General Principles

16. In the desire of the government to protect the environment from pollution and constant
flooding which is caused mainly by plastic bags which blocks the drainage system in the
country, Congress is contemplating to pass a law requiring the payment of a twenty centavo
plastic bag tax for every plastic bag being used by department stores, supermarkets, drug
stores and other convenience stores using plastic bag for the commodities being purchased by
customers. Is the proposed law valid?
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17. A member of Congress acting on information from unimpeachable sources that religious
institutions and churches has so much income emanating from religious activities and other
sources proposed to impose taxes on said income and also to collect realty taxes on their real
properties. The proposal is intended to raise more revenues for the government which is in dire
need of revenues to address the fiscal adequacy needs of the country. It was also argued that
these religious institutions have the financial capacity to pay and requiring them to share in the
burdens of the government conforms with the theoretical justice rule which is one of the basic
principles of a sound tax system. As a counsel working in the oce of this member of
Congress, you are required to reinforce the position espoused by your boss. How will you
handle this assignment? Explain.
- Cite ART. VI, Sec. 28(3) - the exemption only covers PROPERTY taxes and no other
taxes. It is the USE of the PROPERTY and not ownership of the property. However, the
exemption in favor of property used exclusively for charitable or educational purpose is
not limited to property actually indispensable therefore, but extends to facilities which are
incidental to and reasonably necessary for the accomplishment of said purpose.

18. The Philippines is the second biggest exporter of sugar in the world market until an
epidemic hit the sugar industry. The Sugar Stabilization Act (SSA) provided for an increase of
the existing tax on the manufacture of sugar to generate funds to support the sugar planters. Mr.
Pete Villanueva assailed the constitutionality of the SSA alleging such tax as unconstitutional
and void for not being levied for a public purpose but for the aid and support of the sugar
industry exclusively. Is the contention of Villanueva correct? Explain fully.
- lutz vs araneta

19. Mr. Richard Magat questioned the constitutionality of RA 1635 mandating the axture of

Anti-TB stamps on all envelopes for mailing with the Bureau of Post, as well as its
implementing administrative orders, contending that it is not for a public purpose. Is RA 1635

valid? Explain fully.

20. May the power of taxation be used as an implement of the power of eminent domain? In the
case of Lutz vs. Araneta, the Supreme Court ruled that the power of taxation may be used to
implement the police power of the State. Do we have a jurisprudence supporting the rule that
the power of taxation can be used as an implement of the power of eminent domain? Reasons.

21. A petition for declaratory relief was filed by the Roman Catholic Bishop of Capiz in the RTC
of Roxas City in order that the properties therein which all belonged to the Catholic Church of
Capiz could be declared as tax-exempt. If you were the judge that would render the courts
decision in the above-mentioned case, what particular requirement in Sec. 28(3), Article VI of
the Constitution should you take into consideration in seeing to it that an actual hearing thereon
is necessary before you could validly declare that said property is tax-exempt? Explain your
answer.

Tax Remedies
1. Mr. Christian Manuel, a businessman was the recipient of a final assessment from the BIR
for deficiency income tax for taxable year 2012. In view of his failure to pay the deficiency
assessment and his failure to file a protest against said assessment, he was declared
delinquent and his case was endorsed to the Delinquent Accounts Department of the BIR.
Despite repeated demands from said department for Mr. Manuel to pay said deficiency tax,
the latter failed to pay the same forcing the BIR to issue a Warrant of Garnishment against
his deposit account with BPI Family Savings Bank. Then the BIR Sheri served the warrant
to the Manager of BPI, Mr. Amoranto, the latter refused to honor the warrant on the ground
that it will violate RA 1405 otherwise known as the Secrecy of Bank Deposit. Was Mr.
Amoranto correct in his decision? Explain fully.
- bank accounts may be distrained notwithstanding the Bank Secrecy Act which
prohibits inquiry into bank accounts, since in the case of distraint, no inquiry is
made. the BIR simply seizes so much of the deposit as is sucient to discharge
the obligation without having to know how much the deposits are, or where the
money or any part of it came from.
2. Mr. Maning San Pedro, a BIR examiner requested the Commissioner of Internal Revenue
for authority to inquire into the bank deposits of Alben Versoza, a taxpayer whom he
suspects that he did not declare the correct gross income in this 2011 income tax return. He
justified his request to the Commissioner for such authority in order that he can initiate the
net worth method of investigation to establish the suspected fraudulent act of the taxpayer.
May the Commissioner of Internal Revenue give such authority to Mr. San Pedro? Explain
fully your answer.

3. Mr. Bernardino Morales who was the recipient of various notices from the BIR for the
examination of his 2008 income tax return opted to ignore said notices prompting the BIR to
rule that the tax assessment had become final and unappealable. Subsequently, the BIR
filed a civil action against Morales to collect the deficiency tax due. After many years, a
decision was promulgated by the court ordering Morales to pay the tax due together with the
incremental penalties and surcharges. The judgment became final and executory, but
various attempts of the BIR to collect the tax liability yielded negative results. Bothered by
his conscience, Morales invokes the power of the Commissioner to compromise the case
under Section 204 of the Tax Code for which he oered a compromise settlement of 50% of
the courts award stating to the Commissioner that it is only the amount the he could really
aord. May the Commissioner accept the oer? Is there something illegal or unethical if the
same is accepted? Explain your answer.

