Drilon vs.


FACTS: Pursuant to Section 187 of the Local Government Code, the Secretary of Justice had, on appeal to him of four oil companies and a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and void for non-compliance with the prescribed procedure in the enactment of tax ordinances and for containing certain provisions contrary to law and public policy. In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the Secretary’s resolution and sustained the ordinance, holding inter alia that the procedural requirements had been observed. More importantly, it declared Section 187 of the Local Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power of control over local governments in violation of the policy of local autonomy mandated in the Constitution and of the specific provision therein conferring on the President of the Philippines only the power of supervision over local governments. The court cited the familiar distinction between control and supervision, the first being “the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for the latter,” while the second is “the power of a superior officer to see to it that lower officers perform their fun ctions is accordance with law.” ISSUES: The issues in this case are (1) whether or not Section 187 of the Local Government Code is unconstitutional; and (2) whether or not the Secretary of Justice can exercise control, rather than supervision, over the local government HELD: The judgment of the lower court is reversed in so far as its declaration that Section 187 of the Local Government Code is unconstitutional but affirmed the said lower court’s finding that the procedural requirements in the enactment of the Manila Revenue Code have been observed. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. An officer in control lays down the rules in the doing of an act. It they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. In the opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so performed an act not of control but of mere supervision.

Regarding the issue on the non-compliance with the prescribed procedure in the enactment of the Manila Revenue Code. . considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. The only exceptions are the posting of the ordinance as approved but this omission does not affect its validity. the Court carefully examined every exhibit and agree with the trial court that the procedural requirements have indeed been observed.

ISSUE: Whether or not the President. among them. The Constitution did not…intend . HELD: Yes.Ganzon v. local officials. 5. He also instituted actions for prohibition before the Court of Appeals but were both dismissed. the respondent Secretary of the Department of Local Government Luis T. the charter did not intend to divest the legislature of its right-or the President of her prerogative as conferred by existing legislation to provide administrative sanction against local officials. ten in number. Santos issued successive suspensions. this petition for review with the argument that the respondent Secretary is devoid. Aug. in any event. Finding probable grounds. or both. oppression. abuse of authority. 1991 FACTS: A series of administrative complaints. were filed before the Department of Local Government against petitioner Mayor Rodolfo T. of any authority to suspend and remove local officials as the 1987 Constitution no longer allows the President to exercise said power. Thus. etc. has the power to suspend. grave misconduct. acting thru the Secretary of Local Government. remove. The petitioner then instituted an action for prohibition against the secretary in the RTC of Iloilo City where he succeeded in obtaining a writ of preliminary injunction. Ganzon by various city officials sometime in 1988 on various charges. Court of Appeals GRN 93252. It is the considered opinion of the Court that notwithstanding the change in the Constitutional language.

And if Congress can grant the City of Manila the power to tax certain matters. Congress. Basco et al contend that P. being a mere Municipal corporation has no inherent right to impose taxes. (2) of P. and other charges subject to such guidelines and limitation as the congress may provide. Article 10 of the 1987 Constitution provides: Each local government unit shall have the power to create its own source of revenue and to levy taxes. Otherwise. its operation might be burdened. fees and charges shall accrue exclusively to the local government. All of its shares of stocks are owned by the National Government. A close reading of the above provision does not violate local autonomy (particularly on taxing powers) as it was clearly stated that the taxing power of LGUs are subject to such guidelines and limitation as Congress may provide. 1983. Such taxes. This doctrine emanates from the “supremacy” of the National Government over local governments. HELD: NO. PD 1869. as the franchise holder from paying any “tax of any kind or form. Further. has the power of control over Local governments. It should be stressed that “municipal corporations are mere creatures of Congress” which has the power to “create and abolish municipal corporations” due to its “general legislative powers”. as well as fees. charges or levies of whatever nature.Basco vs PAGCOR Municipal Corporation – Local Autonomy – imperium in imperio On July 11. ISSUE: Whether or not PAGCOR’s charter is violative of the principle of local autonomy. impeded or subjected to control by a mere Local government. Section 5. therefore. 1869 which exempts PAGCOR. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees. the City of Manila. Further still. Basco and four others (all lawyers) assailed the validity of the law creating PAGCOR on constitutional grounds among others particularly citing that the PAGCOR’s charter is against the constitutional provision on local autonomy. it can also provide for exemptions or even take back the power. local governments have no power to tax instrumentalities of the National Government. fees. consistent with the basic policy on local autonomy.D. that Section 13 par. PAGCOR is a government owned or controlled corporation with an original charter.D. The Charter of the City of Manila is subject to control by Congress. income or otherwise. whether National or Local” is violative of the local autonomy principle. . PAGCOR was created under PD 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law.

