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[Type text] Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-31156 February 27, 1976 PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees. Sabido, Sabido & Associates for appellant. Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.: This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294, which was certified to Us by the Court of Appeals on October 6, 1969, as involving only pure questions of law, challenging the power of taxation delegated to municipalities under the Local Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959). On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of Republic Act No. 2264. 1 otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void. On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state that, first, both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed therein are practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the provisions of said Ordinance No. 27, series of 1962. Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked." 2 For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during the month. 3 On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity." 4 For the purpose of computing the taxes due, the person, fun company, partnership, corporation or plant producing soft drinks shall submit to 1

[Type text] the Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month. 5 The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.' On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under the oft the said Ordinances; and to pay the costs." From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as amended. There are three capital questions raised in this appeal: 1. — Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive? 2. — Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes? 3. — Are Ordinances Nos. 23 and 27 unjust and unfair? 1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people. 6 It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local concern. 7 This is sanctioned by immemorial practice. 8 By necessary implication, the legislative power to create political corporations for purposes of local selfgovernment carries with it the power to confer on such local governmental agencies the power to tax. 9 Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation. The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact measure of that which is exercised by itself. When it is said that the taxing power may be delegated to municipalities and the like, it is meant that there may be delegated such measure of power to impose and collect taxes as the legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax for more general purposes. 10 This is not to say though that the constitutional injunction against deprivation of property without due process of law may be passed over under the guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are provided. 11 Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or 2

[Type text] oppressive methods are used in assessing and collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally not necessary to due process of law. 12 There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. 13 The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United States and some states of the Union. 14 Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity 15 or by the same jurisdiction for the same purpose, 16 but not in a case where one tax is imposed by the State and the other by the city or municipality. 17 2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two ordinances cover the same subject matter and impose practically the same tax rate. The thesis proceeds from its assumption that both ordinances are valid and legally enforceable. This is not so. As earlier quoted, Ordinance No. 23, which was approved on September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax of one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used. When it was discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28, 1962, imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the provisions of the former." That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax. Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those which are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law, the same comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non excepti 19 The limitation applies, particularly, to the prohibition against municipalities and municipal districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a 3

is hereby declared of valid and legal effect.. 27. producers. cinematographic films.) of volume capacity" on all soft drinks produced or manufactured under Ordinance No.J. 27 does not partake of the nature of a percentage tax on sales. Muñoz Palma. but there is not set ratio between the volume of sales and the amount of the tax. Costs against petitioner-appellant. courts will go slow in writing off an ordinance as unreasonable.) of volume capacity on all softdrinks. coal. or other taxes in any form based thereon. SO ORDERED.S. Makasiar. 27 of the Municipality of Tanauan. 231.S. 27 if the purpose of the law to further strengthen local autonomy were to be realized. as amended. C.. U. Municipal corporations are allowed much discretion in determining the reates of imposable taxes. 26 Unless the amount is so excessive as to be prohibitive. opium and other habit-forming drugs. matches firecrackers. July 1.000. Barredo. same series. re-pealing Municipal Ordinance No. produced or manufactured. the constitutionality of Section 2 of Republic Act No. manufactured oils and other fuels. of defendant Municipality. 22 Soft drink is not one of those specified. 54. Leyte. 41. 28 Finally. concur.01) on each gallon (128 fluid ounces. Municipalities are empowered to impose. The ordinance in question (Ordinance No. 27 Reluctance should not deter compliance with an ordinance such as Ordinance No. diesel fuel oil. 24 an increase in the tax alone would not support the claim that the tax is oppressive. just and uniform taxes. importers and dealers of soft drinks and/or mineral waters under Ordinance No.00 with ten but not more than twenty crowners imposed on manufacturers.[Type text] set ratio between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to enact. series of 1968. 2264. 25 This is in line with the constutional policy of according the widest possible autonomy to local governments in matters of local taxation. is hereby upheld and Municipal Ordinance No. The tax is levied on the produce (whether sold or not) and not on the sales. series of 1962. series of 1964. Jr.. Aquino and Concepcion. The tax of one (P0. or an equivalent of 1-½ centavos per case. 20 But. Separate Opinions 4 . 23. bunker fuel oil. Specific taxes are those imposed on specified articles. otherwise known as the Local Autonomy Act. 1973). 3. Teehankee. wines. 21 Nor can the tax levied be treated as a specific tax. Antonio. such as distilled spirits. playing cards. JJ. Esguerra. 27) comes within the second power of a municipality. as amended by Ordinance No. U. products of tobacco other than cigars and cigarettes. unjust and confiscatory. ACCORDINGLY.00 per corking machine with five but not more than ten crowners or P2. saccharine. 23 cannot be considered unjust and unfair. not only municipal license taxes upon persons engaged in any business or occupation but also to levy for public purposes. an aspect that is given expression in the Local Tax Code (PD No. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products. the imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces.000. the municipal license tax of P1. 29 appears not to affect the resolution of the validity of Ordinance No. Castro. fermented liquors.

." 9 That case left no doubt either as to weakness of a claim "based merely by inferences. It would seem though that in the United States. however.. If I limit myself to concurrence in the result. De Leon. I would prefer to rely on the doctrine announced by this Court in City of Baguio v. short of (confiscation or proceedings unconstitutional on other grouse With that decision rendered at a time when American sovereignty in the Philippines was recognized. 12 So I would view the issues in this suit and accordingly concur in the result.. it is primarily because with the article on Local Autonomy found in the present Constitution. through Justice Dizon. It exercise general supervision over all local governments as may be provided by law . its ghost. De Leon. I would limit myself to what has been set forth in City of Baguio v. as with us. I am only in agreement. 'In a 1947 decision. I feel a sense of reluctance in restating doctrines that arose from a different basic premise as to the scope of such power in accordance with the 1935 Charter. or offices. 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal corporations. the statute must be sustained even though double taxation results. The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations. and that any such power granted must be construed strictly. The only limitation then on the authority.[Type text] FERNANDO. 2 That was not the case under the 1935 Charter. City of Butuan. he could only . plenary in character of the national government. bureaus. we quoted with approval this excerpt from a leading American decision: 'Where. Nonetheless it is well-nigh unavoidable that I do so as I am unable to share fully what for me are the nuances and implications that could arise from the approach taken by my brethren. was that while the President of the Philippines was vested with the power of control over all executive departments. as here. I concur in the result. according to Justice Parades in the earlier case of Tan v.. it delivered the coup justice to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. The 14th Amendment [the due process clause) no more forbids double taxation than it does doubling the amount of a tax. . as noted by an eminent critic. 1 1. Likewise as to the constitutional aspect of the thorny question of double taxation. v.. Municipality of Pagbilao. J. As to any possible infirmity based on an alleged double taxation. in Golden Ribbon Lumber Co. as late as December of 1964. five years after its enactment of the Local Autonomy Act. 3 As far as legislative power over local government was concerned. It is true that in 1939. implications and deductions. unlike sovereign states. Congress has clearly expressed its intention. concurring: The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character. this Court. [as they have no place in the interpretation of the power to tax of a municipal corporation. Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation. there was a statute that enlarged the scope of the municipal taxing power. any doubt or ambiguity arising from the terms of the grant to be resolved against the municipality. still stalks the juridical stage." 10 As the conclusion reached by the Court finds support in such grant of the municipal taxing power. 11 Thus: "As to why double taxation is not violative of due process. after clothed with no power of taxation. To some. 4 Thereafter. It would appear therefore that the extent of the taxing power was solely for the legislative body to decide. no restriction whatsoever was placed on the Congress of the Philippines. 5 Nevertheless. 8 "is an attribute of sovereignty which municipal corporations do not enjoy. in 1959 such competence was further expanded in the Local Autonomy Act. 2. it possesses more than just a persuasive effect. that its charter or a statute must clearly show an intent to confer that power or the municipal corporation cannot assume and exercise it. Justice Holmes made clear in this language: 'The objection to the taxation as double may be laid down on one side. 5 . It is therein specifically provided: "Each local government unit shall have the power to create its own sources of revenue and to levy taxes subject to such limitations as may be provided by law." 7 Taxation.

