of
judicial addition or subtraction.
Petitioners also contend that the increase in the VAT rate, which was allegedly an
incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP
of the previous year, should be based on fiscal adequacy.
Petitioners obviously overlooked that increase in VAT collection is not the only
condition. There is another condition, i.e., the national government deficit as a
percentage of GDP of the previous year exceeds one and one-half percent (1 %).
Respondents explained the philosophy behind these alternative conditions:
1. VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have economic or fiscal
meaning. If VAT/GDP is less than 2.8%, it means that government has weak
or no capability of implementing the VAT or that VAT is not effective in the
function of the tax collection. Therefore, there is no value to increase it to
12% because such action will also be ineffectual.
2. Natl Govt Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP is 1.5% or less means
the fiscal condition of government has reached a relatively sound position or
is towards the direction of a balanced budget position. Therefore, there is no
need to increase the VAT rate since the fiscal house is in a relatively healthy
position. Otherwise stated, if the ratio is more than 1.5%, there is indeed a
need to increase the VAT rate.
That the first condition amounts to an incentive to the President to increase the
VAT collection does not render it unconstitutional so long as there is a public
purpose for which the law was passed, which in this case, is mainly to raise
revenue. In fact, fiscal adequacy dictated the need for a raise in revenue.
It simply means that sources of revenues must be adequate to meet government
expenditures and their variation. The dire need for revenue cannot be ignored.
Our country is in a quagmire of financial woe.
CIR VS FORTUNE TOBACCO
After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals,
Fortune Tobacco Corporation (Fortune Tobacco) was granted a tax refund or tax
credit representing specific taxes erroneously collected from its tobacco products.
The tax refund is being re-claimed by the Commissioner of Internal Revenue
(Commissioner) in this petition.
FORTUNE TOBACCO is a domestic corporation duly organized and existing under
and by virtue of the laws of the Republic of the Philippines, and is the
manufacturer/producer of, among others, the several cigarette brands (Champion,
Salem, Camel, Winston), with tax rate classification based on net retail price.
The cigarette brands were subject to ad valorem tax pursuant to then Section 142
of the Tax Code of 1977, as amended. However, on January 1, 1997, R.A. No.
8240 took effect whereby a shift from the ad valorem tax (AVT) system to the
specific tax system was made and subjecting the aforesaid cigarette brands to
specific tax under [S]ection 142 thereof, now renumbered as Sec. 145 of the Tax
Code of 1997. Sec. 145 thereof now subjects the cigarette brands to specific tax
and also provides that: (1) the excise tax from any brand of cigarettes within the
next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than
the tax, which is due from each brand on October 1, 1996; (2) the rates of excise
tax on cigarettes enumerated therein shall be increased by 12% on January 1,
2000; and (3) the classification of each brand of cigarettes based on its average
retail price as of October 1, 1996, as set forth in Annex D shall remain in force
until revised by Congress.
To implement the provisions for a twelve percent (12%) increase of excise tax on,
among others, cigars and cigarettes packed by machines by January 1, 2000, the
Secretary of Finance issued Revenue Regulations No. 17-99 to implement the
provision for the 12% excise tax increase. RR No. 17-99 added the qualification
that the new specific tax rate xxx shall not be lower than the excise tax that is
actually being paid prior to January 1, 2000. In effect, it provided that the 12%
tax increase must be based on the excise tax actually being paid prior to January
1, 2000 and not on their actual net retail price.
For the period covering January 1-31, 2000, petitioner allegedly paid specific taxes
on all brands manufactured and removed in the total amounts of P585,705,250.00.
FORTUNE TOBACCO filed a claim for refund or tax credit of its purportedly
overpaid excise tax for the month of January 2000 in the amount of
P35,651,410.00
filed with respondents Legal Service a letter dated June 20, 2001
reiterating all the claims for refund/tax credit of its overpaid excise
taxes filed on various dates, including the present claim for the month
of January 2000 in the amount of P35,651,410.00.
As there was no action on the part of the respondent, petitioner filed the instant
petition for review with this Court on December 11, 2001, in order to comply with
the two-year period for filing a claim for refund.