. insofar as it concerned MERALCO.09 of Laguna Provincial Ordinance No. in his capacity as Provincial Treasurer of Laguna. respondents relied on a more recent law. providing. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. 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.42.: On various dates.e. “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.MANILA ELECTRIC COMPANY.520. income and privilege of generation. any provision of the Local Tax Code or any other law to the contrary notwithstanding. Sta Rosa. Franchise Tax. the franc hise tax payable by all grantees of franchises to generate. respondent province enacted Laguna Provincial Ordinance No. Republic Act No.628.09. Biñan. BALAZO. 7160 or the Local Government Code of 1991. 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. – There is hereby imposed a tax on businesses enjoying a franchise. by virtue of existing laws then in effect. in part. fees and charges. Laguna. be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings. 01-92. DECISION VITUG.. J. subject to the limitations expressed therein. at a rate of fifty percent (50%) of one percent (1%) of the gross annual receipts. which then amounted to P19. Lina. On 19 January 1983. Republic Act No.” On 28 August 1995. Luisiana. respondents. as may be provided in the respective franchise or pertinent municipal regulation and shall. otherwise known as the “Local Government Code of 1991. San Pedro. i. which shall include both cash sales and sales on account realized during the preceding calendar year within this province. the claim for refund of petitioner was denied in a letter signed by Governor Jose D. under protest. 551 which read: “Any provision of law or local ordinance to the contrary notwithstanding. distribute and sell electric current for light. Calauan and Cabuyao. 01-92. consistent with the basic policy of local autonomy.D. 2. certain municipalities of the Province of Laguna including. receipts. than the old decree invoked by petitioner. Petitioner MERALCO paid the tax. respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding tax payment.” was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes. petitioner vs. contravened the provisions of Section 1 of P. distribution and sale of electric current. issued resolutions through their respective municipal councils granting franchise in favor of petitioner Manila Electric Company (“MERALCO”) for the supply of electric light. MERALCO contended that the imposition of a franchise tax under Section 2. On 12 September 1991. 7160. MERALCO was likewise granted a franchise by the National Electrification Administration to operate an electric light and power service in the Municipality of Calamba.D. Pursuant to the provisions of the Code. In denying the claim. distribution and sale of electric current. as follows: “Sec. PROVINCE OF LAGUNA and BENITO R. effective 01 January 1993. heat and power within their concerned areas. including the territorial limits on any city located in the province”*1+ On the basis of the above ordinance.

