1. Vera vs. Fernandez 89 SCRA 199 Facts: A Motion for allowance of claim and for payment of taxes was filed on june 3, 1969 representing the claim of indebtedness of the late Luis D. Tongoy for deficiency of income taxes. The administrator opposed the motion on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. Respondent judge Fernandez dismissed the claim. On September 18, 1969, a motion for reconsideration was filed, which was thereafter denied.

Issue: Whether the claim for the payment of taxes is barred under Rule 86 of the Rules of Court

Held: No, the claim for the payment of taxes is not barred. In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, it was held that the prescription of taxes are governed by the NIRC and not by other provisions of law. Also, in the case of Pineda vs. CFI of Tayabas, it was pointed out that the court may direct the payment of taxes upon motion showing that the taxes have been assessed against the estate. Claims for taxes may be collected even after the estate has been distributed among the heirs. The reason for the liberal treatment of claims for taxes as exception from the statute of non-claims is that taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. To safeguard the interest of the people, neglect or omission to collect such should not be allowed to detriment other people.

case 5 CIR v. CTA 234 SCRA 348

FACTS: A petition for review of the decision of the BIR denying the tax refund of Citytrust was filed with the CTA. It was submitted for decision based solely on the pleadings and evidence submitted by Citytrust. CIR could not present any evidence by reason of the repeated failure of the Tax Credit/Refund Division of the BIR to transmit the records of the case, as well as the investigation report thereon, to the Solicitor General. The CTA rendered its decision ordering BIR to grant a refund to Citytrust in the amount of P13,314,506.14. The CA affirmed the judgment of the CTA.Issue: Whether or not Citytrust is entitled to a refund.

HELD: It is a long and firmly settled rule of law that the government is not bound by the errors committed by its agents. In the performance of its government functions, the State can not be estopped by the neglect of its agents and officers. Although the government may generally be estopped through affirmative acts of public officers acting within their authority, their neglect or omission of public duties as exemplified in this case will not and should not produce that effect. Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the government cannot and must be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents. The errors of certain administrative officers should never be allowed to jeopardize the government's financial position, especially in the case at bar where the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Judgment of the CA is SET ASIDE and the case is REMANDED to the CTA for further proceedings and appropriate action.

Case #6 - Commissioner vs. Algue, 158 SCRA 9 Facts: The Philippine Sugar Estate Development Company (PSEDC). Appointed Algue Inc. as its agent. Algue received a commission of 125,000.00 and it was from their commission that it paid organizers of VOICP 75,000.00 in proportional fees. He received an assessment from the CIR. He filed a letter of protest or reconsideration. The CIR contends that the claimed deduction was properly disallowed because it was not an ordinary, reasonable or necessary expense. Issue: Is the CIR correct? Ruling: No. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. Every person who is able to pay 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 is an arbitrary method of exaction by those in the seat of power. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself.

case 7 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC., respondents. PANGANIBAN, J.: Facts: Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. YMCA earned income from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and from parking fees collected from non-members. The commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. YMCA formally protested the assessment and. The CIR denied the claims of YMCA. Issue: Whether or not the income derived from rentals of real property owned by YMCA, established as a welfare, educational, and charitable non-profit corporation, is subject to income tax under the NIRC and the Constitution. Held: The SC agree with the CIR that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived ". . . from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income . . . ." The CIR adds that "rental income derived by a tax-exempt organization from the lease of its properties, real or personal, [is] not, therefore, exempt from income taxation, even if such income [is] exclusively used for the accomplishment of its objectives." Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest. and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken." Private respondent also invokes Article XIV, Section 4, par. 3 of the Constitution, claiming that the YMCA "is a nonstock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and income." The Court reiterate that private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. The bare allegation alone that it is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. Laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be granted the exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. However, the Court notes that not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.

10. PHILIPPINE BANK OF COMMUNICATIONS, petitioner, VS. COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF APPEALS, respondent. G.R. No. 112024 January 28, 1999 Facts: Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, repo rted profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying PBCom's tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and P1,615,253.00, respectively. Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the yearended December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year. But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On August 7, 1987, petitioner requested the Commissioner of Internal Revenue (CIR), among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985. Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69. Pending the investigation of the respondent CIR, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). On May 20, 1993, the CTA rendered a decision which denied the request of petitioner for a tax refund or credit in the sum amount of P5,299,749.95, on the ground that it was filed beyond the two-year reglementary period provided for by law. The petitioner's claim for refund in 1986 amounting to P234,077.69 was likewise denied on the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year. On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTA's decision but the same was denied due course for lack of merit. Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the Court of Appeals (CA). However on September 22, 1993, the CA affirmed in toto the CTA's resolution dated July 20, 1993, hence this petition. Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular states that overpaid income taxes are not covered by the two-year prescriptive period under the tax Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR within ten (10) years. Issue: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioner's reliance on Revenue Memorandum Circular No. 7-85, changing the prescriptive period of two years to ten years. Held: Contrary to the petitioner's contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law. Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible. Claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes; its functions should not be unduly delayed or hampered by incidental matters. The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

15. Caltex Philippines vs. Commission on Audit (COA) GR 92585, 8 May 1992 En Banc, Davide (J): 12 concur, 2 took no part FACTS: On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI), hereinafter referred to as Petitioner, directing the latter to remit to the OPSF its collection, excluding that unremitted for the years 1986 and 1988, of the additional tax on petroleum products authorized under the aforesaid Section 8 of P.D. No. 1956 which as of 31 December 1987, amounted to 335,037,649.00 and informing it that, pending such remittance, all of its claims for from the OPSF shall be held in abeyance. Caltex in its letter of 3 May 1989, petitioner requested the COA for an early release of its reimbursement certificates from the OPSF covering claims with the Office of energy Affairs In its Answer dated 8 May 1989, the COA denied petitioner's request for the early release of the reimbursement certificates from the OPSF. COA further prohibited Caltex from offseting remittances and reimbursements for the current and ensuing years ISSUE: Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex outstanding claims from said funds. HELD: NO. A taxpayer may not offset taxes due from the claims that he may have against the government. Although petitioner's financing losses, if indeed incurred, may constitute cost underecovery in the sense that such were incurred as a result of the inability to fully offset financing expenses from yields in money market placements, they do not, however, fall under the foregoing provision of P.D. No. 1956, as amended, because the same did not result from the reduction of the domestic price of petroleum products. Until paragraph (2), Section 8 of the decree, as amended, is further amended by Congress, this Court can do nothing. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the state.