OSG seeks to convince the Court that the literal interpretation given by the CTA
and the Court of Appeals of Section 145 of the Tax Code of 1997 (Tax Code) would
lead to a lower tax imposable on 1 January 2000 than that imposable during the
transition period. Instead of an increase of 12% in the tax rate effective on 1
January 2000 as allegedly mandated by the Tax Code, the appellate courts ruling
would result in a significant decrease in the tax rate by as much as 66%.
OSG asserts that a tax refund is in the nature of a tax exemption and must,
therefore, be construed strictly against the taxpayer, such as Fortune Tobacco.
FORTUNE TOBACCO argues that the CTA and the Court of Appeals merely
followed the letter of the law when they ruled that the basis for the 12% increase
in the tax rate should be the net retail price of the cigarettes in the market as
outlined in paragraph C, sub paragraphs (1)-(4), Section 145 of the Tax Code. The
Commissioner allegedly has gone beyond his delegated rule-making power when
he promulgated, enforced and implemented Revenue Regulation No. 17-99, which
effectively created a separate classification for cigarettes based on the excise tax
"actually being paid prior to January 1, 2000."
Whether the revenue regulation has exceeded the allowable limits of
legislative delegation. YES.
The power to tax is inherent in the State, such power being inherently legislative,
based on the principle that taxes are a grant of the people who are taxed, and the
grant must be made by the immediate representatives of the people; and where
the people have laid the power, there it must remain and be exercised.
This entire controversy revolves around the interplay between Section 145 of the
Tax Code and Revenue Regulation 17-99. Revenue Regulation 17-99, which was
issued pursuant to the unquestioned authority of the Secretary of Finance to
promulgate rules and regulations for the effective implementation of the Tax Code,
interprets the above-quoted provision and reflects the 12% increase in excise taxes
in the following manner:
SECTION DESCRIPTION OF ARTICLES PRESENT SPECIFIC TAX RATES
PRIOR TO JAN. 1, 2000 NEW SPECIFIC TAX RATE Effective Jan.. 1,
2000
145 (A) P1.00/cigar P1.12/cigar
(B)Cigarettes packed by Machine
(1) Net Retail Price (excluding VAT and Excise) exceeds P10.00 per
pack P12.00/pack P13.44/pack
(2) Net Retail Price (excluding VAT and Excise) is P6.51 up to P10.00
per pack P8.00/pack P8.96/pack
(3) Net Retail Price (excluding VAT and excise) is P5.00 to P6.50 per
pack P5.00/pack P5.60/pack
(4) Net Retail Price (excluding VAT and excise) is below P5.00 per pack)
P1.00/pack P1.12/pack
This table reflects Section 145 of the Tax Code insofar as it mandates a 12%
increase effective on 1 January 2000 based on the taxes indicated under paragraph
C, sub-paragraph (1)-(4). However, Revenue Regulation No. 17-99 went further
and added that "[T]he new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquor shall
not be lower than the excise tax that is actually being paid prior to January 1,
2000."13
Section 145 states that during the transition period, i.e., within the next three (3)
years from the effectivity of the Tax Code, the excise tax from any brand of
cigarettes shall not be lower than the tax due from each brand on 1 October 1996.
This qualification, however, is conspicuously absent as regards the 12% increase
which is to be applied on cigars and cigarettes packed by machine, among others,
effective on 1 January 2000. Clearly and unmistakably, Section 145 mandates a
new rate of excise tax for cigarettes packed by machine due to the 12% increase
effective on 1 January 2000 without regard to whether the revenue collection
starting from this period may turn out to be lower than that collected prior to this
date.
By adding the qualification that the tax due after the 12% increase becomes
effective shall not be lower than the tax actually paid prior to 1 January 2000,
Revenue Regulation No. 17-99 effectively imposes a tax which is the higher
amount between the ad valorem tax being paid at the end of the three (3)-year
transition period and the specific tax under paragraph C, sub-paragraph (1)-(4),
as increased by 12%a situation not supported by the plain wording of Section
145 of the Tax Code.
