CARLOS SUPLRDRUG CORP., et al. v. DSWD, et al.

G.R. No. J66494, 29 June 2007, Azcuna, J. (Ln Banc)

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Republic Act 432 ,Old Senior Citizens Act, proides that the 20 discount rom
goods and serices o establishments or the exclusie use and enjoyment o the senior
citizens may be claimed by the establishments as tax credit. \ith the passage o R.A. 925
,Lxpanded Senior Citizens Act o 2003,, said discount may now be claimed by the
establishments as tax deduction based on the net cost o the goods sold or serices
rendered, proided that the cost o the discount shall be allowed as a deduction rom gross
income or the same taxable year that the discount is granted. Under this new law, more
establishments were added such as: establishments proiding medical and dental serices,
diagnostic and laboratory serices, including proessional ees o attending doctors in all
priate hospitals and medical acilities, operators o domestic air and sea transport serices,
public railways and skyways and bus transport serices.

Petitioners are domestic corporations and proprietors operating drugstores in the
Philippines, who assail the constitutionality o the said law, alleging that they are entitled to
just compensation since the allowance o the discount as a tax deduction amounts to
depriation o property.

ISSULS:

1, \hether or not Section 4,a, o R.A. 925 is constitutional
2, \hether or not petitioners are entitled to just compensation

HLLD:

Petition DLNILD.

Certain dierences o tax deduction and tax credit can be deried rom the two laws.
1he tax credit under R.A. 432 is a peso-or-peso deduction rom a taxpayer`s tax liability
due to the goernment o the amount o discounts such establishment has granted to a
senior citizen. 1he establishment recoers the ull amount o discount gien to a senior
citizen and hence, the goernment shoulders 100 o the discounts granted. 1he tax
deduction under R.A. 925 is based on the net cost o goods sold or serices rendered.
Lectiely, the goernment loses in terms o oregone reenues an amount equialent to
the marginal tax rate the said establishment is liable to pay the goernment. Under a tax
deduction scheme, the tax deduction on discounts was subtracted rom net sales together
with other deductions which are considered as operating expenses beore the tax due was
computed based on the net taxable income. Being a tax deduction, the discount does not
reduce taxes owed on a peso-or-peso basis but merely oers a ractional reduction in taxes
paid. Said treatment reduces the net income o the establishments concerned. On the other
hand, under the tax credit scheme, the amount o discounts which is the tax credit item, was
deducted directly rom the tax due amount.

Section 4(a) of R.A. 92S7 has constitutional basis.

R.A. 925 is in accord with the State`s policy to proide social justice in all phases o
national deelopment and to adopt an integrated and comprehensie approach to health
deelopment which shall endeaor to make essential goods, health and other social serices
aailable to all people at aordable cost. 1here shall be priority or the needs o the
underpriileged sick, elderly, disabled, women and children.

No just compensation is due.

Petitioners are not entitled to just compensation. Just compensation is the ull and
air equialent o the property taken rom its owner by the expropriator. 1he measure is not
the taker`s gain, but the owner`s loss. A tax deduction does not oer ull reimbursement o
the senior citizen discount. As such it would not meet the deinition o just compensation.
\hile the Constitution protects property rights, petitioner must accept the realities o
business and the State, in the exercise o police power, can interene in the operations o a
business which may result in an impairment o property rights in the process. 1he right to
property can be relinquished upon the command o the State or the promotion o the
public good.