De Leon. in Golden Ribbon Lumber Co.. 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal corporations. bureaus.. was that while the President of the Philippines was vested with the power of control over all executive departments. 5 Nevertheless. The only limitation then on the authority. Insofar as it shows adherence to tried and tested concepts of the law of municipal taxation. 3 As far as legislative power over local government was concerned. in 1959 such competence was further expanded in the Local Autonomy Act. De Leon. through Justice Dizon. there was a statute that enlarged the scope of the municipal taxing power. this Court. short of (confiscation or proceedings unconstitutional on other grouse With that decision rendered at a time when American sovereignty in the Philippines was recognized. five years after its enactment of the Local Autonomy Act. 2 That was not the case under the 1935 Charter. after clothed with no power of taxation. that its charter or a statute must clearly show an intent to confer that power or the municipal corporation cannot assume and exercise it. J. Justice Holmes made clear in this language: 'The objection to the taxation as double may be laid down on one side. The 14th Amendment [the due process clause) no more forbids double taxation than it does doubling the amount of a tax. it possesses more than just a persuasive effect. Nonetheless it is well-nigh unavoidable that I do so as I am unable to share fully what for me are the nuances and implications that could arise from the approach taken by my brethren.[Type text] Separate Opinions FERNANDO. 8 "is an attribute of sovereignty which municipal corporations do not enjoy. I would prefer to rely on the doctrine announced by this Court in City of Baguio v. It exercise general supervision over all local governments as may be provided by law . unlike sovereign states. To some. and that any such power granted must be construed strictly. it is primarily because with the article on Local Autonomy found in the present Constitution... any doubt or ambiguity arising from the terms of the grant to be resolved against the municipality. It would appear therefore that the extent of the taxing power was solely for the legislative body to decide. it delivered the coup justice to the bogey of double taxation as a constitutional bar to the exercise of the 6 . Likewise as to the constitutional aspect of the thorny question of double taxation. concurring: The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character. . [as they have no place in the interpretation of the power to tax of a municipal corporation. according to Justice Parades in the earlier case of Tan v. The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations. he could only . I feel a sense of reluctance in restating doctrines that arose from a different basic premise as to the scope of such power in accordance with the 1935 Charter. City of Butuan. as late as December of 1964. 1 1. I concur in the result. If I limit myself to concurrence in the result. or offices. implications and deductions." 10 As the conclusion reached by the Court finds support in such grant of the municipal taxing power. 4 Thereafter. It is therein specifically provided: "Each local government unit shall have the power to create its own sources of revenue and to levy taxes subject to such limitations as may be provided by law. As to any possible infirmity based on an alleged double taxation. I would limit myself to what has been set forth in City of Baguio v. It is true that in 1939. I am only in agreement.. 2." 9 That case left no doubt either as to weakness of a claim "based merely by inferences. 11 Thus: "As to why double taxation is not violative of due process. no restriction whatsoever was placed on the Congress of the Philippines. v. Municipality of Pagbilao. plenary in character of the national government." 7 Taxation.

— Any provision of law to the contrary notwithstanding. or the municipal district council of the municipal district to collect fees and charges for service rendered by the city. except gasoline. That no city. (d) Taxes on persons operating waterworks. and 7 . under the provisions of the National Internal Revenue Code: Provided. just and uniform taxes. That municipalities and municipal districts shall. 2. the municipal council of the municipality. all chartered cities. (e) Taxes on forest products and forest concessions. 'In a 1947 decision. Taxation. municipality or municipal district may levy or impose any of the following: (a) Residence tax. (i) Customs duties registration. review or bulletin appearing at regular interval and having fixed prices for subscription and sale. (j) Taxes of any kind on banks. It would seem though that in the United States. insurance companies. however. to regulate and impose reasonable for services rendered in connection with any business. we quoted with approval this excerpt from a leading American decision: 'Where. irrigation and other public utilities except electric light. or exercising private in chartered cities. wharfage on wharves owned by the national government. (f) Taxes on estates. as noted by an eminent critic. inheritance. (c) Taxes on the business of any newspaper engaged in the printing and publication of any newspaper. as here. and which is not published primarily for the purpose of publishing advertisements. municipalities and municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city. heat and power.[Type text] taxing power. still stalks the juridical stage. profession occupation being conducted within the city. the statute must be sustained even though double taxation results. 12 So I would view the issues in this suit and accordingly concur in the result. municipality or municipal district and otherwise to levy for public purposes. as with us. magazine. gifts. however. Footnotes 1 "Sec. impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax. Congress has clearly expressed its intention. licenses or fees: Provided. municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business. tonnage and all other kinds of customs fees. charges and dues. municipality or municipal district. (h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof. its ghost. and persons paying franchise tax: (k) Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance companies. (b) Documentary stamp tax. in no case. legacies and other acquisitions mortis causa (g) Taxes on income of any kind whatsoever.

ante. Municipal Corporations. June 20. 394-95 (1954). at 206. v. 11 SCRA 609. L-20312. Vol. 26 SCRA 585-86. Sections 123-148. Ed. 1.18169. 513-14. 702 (1919). City of Cebu. defendants-appellees.. 1972. February 26.. August 28. 1953. 11 Malcolm. 1965. 3 Section 3. Ltd. Brd. v. 14 SCRA 663-64. v. A regular bottle of Pepsi-Cola soft drinks contains 8 oz. 13 See footnote 1. per case of 12 bottles. Vol. at 14. manufactured or processed products and products of Philippine cottage industries. 89 Phil. of any kind. 953. 1968. 4 Section 2. Nin Bay Mining Co. of Mindoro. 22. 149-150. 16 SMB. Fourth Edition. Inc. VI. 24 SCRA 793-96. Mun. ante at 190. 8 . 24 SCRA 793-96. Mun. L-26521. of P. or 312 oz. July 20. Art. 1975. July 31.. City of Butuan. Narcotic Drugs Law. Inc. 20 Arabay. Palawan. 7 Pepsi-Cola Bottling Co.-210. City of Butuan. 22 Shell Co. 12 Cooley ante at 334. See Sec. 21 SMB. Inc. Lednicky L. 15 Commissioner of Internal Revenue v. VIII. Philippine Constitutional Law. L-20125. Art. v. Co. v. vs. vs. 6 Cooley. 14 Pepsi-Cola Bottling Co. L-22814. 1973 Constitution. or 192 oz. September 10. 18 McQuillin. a family-size contains 26 oz. 2S 1 4. City of Cebu. 17 (1). of Roxas. City of Iloilo.G. Meer.[Type text] (i) Taxes. 1. Bd of City of Manila. The Law of Taxation. 43 SCRA 280. per case of 24 bottles. 1964. L-27684. Footnote 16. Prov. August 28.I. 2 Section 2. Vaño. December 28. which in effect impose a burden on exports of Philippine finished. fees or levies. Inc. 19 Villanueva v. 9 Cooley. 1968. et al. of the Phil. 39 Phil.. 5 Section 3. NIRC. of the Phil. Inc. 94 Phil. 17 Punzalan v. 1935 Constitution and Sec. 10 Idem at 198-200. 8 Rubi v. RA No. 6. 351 (1951). v. 3rd. CFI of Zamboanga del Norte. 23 Brief. 50 O. 2485. 1968. manufacturers Life Ins..

