 General Princioles of Tax

o Definition, Concept, and Purpose of Taxation

 Lutz vs Araneta
 FACTS:
 Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio
Jayme Ledesma, sought to recover the sum of P14,666.40 paid by the
estate as taxes from the Commissioner under Section e of
Commonwealth Act 567 or the Sugar Adjustment Act, alleging that such
tax is unconstitutional as it levied for the aid and support of the sugar
industry exclusively, which is in his opinion not a public purpose.
 ISSUE:
 Is the tax valid?
 HELD:
 Yes. The tax is levied with a regulatory purpose, i.e. to provide means
for the rehabilitation and stabilization of the threatened sugar industry.
The act is primarily an exercise of police power and is not a pure
exercise of taxing power.
 As sugar production is one of the great industries of the Philippines and
its promotion, protection and advancement redounds greatly to the
general welfare, the legislature found that the general welfare
demanded that the industry should be stabilized, and provided that the
distribution of benefits had to sustain.
 Further, it cannot be said that the devotion of tax money to
experimental stations to seek increase of efficiency in sugar production,
utilization of by-products, etc., as well as to the improvement of living
and working conditions in sugar mills and plantations without any part
of such money being channeled directly to private persons, constitute
expenditure of tax money for private purposes.
 Hence, the tax is valid.
 PAL vs EDU
 FACTS:
 The Philippine Airlines (PAL) is a corporation engaged in the air
transportation business under a legislative franchise, Act No. 42739.
Under its franchise, PAL is exempt from the payment of taxes.
 Sometime in 1971, however, Land Transportation Commissioner Romeo
F. Elevate (Elevate) issued a regulation pursuant to Section 8, Republic
Act 4136, otherwise known as the Land and Transportation and Traffic
Code, requiring all tax exempt entities, among them PAL to pay motor
vehicle registration fees.
 Despite PAL's protestations, Elevate refused to register PAL's motor
vehicles unless the amounts imposed under Republic Act 4136 were
paid. PAL thus paid, under protest, registration fees of its motor
vehicles. After paying under protest, PAL through counsel, wrote a letter
dated May 19,1971, to Land Transportation Commissioner Romeo Edu
 (Edu) demanding a refund of the amounts paid. Edu denied the request
for refund. Hence, PAL filed a complaint against Edu and National
Treasurer Ubaldo Carbonell (Carbonell).
 The trial court dismissed PAL's complaint. PAL appealed to the Court of
Appeals which in turn certified the case to the Supreme Court.
 ISSUE:
 Whether or not motor vehicle registration fees are considered as taxes.
 RULING:
 Yes. If the purpose is primarily revenue, or if revenue is, at least, one of
the real and substantial purposes, then the exaction is properly called a
tax. Such is the case of motor vehicle registration fees. The motor
vehicle registration fees are actually taxes intended for additional
revenues of the government even if one fifth or less of the amount
collected is set aside for the operating expenses of the agency
administering the program.
 FACTS:
 PAL is engaged in the air transportation business under a legislative
franchise (Act 4271), wherein it is exempt from the payment of taxes.
On the strength of an opinion of the Secretary of Justice, PAL was
determined to have not been paying motor vehicle registration fees
since 1956. The Land Transportation Commissioner required all tax-
exempt entities, including PAL, to pay motor vehicle registration fees.
PAL protested. The trial court dismissed PAL’s complaint. Hence, this
petition.
 ISSUE:
 Are motor vehicle registration fees taxes or regulatory taxes?
 RULING:
 They are taxes. Tax are for revenue, whereas fees are exactions for
purposes of regulation and inspection, and are for that reason limited in
amount to what is necessary to cover the cost of the services rendered
in that connection.
 It is the object of the charge, and not the name, that determines
whether a charge is a tax or a fee. The money collected under the
Motor Vehicle Law is not intended for the expenditures of the Motor
Vehicle Law is not intended for the expenditures of the Motor Vehicles
Office but accrues to the funds for the construction and maintenance of
public roads, streets and bridges.
 As the fees are not collected for regulatory purposes as an incident to
the enforcement of regulations governing the operation of motor
vehicles on public highways, but to provide revenue with which the
Government is to construct and maintain public highways for
everyone’s use, they are veritable taxes, not merely fees.
  PAL is, thus, exempt from paying such fees, except for the period
between June 27, 1968 to April 9, 1979, where its tax exception in the
franchise was repealed.
 Caltex vs COA
 FACTS:
 In 1989, COA sent a letter to Caltex, directing it to remit its collection to
the Oil Price Stabilization Fund (OPSF), excluding that unremitted for the
years 1986 and 1988, of the additional tax on petroleum products
authorized under the PD 1956. Pending such remittance, all of its claims
for reimbursement from the OPSF shall be held in abeyance. The grant
total of its unremitted collections of the above tax is P1,287,668,820.
 Caltex submitted a proposal to COA for the payment and the recovery of
claims. COA approved the proposal but prohibited Caltex from further
offsetting remittances and reimbursements for the current and ensuing
years. Caltex moved for reconsideration but was denied. Hence, the
present petition.
 ISSUE:
 Whether the amounts due from Caltex to the OPSF may be offsetted
against Caltex’s outstanding claims from said funds
 RULING:
 No. Taxation is no longer envisioned as a measure merely to raise
revenue to support the existence of government. Taxes may be levied
with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public
interest as to be within the police power of the State.
 PD 1956, as amended by EO 137, explicitly provides that the source of
OPSF is taxation. A taxpayer may not offset taxes due from the claims he
may have against the government. Taxes cannot be subject of
compensation because the government and taxpayer are not mutually
creditors and debtors of each other and a claim for taxes is not such a
debt, demand, contract or judgment as is allowed to be set-off.
 Hence, COA decision is affirmed except that Caltex’s claim for
reimbursement of underrecovery arising from sales to the National
Power Corporation is allowed.
 Tion vs Videogram
 DOCTRINES:
 Taxation; security against oppressive taxation – 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. In imposing a tax, the legislature acts upon its constituents.
This is, in general, a sufficient security against erroneous and oppressive
taxation.
