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Constitutional Law 2

Professor: Atty. Judiel M. Pareja
POWER OF TAXATION

A. Definition and Concept of Taxation
1. Commissioner of Internal Revenue vs. Algue, Inc. , Feb. 17, 1988
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
Principle:
Definition and Concept of Taxation
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance On the other hand, such collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself.
Facts:
The record shows that on January 14, 1965, the private respondent, a domestic corporation
engaged in engineering, construction and other allied activities, received a letter from the
petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the
years 1958 and 1959. 1
The petitioner contends that the claimed deduction of P75,000.00 was properly
disallowed because it was not an ordinary reasonable or necessary business
expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that
the said amount had been legitimately paid by the private respondent for actual services
rendered. The payment was in the form of promotional fees. These were collected by the
Payees for their work in the creation of the Vegetable Oil Investment Corporation of the
Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate
Development Company.
It has been established that the Philippine Sugar Estate Development Company had earlier
appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing
process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara,
Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment
Corporation, inducing other persons to invest in it. 14 Ultimately, after its incorporation
largely through the promotion of the said persons, this new corporation purchased the
PSEDC properties. 15 For this sale, Algue received as agent a commission of P126,000.00,
and it was from this commission that the P75,000.00 promotional fees were paid to the
aforenamed individuals. 16
Issue:

payments purely for service. the appealed decision of the Court of Tax Appeals is AFFIRMED in toto. however it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. ACCORDINGLY. If it is not. The Court concede the inevitability and indispensability of taxation.00 as clear profit from the transaction.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. 22 and Revenue Regulations No. 30. payments purely for service. The Court agree with the respondent court that the amount of the promotional fees was not excessive. This test and deductibility in the case of compensation payments is whether they are reasonable and are. 21After deducting the said fees. Held: No. The test of deductibility in the case of compensation payments is whether they are reasonable and are. in fact.00 was 60% of the total commission. 2003 .Whether or not the Collector of Internal Revenue correctly disallowed the P75.. 1125.000.000. April 09. Deductions from gross income.--In computing net income there shall be allowed as deductions — (a) Expenses: (1) In general. And we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the petitioner. Section 70 (1). City of Cabanatuan. 70. reading as follows: SEC.00. considering that it was the payees who did practically everything.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. he may still be stopped in his tracks if the taxpayer can demonstrate. Act No. without costs. from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. to the private respondent was P125. Compensation for personal services. The total commission paid by the Philippine Sugar Estate Development Co. The amount of P75. This was a reasonable proportion. including a reasonable allowance for salaries or other compensation for personal services actually rendered. NPC vs. We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance with Rep. that the law has not been observed. in fact. as it has here. then the taxpayer has a right to complain and the courts will then come to his succor.000.000. This finding of the respondent court is in accord with the following provision of the Tax Code: SEC. .. For all the awesome power of the tax collector. 2. Algue still had a balance of P50. 2.--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered.

duties or fees. respectively. petitioner. The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City. It argued that the respondent has no authority to impose tax on government entities. >>> As a rule. charges. demanding that petitioner pay the assessed tax due. No. finding petitioner National Power Corporation (NPC) liable to pay franchise tax to respondent City of Cabanatuan. CITY OF CABANATUAN. Exemptions must be shown to exist clearly and categorically. A principal attribute of sovereignty. 2003 NATIONAL POWER CORPORATION. 149110 April 9. 2001 and July 10. vs. 4 >>> A franchise tax is "a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state. upon its property 54 or its income.10 refused to pay the tax assessment. Petitioner also contended that as a nonprofit organization. which does not belong to citizens of the country generally as a matter of common right. whose capital stock was subscribed and paid wholly by the Philippine Government. Principle: Definition and Concept of Taxation >>>Taxes are the lifeblood of the government. tax exemptions are construed strongly against the claimant. 4 For many years now. 30 for without taxes. 2001. Facts: Petitioner is a government-owned and controlled corporation. petitioner sells electric power to the residents of Cabanatuan City.R.8 the respondent assessed the petitioner a franchise tax. >>> A franchise is a privilege conferred by government authority.55 but on its exercise of the rights or privileges granted to it by the government. 32 without taxes. the government can neither exist nor endure. plus a surcharge and . government cannot fulfill its mandate of promoting the general welfare and well-being of the people. and supported by clear legal provisions. 7 Pursuant to section 37 of Ordinance No. 165-92. 9 Petitioner. it is exempted from the payment of all forms of taxes." 53 It is not levied on the corporation simply for existing as a corporation.G. 31 the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. respondent. >>>The theory behind the exercise of the power to tax emanates from necessity (Necessity Theory). 71 The case: This is a petition for review1 of the Decision2 and the Resolution3 of the Court of Appeals dated March 12.