The trial court.On 14 February 1996. MERALCO assails the above ruling and brings up the following issues. No. by: “1. term. has repealed. 01-92. 01 -92 as valid. dismissed the complaint and concluded: “WHEREFORE. Whether the doctrine of exhaustion of administrative remedies is applicable in this case. viz: “1. Thus: “Sec. and duties of local officials. against the Province of Laguna and also Benito R. Whether the imposition of a franchise tax under Section 2. consistent with the basic policy of local autonomy.09 of Laguna Provincial Ordinance No.”*3+ The petition lacks merit. fees and charges shall accrue exclusively to the local governments. and provide for the qualifications.669. Each local government shall have the power to create its own sources of revenues and to levy taxes. responsibilities. otherwise known as the Local Government Code of 1991. initiative. with a prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order. petitioner thereafter likewise made additional payments under protest on various dates totaling P27. JUDGMENT is hereby rendered in favor of the defendants and against the plaintiff. Presently. “x x x xxx xxx “Sec.” 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. IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS. and resources. it might be well to recall that local governments do not have the inherent power to tax[4] except to the extent that such power might be delegated to them either by the basic law or by statute. Such taxes. 3. petitioner MERALCO filed with the Regional Trial Court of Sta Cruz. 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. salaries. Whether Republic Act. allocate among the different local government units their powers.628.42 for which petitioner MERALCO had priority made a formal request for refund. a general delegation of that power has been given in favor of local government units. 551. Prefatorily. 551. 5. reasonable and enforceable. appointment and removal.91. “2. binding. 7160. Ordering the dismissal of the Complaint. amended or modified Presidential Decree No.”*2+ In the instant petition. and charges subject to such guidelines and limitations as the Congress may provide. election. and referendum. Aside from the amount of P19. under Article X of the 1987 Constitution.[5] . is violative of the non-impairment clause of the Constitution and Section 1 of Presidential Decree No. a complaint for refund. in its assailed decision of 30 September 1997. fees. Balazo in his capacity as the Provincial Treasurer of Laguna. and Declaring Laguna Provincial Tax Ordinance No. “2. and all other matters relating to the organization and operation of the local units.566.520. “3. insofar as petitioner is concerned. powers and functions. Laguna.

or realized. the province may impose a tax on businesses enjoying a franchise. Franchise Tax – Notwithstanding any exemption granted by any law or other special law. then. promulgated into law by Presidential Decree No. Repealing Clause. notwithstanding “any exemption granted by any law or other special law. of the 1973 Constitution. the tax shall be based on the gross receipts for the preceding calendar year. whether natural or juridical. proclamations and administrative regulations. the present constitutional rule (starting with the 1973 Constitution). the constitutional objective obviously is to ensure that. (Underscoring supplied for emphasis) The Code. (Underscoring supplied for emphasis)”*8+ . cooperatives duly registered under R. tax exemptions or incentives theretofore enjoyed by certain entities. Nevertheless. and just. while the local government units are being strengthened and made more autonomous. (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 any fraction thereof. including governmentowned or controlled corporations. Under the now prevailing Constitution. 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). within its territorial jurisdiction. (c) the resources of the national government will not be unduly disturbed. Section 137 thereof provides: “Sec. by and large the provisions of the now repealed Local Tax Code. Article XI. This law states: “Section 193 Withdrawal of Tax Exemption Privileges – Unless otherwise provided in this Code. x x x (to) impose a tax on businesses enjoying a franchise. (b) each local government unit will have its fair share of available resources. or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. thus: “Section 534. Whereas. and (d) local taxation will be fair. however. and local government units instead derived their tax powers under a limited statutory authority. contains a general repealing clause in its Section 534. city charters. 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. acts. decrees. 231[7] pursuant to the then provisions of Section 2. are hereby withdrawn upon the effectivity of this Code. The Local Government Code of 1991 has incorporated and adopted. executive orders. the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. the Local Government Code has effectively withdrawn under Section 193 thereof. the fundamental law did not intend the delegation to be absolute and unconditional. regardless of when the business started to operate. 137. except local water districts. tax exemptions or incentives granted to. uniform.[6] the legislature must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions. in addition. which had been in effect since 01 July 1973.A. where there is neither a grant nor a prohibition by statute.Under the regime of the 1935 Constitution no similar delegation of tax powers was provided. the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. or presently enjoyed by all persons. In the succeeding calendar year. 6938. non-stock and non-profit hospitals and educational institutions. In the case of a newly started business. No. The 1991 Code explicitly authorizes provincial governments. as provided herein. – x x x. “(f) All general and special laws. would broadly confer such tax powers subject only to specific exceptions that the law might prescribe. 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.

