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CHAMBER OF REAL ESTATE AND BUILDERSASSOCIATIONS, INC.

,
- v e r s u s - THE HON. EXECUTIVE SECRETARY ALBERTO ROMULO,

FACTS: Petitioner Chamber of Real Estate and Builders Associations, Inc. (CREBA) is questioning the constitutionality of Section 27 (E) of
Republic Act (RA) 8424 {NIRC 1997} and the revenue regulations (RRs) issued by the Bureau of Internal Revenue (BIR) to implement said
provision and those involving creditable withholding taxes.
Petitioner is an association of real estate developers and builders in the Philippines.
Petitioner assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations and creditable withholding tax (CWT) on
sales of real properties classified as ordinary assets.

Section 27(E) of RA 8424 provides for MCIT on domestic corporations and is implemented by RR 9-98. Petitioner argues that the MCIT violates
the due process clause because it levies income tax even if there is no realized gain.

Petitioner also seeks to nullify Sections 2.57.2(J) (as amended by RR 6-2001) and 2.58.2 of RR 2-98, and Section 4(a)(ii) and (c)(ii) of RR 7-
2003, all of which prescribe the rules and procedures for the collection of CWT on the sale of real properties categorized as ordinary
assets. Petitioner contends that these revenue regulations are contrary to law for two reasons: first, they ignore the different treatment by RA
8424 of ordinary assets and capital assets and second, respondent Secretary of Finance has no authority to collect CWT, much less, to base the
CWT on the gross selling price or fair market value of the real properties classified as ordinary assets.

Petitioner also asserts that the enumerated provisions of the subject revenue regulations violate the due process clause because, like the MCIT,
the government collects income tax even when the net income has not yet been determined. They contravene the equal protection clause as
well because the CWT is being levied upon real estate enterprises but not on other business enterprises, more particularly those in the
manufacturing sector.

ISSUE: whether or not the imposition of the MCIT on domestic corporations is unconstitutional and
whether or not the imposition of CWT on income from sales of real properties classified as ordinary assets under RRs 2-98, 6-2001 and 7-2003,
is unconstitutional.

RULING: Under the MCIT scheme, a corporation, beginning on its fourth year of operation, is assessed an MCIT of 2% of its gross income when
such MCIT is greater than the normal corporate income tax imposed under Section 27(A) If the regular income tax is higher than the MCIT, the
corporation does not pay the MCIT. Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal income
tax for the three immediately succeeding taxable years. Section 27(E) of RA 8424 provides (32% Domestic Corp)

MCIT IS NOT VIOLATIVE OF DUE PROCESS

Petitioner claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because it is highly oppressive, arbitrary and confiscatory
which amounts to deprivation of property without due process of law. It explains that gross income as defined under said provision only
considers the cost of goods sold and other direct expenses; other major expenditures, such as administrative and interest expenses which are
equally necessary to produce gross income, were not taken into account. [31] Thus, pegging the tax base of the MCIT to a corporations gross
income is tantamount to a confiscation of capital because gross income, unlike net income, is not realized gain.

We disagree.

Taxes are the lifeblood of the government. Without taxes, the government can neither exist nor endure. 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 the common good.

Taxation is an inherent attribute of sovereignty.It is a power that is purely legislative. Essentially, this means that in the legislature primarily lies
the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation.[36] It has the
authority to prescribe a certain tax at a specific rate for a particular public purpose on persons or things within its jurisdiction. In other words, the
legislature wields the power to define what tax shall be imposed, why it should be imposed, how much tax shall be imposed, against whom (or
what) it shall be imposed and where it shall be imposed.

As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in its very nature no limits, so that the principal check
against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its constituency who are to pay
it.[37] Nevertheless, it is circumscribed by constitutional limitations. At the same time, like any other statute, tax legislation carries a presumption
of constitutionality.

The constitutional safeguard of due process is embodied in the fiat [no] person shall be deprived of life, liberty or property without due process of
law. This merely adheres to the authoritative doctrine that, where the due process clause is invoked, considering that it is not a fixed rule but
rather a broad standard, there is a need for proof of such persuasive character.

Petitioner is correct in saying that income is distinct from capital. Income means all the wealth which flows into the taxpayer other than a mere
return on capital. Capital is a fund or property existing at one distinct point in time while income denotes a flow of wealth during a definite period
of time. Income is gain derived and severed from capital. For income to be taxable, the following requisites must exist:

(1) there must be gain;


(2) the gain must be realized or received and
(3) the gain must not be excluded by law or treaty from
taxation.[47]

Certainly, an income tax is arbitrary and confiscatory if it taxes capital because capital is not income. In other words, it is income, not capital,
which is subject to income tax. However, the MCIT is not a tax on capital.
The MCIT is imposed on gross income which is arrived at by deducting the capital spent by a corporation in the sale of its goods, i.e., the cost of
goods[48] and other direct expenses from gross sales. Clearly, the capital is not being taxed.

Furthermore, the MCIT is not an additional tax imposition. It is imposed in lieu of the normal net income tax, and only if the normal income tax is
suspiciously low. The MCIT merely approximates the amount of net income tax due from a corporation, pegging the rate at a very much reduced
2% and uses as the base the corporations gross income.
MAYOR ANTONIO J. VILLEGAS, petitioner,
vs.
HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents.

FACTS: Ordinance No. 6537 was passed by the Municipal Board of Manila signed by the herein petitioner Mayor
Antonio J. Villegas of Manila

City Ordinance No. 6537 is entitled:

AN ORDINANCE MAKING IT UNLAWFUL FOR ANY PERSON NOT A CITIZEN OF THE PHILIPPINES TO BE
EMPLOYED IN ANY PLACE OF EMPLOYMENT OR TO BE ENGAGED IN ANY KIND OF TRADE, BUSINESS OR
OCCUPATION WITHIN THE CITY OF MANILA WITHOUT FIRST SECURING AN EMPLOYMENT PERMIT FROM
THE MAYOR OF MANILA; AND FOR OTHER PURPOSES. 3

Section 1 of said Ordinance No. 6537 4 prohibits aliens from being employed or to engage or participate in any
position or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing
an employment permit from the Mayor of Manila and paying the permit fee of P50.00 except persons employed in the
diplomatic or consular missions of foreign countries, or in the technical assistance programs of both the Philippine
Government and any foreign government, and those working in their respective households, and members of religious
orders or congregations, sect or denomination, who are not paid monetarily or in kind.

