Definition, Concept and Purpose of Taxation

⮚ Taxation is a mode by which governments make exactions for revenue in order to support their existence and carry out legitimate objectives

⮚ Taxes are the lifeblood of the government. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it.

⮚ Their primary purpose is to generate funds for the State to finance the needs of the citizenry, finance the government and its activities.

THEORY AND BASIS OF TAXATION

LIFEBLOOD DOCTRINE Taxes are the lifeblood of the State through which the government continues to operate and with which the State effects its functions for the welfare of its
constituents

Benefits-Protection Theory
It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate
it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his
share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that
it is an arbitrary method of exaction by those in the seat of power. [Comm. V. Algue, G.R. No. L-28896 February 17, 1988]

Necessity Theory The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the State's sovereignty and a means to
give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvement designed for the
enjoyment of the citizenry and those which come within the State's territory, and facilities and protection which a government is supposed to provide. Considering
that the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges
guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the state. [Phil. Guaranty Co. vs. Commissioner, L-
22074, April 30, 1965]

Lutz vs. Araneta G.R. No. L-7959, December 22, 1955
Commonwealth Act 567, enacted in 1940, was a response to an imminent crisis in the Philippine sugar industry
due to export taxes and the potential loss of preferential status in the U.S. market outlined in the Tydings-
McDuffie Act. The law aimed to readjust benefits within the industry and stabilize it in anticipation of these
challenges. Section 3 of the Act imposed a tax on landowners leasing land for sugar cane cultivation, calculated
based on the rental value and assessed land value. Section 6 established the 'Sugar Adjustment and
Stabilization Fund' in the Philippine Treasury, collecting revenues for specific purposes such as sustaining the
industry despite potential market losses, redistributing benefits among industry components, and regulating
sugar production to economically suitable areas. The fund's objectives included maintaining the industry's
viability amid global competition and ensuring fair distribution of benefits among mills, landowners, planters, and
laborers.
Taxes may be imposed for regulatory purpose such as sugar industry
Commonwealth Act No. 567 serve for regulatory purpose aimed at the
rehabilitation and stabilization of the endangered sugar industry. The analysis of
the Act, particularly section 6, reveals that the tax is imposed with a primary
objective of exercising the police power rather than merely generating revenue.
Act is not merely a tax measure but a regulatory exercise of the police power,
justified by the overarching goal of promoting the general welfare and stabilizing a
critical industry.

The plaintiff, Walter Lutz, in his role as Judicial Administrator of Antonio Jayme Ledesma's Intestate Estate,
sought to recover P14,666.40 in taxes paid under section 3 for the crop years 1948-1949 and 1949-1950.

Lutz argued that the tax was unconstitutional and void, as it exclusively supported the sugar industry, which, in
his opinion, did not constitute a valid public purpose for taxation.

Caltex Philippines, Inc. vs. Commission on Audit, et. al, G.R. No. 92585, May 8, 1992. Taxes may be imposed for regulatory purpose such as oil industry

In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund, Taxes may be levied with a regulatory purpose to provide means for the
excluding the unremitted for the years 1986 and 1988. Pending such remittance, all of its claims for rehabilitation and stabilization of a threatened industry which is affected with public
reimbursement from the OPSF shall be held in abeyance. The grant total of its unremitted collections of the interest as to be within the police power of the State.
above tax is 1.2B.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the proposal but
prohibited Caltex from further offsetting remittances and reimbursements for the current and ensuing years.
Caltex moved for reconsideration but was denied. Hence, the present petition.

Power of Taxation as distinguished from Police Power and Power of Eminent Domain
Gerochi vs. Department of Energy, 527 SCRA 696 (2007).
Congress enacted RA 9136 or the “Electric Power Industry Reform Act (EPIRA) of 2001”. The universal
charge to be collected would serve as payment for government debts, missionary electrification,
equalization of taxes and royalties applied to renewable energy and imported energy, environmental
charge.
Petitioners Romeo P. Gerochi, et. al come before the Court praying that Section 34 of RA 9136 imposing
the Universal Charge, and Rule 18 of the Rules and Regulations (IRR) which seeks to implement the said
imposition, be declared unconstitutional. Petitioners contend that the Universal Charge has the
characteristics of a tax and is collected to fund the operations of the NPC.
Power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in
its very nature no limits, so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency that is to pay it.
Police power is the power of the state to promote public welfare by restraining and
regulating the use of liberty and property. Police power grants a wide exhibition of
instruments through which the State, as parens patriae, gives effect to a host of its
regulatory powers.
Power of Eminent Domain is the power of the State to facilitate the taking of private
property for public use with just compensation.

Respondents Department of Energy (DOE), ERC, and NPC, contends that the Universal Charge is not a
tax because it is levied for a specific regulatory purpose, which is to ensure the viability of the country's
electric power industry, it does not possess the essential characteristics of a tax and an exaction in the
exercise of the State's police power.
The conservative and pivotal distinction between these two powers rests in the
purpose for which the charge is made. If generation of revenue is the primary purpose
and regulation is merely incidental, the imposition is a tax but if regulation is the primary
purpose, the fact that revenue is incidentally raised does not make the imposition a tax. It
is a well-established doctrine that the taxing power may be used as an implement of
police power.

TAX POLICE POWER EMINENT DOMAIN

AUTHORITY Government or political subdivision Government or political subdivision Government or public utilities/public service
companies

PURPOSE Income generation Promote general welfare via regulations Taking of private property for public purpose

PERSONS AFFECTED Community of class of individuals Community or class of individuals Owners of private property

AMOUNT No limit (XPN: Inherent and Consti limitations) Only to the cost of regulation Just compensation to the owner

BENEFITS RECEIVED No direct benefit No direct benefit Just compensation

NON-IMPAIRMENT OF Tax laws generally do not impair contracts unless government Contracts may be impaired Contracts may be impaired
CONTRACTS is a party to a contract granting tax exemption for a
consideration

PROPERTY RIGHTS Taxes are part of public property No taking of property but only restriction of use Private property becomes property of the State

SCOPE All persons, property, activities All persons, property, activities Private property
 General Principles of Taxation
CIR vs. Pineda, G.R. No. L-22734, September 15, 1967
Manuel Pineda (respondent), one of the heirs of Atanasio Pineda (deceased), awarded from the estate of the latter a
share amounted to about P2,500.00. After the estate proceedings were closed, the CIR (petitioner) found out that there
was a tax liability due to the income tax returns not filed.
The petitioner ordered respondent to pay a total amount of 2,707.44Php of tax from the years 1945-1948 but, the
respondent appealed to the Court of Tax Appeals alleging that he was liable only for the proportionate part pertaining to
his share as one of the heirs and not to the totality of the estate.
Manuel B. Pineda was held liable for the payment of his share of the assessed taxes, including deficiency income tax
for 1945 and 1946 and real estate dealer's tax for the fourth quarter of 1946 and the whole year of 1947. Pineda's
liability was both as an heir and as a holder-transferee of property belonging to the estate. He was individually
responsible for the tax proportionate to his share and liable for the tax up to the amount of the property in his
possession.
Vera v. Fernandez, G.R. No. L-31364 March 30, 1979
Petitioner CIR and BIR Regional Director filed an Allowance of Claim and an Order of Payment of Taxes in the Special
Proceedings for the settlement of intestate estate of Luis Tongoy. The claim represents the indebtedness of the
deceased to the government for the deficiency income taxes for the years 1963 and 1964. The petitioners filed the
motions after the expiration of the time limited in the notice but before an order of the distribution is entered.
Respondent Judge Fernandez granted the opposition by the Administrator on the ground that the claim has already
prescribed.
Court ruled that claims for taxes may be collected even after the distribution of the decedent’s estate among his heirs
who shall be liable therefore in proportion of their share.
Tax obligations of decedent which are created by law are different from money claims against decedent arising from
contract provided by Section 5 Rule 85 of the Rules of Court. Taxes are entirely of different character from the claims
expressly enumerated in this provision, such as: all claims for money against the decedent arising from contract,
express or implied, whether the same be due, not due or contingent, all claims for funeral expenses and expenses for
the last sickness of the decedent and judgment for money against the decedent.
Comm. V. Algue, G.R. No. L-28896 February 17, 1988
Philippine Sugar Estate Development Corporation (PSEDC) appointed Algue Inc. (private respondent) as an agent with
authority to sell the former’s land, factories, and oil manufacturing plants.
Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo
Sanchez, worked for the formation of the Vegetable Oil Investment Corporation (VOIC), inducing other persons to invest
in it. Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased
the PSEDC properties. For this sale, Algue received as agent a commission of P126,000.00, and it was from this
commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. The individuals thereafter
filed their corresponding taxes.
Algue received a letter from BIR assessing it with P83,183.85 as delinquency income taxes. The private respondent
filed a letter of protest/reconsideration alleging that P75,000 should be deducted as legitimate business expense paid to
the promoters of VOIC. The CIR denied such request.
The government has two ways of collecting the tax in question:
1. By going after all the heirs and collecting from each of them the
amount of the tax proportionate to the inheritance received;
2. By subjecting the property of the estate which is in the hands of an
heir or transferee to the payment of the tax due—the estate.
Section 315 of the Tax Code payment of income tax shall be a lien in favor
of the Government of the Philippines from the time the assessment was
made by the Commissioner of Internal Revenue until paid with interests,
penalties, etc. By virtue of such lien, this Court held that the property of the
estate already in the hands of an heir or transferee may be subject to the
payment of the tax due the estate. Taxes are the life blood of the
Government and their prompt and certain availability are an imperious
need.
Citing CIR vs Pineda, Taxes are the life blood of the Government and their
prompt and certain availability are an imperious need.
Upon taxation depends the Government’s ability to serve the people whose
benefit taxes are collected. To safeguard such interest, neglect or omission
of government officials entrusted with the collection of taxes should not be
allowed to bring harm or detriment to the people, in the same manner as
private persons may foe made to suffer individually on account of his own
negligence, the presumption being that they take good care of their
personal affairs.
Taxation is the indispensable and inevitable price for civilized society;
without taxes, the government would be paralyzed.
Hence, despite the natural reluctance to surrender part of one's hard-
earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government, for
its part, is expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and enhance their
moral and material values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is an arbitrary
method of exaction by those in the seat of power.
In accordance with the provision of the Tax Code:
SEC. 30. Deductions from gross income.--In computing net income there
Court ruled that the amount of the promotional fees of P75, 000.00 was not excessive. The total commission paid by the
Philippine Sugar Estate Development Co. to the private respondent was P125,000.00. After deducting the said fees,
Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the
total commission. This was a reasonable proportion, considering that it was the payees who did practically everything,
from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate
properties.
Mun. Makati vs. CA, G.R. Nos. 89898-99 October 1, 1990
Petitioner Municipality of Makati expropriated a portion of land owned by private respondents, Admiral Finance Creditors
Consortium, Inc., Home Building System & Realty Corporation located at Mayapis St. San Antonio Village, Makati and
registered in the name of Arceli P. Jo.
After proceedings, the RTC of Makati determined the cost of the said land which the petitioner must pay to the private
respondents amounting to P5,291,666.00 minus the advanced payment of P338,160.00. It issued the corresponding
writ of execution accompanied with a writ of garnishment of funds of the petitioner which was deposited in PNB.
However, such order was opposed by petitioner through a motion for reconsideration, contending that its funds at the
PNB could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds
without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio.
Whether or not funds of the Municipality of Makati are exempt from garnishment and levy upon execution?
Phil. Guaranty Co. vs. Commissioner, L-22074, April 30, 1965
Local insurance company Philippine Guaranty did not include in its income tax returns for 1953 and 1954 the amount
ceded to its foreign reinsurance partners, arguing that said amount is not subject to withholding tax. Consequently, it
was slapped with a tax assessment by the CIR, which was later affirmed by the CTA. The SC affirmed the CTA ruling,
holding that for foreign companies, what is controlling is not the place of business but the place of activity that created
an income.
Whether the reinsurance premiums ceded by Philippine Guaranty to foreign reinsurers not doing business in the
Philippines are subject to withholding tax. – YES.
Pepsi-Cola Bottling Company of the Phil. Vs. Mun. of Tanauan, Leyte, G.R. No. L-31156, February 27, 1976
The Pepsi-Cola Bottling Company of the Philippines, Inc. filed a complaint with preliminary injunction before the CFI of
Leyte. It challenged the constitutionality of Section 2 of Republic Act No. 2264, “the Local Autonomy Act” alleging that it
constituted an undue delegation of taxing authority. Additionally, the company sought a declaration of nullity for
Ordinances Nos. 23 and 27, series of 1962, enacted by the municipality of Tanauan, Leyte.
Municipal Ordinance No. 23, imposed a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked,
requiring monthly reports from producers for tax computation.
Municipal Ordinance No. 27, levied a tax of ONE CENTAVO (P0.01) on each gallon of soft drinks produced or
manufactured within the municipality.
Both ordinances referred to the tax as the "municipal production tax." The CFI of Leyte rendered a decision dismissing
shall be allowed as deductions —
(a) Expenses: (1) In general.--All the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on any trade or
business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered
The funds deposited in the second PNB account are public funds of the
municipal government.
It is well-settled is the rule that public funds are not subject to levy and
execution, unless otherwise provided for by statute. Municipal revenues
derived from taxes, licenses and market fees, and which are intended
primarily and exclusively for the purpose of financing the governmental
activities and functions of the municipality, are exempt from execution.
Absent a showing that the municipal council of Makati has passed an
ordinance appropriating the said amount from its public funds deposited in
their PNB account, no levy under execution may be validly effected.
The Tax Code subjects foreign corporations to tax on their income from
sources within the Philippines. The word "sources" has been interpreted as
the activity, property or service giving rise to the income. The reinsurance
premiums were income created from the undertaking of the foreign
reinsurance companies to reinsure Philippine Guaranty against liability for
loss under original insurances. Such undertaking took place in the
Philippines. These insurance premiums, therefore, came from sources
within the Philippines and, hence, are subject to corporate income tax.
The foreign insurers' place of business should not be confused with their
place of activity. Business refers to continuity and progression of
transactions while activity may consist of only a single transaction. An
activity may occur outside the place of business.
Section 24 of the Tax Code does not require a foreign corporation to
engage in business in the Philippines in subjecting its income to tax. It
suffices that the activity creating the income is performed or done in the
Philippines. What is controlling, therefore, is not the place of business but
the place of activity that created an income.
The power of taxation is an inherent attribute of sovereignty, belonging to
every independent government as a matter of right, even without explicit
grant by the people. This Power is inherent to legislative and cannot be
delegated to the executive or judicial branches without violating the
separation of powers, except in the case of municipal corporations exempt
from this theory. Legislative powers may be delegated to local governments
for matters of local concern, including the power to tax, as implied in the
power to create political corporations for local self-government.
Delegation must adhere to constitutional principles: the tax should serve a
public purpose, follow the rule of uniformity, apply to persons or property
within the taxing jurisdiction, and provide notice and hearing for certain
the complaint, upholding the constitutionality of Section 2 of Republic Act No. 2264, and declaring Ordinances Nos. 23
and 27 legal and constitutional. The court also ordered the Pepsi-Cola Bottling Company to pay the taxes due under
these ordinances.
Churchill and Tait vs. Concepcion, G.R. No. 11572, September 22, 1916
Section 100 of Act No. 2339, passed February 27, 1914, effective July 1, 1914, imposed an annual tax of P4 per square
meter upon "electric signs, billboards, and spaces used for posting or displaying temporary signs, and all signs
displayed on premises not occupied by buildings." This section was subsequently amended by Act No. 2432 by
reducing the tax on such signs, billboards, etc., to P2 per square meter or fraction thereof. Francis A. Churchill and
Stewart Tait, co-partners and owners of a sign or billboard, paid the tax amounting to 104Php for the 52 sq. m property
exposed to public view. The tax was paid under protest and the plaintiffs having exhausted all their administrative
remedies instituted the present action under section 140 of Act No. 2339 against the Collector of Internal Revenue to
recover back the amount thus paid.
Collector vs. Yuseco, G.R. No. L-12518, October 28, 1961
Yuseco did not file ITR for 1945 and 1946
Upon discovery, revenue examiners assessed him and demanded that he make payment in a series of
correspondence.
a warrant of distraint and levy was issued but not executed. Subsequent actions, including a revised assessment notice
and another warrant which led Yuseco to file a petition for prohibition.
The petitioner Collector of Internal Revenue assails the jurisdiction of the respondent Court of Tax Appeals to take
cognizance of the respondent taxpayer's petition that seeks to enjoin him (the petitioner) from collecting his income
taxes due for the years 1945 and 1946 and surcharges by summary distraint of and levy upon his personal and real
properties, under the provisions of sections 316 to 330 of the National Internal Revenue Code. The petitioner's
contention is that the respondent taxpayer cannot bring in the respondent Court an independent special civil action for
prohibition without taking to the said Court an appeal from the decision or ruling of the Collector of Internal Revenue in
the cases provided for in sections 7 and 11 of Republic Act No. 1125.
Whether or not CTA has original jurisdiction over the petition of Yuseco for the issuance of writs of prohibition and
injunction? No
Basic Principles of a Sound Tax System
1. Fiscal adequacy –
⮚ Must meet the financial needs of the government
⮚ The sources (proceeds) of tax revenue should coincide with and approximate the needs of government expenditures.
2. Theoretical justice
taxes.
Double taxation is generally not forbidden in the country's fundamental law,
as there is no explicit injunction against it. Double taxation becomes
violative 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.
The statute under consideration imposes a tax of P2 per square meter or
fraction thereof upon every electric sign, billboard, etc., wherever found in
the Philippine Islands. Or in other words, "the rule of taxation" upon such
signs is uniform throughout the Islands. The rule, which we have just
quoted from the Philippine Bill, does not require taxes to be graded
according to the value of the subject or subjects upon which they are
imposed, especially those levied as privilege or occupation taxes.
Uniformity in taxation means that all taxable articles or kinds of property
of the same classes shall be taxed at the same rate. A tax is uniform when
it operates with the same.force and effect in every place where the subject
of it is found.
It does not mean that lands, chattels, securities, incomes, occupations,
franchises, privileges, necessities, and luxuries, shall all be assessed at the
same rate. Different articles may be taxed at different amounts, provided
the rate is uniform on the same class everywhere, with all people, and at all
times.
Nowhere does the law expressly vest in the Court of Tax Appeals original
jurisdiction to issue writs of prohibition and injunction independently of, and
apart from, an appealed case. The writ of prohibition or injunction that it
may issue under the provisions of section 11, Republic Act No. 1125, to
suspend the collection of taxes, is merely ancillary to and in furtherance of
its appellate jurisdiction in the cases mentioned in section 7 of the Act. The
power to issue the writ exists only in cases appealed to it.
Taxes being the chief source of revenue for the Government to keep it
running must be paid immediately and without delay. A taxpayer who feels
aggrieved by the decision or ruling handed down by a revenue officer and
appeals from his decision or ruling to the Court of Tax Appeals must pay
the tax assessed, except that, if in the opinion of the Court the collection
would jeopardize the interest of the Government and/or the taxpayer, it
could suspend the collection and require the taxpayer either to deposit the
amount claimed or to file a surety bond for not more than double the
amount of the tax assessed.
 ⮚ Must be fair and equitable to the taxpayers. The tax system should be fair to the average taxpayer and based upon his ability to pay.