  Taxation as a revenue and regulatory measure – The tax imposed by the
DECREE is not only a regulatory but also a revenue measure prompted
by the realization that earnings of videogram establishments of around
P600 million per annum have not been subjected to tax, thereby
depriving the Government of an additional source of revenue. . . . The
levy of the 30% tax is for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because
of the rampant film piracy, the flagrant violation of intellectual property
rights, and the proliferation of pornographic video tapes. And while it
was also an objective of the DECREE to protect the movie industry, the
tax remains a valid imposition.
 Undue delegation of legislative power – The grant in Section 11 of the
DECREE of authority to the BOARD to "solicit the direct assistance of
other agencies and units of the government and deputize, for a fixed
and limited period, the heads or personnel of such agencies and units to
perform enforcement functions for the Board" is not a delegation of the
power to legislate but merely a conferment of authority or discretion as
to its execution, enforcement, and implementation. "The true
distinction is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring
authority or discretion as to its execution to be exercised under and in
pursuance of the law. The first cannot be done; to the latter, no valid
objection can be made." Besides, in the very language of the decree, the
authority of the BOARD to solicit such assistance is for a "fixed and
limited period" with the deputized agencies concerned being "subject to
the direction and control of the BOARD." That the grant of such
authority might be the source of graft and corruption would not
stigmatize the DECREE as unconstitutional. Should the eventuality occur,
the aggrieved parties will not be without adequate remedy in law.
 FACTS:
 Valentin Tio is a videogram establishment operator adversely affected
by Presidential Decree No. 1987 entitled "An Act Creating the
Videogram Regulatory Board".
 P.D. No. 1987 provides for the levy of a tax over each cassette sold (Sec.
134) and a 30% tax on the gross receipts of a videogram establishment,
payable to the local government (Sec. 10). The rationale for this decree
is set forth in its preambulatory/whereas clauses to wit:
 1. WHEREAS, the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes ...
have greatly prejudiced the operations of moviehouses and theaters,
and have caused a sharp decline in theatrical attendance by at least
forty percent (40%) and a tremendous drop in the collection of [taxes]
thereby resulting in substantial losses estimated at P450 Million
annually in government revenues;
  2. WHEREAS, videogram(s) establishments collectively earn around
P600 Million per annum from rentals, sales and disposition of
videograms, and such earnings have not been subjected to tax, thereby
depriving the Government of approximately P180 Million in taxes each
year;
 3. WHEREAS, the unregulated activities of videogram establishments
have also affected the viability of the movie industry, ...;
 5. WHEREAS, proper taxation of the activities of videogram
establishments will not only alleviate the dire financial condition of the
movie industry ..., but also provide an additional source of revenue for
the Government, and at the same time rationalize the heretofore
uncontrolled distribution of videograms;
 6. WHEREAS, the rampant and unregulated showing of obscene
videogram features constitutes a clear and present danger to the moral
and spiritual well-being of the youth [READ: PORN], and impairs the
mandate of the Constitution for the State to support the rearing of the
youth for civic efficiency and the development of moral character and
promote their physical, intellectual, and social well-being;
 8. WHEREAS, in the face of these grave emergencies corroding the
moral values of the people [AGAIN, READ: PORN] and betraying the
national economic recovery program, bold emergency measures must
be adopted with dispatch; (emphasis supplied and certain passages
omitted)
 ISSUES:
 The petioner, among others, raised the following issues:
 1. Whether or not the imposition of the 30% tax is a rider and the same
is not germane to the subject matter of the law.
 2. Whether or not there is undue delegation of power and authority;
 HELD:
 1. No, the tax is not a rider and is germane to the purpose and subject
of the law.
 The Constitutional requirement that "every bill shall embrace only one
subject which shall be expressed in the title thereof" is sufficiently
complied with if the title be comprehensive enough to include the
general purpose which a statute seeks to achieve. It is not necessary
that the title express each and every end that the statute wishes to
accomplish. The requirement is satisfied if all the parts of the statute
are related, and are germane to the subject matter expressed in the
title, or as long as they are not inconsistent with or foreign to the
general subject and title.
 Reading section 10 of P.D. No. 1987 closely, one can see that the
foregoing provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the law,
which is the regulation of the video industry through the Videogram
 Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool
for regulation it is simply one of the regulatory and control mechanisms
scattered throughout the decree.
 Aside from revenue collection, tax laws may also be enacted for the
purpose of regulating an activity. At the same time, the videogram
industry is also an untapped source of revenue which the government
may validly tax. All of this is evident from preambulatory clauses nos. 2,
5, 6 and 8, quoted in part above.
 The levy of the 30% tax is also for a public purpose. It was imposed
primarily to answer the need for regulating the video industry,
particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video
tapes. And while it was also an objective of the law to protect the movie
industry, the tax remains a valid imposition.

 2. No. There was no undue delegation of law making authority.
 Petitioner was concerned that Section 11 of P.D. No. 1987 stating that
the videogram board (Board) has authority to "solicit the direct
assistance of other agencies and units of the government and deputize,
for a fixed and limited period, the heads or personnel of such agencies
and units to perform enforcement functions for the Board" is an undue
delegation of legislative power.
 This is not a delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution, enforcement,
and implementation. "The true distinction is between the delegation of
power to make the law, which necessarily involves a discretion as to
what it shall be, and conferring authority or discretion as to its
execution to be exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be made." Besides,
in the very language of the decree, the authority of the Board to solicit
such assistance is for a "fixed and limited period" with the deputized
agencies concerned being "subject to the direction and control of the
Board."
 The petition was DISMISSED.
 Facts:
 The case is a petition filed by petitioner on behalf of videogram
operators adversely affected by Presidential Decree No. 1987, “An Act
Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry.
 A month after the promulgation of the said Presidential Decree, the
amended the National Internal Revenue Code provided that:
 "SEC. 134. Video Tapes. — There shall be collected on each processed
video-tape cassette, ready for playback, regardless of length, an annual
 tax of five pesos; Provided, That locally manufactured or imported blank
video tapes shall be subject to sales tax."
