2022 FORECAST Taxation Law

TAXATION LAW
from the doctrines and cases cited

during the lecture of Judge Noel M. Ortega
Oct. 24, 2022
When a non-stock, nonprofit educational institution proves that it uses its revenues actually,
directly, and exclusively for educational purposes, it shall be exempted from income tax, value-
added tax (VAT), and local business tax. On the other hand, when it also shows that it uses its
assets in the form of real property for educational purposes, it shall be exempted from real
property tax.
Thus, when a non-stock, nonprofit educational institution proves that it uses its revenues
actually, directly, and exclusively for educational purposes, it shall be exempted from income tax,
VAT, and LBT. On the other hand, when it also shows that it uses its assets in the form of real
property for educational purposes, it shall be exempted from RPT. Commissioner of Internal
Revenue vs. De La Salle University, Inc., 808 SCRA 156, G.R. No. 196596, G.R. No. 198841, G.R.
No. 198941 November 9, 2016
Income and revenues of non-stock, nonprofit educational institution not used actually, directly
and exclusively for educational purposes are not exempt from duties and taxes.
Parenthetically, income and revenues of non-stock, nonprofit educational institution not used
actually, directly and exclusively for educational purposes are not exempt from duties and taxes.
To avail of the exemption, the taxpayer must factually prove that it used actually, directly and
exclusively for educational purposes the revenues or income sought to be exempted.
Commissioner of Internal Revenue vs. De La Salle University, Inc., 808 SCRA 156, G.R. No.
196596, G.R. No. 198841, G.R. No. 198941 November 9, 2016
Section 30 (Exemptions from Tax on Corporations) of the National Internal Revenue Code (NIRC)
and Section 27 (Rates of Income Tax on Domestic Corporations)
While a non-stock, nonprofit educational institution is classified as a tax-exempt entity under

Section 30 (Exemptions from Tax on Corporations) of the Tax Code, a proprietary educational
institution is covered by Section 27 (Rates of Income Tax on Domestic Corporations).
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A proprietary educational institution is entitled only to the reduced rate of ten percent (10%)
corporate income tax. The reduced rate is applicable only if: (1) the proprietary educational
institution is nonprofit and (2) its gross income from unrelated trade, business or activity does
not exceed fifty percent (50%) of its total gross income.
By the Tax Code’s clear terms, a proprietary educational institution is entitled only to the reduced
rate of 10% corporate income tax. The reduced rate is applicable only if: (1) the proprietary
educational institution is nonprofit and (2) its gross income from unrelated trade, business or
activity does not exceed 50% of its total gross income. Commissioner of Internal Revenue vs. De
La Salle University, Inc., 808 SCRA 156, G.R. No. 196596, G.R. No. 198841, G.R. No. 198941
November 9, 2016
The last paragraph of Section 30 of the National Internal Revenue Code (NIRC) is declared
without force and effect for being contrary to the Constitution insofar as it subjects to tax the
income and revenues of non-stock, nonprofit educational institutions used actually, directly
and exclusively for educational purpose.
Thus, we declare the last paragraph of Section 30 of the Tax Code without force and effect for
being contrary to the Constitution insofar as it subjects to tax the income and revenues of non-
stock, nonprofit educational institutions used actually, directly and exclusively for educational
purpose. We make this declaration in the exercise of and consistent with our duty to uphold the
primacy of the Constitution. Commissioner of Internal Revenue vs. De La Salle University, Inc.,
808 SCRA 156, G.R. No. 196596, G.R. No. 198841, G.R. No. 198941 November 9, 2016
The requirement to specify the taxable period covered by the Letter of Authority (LOA) is simply
to inform the taxpayer of the extent of the audit and the scope of the revenue officer’s
authority.
Read in this light, the requirement to specify the taxable period covered by the LOA is simply to
inform the taxpayer of the extent of the audit and the scope of the revenue officer’s authority.
Without this rule, a revenue officer can unduly burden the taxpayer by demanding random
accounting records from random unverified years, which may include documents from as far back
as ten years in cases of fraud audit. Commissioner of Internal Revenue vs. De La Salle University,
Inc., 808 SCRA 156, G.R. No. 196596, G.R. No. 198841, G.R. No. 198941 November 9, 2016

