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FUNDAMENTALS OF TAXATION

ABAN: Tax is the power of the sovereign through its law making body to raise Due process is usually violated where the tax imposed is for a private as
revenues to defray the necessary expenses of the government distinguished from a public purpose; a tax is imposed on property outside
- inherent power of the sovereign exercised through the legislature to impose the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods
burdens upon subjects and objects within its jurisdiction for the purpose of are used in assessing and collecting taxes. But, a tax does not violate the
raising revenues to carry out the legitimate objects of the government. It is due process clause, as applied to a particular taxpayer, although the purpose
a mode of raising revenue for public purposes. of the tax will result in an injury rather than a benefit to such taxpayer. Due
process does not require that the property subject to the tax or the amount
- It is the power by which the sovereign raises revenue to defray the expenses of tax to be raised should be determined by judicial inquiry, and a notice and
of the government. It is a way of apportioning the cost of government among hearing as to the amount of the tax and the manner in which it shall be
those who in some measure are privileged to enjoy its benefits and must apportioned are generally not necessary to due process of law. 12
bear its burden.
DELEGATED AUTHORITY NOT UNCONSTITUTIONAL ON THE
Nature and Characteristics THEORY OF DOUBLE TAXATION. delegated authority can be declared
1) Inherent unconstitutional on the theory of double taxation. It must be observed that
the delegating authority specifies the limitations and enumerates the taxes
Pepsi vs Municipality of Tanauan over which local taxation may not be exercised. 13 The reason is that the
G.R. No. L-31156 February 27, 1976 State has exclusively reserved the same for its own prerogative. Moreover,
double taxation, in general, is not forbidden by our fundamental law, since
Pepsi-Cola Bottling Company commenced a complaint with preliminary We have not adopted as part thereof the injunction against double taxation
injunction to declare Section 2 of Republic Act No. 2264. 1 otherwise known as the found in the Constitution of the United States and some states of the
Local Autonomy Act, unconstitutional as an undue delegation of taxing authority Union. 14 Double taxation becomes obnoxious only where the taxpayer is
as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality taxed twice for the benefit of the same governmental entity 15 or by the
of Tanauan, Leyte, null and void. same jurisdiction for the same purpose, 16 but not in a case where one tax
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on is imposed by the State and the other by the city or municipality.
September 25, 1962, levies and collects "from soft drinks producers and
manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle 2. ORDINANCE 27 IMPLIEDLY REPEALED ORDINANCE 23, NO
of soft drink corked." 2 DOUBLE TAXATION. The plaintiff-appellant submits that Ordinance No. 23
Municipal Ordinance No. 27, which was approved on October 28, 1962, and 27 constitute double taxation, because these two ordinances cover the
levies and collects "on soft drinks produced or manufactured within the same subject matter and impose practically the same tax rate. The thesis
territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on proceeds from its assumption that both ordinances are valid and legally
each gallon (128 fluid ounces, U.S.) of volume capacity." 4 enforceable. This is not so. The intention of the Municipal Council of Tanauan
in enacting Ordinance No. 27 was to substitute prior Ordinance No. 23, thus
RTC dismissed the complaint and upheld the constitutionality of Sec. 2 of RA 2264 operating as an implied repeal. Even the Provincial Fiscal, counsel for
and the municipal ordinances. Hence, the appeal. defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27,
series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter
ISSUEs: are inconsistent with the provisions of the former."
1. Is Section 2, Republic Act No. 2264 an undue delegation of power,
confiscatory and oppressive? 3. AN INCREASE IN THE TAX ALONE WOULD NOT SUPPORT THE
2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose CLAIM THAT THE TAX IS OPPRESSIVE, UNJUST AND
percentage or specific taxes? CONFISCATORY. The tax of one (P0.01) on each gallon (128 fluid ounces,
3. Are Ordinances Nos. 23 and 27 unjust and unfair? U.S.) of volume capacity on all softdrinks, produced or manufactured, or an
equivalent of 1- centavos per case, 23 cannot be considered unjust and
HELD: unfair. Municipal corporations are allowed much discretion in
1. THE POWER OF TAXATION IS AN ESSENTIAL AND INHERENT determining the rates of imposable taxes. This is in line with the
ATTRIBUTE OF SOVEREIGNTY, BELONGING AS A MATTER OF constitutional policy of according the widest possible autonomy to local
RIGHT TO EVERY INDEPENDENT GOVERNMENT, WITHOUT BEING governments in matters of local taxation, an aspect that is given expression
EXPRESSLY CONFERRED BY THE PEOPLE. 6 It is a power that is purely in the Local Tax Code (PD No. 231, July 1, 1973). Unless the amount is so
