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Marie: Tax 1 Notes

A. CONCEPT, NATURE, UNDERLYING BASIS AND PURPOSE *Taxes are the enforced proportional and pecuniary contributions from persons and property levied by the law making body of the state having jurisdiction over the subject of the burden for the support of the government and all public needs. Nature: inherent in the sovereignty; legislative in character; subject to constitutional and inherent limitations Basis and purpose: Governmental Necessity (existence of the government, reciprocal duties of state and inhabitants, public purpose) Commissioner vs Pineda The Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need. Vera vs Fernandez Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. 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. 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. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

Commissioner vs Algue


PRINCIPLES OF A SOUND TAX SYSTEM 1. fiscal adequacy 2. theoretical justice 3. administrative feasibility ASPECTS OF TAXATION 1. Levy (see ABAKADA vs Exec. Sec.) 2. Assessment and collection ESSENTIAL CHARACTERISTICS OF TAX 1. Enforced contribution 2. Proportionate in character 3. Generally payable in money 4. Levied on persons or property 5. Levied by the state which has jurisdiction 6. Levied by the law-making body 7. Levied for public purpose CLASSIFICATION OF TAXES 1. According to subject matter or object a. Personal, poll or capitation - imposed on persons residing within a specified territory, whether citizens or not, without regard to their property or occupation.




Marie: Tax 1 Notes

b. c.

Property – imposed on property, real or personal, in proportion to their value or some other reasonable method of apportionment. Excise – a charge upon the performance of an act, the enjoyment of a privilege, or the engaging in an occupation, profession or business; synonymous with “privilege tax”.


According to burden or incidence a. Direct – tax which is demanded from the person who also shoulders the burden of the tax; tax for which the taxpayer is directly or primarily liable or which he cannot shift to another. (income, community, estate…) b. Indirect – tax which is demanded from one person in the expectation and intention to indemnify himself at the expense of another, falling finally upon the ultimate purchaser or consumer. (VAT, percentage taxes...) According to determination of amount a. Specific - fixed amount imposed by the head or number, weight or measurement; requires no assessment b. Ad valorem (according to value) – tax of a fixed proportion of the value of the property to which the tax is assessed; requires assessment. According to purpose a. General, fiscal or revenue b. Special or regulatory According to scope or authority imposing the tax a. National b. Municipal or local




According to graduation or rate a. Proportional b. Progressive c. Regressive *Regressive system of taxation: when there are more indirect taxes imposed than direct taxes F. DISTINGUISHED FROM CERTAIN KINDS OF EXACTIONS License fee Legal compensation or reward of an officer for specific services Imposed for regulation Police power Amount limited to the necessary expenses of inspection and regulation Imposed on the right to exercise a privilege Failure to pay makes the act or business illegal Toll Demand of proprietorship Paid for the use of another’s property Amount depends upon the cost of construction or maintenance of the public improvement used May be imposed by the government or private individual or entities Special Assessment Levied only on land Not a personal liability of the person assessed Based wholly on benefits Exceptional to both time and place Debt Tax Enforced contribution assessed by the sovereign to defray public expenses Levied for revenue Taxing power Generally no limit Imposed on persons and property Does not make the act or business illegal Tax Demand of sovereignty Paid for the support of the government Generally no limit Government only


Levy Levied on persons and property

General application Tax

Marie: Tax 1 Notes

Based on contract Assignable May be paid in kind May be set-off A person cannot be imprisoned for non-payment of debt Governed by ordinary periods of prescription Draws interest

Based on law Cannot generally be assigned Generally payable in money Generally not Imprisonment is a sanction for non-payment of tax (except poll tax) Special prescriptive periods in the tax code Does not draw interest except only when delinquent

P & G vs Mun. of Jagna

The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on persons, firms and corporations, like plaintiff, exercising the privilege of storing copra in a bodega within the Municipality's territorial jurisdiction. For the term "license tax" has not acquired a fixed meaning. It is often used indiscriminately to designate impositions exacted for the exercise of various privileges. In many instances, it refers to revenue-raising exactions on privileges or activities. The cost of regulation cannot be taken as a gauge, if the municipality really intended to enact a revenue ordinance. For, 'if the charge exceeds the expense of issuance of a license and costs of regulation, it is a tax'. And if it is, and it is validly imposed, 'the rule that license fees for regulation must bear a reasonable relation to the expense of the regulation has no application'.

