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

Cebu Portland Cement FACTS: By virtue of a decision of the CTA, as modified on appeal by the Supreme Court, the CIR was ordered to refund to Cebu Portland Cement Company the amount of P 359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it. When respondent moved for a writ of execution, petitioner opposed on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. The CTA granted the CIRs motion. The CIR claims that the refund should be charged against the tax deficiency of the private respondent on the sales of cement under Section 186 of the Tax Code. His position is that cement is a manufactured and not a mineral product and therefore not exempt from sales taxes. The petitioner also denies that the sales tax assessments have already prescribed because the prescriptive period should be counted from the filing of the sales tax returns, which had not yet been done by the private respondent. Meanwhile, the private respondent disclaims liability for the sales taxes, on the ground that cement is not a manufactured product but a mineral product. As such, it was exempted from sales taxes. Also, the alleged sales tax deficiency could not as yet be enforced against it because the tax assessment was not yet final, the same being still under protest and still to be definitely resolved on the merits. Besides, the assessment had already prescribed, not having been made within the reglementary fiveyear period from the filing of the tax returns. ISSUE: Whether or not sales tax was properly imposed upon private respondent. HELD: Yes, because cement has always been considered a manufactured product and not a mineral product. This matter was extensively discussed and categorically resolved in Commissioner of Internal Revenue v. Republic Cement Corporation , decided on August 10, 1983, stating that cement qua cement was never considered as a mineral product within the meaning of Section 246 of the Tax Code, notwithstanding that at least 80% of its components are minerals, for the simple reason that cement is the product of a manufacturing process and is no longer the mineral product contemplated in the Tax Code (i.e.; minerals subjected to simple treatments) for the purpose of imposing the ad valorem tax. The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood 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.

REYES VS ALMANZOR FACTS: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants were paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. On July 14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands on which another's

dwelling is located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently, the Reyeses were precluded from raising the rentals and from ejecting the tenants thereof. The City Assessor of Manila assessed the value of the Reyeses property on the schedule of market values duly reviewed by the Secretary of Finance. The revision entailed an increase to the tax rates and the petitioners averred that the reassessment imposed upon them greatly exceeded the annual income derived from their properties. ISSUE: WON income approach is the method to be used in the tax assessment and not the comparable sales approach. HELD: The income approach and not the comparable sales approach must be used. By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions. In the case at bar, not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property. Nothing can justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were comparable with other residential properties not burdened by P.D. 20. PHILIPPINE GUARANTY CO vs CIR Commissioner vs. Algue Facts: Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959, amtg to P83,183.85 A letter of protest or reconsideration was filed by Algue Inc on Jan 18 On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who refused to receive it on the ground of the pending protest Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent Reyes, who deferred service of the warrant On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals CIR contentions: the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense payments are fictitious because most of the payees are members of the same family in control of Algue and that there is not enough substantiation of such payments CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue as legitimate business expenses in its income tax returns Ruling: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance, made in accordance with law. RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged During the intervening period, the warrant was premature and could therefore not be served. Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but later on conformed to the decision of CTA There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon. CTA also found, after examining the evidence, that no distribution of dividends was involved CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction Algue Inc. was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00. This arrangement was understandable in view of the close relationship among the persons in the family corporation The amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. Sec. 30 of the Tax Code: allowed deductions in the net income Expenses - All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered xxx the burden is on the taxpayer to prove the validity of the claimed deduction In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by Algue Inc. was permitted under the Internal Revenue Code and should therefore not have been disallowed by the CIR INHERENT POWER OF THE STATE Lutz vs. Araneta FACTS: Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffie Act, and the "eventual loss of its preferential position in the United States market"; wherefore, the national policy was expressed "to obtain a readjustment of the benefits

derived from the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the United States market and the imposition of the export taxes." In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on a graduated basis, on each picul of sugar manufactures; while section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise. Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action having been dismissed by the Court of First Instance, the plaintiffs appealed the case directly to this Court ISSUE: Whether or not taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act is legal? RULING: As the protection and promotion of the sugar industry is a matter of public concern the Legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Here, the legislative must be allowed full play, subject only to the test of reasonableness; and it is not contended that the means provided in section 6 of Commonwealth Act No. 567 bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's police power. 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 "inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. GOMEZ vs PALOMAR FACTS: On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the post office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of 1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the statute, it was returned to the petitioner. In view of this development, the petitioner brought suit for declaratory relief in the Court of First Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing administrative orders issued, contending that it violates the equal protection clause of the Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the statute and the orders unconstitutional. This appeal puts in issue the constitutionality of Republic Act 1635,as amended by Republic 2 Act 2631, which provides as follows: To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for the period from August nineteen to September thirty every year the printing and issue of semipostal stamps of different denominations with face value showing the regular postage charge plus the additional amount of five centavos for the said purpose, and during the said period, no mail matter shall be accepted in the mails unless it bears such semi-postal stamps: Provided, That no such additional charge of five centavos shall be imposed on newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall constitute a special fund and be deposited with the National Treasury to be expended by the Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate tuberculosis. The respondent Postmaster General, in implementation of the law, thereafter issued four (4) administrative orders numbered 3 (June 20, 1958), 7 (August 9, 1958), 9 (August 28, 1958), and 10

