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Arturo Tolentino vs.

Sec of Finance & CIR

Facts: The Case is about challenging the Constitutionality of RA 7716 otherwise known as
Expanded Value Added Tax (EVAT). A lot of issues were thrown like: (1) it did not originate
exclusively in the House of Representatives; (2) The Growing Budget decit is not an
Emergency, especially Philippines where budget decit is a chronic condition. These are
motions directly led to the Supreme Court seeking reconsideration to dismiss the case. The
enactment of RA 7716 otherwise known as EVAT was brought about by the enormous budget
decit of the Philippines. It is an amendment which seeks to restructure the VAT by widening its
tax base. Arturo Tolentino together with other petitioners like the CREBA and other Civil Society
riding on the popularity of the issue on EV AT to gain political grounds, assents that EV AT
violates the rules that taxes should be uniform and equitable and that Congress shall evolve a
progressive system of Taxation. CREBA claims that VAT is regressive because the law imposes
a at rate of 10% and thus places the Tax Burden on all taxpayers without regard to their ability
to pay. The mandate of Congress is to evolve a progressive tax system.

Issue: Whether or not EVAT violates the rule that Taxes evolve a progressive system of

Held: Motion Denied. The Constitution does not really prohibit imposition of Indirect Taxes. It has
been interpreted to mean simply that Direct Taxes are to be preferred as much as possible
whereas Indirect Taxes should be minimized. Sales Taxes are the oldest form of Indirect Taxes.
The issue of VAT was already provided long before RA 7716. It merely expands the base of the
Tax. Resort to indirect taxes should be minimized but not avoid entirely because it is difcult, if
not IMPOSSIBLE, to avoid them by imposing such taxes according to the Taxpayers ability to
pay. Where VAT imposes regressive taxation, the Law on VAT minimizes the regressive effects
of this imposition by providing for ZERO Rating of certain transactions like Goods in its Original
State (Palay, Corn), Educational Services, Work of Art, Export sales by person not VAT
registered. Transactions which involves VAT are goods and services used or availed mainly by
higher income group. Real Property for Sale, Patent, copyright, lms, radio, 1V, Hotels,
Restaurants, Common Carriers &Lending Investments.

ABAKADA Guro Party List vs. Ermita

G.R. No. 168056 September 1, 2005

Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition
for prohibition on May 27, 2005 questioning the constitutionality of Sections 4, 5 and 6 of R.A.
No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue
Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5
imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of
services and use or lease of properties. These questioned provisions contain a uniformp ro v is
o authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT
rate to 12%, effective January 1, 2006, after specified conditions have been satisfied.
Petitioners argue that the law is unconstitutional.

1. Whether or not there is a violation of Article VI, Section 24 of the Constitution.
2. Whether or not there is undue delegation of legislative power in violation of Article VI Sec
28(2) of the Constitution.
3. Whether or not there is a violation of the due process and equal protection under Article III
Sec. 1 of the Constitution.
1. Since there is no question that the revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its constitutional power to introduce amendments
to the House bill when it included provisions in Senate Bill No. 1950 amending corporate income
taxes, percentage, and excise and franchise taxes.
2. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its functions
or unduly delegate power when it describes what job must be done, who must do it, and what is
the scope of his authority; in our complex economy that is frequently the only way in which the
legislative process can go forward.
3. The power of the State to make reasonable and natural classifications for the purposes of
taxation has long been established. Whether it relates to the subject of taxation, the kind of
property, the rates to be levied, or the amounts to be raised, the methods of assessment,
valuation and collection, the States power is entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.

