Vous êtes sur la page 1sur 27


Planters Products, Inc. vs. Fertiphil Corporation

G.R. No. 166006, 14 March 2008
Petitioner PPI and private respondent Fertiphil are private corporations incorporated under Philippine laws.They are
both engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals.
On June 3, 1985, then President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which
provided, among others, for the imposition of a capital recovery component (CRC) on
the domestic sale of all grades of fertilizers in the Philippines.
Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the domestic market to the Fertilizer and
Pesticide Authority (FPA). FPA then remitted the amount collected to the Far East Bank and Trust Company, the
depositary bank of PPI. Fertiphil paid P6,689,144 to FPA from July 8, 1985 to January 24, 1986.
After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. With the return of
democracy, Fertiphil demanded from PPI a refund of the amounts it paid under LOI No.
1465, but PPI refused to accede to the demand. Fertiphil filed a complaint for collection and damagesagainst FPA
and PPI with the RTC in Makati. It questioned the constitutionality of LOI No. 1465 for being unjust, unreasonable,
oppressive, invalid and an unlawful imposition that amounted to a denial of due process of law.Fertiphil alleged that
the LOI solely favored PPI, a privately owned corporation, which used the proceeds to maintain its monopoly of the
fertilizer industry.
In its Answer,FPA, through the Solicitor General, countered that the issuance of LOI No. 1465 was a valid exercise of
the police power of the State in ensuring the stability of the fertilizer industry in the country.
On November 20, 1991, the RTC rendered judgment in favor of Fertiphil. Ruling that the imposition of the P10 CRC
was an exercise of the States inherent power of taxation, the RTC invalidated the levy for
violating the basic principle that taxes can only be levied for public purpose.
PPI moved for reconsideration but its motion was denied.PPI then filed a notice of appeal with the RTC but it failed
to pay the requisite appeal docket fee. In a separate but related proceeding, the
SCallowed the appeal of PPI and remanded the case to the CA for proper disposition.
On November 28, 2003, the CA handed down its decision affirming with modification that of the RTC. The CA held
that even on the assumption that LOI No. 1465 was issued under the police power of the state, it is still
unconstitutional because it did not promote public welfare.
PPI moved for reconsideration but its motion was denied.
Whether the P10 levy under LOI 1465 is unconstitutional.
The Court holds that the RTC and the CA did not err in ruling against the constitutionality of the LOI. An inherent
limitation on the power of taxation is public purpose. Taxes are exacted only for a public purpose. They cannot be
used for purely private purposes or for the exclusive benefit of private
persons. The reason for this is simple. The power to tax exists for the general welfare hence, implicit in its power is
the limitation that it should be used only for a public purpose. It would be a robbery for
the State to tax its citizens and use the funds generated for a private purpose.

We agree with the RTC and that CA that the levy imposed under LOI No. 1465 was not for a public purpose. Even if
We consider LOI No. 1695 enacted under the police power of the State, it would still be invalid because it did not
promote public interest. The law was enacted to give undue advantage to a private corporation.
197 SCRA 771/ GR No. 88291 May 31, 1991
"A taxpayer may question the legality of a law or regulation when it involves illegal expenditure of public money."
Senator Ernesto Maceda sought to nullify certain decisions, orders, rulings, and resolutions of respondents
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs and the
Fiscal Incentives Review Board FIRB for exempting the National Power Corporation (NPC) from indirect tax and
duties. RA 358, RA 6395 and PD 380 expressly grant NPC exemptions from all taxes whether direct or indirect. In
1984, however, PD 1931 and EO 93 withdrew all tax exemptions granted to all GOCCs including the NPC but granted
the President and/or the Secretary of Finance by recommendation of the FIRB the power to restore certain tax
exemptions. Pursuant to the latter law, FIRB issued a resolution restoring the tax and duty exemption privileges of
the NPC. The actions of the respondents were thus questioned by the petitioner by this petition for certiorari,
prohibition and mandamus with prayer for a writ of preliminary injunction and/or restraining order. To which public
respondents argued, among others, that petitioner does not have the standing to challenge the questioned orders
and resolution because he was not in any way affected by such grant of tax exemptions.
Has a taxpayer the capacity to question the legality of the resolution issued by the FIRB restoring the tax
Whether or not NPC has ceased to enjoy indirect tax and duty exemption with the enactment of PD 938 on
May 27, 1976 which amended PD 380 issued on January 11, 1974
Yes. In this petition it is alleged that petitioner is "instituting this suit in his capacity as a taxpayer and a
duly-elected Senator of the Philippines." Public respondent argues that petitioner must show that he has sustained
direct injury as a result of the action and that it is not sufficient for him to have a mere general interest common to
all members of the public. The Court however agrees with the petitioner that as a taxpayer he may file the instant
petition following the ruling in Lozada when it involves illegal expenditure of public money. The petition questions
the legality of the tax refund to NPC by way of tax credit certificates and the use of said assigned tax credits by
respondent oil companies to pay for their tax and duty liabilities to the BIR and Bureau of Customs.
No, it is still exempt. NAPOCOR is a non-profit public corporation created for the general good and welfare,
and wholly owned by the government of the Republic of the Philippines. From the very beginning of the
corporations existence, NAPOCOR enjoyed preferential tax treatment to enable the corporation to pay the
indebtedness and obligation and effective implementation of the policy enunciated in Section 1 of RA 6395.