legislative and which the central legislative body cannot delegate either to excessive as to be prohibitive, courts will go slow in writing off an ordinance
the executive or judicial department of the government without infringing as unreasonable. 27 Reluctance should not deter compliance with an
upon the theory of separation of powers. The exception, however, lies ordinance such as Ordinance No. 27 if the purpose of the law to further
in the case of municipal corporations, to which, said theory does not strengthen local autonomy were to be realized. Municipalities are
apply. Legislative powers may be delegated to local governments in empowered to impose, not only municipal license taxes upon persons
respect of matters of local concern. 7 This is sanctioned by immemorial engaged in any business or occupation but also to levy for public purposes,
practice. 8 By necessary implication, the legislative power to create political just and uniform taxes. The ordinance in question (Ordinance No. 27) comes
corporations for purposes of local self-government carries with it the power within the second power of a municipality.
to confer on such local governmental agencies the power to tax. 9 Under the
New Constitution, local governments are granted the autonomous authority Constitutionality of Section 2 of Republic Act No. 2264, otherwise known as
to create their own sources of revenue and to levy taxes. Section 5, Article the Local Autonomy Act, as amended, is hereby upheld and Municipal
XI provides: "Each local government unit shall have the power to create its Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962, re-
sources of revenue and to levy taxes, subject to such limitations as may be pealing Municipal Ordinance No. 23, same series, is hereby declared of valid
provided by law." Withal, it cannot be said that Section 2 of Republic Act No. and legal effect.
2264 emanated from beyond the sphere of the legislative power to enact
and vest in local governments the power of local taxation.
Tio vs Videogram Regulatory Board
The plenary nature of the taxing power thus delegated, would not
suffice to invalidate the said law as confiscatory and oppressive. In FACTS: Valentin Tio is a videogram operator challenged the constitutionality of
delegating the authority, the State is not limited the exact measure of that Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory
which is exercised by itself. When it is said that the taxing power may be Board" with broad powers to regulate and supervise the videogram industry
delegated to municipalities and the like, it is meant that there may be (BOARD). The decree was later amended by the NIRC thereby imposing a tax to
delegated such measure of power to impose and collect taxes as the be collected equivalent to 30% on the gross receipts payable to the local
legislature may deem expedient. Thus, municipalities may be permitted to government. Among other grounds, he contends that such imposition is harsh,
tax subjects which for reasons of public policy the State has not deemed confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due
wise to tax for more general purposes. 10 This is not to say though that the process clause of the constitution.
constitutional injunction against deprivation of property without due process
of law may be passed over under the guise of the taxing power, except when In the whereas clauses, one of the intentions of the decree is to alleviate the dire
the taking of the property is in the lawful exercise of the taxing power, as financial condition of the movie industry and at the same time provide an additional
when PUJO source of revenue for the government.
(1) the tax is for a public purpose;
(2) the rule on uniformity of taxation is observed; ISSUE: w/n the 30% tax imposition is harsh, oppressive, and confiscatory? NO. it
(3) either the person or property taxed is within the jurisdiction of was imposed primarily to answer the need for regulating video industry,
the government levying the tax; and particularly rampant film piracy and flagrant violation of intellectual property rights.
(4) in the assessment and collection of certain kinds of taxes notice
and opportunity for hearing are provided. 11
HELD: Section 185. Stamp tax on fidelity bonds and other insurance policies. On all
A TAX DOES NOT CEASE TO BE VALID MERELY BECAUSE IT REGULATES, policies of insurance or bonds or obligations of the nature of indemnity
DISCOURAGES, OR EVEN DEFINITELY DETERS THE ACTIVITIES for loss, damage, or liability made or renewed by any person, association or
TAXED. The power to impose taxes is one so unlimited in force and so company or corporation transacting the business of accident, fidelity, employers
searching in extent, that the courts scarcely venture to declare that it is liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other
subject to any restrictions whatever, except such as rest in the discretion branch of insurance (except life, marine, inland, and fire insurance), xxxx
of the authority which exercises it. 9 In imposing a tax, the legislature acts (Emphasis supplied)
upon its constituents. This is, in general, a sufficient security against erroneous
and oppressive taxation. TAX STATUTES ARE STRICTLY CONSTRUED AGAINST THE TAXING
