Inherent In Sovereignty/ Distinguished From Police Power And Eminent Domain

Roxas v CTA
GR No L-25043, April 26, 1968

Facts:
Antonio, Eduardo and Jose Roxas, brothers and at the same time partners of the Roxas
y Compania, inherited from their grandparents several properties which included
farmlands. The tenants expressed their desire to purchase the farmland. The tenants,
however, did not have enough funds, so the Roxases agreed to a purchase by
installment. Subsequently, the CIR demanded from the brothers the payment of
deficiency income taxes resulting from the sale, 100% of the profits derived therefrom
was taxed. The brothers protested the assessment but the same was denied. On
appeal, the Court of Tax Appeals sustained the assessment. Hence, this petition.

Issue:
Is Roxas liable?

Ruling:
No. It should be borne in mind that the sale of the farmlands to the very farmers who
tilled them for generations was not only in consonance with, but more in obedience to
the request and pursuant to the policy of our Government to allocate lands to the
landless.

In order to maintain the general public’s trust and confidence in the Government this
power must be used justly and not treacherously. It does not conform with the sense of
justice for the Government to persuade the taxpayer to lend it a helping hand and later
on penalize him for duly answering the urgent call.

In fine, Roxas cannot be considered a real estate dealer and is not liable for 100% of
the sale. Pursuant to Section 34 of the Tax Code, the lands sold to the farmers are
capital assets and the gain derived from the sale thereof is capital gain, taxable only to
the extent of 50%.
Tanada v. Angara
G.R. No. 118295. May 2, 1997

Facts:
This is a case petition by Sen. Wigberto Tanada, together with other lawmakers,
taxpayers, and various NGO’s to nullify the Philippine ratification of the World Trade
Organization (WTO) Agreement.

Petitioners believe that this will be detrimental to the growth of our National Economy
and against to the “Filipino First” policy. The WTO opens access to foreign markets,
especially its major trading partners, through the reduction of tariffs on its exports,
particularly agricultural and industrial products. Thus, provides new opportunities for the
service sector cost and uncertainty associated with exporting and more investment in
the country. These are the predicted benefits as reflected in the agreement and as
viewed by the signatory Senators, a “free market” espoused by WTO.
Petitioners also contends that it is in conflict with the provisions of our constitution, since
the said Agreement is an assault on the sovereign powers of the Philippines because it
meant that Congress could not pass legislation that would be good for national interest
and general welfare if such legislation would not conform to the WTO Agreement.

Issue:
Whether or not certain provisions of the Agreement unduly limit, restrict or impair the
exercise of legislative power by Congress.

Ruling:
By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty.
By their voluntary act, nations may surrender some aspects of their state power in
exchange for greater benefits granted by or derived from a convention or pact. After all,
states, like individuals, live with coequals, and in pursuit of mutually covenanted
objectives and benefits, they also commonly agree to limit the exercise of their
otherwise absolute rights. As shown by the foregoing treaties Philippines has entered, a
portion of sovereignty may be waived without violating the Constitution, based on the
rationale that the Philippines “adopts the generally accepted principles of international
law as part of the law of the land and adheres to the policy of cooperation and amity
with all nations.”
LTO v. City of Butuan
G. R. No. 131512. January 20, 2000

Facts:
Relying on the fiscal autonomy granted to LGU's by the Constittuion and the
provisons of the Local Government Code, the Sangguniang Panglunsod of the City of
Butuan enacted an ordinance "Regulating the Operation of Tricycles-for-Hire, providing
mechanism for the issuance of Franchise, Registration and Permit, and Imposing
Penalties for Violations thereof and for other Purposes." The ordinance provided for,
among other things, the payment of franchise fees for the grant of the franchise of
tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a
permit for the driving thereof.

Petitioner LTO explains that one of the functions of the national government that,
indeed, has been transferred to local government units is the franchising authority over
tricycles-for-hire of the Land Transportation Franchising and Regulatory Board
("LTFRB") but not, it asseverates, the authority of LTO to register all motor vehicles and
to issue to qualified persons of licenses to drive such vehicles.

The RTC and CA ruled that the power to give registration and license for driving
tricycles has been devolved to LGU's.

Issue:
Whether or not, the registration of tricycles was given to LGU's, hence the ordinance is
a valid exercise of police power.

Ruling:
No, based on the-"Guidelines to Implement the Devolution of LTFRBs Franchising
Authority over Tricycles-For-Hire to Local Government units pursuant to the Local
Government Code"- the newly delegated powers to LGU's pertain to the franchising and
regulatory powers exercised by the LTFRB and not to the functions of the LTO relative
to the registration of motor vehicles and issuance of licenses for the driving thereof.
Corollarily, the exercised of a police power must be through a valid delegation. In this
case the police power of registering tricycles was not delegated to the LGU’s, but
remained in the LTO.

LGUs indubitably now have the power to regulate the operation of tricycles-for-hire
and to grant franchises for the operation thereof, and not to issue registration.

Ergo, the ordinance being repugnant to a statute is void and ultra vires.
Exclusively Legislative in Nature
Extent of the Legislative Power to Tax

Tan v Del Rosario

G.R. No. 109289 October 3, 1994

Facts:
Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income
Taxation Scheme ("SNIT"), which amended certain provisions of the NIRC, as well as the
Rules and Regulations promulgated by public respondents pursuant to said
law. Petitioners posit that RA 7496 is unconstitutional as it allegedlyviolates the following
provisions of the Constitution:

-Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
- Article III, Section 1 — No person shall be deprived of . . . property without due process
of law, nor shall any person be denied the equal protection of the laws.

Petitioners contended that public respondents exceeded their rule-making authority in

applying SNIT to general professional partnerships. Petitioner contends that the title of
HB 34314, progenitor of RA 7496, is deficient for being merely entitled, "Simplified Net
Income Taxation Scheme for the Self-Employed and Professionals Engaged in the
Practice of their Profession" (Petition in G.R. No. 109289) when the full text of the title
actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and
Professionals Engaged In The Practice of Their Profession, Amending Sections 21 and
29 of the National Internal Revenue Code,' as amended. Petitioners also contend it
violated due process.

The Solicitor General espouses the position taken by public respondents.

The Court has given due course to both petitions.

Issue:
Whether or not public respondents exceeded their authority in promulgating the
RR

Ruling:
No. There is no evident intention of the law, either before or after the amendatory
legislation, to place in an unequal footing or in significant variance the income tax
treatment of professionals who practice their respective professions individually and of
those who do it through a general professional partnership.
CIR v. Santos, 277 SCRA 617 (1997)
G.R. No. 119252 August 18,

Facts:
Guild of Phil. Jewellers questions the constitutionality of certain provisions of the NIRC
and Tariff and Customs Code of the Philippines. It is their contention that present Tariff
and tax structure increases manufacturing costs and render local jewelry
manufacturers uncompetitive against other countries., in support of their position, they
submitted what they purported to be an exhaustive study of the tax rates on jewelry
prevailing in other Asian countries, in comparison to tax rates levied in the country.
Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and
oppressive and declared them INOPERATIVE and WITHOUR FORCE AND EFFECT
insofar as petitioners are concerned. Petitioner CIR assailed decision rendered by
respondent judge contending that the latter has no authority to pass judgment upon the
taxation policy of the government. Petitioners also impugn the decision by asserting that
there was no showing that the tax laws on jewelry are confiscatory.
Issue:
Whether or not the Regional Trial Court has authority to pass judgment upon taxation
policy of the government.
Ruling:
The policy of the courts is to avoid ruling on constitutional questions and to presume
that the acts of the political departments are valid in the absence of a clear and
unmistakable showing to the contrary. This is not to say that RTC has no
power whatsoever to declare a law unconstitutional. But this authority does not
extend to deciding questions which pertain to legislative policy. RTC have the power to
declare the law unconstitutional but this authority does not extend to deciding questions
which pertain to legislative policy. RTC can only look into the validity of a provision, that
is whether or not it has been passed according to the provisions laid down by law, and
thus cannot inquire as to the reasons for its existence.
RULING ON THE EXTENT OF LEGISLATIVE POWER TO TAXSC held that it is within
the power f the legislature whether to tax jewelry or not. With the legislature primarily
lies the discretion to determine the nature (kind), object(purpose), extent (rate),
coverage (subject) and situs (place) of taxation.
Cannot Be Delegated
Maceda vs. Energy Regulatory Board, et al.
G.R. No. 96266 .18 July 1991.

Facts:
Upon the outbreak of the Persian Gulf conflict on August 1990, private respondents oil
companies filed with the ERB their respective applications on oil price increases. ERB
then issued an order granting a provisional increase of P1.42 per liter. Petitioner Maceda
filed a petition for Prohibition seeking to nullify said increase.

Issue:
Whether or not the decisions of the Energy Regulatory Board should be subject to
presidential review.

Held:
Pursuant to Section 8 of E.O. No. 172, while hearing is indispensable, it does not preclude
the Board from ordering a provisional increase subject to final disposition of whether or
not to make it permanent or to reduce or increase it further or to deny the application. The
provisional increase is akin to a temporary restraining order, which are given ex-parte.
The Court further noted the Solicitor General’s comments that “the ERB is not averse to
the idea of a presidential review of its decision,” except that there is no law at present
authorizing the same. The Court suggested that it will be under the scope of the
legislative to allow the presidential review of the decisions of the ERB since, despite its
being a quasi-judicial body, it is still “ an administrative body under the Office of the
President whose decisions should be appealed to the President under the established
principle of exhaustion of administrative remedies,” especially on a matter as
transcendental as oil price increases which affect the lives of almost all Filipinos.
Maceda v Macaraig
GR No 88291, May 31, 1991

Facts:
Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the
development of hydraulic power and the production of power from other sources. RA
358 granted NAPOCOR tax and duty exemption privileges. RA 6395 revised the charter
of the NAPOCOR, tasking it to carry out the policy of the national electrification and
provided in detail NAPOCOR’s tax exceptions. PD 380 specified that NAPOCOR’s
exemption includes all taxes, etc. imposed “directly or indirectly.” PD 938 dated May 27,
1976 further amended the aforesaid provision by integrating the tax exemption in
general terms under one paragraph.

Issue:
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the
enactment of PD 938 on May 27, 1976 which amended PD 380 issued on January 11,
1974

Ruling:
No, it is still exempt.
NAPOCOR is a non-profit public corporation created for the general good and welfare,
and wholly owned by the government of the Republic of the Philippines. From the very
beginning of the corporation’s existence, NAPOCOR enjoyed preferential tax treatment
“to enable the corporation to pay the indebtedness and obligation” and effective
implementation of the policy enunciated in Section 1 of RA 6395.

From the preamble of PD 938, it is evident that the provisions of PD 938 were not
intended to be interpreted liberally so as to enhance the tax exempt status of
NAPOCOR.

It is recognized that the rule on strict interpretation does not apply in the case of
exemptions in favor of government political subdivision or instrumentality. In the case of
property owned by the state or a city or other public corporations, the express exception
should not be construed with the same degree of strictness that applies to exemptions
contrary to the policy of the state, since as to such property “exception is the rule and
taxation the exception.”
Basco vs. PAGCOR
G.R. No. 91649

Facts:

Petitioner is seeking to annul the Philippine Amusement and Gaming Corporation

(PAGCOR) Charter -- PD 1869, because it is allegedly contrary to morals, public policy
and order, and because it constitutes a waiver of a right prejudicial to a third person with
a right recognized by law. It waived the Manila Cit government’s right to impose taxes
and license fees, which is recognized by law. For the same reason, the law has intruded
into the local government’s right to impose local taxes and license fees. This is in
contravention of the constitutionally enshrined principle of local autonomy.

