July 3, 2018

Hermilando Mandanas, et al., petitioners

Executive Secretary Paquito Ochoa, et al., respondents

FACTS:

The fiscal autonomy guaranteed to local governments under Section 6, Article X of the 1987
Constitution means the power to create their own sources of revenue in addition to their equitable
share in the "national taxes" released by the National Government, as well as the power to allocate
their resources in accordance with their own priorities.

Pursuant to this Constitutional dictum, Congress enacted Republic Act No. 7160, otherwise known as
the Local Government Code (LGC). Sec. 284 of the LGC provides that LGUs shall have an allotment
equivalent to 40% of the the national internal revenue taxes.

The share of the LGUs, known as the Internal Revenue Allotment (IRA), has been regularly released
to the LGUs. According to the implementing rules and regulations of the LGC, the IRA is determined
on the basis of the actual collections of the National Internal Revenue Taxes (NIRTs) as certified by
the Bureau of Internal Revenue (BIR).

Two petitions were filed to challenge the base figure for the computation of the IRA.

In G.R. No. 199802, Cong. Hermilando Mandanas, et al., alleged that the NIRTs certified by the BIR
excluded the NIRTs collected by the Bureau of Customs, specifically excise taxes, value added taxes
(VATs), and documentary stamp taxes (DSTs). Such exclusion resulted in LGUs being deprived of
₱60,750,000,000.00 for FY 2012. Further, the petitioners argued that since this mistake in
computation was happening since 1992, then the National Government has effectively deprived LGUs
of ₱438,103,906,675.73 in their IRA.

Meanwhile, in G.R. No. 208488, Cong. Enrique Garcia, Jr. sought the issuance of the writ of
mandamus to compel respondents to compute the just share of the LGUs on the basis of all national
taxes. He argued that the insertion by Congress of the words "internal revenue" in the phrase
"national taxes" found in Section 284 of the LGC caused the diminution of the base for determining
the just share of the LGUs, and should be declared unconstitutional.

ISSUE:
Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6, Article X
of the 1987 Constitution. -- YES.

HELD:

Section 6 of the Constitution mentions "national taxes" as the source of the just share of the LGUs
while Section 284 of the LGC ordains that the share of the LGUs be taken from "national internal
revenue taxes" instead. Congress thereby infringed the constitutional provision.

Although the power of Congress to make laws is plenary in nature, congressional lawmaking remains
subject to the limitations stated in the 1987 Constitution.

The phrase "national internal revenue taxes" in Section 284 is undoubtedly more restrictive than the
term "national taxes" written in Section 6 of the Constitution. As such, Congress has actually departed
from the letter of the 1987 Constitution stating that national taxes should be the base from which the
just share of the LGU comes. Such departure is impermissible. Verba legis non est recedendum (from
the words of a statute there should be no departure).

Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal autonomy in
favor of the LGUs under the 1987 Constitution.

What the phrase "national internal revenue taxes" as used in Section 284 of the LGC included are all
the taxes enumerated in Section 21 of the National Internal Revenue Code (NIRC), as amended by
R.A. No. 8424, namely: income tax, estate and donor's taxes, VAT, other percentage taxes, excise
taxes, documentary stamp taxes, and such other taxes as may be imposed and collected by the BIR.

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284 of
the LGC has effectively deprived the LGUs from deriving their just share from other national taxes,
like the customs duties.

Moving forward, the BIR and the BOC are directed certify all national tax collections. This ruling, also
known as the "Mandanas Ruling," is to be applied prospectively.
 — CONSTITUTIONAL LAW, POLITICAL LAW, TAXATION —

Tolentino vs. Secretary of Finance G.R. No. 115455 October 30, 1995 Freedom of the
Press

JANUARY 26, 2018

FACTS:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases
for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-
Added Tax Law. Now it is contended by the Philippine Press Institute (PPI) that by removing the
exemption of the press from the VAT while maintaining those granted to others, the law discriminates
against the press. At any rate, it is averred, “even nondiscriminatory taxation of constitutionally
guaranteed freedom is unconstitutional.”

ISSUE:

Does sales tax on bible sales violative of religious and press freedom?

RULING:

No. The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for
regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the
exercise of its right. Hence, although its application to others, such those selling goods, is valid, its
application to the press or to religious groups, such as the Jehovah’s Witnesses, in connection with
the latter’s sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put
it, “it is one thing to impose a tax on income or property of a preacher. It is quite another thing to
exact a tax on him for delivering a sermon.”

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege,
much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or
properties or the sale or exchange of services and the lease of properties purely for revenue
purposes. To subject the press to its payment is not to burden the exercise of its right any more than
to make the press pay income tax or subject it to general regulation is not to violate its freedom
under the Constitution.
 Tolentino v. Secretary of Finance

G.R. No. 115455; October 30, 1995

TOPIC: Constitutional Law, RA 7716, VAT

FACTS:

Philippine Press Institute (PPI) contends that by removing the exemption of the press from the VAT
while maintaining those granted to others, the law discriminates against the press. CREBA asserts
that R.A. No. 7716 impairs the obligations of contracts, and violates the rule that taxes should be
uniform and equitable and that Congress shall “evolve a progressive system of taxation”.

CUP argues that legislature was to adopt a definite policy of granting tax exemption to cooperatives
that the present Constitution embodies provisions on cooperatives. To subject cooperatives to the
VAT would, therefore, be to infringe a constitutional policy.

ISSUE:

Whether or not RA 7716 is unconstitutional.

RULING:

No. In withdrawing the exemption, the law merely subjects the press to the same tax burden to
which other businesses have long ago been subject. The VAT is not a license tax. It is imposed purely
for revenue purposes.

Equality and uniformity of taxation mean that all taxable articles or kinds of property of the same
class be taxed at the same rate. It is enough that the statute or ordinance applies equally to all
persons, firms, and corporations placed in similar situation.