You are on page 1of 17

LUTZ vs.

ARANETA
FACTS:
This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the
taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.
Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the
threat to our industry by the imminent imposition of export taxes upon sugar as provided in the
Tydings-McDuffie Act, and the "eventual loss of its preferential position in the United States market" ;
wherefore, the national policy was expressed "to obtain a readjustment of the benefits derived from the
sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare
it for the eventuality of the loss of its preferential position in the United States market and the
imposition of the export taxes."
cralaw

virtua1aw

virtua1aw

library

library

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme
Ledesma, seeks to recover from the Collector of Internal Revenue the sum paid by the estate as taxes,
under section 3 of the Act alleging that such tax is unconstitutional and void, being levied for the aid
and support of the sugar industry exclusively, which in plaintiffs opinion is not a public purpose for
which a tax may be constitutionally levied. The action having been dismissed by the Court of First
Instance, the plaintiffs appealed the case directly to this Court.
The basic defect in the plaintiffs position is his assumption that the tax provided for in Commonwealth
Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6
(heretofore quoted in full), will show that the tax is levied with a regulatory purpose, to provide means
for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is
primarily an exercise of the police power.
This Court can take judicial notice of the fact that sugar production in one of the great industries of our
nation, sugar occupying a leading position among its export products; that it gives employment to
thousands of laborers in fields and factories; that it is a great source of the states wealth, is one of the
important sources of foreign exchange needed by our government, and is thus pivotal in the plans of a
regime committed to a policy of currency stability. Its promotion, protection and advancement,
therefore redounds greatly to the general welfare.
Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of
public concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative discretion must be
allowed full play, subject only to the test of reasonableness; and it is not contended that the means
provided in the law bear no relation to the objective pursued or are oppressive in character. If objective
and methods are alike constitutionally valid, no reason is seen why the state may not be levy taxes to
raise funds for their prosecution and attainment. Taxation may be made the implement of the states
police power.
That the tax to be levied should burden the sugar producers themselves can hardly be a ground of
complaint; indeed, it appears rational that the tax be obtained precisely from those who are to be
benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the power to

tax that a state be free to select the subjects of taxation, and it has been repeatedly held that
"inequalities which result from a singling out of one particular class for taxation, or exemption infringe
no constitutional limitation."

OSMEA vs. ORBOS


FACTS:
The petitioner to have the "TRUST ACCOUNT" created pursuant to P.D. No. 1956, as amended,
invalidated being contrary to Section 29 (3), Article VI of the Constitution; and to have Sec. 8, par. 1
(c) of P.D. No. 1956, as amended by Executive Order No. 137, be declared unconstitutional for "being
an undue and invalid delegation of legislative power to the Energy Regulatory Board.
President Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the
Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost
increases in crude oil and imported petroleum products. Subsequently, the OPSF was reclassified into a
"trust liability account," in virtue of E.O. 1024.
President Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 expanding the
grounds for reimbursement to oil companies for possible cost underrecovery.
The
petition
avers
that
the
29(3), Article VI of the Constitution:

creation

of

the

trust

fund

violates

Sec.

(3) All money collected on any tax levied for a special purpose shall be treated as a
special fund and paid out for such purposes only. If the purpose for which a special fund
was created has been fulfilled or abandoned, the balance, if any, shall be transferred to
the general funds of the Government.
The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated
as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for
a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only
for the purpose indicated, and not channeled to another government objective."
He also contends that the "delegation of legislative authority" to the ERB violates Section 28(2), Article
VI of the Constitution.
The petitioner does not suggest that a "trust account" is illegal per se, but maintains that the monies
collected, which form part of the OPSF, should be maintained in a special account of the general fund
for the reason that the Constitution so provides, and because they are, supposedly, taxes levied for a
special purpose. He assumes that the Fund is formed from a tax undoubtedly because a portion thereof
is taken from collections of ad valorem taxes and the increases thereon.
It thus appears that the challenge posed by the petitioner is premised primarily on the view that the
powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of
the State.
The Solicitor General observes that the "argument rests on the assumption that the OPSF is a form of
revenue measure drawing from a special tax to be expended for a special purpose." The petitioner's
perceptions are, in the Court's view, not quite correct.
ISSUE:

WON OPSF is unconstitutional.