. 49 O. Inc. This Court pointed out that such exemption is part of the inducement for the acceptance of the franchise and the rendition of public service by the grantee. established by. 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. Act No. and prosperity of the people. fiscal or otherwise. et al. David. etc.[11] thus: “In an earlier case.A.[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. (Sec. 39 (Philippine Railway Co vs. Collector of Internal Revenue. in Mactan Cebu International Airport Authority vs. 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. 39 (Carcar Electric & Ice Plant vs.A. Section 1. Bienvenido V.. “The same phrase found in the franchise of the Philippine Railway Co.” and that “upon the effectivity of the Local Government Code all exemptions except only as provided therein can no longer be invoked . “Those magic words. 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. Act No. Marcos.”*10+ Petitioner in its complaint before the Regional Trial Court cited the ruling of this Court in Province of Misamis Oriental vs. 7 of the City of Cotabato (Cotabato Light and Power Co. 2432 and the Amendatory Acts of the Philippine Legislature (Manila Railroad vs. 35). City of Cotabato. 4] 1068). privileges.[9] the Court upheld the withdrawal of the real estate tax exemption previously enjoyed by Mactan Cebu International Airport Authority. 53 O.G. [No. No. as amended by R. 13. 224). Hon. 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. No. Cagayan Electric Power and Light Company. 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. vs. 91 Phil.”*12+ In the recent case of the City Government of San Pablo. 4] 1385) “Similarly. 1510) exempts the Manila Railroad from payment of internal revenue tax for its importations of coal and oil under Act No. [No. the phrase ‘shall be in lieu of all taxes and at any time levied. et al. “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. 32 SCRA 231). 40 Phil. progress. vs. vs.G. Collector of Internal Revenue. by paying the taxes and other charges due from them. Reyes. or collected by any authority’ found in the franchise of the Visayan Electric Com pany 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.To exemplify. Rafferty.. ‘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. and there was a need for these entities to share in the requirements of development.

without violating the Constitution. acting in its private capacity. are those agreed to by the taxing authority in contracts. the tax exemption or not. 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.by MERALCO to disclaim liability for the local tax.[14] These contractual tax exemptions. SO ORDERED. alteration or repeal by Congress as and when the common good so requires. not too infrequently. 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. sheds its cloak of authority and waives its governmental immunity. lawfully entered into by them under enabling laws in which the government. WHEREFORE. however. are not to be confused with tax exemptions granted under franchises. Contractual tax exemptions.[15] Indeed. Article XII. tax exemptions of this kind may not be revoked without impairing the obligations of contracts. While the Court has. such as those contained in government bonds or debentures. these exemptions. in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked. of the 1987 Constitution. Truly. the instant petition is hereby DISMISSED. nevertheless. are far from being strictly contractual in nature. Section 11. No costs.” In fine. like its precursor provisions in the 1935 and the 1973 Constitutions. . 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. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution.

which imposes a franchise tax on businesses enjoying a franchise within the territorial jurisdiction of Davao. Smart shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the business transacted under this franchise by the grantee. even in the instances when it is granted. Smart filed an appeal before the SC but was denied. And. Jurisprudence suggests that aside from the national franchise tax. its successors or assigns and the said percentage shall be in lieu of all taxes on this franchise or earnings. Tax exemptions are highly disfavored and that a tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. ISSUE: Whether Smart is liable to pay franchise tax to the City of Davao in view of the "in lieu of all taxes" clause in its franchise? HELD: YES. it argues that the “in in lieu of all taxes" clause is not rendered ineffective by the Expanded VAT Law. CITY OF DAVAO FACTS: Smart filed a special civil action for declaratory relief for the ascertainment of its rights and obligations under the Tax Code of the City of Davao. the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. RTC denied the petition. Smart argues that the “in lieu of all taxes” clause in Smart’s franchise covers local taxes According to its franchise. Moreover. Smart avers that its telecenter in Davao City is exempt from payment of franchise tax to the City. Hence. Smart filed a the motion for reconsideration.SMART COMMUNICATIONS VS. the franchisee is still liable to pay the local .

