Equal Protection Clause

TAN VS. DEL ROSARIO

FACTS:

Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income Taxation Scheme ("SNIT"), which amended certain
provisions of the NIRC, as well as the Rules and Regulations promulgated by public respondents pursuant to said law.

Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following provisions of the Constitution:
-Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.
- Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.
- Article III, Section 1 — No person shall be deprived of . . . property without due process of law, nor shall any person be denied the equal
protection of the laws.

Petitioners contended that public respondents exceeded their rule-making authority in applying SNIT to general professional partnerships.
Petitioner contends that the title of HB 34314, progenitor of RA 7496, is deficient for being merely entitled, "Simplified Net Income Taxation
Scheme for the Self-Employed and Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289) when the full text
of the title actually reads, ‘'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals Engaged In
The Practice of Their Profession, Amending Sections 21 and 29 of the National Internal Revenue Code,' as amended. Petitioners also contend
it violated due process.
The constitutionality of R.A. 7946, or the Simplified Net Income Taxation Scheme (SNIT), was challenged on the following grounds:
(a) it adopts a gross income taxation scheme;
(b) it attempts to tax single proprietorships and professionals differently from corporations and partnerships; and
(c) it violates the due process and protection clauses.
The validity of Sec. 6 of the Revenue Regulation No. 2-93, which makes SNIT applicable to partners in general professional partnerships, was
also challenged for unlawfully creating a distinction between a person who practices his profession individually and one who does it through
partnership with others.

Issue: W/N the tax law is unconstitutional for violating due process and equal protection.

RULING:
NO. The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the
exercise of the tax power. No such transgression is so evident in herein case.

Uniformity of taxation, like the concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be
treated alike both in privileges and liabilities. Uniformity does not violate classification as long as: (1) the standards that are used therefor are
substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things being equal, to
both present and future conditions, and (4) the classification applies equally well to all those belonging to the same class.

What is apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular
approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable corporations.
The Court does not view this classification to be arbitrary and inappropriate.

The SC also held that there is no distinction in income tax liability between a person who practices his profession individually and one who
does it through partnership with others. Uniformity of taxation, like the concept of equal protection, merely requires that all subjects or
objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities.

The SC added that with the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage
(subjects), and situs (place) of taxation. WHEREFORE, the petitions are DISMISSED.

PHIL RURAL ELECTRIC VS SECRETARY

Equal Protection

FACTS:
On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized and existing
under PD 269 which are members of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA). The other petitioners,
electric cooperatives of Agusan del Norte (ANECO), Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric cooperatives
organized and existing under PD 269, as amended, and registered with the National Electrification Administration (NEA).
Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment of all National Government, local government, and municipal
taxes and fee, including franchise, fling recordation, license or permit fees or taxes and any fees, charges, or costs involved in any court or
administrative proceedings in which it may be party.
From 1971to 1978, in order to finance the electrification projects envisioned by PD 269, as amended, the Philippine Government, acting
through the National Economic council (now National Economic Development Authority) and the NEA, entered into six loan agreements with
the government of the United States of America, through the United States Agency for international Development(USAID) with electric
cooperatives as beneficiaries. The loan agreements contain similarly worded provisions on the tax application of the loan and any property or
commodity acquired through the proceeds of the loan.
Petitioners allege that with the passage of the Local Government Code their tax exemptions have been validly withdrawn. Particularly,
petitioners assail the validity of Sec. 193 and 234 of the said code. Sec. 193 provides for the withdrawal of tax exemption privileges granted to
all persons, whether natural or juridical, except cooperatives duly registered under RA 6938, while Sec. 234 exempts the same cooperatives
from payment of real property tax.