This is not the first time that national revenue officials had ventured in the area of
unauthorized administrative legislation. Rule-making power must be confined to
details for regulating the mode or proceedings in order to carry into effect the law
as it has been enacted, and it cannot be extended to amend or expand the
statutory requirements or to embrace matters not covered by the statute.
Administrative regulations must always be in harmony with the provisions of the
law because any resulting discrepancy between the two will always be resolved in
favor of the basic law.
In the case at bar, the OSGs argument that by 1 January 2000, the excise tax on
cigarettes should be the higher tax imposed under the specific tax system and the
tax imposed under the ad valorem tax system plus the 12% increase imposed by
paragraph 5, Section 145 of the Tax Code, is an unsuccessful attempt to justify
what is clearly an impermissible incursion into the limits of administrative
legislation. Such an interpretation is not supported by the clear language of the
law and is obviously only meant to validate the OSGs thesis that Section 145 of
the Tax Code is ambiguous and admits of several interpretations.
The contention that the increase of 12% starting on 1 January 2000 does not apply
to the brands of cigarettes listed under Annex "D" is likewise unmeritorious, absurd
even. Paragraph 8, Section 145 of the Tax Code simply states that, "[T]he
classification of each brand of cigarettes based on its average net retail price as of
October 1, 1996, as set forth in Annex D, shall remain in force until revised by
Congress." This declaration certainly does not lend itself to the interpretation given
to it by the OSG. As plainly worded, the average net retail prices of the listed
brands under Annex "D," which classify cigarettes according to their net retail price
into low, medium or high, obviously remain the bases for the application of the
increase in excise tax rates effective on 1 January 2000.
REVENUE REGULATION NO. 17-99 IS FLAWED. The Commissioner cannot
seek refuge in his claim that the purpose behind the passage of the Tax Code is
to generate additional revenues for the government. Revenue generation has
undoubtedly been a major consideration in the passage of the Tax Code. However,
as borne by the legislative record, the shift from the ad valorem system to the
specific tax system is likewise meant to promote fair competition among the
players in the industries concerned, to ensure an equitable distribution of the tax
burden and to simplify tax administration by classifying cigarettes, among others,
into high, medium and low-priced based on their net retail price and accordingly
graduating tax rates.
At any rate, this advertence to the legislative record is merely gratuitous because,
as we have held, the meaning of the law is clear on its face and free from the
ambiguities that the Commissioner imputes. We simply cannot disregard the letter
of the law on the pretext of pursuing its spirit.26
Finally, the Commissioners contention that a tax refund partakes the nature of a
tax exemption does not apply to the tax refund to which Fortune Tobacco is
entitled. There is parity between tax refund and tax exemption only when the
former is based either on a tax exemption statute or a tax refund statute.
Obviously, that is not the situation here. Quite the contrary, Fortune Tobaccos
claim for refund is premised on its erroneous payment of the tax, or better still the
governments exaction in the absence of a law.
What is controlling in this case is the well-settled doctrine of strict interpretation
in the imposition of taxes, not the similar doctrine as applied to tax exemptions.
The rule in the interpretation of tax laws is that a statute will not be construed as
imposing a tax unless it does so clearly, expressly, and unambiguously. A tax
cannot be imposed without clear and express words for that purpose. Accordingly,
the general rule of requiring adherence to the letter in construing statutes applies
with peculiar strictness to tax laws and the provisions of a taxing act are not to be
extended by implication. In answering the question of who is subject to tax
statutes, it is basic that in case of doubt, such statutes are to be construed most
strongly against the government and in favor of the subjects or citizens because
burdens are not to be imposed nor presumed to be imposed beyond what statutes
expressly and clearly import. As burdens, taxes should not be unduly exacted nor
assumed beyond the plain meaning of the tax laws.
BATANGAS POWER CORPORATION, vs. BATANGAS CITY and NATIONAL
POWER CORPORATION
In the early 1990s, the country suffered from a crippling power crisis. Power
outages lasted 8-12 hours daily and power generation was badly needed.
Addressing the problem, the government, through the National Power Corporation
(NPC), sought to attract investors in power plant operations by providing them
with incentives, one of which was through the NPCs assumption of payment of
their taxes in the Build Operate and Transfer (BOT) Agreement.