 "Section 10. Tax on Sale, Lease or Disposition of Videograms. —
Notwithstanding any provision of law to the contrary, the province shall
collect a tax of thirty percent (30%) of the purchase price or rental rate,
as the case may be, for every sale, lease or disposition of a videogram
containing a reproduction of any motion picture or audiovisual
program.”
 “Fifty percent (50%) of the proceeds of the tax collected shall accrue to
the province, and the other fifty percent (50%) shall accrue to the
municipality where the tax is collected; PROVIDED, That in Metropolitan
Manila, the tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.”
 The rationale behind the tax provision is to curb the proliferation and
unregulated circulation of videograms including, among others,
videotapes, discs, cassettes or any technical improvement or variation
thereof, have greatly prejudiced the operations of movie houses and
theaters. Such unregulated circulation have caused a sharp decline in
theatrical attendance by at least forty percent (40%) and a tremendous
drop in the collection of sales, contractor's specific, amusement and
other taxes, thereby resulting in substantial losses estimated at P450
Million annually in government revenues.
 Videogram(s) establishments collectively earn around P600 Million per
annum from rentals, sales and disposition of videograms, and these
earnings have not been subjected to tax, thereby depriving the
Government of approximately P180 Million in taxes each year.
 The unregulated activities of videogram establishments have also
affected the viability of the movie industry.
 Issues:
 (1) Whether or not tax imposed by the DECREE is a valid exercise of
police power.
 (2) Whether or nor the DECREE is constitutional.
 Held:
 Taxation has been made the implement of the state's police power. The
levy of the 30% tax is for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because
of the rampant film piracy, the flagrant violation of intellectual property
rights, and the proliferation of pornographic video tapes. And while it
was also an objective of the DECREE to protect the movie industry, the
tax remains a valid imposition.
 We find no clear violation of the Constitution which would justify us in
pronouncing Presidential Decree No. 1987 as unconstitutional and void.
While the underlying objective of the DECREE is to protect the moribund
movie industry, there is no question that public welfare is at bottom of
 its enactment, considering "the unfair competition posed by rampant
film piracy; the erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed video tapes
containing pornographic films and films with brutally violent sequences;
and losses in government revenues due to the drop in theatrical
attendance, not to mention the fact that the activities of video
establishments are virtually untaxed since mere payment of Mayor's
permit and municipal license fees are required to engage in business."
 WHEREFORE, the instant Petition is hereby dismissed. No costs.
 Comm of Customs vs Phil Phosphate Fertilizer Corp

 Manila Memorial Park vs SSWD and SOF
 FACTS:
 RA 7432 was passed into law (amended by RA 9257), granting senior
citizens 20% discount on certain establishments.
 To implement the tax provisions of RA 9257, the Secretary of Finance
and the DSWD issued its own Rules and Regulations.
 Hence, this petition.
 Petitioners are not questioning the 20% discount granted to senior
citizens but are only assailing the constitutionality of the tax deduction
scheme prescribed under RA 9257 and the implementing rules and
regulations issued by the DSWD and the DOF.
 Petitioners posit that the tax deduction scheme contravenes Article III,
Section 9 of the Constitution, which provides that: "private property
shall not be taken for public use without just compensation."
 Respondents maintain that the tax deduction scheme is a legitimate
exercise of the State’s police power.
 ISSUE:
 Whether the legally mandated 20% senior citizen discount is an exercise
of police power or eminent domain.
 RULING:
 The 20% senior citizen discount is an exercise of police power.
 It may not always be easy to determine whether a challenged
governmental act is an exercise of police power or eminent domain. The
judicious approach, therefore, is to look at the nature and effects of the
challenged governmental act and decide on the basis thereof.
 The 20% discount is intended to improve the welfare of senior citizens
who, at their age, are less likely to be gainfully employed, more prone to
illnesses and other disabilities, and, thus, in need of subsidy in
purchasing basic commodities. It serves to honor senior citizens who
presumably spent their lives on contributing to the development and
progress of the nation.
 In turn, the subject regulation affects the pricing, and, hence, the
profitability of a private establishment.
  The subject regulation may be said to be similar to, but with substantial
distinctions from, price control or rate of return on investment control
laws which are traditionally regarded as police power measures.
 The subject regulation differs there from in that (1) the discount does
not prevent the establishments from adjusting the level of prices of
their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior
citizens. Nonetheless, to the degree material to the resolution of this
case, the 20% discount may be properly viewed as belonging to the
category of price regulatory measures which affect the profitability of
establishments subjected thereto. On its face, therefore, the subject
regulation is a police power measure.
 Southern Luzon Drug Corp vs DSWD
 FACTS:
 The case at bar is a Petition for Review on Certiorari assailing the
Decision of the Court of Appeals which dismissed the petition for
prohibition filed by Southern Luzon Drug Corporation (petitioner)
against the Department of Social Welfare and Development , the
National Council for the Welfare of Disabled Persons (now National
Council on Disability Affairs or NCDA), the Department of Finance and
the Bureau of Internal Revenue (collectively, the respondents), which
sought to prohibit the implementation of Section 4(a) of Republic Act
(R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act
of 2003" and Section 32 of R.A. No. 9442, which amends the "Magna
Carta for Disabled Persons," particularly the granting of 20% discount on
the purchase of medicines by senior citizens and persons with disability
(PWD), respectively, and treating them as tax deduction. which
dismissed the petition for prohibition filed by Southern Luzon Drug
Corporation (petitioner) against the Department of Social Welfare and
Development , the National Council for the Welfare of Disabled Persons
(now National Council on Disability Affairs or NCDA), the Department of
Finance and the Bureau of: Internal Revenue (collectively, the
respondents), which sought to prohibit the implementation of Section
4(a) of Republic Act (R.A.) No. 9257, otherwise known as the "Expanded
Senior Citizens Act of 2003" and Section 32 of R.A. No. 9442, which
amends the "Magna Carta for Disabled Persons," particularly the
granting of 20% discount on the purchase of medicines by senior
citizens and persons with disability (PWD),: respectively, and treating
them as tax deduction due to the reason that claiming it affects the
profitability of their business.