Issue:
Does the Local Government Code (under Sec. 193 and 234) violate the equal protection clause since the provisions unduly discriminate
against petitioners who are duly registered cooperatives under PD 269

Held:No. The guaranty of the equal protection clause is not violated by a law based on a reasonable classification. Classification, to be
reasonable must
(a) rest on substantial classifications;
(b) germane to the purpose of the law;
(c) not limited to the existing conditions only; and
 (d) apply equally to all members of the same class.

there is reasonable classification under the Local Government Code to justify the different tax treatment between electric cooperatives
covered by PD 269 and electric cooperatives under RA 6938.
First, substantial distinctions exist between cooperatives under PD 269 and those under RA 6938. In the former, the government is the one
that funds those so-called electric cooperatives, while in the latter, the members make equitable contribution as source of funds.

Extent of Government Control over Cooperatives – The extent of government control over electric cooperatives covered by PD 269 is largely
a function of the role of the NEA as a primary source of funds of these electric cooperatives. It is crystal clear that NEA incurred loans from
various sources to finance the development and operations of these electric cooperatives. Consequently, amendments were primarily geared
to expand the powers of NEA over the electric cooperatives o ensure that loans granted to them would be repaid to the government. In
contrast, cooperatives under RA 6938 are envisioned to be self-sufficient and independent organizations with minimal government
intervention or regulation.
Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the law. The Constitutional
mandate that “every local government unit shall enjoy local autonomy,” does not mean that the exercise of the power by the local
governments is beyond the regulation of Congress. Sec. 193 of the LGC is indicative of the legislative intent to vet broad taxing powers upon
the local government units and to limit exemptions from local taxation to entities specifically provided therein.
Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these exemptions are not limited to existing conditions
and apply equally to all members of the same class.

to continue my report on the cases under equal protection clause on constitutional limitation I will be
discussing the case of

so
Southern Luzon Drug Corporation vs. DSWD

The petitioner is a domestic corporation engaged in the business of drugstore operation in the
Philippines while the respondents are government agencies, office and bureau tasked to monitor
compliance with R.A. Nos. 9257 and 9442, promulgate implementing rules and regulations for their
effective implementation, as well as prosecute and revoke licenses of erring establishments.

FACTS:
On April 23, 1992,,R.A. No. 7432, entitled "An Act to Maximize the Contribution of Senior Citizens
to Nation-Building, Grant Benefits and Special Privileges and For Other Purposes," was enacted.
Under the said law, a senior citizen, who must be at least 60 years old and has an annual income of
not more than P60,000.00, may avail of the privileges provided in Section 4 thereof, one of which is
20% discount on the purchase of medicines. So dahil dto sa 20% discount na ito naapektohan ung
kita ng mga drug companies such as the petiotioner Southern Luzon Drug.
To regain the amount given as discount to qualified senior citizens, covered establishments can
claim an equal amount as tax credit which can be applied against the income tax due from them.
However
R.A. No. 9257 was enacted, amending some provisions of R.A. No. 7432. The new law retained the
20% discount on the purchase of medicines but removed the annual income ceiling thereby
qualifying all senior citizens to the privileges under the law. Further, R.A. No. 9257 modified the tax
treatment of the discount granted to senior citizens, from tax credit to tax deduction from gross
income, computed based on the net cost of goods sold or services rendered.