Morcoin vs City of Manila

The power to regulate and impose license fees, though granted to the City of Manila through its Charter, should not be construed as including the power to impose license taxes for revenue purposes. The power to tax, when construed from the Charter, is purely for police purposes. As such, the amount of license fees that may be imposed on juke boxes and coinoperated machines cannot be prohibitive, extortionate, confiscatory or in an unlawful restraint of trade, but should be commensurate with and sufficient to cover all the necessary or probable expenses of issuing the license and of such inspection, regulation and supervision as may be lawful. The title given to the original ordinance in question was "An ordinance imposing a tax on the sales of lumber". Section 1 thereof made the tax collectible on "every board foot of lumber sold" by every person, association or corporation operating a lumber mill within the territory of the City of Butuan, while Section 4 expressly exempted lumber mills from the payment of the quarterly sales tax provided for in Section 3, Article 11 of Ordinance No. 47, Series of 1949. The above would seem to be sufficient to show that the tax imposed is and was really intended to be on lumber sold and not a tax on, or, license fee for the privilege of operating a lumber mill and/or a lumber yard. Neither the original ordinance in question nor the amendatory ones show that the tax provided for therein is imposed by reason of the enjoyment of the privilege to engage in a particular trade or business. Neither do they provide that payment thereof is a condition precedent to the enjoyment of such privilege or that its non-payment would result in the cancellation of any previous license granted. The only consequence of its non-payment appears to be the imposition of a surcharge or liability to suffer the penal sanctions prescribed in Section 3 of the original ordinance. These circumstances lead Us to the conclusion that the questioned tax cannot be considered as one imposed upon a party for engaging in the business of operating a lumber mill or a lumber yard.

Golden Ribbon Lumber vs City of Butuan

Progressive Development Corporation vs QC

A license fee is imposed in the exercise of police power primarily for purposes of regulation, while a tax 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.

Marie: Tax 1 Notes


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.

Toll City of Ozamis vs Lumapas

The word "toll" when used in connection with highways has been defined as a duty imposed on goods and passengers travelling public roads. The toll for use of a toll road is for its use in travelling thereon, not for its use as a parking place for vehicles. Considering that the public utility vehicles are only charged the fee when said vehicles stop on "any portion of the existing parking areas for the purpose of loading or unloading passengers or cargoes", the fees collected are actually in the nature of parking fees and not toll fees for the use of Zulueta Street.

Debt or Ordinary Obligation Victoria Milling vs PPA

The fees and charges PPA collects are not for the use of the wharf that Victorias Milling owns BUT for the privilege of navigating in public waters, of entering and leaving public harbors and berthing on public streams or waters. In Compana General de Tabacos de Filipinas vs. Actg. Commissioner of Customs, the court held 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 govt maintains bodies of water in navigable condition and it is to support its operations that dues and charges are imposed regardless of their ownership. As to the requirement to remit 10% of the handling charges, this 10% 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.

Philex Mining vs CIR

Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. • 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

Scope and Limitations of Taxation Sison vs Ancheta Taxation is uniform and equitable when the tax "operates with the same force and effect in every place where the subject may be found. " It does not call for perfect uniformity and equality but admits of rational classification. Where "the differentiation" conforms to the practical dictates of justice and equity, such is not discriminatory and the tax thus imposed is uniform. All that is required thus is that the tax apply equally to all persons, firms and corporations placed in similar situations. Commissioner vs Algue But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without expressly being conferred by people. It is purely legislative and the legislative body cannot delegate it to either branch of

Pepsi Cola vs Mun. of Tanauan

Marie: Tax 1 Notes

government. An exception to this rule, however, is municipal corporations, because the legislative power to create such corporations for purposes of self-government carries with it the power to confer such authorities the power to tax. Such power being delegated does not suffice to invalidate the law. However, the constitutional protection against deprivation of property without due process of law cannot be by-passed under the guise of taxing power, except when such power is lawfully exercised as when:  The tax is for a public purpose  Uniformity in taxation is observed  Either person or property taxed is within the jurisdiction of the government levying the tax  Notice and hearing


INHERENT LIMITATIONS a. Taxation is for a public purpose Since taxation must be exercised only for public purposes, money raised by taxation can be expended only for public purposes and not for a private purpose. This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation. Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain. Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by-products and solution of allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private purposes.

Pascual vs Secretary of Public Works Lutz vs Araneta

Gomez vs Palomar

The eradication of a dreaded disease is a public purpose, but if by public purpose the petitioner means benefit to a taxpayer as a return for what he pays, then it is sufficient answer to say that the only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. Taxation has been made the implement of the state’s police power. (The fact that one industry is favored over another does not detract from the nature of taxation to be for public purpose.)