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The Court will not lightly set aside the conclusions reached by the Court of Tax Appeals (CTA)
which, by the very nature of its function of being dedicated exclusively to the resolution of tax
problems, has developed an expertise on the subject, unless there has been an abuse or
improvident exercise of authority.
It is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which,
by the very nature of its function of being dedicated exclusively to the resolution of tax problems,
has developed an expertise on the subject, unless there has been an abuse or improvident
exercise of authority. We thus accord the findings of fact by the CTA with the highest respect.
Equality and uniformity of taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate.
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. A tax is uniform when it operates with the same force and
effect in every place where the subject of it is found. Commissioner of Internal Revenue vs. De
La Salle University, Inc., 808 SCRA 156, G.R. No. 196596, G.R. No. 198841, G.R. No. 198941
November 9, 2016
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Unlike the national government, Local Government Units (LGUs) have no inherent power to
tax. They merely derive the power from Article X, Section 5 of the 1987 Constitution.
Unlike the national government, local government units have no inherent power to tax. They
merely derive the power from Article X, Section 5 of the 1987 Constitution. Consistent with this
provision, the Local Government Code was enacted to give each local government unit the power
to create its own sources of revenue and to levy taxes, fees, and charges subject to statutory
guidelines and limitations. City of Cagayan de Oro vs. Cagayan Electric Power & Light Co., Inc.
(CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17, 2018

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“Taxes” and “Fees,” as Defined
The term “taxes” has been defined by case law as “the enforced proportional contributions from
persons and property levied by the state for the support of government and for all public needs.”
While, under the Local Government Code, a “fee” is defined as “any charge fixed by law or
ordinance for the regulation or inspection of a business or activity. City of Cagayan de Oro vs.
Cagayan Electric Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17,
2018
The purpose of an imposition will determine its nature as either a tax or a fee. If the purpose is
primarily revenue, or if revenue is at least one of the real and substantial purposes, then the
exaction is properly classified as an exercise of the power to tax. On the other hand, if the
purpose is primarily to regulate, then it is deemed an exercise of police power in the form of a
fee, even though revenue is incidentally generated.
Stated otherwise, if generation of revenue is the primary purpose, the imposition is a tax but, if
regulation is the primary purpose, the imposition is properly categorized as a regulatory fee. City
of Cagayan de Oro vs. Cagayan Electric Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No.
224825 October 17, 2018
An appeal of a tax ordinance or revenue measure should be made to the Secretary of Justice
within thirty (30) days from the effectivity of the ordinance.
Proceeding to the question of non-exhaustion, the Court rules that ordinances that impose
regulatory fees do not need to be challenged before the Secretary of Justice. To be sure, this is
not a novel issue. Section 187 of the Local Government Code, which outlines the administrative
procedure for questioning the constitutionality or legality of a tax ordinance or revenue measure,
does not find application in cases where the imposition is in the nature of a regulatory fee. The
provision requires that an appeal of a tax ordinance or revenue measure should be made to the
Secretary of Justice within thirty (30) days from the effectivity of the ordinance. City of Cagayan
de Oro vs. Cagayan Electric Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No. 224825
October 17, 2018