On June 29, 1992, Enron Power Development Corporation (Enron) and petitioner
NPC entered into a Fast Track BOT Project. Enron agreed to supply a power station
to NPC and transfer its plant to the latter after ten (10) years of operation. Section
11.02 of the BOT Agreement provided that NPC shall be responsible for the
payment of all taxes that may be imposed on the power station, except income
taxes and permit fees. Subsequently, Enron assigned its obligation under the BOT
Agreement to petitioner Batangas Power Corporation (BPC).
On September 13, 1992, BPC registered itself with the Board of Investments (BOI)
as a pioneer enterprise. On September 23, 1992, the BOI issued a certificate of
registration to BPC as a pioneer enterprise entitled to a tax holiday for a period of
six (6) years.The construction of the power station in respondent Batangas City
was then completed. BPC operated the station.
On October 12, 1998, Batangas City sent a letter to BPC demanding payment of
business taxes and penalties, commencing from the year 1994 as provided under
Ordinance XI or the 1992 Batangas City Tax Code. BPC refused to pay, citing its
tax-exempt status as a pioneer enterprise for six (6) years under Section 133 (g)
of the Local Government Code (LGC).
City treasurer Benjamin S. Pargas modified the citys tax claim and demanded
payment of business taxes from BPC only for the years 1998-1999. He
acknowledged that BPC enjoyed a 6-year tax holiday as a pioneer industry but its
tax exemption period expired on September 22, 1998, six (6) years after its
registration with the BOI on September 23, 1992. The city treasurer held that
thereafter BPC became liable to pay its business taxes.
BPC still refused to pay the tax. It insisted that its 6-year tax holiday commenced
from the date of its commercial operation on July 16, 1993, not from the date of
its BOI registration in September 1992. It furnished the city with a BOI letter
wherein BOI designated July 16, 1993 as the start of BPCs income tax holiday as
BPC was not able to immediately operate due to force majeure. BPC claimed that
the local tax holiday is concurrent with the income tax holiday. BPC asserted that
the city should collect the tax from the NPC as the latter assumed responsibility
for its payment under their BOT Agreement.
The city legal officer insisted that BPCs tax holiday has already expired, while the
city argued that it directed its tax claim to BPC as it is the entity doing business in
the city and hence liable to pay the taxes. The city alleged that it was not privy to
NPCs assumption of BPCs tax payment under their BOT Agreement as the only
parties thereto were NPC and BPC.
NPC intervened. While admitting assumption of BPCs tax obligations under their
BOT Agreement, NPC refused to pay BPCs business tax as it allegedly constituted
an indirect tax on NPC which is a tax-exempt corporation under its Charter.
BPC filed a petition for declaratory relief against Batangas City and NPC, praying
for a ruling that it was not bound to pay the business taxes imposed on it by the
city. It alleged that under the BOT Agreement, NPC is responsible for the payment
of such taxes but as NPC is exempt from taxes, both the BPC and NPC are not
liable for its payment. NPC and Batangas City filed their respective answers.
While the case was still pending, the city refused to issue a permit to BPC for the
operation of its business unless it paid the assessed business taxes amounting to
close to P29M.
RTC: It held that: (1) BPC is liable to pay business taxes to the city; (2) NPCs tax
exemption was withdrawn with the passage of R.A. No. 7160 (The Local
Government Code); and, (3) the 6-year tax holiday granted to pioneer business
enterprises starts on the date of registration with the BOI as provided in Section
133 (g) of R.A. No. 7160, and not on the date of its actual business operations.
Whether NPCs tax exemption privileges under its Charter were
withdrawn by Section 193 of the Local Government Code (LGC). YES.
BPC insist that NPCs exemption from all taxes under its Charter had not been
repealed by the LGC. They argue that NPCs Charter is a special law which cannot
be impliedly repealed by a general and later legislation like the LGC. They likewise
anchor their claim of tax-exemption on Section 133 (o) of the LGC which exempts
government instrumentalities, such as the NPC, from taxes imposed by local
government units (LGUs). NO MERIT.