⮚ Section 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of Taxation.

3. Administrative feasibility
⮚ Must be properly carried out by the government with the least inconvenience to the taxpayer.

⮚ The tax system should be capable of being properly and efficiently administered by the Government and enforced with the least inconvenience to the taxpayer.

Chaven vs. Ongpin, G.R. No. 76778 June 6, 1990
This petition challenges the constitutionality of Executive Order No. 73, which mandates the collection of real
property taxes based on 1984 values. The order sets the real property values as of December 31, 1984, to take
effect from January 1, 1987, for real property tax collection purposes.
Memorandum Order No. 77, issued on March 31, 1987, temporarily suspends the implementation of Executive
Order No. 73 until June 30, 1987.
Francisco I. Chavez, a taxpayer and owner of three land parcels, is the petitioner, arguing that the order led to an
excessive 100% to 400% increase in real property taxes on improvements and up to 100% on land. Chavez
contends that the acceleration of the general revision of assessments to January 1, 1987, resulted in oppressive
tax hikes during harsh economic conditions.
EO 73 does not impose new taxes nor create an increased rate; it merely
directs the implementation of revised assessments mandated by PD 464.
Moreover, the Court agreed with the observation of the Office of the Solicitor
General that without Executive Order No. 73, the basis for collection of real
property taxes will still be the 1978 revision of property values.
Doctrine: To continue collecting real property taxes based on valuations
arrived at several years ago, in disregard of the increases in the value of real
properties that have occurred since then, is not in consonance with a sound
tax system. Fiscal adequacy, which is one of the characteristics of a sound
tax system, requires that sources of revenues must be adequate to meet
government expenditures and their variations.

Scope and Limitations

Sison v. Ancheta, G.R. No. L-59431 July 25, 1984 WoN the imposition of a higher tax rate on taxable net income derived from business
or profession than on compensation is constitutionally infirm? NO
Petitioner assails Section I of BP 135. The assailed provision further amends Section 21 of the National
Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable The power to tax, an inherent prerogative, has to be availed of to assure the
compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from performance of vital state functions. It is the source of the bulk of public funds.
bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and
The power to tax "is an attribute of sovereignty. It is the strongest of all the powers of
similar arrangements, (e) dividends and share of individual partner in the net profits of taxable
government." It is, of course, to be admitted that for all its plenitude 'the power to tax
partnership, (f) adjusted gross income.
is not unconfined. There are restrictions. The Constitution sets forth such limits.
Petitioner as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the Adversely affecting as it does properly rights, both the due process and equal
imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis protection clauses may properly be invoked, all petitioner does, to invalidate in
those which are imposed upon fixed income or salaried individual taxpayers. He characterizes the above appropriate cases a revenue measure.
section as arbitrary amounting to class legislation, oppressive and capricious in character. For petitioner,
therefore, there is a transgression of both the equal protection and due process clauses of the
Constitution as well as of the rule requiring uniformity in taxation.

Comm. vs. Algue, G.R. No. L-28896 February 17, 1988
Algue, Inc. is a domestic corporation engaged in engineering, construction and other allied activities.
In 1958 and 1959, Algue, Inc. received a total of P125,000.00 as commission from the Philippine Sugar
Estate Development Co. for its services in inducing investors to purchase the Sugar Estate properties.
Algue, Inc. claimed the P75,000.00 as promotional fees as a deduction from its gross income in its
income tax returns for 1958 and 1959.
The Commissioner of Internal Revenue (CIR) disallowed the deduction, claiming that the promotional
fees were fictitious.
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government
itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
Rationale of taxation.—It is said that taxes are what we pay for civilized society.
Without taxes, the government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to surrender part of
Algue, Inc. appealed the decision of the CIR to the Court of Tax Appeals (CTA), which affirmed the
decision of the CIR.
ABAKADA Guro vs. Exec. Secretary Ermita, G.R. No. 168056 September 1, 2005
R.A. No. 9337 “VAT Reform Act” is a consolidation of three legislative bills namely, House Bill Nos. 3555
and 3705, and Senate Bill No. 1950.
House Bill No. 3555 “An Act Restructuring the Value-Added Tax”
House Bill No. 3705 “An Act Amending Sections 106, 107, 108, 109, 110 and 111 of the NIRC of 1997”
Senate Bill No. 1950 “An Act Amending Sections 27, 28, 34, 106, 108, 109, 110, 111, 112, 113, 114,
116, 117, 118, 119, 125, 148, 236, 237 And 288 of the National Internal Revenue Code Of 1997, As
Amended, and for Other Purposes”
The reasons why R.A. No. 9337 was enacted is due to the mounting budget deficit, revenue generation,
inadequate fiscal allocation for education, increased emoluments for health workers, and wider coverage
for full value-added tax benefits
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for
prohibition. They question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending
Sections 106, 107 and 108, respectively, of the NIRC. Section 4 imposes a 10% VAT on sale of goods
and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10%
VAT on sale of services and use or lease of properties. These questioned provisions contain a
uniform proviso, the so-called “stand-by authority”, authorizing the President, upon recommendation of
the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the
following conditions have been satisfied, to wit:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its
exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.
Respondents also refute petitioners’ argument that the increase to 12%, as well as the 70% limitation on
the creditable input tax, the 60-month amortization on the purchase or importation of capital goods
exceeding ₱1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary,
oppressive, and confiscatory, and that it violates the constitutional principle on progressive taxation,
among others.
There is no undue delegation of legislative power. It is simply a delegation of ascertainment of facts
one's hard-earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government, for its part, is
expected to respond in the form of tangible and intangible benefits intended to
improve the lives of the people and enhance their moral and material values, this
symbiotic relationship is the rationale of taxation and should dispel the erroneous
notion that it is an arbitrary method of exaction by those in the seat of power.
Procedural
1. Whether or not the Bicameral Committee can still amend the bill even if the
Constitution states that there should be no amendments after the 3rd reading
⮚ Yes. Ang prohibition sa amendment only apply doon sa normal process ng
paggawa ng bill na may 1st-3rd Reading. Once na nasa BiCam, pwede maglagay
ng amendment
2. WoN the BiCam can adopt the amendments introduced by the Senate without
violating the provision which states that “all tax laws should originate from the HoR”?
⮚ Yes. Senate pwede i-adoot ng BiCam ang amendments or provisions ng Senate
kahit regarding tax law, as long as 'yunh original bill comes from the House and
'yung amendments na prinopose ng Senate ay necessarily related doon sa law
As a general note, 'di pwede paki-alaman ng SC 'yung matters na related sa
procedural rules ng legislative unless may grave abude of discretion. In this case,
wala naman
SUBSTANTIVE:
1. WoN there is undue delegation of Legislative Power due to the “stand-by” powers
of the President?
⮚ 'Di siya undue delegation of legislative power. Una, complete naman 'yung batas
so pasado sa test of completeness. No need mag-add si President ng kung ano
mang gusto niya. Second, may standards provided sa batas kung kailan lang ma-
excericise yung power ni Pres. Hindi niya need nh discretion kasi ministerial lang
ang powers niya when the circumstances arise.
⮚ Also, 'yung SOF in this case is actually an agent of the Legislative kasi siya 'yung
may means ma-determine kung nag-arise na 'yunh dalawang instances kung
kailan pwede itaas 'yung VAT Rate. So hindi rij siya delegation ng legislatibe
power.
NOTE: Delegation ng power to create laws - BAWAL; Delegation ng power to
acsertain facts and implement laws regarding those facts - PWEDE
2. WoN Due Process and Equal Protection clauses were violated with regard to input
and output tax?
upon which enforcement and administration of the increase rate under the law is contingent. The
legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified
fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters
outside of the control of the executive.
CIR vs. Placer Dome, G.R. NO. 164365, June 8, 2007
The case involves Marcopper Mining Corporation's cleanup project in Marinduque, Philippines, where
Placer Dome Technical Services Limited (PDTSL), a Canadian company, hired a local company, Placer
Dome Technical Services (Philippines), Inc. (respondent), for the project. Respondents sought a VAT
refund, claiming zero-rated sales under the Tax Code due to the nature of their services. The Court of
Tax Appeals (CTA) approved a partial refund, citing discrepancies. The Court of Appeals affirmed this,
leading to a challenge.
The main issue was whether the respondent's services qualified for zero-rating. The court ruled in favor of
respondent, stating that services performed in the Philippines by VAT-registered persons, paid in
acceptable foreign currency and accounted for accordingly, are zero-rated. The court also invalidated a
VAT ruling requiring services to be consumed outside the Philippines for zero-rating, stating it contradicts
the law.
Overall, the court clarified that the destination principle doesn't require services to be consumed abroad
for zero-rating, affirming that services performed in the Philippines can be zero-rated under certain
conditions.
David vs. Ramos G.R. No. L-4300. October 31, 1951
Maria B. Castro filed a complaint against Saturnino David, the Collector of Internal Revenue, challenging
the constitutionality of the war profits tax after being acquitted in a criminal case for non-payment of the
tax. She sought to enjoin the Collector from proceeding with the sale of her properties to satisfy the tax
assessment. The Collector argued that the court lacked jurisdiction to entertain the complaint or issue an
injunction to restrain tax collection. The lower court ruled that it had authority to hear the case but denied
Castro's request for a preliminary injunction. The issue before the court was whether courts can restrain
tax collection when its validity is disputed. The court ruled that courts cannot enjoin tax collection, even if
disputed by the taxpayer, as per the National Internal Revenue Code. Disputes regarding tax validity
should be addressed through payment of the tax, filing a claim with the Collector, and, if denied, bringing
an action for recovery. Challenges to the constitutionality of tax laws should be raised as part of a claim
for tax recovery, not through an injunction.
Angeles City vs. Angles City Elec., G.R. No. 166134, June 29, 2010
⮚ Hindi siya violative ng due process. May reasons 'yung paggawa ng batas and
hindi siya arbitrary. 'Yung portion na hindi macre-credit as deduction 'yung input
tax kapag nag-exceed siya ng 70% ng output tax ay hindi rin invalid. In the first
place, 'yung mga tax credit and other privileges are NOT ACTUAL PROPERTY na
may RIGHTS. Privileges lang siya na binigay ng batas, which the legislature may
remove dahil nga hindi naman sila vested rights.
⮚ Wala ring violation ng equal protection. Una, may mga goods and services
covered ng imposition ng VAT pero wala namang special sa kanila, lahat sila
mata-taxan.
3. WoN the law violates the Uniformity on Taxation and Progressive Taxation rules?
⮚ Hindi rin violation ng Uniformity on Taxation. All services and goods na included
sa RA 9337 ay subject ng same tax (0%-10% or 12%
As a general rule, the VAT system uses the destination principle as a basis for the
jurisdictional reach of the tax. Goods and services are taxed only in the country where
they are consumed. Thus, exports are zero-rated, while imports are taxed. The
consumption contemplated by law, contrary to petitioner's administrative
interpretation, does not imply that the service be done abroad in order to be zero-
rated. Under the last paragraph of Section 102(b), services performed by VAT-
registered persons in the Philippines (other than the processing, manufacturing or
repacking of goods for persons doing business outside the Philippines), when paid in
acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BSP, are zero-rated
The prompt collection of taxes is deeply embedded in the tax system, and courts are
prohibited from granting injunctions to impede the collection of internal revenue taxes
to minimize interference with enforcement methods as provided by Section 305 and
Section 306 of the NIRC.
Remedy is to pay the tax, file a claim with the Collector, and, if denied, pursue an
action for recovery.
A principle deeply embedded in our jurisprudence that taxes being the lifeblood of the
government should be collected promptly, without unnecessary hindrance or delay. In
line with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly
provides that no court shall have the authority to grant an injunction to restrain the
 collection of any national internal revenue tax, fee or charge imposed by the code.

