Pascual v. Secretary of Public Works Digest G.R. No. L-10405 December 29, 1960 Ponente: Concepcion, J.

Legal Standing Facts: 1. Petitioner was the governor of Rizal, filed a petition assailing the validity of R.A. 920 which contains an item providing for an appropriation of P85,000.00 for the construction and repair of a feeder road in Pasig. The said law was passed in Congress and approved by the President. 2. The property over which the feeder road will be constructed is however owned by Sen. Zulueta. The property was to be donated to the local government, though the donation was made a few months after the appropriation was included in RA 920. The petition alleged that the said planned feeder road would relieve Zulueta the responsibility of improving the road which is inside a private subdivision. 3. The lower court (RTC) ruled that the petitioner has standing to assail the validity of RA 920, due to the public interest involved in the appropriation. However, he does not have a standing with respect to the donation since he does not have an interest that will be injured by said donation, hence it dismissed the petition. Issue: Whether or not the petitioner has the standing to file the petition YES. 1. Petitioner has standing. He is not merely a taxpayer but the governor of the province of Rizal which is considered one of the most populated biggest provinces during that time, its taxpayers bear a substantial portion of the burden of taxation in the country. 2. Public funds can only be appropriated for a public purpose. The test of the constitutionality of a statute requiring the use of public funds is whether it is used to promote public interest. Moreover, the validity of a stature depends on the powers of the Congress at the time of its passage or approval, not upon events occurring, or acts performed subsequent thereto, unless it is an amendment of the organic law.

TAXATIONLUTZ VS. ARANETA, 1 9 5 5 Reyes, J.: FACTS: Walter Lutz, Judicial Administrator of the intestate estate of Ledesma, sought torecover the sum of Php14, 666.40 paid by the estate as taxes, alleging that such tax isunconstitutional as it levied for the aid and support of the sugar industry exclusively whichis in his opinion not a public purpose. ISSUE:Whether or not tax is valid in supporting the sugar industry ?RULING: The court ruled that the tax is valid as it served public purpose. The tax provided forin CA 567 is primarily an exercise of police power since sugar is a great source of incomefor the country and employs thousands of laborers. Hence, it was competent for thelegislature to find that the general welfare demanded that the sugar industry should bestabilized in turn; and in the wide field of its police power, the lawmaking body couldprovide that the distribution of benefits therefrom be readjusted among its components toenable it to resist the added strain of the increase in taxes that it had to sustain

PAL VS EDU FACTS: PAL is engaged in air transportation business under a legislative franchise wherein itis exempt from tax payment. PAL has not been paying motor vehicle registration since1956. The Land Registration Commissioner required all tax exempt entities including PALto pay motor vehicle registration fees. ISSUE:Whether or not registration fees as to motor vehicles are taxes to which PAL isexempted

.RULING: Taxes are for revenue whereas fees are exactions for purposes of regulation andinspection, and are for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. It is the object of the charge, and not thename, that determines whether a charge is a tax or a fee. The money collected underMotor Vehicle Law is not intended for the expenditures of the MV Office but accrues to thefunds for the construction and maintenance of public roads, streets and bridges.As fees are not collected for regulatory purposes as an incident to the enforcementof regulations governing the operation of motor vehicles on public highways but to providerevenue with which the Government is to construct and maintain public highways foreveryones use, they are veritable taxes, not merely fees. PAL is thus exempt from payingsuch fees, except for the period between June 27, 1968 to April 9, 1979 where its taxexemption in the franchise was repealed

Facts:
Marubeni Corporation is a Japanese corporation licensed to engage in business in the Philippines. When the profits on Marubenis investments in Atlantic Gulf and Pacific Co. of Manila were declared, a 10% final dividend tax was withheld from it, and another 15% profit remittance tax based on the remittable amount after the final 10% withholding tax were paid to the Bureau of Internal Revenue. Marubeni Corp. now claims for a refund or tax credit for the amount which it has allegedly overpaid the BIR.

Issues and Ruling:

1. Whether or not the dividends Marubeni Corporation received from Atlantic Gulf and Pacific Co. are effectively connected with its conduct or business in the Philippines as to be considered branch profits subject to 15% profit remittance tax imposed under Section 24(b)(2) of the National Internal Revenue Code.
NO. Pursuant to Section 24(b)(2) of the Tax Code, as amended, only profits remitted abroad by a branch office to its head office which are effectively connected with its trade or business in the Philippines are subject to the 15% profit remittance tax. The dividends received by Marubeni Corporation from Atlantic Gulf and Pacific Co. are not income arising from the business activity in which Marubeni Corporation is engaged. Accordingly, said dividends if remitted abroad are not considered branch profits for purposes of the 15% profit remittance tax imposed by Section 24(b)(2) of the Tax Code, as amended.

