CONCEPT AND PURPOSE OF TAXATION (NATURE – Tax vs License and Regulatory Fee)

G.R. No. 99886 March 31, 1993

JOHN H. OSMEÑA, petitioner,

vs.
OSCAR ORBOS, in his capacity as Executive Secretary; JESUS ESTANISLAO, in his
capacity as Secretary of Finance; WENCESLAO DELA PAZ, in his capacity as Head of the
Office of Energy Affairs; REX V. TANTIONGCO, and the ENERGY REGULATORY
BOARD, respondents.

Nachura & Sarmiento for petitioner.

The Solicitor General for public respondents.

NARVASA, C.J.:

The petitioner seeks the corrective,1 prohibitive and coercive remedies provided by Rule 65 of
the Rules of Court,2 upon the following posited grounds, viz.:3

1) the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry of Energy
(now, the Office of Energy Affairs), created pursuant to § 8, paragraph 1, of P.D. No. 1956, as
amended, "said creation of a trust fund being contrary to Section 29 (3), Article VI of the . .
Constitution;4

2) the unconstitutionality of § 8, paragraph 1 (c) of P.D. No. 1956, as amended by Executive

Order No. 137, for "being an undue and invalid delegation of legislative power . . to the Energy
Regulatory Board;"5

3) the illegality of the reimbursements to oil companies, paid out of the Oil Price Stabilization
Fund,6 because it contravenes § 8, paragraph 2 (2) of
P. D. 1956, as amended; and

4) the consequent nullity of the Order dated December 10, 1990 and the necessity of a rollback
of the pump prices and petroleum products to the levels prevailing prior to the said Order.

It will be recalled that on October 10, 1984, President Ferdinand Marcos issued P.D. 1956
creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund
(OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and
imported petroleum products resulting from exchange rate adjustments and from increases in
the world market prices of crude oil.

Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O.
1024,7 and ordered released from the National Treasury to the Ministry of Energy. The same
Executive Order also authorized the investment of the fund in government securities, with the
earnings from such placements accruing to the fund.
President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137
on February 27, 1987, expanding the grounds for reimbursement to oil companies for
possible cost underrecovery incurred as a result of the reduction of domestic prices of
petroleum products, the amount of the underrecovery being left for determination by the Ministry
of Finance.

Now, the petition alleges that the status of the OPSF as of March 31, 1991 showed a "Terminal
Fund Balance deficit" of some P12.877 billion;8 that to abate the worsening deficit, "the Energy
Regulatory Board . . issued an Order on December 10, 1990, approving the increase in pump
prices of petroleum products," and at the rate of recoupment, the OPSF deficit should have
been fully covered in a span of six (6) months, but this notwithstanding, the respondents —
Oscar Orbos, in his capacity as Executive Secretary; Jesus Estanislao, in his capacity as
Secretary of Finance; Wenceslao de la Paz, in his capacity as Head of the Office of Energy
Affairs; Chairman Rex V. Tantiongco and the Energy Regulatory Board — "are poised to accept,
process and pay claims not authorized under P.D. 1956."9

The petition further avers that the creation of the trust fund violates §
29(3), Article VI of the Constitution, reading as follows:

(3) All money collected on any tax levied for a special purpose shall be treated as
a special fund and paid out for such purposes only. If the purpose for which a
special fund was created has been fulfilled or abandoned, the balance, if any,
shall be transferred to the general funds of the Government.

The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be
treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax
is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a
special fund' to be used only for the purpose indicated, and not channeled to another
government objective." 10 Petitioner further points out that since "a 'special fund' consists of
monies collected through the taxing power of a State, such amounts belong to the State,
although the use thereof is limited to the special purpose/objective for which it was created." 11

He also contends that the "delegation of legislative authority" to the ERB violates § 28 (2).
Article VI of the Constitution, viz.:

(2) The Congress may, by law, authorize the President to fix, within specified
limits, and subject to such limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the
Government;

and, inasmuch as the delegation relates to the exercise of the power of taxation, "the
limits, limitations and restrictions must be quantitative, that is, the law must not only
specify how to tax, who (shall) be taxed (and) what the tax is for, but also impose a
specific limit on how much to tax." 12

The petitioner does not suggest that a "trust account" is illegal per se, but maintains that the
monies collected, which form part of the OPSF, should be maintained in a special account of
the general fund for the reason that the Constitution so provides, and because they are,
supposedly, taxes levied for a special purpose. He assumes that the Fund is formed from a tax
undoubtedly because a portion thereof is taken from collections of ad valorem taxes and the
increases thereon.