1973. of Agoo. v. v. Alfonso 83 Phil. 748 (1927. January 30. of Victorias. 1 L-24756. J. Antigua. 588 (1939). Mun. 6 L-18534. Section 5 of the present Constitution. Arquiza Luta v. L-29125. v. 25 Northern Philippines Tobacco Corp. of the Phil. 1969. 27 Victorias Milling Co. Inc.[Type text] 24 See Pepsi-Cola Bottling Co. October 31. 50 Phil. FERNANDO. where the tax is P. 43 SCRA 133-34." 5 Republic Act No.12 SCRA 611. 96 Phil. Taxation 1 Case Digests Pepsi-Cola vs Mun. Potspone. April 23. 44 Phil. 656 (1931).1964. 56 SCRA 593. Subject to Certain Limitations. 852 (1949). 1968. Eastern Theatrical Co. Municipality of Zamboanga. J. City of Baguio. L-26447. 2264. 854 (1952). De la Rosa v. Pepsi commenced a complaint with preliminary injunctionbefore the CFI of Leyte for that court to declare Section 2 ofR. 29 Subject of plaintiff-appellant's Motion for Admission and consideration of Essential Newly Dissevered Evidence. Section 10 of the 1935 Constitution. 909 (1955). September 27. 55 Phil. Cuunjieng v. Reyes. 4 Commonwealth Act 472 entitled: "An Act Revising the General Authority of Municipal Councils and Municipal District Councils to Levy Taxes. 26 William Lines. 31 SCRA 308. 7 SCRA 168-69. 28 Procter & Gamble Trading Co. L-21183.R. 42 Phil. 2 Article XI. Municipal Board. Footnote 14. Mun. Misamis Oriental. La Union. dated April 30. 511 (1939). De Linan v. Medina v. City of Bacolod v. December 24. 818 (1922). L-18290. City of Baguio.1976) The legislative power to create political corporations for purposes of localself-government courts with it the power to confer on such local government agencies the power to tax. v. 619. Standard-Vacuum Oil Co. 1968. January 31. 25 SCRA 938. Second Division. 2264 (Local Autonomy Act) unconstitutional as an unduedelegation of taxing authority as well 9 . where the tax rate is P. City of Butuan. of Tanauan (G. of Medina. Gruet. 1963. 55 Phil. 792 (1923). January 31. 7 Ibid. Inc. L-31156 Feb 27. Yeo Loby v. v. 720 (I!)52). Zamboanga. 91 Phil.03 on every case of bottled Coca-Coal. Hercules Lumber Co. Cf. 91 Phil. Municipal Government of Pagsanjan v. 98 Phil.10 per case of 24 bottles. 653 (1931). City of Ozamis.. 68 Phil. 25 SCRa 205. 65 Phil. 1971. v. 3 Article VII. 1974. per Fernando. v. Municipal Council of Daet. Mun. v.A. Yap Tak Wing v. ante. No. Carreon. Zamboanga. L-350048. People v. 654 (1956).

is broadenough as to extend to almost "everything.On the other hand.23. The tax is levied on theproduce (whether sold or not) and not on the sales. or othertaxes in any form based thereon. Municipal Ordinance 27 levies andcollects on softdrinks produced or manufactured within theterritorial jurisdiction of the municipality a tax of 1 centavoon each gallon of volume capacity.b) No. Legislative concerns may be delegated to localgovernments in respect of matters of local concerns. it was 1/16 of a centavo for every bottle corked. U.particularly to the prohibition against municipalities andmunicipal districts to impose "any percentage tax or othertaxes in any form based thereon nor impose taxes on articlessubject to specific tax except gasoline. 2264. Bynecessary implication. series of 1962. the taxing authority conferred on localgovernments under Section 2. the imposition of "a tax of one centavo (P0. Leyte null and void.[Type text] as declare MunicipalOrdinance Nos. it is one centavo (P0. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 23. Republic Act No.01)on each gallon of volume capacity" on all soft drinksproduced or manufactured under Ordinance No. and operates as a repeal of thelatter. accepting thosewhich are mentioned therein. Plaintiff-appellantin its brief admitted that defendants-appellees are onlyseeking to enforce Ordinance No.S. 27 does notpartake of the nature of a percentage tax on sales." For purposes of thisparticular limitation. inOrdinance No. But. Thevolume capacity of the taxpayer's production of soft drinks isconsidered solely for purposes of 10 .01) on each gallon(128 fluid ounces. Municipal Ordinance 23 leviesand collects from softdrinks producers and manufacturers atai of 1/16 th of a centavo for every bottle of softdrink corked. the legislative power to createpolitical corporations for purposes of local self-governmentcourts with it the power to confer on such local governmentagencies the power to tax. 27. a municipal ordinance which prescribesa set ratio between the amount of the tax and the volume ofsale of the taxpayer imposes a sales tax and is null and voidfor being outside the power of the municipality toenact." The limitation applies.Undoubtedly. Both are denominated as―municipal production tax‖. it is true that power of taxation is purelylegislative and which the central legislative body cannotdelegate either to the executive or judicial department ofthe government without infringing upon the theory ofseparation of powers but the exception lies in the case ofmunicipal corporations to which the said theory does notapply. The constitution grants localgovernment the autonomous authority to create their ownsources of revenue and to levy taxes. 27. even without words to that effect. the difference between the two ordinances clearly liesin the tax rate of the soft drinks produced: in Ordinance No.) of volume capacity.Issues: a) WoN section 2 of R. 2264 is an undue delegationof power b) WoN Ordinances 23 & 27 constitute doubletaxation and impose percentage or specific tax c) WoNOrdinances 23 and 27 are unjust and unfairHeld: a) No.27 is thus clear: it was intended as a plain substitute for theprior Ordinance No. under the provisionsof the National Internal Revenue Code. 23 & 27 series of 1962 of Municipality ofTanauan.A.

such as distilled spirits. 27 if the purpose of thelaw to further strengthen local autonomy were to berealized 11 . unjust and confiscatory.1973).playing cards.S. Unless the amount is so excessive as to be prohibitive. fermentedliquors. wines. saccharine. Specific taxes are those imposed onspecified articles. Municipal corporationsare allowed much discretion in determining the rates ofimposable taxes. diesel fuel oil. An increasein the tax alone would not support the claim that the tax isoppressive. This is in line with the constitutional policyof according the widest possible autonomy to localgovernments in matters of local taxation. Nor can the tax levied betreated as a specific tax. manufactured oils and other fuels.coal.matches firecrackers. produced ormanufactured.c) The tax of one (P0.courts will go slow in writing off an ordinance asunreasonable.U. an aspect that isgiven expression in the Local Tax Code (PD No.) of volume capacity on all softdrinks. July 1. opium and other habit-formingdrugs. bunker fuel oil. Reluctance should not deter compliance withan ordinance such as Ordinance No. cinematographic films. but there is not set ratio between the volumeof sales and the amount of the tax. or an equivalent of 1-½ centavos percase. Soft drink is not one of those specified. cannot be considered unjust and unfair.[Type text] determining the tax rate onthe products. 231. products of tobacco other than cigars and cigarettes.01) on each gallon (128 fluid ounces.

TOMAS R.: For review under Rule 45 of the Rules of Court on a pure question of law are the decision of 22 March 1995 1 of the Regional Trial Court (RTC) of Cebu City. and EUSTAQUIO B. Tax Exemptions. We resolved to give due course to this petition for its raises issues dwelling on the scope of the taxing power of local government-owned and controlled corporations.R. agencies and instrumentalities . respondents. 120082 September 11. Branch 20. 3. mandated to "principally undertake the economical. No. represented by its Mayor HON. 1996 MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY. 12 . efficient and effective control. JR.. City of Cebu". . — The authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions. . vs. and accelerating the development of the means of transportation and communication in the country. promote and develop international and domestic air traffic in the Central Visayas and Mindanao regions as a means of making the regions centers of international trade and tourism. . May 1995 2 denying the motion to reconsider the decision. in his capacity as the Presiding Judge of the Regional Trial Court. Branch 20. CEB-16900 entitled "Mactan Cebu International Airport Authority vs. and b) upgrade the services and facilities of the airports and to formulate internationally acceptable standards of airport accommodation and service. Sec. (Sec. MARCOS. DAVIDE. FERDINAND J. 6958. HON. and its order of 4. OSMEÑA.[Type text] Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. THE CITY OF CEBU. RA 6958). 14. . CESA. The uncontradicted factual antecedents are summarized in the instant petition as follows: Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. dismissing the petition for declaratory relief in Civil Case No. Cebu City. petitioner. Since the time of its creation. . . . J. It is also mandated to: a) encourage. management and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in Cebu City. petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter. and such other Airports as may be established in the Province of Cebu .