M u n i c i p a l i t

16) G.R. Nos. 89898-99 October 1, 1990 MUNICIPALITY OF MAKATI, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA,respondents. FACTS: The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-5499. It appears that the action for eminent domain was filed on May 20, 1986, Attached to petitioner's complaint was a certification that a bank account (Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under petitioner's name containing the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing where the parties presented their respective appraisal reports regarding the value of the property, respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment of P338,160.00 which was earlier released to private respondent. After this decision became final and executory, private respondent moved for the issuance of a writ of execution. This motion was granted by respondent RTC judge. After issuance of the writ of execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was informed that a "hold code" was placed on the account of petitioner. As a result of this, private respondent filed a motion dated January 27, 1988 praying that an order be issued directing the bank to deliver to respondent sheriff the amount equivalent to the unpaid balance due under the RTC decision dated June 4, 1987. Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the expropriation amount should be done in installments which the respondent RTC judge failed to state in his decision. Private respondent filed its opposition to the motion. Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing the court that private respondent was no longer the true and lawful owner of the subject property because a new title over the property had been registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents pertaining to its transactions over the subject property, and the PNB Buendia Branch to reveal the amount in petitioner's account which was garnished by respondent sheriff. In compliance with this order, PSB filed a manifestation informing the court that it had consolidated its ownership over the property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB and private respondent entered into a compromise agreement whereby they agreed to divide between themselves the compensation due from the expropriation proceedings. Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised value of the subject property under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and private respondent to execute the necessary deed of conveyance over the subject property in favor of petitioner. Petitioner's motion to lift the garnishment was denied. Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the other hand, for failure of the manager of the PNB Buendia Branch to comply with the order dated September 8, 1988, private respondent filed two succeeding motions to require the bank manager to show cause why he should not be held in contempt of court. During the hearings conducted for the above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed the court that he was still waiting for proper authorization from the PNB head office enabling him to make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at the PNB Buendia Branch 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 [G.R. No. L-20322, May 29, 1968, 23 SCRA 899]. Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the case because petitioner's PNB Account No. S/A 265-537154-3 was an account specifically opened for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42. Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions, the Court of Appeals dismissed both petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB Account No. 265-537154-3, and affirmed his authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the present petition for review with prayer for preliminary injunction. Issue: Whether or not the money in the bank account of the petitioner can be disbursed to the private respondent. Held: There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute More particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment against the municipality. 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 The foregoing rule finds application in the case at bar. Absent a showing that the municipal council of Makati has passed an ordinance appropriating from its public funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be validly effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7. Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel the enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement of municipal funds therefor In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner. No appeal was taken therefrom. For three years now, petitioner has enjoyed possession and use of the subject property notwithstanding its inexcusable failure to comply with its legal obligation to pay just compensation. Petitioner has benefited from its possession of the property since the same has been the site of Makati West High School since the school year 19861987. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation proceedings it had in fact initiated. The State's power of eminent domain should be exercised within the bounds of fair play and justice. In the case at bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in full possession and utilizing the property for public purpose, for three (3) years, the Court finds that the municipality has had more than reasonable time to pay full compensation.

17. Roxas Y Cia vs CTA Facts: Roxas Siblings inherited properties, one of which is an agricultural land in Nasugbu Batangas. The tenants who have all been tilling the subject lands expressed their desire to purchase from the Roxas siblings the parcels which they actually occupied. The government, in consonance with its constitutional mandate to acquire big landed estates and apportion them among the tenant farmers, persuaded the Roxas siblings to sell their landholdings. Since the government did not have funds to cover the purchase price, loans were granted and Roxas siblings allowed payment through installment. Roxas derived from said installments a net gain, 50% of which was reported for income tax purposes as gain on the sale of capital asset. The CIR subsequently demanded among others, payment for real estate dealers tax referring to the act of subdividing the Nasugbu farmlands and selling them to the farmer occupants on installment. Issue: WON Roxas siblings should be imposed with a real estate dealers tax in view of the sale of Nasugbu farmlands. Held: No. The court held that the sale was not only in consonance with, but more in obedience to the request and pursuant to the policy of the government to allocate lands to the landless. It was the bounden duty of the government to pay the agreed compensation after it had persuaded the Roxas siblings to sell. The court went on to discuss the power of taxation is sometimes 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 kill the hen that lays the golden egg. In order to maintain the general publics trust and confidence, this power must be used justly and not treacherously. It does not conform with the sense of justice for the government to persuade the taxpayer to lend it a helping hand and later on penalize him for duly answering the urgent call. Roxas cannot therefore be considered as a real estate dealer. Thus, pursuant to the tax code, the lands sold are capital assets and gain derived thereof is capital gain taxable only to the extent of 50%.