Violations of this ordinance is punishable by an imprisonment of not less than three (3) months to six (6) months or
fine of not less than P100.00 but not more than P200.00 or both such fine and imprisonment, upon conviction. 5

On May 4, 1968, private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition with the
Court of First Instance of Manila, Branch I, denominated as Civil Case No. 72797, praying for the issuance of the writ
of preliminary injunction and restraining order to stop the enforcement of Ordinance No. 6537 as well as for a
judgment declaring said Ordinance No. 6537 null and void. 6

In this petition, Hiu Chiong Tsai Pao Ho assigned the following as his grounds for wanting the ordinance declared null
and void:

1) As a revenue measure imposed on aliens employed in the City of Manila, Ordinance No. 6537 is discriminatory and
violative of the rule of the uniformity in taxation;

2) As a police power measure, it makes no distinction between useful and non-useful occupations, imposing a fixed
P50.00 employment permit, which is out of proportion to the cost of registration and that it fails to prescribe any
standard to guide and/or limit the action of the Mayor, thus, violating the fundamental principle on illegal delegation of
legislative powers:

3) It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus, deprived of their rights to life,
liberty and property and therefore, violates the due process and equal protection clauses of the Constitution. 7

ISSUE: WHETHER ORDINANCE NO. 6537 VIOLATED THE CARDINAL RULE OF UNIFORMITY OF TAXATION.

Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the
exercise of the power which has been granted to him by the ordinance.

The ordinance in question violates the due process of law and equal protection rule of the Constitution.

Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold or
refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of
livelihood. While it is true that the Philippines as a State is not obliged to admit aliens within its territory, once an alien
is admitted, he cannot be deprived of life without due process of law. This guarantee includes the means of livelihood.
The shelter of protection under the due process and equal protection clause is given to all persons, both aliens and
citizens. 13
CITY OF BAGUIO, vs. FORTUNATO DE LEON,

FACTS: In this appeal, a lower court decision upholding the validity of an ordinance1 of the City of Baguio
imposing a license fee on any person, firm, entity or corporation doing business in the City of Baguio is
assailed by Fortunato de Leon.

He was held liable as a real estate dealer with a property therein worth more than P10,000, but not in
excess of P50,000, and therefore obligated to pay under such ordinance the P50 annual fee.

A complaint having been filed against him by the City Attorney of Baguio for his failure to pay the amount of
P300 as license fee covering the period from the first quarter of 1958 to the fourth quarter of 1962, allegedly,
inspite of repeated demands.

The source of authority for the challenged ordinance is supplied by Republic Act No. 329, amending the city
charter of Baguio2 empowering it to fix the license fee and regulate "businesses, trades and occupations as
may be established or practiced in the City."

ISSUE: Whether imposition of license fee is constitutional or does not violate due process of law

In our opinion, the amendment above adverted to empowers the city council not only to impose a license fee
but also to levy a tax for purposes of revenue, more so when in amending section 2553 (b), the phrase 'as
provided by law' has been removed by section 2 of Republic Act No. 329. The city council of Baguio,
therefore, has now the power to tax, to license and to regulate provided that the subjects affected be one of
those included in the charter. In this sense, the ordinance under consideration cannot be considered ultra
vires whether its purpose be to levy a tax or impose a license fee. The terminology used is of no
consequence."

To repeat the challenged ordinance cannot be considered ultra vires as there is more than ample statutory
authority for the enactment thereof. Nonetheless, its validity on constitutional grounds is challenged because
of the allegation that it imposed double taxation, which is repugnant to the due process clause, and that it
violated the requirement of uniformity.

As to why double taxation is not violative of due process, Justice Holmes made clear in this language: "The
objection to the taxation as double may be laid down on one side. ... The 14th Amendment [the due process
clause] no more forbids double taxation than it does doubling the amount of a tax, short of confiscation or
proceedings unconstitutional on other grounds." 8With that decision rendered at a time when American
sovereignty in the Philippines was recognized, it possesses more than just a persuasive effect. To some, it
delivered the coup de graceto the bogey of double taxation as a constitutional bar to the exercise of the
taxing power. "Where, as here, Congress has clearly expressed its intention, the statute must be sustained
even though double taxation results."

At any rate, it has been expressly affirmed by us that such an "argument against double taxation may not be
invoked where one tax is imposed by the state and the other is imposed by the city ..., it being widely
recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be
exacted with respect to the same occupation, calling or activity by both the state and the political
subdivisions thereof."11
The above would clearly indicate how lacking in merit is this argument based on double taxation.

Now, as to the claim that there was a violation of the rule of uniformity established by the constitution.
According to the challenged ordinance, a real estate dealer who leases property worth P50,000 or above
must pay an annual fee of P100. If the property is worth P10,000 but not over P50,000, then he pays P50
and P24 if the value is less than P10,000. On its face, therefore, the above ordinance cannot be assailed as
violative of the constitutional requirement of uniformity. In Philippine Trust Company v. Yatco,12 Justice
Laurel, speaking for the Court, stated: "A tax is considered uniform when it operates with the same force and
effect in every place where the subject may be found."
There was no occasion in that case to consider the possible effect on such a constitutional requirement
where there is a classification. The opportunity came in Eastern Theatrical Co. v. Alfonso.13 Thus: "Equality
and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed
at the same rate. The taxing power has the authority to make reasonable and natural classifications for
purposes of taxation; ..."
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION, respondents.

FACTS: Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes.
On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over
"Champion," "Hope," and "More" cigarettes. Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon
Diaz of the Presidential Commission on Good Government, "the initial position of the Commission was to classify 'Champion,'
'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies.
However, Fortune Tobacco changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the
said brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion'
was an original Fortune Tobacco Corporation register and therefore a local brand." 3 Ad Valorem taxes were imposed on these
brands.

(c) Cigarettes packed by machine. — There shall be levied, assessed and collected on cigarettes packed by machine a tax at the
rates prescribed below based on the constructive manufacturer's wholesale price or the actual manufacturer's wholesale price,
whichever is higher:
(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five percent (55%) or the exportation of
which is not authorized by contract or otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five Pesos
(P5.00) per pack.
(2) On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax shall not be less than Three
Pesos (P3.00) per pack.
xxx xxx xxx
When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price whichever is higher of existing
brands of cigarettes, including the amounts intended to cover the taxes, of cigarettes packed in twenties does not exceed Four
Pesos and eighty centavos (P4.80) per pack, the rate shall be twenty percent (20%). 7

Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-93. The request was denied and CIR assessed Fortune Tobacco
for ad valorem tax deficiency amounting to P9,598,334.00.