CIR and Commissioner of Customs vs. Botelho Shipping Corp. & General Shipping Co.,
FACTS: Reparations Commission of the Philippines sold to Botelho the vessel "M/S Maria
Rosello" for the amount of P6,798,888.88. The former likewise sold to General Shipping the
vessel "M/S General Lim" at the price of P6,951,666.66. Upon arrival at the port of Manila, the
Bureau of Customs placed the same under custody and refused to give due course [to
applications for registration], unless the aforementioned sums of P483,433 and P494,824 be
paid as compensating tax. The buyers subsequently filed with the CTA their respective petitions
for review. Pending the case, Republic Act No. 3079 amended Republic Act No. 1789 the
Original Reparations Act, under which the aforementioned contracts with the Buyers had been
executed by exempting buyers of reparations goods acquired from the Commission, from
liability for the compensating tax.
Invoking [section 20 of the RA 3079], the Buyers applied, for the renovation of their utilizations
contracts with the Commission, which granted the application, and, then, filed with the Tax
Court, their supplemental petitions for review. The CTA ruled in favor of the buyers.
[On appeal, the CIR and COC maintain that such proviso should not be applied retroactively],
upon the ground that a tax exemption must be clear and explicit; that there is no express
provision for the retroactivity of the exemption, established by Republic Act No. 3079, from the
compensating tax; that the favorable provisions, which are referred to in section 20 thereof,
cannot include the exemption from compensating tax; and, that Congress could not have
intended any retroactive exemption, considering that the result thereof would be prejudicial to
the Government.
ISSUE: Whether or not the tax exemption can be applied retroactively
HELD: YES. The inherent weakness of the last ground becomes manifest when we consider
that, if true, there could be no tax exemption of any kind whatsoever, even if Congress should
wish to create one, because every such exemption implies a waiver of the right to collect what
otherwise would be due to the Government, and, in this sense, is prejudicial thereto. It may not
be amiss to add that no tax exemption like any other legal exemption or exception is given
without any reason therefor. In much the same way as other statutory commands, its avowed
purpose is some public benefit or interest, which the law-making body considers sufficient to
offset the monetary loss entitled in the grant of the exemption. Indeed, section 20 of Republic
Act No. 3079 exacts a valuable consideration for the retroactivity of its favorable provisions,
namely, the voluntary assumption, by the end-user who bought reparations goods prior to June
17, 1961 of "all the new obligations provided for in" said Act.

Furthermore, Section 14 of the Law on Reparations, as amended, exempts from the

compensating tax, not particular persons, but persons belonging to a particular class. Indeed,
appellants do not assail the constitutionality of said section 14, insofar as it grants exemptions to
end-users who, after the approval of Republic Act No. 3079, on June 17, 1961, purchased
reparations goods procured by the Commission. From the viewpoint of Constitutional Law,
especially the equal protection clause, there is no difference between the grant of exemption to
said end-users, and the extension of the grant to those whose contracts of purchase and sale
mere made before said date, under Republic Act No. 1789.

Tan vs. Del Rosario

Facts: Petitioners challenge the constitutionality of RA 7496 or the simplified income taxation
scheme (SNIT) under Arts (26) and (28) and III (1). The SNIT contained changes in the tax
schedules and different treatment in the professionals which petitioners assail as
unconstitutional for being isolative of the equal protection clause in the constitution.
Issue: Whether or not RA 7496 is violative of the constitutional requirement that taxation shall
be uniform and equitable.
Ruling: No. uniformity of taxation, like the hindered concept of equal protection, merely require
that all subjects or objects of taxation similarly situated are to be treated alike both privileges
and liabilities. Uniformity, does not offend classification as long as it rest on substantial
distinctions, it is germane to the purpose of the law. It is not limited to existing only and must
apply equally to all members of the same class.
The legislative intent is to increasingly shift the income tax system towards the scheduled
approach in taxation of individual taxpayers and maintain the present global treatment on
taxable corporations. This classification is neither arbitrary nor inappropriate.


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

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

HELD: Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a
taxpayer and a duly-elected Senator of the Philippines." Public respondent argues that
petitioner must show that he has sustained direct injury as a result of the action and that it is not
sufficient for him to have a mere general interest common to all members of the public. The
Court however agrees with the petitioner that as a taxpayer he may file the instant petition
following the ruling in Lozada when it involves illegal expenditure of public money. The petition
questions the legality of the tax refund to NPC by way of tax credit certificates and the use of
said assigned tax credits by respondent oil companies to pay for their tax and duty liabilities to
the BIR and Bureau of Customs.

Tan vs Municipality of Pagbilao

Facts: The municipal council of Pagbilao enacted Ordinance No. 11, series of 1956, imposing
certain charges and/or fees on articles or merchandises landed upon, or loaded from the said
wharf and on the strip of shoreline adjacent thereto, measuring 300 meters. The plaintiffs, who
were fishermen, merchants and proprietors of Padre Burgos Quezon, alleging that the
Ordinance was ultra vires, in that the fees prescribed therein partake of the nature of import or
export taxes, in the guise of wharfage or rental fees, the plaintiffs, instituted an action with a
prayer that the said Municipal ordinance be declared null and void and of no legal effect.