From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be interpreted
liberally so as to enhance the tax exempt status of NAPOCOR.
It is recognized that the rule on strict interpretation does not apply in the case of exemptions in favor of government
political subdivision or instrumentality. In the case of property owned by the state or a city or other public
corporations, the express exception should not be construed with the same degree of strictness that applies to
exemptions contrary to the policy of the state, since as to such property exception is the rule and taxation the
G.R. No. 159796, July 17, 2007
RA 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), which sought to impose a
universal charge on all end-users of electricity for the purpose of funding NAPOCORs projects, was enacted and
took effect in 2001.
Petitioners contest the constitutionality of the EPIRA, stating that the imposition of the universal charge on all endusers is oppressive and confiscatory and amounts to taxation without representation for not giving the consumers a
chance to be heard and be represented.
Issue: Whether the universal charge is a tax.
NO. The assailed universal charge is not a tax, but an exaction in the exercise of the States police power. That
public welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the State
regarding electrification. Moreover, the Special Trust Fund feature of the universal charge reasonably serves and
assures the attainment and perpetuity of the purposes for which the universal charge is imposed (e.g. to ensure the
viability of the countrys electric power industry), further boosting the position that the same is an exaction
primarily in pursuit of the States police objectives.
If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.
The taxing power may be used as an implement of police power.
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.
Central Luzon Drug Corp. V. CIR

Respondent is a domestic corporation primarily engaged in retailing of medicines and other pharmaceutical
products. In 1996, it operated six (6) drugstores under the business name and style Mercury Drug.
From January to December 1996, respondent granted twenty (20%) percent sales discount to qualified senior
citizens on their purchases of medicines pursuant to Republic Act No. [R.A.] 7432 and its Implementing Rules and
Regulations. For the said period, the amount allegedly representing the 20% sales discount granted by respondent
to qualified senior citizens totaled P904,769.00.
On April 15, 1997, respondent filed its Annual Income Tax Return for taxable year 1996 declaring therein that it
incurred net losses from its operations.
On January 16, 1998, respondent filed with petitioner a claim for tax refund/credit in the amount of P904,769.00
allegedly arising from the 20% sales discount granted by respondent to qualified senior citizens in compliance with
[R.A.] 7432. Unable to obtain affirmative response from petitioner, respondent elevated its claim to the Court of Tax
Appeals [(CTA or Tax Court)] via a Petition for Review.
Whether respondent, despite incurring a net loss, may still claim the 20 percent sales discount as a tax credit.
The concept of public use is no longer confined to the traditional notion of use by the public, but held synonymous
with public interest, public benefit, public welfare, and public convenience.[78] The discount privilege to which our
senior citizens are entitled is actually a benefit enjoyed by the general public to which these citizens belong. The
discounts given would have entered the coffers and formed part of the gross sales of the private establishments
concerned, were it not for RA 7432. The permanent reduction in their total revenues is a forced subsidy
corresponding to the taking of private property for public use or benefit.
As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just compensation.
This term refers not only to the issuance of a tax credit certificate indicating the correct amount of the discounts
given, but also to the promptness in its release. Equivalent to the payment of property taken by the State, such
issuance -- when not done within a reasonable time from the grant of the discounts -- cannot be considered as just
compensation. In effect, respondent is made to suffer the consequences of being immediately deprived of its
revenues while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with the
reduction in its revenues.
Victorias Milling Co., Inc. vs. Philippine Ports Authority
Note :
On April 28, 1981, the Iloilo Port Manager of respondent Philippine Ports Authority (PPA for short) wrote petitioner
Victorias Milling Co., requiring it to have its tugboats and barges undergo harbor formalities and pay
entrance/clearance fees as well as berthing fees effective May 1, 1981. PPA, likewise, requiring petitioner to secure
a permit for cargo handling operations at its Da-an Banua wharf and remit 10% of its gross income for said
operations as the government's share.