VAT replaced the national franchise tax. but it did not prohibit nor abolish the imposition of local franchise tax by cities or municipaties. It merely replaced the national franchise tax that was previously paid by telecommunications franchise holders and in its stead imposed a ten percent (10%) VAT. otherwise. the exemption claimed should be strictly construed against the taxpayer and liberally in favor of the taxing authority.franchise tax. which renders functus officio the franchise tax paid to the national government. VAT inures to the benefit of the national government. The imposition of local franchise tax is not inconsistent with the advent of the VAT. Moreover. the "Expanded VAT Law. while a local franchise tax is a revenue of the local government unit . unless it is expressly and unequivocally exempted from the payment thereof under its legislative franchise. The "in lieu of all taxes" clause in a legislative franchise should categorically state that the exemption applies to both local and national taxes." did not remove or abolish the payment of local franchise tax.

irrespective of any local ordinance that seeks to declare otherwise. Accordingly. and charges subject to such guidelines and limitations as the Congress may provide. thus.Yamane v. liable to pay the correct business taxes. Issue: Whether or not the City Treasurer of Makati may collect business taxes on condominium corporations Held: Petition denied. consistent with the basic policy of local autonomy.” .6M in which the respondents protested contending that condominium does not fall under the definition of a business. BA Lepanto Condominium Corporation. fees and charges totaling to P1. fees. they are not liable for such taxes. in a Notice of Assessment. we hold that condominium corporations are generally exempt from local business taxation under the LGC. and with significant degree of comfort. 474 SCRA 258 (2005) Facts: Petitioner City Treasurer of Makati holds respondent. The power of the local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself. which recognizes the power of these units “to create its own sources of revenue and to levy taxes.

the filing of this petition.” There is no doubt that among the excise taxes on articles enumerated under the NIRC are those levied on petroleum products. Common Limitations on the Taxing Powers of Local Government Units.62. Petron filed a letter protest arguing that it is exempt from paying local business taxes as provided by Article 232 (h) of the Implementing Rules of the Local Government Code. Under the provision. as amended. namely: “excise taxes o n articles enumerated under the National Internal Revenue Code *(NIRC)+. paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units.” and “taxes. or any other petroleum product for that matter. Section 133(h) of the LGC reads as follows: Sec. Section 133(h) provides two kinds of taxes which cannot be imposed by local government units: “excise taxes on articles enumerated” under the NIRC.259. the exercise of the taxing powers of provinces. Hence. fees or charges on petroleum products. cities. municipalities. MAYOR TOBIAS M. METRO MANILA While local government units are authorized to burden all such other class of goods with “taxes. as amended. Section 143. .” excepting excise taxes. A Motion for Reconsideration was filed but it was later denied by the court. In accordance to the New Navotas Revenue Code or Ordinance 92-03. as amended. fees or charges on petroleum products.PETRON CORPORATION v. per Section 148 of the NIRC. The letter-protest was denied. fees and charges. a municipality is authorized to impose business taxes on a whole host of business activities. 133. ENRIQUEZ of the MUNIPALITY OF NAVOTAS. and Barangays shall not extend to the levy of the following: xxx (h) Excise taxes on articles enumerated under the National Internal Revenue Code. and “taxes. Evidently. The RTC dismissed the Complaint and required Petron to pay the assessed tax. and taxes.087. a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products. .Unless otherwise provided herein.” The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Suffice it to say. A Complaint for Cancellation of Assessment was filed before the Regional Trial Court (RTC) of Malabon. TIANGCO and MUNICIPAL TREASURER MANUEL T. fees or charges on petroleum products. would undoubtedly cover the business of selling diesel fuels. Apparently. petitioner Petron Corporation was assessed a total tax of P6. Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing powers otherwise granted to them under the LGC. unless there is another provision of law which states otherwise. ISSUE: Whether or not a local government unit is empowered under the Local Government Code (LGC) to impose business taxes on persons or entities engaged in the sale of petroleum HELD: Petition GRANTED. broad in scope as it is.