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Review by the Secretary of Justice is mandatory only when what is being questioned is a tax
ordinance or revenue measure. Section 187 does not require the same from parties who assail
ordinances imposing regulatory fees.
It can be gleaned from the provision that review by the Secretary of Justice is mandatory only
when what is being questioned is a tax ordinance or revenue measure. Section 187 does not
require the same from parties who assail ordinances imposing regulatory fees. Stated otherwise,
the procedure found in Section 187 must be followed when an ordinance imposes a tax; the
institution of an action in court without complying with the requirements of the provision will
lead to the dismissal of the case on the ground of non-exhaustion of administrative remedies.
However, when an ordinance imposes a fee, direct recourse to the courts may be had without
prior protest before the Secretary of Justice. Simply put, fees are not subject to the procedure
outlined under Section 187. City of Cagayan de Oro vs. Cagayan Electric Power & Light Co., Inc.
(CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17, 2018
Requisites of a Valid Ordinance.
Few things are more established in this jurisdiction than the requisites of a valid ordinance. In
order for an ordinance to be valid in substance, it (1) must not contravene the Constitution or
any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4)
must not prohibit, but may regulate trade; (5) must be general and consistent with public policy;
and (6) must not be unreasonable. Equally established, however, is the presumption of validity
in favor of all laws, which extends to ordinances. City of Cagayan de Oro vs. Cagayan Electric
Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17, 2018
Regulatory fee, when excessive
If a regulatory fee produces revenue in excess of the cost of the regulation, inspection, and
licensing, it will be considered excessive, and hence fail the test of judicial scrutiny. City of
Cagayan de Oro vs. Cagayan Electric Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No.
224825 October 17, 2018

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Before a law may be struck down as unconstitutional, courts must be certain that there exists
a clear and unequivocal breach of the constitution, and not one that is speculative or
argumentative.
The presumption of constitutionality, in its most basic sense, only means that courts, in passing
upon the validity of a law, will afford some deference to the statute and charge the party assailing
it with the burden of showing that the act is incompatible with the constitution. The doctrine
comes into operation when a party comes to court praying that a law be set aside for being
unconstitutional. In effect, it places a heavy burden on the act’s assailant to prove invalidity
beyond reasonable doubt; it commands the clearest showing of a constitutional infraction. Thus,
before a law may be stuck down as unconstitutional, courts must be certain that there exists a
clear and unequivocal breach of the constitution, and not one that is speculative or
argumentative. To doubt, it has been said, is to sustain. City of Cagayan de Oro vs. Cagayan
Electric Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17, 2018
An ordinance that is incompatible with the law is ultra vires and hence null and void.
The United States Supreme Court expressed the rationale for the presumption in Ogden v.
Saunders, 25 U.S. 213 (1827), thus: “it is but a decent respect due to the wisdom, the integrity,
and the patriotism of the legislative body by which any law is passed to presume in favor of its
validity x x x.” For the same reason, the presumption extends to legislative acts of local
governments, as well. Thus, ordinances too are presumed constitutional, and, in addition, they
are also presumed consistent with the law. This is necessary because one of the requisites of a
valid ordinance is that it does not contravene any statute. An ordinance that is incompatible with
the law is ultra vires and hence null and void. City of Cagayan de Oro vs. Cagayan Electric Power
& Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17, 2018
When an action assailing an ordinance is brought before a court, the judge must, as a rule,
presume that the ordinance is valid and therefore charge the plaintiff with the burden of
showing otherwise.
To this end, when an action assailing an ordinance is brought before a court, the judge must, as
a rule, presume that the ordinance is valid and therefore charge the plaintiff with the burden of
showing otherwise. In U.S. v. Salaveria, 39 Phil. 102 (1918), the Court, speaking through Justice
Malcolm, laid down the basis for the presumption in this wise: The presumption is all in favor of
validity x x x. The action of the elected representatives of the people cannot be lightly set aside.
The councilors must, in the very nature of things, be familiar with the necessities of their