743. municipalities. — Unless otherwise provided herein. it 13 . and barangay shall not extend to the levy of the following: a) . Officer-in-Charge. xxx xxx xxx (c) . — . (Emphasis supplied) xxx xxx xxx Sec. the exercise of the taxing powers of provinces. As the City of Cebu was about to issue a warrant of levy against the properties of petitioner. or presently enjoyed by all persons. claiming in its favor the aforecited Section 14 of RA 6958 which exempt it from payment of realty taxes. except local water districts. 989-A. are hereby withdrawn upon the effectivity of this Code. 919. 942. including government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. . . fees or charges of any kind on the National Government. Eustaquio B. any exemption from payment of real property tax previously granted to. Branch 20. 1992: Sec. including governmentowned or controlled corporations. 474. It was also asserted that it is an instrumentality of the government performing governmental functions. its agencies and instrumentalities.229. cooperatives duly registered under RA No. (Emphasis supplied) Respondent City refused to cancel and set aside petitioner's realty tax account. . however. or presently enjoyed by all persons whether natural or juridical. on December 29. 1994.078. and local government units. non-stock. 133. Petitioner objected to such demand for payment as baseless and unjustified. Office of the Treasurer of the City of Cebu. . 913-F. Withdrawal of Tax Exemption Privilege. 913G. Except as provided herein. xxx xxx xxx o) Taxes. Mr. tax exemptions or incentives granted to. . 941. . 948-A. 109(931). 193.79. (a) . 88 SWO. — Unless otherwise provided in this Code. . 1994. 746 and 991-A). Lahug. I-M. the latter was compelled to pay its tax account "under protest" and thereafter filed a Petition for Declaratory Relief with the Regional Trial Court of Cebu. in the total amount of P2. Cesa. 6938. Common Limitations on the Taxing Powers of Local Government Units.. Exemptions from Real Property taxes. citing section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units: Sec. whether natural or juridical. insisting that the MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Governmental Code that took effect on January 1. 77 Psd. MCIAA basically contended that the taxing powers of local government units do not extend to the levy of taxes or fees of any kind on an instrumentality of the national government. and non-profit hospitals and educational institutions. cities. 918.[Type text] On October 11. 947. 234. Cebu City. Petitioner insisted that while it is indeed a government-owned corporation. . demanded payment for realty taxes on several parcels of land belonging to the petitioner (Lot Nos. located at Barrio Apas and Barrio Kasambagan.

it is safe to infer and state that the tax exemption provided for in RA 6958 creating petitioner had been expressly repealed by the provisions of the New Local Government Code of 1991. . to wit: A close reading of the New Local Government Code of 1991 or RA 7160 provides the express cancellation and withdrawal of exemption of taxes by government owned and controlled corporation per Sections after the effectivity of said Code on January 1." ([f]. RA 7160 expressly provides that "All general and special laws. it nonetheless stands on the same footing as an agency or instrumentality of the national government by the very nature of its powers and functions. acts. . However. all exemptions previously granted to it were deemed withdrawn by operation of law. In its decision of 22 March 1995. This Court's ruling finds expression to give impetus and meaning to the overall objectives of the New Local Government Code of 1991. CEB-16900. the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units shall be given more powers. Respondent City. responsibilities. Section 534.[Type text] nonetheless stands on the same footing as an agency or instrumentality of the national government. The process of decentralization shall proceed from the national government to the local government units. as provided under Sections 193 and 234 of the Local Government Code when it took effect on January 1. city charters. executive orders. So that petitioner in this case has to pay the assessed realty tax of its properties effective after January 1. 1992. "It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. however. 5 Its motion for reconsideration having been denied by the trial court in its 4 May 1995 order. decress [sic]. RA 7160. 1992. Petitioner insisted that while it is indeed a government-owned corporation. to wit: [proceeds to quote Sections 193 and 234] Petitioners claimed that its real properties assessed by respondent City Government of Cebu are exempted from paying realty taxes in view of the exemption granted under RA 6958 to pay the same (citing Section 14 of RA 6958). asserted that MACIAA is not an instrumentality of the government but merely a government-owned corporation performing proprietary functions As such. . 14 . proclamations and administrative regulations. Towards this end. 3 The petition for declaratory relief was docketed as Civil Case No. 4 the trial court dismissed the petition in light of its findings. With that repealing clause in RA 7160. 1992 until the present. and resources. authority. RA 7160). the petitioner filed the instant petition based on the following assignment of errors: I RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT THE PETITIONER IS VESTED WITH GOVERNMENT POWERS AND FUNCTIONS WHICH PLACE IT IN THE SAME CATEGORY AS AN INSTRUMENTALITY OR AGENCY OF THE GOVERNMENT.

Being an instrumentality of the Government. PAGCOR should be and actually is exempt from local taxes. its tax exemption privilege under Section 14 of its Charter "cannot be considered withdrawn with the passage of the Local Government Code of 1991 (hereinafter LGC) because Section 133 thereof specifically states that the taxing powers of local government units shall not extend to the levy of taxes of fees or charges of any kind on the national government its agencies and instrumentalities. PD 1869. 9 Local governments have no power to tax instrumentalities of the National Government. and accelerating the development of the means of transportation and communication in the country. . Vol. its operation might be burdened. v." Hence. Maryland.[Type text] II RESPONDENT JUDGE ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAXES TO THE CITY OF CEBU. make references to the entire absence of power on the part of the States to touch. . 340 US 42)." 7 and that it is an attached agency of the Department of Transportation and Communication (DOTC). The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. This doctrine emanates from the "supremacy" of the National Government over local government. or even to seriously burden it in the accomplishment of them. An instrumentality of Government is one created to perform governmental functions primarily to promote certain aspects of the economic life of the people. but more importantly. to retard. 579). the instrumentalities of the United States (Johnson v. impede. (Emphasis supplied) 15 . PAGCOR has a dual role. Philippine Amusement and Gaming Corporation. Justice Holmes." As to the second assigned error. Otherwise. which places it in the category of an agency or instrumentality of the Government. as explained in Basco vs. 2. Sanchez. in that way (taxation) at least. PAGCOR is a government owned or controlled corporation with an original character. . to operate and regulate gambling casinos. 4 Wheat 316. burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (Antieau Modern Constitutional Law. Maryland. All its shares of stock are owned by the National Government. 4 L Ed. 8 the petitioner "may stand in [sic] the same footing as an agency or instrumentality of the national government. 6 Considering its task "not merely to efficiently operate and manage the Mactan-Cebu International Airport. (McCulloch v. The latter joke is governmental. respondent City of Cebu has no power nor authority to impose realty taxes upon it in accordance with the aforesaid Section 133 of the LGC. to carry out the Government policies of promoting and developing the Central Visayas and Mindanao regions as centers of international trade and tourism. supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. the petitioner asserts that although it is a government-owned or controlled corporation it is mandated to perform functions in the same category as an instrumentality of Government. the petitioner contends that being an instrumentality of the National Government. 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities. p. 140) Otherwise mere creature of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a toll for regulation" (U. The states have no power by taxation or otherwise. Maryland.S. impeded or subjected to control by a mere Local government. speaking for the Supreme Court. Anent the first assigned error.

20 However. 13 Our Constitution. Section 133 of the LGC prohibits local government units from imposing taxes. agencies. or charges of any kind on it. In response to the petitioner's claim that such exemption was not repealed because being an instrumentality of the National Government. 22 Under the latter. 17 or are the lifeblood of the nation. tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. 14 So potent indeed is the power that it was once opined that "the power to tax involves the power to destroy. 16 But since taxes are what we pay for civilized society. No. As a general rule.[Type text] It then concludes that the respondent Judge "cannot therefore correctly say that the questioned provisions of the Code do not contain any distinction between a governmental function as against one performing merely proprietary ones such that the exemption privilege withdrawn under the said Code would apply to all government corporations. 11 this exemption was withdrawn by Section 234 of the LGC. While it may be true that under its Charter the petitioner was exempt from the payment of realty taxes. however. 6958 the petitioner is exempt from the payment of realty taxes imposed by the National Government or any of its political subdivisions. taxation is a destructive power which interferes with the personal and property for the support of the government. and Section 234 thereof does not distinguish between government-owned corporation. 19 Elsewise stated. There can be no question that under Section 14 of R. respondent City of Cebu points out that the petitioner is likewise a governmentowned corporation. 18 A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. Respondent city of Cebu urges this the Manila International Airport Authority is a governmental-owned corporation. it may be exercised by local legislative bodies. 21 The power to tax is primarily vested in the Congress. exemption therefrom is the exception. levy. therefore. in relation to Section 234. in our jurisdiction. 12 and to reject the application of Basco because it was "promulgated . acknowledging in its very nature no limits. if the grantee of the exemption is a political subdivision or instrumentality. of the LGC that the legislature meant to exclude instrumentalities of the national government from the taxing power of the local government units. effective limitations thereon may be imposed by the people through their Constitutions. In its comment respondent City of Cebu alleges that as local a government unit and a political subdivision. before the enactment and the singing into law of R. decided "in the light of the spirit and intention of the framers of the said law. Such power is guaranteed by the Constitution 10 and enhanced further by the LGC. taxation is the rule.A. the power to tax is an incident of sovereignty and is unlimited in its range. and Section 234 thereof does not distinguish between government-owned or controlled corporations performing governmental and purely proprietary functions." 15 Verily. Accordingly. it has the power to impose. the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations." For it is clear from Section 133. for instance.A. . but pursuant to direct authority conferred by Section 5. the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority. No. Nevertheless. however. and collect taxes within its jurisdiction. and Section 234 thereof does not distinguish between government-owned corporation. and 16 . the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which. so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it." and was not. must be consistent with the basic policy of local autonomy. . provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. assess. 7160. fees. no longer merely by virtue of a valid delegation as before. Article X of the Constitution.