To these demands, petitioner sent two (2) letters, both dated June 2, 1981, wherein it maintained that it is exempt
from paying PPA any fee or charge because: (1) the wharf and an its facilities were built and installed in its land; (2)
repair and maintenance thereof were and solely paid by it; (3) even the dredging and maintenance of the Malijao
River Channel from Guimaras Strait up to said private wharf are being done by petitioner's equipment and
personnel; and (4) at no time has the government ever spent a single centavo for such activities. Petitioner further
added that the wharf was being used mainly to handle sugar purchased from district planters pursuant to existing
milling agreements.
Petitioner maintains and submits that there is no basis for the PPA to assess and impose the dues and charges it is
collecting since the wharf is private, constructed and maintained at no expense to the government, and that it exists
primarily so that its tugboats and barges may ferry the sugarcane of its Panay planters.
Issue :
1.Whether or not PPA may validly collect clearance/entrance fees as well as berthing fees despite the fact that the
Wharf is privately owned.
2. Whether or not PPA is entitled to the 10% of the gross income of VMC
Held :
1st issue : As correctly stated by the Solicitor General, the fees and charges PPA collects are not for the use of the
wharf that petitioner owns but for the privilege of navigating in public waters, of entering and leaving public harbors
and berthing on public streams or waters. (Rollo, pp. 056-057).
In Compaia General de Tabacos de Filipinas vs. Actg. Commissioner of Customs (23 SCRA 600), this Court laid down
the rule that berthing charges against a vessel are collectible regardless of the fact that mooring or berthing is made
from a private pier or wharf. This is because the government maintains bodies of water in navigable condition and it
is to support its operations in this regard that dues and charges are imposed for the use of piers and wharves
regardless of their ownership.
2nd issue : As to the requirement to remit 10% of the handling charges, Section 6B-(ix) of the Presidential Decree
No. 857 authorized the PPA "To levy dues, rates, or charges for the use of the premises, works, appliances, facilities,
or for services provided by or belonging to the Authority, or any organization concerned with port operations." This
10% government share of earnings of arrastre and stevedoring operators is in the nature of contractual
compensation to which a person desiring to operate arrastre service must agree as a condition to the grant of the
permit to operate.
PREMISES CONSIDERED, the instant petition is hereby DISMISSED.
G.R. No. L-17725, February 28, 1962
Defendant-appellant company paid P9,127.50 to plaintiff-appellee as reforestation charges from 1947 to 1956. It
seeks to set off or applied to the payment of the sum ofP4,802.37 as forest charges due and owing from appellant
to appellee. It is appellant's contention that said sum of P9,127.50, not having been used in the reforestation of the
area covered by its license, the same is refundable to it or may be applied in compensation of said sum of P4,802.37
due from it as forest charges.