(July 15, 1960). All these administrative orders were issued with the approval of the respondent Secretary of Public Works and Communications. ISSUE: Whether or not RA 1635 as amended by RA 2631 and the four Administrative orders violates the equal protection clause of the Constitution as well as the rule of uniformity and equality of taxation? RULING: It is settled that the legislature has the inherent power to select the subjects of taxation and to grant exemptions. This power has aptly been described as "of wide range and flexibility. Indeed, it is said that in the field of taxation, more than in other areas, the legislature possesses the greatest freedom in classification. The reason for this is that traditionally, classification has been a device for fitting tax programs to local needs and usages in order to achieve an equitable distribution of the tax burden. The classification is based on considerations of administrative convenience. For it is now a settled principle of law that consideration of practical administrative convenience and cost in the administration of tax laws afford adequate ground for imposing a tax on a well recognized and defined class. In the case of the anti-TB stamps, undoubtedly, the single most important and influential consideration that led the legislature to select mail users as subjects of the tax is the relative ease and convenience of collecting the tax through the post offices. The small amount of five centavos does not justify the great expense and inconvenience of collecting through the regular means of collection. On the other hand, by placing the duty of collection on postal authorities the tax was made almost self-enforcing, with as little cost and as little inconvenience as possible. The eradication of a dreaded disease is a public purpose, but if by public purpose the petitioner means benefit to a taxpayer as a return for what he pays, then it is sufficient answer to say that the only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. Any other view would preclude the levying of taxes except as they are used to compensate for the burden on those who pay them and would involve the abandonment of the most fundamental principle of government that it exists primarily to provide for the common good. Nor is the rule of uniformity and equality of taxation infringed by the imposition of a flat rate rather than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the service rendered. We have said that considerations of administrative convenience and cost afford an adequate ground for classification. The same considerations may induce the legislature to impose a flat tax which in effect is a charge for the transaction, operating equally on all persons within the class regardless of the amount involved. 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 Facts: In CTA Case No. 1251, Esso Standard Eastern Inc. (Esso) deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleum concessions. This claim was disallowed by the Commissioner of Internal Revenue (CIR) on the ground that the expenses should be capitalized and might be written off as a loss only when a "dry hole" should result. Esso then filed an amended return where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells. Also claimed as ordinary and necessary expenses in the same return was the amount of P340,822.04,

representing margin fees it had paid to the Central Bank on its profit remittances to its New York head office. On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed deduction for the margin fees paid on the ground that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. Esso appealed to the Court of Tax Appeals (CTA) for the refund of the margin fees it had earlier paid contending that the margin fees were deductible from gross income either as a tax or as an ordinary and necessary business expense. However, Essos appeal was denied. Issues: (1) Whether or not the margin fees are taxes. (2) Whether or not the margin fees are necessary and ordinarybusiness expenses. Held: (1) No. A tax is levied to provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our country's international reserves. The margin fee was imposed by the State in the exercise of its police power and not the power of taxation. (2) No. Ordinarily, an expense will be considered 'necessary' where the expenditure is appropriate and helpful in the development of the taxpayer's business. It is 'ordinary' when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances. Since the margin fees in question were incurred for the remittance of funds to Esso's Head Office in New York, which is a separate and distinct income taxpayer from the branch in the Philippines, for its disposal abroad, it can never be said therefore that the margin fees were appropriate and helpful in the development of Esso's business in the Philippines exclusively or were incurred for purposes proper to the conduct of the affairs of Esso's branch in the Philippines exclusively or for the purpose of realizing a profit or of minimizing a loss in the Philippines exclusively. If at all, the margin fees were incurred for purposes proper to the conduct of the corporate affairs of Esso in New York, but certainly not in the Philippines.