 The petitioner is a domestic corporation engaged in the business of
drugstore operation in the Philippines while the respondents are
government' agencies, office and bureau tasked to monitor compliance
with R.A. Nos. 9257 and 9442, promulgate implementing rules and
 regulations for their effective implementation, as well as prosecute and
revoke licenses of erring establishments.
 ISSUES:
 1. Whether or not the Petition for Prohibition may be filed to question
the constitutionality of a law;
 2. Whether or not the case constitute stare decisis
 3. Whether or not the 20% Sales Discount for Senior Citizens PWDs does
not violate the petitioner’s right to equal
 protection of the law
 4. Whether or not the definitions of Disabilities and PWDs are vague and
violates the petitioners right to due process of law
 RULING:
 1. Yes. Prohibition may be filed to question the constitutionality of a
law. Generally, the office of prohibition is to prevent the unlawful and
oppressive exercise of authority and is directed against proceedings that
are done without or in excess of jurisdiction, or with grave abuse of
discretion, there being no appeal or other plain, speedy, and adequate
remedy in the ordinary course of law. It is the remedy to prevent
inferior courts, corporations, boards, or persons from usurping or
exercising a jurisdiction or power with which they have not been vested
by the law. This is, however, not the lone office of an action for
prohibition. In Diaz, et al. v. The Secretary of Finance, et al., prohibition
was also recognized as a proper remedy to prohibit or nullify acts of
executive officials that amount to usurpation of legislative authority.
And, in a number of jurisprudence, prohibition was allowed as a proper
action to assail the constitutionality of a law or prohibit its
implementation.

 2. No. The Court agrees that the ruling in Carlos Superdrug does not
constitute stare decisis to the instant case, not because of the
petitioner's submission of financial statements which were wanting in
the first case, but because it had the good sense of including questions
that had not been raised or deliberated in the former case of Carlos
Superdrug, i.e., validity of the 20% discount granted to PWDs, the
supposed vagueness of the provisions of R.A. No. 9442 and violation of
the equal protection clause.

 3. Yes. The subject laws do not violate the equal protection clause. The
equal protection clause is not infringed by legislation which applies only
to those persons falling within a specified class. If the groupings are
characterized by substantial distinctions that make real differences, one
class may be treated and regulated differently from another." For a
classification to be valid, (1) it must be based upon substantial
distinctions, (2) it must be germane to the purposes of the law, (3) it
 must not be limited to existing conditions only, and (4) it must apply
equally to all members of the same class.

 4. No. The definitions of "disabilities" and "PWDs" are clear and
unequivocal. Section 4(a) of R.A. No. 7277, the precursor of R.A. No.
94421 defines "disabled persons" as follows:
(a) Disabled persons are those suffering from restriction or
different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in the manner or within the range
considered normal for a human being[.]
On the other hand, the term "PWDs" is defined in Section 5.1 of
the IRR of R.A. No. 9442 as follows:

 5.1. Persons with Disability are those individuals defined under Section
4 of [R.A. No.] 7277 [or] An Act Providing for the Rehabilitation, Self-
Development and Self-Reliance of Persons with Disability as amended
and their integration into the Mainstream of Society and for Other
Purposes. This is defined as a person suffering from restriction or
different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in a manner or within the range
considered normal for human being. Disability shall mean (1) a physical
or mental impairment that substantially limits one or more
psychological, physiological or anatomical function of an individual or
activities of such individual; (2) a record of such an impairment; or (3)
being regarded as having such an impairment.

 In view of the foregoing disquisition, Section 4(a) of Republic Act No.
9257 and Section 32 of Republic Act No. 9442 are hereby declared
CONSTITUTIONAL.
 Drugstores Association of the Phil vs National Council on Disability Affairs
 FACTS: RA 7277 mandates a 20% on purchase of medicines in favor of
persons with disabilities.
 ISSUE: Is this an instance of eminent domain?
 HELD: No, this is not an exercise of eminent domain. This is an exercise
of police power to promote the welfare of the people, especially those
who have less in life. Consequently, there is no need for just
compensation. The law leaves reasonable and viable economic
usefulness; hence, there is no “taking.”
 ISSUE: Does the law violate the reasonable means test (due process),
considering it only requires an ID?
 HELD: No, it does not violate due process. The implementation is
reasonable because, before a person is issued a PWD ID, he must first
show a medical certificate of his disability if it is not apparent by the
naked eye.
  ISSUE: Does the law violate equal protection because it only targets
retailers and not all players in the drug industry?
 HELD: No, it does not violate equal protection because the distinction
between retailers and manufacturers, etc. is real and substantial. Equal
protection is not an iron-clad rule.
o Nature and Characteristics of Taxation
 CIR vs Eastern Telecommunications
 Doctrine:
 Lapses in the literal observance of a rule of procedure may be
overlooked when they have not prejudiced the adverse party and
especially when they are more consistent with upholding settled
principles in taxation.
 The burden of strict compliance with statutory and administrative
requirements by the person claiming for a tax refund cannot be offset
by the non-observance of procedural technicalities by the government’s
tax agents when the non-observance of the remedial measure
addressing it does not in any manner prejudice the taxpayer’s due
process rights.
 Facts:
 Eastern filed with the CIR a written application for refund or credit of
unapplied input taxes it paid on the imported equipment purchased
during 1995 and 1996 amounting to P22,013,134.00. To toll the running
of the two-year prescriptive period under the same provision, Eastern
filed an appeal with the CTA. The CTA found that Eastern has a valid
claim for the refund/credit of the unapplied input taxes, declaring it
entitled to a tax refund of P16,229,100.00.
 The CIR filed a motion for reconsideration of the CTA’s decision.
Subsequently, it filed a supplemental motion for reconsideration. The
CTA denied the CIR’s motion for reconsideration. The CIR then elevated
the case to the CA, who affirmed the CTA ruling and likewise denied the
subsequent motion for reconsideration. Hence, the present petition.