In the case at bar. Petitioner fulfills the first requisite. Decree No. as amended by Rep. including government owned or controlled corporations. a public non-profit corporation is liable to pay franchise tax. A PUBLIC NON-PROFIT CORPORATION. To determine whether the petitioner is covered by the franchise tax in question.59 nationalizing the electric power industry. 40.1 "Sec. 193. constitutes petitioner's primary and secondary franchises. Act No. Held: First Issue: NPC. IS LIABLE TO PAY A FRANCHISE TAX AS IT FAILED TO CONSIDER THAT SECTION 137 OF THE LOCAL GOVERNMENT CODE IN RELATION TO SECTION 131 APPLIES ONLY TO PRIVATE PERSONS OR CORPORATIONS ENJOYING A FRANCHISE. tax exemptions or incentives granted to. Withdrawal of Tax Exemption Privileges.interest. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC'S EXEMPTION FROM ALL FORMS OF TAXES HAS BEEN REPEALED BY THE PROVISION OF THE LOCAL GOVERNMENT CODE AS THE ENACTMENT OF A LATER LEGISLATION. WON NPC a public corporation is liable to pay franchise tax.A. THE COURT OF APPEALS GRAVELY ERRED IN NOT CONSIDERING THAT AN EXERCISE OF POLICE POWER THROUGH TAX EXEMPTION SHOULD PREVAIL OVER THE LOCAL GOVERNMENT CODE. 7395. No. Commonwealth Act No. whether natural or juridical. With the powers granted to the petitioner. and (2) that it is exercising its rights or privileges under this franchise within the territory of the respondent city government .13Respondent alleged that petitioner's exemption from local taxes has been repealed by section 193 of Rep. cooperatives duly registered under R. . Act No. B. except local water districts. C.. This monopoly was strengthened with the issuance of Pres." Issues: "A. 120. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC. the following requisites should concur: (1) that petitioner has a " franchise" in the sense of a secondary or special franchise. it eventually had the monopoly in the generation and distribution of electricity. WHICH IS A GENERAL LAW. section 151 in relation to section 137 of the LGC clearly authorizes the respondent city government to impose on the petitioner the franchise tax in question."21 WON the Local Government Code prevails over the tax exemption granted by the legislative as an exercise of police power. CANNOT BE CONSTRUED TO HAVE REPEALED A SPECIAL LAW. 6938. are hereby withdrawn upon the effectivity of this Code.Unless otherwise provided in this Code. 7160. WON NPC’s exemption has been repealed by the Local Government Code. non-stock and non-profit hospitals and educational institutions. or presently enjoyed by all persons.