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: PAL is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business under a legislative franchise, Act No. 42739, as amended by Republic Act Nos. 25) and 269.1 Under its franchise, PAL is exempt from the payment of taxes. On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has , since 1956, not been paying motor vehicle registration fees. Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the amount of P19, 529.75 as registration fees of its motor vehicles. PAL demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise. Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory exceptional and not revenue measures and, therefore, do not come within the exemption granted to PAL under its franchise. Hence, PAL filed the complaint against Land Transportation Commission after paying under protest. ISSUE: Whether or not motor vehicle registration is considered tax? RULING: Yes, motor vehicle registration fees are now considered revenue or tax measures. This case reversed the doctrine in the Philippine Rabbit Bus Lines to the effect that registration fees are regulatory exactions and not revenues. Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides that "no other taxes or fees than those prescribed in this Act shall be imposed," thus implying that the charges therein imposed though called feesare of the category of taxes. The provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of Republic Act 587, which reads: Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the provisions of any city charter to the contrary notwithstanding: Provided, however, That any provincial board, city or municipal council or board, or other competent authority may exact and collect such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the President of the Philippines upon the recommendation of the Secretary of Public Works and Communications, but in none of these cases, shall any toll fee." be charged or collected until and unless the approved schedule of tolls shall have been posted levied, in a conspicuous place at such toll station. Fees may be properly regarded as taxes even though they also serve as an instrument of regulation. It is possible for an exaction to be both tax and regulation. License fees are charges looked to as a source of revenue as well as a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. In such case, the fees may properly be regarded as taxes even though they also serve as an instrument of regulation. If the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly called a tax. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue

Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593). Indeed, taxation may be made the implement of the state's police power. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Umali, Id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears as Section 591-593) in the Land Transportation code. It is patent there from that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 591-593) speaks of "taxes." or fees ... for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional" tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees," such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 591-593 of the Code as taxes like the motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land Transportation Commission. It is quite apparent that vehicle registration fees were originally simple exceptional intended only for rigidly purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. A registration payment as fees, their nature has become that of "taxes." In pursuant to the Land Transportation and Traffic Code, taxes can be intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program. Villegas vs HiuChiong Tsai Pao Ho FACTS: On 22 February 1968, Ordinance 6537 was passed by the Municipal Board of Manila and signed by Manila Mayor Antonio J. Villegas on March 27, 1968. Ordinance 6537, entitled An ordinance making it unlawful for any person not a citizen of the Philippines to be employed in any place of employment or to be engaged in any kind of trade, business or occupation within the City of Manila without first securing an employment permit from the mayor of Manila; and for other purposes. Law prohibits aliens from employment and trade in the City of Manila without the requisite mayors permit). Exceptions to law are persons employed in the diplomatic or consular missions of foreign countries, or in the technical assistance programs of both the Philippine Government and any foreign government, and those working in their respective households, and members of religious orders or congregations, sect or denomination, who are not paid monetarily or in kind. Permit fee is P50. Penalty is imprisonment of 3 to 6 months or fine of P100-200, or both. On 4 May 1968, HiuChiong Tsai Pao Ho, who was employed in Manila, filed a petition, with the CFI Manila (Civil Case 72797), praying for (1) the issuance of the writ of preliminary injunction and restraining order to stop the implementation of the ordinance, and (2) judgment to declare the ordinance null and void. On 24 May 1968, Judge Francisco Arca (CFI Manila, Branch I) issued the writ of preliminary injunction and on 17 September 1968, the Judge rendered a decision declaring the ordinance null and void, and the preliminary injunction is made permanent. Mayor Villegas filed a petition for certiorari to review the decision of the CFI. ISSUES: 1. Whether or not there is a violation of due process and equal protection clauses? 2. Whether or not there was an illegal delegation of legislative powers?