The effect of the LGC on the tax exemption privileges of the NPC has already been
extensively discussed and settled in the recent case of National Power Corporation
v. City of Cabanatuan. In said case, this Court recognized the removal of the
blanket exclusion of government instrumentalities from local taxation as one of the
most significant provisions of the 1991 LGC. Specifically, we stressed that Section
193 of the LGC, an express and general repeal of all statutes granting exemptions
from local taxes, withdrew the sweeping tax privileges previously enjoyed by the
NPC under its Charter. We explained the rationale for this provision, thus:
In recent years, the increasing social challenges of the times expanded the
scope of state activity, and taxation has become a tool to realize social justice
and the equitable distribution of wealth, economic progress and the
protection of local industries as well as public welfare and similar objectives.
Taxation assumes even greater significance with the ratification of the 1987
Constitution. Thenceforth, the power to tax is no longer vested exclusively
on Congress; local legislative bodies are now given direct authority to levy
taxes, fees and other charges pursuant to Article X, section 5 of the 1987
Constitution.
Section 5.- Each Local Government unit shall have the power to create its
own sources of revenue, to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the Local Governments.
This paradigm shift results from the realization that genuine development
can be achieved only by strengthening local autonomy and promoting
decentralization of governance. For a long time, the countrys highly
centralized government structure has bred a culture of dependence among
local government leaders upon the national leadership. It has also dampened
the spirit of initiative, innovation and imaginative resilience in matters of local
development on the part of local government leaders. The only way to
shatter this culture of dependence is to give the LGUs a wider role in the
delivery of basic services, and confer them sufficient powers to generate
their own sources for the purpose. To achieve this goal, x xx the 1987
Constitution mandates Congress to enact a local government code that will,
consistent with the basic policy of local autonomy, set the guidelines and
limitations to this grant of taxing powers x xx.
To recall, prior to the enactment of the x xx Local Government Code x xx,
various measures have been enacted to promote local autonomy. x x x
Despite these initiatives, however, the shackles of dependence on the
national government remained. Local government units were faced with the
same problems that hamper their capabilities to participate effectively in the
national development efforts, among which are: (a) inadequate tax base, (b)
lack of fiscal control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control over
personnel of national line agencies.
Considered as the most revolutionary piece of legislation on local autonomy,
the LGC effectively deals with the fiscal constraints faced by LGUs. It widens
the tax base of LGUs to include taxes which were prohibited by previous laws
x xx.
Consequently, when NPC assumed the tax liabilities of the BPC under their 1992
BOT Agreement, the LGC which removed NPCs tax exemption privileges had
already been in effect for six (6) months. Thus, while BPC remains to be the entity
doing business in said city, it is the NPC that is ultimately liable to pay said taxes
under the provisions of both the 1992 BOT Agreement and the 1991 Local
Government Code.
MANILA ELECTRIC COMPANY VS. PROVINCE OF LAGUNA
FACTS:
Certain municipalities of the Province of Laguna, by virtue of existing laws then in
effect, issued resolutions granting franchise in favor of petitioner MERALCO for the
supply of electric light, heat and power.
On 12 September 1991, the "Local Government Code of 1991," was enacted
enjoining local government units to create their own sources of revenue and to
levy taxes, fees and charges, subject to the limitations expressed therein.
Pursuant to the provisions of the Code, respondent province enacted Laguna
Provincial Ordinance No. 01-92 providing, in part, as follows:
Sec. 2.09. Franchise Tax. There is hereby imposed a tax on
businesses enjoying a franchise, at a rate of fifty percent (50%) of one
percent (1%) of the gross annual receipts, which shall include both cash
sales and sales on account realized during the preceding calendar year
within this province, including the territorial limits on any city located in the
province.
Respondent Provincial Treasurer sent a demand letter to MERALCO for the
corresponding tax payment. Petitioner MERALCO paid the tax, under protest.
A formal claim for refund was thereafter sent by MERALCO to the Provincial
Treasurer of Laguna claiming that the franchise tax it had paid and continued to
pay to the National Government pursuant to P.D. 551 already included the
franchise tax imposed by the Provincial Tax Ordinance.