[Type text] instrumentalities. — Unless otherwise provided herein. (h) Excise taxes on articles enumerated under the National Internal Revenue Code. gifts. or passing through. the scope thereof or its limitations. (b) Documentary stamp tax. (i) Percentage or value added tax (VAT) on sales. tonnage dues. (f) Taxes fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen. municipalities. or other charges on Philippine product actually exported. (l) Taxes. (k) Taxes on premiums paid by ways reinsurance or retrocession. except. (j) Taxes on the gross receipts of transportation contractor and person engage in the transportation of passengers of freight by hire and common carriers by air. fees. fees and charges and other imposition upon goods carried into or out of. cities. Article X of the constitution provides for the exercise by local government units of their power to tax. (g) Taxes on business enterprise certified to be the Board of Investment as pioneer or non-pioneer for a period of six (6) and four (4) years. tricycles. Common Limitations on the Taxing Power of Local Government Units. legacies and other acquisitions mortis causa. 23 The LGC. and barangays shall not extend to the levy of the following: (a) Income tax. and the exemption from taxation. which then becomes contractual and is thus covered by the non-impairment clause of the Constitution. and taxes. land. "inheritance. or water. or other taxes. Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units as follows: Sec. as amended. the territorial jurisdictions of local government units in the guise or charges for wharfages. tolls for bridges or otherwise. fees or charges on petroleum products. (m) Taxes. registration fees of vessels and wharfage on wharves. except as otherwise provided herein (d) Customs duties. fees. enacted pursuant to Section 3. the exemption may thus be withdrawn at the pleasure of the taxing authority. 133. except as otherwise provided herein. (c) Taxes on estates. respectively from the date of registration. The only exception to this rule is where the exemption was granted to private parties based on material consideration of a mutual nature. the exercise of the taxing powers of provinces. fees or charges in any form whatsoever upon such goods or merchandise. Nevertheless. and all other kinds of customs fees charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned: (e) Taxes. or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving of thereof. except as provided in this code. except when levied on banks and other financial institutions. since taxation is the rule and exemption therefrom the exception. 17 . barters or exchanges or similar transactions on goods or services except as otherwise provided herein.

ITS AGENCIES AND INSTRUMENTALITIES. OR CHARGES OF ANY KIND ON THE NATIONAL GOVERNMENT. all persons whether natural or juridical. directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power. — A province or city or a municipality within the Metropolitan Manila Area may levy on an annual ad valorem tax on real property such as land. parsonages or convents appurtenants thereto. (emphasis supplied) Needless to say the last item (item o) is pertinent in this case. or charges. except as provided therein.A. unless otherwise provided by the LGC. The "taxes. and. which is governed by Section 232. machinery and other improvements not hereafter specifically exempted. 6938) otherwise known as the "Cooperative Code of the Philippines. churches. It reads as follows: Sec. No. Section 234 of LGC provides for the exemptions from payment of real property taxes and withdraws previous exemptions therefrom granted to natural and juridical persons. The term "fees" means charges fixed by law or Ordinance for the regulation or inspection of business activity. directly. 6810 and Republic Act Numbered Sixty nine hundred thirty-eight (R. 25 Among the "taxes" enumerated in the LGC is real property tax. building. for reconsideration or otherwise. No.A. Exemptions from Real Property Tax. 18 . character. (c) All machineries and equipment that are actually. to a taxable person. especially in the light of the above enumeration. No. — 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 had been granted. Except as provided herein. 232. Power to Levy Real Property Tax. FEES. any exemptions from payment of real property tax previously granted to or presently enjoyed by. The term "taxes" is well understood so as to need no further elaboration. These exemptions are based on the ownership. (b) Charitable institutions. and exclusively used for religious charitable or educational purposes. (d) All real property owned by duly registered cooperatives as provided for under R. hence they include all of these. including government owned and controlled corporations. 24 while "charges" are pecuniary liabilities such as rents or fees against person or property. building and improvements actually.[Type text] (n) Taxes. and use of the property.A. 6938. fees. AND LOCAL GOVERNMENT UNITS. and (o) TAXES. Thus. including all government owned or controlled corporations are hereby withdrawn upon the effectivity of his Code. on Countryside and Barangay Business Enterprise and Cooperatives duly registered under R. It provides: Sec. mosques nonprofits or religious cemeteries and all lands. (e) Machinery and equipment used for pollution control and environmental protection. 234. fees or charges" referred to are "of any kind".

Other Exemptions Withdrawn. (v) a barangay. (c) Usage exemptions. tax exemptions or incentives granted to or presently enjoyed by all persons. (iii) a city. On the other hand. Exempted from real property taxes on the basis of the actual. as shown by the following clauses: (1) "unless otherwise provided herein" in the opening paragraph of Section 133. non stock and non profit hospitals and educational constitutions. all machinery and equipment for pollution control and environmental protection may not be taxed by local governments. including governmentowned. are hereby withdrawn upon the effectivity of this Code. — Local government units may. Exemptions from real property taxes on the basis of ownership are real properties owned by: (i) the Republic. mosques. Thus. Instead of the clause "unless otherwise provided herein. too. Withdrawal of Tax Exemption Privileges. To help provide a healthy environment in the midst of the modernization of the country. All other exemptions previously granted to natural or juridical persons including government-owned or controlled corporations are withdrawn upon the effectivity of the Code. directed and exclusively used for religious. the LGC authorizes local government units to grant tax exemption privileges. Authority to Grant Tax Exemption Privileges. except local water districts. and (b) the rule on tax exemptions and the exceptions thereto. (iv) a municipality.[Type text] (a) Ownership Exemptions. 6938.A. 26 Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. 192. (ii) a province. and (iii) non profit or religious cemeteries. (3) "not hereafter specifically exempted" in Section 232. through ordinances duly approved. and (vi) registered cooperatives. It provides: Sec. that the aforementioned clause in section 133 seems to be inaccurately worded. and (4) "Except as provided herein" in the last paragraph of Section 234 initially hampers a ready understanding of the sections." with the 19 . whether natural or juridical. cooperatives duly registered under R. (2) "Unless otherwise provided in this Code" in section 193. (ii) all machineries and equipment actually. The use of exceptions of provisos in these section. grant tax exemptions. and (iii) all machinery and equipment used for pollution control and environmental protection. The foregoing sections of the LGC speaks of: (a) the limitations on the taxing powers of local government units and the exceptions to such limitations. direct and exclusive use to which they are devoted are: (i) all lands buildings and improvements which are actually. incentives or reliefs under such terms and conditions as they may deem necessary. directly and exclusively used or by local water districts or by government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power. Note. (ii) houses and temples of prayer like churches. Exempted from real property taxes on the basis of their character are: (i) charitable institutions. or controlled corporations. 193. parsonages or convents appurtenant thereto. charitable or educational purpose. — Unless otherwise provided in this code. (b) Character Exemptions. 2. Section 192 thereof provides: Sec.