Is however different in the case of the collection of local taxes as there is no express
provision in the LGC prohibiting courts from issuing an injunction to restrain local
governments from collecting taxes. The prohibition on the issuance of a writ of
injunction to enjoin the collection of taxes applies only to national internal revenue
taxes, and not to local taxes.

Ermita vs. Aldecoa-delorino, G.R. No. 177130, June 7, 2011
Also, unlike the National Internal Revenue Code, the Local Tax Code does not contain
any specific provision prohibiting courts from enjoining the collection of local taxes.
More importantly, tariff protection is not a right, but a privilege granted by the
government and, therefore, APMP cannot claim redress for alleged violation thereof.
APMP failed to adduce any evidence to prove that it had a clear and unmistakable
right which was or would be violated by the enforcement of E.O. 486. The filing of the
petition at the court a quo was anchored on APMP and its members’ fear of loss or
reduction of their income once E.O. 486 is implemented and imported plastic and
similar products flood the domestic market due to reduced tariff rates. APMP was
seeking protection over "future economic benefits"

In a similar case, the Court held: The input tax is not a property or a property right
within the constitutional purview of the due process clause. A VAT-registered person’s
entitlement to the creditable input tax is a mere statutory privilege. The distinction
between statutory privileges and vested rights must be borne in mind for persons
have no vested rights in statutory privileges. The state may change or take away
rights, which were created by the law of the state, although it may not take away
property, which was vested by virtue of such rights.

Constitutional Limitations
A. Due Process Clause
⮚ The opportunity of a person to be heard; the reasonable connection between the subject of the law and the means used to attain the goals of such subject

⮚ The due process clause is violated if a tax serves a private rather than a public purpose, involves extraterritorial taxation, or uses arbitrary methods. However, a tax doesn't violate due
process simply because it results in injury rather than benefit to a particular taxpayer.

Manila Gas v. Collector, G.R. No. L-42780, January 17, 1936
MANILA GAS operates its business entirely within the Philippines. Its earnings, therefore come from local
sources. The place of material delivery of the interest to the foreign corporations paid out of the revenue of
the domestic corporation is of immaterial. The place of payment even if conceded to be outside of the
country cannot alter the fact that the income was derived from the Philippines. The word "source" conveys
only one idea, that of origin, and the origin of the income was the Philippines.

The accepted principle holds that no state can levy taxes on entities outside its jurisdiction without violating
the constitutional due process clause.
A state's taxing authority is confined within its territorial limits, allowing taxation of individuals, property,
income, or businesses within those boundaries.
In the case of taxing an interest in property, it is essential to identify the situs, which must be within the
state.

Income taxation requires the recipient to have domicile within the state, or the property or business
generating the income must be situated within the state to establish a situs for the income.

Tiu vs. CA, G.R. No. 127410 January 20, 1999
Personal property can be taxed independently of its owner's domicile, allowing taxation at the location
where the property is situated, even if the owner is not a citizen or resident of that particular state; however,
debts owed by corporations are considered obligations of the debtors and only hold value in the hands of
the creditors.
The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable
classification. If the groupings are characterized by substantial distinctions that make real differences, one
class may be treated and regulated differently from another. The classification must also be germane to the
purpose of the law and must apply to all those belonging to the same class.
Classification, to be valid, must:
(1) rest on substantial distinctions,
(2) be germane to the purpose of the law,
(3) not be limited to existing conditions only, and
(4) apply equally to all members of the same class.

RA 7227 is to convert the lands formerly occupied by the US military bases into economic or industrial
areas. In furtherance of such objective, Congress deemed it necessary to extend economic incentives to
attract and encourage investors, both local and foreign. Among such enticements are: (1) a separate
customs territory within the zone, (2) tax-and-duty-free importations, (3) restructured income tax rates on
business enterprises within the zone, (4) no foreign exchange control, (5) liberalized regulations on banking
and finance, and (6) the grant of resident status to certain investors and of working visas to certain foreign
executives and workers.

Additionally, it will be easier to manage and monitor the activities within the “secured area,” which is already
fenced off, to prevent “fraudulent importation of merchandise” or smuggling.
It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As long as
there are actual and material differences between territories, there is no violation of the constitutional
clause. And of course, anyone, including the petitioners, possessing the requisite investment capital can
always avail of the same benefits by channeling his or her resources or business operations into the
fenced-off free port zone.

B. Equal Protection Clause

⮚ It means that laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different,
both in the privileges conferred and the liabilities imposed.

Requisites for a valid classification (equal protection):

1. Reasonable
2. Germane to the purpose of the law
3. Applies in present and future
4. Applies to all within the same class

Shell vs. Vano, G.R. No. L-6093 February 24, 1954 Even if the installation manager is a salaried employee of the corporation, still it is
an occupation. Further, one occupation or line of business does not become exempt
by being conducted with some other occupation or business for which such tax has
been paid. The occupation tax must be paid by each individual engaged in a calling
subject to it. According to section 179 of the National Internal Revenue Code,
payment of an occupation tax does not exempt an individual from any other tax
provided by law or ordinance, and municipalities are allowed to impose local taxes
on the same occupation for local purposes.

City of Baguio vs. De Leon, G.R. No. L 24756 October 31, 1968 Equality and uniformity in taxation means that all taxable articles or kinds of property
 of the same class shall be taxed at the same rate. The taxing power has the
authority to make reasonable and natural classifications for purposes of taxation.

The contested ordinance is deemed valid and not ultra vires due to sufficient
statutory authority. Despite claims of double taxation violating the due process
clause and uniformity requirement, the court disagrees, asserting that such
arguments are not applicable when one tax is imposed by the state and another by
the city. The court emphasizes that imposing license fees or taxes on the same
occupation, calling, or activity by both the state and its political subdivisions is widely
recognized and not inherently objectionable. And does not violate due process.

Now, as to the claim that there was a violation of the rule of uniformity established
by the constitution. A tax is considered uniform when it operates with the same force
and effect in every place where the subject may be found.

Eastern Theatrical vs. Alfonso, G.R. No. L-1104 May 31, 1949
Equality and uniformity in taxation means that all taxable articles or kinds of property
of the same class shall be taxed at the same rate. The taxing power has the
authority to make reasonable and natural classifications for purposes of taxation;
and the appellants cannot point out what places of amusement taxed by the
ordinance do not constitute a class by themselves and which can be confused with
those not included in the ordinance.

C. Rate of Tax shall be Uniform

⮚ The rule requires the uniform application and operation, without discrimination, of the tax in every place where the subject of it is found. All taxable articles or properties of the same
class shall be taxed at the same rate.
Ormoc Sugar vs. Treasurer, G.R. No. L-23794, February 17, 1968 The Constitution in the bill of rights provides: ". . . nor shall any person be denied the
equal protection of the laws." We ruled that the equal protection clause applies only
to persons or things identically situated and does not bar a reasonable classification
of the subject of legislation, and a classification is reasonable where
(1) it is based on substantial distinctions which make real differences;
(2) these are germane to the purpose of the law;
(3) the classification applies not only to present conditions but also to future
conditions which are substantially identical to those of the present;
(4) the classification applies only to those who belong to the same class.

A perusal of the requisites instantly shows that the questioned ordinance does not
meet them, for it taxes only centrifugal sugar produced and exported by the Ormoc
Sugar Company, Inc. and none other. The classification, to be reasonable, should
be in terms applicable to future conditions as well. The taxing ordinance should not
be singular and exclusive as to exclude any subsequently established sugar central,
of the same class as plaintiff, for the coverage of the tax. As it is now, even if later a
similar company is set up, it cannot be subject to the tax because the ordinance

D. Non-impairment of Contracts
⮚ Contracts may not be impaired
Cagayan Electric vs. CIR, G.R. No. L-60126, September 25, 1985
CIR vs. Lingayen Gulf, G.R. No. L-23771, August 4, 1988
Misamis vs. CEPALCO, G.R. No. L-45355, January 12, 1990
City of San Pablo v. Reyes, G.R. No. 127708, March 25, 1999
MERALCO vs. Province of Laguna, G.R. No. 131359 May 5, 1999
expressly points only to Ormoc City Sugar Company, Inc. as the entity to be levied
upon.
RA 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while PD 231 is a general
tax law. The presumption is that the special statutes are exceptions to the general law because
they pertain to a special charter granted to meet a particular set of conditions and circumstances.
The franchise of respondent CEPALCO expressly exempts it from payment of “all taxes of
whatever authority” except the 3% tax on its gross income.
This court pointed out that such exemption is part of the inducement for the acceptance of the
franchise and the rendition of public service by the grantee. As a charter is in the nature of a
private contract, the imposition of another franchise tax on the corporation by the local authority
would constitute an impairment of the contract between the government and the corporation.
The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised
by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant
to direct authority conferred by Section 5, Article X of the Constitution. Thus Article X, Section 5 of
the Constitution reads: Sec. 5 — Each Local Government unit shall have the power to create its
own sources of revenue and to levy taxes, fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such
taxes, fees and charges shall accrue exclusively to the Local Governments. The important legal
effect of Section 5 is that henceforth, in interpreting statutory provision on municipal fiscal powers,
doubts will have to resolved in favor of municipal corporations. The power to tax is the most
effective instrument to raise needed revenues to finance and support myriad activities of local
government units for the delivery of basic services essential to the promotion of the general
welfare and the enhancement of peace, progress, and prosperity of the people. It may also be
relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to
government-owned or controlled corporations and all other units of government were that such
privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly
situated enterprises, and there was a need for these entities to share in the requirements of
development, fiscal or otherwise, by paying the taxes and other charges due from them.
 E. No Person shall be imprisoned for Non-Payment of Poll Taxes (Article III, Section 20)
⮚ “No person shall be imprisoned for debt or non-payment of a poll tax”

F. Imposition of Tariffs (Article, VI, Section 28, par. 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 imports within the framework of the National development program of the Government”

G. Charitable Institutions (Article VI, Section 28, par 3.)

⮚ “Charitable institutions, churches and personages 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.”

Herrera vs. QC Board of Assessments, G.R. No. L-15270, September 30, 1961 The exemption in favor of property used exclusively for charitable or educational purposes is “not
limited to property actually indispensable” therefor but extends to facilities which are “incidental
to and reasonably necessary for” the accomplishment of said purposes.

St. Catherine's Hospital is a charitable institution, the fact that it admits pay-patients does not
detract from the charitable character of a hospital, if all of its funds are devoted “exclusively to
the maintenance of the institution” as a “public charity”. In other words, “where rendering charity
is its primary object, and the funds derived from payments made by patients able to pay are
devoted to the benevolent purposes of the institution, the mere fact that a profit has been made
will not deprive the hospital of its benevolent character”.

Abra Valley College, Inc. vs. Aquino, G.R. No. L-39086, June 15, 1988
The exemption in favor of property used exclusively for charitable or educational purposes is not
limited to property “actually indispensable” but extends to facilities which are incidental to and
reasonably necessary for the accomplishment of said purposes. The test of exemption from
taxation is the use of the property for purposes mentioned in the Constitution. The phrase
“exclusively used for educational purposes” has always been made that exemption extends to
facilities which are incidental to and reasonably necessary for the accomplishment of the main
purposes.

Hodges vs. Municipal Board of Iloilo, G.R. No. L-18276, January 12, 1967

Systems Plus Computer College v Caloocan City, G.R. No. 146382, August 7,2003 Under Section 226 of RA 7160, the remedy of appeal to the Local Board of Assessment
Appeals is available from an adverse ruling or action of the provincial, city or municipal
assessor in the assessment of property.
 Mandamus does not lie against the respondent City Assessor in the exercise of his function of
assessing properties for taxation purposes. While its duty to conduct assessments is a
ministerial function, the actual exercise thereof is necessarily discretionary. Well-settled is the
rule that mandamus may not be availed of to direct the exercise of judgment or discretion in a
particular way, or to retract or reverse an action already taken in the exercise of either.

John Hay People’s Alternative Coalition v Lim G. R. No. 119775, October 24, 2003

Phil. Lung Center vs. QC, G.R. No. 144104, June 29, 2004

St. Luke’s vs. CIR, G.R. No. 195909, September 26, 2012

CIR vs. DLSU, G.R. No. 196596, November 9, 2016

H. Grant of Tax Exemption (Article VI, Section 28, par. 4)

⮚ “No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of the Congress.”

⮚ As a rule, claims of tax exemption are construed strongly against the claimant.

⮚ Tax exemptions as a general rule are construed strictly against the grantee and liberally in favor of the taxing authority. The burden of proof rests upon the party claiming exemption to
prove that it is in fact covered by the exemption so claimed. The party claiming exemption must therefore be expressly mentioned in the exempting law or at least be within its purview
by clear legislative intent.

I. All Monies Collected for Special Purpose (Article VI, Section 29, par. 3)
⮚ “All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose 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.”

Gaston vs. Republic Planter’s Bank, G.R. No. L-77194 March 15, 1988

J. Line-item Veto by the President (Article VI, Section 27, par. 2)

⮚ “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.”
CIR vs. CTA, G.R. No. L-47421 May 14, 1990 The presidential veto referred only to the imposition of 20% tax on gross receipts of
operators or proprietors of restaurants, refreshment parlors, bars and other eating
places which are maintained within the premises or compound of a hotel, motel or
rest houses

An unconstitutional veto is ineffectual—As mentioned earlier, we have already ruled

that the presidential veto referred merely to the inclusion of hotels, motels and rest
houses in the 20% caterer’s tax bracket but not to the whole section. But, as
mentioned earlier also, the CTA opined that the President could not veto words or
phrases in a bill but only an entire item. Obviously, what the CTA meant by “item”
 was an entire section. We do not agree. But even assuming it to be so, it would also
be to petitioner’s favor. The ineffectual veto by the President rendered the whole
section 191-A as not having been vetoed at all and it, therefore, became law as an
unconstitutional veto has no effect, whatsoever.
Gonzales vs. Macaraig, G.R. No. 87636. November 19, 1990

PHILCONSA vs. Enriquez, G.R. No. 113105 August 19, 1994

LINE-ITEM VETO POWER OF THE PRESIDENT

APPROPRIATE PROVISION INAPPROPRIATE PROVISION

K. Power of the Supreme Court (Article VIII, Section 5, par 2)

⮚ Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgements and orders of the lower courts in:
(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or
regulation is in question.
(b) All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed in relation thereto.
(c) All cases in which the jurisdiction of any lower court is in issue.
(d) All criminal cases in which the penalty imposed is reclusion Perpetua or higher.
(e) All cases in which only an error or question of law is involved.

L. Local Government Units (Article X, Section 6)

⮚ “Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.”