It thus appears that the challenge posed by the petitioner is premised primarily on the view that
the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the
taxation power of the State. The Solicitor General observes that the "argument rests on the
assumption that the OPSF is a form of revenue measure drawing from a special tax to be
expended for a special purpose." 13 The petitioner's perceptions are, in the Court's view, not
quite correct.

To address this critical misgiving in the position of the petitioner on these issues, the Court
recalls its holding in Valmonte v. Energy Regulatory Board, et al. 14 —

The foregoing arguments suggest the presence of misconceptions about the

nature and functions of the OPSF. The OPSF is a "Trust Account" which was
established "for the purpose of minimizing the frequent price changes brought
about by exchange rate adjustment and/or changes in world market prices of
crude oil and imported petroleum products." 15 Under P.D. No. 1956, as amended
by Executive Order No. 137 dated 27 February 1987, this Trust Account may be
funded from any of the following sources:

a) Any increase in the tax collection from ad valorem tax or

customs duty imposed on petroleum products subject to tax under
this Decree arising from exchange rate adjustment, as may be
determined by the Minister of Finance in consultation with the
Board of Energy;

b) Any increase in the tax collection as a result of the lifting of tax

exemptions of government corporations, as may be determined by
the Minister of Finance in consultation with the Board of Energy:

c) Any additional amount to be imposed on petroleum products to

augment the resources of the Fund through an appropriate Order
that may be issued by the Board of Energy requiring payment of
persons or companies engaged in the business of importing,
manufacturing and/or marketing petroleum products;

d) Any resulting peso cost differentials in case the actual peso

costs paid by oil companies in the importation of crude oil and
petroleum products is less than the peso costs computed using
the reference foreign exchange rate as fixed by the Board of
Energy.

xxx xxx xxx

The fact that the world market prices of oil, measured by the spot market in
Rotterdam, vary from day to day is of judicial notice. Freight rates for hauling
crude oil and petroleum products from sources of supply to the Philippines may
also vary from time to time. The exchange rate of the peso vis-a-vis the U.S.
dollar and other convertible foreign currencies also changes from day to day.
 These fluctuations in world market prices and in tanker rates and foreign
exchange rates would in a completely free market translate into corresponding
adjustments in domestic prices of oil and petroleum products with sympathetic
frequency. But domestic prices which vary from day to day or even only from
week to week would result in a chaotic market with unpredictable effects upon
the country's economy in general. The OPSF was established precisely to
protect local consumers from the adverse consequences that such frequent oil
price adjustments may have upon the economy. Thus, the OPSF serves as a
pocket, as it were, into which a portion of the purchase price of oil and petroleum
products paid by consumers as well as some tax revenues are inputted and from
which amounts are drawn from time to time to reimburse oil companies, when
appropriate situations arise, for increases in, as well as underrecovery of, costs
of crude importation. The OPSF is thus a buffer mechanism through which the
domestic consumer prices of oil and petroleum products are stabilized, instead of
fluctuating every so often, and oil companies are allowed to recover those
portions of their costs which they would not otherwise recover given the level of
domestic prices existing at any given time. To the extent that some tax revenues
are also put into it, the OPSF is in effect a device through which the domestic
prices of petroleum products are subsidized in part. It appears to the Court that
the establishment and maintenance of the OPSF is well within that pervasive and
non-waivable power and responsibility of the government to secure the physical
and economic survival and well-being of the community, that comprehensive
sovereign authority we designate as the police power of the State. The
stabilization, and subsidy of domestic prices of petroleum products and fuel oil —
clearly critical in importance considering, among other things, the continuing high
level of dependence of the country on imported crude oil — are appropriately
regarded as public purposes.

