TAXATION method of exaction by those in the seat

of power.
(Prelim reviewer) - But even as we concede the inevitability
and indispensability of taxation, it is a
BASIC TAX CONCEPTS requirement in all democratic regimes
that it be exercised reasonably and in
Taxation- the power by which the sovereign accordance with the prescribed
raises revenue to defray the necessary procedure. If it is not, then the taxpayer
expenses of the government. The power of has a right to complain and the courts will
taxation is essential because the government then come to his succor. For all the
can neither exist nor endure without awesome power of the tax collector, he
taxation. The collection of taxes must be may still be stopped in his tracks if the
made without hindrance if the state is to taxpayer can demonstrate, as it has
maintain its orderly existence. here, that the law has not been
observed.
Purpose of taxation: To raise revenues.
For the support of the government and for all
public needs. The primary purpose of the Taxation v Police power
taxation is to raise funds or property to
enable the state to promote general welfare TAXATION POLICE
and protection of its citizens. POWER
As to Raising Promote the
TAX REVENUES
Purpose revenue public
re-distribute limited resources; welfare
maintain economic stability;
promote growth; and As to Taxes paid No transfer,
achieve specific social objectives. Transfer of become part but only
Property of the public restraint on
Should the power to tax be stated in
Rights funds the exercise,
the Constitution in order for it to be
of property
enforceable?
Ans: No, because power to tax is inherent rights exists
- The power to tax is not granted in the
Constitution. Taxation v Eminent Domain
- The power of taxation is an incident of
sovereignty as it is inherent of the state, TAXATION EMINENT
belonging as a matter of right to every DOMAIN
independent government. It does not As to Nature Raise public Taking of
need of constitutional conferment. of the revenue private
- It is considered inherent in a sovereign Power property for
state because it is necessary attribute of Exercised public use
sovereignty. Without this power, no
sovereign state can exist nor endure.
As to General Just
-
CIR VS ALGUE Compensati benefit of all compensatio
Life blood doctrine on Received citizens and n to the
- It is said that taxes are what we pay for inhabitants property
civilization society. Without taxes, the of a State owner
government would be paralyzed for lack
of the motive power to activate and As to Applies to all Only a
operate it. Hence, despite the natural Persons persons, particular
reluctance to surrender part of one's hard
Affected property and property is
earned income to the taxing authorities,
every person who is able to must exercises comprehende
contribute his share in the running of that may be d
the government. subject
- Taxes are the lifeblood of the government thereto
and so should be collected without
unnecessary hindrance.
- The government for its part, is expected
to respond in the form of tangible and THEORY AND BASIS OF TAXATION
intangible benefits intended to improve
the lives of the people and enhance their 1. Necessity Theory
moral and material values. This Taxes proceed upon the theory that the
symbiotic relationship is the rationale existence of government is a necessity;
of taxation and should dispel the that it cannot continue without the means
erroneous notion that it is an arbitrary to pay its expenses; and that for those
 means, it has the right to compel all
citizens and properties within its limits to
contribute
2. The Benefits-Protection Theory
According to this theory, the State
demands and receives taxes from the
subjects of taxation within its jurisdiction
so that it may be enabled to carry its
mandate into effect and perform the
functions of government, and the citizen
pays from his property the portion
demanded in order that he may, by
means thereof, be secured in the
enjoyment of the benefits of
organized society.
LIMITATIONS ON THE POWER OF
TAXATION
I. INHERENT LIMITATIONS
a. Public purpose Taxes are exacted only
for public purpose. They cannot be used
for purely private purposes or for the
exclusive benefit of private persons.
- The power to determine whether the
purpose of taxation is public or private
resides in congress.
b. Non-delegability of the taxing power
The power to tax is exclusively vested in the
legislative body.
Exceptions:
1. Under the Constitution, Congress may
expressly authorize the President to fix
within specified limits, and subject to
such limitations and restrictions as it
may impose, tariff rates, import and
export quotas, tonnage and wharfage
dues, and other duties or imposts
within the framework of national
development program of the
Government.
2. 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
c. Territoriality or the Situs of taxation-
The taxing power should be exercised only
within territorial boundaries of the taxing
authority.
d. Exemption of the Government from
Taxes Properties of the national
government as well as those of the local
government units are not subject to tax,
otherwise it will result in the absurd situation
of the government taking money from one
pocket and putting it in another.
e. International Comity
- It is significant to note that Sec. 12,
Art. II of our Constitution declares that
the Philippines adopts the generally
accepted principles on international law
as part of the law of the land and
adheres to the policy of peace, equality,
justice, freedom, cooperation and amity
with all nations.
- Observance of the principle of comity.
Comity is the respect accorded by
nations to each other because they are
equals. On the other hand taxation is an
act of sovereign. Thus, the power should
be imposed upon equals out of respect.
- Some authorities include no double
taxation.
- Property of a foreign State of government
may not be taxed by another.
II. CONSTITUTIONAL LIMITATIONS
a. Sec. 24, Art. VI of the Constitution
provides that (a)ll appropriation,
revenue or tariff bills, bills authorizing
the 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.
b. Sec. 28 [1], Art. VI of the Constitution
provides: The rule of taxation shall be
uniform and equitable. The Congress
shall evolve a progressive system of
taxation.