(A) The effect of converting the 20% discount from a "tax credit " to “tax
deduction" is that the tax benefit enjoyed by sellers of goods and services to
senior citizens is effectively reduced. A tax credit reduce the tax liability while a
tax deduction merely reduces the tax base. Under the tax credit scheme, the
establishments are paid back 100% of the discount they give to senior citizens
while under the tax deduction scheme, they are only paid back about 32% of the
20% discount granted to senior citizens.
DSWD issued the Implementing Rules and Regulations (IRR) of R.A. No. 9257. Article 8 of Rule VI
of the said IRR provides: Article 8. Tax Deduction of Establishments. - The establishment may
claim the discounts granted under Rule V, Section 4 – Discounts for Establishments; Section 9,
Medical and Dental Services in Private Facilities and Sections 10 and 11 – Air, Sea and Land
Transportation as tax deduction based on the net cost of the goods sold or services rendered.
Provided, That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted; Provided, further, That the total amount of the
claimed tax deduction net of value-added tax if applicable, shall be included in their gross sales
receipts for tax purposes and shall be subject to proper documentation and to the provisions of
the National Internal Revenue Code, as amended; Provided, finally, that the implementation of the
tax deduction shall be subject to the Revenue Regulations to be issued by the Bureau of Internal
Revenue (BIR) and approved by the Department of Finance (DOF).
The change in the tax treatment of the discount given to senior citizens did not sit well with some
drug store owners and corporations, claiming it affected the profitability of their business.
Thus,they on January 13, 2005, Carlos Superdrug Corporation (Carlos Superdrug), together with
other corporation and proprietors operating drugstores in the Philippines, filed a Petition for
Prohibition with Prayer for Temporary Restraining Order (TRO) and/or Preliminary Injunction
before this Court, entitled Carlos Superdrug Corporation v. DSWD,[5] docketed as G.R. No. 166494,
assailing the constitutionality of Section 4(a) of R.A. No. 9257 primarily on the ground that it
amounts to taking of private property without payment of just compensation. In a Decision dated
June 29, 2007, the Court upheld the constitutionality of the assailed provision, holding that the
same is a legitimate exercise of police power.
Meanwhile, on March 24, 1992, R.A. No. 7277 pertaining to the "Magna Carta for Disabled Persons"
was enacted, codifying the rights and privileges of PWDs. Thereafter, on April 30, 2007, R.A. No.
9442 was enacted, amending R.A. No. 7277. One of the salient amendments in the law is the
insertion of Chapter 8 in Title 2 thereof, which enumerates the other privileges and incentives of
PWDs, including the grant of 20% discount on the purchase of medicines. Similar to R.A. No. 9257,
covered establishments shall claim the discounts given to PWDs as tax deductions from the gross
income, based on the net cost of goods sold or services rendered.
On February 26, 2008, the petitioner filed a Petition for Prohibition with Application for TRO and/or
Writ of Preliminary Injunction with the CA, seeking to declare as unconstitutional Section 4(a) of
R.A. No. 9257, and Section 32 of R.A. No. 9442 and Section 5.1 of its IRR, insofar as these
provisions only allow tax deduction on the gross income based on the net cost of goods sold or
services rendered as compensation to private establishments for the 20% discount that they are
required to grant to senior citizens and PWDs. Further, the petitioner prayed that the respondents
be permanently enjoined from implementing the assailed provisions. CA dismissed.
Issue:
Whether the 20% sales discount for senior citizens PWDs does not violate the petitioner’s right to
equal protection of the law
Ruling:
Yes. The subject laws do not violate the equal protection clause. The legislation which applies only
to persons falling within a specified class maybe treated and regulated differently from another.

The subject laws do not violate the

equal protection clause

The petitioner argues that R.A. Nos. 9257 and 9442 are violative of the equal protection clause in
that it failed to distinguish between those who have the capacity to pay and those who do not, in
granting the 20% discount. R.A. No. 9257, in particular, removed the income qualification in R.A. No.
7432 of P60,000.00 per annum before a senior citizen may be entitled to the 20% discount.

The contention lacks merit.

The petitioner's argument is dismissive of the reasonable qualification on which the subject laws were
based.
Equal protection requires that all persons or things similarly situated should be treated alike, both as
to rights conferred and responsibilities imposed. Similar subjects, in other words, should not be
treated differently, so as to give undue favor to some and unjustly discriminate against others.

"The equal protection clause is not infringed by legislation which applies only to those persons falling
within a specified class. If the groupings are characterized by substantial distinctions that make real
differences, one class may be treated and regulated differently from another." 69 For a classification to
be valid, (1) it must be based upon substantial distinctions, (2) it must be germane to the purposes
of the law, (3) it must not be limited to existing conditions only, and (4) it must apply equally to all
members of the same class.70

To recognize all senior citizens as a group, without distinction as to income, is a valid classification.
The Constitution itself considered the elderly as a class of their own and deemed it a priority to
address their needs. it did not make any reservation as to income, race, religion or any other
personal circumstances. It was a blanket privilege afforded the group of citizens in the enumeration
in view of the vulnerability of their class.