inter alia. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234. or any of its political subdivisions covered by item (a) of the first paragraph of Section 234. item (d) which excepts "wharfage on wharves constructed and maintained by the local government until concerned". No. for consideration or otherwise. exemptions from real property taxes granted to natural or juridical persons. For instance. it necessarily follows that its exemption from such tax granted it in Section 14 of its charter. Thus. municipalities in the Metropolitan Manila Area may impose the real property tax except on. since under Section 232 local government units have the power to levy real property tax." The former results in absurdity since the section itself enumerates what are beyond the taxing powers of local government units and. as it now asserts. including government-owned or controlled corporations. the section. In any event. they are withdrawn upon the effectivity of the LGC. as laid down in Section 133 the taxing powers of local government units cannot extend to the levy of inter alia. provinces. fees. has been withdrawn. and local government units". or the clause "except as otherwise provided herein" as in items (c) and (i). but not under Section 133. then Section 232 must be deemed to qualify Section 133. even if the latter is used. its agencies and instrumentalties. except upon the effectivity of the LGC. we conclude that as a general rule. or the clause "excepts as provided in this Code" in item (j). since. of course. Section 193 of the LGC prescribes the general rule. except as provided in the said section. viz. the exceptions were explicitly indicated in the text. R. No. fees.. cities. 6938. in item (a) which excepts the income taxes "when livied on banks and other financial institutions". which enumerates the properties exempt from real property tax. cooperatives duly registered under R. and charges for the registration and issuance of license or permits for the driving of "tricycles". and unless otherwise provided in the LGC. reading together Section 133. where exceptions were intended. Moreover. "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has been granted. Since the last paragraph of Section 234 unequivocally withdrew. as shown above. however. 232 and 234 of the LGC. a government-owned corporation. non stock and non-profit hospitals and educational institutions. there are exceptions which can be found only in other parts of the LGC. including government-owned and controlled corporations.[Type text] "herein" to mean. but the section interchangeably uses therein the clause "except as otherwise provided herein" as in items (c) and (i). upon the effectivity of the LGC. even as the real property is owned by the Republic of the Philippines. These clauses would be obviously unnecessary or mere surplus-ages if the opening clause of the section were" "Unless otherwise provided in this Code" instead of "Unless otherwise provided herein".A. and charges of any kind of the National Government. The latter proviso could refer to Section 234. except those granted to local water districts. as provided in item (a) of the first paragraph of Section 234. It may also be observed that within the body itself of the section. pursuant to Section 232.A. the exemption is withdrawn if the beneficial use of such property has been granted to taxable person for consideration or otherwise. 6958. to a taxable person". undoubtedly. and item (1) which excepts taxes. all others not included in the enumeration lost the privilege upon the effectivity of the LGC. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons. except those exempted therefrom under Section 234. it should have used the clause "unless otherwise provided in this Code. the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units cannot extend to the levy of: 20 . the said section is qualified by Section 232 and 234. But the last paragraph of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are concerned by limiting the retention only to those enumerated there-in. "taxes. In short. and the petitioner is.

its agencies. for one exists. saves as the contrary appears from the context. are any one of those enumerated in Section 234. it could only be within be first item of the first paragraph of the section by expanding the scope of the terms Republic of the Philippines" to embrace . The terms "Republic of the Philippines" and "National Government" are not interchangeable. or instrumentalities. office instrumentality.[Type text] (o) taxes. . fees. 30 An "agency" of the Government refers to "any of the various units of the Government. Most likely. In light of the petitioner's theory that it is an "instrumentality of the Government". it did not Moreover. municipal or barangay subdivision or other forms of local government. No. to a taxable person. or any of its political subdivisions except when the beneficial use thereof has been granted. usually through a charter. character. but not under any explicit provision of the said section. "instrumentalities" and "agencies" or expediency we quote: (a) real property owned by the Republic of the Philippines. which are real property. not integrated within the department framework. This term includes regulatory agencies. or charges of any kind on the National Government. city. vested with special functions or jurisdiction by law. either by virtue of ownership. the various arms through which political authority is made effective in the Philippines. chartered institutions and government-owned and controlled corporations". bureau. "National Government" refers "to the entire machinery of the central government. In the first place." 27 These autonomous regions. city. administering special funds. 646. and in the second place it fails to consider the fact that the legislature used the phrase "National Government. the provincial. then it should have restated the wording of the latter. . or use of the property. . otherwise known as the Real Property Tax Code. or any of the Philippines. . it could only be the first. Yet. endowed with some if not all corporate powers.D. including. I must show that the parcels of land in question. the legislative and the judicial. The former is boarder and synonymous with "Government of the Republic of the Philippines" which the Administrative Code of the 1987 defines as the "corporate governmental entity though which the functions of the government are exercised through at the Philippines. as distinguished from the different forms of local Governments. or government-owned or controlled corporation. which expressly mentions the word "instrumentalities". and local government units. the petitioner's claim that it is an instrumentality of the Government is based on Section 133(o). 32 If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment of real property taxes under the last sentence of the said section to the agencies and instrumentalities of the National Government mentioned in Section 133(o). its agencies and instrumentalities" "in Section 133(o). This view does not persuade us. which reads: 21 . provincial. .but only the phrase "Republic of the Philippines or any of its political subdivision "in Section 234(a)." 31 while an "instrumentality" refers to "any agency of the National Government. municipal or barangay subdivisions" are the political subdivision. or a local government or a distinct unit therein. for consideration or otherwise. and enjoying operational autonomy. whether pertaining to the autonomous reason. that Congress did not wish to expand the scope of the exemption in Section 234(a) to include real property owned by other instrumentalities or agencies of the government including governmentowned and controlled corporations is further borne out by the fact that the source of this exemption is Section 40(a) of P. 28 On the other hand. including a department." 29 The National Government then is composed of the three great departments the executive.

Exemption from Real Property Tax. Transfer of Existing Facilities and Intangible Assets. buildings and other properties. for consideration or otherwise. specially in light of the general provision on withdrawal of exemption from payment of real property taxes in the last paragraph of property taxes in the last paragraph of Section 234. runways. progress. movable or immovable. that this exemption shall not apply to real property of the above mentioned entities the beneficial use of which has been granted. airways communication. belonging to or presently administered by the airports. fiscal or otherwise. crash. and prosperity of the people. that the operations control of all equipment necessary for the operation of radio aids to air navigation. lands. rights. however. Note that as a reproduced in Section 234(a). to a taxable person. The authority may assist in the maintenance of the Air Transportation Office equipment. 15. 35 The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the Republic of the Philippines whose beneficial use has been granted to the petitioner. by paying the taxes and other charges due from them. and (b) whether the petitioner is a "taxable person". It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises. This section involves a "transfer" of the "lands" among other things. however. No equipment. acrodrome control towers. The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International AirPort in the Province of Cebu". powers. including all equipment which are necessary for the operations of air navigation.[Type text] Sec 40. and the area control center shall be retained by the Air Transportation Office. then under the Air Transportation Office (ATO). the approach control office. Section 15 of the petitioner's Charter provides: Sec. and all assets. and rescue facilities are hereby transferred to the Authority: Provided however. the phrase "and any government-owned or controlled corporation so exempt by its charter" was excluded. to the petitioner and not just the transfer of the beneficial use thereof. and there was a need for this entities to share in the requirements of the development. fire. 36 which belonged to the Republic of the Philippines. These policy considerations are consistent with the State policy to ensure autonomy to local governments 33 and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. or air operations. 34 The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace. with the ownership being retained by the Republic of the Philippines. interests and privileges relating on airport works. — All existing public airport facilities. The justification for this restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges. 37 It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. shall be removed by the Air Transportation Office from Mactan without the concurrence of the authority. — The exemption shall be as follows: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned or controlled corporations so exempt by is charter: Provided. 22 .

28-29. 23 .J. a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment of real property taxes. CEB-16900 are AFFIRMED. Philippine Amusement and Gaming Corporation 39 is unavailing since it was decided before the effectivity of the LGC. it had already become even if it be conceded to be an "agency" or "instrumentality" of the Government. applies to the petitioner. Id. No pronouncement as to costs. WHEREFORE. no one can doubt its wisdom. 6 Citing Gonzales vs. 9 197 SCRA 52 [1991]. Accordingly.A. 10-13.. Francisco and Panganiban. Narvasa. 2 Id. the petitioner cannot claim that it was never a "taxable person" under its Charter. 1065 [1963]. Melo. 27-29. 3 Rollo. the instant petition is DENIED. 30-31. The challenged decision and order of the Regional Trial Court of Cebu. the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable. in Civil Case No. 8 Citing Section 2. inter alia "the value of such real estate owned and/or administered by the airports.[Type text] This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of. even if the petitioner was originally not a taxable person for purposes of real property tax. 4 Supra note 1.. Footnotes 1 Rollo. 6958. Where it is done precisely to fulfill a constitutional mandate and national policy. nothing can prevent Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. It was only exempted from the payment of real property taxes. Branch 20.. Moreover. Besides." 38 Hence. except real property tax. Per Judge Ferdinand J. 118 Phil. Finally. C. SO ORDERED. JJ. Hechanova. Marcos. 7 Citing Section 3. R. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes. in light of the forgoing disquisitions. No. as earlier adverted to. 5 Rollo. Reliance on Basco vs. concur. the position taken by the petitioner is untenable. which.