Issue:

Whether or not Presidential Decree No. 1869 is valid.

Ruling:

The City of Manila, being a mere Municipal corporation has no inherent right to impose
taxes. Their charter or statute must plainly show an intent to confer that power, otherwise
the municipality cannot assume it. Its power to tax therefore must always yield to a
legislative act which is superior having been passed upon by the state itself which has
the “inherent power to tax.”

The Charter of Manila is subject to control by Congress. It should be stressed that

“municipal corporations are mere creatures of Congress”, which has the power to “create
and abolish municipal corporations” due to its “general legislative powers”. Congress,
therefore, has the power of control over the Local governments. And if Congress can
grant the City of Manila the power to tax certain matters, it can also provide for exemptions
or even take back the power.
The City of Manila’s power to impose license fees on gambling, has long been revoked
by P.D. No. 771 and vested exclusively on the National Government. Therefore, only the
National Government has the power to issue “license or permits” for the operation of
gambling.
Local governments have no power to tax instrumentalities of the National Government.
PAGCOR is government owned or controlled corporation with an original charter, P.D.
No. 1869. All of its shares of stocks are owned by the National Government. PAGCOR
has a dual role, to operate and to regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded
or subjected to control by a mere Local Government.
Wherefore, the petition is DISMISSED
Who May Question The Validity Of A Tax Measure Or A Expenditure Of Taxes-
Taxpayer’s Suit”

Lozada vs. COMELEC

G.R. No. L-59068 January 27, 1983

Facts:
This is a petition for mandamus filed by Jose Mari Eulalio C. Lozada and Romeo B. Igot
as a representative suit forand in behalf of those who wish to participate in the election
irrespective of party affiliation, to compel therespondent COMELEC to call a special
election to fill up existing vacancies numbering twelve (12) in the InterimBatasan
Pambansa.Petitioner Lozada claims that he is a taxpayer and a bonafide elector of
Cebu City and a transient voter of QuezonCity, Metro Manila, who desires to run for the
position in the Batasan Pambansa; while petitioner Romeo B. Igotalleges that, as a
taxpayer, he has standing to petition by mandamus the calling of a special election as
mandatedby the 1973 Constitution.The respondent COMELEC, represented by counsel,
opposes the petition alleging, substantially, that petitioners lackstanding to file the
instant petition for they are not the proper parties to institute the action

Issue:
As taxpayers, may the petitioners file the instant petition?

Ruling:
As taxpayers, petitioners may not file the instant petition, for nowhere therein is it
alleged that tax money is beingillegally spent. The act complained of is the inaction of
the COMELEC to call a special election, as is allegedly itsministerial duty under the
constitutional provision above cited, and therefore, involves no expenditure of
publicfunds. It is only when an act complained of, which may include a legislative
enactment or statute, involves the illegalexpenditure of public money that the so-called
taxpayer suit may be allowed.
MACEDA vs. MACARAIG, JR.
197 SCRA 771
GR No. 88291 May 31, 1991

Facts:
Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and
resolutions of respondents Executive Secretary, Secretary of Finance, Commissioner of
Internal Revenue, Commissioner of Customs and the Fiscal Incentives Review Board
FIRB for exempting the National Power Corporation (NPC) from indirect tax and duties.
RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether
direct or indirect. In 1984, however, PD 1931 and EO 93 withdrew all tax exemptions
granted to all GOCCs including the NPC but granted the President and/or the Secretary
of Finance by recommendation of the FIRB the power to restore certain tax exemptions.
Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption
privileges of the NPC. The actions of the respondents were thus questioned by the
petitioner by this petition for certiorari, prohibition and mandamus with prayer for a writ
of preliminary injunction and/or restraining order. To which public respondents argued,
among others, that petitioner does not have the standing to challenge the questioned
orders and resolution because he was not in any way affected by such grant of tax
exemptions.

Issue:
Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB
restoring the tax exemptions?

Held:
Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a
taxpayer and a duly-elected Senator of the Philippines." Public respondent argues that
petitioner must show that he has sustained direct injury as a result of the action and that
it is not sufficient for him to have a mere general interest common to all members of the
public. The Court however agrees with the petitioner that as a taxpayer he may file the
instant petition following the ruling in Lozada when it involves illegal expenditure of
public money. The petition questions the legality of the tax refund to NPC by way of tax
credit certificates and the use of said assigned tax credits by respondent oil companies
to pay for their tax and duty liabilities to the BIR and Bureau of Customs.
Chavez vs. PCGG et al.,
GR No. 130716, December 09, 1998

Facts:

Petitioner in his capacity as a taxpayer, instituted a case against public respondent to

make public any negotiations and/or agreements pertaining to the latter's task of
recovering the Marcoses' ill-gotten wealth. The respondents argued that the action was
premature since he has not shown that he had asked the respondents to disclose the
negotiations and agreements before filing the case.

Issue:

Does the petitioner have the personality or legal standing to file the instant petition?

Held:

The instant petition is anchored on the right of the people to information and access to
government records, documents and papers- a right guaranteed under section 7, article
III of the Philippine Constitution. The petitioner a former solicitor general, is a Filipino
citizen, and because of the satisfaction of the two basic requisites laid down by
decisional law to sustain petitioner's standing i.e

Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the
Marcoses is an issue “of transcendental importance to the public.” He asserts that
ordinary taxpayers have a right to initiate and prosecute actions questioning the validity
of acts or orders of government agencies or instrumentalities, if the issues raised are “of
paramount public interest;” and if they “immeasurably affect the social, economic, and
moral well-being of the people.”
Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest,
when the proceeding involves the assertion of a public right.such as in this case. He
invokes several decisions of this Court which have set aside the procedural matter
of locus standi, when the subject of the case involved public interest.
GONZALES VS. NARVASA
GR No. 140835.July 06, 2013

Facts:
Petitioner Ramon A. Gonzales, in his capacity as a citizen and taxpayer, filed a petition
for prohibition and mandamus filed on December 9, 1999, assailing the constitutionality
of the creation of the Preparatory Commission on Constitutional Reform (PCCR) and of
the positions of presidential consultants, advisers and assistants. The Preparatory
Commission on Constitutional Reform (PCCR) was created by President Estrada on
November 26, 1998 by virtue of Executive Order No. 43 (E.O. No. 43) in order “to study
and recommend proposed amendments and/or revisions to the 1987 Constitution, and
the manner of implementing the same.” Petitioner disputes the constitutionality of the
PCCR based on the grounds that it is a public office which only the legislature can create
by way of a law.

Issue:
Whether or not the petitioner has a legal standing to assail the constitutionality of
Executive Order 43

Held:

No. The Court dismissed the petition. A citizen acquires standing only if he can establish
that he has suffered some actual or threatened injury as a result of the allegedly illegal
conduct of the government; the injury is fairly traceable to the challenged action; and the
injury is likely to be redressed by a favorable action. Petitioner has not shown that he has
sustained or is in danger of sustaining any personal injury attributable to the creation of
the PCCR. If at all, it is only Congress, not petitioner, which can claim any “injury” in this
case since, according to petitioner, the President has encroached upon the legislature’s
powers to create a public office and to propose amendments to the Charter by forming
the PCCR. Petitioner has sustained no direct, or even any indirect, injury.

Neither does he claim that his rights or privileges have been or are in danger of being
violated, nor that he shall be subjected to any penalties or burdens as a result of the
PCCR’s activities. Clearly, petitioner has failed to establish his locus standi so as to
enable him to seek judicial redress as a citizen.

Furthermore, a taxpayer is deemed to have the standing to raise a constitutional issue

when it is established that public funds have been disbursed in alleged contravention of
the law or the Constitution. It is readily apparent that there is no exercise by Congress of
its taxing or spending power. The PCCR was created by the President by virtue of E.O.
No. 43, as amended by E.O. No. 70. Under section 7 of E.O. No. 43, the amount of P3
million is “appropriated” for its operational expenses “to be sourced from the funds of the
Office of the President.” Being that case, petitioner must show that he is a real party in
interest - that he will stand to be benefited or injured by the judgment or that he will be
entitled to the avails of the suit. Nowhere in his pleadings does petitioner presume to
make such a representation.
BAYAN v. Executive Secretary
G.R. No. 138570. October 10, 2000.

Facts:
On March 14, 1947, the Philippines and the United States of America forged a Military
Bases Agreement which formalized, among others, the use of installations in the
Philippine territory by United States military personnel. In view of the impending expiration
of the RP-US Military Bases Agreement in 1991, the Philippines and the United States
negotiated for a possible extension of the military bases agreement. On September 16,
1991, the Philippine Senate rejected the proposed RP-US Treaty of Friendship,
Cooperation and Security which, in effect, would have extended the presence of US
military bases in the Philippines. On July 18, 1997, the United States panel, headed by
US Defense Deputy Assistant Secretary for Asia Pacific Kurt Campbell, met with the
Philippine panel, headed by Foreign Affairs Undersecretary Rodolfo Severino Jr., to
exchange notes on “the complementing strategic interests of the United States and the
Philippines in the Asia-Pacific region.” Both sides discussed, among other things, the
possible elements of the Visiting Forces Agreement (VFA for brevity). Thereafter, then
President Fidel V. Ramos approved the VFA, which was respectively signed by public
respondent Secretary Siazon and Unites States Ambassador Thomas Hubbard. On
October 5, 1998, President Joseph E. Estrada, through respondent Secretary of Foreign
Affairs, ratified the VFA. On October 6, 1998, the President, acting through respondent
Executive Secretary Ronaldo Zamora, officially transmitted to the Senate of the
Philippines, the Instrument of Ratification, the letter of the President and the VFA, for
concurrence pursuant to Section 21, Article VII of the 1987 Constitution

Issue:
Whether or not petitioners have legal standing as concerned citizens, taxpayers, or
legislators to question the constitutionality of the VFA

Ruling:
No. Petitioners failed to show that they have sustained, or are in danger of sustaining any
direct injury as a result of the enforcement of the VFA. As taxpayers, petitioners have not
established that the VFA involves the exercise by Congress of its taxing or spending
powers. On this point, it bears stressing that a taxpayer’s suit refers to a case where the
act complained of directly involves the illegal disbursement of public funds derived from
taxation.
DEL MAR V. PAGCOR
G.R. Nos. 138298 & 138982. June 19, 2001.

Facts:
PAGCOR requested for legal advice from the Secretary of Justice as to whether or
not it is authorized by its Charter to operate and manage jai-alai frontons in the country. In
its Opinion No. 67, Series of 1996 dated July 15, 1996, the Secretary of Justice opined
that the authority of PAGCOR to operate and maintain games of chance or gambling
extends to jai-alai which is a form of sport or game played for bets and that the Charter
of PAGCOR amounts to a legislative franchise for the purpose. Similar favorable opinions
were received by PAGCOR from the Office of the Solicitor General per its letter dated
June 3, 1996 and the Office of the Government Corporate Counsel under its Opinion No.
150 dated June 14, 1996. Thus, PAGCOR started the operation of jai-alai frontons.
On June 17, 1999, respondent PAGCOR entered into an Agreement with private
respondents Belle Jai Alai Corporation (BELLE) and Filipinas Gaming Entertainment
Totalizator Corporation (FILGAME) wherein it was agreed that BELLE will make available
to PAGCOR the required infrastructure facilities including the main fronton, as well as
provide the needed funding for jai-alai operations with no financial outlay from PAGCOR,
while PAGCOR handles the actual management and operation of jai-alai.
Petitioners Raoul B. del Mar, Federico S. Sandoval II, Michael T. Defensor, and
intervenor Juan Miguel Zubiri, are suing as taxpayers and in their capacity as members
of the House of Representatives on the ground that PAGCOR is without jurisdiction,
legislative franchise, authority or power to enter into such Agreement for the opening,
establishment, operation, control and management of jai-alai games.