187. viz: "Section 5. geothermal and other sources. fees or charges of any kind on the National Government. .. when specific provisions of the LGC authorize the LGUs to impose taxes.Each Local Government unit shall have the power to create its own sources of revenue. subject of the franchise tax in question." 66 Pursuant to this mandate. these activities do not partake of the sovereign functions of the government. petitioner is. It is operating within the respondent city government's territorial jurisdiction pursuant to the powers granted to it by Commonwealth Act No. By virtue of its charter. and its charter characterized it as a "non-profit" organization. and not the individual stockholders. however. petitioner realized a gross income of P107. albeit imbued with public interest. To stress. From its operations in the City of Cabanatuan. fees and charges shall accrue exclusively to the Local Governments. insists that it is excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the National Government. a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a privilege to do business.. The public interest involved in its activities. section 5 of the 1987 Constitution. Second Issue: NPC’s exemption has been repealed by the Local Government Code. Fulfilling both requisites. They are purely private and commercial undertakings. Although as a general rule. fees and charges subject to such guidelines and limitations as the Congress may provide. To be sure. petitioner generates power and sells electricity in bulk. These contentions must necessarily fail. as well as the transmission of electric power on a nationwide basis." One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the national government from the coverage of local taxation. Certainly. It can sue and be sued under its own name. this rule now admits an exception. to levy taxes. Petitioner. fees or charges on the aforementioned entities. Third Issue: An exercise of police power through tax exemption did not prevail over the Local Government Code.96 in 1992. consistent with the basic policy of local autonomy. Petitioner was created to "undertake the development of hydroelectric generation of power and the production of electricity from nuclear.Petitioner also fulfills the second requisite. LGUs cannot impose taxes. The power to tax is no longer vested exclusively on Congress. however. local legislative bodies are now given direct authority to levy taxes. fees and other charges 34 pursuant to Article X. does not distract from the true nature of the petitioner as a commercial enterprise. Such taxes. petitioner was created as a separate and distinct entity from the National Government. and ought to be. as amended.814. 61 and can exercise all the powers of a corporation under the Corporation Code. The taxable entity is the corporation which exercises the franchise. the ownership by the National Government of its entire capital stock does not necessarily imply that petitioner is not engaged in business.e. its agencies and instrumentalities. i. 120.

including government-owned or controlled corporations. Act No. municipalities and other government agencies and instrumentalities. among others. or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. SO ORDERED. non-stock and non-profit hospitals and educational institutions."78 With the added burden of devolution. the petitioner's sole refuge is section 13 of Rep. v.We also do not find merit in the petitioner's contention that its tax exemptions under its charter subsist despite the passage of the LGC. North Camarines Lumber Co. the sweeping tax privileges previously enjoyed by private and public corporations. INC.A. albeit general. Collector of Internal Revenue. No.. L-12353 September 30.73 Not being a local water district. As a rule.. except local water districts. are hereby withdrawn upon the effectivity of this Code.71 In the case at bar. cities. Theory and Basis of Taxation 3. act. vs.." However. IN VIEW WHEREOF. respectively. 72 It reads: "Sec.Unless otherwise provided in this Code. "the original reasons for the withdrawal of tax exemption privileges granted to governmentowned or 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. COLLECTOR OF INTERNAL REVENUE. Exemptions must be shown to exist clearly and categorically. or presently enjoyed by all persons. section 193 of the LGC is an express.. and prosperity of the people. "all income taxes. respondent. cooperatives duly registered under R. No. the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace. No. the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals dated March 12. petitioner clearly does not belong to the exception. . 6938. subject to limited exceptions. 2001. B. franchise taxes and realty taxes to be paid to the National Government. by paying taxes or other charges due from them. progress. Contrary to the contention of petitioner. 1960 NORTH CAMARINES LUMBER CO.R. 6938. 6395 exempting from. tax exemptions are construed strongly against the claimant. Inc. or a non-stock and non-profit hospital or educational institution. it is even more imperative for government entities to share in the requirements of development. a cooperative registered under R. petitioner. tax exemptions or incentives granted to. As this Court observed in the Mactan case. 193. whether natural or juridical. and supported by clear legal provisions. its provinces.A. fiscal or otherwise." (emphases supplied) It is a basic precept of statutory construction that the express mention of one person. repeal of all statutes granting tax exemptions from local taxes. are hereby AFFIRMED. G. 2001 and July 10. Disposition: Doubtless. thing. section 193 of the LGC withdrew. Withdrawal of Tax Exemption Privileges.