 The CIR posits that, applying Section 104(A) of the Tax Code on
apportionment of tax credits, Eastern is entitled to a tax refund of only a
portion of the amount claimed. Since the VAT returns clearly reflected
income from exempt sales, the CIR asserts that this constitutes as an
admission on Eastern’s part that it engaged in transactions not subject
to VAT. Hence, the proportionate allocation of the tax credit to VAT and
non-VAT transactions provided in Section 104(A) of the Tax Code should
apply.
 Eastern objects to the arguments raised in the petition, alleging that
these have not been raised in the Answer filed by the CIR before the
CTA and was only raised. In fact, the CIR only raised the applicability of
Section 104(A) of the Tax Code in his supplemental motion for
reconsideration of the CTA’s ruling. Eastern claims that for the CIR to
 raise such an issue now would constitute a violation of its right to due
process; following settled rules of procedure and fair play, the CIR
should not be allowed at the appeal level to change his theory of the
case.
 Eastern further argues that there is no evidence on record that would
evidently show that respondent is also engaged in other transactions
that are not subject to VAT.
 Issue:
 Whether or not the rule in Section 104(A) of the Tax Code on the
apportionment of tax credits can be applied in appreciating Eastern’s
claim for tax refund, considering that the matter was raised by the CIR
only when he sought reconsideration of the CTA ruling
 Held:
 Yes. The question of the applicability of Section 104(A) of the Tax Code
was already raised but the tax court did not rule on it. This failure
should not be taken against the CIR. The mere declaration of exempt
sales in the VAT returns, whether based on Section 103 of the Tax Code
or some other special law, should have prompted for the application of
Section 104 (A) of the Tax Code to Eastern’s claim.
 The general rule is that appeals can only raise questions of law or fact
that (a) were raised in the court below, and (b) are within the issues
framed by the parties therein (People v. Echegaray, G.R. No. 117472).
An issue which was neither averred in the pleadings nor raised during
trial in the court below cannot be raised for the first time on appeal.
 The rule against raising new issues on appeal is not without exceptions;
it is a procedural rule that the Court may relax when compelling reasons
so warrant or when justice requires it. What constitutes good and
sufficient cause that would merit suspension of the rules is discretionary
upon the courts (CIR v. Mirant Pagbilao Corporation, G.R. No. 159593).
Another exception is when the question involves matters of public
importance.
 “Taxes are the lifeblood of the government.” For this reason, the right
of taxation cannot easily be surrendered; statutes granting tax
exemptions are considered as a derogation of the sovereign authority
and are strictly construed against the person or entity claiming the
exemption. Claims for tax refunds, when based on statutes granting tax
exemption or tax refund, partake of the nature of an exemption; thus,
the rule of strict interpretation against the taxpayer-claimant similarly
applies (CIR v. Fortune Tobacco Corporation, G.R. Nos. 167274-75).
 The taxpayer is charged with the heavy burden of proving that he has
complied with and satisfied all the statutory and administrative
requirements to be entitled to the tax refund. This burden cannot be
offset by the non-observance of procedural technicalities by the
government’s tax agents when the non-observance of the remedial
 measure addressing it does not in any manner prejudice the taxpayer’s
due process rights.
 Lapses in the literal observance of a rule of procedure may be
overlooked when they have not prejudiced the adverse party and
especially when they are more consistent with upholding settled
principles in taxation.
 CIR vs Santos
 FACTS:
o Respondent Guild of Philippine Jewelers seek the nullification of
a provision in the Tariff and Customs Code and to declare such
as unconstitutional for being oppressive in taxing jewelry
compared to other countries.
 ISSUE:
o Is the tax imposed oppressive?
 RULING:
o No. The curt may not question the wisdom f the legislature. The
court cannot subscribe to the theory that the tax rates of other
countries should be used as a yardstick in determining what
may be the proper subjects of taxation in our country.
 Facts:
o Petitioner in this case, the Commissioner of Internal Revenue
and the Commissioner of Customs jointly seek the reversal of
the Decision of herein public respondent, Hon. Apolinario B.
Santos, Presiding Judge of RTC Pasig City, declaring Section
150(a) of Executive Order No. 273 inoperative and without force
and effect insofar as petitioners are concerned. This EO
subjected jewelry to a 20% excise tax in addition to a 10% value-
added tax under the old law.
o Private respondent Guild of Philippine Jewelers, Inc., is an
association of Filipino jewelers engaged in the manufacture of
jewelries and allied undertakings, with private respondent
Antonio M. Marco is the President of the Guild.
o Some of the members of the Guild of Philippine Jewelers were
given a Mission Order not to sell the jewelries and other articles
displayed in their respective establishments until it can be
proven that the necessary taxes thereon have been paid. In
response, Private Respondent prayed that Regional Trial Court
declare Sections 126, 127(a) and (b) and 150(a) of the National
Internal Revenue Code and Hdg. No. 71.01, 71.02, 71.03, and
71.04, Chapter 71 of the Tariff and Customs Code of the
Philippines unconstitutional and void, and that the
Commissioner of Internal Revenue and Customs be prevented
or enjoined from issuing mission orders and other orders of
similar nature. It even submitted a position paper purporting to
 be an exhaustive study of the tax rates on jewelry prevailing in
other Asian countries, in comparison to tax rates levied on the
same in the Philippines.
 Issue:
o Can the Regional Trial Courts declare a law inoperative and
without force and effect or otherwise unconstitutional?
 Held:
o No. This is a matter on which the RTC is not competent to rule.
As Cooley observed: “Debatable questions are for the
legislature to decide. The courts do not sit to resolve the merits
of conflicting issues.” In Angara vs. Electoral Commission, Justice
Laurel made it clear that “the judiciary does not pass upon
questions of wisdom, justice or expediency of legislation.” And
fittingly so, for in the exercise of judicial power, we are allowed
only “to settle actual controversies involving rights which are
legally demandable and enforceable,” and may not annul an act
of the political departments simply because we feel it is unwise
or impractical. This is not to say that Regional Trial Courts have
no power whatsoever to declare a law unconstitutional. In J.M.
