Case

Gonzales, a copra dealer claims that he should be exempt from payment of taxes considering that
coconut farmers and producers are exempt. After all, he said, they both sell copra in its original state
Should Gonzales be given the same exemption?
No. There is substantial difference between copra producers on one hand, and copra traders on
the other. There is no violation of the equal protection clause here because there could only be
denial of the equal protection of the law if there is discrimination that finds no support in reason

3. Rule of uniformity and equity in taxation

 The rule of taxation shall uniform and equitable The Congress shall evolve a progressive system
of taxation (Sec 28 (1). Art VI, Ibid.).
Case
A municipal council passed an ordinance imposing an occupation tax on the profession or occupation of
an "installation manager". Manny is the only sale person with such occupation in the municipality. Can
he successfully challenge the validity of the ordinance as being discriminatory since he is the only one
adversely affected?
No, because the occupation tax could be imposed on all installation managers who may come
within the jurisdiction of the municipality. What the ordinance taxes is the occupation itself and
not the person. Hence, the number of persons exercising the occupation is not material

4. Non imprisoned for debt or non-payment of a poll tax

Case
Evander refused to pay the basic community tax of P5.00 and the additional tax of P 1.00 for every P
1,000 of his income from business. Can he be imprisoned for non-payment?
He cannot be imprisoned for non-payment of the basic tax of P5.00. However, imprisonment is a
sanction for his failure to pay the additional community tax because it is not a poll tax.

5. Non-impairment of the obligations of contracts.

No law impairing the obligations of contracts shall be passed (Sec. 10, Art. II, id.). There is
"impairment when a law substantially invalidates, releases or extinguishes the obligations of a
contract, or that derogates substantial contractual rights.
Case
The government entered into a contract with Abala Lines. The condition provides that Abala Lines shall
carry government mails. In return, the former shall be exempt from the payment of income tax. Can the
Congress later on pass a law revoking such exemption without the consent of Abala Lines?
 No. Since the granting of tax exemption is based on a valid contract, its withdrawal would impair
the obligation of contracts. The obligation of contract is impaired when its terms or conditions
are changed by law or by treaty without consent of the other, thereby weakening the position of
the latter (Edwards vs. Kearney, 96 U.S. 607).
6. Non-infringement of religious freedom
No law shall be made respecting the establishment of religion, or prohibiting the free exercise
thereof. The free exercise of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religious test shall be required for result the exercise of
civil or political rights (Soc: 5, Art. III, id)
Case
A religious group engaged in the sale of bibles and other religious articles was required to pay taxes on
the sales of the merchandise. Is the imposition of the tax valid?
No. To require such religious group to pay taxes would impair its free exercise and enjoyment of
religious freedom and worship, as well as its rights and dissemination of religious beliefs
(American Bible Society's City of Manila 109 Phil 396).

7. No appropriation for religious purposes.

No public money or property shall be appropriated applied, paid or employed, directly or
indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian
institution, or system of religion, or of any priest, preacher, minister, or other religious teacher,
or dignitary.
Case
The Barangay Council of May-Ogob disbursed a certain amount of its Economic Development Fund in
the Annual Budget of the barangay for the construction of the barangay chapel. Is the action valid?
No. The constitution strictly prohibits public money from being appropriated. applied, paid or
used, directly or indirectly, for the use, benefit or support of any sect, church, denomination,
sectarian institution, or system of religion.

8. Exemption of religious, charitable or educational entities, non-profit cemeteries, and churches from
taxation.
Charitable institutions, churches, and parsonages or convents appurtenant thereto, mosques,
non-profit cemeteries, and all lands, buildings and improvements, actually, directly. and
exclusively used for religious, charitable, or educational purposes shall be exempt from taxation
(Sec. 28[3). Art. VI. Id).
The word "exclusive" means primarily rather than solely. Thus, the admission of pay patients does not
detract from the charitable character of a hospital if all its funds are devoted exclusively to the
maintenance of the institution as a public charity
9. Exemption of revenues and assets of non-stock, non-profit educational institutions and donations
for educational purposes from taxation
All revenues and assets of non-stock, non-profit educational institutions used actually, directly
and exclusively for educational purposes shall be exempt from taxes and duties. Upon the
dissolution or cessation of the corporate existence of such institutions, their assets shall be
disposed of in the manner provided by law.
Proprietary educational institutions, including those cooperatively owned may likewise be
entitled to such exemptions, subject to the limitations provided by law, restrictions on dividends
and provisions for reinvestments.