The classification is based on age and therefore qualifies all who have attained the age of 60. To
instantly tag them as undeserving of the privilege would be the height of ingratitude; it is an outright
discrimination.

The same ratiocination may be said of the recognition of PWDs as a class in R.A. No. 9442 and in
granting them discounts. It needs no further explanation that PWDs have special needs which last
their entire lifetime. They constitute a class of their own, equally deserving of government support as
our elderlies.

There is also no question that the grant of mandatory discount is germane to the purpose of R.A.
Nos. 9257 and 9442, that is, to adopt an integrated and comprehensive approach to health
development and make essential goods and other social services available to all the people at
affordable cost, with special priority given to the elderlies and the disabled.

The subject laws also address a continuing concern of the government for the welfare of the senior
citizens and PWDs. It is not some random predicament but an actual, continuing and pressing
concern that requires preferential attention. Also, the laws apply to all senior citizens and PWDs,
respectively, without further distinction or reservation. Without a doubt, all the elements for a valid
classification were met.

It also is apparent that what the petitioners are ultimately questioning is not only the grant of the
senior citizen discount, but the manner by which they were allowed to recoup/regain the said
discount. In particular, they are protesting the change in the tax treatment of the senior citizen
discount from tax credit to being merely a deduction from gross income which they claimed to
have significantly reduced their profits.
The change in the tax treatment of the discount was a valid exercise of police power, thus: the
treatment of the discount as a deduction reduces the net income of the private establishments
concerned. A tax deduction does not offer full reimbursement of the senior citizen discount. As
such, it would not meet the definition of just compensation. Having said that, this raises the
question of whether the State, in promoting the health and welfare of a special group of citizens,
can impose upon private establishments the burden of partly subsidizing a government program.
Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-
building, and to grant benefits and privileges to them as the State considers them an integral part
of our society. The priority given to senior citizens finds its basis in the Constitution as set forth in
the law itself.

. WHEREFORE, petition is dismissed and, Section 4(a) of Republic Act No. 9257 and Section 32 of
Republic Act No. 9442 are declared CONSTITUTIONAl.
END=---------------------------

TOLENTINO VS SECRETARY OF FINANCE

Rule of taxation which shall be uniform and equitable

FACTS:

These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act No. 7716….
on various grounds summarized in the resolution of July 6, 1994.

Congress enacted RA No. 7716, The title of Republic Act No. 7716 is:
AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND
ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR
OTHER PURPOSES which sought to widen the tax base of the existing Value Added Tax (VAT)
system and enhance its administration by amending the National Internal Revenue Code
(NIRC).

There were Several petitioners here, including Arturo Tolentino, Raul Roco, the IBP, the
Philippine Press Institute, PAL, Kilosbayan, and others, challenged the constitutionality of
said law.

The VAT is levied on the sale, barter or exchange of goods and properties as well as on the
sale or exchange of service. It is equivalent to 10% of the gross selling price or gross value in
money, goods or properties sold, bartered or exchanged or of the gross receipts from the sale
or exchange of services. For instance,

RA. 7716 expressly amends PAL's franchise (P.D. No. 1590) by specifically excepting from exemptions of VAT
under P.D. No. 1590. This is within the power of Congress to do under the Constitution, which provides that the
grant of a franchise for operation of a public utility is subject to amendment, alteration or repeal by Congress
when common good requires.