RULING:
NO.
To address this critical misgiving in the position of the petitioner on these issues, the Court recalls its
holding in Valmonte v. Energy Regulatory Board, et al.
The OPSF was established precisely to protect local consumers from the adverse
consequences that such frequent oil price adjustments may have upon the economy...The
OPSF is thus a buffer mechanism through which the domestic consumer prices of oil
and petroleum products are stabilized, instead of fluctuating every so often, and oil
companies are allowed to recover those portions of their costs which they would not
otherwise recover given the level of domestic prices existing at any given time. To the
extent that some tax revenues are also put into it, the OPSF is in effect a device through
which the domestic prices of petroleum products are subsidized in part. It appears to the
Court that the establishment and maintenance of the OPSF is well within that pervasive
and non-waivable power and responsibility of the government to secure the physical and
economic survival and well-being of the community, that comprehensive sovereign
authority we designate as the police power of the State...
Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the
exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the
special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in
what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny
and review of the COA. The Court is satisfied that these measures comply with the constitutional
description of a "special fund." Indeed, the practice is not without precedent.
With regard to the alleged undue delegation of legislative power, the Court finds that the provision
conferring the authority upon the ERB to impose additional amounts on petroleum products provides a
sufficient standard by which the authority must be exercised.
What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit
on how much to tax." The Court is cited to this requirement by the petitioner on the premise that what
is involved here is the power of taxation; but as already discussed, this is not the case. What is here
involved is not so much the power of taxation as police power. Although the provision authorizing the
ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be
overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying
out the objectives of the law which are embraced by the police power of the State.

CHURCHILL vs. CONCEPCION


FACTS:
Section 100 of Act No. 2339 imposed an annual tax of P4 per square meter upon "electric signs,
billboards, and spaces used for posting or displaying temporary signs, and all signs displayed on
premises not occupied by buildings."
This section was subsequently amended by Act No. 2432 by reducing the tax on such signs, billboards,
etc., to P2 per square meter or fraction thereof.
The taxes imposed by Act No. 2432, as amended, were ratified by the Congress of the United States.
Churchill and Tait, copartners doing business under the firm name and style of the Mercantile
Advertising Agency, owners of a sign or billboard containing an area of 52 square meters constructed
on private property in the city of Manila and exposed to public view, were taxes thereon P104.
The tax was paid under protest and the plaintiffs having exhausted all their administrative remedies
instituted the present action against the Collector of Internal Revenue to recover back the amount thus
paid.
Plaintiffs contend that the tax imposed constitutes deprivation of property without compensation or due
process of law, because it is confiscatory and unjustly discriminatory and that the said tax is void for
lack of uniformity, because it is not graded according to value and because the classification on which
it is based on any reasonable ground; and furthermore, because it constitutes double taxation.
ISSUES:
1. Is the tax in question confiscatory?
2. Is the tax void for lack of uniformity or because it is not graded according to value or constitutes
double taxation, or because the classification upon which it is based is mere arbitrary selection and not
based on any reasonable grounds?
3. Does the tax constitute double taxation?
RULING:
1. NO, not confiscatory.
Is the exercise of the taxing power of the Legislature dependent upon and restricted by the opinion of
two interested witnesses? There can be but one answer to these questions, especially in view of the fact
that others are paying the tax and presumably making a reasonable profit from their business.
It is further alleged that the tax in question is unconstitutional because "the law herein complained of
was enacted for the sole purpose of destroying billboards and advertising business depending on the
use of signs or billboards."
If it be conceded that the Legislature has the power to impose a tax upon signs, signboards, and
billboards, then "the judicial cannot prescribed to the legislative department of the Government
limitation upon the exercise of its acknowledge powers."

That the Philippine Legislature has the power to impose such taxes, we think there can be no serious
doubt, because "the power to impose taxes is one so unlimited in force and so searching in extent, that
the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest
in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every
object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in
case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No
attribute of sovereignty is more pervading, and at no point does the power of the government affect
more constantly and intimately all the relations of life than through the exactions made under it."
If a case were presented where the abuse of the taxing power of the local legislature was to extreme as
to make it plain to the judicial mind that the power had been exercised for the sole purpose of
destroying rights which could not be rightfully destroyed consistently with the principles of freedom
and justice upon which the Philippine Government rests, then it would be the duty of the courts to say
that such an arbitrary act was not merely an abuse of the power, but was the exercise of an authority not
conferred.
But the instant case is not one of that character, for the reason that the tax herein complained of falls far
short of being confiscatory. Consequently, it cannot be held that the Legislature has gone beyond the
power conferred upon it by the Philippine Bill in so far as the amount of the tax is concerned.
2. NO, no violation of the uniformity rule.
The only limitation, in so far as these questions are concerned, placed upon the Philippine Legislature
in the exercise of its taxing power is that found in section 5 of the Philippine Bill, wherein it is declared
"that the rule of taxation in said Islands shall be uniform."
Uniformity in taxation says Black on Constitutional Law, page 292 means that all taxable
articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean
that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and
luxuries, shall all be assessed at the same rate. Different articles may be taxed at different
amounts, provided the rate is uniform on the same class everywhere, with all people, and at all
times.
A tax is uniform when it operates with the same force and effect in every place where the subject of it is
found. The words "uniform throughout the United States," as required of a tax by the Constitution, do
not signify an intrinsic, but simply a geographical, uniformity, and such uniformity is therefore the only
uniformity which is prescribed by the Constitution.
A tax is uniform, within the constitutional requirement, when it operates with the same force and effect
in every place where the subject of it is found. "Uniformity," as applied to the constitutional provision
that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike.
The statute under consideration imposes a tax of P2 per square meter or fraction thereof upon every
electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, "the rule of
taxation" upon such signs is uniform throughout the Islands. The rule, which we have just quoted from
the Philippine Bill, does not require taxes to be graded according to the value of the subject or subjects