Tuason and Co. v. Court of Appeals, we said that “[p]lainly the
Constitution contemplates that the inferior courts should have
jurisdiction in cases involving constitutionality of any treaty or
law, for it speaks of appellate review of final judgments of
inferior courts in cases where such constitutionality happens to
be in issue.”
o This authority of lower courts to decide questions of
constitutionality in the first instance was reaffirmed in Ynot v.
Intermediate Appellate Court. But this authority does not
extend to deciding questions which pertain to legislative policy.
o The trial court is not the proper forum for the ventilation of the
issues raised by the private respondents. The arguments they
presented focus on the wisdom of the provisions of law which
they seek to nullify. Regional Trial Courts can only look into the
validity of a provision, that is, whether or not it has been passed
according to the procedures laid down by law, and thus cannot
inquire as to the reasons for its existence. Granting arguendo
that the private respondents may have provided convincing
arguments why the jewelry industry in the Philippines should
not be taxed as it is, it is to the legislature that they must resort
to for relief, since with the legislature primarily lies the
discretion to determine the nature (kind), object (purpose),
extent (rate), coverage (subjects) and situs(place) of taxation.
This Court cannot freely delve into those matters which, by
constitutional fiat, rightly rest on legislative judgment.
 o As succinctly put in Lim vs. Pacquing: “Where a controversy may
be settled on a platform other than one involving constitutional
adjudication, the court should exercise becoming modesty and
avoid the constitutional question.” As judges, we can only
interpret and apply the law and, despite our doubts about its
wisdom, cannot repeal or amend it.
o The respondents presented an exhaustive study on the tax rates
on jewelry levied by different Asian countries. This is meant to
convince us that compared to other countries, the tax rates
imposed on said industry in the Philippines is oppressive and
confiscatory. This Court, however, cannot subscribe to the
theory that the tax rates of other countries should be used as a
yardstick in determining what may be the proper subjects of
taxation in our own country. It should be pointed out that in
imposing the aforementioned taxes and duties, the State, acting
through the legislative and executive branches, is exercising its
sovereign prerogative. It is inherent in the power to tax that the
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.”
 CREBA vs Romulo
 FACTS:
o CREBA assails the imposition of the minimum corporate income
tax (MCIT) as being violative of the due process clause as it
levies income tax even if there is no realized gain. They also
question the creditable withholding tax (CWT) on sales of real
properties classified as ordinary assets stating that (1) they
ignore the different treatment of ordinary assets and capital
assets; (2) the use of gross selling price or fair market value as
basis for the CWT and the collection of tax on a per transaction
basis (and not on the net income at the end of the year) are
inconsistent with the tax on ordinary real properties; (3) the
government collects income tax even when the net income has
not yet been determined; and (4) the CWT is being levied upon
real estate enterprises but not on other enterprises, more
particularly those in the manufacturing sector.
 ISSUE:
o Are the impositions of the MCIT on domestic corporations and
CWT on income from sales of real properties classified as
ordinary assets unconstitutional?
 HELD:
o NO. MCIT does not tax capital but only taxes income as shown
by the fact that the MCIT is arrived at by deducting the capital
 spent by a corporation in the sale of its goods, i.e., the cost of
goods and other direct expenses from gross sales. Besides,
there are sufficient safeguards that exist for the MCIT: (1) it is
only imposed on the 4th year of operations; (2) the law allows
the carry forward of any excess MCIT paid over the normal
income tax; and (3) the Secretary of Finance can suspend the
imposition of MCIT in justifiable instances.
o The regulations on CWT did not shift the tax base of a real
estate business’ income tax from net income to GSP or FMV of
the property sold since the taxes withheld are in the nature of
advance tax payments and they are thus just installments on
the annual tax which may be due at the end of the taxable year.
As such the tax base for the sale of real property classified as
ordinary assets remains to be the net taxable income and the
use of the GSP or FMV is because these are the only factors
reasonably known to the buyer in connection with the
performance of the duties as a withholding agent.
o Neither is there violation of equal protection even if the CWT is
levied only on the real industry as the real estate industry is, by
itself, a class on its own and can be validly treated different
from other businesses.
 FACTS:
o Petitioner is an association of real estate developers and
builders in the Philippines. It impleaded former Executive
Secretary Alberto Romulo, then acting Secretary of Finance
Juanita D. Amatong and then Commissioner of Internal Revenue
Guillermo Parayno, Jr. as respondents.
o 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.
o 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.
o 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.
o 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.
 ISSUES:
o Whether or not the imposition of the MCIT on domestic
corporations is unconstitutional?
o 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?
 HELD:
o The petition is dismissed.
 TAXATION LAW: authority of the secretary of finance
o The Secretary of Finance is granted, under Section 244 of RA
8424, the authority to promulgate the necessary rules and
regulations for the effective enforcement of the provisions of
the law. Such authority is subject to the limitation that the rules
and regulations must not override, but must remain consistent
and in harmony with, the law they seek to apply and
implement. It is well-settled that an administrative agency
cannot amend an act of Congress.
o It has been recognized that the method of withholding tax at
source is a procedure of collecting income tax which is
sanctioned by our tax laws. The withholding tax system was
devised for three primary reasons: first, to provide the taxpayer
a convenient manner to meet his probable income tax liability;
second, to ensure the collection of income tax which can
otherwise be lost or substantially reduced through failure to file
the corresponding returns and third, to improve the
governments cash flow. This results in administrative savings,
prompt and efficient collection of taxes, prevention of
delinquencies and reduction of governmental effort to collect
taxes through more complicated means and remedies.
o Respondent Secretary has the authority to require the
withholding of a tax on items of income payable to any person,
national or juridical, residing in the Philippines. Such authority is
derived from Section 57(B) of RA 8424
 o The questioned provisions of RR 2-98, as amended, are well
within the authority given by Section 57(B) to the Secretary, i.e.,
the graduated rate of 1.5%-5% is between the 1%-32% range;
the withholding tax is imposed on the income payable and the
tax is creditable against the income tax liability of the taxpayer
for the taxable year.