#18 G.R. No. 90776 June 3, 1991 PHILIPPINE PETROLEUM CORPORATION, petitioner, vs. MUNICIPALITY OF PILILLA, RIZAL, Represented by MAYOR NICOMEDES F. PATENIA, respondent. FACTS: Petitioner is a business enterprise engaged in the manufacture of lubricated oil basestock which is a petroleum product, with its refinery plant situated at Malaya, Pililla, Rizal. PPC owns and maintains an oil refinery including 49 storage tanks for its petroleum products in Malaya, Pililla, Rizal. Under Section 142 of the NIRC of 1939, manufactured oils and other fuels are subject to specific tax. On June 28, 1973, PD 231 (Local Tax Code) was issued enacted. Sections 19 and 19 (a) provide that the municipality may impose taxes on business, except on those for which fixed taxes are provided on manufacturers, importers or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the schedule listed therein. The Secretary of Finance issued Provincial Circular No. 26-73 (December 27, 1973) directed to all provincial, city and municipal treasurers to refrain from collecting any local tax imposed in old or new tax ordinances in the business of manufacturing, wholesaling, retailing, or dealing in petroleum products subject to the specific tax under the NIRC. Provincial Circular No. 26 A-73 (January 9, 1973)was also issued instructing all City Treasurers to refrain from collecting any local tax imposed in tax ordinances enacted before or after the effectivity of the Local Tax Code, on the businesses of manufacturing, wholesaling, retailing, or dealing in, petroleum products subject to the specific tax under the NIRC. Respondent enacted Municipal Tax Ordinance No. 1, S-1974 otherwise known as "The Pililla Tax Code of 1974" which took effect on July 1, 1974. Sections 9 and 10 of the said ordinance imposed a tax on business, except for those for which fixed taxes are provided in the Local Tax Code on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the schedule found in the Local Tax Code, as well as mayor's permit, sanitary inspection fee and storage permit fee for flammable, combustible or explosive substances, while Section 139 of the disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. On April 13, 1974, P.D. 436 was promulgated increasing the specific tax on lubricating oils, gasoline, bunker fuel oil, diesel fuel oil and other similar petroleum products levied under Sections 142, 144 and 145 of the NIRC, and granting provinces, cities and municipalities certain shares in the specific tax on such products in lieu of local taxes imposed on petroleum products. The questioned Municipal Tax Ordinance No. 1 was reviewed and approved by the Provincial Treasurer of Rizal, but was not implemented and/or enforced by the Municipality of Pililla because of its having been suspended up to now in view of Provincial Circular Nos. 26-73 and 26 A-73. On June 3, 1977, P.D. 1158 otherwise known as the National Internal Revenue Code of 1977 was enacted, Section 153 of which specifically imposes specific tax on refined and manufactured mineral oils and motor fuels. Enforcing the provisions of the ordinance, the respondent filed a complaint against PPC for the collection of the business tax from 1979 to 1986; storage permit fees from 1975 to 1986; mayor's permit and sanitary inspection fees from 1975 to 1984. PPC, however, have already paid the last- named fees starting 1985. The RTC rendered a decision against petitioner. ISSUE: WON PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees, considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee unto the respondent Municipality of Pililla, Rizal, based on Municipal Ordinance No. 1.

HELD: There is no question that Pililla's Municipal Tax Ordinance No. 1 imposing the assailed taxes, fees and charges is valid especially Section 9 (A) which according to the trial court "was lifted in toto and/or is a literal reproduction of Section 19 (a) of the Local Tax Code as amended by P.D. No. 426." It conforms with the mandate of said law. But P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were carried over into P.D. No. 426 and no exemptions were given to manufacturers, wholesalers, retailers, or dealers in petroleum products. Well-settled is the rule that administrative regulations must be in harmony with the provisions of the law. Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in P.D. No. 436. The exercise by local governments of the power to tax is ordained by the present Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-73 (1) would be tantamount to restricting their power to tax by mere administrative issuances.

Case 21 PETRON CORPORATION v. MAYOR TOBIAS M. TIANGCO and MUNICIPAL TREASURER MANUEL T. ENRIQUEZ of the MUNIPALITY OF NAVOTAS, METRO MANILA G.R. 158881, 16 April 2006, Second Division, (Tinga, J.) While local government units are authorized to burden all such other class of goods with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

In accordance to the New Navotas Revenue Code or Ordinance 92-03, petitioner Petron Corporation was assessed a total tax of P6,259,087.62. Petron filed a letter protest arguing that it is exempt from paying local business taxes as provided by Article 232 (h) of the Implementing Rules of the Local Government Code. The letter-protest was denied. A Complaint for Cancellation of Assessment was filed before the Regional Trial Court (RTC) of Malabon. The RTC dismissed the Complaint and required Petron to pay the assessed tax. A Motion for Reconsideration was filed but it was later denied by the court. Hence, the filing of this petition. ISSUE: Whether or not a local government unit is empowered under the Local Government Code (LGC) to impose business taxes on persons or entities engaged in the sale of petroleum HELD: Petition GRANTED. Section 133(h) of the LGC reads as follows: Sec. 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: xxx (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; 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 National Internal Revenue Code [(NIRC)], as amended; and taxes, fees or charges on petroleum products. The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the provision, a municipality is authorized to impose business taxes on a whole host of business activities. Suffice it to say, unless there is another provision of law which states otherwise, Section 143, broad in scope as it is, would undoubtedly cover the business of selling diesel fuels, or any other petroleum product for that matter. Section 133(h) provides two kinds of taxes which cannot be imposed by local government units: excise taxes on articles enumerated under the NIRC, as amended; and taxes, fees or charges on petroleum products. There is no doubt that among the excise taxes on articles enumerated under the NIRC are those levied on petroleum products, per Section 148 of the NIRC. The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers, distributors, dealers of any article of commerce of whatever nature; those engaged in the export or commerce of essential commodities; retailers; contractors and other independent contractors; banks and financial institutions; and peddlers engaged in the sale of any merchandise or article of commerce. This obviously broad power is further supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax.

This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987 Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges, though the power is subject to such guidelines and limitations as the Congress may provide. There is no doubt that following the 1987 Constitution and the Code, the fiscal autonomy of local government units has received greater affirmation than ever. Previous decisions that have been skeptical of the viability, if not the wisdom of reposing fiscal autonomy to local government units have fallen by the wayside. Section 5(a) of the Code states that [a]ny provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. But somewhat conversely, Section 5(b) then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. And this latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of local government units to impose taxes. Section 133(h) states that local government units shall not extend to the levy of xxx taxes, fees or charges on petroleum products. Respondents assert that the phrase taxes, fees or charges on petroleum products pertains to the imposition of direct or excise taxes on petroleum products, and not business taxes. If the phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such taxes under the NIRC, such as petroleum products. There would be no sense on the part of the legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond the pale of local government taxation. The Court concedes that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase taxes, fees or charges on petroleum products does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It would have been a different matter had Congress, in crafting Section 133(h), barred excise taxes or direct taxes, or any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish. 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. The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to taxes, fees and charges pertains only to one class of articles of the many subjects of excise taxes, specifically, petroleum products. While local government units are authorized to burden all such other class of goods with taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.