Thus Section 7. Accordingly. which fixes the time for invoking said jurisdiction..598. the respondent Collector. in his letter dated August 30.B.. the party seeking redress must first invoke its exercise in the manner and within the time prescribed by the law. the petitioner points out that Section 7. 1955. North Camarines Lumber Co. the same having been filed beyond the 30-day period fixed in Section 11 of Republic Act No. with the agreement that the latter would assume responsibility for the payment of the sales tax thereon in the amount of P7. The Court. the case was dismissed. Alejandro and Atty.. for the respondent court to have jurisdiction over any case. failed to pay the tax liabilities. In contending that the Court of Tax Appeals erred. Paredes for respondent. While the petitioner is correct as to the attribute of Section 7... . 1125 confers and determines the jurisdiction of the respondent court. Inc. 1125. However. of Republic Act No. Principle: Theory and Basis of Taxation Taxes are the lifeblood of the government. it sold a total of 2.Miguel San Jose and A. Inc. Christi for petitioner. ruled that. General Lumber Co. Inc.nèt Issue: WON said jurisdiction invoked by the petitioner is within the period prescribed by Section 11? Held: No. it should be remembered that. Therefore.. required the petitioner to pay the total amount of P9. after a preliminary hearing on respondent Collector's motion to dismiss. D. 1125. which enumerates the specific cases falling within the jurisdiction of the Court of Tax Appeals must be read together with Section 11. it has no jurisdiction to try the same. S.768.164. On June 19. is a domestic corporation engaged in the lumber business. 1951. and that Section 11 refers merely to the prescriptive period for filing appeals. and their prompt and certain availability an imperious need. 1951 and July 31. as the petition was filed beyond the 30-day period prescribed by Section 11 of Republic Act No.. Assistant Solicitor General Jose P.51. and not Section 11..1awphîl. Inc. The Case: This is an appeal from the resolution of the Court of Tax Appeals dismissing the petition for review filed by the petitioner for lack of jurisdiction to try it on the merits.72 as sales tax and incidental penalties in the sale of logs to the General Lumber Co. Facts: The petitioner.863 board feet of logs to the General Lumber Co.

.............. vs. the letter of the respondent Collector dated January 30... April 30. 1955............. that in computing the 30-day period fixed in Section 11 of Republic Act No........................... No.. for "taxes are the lifeblood of the government... 1956..... ........... petitioner.. . the filing of petition for review...... It is argued. Guaranty Co. vs..... Such an absurd procedure would be detrimental to the interest of the Government. to March 13... and not the letter of demand dated August 30..... Phil....... Commissioner of Internal Revenue... 1956.S...... however........ presumed date of receipt of denial of reconsideration..The respondent court ruled that the time consumed by the petitioner in perfecting its appeal after deducting the time during which the period for appeal was suspended by a pending request for reconsideration is as follows: From September 9........ 1125... 1956. 33 ................... with costs............................ the filing of request for reconsideration..... 3 days From January 5......... 4. denying the second request for reconsideration......" (Bull vs.............. We cannot countenance that theory that would make the commencement of the statutory 30-day period solely dependent on the will of the taxpayer and place the latter in a position to put off indefinitely and at his convenience the finality of a tax assessment......................... 3m 3 so ordered... 26 days Total... 1965 THE PHILIPPINE GUARANTY CO.... 1955....R. 295.... U. and their prompt and certain availability an imperious need............................ L-22074 April 30.. INC. 1965 G.. the filing of the second request for reconsideration..... presumed date of receipt of decision..... to September 12............. ..... Inc............. ........... receipt of denial of second request for reconsideration. its appeal was clearly filed out of time... to January 9............ should be considered as the final decision contemplated in Section 7... 1955. 1956.....S.... the resolution appealed from is affirmed.. This contention is untenable.. U. 1956... WHEREFORE.......... 4 days From February 16... 247).. days As the petitioner had consumed thirty-three days.