M. Revenues of non-stock, non-profit organizations (Article XIV, Section 4(3))

⮚ “SECTION 4. (3) 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 including restrictions on
dividends and provisions for reinvestment.”

La Sallian Educational Innovators Foundation vs CIR, G.R. No. 202792, February 27, 2019
 N. Freedom of Religious Worship
⮚ “SECTION 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship,
without discrimination or preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights.”

American Bible Society vs. Manila, G.R. No. L-9637 April 30, 1957 The constitutional guaranty of the free exercise and enjoyment of religious profession and worship
carries with it the right to disseminate religious information. Any restraint of such right can only be
American Bible Society is a foreign, non-stock, non-profit, religious, missionary
justified like other restraints of freedom of expression on the grounds that there is a clear and present
corporation duly registered and doing business in the Philippines, with its principal office
danger of any substantive evil which the State has the right to prevent."
in Manila. They distribute and sell bibles throughout the country. The City Treasurer of
Manila informed American Bible Society that it violated Ordinance No. 3000 and 2529 as
It is true the price asked for the religious articles was in some instances a little bit higher than the
it was conducting business of general merchandise since November 1945, without the
actual cost of the same, but this cannot mean that plaintiff was engaged in the business or occupation
necessary Mayor’s permit and municipal license and required them to secure the permit
of selling said "merchandise" for profit. For this reasons, the provisions of City Ordinance No. 2529, as
and license within three days together with compromise in the sum of P5,821.45. To
amended, which requires the payment of license fee for conducting the business of general
avoid the closure of their business, they paid under protest.
merchandise, cannot be applied to plaintiff society, for in doing so, it would impair its free exercise and
American Bible filed a complaint, questioning the constitutionality and legality of enjoyment of its religious profession and worship, as well as its rights of dissemination of religious
Ordinance 2529 and 3000, praying for a refund of the payment made to the city of Manila. beliefs. Hence, exempted from taxation.

Inherent Limitations
A. Inherently Legislative
Luzon Stevedoring vs. CTA, G.R. No. L-30232, July 29, 1998

NPC vs. Albay, G.R. No. 87479, June 4, 1990 Under Presidential Decree No. 776, the power of the FIRB was merely to "recommend to the
President of the Philippines and for reasons of compatibility with the declared economic policy,
the withdrawal, modification, revocation or suspension of the enforceability of any of the above-
cited statutory subsidies or tax exemption grants, except those granted by the Constitution." It
has no authority to impose taxes or revoke existing ones, which, after all, under the
Constitution, only the legislature may accomplish.

The FIRB, under its charter, Presidential Decree No. 776, had been empowered merely to
"recommend" tax exemptions. By itself, it could not have validly prescribed exemptions or
restore taxability. Hence, as of June 11, 1984 (promulgation of Presidential Decree No. 1931),
NAPOCOR had ceased to enjoy tax exemption privileges.

The fact that under Executive Order No. 93, the FIRB has been given the prerogative to
"restore tax and/or duty exemptions withdrawn hereunder in whole or in part," and "impose
conditions for tax and/or duty exemption" is of no moment. These provisions are prospective in
character and cannot affect the Board's past acts
Pepsi vs. City of Butuan, G.R. No. L-22814, August 28, 1968
B. Public Purpose
Pascual vs. Sec. of Public Works, G.R. No. L-10405, December 29, 1960

Lutz vs. Araneta G.R. No. L-7959, December 22, 1955 The protection and promotion of the sugar industry is a matter of public concern, it follows that the
Legislature may determine within reasonable bounds, what is necessary for its protection and
expedient for its promotion. The Act, will show that the tax is levied with a regulatory purpose, to
provide means for the rehabilitation and stabilization of the threatened sugar industry.

Valentin Tio vs. Videogram Regulatory Board, G.R. No. L-75697
Petitioner Tio on behalf of other videogram operators adversely affected filed this petition
assailing the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the
Videogram Regulatory Board" with broad powers to regulate and supervise the videogram
industry.
A month after the promulgation of PD No. 1987. PD No. 1994 amended the National Internal
Revenue Code citing SEC. 134. Video Tapes. — There shall be collected on each processed
video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, that locally manufactured or imported blank video tapes shall be subject to sales
tax.
Petitioner's attack on the constitutionality of the DECREE arguing that the tax imposed is
harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due
process clause of the Constitution and that here is undue delegation of power and authority.
Tax imposed under the Decree is not harsh; oppressive, confiscatory and in restraint of trade but
regulatory and a revenue measure; The levy is for a public purpose.
The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted
by the realization that earnings of videogram establishments of around P600 million per annum
have not been subjected to tax, thereby depriving the Government of an additional source of
revenue. It is an end-user tax, imposed on retailers for every videogram they make available for
public viewing, It is similar to the 30% amusement tax imposed or borne by the movie industry
which the theater-owners pay to the government, but which is passed on to the entire cost of the
admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is
imposed uniformly on all videogram operators. The levy of the 30% tax is for a public purpose. It
was imposed primarily to answer the need for regulating the video industry, particularly because of
the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the DECREE to protect the movie
industry, the tax remains a valid imposition.

Classification of Taxes

According to Subject Matter or Object:

1. Personal - Taxes of fixed amounts upon residents or persons of a certain class without regard to their property or business (e.g., the basic community tax)
2. Property - Taxes assessed on things or property of a certain class (e.g., real estate taxes)
3. Excise/license - Taxes on privilege, occupation or business not falling within the classification of poll taxes or property taxes (e.g., internal revenue taxes and customs duties)

According to Burden
1. Direct
● Taxes which are demanded from persons who are primarily burdened to pay them (e.g., income, estate and donor’s taxes)

● A tax for which a taxpayer is directly liable on the transaction or business it engages in (Maceda vs. Macaraig, Jr)
2. Indirect
● Taxes levied upon transactions or activities before the articles subject matter thereof reach the consumers to whom the burden of the tax may ultimately be charged or
shifted (e.g., VAT)
● Taxes primarily paid by persons who can shift the burden upon someone else.
 According to Determination of amount
1. Specific Taxes - Taxes imposed per head, unit or number, or by weight or volume and which require no assessment beyond a listing and classification of the subjects or articles to
be taxed.
2. Ad Valorem - - tax of a fixed proportion of the value of property with respect to which the tax is assessed; requires intervention of assessor.
Ex. Real estate tax, excise tax on cars, nonessential Good

According to Purpose
1. General - Taxes imposed for the general purposes of the government (e.g., income taxes)
2. Special - Taxes imposed for a particular legitimate object of government (e.g., educational fund tax under real property taxation of the local government code)

Calalang vs. Lorenzo, G.R. No. L-6961. June 17, 1955.

PAL v. Edu, G.R. No. L- 41383 August 15, 1988
ESSO Standard Eastern vs. CIR, G.R. Nos. L-28508-9 July 7, 1989
Lozano vs. ERB, G.R. Nos. 95203-05 December 18, 1990

According to Scope
1. National
- Taxes imposed by the national government (e.g., internal revenue taxes and custom duties)
2. Municipal of Local
- Taxes imposed by local governments (e.g., business taxes that may be imposed under the Local Government Code)

Classification according to gradation

1. Progressive - The tax rate increases as the tax base increases (e.g., income tax)
2. Regressive - The tax rate decreases as the tax base increases
3. Mixed - The tax rates are partly progressive and partly regressive
4. Proportional - The tax rates are fixed (in amounts or in percentage) on a flat tax base.

Taxation distinguished from certain exactions

License Fee
- Imposed for the regulation of lawful business or occupation in the exercise of police power, the amount of which is invariably limited to cover the expenses of issuing the license and the
cost of the necessary surveillance, inspection or supervision by the government.

Tax License Fees

Basis: Levied in the exercised of the taxing power Emanates from police power

Purpose: Primarily for Revenue For regulation

Limitation on Amount: No limit Limited to the cost of:

1. Issuance of license: and
2. Inspection and surveillance, except for non-useful
occupation

When Paid: Normally paid after the start of business operations Normally paid before the commencement of business operations

In Case of Surrender: Taxes, being the lifeblood of the State, cannot be License fee may be surrendered with or without consideration.
surrendered except for lawful considerations
Villegas vs. Hui Tsai, G.R. No. L-29646 November 10, 1978 The term "tax" frequently applies to all kinds of exactions of monies which become
public funds. It is often loosely used to include levies for revenue as well as levies
for regulatory purposes such that license fees are frequently called taxes although
license fee is a legal concept distinguishable from tax: the former is imposed in the
exercise of police power primarily for purposes of regulation, while the latter is
imposed under the taxing power primarily for purposes of raising revenues. Thus,
if the generating of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax; but if regulation is the primary purpose, the fact
that incidentally revenue is also obtained does not make the imposition a tax. To
be considered a license fee, the imposition questioned must relate to an
occupation or activity that so engages the public interest in health, morals, safety
and development as to require regulation for the protection and promotion of such
public interest; the imposition must also bear a reasonable relation to the probable
expenses of regulation, taking into account not only the costs of direct regulation
but also its incidental consequences as well.
Progressive Dev. Corp. vs. QC, G.R. No. L-36081 April 24, 1989

Toll
- An act or demand on proprietorship or ownership. Its imposition is generally contractual in nature, and it may be demanded by private persons or entities.

Tax Toll Fees

Definition: Enforced proportional contribution from persons or property A consideration which is paid for the use of a property which is of a public
nature

Basis: A demand of sovereignty A demand of proprietorship

Purpose: Taxes are levied for the support of the government Tolls are compensation for the cost and maintenance of the property used.

Determination of The amount of tax is determined by the legislature The amount of the toll is determined by the cost of the property or of the
Amount: improvement

Who may Impose: May only be imposed by the State Imposed by the government or private individual

City of Ozamis vs. Lumapas, G.R. No. L-30727 July 15, 1975
Serapio LUMAPAS was an operator of Romar Line, a business of transportation buses for passengers and
cargoes in Ozamiz City and Pagadian.
The Municipal BOARD of Ozamiz CITY enacted Ordinance No. 466, which imposed “parking fees for every
motor vehicle parked on any portion of the existing parking space in the City of Ozamiz.” This ordinance
covered LUMAPAS’ buses, which parked along Zulueta Street (in the market area) whenever they would wait
for passengers. The buses had to pay the “parking fee” at a toll station, around 100 ft. after the “parking area”
along Zulueta Street.
The City of Ozamis has been clothed with full power to control and regulate its
streets for the purpose of promoting health, safety and welfare. Indeed,
municipal power to regulate the use of streets is a delegation of the police
power of the national government, and in the exercise of such power, a
municipal corporation can make all necessary and desirable regulations which
are reasonable and manifestly in the interest of public safety and convenience.
The fees collected are actually in the nature of parking fees and not toll fees for
the use of Zulueta Street. The fees charged are undeniably to cover the
 expenses for supervision, inspection and control, to ensure the smooth flow of
LUMAPAS paid P1259 under protest and filed a complaint against the CITY, alleging that Ordinance No. 466
traffic in the environs of the public market, and for the safety and convenience
was ultra vires and asking that it be nullified and his parking fees reimbursed.
of the public.
The CFI declared the Ordinance null and void on the ground that the “parking area” was a municipal street,
The word “toll” when used in connection with highways has been defined as a
and the parking fees were in the nature of “toll fees” for the use of public works—and violated R.A. 4136
duty imposed on goods and passengers travelling public roads. The toll for use
(Land Transportation & Traffic Code) since the “toll fees” were imposed without prior recommendation of the
of a toll road is for its use in travelling thereon, not for its use as a parking
Sec. of Public Works and approval by the President.
place for vehicle.

Special Assessment or Levy

- A demand for contribution to help defray the cost of improvement on real property owners of a particular locale directly benefited by such improvement. It is not a personal liability of the
person assessed but one assessable on the property itself.

Tax Special Assessments

Definition: Enforced proportional contribution from persons or property Enforced proportional contributions from owners of lands especially or
peculiarly benefited by public improvements

Subject: Taxes are levied on persons, property (which includes land), income, business, Levied only on land
etc.

Liability: Personal liability of the taxpayer Cannot be made a personal liability of the person assessed.

Basis: Based on necessity and partially on benefits Based solely on benefits

Application: General application Special application only as to a particular time and place

Apostolic Prefect vs. Treasurer of Baguio, G.R. No. 47252. April 18, 1941
The differences between a special assessment and a tax are that
(1) a special assessment can be levied only on land;
(2) a special assessment cannot (at least in most states) be made a personal liability of the person assessed;
(3) a special assessment is based wholly on benefits; and
(4) a special assessment is exceptional both as to time and locality. The imposition of a charge on all
property, real and personal, in a prescribed area, is a tax and not an assessment, although the purpose is to
make a local improvement on a street ol highway. A charge imposed only on property owners benefited is a
special assessment rather than a tax notwithstanding the statute calls it a tax.

Debt or Ordinary Obligation

⮚ It is based upon a juridical tie, created by law, contracts, quasi-contracts, delicts or quasi-delicts between parties for their private interest or resulting from their own acts or
omissions.

Tax Debts

Basis: An obligation based on law An obligation based on contract or judgment

Effect of Non-Payment: Failure to pay tax (other than poll tax) may result in imprisonment No imprisonment for non-payment of debt
 Mode of Payment: Generally payable in money Payable in money, property, or service

Assignability: Not assignable Assignable

Payment: Generally, not subject to compensation or set-off. May be subject to compensation or set-off

Drawing of Interest: Tax does not draw interest except in case of delinquency Debt draws interest if stipulated or if the debtor incurs legal delay

Imposing Authority: Imposed by public authority Imposed by private individuals

Prescription: Determined by NIRC Determined by the Civil Code

Victorias Milling vs. PPA, G.R. No. 73705 August 27, 1987
Caltex vs. COA, G.R. No. 92585 May 8, 1992
RP vs. Ericta, G.R. No. L-35238 April 21, 1989
As correctly stated by the Solicitor General, the fees and charges PPA collects are not for
the use of the wharf that petitioner owns but for the privilege of navigating in public waters,
of entering and leaving public harbors and berthing on public streams or waters. This Court
laid down the rule that berthing charges against a vessel are collectible regardless of the
fact that mooring or berthing is made from a private pier or wharf. This is because the
government maintains bodies of water in navigable condition and it is to support its
operations in this regard that dues and charges are imposed for the use of piers and
wharves regardless of their ownership. As to the requirement to remit 10% of the handling
charges, this is the government share of earnings of arrastre and stevedoring operators is
in the nature of contractual compensation to which a person desiring to operate arrastre
service must agree as a condition to the grant of the permit to operate.
It is settled that a taxpayer may not offset taxes due from the claims that he may have
against the government. Taxes cannot be the subject of compensation because the
government and taxpayer are not mutually creditors and debtors of each other and a claim
for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.
The Trial Court was saying in effect that while judgment should be rendered in favor of the
Republic against Sampaguita for unpaid taxes in the amount of P10,268.41, judgment
ought at the same time to issue for Sampaguita commanding payment to it by the Republic
of the same sum, representing the face value of the certificates of indebtedness assigned
to it and for recovery of which it had specifically prayed in its counterclaim. It is useless to
quibble about the precise time "within ten years" when an obligation becomes demandable,
when that period of ten years has already expired. Whatever inexactitude might inhere in
the phrase, "within ten years," as fixing the time of exibility of the obligation in question,
there can be no debate about the proposition that the obligation became due and
demandable after ten years. It would be absurd and unfair to sanction the theory subsumed
in the Republic's petition that its obligation was not demandable within ten years because of
inexactitude yet became time-barred upon the lapse of that self-same period.