84. [1927]. New York (306 U. 20 SANDS. Collector of Internal Revenue. RUBEN E. 1987 Constitution..S. Introductory Provisions. 316.. Article X. Introductory Provisions. 15 Chief Justice Marshall in McCulloch vs. ed. op. Maryland. 799 [1991]. 577578). id. 1987 Constitution. 4 L. and SANDS. 100 Phil. Introductory Provisions.. Statutes and Statutory Construction. op. R. Macaraig. 87. 472 [1956]. AQUILINO JR. 91-92. National Coconut Corporation. Article X. Constitutional Law [1991]. op. op." Justice Frankfurter in Graves vs. 6958. SINCO.[Type text] 10 Section 5. cit. 607. 1987 Constitution. 275 U. op. Administrative Code of 1987.. 16 AGPALO. 30 Bacani vs. 216. DALLAS C.. 62. cit.. 13 COOLEY on Constitutional Law. 4 Wheat. Philippine Political Law [1954]. 22 CRUZ. 466) also remarked that Justice Marshall's statement was a "mere flourish of rhetoric" and a product of the "intellectual fashion of the times to indulge in a free case of absolutes. Article VI." (See SINCO. Local Government Code of 1991.. 468. ISAGANI. 587. 579. 25 Section 131(g). 207. cit. 18 AGPALO. 218) that "the power to tax is not the power to destroy while this Court sits. 207. 31 Section 2(4). cit. 29 Section 2(2). Jr. 217 SANDS. 587. vol. 197 SCRA 771. Mississippi (277 U. See also SANDS. 329. vs. citing 2 COOLEY on the Law on Taxation.A. The Local Government Code of 1991 — The Key to National Development [1933]. 28 Section 1. 4th ed. Commission on Audit.S. Later Justice Holmes brushed this aside by declaring in Panhandle Oil Co. 26 PIMENTEL. Statutory Construction [1990 ed]. Administrative Code of 1987. 23 Id. 12 Manila International Airport Authority (MIAA) vs. 100[1927]. [1931]. 207 21 Maceda vs. cit. 238 SCRA 714 [1994].. 24 Section 131(l). No. 4th ed.. Administrative Code of 1987. 3 [1974] 179. 19 SINCO. op. 17 Justice Holmes in his dissent in Compania General vs. 24 . 14 Section 28(1).. cit.S. 11 Section 14. 1414. 27 Section 2(1).

ISSUE: Whether or not the MCIAA is excempted from realty taxes? RULING: With the repealing clause of RA 7160 the tax exemption provided. ―All general and special in the charter of the MCIAA has been expressly repeated. 37 Section 18. and Section 2. Article X. by nature of its powers and functions. 1931.. Constitution. R. It state laws. management and supervision of the Mactan International Airport… and such other airports as may be established in the province of Cebu…‖ Section 14 of its charter excempts the Authority from payment of realty taxes but in 1994. 1996 261 SCRA 667 Davide Jr. No. 1992 up to the present. acts. decrees.A. Mactan Cebu (MCIAA) vs. Marcos GR 120082 September 11. Article II..‖ Therefore the SC affirmed the decision and order of the RTC and herein petitioner has to pay the assessed realty tax of its properties effective January 1. . the City Treasurer demanded payment for realty taxes on several parcels of land belonging to the other. 7160.. 36 Section 3. 34 Section 2(a). or part of parts thereof which are inconsistent with any of the provisions of the Code are hereby repeated or modified accordingly. efficient and effective control. 35 P.[Type text] 32 Section 2(10). Id. 6958. Thus this petition. executive orders. it has the same footing of an agency or instrumentality of the national government. Id.A.D. No. Id. proclamations and administrative regulations. 33 Section 25. MCIAA filed a petition in RTC contending that. 25 .: (CJ) FACTS: Mactan Cebu International Airport Authority (MCIAA) was created to ―principally undertake to economical. City Charters. The RTC dismissed the petition based on Section 193 & 234 of the local Government Code or R. Local Government Code of 1991.

fees and charges.D. On 12 September 1991. May 5. Republic Act No. Franchise Tax. be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings. On 19 January 1983. MERALCO was likewise granted a franchise by the National Electrification Administration to operate an electric light and power service in the Municipality of Calamba. 2. Biñan. as follows: ―Sec. receipts. distribute and sell electric current for light.R. 01-92. petitioner vs. Calauan and Cabuyao. 7160. A formal claim for refund was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.09. 131359. PROVINCE OF LAGUNA and BENITO R. by virtue of existing laws then in effect. at a rate of fifty percent (50%) of one percent (1%) of the gross annual receipts. MERALCO contended that the imposition of a franchise tax under Section 2. BALAZO.: On various dates. distribution and sale of electric current. which shall include both cash sales and sales on account realized during the preceding calendar year within this province. J.520.42. ―Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly authorized representative on or before the twentieth day of the month following the end of each calendar quarter or month. Luisiana. under protest. consistent with the basic policy of local autonomy. issued resolutions through their respective municipal councils granting franchise in favor of petitioner Manila Electric Company (―MERALCO‖) for the supply of electric light. respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding tax payment. in part. the franchise tax payable by all grantees of franchises to generate. Petitioner MERALCO paid the tax. including the territorial limits on any city located in the province‖i[1] On the basis of the above ordinance. 01-92.D.628. insofar as it concerned MERALCO. certain municipalities of the Province of Laguna including. providing. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. respondents. Sta Rosa. as may be provided in the respective franchise or pertinent municipal regulation and shall. contravened the provisions of Section 1 of P.‖ 26 .[Type text] THIRD DIVISION [G. 551 which read: ―Any provision of law or local ordinance to the contrary notwithstanding. Pursuant to the provisions of the Code. heat and power within their concerned areas. San Pedro.09 of Laguna Provincial Ordinance No. DECISION VITUG. heat and power shall be two per cent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation. 1999] MANILA ELECTRIC COMPANY. otherwise known as the ―Local Government Code of 1991. Laguna. income and privilege of generation. in his capacity as Provincial Treasurer of Laguna. which then amounted to P19. effective 01 January 1993. distribution and sale of electric current. subject to the limitations expressed therein. any provision of the Local Tax Code or any other law to the contrary notwithstanding. No.‖ was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes. respondent province enacted Laguna Provincial Ordinance No. – There is hereby imposed a tax on businesses enjoying a franchise.

powers and functions. Presently. Whether the doctrine of exhaustion of administrative remedies is applicable in this case. consistent with the 27 . otherwise known as the Local Government Code of 1991. 551. viz: ―1. 7160 or the Local Government Code of 1991. The trial court. No. respondents relied on a more recent law.628. a general delegation of that power has been given in favor of local government units. and resources. Whether Republic Act. 0192. it might be well to recall that local governments do not have the inherent power to taxiv[4] except to the extent that such power might be delegated to them either by the basic law or by statute. Ordering the dismissal of the Complaint. In denying the claim. election. has repealed. under Article X of the 1987 Constitution. 5. binding.[Type text] On 28 August 1995. Balazo in his capacity as the Provincial Treasurer of Laguna. and all other matters relating to the organization and operation of the local units. ―2. MERALCO assails the above ruling and brings up the following issues. than the old decree invoked by petitioner. allocate among the different local government units their powers. the claim for refund of petitioner was denied in a letter signed by Governor Jose D. term. and ―2. initiative. Each local government shall have the power to create its own sources of revenues and to levy taxes. and provide for the qualifications. Lina. Republic Act No. in its assailed decision of 30 September 1997.669. petitioner MERALCO filed with the Regional Trial Court of Sta Cruz. ―3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall.. appointment and removal. i. and duties of local officials. Whether the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. and charges subject to such guidelines and limitations as the Congress may provide. a complaint for refund. by: ―1. On 14 February 1996. is violative of the non-impairment clause of the Constitution and Section 1 of Presidential Decree No. Declaring Laguna Provincial Tax Ordinance No. amended or modified Presidential Decree No. Thus: ―Sec. ―x x x x x x xxx ―Sec. responsibilities.‖iii[3] The petition lacks merit. salaries. 3. JUDGMENT is hereby rendered in favor of the defendants and against the plaintiff. Laguna.e. reasonable and enforceable. 7160. against the Province of Laguna and also Benito R.520.‖ii[2] In the instant petition. Aside from the amount of P19.91. 01-92 as valid. dismissed the complaint and concluded: ―WHEREFORE. insofar as petitioner is concerned. petitioner thereafter likewise made additional payments under protest on various dates totaling P27. Prefatorily. 551. and referendum. fees.42 for which petitioner MERALCO had priority made a formal request for refund. with a prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order.566. IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS.

