ABAKADA HELD:

GURO PARTY
LIST VS. Uniformity of Taxation; The rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation, and only demands uniformity
ERMITA within the particular class.—Uniformity in taxation means that all taxable kinds of property of the same class shall be taxed at the same rate. Different
articles may be taxed at different amounts provided that the rate is uniform on the same class everywhere with all people at all times. In this case, the tax
law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and sale of services
and use or lease of properties. These same sections also provide for a 0% rate on certain sales and transaction. Neither does the law make any distinction
as to the type of industry or trade that will bear the 70% limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital
goods or the 5% final withholding tax by the government. It must be stressed that the rule of uniform taxation does not deprive Congress of the power to
classify subjects of taxation, and only demands uniformity within the particular class.

The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of progressive taxation has no relation with the VAT
system inasmuch as the VAT paid by the consumer or business for every goods bought or services enjoyed is the same regardless of income. In other
words, the VAT paid eats the same portion of an income, whether big or small. The disparity lies in the income earned by a person or profit margin marked
by a business, such that the higher the income or profit margin, the smaller the portion of the income or profit that is eaten by VAT. A converso, the lower
the income or profit margin, the bigger the part that the VAT eats away. At the end of the day, it is really the lower income group or businesses with low-
profit margins that is always hardest hit.

TOLENTINO VS. HELD:

SECRETARY OF
FINANCE The Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall “evolve a progressive
system of taxation.” The Court stated in the Tolentino case, thus: The Constitution does not really prohibit the imposition of indirect taxes which, like the
VAT, are regressive. What it simply provides is that Congress shall ‘evolve a progressive system of taxation.’ The constitutional provision has been
interpreted to mean simply that ‘direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized.’ (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 [Second ed. 1977]) Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax
system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the procla mation of Art. VIII, §17 (1)
of the 1973 Constitution from which the present Art. VI, §28 (1) was taken. Sales taxes are also regressive. Resort to indirect taxes should be minimized
but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case
of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, §3, amending
§102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4 amending §103 of the NIRC)
CIR VS. HELD:
MAGSAYSAY
LINES Value Added Tax (VAT); The tax is levied only on the sale, barter or exchange of goods or services by persons who engage in such activities in the course
of trade or business.

What is clear therefore, based on the aforecited jurisprudence, is that “course of business” or “doing business” connotes regularity of activity. In the instant
case, the sale was an isolated transaction. The sale which was involuntary and made pursuant to the declared policy of Government for privatization could
no longer be repeated or carried on with regularity. It should be emphasized that the normal VAT-registered activity of NDC is leasing personal property.
PHIL HELD
ACETYLENE
VS. CIR We agree with the Court of Tax Appeals in rejecting this contention of the petitioner. Said the respondent court:
CIR VS JOHN "In context, direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those
GOTAMCO & that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else. (Pollock vs.
SONS Farmers, L & T Co., 1957 US 429,15 S. Ct. 673, 39 Law. Ed. 759.) The contractor's tax is of course payable by the contractor but in the last analysis it is
the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of selfpreservation.
Thus, it is an indirect tax. And it is an indirect tax on the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO.
In the last analysis it is the WHO that will pay the tax indirectly through the contractor and it certainly cannot be said that 'this tax has no bearing upon the
World Health Organization.' "

Petitioner claims that under the authority of the Philippine Acetylene Company versus Commissioner of Internal Revenue, et al.,3 the 3% contractor's tax
falls directly on Gotamco and cannot be shifted to the WHO. The Court of Tax Appeals, however, held that the said case is not controlling in this case,
since the Host Agreement specifically exempts the WHO from "indirect taxes." We agree. The Philippine Acetylene case involved a tax on sales of goods
which under the law had to be paid by the manufacturer or producer; the fact that the manufacturer or producer might have added the amount of the tax to
the price of the goods did not make the sales tax "a tax on the purchaser." The Court held that the sales tax must be paid by the manufacturer or producer
even if the sale is made to tax-exempt entities like the National Power Corporation, an agency of the Philippine Government, and to the Voice of America,
an agency of the United States Government. The Host Agreement, in specifically exempting the WHO from "indirect taxes," contemplates taxes which,
although not imposed upon or paid by the Organization directly, form part of the price paid or to be paid by it. This is made clear in Section 12 of the Host
Agreement which provides:
"While the Organization will not, as a general rule, in the case of minor purchases, claim exemption from excise duties, and from taxes on the sale of
movable and immovable property which form part of the price to be paid, nevertheless, when the Organization is making important purchases for official
use of property on which such duties and taxes have been charged or are chargeable the Government of the Republic of the Philippines shall make
appropriate administrative arrangements for the remission or return of the amount of duty or tax." (Italics supplied).
The above-quoted provision, although referring only to purchases made by the WHO, elucidates the clear intention of the Agreement to exempt the WHO
from "indirect" taxation. The certification issued by the WHO, dated January 20, 1960, sought exemption of the contractor, Gotamco, from any taxes in
connection with the construction of the WHO office building. The 3% contractor's tax would be within this category and should be viewed as a form of an
"indirect tax" on the Organization, as the payment thereof or its inclusion in the bid price would have meant an increase in the construction cost of the
building. Accordingly, finding no reversible error committed by the respondent Court of Tax Appeals, the appealed decision is hereby affirmed.