upon which they are imposed, especially those levied as privilege or occupation taxes.
3. NO, there is no double taxation.
The fact that the land upon which the billboards are located is taxed at so much per unit and the
billboards at so much per square meter does not constitute "double taxation." Double taxation, within
the true meaning of that expression, does not necessarily affect its validity. And again, it is not for the
judiciary to say that the classification upon which the tax is based "is mere arbitrary selection and not
based upon any reasonable grounds." The Legislature selected signs and billboards as a subject for
taxation and it must be presumed that it, in so doing, acted with a full knowledge of the situation.

ROXAS vs. COURT OF TAX APPEALS


FACTS:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by
hereditary succession agricultural lands.
To manage their properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas,
formed a partnership called Roxas y Compania.
The Government, in consonance with the constitutional mandate to acquire big landed estates and
apportion them among landless tenants-farmers, persuaded the Roxas brothers to part with their
landholdings. Conferences were held with the farmers and finally the Roxas brothers agreed to sell to
the Government for distribution to actual occupants survey and subdivision expenses.
It turned out however that the Government did not have funds to cover the purchase price, and so a
special arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y Cia.
the amount of P1,500,000.00 as loan. Collateral for such loan were the lands proposed to be sold to the
farmers. Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price
but by installment, and contracted with the Rehabilitation Finance Corporation to pay its loan from the
proceeds of the yearly amortizations paid by the farmers. Fifty percent of the net gain from the
installments was reported for income tax purposes as gain on the sale of capital asset held for more than
one year pursuant to Section 34 of the Tax Code.
The Commissioner of Internal Revenue demanded from Roxas y Cia the payment of real estate dealer's
tax.
The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted an
appeal in the Court of Tax Appeals.
The Tax Court heard the appeal and rendered judgment sustaining the assessment except the demand
for the payment of the fixed tax on dealer of securities and the disallowance of the deductions for
contributions to the Philippine Air Force Chapel and Hijas de Jesus' Retiro de Manresa.
Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this Court.
ISSUES:
(1) Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100%
taxable?
RULING:
1. NO.
The Commissioner of Internal Revenue contends that Roxas y Cia. could be considered a real estate
dealer because it engaged in the business of selling real estate. The business activity alluded to was the
act of subdividing the Nasugbu farm lands and selling them to the farmers-occupants on installment.
The proposition of the Commissioner of Internal Revenue cannot be favorably accepted by Us in this

isolated transaction with its peculiar circumstances in spite of the fact that there were hundreds of
vendees. Although they paid for their respective holdings in installment for a period of ten years, it
would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the ten-year
amortization period.
It was the bounden duty of the Government to pay the agreed compensation after it had persuaded
Roxas y Cia. to sell its haciendas, and to subsequently subdivide them among the farmers at very
reasonable terms and prices. However, the Government could not comply with its duty for lack of
funds. Obligingly, Roxas y Cia. shouldered the Government's burden, went out of its way and sold
lands directly to the farmers in the same way and under the same terms as would have been the case
had the Government done it itself. For this magnanimous act, the municipal council of Nasugbu passed
a resolution expressing the people's gratitude.
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised
with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly,
equally and uniformly, lest the tax collector kill the "hen that lays the golden egg". And, in order to
maintain the general public's trust and confidence in the Government this power must be used justly
and not treacherously. It does not conform with Our sense of justice in the instant case for the
Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly
answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant
to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from
the sale thereof is capital gain, taxable only to the extent of 50%.