ISSUE: Whether RMC 37-93 might have likewise infringed on uniformity of taxation.

A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular
cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of past Commissioners) or
merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to
place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign
brands and to thereby have them covered by RA 7654. Specifically, the new law would have its amendatory provisions applied to
locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the
issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally
manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax. Hence, without RMC 37-93, the enactment of
RA 7654, would have had no new tax rate consequence on private respondent's products.

In order that there shall be a just enforcement of rules and regulations, in conformity with the basic element of due process, the
following procedures are hereby prescribed for the drafting, issuance and implementation of the said Revenue Tax Issuances:
(1) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum Orders; and (c) Revenue
Memorandum Circulars and Revenue Memorandum Orders bearing on internal revenue tax rules and regulations.
(2) Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances shall not begin to be operative
until after due notice thereof may be fairly presumed.
Due notice of the said issuances may be fairly presumed only after the following procedures have been taken;
xxx xxx xxx
(5) Strict compliance with the foregoing procedures is
enjoined. 13
Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe and comply with the above
requirements before giving effect to its questioned circular.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.
Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be uniform and equitable. Uniformity requires
that all subjects or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and
liabilities. 14 Thus, all taxable articles or kinds of property of the same class must be taxed at the same rate 15 and the tax must
operate with the same force and effect in every place where the subject may be found.

Apparently, RMC 37-93 would only apply to "Hope Luxury," "Premium More" and "Champion" cigarettes and, unless petitioner
would be willing to concede to the submission of private respondent that the circular should, as in fact my esteemed colleague Mr.
Justice Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and thus violative of due process
following the Ang Tibay 16 doctrine, the measure suffers from lack of uniformity of taxation. In its decision, the CTA has keenly
noted that other cigarettes bearing foreign brands have not been similarly included within the scope of the circular,

All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective administrative
issuance.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MICHEL J. LHUILLIER PAWNSHOP,
INC., respondent.

FACTS:
CIR Jose U. Ong issued Revenue Memorandum Order (RMO) No. 15-91 imposing a 5% lending
investors tax on pawnshops.
Bureau of Internal Revenue (BIR) issued Assessment Notice against Lhuillier demanding payment of
deficiency percentage tax in the sum of P3,360,335.11 for 1994 inclusive of interest and surcharges.
On 3 October 1997, Lhuillier filed an administrative protest with the Office of the Revenue Regional
Director contending that (1) neither the Tax Code nor the VAT Law expressly imposes 5% percentage tax on
the gross income of pawnshops; (2) pawnshops are different from lending investors, which are subject to the
5% percentage tax under the specific provision of the Tax Code; (3) RMO No. 15-91 is not implementing any
provision of the Internal Revenue laws but is a new and additional tax measure on pawnshops, which only
Congress could enact; (4) RMO No. 15-91 impliedly amends the Tax Code and is therefore taxation by
implication, which is proscribed by law; and (5) RMO No. 15-91 is a class legislation because it singles out
pawnshops among other lending and financial operations.
On 12 October 1998, Deputy BIR Commissioner Romeo S. Panganiban issued Warrant of Distraint
and/or Levy No. 81-043-98 against Lhuilliers property for the enforcement and payment of the assessed
percentage tax.
Its protest having been unacted upon, Lhuillier, in a letter dated 3 March 1998, elevated the matter to the
CIR. Still, the protest was not acted upon by the CIR. Thus, on 11 November 1998, Lhuillier filed a Notice
and Memorandum on Appeal with the Court of Tax Appeals invoking Section 228 of Republic Act No. 8424,
otherwise known as the Tax Reform Act of 1997, which provides:
CIR filed with the CTA a motion to dismiss Lhuilliers petition on the ground that it did not state a cause of
action, as there was no action yet on the protest.
Lhuillier opposed the motion to dismiss and moved for the issuance of a writ of preliminary injunction
praying that the BIR be enjoined from enforcing the warrant of distraint and levy.
Lhuillier, on the other hand, maintains that before and after the amendment of the Tax Code by E.O. No.
273, which took effect on 1 January 1988, pawnshops and lending investors were subjected to different tax
treatments. Pawnshops were required to pay an annual fixed tax of only P1,000, while lending investors
were subject to a 5% percentage tax on their gross income in addition to their fixed annual
taxes. Accordingly, during the period from April 1982 up to December 1990, the CIR consistently ruled that a
pawnshop is not a lending investor and should not therefore be required to pay percentage tax on its gross
income.
Lhuillier likewise asserts that RMO No. 15-91 and RMC No. 43-91 are not implementing rules but are
new and additional tax measures, which only Congress is empowered to enact. Besides, they are invalid
because they have never been published in the Official Gazette or any newspaper of general circulation.
Issue: whether pawnshops are subject to the 5% lending investors tax.
RULING: NO.
Under Section 157(u) of the NIRC of 1986, as amended, the term lending investor includes all persons
who make a practice of lending money for themselves or others at interest. A pawnshop, on the other hand,
is defined under Section 3 of P.D. No. 114 as a person or entity engaged in the business of lending money
on personal property delivered as security for loans and shall be synonymous, and may be used
interchangeably, with pawnbroker or pawn brokerage.
While it is true that pawnshops are engaged in the business of lending money, they are not considered
lending investors for the purpose of imposing the 5% percentage taxes for the following reasons:
In view of the foregoing, RMO No. 15-91 and RMC No. 43-91 are hereby declared null and void.
Consequently, Lhuillier is not liable to pay the 5% lending investors tax.
ABAKADA GURO PARTY LIST (formerly AASJS)1 OFFICERS/MEMBERS SAMSON S. ALCANTARA, ED
VINCENT S. ALBANO, ROMEO R. ROBISO, RENE B. GOROSPE and EDWIN R. SANDOVAL, petitioners,
vs. HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, HON. GUILLERMO L. PARAYNO,
JR., in his capacity as Commissioner of the Bureau of Internal Revenue, and HON. ALBERTO D. LINA, in
his Capacity as Commissioner of Bureau of Customs, respondents.