Appellant maintains that the principle of a compensation in Article 1278 of the new Civil Code 2 is applicable, such
that the sum ofP9,127.50 paid by it as reforestation charges may compensate its indebtedness to appellee in the
sum of P4,802.37 as forest charges.
ISSUE: Whether or not set off or compensation is admissible against demand fortaxes levied.
But in the view we take of this case, appellant and appellee are not mutually creditors and debtors of each other.
Consequently, the law on compensation is inapplicable. On this point, the trial court correctly observed: .Under
Article 1278, NCC, compensation should take place when two persons in their own right are creditors and debtors of
each other. With respect to the forest charges which the defendant Mambulao Lumber Company has paid to the
government, they are in the coffers of the government as taxes collected, and the government does not owe
anything, crystal clear that the Republic of the Philippines and the Mambulao Lumber Company are not creditors
and debtors of each other, because compensation refers to mutual debts.
The general rule, based on grounds of public policy is well-settled that no set-off is admissible against demands for
taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes
are not in the nature of contracts between the party and party but grow out of a duty to, and are the positive acts of
the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required.
If the taxpayer can properly refuse to pay his tax when called upon by the Collector, because he has a claim against
the governmental body which is not included in the tax levy, it is plain that some legitimate and necessary
expenditure must be curtailed. If the taxpayer's claim is disputed, the collection of the tax must await and abide the
result of a lawsuit, and meanwhile the financial affairs of the government will be thrown into great confusion.
G.R. No. 210551 , June 30, 2015
Facts: Quezon City Council enacted Ordinance No. SP-2095, S-2011,2or the Socialized Housing Tax of Quezon City,
Section 3 of which provides:
SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on the assessed value of land in
excess of One Hundred Thousand Pesos (Php100,000.00) shall be collected by the City Treasurer which shall accrue
to the Socialized Housing Programs of the Quezon City Government. The special assessment shall accrue to the
General Fund under a special account to be established for the purpose.
Effective for five (5) years, the Socialized Housing Tax (SHT) shall be utilized by the Quezon City Government for the
following projects: (a) land purchase/land banking; (b) improvement of current/existing socialized housing facilities;
(c) land development; (d) construction of core houses, sanitary cores, medium-rise buildings and other similar
structures; and (e) financing of public-private partnership agreement of the Quezon City Government and National
Housing Authority (NHA) with the private sector.3 Under certain conditions, a tax credit shall be enjoyed by
taxpayers regularly paying the special assessment.
On the other hand, Ordinance No. SP-2235, S-20135 was enacted on December 16, 2013 and took effect ten days
after when it was approved by respondent City Mayor.6 The proceeds collected from the garbage fees on residential
properties shall be deposited solely and exclusively in an earmarked special account under the general fund to be
utilized for garbage collections.7 Section 1 of the Ordinance set forth the schedule and manner for the collection of
garbage fees:
SECTION 1. The City Government of Quezon City in conformity with and in relation to Republic Act No. 7160,
otherwise known as the Local Government Code of 1991 HEREBY IMPOSES THE FOLLOWING SCHEDULE AND
On all domestic households in Quezon City;

Less than 200 sq. m.
PHP 100.00
201 sq. m. 500 sq. m. PHP 200.00
501 sq. m. 1,000 sq. m. PHP 300.00
1,001 sq. m. 1,500 sq. m.
PHP 400.00
1,501 sq. m. 2,000 sq. m. or more
PHP 500.00
On all condominium unit and socialized housing projects/units in Quezon City;
Less than 40 sq. m.
41 sq. m. 60 sq. m.
61 sq. m. 100 sq. m.
101 sq. m. 150 sq. m. PHP100.00
151 sq. m. 200 sq. [m.] or more PHP200.00
On high-rise Condominium Units
High-rise Condominium The Homeowners Association of high- rise condominiums shall pay the annual
garbage fee on the total size of the entire condominium and socialized Housing Unit and an additional garbage fee
shall be collected based on area occupied for every unit already sold or being amortized.
High-rise apartment units Owners of high-rise apartment units shall pay the annual garbage fee on the
total lot size of the entire apartment and an additional garbage fee based on the schedule prescribed herein for
every unit occupied.
Socialized Housing Tax
Petitioner claims that the collection of the SHT is tantamount to a penalty imposed on real property owners due to
the failure of respondent Quezon City Mayor and Council to perform their duty to secure and protect real property
owners from informal settlers, thereby burdening them with the expenses to provide funds for housing. Also,
petitioner argues that the collection of the SHT is a kind of class legislation that violates the right of property owners
to equal protection of the laws since it favors informal settlers who occupy property not their own and pay no taxes
over law-abiding real property owners who pay income and realty taxes.
Garbage Fee
Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise of police power. The cases
of Calalang v. Williams, Patalinghug v. Court of Appeals, and Social Justice Society (SJS), et al. v. Hon. Atienza, Jr.,
which were cited by respondents, are inapplicable since the assailed ordinance is a revenue measure and does not
regulate the disposal or other aspect of garbage.
The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from domestic households and
not from restaurants, food courts, fast food chains, and other commercial dining places that spew garbage much
more than residential property owners.
Petitioner likewise contends that the imposition of garbage fee is tantamount to double taxation because garbage
collection is a basic and essential public service that should be paid out from property tax, business tax, transfer tax,
amusement tax, community tax certificate, other taxes, and the IRA of the Quezon City Government.
Issue: a. Whether the Socialized Housing Tax and Garbage Fee are taxes; and
b. Whether Socialized Housing Tax and Garbage Fee are discriminatory;
Held: 1. Socialized Housing Tax
a. It is the declared policy of the State to undertake a comprehensive and continuing urban development and
housing program that shall, among others, uplift the conditions of the underprivileged and homeless citizens in