Also of relevance is this Court's ruling in relation to the sugar stabilization fund the nature of
which is not far different from the OPSF. In Gaston v. Republic Planters Bank, 16 this Court
upheld the legality of the sugar stabilization fees and explained their nature and character, viz.:

The stabilization fees collected are in the nature of a tax, which is within the
power of the State to impose for the promotion of the sugar industry (Lutz v.
Araneta, 98 Phil. 148). . . . The tax collected is not in a pure exercise of the
taxing power. It is levied with a regulatory purpose, to provide a means for the
stabilization of the sugar industry. The levy is primarily in the exercise of the
police power of the State (Lutz v. Araneta, supra).

xxx xxx xxx

The stabilization fees in question are levied by the State upon sugar millers,
planters and producers for a special purpose — that of "financing the growth and
development of the sugar industry and all its components, stabilization of the
domestic market including the foreign market." The fact that the State has taken
possession of moneys pursuant to law is sufficient to constitute them state funds,
even though they are held for a special purpose (Lawrence v. American Surety
Co. 263 Mich. 586, 249 ALR 535, cited in 42 Am Jur Sec. 2, p. 718). Having
been levied for a special purpose, the revenues collected are to be treated as a
special fund, to be, in the language of the statute, "administered in trust" for the
 purpose intended. Once the purpose has been fulfilled or abandoned, the
balance if any, is to be transferred to the general funds of the Government. That
is the essence of the trust intended (SEE 1987 Constitution, Article VI, Sec.
29(3), lifted from the 1935 Constitution, Article VI, Sec. 23(1). 17

The character of the Stabilization Fund as a special kind of fund is emphasized

by the fact that the funds are deposited in the Philippine National Bank and not in
the Philippine Treasury, moneys from which may be paid out only in pursuance
of an appropriation made by law (1987) Constitution, Article VI, Sec. 29 (3), lifted
from the 1935 Constitution, Article VI, Sec. 23(1). (Emphasis supplied).

Hence, it seems clear that while the funds collected may be referred to as taxes, they are
exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special
fund is plain from the special treatment given it by E.O. 137. It is segregated from the general
fund; and while it is placed in what the law refers to as a "trust liability account," the fund
nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that
these measures comply with the constitutional description of a "special fund." Indeed, the
practice is not without precedent.

With regard to the alleged undue delegation of legislative power, the Court finds that the
provision conferring the authority upon the ERB to impose additional amounts on petroleum
products provides a sufficient standard by which the authority must be exercised. In addition to
the general policy of the law to protect the local consumer by stabilizing and subsidizing
domestic pump rates, § 8(c) of P.D. 1956 18 expressly authorizes the ERB to impose additional
amounts to augment the resources of the Fund.

What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific
limit on how much to tax." 19 The Court is cited to this requirement by the petitioner on the
premise that what is involved here is the power of taxation; but as already discussed, this is not
the case. What is here involved is not so much the power of taxation as police power. Although
the provision authorizing the ERB to impose additional amounts could be construed to refer to
the power of taxation, it cannot be overlooked that the overriding consideration is to enable the
delegate to act with expediency in carrying out the objectives of the law which are embraced by
the police power of the State.

The interplay and constant fluctuation of the various factors involved in the determination of the
price of oil and petroleum products, and the frequently shifting need to either augment or
exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law
as proposed by the petitioner. To do so would render the ERB unable to respond effectively so
as to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as
it is expressed, suffices to guide the delegate in the exercise of the delegated power, taking
account of the circumstances under which it is to be exercised.

For a valid delegation of power, it is essential that the law delegating the power must be (1)
complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it
must fix a standard — limits of which
are sufficiently determinate or determinable — to which the delegate must conform. 20

. . . As pointed out in Edu v. Ericta: "To avoid the taint of unlawful delegation,
there must be a standard, which implies at the very least that the legislature itself
 determines matters of principle and lays down fundamental policy. Otherwise, the
charge of complete abdication may be hard to repel. A standard thus defines
legislative policy, marks its limits, maps out its boundaries and specifies the
public agency to apply it. It indicates the circumstances under which the
legislative command is to be effected. It is the criterion by which the legislative
purpose may be carried out. Thereafter, the executive or administrative office
designated may in pursuance of the above guidelines promulgate supplemental
rules and regulations. The standard may either be express or implied. If the
former, the non-delegation objection is easily met. The standard though does not
have to be spelled out specifically. It could be implied from the policy and
purpose of the act considered as a whole. 21

It would seem that from the above-quoted ruling, the petition for prohibition should fail.