Police Inspection fees

Matalin Coconut vs. Municipality of Malabang, G.R. No. L-28138 August 13, 1986
We agree with the finding of the trial court that the amount collected under the ordinance in
question partakes of the nature of a tax, although denominated as "police inspection fee"
since its undeniable purpose is to raise revenue. However, we cannot agree with the trial
court's finding that the tax imposed by the ordinance is a percentage tax on sales. The tax
imposed under the ordinance in question is not a percentage tax on sales or any other form
of tax based on sales. It is a fixed tax of P.30 per bag of cassava starch or flour "shipped
out" of the municipality. It is not based on sales as correctly held by the trial court, the so-
 called "police inspection fee" levied by the ordinance is "unjust and unreasonable." Said the
court a quo: ... It has been proven that the only service rendered by the Municipality of
Malabang, by way of inspection, is for the policeman to verify from the driver of the trucks of
the petitioner passing by at the police checkpoint the number of bags loaded per trip which
are to be shipped out of the municipality based on the trip tickets for the purpose of
computing the total amount of tax to be collect (sic) and for no other purpose.

Vehicle Registration
PAL v. Edu, G.R. No. L- 41383 August 15, 1988 It is possible for an exaction to be both tax and regulation. License fees are changes looked
to as a source of revenue as well as a means of regulation. This is true, for example, of
automobile license fees. In 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. These exactions are sometimes called regulatory taxes. Indeed,
taxation may be made the implement of the state's police power. 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. Such is the case of motor vehicle registration fees. 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."
LTO vs. City of Butuan

Interpretation and Construction of Tax Statutes and Tax Exemptions

1. The primordial consideration in interpreting the tax statutes and tax exemptions is, every time, the legislative intent.
2. Where language is plain — the words employed are to be given their ordinary meaning.
3. Where there is doubt — the doubt must be resolved liberally in favor of taxpayers and strictly against the taxing authority.
4. Public purpose is always presumed. This is in consonance with the doctrine that like any other statute, tax legislation carries a presumption of constitutionality.
5. Provisions of the taxing act are not to be extended by implication. It is a hornbook doctrine in the interpretation of tax laws that a statute will not be construed as imposing a tax unless it
does so clearly, expressly, and unambiguously.
6. Tax laws are special laws and prevail over general laws.
7. Tax exemptions are not presumed and, when granted, are strictly construed against the grantee.

Commissioner of Internal Revenue v. Court of Appeals, G.R. 115349, April 18, 1997
Marinduque Iron Mines Agents, Inc. v. Municipal Council of Hinabangan, G.R. No. L-
18924, June 30, 1964
The Court takes this occasion to reiterate the hornbook doctrine in the interpretation of tax laws
that "(a) statute will not be construed as imposing a tax unless it does so clearly, expressly, and
unambiguously . . . (A) tax cannot be imposed without clear and express words for that purpose.
Accordingly, the general rule of requiring adherence to the letter in construing statutes applies with
peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by
implication."

Commissioner of Internal Revenue v. SM Prime Holdings, Inc. G.R. No. 183505, The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the imposition of VAT
February 26, 2010 on the gross receipts of cinema/theater operators or proprietors derived from admission tickets.
The removal of the prohibition under the Local Tax Code did not grant nor restore to the national
government the power to impose amusement tax on cinema/theater operators or proprietors.
Neither did it expand the coverage of VAT. Since the imposition of a tax is a burden on the
taxpayer, it cannot be presumed nor can it be extended by implication. A law will not be construed
as imposing a tax unless it does so clearly, expressly, and unambiguously. As it is, the power to
impose amusement tax on cinema/theater operators or proprietors remains with the local
government.
 The rule that tax exemptions should be construed strictly against the taxpayer presupposes that
the taxpayer is clearly subject to the tax being levied against him. The reason is obvious: it is both
illogical and impractical to determine who are exempted without first determining who are covered
by the provision. Thus, unless a statute imposes a tax clearly, expressly and unambiguously, what
applies is the equally well-settled rule that the imposition of a tax cannot be presumed. In fact, in
case of doubt, tax laws must be construed strictly against the government and in favor of the
taxpayer.
National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 9, 2003

Surigao Electric Co. Inc. v. Court of Tax Appeals, G.R. No. L-25289, June 28, 1974

Commissioner of Internal Revenue v. Algue, G.R. No. L-28896, February, 17, 1988

Republic of the Philippines v. Paranaque, G.R. No. 191908, July 18, 2012

Contractual Tax Exemption

Tax Exemption may be classified into —

1. Express
- Exemptions are expressly granted by the Constitution, statutes, treaties, franchises or similar legislative acts (e.g., inter-corporate dividends by a domestic corporation
from another domestic corporation, conditionally tax and/or tax-exempt importations, exemptions from real property tax, and other special laws such as omnibus
investment code of 1987)
2. Implied
- Whenever particular persons, properties, or excises are deemed exempt as they fall outside the scope of the taxing provision itself
3. Contractual
- Tax exemption in consideration of a contractual agreement with the government
Commissioner v. CTA, G.R. No. L-44007, March 20, 1991 The presumption is that special statutes are exemptions to the general law because they
pertain to special charter granted to meet a particular set of conditions and circumstances.
Cagayan Electric v. CIR G.R. No. L-60126, September 25, 1985

Misamis v. CEPALCO, G.R. No. L-45355, January 12, 1990

Maceda v. Macaraig, G.R. No. 88291, May 31, 1991

City of San Pablo v. Reyes, G.R. No. 127708 March 25, 1999

Meralco v. Province of Laguna, G.R. No. 131359 May 5, 1999

Doctrines in Taxation
Prospectivity
- Taxes may be imposed retroactively by law but, unless so expressed by such law, these taxes must only be imposed prospectively.
- Internal revenue laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation
government.
- Retroactive application of tax laws is allowed if legislative intent is clear. A statute should be considered as prospective in its operation, whether it enacts, amends, or repeals, unless the
language of the statute clearly demands or expresses that it shall have a retroactive effect.
 Hydro Resources v. CA, G.R. No. 85714 November 29, 1991 Taxes may be imposed retroactively by law but, unless so expressed by such law, these
taxes must only be imposed prospectively.

Hilado v. Collector – G.R. No. L-9408. October 31, 1956. Tax laws are neither political nor penal in nature, and they are deemed laws of the occupied
territory rather than of the occupying enemy
An erroneous construction of the law by the Treasury Department or the collector of internal
revenue does not preclude or estop the government from collecting a tax which is legally due.

Lorenzo v. Posadas – G.R. No. L-43082, June 18, 1937 A statute should be considered as prospective in its operation, whether it enacts, amends, or
repeals unless the language of the statute clearly demands or expresses that it shall have a
retroactive effect

ABS-CBN Broadcasting Corporation v. Court of Tax Appeals, G.R. No. L-52306 October It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of
12, 1981 Internal Revenue have no retroactive application where to so apply them would be prejudicial
to taxpayers.

Imprescriptibility
⮚As a general rule, the right to assess and to collect are imprescriptible.

⮚XPN: when the laws provide for statute of limitations.

⮚Unless otherwise provided by tax law itself, taxes are imprescriptible.

⮚Where, however, the taxpayer, although not required, files a return and declares his tax liability, then the prescriptive periods may become operative.

⮚The law on prescription; being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be
strictly construed.

Examples:
1. Assessment of internal revenue taxes within 3 years after the last day prescribed by law for filing of the return; In cases of fraud, at any time within 10 years after the discovery of
the fraud.
2. For LGUs, 5 year prescriptive period for assessment and collection.

CIR v. Ayala Securities Corp, G.R. No. L-29485 November 21, 1980 Unless otherwise provided by the tax law itself, taxes are imprescriptible.

The prescriptive periods therein contained were considered to be applicable only to those taxes that were
thereunder required to be reported or returned by the taxpayer for tax purposes.

The Court thus held that the then 25% surtax imposed on unreasonably accumulated surplus profits of
Collector v. Bisaya Land Transport – GR Nos. L-12100 and L-11812. May 29, corporations is imprescriptible and there is no time limit on the right of the Commissioner to assess the
1959 same. Where, however, the taxpayer, although not required, files a return and declares his tax liability,
then the prescriptive periods may become operative.

Double Taxation
⮚ An act of the sovereign by taxing twice for the same purpose in the same year upon the same property or activity of the same person, when it should be taxed once, for the same purpose
and with the same kind of character of tax.
 ⮚ Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity.

⮚ In order to constitute double taxation in the objectionable or prohibited sense (Requisites)

a. the same property must be taxed twice when it should be taxed but once;
b. both taxes must be imposed on the same property or subject-matter,
c. for the same purpose, by the same State, Government, or taxing authority,
d. within the same jurisdiction or taxing district,
e. during the same taxing period, and
f. they must be the same kind or character of tax."

Villanueva v. City of Iloilo, G.R. No. L-26521, December 28, 1968 In the broad sense, double taxation means indirect duplicate taxation. It extends to all cases in
which there are two or more pecuniary impositions. The Constitution does not prohibit the
imposition of double taxation in the broad sense.

It has been shown that a real estate tax and the tenement tax imposed by the ordinance, although
imposed by the same taxing authority, are not of the same kind or character.
In order to constitute double taxation in the objectionable or prohibited sense:
a) the same property must be taxed twice when it should be taxed but once;
b) both taxes must be imposed on the same property or subject-matter,
c) both taxes must be imposed for the same purpose,
d) both taxes must be imposed by the same State, Government, or taxing authority,
e) within the same jurisdiction or taxing district,
f) during the same taxing period, and
g) they must be the same kind or character of tax."

Comm. v. Lednickey, G.R. Nos. L-18169, L-18262 & L-21434, July 31, 1964 Double taxation is one of direct duplicate taxation; otherwise, the case is merely one of indirect
duplicate taxation.

Pepsi-Cola v. Tanauan – G.R. No. L-31156 February 27, 1976 Standing alone and not being forbidden by our fundamental law, double taxation is not a valid
defense against the validity of a tax measure.

Kinds of double taxation:

1. Direct duplicate taxation (obnoxious, objectionable, prohibited in a strict sense) - the objectionable kind of double taxation in its prohibited sense, since it violates the equal
protection clause of the Constitution.

Elements:
a. The same property or subject matter is taxed twice when it should be taxed only once;
b. Both taxes are levied for the same purpose; and
c. Imposed by the same taxing authority (1) within the same jurisdiction; (2) during the same taxing period; and (3) covering the same kind/character of tax.

2. Indirect duplicate taxation (broad sense) - it extends to all cases in which there is a burden of two or more pecuniary impositions. It is usually allowed as long as there is no
violation of the equal protection and uniformity clauses of the Constitution.

Examples:
a. A tax upon a corporation for its property and upon its shareholders for their shares;
b. A tax upon the same property imposed by two different states; and
c. A tax on a mortgage as personal property and upon the mortgaged property as real estate

Power to Tax is the Power to Destroy

 ⮚ The power of taxation is sometimes also called the power to destroy. Therefore, it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector ‘kills the hen that lays the golden egg.’ And, in order to maintain the general public’s trust and confidence in the Government,
this power must be used justly and not treacherously.
⮚ The doctrine seeks to describe, in an extreme, the consequential nature of taxation and its resulting implications to wit:
(a) the power to tax must be exercised with caution to minimize injury to the propriety rights of a taxpayer; but
(b) if the tax is lawful and not violate of any of the inherent and constitutional limitations, the fact alone that it may destroy an activity or object of taxation will not entirely permit the
courts to afford any relief; and
(c) a subject or object that may not be destroyed by the taxing authority may not likewise be taxed.

⮚ Thus a tax may not be imposed on the exercise of a fundamental right since to otherwise permit it would amount to destroying that fundamental right.

⮚ The power to tax is not the power to destroy while this Court sits (Justice Holmes)

McCulloch v. Maryland :: 17 U.S. 316 (1819)

Panhandle Oil Co. v. Mississippi ex Rel. Knox, 277 U.S. 218 (1928)

Commissioner of Internal Revenue v. San Roque Power Corp., G.R. Nos. 187485, 196113 & 197156,
February 12, 2013.

Escape from Taxation

⮚ The “doctrine of escape from taxation” permits the taxpayer to minimize (if not to escape payment of tax by lawful means, the same is effected through tax avoidance and tax evasion.

⮚ A tax evader breaks the law, the tax avoider sidesteps it.

⮚ Most common ways used by taxpayer in escaping from taxation

1. Tax Avoidance
❖ Also called tax minimization. It is reducing or totally escaping payment of taxes through legally permissible means.

❖ The tax saving device within the means sanctioned by law.

❖ Should be used by the taxpayer in good faith and at arms length.

Examples:
a. Selling shares of stock through a stock exchange in order to avail of the lower tax rates; estate planning within the means sanctioned by the Tax Code.
b. Availing of all deductions allowed by law or refraining from engaging in activities subject to tax

2. Tax Evasion
❖ An illegal means of escaping taxation. It connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes. Hence, it subjects the taxpayer to
further or additional civil or criminal liabilities. It is sometimes referred to as tax dodging.
❖ A scheme used outside of those lawful means and, when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities

Elements/Requisites:
a. The end to be achieved (i.e., payment of less than that known by the taxpayer to be legally due, or paying no tax when it is shown that the tax is due)
b. An accompanying state of mind which is described as being evil, in bad faith, willful, or deliberate and not coincidental; and
c. A course of action or failure of action which is unlawful.
 FAILURE TO FILE RETURNS:
1. That the accused was a person required to make of file a return;
2. That the accused failed to make or file a return at the time required by law; and
3. That the failure to make or file a return was willful.

Tax Avoidance Tax Evasion

Legality: Legal and not subject to criminal penalty Illegal and subject to criminal or civil penalty

Manner of Accomplished by legal procedures or means which may be contrary to the intent Accomplished by breaking the letter of the law
Commission: of the law yet do not violate the letter of the law

Effects: Minimization of taxes Almost always results in the absence of tax payments

Comm. v. Rufino – G.R. No. L-33665-68 February 27, 1987

Delpher Trades Corp v. IAC – G.R. No. L-69259 January 26, 1988 A taxpayer has the legal right to decrease the amount of what would otherwise be his taxes or
altogether avoid them by means which the law permits.
"The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or
altogether avoid them, by means which the law permits, cannot be doubted."

CIR v. Estate of Benigno Toda (G.R. No. 147188, September 14, 2004) Tax avoidance is the tax saving device within the means sanctioned by law. This method
should be used by the taxpayer in good faith and at arm’s length.

It is a scheme used outside of those lawful means and when availed of, usually subjects the
taxpayer to further or additional civil or criminal liabilities.

People v. Kintanar, G.R. No. 196340, August 26, 2009)
To establish the offense of failure to file a return, the prosecution must prove three (3) esssetial
elements beyond reasonable that to wit:
1. That the accused was a person required to make of file a return;
2. That the accused failed to make or file a return at the time required by law; and
3. That the failure to make or file a return was willful.