Issue:
Whether petitioners have legal standing to file a taxpayers’ suit because the
operation of jai-alai does not involve the disbursement of public funds
Held:
As members of the House of Representatives, petitioners have legal standing to
file the petitions at bar. In the instant cases, petitioners complain that the operation of jai-
alai constitutes an infringement by PAGCOR of the legislatures exclusive power to grant
franchise. To the extent the powers of Congress are impaired, so is the power of each
member thereof, since his office confers a right to participate in the exercise of the powers
of that institution, so petitioners contend. The contention commands our concurrence for
it is now settled that a member of the House of Representatives has standing to maintain
inviolate the prerogatives, powers and privileges vested by the Constitution in his office.
MIRANDA v. CARREON

G.R. No. 143540. April 11, 2003

Facts:

Vice Mayor Amelita Navarro, while serving as Acting Mayor of the City of Santiago
because of the suspension of Mayor Jose Miranda, appointed the respondents to various
positions in the city government. Their appointments were with permanent status and
based on the evaluation made by the City Personnel Selection and Promotion Board
created pursuant to Republic Act No. 7160. CSC approved the appointments.
When Mayor Jose Miranda reassumed his post he considered the composition of the
PSPB irregular since the majority party, to which he belongs, was not properly
represented. He then formed a three-man special performance audit team composed of
Roberto C. Bayaua, Antonio AL. Martinez and Antonio L. Santos, to conduct a personnel
evaluation audit of those who were previously screened by the PSPB and those on
probation. After conducting the evaluation, the audit team submitted to him a report dated
June 8, 1998 stating that the respondents were found wanting in (their) performance.
On June 10, 1998, or three months after Mayor Miranda reassumed his post, he
issued an order terminating respondents services effective June 15, 1998 because they
performed poorly during the probationary period.

Issue:

Whether Miranda has a legal standing to file the petition.

Held:

No. Petitioner insists though that as a taxpayer, he is a real party-in-interest and,

therefore, should continue and maintain this suit. Such contention is misplaced. Section
2, Rule 3 of the same Rules provides:

Section 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.

Even as a taxpayer, petitioner does not stand to be benefited or injured by the

judgment of the suit. Not every action filed by a taxpayer can qualify to challenge the
legality of official acts done by the government. It bears stressing that a taxpayers suit
refers to a case where the act complained of directly involves the illegal disbursement of
public funds from taxation. The issue in this case is whether respondents services were
illegally terminated. Clearly, it does not involve the illegal disbursement of public funds,
hence, petitioners action cannot be considered a taxpayers suit.
Inherent Limitations: Purpose must be public in nature

CALTEX V. COMMISSION ON AUDIT

208 SCRA 755

Facts:

In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil
Price Stabilization Fund (OPSF), excluding that unremitted for the years 1986 and 1988,
of the additional tax on petroleum products authorized under the PD 1956. Pending such
remittance, all of its claims for reimbursement from the OPSF shall be held in abeyance.
The grant total of its unremitted collections of the above tax is P1,287,668,820.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA
approved the proposal but prohibited Caltex from further offsetting remittances and
reimbursements for the current and ensuing years. Caltex moved for reconsideration but
was denied. Hence, the present petition.

Issue:

Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex’s
outstanding claims from said funds

Held:

No. Taxation is no longer envisioned as a measure merely to raise revenue to support

the existence of government. Taxes may be levied with a regulatory purpose to provide
means for the rehabilitation and stabilization of a threatened industry which is affected
with public interest as to be within the police power of the State.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation.
A taxpayer may not offset taxes due from the claims he may have against the government.
Taxes cannot be subject of compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off.
Hence, COA decision is affirmed except that Caltex’s claim for reimbursement of
underrecovery arising from sales to the National Power Corporation is allowed.
PASCUAL V. SEC. OF PUBLIC WORKS
110 PHIL 331

Facts:

In 1953, Republic Act No. 920 was passed. This law appropriated P85,000.00 “for
the construction, reconstruction, repair, extension and improvement Pasig feeder road
terminals”. Wenceslao Pascual, then governor of Rizal, assailed the validity of the law.
He claimed that the appropriation was actually going to be used for private use for the
terminals sought to be improved were part of the Antonio Subdivision. The said
Subdivision is owned by Senator Jose Zulueta who was a member of the same Senate
that passed and approved the same RA. Pascual claimed that Zulueta misrepresented in
Congress the fact that he owns those terminals and that his property would be unlawfully
enriched at the expense of the taxpayers if the said RA would be upheld. Pascual
then prayed that the Secretary of Public Works and Communications be restrained from
releasing funds for such purpose. Zulueta, on the other hand, perhaps as an afterthought,
donated the said property to the City of Pasig.
Issue:
Whether or not the appropriation is valid.
Held:
No, the appropriation is void for being an appropriation for a private purpose. The
subsequent donation of the property to the government to make the property public does
not cure the constitutional defect. The fact that the law was passed when the said property
was still a private property cannot be ignored. “In accordance with the rule that the taxing
power must be exercised for public purposes only, money raised by taxation can be
expanded only for public purposes and not for the advantage of private
individuals.” Inasmuch as the land on which the projected feeder roads were to be
constructed belonged then to Zulueta, the result is that said appropriation sought a private
purpose, and, hence, was null and void.
TIO V. VIDEOGRAM REGULATORY BOARD
151 SCRA 208

Facts:

In 1985, Presidential Decree No. 1987 entitled “An Act Creating the Videogram
Regulatory Board” was enacted which gave broad powers to the VRB to regulate and
supervise the videogram industry. The said law sought to minimize the economic effects
of piracy. There was a need to regulate the sale of videograms as it has adverse effects
to the movie industry. The proliferation of videograms has significantly lessened the
revenue being acquired from the movie industry, and that such loss may be recovered if
videograms are to be taxed. Section 10 of the PD imposes a 30% tax on the gross receipts
payable to the LGUs.
In 1986, Valentin Tio assailed the said PD as he averred that it is unconstitutional on the
ground that Section 10 thereof, which imposed the 30% tax on gross receipts, is a rider
and is not germane to the subject matter of the law.
Issue:
Whether the tax provision is consistent with that of general subject and title
Held:
No. The Constitutional requirement that “every bill shall embrace only one subject
which shall be expressed in the title thereof” is sufficiently complied with if the title be
comprehensive enough to include the general purpose which a statute seeks to achieve.
In the case at bar, the questioned provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the PD, which is the regulation
of the video industry through the VRB as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for regulation it is
simply one of the regulatory and control mechanisms scattered throughout the PD.
GASTON V. REPUBLIC PLANTER
158 SCRA 626

Facts:

Petitioners are sugar producers and planters and millers filed a MANDAMUS
to implement the privatization of Republic Planters Bank, and for the transfer of the
shares in the government bank to sugar producers and planters. (because they are
allegedly the true beneficial owners of the bank since they pay P1.00 per picul of sugar
from the proceeds of sugar producers as STABILIZATION FEES)

The shares are currently held by Philsucom / Sugar Regulatory Admin.

The Solgen countered that the stabilization fees are considered government funds and
that the transfer of shares to from Philsucom to the sugar producers would be irregular.

Issue:

What is the nature of the P1.00 stabilization fees collected from sugar producers?

Held:

PUBLIC FUNDS. While it is true that the collected fees were used to buy shares in RPB,
it did not collect said fees for the account of sugar producers. The stabilization fees were
charged on sugar produced and milled which ACCRUED TO PHILSUCOM, under PD
338.

The fees collected ARE IN THE NATURE OF A TAX., which is within the power of the
state to impose FOR THE PROMOTION OF THE SUGAR INDUSTRY. They constitute
sugar liens. The collectionsaccrue to a SPECIAL FUNDS. It is levied not purely for
taxation, but for regulation, to provide means TO STABILIZE THE SUGAR INDUSTRY.
The levy is primarily an exercise of police powers.

The fact that the State has taken money pursuant to law is sufficient to constitute them
as STATE FUNDS, even though held for a special purpose. Having been levied for a
special purpose, the revenues are treated as a special fund, administered in trust for the
purpose intended. Once the purpose has been fulfilled or abandoned, the balance will be
transferred to the general funds of gov’t.

It is a special fund since the funds are deposited in PNB, not in the National Treasury.

The sugar planters are NOT BENEFICIAL OWNERS. The money is collected from them
only because they it is also they who are to be benefited from the expenditure
of funds derived from it. The investing of the funds in RPB is not alien to the purpose since
the Bank is a commodity bank for sugar, conceived for the sugar industry’ growth and
development.

Revenues derived from taxes cannot be used purely for private purposes or for the
exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit
of the ENTIRE SUGAR INDUSTRY, and all its components, stabilization of domestic and
foreign markets, since the sugar industry is of vital importance to the country’s economy
and national interest.
Prohibition against delegation of taxing power/exceptions

BASCO V. PAGCOR
197 SCRA 52

Facts:
Atty. Humberto Basco and several other lawyers assailed the validity of the law
creating PAGCOR. They claim that PD 1869 is unconstitutional because a) it violates the
equal protection clause and b) it violates the local autonomy clause of the constitution.
Basco et al argued that PD 1869 violates the equal protection clause because it legalizes
PAGCOR-conducted gambling, while most other forms of gambling are outlawed,
together with prostitution, drug trafficking and other vices.

Issue:

Whether or not PD 1869 violates the local autonomy clause.

Held:

No. Section 5, Article 10 of the 1987 Constitution provides:

Each local government unit shall have the power to create its own source of revenue
and to levy taxes, fees, and other charges subject to such guidelines and limitation as
the congress may provide, consistent with the basic policy on local autonomy. Such
taxes, fees and charges shall accrue exclusively to the local government.
A close reading of the above provision does not violate local autonomy (particularly on
taxing powers) as it was clearly stated that the taxing power of LGUs are subject to such
guidelines and limitation as Congress may provide.
Further, the City of Manila, being a mere Municipal corporation has no inherent right to
impose taxes. The Charter of the City of Manila is subject to control by Congress. It should
be stressed that “municipal corporations are mere creatures of Congress” which has the
power to “create and abolish municipal corporations” due to its “general legislative
powers”. Congress, therefore, has the power of control over Local governments. And if
Congress can grant the City of Manila the power to tax certain matters, it can also provide
for exemptions or even take back the power.
Further still, local governments have no power to tax instrumentalities of the National
Government. PAGCOR is a government owned or controlled corporation with an original
charter, PD 1869. All of its shares of stocks are owned by the National Government.
Otherwise, its operation might be burdened, impeded or subjected to control by a mere
Local government.
This doctrine emanates from the “supremacy” of the National Government over local
governments.
LTO V. CITY OF BUTUAN
G.R. No. 131512. January 20, 2000

FACTS:
Relying on the fiscal autonomy granted to LGU's by the Constittuion and the
provisons of the Local Government Code, the Sangguniang Panglunsod of the City of
Butuan enacted an ordinance "Regulating the Operation of Tricycles-for-Hire, providing
mechanism for the issuance of Franchise, Registration and Permit, and Imposing
Penalties for Violations thereof and for other Purposes." The ordinance provided for,
among other things, the payment of franchise fees for the grant of the franchise of
tricycles-for-hire, fees for the registration of the vehicle, and fees for the issuance of a
permit for the driving thereof.