Issue: Whether or not the municipality has the power to collect wharfage fees

Held: No, the the municipality has no power to to collect wharfage fees. Being a specific tax, the
municipality has no right to impose the same, for taxation is an attribute of sovereignty which
municipal corporation do not enjoy. It shall not be in the power of the council to impose a tax in
any form whatever upon goods and merchandise carried into the municipality or out of the
same, and any attempt to impose such tax in the guise of wharfage fee or charge is void. And
being wharfage fee, it is likewise beyond the power of the municipal council and municipal
district council to impose (Sec. 3, Comm. Act No. 472, supra).

The ordinance in question, is ultra vires, and hence, null and void. The ordinance calls for a
specific tax. Aside from the fact that the right of the municipality to collect wharfage fees is
doubtful for, at most, its claim is based merely by inference, implications and deductions, which
have no place in the interpretation of the power to tax of a municipal corporation. Section 3,
paragraph (t), Commonwealth Act No. 472, forbids municipalities from imposing wharfage fees,
a municipal ordinance levying wharfage or berthing fees is illegal and void. Ordinance No. 11,
providing for the wharfage of boats and vessels and of goods and merchandise; and while it
fixed the fees or charges for loading and unloading goods and merchandise, it did not state the
berthing fees for boats and vessels carrying the goods, all of which go to show that the council
wanted only to impose specific tax on the goods and merchandise.


FACTS: The Philippine Airlines (PAL) is a corporation engaged in the air transportation business
under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the
payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate (Elevate)
issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the Land and
Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to pay motor
vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration
fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated
May 19,1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of
the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu
and National Treasurer Ubaldo Carbonell (Carbonell).
The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn
certified the case to the Supreme Court.

ISSUE: Whether or not motor vehicle registration fees are considered as taxes.

HELD: Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax. Such is the case of motor
vehicle registration fees. The motor vehicle registration fees are actually taxes intended for
additional revenues of the government even if one fifth or less of the amount collected is set
aside for the operating expenses of the agency administering the program.


FACTS: ESSO deducted from its gross income for 1959, as part of its ordinary and necessary
business expenses, the amount it had spent for drilling and exploration of its petroleum
concessions. The Commissioner disallowed the claim on the ground that the expenses should
be capitalized and might be written off as a loss only when a dry hole should result. Hence,
ESSO filed an amended return where it asked for the refund of P323,270 by reason of its
abandonment, as dry holes, of several of its oil wells. It also claimed as ordinary and necessary
expenses in the same return amount representing margin fees it had paid to the Central Bank
on its profit remittances to its New York Office.

ISSUE: Whether the margin fees may be considered ordinary and necessary expenses when

HELD: For an item to be deductible as a business expense, the expense must be ordinary and
necessary; it must be paid or incurred within the taxable year; and it must be paid or incurred in
carrying on a trade or business. In addition, the taxpayer must substantially prove by evidence
or records the deductions claimed under law, otherwise, the same will be disallowed. There has
been no attempt to define ordinary and necessary with precision. However, as guiding
principle in the proper adjudication of conflicting claims, an expenses is considered necessary
where the expenditure is appropriate and helpful in the development of the taxpayers business.
It is ordinary when it connotes a payment which is normal in relation to the business of the
taxpayer and the surrounding circumstances. Assuming that the expenditure is ordinary and
necessary in the operation of the taxpayers business; the expenditure, to be an allowable
deduction as a business expense, must be determined from the nature of the expenditure itself,
and on the extent and permanency of the work accomplished by the expenditure. Herein, ESSO
has not shown that the remittance to the head office of part of its profits was made in
furtherance of its own trade or business. The petitioner merely presumed that all corporate
expenses are necessary and appropriate in the absence of a showing that they are illegal or
ultra vires; which is erroneous. Claims for deductions are a matter of legislative grace and do
not turn on mere equitable considerations.