Uniformity in taxation is further
defined in one case as that in
which the tax levied operates with
the same force and effect in every
place where the subject of it is
found. Uniformity means that all
property belonging to the same
class shall be taxed alike
c. Sec. 28[3], Art. VI, of the
Constitution provides Charitable
institutions, churches and parsonages
or convents appurtenant thereto,
mosques, non-profit cemeteries and
all lands, buildings and improvements
actually, directly and exclusively
used for religious, charitable, or
educational purposes shall be exempt
from taxation.
Case:
Portions of the Lung Center of the
Philippines are used for the treatment
of patients and the dispensation of
medical services to them, whether
paying or non-paying, other portions
thereof are being leased to private
doctors for their clinics and a canteen.
Further, a portion of the land is being
leased to a private individual for her
business enterprises under the
business name Elliptical and Garden
Center.
 Are these properties of the Lung
Center exempt from real property tax?
Case:
H Hospital is a 100 bed hospital
organized for charity patients.
However, out of its 100-bed capacity,
40 beds are alloted for paying
patients, while the rest are intended
for charity patients. The revenues
generated from these paying patients,
however, are being used to improve
the facilities of the hospital. Can said
hospital claim exemption from income
as well as real property taxes relying
on the 1987 Constitution? Explain.
d. Sec. 28[4], Art. VI of
Constitution provides: No law
granting any tax exemption shall be
passed without the concurrence of a
majority of all the members of
Congress.
e. Sec. 5, Art. VIII: The Supreme Court
shall have the following powers:
x x x (2) Review, revise, reverse,
modify or affirm on appeal or certiorari
as the law or the Rules of Court may
provide, final judgments and orders of
lower courts in: (b) all cases
involving the legality of any tax,
impost, assessment or toll, or any
penalty imposed in relation
thereto. x x x
f. Section 4[3], Art XIV, 1987
Constitution
All revenues and assets of non-stock,
non-profit educational institutions
used actually, directly, and exclusively
for educational purposes shall be
exempt from taxes and duties.
g. Section 4[4], Art XIV, 1987
Constitution
Subject to conditions prescribed by
law, all grants, endowments,
donations, or contributions used
actually, directly, and exclusively for
educational purposes shall be exempt
from tax.
ASPECTS OF TAXATION
1. The levy or imposition of the tax on
persons, property or excises; and
- The term / levy refers to the
enactment of tax laws or statutes.
2. The assessment & collection of the
taxes already levied.
- The act of assessing and collecting
taxes is administrative in character,
and therefore can be delegated.
3. Payment
- This signifies an act of compliance by
the taxpayer.
BASIC PRINCIPLES OF A SOUND TAX
SYSTEM
(Code: FAT)
The canons of a sound tax system, also
known as the characteristics or, principles of
a sound tax system, are used as a criteria in
order to determine whether a tax system is
able to meet the purposes or objectives of
taxation. They are:
F Fiscal Adequacy sufficient revenue
A Administrative Feasibility ease in
collection
T Theoretical justice ability to pay
GENERAL RELEVANCE OF CITIZENSHIP
TO TAXATION
the
o Citizens and aliens, whether natural or
juridical, are generally taxed at different
rates under the income tax law.
o Citizenship is necessary in determining
local personal exemptions allowable to a
certain taxpayer.
o Citizenship is also necessary in
determining the allowable exclusions and
deductions in taxation.
CONSEQUENCES OF NOT PAYING
CORRECT TAXES ON TIME
o Either fine or imprisonment;
o Both fine and imprisonment;
o Compromise penalty.
BAR QUESTIONS:
1. Explain the requirement of uniformity as
limitation in the imposition and/or
collection of taxes. [15%]
Ans: The criteria is met when the tax
laws operate equally and uniformly on all
persons under similar circumstances. All
persons are treated in the same manner,
the conditions not being different, both in
privileges conferred and liabilities
imposed.
2. Enumerate the 3 stages or aspects of
taxation. Explain each (5%)
Ans:
3. Distinguish direct taxes from indirect
taxes. Give examples [5%]
Ans:
a. Direct taxes. Is a tax for which a tax
payer is directly liable on the transaction or
business it engages in. Example income
tax, estate tax, donors tax, etc.
b. Indirect taxes is a tax primarily
paid by persons who can shift the burden
upon someone else. Example value added
tax (VAT), documentary stamp tax, excise
tax, percentage tax, etc.
4. May a legislative body enact laws to raise 2. Indirect duplicate taxation, which is
revenues in the absence of a the opposite of direct double taxation, is
constitutional provision granting said not legally objectionable.
body of the power of tax? Explain. - This is allowed if the taxes are of the
Ans: Yes. It must be noted that different nature or character, imposed
Constitutional provision relating to the by different taxing authorities.
power of taxation do not operate as - While it is true that the plaintiffs-
grants of the power of taxation to the appellees are taxable under the
government, but instead merely aforesaid provisions of the National
constitute a limitation upon a power Internal Revenue Code as real estate
which would otherwise be practically dealers, and still taxable under the
without limit. ordinance in question, the argument
against double taxation may not be
invoked. The same tax may be
SCOPE OF LEGISLATIVE TAXING POWER imposed by the national
government as well as by the local
- The person, property or occupation to be
government. There is nothing
taxed. Excises (tax on certain
inherently obnoxious in the exaction of
commodities) or privileges, provided they
license fees or taxes with respect to the
are within the taxing jurisdiction, are also
same occupation, calling or activity by
included. According to one case, the
both the State and a political
taxing authority can select the subjects of
subdivision thereof. (Villanueva v. City
taxation.
of Iloilo).