3. Whether or not there is a violation of the principle of Uniformity of Taxation? RULING: 1. Due process and equal protection clauses The ordinance 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. Requiring a person, before he can be employed, to get a permit from the City Mayor of Manila, who may withhold or refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of livelihood. Once an alien is admitted by the State within its territory, he cannot be deprived of life without due process of law, including the means of livelihood. The shelter of protection under the due process and equal protection clause is given to all persons, both aliens and citizens. 2. Police Power, illegal delegation of legislative powers 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. The ordinance does not provide a standard to guide or limit the mayors action, expresses no purpose to be attained by requiring a permit, and enumerates no conditions for its grant or refusal. 3. Uniformity of Taxation, discriminatory and violative 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 differences in situation among aliens required to pay it, i.e. being casual, permanent, full-time, part-time, rank-an-file or executive. 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. Legal ly, 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: Appellees are foreign shipping companies licensed to do business in the Philippines, with offices in Manila. Their vessels call at Basilan City and anchor in the bay or channel within its territorial waters. As the city treasurer assessed and attempted to collect from them the anchorage fees prescribed in the aforesaid amendatory ordinance, they filed the present action for Declaratory Relief to have the courts determine its validity. Upon their petition the lower court issued a writ of preliminary injunction restraining appellants from collecting or attempting to collect from them the fees prescribed therein. Appellant contended that, through its city council, it had authority to enact the questioned ordinance in the exercise of either its revenue-raising power or of its police power. The question to be resolved is whether the City of Basilan has the authority to enact Ordinance 180 and to collect the anchorage fees prescribed therein. ISSUE: Is the ordinance valid exercise of taxing power of the City of Basilan. RULING: Under paragraph (a) sec. 14, R.A. 288, it is clear that the City of Basilan may only levy and collect taxes for general and special purposes in accordance with or as provided by law; in other words, the city of Basilan was not granted a blanket power of taxation. The use of the phrase "in accordance with law" which, in our opinion, means the same as "provided by law" clearly discloses the legislative intent to limit the taxing power of the City. It has been held that the power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. Appellant city's own contention that the questioned ordinance was enacted in the exercise of its power of taxation, makes it obvious that the fees imposed are not merely regulatory. Gerochi vs Department of Energy

FACTS Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers Network, Inc. (ECN) (petitioners), come before this Court in this original action praying that Section 34 of Republic Act (RA) 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), imposing the Universal Charge, and Rule 18 of the Rules and Regulations (IRR) which seeks to implement the said imposition, be declared unconstitutional. Petitioners also pray that the Universal Charge imposed upon the consumers be refunded and that a preliminary injunction and/or temporary restraining order (TRO) be issued directing the respondents to refrain from implementing, charging, and collecting the said charge. Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect. On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities Group (NPC-SPUG) filed with respondent Energy Regulatory Commission (ERC) a petition for the availment from the Universal Charge of its share for Missionary Electrification. On May 7, 2002, NPC filed another petition with ERC, praying that the proposed share from the Universal Charge for the Environmental charge be approved for withdrawal from the Special Trust Fund (STF) managed by respondent Power Sector Assets and Liabilities Management Group (PSALM) for the rehabilitation and management of watershed areas. On December 20, 2002, the ERC issued an Order provisionally approving the computed amount as the share of the NPC-SPUG from the Universal Charge for Missionary Electrification and authorizing the National Transmission Corporation (TRANSCO) and Distribution Utilities to collect the same from its end-users on a monthly basis. On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, among others,[14] to set aside the Decision. On April 2, 2003, ERC authorized the NPC to draw up to P70,000,000.00 from PSALM for its 2003 Watershed

Rehabilitation Budget subject to the availability of funds for the Environmental Fund component of the Universal Charge. On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO) charged petitioner Romeo P. Gerochi and all other end-users with the Universal Charge as reflected in their respective electric bills starting from the month of July 2003. Petitioners submit that the assailed provision of law and its IRR which sought to implement the same are unconstitutional on the following grounds: 1) The universal charge provided for under Sec. 34 of the EPIRA and sought to be implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax which is to be collected from all electric end-users and self-generating entities. The power to tax is strictly a legislative function and as such, the delegation of said power to any executive or administrative agency like the ERC is unconstitutional, giving the same unlimited authority. The assailed provision clearly provides that the Universal Charge is to be determined, fixed and approved by the ERC, hence leaving to the latter complete discretionary legislative authority. 2) The ERC is also empowered to approve and determine where the funds collected should be used. 3) The imposition of the Universal Charge on all end-users is oppressive and confiscatory and amounts to taxation without representation as the consumers were not given a chance to be heard and represented. Respondent PSALM through the Office of the Government Corporate Counsel (OGCC) and Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor General (OSG) contends: 1) Unlike a tax which is imposed to provide income for public purposes, the assailed Universal Charge is levied for a specific regulatory purpose, which is to ensure the viability of the country's electric power industry. 2) It is exacted by the State in the exercise of its inherent police power. On this premise, PSALM submits that there is no undue delegation of legislative power to the ERC since the latter merely exercises a limited authority or discretion as to the execution and implementation of the provisions of the EPIRA. 3) Universal Charge does not possess the essential characteristics of a tax, that its imposition would redound to the benefit of the electric power industry and not to the public, and that its rate is uniformly levied on electricity end-users, unlike a tax which is imposed based on the individual taxpayer's ability to pay. 4) Imposition of the Universal Charge is not oppressive and confiscatory since it is an exercise of the police power of the State and it complies with the requirements of due process. PECO argues that it is duty-bound to collect and remit the amount pertaining to the Missionary Electrification and Environmental Fund components of the Universal Charge, pursuant to Sec. 34 of the EPIRA and the Decisions in ERC Case Nos. 2002-194 and 2002-165.Otherwise, PECO could be held liable under Sec. 46[24] of the EPIRA, which imposes fines and penalties for any violation of its provisions or its IRR. ISSUE 1) Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is a tax. 2) Whether or not there is undue delegation of legislative power to tax on the part of the ERC. HELD 1st ISSUE