Petitioner LTO explains that one of the functions of the national government that,
indeed, has been transferred to local government units is the franchising authority over
tricycles-for-hire of the Land Transportation Franchising and Regulatory Board ("LTFRB")
but not, it asseverates, the authority of LTO to register all motor vehicles and to issue to
qualified persons of licenses to drive such vehicles.

The RTC and CA ruled that the power to give registration and license for driving
tricycles has been devolved to LGU's.

ISSUE:

Whether or not, the registration of tricycles was given to LGU's, hence the
ordinance is a valid exercise of police power.

HELD:

The power over tricycles granted under Section 458(a)(3)(VI) of the Local Government
Code to LGUs is the power to regulate their operation and to grant franchises for the
operation thereof. The exclusionary clause contained in the tax provisions of Section 133
(1) of the Local Government Code must not be held to have had the effect of withdrawing
the express power of LTO to cause the registration of all motor vehicles and the issuance
of licenses for the driving thereof. These functions of the LTO are essentially regulatory
in nature, exercised pursuant to the police power of the State, whose basic objectives are
to achieve road safety by insuring the road worthiness of these motor vehicles and the
competence of drivers prescribed by R. A. 4136. Not insignificant is the rule that a statute
must not be construed in isolation but must be taken in harmony with the extant body of
laws.

LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and
to grant franchises for the operation thereof, and not to issue registration.

Ergo, the ordinance being repugnant to a statute is void and ultra vires.
Delegation to the President

GARCIA V. EXECUTIVE SECRETARY

210 SCRA 219

FACTS:

In November 1990, President Corazon Aquino issued Executive Order No. 438
which imposed, in addition to any other duties, taxes and charges imposed by law on all
articles imported into the Philippines, an additional duty of 5% ad valorem tax. This
additional duty was imposed across the board on all imported articles, including crude
oil and other oil products imported into the Philippines. In 1991, EO 443 increased the
additional duty to 9%. In the same year, EO 475 was passed reinstating the previous
5% duty except that crude oil and other oil products continued to be taxed at
9%. Enrique Garcia, a representative from Bataan, avers that EO 475 and 478 are
unconstitutional for they violate Section 24 of Article VI of the Constitution which
provides:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills
of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
He contends that since the Constitution vests the authority to enact revenue bills in
Congress, the President may not assume such power by issuing Executive Orders Nos.
475 and 478 which are in the nature of revenue-generating measures.
ISSUE:

Whether or not EO 475 and 478 are constitutional.

HELD:

Under Section 24, Article VI of the Constitution, the enactment of appropriation,

revenue and tariff bills, like all other bills is, of course, within the province of the Legislative
rather than the Executive Department. It does not follow, however, that therefore
Executive Orders Nos. 475 and 478, assuming they may be characterized as revenue
measures, are prohibited to be exercised by the President, that they must be enacted
instead by the Congress of the Philippines.
Section 28(2) of Article VI of the Constitution provides as follows:
(2) The Congress may, by law, authorize the President to fix within specified limits, and
subject to such limitations and restrictions as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the Government.
There is thus explicit constitutional permission to Congress to authorize the President
“subject to such limitations and restrictions as [Congress] may impose” to fix “within
specific limits” “tariff rates . . . and other duties or imposts . . . .” In this case, it is the Tariff
and Customs Code which authorized the President to issue the said EOs.

Delegation to administrative agencies

OSMENA V. ORBOS
220 SCRA 703

FACTS:
Senator John Osmeña assails the constitutionality of paragraph 1c of PD 1956, as
amended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the
increase of fuel prices or impose additional amounts on petroleum products which
proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the
reimbursement to ailing oil companies in the event of sudden price increases. The
petitioner avers that the collection on oil products establishments is an undue and invalid
delegation of legislative power to tax. Further, the petitioner points out that since a 'special
fund' consists of monies collected through the taxing power of a State, such amounts
belong to the State, although the use thereof is limited to the special purpose/objective
for which it was created. It thus appears that the challenge posed by the petitioner is
premised primarily on the view that the powers granted to the ERB under P.D. 1956, as
amended, partake of the nature of the taxation power of the State.

ISSUE:

Is there an undue delegation of the legislative power of taxation?

HELD:

None. It seems clear that while the funds collected may be referred to as taxes,
they are exacted in the exercise of the police power of the State. Moreover, that the OPSF
as a special fund is plain from the special treatment given it by E.O. 137. It is segregated
from the general fund; and while it is placed in what the law refers to as a "trust liability
account," the fund nonetheless remains subject to the scrutiny and review of the COA.
The Court is satisfied that these measures comply with the constitutional description of a
"special fund." With regard to the alleged undue delegation of legislative power, the
Court finds that the provision conferring the authority upon the ERB to impose additional
amounts on petroleum products provides a sufficient standard by which the authority must
be exercised. In addition to the general policy of the law to protect the local consumer by
stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB
to impose additional amounts to augment the resources of the Fund.
COMMISSIONER V. CA
G.R. No. 119761. August 29, 1996

FACTS:

Fortune Tobacco Corporation is engaged in the manufacture of different brands of

cigarettes. On various dates, the Philippine Patent Office issued to the corporation
separate certificates of trademark registration over "Champion," "Hope," and "More"
cigarettes.

The CIR initially classified 'Champion,' 'Hope,' and 'More' as foreign brands since they
were listed in the World Tobacco Directory as belonging to foreign companies. However,
Fortune changed the names of 'Hope' to Hope Luxury' and 'More' to 'Premium More,'
thereby removing the said brands from the foreign brand category. Fortune also submitted
proof the BIR that 'Champion' was an original register and therefore a local brand. Ad
Valorem taxes were imposed on these brands.

RA 7654 was passed in it was provided that 55% ad valorem tax will be imposed on local
brands carrying a foreign name. Two days before the effectivity of RA 7654, the BIR
issued Revenue Memorandum Circular No. 37-93, in which Fortune was to be imposed
55% ad valorem tax on the three brands classifying them as local brands carrying a
foreign name.

Fortune filed a petition with the CTA which was granted finding the RMC as defective.
The CIR filed a motion for reconsideration with the CTA which was denied, then to the
CA, an appeal, which was also denied.

ISSUE:

Whether the RMC was valid.

RULING:

NO. The RMC was made to place the three brands as locally made cigarettes bearing
foreign brands and to thereby have them covered by RA 7654. Specifically, the new law
would have its amendatory provisions applied to locally manufactured cigarettes which at
the time of its effectivity were not so classified as bearing foreign brands. Prior to the
issuance of the RMC, the brands were subjected to 45% ad valorem tax. In so doing, the
BIR not simply interpreted the law but it legislated under its quasi-legislative authority.
The due observance of the requirements of notice, of hearing, and of publication should
not have been then ignored.

The Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid
and effective administrative issuance.
Exemption of government entities/agencies and instrumentality

MACEDA V. MACARAIG
197 SCRA 771

FACTS:

Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and
resolutions of respondents Executive Secretary, Secretary of Finance, Commissioner of
Internal Revenue, Commissioner of Customs and the Fiscal Incentives Review Board
FIRB for exempting the National Power Corporation (NPC) from indirect tax and duties.
RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether
direct or indirect. In 1984, however, PD 1931 and EO 93 withdrew all tax exemptions
granted to all GOCCs including the NPC but granted the President and/or the Secretary
of Finance by recommendation of the FIRB the power to restore certain tax exemptions.
Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption
privileges of the NPC. The actions of the respondents were thus questioned by the
petitioner by this petition for certiorari, prohibition and mandamus with prayer for a writ of
preliminary injunction and/or restraining order. To which public respondents argued,
among others, that petitioner does not have the standing to challenge the questioned
orders and resolution because he was not in any way affected by such grant of tax
exemptions.

ISSUE:

Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB
restoring the tax exemptions?

HELD:

Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a
taxpayer and a duly-elected Senator of the Philippines." Public respondent argues that
petitioner must show that he has sustained direct injury as a result of the action and that
it is not sufficient for him to have a mere general interest common to all members of the
public. The Court however agrees with the petitioner that as a taxpayer he may file the
instant petition following the ruling in Lozada when it involves illegal expenditure of public
money. The petition questions the legality of the tax refund to NPC by way of tax credit
certificates and the use of said assigned tax credits by respondent oil companies to pay
for their tax and duty liabilities to the BIR and Bureau of Customs.
MACTAN CEBU AIRPORT V. MARCOS
G.R. NO. 120082. SEPTEMBER 11, 1996

FACTS:
Petitioner was created by virtue of RA 6958. Section 1 thereof states that the authority
shall be exempt from realty taxes imposed by the National Government or any of its
political subdivisions, agencies and instrumentalities. However, the Treasurer of Cebu
City demanded payment for realty taxes from petitioner. Petitioner filed a declaratory relief
before the Regional Trial Court. The trial court dismissed the petitioner ruling that the
Local Government Code withdrew the tax exemption granted to Government owned and
controlled corporation.

ISSUE:

Whether the city of Cebu has the power to impose taxes on petitioner

RULING:

Yes. Taxation is the rule and exemption is the exception, the exemption may thus be
withdrawn at the pleasure of the taxing authority. As to tax exemptions or incentives
granted to or presently enjoyed by natural or juridical persons, including government-
owned and controlled corporations, section 193 of the LGC prescribes the general rule,
viz, they are withdrawn upon the effectivity of the LGC, except those granted to local
water districts, cooperatives, duly registered under RA 6938, non stock and nonprofit
hospitals and educational institutions and unless otherwise provided in the LGC.
International Comity

Tanada v. Angara
G.R No. 118295. May 2,1997

Facts:
This is a case petition by Sen. Wigberto Tanada, together with other lawmakers,
taxpayers, and various NGO’s to nullify the Philippine ratification of the World Trade
Organization (WTO) Agreement.

Petitioners believe that this will be detrimental to the growth of our National Economy
and against to the “Filipino First” policy. The WTO opens access to foreign markets,
especially its major trading partners, through the reduction of tariffs on its exports,
particularly agricultural and industrial products. Thus, provides new opportunities for the
service sector cost and uncertainty associated with exporting and more investment in
the country. These are the predicted benefits as reflected in the agreement and as
viewed by the signatory Senators, a “free market” espoused by WTO.

Petitioners also contends that it is in conflict with the provisions of our constitution, since
the said Agreement is an assault on the sovereign powers of the Philippines because it
meant that Congress could not pass legislation that would be good for national interest
and general welfare if such legislation would not conform to the WTO Agreement.
Issue:

Whether or not the provisions of the ‘Agreement Establishing the World Trade
Organization and the Agreements and Associated Legal Instruments included in
Annexes one (1), two (2) and three (3) of that agreement’ cited by petitioners directly
contravene or undermine the letter, spirit and intent of Section 19, Article II and
Sections 10 and 12, Article XII of the 1987 Constitution.