Santos v. People, G.R. No. 173176, August 26, 2008

Equitable Recoupment
⮚ It states that a tax claim for refund, which is barred by prescription, may be allowed to be used as payment for unsettled tax liabilities if both taxes arise from the same transaction in which
overpayment is made and underpayment is due.
⮚ The doctrine of equitable recoupment means that when a refund of a tax illegally or erroneously collected or overpaid by a taxpayer is barred by the statute of limitations and a tax is being
presently assessed against said taxpayer, said present tax may be recouped or set-off against the tax, the refund of which has been barred.
 ⮚ The same thing would have been true where the government has failed to collect a tax within the period of limitation and said collection is already barred, and the taxpayer has to its credit a
tax illegally or erroneously collected or overpaid, whose refund is not yet barred, the government need not make refund of all the tax illegally or erroneously collected, but it may set off
against it the tax whose collection is barred by the statute of limitations.

Collector v. UST G.R. No. L-11274, Nov. 28, 1958 The doctrine of equitable recoupment is not applicable in our jurisdiction. The reason is that: “if
allowed, both the collecting agency and the taxpayer might be tempted to delay and neglect the
pursuit of their respective claims within the period prescribed by law.”

The doctrine of equitable recoupment means that when a refund of a tax illegally or
erroneously collected or overpaid by a taxpayer is barred by the statute of limitations and a tax
is being presently assessed against said taxpayer, said present tax may be recouped or set-off
against the tax, the refund of which has been barred. The same thing would have been true
where the government has failed to collect a tax within the period of limitation and said
collection is already barred, and the taxpayer has to its credit a tax illegally or erroneously
collected or overpaid, whose refund is not yet barred, the government need not make refund of
all the tax illegally or erroneously collected, but it may set off against it the tax whose collection
is barred by the stature of limitations. Common law doctrine to the effect that a claim for refund
barred by prescription may be allowed to offset unsettled tax liabilities should be pertinent only
to taxes arising from the same transaction on which an overpayment is made and
underpayment is due. It finds no application where the taxes involved are totally unrelated.
(invocation of equity rather than law)

Set-off Taxes
⮚ As a general rule, there can be no off-setting of taxes against the claims that the taxpayer may have against the government.

⮚ XPN: if the obligation to pay taxes and the taxpayer’s claim against the government are both overdue, demandable and fully liquidated, compensation takes place by operation of law and
both obligations are extinguished to their concurrent amount.
⮚ Taxes are not subject to set off or legal compensation.

⮚ Requisites of legal compensation

a. that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
b. that both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;
c. that the two debts be due;
d. that they be liquidated and demandable; and
e. that over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Domingo v. Garlitos, G.R. No. L-18994, June 29, 1963 The Supreme Court reversed its pronouncement in the case of Republic vs Mambulao Lumber Co. that taxes are not subject to
set-off or legal compensation. It ruled that where the taxes and the taxpayer’s claim are fully liquidated, due and demandable, legal
compensation (under Art. 1279, NCC) can take place by operation of law, and both debts are extinguished to the concurrent
amount.

WILLFUL BLINDNESS DOCTRINE - The taxpayer’s deliberate refusal or avoidance to verify the contents of his or her ITR and other documents constitutes "willful blindness" on his or her part.
Taxpayers cannot simply invoke reliance on mere representations of their accountants or authorized representatives in order to avoid liability for failure to pay
the correct taxes.
TAXPAYER SUIT - It is only when an act complained of, which may include a legislative enactment, directly involves the illegal disbursement of public funds derived from taxation that the taxpayer’s
suit may be allowed.

COMPROMISES - As a general principle, a tax compromise may be entered into and made binding when
(a) the subject matter thereof is not expressly prohibited from being compromised, and
(b) the public official entering into it is authorized by law.

Local Taxation
A. Local Autonomy - Local autonomy refers to various activities through which a self-governing body representing the residents within a certain regional boundary carries out its political and
administrative decision making while maintaining relative independence from the central government.
Nature and source of local taxing power
⮚ Source: Local government taxation in the Philippines is based on the constitutional grant of the power to tax to the local governments.

SEC. 5 - Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations
as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.
SEC. 129 - Power to Create Sources of Revenue. – Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and
charges subject to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
government units.

NATURE OF THE TAXING POWER OF LGUs

1. Not inherent but a direct grant - The taxing power of provinces, cities, municipalities, and barangay neither inherent nor a mere delegation by the legislative body but a direct
grant from the constitution.
2. Limited - It is neither plenary nor absolute. The authority of the legislature over the taxing authority of the local governments is merely to limit the exercise thereof.
 3. Legislative -
⮚ It may be exercised by the local legislative bodies

⮚ SEC. 132 - Local Taxing Authority. – The power to impose a tax, fee, or charge or to generate revenue under this Code shall be exercised by the sanggunian of the
local government unit concerned through an appropriate ordinance.
4. Territorial - It can only be exercised within the territorial jurisdiction of the LGU.
Mactan Cebu Int’l Airport vs. Marcos, G.R. No. 120082, September 11, 1996 The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by
local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct
The MCIAA enjoyed the privilege of exemption from payment of realty taxes in
authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power
accordance with Section 14 of its Charter.
may be subject to such guidelines and limitations as the Congress may provide which, however, must be
In 1994, the Office of the Treasurer of the City of Cebu, demanded payment for realty consistent with the basic policy of local autonomy.
taxes on several parcels of land belonging to the petitioner in the total amount of
Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units.
P2,229,078.79.
Needless to say, the last item (item 0 of Sec. 133 of the LGC) is pertinent to this case. The “taxes, fees or
Petitioner said that the assessment is baseless and unjustified, claiming that it is charges” referred to are “of any kind;” hence, they include all of these, unless otherwise provided by the
exempt from payment of realty taxes. LGC. The term “taxes” is well understood so as to need no further elaboration, especially in light of the
above enumeration. The term “fees” means charges fixed by law or ordinance for the regulation or
Cebu City insists that the MCIAA whose tax exemption privilege has been withdrawn by inspection of business or activity, while “charges” are pecuniary liabilities such as rents or fees against
virtue of Sections 193 and 234 of the Local Governmental Code that took effect on persons or property.
January 1, 1992.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,
MCIAA was compelled to pay its tax account "under protest" contending that the taxing exemptions from payment of real property taxes granted to natural or juridical persons, including
powers of local government units do not extend to the levy of taxes or fees of any kind government-owned or controlled corporations, except as provided in the said section, and the petitioner is,
on an instrumentality of the national government. undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax
granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn.

B. Fundamental Principles (Section 130, LGC)

a. Uniformity in taxation - Taxation shall be uniform in each local government unit
b. Local exactions shall
(i) equitable and based on taxpayer’s ability to pay;
(ii) be for public purposes;
(iii) not be unjust, excessive, oppressive, or confiscatory;
(iv) not to be contrary to law, public policy, national economic policy, or in the restraint of trade
c. Collection shall not be let to private persons - The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person
d. Revenue collections shall accrue exclusively to LGUs - The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the
disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein
e. System of taxation must be progressive - Each local government unit shall, as far as practicable, evolve a progressive system of taxation

Pepsi Cola Bottling Co. of the Phils., Inc. vs. Municipality of Tanuan, G.R.
No. L-31156, February 27, 1976
Pepsi-Cola Bottling Company filed a complaint challenging the constitutionality
of Section 2 of Republic Act No. 2264 (Local Autonomy Act) and seeking to
declare Ordinances Nos. 23 and 27 of the municipality of Tanauan, Leyte, null
and void.
Both ordinances imposed taxes on soft drink producers. Ordinance No. 23 taxed
each bottle of soft drink corked, while Ordinance No. 27 imposed a tax on each
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant’s pretense, would not
suffice to invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not
limited to the exact measure of that which is exercised by itself. When it is said that the taxing power may be
delegated to municipalities and the like, it is meant taxes there may be delegated such measure of power to
impose and collect taxes as the legislature may deem expedient. Thus, municipalities may be permitted to
tax subjects which for reasons of public policy the State has not deemed wise to tax for more general
purposes.
Taking of property without due process of law may not be passed over under the guise of taxing power,
except when the latter is exercised lawfully.— when:
gallon of soft drinks produced.
RULING:
A municipal ordinance which imposes a tax of P0.01 for every gallon of soft
drinks produced in the municipality does not partake of a percentage tax. The
volume capacity of the taxpayer’s production of soft drinks is considered solely
for purposes of determining the tax rate on the products.
Nor can the tax levied be treated as a specific tax. Specific taxes are those
imposed on specified articles, such as distilled spirits, wines, cigars and
cigarettes, matches, bunker fuel oil, diesel fuel oil, cinematographic films, playing
cards, saccharine, opium and other habit-forming drugs.
(1) the tax is for a public purpose;
(2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of the government levying the tax; and
(4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are
provided.
⮚ Delegation of powers; Delegation of taxing power to local governments may not be assailed on the
ground of double taxation.
⮚ Municipalities are empowered to impose, not only municipal license taxes upon persons engaged in any
business or occupation but also to levy for public purposes, just and uniform taxes. The ordinance in
question (Ordinance No. 27) comes within the second power of a municipality.

Mactan Coconut vs. Mun. Council of Malabang, 143 SCRA 404
The Municipal Council of Malabang, Lanao del Sur, enacted Municipal
Ordinance No. 45-46, titled "AN ORDINANCE IMPOSING A POLICE
INSPECTION FEE OF P.30 PER SACK OF CASSAVA STARCH PRODUCED
AND SHIPPED OUT OF THE MUNICIPALITY OF MALABANG."
The ordinance made it unlawful for any person, company, or group of persons to
ship cassava starch or flour out of the Municipality of Malabang without paying
the corresponding fee fixed by the ordinance.
The fee imposed was a "police inspection fee" of P.30 per sack of cassava
starch or flour.
Matalin Coconut, Inc. filed a petition for declaratory relief challenging the validity
of the ordinance and argued that the ordinance was ultra vires, meaning it
exceeded the powers granted to the Municipal Council, and that it violated
Republic Act No. 2264, the Local Autonomy Act.
The court considered the provisions of Republic Act No. 2264, also known as the Local Autonomy Act.
This law grants municipalities the power to impose taxes, subject to the limitation that the tax must be for
public purposes, just, and uniform.
The tax imposed under the ordinance can be stricken down on another ground. According to Section 2 of the
abovementioned Act, the tax levied must be “for public purposes, just and uniform”. It was held that the so-
called “police inspection fee” levied by the ordinance is “unjust and unreasonable.” And in fact, a tax for
revenue purposes. This was based on the undeniable purpose of raising revenue rather than serving a
specific regulatory or inspection function.
It has been proven that the only service rendered by the Municipality of Malabang, by way of inspection, is for
the policeman to verify from the driver of the trucks of the petitioner passing by at the police checkpoint the
number of bags loaded per trip which are to be shipped out of the municipality based on the trip tickets for the
purpose of computing the total amount of tax to be collect and for no other purpose

C. Common limitations on Taxing Power

***Section 133 of the Local Government Code of 1991 (“LGC”)
Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed
and maintained by the local government unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for
wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such goods or merchandise
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the national Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except
as provided in this Code
(k) Taxes on premiums paid by way or reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;
 (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred
thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.

Province of Bulacan vs. CA, G.R. No.

126232, November 27, 1998

Phil. Petroleum Corp. vs. Municipality of

Pililia, G.R. No. 90776, June 3, 1991

Petron Corporation vs. Tiangco, G.R. No.
158881, April 16, 2008
San Miguel Corp. vs. Mun. Council of
Mandaue, G.R. No. L-30761, July 11,
1973
The language of Section 133 (h) makes plain that the prohibition with respect to
petroleum products extends not only to excise taxes thereon, but all “taxes, fees and
charges.” Evidently, Section 133 prescribes the limitations on the capacity of local
government units to exercise their taxing powers otherwise granted to them under the
LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which
cannot be imposed by local government units, namely: "excise taxes on articles
enumerated under the NIRC, as amended;" and "taxes, fees or charges on petroleum
products."

D. Scope of Taxing Powers of Local Government Units

Provinces
a. Tax on transfer of real property ownership (Section 135 of LGC)
Section 135. Tax on Transfer of Real Property Ownership.

(a) The province may impose a tax on the sale , donation, barter, or on any other mode of transferring ownership or title of real property at the rate of not more than fifty percent
(50%) of the one percent (1%) of the total consideration involved in the acquisition of the property or of the fair market value in case the monetary consideration involved in
the transfer is not substantial, whichever is higher. The sale, transfer or other disposition of real property pursuant to R.A. No. 6657 shall be exempt from this tax.

(b) For this purpose, the Register of Deeds of the province concerned shall, before registering any deed, require the presentation of the evidence of payment of this tax. The
provincial assessor shall likewise make the same requirement before cancelling an old tax declaration and issuing a new one in place thereof, Notaries public shall furnish
the provincial treasurer with a copy of any deed transferring ownership or title to any real property within thirty (30) days from the date of notarization.

It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein imposed within sixty (60) days from the date of the execution of the deed or from the
date of the decedent's death.

b. Printer’s or publisher’s tax (Section 136 of LGC)

Section 136. Tax on Business of Printing and Publication. - The province may impose a tax on the business of persons engaged in the printing and/or publication of books, cards,
posters, leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross
annual receipts for the preceding calendar year.

In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided
herein.

The receipts from the printing and/or publishing of books or other reading materials prescribed by the Department of Education, Culture and Sports as school texts or
references shall be exempt from the tax herein imposed.

c. Franchise tax (Section 137 of LGC)

Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at the rate
not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its
territorial jurisdiction.

In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereon, as provided
herein.

d. Tax on sand, gravel, and other quarry resources (Section 138 of LGC)
Section 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than ten percent (10%) of fair market value in the locality per cubic
meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public lands
or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction.

The permit to extract sand, gravel and other quarry resources shall be issued exclusively by the provincial governor, pursuant to the ordinance of the sangguniang
panlalawigan.

The proceeds of the tax on sand, gravel and other quarry resources shall be distributed as follows:
(1) Province - Thirty percent (30%);
(2) Component City or Municipality where the sand, gravel, and other quarry resources are extracted - Thirty percent (30%); and
(3) Barangay where the sand, gravel, and other quarry resources are extracted - Forty percent (40%).

e. Professional tax (Section 139 of LGC)

Section 139. Professional Tax. -
(a) The province may levy an annual professional tax on each person engaged in the exercise or practice of his profession requiring government examination at such
amount and reasonable classification as the sangguniang panlalawigan may determine but shall in no case exceed Three hundred pesos (P300.00).
 (b) Every person legally authorized to practice his profession shall pay the professional tax to the province where he practices his profession or where he maintains his
principal office in case he practices his profession in several places: Provided, however, That such person who has paid the corresponding professional tax shall be
entitled to practice his profession in any part of the Philippines without being subjected to any other national or local tax, license, or fee for the practice of such
profession.

(c) Any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and
annually thereafter.

(d) The professional tax shall be payable annually, on or before the thirty-first (31st) day of January. Any person first beginning to practice a profession after the month of
January must, however, pay the full tax before engaging therein. A line of profession does not become exempt even if conducted with some other profession for which
the tax has been paid. Professionals exclusively employed in the government shall be exempt from the payment of this tax.