The amount or rate of the tax;
- The legislature has the right to CLASSIFICATIONS OF TAXES
finally determine the amount or
rate of a tax, in the absence of 1. Personal Tax
constitutional prohibition. It may 2. Property Tax
levy a tax of any amount it sees fit. 3. Excise Tax
The purposes for which taxes shall be 4. Direct Tax
levied provided they are public 5. Indirect Tax
purposes; 6. General Tax
- The courts may review the levy of 7. Special Tax
the tax to determine whether the 8. Specific Tax
purpose is a public one but once 9. Ad Valorem Tax
that is determined, the courts can 10. National Tax
make no other inquiry as to the 11. Local Tax
purpose of the tax, as it affects the 12. Progressive Tax
power to impose it. 13. Regressive Tax
The kind of tax to be collected; 14. Proportionate Tax
The apportionment of the tax, i.e.,
whether the tax shall be general or Tax Collection Process
limited to a particular locality or partly 3 Phases
general and partly local; 1. Levy/Imposition
The situs of taxation; and 2. Collection (manner of enforcing)
The method of collection. 3. Payment of taxpayer

DOUBLE TAXATION LEVY AND ASSESSMENT

- In taxation, levy is synonymous with
Double taxation is twice taxing for the imposition of a tax. Its object is to
same purpose an object of taxation compulsorily raise money for
within the same taxable year by the government. The levy of a tax is
same jurisdiction. accomplished thru legislation.
- Assessment is the official action of an
administrative officer in determining the
KINDS OF DOUBLE TAXATION amount of tax due from a taxpayer, or it
may be a notice to the effect that the
1. Direct duplicate taxation or double
amount therein state is due from the
taxation in the objectionable or prohibited
taxpayer as a tax with a demand for
sense means that same property is taxed
payment of the tax or deficiency stated
twice when it should be taxed only once;
therein.
and that both taxes are imposed on the
Kinds of Assessment
same property or subject matter for the
1. Self-assessment
same purpose, by the same State,
2. Deficiency Assessment
Government or taxing authority within the
3. Illegal and Void Assessment
same jurisdiction or taxing district and
4. Erroneous Assessment
covering the same kind or character of
tax (Villanueva v. City of Iloilo).

What is the importance of
distinguishing the two?
- The remedy available against levy of
taxes or during the first phase of taxation
is to question the legality of the tax
itself.
- In the second phase, they are to question
the legality of the tax and/or the
correctness of the acts of the tax
collectors.
TAX ADMINISTRATION AND
ENFORCEMENT
1. Agencies involved
- BIR
- BOC
- Provincial,City , Municipal Assessors
Office
- Large Taxpayer Division
Large Taxpayer' means a taxpayer
who satisfies any of the following
criteria:
1. Value-Added Tax (VAT)
Business establishment with VAT paid
or payable of at least One hundred
thousand pesos (P100,000) for any
quarter of the preceding taxable year;
2. Excise Tax Business
establishment with excise tax paid or
payable of at least One million pesos
(P1,000,000) for the preceding taxable
year;
3. Corporate Income Tax
Business establishment with annual
income tax paid or payable of at least
One million pesos (P1,000,000) for the
preceding taxable year; and
4. Withholding Tax Business
establishment with withholding tax
payment or remittance of at least One
million pesos (P1,000,000) for the
preceding taxable year.
TAX EVASION AND TAX AVOIDANCE
Tax evasion is the deliberate failure of a
taxpayer to pay taxes due to the
government. It connotes fraud through the
use of pretense and forbidden devices to
lessen or defeat taxes. Tax evasion is illegal
and, therefore, punishable by law.
Tax avoidance takes place when a taxpayer
uses his knowledge of taxation to avoid
payment of taxes by means which the law
permits. Tax avoidance is legal and therefore,
allowed by law.
Tax Avoidance Schemes
1. On Income Taxation - use of 40%
Standard Deduction
2. On Transfer Taxation: Correct
computation of the exclusions from
gross estate
3. On Business Taxation: Correct
application of business tax rates
4. Shifting burden of taxation
5. Changing the form of property by
putting money in non-taxable
securities
6. Life insurance a means to avoid
estate tax.
Tax Fraud means actual evil motive or
intent to evade taxes which are legally due
to the government or willfully acting contrary
to truth within the taxpayers knowledge.
- It is a well-established rule that fraud
is a question of fact.
- Fraud can never be presumed.
The following circumstances justify the
imposition of the fraud penalty, to wit:
1. Intentional understatement of income,
substantial in amount per se or
substantial in relation to the total
reported income;
2. Intentional overstatement of
deductions, substantial in amount per
se or substantial in relation to the total
unreported income; and
3. Recurrence of the understatement of
income and overstatement of
deductions for more than one tax year.