o Taxation vs Police Power vs Eminent Domain Power
o Theory and Basis of Taxation
 CIR vs Algue
 Facts:
 Algue Inc. is a domestic corp engaged in engineering, construction and
other allied activities
 On Jan. 14, 1965, the corp received a letter from the CIR regarding its
delinquency income taxes from 1958-1959, amtg to P83,183.85
 A letter of protest or reconsideration was filed by Algue Inc on Jan 18
 On March 12, a warrant of distraint and levy was presented to Algue
Inc. thru its counsel, Atty. Guevara, who refused to receive it on the
ground of the pending protest
 Since the protest was not found on the records, a file copy from the
corp was produced and given to BIR Agent Reyes, who deferred service
of the warrant
 On April 7, Atty. Guevara was informed that the BIR was not taking any
action on the protest and it was only then that he accepted the warrant
of distraint and levy earlier sought to be served
 On April 23, Algue filed a petition for review of the decision of the CIR
with the Court of Tax Appeals
 CIR contentions:
o the claimed deduction of P75,000.00 was properly disallowed
because it was not an ordinary reasonable or necessary
business expense
o payments are fictitious because most of the payees are
members of the same family in control of Algue and that there
is not enough substantiation of such payments
 CTA: 75K had been legitimately paid by Algue Inc. for actual services
rendered in the form of promotional fees. These were collected by the
Payees for their work in the creation of the Vegetable Oil Investment
Corporation of the Philippines and its subsequent purchase of the
properties of the Philippine Sugar Estate Development Company.
 Issue:
 W/N the Collector of Internal Revenue correctly disallowed the
P75,000.00 deduction claimed by Algue as legitimate business expenses
in its income tax returns
 Ruling:
 Taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance, made in accordance with law.
 RA 1125: the appeal may be made within thirty days after receipt of the
decision or ruling challenged
 During the intervening period, the warrant was premature and could
therefore not be served.
 Originally, CIR claimed that the 75K promotional fees to be personal
holding company income, but later on conformed to the decision of CTA
 There is no dispute that the payees duly reported their respective
shares of the fees in their income tax returns and paid the
corresponding taxes thereon. CTA also found, after examining the
evidence, that no distribution of dividends was involved
 CIR suggests a tax dodge, an attempt to evade a legitimate assessment
by involving an imaginary deduction
 Algue Inc. was a family corporation where strict business procedures
were not applied and immediate issuance of receipts was not required.
at the end of the year, when the books were to be closed, each payee
made an accounting of all of the fees received by him or her, to make up
the total of P75,000.00. This arrangement was understandable in view
of the close relationship among the persons in the family corporation
 The amount of the promotional fees was not excessive. The total
commission paid by the Philippine Sugar Estate Development Co. to
Algue Inc. was P125K. After deducting the said fees, Algue still had a
balance of P50,000.00 as clear profit from the transaction. The amount
of P75,000.00 was 60% of the total commission. This was a reasonable
proportion, considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil Investment
Corporation to the actual purchase by it of the Sugar Estate properties.
 Sec. 30 of the Tax Code: allowed deductions in the net income –
Expenses - All the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal
services actually rendered xxx
 the burden is on the taxpayer to prove the validity of the claimed
deduction
 In this case, Algue Inc. has proved that the payment of the fees was
necessary and reasonable in the light of the efforts exerted by the
payees in inducing investors and prominent businessmen to venture in
an experimental enterprise and involve themselves in a new business
requiring millions of pesos.
 Taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate
and operate it. Hence, despite the natural reluctance to surrender part
of one's hard earned income to the taxing authorities, every person who
 is able to must contribute his share in the running of the government.
The government for its part, is expected to respond in the form of
tangible and intangible benefits intended to improve the lives of the
people and enhance their moral and material values
 Taxation must be exercised reasonably and in accordance with the
prescribed procedure. If it is not, then the taxpayer has a right to
complain and the courts will then come to his succor
 Algue Inc.’s appeal from the decision of the CIR was filed on time with
the CTA in accordance with Rep. Act No. 1125. And we also find that the
claimed deduction by Algue Inc. was permitted under the Internal
Revenue Code and should therefore not have been disallowed by the
CIR
 FACTS:
 The BIR assessed Algue a total amount of delinquency taxes of Php
83,183.85 for the years 1958 and 1959. It contends that the company's
claimed deduction of Php 75,000 in the form of promotional fees is
disallowed because it was not ordinary reasonable or necessary
business expenses. Algue filed a protest.
 BIR did not take any action. So, Algue filed a petition for review with the
Court of Tax Appeals which rule in favor of Algue. Thus, the current
petition.
 ISSUE:
 Whether the BIR correctly disallowed the deduction
 RULING:
 No.
 The burden is on the taxpayer to prove the validity of the claimed
deduction. Here, the onus has been discharged satisfactorily. Here, the
onus has been discharged satisfactorily. The promotional fees were
necessary and reasonable in the light of the efforts exerted by the
payees in the inducement of investors to venture in an experimental
enterprise. Thus, the payees should be sufficiently recompensed.
 CIR vs CA

 Davao Gulf Lumber Co vs CIR
 FACTS:
 Republic Act No. 1435 entitles miners and forest concessioners to the
refund of 25% of the specific taxes paid by the oil companies, which
were eventually passed on to the user--the petitioner in this case--in the
purchase price of the oil products. Petitioner filed before respondent
Commissioner of Internal Revenue (CIR) a claim for refund in the
amount representing 25% of the specific taxes actually paid on the
above-mentioned fuels and oils that were used by petitioner in its
operations. However petitioner asserts that equity and justice demands
that the refund should be based on the increased rates of specific taxes
 which it actually paid, as prescribed in Sections 153 and 156 of the NIRC.
Public respondent, on the other hand, contends that it should be based
on specific taxes deemed paid under Sections 1 and 2 of RA 1435.
 ISSUE:
 Should the petitioner be entitled under Republic Act No. 1435 to the
refund of 25% of the amount of specific taxes it actually paid on various
refined and manufactured mineral oils and other oil products, and not
on the taxes deemed paid and passed on to them, as end-users, by the
oil companies?