Case Digests: Taxation I (add'l)

TIO vs. VRB 151 SCRA 208 GR No. L-75697, June 18, 1987 "The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another." FACTS: The petitioner assails the validity of PD 1987 entitled an "Act creating the Videogram Regulatory Board," citing especially Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government. Petitioner contends that aside from its being a rider and not germane to the subject matter thereof, and such imposition was being harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of the due process clause of the Constitution. ISSUE: Is PD 1987 a valid exercise of taxing power of the state?

HELD: Yes. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as those rest in the discretion of the authority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another.

CITY OF BAGUIO vs. DE LEON 25 SCRA 938 GR No. L-24756, October 31, 1968 "There is no double taxation where one tax is imposed by the state and the other is imposed by the city." FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation doing business in the City. The ordinance sourced its authority from RA No. 329, thereby amending the city charter empowering it to fix the license fee and regulate businesses, trades and occupations as may be established or practiced in the City. De Leon was assessed for P50 annual fee it being shown that he was engaged in property rental and deriving income therefrom. The latter assailed the validity of the ordinance arguing that it is ultra vires for there is no statury authority which expressly grants the City of Baguio to levy such tax, and that there it imposed double taxation, and violates the requirement of uniformity. ISSUE: Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering the City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance cannot be considered ultra vires for there is more than ample statury authority for the enactment thereof. Second, an argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation results. And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof.

PEPSI-COLA BOTTLING CO. 24 GR No. L-22814, August 28, 1968

OF

THE PHILS., SCRA

INC.

vs.

CITY

OF

BUTUAN 789

"The classification made in the exercise of power to tax, to be valid, must be reasonable ." FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff assails as null and void because it partakes of the nature of an import tax, amounts to double taxation, highly unjust and discriminatory, excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the power to tax. The ordinance imposes taxes for every case of softdrinks, liquors and other carbonated beverages, regardless of the volume of sales, shipped to the agents and/or consignees by outside dealers or any person or company having its actual business outside the City. ISSUE: Does the tax ordinance violate the uniformity requirement of taxation? HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class.

Case Digests: Taxation I (add'l)

TIO vs. VRB 151 SCRA 208 GR No. L-75697, June 18, 1987 "The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another." FACTS: The petitioner assails the validity of PD 1987 entitled an "Act creating the Videogram Regulatory Board," citing especially Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government. Petitioner contends that aside from its being a rider and not germane to the subject matter thereof, and such imposition was being harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of the due process clause of the Constitution. ISSUE: Is PD 1987 a valid exercise of taxing power of the state?

HELD: Yes. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as those rest in the discretion of the authority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another.

CITY OF BAGUIO vs. DE LEON 25 SCRA 938 GR No. L-24756, October 31, 1968 "There is no double taxation where one tax is imposed by the state and the other is imposed by the city." FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation doing business in the City. The ordinance sourced its authority from RA No. 329, thereby amending the city charter empowering it to fix the license fee and regulate businesses, trades and occupations as may be established or practiced in the City. De Leon was assessed for P50 annual fee it being shown that he was engaged in property rental and deriving income therefrom. The latter assailed the validity of the ordinance arguing that it is ultra vires for there is no statury authority which expressly grants the City of Baguio to levy such tax, and that there it imposed double taxation, and violates the requirement of uniformity. ISSUE: Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering the City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance cannot be considered ultra vires for there is more than ample statury authority for the enactment thereof. Second, an argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation results. And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof.

BAGATSING vs. RAMIREZ 74 SCRA 306 GR No. L-41631, December 17, 1976 "The entrusting of the collection of the fees to private entities does not destroy the public purpose of a tax ordinance." FACTS: Aside from the issue on publication, private respondent bewails that the market stall fees imposed in the disputed City Ordinance No. 7522, which regulates public markets and prescribes fees for rentals of stalls, are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating Contract." ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a tax ordinance and defeats its public purpose? HELD: No. The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon

the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation.

