Sison v.

Ancheta
G.R. No. L-59431

Facts: In the leading case of Sison vs. Ancheta, Petitioner Antero Sison questioned the constitutionality
of B.P. 135. The assailed provision amends section 21 of the National Internal Revenue Code, which
provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net
income, x x x. Under this law, salaried individuals are subject to a graduated tax rates from 1% to 35%
whereas a much higher graduated tax rates of 5% to 60% are applied to self-employed/Professionals.

Petitioner as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his profession vis-à-vis
those which are imposed upon fixed income or salaried individual taxpayer." For him, there is a
transgression of both the equal protection and due process clauses of the constitution as well as of the rule
requiring uniformity in taxation.

Issue: The issue is centered on the question of whether the imposition of a higher tax rate on taxable net
income derived from business or profession than on compensation is constitutionally infirm.

Ruling: The Supreme Court ruled in the negative. In summary, both the due process and equal protection
clauses were not violated. On the concept of uniformity, it was held that indeed, there is a substantial
distinction between the two groups that set them apart as a class.

The discernible basis of classification is the susceptibility of the income to the application of generalized
rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates
to be applied to all of them. As there is practically no overhead expense, these taxpayers are not entitled
to make deductions for income tax purposes because they are in the same situation more or less.
Taxpayers who are recipients of compensation income are set apart as a class.

On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no
uniformity in the costs or expenses necessary to produce their income. It would not be just then to
disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the
same tax rates on the basis of gross income.

It is well-settled then that there is indeed a substantial distinction between these two sets of individual
taxpayers, in compliance with the requirement that taxation shall be uniform and equitable. 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.