Also, The Philippine Press Institute (PPI), petitioner G.R. No. 115544, is a nonprofit organization of newspaper
publishers established for the improvement of journalism in the Philippines. petitioner in G.R. No. 115781, the
Philippine Bible Society (PBS), is also a nonprofit organization engaged in the printing and distribution of bibles
and other religious articles. Both

Petitioners claim violations of their rights under 4 and 5 of the Bill of Rights as a result of the enactment of the
VAT Law.
The PPI questions the law insofar as it has withdrawn the exemption previously granted to the press under 103
(f) of the NIRC. Although the exemption was subsequently restored by administrative regulation with respect to
the circulation income of newspapers, the PPI presses its claim because of the possibility that the exemption
may still be removed by mere revocation of the regulation of the Secretary of Finance.
On the other hand, the PBS goes so far as to question the Secretary's power to grant exemption for two
reasons: (1) The Secretary of Finance has no power to grant tax exemption because this is vested in Congress
and requires for its exercise the vote of a majority of all its members 26 and (2) the Secretary's duty is to
execute the law.under 103 of the NIRC contains a list of transactions exempted from VAT. Among the
transactions previously granted exemption were:
(f) Printing, publication, importation or sale of books and any newspaper, magazine, review, or bulletin which
appears at regular intervals with fixed prices for subscription and sale and which is devoted principally to the
publication of advertisements.

The situation in the case at bar is indeed a far cry from those cited by the PPI in support of its claim that RA
7716 subjects the press to discriminatory taxation. The discriminatory purpose was clear from its operation.
The effect of the tax was to curtail both their revenue and their circulation. This is a classic illustration of the
warning that the power to tax is the power to destroy.

Thus, the broad argument against the VAT is that it violates the requirement that "The rule of taxation shall be
uniform and equitable [and] Congress shall evolve a progressive system of taxation.

Petitioners contend that as a result of the uniform 10% VAT, is that the tax on consumption goods of those who
are in the higher-income bracket, which before were taxed at a rate higher than 10%, has been reduced, while
basic commodities- or those who are at lower income bracket, which before were taxed at rates ranging from
3% to 5%, are now taxed at a higher rate.

ISSUE: W/N Republic Act No. 7716 is unconstitutional…

W/N EVAT law is unsconstitutional…

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

with regards on the contention of the petitioners that,

R.A. No. 7716 violates Art. VI, 28(1) which provides that "The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation." The court says that
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed
at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of
taxation. it is enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar
situation.

Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted.

R.A. No. 7716 merely expands the base of the tax. As the Court sees it,..yung EO 273 satisfies all the requirements of a
valid tax. It is uniform. The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,
which are not exempt, at the constant rate of 0% or 10%.

SC also held that the law in fact, distributes the tax burden, to as many goods and services as
possible particularly to those which are within the reach of higher-income groups, even as the
law exempts basic goods and services. It is thus equitable.

it is inherent in the power to tax that the State be free to select the subjects of taxation, and it
has been repeatedly held that inequalities which result from a singling out of one particular
class for taxation, or exemption infringe no constitutional limitation.

A tax measure, like the expanded VAT law, is enacted by Congress,approved by the President
in the exercise of the State's power to tax, which is an attribute of sovereignty. And while the
power to tax, if exercised without limit, it is a power to destroy, and should, therefore, not be
allowed in such form, it has to be equally recognized that the power to tax is an essential right
of government. Without taxes, basic services can come to a halt; economic progress will be
stunted, and, in the long run, the people will suffer the pains of stagnation and retrogression.

The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT,
are regressive. What it simply provides is that Congress shall “evolve a progressive system of
 taxation.”

The constitutional provision has been interpreted to mean simply that “direct taxes are to be
preferred and as much as possible, indirect taxes should be minimized.”

WHEREFORE, the petitions in these cases are DISMISSED.