CIR vs. LINGAYEN GULF ELECTRIC


FACTS:
The respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an electric power plant
serving the adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan,
pursuant to the municipal franchise granted it by their respective municipal councils.
The President of the Philippines approved the franchises granted to the private respondent.
BIR assessed against and demanded from the private respondent the deficiency franchise taxes and
surcharges applying the franchise tax rate of 5% on gross receipts as prescribed in Section 259 of the
National Internal Revenue Code, instead of the lower rates as provided in the municipal franchises.
Private respondent requested for a reinvestigation of the case on the ground that instead of incurring a
deficiency liability, it made an overpayment of the franchise tax.
BIR through its regional director, denied the private respondent's request for reinvestigation and
reiterated the demand for payment of the same.
Private respondent protested the said assessment and requested for a conference with a view to settling
the liability amicably but the Commissioner denied the request of the private respondent. Thus, the
appeal to the respondent Court of Tax Appeals. Commissioner demanded from the private respondent
the payment of deficiency franchise tax and surcharges again applying the franchise tax rate of 5% on
gross receipts as prescribed in NIRC. Private respondent protested the assessment and requested
reconsideration thereof which was denied. Thus, the appeal to the respondent Court of Appeals.
Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed granting to the private
respondent a legislative franchise for the operation of the electric light, heat, and power system in the
same municipalities of Pangasinan.
The respondent court ruled that the provisions of R.A. No. 3843 should apply and accordingly
dismissed the claim of the Commissioner of Internal Revenue. The said ruling is now the subject of the
petition at bar.
ISSUES:
1. WON the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code
assessed against the private respondent on its gross receipts realized before the effectivity of R.ANo. 3843 is collectible.
2. WON Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and
equality of taxation" clause of the Constitution.
3. WON Section 4 of R.A. No. 3843 is valid and can be given retroactive effect so as to render
uncollectible the taxes in question which were assessed before its enactment.
RULING:
1. NO.

R.A. No. 3843 granted the private respondent a legislative franchise in June, 1963, amending, altering,
or even repealing the original municipal franchises, and providing that the private respondent should
pay only a 2% franchise tax on its gross receipts, "in lieu of any and all taxes and/or licenses of any
kind, nature or description levied, established, or collected by any authority whatsoever, municipal,
provincial, or national, now or in the future ... and effective further upon the date the original
franchise was granted, no other tax and/or licenses other than the franchise tax of two per centum on
the gross receipts ... shall be collected, any provision of law to the contrary notwithstanding."
Thus, by virtue of R.A- No. 3843, the private respondent was liable to pay only the 2% franchise
tax, effective from the date the original municipal franchise was granted.
2. NO.
The petitioner submits that the said law is unconstitutional insofar as it provides for the payment by the
private respondent of a franchise tax of 2% of its gross receipts, while other taxpayers similarly situated
were subject to the 5% franchise tax imposed in Section 259 of the Tax Code, thereby discriminatory
and violative of the rule on uniformity and equality of taxation.
A tax is uniform when it operates with the same force and effect in every place where the subject of it is
found. Uniformity means that all property belonging to the same class shall be taxed alike.
The Legislature has the inherent power not only to select the subjects of taxation but to grant
exemptions. Tax exemptions have never been deemed violative of the equal protection clause.
The benefits of the tax reduction provided by law (Act No. 3636 as amended by C.A. No. 132 and R.A. No. 3843)
apply to the respondent's power plant and others circumscribed within this class. R.A-No. 3843 merely
transferred the petitioner's power plant from that class provided for in Act No. 667, as amended, to which it
belonged until the approval of R.A- No. 3843, and placed it within the class falling under Act No. 3636, as
amended. Thus, it only effected the transfer of a taxable property from one class to another.

3. YES.
Given its validity, should the said law be applied retroactively so as to render uncollectible the taxes in
question which were assessed before its enactment? The question of whether a statute operates
retrospectively or only prospectively depends on the legislative intent. In the instant case, Act No. 3843
provides that "effective ... upon the date the original franchise was granted, no other tax and/or licenses
other than the franchise tax of two per centum on the gross receipts ... shall be collected, any provision
to the contrary notwithstanding." Republic Act No. 3843 therefore specifically provided for the
retroactive effect of the law.