Tio vs VRB


Taxation is Inherently Legislative

Marie: Tax 1 Notes

NPC vs Albay

The FIRB only has recommendatory powers with respect to tax exemptions. It has no authority to impose taxes or revoke existing ones, which, under the Constitution, only the legislature may accomplish. Legislative powers in regard to taxes and licenses are not inherent in municipal corporations but must be granted by statute either expressly or by necessary implication. Quarters allowance is considered as compensation and may not be increased beyond the maximum amount allowed by law. The rule is that so long as the Legislature "lays down a policy and a standard is established by the statute" there is no undue delegation.

Cu Unjieng vs Patstone

Cervantes vs Auditor General

Maceda vs Macaraig

Standard: “greater national interest.”

2. a.

b. c. d.

Constitutional Limitations Art. III, Sec. 1, 1987 Constitution (No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.) Art. III, Sec. 10 (No law impairing the obligation of contracts shall be passed.) Art. III, Sec. 20 (No person shall be imprisoned for debt or non-payment of a poll tax.) (Until f). Art. VI, Sec.28 1. 2. The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government. 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. No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress.



City of Baguio vs De Leon

“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". To satisfy this requirement, all that is needed is that the statute or ordinance in question applies equally to all persons, firms and corporations placed in similar situation. A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found. Inequities which result from a singling out of one particular class of taxation or exemption infringe no constitutional limitation. Uniformity essential to the valid exercise of the power of taxation does not require equality under all circumstances, or negate the authority to classify the objects of taxation. There is valid and reasonable classification when: a) it is based upon substantial distinctions which make real differences; b) these are germane to the purpose of the legislation/ordinance; c) the classification applies, not only to present conditions, but also, to future conditions substantially identical to those of the present; and d) the classification applies equally to all those who belong to the same class. If the purpose were merely to levy a burden upon the sale of softdrinks, there is no reason

Pepsi Cola vs City of Butuan

Marie: Tax 1 Notes

why sales by dealers other than agents/consignees of producers established outside the City of Butuan should be exempt from the tax. Eastern Theatrical vs Alfonso SC held to be absolutely without merit the contention that an ordinance which imposes a tax on some places of amusement such as cinematographs, theaters, vaudeville companies, theatrical shows, boxing exhibitions and other kinds of amusements or places of amusement, but not on “many more kinds of amusements” like “race tracks, cockpits, cabarets, concert halls, circuses and other places of amusements” is against the equality and uniformity of the tax imposition. Equality 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 Equal Protection clause does not preclude classification of individuals who may be accorded different treatment under the law as long as the classification is not unreasonable or arbitrary. A law does not have to operate in equal force on all persons or things to be conformable to Article III, Section 1 of the Constitution. The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals or objects upon which different rules shall operate. The Constitution does not require situations which are different in fact or opinion to be treated in law as though they were the same. Association of Customs Brokers vs Municipal Board of Manila Sison vs Ancheta Herrara vs QC Board of Assessment Appeals Motor vehicles that likewise benefit by their use of public streets and highways should also be made to share the burden of taxation. Supra : Simplified net income taxation The term “exclusively” means primarily, not solely. The exemption in favor of property used exclusively for charitable purposes is not limited to property “actually indispensable” therefor but extends to facilities which are “incidental to and necessary for” the accomplishment of said purposes, such as in case of hospitals, a school for training nurses, a nurses’ home… Prof. Loriega: better reason for exempting the school – the school is independently exempt. Abra Valley College vs Aquino The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution.

Basco vs PAGCOR

g. Art. VI, Sec. 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 Planters Bank The collections made accrue to a “Special Fund”. They are in the nature of tax which was levied with a regulatory purpose. The purpose being is to finance the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market. The levy is primarily in the exercise of the police power of the state.

h. Art. VI, Sec. 27, par 2

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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. i. Art. VIII, Sec 5, par 2(b) All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed in relation thereto. j. Art. X, 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. k. Art. XIV, Sec. 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. Subject to conditions prescribed by law, all grants, endowments, donations, or contributions used actually, directly, and exclusively for educational purposes shall be exempt from tax.