urban areas and in resettlement areas, and provide for the rational use and development of urban land in order to
bring about, among others, reduction in urban dysfunctions, particularly those that adversely affect public health,
safety and ecology, and access to land and housing by the underprivileged and homeless citizens. Urban renewal
and resettlement shall include the rehabilitation and development of blighted and slum areas and the resettlement
of program beneficiaries in accordance with the provisions of the UDHA. Chan Clearly, the SHT charged by the
Quezon City Government is a tax which is within its power to impose. blesVirtualawlibrary
Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless constituents but
advantageous to the real property owners as well. The situation will improve the value of the their property
investments, fully enjoying the same in view of an orderly, secure, and safe community, and will enhance the quality
of life of the poor, making them law-abiding constituents and better consumers of business products.
b. The reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or oppressive since
the tax being imposed therein is below what the UDHA actually allows. As pointed out by respondents, while the law
authorizes LGUs to collect SHT on lands with an assessed value of more than P50,000.00, the questioned ordinance
only covers lands with an assessed value exceeding P100,000.00. Even better, on certain conditions, the ordinance
grants a tax credit equivalent to the total amount of the special assessment paid beginning in the sixth (6th) year of
its effectivity. Far from being obnoxious, the provisions of the subject ordinance are fair and just.
2. Garbage Fee
a. Ordinances regulating waste removal carry a strong presumption of validity. Not surprisingly, the
overwhelming majority of U.S. cases addressing a city's authority to impose mandatory garbage service and fees
have upheld the ordinances against constitutional and statutory challenges. Necessarily, LGUs are statutorily
sanctioned to impose and collect such reasonable fees and charges for services rendered. Charges refer to
pecuniary liability, as rents or fees against persons or property, while Fee means a charge fixed by law or
ordinance for the regulation or inspection of a business or activity. The fee imposed for garbage collections under
Ordinance No. SP-2235 is a charge fixed for the regulation of an activity. Certainly, as opposed to petitioners
opinion, the garbage fee is not a tax.
b. It violates the equal protection clause of the Constitution and the provisions of the LGC that an ordinance must
be equitable and based as far as practicable on the taxpayers ability to pay, and not unjust, excessive, oppressive,
confiscatory. In the subject ordinance, the rates of the imposable fee depend on land or floor area and whether the
payee is an occupant of a lot, condominium, social housing project or apartment. For the purpose of garbage
collection, there is, in fact, no substantial distinction between an occupant of a lot, on one hand, and an occupant of
a unit in a condominium, socialized housing project or apartment, on the other hand. Most likely, garbage output
produced by these types of occupants is uniform and does not vary to a large degree; thus, a similar schedule of fee
is both just and equitable.
The rates being charged by the ordinance are unjust and inequitable: a resident of a 200 sq. m. unit in a
condominium or socialized housing project has to pay twice the amount than a resident of a lot similar in size; unlike
unit occupants, all occupants of a lot with an area of 200 sq. m. and less have to pay a fixed rate of Php100.00; and
the same amount of garbage fee is imposed regardless of whether the resident is from a condominium or from a
socialized housing project.
G.R. No. 204429 February 18, 2014
Smart Communications, Inc. (Smart) In the course of its business, Smart constructed a telecommunications tower
within the territorial jurisdiction of the Municipality. The construction of the tower was for the purpose of receiving
and transmitting cellular communications within the covered area. On 30 July 2003, the Municipality passed