PASCUAL vs. SECRETARY OF PUBLIC WORKS 110 PHIL 331 GR No. L-10405, December 29, 1960 "A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure, is merely incidental in the promotion of a particular enterprise." FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction, upon the ground that RA No. 920, which apropriates funds for public works particularly for the construction and improvement of Pasig feeder road terminals. Some of the feeder roads, however, as alleged and as contained in the tracings attached to the petition, were nothing but projected and planned subdivision roads, not yet constructed within the Antonio Subdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal; and which projected feeder roads do not connect any government property or any important premises to the main highway. The respondents' contention is that there is public purpose because people living in the subdivision will directly be benefitted from the construction of the roads, and the government also gains from the donation of the land supposed to be occupied by the streets, made by its owner to the government. ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an expenditure of the government? HELD: No. It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of private enterprises or business, does not justify their aid by the use public money. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public.

COMMISSIONER vs. BOAC 149 SCRA 395 GR No. L-65773-74 April 30, 1987 "The source of an income is the property, activity or service that produced the income. For such source to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines." FACTS: Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment of deficiency income taxes against respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1971. BOAC is a 100% British Government-owned corporation organized and existing under the laws of the United Kingdom, and is engaged in the international airline business. During the periods covered by the

disputed assessments, it is admitted that BOAC had no landing rights for traffic purposes in the Philippines. Consequently, it did not carry passengers and/or cargo to or from the Philippines, although during the period covered by the assessments, it maintained a general sales agent in the Philippines Wamer Barnes and Company, Ltd., and later Qantas Airways which was responsible for selling BOAC tickets covering passengers and cargoes. The CTA sided with BOAC citing that the proceeds of sales of BOAC tickets do not constitute BOAC income from Philippine sources since no service of carriage of passengers or freight was performed by BOAC within the Philippines and, therefore, said income is not subject to Philippine income tax. The CTA position was that income from transportation is income from services so that the place where services are rendered determines the source. ISSUE: Are the revenues derived by BOAC from sales of ticket for air transportation, while having no landing rights here, constitute income of BOAC from Philippine sources, and accordingly, taxable? HELD: Yes. The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income. The tickets exchanged hands here and payments for fares were also made here in Philippine currency. The site of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government.

ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR 524 SCRA 73, 103 GR Nos. 141104 & 148763, June 8, 2007 "The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic or statute law and should not be permitted to stand on vague implications." "Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes." FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did not immediately act on the matter prompting the petitioner to file a petition for review before the CTA. The latter denied the claims on the grounds that for zero-rating to apply, 70% of the company's sales must consists of exports, that the same were not filed within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20, 1994), and that petitioner failed to submit substantial evidence to support its claim for refund/credit. The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period should be counted from the date of filing of the last adjustment return which was April 15, 1993, and not on every end of the applicable quarters; and that the certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers invoices or receipts examined, evaluated and audited by said CPA should substantiate its claims. ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for

refund/credit

of

input

VAT?

HELD: No. Although the Court agreed with the petitioner corporation that the two-year prescriptive period for the filing of claims for refund/credit of input VAT must be counted from the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed as exports because these export processing zones are to be managed as a separate customs territory from the rest of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory, it still denies the claims of petitioner corporation for refund of its input VAT on its purchases of capital goods and effectively zero-rated sales during the period claimed for not being established and substantiated by appropriate and sufficient evidence. Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign authority, and should be construed in strictissimi juris against the person or entity claiming the exemption. The taxpayer who claims for exemption must justify his claim by the clearest grant of organic or statute law and should not be permitted to stand on vague implications.

BOARD OF ASSESSMENT APPEALS OF LAGUNA vs. CTA, NWSA 8 SCRA 224 GR No. L-18125, May 31, 1963 "A tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket." FACTS: National Waterworks and Sewerage Authority (NWSA), a public corporation owned by the Government of the Philippines as well as all property comprising waterworks and sewerage systems placed under it, took over the Cabuyao-Sta. Rosa-Bian Waterworks System in 1956. It was assessed by the Provincial Assessor of Laguna, for purposes of real estate taxes, on the real properties owned by Cabuyao Waterworks. The respondent protested claiming it is exempted from the payment of real estate taxes in view of the nature and kind of said property and functions and activities of petitioner. The petitioner denied the protest arguing that such real properties are subject to real estate tax because although said properties belong to the Republic of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, but in a private, proprietary or patrimonial character, which, allegedly, is not covered by the exemption contained in section 3(a) of Republic Act No. 470. ISSUE: Are the real properties owned by the respondent public corporation subject to real estate tax? HELD: No. Republic Act No. 470 makes no distinction between property held in a sovereign, governmental or political capacity and those possessed in a private, proprietary or patrimonial character. And where the law does not distinguish neither may we, unless there are facts and circumstances clearly showing that the lawmaker intended the contrary, but no such facts and circumstances have been brought to our attention. Indeed, the noun "property" and the verb "owned" used in said section 3(a) strongly suggest that the object of exemption is considered more from the view point of dominion, than from that of domain. Moreover, taxes are financial burdens imposed for the purpose of raising revenues with which to defray the cost of the operation of the Government, and a tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket. Hence, it would not serve, in the final analysis, the main purpose of taxation. What is more, it would tend to defeat it, on account of the paper work, time and consequently, expenses it would entail.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN 24 SCRA 789 GR No. L-22814, August 28, 1968 "The classification made in the exercise of power to tax, to be valid, must be reasonable ." FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff assails as null and void because it partakes of the nature of an import tax, amounts to double taxation, highly unjust and discriminatory, excessive, oppressive and confiscatory, and constitutes an invlaid delegation of the power to tax. The ordinance imposes taxes for every case of softdrinks, liquors and other carbonated beverages, regardless of the volume of sales, shipped to the agents and/or consignees by outside dealers or any person or company having its actual business outside the City. ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?

HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN 69 SCRA 460 GR No. L-31156, February 27, 1976 "Legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax. FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of Republic Act No. 2264, 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 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects "from soft drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27 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. Aside from the undue delegation of authority, appellant contends that it allows double taxation, and that the subject ordinances are void for they impose percentage or specific tax.

ISSUE:

Are

the

contentions

of

the

appellant

tenable?

HELD: No. On the issue of undue delegation of taxing power, it is settled that 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. 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. By necessary implication, the legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax. Also, 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. 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, so that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality. On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products, but there is not set ratio between the volume of sales and the amount of the tax.

OSMEA vs. ORBOS 220 SCRA 703 GR No. 99886, March 31, 1993 " To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the legislature determines matter of principle and lays down fundamental policy." FACTS: Senator John Osmea assails the constitutionality of paragraph 1c of PD 1956, as amended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the increase of fuel prices or impose additional amounts on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the collection on oil products establishment is an undue and invalid delegation of legislative power to tax. Further, the petitioner points out that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State. ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the

exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund." With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund.

VILLEGAS vs. HIU CHIONG 86 SCRA 270 GR No. L-29646, November 10, 1978 "A tax law should be declared invalid if it fails to lay down standards to guide or limit the actions of the taxing authority." FACTS: The Municipal Board of Manila enacted Ordinance No. 6537 which prohibits aliens from being employed or to engage or participate in any position or occupation or business, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00. The repondent challenged the validity of the ordinance upon the contention that it does not qualify as a valid exercise of the power to tax for as a revenue measure imposed on aliens employed in the City of Manila, the ordinance is discriminatory and violative of the rule of the uniformity in taxation, and as a police power measure, it makes no distinction between useful and non-useful occupations, imposing a fixed P50.00 employment permit, which is out of proportion to the cost of registration and that it fails to prescribe any standard to guide and/or limit the action of the Mayor, thus, violating the fundamental principle on illegal delegation of legislative powers: ISSUE: Is there a valid exercise of the taxing power of the local government?

HELD: None. First, the ordinance is not a regulatory or police power measure; it is but a revenue measure guise in a police power measure. Second, the P50.00 fee is unreasonable not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it. Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation. The same amount of P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid executive. On the illegal delegation part of the argument, Ordinance No. 6537 is void for it does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion. It has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to guide or limit the mayor's action, expresses no purpose to be attained by requiring a permit, enumerates no conditions for its grant or refusal, and entirely lacks standard, thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of building permits, such ordinance is invalid, being an undefined and unlimited delegation of power to allow or prevent an activity per se lawful.

Philex Mining vs. CIR GR 125704, August 28, 1998 Facts: Philex Mining Corporation assails the decision of the court of appeals which affirmed the decision of the court of tax appeals ordering philex to pay its excise tax liability philex refused to pay and contended it has pending claims for vat input credit or refund against the government which should be made compensate or set-off its tax liability. Issue: can tax be subject for set-off? Ruling: No. tax cannot be the subject for compensation for simple reason that the government and the tax payer are not mutual creditors and debtors of each other. Debts are due in the government in its corporate capacity while taxes are due to the government in its sovereign capacity. A tax payer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government that the collection of the tax is contingent on the result of the law suit it filed against the government.