The standard, as the Court has already stated, may even be implied. In that light, there can be
no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a
determinable standard which guides the exercise of the power granted to the ERB. By the same
token, the proper exercise of the delegated power may be tested with ease. It seems obvious
that what the law intended was to permit the additional imposts for as long as there exists a
need to protect the general public and the petroleum industry from the adverse consequences
of pump rate fluctuations. "Where the standards set up for the guidance of an administrative
officer and the action taken are in fact recorded in the orders of such officer, so that Congress,
the courts and the public are assured that the orders in the judgment of such officer conform to
the legislative standard, there is no failure in the performance of the legislative functions." 22

This Court thus finds no serious impediment to sustaining the validity of the legislation; the
express purpose for which the imposts are permitted and the general objectives and purposes
of the fund are readily discernible, and they constitute a sufficient standard upon which the
delegation of power may be justified.

In relation to the third question — respecting the illegality of the reimbursements to oil
companies, paid out of the Oil Price Stabilization Fund, because allegedly in contravention of §
8, paragraph 2 (2) of P.D. 1956, amended 23 — the Court finds for the petitioner.

The petition assails the payment of certain items or accounts in favor of the petroleum
companies (i.e., inventory losses, financing charges, fuel oil sales to the National Power
Corporation, etc.) because not authorized by law. Petitioner contends that "these claims are not
embraced in the enumeration in § 8 of P.D. 1956 . . since none of them was incurred 'as a result
of the reduction of domestic prices of petroleum products,'" 24 and since these items are
reimbursements for which the OPSF should not have responded, the amount of the P12.877
billion deficit "should be reduced by P5,277.2 million." 25 It is argued "that under the principle
of ejusdem generis . . . the term 'other factors' (as used in § 8 of P.D. 1956) . . can only include
such 'other factors' which necessarily result in the reduction of domestic prices of petroleum
products." 26

The Solicitor General, for his part, contends that "(t)o place said (term) within the restrictive
confines of the rule of ejusdem generis would reduce (E.O. 137) to a meaningless provision."

This Court, in Caltex Philippines, Inc. v. The Honorable Commissioner on Audit, et al., 27 passed
upon the application of ejusdem generis to paragraph 2 of § 8 of P.D. 1956, viz.:
 The rule of ejusdem generis states that "[w]here words follow an enumeration of
persons or things, by words of a particular and specific meaning, such general
words are not to be construed in their widest extent, but are held to be as
applying only to persons or things of the same kind or class as those specifically
mentioned." 28 A reading of subparagraphs (i) and (ii) easily discloses that they
do not have a common characteristic. The first relates to price reduction as
directed by the Board of Energy while the second refers to reduction in
internal ad valorem taxes. Therefore, subparagraph (iii) cannot be limited by the
enumeration in these subparagraphs. What should be considered for purposes of
determining the "other factors" in subparagraph (iii) is the first sentence of
paragraph (2) of the Section which explicitly allows the cost underrecovery only if
such were incurred as a result of the reduction of domestic prices of petroleum
products.

The Court thus holds, that the reimbursement of financing charges is not authorized by
paragraph 2 of § 8 of P.D. 1956, for the reason that they were not incurred as a result of the
reduction of domestic prices of petroleum products. Under the same provision, however, the
payment of inventory losses is upheld as valid, being clearly a result of domestic price
reduction, when oil companies incur a cost underrecovery for yet unsold stocks of oil in
inventory acquired at a higher price.

Reimbursement for cost underrecovery from the sales of oil to the National Power Corporation
is equally permissible, not as coming within the provisions of P.D. 1956, but in virtue of other
laws and regulations as held in Caltex 29 and which have been pointed to by the Solicitor
General. At any rate, doubts about the propriety of such reimbursements have been dispelled
by the enactment of R.A. 6952, establishing the Petroleum Price Standby Fund, § 2 of which
specifically authorizes the reimbursement of "cost underrecovery incurred as a result of fuel oil
sales to the National Power Corporation."