 HELD:
 No. According to an eminent authority on taxation, "there is no tax
exemption solely on the ground of equity." Thus, the tax refund should
be based on the taxes deemed paid. Because taxes are the lifeblood of
the nation, statutes that allow exemptions are construed strictly against
the grantee and liberally in favor of the government. Otherwise stated,
any exemption from the payment of a tax must be clearly stated in the
language of the law; it cannot be merely implied therefrom.
 Lessons Applicable: tax exemption should be construed strictissimi juris against
the grantee, equity is not a ground for tax exemption
 Laws Applicable:
 FACTS:
 Davao Gulf Lumber Corporation, a licensed forest concessionaire
possessing a Timber License Agreement granted by the Ministry of
Natural Resources (Now DENR), purchased from various oil companies
refined and manufactured oils as well as motor and diesel fuels for its
exploitation and operation.
 Selling companies paid and passed the specific taxes imposed under
Sec. 153 and 156 of the 1997 NIRC to petitioner as purchaser who in
turn filed before CIR a Claim for Refund for P120, 825 representing 25%
of the specific taxes actually paid based on Insular Lumber Co. v. CTA
and Sec. 5 of RA 1435 and complied with its procedure.
 Then, petitioner filed before CA a Petition for Review: Favored
petitioner to a partial refund P2,923 (excluding those that have
prescribed) and based on the rates deemed paid under RA 1435 (NOT
higher rates actually paid under the NIRC)
 Insisting that the basis be the higher rate, petitioner elevated the case
to the CTA who affirmed the CA's decision
 ISSUE:
 W/N the basis should be the higher rates prescribed by Sec. 153 and
156 of the 1997 NIRC
 HELD:
 NO. A tax cannot be imposed unless it is supported by the clear and
express language of a statute; On the other hand, once the tax is
unquestionably imposed, a claim of exemption from tax payments must
 be clearly shown and based on language in the law too plain to be
mistaken. Section 5, RA 1435 as a tax exemption, must be construed
strictissimi juris against the grantee.
 Supported by CIR v. CA and Atlas Co., CIR v. Rio Tuba Nickel Mining
Corp. and Insular Lumber Co. - all cases where purchases was made
BEFORE 1997 NIRC is in effect.
 According to an eminent authority on taxation, there is no tax
exemption solely on the ground of equity
 Phil. Guarranty Co. vs Commissioner
 FACTS:
 The petitioner Philippine Guaranty Co., Inc., a domestic insurance
company, entered into reinsurance contracts with foreign insurance
companies not doing business in the country, thereby ceding to foreign
reinsurers a portion of the premiums on insurance it has originally
underwritten in the Philippines. The premiums paid by such companies
were excluded by the petitioner from its gross income when it file its
income tax returns for 1953 and 1954. Furthermore, it did not withhold
or pay tax on them. Consequently, the CIR assessed against the
petitioner withholding taxes on the ceded reinsurance premiums to
which the latter protested the assessment on the ground that the
premiums are not subject to tax for the premiums did not constitute
income from sources within the Philippines because the foreign
reinsurers did not engage in business in the Philippines, and CIR's
previous rulings did not require insurance companies to withhold
income tax due from foreign companies.
 ISSUE:
 Are insurance companies not required to withhold tax on reinsurance
premiums ceded to foreign insurance companies, which deprives the
government from collecting the tax due from them?
 HELD:
 No. The power to tax is an attribute of sovereignty. It is a power
emanating from necessity. It is a necessary burden to preserve the
State's sovereignty and a means to give the citizenry an army to resist
an aggression, a navy to defend its shores from invasion, a corps of civil
servants to serve, public improvement designed for the enjoyment of
the citizenry and those which come within the State's territory, and
facilities and protection which a government is supposed to provide.
Considering that the reinsurance premiums in question were afforded
protection by the government and the recipient foreign reinsurers
exercised rights and privileges guaranteed by our laws, such reinsurance
premiums and reinsurers should share the burden of maintaining the
state. The petitioner's defense of reliance of good faith on rulings of the
CIR requiring no withholding of tax due on reinsurance premiums may
free the taxpayer from the payment of surcharges or penalties imposed
 for failure to pay the corresponding withholding tax, but it certainly
would not exculpate it from liability to pay such withholding tax. The
Government is not estopped from collecting taxes by the mistakes or
errors of its agents.
o Principles of a Sound Tax System
 Diaz vs Secretary of Finance
 May toll fees collected by tollway operators be subject to VAT?
 YES.
 (1) VAT is imposed on “all kinds of services” and tollway operators who
are engaged in constructing, maintaining, and operating expressways
are no different from lessors of property, transportation contractors,
etc.
 (2) Not only do they fall under the broad term under (1) but also come
under those described as “all other franchise grantees” which is not
confined only to legislative franchise grantees since the law does not
distinguish. They are also not a franchise grantee under Section 119
which would have made them subject to percentage tax and not VAT.
 (3) Neither are the services part of the enumeration under Section 109
on VAT-exempt transactions.
 (4) The toll fee is not a user’s tax and thus it is permissible to impose a
VAT on the said fee. The MIAA case does not apply and the Court
emphasized that toll fees are not taxes since they are not assessed by
the BIR and do not go the general coffers of the government. Toll fees
are collected by private operators as reimbursement for their costs and
expenses with a view to a profit while taxes are imposed by the
government as an attribute of its sovereignty. Even if the toll fees were
treated as user’s tax, the VAT can not be deemed as a ‘tax on tax’ since
the VAT is imposed on the tollway operator and the fact that it might
pass-on the same to the tollway user, it will not make the latter directly
liable for VAT since the shifted VAT simply becomes part of the cost to
use the tollways.
 (5) The assertion that the VAT imposed is not administratively feasible
given the manner by which the BIR intends to implement the VAT (i.e.,
rounding off the toll rates and putting any excess collection in an escrow
account) is not enough to invalidate the law. Non-observance of the
canon of administrative feasibility will not render a tax imposition
invalid “except to the extent that specific constitutional or statutory
limitations are impaired”.