Victorias Milling v.

Municipality of Victorias

• The municipal council of Victorias enacted Ordinance 1 w/c required sugar centrals operating
w/in the municipality to pay an annual municipal license tax.

• Based on the ordinance, Victorias Milling was assessed 40K (imposed on sugar centrals) and
another 40K (imposed on sugar refineries).

• Thus, Victorias Milling filed a suit to declare the ordinance void since it: o a) exceeds the
amount fixed in Provincial Circular 12-A issued by the Finance Dept o b) is discriminatory, as it singles
out VM, w/c is the only operator of a sugar central and a sugar refinery within the jurisdiction of
defendant municipality o c) constitutes double taxation o d) the national government has preempted
the field of taxation with respect to sugar centrals or refineries

• The lower court held that the exaction was invalid because the municipality CANNOT impose
a tax for revenue in the guise of a police measure. The amounts set forth in the ordinance also exceeded
the cost of licensing, regulating, and surveillance.

• I: W/n the ordinance was valid.

• R: The ordinance was valid.

• The ordinance was promulgated not in the exercise of the municipality's regulatory power but
as a REVENUE measure, authorized by Commonwealth Act 472.

• Under this, a municipality is authorized to impose three kinds of licenses: o 1) license for
regulation of useful occupations / enterprises o 2) license for restriction/ regulation of non-useful
occupations or enterprises o 3) license for revenue

• The first 2 fall w/in police power, while the 3rd is for revenue purposes.

• The license fee in this case falls under #3 and is valid.

• Generally speaking, it is NOT a license fee, but rests on taxing power, w/c must be expressly
conferred by statute upon the municipality.

• There is no double taxation because the company is being taxed for the same object: One tax
is on sugar centrals and the other is on sugar refineries. It just so happens that the company is both.
[Also, the tax was imposed based on capacity of the sugar centrals to produce, so it was really a license
on the occupation or business of sugar centrals and sugar refineries and not on the sugar itself; hence
there was no identity of object of taxation].

• There is no discrimination despite the fact that the company is the only sugar producing entity
in the municipality. Victorias Milling is not named in the ordinance and should another corporation
decide to produce sugar in the area, it will be taxed accordingly.

• GR: If not for police inspection, supervision, regulation = it is a revenue measure!

Villanueva v. City of Iloilo: Uniformity

• The municipal board of Iloilo enacted ORDINANCE 11 (series of 1980) imposing 86 license tax
fees on persons engaged in the business of operating tenement houses ((tenement house – any building
or dwelling for renting space divided into separate apartments or accessories).

• The Villanuevas, owners of 4 tenement houses containing 34 apartments, challenged the

validity of such ordinance because only the taxpayers of the City of Iloilo are singled out to pay taxes on
their tenement houses, while citizens of other cities, where their councils do not enact a similar tax
ordinance are permitted to escape such imposition.

• Lower court rendered the ordinance illegal as it is oppressive and unreasonable, constitutes
double taxation and violates uniformity.

• I: W/n the ordinance violates the rule on equality and uniformity in taxation.

• R: NO.
• 1) The rule on equality and uniformity does not require that taxes for the same purpose
should be imposed in different territorial subdivisions at the same time.
• Taxes are uniform and equal when imposed upon all property of the same class or character
within the taxing authority.
• In this case, tenement buildings constitute a distinct class of property.

• 2) Contrary to petitioners' assertion that the tax in question is a REAL ESTATE tax, this
argument cannot be sustained.
• The tax is not a fixed proportion of the assessed value of the tenement houses, and does not
require the intervention of assessors or
appraisers. It is not payable at a designated time or date, and is not enforceable against the tenement
houses either by sale or distraint.
• RATHER, it is seen from the context of the ordinance that the intention is to impose a license
tax on the operation of tenement houses, which is a form of business or calling.

• 3) Also, the petitioners' contention that they are doubly taxed because they are paying the
real estate taxes and the tenement tax imposed by the ordinance in question is devoid of merit.
• A license tax may be levied upon a business or occupation although the land or property used
in connection therewith is subject to property tax. This would not constitute double taxation because
there is only double taxation when the SAME PROPERTY / SUBECT MATTER is taxed twice for the same
purpose, w/in the same jurisdiction and period, and of the same kind of character of tax.
• Real estate and tenement tax aer NOT of the same kind / character.
• At all events, there is no constitutional prohibition against double taxation in the Philippines.
It is something not favored, but is permissible, provided some other constitutional requirement is not
thereby violated, such as the requirement that taxes must be uniform.
Commissioner of Internal Revenue v. Algue

• The Phil. Sugar Estate Development Company (PSEDC) appointed Algue, Inc., a family
corporation, as its agent, authorizing it to sell its land, factories, and oil manufacturing process.