(e) Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports, books of account, plans and designs, surveys and maps, as the case may
be, the number of the official receipt issued to him.

f. Amusement tax (Section 140 of LGC)

Section 140. Amusement Tax. -
(a) The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission fees.

(b) In the case of theaters or cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors, lessees, or operators and the distributors of the cinematographic films.

(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows, musical programs, literary and oratorical presentations, except pop, rock,
or similar concerts shall be exempt from the payment of the tax hereon imposed.

(d) The sangguniang panlalawigan may prescribe the time, manner, terms and conditions for the payment of tax. In case of fraud or failure to pay the tax, the sangguniang
panlalawigan may impose such surcharges, interest and penalties as it may deem appropriate.

(e) The proceeds from the amusement tax shall be shared equally by the province and the municipality where such amusement places are located.

g. Fixed tax on delivery trucks and vans (Section 141 of LGC)

Section 141. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers, Wholesalers of, Dealers, or Retailers in, Certain Products. -
(a) The province may levy an annual fixed tax for every truck, van or any vehicle used by manufacturers, producers, wholesalers, dealers or retailers in the delivery
or distribution of distilled spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products as may be determined by the sangguniang panlalawigan,
to sales outlets, or consumers, whether directly or indirectly, within the province in an amount not exceeding Five hundred pesos (P500.00).

(b) The manufacturers, producers, wholesalers, dealers and retailers referred to in the immediately foregoing paragraph shall be exempt from the tax on peddlers
prescribed elsewhere in this Code.

h. Service fees and charges (Section 153 of LGC)

Section 153. Service Fees and Charges. - Local government units may impose and collect such reasonable fees and charges for services rendered.

i. Public utility charges (Section 154 of LGC)

Section 154. Public Utility Charges. - Local government units may fix the rates for the operation of public utilities owned, operated and maintained by them within their jurisdiction.

j. Toll fees or charges (Section 155 of LGC)

Section 155. Toll Fees or Charges. - The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any
public road, pier, or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such
toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission,
post office personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older.
 When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for
public use.

Municipalities

Scope: Section 142 of LGC

Section 142. Scope of Taxing Powers. - Except as otherwise provided in this Code, municipalities may levy taxes, fees, and charges not otherwise levied by provinces.

Section 143 (a to g) of LGC

Section 143. Tax on Business. - The municipality may impose taxes on the following businesses:

(a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of
commerce of whatever kind or nature, in accordance with the following schedule:

With gross sales or receipts for the preceding calendar Amount of Tax Per
year in the amount of: Annum
Less than 10,000.00 165.00
P 10,000.00 or more but less than 15,000.00 220.00
15,000.00 or more but less than 20,000.00 202.00
20,000.00 or more but less than 30,000.00 440.00
30,000.00 or more but less than 40,000.00 660.00
40,000.00 or more but less than 50,000.00 825.00
50,000.00 or more but less than 75,000.00 1,320.00
75,000.00 or more but less than 100,000.00 1,650.00
100,000.00 or more but less than 150,000.00 2,200.00
150,000.00 or more but less than 200,000.00 2,750.00
200,000.00 or more but less than 300,000.00 3,850.00
300,000.00 or more but less than 500,000.00 5,500.00
500,000.00 or more but less than 750,000.00 8,000.00
750,000.00 or more but less than 1,000,000.00 10,000.00
1,000,000.00 or more but less than 2,000,000.00 13,750.00
2,000,000.00 or more but less than 3,000,000.00 16,500.00
3,000,000.00 or more but less than 4,000,000.00 19,000.00
4,000,000.00 or more but less than 5,000,000.00 23,100.00
5,000,000.00 or more but less than 6,500,000.00 24,375.00
6,000,000.00 or more at a rate not exceeding thirty-seven and a half percent (37½
%) of one percent (1%)

(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in accordance with the following schedule:
With gross sales or receipts for the preceding calendar Amount of Tax Per
year in the amount of: Annum
Less than 1,000.00 18.00
P 1,000.00 or more but less than 2,000.00 33.00
2,000.00 or more but less than 3,000.00 50.00
3,000.00 or more but less than 4,000.00 72.00
4,000.00 or more but less than 5,000.00 100.00
 5,000.00 or more but less than 6,000.00 121.00
6,000.00 or more but less than 7,000.00 143.00
7,000.00 or more but less than 8,000.00 165.00
8,000.00 or more but less than 10,000.00 187.00
10,000.00 or more but less than 15,000.00 220.00
15,000.00 or more but less than 20,000.00 275.00
20,000.00 or more but less than 30,000.00 330.00
30,000.00 or more but less than 40,000.00 440.00
40,000.00 or more but less than 50,000.00 660.00
50,000.00 or more but less than 75,000.00 990.00
75,000.00 or more but less than 100,000.00 1,320.00
100,000.00 or more but less than 150,000.00 1,870.00
150,000.00 or more but less than 200,000.00 2,420.00
200,000.00 or more but less than 300,000.00 3,300.00
300,000.00 or more but less than 500,000.00 4,400.00
500,000.00 or more but less than 750,000.00 6,600.00
750,000.00 or more but less than 1,000,000.00 8,800.00
1,000,000.00 or more but less than 2,000,000.00 10,000.00
2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent
(1%).

(c) On exporters, and on manufacturers , millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding
one-half (½) of the rates prescribed under subsection (a), (b) and (d) of this Section:
(1) Rice and corn;
(2) Wheat or cassava flour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and other agricultural, marine, and fresh water products,
whether in their original state or not;
(3) Cooking oil and cooking gas;
(4) Laundry soap, detergents, and medicine;
(5) Agricultural implements. equipment and post-harvest facilities, fertilizers, pesticides, insecticides, herbicides and other farm inputs;
(6) Poultry feeds and other animal feeds;
(7) School supplies; and
(8) Cement.

(d) On retailers.

With gross sales or receipts for the preceding Rate of Tax Per
calendar year in the amount of: Annum
P400,000.00 or less 2%
more than P400,000.00 1%

Provided, however, That barangays shall have the exclusive power to levy taxes, as provided under Section 152 hereof, on gross sales or receipts of the preceding calendar year
of Fifty thousand pesos (P50,000.00) or less, in the case of cities, and Thirty thousand pesos (P30,000.00) or less, in the case of municipalities.

(e) On contractors and other independent contractors, in accordance with the following schedule:

With gross sales or receipts for the preceding calendar year Amount of Tax
in the amount of: Per Annum
Less than 5,000.00 27.50
P 5,000.00 or more but less than P 10,000.00 61.60
10,000.00 or more but less than 15,000.00 104.50
 15,000.00 or more but less than 20,000.00 165.00
20,000.00 or more but less than 30,000.00 275.00
30,000.00 or more but less than 40,000.00 385.00
40,000.00 or more but less than 50,000.00 550.00
50,000.00 or more but less than 75,000.00 880.00
75,000.00 or more but less than 100,000.00 1,320.00
100,000.00 or more but less than 150,000.00 1,980.00
150,000.00 or more but less than 200,000.00 2,640.00
200,000.00 or more but less than 250,000.00 3,630.00
250,000.00 or more but less than 300,000.00 4,620.00
300,000.00 or more but less than 400,000.00 6,160.00
400,000.00 or more but less than 500,000.00 8,250.00
500,000.00 or more but less than 750,000.00 9,250.00
750,000.00 or more but less than 1,000,000.00 10,250.00
1,000,000.00 or more but less than 2,000,000.00 11,500.00
2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent
(1%)

(f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the preceding calendar year derived from
interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property, insurance
premium.

(g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding Fifty pesos (P50.00) per peddler annually.

Section 144 of LGC

Section 144. Rates of Tax within the Metropolitan Manila Area. - The municipalities within the Metropolitan Manila Area may levy taxes at rates which shall not exceed by fifty
percent (50%) the maximum rates prescribed in the preceding Section.

Fees and charges:

Section 147 of LGC
Section 147. Fees and Charges. - The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province
in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such
business or occupation, or practice such profession or calling.

Section 153 of LGC

Section 153. Service Fees and Charges. - Local government units may impose and collect such reasonable fees and charges for services rendered.

Section 154 of LGC

Section 154. Public Utility Charges. - Local government units may fix the rates for the operation of public utilities owned, operated and maintained by them within their jurisdiction.

Section 155 of LGC

Section 155. Toll Fees or Charges. - The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any
public road, pier, or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or
charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office personnel
delivering mail, physically-handicapped, and disabled citizens who are sixty-five (65) years or older.

When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use.
Cities
Section 151 of LGC
 Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance
with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional
and amusement taxes.

Barangays (ART. IV, LGC)

SECTION 152. Scope of Taxing Powers. – The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively accrue to them:

(a) Taxes – On stores or retailers with fixed business establishments with gross sales of receipts of the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the
case of cities and Thirty thousand pesos (P30,000.00) or less, in the case of municipalities, at a rate not exceeding one percent (1%) on such gross sales or receipts.

(b) Service Fees or Charges. – Barangays may collect reasonable fees or charges for services rendered in connection with the regulations or the use of barangay-owned properties
or service facilities such as palay, copra, or tobacco dryers.

(c) Barangay Clearance. – No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such
business or activity is located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee. The application for clearance shall be acted upon
within seven (7) working days from the filing thereof. In the event that the clearance is not issued within the said period, the city or municipality may issue the said license or
permit.

(d) Other fees and Charges. – The barangay may levy reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor advertisements.

E. Community Tax Certificate (“CTC”)

SECTION 162. Community Tax Certificate. – A community tax certificate shall be issued to every person or corporation upon payment of the community tax. A community tax
certificate may also be issued to any person or corporation not subject to the community tax upon payment of One peso (P1.00).

Who are authorized to levy or collect CTCs? Section 156 of LGC

SECTION 156. Community Tax. – Cities or municipalities may levy a community tax in accordance with the provisions of this Article.

Who are liable? Section 157 of LGC and Section 158 of LGC
SECTION 157. Individuals Liable to Community Tax. – Every inhabitant of the Philippines eighteen (18) years of age or over who has been regularly employed on a wage or salary
basis for at least thirty (30) consecutive working days during any calendar year, or who is engaged in business or occupation, or who owns real property with an aggregate assessed
value of One thousand pesos (P1,000.00) or more, or who is required by law to file an income tax return shall pay an annual additional tax of Five pesos (P5.00) and an annual
additional tax of One peso (P1.00) for every One thousand pesos (P1,000.00) of income regardless of whether from business, exercise of profession or from property which in no case
shall exceed Five thousand pesos (P5,000.00).

In the case of husband and wife, the additional tax herein imposed shall be based upon the total property owned by them and the total gross receipts or earnings derived by them.

SECTION 158. Juridical Persons Liable to Community Tax. – Every corporation no matter how created or organized, whether domestic or resident foreign, engaged in or doing
business in the Philippines shall pay an annual community tax of Five hundred pesos (P500.00) and an annual additional tax, which, in no case, shall exceed Ten thousand pesos
(P10,000.00) in accordance with the following schedule:
 (1) For every Five thousand pesos (P5,000.00) worth of real property in the Philippines owned by it during the preceding year based on the valuation used for the payment of real
property tax under existing laws, found in the assessment rolls of the city or municipality where the real property is situated – Two pesos (P2.00); and

(2) For every Five thousand pesos (P5,000.00) of gross receipts or earnings derived by it from its business in the Philippines during the preceding year – Two pesos (P2.00).

The dividends received by a corporation from another corporation however shall, for the purpose of the additional tax, be considered as part of the gross receipts or earnings of
said corporation.

Who are exempt? Section 159 of LGC

SECTION 159. Exemptions. – The following are exempt from the community tax:
(1) Diplomatic and consular representatives; and
(2) Transient visitors when their stay in the Philippines does not exceed three (3) months.

Place and time of payment: Section 160 and Section 161

SECTION 160. Place of Payment. – The community tax shall be paid in the place of residence of the individual, or in the place where the principal office of the juridical entity is
located.

SECTION 161. Time for Payment; Penalties for Delinquency. – (a) The community tax shall accrue on the first (1st) day of January of each year which shall be paid not later than the
last day of February of each year. If a person reaches the age of eighteen (18) years or otherwise loses the benefit of exemption on or before the last day of June, he shall be liable for
the community tax on the day he reaches such age or upon the day the exemption ends. However, if a person reaches the age of eighteen (18) years or loses the benefit of exemption
on or before the last day of March, he shall have twenty (20) days to pay the community tax without becoming delinquent.
Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or after the first (1st) day of July of any year, or who cease to belong to an exempt class on
or after the same date, shall not be subject to the community tax for that year.
(b) Corporations established and organized on or before the last day of June shall be liable for the community tax for that year. But corporations established and organized on or
before the last day of March shall have twenty (20) days within which to pay the community tax without becoming delinquent. Corporations established and organized on or after
the first day of July shall not be subject to the community tax for that year.
If the tax is not paid within the time prescribed above, there shall be added to the unpaid amount an interest of twenty-four percent (24%) per annum from the due date until it is paid.
F. Local Business Tax
Tax period - Section 165 of LGC
Section 165. Tax Period and Manner of Payment. - Unless otherwise provided in this Code, the tax period of all local taxes, fees and charges shall be the calendar year. Such
taxes, fees and charges may be paid in quarterly installments.

Manner of payment - Section 165 of LGC

Section 165. Tax Period and Manner of Payment. - Unless otherwise provided in this Code, the tax period of all local taxes, fees and charges shall be the calendar year. Such
taxes, fees and charges may be paid in quarterly installments.

Accrual of tax - Section 166 of LGC

Section 166. Accrual of Tax. - Unless otherwise provided in this Code, all local taxes, fees, and charges shall accrue on the first (1st) day of January of each year. However, new
taxes, fees or charges, or changes in the rates thereof, shall accrue on the first (1st) day of the quarter next following the effectivity of the ordinance imposing such new levies or rates.

Time of payment - Section 167 of LGC, Section 145 of LGC

Section 167. Time of Payment. - Unless otherwise provided in this Code, all local taxes, fees, and charges shall be paid within the first twenty (20) days of January or of each
subsequent quarter, as the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time for payment of such taxes, fees, or charges without
surcharges or penalties, but only for a period not exceeding six (6) months.

Section 145. Retirement of Business. - A business subject to tax pursuant to the preceding sections shall, upon termination thereof, submit a sworn statement of its gross sales or
receipts for the current year. If the tax paid during the year be less than the tax due on said gross sales or receipts of the current year, the difference shall be paid before the business
is considered officially retired.
Place of Payment (Situs Rules)
a. Branch or Sales Office Rule [Section 150 (a)]
 Section 150. Situs of the Tax. -

(a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers, assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled
spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and other financial institutions, and other businesses, maintaining or
operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid
to the municipality where such branch or sales outlet is located. In cases where there is no such branch or sales outlet in the city or municipality where the sale or transaction is
made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality.

(c) In case of a plantation located at a place other than the place where the factory is located, said seventy percent (70%) mentioned in subparagraph (b) of subsection (2) above
shall be divided as follows:

(1) Sixty percent (60%) to the city or municipality where the factory is located; and
(2) Forty percent (40%) to the city or municipality where the plantation is located.