Issue: WON the reinsurance premiums are subject to withholding tax. entered into reinsurance contracts. the Commissioner of Internal Revenue assessed against Philippine Guaranty Co. property or service giving rise to the income. withholding tax on the ceded reinsurance premiums. Office of the Solicitor General and Attorney V.. in an amount equal to 5% of the reinsurance premiums. Held: Yes. The foreign reinsurers further agreed. Consequently.. which was signed by both parties in Switzerland. a navy to defend its shores from invasion. a domestic insurance company. It is a power emanating from necessity. public improvement designed for the enjoyment of the citizenry and those which come within the State's territory. in Manila and by the foreign reinsurers outside the Philippines. Principle: Theory and Basis of Taxation The power to tax is an attribute of sovereignty.THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS.. Facts: The Philippine Guaranty Co.G. and facilities and protection which a government is supposed to provide. from its gross income when it files its income tax returns for 1953 and 1954. in consideration for managing or administering their affairs in the Philippines. with foreign insurance companies not doing business in the Philippines. Josue H... Inc. Furthermore. . Inc. Inc. A proportionate amount of taxes on insurance premiums not recovered from the original assured were to be paid for by the foreign reinsurers. 1959. Inc. Inc.. However some premiums were excluded by Philippine Guaranty Co. It is a necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression. per letter dated April 13. to compensate the Philippine Guaranty Co. on various dates. Said reinsurance contracts were signed by Philippine Guaranty Co.. Inc. The word "sources" has been interpreted as the activity. Philippine Guaranty Co.. Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources within the Philippines. Gustilo and Ramirez and Ortigas for petitioner. protested the assessment on the ground that reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines are not subject to withholding tax. except the contract with Swiss Reinsurance Company. Saldajena for respondents.. it did not withhold or pay tax on them. respondents. a corps of civil servants to serve.

August 04. Respondent. 3 Disposition: WHEREFORE. Section 24 of the Tax Code does not require a foreign corporation to engage in business in the Philippines in subjecting its income to tax. vs. Principle: Double Taxation Double taxation means taxing the same property twice when it should be taxed only once. that is.petitioners. in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OF MANILA.00.. plus interest at the rate of 1% a month from the date of delinquency to the date of payment. INC. Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner of Internal Revenue requiring no withholding of the tax due on the reinsurance premiums in question relieved it of the duty to pay the corresponding withholding tax thereon. such reinsurance premiums and reinsurers should share the burden of maintaining the state. 181845 August 4. Considering that the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws. Double Taxation 5. provided that the maximum amount that may be collected as interest shall not exceed the amount corresponding to a period of three (3) years. City of Manila vs. or a total amount of P375. LIBERTY M. This defense of petitioner may free if from the payment of surcharges or penalties imposed for failure to pay the corresponding withholding tax. the Philippine Guaranty Co. respectively. No. 2009 G.The foreign insurers' place of business should not be confused with their place of activity." Otherwise described as "direct duplicate taxation. is hereby ordered to pay to the Commissioner of Internal Revenue the sums of P202.153. as withholding tax for the years 1953 and 1954. TOLEDO. is not the place of business but the place of activity that created an income.00 is not paid within 30 days from the date this judgement becomes final. therefore. in her capacity as THE TREASURER OF MANILA and JOSEPH SANTIAGO.. Inc.345. "taxing the same person twice by the same jurisdiction for the same thing. It suffices that the activity creating the income is performed or done in the Philippines." the two taxes must be imposed . C.. but it certainly would not exculpate if from liability to pay such withholding tax The Government is not estopped from collecting taxes by the mistakes or errors of its agents.192.00. COCA-COLA BOTTLERS PHILIPPINES.R. With costs againsts petitioner.345. Coca-Cola Bottlers Philippines. Inc. 2009 THE CITY OF MANILA.00 and P173. in affirming the decision appealed from. there shall be collected a surcharged of 5% on the amount unpaid. What is controlling. If the amount of P375.