================
++++++++++++++++

ARTURO M. TOLENTINO vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. 115455 October 30, 1995

It is contended by the PPI that by removing the exemption of the press from the VAT while maintaining
those granted to others, the law discriminates against the press.
It would suffice to say that since the law granted the press a privilege, the law could take back the privilege
anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever
waive the exercise of its sovereign prerogative. Indeed, in withdrawing the exemption, the law merely subjects the press to
the same tax burden to which other businesses have long ago been subject.
The PPI asserts that it does not really matter that the law does not discriminate against the press because
"even nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional.
The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its
application to others, such those selling goods, is valid, its application to the press or to religious groups, such as the
Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets, is unconstitutional. As the U.S.
Supreme Court put it, "it is one thing to impose a tax on income or property of a preacher. It is quite another thing to
exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society v. City of Manila, which invalidated a city
ordinance requiring a business license fee on those engaged in the sale of general merchandise. It was held that the tax
could not be imposed on the sale of bibles by the American Bible Society without restraining the free exercise of its right to
propagate.
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of
services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the
exercise of its right any more than to make the press pay income tax or subject it to general regulation is not to violate its
freedom under the Constitution.

CREBA asserts that R.A. No. 7716

a. impairs the obligations of contracts,

It is claimed that the application of the tax to existing contracts of the sale of real property by installment or on deferred payment
basis would result in substantial increases in the monthly amortizations to be paid because of the 10% VAT. The additional amount, it is
pointed out, is something that the buyer did not anticipate at the time he entered into the contract.
Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen
the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax
must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing
contract in its true legal sense." Indeed not only existing laws but also "the reservation of the essential attributes of
sovereignty, is . . . read into contracts as a postulate of the legal order." Contracts must be understood as having been
made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can
extend to the defeat of that authority.

b. classifies transactions as covered or exempt without reasonable basis and

That while §4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products, food items, petroleum, and medical
and veterinary services, it grants no exemption on the sale of real property which is equally essential. The sale of real property for socialized
and low-cost housing is exempted from the tax, but CREBA claims that real estate transactions of "the less poor," i.e., the middle class, who
are equally homeless, should likewise be exempted.
The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services
was already exempt under §103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in error in
claiming that R.A. No. 7716 granted exemption to these transactions, while subjecting those of petitioner to the payment
of the VAT. Moreover, there is a difference between the "homeless poor" and the "homeless less poor" in the example given
by petitioner, because the second group or middle class can afford to rent houses in the meantime that they cannot yet
 buy their own homes. The two social classes are thus differently situated in life. "It is inherent in the power to tax that the
State be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which result from a
singling out of one particular class for taxation, or exemption infringe no constitutional limitation.

c. Violates the rule that taxes should be uniform and equitable and that Congress shall "evolve a progressive system
of taxation."

R.A. No. 7716 also violates Art. VI, §28(1) which provides that "The rule of taxation shall be uniform and equitable. The Congress
shall evolve a progressive system of taxation."
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed
at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of
taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to all persons, forms and
corporations placed in similar situation.
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716
merely expands the base of the tax.
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. The sales tax adopted in
EO 273 is applied similarly on all goods and services sold to the public, which are not exempt, at the constant rate of 0%
or 10%.
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engaged in
business with an aggregate gross annual sales exceeding P200,000.00. Small corner sarisari stores are consequently
exempt from its application. Likewise exempt from the tax are sales of farm and marine products, so that the costs of
basic food and other necessities, spared as they are from the incidence of the VAT, are expected to be relatively lower and
within the reach of the general public.

The CREBA claims that the VAT is regressive. The law imposes a flat rate of 10% and thus places the tax burden on all taxpayers
without regard to their ability to pay.
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What
it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has been
interpreted to mean simply that "direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be
minimized." Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales
taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII,
§17(1) of the 1973 Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the
regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, §3, amending §102
(b) of the NIRC), while granting exemptions to other transactions.
The transactions which are subject to the VAT are those which involve goods and services which are used or
availed of mainly by higher income groups. These include real properties held primarily for sale to customers or for lease
in the ordinary course of trade or business, the right or privilege to use patent, copyright, and other similar property or
right, the right or privilege to use industrial, commercial or scientific equipment, motion picture films, tapes and discs,
radio, television, satellite transmission and cable television time, hotels, restaurants and similar places, securities, lending
investments, taxicabs, utility cars for rent, tourist buses, and other common carriers, services of franchise grantees of
telephone and telegraph.