Definition of Taxation PCGG vs COJUANCO Life Blood Theory CIR vs CTA Commissioner vs.

Cebu Portland Cement GR L-29059, 15 December 1987 Facts: By virtue of a decision of the Court of Tax Appeals, modified by the Supreme Court, the Commissioner was ordered to refund overpayments of ad valorem taxes on cement produced and sold by the company after October 1957. The company moved for a writ of execution, which was opposed by the Commissioner on the ground that the company had an outstanding sales tax liability to which the judgment debt had already been credited. The Court of Tax Appeals held that the alleged sales tax liability was still being questioned and therefore cannot be set-off against the refund. Issue: Whether the assessment of sales tax liability may be enforced, i.e. to set off against the refund. Held: The argument, that the assessment cannot as yet be enforced because it is still being contested, loss sight of the urgency of the need to collect taxes as the life blood of the government. If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. To require the Commissioner to actually refund to the company the amount of the judgment debt. Which he will later have the right to distrait for payment of its sales tax liability, is an idle ritual. REYES VS ALMANZOR Reyes vs. Almanzor GR 49839-46, 26 April 1991 En Banc, Paras (J): 15 concur Facts: JBL, Edmundo and Milagros Reyes are owners of parcels of land in Manila which are leased and occupied as dwelling sites by tenants. In 1971, RA 6359 was passed prohibiting an increase of monthly rentals of dwelling units or of land on which another dwelling is located for one year after effectivity for rentals not exceeding P300 but allowing an increase of rent thereafter by not more than 10%. The Act also suspended the operation of Article 1673 of the Civil Code (ejectment of lessess). PD 20 amended RA 6359 by absolutely prohibiting the increase and indefinitely suspending Article 1673. The Reyeses, thus, were precluded from raising the rentals and from ejecting the tenants. In 1973, the City Assessor of Manila reclassified and reassessed the value of the properties based on the schedule of market values duly reviewed by the Secretary of Finance. As it entailed an increase of the corresponding tax rates, the Reyeses filed a memorandum of disagreement with the Board of Tax Assessment Appeals and averring therein that the reassessments were excessive, unwarranted, unequitable, confiscatory and unconstitutional inasmuch as the taxes imposed exceeded the annual income derived from their properties; and that the income approach should have been used in determining land values instead of the comparative sales approach which the assessor adopted. Issue: Whether the reassessment is unequitable. Held: Taxation is equitable when its burden falls on those better able to pay. Taxation is progressive when its rate goes up depending on the resources of the person affected. Taxes are uniform when all taxable articles or kinds of property of the same

class are taxed at the same rate. The taxing power has the authority to make reasonable and natural classification for purposes of taxation. Laws should operate equally and uniformly, however, on all persons under similar circumstances or that all persons mus t be treated in the same manner, the conditiions not being different both in the privileges conferred and liabilities imposed. Finally, under the Real Property Tax Code (PD 464), property must be appraised at its cuurent and fair market value. The market value of the properties covered by PD 20, thus cannot be equated with the market value of properties not so covered. Shcu property covered by PD 20 has naturally a much lesser market value in view of the rental restrictions. Although taxes are the lifeblood of the government and should be collected without unnecessary hindrance, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. As teh Reyeses are burdened by the Rent Freeze Laws (RA 6359 and PD 20), they should not be penalized by the same government by the imposition of excessive taxes they cancan ill afford and would eventually result in the forfeiture of their properties, under the principle of social justice. PHILIPPINE GUARANTY CO vs CIR Commissioner vs. Algue Facts: The Philippine Sugar Estate Development Company (PSEDC) appointed Algue Inc. as its agent, authorizing it to sell its land, factories, and oil manufacturing process. The Vegetable Oil Investment Corporation (VOICP) purchased PSEDC properties. For the sale, Algue received a commission of P125,000 and it was from this commission that it paid Guevara, et. al. organizers of the VOICP, P75,000 in promotional fees. In 1965, Algue received an assessment from the Commissioner of Internal Revenue in the amount of P83,183.85 as delinquency income tax for years 1958 amd 1959. Algue filed a protest or request for reconsideration which was not acted upon by the Bureau of Internal Revenue (BIR). The counsel for Algue had to accept the warrant of distrant and levy. Algue, however, filed a petition for review with the Coourt of Tax Appeals. Issue: Whether the assessment was reasonable. Held: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Every person who is able to pay must contribute his share in the running of the government. The Government, for his part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that is an arbitrary method of exaction by those in the seat of power. Tax collection, however, should be made in accordance with law as any arbitrariness will negate the very reason for government itself. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate that the law has not been observed. Herein, the claimed deduction (pursuant to Section 30 [a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation 2: as to compensation for personal services) had been legitimately by Algue Inc. It has further proven that the payment of fees was reasonable and necessary in light of the efforts exerted by the payees in inducing investors (in VOICP) to involve themselves in an experimental enterprise or a business requiring millions of pesos. The assessment was not reasonable.