PAL vs. Edu 164 SCRA 320 Facts: The Philippine airlines is engaged in the air transportation business under a legislative franchise, Act 4271, wherein it is exempt from the payment of taxes. On the strength of an opinion of the secretary of justice, PAL was determined not to have been paying motor vehicle registration fees since 1956. The Land Transportation Commissioner required all tax exempt entities, including PAL, to pay motor vehicle registration fees, PAL protested. Issue: Are motor vehicle registration fees taxes? Ruling: It is possible for an exaction to be both a tax and a regulation. License fees and charges, looked to as a source of revenue as well as a means of regulation. The money collected under the motor vehicle law is not intended for the expenditures of the motor vehicle office but accrue to the funds for the construction and maintenance of the public roads, streets, and bridges. As the fees are not collected for regulatory purpose as an incident to the enforcement of regulational governing operation of motor vehicles on public highways, but to provide revenue with which the government is to construct and maintain public highways for everyones use, they are taxes, not merely fees.

Lutz vs. Araneta G.R. L 7859 12/22/55 Facts: Walter Lutz, as juridical administrator of the intestate estate of Antonio Ledesma, sought to recover the sum of 14,666.40 paid by the estate as taxes from the commissioner under section V of the commonwealth act 567 the sugar adjustment act. He alleged that such tax is unconstitutional as it is levied for the aid and support of the sugar industry exclusively, which is in his opinion, not a public purpose. Issue: Is the taxes valid? Ruling: Yes. The tax is levied with regulatory purpose; is to provide means for the rehabilitation and stabilization of the sugar industry. The act is a primarily an exercise of police power, and not a pure exercise of taxing power. As sugar production is one of the

great industries of the Philippines, and that its promotion, protection and advancement redounds greatly to the general welfare. The legislature found that the general welfare demands that the industry should be stabilized, and provided that the distribution of benefits therefrom be readjusted among its component to enable it to resist the added strain of the increase in tax that it had to sustain.

American Bible Society v. City of Manila [GR L-9637, 30 April 1957]

Facts: Plaintiff-appellant, American Bible Society, is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November 1898. The defendant-appellee, City of Manila, is a municipal corporation with powers that are to be exercised in conformity with the provisions of RA 409, (Revised Charter of the City of Manila). In the course of its ministry, plaintiffs Philippine agency has been distributing and selling bibles and/or gospel portions thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several Philippine dialects. On 29 May 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the business of general merchandise since November 1945, without providing itself with the necessary Mayors permit and municipal license, in violation of Ordinance 3000, as amended, and Ordinances 2529, 3028 and 3364, and required plaintiff to secure, within 3 days, the corresponding permit and license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45. On 24 October 1953, plaintiff paid to the defendant under protest the said permit and license fees, giving at the same time notice to the City Treasurer that suit would be taken in court to question the legality of the ordinances under which the said fees were being collected, which was done on the same date by filing the complaint that gave rise to this action. After hearing, the lower court dismissed the complaint for lack of merit. Plaintiff appealed to the CA,, which in turn certified the case to the Supreme Court for the reason that the errors assigned involved only questions of law. The Supreme Court reversed the decision appealed and ordering the defendant to return to plaintiff the sum of P5,891.45 unduly collected from it; without pronouncement as to costs.

Issue: Is the American Bible Society Liable? Ruling: A municipal license tax on the sale of bibles and religious articles by a non-stock, non-profit, missionary organization at a minimal profit constitutes a curtailment of religious freedom and worship which is guaranteed by the constitution. However, the income of such organization from any activity for profit or from any of their property, real or personal, regardless of the disposition made of such income is taxable.

Herrera vs. Quezon City Board of Assessment Appeals G.R. L-15270 Facts: In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester Ochangco Herrera to establish and operate the St. Catherines Hospital. In 1953, the Herreras sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the hospital, stating that the same was established for charitable and humanitarian purposes and not for commercial gain. The exemption was granted effective years 1953 to 1955. In 1955, however, the Assessor reclassified the properties from exempt to taxable effective 1956, as it was ascertained that out 32 beds in the hospital, 12 of which are for pay-patients. A school of midwifery is also operated within the premises of the hospital. Issue: Whether St. Catherines Hospital is exempt from reallty tax. Ruling: The admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted exclusively to the maintenance of the institution as a public charity. The exemption in favour of property used exclusively for charitable or educational purpose is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purpose, such as in the case of hospitals a school for training nurses; a nurses home; property used to provide housing facilities for interns, resident doctors, superintendents and other members of the hospital staff; and recreational facilities for student nurses, interns and residents. Within the purview of the Constitution, St. Catherines Hospital is a charitable institution exempt from taxation.