AUTHORITY. This is because taxation is a destructive power which interferes with
THE TAX IMPOSED BY THE DECREE IS NOT ONLY A REGULATORY BUT the personal and property rights of the people and takes from them a portion of
ALSO A REVENUE MEASURE prompted by the realization that earnings of their property for the support of the government. Hence, tax laws may not be
videogram establishments of around P600 million per annum have not been extended by implication beyond the clear import of their language, nor their
subjected to tax, thereby depriving the Government of an additional source of operation enlarged so as to embrace matters not specifically provided. The fact
revenue. It is an end-user tax, imposed on retailers for every videogram they make that the NIRC contained no specific provision on the DST liability of health care
available for public viewing. It is similar to the 30% amusement tax imposed or agreements of HMOs at a time they were already known as such, belies any
borne by the movie industry which the theater-owners pay to the government, but legislative intent to impose it on them.
which is passed on to the entire cost of the admission ticket, thus shifting the tax
burden on the buying or the viewing public. It is a tax that is imposed uniformly THE POWER TO TAX IS THE POWER TO DESTROY
on all videogram operators. As a general rule, the power to tax is an incident of sovereignty and is unlimited
in its range, acknowledging in its very nature no limits, so that security against
THE LEVY OF THE 30% TAX IS FOR A PUBLIC PURPOSE. It was imposed its abuse is to be found only in the responsibility of the legislature which
primarily to answer the need for regulating the video industry, particularly because imposes the tax on the constituency who is to pay it. So potent indeed is the power
of the rampant film piracy, the flagrant violation of intellectual property rights, and that it was once opined that the power to tax involves the power to destroy.
the proliferation of pornographic video tapes. And while it was also an objective of
the DECREE to protect the movie industry, the tax remains a valid imposition. DST WAS HIGHLY OPPRESSIVE. IT IS NOT THE PURPOSE OF THE GOVT
TO THROTTLE PRIVATE BUSINESS. Petitioner claims that the assessed DST to
The public purpose of a tax may legally exist even if the motive which impelled the date which amounts to P376 million is way beyond its net worth of P259 million.
legislature to impose the tax was to favor one industry over another. 11 It is Respondent never disputed these assertions. Given the realities on the ground,
inherent in the power to tax that a state be free to select the subjects of imposing the DST on petitioner would be highly oppressive. It is not the purpose
taxation, and it has been repeatedly held that "inequities which result from a of the government to throttle private business. On the contrary, the government
singling out of one particular class for taxation or exemption infringe no ought to encourage private enterprise. Petitioner, just like any concern organized
constitutional limitation". 12 Taxation has been made the implement of the state's for a lawful economic activity, has a right to maintain a legitimate business. [56] As
police power.13 aptly held in Roxas, et al. v. CTA, et al. :
At bottom, the rate of tax is a matter better addressed to the taxing legislature.
The power of taxation is sometimes called also the power to destroy.
Therefore it should be exercised with caution to minimize injury to the
The power to tax involves the power to destroy Marshall Doctrine proprietary rights of a taxpayer. It must be exercised fairly, equally and
The power to tax is not the power to destroy while the court sits Holmes uniformly, lest the tax collector kill the hen that lays the golden egg.
Doctrine
Legitimate enterprises enjoy the constitutional protection not to be taxed out of
Philippine Health Care vs CIR existence. Incurring losses because of a tax imposition may be an acceptable
consequence but killing the business of an entity is another matter and should not
be allowed. It is counter-productive and ultimately subversive of the nations thrust
FACTS: Phil. Health Care (PHC) is a domestic corporation whose primary
towards a better economy which will ultimately benefit the majority of our people.
purpose is [t]o establish, maintain, conduct and operate a prepaid group practice
health care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide for
the administrative, legal, and financial responsibilities of the organization. CIR vs. SM PRIME HOLDINGS
GR 183505. February 26, 2010
On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent
PHC a formal demand letter and the corresponding assessment notices demanding FACTS:
the payment of deficiency taxes, including surcharges and interest, for the taxable SM Prime Holdings and First Asia Realty Development Corporation are engaged in
years 1996 and 1997 in the total amount of P224m. The deficiency [documentary the business of operating cinema houses, among others.
stamp tax (DST)] assessment was imposed on PHCs health care agreement with
the members of its health care program pursuant to Section 185 of the 1997 Tax The BIR assessed and demanded from SM Prime and FIRST ASIA VAT deficiency
Code. on its cinema sales. Both protested.