The conservative and pivotal distinction between these two powers rests in the purpose for which the charge is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax. In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police power, particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which enumerates the purposes for which the Universal Charge is imposed. From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the exercise of the State's police power. Public welfare is surely promoted. 2nd ISSUE There is no undue delegation of legislative power to the ERC. The principle of separation of powers ordains that each of the three 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 nondelegation of powers, as expressed in the Latin maxim potestas delegata non delegari potest (what has been delegated cannot be delegated). This is based on the ethical principle that such delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the intervening mind of another. In the face of the increasing complexity of modern life, delegation of legislative power to various specialized administrative agencies is allowed as an exception to this principle. Given the volume and variety of interactions in today's society, it is doubtful if the legislature can promulgate laws that will deal adequately with and respond promptly to the minutiae of everyday life. Hence, the need to delegate to administrative bodies - the principal agencies tasked to execute laws in their specialized fields - the authority to promulgate rules and regulations to implement a given statute and effectuate its policies. All that is required for the valid exercise of this power of subordinate legislation is that the regulation be germane to the objects and purposes of the law and that the regulation be not in contradiction to, but in conformity with, the standards prescribed by the law. These requirements are denominated as the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate, the only thing he will have to do is to enforce it. The second test mandates adequate guidelines or limitations in the law to determine the boundaries of the delegate's authority and prevent the delegation from running riot. The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all its essential terms and conditions, and that it contains sufficient standards. 1st test - Although Sec. 34 of the EPIRA merely provides that within one (1) year from the effectivity thereof, a Universal Charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity end-users, and therefore, does not state the specific amount to be paid as Universal Charge, the amount nevertheless is made certain by the legislative parameters provided in the law itself. Moreover, contrary to the petitioners contention, the ERC does not enjoy a wide latitude of discretion in the determination of the Universal Charge. Thus, the law is complete and passes the first test for valid delegation of legislative power. 2nd test - Provisions of the EPIRA such as, among others, to ensure the total electrification of the country and the quality, reliability, security and affordability of the supply of electric power[59] and watershed rehabilitation and management[60] meet the requirements for valid delegation, as they provide the limitations on the ERCs power to formulate the IRR. These are sufficient standards.

From the foregoing disquisitions, we therefore hold that there is no undue delegation of legislative power to the ERC. Petitioners failed to pursue in their Memorandum the contention in the Complaint that the imposition of the Universal Charge on all end-users is oppressive and confiscatory, and amounts to taxation without representation. Hence, such contention is deemed waived or abandoned. Moreover, the determination of whether or not a tax is excessive, oppressive or confiscatory is an issue which essentially involves questions of fact, and thus, this Court is precluded from reviewing the same. Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the Constitution and not one that is doubtful, speculative, or argumentative. Indubitably, petitioners failed to overcome this presumption in favor of the EPIRA. We find no clear violation of the Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are unconstitutional and void. WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
Osmena vs Orbos FACTS P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024, and ordered released from the National Treasury to the Ministry of Energy. The same Executive Order also authorized the investment of the fund in government securities, with the earnings from such placements accruing to the fund.
7

President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the underrecovery being left for determination by the Ministry of Finance. The petition further avers that the creation of the trust fund violates 29(3), Article VI of the Constitution. The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and not channeled to another 10 government objective." Petitioner further points out that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State , although the use thereof is limited to the special purpose/objective for which it was created." RULING While the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund." Indeed, the practice is not without precedent.

With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, 18 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit 19 on how much to tax." The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard limits of which are sufficiently determinate or determinable to which the delegate must conform. The standard, as the Court has already stated, may even be implied. In that light, there can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable standard which guides the exercise of the power granted to the ERB. By the same token, the proper exercise of the delegated power may be tested with ease. It seems obvious that what the law intended was to permit the additional imposts for as long as there exists a need to protect the general public and the petroleum industry from the adverse consequences of pump rate fluctuations. "Where the standards set up for the guidance of an administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the judgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative functions." PCGG vs Cojuangco Planters Products vs Fertiphil Corp. Chevron Philippines vs Bases Conversion Dev. Authority Angeles Foundation vs City of Angeles