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particular municipality and with all the facts and circumstances which surround the subject and
necessitate action. The local legislative body, by enacting the ordinance, has in effect given notice
that the regulations are essential to the well-being of the people. City of Cagayan de Oro vs.
Cagayan Electric Power & Light Co., Inc. (CEPALCO), 884 SCRA 1, G.R. No. 224825 October 17,
2018
Local governments are allowed wide discretion in determining the rates of imposable fees.
In the absence of proof of unreasonableness, courts are bound to respect the judgment of the
local authorities. Any undue interference with their sound discretion will imperatively warrant
review and correction. In this case, as the party assailing the ordinance, it was CEPALCO’s
responsibility to prove the amount’s excessiveness; it had the burden to show that the fee was
not commensurate with the cost of regulation, inspection, and licensing. Nevertheless, for the
reasons discussed above, it failed to dismantle the presumption of validity because it never
established that the city council abused its discretion in setting the amount of the fee at P500.00.
Thus, the CA erred in declaring the ordinance invalid. Courts, as a rule, must refrain from
interfering with legislative acts, lest they stray into the realm of policy decision-making. The
public interest is best served by allowing the political processes to operate without undue
interference. City of Cagayan de Oro vs. Cagayan Electric Power & Light Co., Inc. (CEPALCO),
884 SCRA 1, G.R. No. 224825 October 17, 2018
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Section 133(e) of RA No. 7160 prohibit the imposition, in the guise of wharfage, of fees—as well
as all other taxes or charges in any form whatsoever.
By express language of Sections 153 and 155 of RA No. 7160, local government units, through
their Sanggunian, may prescribe the terms and conditions for the imposition of toll fees or
charges for the use of any public road, pier or wharf funded and constructed by them. A service
fee imposed on vehicles using municipal roads leading to the wharf is thus valid. However,
Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees—as well
as all other taxes or charges in any form whatsoever—on goods or merchandise. It is therefore
irrelevant if the fees imposed are actually for police surveillance on the goods, because any other
form of imposition on goods passing through the territorial jurisdiction of the municipality is

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clearly prohibited by Section 133(e). Palma Development Corporation vs. Municipality of