H.INTERPRETATION AND CONSTRUCTION OF TAX STATUTES Commissioner vs Fireman’s Insurance It is the general rule in the interpretation of statutes levying taxes or duties, that in case of doubt, such statutes are to be construed most strongly against the government and in favor of the subjects or citizens, because burdens are not to be imposed, nor presumed to be imposed beyond what statutes expressly and clearly import. A partial refund under Sec 5 of RA 1435 is in the nature of a tax exemption, thus must be construed strictissimi juris against the grantee. On the exemption claimed by petitioner, this Court has laid down the rule that as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any reduction or diminution thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may be applied. More specifically stated, the general rule is that any claim for exemption from the tax statute should be strictly construed against the taxpayer (Luzon Stevedoring Corporation vs. Court of Appeals, 163 SCRA 647 [1988]). He who claims an exemption must be able to point out some provision of law creating the right; it cannot be allowed to exist upon a mere vague implication or inference. It must be shown indubitably to exist, for every presumption is against it, and a well-founded doubt is fatal to the claim. As the power of taxation is a high prerogative of sovereignty, the relinquishment is NEVER presumed and any reduction or diminution thereof with respect to its mode or its rate, must be STRICTLY CONSTRUED, and the same must be COUCHED IN CLEAR AND UNMISTAKEABLE TERMS in order that it may be applied”. Another fundamental rule is that statutes are to be construed in the light of purposes to be


Floro Cement vs Gorospe

Luzon Stevedoring vs CTA

Marie: Tax 1 Notes

achieved and the evils sought to be remedied. NPC vs Albay (supra) As a rule, claims of tax exemption are construed strongly against the claimant. They must also be shown to exist clearly and categorically, and supported by clear legal provisions.

Republic vs IAC

The rule is that in case of doubt, tax statutes are to be construed strictly against the Government and liberally in favor the taxpayer, for taxes, being burdens, are not to be presumed beyond what the applicable statute expressly and clearly declares. There is no way to dispute the cardinal rule in taxation that exemptions therefrom are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right thereto by the dearest grant of organic or statute law. Tax exemption must be clearly expressed and cannot be established by implication. Exemption from a common burden cannot be permitted to exist upon vague implication.

Wonder Mechanical Engineering Corp. vs CTA

Maceda vs Macaraig (supra) Crispin Penid vs Cesar Virata

Statutes offering reward must be liberally construed in favor of informers and with regard to the purpose for which they are intended, with mere technicality yielding to the substantive purpose of the law. Otherwise, the government would lose a positive and effective means of checking the anomalies that are committed to the detriment of the finances of the state. It is both illogical and impractical to determine who are exempted without first determining who are covered by the aforesaid provision. The CIR Commissioner should have determined first if Ateneo was covered by Section 205, applying the rule of strict interpretation of laws imposing taxes and other burdens on the populace, before asking Ateneo to prove its exemption. Tax cannot be imposed without clear and express words for that purpose. In answering the question of who is subject to tax statutes, it is basic that "in case of doubt, such statutes are to be construed most strongly against the government and in favor of the subjects or citizens because burdens are not to be imposed nor presumed to be imposed beyond what statutes expressly and clearly import.”


Republic vs Gancayco

Extrajudicial demands as contemplated in the Civil Code as a means of suspending the running of the period of prescription of actions do not apply in tax collection cases. The Internal Revenue Code being a special law, prevails over a general law. It is a general rule of statutory construction that courts may take judicial notice of the original and history of the statutes which they are called upon to construe and administer, and of the facts which affect their derivation, validity and operation. The general rule is if local rule is patterned or copied from that of another country, then the decisions of the courts in such country construing the rule are entitled to great weight in interpreting the local rule.

US vs De Guzman

People vs Pagpaguitan

Summary: 1. 2. When the law is clear, there is no room for interpretation When the law is not clear: a. b. Tax statute - construed strictly against the government Tax exemption – construed strictly against the grantee; the person claiming tax exemption must base his claim on law or statute and must not be based on “vague implications”

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c. d. e. f.