Instances when fraud penalty cannot be
imposed
1. Non-existence of fraudulent intent to
evade taxes when return is filed.
2. Assessment based solely upon the
books and records of a taxpayer.
3. Non-inclusion by the Commissioner of
Internal Revenue of the fraud penalty
in his assessment.
4. Taxpayer seeking the advice of an
accountant or lawyer in filing his
return.
5. Error or mistake of fact or law.
Can there be an injunction in collection
of taxes?
GR: Under the tax code (Section 218), no
court shall have the authority to grant an
injunction to restrain the collection of any
national internal revenue tax, fee or charge
imposed by this Code.
Exception: When in the opinion of the Court
the collection by the aforementioned
government agencies may jeopardize the
interest of the Government and/or the
taxpayer the Court at any stage of the
proceeding may suspend the said collection
and require the taxpayer either to deposit
the amount claimed or to file a surety bond
for not more than double the amount with
the Court.
(Section 11 of Republic Act No. 1125
creating the Court of Tax Appeals, as
amended by Republic Act No. 9282 )
Do taxes prescribe???
GR: No
Except:
a. NIRC 3 years; 10 years if no return,
false or fraudulent
b. Tariff and Customs Code 1 year from
date of final payment
C. Local Government Code - 5 years from
the date they become due. If there is fraud,
10 years from discovery.
Considering the principle that taxes are
personal in nature, may a stockholder,
director or officer of a corporation
become personally liable for the tax
liabilities of the corporation?
GR: Yes, up to the extent of unpaid
subscription
Except:
1. Assents ot patently illegal acts of the
corporation
2. Bad faith or gross negligence in
directing its affairs Conflict of interest
Can he invoke the doctrine of separate
corporate personality?
(CIR v. The Estate of Benigno Toda Jr., G.R.
No. 147188, September 14, 2004)
Construction of Tax Laws
1. Legislative intent must be considered
2. Where there is doubt against govt.
3. Where language is plain in its
ordinary meaning (ex. individual vs
person)
4. Tax exemption against taxpayer
CASES:
Mactan Cebu International Airport
Authority v. Marcos, etc., et al., G.R.
No. 120082, Sept. 11, 1996 (nature of
taxing power)
Facts:
-MCIAA was created by law to manage
Mactan Airport
-Cebu City demanded payment of real
property tax
-MCIAA says it is exempted from RPT
-MCIAA paid the RPT under protest
-MCIAA basically contended that the
taxing powers of local government
units do not extend to the levy of
taxes or fees of any kind on
an instrumentality of the national
government.
-Respondent City, however, asserted
that MACIAA is not an instrumentality
of the government but merely a
government-owned corporation
performing proprietary functions As
such, all exemptions previously
granted to it were deemed withdrawn
by operation of law
-There can be no question that under
Section 14 of R.A. No. 6958 the
petitioner is exempt from the payment
of realty taxes imposed by the
National Government or any of its
political subdivisions, agencies, and
instrumentalities. Nevertheless, since
taxation is the rule and exemption
therefrom the exception, the
exemption may thus be withdrawn at
the pleasure of the taxing authority.
The only exception to this rule is
where the exemption was granted to
private parties based on material
consideration of a mutual nature,
which then becomes contractual and
is thus covered by the non-impairment
clause of the Constitution.
-Since the last paragraph of Section
234 unequivocally withdrew, upon the
effectivity of the LGC, exemptions
from real property taxes granted to
natural or juridical persons, including
government-owned or controlled
corporations, except as provided in the
said section, and the petitioner is,
undoubtedly, a government-owned
corporation, it necessarily follows that
its exemption from such tax granted it
in Section 14 of its charter, R.A. No.
6958, has been withdrawn. Any claim
to the contrary can only be justified if
the petitioner can seek refuge under
any of the exceptions provided in
Section 234, but not under Section
133, as it now asserts, since, as shown
above, the said section is qualified by
Section 232 and 234.
- Besides, nothing can prevent
Congress from decreeing that even
instrumentalities or agencies of the
government performing governmental
 functions may be subject to tax.
Where it is done precisely to fulfill a
constitutional mandate and national
policy, no one can doubt its wisdom.
-upon
of real effectivity
estate dealer'softax.
LC,The
theassessment
exemption
from RPT was withdrawn
for real estate dealer's tax was based on the
fact-thus, MCIAA
that Roxas y Ciais received
now taxable
house rentals
Note: 2006 case
from Jose Roxas in the of Manila
amount IAA vs
of P8,
CA (exempt from RPT)
000.00. Pursuant to Sec. 194 of the Tax
Code, an owner of a real estate who derives
Roxas et al.rental
a yearly v. CTA, et al.
income G.R. L-25043,
therefrom in the
amount of P3,000.00 or more
Apr. 26, 1968 Power to Destroy is considered
a real estate dealer and is liable to pay the
- The power of taxation
corresponding fixed tax. is sometimes called
The issues:
also the power to destroy. Therefore it
(1) Is thebe
should gainexercised
derived from the caution
with sale of theto
Nasugbu farm lands an ordinary gain,
minimize injury to the proprietary rights
hence 100% taxable?
of a taxpayer. It must be exercised fairly,
(2) Is Roxas y Cia. liable for the payment of
equally andon real
the fixed tax uniformly, lest the tax
estate dealers?
collector
Rulings: kill the "hen that lays the golden
egg".