Subject to the conditions prescribed by law, all grants, endowments donations or contributions
used actually, directly, and exclusively for educational purposes shall be exempt from tax (Art
XIV, Sec. 4/31. (4)

Who are exempt?
What taxes are exempt?
Limitation 8
Charitable, educational and
religious institutions
Property Tax
Limitation 9
Non stock non profit
educational institutions
Income Tax, Property Tax,
Custom Duties

Case
Hanap Taypa Corporation, non-stock corporation which owns and operates a memorial park, contests
the real estate assessment made by the City of Manila. Sued by the city. Hanap Taypa Corporation
contends that burial grounds are exempt from real estate tax. It appears that two years prior to the
assessment, Hanap Taypa Corporation had declared dividends to its stockholders. Is the corporation
justified in disputing the assessment?
No. Only non-profit cemeteries are exempt from the real property tax. One of the requisites for
a non-profit institution is that it must declare no dividends. The fact that the company declared
dividends to its stockholders clearly shows that it is a profit oriented corporation.

The ARTS College of Business and Arts (ACBA) is a non-stock, non-profit educational institution. It owns a
5-hectare lot. One half of which is used as its school campus while the other one-half is vacant. The
school plans to do the following effective January 1 of next year.
a. Rent out to Aristocrat, Inc. the vacant portion of the lot for P 1 million a year,
b. Lease a two story building owned by Mrs. Lee to be used as library, facilities for student nurses
and computer room for students of computer courses:
Increase tuition fees by 6% in accordance with government regulations, and
c. Import 100 computers for use in its computer courses.
Q 1: Is the school subject to real estate tax on its 5-hectare lot for the current year and succeeding year?
Answer:
Only the one-half portion which is vacant and was subsequently rented out to Aristocrat, Inc. is subject
to real property tax because it is not actually, directly and exclusively used for educational purposes.
Q 2: Is the two-story building exempt from real property tax?
Answer
Yes. The test of exemption from property tax is the use of the property for the purposes mentioned in the
constitution and not the ownership. Thus even if the building is not owned by the school, it is exempt
from property tax because it is being used actually, directly, and exclusively.
Q3: Will the school be subject to income tax on its rental income from Aristocrat Inc.?
Answer:
The rental income is subject to income tax because the property is not being used actually, directly and
exclusively for educational purpose.
10. Concurrence by a majority of all the members of the Congress for the passage of a law granting
any tax exemption.
No law granting any tax exemption shall be passed without the concurrence of a majority of all
the members of the Congress (Sec. 28/4), Art VI. id.)
11. Power of the President to veto any particular item or items in a revenue or tariff bill.
The President shall have the power to veto any particular item or items in an appropriation,
revenue or tariff bill, but the veto shall not affect the item or items to which he does not object
(Sec 272) Art VI).
12. Non-impairment of the jurisdiction of the Supreme Court in tax cases.
The Supreme Court shall have the power to review revise, reverse modify or affirm on appeal or
certiorari is the law or the Rules of Court may provide final judgments and orders of lower
Courts in all cases involving the legality of any tax, impost, assessment, or toll or any penalty
imposed in relation thereto (See 52. AH VIH, K)
Case
The Congress enacted a law declaring that the decisions of the Court of Tax Appeals shall be final and
non-appealable for purposes of improving the tax collection of the government. Is the law valid?
No, such law shall violate the constitutional limitation on the non-impairment of the jurisdiction
of the Supreme Court in tax cases