Malangas, Zamboanga del Sur, 413 SCRA 572, G.R. No. 152492 October 16, 2003
A wharfage does not lose its basic character by being labeled as a service fee “for police
surveillance on all goods.”
Under Section 131 (y) of RA No. 7160, wharfage is defined as “a fee assessed against the cargo
of a vessel engaged in foreign or domestic trade based on quantity, weight, or measure received
and/or discharged by vessel.” It is apparent that a wharfage does not lose its basic character by
being labeled as a service fee “for police surveillance on all goods.” Palma Development
Corporation vs. Municipality of Malangas, Zamboanga del Sur, 413 SCRA 572, G.R. No. 152492
October 16, 2003
Two conditions for unjust enrichment to be deemed present; There is no unjust enrichment
where the one receiving the benefit has a legal right or entitlement thereto, or when there is
no causal relation between one’s enrichment and the other’s impoverishment.
Unpersuasive is the contention of respondent that petitioner would unjustly be enriched at the
former’s expense. Though the rules thereon apply equally well to the government, for unjust
enrichment to be deemed present, two conditions must generally concur: (a) a person is unjustly
benefited, and (b) such benefit is derived at another’s expense or damage. In the instant case,
the benefits from the use of the municipal roads and the wharf were not unjustly derived by
petitioner. Those benefits resulted from the infrastructure that the municipality was mandated
by law to provide. There is no unjust enrichment where the one receiving the benefit has a legal
right or entitlement thereto, or when there is no causal relation between one’s enrichment and
the other’s impoverishment. Palma Development Corporation vs. Municipality of Malangas,
Zamboanga del Sur, 413 SCRA 572, G.R. No. 152492 October 16, 2003
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Taxes, once due, must be paid without delay to the taxing authority; as the Supreme Court (SC)
has repeatedly stated, “taxes are the lifeblood of Government and their prompt and certain
availability is an [imperious] need.”
In the Main Decision, the Court, in applying the doctrine of operative fact, held that FDCP and
the producers of graded films need not return the amounts already received from LGUs because
they merely complied with the provisions of RA 9167 which were in effect at that time
(Disposition 1 above). Clearly, this disposition squarely hews with the practicality and fairness
thrust of the operative fact doctrine because, as observed by the Court, to command the return
of the amounts received pursuant to Sections 13 and 14 of RA 9167 which were then existing
“would certainly impose a heavy, and possibly crippling, financial burden upon them who merely,
and presumably in good faith, complied with the legislative fiat subject of this case.” Accordingly,
contrary to Cebu City’s position, the Court’s holding on this score must stand. Similarly, the same
rationale must apply to the Court’s directive ordering cinema proprietors and operators to remit
to FDCP any amusement taxes they have retained prior to Sections 13 and 14 of RA 9167 being
declared unconstitutional. As enunciated in the Main Decision, prior to the striking down of the
said provisions, FDCP has a right to receive the amusement taxes withheld by the cinema
proprietors and operators during such time. This right to receive the amusement taxes accrued
the moment the taxes were deemed payable under the provisions of the Omnibus Tax Ordinance
of Cebu City. Taxes, once due, must be paid without delay to the taxing authority; as the Court
has repeatedly stated, “taxes are the lifeblood of Government and their prompt and certain
availability is an [imperious] need.” This flows from the truism that “[w]ithout 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.” Consequently, the prompt payment of taxes to the then recognized rightful
authority, which in this case is FDCP, cannot be left to the whims of taxpayers. To rule otherwise
would be to acquiesce to the norm allowing taxpayers to reject payment of taxes under the
supposition that the law imposing the same is illegal or unconstitutional. This would unduly
hamper government operations. As the Court held in the Main Decision, “[o]beisance to the rule
of law must always be protected and preserved at all times and the unjustified refusal of said
proprietors cannot be tolerated. The operative fact doctrine equally applies to the nonremittance
by said proprietors since the law produced legal effects prior to the declaration of the nullity of
[Sections] 13 and 14 [of RA 9167] in these instant petitions.” Film Development Council of the
Philippines vs. Colon Heritage Realty Corporation, 923 SCRA 583, G.R. No. 203754, G.R. No.
204418 October 15, 2019

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Respect for a presumably valid tax provision prior to its being declared unconstitutional must
be observed; otherwise, not only would unscrupulous taxpayers be emboldened to undercut
the ability of the State to timely collect taxes needed for important public services based on
theoretical suppositions anent their legal status, it would likewise run afoul of the principle of
separation of powers which accords laws enacted by Congress the presumption of
constitutionality up until they are declared otherwise by the Supreme Court (SC).
Cebu City’s motion seeking the nonapplication operative fact doctrine in favor of FDCP to retain
the subject amusement taxes it had withheld, as well as to collect payments accruing to it during
the covered period within which Sections 13 and 14 of RA 9167 had yet to be declared
unconstitutional, i.e., from the effectivity of RA 9167 up until the finality of the Main Decision, is
denied. In this regard, the Court’s directive (Disposition 2 above) to Cebu City to turn over to
FDCP the amount of P76,836,807.08, which represented the amount that should have been
remitted by SMPHI to FDCP at that time, remains. To be sure, the operative fact doctrine cannot
be used to give any unwarranted advantage to parties, but merely seeks to protect those who,
in good faith, relied on the invalid law. Consequently, Cebu City cannot be allowed to retain the
amusement taxes it received during the period when Sections 13 and 14 of RA 9167 were
operative. The Court cannot condone Cebu City’s apparent disregard for what was, at that time,
a valid legislative mandate, regardless of the fact that its position on the unconstitutionality of
said provisions is ultimately correct. Respect for a presumably valid tax provision prior to its
being declared unconstitutional must be observed; otherwise, not only would unscrupulous
taxpayers be emboldened to undercut the ability of the State to timely collect taxes needed for
important public services based on theoretical suppositions anent their legal status, it would
likewise run afoul of the principle of separation of powers which accords laws enacted by
Congress the presumption of constitutionality up until they are declared otherwise by the Court.
Film Development Council of the Philippines vs. Colon Heritage Realty Corporation, 923 SCRA
583, G.R. No. 203754, G.R. No. 204418 October 15, 2019
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The Local Government Code (LGC) authorizes the imposition by local government units (LGUs)
of amusement tax under Section 140.
The Local Government Code authorizes the imposition by local government units of amusement
tax under Section 140, which provides: Sec. 140. Amusement Tax.—(a) The province may levy an
amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas,
concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than