FACTS: RA 9335 was enacted to optimize the revenue-generation capability and collection of the Bureau of
Internal Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage BIR and BOC
officials and employees to exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation
Board (Board).3 It covers all officials and employees of the BIR and the BOC with at least six months of
service, regardless of employment status.4

The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for the
year, as determined by the Development Budget and Coordinating Committee (DBCC). Any incentive or
reward is taken from the fund and allocated to the BIR and the BOC in proportion to their contribution in the
excess collection of the targeted amount of tax revenue.5

Petitioners, invoking their right as taxpayers filed this petition challenging the constitutionality of RA 9335, a
tax reform legislation. They contend that, by establishing a system of rewards and incentives, the law
"transform[s] the officials and employees of the BIR and the BOC into mercenaries and bounty hunters" as
they will do their best only in consideration of such rewards. Thus, the system of rewards and incentives
invites corruption and undermines the constitutionally mandated duty of these officials and employees to
serve the people with utmost responsibility, integrity, loyalty and efficiency.

Petitioners also claim that limiting the scope of the system of rewards and incentives only to officials and
employees of the BIR and the BOC violates the constitutional guarantee of equal protection. There is no
valid basis for classification or distinction as to why such a system should not apply to officials and
employees of all other government agencies.

ISSUE: Whether RA 9335 is a violation of Equal Protection

RULING: Equality guaranteed under the equal protection clause is equality under the same conditions and
among persons similarly situated; it is equality among equals, not similarity of treatment of persons who are
classified based on substantial differences in relation to the object to be accomplished. 19When things or
persons are different in fact or circumstance, they may be treated in law differently. In Victoriano v. Elizalde
Rope Workers’ Union,20 this Court declared:
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon
all citizens of the [S]tate. It is not, therefore, a requirement, in order to avoid the constitutional prohibition
against inequality, that every man, woman and child should be affected alike by a statute. Equality of
operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons
according to the circumstances surrounding them. It guarantees equality, not identity of rights. The
Constitution does not require that things which are different in fact be treated in law as though they were the
same. The equal protection clause does not forbid discrimination as to things that are different. It does not
prohibit legislation which is limited either in the object to which it is directed or by the territory within which it
is to operate.

The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable
foundation or rational basis and not arbitrary.22 With respect to RA 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and the BOC. 23 Since the subject
of the law is the revenue- generation capability and collection of the BIR and the BOC, the incentives and/or
sanctions provided in the law should logically pertain to the said agencies. Moreover, the law concerns only
the BIR and the BOC because they have the common distinct primary function of generating revenues for
the national government through the collection of taxes, customs duties, fees and charges.

Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of
being the instrumentalities through which the State exercises one of its great inherent functions – taxation.
Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence,
the classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands
of equal protection.
G.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,


vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY MAYOR, all of the
City of Manila, respondents-appellees.

FACTS: This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal
Board of the City of Manila on March 24, 1950.

The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor
vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator of the
trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called property tax
it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance
offends against the rule of uniformity of taxation; and (3) it constitutes double taxation.

The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a
property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of
Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it
constitute double taxation.

ISSUE: Whether Ordinance No. 3379 is valid?

RULING: The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority
conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax
motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary
notwithstanding." It is contended that this power is broad enough to confer upon the City of Manila the power to enact
an ordinance imposing the property tax on motor vehicles operating within the city limits.

The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad valorem yet
we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila with the main
purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of the streets and
bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that,
under said Act, municipal corporation already participate in the distribution of the proceeds that are raised for the
same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the Motor Vehicle
Law). This prohibition is intended to prevent duplication in the imposition of fees for the same purpose. It is for this
reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad
valorem tax to circumvent the prohibition above adverted to.

It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution.
Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not
distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish
between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to
Manila and uses its streets and public highways. The distinction is important if we note that the ordinance intends to
burden with the tax only those registered in the City of Manila as may be inferred from the word "operating" used
therein. The word "operating" denotes a connotation which is akin to a registration, for under the Motor Vehicle Law no
motor vehicle can be operated without previous payment of the registration fees. There is no pretense that the
ordinance equally applies to motor vehicles who come to Manila for a temporary stay or for short errands, and it
cannot be denied that they contribute in no small degree to the deterioration of the streets and public highway. The
fact that they are benefited by their use they should also be made to share the corresponding burden. And yet such is
not the case. This is an inequality which we find in the ordinance, and which renders it offensive to the Constitution.

Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.
G.R. No. L-6093 February 24, 1954
THE SHELL CO. OF P.I., LTD., plaintiff-appellant,
vs.
E. E. VAÑO, as Municipal Treasurer of the Municipality of Cordova, Province of Cebu, defendant-appellee.

FACTS: The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10,
series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the privilege of
installation manager; No. 9, series of 1947, which imposes an annual tax of P40 for local deposits in drums
of combustible and inflammable materials and an annual tax of P200 for tin can factories; and No. 11, series
of 1948, which imposes an annual tax of P150 on tin can factories having a maximum output capacity of
30,000 tin cans.

The Shell Co. of P.I. Ltd., a foreign corporation, filed suit for the refund of the taxes paid by it, on the ground
that the ordinances imposing such taxes are ultra vires. The defendant denies that they are so.

It is contended that as the municipal ordinance imposing an annual tax of P40 for "minor local deposit in
drums of combustible and inflammable materials," and of P200 "for tin factory" was adopted under and
pursuant to section 2244 of the Revised Administrative Code, which provides that the municipal council in
the exercise of the regulative authority may require any person engaged in any business or occupation, such
as "storing combustible or explosive materials" or "the conducting of any other business of an unwholesome,
obnoxious, offensive, or dangerous character," to obtain a permit for which a reasonable fee, in no case to
exceed P10 per annum, may be charged, the annual tax of P40 and P200 are unauthorized and illegal.

This contention is without merit, because even if the installation manager is a salaried employee of the
plaintiff, still it is an occupation "and one occupation or line of business does not become exempt by being
conducted with some other occupation or business for which such tax has been paid' 1 and the occupation
tax must be paid "by each individual engaged in a calling subject thereto." 2 And pursuant to section 179 of
the National Internal Revenue Code, "The payment of . . . occupation tax shall not exempt any person from
any tax, . . . provided by law or ordinance in places where such . . . occupation in . . . regulated by municipal
law, nor shall the payment of any such tax be held to prohibit any municipality from placing a tax upon the
same . . . occupation, for local purposes, where the imposition of such tax is authorized by law." It is true
that, according to the stipulation of facts, Ordinance No. 10, series of 1946, was approved by the Provincial
Board of Cebu in its Resolution No. 1070, series of 1946, and that it does not appear that it was approved by
the Department of Finance, as provided for and required in section 4, paragraph 2, of Commonwealth Act
No. 472, the rate of municipal tax being in excess of P50 per annum. But at this point on the approval of the
Department of Finance was not raised in the court below, it cannot be raised for the first time on appeal. The
issue joined by the parties in their pleadings and the point raised by the plaintiff is that the municipal council
was not empowered to adopt the ordinance and not that it was not approved by the Department of Finance.
The fact that it was not stated in the stipulation of facts justifies the presumption that the ordinance was
approved in accordance with law.