AMERICAN BIBLE SOCIETY VS MANILA GRN 9637 April 30, 1957 Felix, J.: FACTS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation and in the course of its ministry, it has been selling bible and or gospel portions throughout the country and translating the same into several Philippine dialects. The City of Manila considered appellant as conducting the business of general merchandize and required it to secure the necessary permit and license fees. ISSUE: Whether or not appellant if engaged in business as a religious corporation and thus be made to pay fees or taxes. RULING: It may be true that the price of bibles and pamphlets was a bit higher than the actual cost of the same, but this could not mean that appellant is engaged in business for profit. For this reason, we believe that the ordinance requiring them to pay fees or taxes would impair its free exercise of its religious freedom thru distribution of pamphlets.

REPUBLIC OF THE PHILIPPINES vs. MAMBULAO LUMBER COMPANY, ET AL G.R. No. L-17725, February 28, 1962 FACTS: There are three causes of action in this case in which the defendants admitted all these three liabilities with an aggregate amount of P4, 802.37. Though such liabilities are admitted it interposed the defence though exhibits that from July 31, 1948 to December 29, 1956, defendant Mambulao Lumber Company paid to the Republic of the Philippines P8,200.52 for 'reforestation charges' and for the period commencing from April 30, 1947 to June 24, 1948, said defendant paid P927.08 to the Republic of the Philippines for 'reforestation charges'. These reforestation were paid to the plaintiff in pursuance of Section 1 of Republic Act 115 which provides that there shall be collected, in addition to the regular forest charges provided under Section 264 of Commonwealth Act 466 known as the National Internal Revenue Code, the amount of P0.50 on each cubic meter of timber... cut out and removed from any public forest for commercial purposes. The total amount of the reforestation charges paid by Mambulao Lumber Company is P9,127.50, and it is the contention of the defendant that since the Republic of the Philippines has not made use of those reforestation charges collected from it for reforesting the denuded area of the land covered by its license, the Republic of the Philippines should refund said amount, or, if it cannot be refunded, at least it should be compensated with what Mambulao Lumber Company owed the Republic of the Philippines for reforestation charges. ISSUE: Whether or not the sum of P9, 127.50 paid by defendant company to plaintiff as reforestation charges from 1947 to 1956 may be set off or applied to the payment of the sum of P4,802.37 as forest charges due and owing from defendant to plaintiff. RULING: The court find defendants claim devoid of any merit. Note that there is nothing in the law which requires that the amount collected as reforestation charges should be used exclusively for the reforestation of the area covered by the license of a licensee or concessionaire, and that if not so used; the same should be refunded to him. The general rule, based on grounds of public policy is well-settled that no set-off is admissible against demands for taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of a duty to, and are the positive acts of the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required.

CIR v. CA, FORTUNE TOBACCO CORP., & LUCIO TAN JUNE 04, 1996 GR. 119322 In every step in the production of cigarettes was closely monitored and supervised by the BIR personnel specifically assigned to Fortunes premises, and considering that the Manufacturers Sworn Declarations on the data required to be submitted by the manufacturer were scrutinized and verified by the BIR, and since the manufacturers wholesale price was duly approved by the BIR, then it is presumed that such registered wholesale price is the same as, or approximates the price, excluding the VAT, at which the goods are sold at wholesale in the place of production, otherwise, the BIR would not have approved the registered wholesale price of the goods for purposes of imposing the ad valorem tax due. In such case, and in the absence of contrary evidence, it was precipitate and premature to conclude that Fortune made fraudulent returns or wilfully attempted to evade payment of taxes due. If there was fraud or wilful attempt to evade payment of ad valorem taxes by Fortune through the manipulation of the registered wholesale price of the cigarettes, it must have been with the connivance or cooperation of certain BIR officials and employees who supervised and monitored Fortunes production activities to see to it that the correct taxes were paid. But there is no allegation, much less evidence of BIR personnels malfeasance. There is the presumption that the BIR personnel performed their duties in the regular course in ensuing that the correct taxes were paid by Fortune. The SC share the same view of both the trial court and CA that before the tax liabilities of Fortune are first finally determined, it cannot be correctly asserted that Fortune have wilfully attempted to evade or defeat the taxes sought to be collected from Fortune. Before one is prosecuted for wilful attempt to evade or defeat any tax under Sec. 253 and Sec. 255 of the Tax Code, the fact that a tax is due must first be proved.