Petitioner protested the assessment. CIR claimed that PHCs health care CIR: Granted.
agreement was a contract of insurance subject to DST under Section 185 of the The activity of showing cinematographic films is not a service covered
1997 Tax Code. by VAT under the NIRC of 1997 as amended, but an activity subject to
amusement tax under the LGC of 1991.
CA: petitioners health care agreement was in the nature of a non-life insurance Consistent with the States policy to have a viable, sustainable and
contract subject to DST. Respondent is ordered to pay the deficiency Documentary competitive theater and film industry, the national government should
Stamp Tax. be precluded from imposing its own business tax in addition to that
already imposed and collected by local government units.

ISSUE: Was petitioner, as a Health Maintenance Organization, subject to CTA En Banc: Affirmed.
Documentary Stamp Tax? No. And since the showing or exhibition of motion pictures, films or movies
by cinema operators or proprietors is not among the enumerated
HELD: activities in Section 108 of the NIRC, then gross receipts derived by
the language of Section 185, it is evident that two requisites must concur before cinema/ theater operators or proprietors from admission tickets in
the DST can apply, namely: showing motion pictures, film or movie are not subject to VAT.
(1) the document must be a policy of insurance or an obligation in the
nature of indemnity and ISSUE:
(2) the maker should be transacting the business of accident, fidelity, WON THE GROSS RECEIPTS DERIVED BY OPERATORS OR PROPRIETORS
employers liability, plate, glass, steam boiler, burglar, elevator, automatic OF CINEMA/THEATER HOUSES FROM ADMISSION TICKETS ARE
sprinkler, or other branch of insurance (except life, marine, inland, and fire SUBJECT TO VAT. No.
insurance).
HELD:
The enumeration of the sale or exchange of services subject to VAT is not
A HEALTH CARE AGREEMENT IS NOT AN INSURANCE CONTRACT exhaustive. The words, including, similar services, and shall likewise include,
CONTEMPLATED UNDER SECTION 185 OF THE NIRC OF 1997 indicate that the enumeration in Section 108 of the NIRC is by way of example
only.
Tracking down the history of the law: shall be subject to all applicable taxes, duties, charges, including excise taxes
1. Historically, the activity of showing motion pictures, films or movies by due thereon. This shall apply to cigars and cigarettes, distilled spirits,
cinema/theater operators or proprietors has always been considered fermented liquors and wines brought directly into the duly chartered or
as a form of entertainment subject to amusement tax. legislated freeports of the Subic Economic Freeport Zone, created under
2. Prior to the Local Tax Code, all forms of amusement tax were Republic Act No. 7227
imposed by the national government.
3. When the Local Tax Code was enacted, amusement tax on admission Thus, the BIR Commissioner requested then Customs Commissioner to
tickets from theaters, cinematographs, concert halls, circuses and immediately collect the excise tax due on imported alcohol and tobacco products
other places of amusements were transferred to the local brought to the Duty Free Philippines (DFP) and Freeport zones.
government.
4. Under the NIRC of 1977, the national government imposed amusement The PR requested for a reconsideration of the directives on the imposition of duties
tax only on proprietors, lessees or operators of cabarets, day and and taxes, particularly excise taxes, on their shipments of cigars, cigarettes, wines
night clubs, Jai-Alai and race tracks. and liquors. Still, they were not allowed to file any warehousing entry for their
5. The VAT law was enacted to replace the tax on original and shipments.
subsequent sales tax and percentage tax on certain services.
6. When the VAT law was implemented, it exempted persons The PR filed a special civil action for declaratory relief to have certain provisions of
subject to amusement tax under the NIRC from the coverage RA 9334 declared as unconstitutional. Alleging that great and irreparable loss
of VAT. and injury would befall them as a consequence of the imposition of taxes on
