This case examines the constitutionality of taxes imposed under the Sugar Adjustment Act (CA 567) to support the sugar industry. Walter Lutz contested taxes paid by an estate under Section 3 of CA 567, arguing the taxes were unconstitutional because supporting the sugar industry was not a valid public purpose. The Court held that CA 567 was a valid exercise of police power aimed at rehabilitating and stabilizing the threatened sugar industry, which was a matter of public concern. As the primary industry providing employment and foreign exchange, promoting the sugar industry promoted the general welfare. Taxation was a valid tool to implement the state's police power to regulate industries.
This case examines the constitutionality of taxes imposed under the Sugar Adjustment Act (CA 567) to support the sugar industry. Walter Lutz contested taxes paid by an estate under Section 3 of CA 567, arguing the taxes were unconstitutional because supporting the sugar industry was not a valid public purpose. The Court held that CA 567 was a valid exercise of police power aimed at rehabilitating and stabilizing the threatened sugar industry, which was a matter of public concern. As the primary industry providing employment and foreign exchange, promoting the sugar industry promoted the general welfare. Taxation was a valid tool to implement the state's police power to regulate industries.
This case examines the constitutionality of taxes imposed under the Sugar Adjustment Act (CA 567) to support the sugar industry. Walter Lutz contested taxes paid by an estate under Section 3 of CA 567, arguing the taxes were unconstitutional because supporting the sugar industry was not a valid public purpose. The Court held that CA 567 was a valid exercise of police power aimed at rehabilitating and stabilizing the threatened sugar industry, which was a matter of public concern. As the primary industry providing employment and foreign exchange, promoting the sugar industry promoted the general welfare. Taxation was a valid tool to implement the state's police power to regulate industries.
Inherent limitations (the levy must be for public purpose)
Lutz v. Araneta, 98 phil 148
Facts: The case is to test the legality of the taxes imposed by CA 567 a.k.a Sugar Adjustment Act 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 14,666.40php paid by the estate taxes, under section 3 of the act, for the crop years 1948-1949 and 1949-1950. (Section 3, CA 567 levies on owners or persons in control of lands devoted to the cultivation of sugar cane). Alleging that such tax is unconstitutional and void being levied for aid and support of the sugar industry exclusively, which in Lutz opinion is not a public purpose for which a tax may be constitutionally levied. Issue: Whether or not the imposition of tax by CA 567 serves a public purpose. Held: The basic defect in plaintiffs position is his assumption that the tax provided for in CA 567 is a pure exercise of the taxing power. Analysis of the act and particularly Section 6 will show that the tax is levied with a regulatory purpose to provide means for the rehabilitation and stabilization of the threatened sugar industry (Section 6, CA567 All collections made under this Act shall accrue to a special fund in the Philippine treasury, to be known as Sugar Adjustment and Stabilization Fund and shall be paid out only for any or all of the following objectives as may be provided by law). In other words, the act is primarily an exercise of the Police power.
Sugar production is one of the great industries of our nation,
sugar occupying a leading position among its export products. It gives employment to thousands of laborers in fields and factories, great source of states wealth, one of the great sources of foreign exchange needed by the government and is pivotal in the plans of a regime committed to a policy of currency stability. Its promotion, protection and advancement redounds greatly to the general welfare. The protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature may determine within reasonable bounds whats necessary for its protection and expedient for its promotion. Taxation may be made the implement of the States Police power. It appears rational that the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. 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 inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation.
[g.r. No. L-9408. October 31, 1956.] Emilio y. Hilado, Petitioner, Vs. the Collector of Internal Revenue and the Court of Tax Appeals, Respondents. _ October 1956 - Philippine Supreme Court Jurisprudence - Chanrobles Virtual Law Library
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