Pepsi-Cola Bottling Company of the Philippines, Inc. vs.

Municipality of Tanauan Leyte

G.R. No. L-31156; February 27, 1976

Facts:
Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In September 1962, the
Municipality approved Ordinance No. 23 which levies and collects “from soft drinks producers and
manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked.”

In December 1962, the Municipality also approved Ordinance No. 27 which levies and collects “on soft
drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one
centavo P0.01 on each gallon of volume capacity.”

Pepsi Cola assailed the validity of the ordinances as it alleged that they constitute double taxation in
two instances: a) double taxation because Ordinance No. 27 covers the same subject matter and impose
practically the same tax rate as with Ordinance No. 23, b) double taxation because the two ordinances
impose percentage or specific taxes.

Pepsi Cola also questions the constitutionality of Republic Act 2264 which allows for the delegation of
taxing powers to local government units; that allowing local governments to tax companies like Pepsi
Cola is confiscatory and oppressive.

Issue:
1. Whether or not there is undue delegation of taxing powers.
2. Whether or not there is double taxation.

Held:
1. No. Under the New Constitution, local governments are granted the autonomous
authority to create their own sources of revenue and to levy taxes. Section 5, Article XI
provides: “Each local government unit shall have the power to create its sources of revenue
and to levy taxes, subject to such limitations as may be provided by law.” Thus, legislative
powers may be delegated to local governments in respect of matters of local concern.

2. No. There is no double taxation. The intention of the Municipal Council of Tanauan in
enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior
ordinance no. 23 and operates as a repeal of the latter, even without words to that effect.
The tax is not a percentage tax as the volume capacity of the taxpayer’s production of
softdrinks is considered solely for purposes of determining the tax rate on the products but
there is no set ratio between volume of sales and amount of the tax. Nor can the tax levied be
treated as a specific tax. Softdrink is not one of those specified articles.

It must be observed that the delegating authority specifies the limitations and enumerates the
taxes over which local taxation may not be exercised. The reason is that the State has
exclusively reserved the same for its own prerogative. Moreover, double taxation, in
general, is not forbidden by our fundamental law unlike in other jurisdictions. Double
taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the
same governmental entity or by the same jurisdiction for the same purpose, but not in a
case where one tax is imposed by the State and the other by the city or municipality.