4. On April 15, 2006, Soyo Co., a Philippine Corporation filed its 2005 Income Tax Return
declaring a net loss. On November 10, 2006, Soyo Co. amended its 2005 Income Tax
Return declaring more losses. A tax examination was conducted by the BIR during which
examination, the BIR disallowed a big bulk of Soyo Co.s deductions placing Soyo Co. in a
positive tax position, i.e., Soyo has income instead of loss. As a consequence, on August 5,
2009, the BIR issued a deficiency income tax assessment against Soyo Co. Soyo Co.
protested the assessment on the ground that assessment had already prescribed. Decide
the case.

5. Explain the requirements under the Tax Code before a claim for tax refund or tax credit for
erroneously paid taxes will be allowed by the Commissioner of Internal Revenue. Can a
withholding agent have the right to file a tax refund application? Explain fully.
6. In Basilan, Mindanao, businessmen are being required by the Abu-Saya-MILF Omnibus
Tax Code (AMOTC) to pay a business tax in an amount graduated on the basis of the
amount of gross income during the preceding year. This tax is in addition to the local taxes
due under the Local Government Code and the national internal revenue taxes under the
Tax Reform Code of 1997. Dr. Carlos Pacheco, a dermatologist, paid the amount of
Ph125,000 for taxable year 2009 representing business taxes due under the AMOTC. After
paying the said tax, Dr. Pacheco discovered that he needed to pay only Ph75,000 or an
overpayment of Ph50,000. He discovered this only on July 25, 2013. There is nothing in the
AMOTC which provides for the period within which to file a claim for refund for erroneously
paid taxes. Is Dr. Pacheco still entitled to claim the tax refund and if ever within what period
should the claim be filed? You were hired by Dr. Pacheco to represent him in the filing of his
claim for which you were promised a success fee of 5% in case of a favorable action on the
refund claim. As counsel, how will you handle the case? Explain.

LGC
10. What is the Doctrine of Pre-emption under the Local Government Code?
- Preemption in taxation refers to an instance wherein the National Government elects to tax
a particular area, impliedly withholding from the local government the delegated power to
tax the same. It principally rests upon the intentions of the Congress.
- it is inapplicable when:
A. When Congress allows municipal corporation to cover fields of taxation it already
occupies.
B. Beyond certain level of sales or receipts for the preceding year.
C. if the subjects of the taxes levied by the National and Local Governments are
dierent from each other.
11. The City of Manila passed a new Revenue Code. Vicky, a taxpayer questioned the legality
of the ordinance on the ground of non- compliance with the procedural requirements provided
by law. The Secretary of Justice ruled against the validity of the ordinance for non-compliance.
On appeal, the RTC ruled that the appellate power of the Secretary to rule on the validity of tax
ordinances is unconstitutional because it grants the Secretary the power to control local
government units, in violation of the constitutional policy of local autonomy and the specific
provision that the President shall exercise only the power of supervision over local government
units.
a. What are the procedural requirements provided by law for the adoption of the ordinance?
b. Is the appellate power of the Secretary unconstitutional?
- Sec. 187 of the LGC (both A and B)

12. Megshine Marble Co., a domestic corporation engaged in the business of manufacturing
marble tiles, maintains its principal oce at Quezon City while its factory and warehouse are
located in Nueva Ecija. All sales are conducted and recorded in Quezon City. In 2007, Megshine
Marble Co. made a total sales of Ph300,000. For purposes of paying its local business tax as a
manufacturer, you were asked as counsel in which place or places should it file its return and
how much must be declared? Explain your answer.
- 70% of its sales or P210,000 must be reported to Nueva Ecija (where the warehouse

and factory are located and 30% or P90,000 in QC (where the principal oce is

located).

13. Three years ago, a diversion road was constructed by the government to cut travel time to
the northern provinces in Luzon by the construction of the Subic-Clark-Tarlac Expressway
(SCTEX). The diversion road passed through various agricultural lands along the route and this
improvement increased the market value of the parcels of land in various area in Pampanga
and Tarlac. While before the lands were solely agricultural in nature, now some of these lands
became commercial. A vice mayor of one of the towns where the SCTEX passed consulted you
on what kind of tax can his town collect with the introduction of said improvement. What will be
your advice to the vice mayor? Discuss your reasons to support your advice.
- Local govt have no power to tax the national government, its agencies and
instrumentalities, except as otherwise provided in the LGC pursuant to the saving clause in
Sec 133 stating unless otherwise provided in this code.
- exception to the exception (Sec.234(a) of the LGC

14. After a public hearing, the Sangguniang Pangbayan of Teresa, Rizal, enacted an ordinance
imposing a tax of P0.10 per liter of soft drinks manufactured and sold within the municipality. Is
the ordinance valid? Why?
- No, publication requirements and furnishing of copies to the local treasurer must be
complied first. (not sure)

15. What are the fundamental principles of Local Taxation?

- Sec. 130 of the LGC
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