Facts: Caltex, Shell and Petron proffered separate application with the Energy Regulatory
Board for permission to increase the wholesale posted price of petroleum products. The Board
order granted provisional relief. various petroleum products enumerated below, refined and/or
marketed by them locally. The petitioners submit that the above Order had been issued with
grave abuse of discretion, tantamount to lack of jurisdiction, and correctible by Certiorari.
The petitioner, Senator Ernesto Maceda, also submits that the same was issued without proper
notice and hearing in violation of Section 3, paragraph (e), of Executive Order No. 172; that the
Board, in decreeing an increase, had created a new source for the Oil Price Stabilization Fund
(OPSF), or otherwise that it had levied a tax, a power vested in the legislature, and/or that it had
"re-collected", by an act of taxation, ad valorem taxes on oil which Republic Act No. 6965 had
abolished. The petitioner, Atty. Oliver Lozano, likewise argues that the Board's Order was issued
without notice and hearing, and hence, without due process of law.
Issue: WON the Board's Order was issued without notice and hearing, and hence, without due
process of law.
Held: No. What must be stressed is that while under Executive Order No. 172, a hearing is
indispensable, it does not preclude the Board from ordering, ex parte, a provisional increase, as
it did here, subject to its final disposition of whether or not: (1) to make it permanent; (2) to
reduce or increase it further; or (3) to deny the application. Section 37 paragraph (e) is akin to a
temporary restraining order or a writ of preliminary attachment issued by the courts, which are
given ex parte, and which are subject to the resolution of the main case.
Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate
exclusively of the other, in that the Board may resort to one but not to both at the same time.
Section 3(e) outlines the jurisdiction of the Board and the grounds for which it may decree a
price adjustment, subject to the requirements of notice and hearing. Pending that, however, it
may order, under Section 8, an authority to increase provisionally, without need of a hearing,
subject to the final outcome of the proceeding. The Board, of course, is not prevented from
conducting a hearing on the grant of provisional authority which is of course, the better
procedure however, it cannot be stigmatized later if it failed to conduct one. As we held in
Citizens' Alliance for Consumer Protection v. Energy Regulatory Board. In the light of Section 8
quoted above, public respondent Board need not even have conducted formal hearings in these
cases prior to issuance of its Order of 14 August 1987 granting a provisional increase of prices.
The Board, upon its own discretion and on the basis of documents and evidence submitted by
private respondents, could have issued an order granting provisional relief immediately upon
filing by private respondents of their respective applications. In this respect, the Court considers
the evidence presented by private respondents in support of their applications i.e., evidence
showing that importation costs of petroleum products had gone up; that the peso had
depreciated in value; and that the Oil Price Stabilization Fund (OPSF) had by then been
depleted as substantial and hence constitutive of at least prima facie basis for issuance by
the Board of a provisional relief order granting an increase in the prices of petroleum products.
We do not therefore find the challenged action of the Board to have been done in violation of the
due process clause. The petitioners may contest however, the applications at the hearings

Meralco Securities v. Central Board of Assessment Appeals

Facts: Petitioner questions the decision of the respondent which held that petitioners pipeline is
subject to realty tax. Pursuant to a concession, petitioner installed a pipeline system from Manila
to Batangas. Meanwhile, the provincial assessor of Laguna treated the pipeline as real property.
So, petitioner appealed the assessments to the Board of Assessment Appeals of Laguna. The
board upheld the assessments and the decision became final and executory after the lapse of
fifteen days from the date of receipt of a copy of the decision by the appellant. Meralco
Securities contends that the Court of Tax Appeals has no jurisdiction to review the decision of
the Central Board of Assessment Appeals and no judicial review of the Board's decision is
provided for in the Real Property Tax Code. Hence, the petitioners recourse to file a petition for

Held: It was held that certiorari was properly availed of in this case. It is a writ issued by a
superior court to an inferior court, board or officer exercising judicial or quasi-judicial functions
whereby the record of a particular case is ordered to be elevated for review and correction in
matters of law.

The rule is that as to administrative agencies exercising quasi-judicial power there is an

underlying power in the courts to scrutinize the acts of such agencies on questions of law and
jurisdiction even though no right of review is given by the statute. The purpose of judicial review
is to keep the administrative agency within its jurisdiction and protect substantial rights of parties
affected by its decisions. The review is a part of the system of checks and balances which is a
limitation on the separation of powers and which forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial
functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud
or collusion or in case the administrative decision is corrupt, arbitrary or capricious.