23. HYDRO RESOURCES CONTRACTORS CORPORATION, petitioner, vs. THE COURT OF TAX APPEALS and THE HON. DEPUTY MINISTER OF FINANCE, ALFREDO PIO DE RODA, respondents. 1990 Dec 21 2nd Division G.R. No. 80276 FACTS: The National Irrigation Administration (NIA) entered into an agreement, sometime in August 1978, with petitioner Hydro Resources Contractors Corporation (Hydro for short), for the construction of the Magat River Multipurpose Project in Isabela. Under the aforesaid contract, petitioner was allowed to procure new construction equipment, spare parts and tools from abroad, the payment for which was advanced by NIA under a financing plan embodied in the contract. By the terms of the contract NIA undertakes payment of all the import duties and taxes incident to the importations deductible from the proceeds of the contract price. HYDRO shall repay NIA in full the value of the construction equipment out of the same proceeds before eventual transfer or taking ownership of subject construction equipment upon termination of the contract. NIA reneged and failed in the compliance of its tax obligations. In the meantime, HYDRO had fully repaid the value of the construction equipment so much so that NIA executed deeds of sale covering the same and transferring the ownership thereof in favor of petitioner. Upon the transfer of the ownership of the said equipment HYDRO was assessed by the Bureau of Customs the corresponding customs duty and compensating tax. This amount was paid by HYDRO to the Bureau of Customs. In addition, HYDRO was assessed additional 3% ad valorem duty prescribed in Executive Order 860. HYDRO also paid this amount but this time under protest. The Collector of Customs acted favorably on petitioner's protest and ordered the refund of the amount paid for the ad valorem duty in the form of tax credit. The Acting Commissioner of Customs affirmed the ruling of the Collector of Customs. These findings of the Collector of Customs as well as the Acting Customs Commissioner were reversed by the Deputy Minister of Finance. Petitioner appealed to the Court of Tax Appeals but the same affirmed the ruling of the Deputy Minister of Finance denying petitioner's claim for refund. ISSUE: WHETHER OR NOT THE HYDRO RESOURCES IS LIABLE FOR THE PAYMENT OF AD VALOREM TAX? HELD: No, it is not liable for the payment of ad valorem tax. The subsequent executions of the Deeds of Sale of the equipment in question on December 6, 1982 and March 24, 1983 are not relevant and material in the consideration of the application of Executive Order No. 860 because said Deeds of Sale were mere formalities in the implementation of Contract No. MPI-C-1 executed on August 1978, which should be reckoned and construed as the actual date of sale. This must be so because the contract of purchase and sale of the NIA-

financed/owned equipment to Hydro took place in 1978 when Contract No. MPI-C-1 was signed by NIA and HYDRO wherein the contracting parties provided for their financing, procurement, delivery, repayment, transfer of possession and ownership. The said scheme contemplated a Contract of Sale within the purview of Art. 1458 of the Civil Code. "Let it suffice that the procurement of the equipment, as earlier stated, was not on a tax exempt basis as the import liabilities thereon have been secured to be paid under the terms of the financial scheme in the contract. The formality of vesting of title over the equipment was not an unwarranted expectation but a matter of an implementation of a pre- existing agreement, hence, the imported articles can only be subject to the rates of import duties/taxes prevailing at the time of entry or withdrawal from customs' custody (Sec. 205, TCC) in 1978 and 1979, thus foreclosing any retroactive application of the 1982 Executive Order.

27. Gerochi vs DOE Facts: Petitioners filed an original action praying that Section 34 of Republic Act (RA) 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), 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, among others, that the assailed provision of law and are unconstitutional since the universal charge provided for under Sec. 34 of the EPIRA and sought to be implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax which is to be collected from all electric end-users and self-generating entities. Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to fund the operations of the NPC. On the other hand, respondent PSALM through the Office of the Government Corporate Counsel (OGCC) contends that unlike a tax which is imposed to provide income for public purposes, such as support of the government, administration of the law, or payment of public expenses, the assailed Universal Charge is levied for a specific regulatory purpose, which is to ensure the viability of the country's electric power industry. Respondents further contend that said Universal Charge does not possess the essential characteristics of a tax, that its imposition would redound to the benefit of the electric power industry and not to the public, and that its rate is uniformly levied on electricity end-users, unlike a tax which is imposed based on the individual taxpayer's ability to pay. ISSUE: Whether or not the Universal Charge imposed under Sec. 34 of the EPIRA is a tax. HELD: The power to tax is based on the principle that taxes are the lifeblood of the government, and their prompt and certain availability is an imperious need. Thus, the theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people. On the other hand, police power is the power of the state to promote public welfare by restraining and regulating the use of liberty and property.It is the most pervasive, the least limitable, and the most demanding of the three fundamental powers of the State. In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police power, particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which enumerates the purposes for which the Universal Charge is imposed and which can be amply discerned as regulatory in character. The EPIRA resonates such regulatory purposes. It is a well-established doctrine that the taxing power may be used as an implement of police power. In Valmonte v. Energy Regulatory Board, et al.and in Gaston v. Republic Planters Bank, this Court held that the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF) were exactions made in the exercise of the police power.

28. GOMEZ V. PALOMAR Facts Herein petitioner Benjamin Gomez questions the constitutionality of Republic Act 1635, as amended by RA 2631 (Anti-TB Stamp Law), which provides as follows: To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for the period from August nineteen to September thirty every year the printing and issue of semi-postal stamps of different denominations with face value showing the regular postage charge plus the additional amount of five centavos for the said purpose, and during the said period, no mail matter shall be accepted in the mails unless it bears such semi-postal stamps: Provided, That no such additional charge of five centavos shall be imposed on newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall constitute a special fund and be deposited with the National Treasury to be expended by the Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate tuberculosis. On September l5, 1963 petitioner mailed a letter at the post office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of 1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the statute, it was returned to the petitioner. In view of this development, the petitioner brought suit for declaratory relief in the Court of First Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing administrative orders issued, contending that it violates the equal protection clause of the Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the statute and the orders unconstitutional; hence this appeal by the respondent postal authorities. Issue: Whether or not RA 1635 violates the equal protection clause and the rule of uniformity and equality of taxation Ruling It is said that the statute is violative of the equal protection clause of the Constitution. More specifically the claim is made that it constitutes mail users into a class for the purpose of the tax while leaving untaxed the rest of the population and that even among postal patrons the statute discriminatorily grants exemption to newspapers while Administrative Order 9 of the respondent Postmaster General grants a similar exemption to offices performing governmental functions. The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax, laid upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections leveled against it must be viewed in the light of applicable principles of taxation. It is settled that the legislature has the inherent power to select the subjects of taxation and to grant exemptions. In the field of taxation, more than in other areas, the legislature possesses the greatest freedom in classification. The reason for this is that traditionally, classification has been a device for fitting tax programs to local needs and usages in order to achieve an equitable distribution of the tax burden. While the principle that there must be a reasonable relationship between classification made by the legislation and its purpose is undoubtedly true in some contexts, it has no application to a measure whose sole purpose is to raise revenue. So long as the classification imposed is based upon some standard capable of reasonable comprehension, be that standard based upon ability to produce revenue or some other legitimate distinction, equal protection of the law has been afforded. The classification of mail users is not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on administrative convenience. In the allocation of the tax burden, Congress must have concluded that the contribution to the anti-TB fund can be assured by those who can afford the use of the mails. It is not accurate to say that the statute constituted mail users into a class. Mail users were already a class by themselves even before the enactment of the statue and all that the legislature did was merely to select their class. Legislation is essentially empiric and Republic Act 1635, as amended, no more than reflects a distinction that exists in fact. Moreover, granted the power to select the subject of taxation, the State's power to grant exemption must likewise be conceded as a necessary corollary. The legislature may withhold the burden of the tax in order to foster what it conceives to be a beneficent enterprise, such as the case of newspapers. As for the Government and its instrumentalities, their exemption rests on the State's sovereign immunity from taxation. The State cannot be taxed without its consent. Finally, the rule of uniformity and equality of taxation is not infringed by the imposition of a flat rate rather than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the service rendered. Considerations of administrative convenience and cost afford an adequate ground for classification. The same considerations may induce the legislature to impose a flat tax which in effect is a charge for the transaction, operating equally on all persons within the class regardless of the amount involved.