INHERENT POWER OF THE STATE Lutz vs. Araneta Facts: Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, sought to recover the sum of P14,6666.40 paid by the estate as taxes from the Commissioner under Section e of Commonwealth Act 567 (the Sugar Adjustment Act), alleging that such tax is unconstitutional as it levied for the aid and support of the sugar industry exclusively, which is in his opinion not a public purpose. Issue: Whether the tax is valid in supporting an industry. Held: The tax is levied with a regulatory prupose, i.e. to provide means for the rehabilitation and stabilization of the threatened sugar industry. The act is primarily an exercise of police power, and is not a pure exercise of taxing power. As sugar production is one of the great industries of the Philippines; and that its promotion, protection and advancement redounds greatly to the general welfare, the legislature found that the general welfare demanded that the industry should be stabilized, and provided that the distribution of benefits therefrom be readjusted among its component to enable it to resist the added strain of the increase in tax that it had to sustain. Further, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by-products, etc., as well as to the improvement of living and working conditions in sugar mills and plantations, without any part of such money being channeled diectly to private persons, constitute expenditure of tax money for private purposes. The tax is valid. GOMEZ vs PALOMAR ATTRIBUTES OF A SOUND TAXATION SYSTEM CHAVEZ vs ONGPIN DIAZ vs SECRETARY OF FINANCE CLASSIFICATION AND DISTINCTION LICENSE/ REGULATORY FEE ESSO STANDARD EASTERN vs CIR Progressive Development Corporation vs. Quezon City Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned and operated public markets to pay 10% of the gross receipts from stall rentals to the City, as supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which imposed a 5% tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. Progressive Development Corp., owned and operator of Farmers Market and Shopping Center, filed a petition for prohibition against the city on the ground that the supervision fee or license tax imposed is in reality a tax on income the city cannot impose. Issue: Whether the supervision fee / license tax is a tax on income. Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income,

nor a city income tax (distinguished from the national income tax by the Tax Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of business in which the company is engaged. To be considered a license fee, the imposition must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulations for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of the regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. The gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due to the city to cover the latters administrative expenses. The use of the gross amount of stall rentals, as basis for the determination of the collectible amount of license tax, does not by itself convert or render the license tax into a prohibited city tax on income. For ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related items sold in the privately owned market; and the higher the volume of goods sold in such market, the greater extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public. Philippine Airlines vs Edu Facts: The Philippine Airlines (PAL) is engaged in the air transportation business under a legislative franchise, Act 4271, wherein it is exempt from the payment of taxes. On the strength of an opinion of the Secretary of Justice (Opinion 307 of 1956), PAL was determined to have not been paying motor vehicle registration fees since 1956. The Land Transportation Commissioner required all tax exempt entities, including PAL, to pay motor vehicle registration fees. PAL protested. Issue: Whether registration fees as to motor vehicles are taxes to which Philippine Airlines is exempt. Held: Taxes are for revenue, whereas fees are exactions for purposes of regulation and inspection, and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. It is the object of the charge, and not the name, that determines whether a charge is a tax or a fee. The money collected under the Motor Vehicle Law is not intended for the expenditures of the Motor Vehicle Office but accrues to the funds for the construction and maintenance of public roads, streets and bridges. As the fees are not collected for regulatory purposes as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, but to provide revenue with which the Government is to construct and maintain public highways for everyones use, they are veritable taxes, not merely fees. PAL is, thus, exempt from paying such fees, except for the period between 27 June 1968 to 9 April 1979, where its tax exeption in the franchise was repealed. Villegas vs, Hiu Chiong Tsai Pao Ho Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed in the diplomatic and consular missions of foreign countries, in technical assistance programs of the government and another country, and members of religious orders or congregations) to procure the requisite mayors permit so as to be employed or engage in trade in the City of Manila. The permit fee is P50, and the penalty for the violation of the ordinance is 3 to 6 months imprisonment or a fine of P100 to P200, or both. Issue: Whether the ordinance imposes a regulatory fee or a tax.