GOMEZ vs. PALOMAR


FACTS:
This appeal puts in issue the constitutionality of Republic Act 1635, as amended by Republic Act 2631,
which provides as follows:
To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for
the period from August nineteen to September thirty every year the printing and issue of semipostal stamps of different denominations with face value showing the regular postage charge
plus the additional amount of five centavos for the said purpose, and during the said period, no
mail matter shall be accepted in the mails unless it bears such semi-postal stamps: Provided,
That no such additional charge of five centavos shall be imposed on newspapers. The additional
proceeds realized from the sale of the semi-postal stamps shall constitute a special fund and be
deposited with the National Treasury to be expended by the Philippine Tuberculosis Society in
carrying out its noble work to prevent and eradicate tuberculosis.
The respondent Postmaster General, in implementation of the law, thereafter issued four (4)
administrative orders. All these administrative orders were issued with the approval of the respondent
Secretary of Public Works and Communications.
Petitioner Gomez mailed a letter at the post office in San Fernando, Pampanga. Because this letter,
addressed to a certain Aquino did not bear the special anti-TB stamp required by the statute, it was
returned to the petitioner.
In view of this development, the petitioner brough suit for declaratory relief in the Court of First
Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing
administrative orders issued, contending that it violates the equal protection clause of the Constitution
as well as the rule of uniformity and equality of taxation.
The lower court declared the statute and the orders unconstitutional; hence this appeal by the
respondent postal authorities.
It is said that the statute is violative of the equal protection clause of the Constitution. More specifically
the claim is made that it constitutes mail users into a class for the purpose of the tax while leaving
untaxed the rest of the population and that even among postal patrons the statute discriminatorily grants
exemption to newspapers while Administrative Order 9 of the respondent Postmaster General grants a
similar exemption to offices performing governmental functions.
ISSUE:
WON Republic Act 1635 is unconstitutional.
RULING:
NO.
The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax, laid
upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections

levelled against it must be viewed in the light of applicable principles of taxation.


To begin with, it is settled that the legislature has the inherent power to select the subjects of taxation
and to grant exemptions. This power has aptly been described as "of wide range and flexibility."
Indeed, it is said that in the field of taxation, more than in other areas, the legislature possesses the
greatest freedom in classification.The reason for this is that traditionally, classification has been a
device for fitting tax programs to local needs and usages in order to achieve an equitable distribution of
the tax burden.
That legislative classifications must be reasonable is of course undenied. But what the petitioner asserts
is that statutory classification of mail users must bear some reasonable relationship to the end sought to
be attained, and that absent such relationship the selection of mail users is constitutionally
impermissible. This is altogether a different proposition.
We are not wont to invalidate legislation on equal protection grounds except by the clearest
demonstration that it sanctions invidious discrimination, which is all that the Constitution forbids. The
remedy for unwise legislation must be sought in the legislature. Now, the classification of mail users is
not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on
administrative convinience. In the allocation of the tax burden, Congress must have concluded that the
contribution to the anti-TB fund can be assured by those whose who can afford the use of the mails.
The classification is likewise based on considerations of administrative convenience. For it is now a
settled principle of law that "consideration of practical administrative convenience and cost in the
administration of tax laws afford adequate ground for imposing a tax on a well recognized and defined
class." In the case of the anti-TB stamps, undoubtedly, the single most important and influential
consideration that led the legislature to select mail users as subjects of the tax is the relative ease and
convenience of collecting the tax through the post offices. The small amount of five centavos does not
justify the great expense and inconvenience of collecting through the regular means of collection. On
the other hand, by placing the duty of collection on postal authorities the tax was made almost selfenforcing, with as little cost and as little inconvenience as possible.
And then of course it is not accurate to say that the statute constituted mail users into a class. Mail users
were already a class by themselves even before the enactment of the statue and all that the legislature
did was merely to select their class. Legislation is essentially empiric and Republic Act 1635, as
amended, no more than reflects a distinction that exists in fact.
Granted the power to select the subject of taxation, the State's power to grant exemption must likewise
be conceded as a necessary corollary. Tax exemptions are too common in the law; they have never been
thought of as raising issues under the equal protection clause.
It is thus erroneous for the trial court to hold that because certain mail users are exempted from the levy
the law and administrative officials have sanctioned an invidious discrimination offensive to the
Constitution. The application of the lower courts theory would require all mail users to be taxed, a
conclusion that is hardly tenable in the light of differences in status of mail users. The Constitution
does not require this kind of equality.

As for the Government and its instrumentalities, their exemption rests on the State's sovereign
immunity from taxation. The State cannot be taxed without its consent and such consent, being in
derogation of its sovereignty, is to be strictly construed.
According to the trial court, the money raised from the sales of the anti-TB stamps is spent for the
benefit of the Philippine Tuberculosis Society, a private organization, without appropriation by law. But
as the Solicitor General points out, the Society is not really the beneficiary but only the agency through
which the State acts in carrying out what is essentially a public function. The money is treated as a
special fund and as such need not be appropriated by law.