ISSUE: Whether the ordinance is discriminatory hence it violates equal protection clause

RULING: NO. The contention that the ordinance is discriminatory and hostile because there is no other
person in the locality who exercises such "designation" or occupation is also without merit, because the fact
that there is no other person in the locality who exercises such a "designation" or calling does not make the
ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person or firm who
exercises such calling or occupation named or designated as "installation manager."
Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can factories having
a maximum annual output capacity of 30,000 tin cans which, according to the stipulation of facts, was
approved by the Provincial Board of Cebu and the Department of Finance, is valid and lawful, because it is
neither a percentage tax nor one on specified articles which are the only exceptions provided in section 1,
Commonwealth Act No. 472. Neither does it fall under any of the prohibitions provided for in section 3 of the
same Act. Specific taxes enumerated in the National Internal Revenue Code are those that are imposed
upon "things manufactured or produced in the Philippines for domestic sale or consumption" and upon
"things imported from the United States and foreign countries," such as distilled spirits, domestic denatured
alcohol, fermented liquors, products of tobacco, cigars and cigarettes, matches, mechanical lighters,
firecrackers, skimmed milk, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil,
cinematographic films, playing cards, sacharine.3 And it is not a percentage tax because it is tax on business
and the maximum annual output capacity is not a percentage, because it is not a share or a tax based on
the amount of the proceeds realized out of the sale of the tin cans manufactured therein but on the business
of manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans.
G.R. No. 81311 June 30, 1988

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO,


GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA, petitioners,
vs.
HON. BIENVENIDO TAN, as Commissioner of Internal Revenue, respondent.

These four (4) petitions, which have been consolidated because of the similarity of the main issues involved therein,
seek to nullify Executive Order No. 273 (EO 273, for short), issued by the President of the Philippines on 25 July 1987,
to take effect on 1 January 1988, and which amended certain sections of the National Internal Revenue Code and
adopted the value-added tax (VAT, for short), for being unconstitutional in that its enactment is not allegedly within the
powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due process and
equal protection clauses and other provisions of the 1987 Constitution.

FACTS:

The VAT is a tax levied on a wide range of goods and services. It is a tax on the value, added by every seller, with
aggregate gross annual sales of articles and/or services, exceeding P200,00.00, to his purchase of goods and
services, unless exempt. VAT is computed at the rate of 0% or 10% of the gross selling price of goods or gross
receipts realized from the sale of services.

The VAT is said to have eliminated privilege taxes, multiple rated sales tax on manufacturers and producers, advance
sales tax, and compensating tax on importations. The framers of EO 273 that it is principally aimed to rationalize the
system of taxing goods and services; simplify tax administration; and make the tax system more equitable, to enable
the country to attain economic recovery.

The VAT is not entirely new. It was already in force, in a modified form, before EO 273 was issued. As pointed out by
the Solicitor General, the Philippine sales tax system, prior to the issuance of EO 273, was essentially a single stage
value added tax system computed under the "cost subtraction method" or "cost deduction method" and was imposed
only on original sale, barter or exchange of articles by manufacturers, producers, or importers. Subsequent sales of
such articles were not subject to sales tax. However, with the issuance of PD 1991 on 31 October 1985, a 3% tax was
imposed on a second sale, which was reduced to 1.5% upon the issuance of PD 2006 on 31 December 1985, to take
effect 1 January 1986. Reduced sales taxes were imposed not only on the second sale, but on every subsequent sale,
as well. EO 273 merely increased the VAT on every sale to 10%, unless zero-rated or exempt.

ISSUE: WHETHER EO 273 is oppressive, discriminatory, unjust and regressive, in violation of the provisions of Art.
VI, sec. 28(1) of the 1987 Constitution, which states:

Sec. 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of
taxation.

The petitioners" assertions in this regard are not supported by facts and circumstances to warrant their conclusions.
They have failed to adequately show that the VAT is oppressive, discriminatory or unjust. Petitioners merely rely upon
newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a law. there
must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication. 4

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform.

The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public, which are not
exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engage in
business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are
consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products, spared
as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the general
public. 6
G.R. No. 109289 October 3, 1994
RUFINO R. TAN, petitioner, vs. RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as
COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS: These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the constitutionality
of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"), amending
certain provisions of the National Internal Revenue Code

Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory legislation.
In G.R. No. 109289, it is asserted that the enactment of Republic Act
No. 7496 violates the following provisions of the Constitution:
Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one subject which shall be
expressed in the title thereof.
Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.
Article III, Section 1 — No person shall be deprived of . . . property without due process of law, nor shall any person be
denied the equal protection of the laws.

Petitioner contends that the title of House Bill No. 34314, progenitor of Republic Act No. 7496, is a misnomer or, at
least, deficient for being merely entitled, "Simplified Net Income Taxation Scheme for the Self-Employed and
Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289).

Sec. 21. Tax on citizens or residents. —


xxx xxx xxx
(f) Simplified Net Income Tax for the Self-Employed and/or Professionals Engaged in the Practice of Profession. — A
tax is hereby imposed upon the taxable net income as determined in Section 27 received during each taxable year
from all sources, other than income covered by paragraphs (b), (c), (d) and (e) of this section by every individual
whether a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his
profession herein, determined in accordance with the following schedule:

Not over P10,000 3%


Over P10,000 P300 + 9%
but not over P30,000 of excess over P10,000
Over P30,000 P2,100 + 15%
but not over P120,00 of excess over P30,000
Over P120,000 P15,600 + 20%
but not over P350,000 of excess over P120,000
Over P350,000 P61,600 + 30%
of excess over P350,000

For individuals whose cost of goods sold and direct costs are difficult to determine, a maximum of forty per cent (40%)
of their gross receipts shall be allowed as deductions to answer for business or professional expenses as the case
may be.

On the basis of the above language of the law, it would be difficult to accept petitioner's view that the amendatory law
should be considered as having now adopted a gross income, instead of as having still retained the net income,
taxation scheme. The allowance for deductible items, it is true, may have significantly been reduced by the questioned
law in comparison with that which has prevailed prior to the amendment; limiting, however, allowable deductions from
gross income is neither discordant with, nor opposed to, the net income tax concept. The fact of the matter is still that
various deductions, which are by no means inconsequential, continue to be well provided under the new law.

Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation "shall be
uniform and equitable" in that the law would now attempt to tax single proprietorships and professionals differently
from the manner it imposes the tax on corporations and partnerships. The contention clearly forgets, however, that
such a system of income taxation has long been the prevailing rule even prior to Republic Act No. 7496.

Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects of
taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan Luna Subdivision vs.
Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as: (1) the standards that are used therefor
are substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) the law
applies, all things being equal, to both present and future conditions, and (4) the classification applies equally well to
all those belonging to the same class

Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for being violative of
due process must perforce fail. The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of the tax power. No such transgression is so
evident to us.
G.R. No. L-23794 February 17, 1968
ORMOC SUGAR COMPANY, INC., plaintiff-appellant,
vs.
THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C. CONEJOS
as Mayor of Ormoc City and ORMOC CITY, defendants-appellees.
Ponce Enrile, Siguion Reyna, Montecillo & Belo and Teehankee, Carreon & Tañada for plaintiff-appellant.
Ramon O. de Veyra for defendants-appellees.
BENGZON, J.P., J.:
On January 29, 1964, the Municipal Board of Ormoc City passed 1 Ordinance No. 4, Series of 1964, imposing
"on any and all productions of centrifugal sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal
tax equivalent to one per centum (1%) per export sale to the United States of America and other foreign countries." 2
Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. on March 20, 1964 for
P7,087.50 and on April 20, 1964 for P5,000, or a total of P12,087.50.
On June 1, 1964, Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte, with service of a
copy upon the Solicitor General, a complaint 3 against the City of Ormoc as well as its Treasurer, Municipal Board and
Mayor, alleging that the afore-stated ordinance is unconstitutional for being violative of the equal protection clause
(Sec. 1[1], Art. III, Constitution) and the rule of uniformity of taxation (Sec. 22[1]), Art. VI, Constitution), aside from
being an export tax forbidden under Section 2287 of the Revised Administrative Code. It further alleged that the tax is
neither a production nor a license tax which Ormoc City under Section 15-kk of its charter and under Section 2 of
Republic Act 2264, otherwise known as the Local Autonomy Act, is authorized to impose; and that the tax amounts to
a customs duty, fee or charge in violation of paragraph 1 of Section 2 of Republic Act 2264 because the tax is on both
the sale and export of sugar.
Answering, the defendants asserted that the tax ordinance was within defendant city's power to enact under the
Local Autonomy Act and that the same did not violate the afore-cited constitutional limitations. After pre-trial and
submission of the case on memoranda, the Court of First Instance, on August 6, 1964, rendered a decision that
upheld the constitutionality of the ordinance and declared the taxing power of defendant chartered city broadened by
the Local Autonomy Act to include all other forms of taxes, licenses or fees not excluded in its charter.
Appeal therefrom was directly taken to Us by plaintiff Ormoc Sugar Company, Inc. Appellant alleges the same
statutory and constitutional violations in the aforesaid taxing ordinance mentioned earlier.
Section 1 of the ordinance states: "There shall be paid to the City Treasurer on any and all productions of
centrifugal sugar milled at the Ormoc Sugar Company, Incorporated, in Ormoc City, a municipal tax equivalent to one
per centum (1%) per export sale to the United States of America and other foreign countries." Though referred to as a
tax on the export of centrifugal sugar produced at Ormoc Sugar Company, Inc. For production of sugar alone is not
taxable; the only time the tax applies is when the sugar produced is exported.
Appellant questions the authority of the defendant Municipal Board to levy such an export tax, in view of Section
2287 of the Revised Administrative Code which denies from municipal councils the power to impose an export tax.
Section 2287 in part states: "It shall not be in the power of the municipal 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 an import or
export tax upon such goods in the guise of an unreasonable charge for wharfage use of bridges or otherwise, shall be
void."
Subsequently, however, Section 2 of Republic Act 2264 effective June 19, 1959, gave chartered cities,
municipalities and municipal districts authority to levy for public purposes just and uniform taxes, licenses or fees.
Anent the inconsistency between Section 2287 of the Revised Administrative Code and Section 2 of Republic Act
2264, this Court, in Nin Bay Mining Co. v. Municipality of Roxas 4 held the former to have been repealed by the latter.
And expressing Our awareness of the transcendental effects that municipal export or import taxes or licenses will have
on the national economy, due to Section 2 of Republic Act 2264, We stated that there was no other alternative until
Congress acts to provide remedial measures to forestall any unfavorable results.
The point remains to be determined, however, whether constitutional limits on the power of taxation, specifically
the equal protection clause and rule of uniformity of taxation, were infringed.
The Constitution in the bill of rights provides: ". . . nor shall any person be denied the equal protection of the
laws." (Sec. 1 [1], Art. III) In Felwa vs. Salas, 5 We ruled that the equal protection clause applies only to persons or
things identically situated and does not bar a reasonable classification of the subject of legislation, and a classification
is reasonable where (1) it is based on substantial distinctions which make real differences; (2) these are germane to
the purpose of the law; (3) the classification applies not only to present conditions but also to future conditions which
are substantially identical to those of the present; (4) the classification applies only to those who belong to the same
class.
A perusal of the requisites instantly shows that the questioned ordinance does not meet them, for it taxes only
centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and none other. At the time of the taxing
ordinance's enactment, Ormoc Sugar Company, Inc., it is true, was the only sugar central in the city of Ormoc. Still,
the classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance
should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as
plaintiff, for the coverage of the tax. As it is now, even if later a similar company is set up, it cannot be subject to the
tax because the ordinance expressly points only to Ormoc City Sugar Company, Inc. as the entity to be levied upon.
Appellant, however, is not entitled to interest; on the refund because the taxes were not arbitrarily collected
(Collector of Internal Revenue v. Binalbagan). 6 At the time of collection, the ordinance provided a sufficient basis to
preclude arbitrariness, the same being then presumed constitutional until declared otherwise.
WHEREFORE, the decision appealed from is hereby reversed, the challenged ordinance is declared
unconstitutional and the defendants-appellees are hereby ordered to refund the P12,087.50 pl
PHILIPPINE RURAL ELECTRIC COOPERATIVES ASSOCIATION, INC. (PHILRECA); AGUSAN DEL NORTE ELECTRIC
COOPERATIVE, INC. (ANECO); ILOILO I ELECTRIC COOPERATIVE, INC. (ILECO I); and ISABELA I ELECTRIC
COOPERATIVE, INC. (ISELCO I), petitioners, vs. THE SECRETARY, DEPARTMENT OF INTERIOR AND LOCAL
GOVERNMENT, and THE SECRETARY, DEPARTMENT OF FINANCE, respondents.
This is a petition for Prohibition under Rule 65 of the Rules of Court with prayer for the issuance of a temporary restraining order
seeking to annul as unconstitutional sections 193 and 234 of R.A. No. 7160 otherwise known as the Local Government Code.
On May 23, 2000, a class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized
and existing under P.D. No. 269 who are members of petitioner Philippine Rural Electric Cooperatives Association, Inc.
(PHILRECA). Petitioner PHILRECA is an association of 119 electric cooperatives throughout the country. Petitioners are non-
stock, non-profit electric cooperatives organized and existing under P.D. No. 269, as amended, and registered with the National
Electrification Administration (NEA).
Under P.D. No. 269, as amended, or the National Electrification Administration Decree, it is the declared policy of the State to
provide the total electrification of the Philippines on an area coverage basis the same being vital to the people and the sound
development of the nation.[1] Pursuant to this policy, P.D. No. 269 aims to promote, encourage and assist all public service entities
engaged in supplying electric service, particularly electric cooperatives by giving every tenable support and assistance to the
electric cooperatives coming within the purview of the law.
From 1971 to 1978, in order to finance the electrification projects envisioned by P.D. No. 269, as amended, the Philippine
Government, acting through the National Economic Council (now National Economic Development Authority) and the NEA,
entered into six (6) loan agreements with the government of the United States of America through the United States Agency for
International Development (USAID) with electric cooperatives, including petitioners ANECO, ILECO I and ISELCO I, as
beneficiaries. The six (6) loan agreements involved a total amount of approximately US$86,000,000.00. These loan agreements
are existing until today.
The loan agreements contain similarly worded provisions on the tax application of the loan and any property or commodity
acquired through the proceeds of the loan.
Petitioners contend that pursuant to the provisions of P.D. No. 269, as amended, and the above-mentioned provision in the loan
agreements, they are exempt from payment of local taxes, including payment of real property tax. With the passage of the Local
Government Code, however, they allege that their tax exemptions have been invalidly withdrawn. In particular, petitioners assail
Sections 193 and 234 of the Local Government Code on the ground that the said provisions discriminate against them, in violation
of the equal protection clause.
ISSUED: Whether there is a violation of Equal Protection Clause
I
There is No Violation of the Equal Protection Clause
The pertinent parts of Sections 193 and 234 of the Local Government Code provide:

Section 193. Withdrawal of Tax Exemption Privileges.Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned and controlled
corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions, are hereby withdrawn upon the effectivity of this Code.

Section 234. Exemptions from real property tax.The following are exempted from payment of the real property tax:

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all
persons whether natural or juridical, including all government-owned and controlled corporations are hereby withdrawn upon
effectivity of this Code.[6]

We are not persuaded. The equal protection clause under the Constitution means that no person or class of persons shall be
deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place and in like
circumstances.[8] Thus, the guaranty of the equal protection of the laws is not violated by a law based on reasonable classification.
Classification, to be reasonable, must (1) rest on substantial distinctions; (2) be germane to the purposes of the law; (3) not be
limited to existing conditions only; and (4) apply equally to all members of the same class.[9]
We hold that there is reasonable classification under the Local Government Code to justify the different tax treatment between
electric cooperatives covered by P.D. No. 269, as amended, and electric cooperatives under R.A. No. 6938 .
JUDY ANNE L. SANTOS, Petitioner,
Vs.
PEOPLE OF THE PHILIPPINESand BUREAU OF INTERNAL REVENUE, Respondents

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court filed by petitioner Judy Anne L.
Santos (Santos) seeking the reversal and setting aside of the Resolution, dated 19 June 2006, of the Court of Tax Appeals (CTA)
en banc in C.T.A. EB. CRIM. No. 001 which denied petitioner’s Motion for Extension of Time to File Petition for Review. Petitioner
intended to file the Petition for Review with the CTA en banc to appeal the Resolutions dated 23 February 2006 and 11 May 2006
of the CTA First Division in C.T.A. Crim. Case No. 0-012 denying, respectively, her Motion to Quash the Information filed against
her for violation of Section 255, in relation to Sections 254 and 248(B) of the National Internal Revenue Code (NIRC), as
amended; and her Motion for Reconsideration.

On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner Guillermo L. Parayno, Jr. wrote to the Department of
Justice (DOJ) Secretary Raul M. Gonzales a letter regarding the possible filing of criminal charges against petitioner. BIR
Commissioner Parayno began his letter with the following statement:

I have the honor to refer to you for preliminary investigation and filing of an information in court if evidence so warrants, the herein
attached Joint Affidavit of RODERICK C. ABAD, STIMSON P. CUREG, VILMA V. CARONAN, RHODORA L. DELOS REYES
under Group Supervisor TEODORA V. PURINO, of the National Investigation Division, BIR National Office Building, BIR Road,
Diliman, Quezon City, recommending the criminal prosecution of MS. JUDY ANNE LUMAGUI SANTOS for substantial
underdeclaration of income, which constitutes as prima facie evidence of false or fraudulent return under Section 248(B) of the
NIRC and punishable under Sections 254 and 255 of the Tax Code.

In said letter, BIR Commissioner Parayno summarized the findings of the investigating BIR officers that petitioner, in her Annual
Income Tax Return for taxable year 2002 filed with the BIR, declared an income of P8,033,332.70 derived from her talent fees
solely from ABS-CBN; initial documents gathered from the BIR offices and those given by petitioner’s accountant and third
parties, however, confirmed that petitioner received in 2002 income in the amount of at least P14,796,234.70, not only from ABS-
CBN, but also from other sources, such as movies and product endorsements; the estimated tax liability arising from petitioner’s
under declaration amounted to P1,718,925.52, including incremental penalties; the non-declaration by petitioner of an amount
equivalent to at least 84.18% of the income declared in her return was considered a substantial under declaration of income,
which constituted prima facie evidence of false or fraudulent return under Section 248(B) of the NIRC, as amended; and
petitioner’s failure to account as part of her income the professional fees she received from sources other than ABS-CBN and her
under declaration of the income she received from ABS-CBN amounted to manifest violations of Sections 254 and 255, as well as
Section 248(B) of the NIRC, as amended.

