A.

PEPSI COLA VS MUNICIPALITY OF TANAUAN

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

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

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

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

The Municipality assailed the arguments presented by Pepsi Cola. It argued, among others, that only Ordinance No. 27 is being
enforced and that the latter law is an amendment of Ordinance No. 23, hence there is no double taxation.

ISSUE:
Whether or not there is undue delegation of taxing powers.
Whether or not there is double taxation.

HELD:
1. No. There is no undue delegation. The Constitution even allows such delegation.

Legislative powers may be delegated to local governments in respect of matters of local concern. By necessary implication,
the legislative power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax.

Under the New Constitution, local governments are granted the autonomous authority to create their own sources of
revenue and to levy taxes.
Section 5, Article XI provides: “Each local government unit shall have the power to create its sources of revenue and
to levy taxes, subject to such limitations as may be provided by law.”

Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to
enact and vest in local governments the power of local taxation.

2. NO. There is no double taxation. The argument of the Municipality is well taken. Further, Pepsi Cola’s assertion that the
delegation of taxing power in itself constitutes double taxation cannot be merited.

It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may
not be exercised.

The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is
not forbidden by our fundamental law unlike in other jurisdictions. Double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose,
but not in a case where one tax is imposed by the State and the other by the city or municipality.