7. When the Local Tax Code was repealed by the LGC of 1991, the local alcohol and tobacco products brought into the SBF, they prayed for the issuance
government continued to impose amusement tax on admission tickets of a writ of preliminary injunction and/or TRO and preliminary mandatory
from theaters, cinematographs, concert halls, circuses and other places injunction to enjoin the directives of the CIR.
of amusements.
8. Amendments to the VAT law have been consistent in The CIR argued that:
exempting persons subject to amusement tax under the NIRC 1. Tax exemptions are not presumed and even when granted, are
from the coverage of VAT. strictly construed against the grantee.
9. Only lessors or distributors of cinematographic films are included in the 2. Courts are enjoined from issuing a writ of injunction and/or
coverage of VAT. TRO on the grounds of an alleged nullity of a law, ordinance or
administrative regulation or circular or in a manner that would
THESE REVEAL THE LEGISLATIVE INTENT NOT TO IMPOSE VAT ON effectively dispose of the main case. Taxes, they stressed, are the
PERSONS ALREADY COVERED BY THE AMUSEMENT TAX. This holds true lifeblood of the government and their prompt and certain
even in the case of cinema/theater operators taxed under the LGC of 1991 availability is an imperious need. They maintained that greater
precisely because the VAT law was intended to replace the percentage tax injury would be inflicted on the public should the writ be granted.
on certain services. The mere fact that they are taxed by the local government
unit and not by the national government is immaterial. The Local Tax Code, in The court a quo granted the writ of preliminary injunction.
transferring the power to tax gross receipts derived by cinema/theater
operators or proprietor from admission tickets to the local government, ISSUE:
did not intend to treat cinema/theater houses as a separate class. No WON THE GRANT OF THE WRIT OF PRELIMINARY INJUNCTION IS
distinction must, therefore, be made between the places of amusement taxed by PROPER. No
the national government and those taxed by the local government.
HELD:
To hold otherwise would impose an unreasonable burden on cinema/theater RA 7227 granted PR exemption from local and national taxes, including excise
houses operators or proprietors, who would be paying an additional 10% VAT on taxes, on their importations of general merchandise, for which reason they enjoyed
top of the 30% amusement tax imposed by Section 140 of the LGC of 1991, or a tax-exempt status until the effectivity of RA 9334. By subsequently enacting R.A.
total of 40% tax. Such imposition would result in injustice, as persons taxed under No. 9334, however, Congress expressed its intention to withdraw PRs tax
the NIRC of 1997 would be in a better position than those taxed under the LGC of exemption privilege on their importations of cigars, cigarettes, distilled spirits,
1991. We need not belabor that A LITERAL APPLICATION OF A LAW MUST fermented liquors and wines.
BE REJECTED IF IT WILL OPERATE UNJUSTLY OR LEAD TO ABSURD
RESULTS. Thus, we are convinced that the legislature never intended to include Without necessarily passing upon the validity of the withdrawal of the tax
cinema/theater operators or proprietors in the coverage of VAT. exemption privileges of PR, it behooves this Court to state certain basic principles
and observations that should throw light on the propriety of the issuance of the
On this point, it is apropos to quote the case of Roxas v. Court of Tax Appeals, to writ of preliminary injunction in this case.
wit:
First. Every presumption must be indulged in favor of the constitutionality of a
The power of taxation is sometimes called also the power to destroy. statute.
Therefore, it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and Second. THERE IS NO VESTED RIGHT IN A TAX EXEMPTION, MORE SO
uniformly, lest the tax collector kill the hen that lays the golden egg. And, in WHEN THE LATEST EXPRESSION OF LEGISLATIVE INTENT RENDERS ITS
order to maintain the general public's trust and confidence in the CONTINUANCE DOUBTFUL. Being a mere statutory privilege, a tax exemption
Government this power must be used justly and not treacherously. may be modified or withdrawn at will by the granting authority.