Held:

Although the Constitution mandates to develop a self-reliant and independent

national economy controlled by Filipinos, does not necessarily rule out the entry of
foreign investments, goods and services. It contemplates neither “economic
seclusion” nor “mendicancy in the international community.” The WTO itself has
some built-in advantages to protect weak and developing economies, which
comprise the vast majority of its members. Unlike in the UN where major states have
permanent seats and veto powers in the Security Council, in the WTO, decisions are
made on the basis of sovereign equality, with each member’s vote equal in weight to
that of any other. Hence, poor countries can protect their common interests more
effectively through the WTO than through one-on-one negotiations with developed
countries. Within the WTO, developing countries can form powerful blocs to push
their economic agenda more decisively than outside the Organization. Which is not
merely a matter of practical alliances but a negotiating strategy rooted in law. Thus,
the basic principles underlying the WTO Agreement recognize the need of
developing countries like the Philippines to “share in the growth in international trade
commensurate with the needs of their economic development.”
MITSUBISHI CORPORATION — MANILA BRANCH vs. COMMISSIONER
OFINTERNAL REVENUE,
[C.T.A. CASE NO. 6139. December 17, 2003.]

Facts:

Petitioner is the Philippine Branch of Mitsubishi Corporation, a corporation duly

organized and existing under the laws of Japan. Through an Exchange of Notes
between the Government of Japan and the Government of the Philippines, it was
agreed that a loan amounting to Forty Billion Four Hundred Million Japanese Yen
(Y40,400,000,000) will be extended to the Republic of the Philippines by the then
Overseas Economic Cooperation Fund. The Government of the Republic of the
Philippines, will, itself or through its instrumentalities, assume all fiscal levies or taxes
imposed in the Republic of the Philippines on Japanese firms and nationals operating
as suppliers, contractors or consultants on and /or in connection with any income that
may accrue from the supply of products of Japan and services of Japanese nationals to
be provided under the Loan. On June 21, 1991, the National Power Corporation
(hereinafter, "NPC") and Mitsubishi Corporation, petitioner's head office in Japan,
entered into a contract for the engineering, supply, construction, installation, testing and
commissioning of one (1) x300 MW Batangas Coal-Fired Thermal Power Project II at
Calaca, Batangas. The Calaca II Project was completed by the petitioner on December
2, 1995 but was only accepted by NPC on January 31, 1998.On July 15, 1998,
petitioner filed its Income Tax Return for the fiscal year ended March 31, 1998 with the
Bureau of Internal In the return, petitioner (being the Manila Branch of Mitsubishi
Corporation) reported an income tax due of P90,481,711.00. On September 7, 1998,
the respondent issued Bureau of Internal Revenue Ruling No. DA-407-98 (Exhibit K)
where it held that "Mitsubishi has no liability for income tax and other taxes and fiscal
levies since the said taxes were assumed by the Philippine Government." On June 30,
2000, petitioner filed an administrative claim for refund and/or tax credit with respondent
in the amount of P52,612,812.00, representing its erroneously paid income taxes in the
amount of P44,288,712 and erroneously paid branch profit remittance tax in the amount
of P8,324,100.00 corresponding to the OECF-funded portion of its Calaca II Project.
On July 13, 2000, petitioner, in order to suspend the running of the two-year period
within which to file a judicial claim for refund, filed the instant petition for review pursuant
to Section 229 of the Tax Code.
ISSUE:
Whether or not Mitsubishi is entitled to tax refunds.
Ruling:
YES. There was an erroneous payment of the subject taxes by petitioner for the reason
that said taxes are to be assumed by the Government of the Philippines through its
executing agency, the NPC.As defined in Black's Law Dictionary, 6th Edition, the word
"assume" means "to take on, become bound, or put oneself in place of another as to an
obligation or liability". As can be gleaned from the definition, the Government of the
Philippines, through NPC, binds itself to shoulder the tax obligations and liabilities of
petitioner. Therefore, the income tax and BPRT payments made by petitioner to
respondent when such payments should have been made by the NPC, undoubtedly, put
petitioner's case in the operation of Section 229 of the Tax Code as one involving
erroneous payment .A careful reading of the provisions of the Exchange of Notes will
show that it is the intention of the two governments not to use the proceeds of the loan
in the payment of all fiscal levies or taxes imposed by the Philippines. In view thereof,
we believe that to deny petitioner's claim for refund would violate the covenant that the
funded amount should not be subject to any taxes.
Limitation of Territorial Jurisdiction

Iloilo Bottlers Inc. vs City of Iloilo

164 SCRA 607.1988

Facts:

Iloilo Bottlers Inc. filed a complaint with the CFI of Iloilo for the recovery of the sum of
P3,329.20,which allegedly constituted payments of municipal license taxes under Iloilo
City Tax Ordinance No. 5 series of 1960 that the company paid under protest. Among
the arguments of Iloilo Bottlers Inc. were as follows:
-
That it already closed its bottling plant at Muelle Loney, Iloilo City, and transferred its
bottling operations to its new plant in Barrio Ungca, Municipality of Pavia, Province of
Iloilo, which is outside the jurisdiction of the City of Iloilo
-
That it could not anymore be liable to pay the municipal license fee because its bottling
plant (was) not anymore inside the City of Iloilo, and that moreover, since it itself (sold)
its own products to its(customers) directly, it could not be considered as a distributor
-
That the plaintiff does not maintain any store or commercial establishment in theCity of
Iloilo from which it distributes its products, but by means of a fleet of delivery trucks,
plaintiff distributes its products from its bottling plant at Barrio Ungca Municipality of
Pavia, Iloilo, directly to its customers in the different towns of the Province of Iloilo as
well as the City of Iloilo;
-
That the plaintiff is already paying the National Government a percentage Tax on all the
softdrinks it manufactures The CFI rendered on January 26, 1973 a decision in favor of
Iloilo Bottlers, Inc. declaring the Corporation not liable under the ordinance. The City of
Iloilo appealed to the Court of Appeals which certified the case to this Court.

ISSUE:

WON Iloilo Bottlers Inc. is liable is liable under Iloilo City tax Ordinance No. 5, series of 1960, as
amended, which imposes a municipal license tax on distributors of soft-drinks.

HELD:

YES.
Entities operating under the first system are NOT considered engaged in the separate
business of selling or dealing in their products, independent of their manufacturing
business. Entities operating under the second system are considered engaged in the
separate business of selling.
COMMISSIONER vs. BOAC
149 SCRA 395
GR No. L-65773-74 April 30, 1987

FACTS:
Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment
of deficiency income taxes against respondent British Overseas Airways Corporation
(BOAC) for the fiscal years 1959 to 1971. BOAC is a 100% British Government-owned
corporation organized and existing under the laws of the United Kingdom, and is engaged
in the international airline business. During the periods covered by the disputed
assessments, it is admitted that BOAC had no landing rights for traffic purposes in the
Philippines. Consequently, it did not carry passengers and/or cargo to or from the
Philippines, although during the period covered by the assessments, it maintained a
general sales agent in the Philippines — Wamer Barnes and Company, Ltd., and later
Qantas Airways — which was responsible for selling BOAC tickets covering passengers
and cargoes. The CTA sided with BOAC citing that the proceeds of sales of BOAC tickets
do not constitute BOAC income from Philippine sources since no service of carriage of
passengers or freight was performed by BOAC within the Philippines and, therefore, said
income is not subject to Philippine income tax. The CTA position was that income from
transportation is income from services so that the place where services are rendered
determines the source.

ISSUE:

Are the revenues derived by BOAC from sales of ticket for air transportation, while having
no landing rights here, constitute income of BOAC from Philippine sources, and
accordingly, taxable?

HELD:

Yes. The source of an income is the property, activity or service that produced the income.
For the source of income to be considered as coming from the Philippines, it is sufficient
that the income is derived from activity within the Philippines. In BOAC's case, the sale of
tickets in the Philippines is the activity that produces the income. The tickets exchanged
hands here and payments for fares were also made here in Philippine currency. The site
of the source of payments is the Philippines. The flow of wealth proceeded from, and
occurred within, Philippine territory, enjoying the protection accorded by the Philippine
government. In consideration of such protection, the flow of wealth should share the
burden of supporting the government.
HOPEWELL POWER V. COMMISSIONER
CTA CASE 5310. NOVEMBER 18, 1998

FACTS:

Hopewell is a corporation organized and existing under Philippine laws with address at
Roxas Boulevard, Pasay City. In December 1993, Hopewell, along with Hopewell Energy
International Ltd (a Hong Kong company) entered into a Mortgage Trust Indenture (MTI)
for the mortgage of their chattel and real estate assets with the bank America National
Trust Company (corporation organized under the laws of New York).
The execution of the MTI was done in Hong Kong. Hopewell was made to pay to the BIR
Documentary Stamp Tax worth P24,864,781.58 over the loan and security documents
executed in Hong Kong.
Hopewell paid in protest and sent a letter of request asking for confirmation on the tax
exemption from DST. In November 1995, it filed a written claim for refund. Because of the
BIR’s inaction, Hopewell filed a judicial claim for the refund of the P24M.
ISSUE:

Whether the MTI documented executed in Hong Kong is exempted from Documentary
Stamp Tax being an excise tax.
HELD:

The power to levy an excise upon the performance of an act or the engaging in an
occupation does not depend upon the domicile of the person subject to the excise, nor
upon the physical location of the property and in connection with the act or occupation
taxed, but depends upon the place in which the act is performed or occupation engaged
in. Thus, the gauge for taxability . . . does not depend on the location of the office, but
attaches upon the place where the respective . . . transaction(s) is perfected and
consummated. Thus, inasmuch as the MTI was executed and signed in Hong Kong prior
to the effectivity of Republic Act No. 7660 on January 14, 1994, no DST is imposable on
the same in the Philippines. This conclusion is also in keeping with one of the inherent
limitations of taxation, namely, that it may be exercised only within the territorial
jurisdiction of the taxing authority
SMITH V. COMMISSIONER
CTA CASE 6268. SEPTEMBER 12, 2002

FACTS:

Petitioner is a citizen of the United States, of legal age, single, and is an employee of
Coastal Subic Bay Terminal, Inc., with address at 42A Grayling Street, West Kalayaan,
Subic Bay Freeport Zone, Philippines. He was employed as Controller of Coastal Subic
Bay Terminal Inc. in 1998 (pars. 1 and 3, Joint Stipulation of Facts).Coastal Subic Bay
Terminal Inc. is a business entity located within the Subic Special Economic Zone, as
created by Republic Act 7227, and was issued by the Subic Bay Metropolitan Authority a
Certificate of Registration and Tax Exemption No. 93-0019 on December 4, 1997, valid
until December 4, 1998 (par. 5 Joint Stipulation of Facts).On April 15, 1999, petitioner,
with tax identification number 170-302-240, filed his annual income tax return and paid
P1,533,660.70 in compensation income taxes for the income he derived from his
employment with Coastal Subic Bay Terminal, Inc. (Annexes A, B and C, Petition for
Review).Claiming that the payment of tax on his compensation income was erroneous,
petitioner filed a written claim for refund with the Bureau of Internal Revenue (BIR) on
April 5, 2001 (par. 7, Joint Stipulation of Facts). As there was no immediate action on
his claim for refund and the two-year prescriptive period was about to lapse, petitioner
elevated his case to this court by way of Petition for Review on April 6, 2001.
ISSUE:

Whether or not aliens working within the SSEZ are subject to income taxes on income
earned from such employment.
HELD:

Individual aliens employed within the Subic Special Economic Zone (SSEZ) are
not exempt from the awesome power of Philippine taxation especially so that they
sourced out their earnings from within the Philippines. The secured area of SSEZ, which
is virtually delineated in metes and bounds by Proclamation No. 532, issued by the then
President Fidel Ramos on February 1, 1995, is in reality part of the territorial jurisdiction
of the Philippines. To buttress the point that SSEZ is indeed within the Philippine
jurisdiction, Section 12 (h) of RA 7227, actually placed the fenced-off area of SSEZ under
the responsibility of the Philippine National Government, thus, "The defense of the zone
and the security of its perimeters shall be the responsibility of the National Government
in coordination with the Subic Bay Metropolitan Authority. The Subic Bay
Metropolitan Authority shall provide and establish its own internal security and fire-fighting
forces. "Such being the case, all subjects over which the Philippines can exercise
dominion are necessarily objects of taxation. As such, all subjects of taxation within its
jurisdiction are required to pay tax in exchange of the protection that the state gives
(Commissioner of Internal Revenue vs. Algue, Inc., et al., L-28896, February 17, 1988).
Due Process of Law
SISON V. ANCHETA
130 SCRA 654

FACTS:

Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg.