Ordinance No. 18, series of 2003, entitled "An Ordinance Regulating the Establishment of Special Projects." On 24
August 2004, Smart received from the Permit and Licensing Division of the Office of the Mayor of the Municipality
an assessment letter with a schedule of payment for the total amount of P389,950.00 for Smarts
telecommunications tower. Due to the alleged arrears in the payment of the assessment, the Municipality also
caused the posting of a closure notice on the telecommunications tower. On 9 September 2004, Smart filed a
protest, claiming lack of due process in the issuance of the assessment and closure notice. In the same protest,
Smart challenged the validity of Ordinance No. 18 on which the assessment was based. The Municipality denied
Smarts protest. On 17 November 2004, Smart filed with Regional Trial Court of Tanauan City, Batangas, Branch 6,
an "Appeal/Petition" assailing the validity of Ordinance No. 18.
The trial court held that the assessment covering the period from 2001 to July 2003 was void since Ordinance No. 18
was approved only on 30 July 2003. However, the trial court declared valid the assessment starting 1 October 2003,
citing Article 4 of the Civil Code of the Philippines,9 in relation to the provisions of Ordinance No. 18 and Section 166
of Republic Act No. 7160 or the Local Government Code of 1991 (LGC).10 The dispositive portion of the trial
courts Decision reads: WHEREFORE, in light of the foregoing, the Petition is partly GRANTED. CTA division and CTA
en banc dismissed the petition for review of Smart.
The CTA En Banc dismissed the petition on the ground of lack of jurisdiction. The CTA En Banc declared that it is a
court of special jurisdiction and as such, it can take cognizance only of such matters as are clearly within its
jurisdiction. Citing Section 7(a), paragraph 3, of Republic Act No. 9282, the CTA En Banc held that the CTA has
exclusive appellate jurisdiction to review on appeal, decisions, orders or resolutions of the Regional Trial Courts in
local tax cases originally resolved by them in the exercise of their original or appellate jurisdiction. However, the
same provision does not confer on the CTA jurisdiction to resolve cases where the constitutionality of a law or rule is
Whether or not the respondent Municipality of Malvar has an authority to impose the so-called "fees" on the basis
of the void ordinance.

Smart argues that the "fees" in Ordinance No. 18 are actually taxes since they are not regulatory, but revenueraising. Smart contends that the designation of "fees" in Ordinance No. 18 is not controlling. The Court finds that the
fees imposed under Ordinance No. 18 are not taxes. Section 5, Article X of the 1987 Constitution provides that "each
local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and
charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government." Consistent with this
constitutional mandate, the LGC grants the taxing powers to each local government unit. Specifically, Section 142 of
the LGC grants municipalities the power to levy taxes, fees, and charges not otherwise levied by provinces. Section
143 of the LGC provides for the scale of taxes on business that may be imposed by municipalities while Section 147
of the same law provides for the fees and charges that may be imposed by municipalities on business and
occupation. The LGC defines the term "charges" as referring to pecuniary liability, as rents or fees against persons or
property, while the term "fee" means "a charge fixed by law or ordinance for the regulation or inspection of a
business or activity."
In this case, the Municipality issued Ordinance No. 18, which is entitled "An Ordinance Regulating the Establishment
of Special Projects," to regulate the "placing, stringing, attaching, installing, repair and construction of all gas mains,
electric, telegraph and telephone wires, conduits, meters and other apparatus, and provide for the correction,
condemnation or removal of the same when found to be dangerous, defective or otherwise hazardous to the
welfare of the inhabitant[s]." It was also envisioned to address the foreseen "environmental depredation" to be
brought about by these "special projects" to the Municipality. Pursuant to these objectives, the Municipality
imposed fees on various structures, which included telecommunications towers. As clearly stated in its whereas