(d) In cases where a manufacturer, assembler, producer, exporter or contractor has two (2) or more factories, project offices, plants, or plantations located in different localities, the
seventy percent (70%) sales allocation mentioned in subparagraph (b) of subsection (2) above shall be prorated among the localities where the factories, project offices, plants,
and plantations are located in proportion to their respective volumes of production during the period for which the tax is due.

b. Allocation Rule [Section 150 (e)]

(b) The following sales allocation shall apply to manufacturers, assemblers, contractors, producers, and exporters with factories, project offices, plants, and plantations in the
pursuit of their business:

(1) Thirty percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located; and

(2) Seventy percent (70%) of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, plant, or plantation is
located.
(e) The foregoing sales allocation shall be applied irrespective of whether or not sales are made in the locality where the factory, project office, plant, or plantation is located.
c. Sales Made by Route Trucks, Vans or Vehicles
1. Sale made in the locality where manufacturer, producer, wholesaler, retailer, or dealer has a branch, sales, office, or warehouse - the sales are recorded in the branch, sales
office or warehouse – tax due is paid to LGU where such branch, sales office, or warehouse is located. [IRR of LGC, Art. 243(d1)]
2. Sale made in the locality where manufacturer, producer, wholesaler, retailer, or dealer has no branch, sales, office, or warehouse – sales are recorded in the branch, sales
office, or warehouse from where the route trucks withdraw their products for sale and tax due is to be paid to the LGU where such branch, sales office, or warehouse is
located. [IRR of LGC, Art. 243(d2)]

G. Enactment of Tax Ordinances and Other Revenue Measures

a. Public hearing and publication of Tax Ordinances
Sections 186 and 187 of LGC
SEC. 186 - Power To Levy Other Taxes, Fees or Charges. – Local government units may exercise the power to levy taxes, fees or charges on any base or subject not
otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That
the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the
ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose.

NIRC: SECTION 21. Sources of Revenue. - The following taxes, fees and charges are deemed to be national internal revenue taxes:
"(a) Income tax;
"(b) Estate and donor's taxes;
"(c) Value-added tax;
"(d) Other percentage taxes;
"(e) Excise taxes;
"(f) Documentary stamp taxes; and
 "(g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue.
Figuerres vs. CA, G.R. No. 119172, March 25, 1999

b. Appeal of Tax Ordinances

H. Remedies of Local Government and Taxpayer

a. Section 171 of LGC
Section 171. Examination of Books of Accounts and Pertinent Records of Businessmen by Local Treasurer. - The provincial, city, municipal or barangay treasurer may, by
himself or through any of his deputies duly authorized in writing, examine the books, accounts, and other pertinent records of any person, partnership, corporation, or
association subject to local taxes, fees and charges in order to ascertain. assess, and collect the correct amount of the tax, fee, or charge. Such examination shall be made
during regular business hours, only once for every tax period, and shall be certified to by the examining official. Such certificate shall be made of record in the books of
accounts of the taxpayer examined.

In case the examination herein authorized is made by a duly authorized deputy of the local treasurer, the written authority of the deputy concerned shall specifically state the
name, address, and business of the taxpayer whose books, accounts, and pertinent records are to be examined, the date and place of such examination and the procedure to
be followed in conducting the same.
For this purpose, the records of the revenue district office of the Bureau of Internal Revenue shall be made available to the local treasurer, his deputy or duly authorized
representative.
b. Sections 194 and 195 of LGC
Section 194. Periods of Assessment and Collection. -

(a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. No action for the collection of such taxes, fees, or charges, whether
administrative or judicial, shall be instituted after the expiration of such period: Provided, That. taxes, fees or charges which have accrued before the effectivity of this Code
may be assessed within a period of three (3) years from the date they became due.

(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years from discovery of the fraud or intent to evade
payment.

(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such action shall be instituted after
the expiration of said period: Provided, however, That, taxes, fees or charges assessed before the effectivity of this Code may be collected within a period of three (3) years
from the date of assessment.

(d) The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during which:
(1) The treasurer is legally prevented from making the assessment of collection;

(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect; and

(3) The taxpayer is out of the country or otherwise cannot be located.

Section 195. Protest of Assessment. - When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a
notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice
of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local
treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice
cancelling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to
the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal
with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.

c. Sections 168 and 169 of LGC

 Section 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. - The sanggunian may impose a surcharge not exceeding twenty-five (25%) of the amount of taxes,
fees or charges not paid on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid taxes, fees or charges including surcharges, until such amount is
fully paid but in no case shall the total thirty-six (36%) months.

Section 169. Interests on Other Unpaid Revenues. - Where the amount of any other revenue due a local government unit, except voluntary contributions or donations, is not paid on
the date fixed in the ordinance, or in the contract, expressed or implied, or upon the occurrence of the event which has given rise to its collection, there shall be collected as part of that
amount an interest thereon at the rate not exceeding two percent (2%) per month from the date it is due until it is paid, but in no case shall the total interest on the unpaid amount or a
portion thereof exceed thirty-six (36) months.
d. Sections 175, 176, 178-182, and 184 of LGC

Section 175. Distraint of Personal Property. - The remedy by distraint shall proceed as follows:

(a) Seizure - Upon failure of the person owing any local tax, fee, or charge to pay the same at the time required, the local treasurer or his deputy may, upon written notice, seize
or confiscate any personal property belonging to that person or any personal property subject to the lien in sufficient quantity to satisfy the tax, fee, or charge in question,
together with any increment thereto incident to delinquency and the expenses of seizure. In such case, the local treasurer or his deputy shall issue a duly authenticated
certificate based upon the records of his office showing the fact of delinquency and the amounts of the tax, fee, or charge and penalty due. Such certificate shall serve as
sufficient warrant for the distraint of personal property aforementioned, subject to the taxpayer's right to claim exemption under the provisions of existing laws. Distrained
personal property shall be sold at public auction in the manner hereon provided for.

(b) Accounting of distrained goods. - The officer executing the distraint shall make or cause to be made an account of the goods, chattels or effects distrained, a copy of which
signed by himself shall be left either with the owner or person from whose possession the goods, chattels or effects are taken, or at the dwelling or place or business of that
person and with someone of suitable age and discretion, to which list shall be added a statement of the sum demanded and a note of the time and place of sale.

(c) Publication - The officer shall forthwith cause a notification to be exhibited in not less than three (3) public and conspicuous places in the territory of the local government
unit where the distraint is made, specifying the time and place of sale, and the articles distrained. The time of sale shall not be less than twenty (20) days after the notice to
the owner or possessor of the property as above specified and the publication or posting of the notice. One place for the posting of the notice shall be at the office of the
chief executive of the local government unit in which the property is distrained.

(d) Release of distrained property upon payment prior to sale - If at any time prior to the consummation of the sale, all the proper charges are paid to the officer conducting the
sale, the goods or effects distrained shall be restored to the owner.

(e) Procedure of sale - At the time and place fixed in the notice, the officer conducting the sale shall sell the goods or effects so distrained at public auction to the highest bidder
for cash. Within five (5) days after the sale, the local treasurer shall make a report of the proceedings in writing to the local chief executive concerned.

Should the property distrained be not disposed of within one hundred and twenty (120) days from the date of distraint, the same shall be considered as sold to the local
government unit concerned for the amount of the assessment made thereon by the Committee on Appraisal and to the extent of the same amount, the tax delinquencies
shall be cancelled.

Said Committee on Appraisal shall be composed of the city or municipal treasurer as chairman, with a representative of the Commission on Audit and the city or municipal
assessor as members.

(f) Disposition of proceeds - The proceeds of the sale shall be applied to satisfy the tax, including the surcharges, interest, and other penalties incident to delinquency, and the
expenses of the distraint and sale. The balance over and above what is required to pay the entire claim shall be returned to the owner of the property sold. The expenses
chargeable upon the seizure and sale shall embrace only the actual expenses of seizure and preservation of the property pending the sale, and no charge shall be imposed
for the services of the local officer or his deputy. Where the proceeds of the sale are insufficient to satisfy the claim, other property may, in like manner, be distrained until the
full amount due, including all expenses, is collected.
Section 176. Levy on Real Property. - After the expiration of the time required to pay the delinquent tax, fee, or charge, real property may be levied on before, simultaneously, or
after the distraint of personal property belonging to the delinquent taxpayer. To this end, the provincial, city or municipal treasurer, as the case may be, shall prepare a duly
authenticated certificate showing the name of the taxpayer and the amount of the tax, fee, or charge, and penalty due from him. Said certificate shall operate with the force of a legal
execution throughout the Philippines. Levy shall be effected by writing upon said certificate the description of the property upon which levy is made. At the same time, written notice of
the levy shall be mailed to or served upon the assessor and the Register of Deeds of the province or city where the property is located who shall annotate the levy on the tax
 declaration and certificate of title of the property, respectively, and the delinquent taxpayer or, if he be absent from the Philippines, to his agent or the manager of the business in
respect to which the liability arose, or if there be none, to the occupant of the property in question.
In case the levy on real property is not issued before or simultaneously with the warrant of distraint on personal property, and the personal property of the taxpayer is not sufficient to
satisfy his delinquency, the provincial, city or municipal treasurer, as the case may be, shall within thirty (30) days after execution of the distraint, proceed with the levy on the
taxpayer's real property.
A report on any levy shall, within ten (10) days after receipt of the warrant, be submitted by the levying officer to the sanggunian concerned.
Section 178. Advertisement and Sale. - Within thirty (30) days after the levy, the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion
thereof as may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period of at least thirty (30) days. It shall be effected by posting a notice at the
main entrance of the municipal building or city hall, and in a public and conspicuous place in the barangay where the real property is located, and by publication once a week for three
(3) weeks in a newspaper of general circulation in the province, city or municipality where the property is located. The advertisement shall contain the amount of taxes, fees or
charges, and penalties due thereon, and the time and place of sale, the name of the taxpayer against whom the taxes, fees, or charges are levied, and a short description of the
property to be sold. At any time before the date fixed for the sale, the taxpayer may stay they proceedings by paying the taxes, fees, charges, penalties and interests. If he fails to do
so, the sale shall proceed and shall be held either at the main entrance of the provincial, city or municipal building, or on the property to be sold, or at any other place as determined by
the local treasurer conducting the sale and specified in the notice of sale.
Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned, and which shall form part of his records. After
consultation with the sanggunian, the local treasurer shall make and deliver to the purchaser a certificate of sale, showing the proceeding of the sale, describing the property sold,
stating the name of the purchaser and setting out the exact amount of all taxes, fees, charges, and related surcharges, interests, or penalties: Provided, however, That any excess in
the proceeds of the sale over the claim and cost of sales shall be turned over to the owner of the property.
The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the costs of collection by means of the remedies provided for in this Title, including the
preservation or transportation in case of personal property, and the advertisement and subsequent sale, in cases of personal and real property including improvements thereon.
Section 179. Redemption of Property Sold. - Within one (1) year from the date of sale, the delinquent taxpayer or his representative shall have the right to redeem the property upon
payment to the local treasurer of the total amount of taxes, fees, or charges, and related surcharges, interests or penalties from the date of delinquency to the date of sale, plus
interest of not more than two percent (2%) per month on the purchase price from the date of purchase to the date of redemption. Such payment shall invalidate the certificate of sale
issued to the purchaser and the owner shall be entitled to a certificate of redemption from the provincial, city or municipal treasurer or his deputy.
The provincial, city or municipal treasurer or his deputy, upon surrender by the purchaser of the certificate of sale previously issued to him, shall forthwith return to the latter the entire
purchase price paid by him plus the interest of not more than two percent (2%) per month herein provided for, the portion of the cost of sale and other legitimate expenses incurred by
him, and said property thereafter shall be free from the lien of such taxes, fees, or charges, related surcharges, interests, and penalties.
The owner shall not, however, be deprived of the possession of said property and shall be entitled to the rentals and other income thereof until the expiration of the time allowed for its
redemption.
Section 180. Final Deed to Purchaser. - In case the taxpayer fails to redeem the property as provided herein, the local treasurer shall execute a deed conveying to the purchaser so
much of the property as has been sold, free from liens of any taxes, fees, charges, related surcharges, interests, and penalties. The deed shall succinctly recite all the proceedings
upon which the validity of the sale depends.
Section 181. Purchase of Property By the Local Government Units for Want of Bidder. - In case there is no bidder for the real property advertised for sale as provided herein, or
if the highest bid is for an amount insufficient to pay the taxes, fees, or charges, related surcharges, interests, penalties and costs, the local treasurer conducting the sale shall
purchase the property in behalf of the local government unit concerned to satisfy the claim and within two (2) days thereafter shall make a report of his proceedings which shall be
reflected upon the records of his office. It shall be the duty of the Registrar of Deeds concerned upon registration with his office of any such declaration of forfeiture to transfer the title
of the forfeited property to the local government unit concerned without the necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the taxpayer or any of his representative, may redeem the property by paying to the local treasurer the full amount of the taxes,
fees, charges, and related surcharges, interests, or penalties, and the costs of sale. If the property is not redeemed as provided herein, the ownership thereof shall be fully vested on
the local government unit concerned.
Section 182. Resale of Real Estate Taken for Taxes, Fees, or Charges. - The sanggunian concerned may, by ordinance duly approved, and upon notice of not less than twenty
(20) days, sell and dispose of the real property acquired under the preceding section at public auction. The proceeds of the sale shall accrue to the general fund of the local
government unit concerned.
Section 184. Further Distraint or Levy. - The remedies by distraint and levy may be repeated if necessary until the full amount due, including all expenses, is collected.
e. Section 183 of LGC
Section 183. Collection of Delinquent Taxes, Fees, Charges or other Revenues through Judicial Action. - The local government unit concerned may enforce the collection of
delinquent taxes, fees, charges or other revenues by civil action in any court of competent jurisdiction. The civil action shall be filed by the local treasurer within the period prescribed in
Section 194 of this Code.

Real Property Taxation

A. General Principles
Province of Nueva Ecija vs. Imperial Mining Co. Inc, 118 SCRA 632 (1982)
Ty vs. Trampe, 250 SCRA 500 (1995)
Lopez vs. City of Manila, 303 SCRA 448 (1999)

B. Appraisal and Assessment of Real Property

C. Real Property Tax and Additional or Special Levies
Sections 233, 235, 236-237, 240-243 of LGC

D. Exemptions from Real Property Tax

Sections 206, and 234 of LGC

LRTA v. CBAA, 342 SCRA 692 (2000)

BLGF Opinion dated November 20, 1992
BLGF Opinion dated March 15, 1993
BLGF Opinion April 22, 1999

E. When does RPT accrue? Section 246 of LGC

F. When does special levy accrue? Section 245 of LGC
G. What rule will apply if the same are paid in installments? Section 250 of LGC
H. Are there tax discounts for advanced prompt payments of RPT and SEF? Section 251 of LGC
I. Remedies of LGU
Sections 254, 255, 256-257, 266, 270, 257 of LGC
J. Remedies of Taxpayer
Callanta vs. Office of the Ombudsman, G.R. Nos. 115253-74, January 30, 1998

Erroneous vs. illegal assessment

Section 252 of LGC
City of Lapu-Lapu vs. PEZA, G.R. No. 184203, November 26, 2014