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thirty percent (30%) of the gross receipts from admission fees. (b) In the case of theaters or
cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or operators
and paid to the provincial treasurer before the gross receipts are divided between said
proprietors, lessees, or operators and the distributors of the cinematographic films. (c) The
holding of operas, concerts, dramas, recitals, painting, and art exhibitions, flower shows, musical
programs, literary and oratorical presentations, except pop, rock, or similar concerts shall be
exempt from the payment of the tax hereon imposed. (d) The sangguniang panlalawigan may
prescribe the time, manner, terms and conditions for the payment of tax. In case of fraud or
failure to pay the tax, the sangguniang panlalawigan may impose such surcharges, interests and
penalties as it may deem appropriate. (e) The proceeds from the amusement tax shall be shared
equally by the province and the municipality where such amusement places are located. Alta
Vista Golf and Country Club vs. City of Cebu, 781 SCRA 335, G.R. No. 180235 January 20, 2016
“Amusement places,” as defined in Section 131(c) of the Local Government Code (LGC), “include
theaters, cinemas, concert halls, circuses and other places of amusement where one seeks
admission to entertain oneself by seeing or viewing the show or performance.”
“Amusement places,” as defined in Section 131(c) of the Local Government Code, “include
theaters, cinemas, concert halls, circuses and other places of amusement where one seeks
admission to entertain oneself by seeing or viewing the show or performance.” The
pronouncements of the Court in Pelizloy Realty Corporation v. The Province of Benguet, 695 SCRA
491 (2013), are of particular significance to this case. The Court, in Pelizloy Realty, declared null
and void the second paragraph of Article X, Section 59 of the Benguet Provincial Code, insofar as
it imposes amusement taxes on admission fees to resorts, swimming pools, bath houses, hot
springs, and tourist spots. Applying the principle of ejusdem generis, as well as the ruling in the
Philippine Basketball Association v. Court of Appeals, 337 SCRA 358 (2000), case, the Court
expounded on the authority of local government units to impose amusement tax under Section
140, in relation to Section 131(c), of the Local Government Code. Alta Vista Golf and Country
Club vs. City of Cebu, 781 SCRA 335, G.R. No. 180235 January 20, 2016
Uniformity of taxation, like the kindred concept of equal protection, requires that all subjects
or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities.
In light of Pelizloy Realty, a golf course cannot be considered a place of amusement. As petitioner
asserted, people do not enter a golf course to see or view a show or performance. Petitioner also,
as proprietor or operator of the golf course, does not actively display, stage, or present a show
or performance. People go to a golf course to engage themselves in a physical sport activity, i.e.,