MERALCO, contended that the imposition of a franchise tax under Section 2.09 of
Laguna Provincial Ordinance No. 01-92, insofar as it concerned MERALCO,
contravened the provisions of Section 1 of P.D. 551 which read:
Any provision of law or local ordinance to the contrary notwithstanding, the
franchise tax payable by all grantees of franchises to generate, distribute
and sell electric current for light, heat and power shall be two per cent
(2%) of their gross receipts received from the sale of electric current and
from transactions incident to the generation, distribution and sale of electric
current.
ISSUE: Whether the imposition of a franchise tax under Section 2.09 of Laguna
Provincial Ordinance No. 01-92 is violative of the non-impairment clause of the
Constitution and Section 1 of Presidential Decree No. 551.
RULING:
NO. Prefatorily, it might be well to recall that local governments do not have
the inherent power to tax 4 except to the extent that such power might
be delegated to them either by the basic law or by statute. Presently, under
Article X of the 1987 Constitution, a general delegation of that power has been
given in favor of local government units. Thus:
Sec. 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms
of recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term, salaries,
powers and functions, and duties of local officials, and all other matters
relating to the organization and operation of the local units.
xxx xxx xxx
Sec. 5. Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local governments.
Under the now prevailing Constitution, where there is neither a grant
nor a prohibition by statute, the tax power must be deemed to exist
although Congress may provide statutory limitations and guidelines. The
basic rationale for the current rule is to safeguard the viability and self-sufficiency
of local government units by directly granting them general and broad tax powers.
Nevertheless, the fundamental law did not intend the delegation to be absolute
and unconditional; the constitutional objective obviously is to ensure that, while
the local government units are being strengthened and made more autonomous,
6 the legislature must still see to it that (a) the taxpayer will not be over-burdened
or saddled with multiple and unreasonable impositions; (b) each local government
unit will have its fair share of available resources; (c) the resources of the national
government will not be unduly disturbed; and (d) local taxation will be fair,
uniform, and just.
The Local Government Code of 1991explicitly authorizes provincial governments,
notwithstanding "any exemption granted by any law or other special law, . . . (to)
impose a tax on businesses enjoying a franchise." Section 137 thereof provides:
Sec. 137. Franchise Tax Notwithstanding any exemption granted
by any law or other special law, the province may impose a tax on
businesses enjoying a franchise, at a rate not exceeding fifty percent (50%)
of one percent (1%) of the gross annual receipts for the preceding calendar
year based on the incoming receipt, or realized, within its territorial
jurisdiction. In the case of a newly started business, the tax shall not exceed
one-twentieth (1/20) of one percent (1%) of the capital investment. In the
succeeding calendar year, regardless of when the business started to
operate, the tax shall be based on the gross receipts for the preceding
calendar year, or any fraction thereof, as provided herein. (Underscoring
supplied for emphasis)
Indicative of the legislative intent to carry out the Constitutional mandate of
vesting broad tax powers to local government units, the Local Government Code
has effectively withdrawn under Section 193 thereof, tax exemptions or incentives
theretofore enjoyed by certain entities. This law states:
Sec. 193. Withdrawal of Tax Exemption Privileges Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, are hereby withdrawn upon the effectivity of
this Code. (Underscoring supplied for emphasis)
GARCIA VS EXECUTIVE SECRETARY
FACTS:
Executive Order No. 475 was issued by the President reducing the rate of additional
duty on all imported articles from nine percent (9%) to five percent (5%) ad
valorem, except in the cases of crude oil and other oil products which continued
to be subject to the additional duty of nine percent (9%) ad valorem.
The President issued Executive Order No. 478, dated 23 August 1991, which levied
(in addition to the aforementioned additional duty of nine percent (9%) ad
valorem and all other existing ad valorem duties) a special duty of P0.95 per liter
or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil
products.
Petitioner assails the validity of Executive Orders Nos. 475 and 478. He argues
that Executive Orders Nos. 475 and 478 are violative of Section 24, Article VI of
the 1987 Constitution which provides as follows:
Sec. 24: All appropriation, revenue or tariff bills, bills authorizing increase
of the public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose
or concur with amendments.