as amended by the aforementioned tax ordinances. respectively. 7988 and No. On the other hand. i. is a corporation engaged in the business of manufacturing and selling beverages. and permit fees. particularly: (1) Section 14. and (2) Section 21. as amended by Tax Ordinances No. 8011 was passed amending Tax Ordinance No. 8011. within the same jurisdiction. Tax Ordinances No. 7988.) in Coca-Cola Bottlers Philippines. 8011 null and void. in their capacities as City Treasurer and Chief of the Licensing Division. there can be no double taxation when respondent is being taxed under both Sections 14 and 21 of Tax Ordinance No. Issue: . On the other hand. 7794. or percentage tax. However. Petitioner City of Manila subsequently approved on 25 February 2000. 7988 was enacted in contravention of the provisions of the Local Government Code (LGC) of 1991 and its implementing rules and regulations. it is being taxed as a manufacturer. by the same taxing authority. and which maintains a sales office in the City of Manila. 7988)7 amending certain sections of the previous (Tax Ordinance No. Inc. Respondent filed a protest with petitioner Toledo on the ground that the said assessment amounted to double taxation. 7794. 7794.. 7988 and No. for the same purpose. 7794). Inc. as respondent was taxed twice. for under the first. 7794). The petitioner contends that Section 14 of Tax Ordinance No.on the same subject matter. 7988 and Tax Ordinance No. Subsequently Tax Ordinance No. by deleting the proviso exempting them to pay business tax. City of Manila 8 (Coca-Cola case) for the following reasons: (1) Tax Ordinance No. through its officers. 8011 were later declared by the Court null and void (failure to satisfy the requirement under the law that said ordinance be published for three consecutive days. respondent had been paying the City of Manila local business tax only being expressly exempted from the business tax under a tax ordinance (Tax Ordinance No.1 Facts:: Petitioner City of Manila is a public corporation empowered to collect and assess business taxes. under Sections 14 and 21 of Tax Ordinance No. while under the second. Thus. it is being taxed as a person selling goods in the course of trade or business subject to excise. VAT. revenue fees. Petitioner Toledo did not respond to the protest of respondent. before the Court could declare Tax Ordinance No. the local business tax under Section 21 of Tax Ordinance No. Prior to 25 February 2000. during the same taxing period. petitioners Toledo and Santiago. v. by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila. and the taxes must be of the same kind or character.e. 7794 is imposed upon persons. petitioner City of Manila assessed respondent on the basis of Section 21 of Tax Ordinance No. another tax ordinance (Tax Ordinance No. 7794 imposes local business tax on manufacturers. respondent Coca-Cola Bottlers Philippines.

since these are being imposed: (1) on the same subject matter – the privilege of doing business in the City of Manila. Serafin B. >>> So-called license taxes are of two kinds. L-10470 June 26. CITY OF ILOILO. which is. License versus Tax. Using the direct duplicate taxation test. 1958 G. Principle: License versus Tax. D. No costs. Saldaña vs. But a charge of a fixed sum which bears no relation to the cost of inspection and which is payable into the general revenue of the state is a tax rather than an exercise of the police power.WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF THE [TAX ORDINANCE NO. strictly speaking. defendant-appellee. is clothed with no inherent power of taxation. June 26. 7794. The other. on the other hand. the Court finds that there is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. premises considered. 1958 SERAFIN SALDAÑA.R. assessed according to the value of property. (3) by the same taxing authority – petitioner City of Manila. and is in the main for police purposes. not a tax at all but merely an exercise of the police power. is a fee imposed for the purpose of regulation. unlike a sovereign state. 7794. The one is a tax for the purpose of revenue. >>> A municipal corporation. City Fiscal Filemon R. (5) for the same taxing periods – per calendar year. plaintiff-appellant. City of Iloilo. is not supposed to be imposed for revenue. AS AMENDED] CONSTITUTES DOUBLE TAXATION. A property tax. LGUs Power to Tax 6. vs. and (6) of the same kind or character – a local business tax imposed on gross sales or receipts of the business. (2) for the same purpose – to make persons conducting business within the City of Manila contribute to city revenues. is a tax in the ordinary sense. Its charter must plainly show an intent to confer that power or the corporation . No. Saldaña for appellant. the instant Petition for Review on Certiorari is hereby DENIED. LGUs Power to Tax >>> The license represents the permission conceded to do an act. SO ORDERED. WHEREFORE. Held: Yes. Consolacion for appellee. (4) within the same taxing jurisdiction – within the territorial jurisdiction of the City of Manila.