29. Punsalan vs Municipal Board of the City of Manila. G.R. No. L-4817 May 26, 1954 Facts:This suit was commenced by two lawyers, a medical practitioner, a public accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf and in behalf of other professionals practising in the City of Manila who may desire to join it." Object of the suit is the annulment of Ordinance No. 3398 of the City of Manila together with the provision of the Manila charter authorizing it and the refund of taxes collected under the ordinance but paid under protest. The ordinance in question imposes a municipal occupation tax on persons exercising various professions in the city and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or by imprisonment of not more than six months, or by both such fine and imprisonment in the discretion of the court." Among the professions taxed were those to which plaintiffs belong. Required tax by the questioned ordinance was paid under protest. The lower court upheld the validity of the charter provision but declared the ordinance itself illegal and void on the ground that the penalty there in provided for nonpayment of the tax was not legally authorized. Issue: Whether the ordinance and the law authorizing it constitute class legislation, are unjust and oppressive, and authorize what amounts to double taxation. Held:The lower court was in error in saying that the imposition of the penalty provided for in the ordinance was without the authority of law. Section 18 of Manila Charter in fact authorize to fix tax and provide penalty as much as what has been provided in the Ordinance in question. Regarding "class legislation", Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the said tax, it has withheld that authority from other chartered cities, not to mention municipalities. it is not for the courts to judge what particular cities or municipalities should be empowered to impose occupation taxes in addition to those imposed by the National Government. That matter is peculiarly within the domain of the political departments and the courts would do well not to encroach upon it. Moreover, as the seat of the National Government and with a population and volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the professions, so that it is but fair that the professionals in Manila be made to pay a higher occupation tax than their brethren in the provinces. Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination within a class in that while professionals with offices in Manila have to pay the tax, outsiders who have no offices in the city but practice their profession therein are not subject to the tax this requires judicial determination. The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof.

31. Meriwether vs. Garrett 102 US 472 October 1880 Facts: The city of Memphis, Tennesee is a municipal corporation with the ordinary powers to make contracts and to levy and collect taxes to meet its expenditures. In June 1987, it was financially in a bad condition. On February 28, 1879, herein appellee Robert Garrett and others filed a bill against the City of Memphis, Tennessee asserting that they are the owners and holders of overdue bonds and other indebtedness and that because of the malfeasance and incompetency of the officers charged with the collection of taxes, a large proportion remained uncollected, thus resulting to incompetency. Thus, they pray for the appointment of a receiver and that Garrett be given the powers stated in Chapter 71 of Acts of 1877, including the power to collect all outstanding indebtedness and claim of every kind, to settle the complainants debts. Thereafter, the legislature of Tennessee passed Chapter 10, of Acts of 1879 repealing the charters of certain municipal corporations and Chapter 11, of Acts of 1879 establishing taxing districts and providing the means of local government for the same. On March 13, 1879, the legislature passed Chapter 92, of Acts of 1879, imposing the collection and disposal of taxes assessed for municipal corporations of Tennessee whose charters have been or may be repealed, or which may surrender their Charters, and for the compromise settlement of the debts of such extinct municipal corporations. Pursuant to the Acts passed, the Governor of Tennessee appointed Minor Meriwether as receiver and back-tax collector. The complainants filed an amended and supplemental bill alleging that the appointment of Meriwether is interfering and hindering Mr. Latham as receiver of the court. Though the petitioners themselves were indebted to the city of Memphis, they refused to pay to Latham. Thus, the defendants filed for injunction restraining Meriweather from collecting taxes. The presiding judge held that the parties and other creditors may recover the debts due them and that all the assets and property of the city, including unpaid taxes may be applied as payment of the debts. Latham, as receiver, was directed to retain possession of all the assets and property and may be disposed only through court order. Meriwether appealed before the SC. Issue: Whether the court has the right to seize and impound the assets of the Corporation and place those in the hands of the receiver. Whether the court has the power to collect the taxes due the creditors before the repealing of the charters. Whether the appointment of Meriwether as receiver and back-tax collector can be validly made by an act of the legislature. Held: Properties that are held for public use cannot be subjected to the payment of the debts of the city. Upon the repeal of the Charter, these properties are automatically transferred to the control of the State. Also, private properties may not be used as payments for the debt, except through taxation. The power of taxation is legislative, and cannot be exercised by any other than the legislative. Taxes levied according to law before the repeal of the charter, other than such that were levied in obedience to the special requirement of contracts, and those that were levied under judicial direction for the payment of judgments recovered against the city, cannot be collected through the instrumentality of a court of chancery at the instance of the creditors of the city. Such taxes can only be collected under authority from the legislature. If there is none, the remedy is to appeal to the legislature, which could grant the same. Lastly, the receiver and back-tax collector appointed under the authority of the act of March 13, 1879, is a public officer, clothed with authority from the legislature for the collection of the taxes levied before the repeal

of the charter. The funds collected by him from taxes levied under judicial direction cannot be appropriated to any other uses than those for which they were raised. He, as well as any other agent of the State charged with the duty of their collection, can be compelled by appropriate judicial orders to proceed with the collection of such taxes by sale of property or by suit or in any other way authorized by law, and to apply the proceeds upon the judgments. The decree of the court below is reversed. The cause is remanded, with instructions to dismiss the bills, without prejudice. If, on the settlement of the accounts of the receiver herein, it shall be found he has any money in his hands collected on taxes levied under judicial direction to pay judgments in favor of parties to the suit, an order may be made directing its appropriation to the payment of such judgment.