To state otherwise is to limit the taxing power of the State, which is unlimited,
plenary, comprehensive and supreme. The power to impose taxes is one so
unlimited in force and so searching in extent, it is subject only to restrictions
which rest on the discretion of the authority exercising it.
REPUBLIC vs. CAGUIOA
GR 168584. October 15, 2007 Third. As a general rule, TAX EXEMPTIONS ARE CONSTRUED STRICTISSIMI
JURIS AGAINST THE TAXPAYER AND LIBERALLY IN FAVOR OF THE
NO INJUNCTION PRINCIPLE TAXING AUTHORITY. The burden of proof rests upon the party claiming
FACTS: exemption to prove that it is in fact covered by the exemption so claimed. In case
Pursuant to RA 72273 or the Bases Conversion and Development Act of 1992, of doubt, non-exemption is favored.
several domestic corporations (private respondents) doing business at Subic
Special Economic and Freeport Zone (SBF), applied for and were granted Fourth. A TAX EXEMPTION CANNOT BE GROUNDED UPON THE
Certificates of Registration and Tax Exemption by the Subic Bay Metropolitan CONTINUED EXISTENCE OF A STATUTE WHICH PRECLUDES ITS CHANGE
Authority (SBMA). OR REPEAL. Flowing from the basic precept of constitutional law that no law is
irrepealable, Congress, in the legitimate exercise of its lawmaking powers, can
These certificates allowed them to engage in the business either of trading, enact a law withdrawing a tax exemption just as efficaciously as it may grant the
retailing or wholesaling, import and export, warehousing, distribution and/or same under Section 28(4) of Article VI of the Constitution. There is no gainsaying
transshipment of general merchandise, including alcohol and tobacco products, therefore that Congress can amend Section 131 of the NIRC in a manner it sees
and uniformly granted them tax exemptions for such importations. fit, as it did when it passed RA 9334.