4. same series of the defendant City. totalling P1. crabs. though under protest. 1946. pigs. 28. dismissing his complaint against the City of Iloilo. for issuance of license permit required in article one hereof. papayas or the like. imprisonment of not less than ten (10) days but not exceeding six (6) months and to suffer subsidiary imprisonment in case of insolvency to pay the fine. salted or dried. Art. goats. 2. it is strictly prohibited to send outside of the City of Iloilo. the defendant City of Iloilo promulgated Ordinance No. or more than Two Hundred (P200) Pesos. The Case: Serafin Saldaña is appealing the decision of the Court of First Instance of Iloilo in Civil Case No. Any doubt or ambiguity arising out of the term used must be resolved against the corporation. 3.80. 2236. Under said ordinances. bagoon (guinamos. or air. as amended by Ordinance No. to load any of the articles mentioned herein which is not provided with the corresponding permit as required by this ordinance. Fruits. — Violation of this ordinance shall be punished with a fine of not less than One Hundred (P100) Pesos. — The City Treasurer shall. collect a fee. melon. 28 AN ORDINANCE REGULATING THE EXIT OF FOOD SUPPLY AND LABOR ANIMALS AND IMPOSING PERMIT FEE THEREFOR. Milkfish (semilla). Saldaña had been paying. ARTICLE 1. for the refund of taxes paid by him under protest. ORDINANCE No. Facts: On May 25. 1951. the following: Large cattle. 30. 28. On September 17. plaintiff commenced the present proceedings by complaint for the reimbursement to him of the said amount with interest. — It shall be unlawful for any carrier whether land. 1946. Issue: . — For the purpose of regulating during this state of emergency.359. And the power when granted is to be construed strictissimi juris. the exit of food supply and labor animals in order to avert shortage of the same in the City of Iloilo. whether fresh.cannot assume it. Art. without first obtaining the necessary license permit from the Mayor. Domestic fowls. sheep or the like. such as bananas. ART. 1946 to December 6. water. having been enacted beyond the powers of the Municipal Board of the City. and upholding the legality of Ordinance No. Fish. null and void. during the period from September 16. so-called fees on fish bought in the City of Iloilo and sent by him to Manila by plane. prawn or the like). eggs. Series of 1946. on the ground that the ordinances in question were illegal.

and consequently null and void. On the other hand. way in excess of the cost of inspections and the issuance of the permits. or out of the same. but also in contravention of the provisions of Sections 2287 and 2629 of the Revised Administrative Code. we find that the ordinance in question as amended. shall be void. Section 2287 of the Revised Administrative Code provides that municipal revenue obtainable by taxation shall be derived from such sources only as are expressly authorized by law. As correctly argued by the appellant. enacted beyond the general powers of a municipal corporation and not authorized by the defendantappellee's charter. that: It shall not be in the power of the municipal council to impose a tax in any form whatever upon goods and merchandise into the municipality. and any attempt to impose an import or export taxupon such goods in the guise of an unreasonable charge for wharfage. is ultra vires. for said power cannot be assumed. the appealed decision is hereby reversed and the City of Iloilo is hereby ordered to reimburse plaintiff the amount of P1.levied by the State . the City must find in its charter the power to do so. with legal interest and costs. use of bridges or otherwise. a municipal corporation like the defendant City has no inherent power of taxation. and it further provides. and this is very important.from persons and property . that the fees imposed in the said ordinances are in fact taxes not only unauthorized by the law or the charter of defendant City.359. of animals and articles listed in the ordinance.80. the taking out of the city. _________________________________________________________________________________________ Chapter 7: TAXATION Nature Taxes . In view of the foregoing. nowhere in the charter of the defendant City is it authors to regulate and collect fees or taxes for. To enact a valid ordinance. Aside from this lack of inherent power of taxation by a municipal corporation. which prohibit municipal corporations from imposing any tax in any form upon goods and merchandise carried into or out of the town or City. Disposition: In conclusion. (Emphasis supplied). Held: Judging from the amount of the fees fixed in the ordinances in question. we do not hesitate to find and to hold that the so-called fees were in reality taxes for city revenue. The fees collected would amount to a sizable sum and augment greatly the revenues of the municipal corporation. that the prohibition against taking animals and articles out of the City of Iloilo without permit of the mayor is in restraint of trade and a curtailment of the rights of the owners of the said animals and articles to freely sell and of prospective purchasers to buy and dispose of them without the city limits in the ordinary course of commerce and trade.WON the licensed fees imposed and collected were in reality taxes.Enforced proportional contributions .