(Underscoring supplied for emphasis)‖ Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units. or realized. or presently enjoyed by all persons. and local government units instead derived their tax powers under a limited statutory authority. Franchise Tax – Notwithstanding any exemption granted by any law or other special law. the Local Government Code has effectively withdrawn under Section 193 thereof.vi[6] the legislature must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions. tax exemptions or incentives theretofore enjoyed by certain entities. In the case of a newly started business. cooperatives duly registered under R. The 1991 Code explicitly authorizes provincial governments. contains a general repealing clause in its Section 534. the tax shall be based on the gross receipts for the preceding calendar year. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. the province may impose a tax on businesses enjoying a franchise. whether natural or juridical. while the local government units are being strengthened and made more autonomous. The Local Government Code of 1991 has incorporated and adopted. the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. Under the now prevailing Constitution. where there is neither a grant nor a prohibition by statute. uniform.‖ The 1987 Constitution has a counterpart provision in the 1973 Constitution which did come out with a similar delegation of revenue making powers to local governments. are hereby withdrawn upon the effectivity of this Code. which had been in effect since 01 July 1973. thus: 28 . however. No. notwithstanding ―any exemption granted by any law or other special law. within its territorial jurisdiction. Section 137 thereof provides: ―Sec. except local water districts. fees and charges shall accrue exclusively to the local governments. the delegation of tax powers granted at that time by statute to local governments was confined and defined (outside of which the power was deemed withheld). In the succeeding calendar year.A. regardless of when the business started to operate. Such taxes. including government-owned or controlled corporations. the fundamental law did not intend the delegation to be absolute and unconditional. Article XI. the present constitutional rule (starting with the 1973 Constitution). the constitutional objective obviously is to ensure that. and (d) local taxation will be fair. This law states: ―Section 193 Withdrawal of Tax Exemption Privileges – Unless otherwise provided in this Code. by and large the provisions of the now repealed Local Tax Code.v[5] Under the regime of the 1935 Constitution no similar delegation of tax powers was provided. (b) each local government unit will have its fair share of available resources. at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt. 6938. 137. would broadly confer such tax powers subject only to specific exceptions that the law might prescribe. the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. Whereas. in addition. of the 1973 Constitution. non-stock and non-profit hospitals and educational institutions. as provided herein. (Underscoring supplied for emphasis) The Code. 231vii[7] pursuant to the then provisions of Section 2. and just. then. (c) the resources of the national government will not be unduly disturbed.[Type text] basic policy of local autonomy. promulgated into law by Presidential Decree No. or any fraction thereof. x x x (to) impose a tax on businesses enjoying a franchise. Nevertheless. tax exemptions or incentives granted to.

or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. Repealing Clause. ―The same phrase found in the franchise of the Philippine Railway Co. Collector of Internal Revenue. 2432 and the Amendatory Acts of the Philippine Legislature (Manila Railroad vs. Inc. ―(f) All general and special laws. ―So was the exemption upheld in favor of the Carcar Electric and Ice Plant Company when it was required to pay the corporate franchise tax under Section 259 of the Internal Revenue Code as amended by R. No. David. city charters. acts.ix[9] the Court upheld the withdrawal of the real estate tax exemption previously enjoyed by Mactan Cebu International Airport Authority.‖x[10] Petitioner in its complaint before the Regional Trial Court cited the ruling of this Court in Province of Misamis Oriental vs. 53 O.[Type text] ―Section 534. 91 Phil. established by. decrees. ―Those magic words. fiscal or otherwise. 4] 1385) ―Similarly. proclamations and administrative regulations. or collected by any authority‘ found in the franchise of the Visayan Electric Company was held to exempt the company from payment of the 5% tax on corporate franchise provided in Section 259 of the Internal Revenue Code (Visayan Electric Co.A. 4] 1068). Marcos.G.A. The Court ratiocinated: ―x x x These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. 39 (Philippine Railway Co vs. Act No. 1510) exempts the Manila Railroad from payment of internal revenue tax for its importations of coal and oil under Act No. [No. [No. Section 1. 49 O.G. we ruled that the provision: ‗shall be in lieu of all taxes of every name and nature‘ in the franchise of the Manila Railroad (Subsection 12. This Court pointed out 29 . Act No. Rafferty. No. 32 SCRA 231). the phrase ‗shall be in lieu of all taxes and at any time levied. 7 of the City of Cotabato (Cotabato Light and Power Co. as amended by R. 224). progress. by paying the taxes and other charges due from them. in Mactan Cebu International Airport Authority vs. (Underscoring supplied for emphasis)‖viii[8] To exemplify. ‗shall be in lieu of all taxes‘ also excused the Cotabato Light and Ice Plant Company from the payment of the tax imposed by Ordinance No.xi[11] thus: ―In an earlier case. – x x x. 13. City of Cotabato. Cagayan Electric Power and Light Company. vs. 40 Phil. 39 (Carcar Electric & Ice Plant vs. Collector of Internal Revenue. The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic service essential to the promotion of the general welfare and the enhancement of peace. and prosperity of the people. executive orders.. and there was a need for these entities to share in the requirements of development. 1497) justified the exemption of the Philippine Railway Company from payment of the tax on its corporate franchise under Section 259 of the Internal Revenue Code. (Sec. vs. 35). It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises.

referred to tax exemptions contained in special franchises as being in the nature of contracts and a part of the inducement for carrying on the franchise.. privileges. however. SO ORDERED. Contractual tax exemptions. PAGCOR 197 SCRA 52. the instant petition is hereby DISMISSED. these exemptions. Bienvenido V. 27 ii[2] Rollo. Section 11.. 31. such as those contained in government bonds or debentures. acting in its private capacity. WHEREFORE. Purisima.xiv[14] These contractual tax exemptions. et al. Panganiban. of the 1987 Constitution. Truly. p. are those agreed to by the taxing authority in contracts. Romero.xv[15] Indeed. like its precursor provisions in the 1935 and the 1973 Constitutions. JJ. the Court has viewed its previous rulings as laying stress more on the legislative intent of the amendatory law – whether the tax exemption privilege is to be withdrawn or not – rather than on whether the law can withdraw. i[1] Rollo. 30 .‖xii[12] In the recent case of the City Government of San Pablo. Article XII. are far from being strictly contractual in nature. without violating the Constitution. p.. the tax exemption or not. iii[3] Rollo. is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment. are not to be confused with tax exemptions granted under franchises. vs.xiii[13] the Court has held that the phrase in lieu of all taxes ―have to give way to the peremptory language of the Local Government Code specifically providing for the withdrawal of such exemptions. nevertheless. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution. et al. No costs. Hon. not too infrequently. sheds its cloak of authority and waives its governmental immunity. lawfully entered into by them under enabling laws in which the government. 113 iv[4] Basco vs. While the Court has.‖ In fine. p.[Type text] that such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee. in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked. alteration or repeal by Congress as and when the common good so requires. Reyes. concur. etc. tax exemptions of this kind may not be revoked without impairing the obligations of contracts. and Gonzaga-Reyes.‖ and that ―upon the effectivity of the Local Government Code all exemptions except only as provided therein can no longer be invoked by MERALCO to disclaim liability for the local tax.

vs. p. 25 September 1985. 42-43. vi[6] See Sec.R. ix[9] 261 SCRA 667. Art. xii[12] At pp. pp. viii[8] Rollo. Commissioner. xi[11] 181 SCRA 38 citing Carcar Electric & Ice Plant vs. G. vs. No. reiterated in Comm. Of Misamis Oriental vs. 25 March 1999. II and Sec. 31 . L-601026. 2. Hord 8 Phil. 28-29. xv[15] See Cagayan Electric Co. Cagayan Electric. 195 SCRA 445. CTA. 690. X. xiv[14] See Casanovas vs. 25. No. but see Prov. 127708.[Type text] v[5] Art XI 1973 Constitution. x[10] At. Colector of Internal Revenue. 4) 1068.R. vii[7] Later amended by PD 426. xiii[13] G. 125. Art. 56 OG (No. 181 SCRA 38.

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