37. Tio vs. Videogram Regulatory Board Gr. No. L-75697 June 18, 1987 Melencio-Herrera, J. Facts: The petition assails 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. The DECREE imposes a tax of 30% on the gross receipts and petitioners argue 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. Issue: WON that the tax provision of the DECREE is a rider and is without merit. Held: The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. The tax provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board. The tax provision is not inconsistent with, nor foreign to that general subject and title. 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. 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. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. Taxation has been made the implement of the state's police power. Petition is hereby dismissed.

38.Abakada Guro Party List, et al. vs. Ermita, G.R. No. 168056, 9/1/05 Facts: Petitioners filed a petition for prohibition on 5/27/05 before R.A. No. 9337 took effect. They question the constitutionality of Sections 4, 5, & 6 of said law, amending Sections 106, 107, & 108, respectively of the National Internal Revenue Code. Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, & Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective 1/1/06, after any of the following conditions has been satisfied: 1. Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous years exceeds two and four-fifth percent (2 4/5%); or 2. National gov't deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). 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. Issue: Whether or not R.A. 9337 is unconstitutional Held: It has been said that taxes are the lifeblood of the gov't. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But IT does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes. Congress did not delegate the power to tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. That Congress chose to do so in such a manner that is not within the province of the Court to inquire into, its task being to interpret the law. The VAT is a tax on spending or consumption it is levied on the sale, barter, exchange or lease of goods or properties and services. Being an indirect tax on expenditure, the seller of goods or services may pass on the amount of tax paid to the buyer. In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business it engages in, without transferring the burden to someone else.

44) GR No. L-47252 April 18, 1941 THE APOSTOLIC OF THE MOUNTAIN PROVINCE PREFECT vs.. THE TREASURER OF THE CITY OF BAGUIO, FACTS: In 1937, an ordinance (Ord. 137) was passed in the City of Baguio. The said ordinance sought to assess properties of property owners within the defined city limits. APMP, on the other hand, is a religious corporation duly established under Philippine laws. Pursuant to the ordinance, it contributed a total amount of P1,019.37. It filed the said contribution in protest. APMP later averred that it should be exempt from the said special contribution since as a religious institution, it has a constitutionally guaranteed right not to be taxed including its properties.

ISSUE: Whether or not APMP is exempt from taxes. HELD: The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. Based on Justice Cooleys words: "While the word 'tax' in its broad meaning, includes both general taxes and special assessments, and in a general sense a tax is an assessment, and an assessment is a tax, yet there is a recognized distinction between them in that assessment is confined to local impositions upon property for the payment of the cost of public improvements in its immediate vicinity and levied with reference to special benefits to the property assessed. 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 or highway. A charge imposed only on property owners benefited is a special assessment rather than a tax notwithstanding the statute calls it a tax." In the case at bar, the Prefect cannot claim exemption because the assessment is not taxation per se but rather a system for the benefits of the inhabitants of the city. According to the stipulation of facts, the appellant can not invoke with success the exemption established by the Constitucion because was not incorporated nor proven that their Property exactly who paid the special tax were used exclusively for religious. True, it stipulated that the properties were dedicated to religious purposes, but not agreed or proved that such use was exclusive, and may therefore be that the properties to be more devoted to religious purposes and to use also be earmarked for other purposes nonreligious.

As for the validity of Ordinance No. 137 as amended, it is undeniable that Baguio City is authorized by section 8 (1) of Law No. 1963, now Article 2553 (1) of the Revised Administrative Code, for discussed creating the special tax to repay the cats caused by drainage and sewerage system that was built for the benefit of all inhabitants of that city.

45. VICTORIAS MILLING CO., INC., plaintiff-appellant, vs. THE MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL, defendant-appellant. G.R. No. L-21183 Facts: The disputed ordinance was approved by the municipal Council of Victorias on September 22, 1956 by way of an amendment to two municipal ordinances separately imposing license taxes on operators of sugar centrals and sugar refineries. The changes were: with respect to sugar centrals, by increasing the rates of license taxes; and as to sugar refineries, by increasing the rates of license taxes as well as the range of graduated schedule of annual output capacity. Ordinance No. 1 is labeled "An Ordinance Amending Ordinance No. 25, Series of 1953 and Ordinance No. 18, Series of 1947 on Sugar Central by Increasing the Rates on Sugar Refinery Mill by Increasing the Range of Graduated Schedule on Capacity Annual Output Respectively". Of importance are the provisions of Section 1(m) relating to sugar centrals and Section 2(m) covering sugar refineries with specific reference to the maximum annual license tax, viz: Section No. 1 Any person, corporation or other forms of Companies, operating Sugar Central or engage[d] in the manufacture of centrifugal sugar shall be required to pay the following annual municipal license tax, payable quarterly, to wit: (m) Sugar Central with mill having a capacity of producing an annual output of from 1,500,001 piculs or more shall be required to pay an annual municipal license tax of P40,000.00. Section No. 2 Any person, corporation or other forms of Companies shall be required to pay an annual municipal license tax for the operation of Sugar Refinery Mill at the following rates: (m) Sugar Refinery with mill having a capacity of producing an annual output of from 1,750,001 bags of 100 lbs. or more shall be required to pay an annual municipal license tax of P40,000.00. For, the production of plaintiff Victorias Milling Co., Inc. in both its sugar central and its sugar refinery located in the Municipality of Victorias comes within these items in the schedule. Plaintiff filed asked for judgment declaring Ordinance No. 1, series of 1956, null and void. The reasons put forth by plaintiff are that: (a) the ordinance exceeds the amounts fixed in Provincial Circular 12-A issued by the Finance Department on February 27, 1940; (b) it is discriminatory since it singles out plaintiff which is the only operator of a sugar central and a sugar refinery within the jurisdiction of defendant municipality; (c) it constitutes double taxation; and (d) the national government has preempted the field of taxation with respect to sugar centrals or refineries. Issue: Whether or not Ordinance No. 1, series of 1956, of the Municipality of Victorias, Negros Occidental is valid. Held: To be recalled at this point is that Ordinance No. 1, series of 1956, is but an amendment of Ordinance No. 18, series of 1947, in reference to refineries, and Ordinance No. 25, series of 1953, covering sugar centrals. Ordinance No. 18 imposes "municipal taxes on persons, firms or corporations operating refinery mills in this municipality." Ordinance No. 25 speaks of municipal taxes "relative to the output of the sugar centrals." What are these taxes for? Resolution No. 60 of the municipal council of Victorias, adopted also on September 22, 1956 in conjunction with Ordinance No. 1, series of 1956, furnishes a ready answer. It reads in part: WHEREAS, the Municipal Treasurer informed the Municipal Council of the revenue of the Municipality and the heavy obligations which confront it because of the implementation of Minimum Wage Law on the salaries and wages it pays to its municipal employees and laborers thus greatly draining the Municipal Treasury; September 27, 1968