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to play golf; the same reason why people go to a gym or court to play badminton or tennis or to
a shooting range for target practice, yet there is no showing herein that such gym, court, or
shooting range is similarly considered an amusement place subject to amusement tax. There is
no basis for singling out golf courses for amusement tax purposes from other places where
people go to play sports. This is in contravention of one of the fundamental principles of local
taxation: that the “[t]axation shall be uniform in each local government unit.” Uniformity of
taxation, like the kindred concept of equal protection, requires that all subjects or objects of
taxation, similarly situated, are to be treated alike both in privileges and liabilities. Alta Vista Golf
and Country Club vs. City of Cebu, 781 SCRA 335, G.R. No. 180235 January 20, 2016
A local government unit (LGU) may exercise its residual power to tax when there is neither a
grant nor a prohibition by statute; or when such taxes, fees, or charges are not otherwise
specifically enumerated in the Local Government Code (LGC), National Internal Revenue Code
(NIRC), as amended, or other applicable laws.
Respondents, however, cannot claim that Section 42 of the Revised Omnibus Tax Ordinance, as
amended, imposing amusement tax on golf courses, was enacted pursuant to the residual power
to tax of respondent Cebu City. A local government unit may exercise its residual power to tax
when there is neither a grant nor a prohibition by statute; or when such taxes, fees, or charges
are not otherwise specifically enumerated in the Local Government Code, National Internal
Revenue Code, as amended, or other applicable laws. In the present case, Section 140, in relation
to Section 131(c), of the Local Government Code already explicitly and clearly cover amusement
tax and respondent Cebu City must exercise its authority to impose amusement tax within the
limitations and guidelines as set forth in said statutory provisions. Alta Vista Golf and Country
Club vs. City of Cebu, 781 SCRA 335, G.R. No. 180235 January 20, 2016
x-----------------------------------------------------------------------x
The Local Government Code of 1991 (LGC) is specific in providing that the power to impose a
tax, fee, or charge, or to generate revenue shall be exercised by the sanggunian of the local
government unit concerned through an appropriate ordinance.
For a writ of certiorari to issue, the following requisites must concur: (1) it must be directed
against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal,
board, or officer must have acted without or in excess of jurisdiction or with grave abuse of

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discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain,
speedy, and adequate remedy in the ordinary course of law. The enactment by the Quezon City
Council of the assailed ordinances was done in the exercise of its legislative, not judicial or quasi-
judicial, function. Under Republic Act (R.A.) No. 7160, or the Local Government Code of 1991
(LGC), local legislative power shall be exercised by the Sangguniang Panlungsod for the city. Said
law likewise is specific in providing that the power to impose a tax, fee, or charge, or to generate
revenue shall be exercised by the sanggunian of the local government unit concerned through an
appropriate ordinance. Ferrer, Jr. vs. Bautista, 760 SCRA 652, G.R. No. 210551 June 30, 2015
Every Local Government Unit (LGU) is empowered and authorized to create its own sources of
revenue and to levy taxes, fees, and charges.
Subject to the provisions of the LGC and consistent with the basic policy of local autonomy, every
LGU is now empowered and authorized to create its own sources of revenue and to levy taxes,
fees, and charges which shall accrue exclusively to the local government unit as well as to apply
its resources and assets for productive, developmental, or welfare purposes, in the exercise or
furtherance of their governmental or proprietary powers and functions. Ferrer, Jr. vs. Bautista,
760 SCRA 652, G.R. No. 210551 June 30, 2015
The tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a
regulatory purpose.
Clearly, the SHT charged by the Quezon City Government is a tax which is within its power to
impose. Aside from the specific authority vested by Section 43 of the UDHA, cities are allowed to
exercise such other powers and discharge such other functions and responsibilities as are
necessary, appropriate, or incidental to efficient and effective provision of the basic services and
facilities which include, among others, programs and projects for low-cost housing and other
mass dwellings. The collections made accrue to its socialized housing programs and projects. The
tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory
purpose. The levy is primarily in the exercise of the police power for the general welfare of the
entire city. It is greatly imbued with public interest. Removing slum areas in Quezon City is not
only beneficial to the underprivileged and homeless constituents but advantageous to the real
property owners as well. The situation will improve the value of their property investments, fully
enjoying the same in view of an orderly, secure, and safe community, and will enhance the quality
of life of the poor, making them law-abiding constituents and better consumers of business
products. Ferrer, Jr. vs. Bautista, 760 SCRA 652, G.R. No. 210551 June 30, 2015