Tax amnesty – construed liberally in favor of tax payer; purpose is absolute pardon Tax refunds – in the nature of partial exemptions; strictly construed against tax payer Statute granting informer’s reward – liberally in favor of informer If there is a void in law – resort to American jurisprudence (US vs De Guzman, People vs Pagpaguitan)

I. CLASSIFICATION OF TAX EXEMPTIONS 1. 2. 3. Express Implied or by omission Contractual (provincial franchise tax) We hold that Congress could impair petitioner's legislative franchise by making it liable for income tax from which heretofore it was exempted by virtue of the exemption provided for in section 3 of its franchise. The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest so requires (Sec. 8, Art. XIV, 1935 Constitution; Sec. 5, Art. XIV, 1973 Constitution), Section 1 of petitioner's franchise, Republic Act No. 3247, provides that it is subject to the provisions of the Constitution and to the terms and conditions established in Act No. 3636 whose section 12 provides that the franchise is subject to amendment, alteration or repeal by Congress. Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all corporate taxpayers not expressly exempted therein and in section 27 of the Code, had the effect of withdrawing petitioner's exemption from income tax. The Tax Court acted correctly in holding that the exemption was restored by the subsequent enactment on August 4, 1969 of Republic Act No. 6020 which reenacted the said tax exemption. Hence, the petitioner is liable only for the income tax for the period from January 1 to August 3, 1969 when its tax exemption was modified by Republic Act No. 5431. Province of Misamis Oriental vs Cagayan Electric (CEPALCO) (“in lieu of taxes clause,” where CEPALCO shall pay a franchise tax of 3% in lieu of all taxes and assessments whatsoever) The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law (id.) unless there is manifest intent to repeal or alter the special law. Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while P.D. No. 231 is a general tax law. The presumption is that the special statutes are exceptions to the general law (P.D. No. 231) 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 three per centum (3%) tax on its gross earnings. CIR vs CTA A legislative franchise partakes of the nature of a contract. The franchise is the law between the State and the grantee and they are bound by the terms thereof. CIR, being a government agency, is also bound by the terms of the franchise, including a tax exemption provision therein.

Cagayan Electric Company (CEPALCO) vs Commissioner


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1. Prospectivity Hydro Resources vs CA Hilado vs Collector It is a cardinal rule that laws shall have no retroactive effect unless contrary is provided. Excepting that of a political nature, ‘Law once established continues until changed by some competent legislative power. It is not changed merely by change of sovereignty. There can be no break or interregnum in law. From the time the law comes into existence with the firstfelt corporateness of a primitive people it must last until the final disappearance of human society. Once created, it persists until a change takes place, and when changed it continues in such changed condition until the next change and so forever. Conquest or colonization is impotent to bring law to an end-in spite of change of constitution, the law continues unchanged until the new sovereign by legislative act creates a change. 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. As a matter of fact, income tax returns were filed during that period and income tax payment were effected and considered valid and legal. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy. Central Azucarera de Don Pedro vs CTA The prohibition against ex post facto laws applies only to criminal or penal matters and not to laws which concern civil matters or proceedings generally or which affect or regulate civil or private rights. Inheritance taxation is governed by the statute in force at the time of the death of the decedent. The taxpayer cannot foresee and ought not to be required to guess the outcome of pending measures. However, a tax statute may be made retroactive in its operation provided that the legislative intent to make it so is perfectly clear. "A statute should be considered as prospective in its operation, whether it enacts, amends, or repeals an inheritance tax, unless the language of the statute clearly demands or expresses that it shall have a retroactive effect…" Republic vs Fernandez Property taxes and benefit assessments on real estate, retroactively applied, are not open to the objection that they infringe upon the due process of law clause of the Constitution unless it be so harsh and oppressive. A tax amnesty, much like a tax exemption, is never favored nor presumed in law. If granted, the terms of the amnesty, like that of a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority.

Lorenzo vs Posadas

CIR vs Marubeni

Imprescriptibility of taxes Commissioner vs Ayala Securities Corporation Limitations upon the right of the government to assess and collect taxes will not be presumed in the absence of clear legislation to the contrary and that where the government has not by express statutory provision provided a limitation upon its right to assess unpaid taxes, such right is imprescriptible.

Double Taxation Villanueva vs City of Iloilo “In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once; both taxes must be imposed on the same property or subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax.”

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In addition, there is no constitutional prohibition against double taxation in the Philippines. Although it is not favored, it is permissible. Procter and Gamble vs Mnicipality of Jagna Commissioner vs Lednicky supra taxation is one of direct duplicate taxation when the levies are made by the same taxing authority; otherwise the case is merely one of indirect duplicate taxation (or not an “obnoxious double taxation”

Escape from taxation – tax evasion is illegal, tax avoidance is not Double Recoupment- DOES NOT APPLY IN THE PHILIPPINES!! SET-OFF (see original) Republic vs Mambulao Domingo vs Garlitos

Set-off allowed. Note: there should be exactly the same facts (admission by the government and there should already be an appropriation)

Francia vs IAC Philex Mining vs CIR