Taxes To raise revenue Taxation Unlimited Licenses For regulatory purposes. ..” It is used solely for the purpose of raising revenues.Pervasive .by virtue of its sovereignty. fees. Exercise . Taxes are not debts. Section 5 Each local government unit shall have the power to revenues and to levy taxes. . - create its own sources of to such guidelines and the basic policy of local exclusively to the local Amount to tax.” It is used to implement police power in discouraging and in effect prohibiting certain things or enterprises inimical to public welfare.Imprisonment for non-payment of taxes. fees and charges subject limitations as the Congress may provide.Equitable sharing .The obligation to pay taxes is not based on contract but from the membership of the body politic and his enjoyment of benefits available from such membership.It derives from the “unavoidable obligation of the government to protect the people and extend them benefits in the form of public projects and services.Is the method by which taxes are exacted. tangible and intangible. . Taxation .It is inherent to the State.Non-imprisonment for non-payment of poll tax. whom or what to tax. .Applied to citizens and aliens. consistent with autonomy.for the support of government and for all public needs. . .“The power to tax includes the power to destroy. WON to tax. .It is apportioned based on people’s ability to pay. for what purposes – are subject to the discretion of the legislature. Article VI.Immovable and movable properties. . income derived within and outside the Philippines in proper cases. . Police power Limited only as to cost of regulation Scope . Such taxes.In return it is the reciprocal duty of the people to share the expenses incurred through the payment of taxes. residents and non-residents.“The power to tax does include the power to destroy as long as the Court sits. 28 . Sec.It is primarily vested in the legislative body and may be also exercised by the local legislative bodies (LGUs) by virtue of the Constitution Article X.” . . Prohibition against imprisonment for debts cannot be invoked. and charges shall accrue governments.

It is only applicable to property tax and not to any other tax like donor’s and income tax.“ the rule of taxation should be uniform and equitable” .1. Sec.Uniformity in taxation means that “persons of the same class shall be taxed at the same rate.” . actually.Equitable means that “taxes should be apportioned among the people according to their capacity to pay.Could be constitutional or statutory. import and export quotas. . Tax Exemptions . and exclusively used for religious. charitable. Equal Protection and Taxation . 28 (3) Charitable institutions. The rule of taxation shall be uniform and equitable.Equality in taxation means that “the tax shall be proportional to the relative value of the property. charitable. or educational purposes shall be exempt from taxation. 2. mosques. authorize the President to fix within specified limits. . directly. directly. Public Purpose . and other duties or imposts within the framework of the national development program of the Government. churches and personages or convents appurtenant thereto. tonnage and wharfage dues. and all lands. The Congress shall evolve a progressive system of taxation. or educational purposes shall be exempt from taxation.It cannot be allowed if it violates the equal protection clause. by law. No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress. tariff rates.In ad valorem tax (tax based on the value of the property). churches and personages or convents appurtenant thereto. 4.Constitutional Article VI.There is no provision in the Constitution prohibiting double taxation. buildings. and improvements. The Congress may.It might be enjoyed by private individuals so long as some link to public welfare is established. Charitable institutions. and improvements. 3.Direct double taxation Same subject is taxed twice when it should be taxed only once  For the same purpose  By the same taxing authority  Within the same jurisdiction  For the same taxable period  For the same kind or character of tax . and subject to such limitations and restrictions as it may impose.” Double Taxation . buildings. actually. and exclusively used for religious. the taxpayer is entitled to be notified of the assessment proceedings and heard therein for the correct valuation to be given the property otherwise the ad valorem tax may be increased at the prejudice of the owner in an ex parte appraisal.” . non-profit cemeteries.It includes direct and indirect public advantage or benefit. . . mosques. . non-profit cemeteries. and all lands. Due Process and Taxation .

- - Limitation Article VI. Sec. . with or without caused. 28 (4) No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress. Tax exemption granted gratuitously it might be revoked at will.