WHEREAS, this local administration is committed to the plan of ameliorating the deplorable situation existing in the barrios, sitios and rural areas by giving them essential and necessary facilities calculated to improve conditions thereat thru improvements of roads and feeder roads; WHEREAS, one of the causes of the municipality's financial difficulty is low rates of municipal taxes imposed by some of the ordinances enacted by the local legislative body; WHEREAS, [in] . . . the ordinances known as Ordinance No. 25, Series of 1953, dealing on theoperation of Sugar Central, and Ordinance No. 18, Series of 1947, which exclusively deals with the operation of Sugar Refinery Mill, the rates so given are rates suggested and determined by the Provincial Circular No. 12-A, dated February 27, 1940 issued by the Department of Finance as regards to Sugar Centrals; WHEREAS, the Municipal Council has come to the conclusion that the rates provided for in such ordinances are no longer adequate if made in keeping with the present high cost of living; WHEREAS, the Municipal Council has also taken cognizance of the fact that the price of sugar per picul today is more than twice its pre-war average price; . . . . Given the purposes just mentioned, we find no warrant in logic to give our assent to the view that the ordinance in question is solely for regulatory purpose. Plain is the meaning conveyed. The ordinance is for raising money. To say otherwise is to misread the purpose of the ordinance.1awphl.nt We should not hang so heavy a meaning on the use of the term "municipal license tax". This does not necessarily connote the idea that the tax is imposed as the lower court would want it to mean a revenue measure in the guise of a license tax. For really, this runs counter to the declared purpose to make money. Besides, 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." It does not refer solely to a license for regulation. In many instances, it refers to "revenue-raising exactions on privileges or activities." On the other hand, license fees are commonly called taxes. But, legally speaking, the latter are "for the purpose of raising revenues," in contrast to the former which are imposed "in the exercise of police power for purposes of regulation." We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Precisely because of these considerations the present imposition must be treated as a levy for revenue purposes. A quick glance at the big amount of maximum annual tax set forth in the ordinance, P40,000.00 for sugar centrals, and P40,000.00 for sugar refineries, will readily convince one that the tax is really a revenue tax. And then, we read in the ordinance nothing which would as much as indicate that the tax imposed is merely for police inspection, supervision or regulation. The Supreme Court ruled that Ordinance No. 1, series of 1956, of the Municipality of Victorias, was promulgated not in the exercise of the municipality's regulatory power but as a revenue measure a tax on occupation or business. The authority to impose such tax is backed by the express grant of power in Section 1 of Commonwealth Act 472. Judgment is hereby rendered: declaring valid and subsisting Ordinance No. 1, series of 1956, of the Municipality of Victorias, Province of Negros Occidental.

#46 G.R. No. L-16254 February 21, 1922 G.A. CUUNJIENG, plaintiff-appellee, vs. FRED L. PATSTONE, engineer of the city of Manila, defendant-appellant. FACTS: The plaintiff desires a erect a warehouse on Azcarraga Street but is denied a building permit until be shall have made provision for the construction of an arcade over the side walk in front of the building and until he shall have further complied with section 1 of Ordinance No.301 of the City of Manila, i.e. payment of of the assessed value of the land. The plaintiff refuses to construct the arcade and to comply with the ordinance in question on the grounds that the arcade is unnecessary and unsuitable for his warehouse and that the city has no power to require its construction; and that the ordinance in exacting the payment of a fee of one-half of the assessed value of the city of land covered by the arcade is in excess of the legislative powers of the Municipal Board and, therefore, unconstitutional. It seems, however, to be conceded that under the climatic conditions here existing, arcades are both useful and desirable from the standpoint of public convenience and that the Municipal Board, under the general welfare of the city charter, has power to provide for the construction of arcades on certain by assignment of. ISSUE: Whether the fee was validly imposed. HELD: No. The city does not posses such an extraordinary power as that of compelling property holders to lease the portions of the public sidewalks, which adjoin their lands, requires no argument. The charge of one-half of the assessed value imposed on applicants for building permits can therefore, not be considered as rent, and to be valid must either be a tax or a license fee. In imposing a fee equal to one-half of the assessed value of the portion of the sidewalk covered by the arcade in question, the Municipal Board of the city of Manila exceeded its powers. The construction of buildings is a useful enterprises and the amount of the license fee should therefore be limited to the cost of licensing, regulating, and surveillance. It appears that without the arcade the normal fee for the building permit would have been about P31, with the arcade the fee exacted is P525.60. It does not appear that the cost of licensing, regulating, and surveillance would be materially increased through the construction of the arcade, and it is therefore clear that the excess fee is imposed for the purpose of revenue There is nothing in the character of the city of Manila indicating an intention on the part of the Legislature to confer power on the Municipal Board to impose a license tax for revenue on the construction of buildings. The power conferred in relation to such construction is considered merely as police power from which, as we have seen, taxing power is not inferred. Under the circumstances, to hold the fee in this case valid would amount to judicial legislation, particularly undesirable in the present instance where the Legislature, upon its attention being called to the matter, would no doubt willingly grant as much power as could wisely be placed in the hands of the municipality. Therefore, the City of Manila has the power to require the construction of arcades in certain circumstances but that the license fee prescribed by city Ordinance No. 301 is illegal.