135. It amended
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax
on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c)
royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar arrangements,
(e) dividends and share of individual partner in the net profits of taxable partnership,
(f) adjusted gross income.

Petitioner as taxpayer alleged that "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his
profession vis-a-vis those which are imposed upon fixed income or salaried individual
taxpayers." He characterizes the above section as arbitrary amounting to class legislation,
oppressive and capricious in character.

For petitioner, therefore, there is a transgression of both the equal protection and due
process clauses of the Constitution as well as of the rule requiring uniformity in taxation.

ISSUE:

Whether there is a transgression of both the equal protection and due process
clauses of the Constitution as well as of the rule requiring uniformity in taxation.

HELD:

No. The power to tax is an attribute of sovereignty and the strongest power of the
government. There are restrictions, however, diversely affecting as it does property rights,
both the due process and equal protection clauses may properly be invoked, as petitioner
does, to invalidate in appropriate cases a revenue measure. If it were otherwise, taxation
would be a destructive power.

The petitioner failed to prove that the statute ran counter to the Constitution. He used
arbitrariness as basis without a factual foundation. This is merely to adhere to the
authoritative doctrine that where the due process and equal protection clauses are
invoked, considering that they are not fixed rules but rather broad standards, there is a
need for proof of such persuasive character as would lead to such a conclusion.

It is undoubted that the due process clause may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution. An obvious example is where it can
be shown to amount to the confiscation of property. That would be a clear abuse of power.
Equal Protection of the Laws

TAN vs. DEL ROSARIO, JR.

G.R. No. 109289, October 3, 1994

FACTS:
These two consolidated special civil actions for prohibition challenge, the constitutionality
of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation
Scheme (“SNIT”), amending certain provisions of the National Internal Revenue
Regulations No. 293, promulgated by public respondents pursuant to said law. Petitioner
intimates that Republic Act No. 7496 desecrates the constitutional requirement that
taxation “shall be uniform and equitable” in that the law would now attempt to tax single
proprietorships and professionals differently from the manner it imposes the tax on
corporations and partnerships. Petitioners claim to be taxpayers adversely affected by
the continued implementation of the amendatory legislation.
ISSUE:
Does Republic Act No. 7496 violate the Constitution for imposing taxes that are not
uniform and equitable?
RULING:
The Petition is dismissed. Uniformity of taxation, like the kindred concept of equal
protection, merely requires that all subjects or objects of taxation, similarly situated, are
to be treated alike both in privileges and liabilities (Juan Luna Subdivision
vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as: (1) the
standards that are used therefor are substantial and not arbitrary, (2) the categorization
is germane to achieve the legislative purpose, (3) the law applies, all things being equal
to both present and future conditions, and (4) the classification applies equally well to all
those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Bascovs.
PAGCOR, 197 SCRA 771).What may instead be perceived to be apparent from the
amendatory law is the legislative intent to increasingly shift the income tax system
towards the schedule approach in the income taxation of individual taxpayers and to
maintain, by and large ,the present global treatment on taxable corporations. We certainly
do not view this classification to be arbitrary and inappropriate. Having arrived at this
conclusion, the plea of petitioner to have the law declared unconstitutional for being
violative of due process must perforce fail. The due process clause may correctly be
invoked only when there is a clear contravention of inherent or constitutional limitations
in the exercise of the tax power.
PHILIPPINE RURAL ELECTRIC V. SECRETARY
G.R. NO. 143706. JUNE 10, 2003

FACTS:

On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of
other electric cooperatives organized and existing under PD 269 which are members of
(PHILRECA). The other petitioners, electric cooperatives of Agusan del Norte (ANECO),
Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric
cooperatives organized and existing under PD 269, as amended, and registered with the
(NEA). Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment
of all National Government, local government, and municipal taxes and fee, including
franchise, fling recordation, license or permit fees or taxes and any fees, charges, or costs
involved in any court or administrative proceedings in which it may be party.
From 1971to 1978, in order to finance the electrification projects envisioned by PD 269,
as amended, the Philippine Government, acting through the National Economic council
(now National Economic Development Authority) and the NEA, entered into six loan
agreements with the government of the United States of America, through the United
States Agency for International Development (USAID) with electric cooperatives as
beneficiaries. The loan agreements contain similarly worded provisions on the
tax application of the loan and any property or commodity acquired through the proceeds
of the loan.
Petitioners allege that with the passage of the Local Government Code their tax
exemptions have been validly withdrawn.

ISSUE:

Does the Local Government Code (under Sec. 193 and 234) violate the equal
protection clause?

HELD:

No. The guaranty of the equal protection clause is not violated by a law based on a
reasonable classification. First, substantial distinctions exist between cooperatives under
PD 269 and those under RA 6938. In the former, the government is the one that funds
those so-called electric cooperatives, while in the latter, the members make equitable
contribution as source of funds. Second, the classification of tax-exempt entities in the
Local Government Code is germane to the purpose of the law. The Constitutional
mandate that “every local government unit shall enjoy local autonomy,” does not mean
that the exercise of the power by the local governments is beyond the regulation of
Congress. Sec. 193 of the LGC is indicative of the legislative intent to vet broad taxing
powers upon the local government units and to limit exemptions from local taxation to
entities specifically provided therein.
Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these
exemptions are not limited to existing conditions and apply equally to all members of the
same class.
Classification of Taxpayers/subject or items to be taxed
SISON V. ANCHETA
130 SCRA 654

FACTS:
Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg.
135. It amended
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax
on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c)
royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar arrangements,
(e) dividends and share of individual partner in the net profits of taxable partnership,
(f) adjusted gross income.

Petitioner as taxpayer alleged that "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his
profession vis-a-vis those which are imposed upon fixed income or
salaried individualtaxpayers." He characterizes the above section as arbitrary amounting
to class legislation, oppressive and capricious in character.

For petitioner, therefore, there is a transgression of both the equal protection and due
process clauses of the Constitution as well as of the rule requiring uniformity in taxation.

ISSUE:

Whether the imposition of a higher tax rate on taxable net income derived from
business or profession than on compensation is constitutionally infirm.

HELD:

The need for more revenues is rationalized by the government's role to fill the gap not
done by public enterprise in order to meet the needs of the times. It is better equipped to
administer for the public welfare.

The power to tax, an inherent prerogative, has to be availed of to assure the performance
of vital state functions. It is the source of the bulk of public funds.

The power to tax is an attribute of sovereignty and the strongest power of the government.
There are restrictions, however, diversely affecting as it does property rights, both the
due process and equal protection clauses may properly be invoked, as petitioner does,
to invalidate in appropriate cases a revenue measure. If it were otherwise, taxation would
be a destructive power.
Tolentino vs. Secretary of Finance,
(235 SCRA 630, 249 SCRA 628). August 25, 1994; October 30, 1995
FACTS:
There are various suits challenging the constitutionality of RA 7716 on various
grounds. The value-added tax (VAT) is levied on the sale, barter or exchange of goods
and properties as well as on the sale or exchange of services. It is equivalent to 10% of
the gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services. Republic Act
No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code. Among the Petitioners
was the Philippine Press Institute which claim that R.A.7716 violates their press freedom
and religious liberty, having removed them from the exemption to pay Value Added Tax.
It is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press. At any rate,
it is averred, "even non discriminatory taxation of constitutionally guaranteed freedom is
unconstitutional." PPI argued that the VAT is in the nature of a license tax
ISSUE:
Whether or not the purpose of the VAT is the same as that of a license tax.
HELD:
A license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition
on the press is unconstitutional because it lays a prior restraint on the exercise of itsright.
Hence, although its application to others, such those selling goods, is valid, its application
to the press or to religious groups, such as the Jehovah’s Witnesses, in connection with
the latter’s sale of religious books and pamphlets, is unconstitutional. As the U.S.
Supreme Court put it, “it is one thing to impose a tax on income or property of a preacher.
It is quite another thing to exact a tax on him for delivering a sermon. ”The VAT is,
however, different. It is not a license tax. It is not a tax on the exercise of a privilege,
much less a constitutional right. It is imposed on the sale, barter, lease or exchange of
goods or properties or the sale or exchange of services and the lease of properties purely
for revenue purposes. To subject the press to its payment is not to burden the exercise
of its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.
Prohibition against impairment of obligations of contracts

PHILIPPINE RURAL ELECTRIC V. SECRETARY

G.R. NO. 143706. JUNE 10, 2003

FACTS:

On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of
other electric cooperatives organized and existing under PD 269 which are members of
(PHILRECA). The other petitioners, electric cooperatives of Agusan del Norte (ANECO),
Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric
cooperatives organized and existing under PD 269, as amended, and registered with the
(NEA). Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment
of all National Government, local government, and municipal taxes and fee, including
franchise, fling recordation, license or permit fees or taxes and any fees, charges, or costs
involved in any court or administrative proceedings in which it may be party.
From 1971to 1978, in order to finance the electrification projects envisioned by PD 269,
as amended, the Philippine Government, acting through the National Economic council
(now National Economic Development Authority) and the NEA, entered into six loan
agreements with the government of the United States of America, through the United
States Agency for International Development (USAID) with electric cooperatives as
beneficiaries. The loan agreements contain similarly worded provisions on the
tax application of the loan and any property or commodity acquired through the proceeds
of the loan.
Petitioners allege that with the passage of the Local Government Code their tax
exemptions have been validly withdrawn.

ISSUE:

Is there an impairment of the obligations of contract under the loan entered into between
the Philippine and the US Governments?

HELD:

No. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of

the obligations of contracts does not prohibit every change in existing laws. To fall within
the prohibition, the change must not only impair the obligation of the existing contract, but
the impairment must be substantial. Moreover, to constitute impairment, the law must
affect a change in the rights of the parties with reference to each other and not with
respect to non-parties.
The quoted provision under the loan agreement does not purport to grant any tax
exemption in favor of any party to the contract, including the beneficiaries thereof. The
provisions simply shift the tax burden, if any, on the transactions under the loan
agreements to the borrower and/or beneficiary of the loan. Thus, the withdrawal by the
Local Government Code under Sec. 193 and 234 of the tax exemptions previously
enjoyed by petitioners does not impair the obligation of the borrower, the lender or the
beneficiary under the loan agreements as, in fact, no tax exemption is granted therein.
Prohibition against infringement of religious freedom

AMERICAN BIBLE SOCIETY V. CITY OF MANILA

101 PHIL 386

FACTS:

American Bible Society is a foreign, non-stock, non-profit, religious, missionary

corporation duly registered and doing business in the Philippines through its Philippine
agency established in Manila in November, 1898. City of Manila is a municipal corporation
with powers that are to be exercised in conformity with the provisions of Republic Act No.
409, known as the Revised Charter of the City of Manila. American Bible Society has
been distributing and selling bibles and/or gospel portions throughout the Philippines and
translating the same into several Philippine dialect. City Treasurer of Manila informed
American Bible Society that it was violating several Ordinances for operating without the
necessary permit and license, thereby requiring the corporation to secure the permit and
license fees covering the period from 4Q 1945-2Q 1953.
To avoid closing of its business, American Bible Society paid the City of Manila its permit
and license fees under protest. American Bible filed a complaint, questioning the
constitutionality and legality of the Ordinances 2529 and 3000, and prayed for a refund of
the payment made to the City of Manila.

