C.

EXEMPTION OF GOVERNMENT AGENCIES & INSTRUMENTALITIES (C) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. - The provisions of Section 39(B) notwithstanding, a final tax at the rates prescribed below is hereby imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange. Not over P100,000........ 5% On any amount in excess of P100,000 10% -----------EXECUTIVE ORDER NO. 93

EXECUTIVE ORDER NO. 93 - AMENDING EXECUTIVE ORDER NO. 376 (SERIES OF 1989) ESTABLISHING THE REGIONAL PROJECT MONITORING AND EVALUATION SYSTEM (RPMES) AND FOR OTHER PURPOSES

WHEREAS, there is a need to further delineate and streamline the specific roles and responsibilities of and operating procedures to be observed by the Project Monitoring Committees at the regional, provincial and municipal levels in view of the implementation of the Local Government Code of 1991; WHEREAS, there is a need to expand the membership of Project Monitoring Committees in the national, regional, provincial, city and municipal levels to promote greater non-governmental organization (NGO) participation in and transparency of government programs; and WHEREAS, there is a need to establish a Project Monitoring Committee at the national level to address and coordinate various RPMES matters, to act on implementation issues and problems and to orchestrate RPMES activities and concerns in the regions. Section 1. The third and fourth paragraphs of Section 2 of Executive Order No. 376 (hereinafter referred to as Order) are hereby amended to read as follows: At the regional level, the projects to be monitored shall include all foreign assisted projects (loan or grant funded), interprovincial projects, area development projects, nationality-funded projects, and other projects considered critical by the Office of the President and the Regional Development Councils/Planning Boards, which are implemented in the region. At the provincial, city and municipal levels, the scope of monitoring shall include all foreign and nationality-funded projects, including development projects funded from the Internal Revenue Allotment (IRA) share of LGUs or supported by funds released directly to the province/city/municipality, and projects funded from locally-generated resources, which are implemented within their respective areas. Sec. 2. Sec. 3 of said October is hereby amended to read as follows: SECTION 3. Organization. The RPMES shall be implemented by the development counsels/planning boards at the various levels (RDC, PDC, CDC and MDC). A Regional Project Monitoring Committee (RPMC) shall be established under the RDC in addition to the Project Monitoring Committees (PMCs) created through Memorandum Order No. 175, as amended, and/or the Local Government Code of 1991. At the national level, a National Project Monitoring Committee (NPMC) shall be established to oversee implementation of the RPMES, with NEDA serving as its Secretariat. The Presidential Management Staff (PMS) shall, corollary to the efforts of the RPMCs, focus on monitoring the Presidents commitments in the various regions. The extensive participation of Non- Governmental Organizations (NGOs) and Peoples Organization (POs) as project monitors shall be advocated at all levels, NGO/PO membership in the provincial, city and municipal levels shall include, but not limited to representatives from civic and/or religious groups.

At the national level, designated officials from the National Economic and Development Authority (NEDA), Department of Budget and Management (DBM), Department of the Interior and Local Government (DILG), and PMS/OP shall compose the NMPC, with the NEDA and DBM representatives as Chairman and Co-Chairman, respectively. At the regional level, the NEDA and DBM Regional Directors shall act as Chairman and Co-Chairman, respectively, of the RPMC. The other members of the RPMC shall be the DILG, PMS/OP and three (3) NGO/OP representative, at least one (1) of whom shall be drawn from the NGO representatives in the Regional Development Council (RDC). The Neda Regional Office shall serve as the Secretariat of the RPMC. The PMCs created at the provincial, city, and municipal levels will have, as mandatory members, the DILG official assigned in the locality and two (2) NGO/OP representatives. The other four members of the PMC shall be appointed by the Local Chief Executive From among five nominees of the Local Development Council. The Chairman shall be appointed by the local Chief Executive from among the PMC members. The respective planning and development offices of the local government units. (LGUs) concerned shall serve as Secretariat to the Local PMCS. Sec. 3. The subtitle Development Councils (RDC, PDC, CDC, MDC) under Sec. 4 of said Order, is hereby reworded to read Development Councils/Planning Boards (RDC, PDC, CDC, MDC). Sec. 4. Sec. 7 of said Order is hereby amended to read as follows: SECTION 7. Funding. Funds needed to implement the RPMES, particularly the initial operations of the NPMC shall be made available from sources to be recommended by the DBM, with the approval of the President. Subsequent funding requirements of the RPMES at the national level shall be provided in the General Appropriations Act by the DBM. The funds for RPMES operations at the national level shall be administered by the NEDA Secretariat. The funding requirements of the RPMES at the regional, city and municipal levels, which shall include the granting of financial incentives to NGO monitors as well as training, capability-building and other administrative costs, shall be provided in the General Appropriations Act under the Regional Development Fund. The funds for RPMES at these levels shall be administered by the RCDs concerned. As the RPMC may deem essential, portions of the Regional Development Fund for monitoring and evaluation may be allotted to a local PMC to augment its budget. Sec. 5. The responsibilities of the Office of the Cabinet Secretary as provided under Sec. 4 of said Order is hereby transferred to and shall be assumed by the Presidential Management Staff (PMS). Sec. 6. The National Project Monitoring Committee (NPMC) is hereby authorized, from time to time, to update and make revisions to the manual of Operations implementing the RPMES.