Anent the overpayment refunds mentioned by the petitioner, no substantive discussion has
been presented to show how this is prohibited by P.D. 1956. Nor has the Solicitor General taken
any effort to defend the propriety of this refund. In fine, neither of the parties, beyond the mere
mention of overpayment refunds, has at all bothered to discuss the arguments for or against the
legality of the so-called overpayment refunds. To be sure, the absence of any argument for or
against the validity of the refund cannot result in its disallowance by the Court. Unless the
impropriety or illegality of the overpayment refund has been clearly and specifically shown, there
can be no basis upon which to nullify the same.

Finally, the Court finds no necessity to rule on the remaining issue, the same having been
rendered moot and academic. As of date hereof, the pump rates of gasoline have been reduced
to levels below even those prayed for in the petition.

WHEREFORE, the petition is GRANTED insofar as it prays for the nullification of the
reimbursement of financing charges, paid pursuant to E.O. 137, and DISMISSED in all other
respects.

SO ORDERED.

Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo,
Melo, Campos, Jr., and Quiason, JJ., concur.
G.R. No. L- 41383 August 15, 1988

PHILIPPINE AIRLINES, INC., plaintiff-appellant,

vs.
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO
CARBONELL, in his capacity as National Treasurer, defendants-appellants.

Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

GUTIERREZ, JR., J.:

What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?

This question has been brought before this Court in the past. The parties are, in effect, asking
for a re-examination of the latest decision on this issue.

This appeal was certified to us as one involving a pure question of law by the Court of Appeals
in a case where the then Court of First Instance of Rizal dismissed the portion-about complaint
for refund of registration fees paid under protest.

The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate
pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and
Traffic Code.

The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the
Philippines and engaged in the air transportation business under a legislative franchise, Act No.
42739, as amended by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt
from the payment of taxes. The pertinent provision of the franchise provides as follows:

Section 13. In consideration of the franchise and rights hereby granted, the
grantee shall pay to the National Government during the life of this franchise a
tax of two per cent of the gross revenue or gross earning derived by the grantee
from its operations under this franchise. Such tax shall be due and payable
quarterly and shall be in lieu of all taxes of any kind, nature or description, levied,
established or collected by any municipal, provincial or national automobiles,
Provided, that if, after the audit of the accounts of the grantee by the
Commissioner of Internal Revenue, a deficiency tax is shown to be due, the
deficiency tax shall be payable within the ten days from the receipt of the
assessment. The grantee shall pay the tax on its real property in conformity with
existing law.

On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has,
since 1956, not been paying motor vehicle registration fees.

Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation

requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees.
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles
unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid,
under protest, the amount of P19,529.75 as registration fees of its motor vehicles.

After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to
Commissioner Edu demanding a refund of the amounts paid, invoking the ruling in Calalang v.
Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality
taxes from the payment of which PAL is exempt by virtue of its legislative franchise.

Appellee Edu denied the request for refund basing his action on the decision in Republic v.
Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor
vehicle registration fees are regulatory exceptional. and not revenue measures and, therefore,
do not come within the exemption granted to PAL? under its franchise. Hence, PAL filed the
complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer
Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as
Civil Case No. Q-15862.

Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his
capacity as National Treasurer, filed a motion to dismiss alleging that the complaint states no
cause of action. In support of the motion to dismiss, defendants repatriation the ruling
in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that registration fees of motor vehicles
are not taxes, but regulatory fees imposed as an incident of the exercise of the police power of
the state. They contended that while Act 4271 exempts PAL from the payment of any tax except
two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying
regulatory fees, such as motor vehicle registration fees. The resolution of the motion to dismiss
was deferred by the Court until after trial on the merits.

On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint
"moved by the later ruling laid down by the Supreme Court in the case or Republic v. Philippine
Rabbit Bus Lines, Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals
which certified the case to us.

Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by
PAL and Commissioner Romeo F. Edu respectively, discuss the main points of contention in the
case at bar.