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The public purpose of a tax may legally exist even if the motive which impelled the legislature
to impose the tax was to favor one over another.
For the purpose of undertaking a comprehensive and continuing urban development and housing
program, the disparities between a real property owner and an informal settler as two distinct
classes are too obvious and need not be discussed at length. The differentiation conforms to the
practical dictates of justice and equity and is not discriminatory within the meaning of the
Constitution. Notably, the public purpose of a tax may legally exist even if the motive which
impelled the legislature to impose the tax was to favor one over another. It is inherent in the
power to tax that a State is free to select the subjects of taxation. Inequities which result from a
singling out of one particular class for taxation or exemption infringe no constitutional limitation.
Ferrer, Jr. vs. Bautista, 760 SCRA 652, G.R. No. 210551 June 30, 2015
“Fees” and “Charges,” Distinguished
Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and
charges for services rendered. “Charges” refer to pecuniary liability, as rents or fees against
persons or property, while “Fee” means a charge fixed by law or ordinance for the regulation or
inspection of a business or activity. The fee imposed for garbage collections under Ordinance No.
SP-2235 is a charge fixed for the regulation of an activity. Certainly, as opposed to petitioner’s
opinion, the garbage fee is not a tax. In Smart Communications, Inc. v. Municipality of Malvar,
Batangas, 716 SCRA 677 (2014), the Court had the occasion to distinguish these two concepts: In
Progressive Development Corporation v. Quezon City, the Court declared that “if the generating
of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but
if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not
make the imposition a tax.” In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court
reiterated that the purpose and effect of the imposition determine whether it is a tax or a fee,
and that the lack of any standards for such imposition gives the presumption that the same is a
tax. We accordingly say that the designation given by the municipal authorities does not decide
whether the imposition is properly a license tax or a license fee. The determining factors are the
purpose and effect of the imposition as may be apparent from the provisions of the ordinance.
Thus, “[w]hen no police inspection, supervision, or regulation is provided, nor any standard set
for the applicant to establish, or that he agrees to attain or maintain, but any and all persons
engaged in the business designated, without qualification or hindrance, may come, and a license
on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of
conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the
applicant and licensee, the presumption is strong that the power of taxation, and not the police
power, is being exercised.” Ferrer, Jr. vs. Bautista, 760 SCRA 652, G.R. No. 210551 June 30, 2015

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TAXATION LAW
Oct. 24, 2022
Not being a tax, the contention that the garbage fee under Ordinance No. SP-2235 violates the
rule on double taxation must necessarily fail.
In Georgia, U.S.A., assessments for garbage collection services have been consistently treated as
a fee and not a tax. In another U.S. case, the garbage fee was considered as a “service charge”
rather than a tax as it was actually a fee for a service given by the city which had previously been
provided at no cost to its citizens. Hence, not being a tax, the contention that the garbage fee
under Ordinance No. SP-2235 violates the rule on double taxation must necessarily fail.
Nonetheless, although a special charge, tax, or assessment may be imposed by a municipal
corporation, it must be reasonably commensurate to the cost of providing the garbage service.
To pass judicial scrutiny, a regulatory fee must not produce revenue in excess of the cost of the
regulation because such fee will be construed as an illegal tax when the revenue generated by
the regulation exceeds the cost of the regulation. Ferrer, Jr. vs. Bautista, 760 SCRA 652, G.R. No.
210551 June 30, 2015

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2022 FORECAST Taxation Law

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TAXATION LAW

from the doctrines and cases cited

While a non-stock, nonprofit educational institution is classified as a tax-exempt entity under

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

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“Taxes” and “Fees,” as Defined

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Requisites of a Valid Ordinance.

Regulatory fee, when excessive

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clearly prohibited by Section 133(e). Palma Development Corporation vs. Municipality of

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

“Fees” and “Charges,” Distinguished

Legal Edge Bar Review 0942 – 949 91 76

Legal Edge Bar Review 0942 – 949 91 76

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