He contends that since the Constitution vests the authority to enact revenue bills
in Congress, the President may not assume such power by issuing Executive Orders
Nos. 475 and 478 which are in the nature of revenue-generating measures.
ISSUE:
WON EO 475 and 478 are constitutional
RULING:
YES. Under Section 24, Article VI of the Constitution, the enactment of
appropriation, revenue and tariff bills, like all other bills is, of course, within the
province of the Legislative rather than the Executive Department. It does not
follow, however, that therefore Executive Orders Nos. 475 and 478, assuming they
may be characterized as revenue measures, are prohibited to the President, that
they must be enacted instead by the Congress of the Philippines. Section 28(2) of
Article VI of the Constitution provides as follows:
(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, tonage and wharfage dues, and other
duties or imposts within the framework of the national
development program of the Government. (Emphasis
supplied)
The relevant congressional statute is the Tariff and Customs Code of the
Philippines, and Sections 104 and 401, the pertinent provisions thereof. These are
the provisions which the President explicitly invoked in promulgating Executive
Orders Nos. 475 and 478. Section 104 of the Tariff and Customs Code provides in
relevant part: (IN CASE I-ASK NI SIR ANG PROVISION GIBUTANG NA LANG NAKO
BAHALAG TAAS)
Sec. 104. All tariff sections, chapters, headings and
subheadings and the rates of import duty under Section
104 of Presidential Decree No. 34 and all subsequent
amendments issued under Executive Orders and
Presidential Decrees are hereby adopted and form part of
this Code.
There shall be levied, collected, and paid upon all imported
articles the rates of duty indicated in the Section under this
section except as otherwise specifically provided for in this
 Code: Provided, that, the maximum rate shall not exceed
one hundred per cent ad valorem.
The rates of duty herein provided or subsequently
fixed pursuant to Section Four Hundred One of this Code
shall be subject to periodic investigation by the Tariff
Commission and may be revised by the President upon
recommendation of the National Economic and
Development Authority.
xxx xxx xxx
(Emphasis supplied)
Section 401 of the same Code needs to be quoted in full:
Sec. 401. Flexible Clause.
a. In the interest of national economy, general welfare
and/or national security, and subject to the limitations
herein prescribed, the President, upon recommendation of
the National Economic and Development Authority
(hereinafter referred to as NEDA), is hereby empowered:
(1) to increase, reduce or remove existing protective rates
of import duty (including any necessary change in
classification). The existing rates may be increased or
decreased but in no case shall the reduced rate of import
duty be lower than the basic rate of ten (10) per cent ad
valorem, nor shall the increased rate of import duty be
higher than a maximum of one hundred (100) per cent ad
valorem; (2) to establish import quota or to ban imports of
any commodity, as may be necessary; and (3) to impose
an additional duty on all imports not exceeding ten (10)
per cent ad valorem, whenever necessary; Provided, That
upon periodic investigations by the Tariff Commission and
recommendation of the NEDA, the President may cause a
gradual reduction of protection levels granted in Section
One hundred and four of this Code, including those
subsequently granted pursuant to this section.
b. Before any recommendation is submitted to the
President by the NEDA pursuant to the provisions of this
section, except in the imposition of an additional duty not
exceeding ten (10) per cent ad valorem, the Commission
shall conduct an investigation in the course of which they
shall hold public hearings wherein interested parties shall
be afforded reasonable opportunity to be present, produce
evidence and to be heard. The Commission shall also hear
the views and recommendations of any government office,
agency or instrumentality concerned. The Commission
shall submit their findings and recommendations to the
NEDA within thirty (30) days after the termination of the
public hearings.
c. The power of the President to increase or decrease rates
of import duty within the limits fixed in subsection "a" shall
include the authority to modify the form of duty. In
modifying the form of duty, the corresponding ad
valorem or specific equivalents of the duty with respect to
imports from the principal competing foreign country for
the most recent representative period shall be used as
bases.
d. The Commissioner of Customs shall regularly furnish the
Commission a copy of all customs import entries as filed in
the Bureau of Customs. The Commission or its duly
authorized representatives shall have access to, and the
right to copy all liquidated customs import entries and
other documents appended thereto as finally filed in the
Commission on Audit.
e. The NEDA shall promulgate rules and regulations
necessary to carry out the provisions of this section.
f. Any Order issued by the President pursuant to the
provisions of this section shall take effect thirty (30) days
after promulgation, except in the imposition of additional
duty not exceeding ten (10) per cent ad valorem which
shall take effect at the discretion of the President.