Held: The ordinances purpose is clearly to raise money under the guise of regulation by exacting P50 from aliens who have been cleared for employment. The amount is unreasonable and excessive because it fails to consider difference in situation among aliens required to pay it, i.e. being casual, permanent, part-time, rank- and-file or executive. [ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus deprived of their rights to life, liberty and property and therefore violates the due process and equal protection clauses of the Constitution. Further, the ordinance does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion, thus conferring upon the mayor arbitrary and unrestricted powers. ] Campania General de Tabacos de Filipinas vs City of Manila Facts: Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed license fees prescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance 3634 and 3816 were passed; where the term general merchandise found therein included all articles in Sections 123 to 148 of the Tax Code (thus, also liquor under Sedctions 133 to 135). The Tabacalera paid its wholesalers and retailers taxes. In 1954, the City Treasurer addressed a letter to an accounting firm, expressing the view that liquor dealers paying the annual wholesale and retail fixed tax under Ordinance 3358 are not subject to the wholesale aand retail deaklers taxes prescribed by City Ordinances 3634, 3301, and 3816. The Tabacalera, upon learning of said stopped including quarterly sworn declaratons required by the latter ordinances, and in 1957, demanded refunde of the alleged overpayment. The claim was disallowed. Issue: Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and 3816, to prevent refund to the company. Held: Generally, the term tax applies to all kinds of exactions which become public funds. Legally, however, a license fee is a legal concept quite distinct from tax: the former is imposed in the exercise of police power for purposes of regulation, while the latter is imposed under the taxing power for the purpose of raising revenues. Ordinance 3358 prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcohol beverages; considering that the sale of intoxicating liquor is (potentially) harmful to public health and morals, and must be subject to supervision or regulation by the State and by cities and municipalities authorized to act in the premises. On the other hand, Ordinances 3634 , 3301 and 3816 imposed taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila. Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, without it being in violation of the rule against double taxation. The contrary view of the Treasurer in its letter is of no consequence as the government is not bound by the errors or mistakes committed by its officers, specially on matters of law. The company, thus, is not entitled to refund. American Mail vs City of Basilan Facts: The City Council of Basilan City enacted Ordinance 180 (1955) imposing upon a foreign vessel engaged in coastwise trade which may anchor within the territorial waters of Basilan City to pay an anchorage fee of half centavo per registered gross

ton of the vessle for the first 24 hours, provided that the maximum charge shall not exceed P75 per day. As the city treasurer assessed and attempted to collect from American Mail Line the anchorage fees, the company filed an action for declaratory relief to have the courts determine the validity of the ordinance. Issue: Whether the anchorage fees were for regulatory or revenue purposes. Held: The fees required are intended for revenue purposes. The fees have no proper or reasonable relation to the cost of issuing the permits and the cost of inspection or surveillance; being based upon the tonnage of the vessels. The fees imposed on the vessels exceed even the harbor fees imposed by the National Government to raise revenues for the Port Works Fund. The City of Basilan was not granted a blanket authority or power of taxation, but merely given the powers to levy and collect taxes for general and special purposes in accordance with or as provided by law. The power to regulate as an exercise of police power does not include the power to impose fees for review purposes. The ordinance was invalid. Gerochi vs Department of Energy Osmena vs Orbos PCGG vs Cojuangco Planters Products vs Fertiphil Corp. Chevron Philippines vs Bases Conversion Dev. Authority Angeles Foundation vs City of Angeles