As regards petitioner’s second ground in her intended Petition for Review with the CTA en banc, she asserts that she has been
denied due process and equal protection of the laws when similar charges for violation of the NIRC, as amended, against Regina
Encarnacion A. Velasquez (Velasquez) were dismissed by the DOJ in its Resolution dated 10 August 2005 in I.S. No. 2005-330
for the reason that Velasquez’s tax liability was not yet fully determined when the charges were filed.

Issue: WON petitioner was denied of equal protection of law.

Held:

Petitioner cannot claim denial of due process when she was given the opportunity to file her affidavits and other pleadings and
submit evidence before the DOJ during the preliminary investigation of her case and before the Information was filed against
her. Due process is merely an opportunity to be heard. In addition, preliminary investigation conducted by the DOJ is merely
inquisitorial. It is not a trial of the case on the merits. Its sole purpose is to determine whether a crime has been committed and
whether the respondent therein is probably guilty of the crime. It is not the occasion for the full and exhaustive display of the
parties’ evidence. Hence, if the investigating prosecutor is already satisfied that he can reasonably determine the existence of
probable cause based on the parties’ evidence thus presented, he may terminate the proceedings and resolve the case.

The equal protection clause exists to prevent undue favor or privilege. It is intended to eliminate discrimination and oppression
based on inequality. Recognizing the existence of real differences among men, the equal protection clause does not demand
absolute equality. It merely requires that all persons shall be treated alike, under like circumstances and conditions, both as to the
privileges conferred and liabilities enforced.

Petitioner was not able to duly establish to the satisfaction of this Court that she and Velasquez were indeed similarly situated, i.e.,
that they committed identical acts for which they were charged with the violation of the same provisions of the NIRC; and that they
presented similar arguments and evidence in their defense - yet, they were treated differently.
AMERICAN BIBLE SOCIETY, plaintiff-appellant,
vs.
CITY OF MANILA, defendant-appellee.

FATCS: Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing
business in the Philippines through its Philippine agency established in Manila in November, 1898, with its principal office at
636 Isaac Peral in said City. The defendant appellee is a municipal corporation with powers that are to be exercised in
conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles and/or gospel portions
thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several Philippine
dialects. On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was conducting the
business of general merchandise since November, 1945, without providing itself with the necessary Mayor's permit and
municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364, and
required plaintiff to secure, within three days, the corresponding permit and license fees, together with compromise covering
the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45 (Annex A).

Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit and pay under protest the
sum of P5,891.45, if suit was to be taken in court regarding the same (Annex B). To avoid the closing of its business as well
as further fines and penalties in the premises on October 24, 1953, plaintiff paid to the defendant under protest the said
permit and license fees in the aforementioned amount, giving at the same time notice to the City Treasurer that suit would
be taken in court to question the legality of the ordinances under which, the said fees were being collected (Annex C), which
was done on the same date by filing the complaint that gave rise to this action. In its complaint plaintiff prays that judgment
be rendered declaring the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364
illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum of P5,891.45 paid under
protest, together with legal interest thereon, and the costs, plaintiff further praying for such other relief and remedy as the
court may deem just equitable.

The issues. — As may be seen from the proceeding statement of the case, the issues involved in the present controversy
may be reduced to the following: (1) whether or not the ordinances of the City of Manila, Nos. 3000, as amended, and 2529,
3028 and 3364, are constitutional and valid; and (2) whether the provisions of said ordinances are applicable or not to the
case at bar.

RULING: Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free
exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed.
No religion test shall be required for the exercise of civil or political rights.

With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028, appellant contends that it is
unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious profession and worship of
appellant.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a
little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or
occupation of selling said "merchandise" for profit. For this reason We believe that the provisions of City of Manila
Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair its free exercise and
enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any person can
engage in any of the businesses, trades or occupations enumerated therein, We do not find that it imposes any charge upon
the enjoyment of a right granted by the Constitution, nor tax the exercise of religious practices.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if applied to plaintiff Society.
But as Ordinance No. 2529 of the City of Manila, as amended, is not applicable to plaintiff-appellant and defendant-appellee
is powerless to license or tax the business of plaintiff Society involved herein for, as stated before, it would impair plaintiff's
right to the free exercise and enjoyment of its religious profession and worship, as well as its rights of dissemination of
religious beliefs, We find that Ordinance No. 3000, as amended is also inapplicable to said business, trade or occupation of
the plaintiff.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from, sentencing
defendant return to plaintiff the sum of P5,891.45 unduly collected from it. Without pronouncement as to costs. It is so
ordered.
TOLENTINO VS. SECRETARY OF FINANCE

FACTS: The valued-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the
sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or
properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No.
7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National
Internal Revenue Code.

The Chamber of Real Estate and Builders Association (CREBA) contends that the imposition of VAT on sales and leases by
virtue of contracts entered into prior to the effectivity of the law would violate the constitutional provision of “non-impairment
of contracts.”

ISSUE: Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract clause under Art. III, sec 10 of the
Bill of Rights.

RULING: No. The Supreme Court the contention of CREBA, that the imposition of the VAT on the sales and leases of real
estate by virtue of contracts entered into prior to the effectivity of the law would violate the constitutional provision of non-
impairment of contracts, is only slightly less abstract but nonetheless hypothetical. It is enough to say that the parties to a
contract cannot, through the exercise of prophetic discernment, fetter the exercise of the taxing power of the State. For not
only are existing laws read into contracts in order to fix obligations as between parties, but the reservation of essential
attributes of sovereign power is also read into contracts as a basic postulate of the legal order. The policy of protecting
contracts against impairment presupposes the maintenance of a government which retains adequate authority to secure the
peace and good order of society. In truth, the Contract Clause has never been thought as a limitation on the exercise of the
State's power of taxation save only where a tax exemption has been granted for a valid consideration.

Such is not the case of PAL in G.R. No. 115852, and the Court does not understand it to make this claim. Rather, its
position, as discussed above, is that the removal of its tax exemption cannot be made by a general, but only by a specific,
law.

Further, the Supreme Court held the validity of Republic Act No. 7716 in its formal and substantive aspects as this has been
raised in the various cases before it. To sum up, the Court holds:

(1) That the procedural requirements of the Constitution have been complied with by Congress in the enactment of the
statute;

(2) That judicial inquiry whether the formal requirements for the enactment of statutes - beyond those prescribed by the
Constitution - have been observed is precluded by the principle of separation of powers;

(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the free exercise of religion,
nor deny to any of the parties the right to an education; and

(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive, oppressive and
confiscatory and that it violates vested rights protected under the Contract Clause are prematurely raised and do not justify
the grant of prospective relief by writ of prohibition.

WHEREFORE, the petitions are DISMISSED.