and in case of doubt.” The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC. such distinction is immaterial insofar as the latter part of Section 133(h) is concerned. such as petroleum products. In . but all “taxes. Section 133(h) states that local government units “shall not extend to the levy of xxx taxes. retailers.” And this latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to provide. However. we should not distinguish. distributors. those engaged in the export or commerce of essential commodities. for the phrase “taxes. that a business tax is distinct from an excise tax. and peddlers engaged in the sale of any merchandise or article of commerce. There would be no sense on the part of the legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of local government taxation. This obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax.” or any category of taxes only.” Respondents assert that the phrase “taxes. Section 5(a) of the Code states that “*a+ny provision on a power of a local government unit shall be liberally interpreted in its favor. dealers of any article of commerce of whatever nature. fees or charges that could withstand the absolute prohibition imposed by the provision. The Court concedes that a tax on a business is distinct from a tax on the article itself. fees or charges on petroleum products” does not qualify the kind of taxes. for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. fees or charges on petroleum products. goods made of precious metals. This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987 Constitution. and not business taxes. Section 5(b) then proceeds to assert that “*i+n case of doubt. banks and financial institutions. such as alcohol products. are prohibited by Section 133(h). automobiles. It would have been a different matter had Congress. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products.” though the power is “subject to such guide lines and limitations as the Congress may provide. the fiscal autonomy of local government units has received greater affirmation than ever.” But somewhat conversely. Section 5. fees and charges. Previous decisions that have been skeptical of the viability. in crafting Section 133(h).” There is no doubt that following the 1987 Constitution and the Code. including manufacturers. and such non-essential goods as jewelry. Article X assures that “*e+ach local government unit shall have the power to create its own sources of revenues and to levy taxes. fees and charges. Evidently. any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. and liberally in favor of the taxpayer. fees or charges on petroleum products” pertains to the imposition of direct or excise taxes on petroleum products. then it would be an exercise in utter redundancy. local fiscal autonomy should not necessarily translate into abject deference to the power of local government units to impose taxes. wholesalers. since the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes under the NIRC. The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon. mineral products. contractors and other independent contractors. or for that matter. perfumes. and yachts and other vessels intended for pleasure or sports. any tax ordinance or revenue measu re shall be construed strictly against the local government unit enacting it. barred “excise taxes” or “direct taxes.The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically enumerates several types of business on which it may impose taxes. including business taxes. tobacco products. if not the wisdom of reposing fiscal autonomy to local government units have fallen by the wayside. Where the law does not distinguish. If the phrase actually pertains to excise taxes.

the later reference to “taxes.” excepting excise taxes. . specifically. a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products. While local government units are authorized to burden all such other class of goods with “taxes.contrast. “petroleum products”. fees and charges. fees and charges” pertains only to one class of articles of the many subjects of excise taxes.

the “in lieu of all taxes” clause in Respondent’s franchise has become ineffective with the abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding P10 million as they are now subject to the VAT. It thus filed a complaint against the imposition of local franchise tax. . The uncertainty over whether the “in lieu of all taxes” provision pertains to exemption from local or national taxes. Furthermore. The right to exemption from local franchise tax must be clearly established beyond reasonable doubt and cannot be made out of inference or implications. ISSUE: Does the “in lieu of all taxes” provision in ABS-CBN’s franchise exempt it from payment of the local franchise tax? HELD: NO.LOCAL FRANCHISE TAX FACTS: ABS-CBN was granted a franchise which provides that it “shall pay a 3% franchise tax and the said percentage tax shall be “in lieu of all taxes on this franchise or earnings thereof”. or both. should be construed against Respondent who has the burden to prove that it is in fact covered by the exemption claimed.QUEZON CITY VS. ABS-CBN BROADCASTING CORPORATION .