Issue:

WON American Bible Society liable to pay sales tax for the distribution and sale of bibles

Ruling:

NO
Under Sec. 1 of Ordinance 3000, one of the ordinance in question, person or entity
engaged in any of the business, trades or occupation enumerated under Sec. 3 must
obtain a Mayor’s permit and license from the City Treasurer. American Bible Society’s
business is not among those enumerated
However, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or
occupation not mentioned, except those upon which the City is not empowered to license
or to tax P5.00
Therefore, the necessity of the permit is made to depend upon the power of the City to
license or tax said business, trade or occupation.
Prohibition Re: Appropriation of proceeds of taxation

Osmena vs. Oscar Orbos

220 SCRA 703G.R. No: 99886, March 31, 1993

Facts:
Pres. Marcos created Special Account in the General Fund (P.D.
1956),designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed
to reimburse oil companies for cost increases in crude oil and imported
petroleum products resulting from exchange rate adjustments and from increases in the
world market prices of crude oil.. Pres. Aquino, amended and promulgated E.O. No.
137,expanding the grounds for reimbursement to oil companies for possible
cost under recovery incurred as a result of the reduction of domestic prices of petroleum
products, the amount of the under recovery being left for determination by the Ministry of
Finance. The petition claimed that the status of the OPSF as of March 31, 1991 showed
a “Terminal Balance Deficit” of some P12.877 billion and to abate such, the Energy
Regulatory Board issued an Order approving the increase in pump prices of petroleum
products. The OPSF deficit should have been fully covered in a span of 6 months but
Oscar Orbos, in his capacity as Executive Secretary ;Jesus Estanislao, in his capacity as
Secretary of Finance; Wenceslao de la Paz, in his capacity as Head of the Office of
Energy Affairs; Chairman Rex V. Tantiongco and the Energy Regulatory Board — are
poised to accept, process and pay claims not authorized under P.D. 1956.
Issue:
What is the purpose of the Oil Price Stabilization Fund?
RULING:
The OPSF is a "Trust Account" which was established “for the purpose of minimizing
the frequent price changes brought about by exchange rate adjustment and/or changes
in world market prices of crude oil and imported petroleum products.” It is clear that while
the funds collected may be referred to as taxes; they are exacted in the exercise of the
police power of the State. Moreover, that the OPSF is a special fund is plain from the
special treatment given it by E.O. 137. It is segregated from the general fund; and while
it is placed in what the law refers to as a "trust liability account," the fund nonetheless
remains subject to the scrutiny and review of the COA. The Court Is satisfied that these
measures comply with the constitutional description of a "special fund." The Court cited
Valmonte v. ERB and Gaston v. Republic Planters Bank, “The tax collected is not in a
pure exercise of the taxing power. It is levied with a regulatory purpose, to provide a
means for the stabilization of the sugar (petroleum products) industry. The levy is primarily
in the exercise of the police power of the State.
Gaston vs. Republic Planter
158 SCRA 626

Facts:

Petitioners are sugar producers and planters and millers filed a MANDAMUS
to implement the privatization of Republic Planters Bank, and for the transfer of the
shares in the government bank to sugar producers and planters.(because they
are allegedly the true beneficial owners of the bank since they pay P1.00per picul of sugar
from the proceeds of sugar producers as STABILIZATION FEES).The shares are
currently held by Philsucom / Sugar Regulatory Admin. The Solgen countered that the
stabilization fees are considered government funds and that the transfer of shares to from
Philsucom to the sugar producers would be irregular.
Issues:
What is the nature of the P1.00 stabilization fees collected from sugar
producers? Are they funds held in trust for them, or are they public funds? Are the shares
in the bank (paid using these fees) owned by the government Philsucom or privately by
the different sugar planters from whom such fees were collected?
RULING:
PUBLIC FUNDS. While it is true that the collected fees were used to buy shares in RPB,
it did not collect said fees for the account of sugar producers. The stabilization fees were
charged on sugar produced and milled which ACCRUED TOPHILSUCOM, under PD
338.The fees collected ARE IN THE NATURE OF A TAX., which is within the power of
the state to impose FOR THE PROMOTION OF THE SUGAR INDUSTRY.
They constitute sugar liens. The collections accrue to a SPECIAL FUNDS. It is levied not
purely for taxation, but for regulation, to provide means TO STABILIZE THE
SUGARINDUSTRY. The levy is primarily an exercise of police powers. The fact that the
State has taken money pursuant to law is sufficient to constitute them as STATE FUNDS,
even though held for a special purpose. Having been levied fora special purpose, the
revenues are treated as a special fund, administered in trust for the purpose intended.
Once the purpose has been fulfilled or abandoned, the balance will be transferred to the
general funds of gov’t. It is a special fund since the funds are deposited in PNB, not in the
National Treasury. The sugar planters are NOT BENEFICIAL OWNERS. The money is
collected from them only because they it is also they who are to be
benefited from the expenditure of funds derived from it. The investing of the funds in
RPB is not alien to the purpose since the Bank is a commodity bank for sugar, conceived
for the sugar industry ’growth and development. Revenues derived from taxes cannot be
used purely for private purposes or for the exclusive benefit of private persons. The
Stabilization Fund is to be utilized for the benefit of the ENTIRE SUGAR INDUSTRY, and
all its components, stabilization of domestic and foreign markets, since the sugar industry
is of vital importance to the country’s economy and national interest.
Prohibition against taxation of religious, charitable entities and educational
entitites

ABRA VALLEY COLLEGE V. AQUINO

162 SCRA 106

FACTS:

Petitioner, an educational corporation and institution of higher learning duly incorporated

with the Securities and Exchange Commission in 1948, filed a complaint to annul and
declare void the “Notice of Seizure’ and the “Notice of Sale” of its lot and building located
at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said “Notice of Seizure” by respondents Municipal Treasurer and Provincial
Treasurer, defendants below, was issued for the satisfaction of the said taxes thereon.
The parties entered into a stipulation of facts adopted and embodied by the trial court in
its questioned decision. The trial court ruled for the government, holding that the second
floor of the building is being used by the director for residential purposes and that the
ground floor used and rented by Northern Marketing Corporation, a commercial
establishment, and thus the property is not being used exclusively for educational
purposes. Instead of perfecting an appeal, petitioner availed of the instant petition for
review on certiorari with prayer for preliminary injunction before the Supreme Court, by
filing said petition on 17 August 1974.
ISSUE:
Whether or not the lot and building are used exclusively for educational purposes.
HELD:
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution,
expressly grants exemption from realty taxes for cemeteries, churches and parsonages
or convents appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable or educational purposes.ﾝ Reasonable emphasis has
always been made that the exemption extends to facilities which are incidental to and
reasonably necessary for the accomplishment of the main purposes. The use of the
school building or lot for commercial purposes is neither contemplated by law, nor by
jurisprudence. In the case at bar, the lease of the first floor of the building to the Northern
Marketing Corporation cannot by any stretch of the imagination be considered incidental
to the purpose of education. The test of exemption from taxation is the use of the property
for purposes mentioned in the Constitution.
The decision of the CFI Abra (Branch I) is affirmed subject to the modification that half of
the assessed tax be returned to the petitioner. The modification is derived from the fact
that the ground floor is being used for commercial purposes (leased) and the second floor
being used as incidental to education
Prohibition against taxation of non-stock, non-profit educational institutions
COMMISSIONER V. CA
G.R. NO. 124043. OCTOBER 14, 1998

FACTS:
Private Respondent YMCA is a non-stock, non-profit institution, which conducts various
programs and activities that are beneficial to the public, especially the young people,
pursuant to its religious, educational and charitable objectives.
YMCA earned income from leasing out a portion of its premises to small shop owners,
like restaurants and canteen operators, and from parking fees collected from non-
members. Petitioner issued an assessment to private respondent for deficiency taxes.
Private respondent formally protested the assessment. In reply, the CIR denied the claims
of YMCA.
Issue:

Whether or not the income derived from rentals of real property owned by YMCA subject
to income tax
Held:

Yes. Income of whatever kind and character of non-stock non-profit organizations from
any of their properties, real or personal, or from any of their activities conducted for profit,
regardless of the disposition made of such income, shall be subject to the tax imposed
under the NIRC.
Rental income derived by a tax-exempt organization from the lease of its properties, real
or personal, is not exempt from income taxation, even if such income is exclusively used
for the accomplishment of its objectives.
Grant of Tax Exemption
CHAVEZ vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG),
G. R. No. 130716, May 19, 1999

Facts:

Movants Ma. Imelda Marcos-Manotoc, Ferdinand R. Marcos II and Irene Marcos- Araneta
allege that they are parties and signatories to the General and Supplemental Agreements
dated December 28, 1993, which this Court, in its Decision promulgated on December 9,
1998, declared "NULL AND VOID for being contrary to law and the Constitution." As such,
they claim to "have a legal interest in the matter in litigation, or in the success of either of
the parties or an interest against both as to warrant their intervention." They add that their
exclusion from the instant case resulted in a denial of their constitutional rights to due
process and to equal protection of the laws. They also raise the "principle of
hierarchical administration of justice" to impugn the Court's cognizance of
petitioner's direct action before it.
Issue:
Whether or not Movants have a legal interest in the matter in litigation.
RULING:
The assailed Decision has become final and executory; the original parties have not filed
any motion for reconsideration, and the period for doing so has long lapsed. Indeed, the
movants are now legally barred from seeking leave to participate in this proceeding.
Movants claim that their exclusion from the proceeding regarding the Agreements to
which they were parties and signatories was a denial of "their property right to contract
without due process of law. "We rule that the movants are merely incidental, not
indispensable, parties to the instant case. Being contractors to the General and
Supplemental Agreements involving their supposed properties, they claim that their
interests are affected by the petition. However, as exhaustively discussed in the
assailed Decision, the Agreements undeniably contain terms an condition that are
clearly contrary to the Constitution and the laws and are not subject to compromise. Such
terms and conditions cannot be granted by the PCGG to anyone, not just to movants.
Being so, no argument of the contractors will make such illegal and unconstitutional
stipulations pass the test of validity. The void agreement will not be rendered operative
by the parties' alleges performance (partial or full) of their respective prestations. A
contract that violates the Constitution and the law is null and void ab intio and vests no
rights and creates no obligations. It produces no legal effect at all .In legal terms, the
movants have really no interest to protect or right to assert in this proceeding. Contrary
to their allegations, no infraction upon their rights has been committed .The original
petition of Francisco I. Chavez sought to enforce a constitutional right against the
Presidential Commission on Good Government (PCGG) and to determine whether
the latter has been acting within the bounds of its authority. In the process of adjudication,
there is no need to call on each and every party whom said agency has contracted with.
REPUBLIC V. CITY OF KIDAPAWAN
G.R. NO. 166651

FACTS:
President Corazon C. Aquino issued Proclamation No. 853 which excluded certain
portions of the land embraced in the Mt. Apo National Park and declared the same as
geothermal reservation under the administration of the PNOC, now referred to as the
MAGRA. Thereafter, PNOC-EDC built a 104-megawatt power plant within the MAGRA
which produces electricity through turbines using steam extracted from the MAGRA as
fuel. Subsequently, the City Treasurer of Kidapawan, Cotabato notified PNOC-EDC of its
tax delinquency after which, he issued a warrant of levy on the 701-hectareMAGRA for
failure to pay real property taxes, covering the tax period from 1993-2002. He sent a
notice of sale of delinquent real property to PNOC-EDC declaring that delinquent real
property will be sold through public auction. PNOC-EDC claimed that it was exempt from
real property tax under Section 234,paragraph (a) of the Local Government Code which
reads: SECTION 234.
Exemptions from Real Property Tax
. " The following are exempted from payment of the real property tax:(a) Real property
owned by the Republic of the Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person; "The trial court found that PNOC-EDC is not exempt from paying the real property
taxes and that the MAGRA is part of the Mt. Apo National Park which has not been re-
classified as alienable agricultural land. Thus, it could not be sold at public auction.
However, the trial court ordered that the improvements on the subject land, not being in
the nature of public dominion, may be validly levied and sold at public auction to satisfy
the payment of realty tax delinquencies.
Issue:
Is PNOC liable to pay real property taxes?
HELD:
The exemption claimed by PNOC-EDC hinges on Section 234, paragraph (a)of the LGC.
The above provision exempts from real property taxation properties of the government,
provided the beneficial use of the property was not transferred to a taxable person.