(Emphasis supplied)
FERRER VS BAUTISTA
FACTS:
respondent Quezon City Council enacted the Socialized Housing Tax (SHT)of
Quezon City, Section 3 of which provides:
SECTION 3. IMPOSITION. A special assessment equivalent to one-half
percent (0.5%) on the assessed value of land in excess of One
Hundred Thousand Pesos (Php100,000.00) shall be collected by the
City Treasurer which shall accrue to the Socialized Housing Programs
of the Quezon City Government. The special assessment shall accrue
to the General Fund under a special account to be established for the
purpose.
Effective for five (5) years, the Socialized Housing Tax ( SHT ) shall be utilized by
the Quezon City Government for the following projects: (a) land purchase/land
banking; (b) improvement of current/existing socialized housing facilities; (c)
land development; (d) construction of core houses, sanitary cores, medium-rise
buildings and other similar structures; and (e) financing of public-private partners
hip agreement of the Quezon City Government and National Housing Authority (
NHA ) with the private sector.3
ISSUE:
WON the SHT is constitutional
RULING:
YES. The rule governing the taxing power of provinces, cities, municipalities and
barangays is summarized in Icard v. City Council of Baguio:
It is settled that a municipal corporation unlike a sovereign state is clothed with
no inherent power of taxation. The charter or statute must plainly show an intent
to confer that power or the municipality, cannot assume it. And the power when
granted is to be construed in strictissimi juris . Any doubt or ambiguity arising
out of the term used in granting that power must be resolved against the
municipality. Inferences, implications, deductions all these have no place in
the interpretation of the taxing power of a municipal corporation. [Underscoring
supplied]
xxxx
Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer
vested exclusively on Congress; local legislative bodies are now given direct
authority to levy taxes, fees and other charges." Nevertheless, such authority is
"subject to such guidelines and limitations as the Congress may provide."
In conformity with Section 3, Article X of the 1987 Constitution, Congress
enacted Republic Act No. 7160, otherwise known as the Local Government Code
of 1991. Book II of the LGC governs local taxation and fiscal matters. 86
Indeed, LGUs have no inherent power to tax except to the extent that such
power might be delegated to them either by the basic law or by the
statute.87 "Under the now prevailing Constitution , where there is neither a grant
nor a prohibition by statute , the tax power must be deemed to exist although
Congress may provide statutory limitations and guidelines. The basic rationale for
the current rule is to safeguard the viability and self-sufficiency of local
government units by directly granting them general and broad tax powers.
Nevertheless, the fundamental law did not intend the delegation to be absolute
and unconditional; the constitutional objective obviously is to ensure that, while
the local government units are being strengthened and made more autonomous ,
the legislature must still see to it that (a) the taxpayer will not be over-burdened
or saddled with multiple and unreasonable impositions; (b) each local
government unit will have its fair share of available resources; (c) the resources
of the national government will not be unduly disturbed; and (d) local taxation
will be fair, uniform, and just."
The SHT charged by the Quezon City Government is a tax which is within its
power to impose. Aside from the specific authority vested by Section 43 of the
UDHA, cities are allowed to exercise such other powers and discharge such other
functions and responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and facilities which include,
among others, programs and projects for low-cost housing and other mass
dwellings.108 The collections made accrue to its socialized housing programs and
projects.

The tax is not a pure exercise of taxing power or merely to raise revenue; it is
levied with a regulatory purpose. The levy is primarily in the exercise of the
police power for the general welfare of the entire city. It is greatly imbued with
public interest. 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.

FILM DEVT COUNCIL VS COLON HERITAGE

3) Burden
4) Jurisdiction

1) Territoriality
a. Exception
2) Situs of Taxation
a. Income Tax
i. Within RP
ii. Without RP
iii. Party within and without
CIR VS BAIER-NICKLE

b.