47. City of Iloilo vs Villanueva Facts: Spouses Villanueva are owners of apartment houses in Iloilo where a city ordinance was passed imposing license tax fees for tenant houses. The spouses Villanueva refused to pay the taxes and the City of Iloilo filed a case to recover the same. Spouses Villanueva contend that the ordinance under which the tax infringes the powers granted to the city by its charter and that the said ordinance is violative of the constitutional provisions requiring uniformity of taxation upon the theory that it is oppressive, unreasonable and discriminatory. Because of the issue on constitutionality, the case was elevated to the court of first instance. Issue: WON the municipal board imposed the license fees as a revenue measure and therefore exceeded the powers granted to it by its charter. Held: Yes. The court held that although the municipal board was granted with the power to impose a license fee in exercise of its police power, the license fee for the purpose of raising revenue is not warranted. Imposing a license fee to raise revenues must be expressly granted by the charter or statute and is not to be implied from the conferred power to license and merely regulate. The court distinguished authority to impose a license in exercise of police power from the exercise of power to tax. If the fee is designed to raise substantially more than the cost of the regulation to which it purports to be an incident, its purpose is to raise revenue. If it is a fee to be attached to a particular provision for regulation, and appears to be imposed to cover the cost of that regulation, then it is merely a regulatory measure. Further, it is well settled that a municipal corporation, unlike a sovereign state, is clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer that power or the municipality cannot assume it. It not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the city of Iloilo by its charter, the exercise of such power cannot be assumed and hence the ordinance in question is ultra vires in so far as its taxes a tenement house such as those belonging to the spouses Villanueva

Case 51 E S S O S T A N D A R D E A S T E R N , I N C v s . COMMISSIONEROFINTERNALREVENUEG.R. Nos. L-28508-9, July 7, 1989 F CS AT: In CTA Case No. 1251, Esso Standard Eastern Inc.(E sso ) d e d u cte d fro m its g ro ss in co m e fo r 1 9 5 9 , a s p a rt o f i t s o r d i n a r y a n d n e c e s s a r y b u s i n e s s e x p e n s e s , t h e a m o u n t i t h a d s p e n t f o r d r i l l i n g a n d e x p l o r a t i o n of its petroleum concessions. This c l a i m w a s d i s a l l o w e d b y the Commissioner of Internal Revenue (CIR) on the ground that the expenses should be capitalized and might be written off as a loss only when a "dry hole" should result. Esso then file d a n a m e n d e d re tu rn w h e re it a ske d fo r th e re fu n d o f P323,279.00 by reason of its abandonment as dry holes of s e v e r a l o f i t s o i l w e l l s . A l s o c l a i m e d a s o r d i n a r y a n d n e c e s s a r y e x p e n s e s i n t h e s a m e r e t u r n w a s t h e a m o u n t o f P 3 4 0 ,8 2 2 .0 4 , re p re se n tin g m a rg in fe e s it h a d p a id to th e Central Bank on its profit remittances to its New York head o ffice . O n A u g u st 5 , 1 9 6 4 , th e C IR g ra n te d a ta x cre d it o f P 2 2 1 ,0 3 3 .0 0 o n ly , d isa llo w in g th e cla im e d d e d u ctio n fo r the margin fees paid on the ground that the margin fees paid to the Central Bank could not be considered taxes or allowed as deductible business expenses. Esso appealed to the Court of T a x A p p e a ls (C T A ) fo r th e re fu n d o f th e m a rg in fe e s it h a d earlier paid contending that the margin fees were deductible from gross i n c o m e e i t h e r a s a t a x o r a s a n ordinary and necessary business expense. However, E s s o s appeal was denied. ISSUE: 1. W h e t h e r o r n o t t h e m a r g i n f e e s a r e t a x e s 2. Whether or not the margin fees are necessary and ordinary business expenses. RULING: 1 . N o . A t a x i s l e v i e d t o p r o v i d e r e v e n u e f o r government operations, while the proceeds of the margin fee are applied to strengthen our country's international reserves. T h e m a rg in fe e w a s im p o se d b y th e S ta te in th e e xe rcise o f i t s p o l i c e p o w e r a n d n o t t h e p o w e r o f t a x a t i o n . 2. N o . Ordinarily, an expense will be considered 'necessary' where the expenditure is appropriate and helpful in the development of th e ta xp a ye r's b u sin e ss. It is 'o rd in a ry' w h e n it co n n o te s a p a ym e n t w h ich is n o rm a l in re la tio n to th e b u sin e ss o f th e t a x p a y e r a n d t h e s u r r o u n d i n g circumstances. Since the margin fees in question were incurred for the r e m i t t a n c e of funds to Esso's Head Office in New York, which is a separate a n d d i s t i n c t i n c o m e t a x p a y e r f r o m t h e b r a n c h i n t h e P h ilip p in e s, fo r its d isp o sa l a b ro a d , it ca n n e v e r b e sa id therefore that the margin fees were appropriate and helpful in t h e d e v e l o p m e n t o f E s s o ' s b u s i n e s s i n t h e P h i l i p p i n e s e xclu sive ly o r w e re in cu rre d fo r p u rp o se s p ro p e r to th e co n d u ct o f th e a ffa irs o f E sso 's b ra n ch in th e P h ilip p in e s e x c l u s i v e l y o r f o r t h e p u r p o s e o f r e a l i z i n g a p r o f i t o r o f minimizing a loss in the Philippines exclusively

53. PHILIPPINE AIRLINES, INC. (PAL), plaintiff-appellant, vs. ROMEO F. EDU, in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National Treasurer, defendants-appellants. 1988 Aug 15En Banc G.R. No. L-41383 FACTS: Under its franchise, PAL is exempt from the payment of taxes. However, LTO Commissioner issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest. After paying under protest, PAL demanded a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise. Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory exactions and not revenue measures and, therefore, do not come within the exemption granted to PAL under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell. The trial court rendered a decision dismissing the appellant's complaint "guided by the later ruling laid down by the Supreme Court in the case of Republic v. Philippine Rabbit Bus Lines, Inc. (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to us. ISSUE: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees? HELD: The motor vehicle registration fees are taxes. It appears that the expenditures of the Motor Vehicle Office are but a small portion ---- about 5 per centum ---- of the total collections from motor vehicle registration fees. And as proof that the money collected is not intended for the expenditures of that office, the law itself provides that all such money shall accrue to the funds for the construction and maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their express object is to provide revenue with which the Government is to discharge one of its principal functions ---- the construction and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.

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 (Umali, id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent there from 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." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur . . ." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and chauffeurs' license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of sec. 61, aforequoted. SECOND ISSUE: May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL? The answer is NO. The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5431, dated June 27, 1968, repealed all earlier tax exemptions of corporate taxpayers found in legislative franch