1. And, in order
Although they to paidmaintain
for the
their
general
respectivepublic's trust
holdings in and confidence
installment for ain
the Government
period of ten years,thisitpower
wouldmust be used
nevertheless
justly and the
not make not vendor
treacherously.
Roxas y ItCia does not
a real
estate
conform dealerOur during
with sense ofthe ten-year
justice in the
amortization
instant caseperiod. It should
for the be borne in
Government to
mind that the sale of the Nasugbu
persuade the taxpayer to lend it a helping farm
lands to the very farmers who tilled them for
hand and later on to penalize him for duly
generations was not only in consonance
answering the urgent call.
with, but more in obedience to the request
and pursuant to the policy of our
Roxas et al. v. CTA, et al.
Government to allocate lands to the
landless. It was the bounden duty of the FACTS:
Facts:
Government to pay the agreed Section 100 of Act No. 2339 imposed an
Antonio, Eduardo after
compensation and Joseit had Roxas, brothers
persuaded and
Roxas annual tax of P4 per square meter upon
at ytheCiasameto time
sell partners
its haciendas, of the Roxasand toy "electric signs, billboards, and spaces used for
Compania,
subsequentlyinherited from their
subdivide them grandparents
among the posting or displaying temporary signs, and all
several properties which
farmers at very reasonable terms included farmlands,
and signs displayed on premises not occupied by
residential house and a shares
prices. However, the Government could of stocknot in buildings." This section was subsequently
different corporations. At the end
comply with its duty for lack of funds. of the second amended by Act No. 2432, effective by
world war, the Roxas
Obligingly, tenant of y theCia.farmlands
shouldered express
the reducing the tax on such signs, billboards, etc.,
their desire to purchase from
Government's burden, went out of its waythe brothers the to P2 per square meter or fraction thereof.
parcels
and soldwhere
lands they actually
directly to theoccupy.
farmersFor its
in the Francis A. Churchill and Stewart Tait, owners of
part,
samethe way
government,
and under in consonance
the same terms with the as a sign or billboard containing an area of
constitutional
would have mandate
been to theacquire
case big hadlandedthe 52square meters constructed on private
estate and apportion
Government done them amongFor
it itself. landless
this property in the city of Manila and exposed to
tenants, persuaded
magnanimous act,thethebrothers
municipal to council
part with of public view, were taxes thereon P104.The tax
their landholdings.
Nasugbu passed aHowever,
resolutionthe government
expressing the was paid under protest. Plaintiffs assailed that
didpeople's
not havegratitude.
the funds In to cover the purchase
fine, Roxas y Cia. they were gaining lesser profit than what they
price, so Roxas allowed the
cannot be considered a real estate farmers to buy
dealerthe ought to receive because of the tax imposed
land for the same price but by
for the sale in question. Hence, pursuant to installment. bythe said law. However, it was proven that
Subsequently,
Section 34 ofthe CIR Code
the Tax demanded
the lands that
soldthe to there was no attempt on the part of the
brothers to pay real estate dealers
the farmers are capital assets, and the tax forgain
the plaintiffs to raise the advertising rates inorder
sale of the
derived fromsaidtheland. The Commissioner
sale thereof is capital gain, of to cope up et
Churchill, withal.
thev.
said tax rates. It will
Concepcion, 34 thus
Phil.
Internal
taxable Revenue
only to thedemanded
extent of from
50%. Roxas y Cia be seen that the contention that the rates
969, G.R. No.11572 September 22, 1916
2. Lastly, Roxas y Cia. questions the charged for advertising cannotbe raised is
imposition of the real estate dealer's fixed purely hypothetical, based entirely upon the
tax upon it, because although it earned a opinion of the plaintiffs, unsupported by actual
rental income of P8,000.00 per annum in test, and that theplaintiffs themselves admit
1952, said rental income came from Jose that a number of other persons have
Roxas, one of the partners. Section 194 of voluntarily and without protest paid the tax
the Tax Code, in considering as real estate hereincomplained of.
dealers owners of real estate receiving ISSUE: Is the tax void for lack of uniformity?
rentals of at least P3,000.00 a year, does RULING: A tax is uniform, within the
not provide any qualification as to the constitutional requirement, when it operates
persons paying the rentals. with the same force and effect in every place
The law, which states: where the subject of it is found. "Uniformity,"
. "Real estate dealer" includes any person as applied to the constitutional provision that
engaged in the business of buying, selling, all taxes shall be uniform, means that all
exchanging, leasing or renting property on property belonging to the same class shall be
his own account as principal and holding taxed alike. The statute under consideration
himself out as a full or part-time dealer in imposes a tax of P2 per square meter or
real estate or as an owner of rental property fraction thereof upon every electric sign, bill-
or properties rented or offered to rent for an board, etc., wherever found in the Philippine
aggregate amount of three thousand pesos Islands. Or in other words, "the rule of
 taxing powers of local government units. The City
refused to cancel and set aside petitioners realty
tax account, insisting that the MCIAA is a
government controlled corporation whose tax
exemption privilege has been withdrawn by
virtue of Sections 193 and 234 of the Local
Government Code, and not an instrumentality of
the government but merely a government owned
corporation performing proprietary functions.