Resolving the issue in the Philippine Rabbit case, this Court held:

"The registration fee which defendant-appellee had to pay was imposed by

Section 8 of the Revised Motor Vehicle Law (Republic Act No. 587 [1950]). Its
heading speaks of "registration fees." The term is repeated four times in the body
thereof. Equally so, mention is made of the "fee for registration." (Ibid.,
Subsection G) A subsection starts with a categorical statement "No fees shall be
charged." (lbid., Subsection H) The conclusion is difficult to resist therefore that
the Motor Vehicle Act requires the payment not of a tax but of a registration fee
under the police power. Hence the incipient, of the section relied upon by
defendant-appellee under the Back Pay Law, It is not held liable for a tax but for
a registration fee. It therefore cannot make use of a backpay certificate to meet
such an obligation.
 Any vestige of any doubt as to the correctness of the above conclusion should be
dissipated by Republic Act No. 5448. ([1968]. Section 3 thereof as to the
imposition of additional tax on privately-owned passenger automobiles,
motorcycles and scooters was amended by Republic Act No. 5470 which is (sic)
approved on May 30, 1969.) A special science fund was thereby created and its
title expressly sets forth that a tax on privately-owned passenger automobiles,
motorcycles and scooters was imposed. The rates thereof were provided for in its
Section 3 which clearly specifies the" Philippine tax."(Cooley to be paid as
distinguished from the registration fee under the Motor Vehicle Act. There cannot
be any clearer expression therefore of the legislative will, even on the
assumption that the earlier legislation could by subdivision the point be
susceptible of the interpretation that a tax rather than a fee was levied. What is
thus most apparent is that where the legislative body relies on its authority to tax
it expressly so states, and where it is enacting a regulatory measure, it is equally
exploded (at p. 22,1969

In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other
hand, held:

The charges prescribed by the Revised Motor Vehicle Law for the registration of
motor vehicles are in section 8 of that law called "fees". But the appellation is no
impediment to their being considered taxes if taxes they really are. For not the
name but the object of the charge determines whether it is a tax or a fee. Geveia
speaking, taxes are for revenue, whereas fees are exceptional. 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. Hence, a
charge fixed by statute for the service to be person,-When by an officer, where
the charge has no relation to the value of the services performed and where the
amount collected eventually finds its way into the treasury of the branch of the
government whose officer or officers collected the chauffeur, is not a fee but a
tax."(Cooley on Taxation, Vol. 1, 4th ed., p. 110.)

From the data submitted in the court below, it appears that the expenditures of
the Motor Vehicle Office are but a small portion—about 5 per centum—of the
total collections from motor vehicle registration fees. And as proof that the money
collected is not intended for the expenditures of that office, the law itself provides
that all such money shall accrue to the funds for the construction and
maintenance of public roads, streets and bridges. It is thus obvious that the fees
are not collected for regulatory purposes, that is to say, as an incident to the
enforcement of regulations governing the operation of motor vehicles on public
highways, for their express object is to provide revenue with which the
Government is to discharge one of its principal functions—the construction and
maintenance of public highways for everybody's use. They are veritable taxes,
not merely fees.

As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees
as taxes, for it provides that "no other taxes or fees than those prescribed in this
Act shall be imposed," thus implying that the charges therein imposed—though
called fees—are of the category of taxes. The provision is contained in section
 70, of subsection (b), of the law, as amended by section 17 of Republic Act 587,
which reads:

Sec. 70(b) No other taxes or fees than those prescribed in this Act
shall be imposed for the registration or operation or on the
ownership of any motor vehicle, or for the exercise of the
profession of chauffeur, by any municipal corporation, the
provisions of any city charter to the contrary
notwithstanding: Provided, however, That any provincial board,
city or municipal council or board, or other competent authority
may exact and collect such reasonable and equitable toll fees for
the use of such bridges and ferries, within their respective
jurisdiction, as may be authorized and approved by the Secretary
of Public Works and Communications, and also for the use of
such public roads, as may be authorized by the President of the
Philippines upon the recommendation of the Secretary of Public
Works and Communications, but in none of these cases, shall any
toll fee." be charged or collected until and unless the approved
schedule of tolls shall have been posted levied, in a conspicuous
place at such toll station. (at pp. 213-214)

Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle
Law (Act 3992 [19511) as amended by Commonwealth Act 123 and Republic Acts Nos. 587
and 1621.

Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land
Transportation Code, (as amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382, 843,
896, 110.) and BP Blg. 43, 74 and 398).

Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained
unsegregated, by Rep. Act Nos. 587 and 1603) states:

Section 73. Disposal of moneys collected.—Twenty per centum of the money

collected under the provisions of this Act shall accrue to the road and bridge
funds of the different provinces and chartered cities in proportion to the centum
shall during the next previous year and the remaining eighty per centum shall be
deposited in the Philippine Treasury to create a special fund for the construction
and maintenance of national and provincial roads and bridges. as well as the
streets and bridges in the chartered cities to be alloted by the Secretary of Public
Works and Communications for projects recommended by the Director of Public
Works in the different provinces and chartered cities. ....

Presently, Sec. 61 of the Land Transportation and Traffic Code provides:

Sec. 61. Disposal of Mortgage. Collected—Monies collected under the provisions

of this Act shall be deposited in a special trust account in the National Treasury
to constitute the Highway Special Fund, which shall be apportioned and
expended in accordance with the provisions of the" Philippine Highway Act of
1935. "Provided, however, That the amount necessary to maintain and equip the
Land Transportation Commission but not to exceed twenty per cent of the total
 collection during one year, shall be set aside for the purpose. (As amended by
RA 64-67, approved August 6, 1971).

It appears clear from the above provisions that the legislative intent and purpose behind the law
requiring owners of vehicles to pay for their registration is mainly to raise funds for the
construction and maintenance of highways and to a much lesser degree, pay for the operating
expenses of the administering agency. On the other hand, the Philippine Rabbit case mentions
a presumption arising from the use of the term "fees," which appears to have been favored by
the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of
Rep. Act 4136 which reads:

Sec. 13. Payment of taxes upon registration.—No original registration of motor

vehicles subject to payment of taxes, customs s duties or other charges shall be
accepted unless proof of payment of the taxes due thereon has been presented
to the Commission.

referring to taxes other than those imposed on the registration, operation or ownership of a
motor vehicle (Sec. 59, b, Rep. Act 4136, as amended).

Fees may be properly regarded as taxes even though they also serve as an instrument of
regulation, As stated by a former presiding judge of the Court of Tax Appeals and writer on
various aspects of taxpayers

It is possible for an exaction to be both tax arose. regulation. License fees are
changes. looked to as a source of revenue as well as a means of regulation
(Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license
fees. Isabela such case, the fees may properly be regarded as taxes even
though they also serve as an instrument of regulation. 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. (1955 CCH Fed. tax Course, Par. 3101,
citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-
214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called
regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881,
U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and
alcohol as regulatory taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13,
citing Cooley on Taxation, 2nd Edition, 591-593).

Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98
Phil. 148).

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 (Umali, Id.) Such is the case of motor
vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep.
Act 587 quoted in the Calalang case. The same provision appears as Section 591-593). in the
Land Transportation code. It is patent therefrom that the legislators had in mind a regulatory tax
as the law refers to the imposition on the registration, operation or ownership of a motor vehicle
as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the
imposition is a tax, Section 591-593). speaks of "taxes." or fees ... for the registration or
operation or on the ownership of any motor vehicle, or for the exercise of the profession of
chauffeur ..." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited
by the respondents, speak of an "additional" tax," where the law could have referred to an
original tax and not one in addition to the tax already imposed on the registration, operation, or
ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act
4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional"
tax. Rep. Act 4136 also speaks of other "fees," such as the special permit fees for certain types
of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are
not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus,
they are not mentioned by Sec. 591-593). of the Code as taxes like the motor vehicle
registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land
Transportation Commission as provided for in the last proviso of see. 61, aforequoted.

It is quite apparent that vehicle registration fees were originally simple exceptional. intended
only for rigidly purposes in the exercise of the State's police powers. Over the years, however,
as vehicular traffic exploded in number and motor vehicles became absolute necessities without
which modem life as we know it would stand still, Congress found the registration of vehicles a
very convenient way of raising much needed revenues. Without changing the earlier deputy. of
registration payments as "fees," their nature has become that of "taxes."