The power to tax and to grant tax exemptions is vested in the Congress and, to a
certain extent, in the local legislative bodies.[18] Under Section 28(4), Article VI of the
Constitution, no law granting any tax exemption shall be passed... without the
concurrence of a majority of all Members of Congress. Thus the exemption provided in
the service contract cannot be given effect because the DOE, representing the
government in the execution of the contract, has no authority to grant the same.
Veto of Appropriation, revenue, tariff Bills

Gonzales vs. Macaraig

191 SCRA 452

Facts:
Gonzales, together w/ 22 other senators, assailed the constitutionality of Cory’s veto of
Section 55 of the 1989 Appropriations Bill (Sec 55 FY ’89, and subsequently of its
counterpart Section 16 of the 1990 Appropriations Bill (Sec 16 FY ’90). Gonzalez averred
the following: (1) the President’s line-veto power as regards appropriation bills is limited
to item/s and does not cover provision/s; therefore, she exceeded her authority when she
vetoed Section 55 (FY ’89) and Section 16 (FY ’90) which are provision; (2) when the
President objects to a provision of an appropriation bill, she cannot exercise the item-veto
power but should veto the entire bill; (3) the item-veto power does not carry with it the
power to strike out conditions or restrictions for that would be legislation, in violation of
the doctrine of separation of powers; and (4) the power of augmentation in Article VI,
Section 25 [5] of the 1987 Constitution, has to be provided for by law and, therefore,
Congress is also vested with the prerogative to impose restrictions on the exercise of that
power.
ISSUE:
Whether or not the President exceeded the item-veto power accorded by the Constitution.
Or differently put, has the President the power to veto `provisions’ of an Appropriations
Bill.
HELD:
SC ruled that Congress cannot include in a general appropriations bill matters that should
be more properly enacted in separate legislation, and if it does that, the inappropriate
provisions inserted by it must be treated as “item,” which can be vetoed by the President
in the exercise of his item-veto power. The SC went one step further and rules that even
assuming arguendo that “provisions” are beyond the executive power to veto, and Section
55 (FY ’89) and Section 16 (FY ’90) were not “provisions” in the budgetary sense of the
term, they are “inappropriate provisions” that should be treated as “items” for the purpose
of the President’s veto power.
Non-impairment Of Jurisdiction of the Supreme Court

CIR vs. Santos

277 SCRA 617 (1997)

Facts:

Guild of Phil. Jewellers questions the constitutionality of certain provisions of the NIRC
and Tariff and Customs Code of the Philippines. It is their contention that present Tariff
and tax structure increases manufacturing costs and render local jewelry
manufacturers uncompetitive against other countries., in support of their position, they
submitted what they purported to be an exhaustive study of the tax rates on jewelry
prevailing in other Asian countries, in comparison to tax rates levied in the country.
Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and
oppressive and declared them INOPERATIVE and WITHOUR FORCE AND EFFECT
insofar as petitioners are concerned. Petitioner CIR assailed decision rendered by
respondent judge contending that the latter has no authority to pass judgment upon the
taxation policy of the government. Petitioners also impugn the decision by asserting that
there was no showing that the tax laws on jewelry are confiscatory.
ISSUE:
Whether or not the Regional Trial Court has authority to pass judgment upon taxation
policy of the government.
RULING:
The policy of the courts is to avoid ruling on constitutional questions and to presume
that the acts of the political departments are valid in the absence of a clear and
unmistakable showing to the contrary. This is not to say that RTC has no
power whatsoever to declare a law unconstitutional. But this authority does not
extend to deciding questions which pertain to legislative policy. RTC have the power to
declare the law unconstitutional but this authority does not extend to deciding questions
which pertain to legislative policy. RTC can only look into the validity of a provision, that
is whether or not it has been passed according to the provisions laid down by law, and
thus cannot inquire as to the reasons for its existence.
RULING ON THE EXTENT OF LEGISLATIVE POWER TO TAXSC held that it is within
the power f the legislature whether to tax jewelry or not. With the legislature primarily
lies the discretion to determine the nature (kind), object(purpose), extent (rate),
coverage (subject) and situs (place) of taxation.
San Miguel Corporation v. Avelino
89 SCRA 70

Facts:
City of Cebu, in accordance with Presidential Decree No. 231, enacted in 1973, to take
effect on January 1, 1974 the Mandaue City Tax Code. City Treasurer, on April 1, 1974,
demanded from SMC payment of the made specific tax on the total volume of beer it
produced in the City of Mandaue. SMC on April 8, 1974, contested the correction of said
specific tax "on the ground that Section 12(e) (7) in relation to Section 12(e) (1) and (2),
Mandaue City Ordinance No. 97, is illegal and void because it imposed a specific tax
beyond its territorial jurisdiction.” In an opinion the City Fiscal upheld its validity which was
reversed by the Secretary of Justice, saying the ordinance was of “doubtful validity.” City
of Cebu then filed a suit for collection where it squarely put in issue the validity of such
ordinance. San Miguel Corporation filed a motion to dismiss claiming that the Ordinance
No. 97, Section 12 should be nullified and that the filing of the suit is not the “appeal”
contemplated in the Presidential Decree. CFI: motion to dismiss denied. SMC went to SC
praying for writs of certiorari and prohibition.
Issue:
Can City’s act of filing suit after the Secretary of Justice’s opinion was rendered be
considered "an appeal" under the Presidential Decree?

Ruling:
Yes, action by City valid. The writs prayed for, certiorari and prohibition, cannot issue. 1.
The validity of a statute, an executive order or ordinance is a matter for the judiciary to
decide and whenever in the disposition of a pending case such a question becomes
unavoidable then it is not only the power but the duty of the Court to resolve such a
question. It is undoubted that under the Constitution, even the legislative body cannot
deprive this Court of its appellate jurisdiction over all cases coming from inferior courts
where the constitutionality or validity of an ordinance or the legality of any tax, impost,
assessment, or toll is in question.1 Since it is likewise expressly provided in Section 43
of the Judiciary Act that the original jurisdiction over all civil actions involving the legality
of any tax, impost or assessment appertains to the Court of First Instance, it takes a
certain degree of ingenuity to allege that the lower court was bereft of such authority. Both
under the Constitution and the Judiciary Act, respondent Judge is vested with jurisdiction
to make a declaration regarding an ordinance’s validity. It would be therefore premature
for the corrective power of this Tribunal to be interposed, just because he did not grant
the motion to dismiss on the allegation that there was lack of jurisdiction. Authorities
support the municipal power to impose specific taxes on beverages manufactured within
its territorial boundaries, City of Bacolod v. Gruet and City of Naga v. Court of Appeals.
In the first case cited, the entity involved is SMC itself.
Infringement Of Press Freedom
Tolentino vs. Secretary of Finance,
(235 SCRA 630, 249 SCRA 628). August 25, 1994; October 30, 1995
FACTS:
There are various suits challenging the constitutionality of RA 7716 on various
grounds. The value-added tax (VAT) is levied on the sale, barter or exchange of goods
and properties as well as on the sale or exchange of services. It is equivalent to 10% of
the gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services. Republic Act
No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code. Among the Petitioners
was the Philippine Press Institute which claim that R.A.7716 violates their press freedom
and religious liberty, having removed them from the exemption to pay Value Added Tax.
It is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press. At any rate,
it is averred, "even non discriminatory taxation of constitutionally guaranteed freedom is
unconstitutional." PPI argued that the VAT is in the nature of a license tax
Issue:
Whether press freedom has been violated.
Held:
No. With respect to the first contention, it would suffice to say that since the law granted
the press a privilege, the law could take back the privilege anytime without offense to
the Constitution. The reason is simple: by granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative. Indeed, in withdrawing the
exemption, the law merely subjects the press to the same tax burden to which other
businesses have long ago been subject. The PPI asserts that it does not really matter
that the law does not discriminate against the press because "even nondiscriminatory
taxation on constitutionally guaranteed freedom is unconstitutional." The Court was
speaking in that case (Murdock v. Pennsylvania) of a license tax, which, unlike an
ordinary tax, is mainly for regulation. Its imposition on the press is unconstitutional
because it lays a prior restraint on the exercise of its right. The VAT is, however,
different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or
properties or the sale or exchange of services and the lease of properties purely for
revenue purposes. To subject the press to its payment is not to burden the exercise of
its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.
Grant of Franchise
Tolentino vs. Secretary of Finance,
(235 SCRA 630, 249 SCRA 628). August 25, 1994; October 30, 1995
FACTS:
There are various suits challenging the constitutionality of RA 7716 on various
grounds. The value-added tax (VAT) is levied on the sale, barter or exchange of goods
and properties as well as on the sale or exchange of services. It is equivalent to 10% of
the gross selling price or gross value in money of goods or properties sold, bartered or
exchanged or of the gross receipts from the sale or exchange of services. Republic Act
No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code. Among the Petitioners
was the Philippine Press Institute which claim that R.A.7716 violates their press freedom
and religious liberty, having removed them from the exemption to pay Value Added Tax.
It is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press. At any rate,
it is averred, "even non discriminatory taxation of constitutionally guaranteed freedom is
unconstitutional." PPI argued that the VAT is in the nature of a license tax
ISSUE:
Whether or not the purpose of the VAT is the same as that of a license tax.
HELD:
A license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition
on the press is unconstitutional because it lays a prior restraint on the exercise of itsright.
Hence, although its application to others, such those selling goods, is valid, its application
to the press or to religious groups, such as the Jehovah’s Witnesses, in connection with
the latter’s sale of religious books and pamphlets, is unconstitutional. As the U.S.
Supreme Court put it, “it is one thing to impose a tax on income or property of a preacher.
It is quite another thing to exact a tax on him for delivering a sermon. ”The VAT is,
however, different. It is not a license tax. It is not a tax on the exercise of a privilege,
much less a constitutional right. It is imposed on the sale, barter, lease or exchange of
goods or properties or the sale or exchange of services and the lease of properties purely
for revenue purposes. To subject the press to its payment is not to burden the exercise
of its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.