MCIAA paid its tax account under protest
when City is about to issue a warrant of levy
against the MCIAAs properties. On 29 December
1994, MCIAA filed a Petition of Declaratory Relief
with the Cebu Regional Trial Court contending
that the taxing power of local government units
do not extend to the levy of taxes or fees on an
instrumentality of the national government. It
contends that by the nature of its powers and
functions, it has the footing of an agency or
instrumentality of the national government;
which claim the City rejects. On 22March 1995,
COMMISSIONER vs. ALGUE
the trial court dismissed the petition, citing that
G.R. no. L-28890 February 17, 1988
close reading of the LGC provides the express
FACTS:
cancellation and withdrawal of tax exemptions of
The Philippine
When is tax uniform Sugar Estate Development
Government Owned and Controlled Corporations.
Company (PSEDC) appointed Algue Inc. as its
MCIAAs motion for reconsideration having been
- agent,
churchill & tait are
authorizing partners
it to sell its in thefactories,
land, billboard denied by the trial court in its 4 May 1995 order,
and
business oil manufacturing process. The Vegetable
the petitioner filed the instant petition.
- Oil Investment
they allegedCorporation
that the (VOICP) purchased
tax imposed on ISSUE:
billboards are confiscatory and onlyreceived
PSEDC properties. For the sale, Algue for the Whether the MCIAA is exempted from
a commission of P125,000 and it was from this
purpose of destroying the billboard industry realty taxes?
commission that it paid Guevara, et. al.
- organizers
Uniformity ofin the taxation VOICP,
means that in
P75,000
all RULING:
taxable articles or kinds of property, of the Tax statutes are construed strictly against the
promotional fees. In1965, Algue received an
same class,from shall government and liberally in favor of the taxpayer.
assessment the be taxed at of
Commissioner theInternal
same
rate. It does not mean that lands, chattels, But since taxes are paid for civilized society, or
Revenue in the amount of P83,183.85 as
securities, incomes, are the lifeblood of the nation, the law frowns
delinquency income occupations,
tax for years franchises,
1958amd
against exemptions from taxation and statutes
privileges, necessities,protest
1959. Algue filed a and luxuries,
or request shallfor all
granting tax exemptions are thus construed
reconsideration which
be assessed at the same rate. was not acted upon by
against the taxpayer and liberally in favor of the
- the Bureau
Different of Internal
articles may beRevenue(BIR).
taxed at different The
taxing authority.
counsel for Algue had to accept
amounts, provided the rate is uniform on the the warrant of
A claim of exemption from tax payments must
distrait andlevy. Algue,
same class everywhere, with all people, and however, filed a
be clearly shown and based on language in the
petition for review with the Court of Tax
at all times. law too plain to be mistaken. Elsewise stated,
Appeals.
- ISSUE:
"Uniformity," as applied to the taxation is the rule, exemption therefrom is the
constitutional provision that all taxes shall be exception. However, if the grantee of the
Whether the assessment was reasonable?
uniform, means that all property belonging to exemption is a political subdivision or
RULING:
the same class shall be taxed alike. instrumentality, the rigid rule of construction
Taxes are the lifeblood of the government and
does not apply because the practical effect of the
so should be collected without unnecessary
exemption is merely to reduce the amount of
hindrance. Every person who is able to pay
CASES: money that has to be handled by the government
must contribute his share inthe running of the
in the course of its operations. Further, since
government. The Government, for his part, is
taxation is the rule and exemption therefrom the
expected to respond in the form of tangible
exception, the exemption may be withdrawn at
and intangible benefits intended to improve
the pleasure of the taxing authority. The only
the lives of the people and enhance their moral
exception to this rule is where the exemption was
and material values. This symbiotic
granted to private parties based on material
relationship is the rationale of taxation and
consideration of a mutual nature, which then
should dispel the erroneous notion that is an
becomes contractual and is thus covered by the
arbitrary method of exaction by those in the
non-impairment clause of the Constitution.
seat of power. Tax collection, however, should
MACTAN MCIAA is a taxable person under its Charter
be made CEBU in accordanceINTERNATIONAL with lawAIRPORTas any
vs. MARCOS (RA 6958), and was only exempted from the
arbitrariness will negate the very reason for
G.R. No. 120082 payment of real property taxes. The grant of the
government itself. September 11, 1996power
For all the awesome
Facts: privilege only in respect of this tax is conclusive
of the tax collector, he may still be stopped in
Since the iftime proof of the legislative intent to make it a taxable
his tracks the of its creation,
taxpayer MCIAA enjoyed
can demonstrate that
the law
privilege of exemption from payment of person subject to all taxes, except real property
has not been observed. Herein, the
realty tax. Since Republic Act 7160 or the Local
claimedtaxes deductionin accordance
(pursuant to with Section
Section 14
30 [a]
of Government Code expressly provides that All
[1]itsof Charter.