------------PRESIDENTIAL DECREE NO. 1931 - DIRECTING THE RATIONALIZATION OF DUTY AND TAX EXEMPTION PRIVILEGES GRANTED TO GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS AND ALL OTHER UNITS OF GOVERNMENT

WHEREAS, government-owned or controlled corporations as well as entities performing quasi-governmental functions are still enjoying exemptions from duties, taxes, fees, imposts and other charges despite the fact that they are able to earn profits or pass on these duties and taxes to other parties with whom they transact business; WHEREAS, these duty and tax exemption privileges have resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises; WHEREAS, such privileges make more difficult the accomplishment of the overall program for economic development in general and compete with private industries to a great extent, thus disturbing the equity feature of the tax system; WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any government-owned or controlled corporation and all other units of government; and WHEREAS, there is need for government-owned or controlled corporations and all other units of government enjoying tax privileges to share in the requirements of development, fiscal or otherwise, by paying the duties, taxes and other charges due from them. Section 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the payment of duties, taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled corporations including their subsidiaries, are hereby withdraw. Section 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal Incentives Review Board created under Presidential Decree No. 776, is hereby empowered to restore, partially or totally, the exemptions

withdrawn by Section 1 above, or otherwise revise the scope and coverage of any applicable tax and duty, taking into account, among others, any or all of the following: 1) The 2) The 3) The 4) In relative nature general, effect contribution of the the on of activity greater the in the corporation which national the to relative the corporation interest revenue is to price generation engaged be in; levels; effort; or served.

Section 3. The Ministry of Finance shall promulgate the necessary rules and regulations to effectively implement the provisions of this Decree. Section 4. The provisions of this Decree are hereby declared to be separable, and in the event one or more of such provisions are declared unconstitutional, the validity of the other provisions shall not be affected. Section 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees, executive orders, administrative orders, rules, regulations or parts thereof which are inconsistent with this Decree are hereby repealed, amended or modified accordingly. Section 6. This Decree shall take effect immediately after promulgation.

-----------------Mactan Cebu International Airport Authority vs MarcosDate: September 11, 1996Petitioner: Mactan Cebu International Airport AuthorityRespondents: Hon. Ferdinand Marcos, City of Cebu, et alPonente: Davide JrFacts: Petitioner was created by virtue of RA6958, mandated to "principally undertake the economical,efficient and effective control, management and supervision of the Mactan International Airport in theProvince of Cebu and the Lahug Airport in Cebu City. Under Section 1: The authority shall be exempt fromrealty taxes imposed by the National Government or any of its political subdivisions, agencies andinstrumentalities.However, the Officer of the Treasurer of Cebu City demanded payment for realty taxes on parcels of land belonging to petitioner. Petitioner objected invoking its tax exemption. It also asserted that it is aninstrumentality of the government performing governmental functions, citing section 133 of the LGC whichputs limitations on the taxing powers of LGUs. The city refused insisting that petitioner is a GOCCperforming proprietary functions whose tax exemption was withdrawn by Sections 193 and 234 of the LGC.Petitioner filed a declaratory relief before the RTC. The trial court dismissed the petitioner rulingthat the LGC withdrew the tax exemption granted the GOCCs. Issue:WON the City of Cebu has the power to impose taxes on petitionerH e l d : Y e s

Ratio: As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,acknowledging in its very nature no limits, so that security against its abuse is to be found only in theresponsibility of the legislature which imposes the tax on the constituency who are to pay it. Since taxesare what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptionsfrom taxation and statutes granting tax exemptions are thus construed strictissimi juris against thetaxpayers and liberally in favor of the taxing authority. A claim of exemption from tax payment must beclearly shown and based on language in the law too plain to be mistaken. There can be no question that under Section 14 RA 6958 the petitioner is exempt from the paymentof realty taxes imposed by the National Government or any of its political subdivisions, agencies, andinstrumentalities. Nevertheless, since taxation is the rule and exemption is the exception, the exemptionmay thus be withdrawn at the pleasure of the taxing authority. The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise byLGUs of their power to tax, the scope thereof or its limitations, and the exemption from taxation. Section133 of the LGC prescribes the common limitations on the taxing powers of LGUs: (o) Taxes, fees or chargesof any kind on the national government, its agencies and instrumentalities and LGUs. Among the "taxes"enumerated in the LGC is real property tax. Section 234 of LGC provides for the exemptions from paymentof GOCCs, except as provided therein. On the other hand, the LGC authorizes LGUs to grant tax exemptionprivileges. Reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, aslaid down in Secs 133 the taxing powers of LGUs cannot extend to the levy of inter alia, "taxes, fees, andcharges of any kind of the National Government, its agencies and instrumentalties, and LGUs"; however,pursuant to Sec 232, provinces, cities, municipalities in the Metropolitan Manila Area may impose the realproperty tax except on, inter alia, "real property owned by the Republic of the Philippines or any of itspolitical subdivisions except when the beneficial used thereof has been granted to a taxable person."As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons,including government-owned and controlled corporations, Section 193 of the LGC prescribes the generalrule, viz., they are withdrawn upon the effectivity of the LGC, except upon the effectivity of the LGC,except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non stockand non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latterproviso could refer to Section 234, which enumerates the properties exempt from real property tax. Butthe last paragraph of Section 234 further qualifies the retention of the exemption in so far as the realproperty taxes are concerned by limiting the retention only to those enumerated there-in; all others notincluded in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the realproperty is owned by the Republic of the Philippines, or any of its political subdivisions covered by item (a)of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property hasbeen granted to taxable person for consideration or otherwise.Since the last

paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,exemptions from real property taxes granted to natural or juridical persons, including GOCCs, except as ---------------------D. LIMITATION OF INTERNATIONAL COMITY Section 2. , Art II. The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations. --SEC. 159. Exemptions. - The following are exempt from the community tax:chanrobles virtual law library (1) Diplomatic and consular representatives; and cralaw (2) Transient visitors when their stay in the Philippines does not exceed three (3) months.cralaw ------------Tanada v. Angara Facts On April 15, 1994, the Philippine Government represented by its Secretary of the Department of Trade and Industry signed the Final Act binding the Philippine Government to submit to its respective competent authorities the WTO (World Trade Organization) Agreements to seek approval for such. On December 14, 1994, Resolution No. 97 was adopted by the Philippine Senate to ratify the WTO Agreement. This is a petition assailing the constitutionality of the WTO agreement as it violates Sec 19, Article II, providing for the development of a self reliant and independent national economy, and Sections 10 and 12, Article XII, providing for the Filipino first policy. Issue Whether or not the Resolution No. 97 ratifying the WTO Agreement is unconstitutional

Ruling The Supreme Court ruled the Resolution No. 97 is not unconstitutional. While the constitution mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino interests only against foreign competition and trade practices that are unfair. In other words, the Constitution did not intend to pursue an isolationalist policy. Furthermore, the constitutional policy of a self-reliant and independent national economy does not necessarily rule out the entry of foreign investments, goods and services. It contemplates neither economic seclusion nor mendicancy in the international community. The Senate, after deliberation and voting, gave its consent to the WTO Agreement thereby making it a part of the law of the land. The Supreme Court gave due respect to an equal department in government. It presumes its actions as regular and done in good faith unless there is convincing proof and persuasive agreements to the contrary. As a result, the ratification of the WTO Agreement limits or restricts the absoluteness of sovereignty. A treaty engagement is not a mere obligation but creates a legally binding obligation on the parties. A state which has contracted valid international obligations is bound to make its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken. --------CIR vs. British Overseas Airways Corporation (BOAC) Facts: British Overseas Airways Corp (BOAC) is a 100% British Government-owned corporation engaged in international airline business and is a member of the Interline Air Transport Association, and thus, it operates air transportation services and sells transportation tickets over the routes of the other airline members. From 1959 to 1972, BOAC had no landing rights for traffic purposes in the Philippines and thus, did not carry passengers and/or cargo to or from the Philippines but maintained a general sales agent in the Philippines - Warner Barnes & Co. Ltd. and later, Qantas Airways - which was responsible for selling BOAC tickets covering passengers and cargoes. The Commissioner of Internal Revenue assessed deficiency income taxes against BOAC. Issue: Whether the revenue derived by BOAC from ticket sales in the Philippines, constitute income of BOAC from Philippine sources, and accordingly taxable. Held: The source of an income is the property, activity, or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. Herein, the sale of tickets in the Philippines is the activity that produced the income. The tickets exchanged hands here and payment for fares were also made here in the Philippine currency. The situs of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government. PD 68, in relation to PD 1355, ensures that international airlines are taxed on their income from

Philippine sources. The 2 1/2% tax on gross billings is an income tax. If it had been intended as an excise tax or percentage tax, it would have been placed under Title V of the Tax Code covering taxes on business. -----------SECTION

1 No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.

Sison vs Ancheta GR No. L-59431, 25 July 1984 Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero M. Sison, as taxpayer, alleges that "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He characterizes said provision as arbitrary amounting to class legislation, oppressive and capricious in character. It therefore violates both the equal protection and due process clauses of the Constitution as well asof the rule requiring uniformity in taxation. Issue: Whether or not the assailed provision violates the equal protection and due process clauses of the Constitution while also violating the rule that taxes must be uniform and equitable. Held: The petition is without merit. On due process - it is undoubted that it may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property from abuse of power. Petitioner alleges arbitrariness but his mere allegation does not suffice and there must be a factual foundation of such unconsitutional taint. On equal protection - it suffices that the laws operate equally and uniformly on all persons under similar circumstances, both in the privileges conferred and the liabilities imposed. On the matter that the rule of taxation shall be uniform and equitable - this requirement is met when the tax operates with the same force and effect in every place where the subject may be found." Also, :the rule of uniformity does not call for perfect uniformity or perfect equality, because this is hardly unattainable." When the problem of classification became of issue, the Court said: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation..." As provided by this Court, where "the differentation" complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of this clause and is therefore uniform."