• Pursuant to this authority, five members of the family corporation formed the Vegetable Oil
Investment Corp. and induced other persons to invest in it.

• The newly formed corporation then purchased the PSEDC properties. For this sale, PSEDC gave
Algue, Inc. a commission of P125,000.

• From this amount, Algue Inc. paid the five family members P75,000 as promotional fees.

• Algue, Inc. declared this P75,000 as a deduction from its income tax as a legitimate business
expense.

• The CIR questioned the deduction, claiming that it was not an ordinary, reasonable, or
necessary expense and was merely an attempt to evade payment of taxes.

• I: W/n the P75,000 is tax-deductible as a legitimate business expense of Algue, Inc.

• R: Yes, the P75,000 promotional fee is tax-deductible.

• Sec. 30 of the Tax Code provides that ordinary and necessary expenses incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered are taxdeductible.

• However, the burden in proving the validity of a claimed deduction belongs to the taxpayer. In
this case, the burden has been satisfactorily discharged by the taxpayer Algue, Inc.

• Algue, Inc. was able to prove that the promotional fees were not fictitious and were in fact
paid periodically to the five family members. Moreover, the amount of the promotional fees was
reasonable, considering that the five payees actually performed a service for Algue, Inc. by making the
sale of the properties of PSEDC possible.

• As a result of this sale, Algue, Inc. earned a net commission of P50,000. • Taxes are what we
pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive
power to activate and operate it.

• Hence, despite the natural reluctance to surrender part of one’s hardearned income, every
person who is able to must contribute his share in running the government. The government, for its
part, is expected to respond in the form of BENEFITS for general welfare. This symbiotic relationship is
the rationale of taxation and should dispel the erroneous notion that it is an arbitrary exaction by those
in the seat of power.
Association of Customs Brokers Inc. v. Municipal Board

• The Municipal Board of Manila passed an ordinance levying a property tax on all motor
vehicles operating within the City of Manila.

• The ordinance provided that the rate of the tax would be 1% ad valorem per annum, and that
the proceeds of the tax shall accrue to the Streets and Bridges Funds of the City, w/c will be used for the
repair, maintenance, and improvement of its streets and bridges.

• The Charter of Manila gives the municipal board the power to tax motor vehicles, but this is
limited by the Motor Vehicles Law, which disallows the imposition of fees on motor vehicles, EXCEPT
property taxes imposed by a municipal corp.

• THUS, the law allows the City of Manila to impose a property tax on motor vehicles operating
within its limits. • However, the Association of Customs Brokers contended that the ordinance is void
because it actually imposes a license tax in the guise of a property tax.

• I: W/n ordinance is valid

• R: No, it is void.

• 1) It imposes a license tax, which the municipal corporation may not impose, although it is
made to appear as a property tax/

• As a rule, an ad valorem tax is a property tax. However, if the tax is really imposed upon the
performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered
an EXCISE, even if its amount is determined in proportion to the value of the property used in
connection with the occupation, privilege, or act which is taxed.

• In this case, the tax is fixed ad valorem. BUT, the purpose is to raise funds for the repair,
maintenance, and improvement of the streets and bridges in the city. Thus, it is actually a license fee
under the guise of an ad valorem tax to circumvent the prohibition imposed by the Motor Vehicles Law.

• The reason for the prohibition is that under the Motor Vehicles Law, municipal corporations
already get proceeds for the purpose of repairing and maintaining their streets and bridges. The
prohibition aims at preventing a duplication in the imposition of fees for the same purpose.

• 2) The ordinance infringes on the rule of uniformity of taxation because it exacts the tax upon
ALL motor vehicles operating within the City of Manila, without distinguishing between those for hire
and for private use, those registered in and those registered outside but occasionally come to Manila.

• The ordinance imposes the tax only on those vehicles registered in Manila, even if those
vehicles which are registered outside the city but which use its streets also contribute equally to the
deterioration of the roads and bridges.