In view of the foregoing, we rule that motor vehicle registration fees as at present exacted
pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional
revenues. of government even if one fifth or less of the amount collected is set aside for the
operating expenses of the agency administering the program.

May the respondent administrative agency be required to refund the amounts stated in the
complaint of PAL?

The answer is NO.

The claim for refund is made for payments given in 1971. It is not clear from the records as to
what payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No.
5448 dated June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in
legislative franchises similar to that invoked by PAL in this case.

In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)."
July 11, 1985), this Court ruled:

Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner
Radio Communications of the Philippines, Inc., was subject to both the franchise
tax and income tax. In 1964, however, petitioner's franchise was amended by
Republic Act No. 41-42). to the effect that its franchise tax of one and one-half
percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all
taxes of any kind, nature, or description levied, established, or collected by any
authority whatsoever, municipal, provincial, or national from which taxes the
grantee is hereby expressly exempted." The issue raised to this Court now is the
validity of the respondent court's decision which ruled that the exemption under
Republic Act No. 41-42). was repealed by Section 24 of Republic Act No. 5448
dated June 27, 1968 which reads:

"(d) The provisions of existing special or general laws to the

contrary notwithstanding, all corporate taxpayers not specifically
 exempt under Sections 24 (c) (1) of this Code shall pay the rates
provided in this section. All corporations, agencies, or
instrumentalities owned or controlled by the government, including
the Government Service Insurance System and the Social
Security System but excluding educational institutions, shall pay
such rate of tax upon their taxable net income as are imposed by
this section upon associations or corporations engaged in a
similar business or industry. "

An examination of Section 24 of the Tax Code as amended shows clearly that

the law intended all corporate taxpayers to pay income tax as provided by the
statute. There can be no doubt as to the power of Congress to repeal the earlier
exemption it granted. Article XIV, Section 8 of the 1935 Constitution and Article
XIV, Section 5 of the Constitution as amended in 1973 expressly provide that no
franchise shall be granted to any individual, firm, or corporation except under the
condition that it shall be subject to amendment, alteration, or repeal by the
legislature when the public interest so requires. There is no question as to the
public interest involved. The country needs increased revenues. The repealing
clause is clear and unambiguous. There is a listing of entities entitled to tax
exemption. The petitioner is not covered by the provision. Considering the
foregoing, the Court Resolved to DENY the petition for lack of merit. The decision
of the respondent court is affirmed.

Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly
imposed because the tax exemption in the franchise of PAL was repealed during the period.
However, an amended franchise was given to PAL in 1979. Section 13 of Presidential Decree
No. 1590, now provides:

In consideration of the franchise and rights hereby granted, the grantee shall pay
to the Philippine Government during the lifetime of this franchise whichever of
subsections (a) and (b) hereunder will result in a lower taxes.)

(a) The basic corporate income tax based on the grantee's annual
net taxable income computed in accordance with the provisions of
the Internal Revenue Code; or

(b) A franchise tax of two per cent (2%) of the gross revenues.
derived by the grantees from all specific. without distinction as to
transport or nontransport corporations; provided that with respect
to international airtransport service, only the gross passengers,
mail, and freight revenues. from its outgoing flights shall be
subject to this law.

The tax paid by the grantee under either of the above alternatives shall be in lieu
of all other taxes, duties, royalties, registration, license and other fees and
charges of any kind, nature or description imposed, levied, established,
assessed, or collected by any municipal, city, provincial, or national authority or
government, agency, now or in the future, including but not limited to the
following:
 xxx xxx xxx

(5) All taxes, fees and other charges on the registration, license, acquisition, and
transfer of airtransport equipment, motor vehicles, and all other personal or real
property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9,
1979).

PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier
law. PAL is now exempt from the payment of any tax, fee, or other charge on the registration
and licensing of motor vehicles. Such payments are already included in the basic tax or
franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer
be exacted.

WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration
fees paid in 1971 is DENIED. The Land Transportation Franchising and Regulatory Board
(LTFRB) is enjoined functions-the collecting any tax, fee, or other charge on the registration and
licensing of the petitioner's motor vehicles from April 9, 1979 as provided in Presidential Decree
No. 1590.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Griño Aquino and Medialdea, JJ., concur.