the TaxHowever Code and on Section
11 October 70 [1] 1994,of
the OfficeRegulation
of the Treasurer of compensation
Cebu, demanded general and special laws, acts, city charters,
Revenue 2: as to for
for the payment decrees, executive orders, proclamations and
personal services) of hadrealty
been taxes on several
legitimately by
parcels administrative regulations, or part of parts
Algue Inc. It has further proven petitioner.
of land belonging to the that the
Petitioner objected to suchand demand for thereof which are inconsistent with any of the
payment of fees was reasonable necessary
payment provisions of this Code are hereby repealed or
in light of as thebaseless
efforts exertedand unjustified.
by the payees It alsoin
asserted modified accordingly. With that repealing clause
inducing that investorsit is an (ininstrumentality
VOICP) to involve of the
Garcia vs Executive Secretary GR No
101273 03 July 1992
Facts:
Executive Order no 475 imposed an additional
duty of 9% on crude oil and oil products while
Executive Order 478 imposed a special duty on
crude oil and oil products. Petitioners claimed
that both EOs are unconstitutional because all
revenue measures must originate from the
House of Representatives and the Tariff and
Customs Code authorized the president to
increase the tariff duties only to protect local
industries but not to raise additional revenue
for the government.
Issue:
Whether or not the tariff rates imposed are
valid?
Ruling:
There is thus explicit constitutional permission
to Congress to authorize the President "subject
to such limitations and restrictions as Congress
may impose" to fix" within specific limits" "tariff
rates x x x and other duties or imposts x x x."
The relevant congressional statute is the Tariff
and Customs Code of the Philippines, and
Sections 104 and 401, the pertinent provisions
thereof. Section 401however pertains to
Flexible Clause which holds that the President
has the power to adjust tariff rates for purposes
of protecting our local industries.
The SC believes and so hold that Executive
Orders Nos. 475 and 478 which may be
conceded to be substantially moved by the
desire to generate additional public revenues,
are not, for that reason alone, either
constitutionally flawed, or legally infirm under
Section 401 of the Tariff and Customs Code.
Petitioner has not successfully overcome the
presumptions of constitutionality and legality to
which those Executive
PEPSI-COLA BOTTLING CO. OF THE PHILS.,
Orders
INC. vs.are entitled.
CITY OF BUTUAN
24 SCRA 789
GR No. L-22814, August 28, 1968
"The classification made in the exercise of
power to tax, to be valid, must be reasonable ."
FACTS:
Plaintiff-appellant Pepsi-Cola sought to recover
the sums paid by it under protest, to the City of
Butuan, and collected by the latter, pursuant to
its Municipal Ordinance No. 110 which plaintiff
assails as null and void because it partakes of
the nature of an import tax, amounts to double
taxation, highly unjust and discriminatory,
excessive, oppressive and confiscatory, and
constitutes an invlaid delegation of the power
to tax. The ordinance imposes taxes for every
case of softdrinks, liquors and other carbonated
beverages, regardless of the volume of sales,
shipped to the agents and/or consignees by
outside dealers or any person or company
having its actual business outside the City.
ISSUE:
Does the tax ordinance violate the uniformity
requirement of taxation?
HELD:
Yes. The tax levied is discriminatory. Even if the
burden in question were regarded as a tax on
the sale of said beverages, it would still be
invalid, as discriminatory, and hence, violative
of the uniformity required by the Constitution
and the law therefor, since only sales by
"agents or consignees" of outside dealers would
be subject to the tax. Sales by local dealers, not
merchants, regardless of the volume of their sales,
and even if the same exceeded those made by
said agents or consignees of producers or
merchants established outside the City of Butuan,
would be exempt from the disputed tax.
It is true that the uniformity essential to the valid
exercise of the power of taxation does not require
identity or equality under all circumstances, or
negate the authority to classify the objects of
taxation. The classification made in the exercise of
this authority, to be valid, must, however, be
reasonable and this requirement is not deemed
satisfied unless: (1) it is based upon substantial
distinctions which make real differences; (2) these
are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to
present conditions, but, also, to future conditions
substantially identical to those of the present; and
(4) the classification applies equally to all those
who belong to the same class.
Surigao Consolidated Mining Company v CIR
GR. No. L-14878 Dec. 26,1963
Facts:
Before the outbreak of the War, the Surigao
Consolidated Mining Co. was operating its
mining concessions in Mainit, Surigao. Due
to the interruption of communications at the
outbreak of the war, the company lost
contact with its mines and never received the
production reports for the 4thquarter of 1941. To
avoid incurring any tax liability or penalty, it
deposited of check payable to and indorsed in
favor of the City Treasurer, in payment of ad
valorem taxes for the said period. After the war,
the company filed its ad valorem tax for the said
period pursuant to Commonwealth Act 772.
Its return was revised, until eventually the
company claimed a refund of P17,158.01. The
collector of Internal Revenue denied the request
for refund.
Issue:
Whether Surigao Consolidated may recover its tax
payment in light of the condonation made under a
subsequent law, RA 81.