Congress subsequently passed RA 9334 which among others provides that: Fifth. The rights granted under the Certificates of Registration and Tax Exemption
The provision of any special or general law to the contrary notwithstanding, of PR are not absolute and unconditional as to constitute rights in esse those
the importation of cigars and cigarettes, distilled spirits, fermented liquors clearly founded on or granted by law or is enforceable as a matter of law.
and wines into the Philippines, even if destined for tax and duty free shops,
Sixth. Whatever right may have been acquired on the basis of the Certificates of
Registration and Tax Exemption must yield to the States valid exercise of police
power. It is well to remember that taxes may be made the implement of the police
power.

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


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

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

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

Recalling this Courts pronouncements in Olalia v. Hizon that:

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


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

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


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

It cannot be overemphasized that any injunction that restrains the


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

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

Whether this Court must issue the writ of prohibition, suffice it to stress that being
possessed of the power to act on the petition for declaratory relief, public
respondent can proceed to determine the merits of the main case. To halt the
proceedings at this point may be acting too prematurely and would not be in
keeping with the policy that courts must decide controversies on the merits.
CIR vs. SANTOS It should be pointed out that in imposing the aforementioned taxes and duties, the
GR 119252. August 18, 1997 State, acting through the legislative and executive branches, is exercising its
sovereign prerogative. It is inherent in the power to tax that the State be
FACTS: free to select the subjects of taxation, and it has been repeatedly held
Guild of Philippine Jewelers, Inc., is an association of Filipino jewelers that inequalities which result from singling out of one particular class
engaged in the manufacture of jewelers and allied undertakings. Among its for taxation, or exemption, infringe no constitutional limitation.
members are Hans Brumann, Inc., Miladay Jewels Inc., Mercelles, Inc., Solid Gold
International Traders inc., Diagem Trading Corporation, and Jewelry by Marco &
Co., Inc. 2) Legislative
1) Non-delegation Principle
The BIR issued a mission order to conduct surveillance, monitoring, and 2) Exceptions
inventory of all imported articles of Hans Brumann, Inc., and place the same a. LGUs
under preventive embargo. They informed the establishment that they were Section 5, Article 10 (1987 Constitution). Each LGU shall have
going to make an inventory of the articles involved to see if the proper taxes the power to create its own sources of revenues and to levy
thereon have been paid. taxes, fees and charges subject to such guidelines and limitations
as Congress may provide consistent with the basic policy of local
The BIR officers requested the establishment not to sell the articles until it can be autonomy. Such taxes, fees and charges shall accrue exclusively
proven that the necessary taxes thereon have been paid. Accordingly, Mr. Hans to the local governments.
Brumann, the owner of the establishment, signed a receipt for Goods, Articles, and b. President
Things Seized under Authority of the NIRC, acknowledging that the articles c. Administrative Bodies
inventoried have been seized and left in his possession, and promising not to d. People at large
dispose of the same without authority of the CIR pending investigation.

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

Section 401 of the same Code needs to be quoted in full: SECTION 3. IMPOSITION. A special assessment equivalent to one-half
percent (0.5%) on the assessed value of land in excess of One
Hundred Thousand Pesos (Php100,000.00) shall be collected by the
Sec. 401. Flexible Clause. City Treasurer which shall accrue to the Socialized Housing Programs
of the Quezon City Government. The special assessment shall accrue
to the General Fund under a special account to be established for the
a. In the interest of national economy, general welfare purpose.
and/or national security, and subject to the limitations
herein prescribed, the President, upon recommendation of
the National Economic and Development Authority Effective for five (5) years, the Socialized Housing Tax ( SHT ) shall be utilized by
(hereinafter referred to as NEDA), is hereby empowered: the Quezon City Government for the following projects: (a) land purchase/land
(1) to increase, reduce or remove existing protective rates banking; (b) improvement of current/existing socialized housing facilities; (c)
of import duty (including any necessary change in land development; (d) construction of core houses, sanitary cores, medium-rise
classification). The existing rates may be increased or buildings and other similar structures; and (e) financing of public-private partners
decreased but in no case shall the reduced rate of import hip agreement of the Quezon City Government and National Housing Authority (
duty be lower than the basic rate of ten (10) per cent ad NHA ) with the private sector.3
valorem, nor shall the increased rate of import duty be
higher than a maximum of one hundred (100) per cent ad
valorem; (2) to establish import quota or to ban imports of ISSUE:
any commodity, as may be necessary; and (3) to impose
an additional duty on all imports not exceeding ten (10) WON the SHT is constitutional
per cent ad valorem, whenever necessary; Provided, That
upon periodic investigations by the Tariff Commission and
recommendation of the NEDA, the President may cause a RULING:
gradual reduction of protection levels granted in Section
One hundred and four of this Code, including those
subsequently granted pursuant to this section. YES. The rule governing the taxing power of provinces, cities, municipalities and
barangays is summarized in Icard v. City Council of Baguio:

b. Before any recommendation is submitted to the


President by the NEDA pursuant to the provisions of this It is settled that a municipal corporation unlike a sovereign state is clothed with
section, except in the imposition of an additional duty not no inherent power of taxation. The charter or statute must plainly show an intent
exceeding ten (10) per cent ad valorem, the Commission to confer that power or the municipality, cannot assume it. And the power when
shall conduct an investigation in the course of which they granted is to be construed in strictissimi juris . Any doubt or ambiguity arising
shall hold public hearings wherein interested parties shall out of the term used in granting that power must be resolved against the
be afforded reasonable opportunity to be present, produce municipality. Inferences, implications, deductions all these have no place in
evidence and to be heard. The Commission shall also hear the interpretation of the taxing power of a municipal corporation. [Underscoring
the views and recommendations of any government office, supplied]
agency or instrumentality concerned. The Commission
shall submit their findings and recommendations to the xxxx
NEDA within thirty (30) days after the termination of the
public hearings.
Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer
vested exclusively on Congress; local legislative bodies are now given direct
c. The power of the President to increase or decrease rates authority to levy taxes, fees and other charges." Nevertheless, such authority is
of import duty within the limits fixed in subsection "a" shall "subject to such guidelines and limitations as the Congress may provide."
include the authority to modify the form of duty. In
modifying the form of duty, the corresponding ad
valorem or specific equivalents of the duty with respect to In conformity with Section 3, Article X of the 1987 Constitution, Congress
imports from the principal competing foreign country for enacted Republic Act No. 7160, otherwise known as the Local Government Code
the most recent representative period shall be used as of 1991. Book II of the LGC governs local taxation and fiscal matters. 86
bases.
Indeed, LGUs have no inherent power to tax except to the extent that such
d. The Commissioner of Customs shall regularly furnish the power might be delegated to them either by the basic law or by the
Commission a copy of all customs import entries as filed in statute.87 "Under the now prevailing Constitution , where there is neither a grant
the Bureau of Customs. The Commission or its duly nor a prohibition by statute , the tax power must be deemed to exist although
authorized representatives shall have access to, and the Congress may provide statutory limitations and guidelines. The basic rationale for
right to copy all liquidated customs import entries and the current rule is to safeguard the viability and self-sufficiency of local
other documents appended thereto as finally filed in the government units by directly granting them general and broad tax powers.
Commission on Audit. Nevertheless, the fundamental law did not intend the delegation to be absolute
and unconditional; the constitutional objective obviously is to ensure that, while
the local government units are being strengthened and made more autonomous ,
e. The NEDA shall promulgate rules and regulations the legislature must still see to it that (a) the taxpayer will not be over-burdened
necessary to carry out the provisions of this section. or saddled with multiple and unreasonable impositions; (b) each local
government unit will have its fair share of available resources; (c) the resources
f. Any Order issued by the President pursuant to the of the national government will not be unduly disturbed; and (d) local taxation
provisions of this section shall take effect thirty (30) days will be fair, uniform, and just."
after promulgation, except in the imposition of additional
The SHT charged by the Quezon City Government is a tax which is within its
power to impose. Aside from the specific authority vested by Section 43 of the
UDHA, cities are allowed to exercise such other powers and discharge such other
functions and responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and facilities which include,
among others, programs and projects for low-cost housing and other mass
dwellings.108 The collections made accrue to its socialized housing programs and
projects.

The tax is not a pure exercise of taxing power or merely to raise revenue; it is
levied with a regulatory purpose. The levy is primarily in the exercise of the
police power for the general welfare of the entire city. It is greatly imbued with
public interest. Removing slum areas in Quezon City is not only beneficial to the
underprivileged and homeless constituents but advantageous to the real property
owners as well. The situation will improve the value of the their property
investments, fully enjoying the same in view of an orderly, secure, and safe
community, and will enhance the quality of life of the poor, making them law-
abiding constituents and better consumers of business products.

FILM DEVT COUNCIL VS COLON HERITAGE

3) Burden
4) Jurisdiction

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

b.