Held:
RA 81, Section 1(d) provided that all unpaid
royalties, ad valorem or specific taxes on all
minerals mined from mining claims or concessions
existing and in force on 1 January 1942, and which
minerals were l o s t b y r e a s o n o f w a r , o f
circumstance arising the refrom are
condone d The provision refers to the
condonation of unpaid taxes only. The condonation
of a tax liability is equivalent and is in the nature
of tax exemption. Being so, it should be sustained
only when expressed in explicit terms, and it
cannot be extended beyond the plain meaning of
those terms. He who claims an exemption from his
share of the common burden of taxation must
justify his claim by showing t hat the
Legislature intended to exempt him. The
company failed to show any portion of the law
Villanueva v City v Iloilo
GR No L-26521, December 28, 1968
FACTS:
On September 30, 1946, the Municipal Board of
Iloilo City enacted Ordinance 86 imposing license
tax fees upon
tenement houses. The validity of such ordinance
was challenged by Eusebio and Remedios
Villanueva, owners of four tenement houses
containing 34 apartments. The Supreme Court held
January 15, 1960, however, the municipal board, Marketing Corporation cannot by any stretch
believing that it acquired authority to enact an of the imagination be considered incidental to
ordinance of the same nature pursuant to the Local the purpose of education. The test of
Autonomy Act, enacted Ordinance 11, Eusebio and exemption from taxation is the use of the
property for purposes mentioned in the
Remedios Villanueva assailed the ordinance anew.
Constitution. The decision of the CFI Abra
ISSUE: (Branch I) is affirmed subject to the
Does Ordinance 11 violate the rule of uniformity of modification that half of the assessed tax be
taxation? returned to the petitioner. The modification is
RULING: derived from the fact that the ground floor is
No. The Court has ruled the tenement houses being used for commercial purposes (leased)
Apostolic
and the Prefect
second floor beingofused
Mountain Province v
as incidental
constitute a distinct class of property and that taxes
City Treasurer
to education (residenceofofBaguio City GR No
the director).
are uniform and equal when imposed upon all
47252, April 18, 1941
property of the same class or character within the
taxing authority.
FACTS:
The fact that the owners of the other classes of
The Apostolic Prefect is a corporation sole, of
buildings in Iloilo are not imposed upon by the
religious character, organized under the
ordinance, or that tenement taxes are imposed in
Philippine laws, and with residence
other cities do not violate the rule of equality and
in Baguio. The City imposed a special
uniformity. The rule does not require that taxes for
assessment against properties within its
the same purpose should be imposed in different
territorial jurisdiction, including those of the
territorial subdivisions at the same time. So long as
Apostolic Prefect, which benefits from its
the burden of tax falls equally and impartially on all
drainage and sewerage system. The Apostolic
owners or operators of tenement houses similarly
Prefect contends that its properties should be
classified or situated, equality and uniformity is
free from tax.
accomplished. The presumption that tax statutes Abra Valley College v. Aquino GR L-39086 15
are intended to operate uniformly and equally was June 1988
not overthrown therein. FACTS:ISSUE:
Is the an
Petitioner, Apostolic Prefect exempt
educational from paying?
corporation and
institution of higher learning duly incorporated with
the Securities
RULING: and Exchange Commission in 1948,
filed a complaint to
No, it is liable.
annul and declare void the Notice of Seizure and
the Notice of Sale of its lot and building located
In its broad
at Bangued, Abra, meaning, tax includes
for non-payment bothestate
of real
taxes andgeneral taxes amounting
penalties and special to assessment.
P5,140.31.Yet Said
Noticeactually, there is by
of Seizure a recognized
respondents distinction
Municipal
Treasurer and them
between Provincial
in thatTreasurer,
assessmentdefendants
is confined
below, towas issued for the satisfaction
local impositions upon property for of the
thesaid
taxes thereon. The parties entered into
payment of the cost of public improvements a stipulation
of facts adopted and embodied by the trial court in
in its immediate vicinity and levied with
its questioned decision. The trial court ruled for the
reference
government, to special
holding benefits
that the secondto the property
floor of the
buildingassessed.
is being used by the director for residential
purposeAsandspecial
thatassessment
the groundisfloor not, used
strictlyandspeaking,
rented
by Northern Marketing Corporation,
a tax; and neither the decree nor the a commercial
establishment, and exempt
Constitution thus thethe property
Apostolic is Prefect
not being
used exclusively for educational purposes.
from payment of said special assessment. Instead
of perfecting an appeal, petitioner availed of the
instant petition for review on certiorari with prayer
Furthermore,
for preliminary arguendobefore
injunction that exemption
the Supreme may
encompass such assessment,
Court, by filing said petition on 17 August 1974.the Apostolic
ISSUE: Prefect cannot claim exemption as it has not
Whether or not
proven the the lot and
property building
in question are used
is used
exclusively for educational
exclusively purposes.
for religious purposes; but that it
HELD: appears that the same is being used to other
NO. Section 22, paragraph 3, Article VI, of the then
1935 Philippine Constitution, expressly grants
exemption from realty taxes for cemeteries,
churches and parsonages or convents appurtenant
thereto, and all lands, buildings, and improvements
used exclusively for religious, charitable or
educational purposes. Reasonable emphasis has
always been made that the exemption extends to
facilities which are incidental to and reasonably
necessary for the accomplishment of the main
purposes. The use of the school building or lot for
commercial purposes is neither contemplated by
law, nor