clauses, the primary purpose of Ordinance No. 18 is to regulate the "placing, stringing, attaching, installing, repair
and construction of all gas mains, electric, telegraph and telephone wires, conduits, meters and other apparatus"
listed therein, which included Smarts telecommunications tower. Clearly, the purpose of the assailed Ordinance is
to regulate the enumerated activities particularly related to the construction and maintenance of various structures.
The fees in Ordinance No. 18 are not impositions on the building or structure itself; rather, they are impositions on
the activity subject of government regulation, such as the installation and construction of the structures. Since the
main purpose of Ordinance No. 18 is to regulate certain construction activities of the identified special projects,
which included "cell sites" or telecommunications towers, the fees imposed in Ordinance No. 18 are primarily
regulatory in nature, and not primarily revenue-raising. While the fees may contribute to the revenues of the
Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes. In
Progressive Development Corporation v. Quezon City, the Court declared that "if the generating of revenue is the
primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose,
the fact that incidentally revenue is also obtained does not make the imposition a tax." Considering that the fees in
Ordinance No. 18 are not in the nature of local taxes, and Smart is questioning the constitutionality of the
ordinance, the CTA correctly dismissed the petition for lack of jurisdiction. Likewise, Section 187 of the LGC, which
outlines the procedure for questioning the constitutionality of a tax ordinance, is inapplicable, rendering
unnecessary the resolution of the issue on non-exhaustion of administrative remedies.
Smart argues that the Municipality exceeded its power to impose taxes and fees as provided in Book II, Title One,
Chapter 2, Article II of the LGC. Smart maintains that the mayors permit fees in Ordinance No. 18 (equivalent to
1% of the project cost) are not among those expressly enumerated in the LGC. COURT: As discussed, the fees in
Ordinance No.18 are not taxes. Logically, the imposition does not appear in the enumeration of taxes under Section
held 143 of the LGC. Moreover, even if the fees do not appear in Section 143 or any other provision in the LGC, the
Municipality is empowered to impose taxes, fees and charges, not specifically enumerated in the LGC or taxed under
the Tax Code or other applicable law. Section 186 of the LGC, granting local government units wide latitude in
imposing fees, expressly provides: Section 186. Power to Levy Other Taxes, Fees or Charges. - Local government
units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically
enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or
contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or charges shall
not be enacted without any prior public hearing conducted for the purpose. Smart argues that the Municipality is
encroaching on the regulatory powers of the National Telecommunications Commission (NTC).
The fees are not imposed to regulate the administrative, technical, financial, or marketing operations of
telecommunications entities, such as Smarts; rather, to regulate the installation and maintenance of physical
structures Smarts cell sites or telecommunications tower. The regulation of the installation and maintenance
of such physical structures is an exercise of the police power of the Municipality. Clearly, the Municipality does not
encroach on NTCs regulatory powers. PETITIONER: Ordinance No. 18 violates Sections 130(b)(3)27 and 186 of the
LGC since the fees are unjust, excessive, oppressive and confiscatory COURT: On the constitutionality issue, Smart
merely pleaded for the declaration of unconstitutionality of Ordinance No. 18 in the Prayer of the Petition, without
any argument or evidence to support its plea. Nowhere in the body of the Petition was this issue specifically raised
and discussed. Significantly, Smart failed to cite any constitutional provision allegedly violated by respondent when
it issued Ordinance No. 18. Settled is the rule that every law, in this case an ordinance, is presumed valid. To strike
down a law as unconstitutional, Smart has the burden to prove a clear and unequivocal breach of the Constitution,
which Smart miserably failed to do. WHEREFORE, the Court DENIES the petition. SO ORDERED.
City of Baguio vs De Le

On July 15, 1948, Republic Act No. 329 was enacted amending the charter of said city and adding to its power to
license the power to tax and to regulate.
In view of this amendment that Ordinance No. 99 was approved in order to increase the revenues of the city.
Accordinglysuch ordinance mandated that: a real estate dealer who leases property worth P50,000 or above must
pay an annual fee of P100.00. If the property is worth P10,000 but not over P50,000, then he pays P50 and P24 if
the value is less than P10,000.
A suit was then filed by the City of Baguio against defendant-appellant Fortunato de LeonBaguio for his failure to
pay the amount of P300 as license fee covering the period from the first quarter of 1958 to the fourth quarter of
Fortunato refused to pay assailing the ordinance invalid for it amounts to double taxation and violates the principle
of uniformity.
The lower court ruled that the said ordinance is valid. Hence, there would be no question about the liability of
defendant-appellant for the above license fee, it being shown in the partial stipulation of facts, that he was
"engaged in the rental of his property in Baguio"
WON Ordinance No. 99 is constitutional on the allegation that it imposed double taxation, which is repugnant to the
due process clause, and violativeof the requirement of uniformity?
Challenged ordinance cannot be considered ultra vires as there is more than ample statutory authority for the
enactment thereof
As to why double taxation is not violative of due process:
an "argument against double taxation may not be invoked where one tax is imposed by the state and the
other is imposed by the city.
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
As to the claim that there was a violation of the rule of uniformity:
the above ordinance cannot be assailed as violative of the constitutional requirement of uniformity. "A tax
is considered uniform when it operates with the same force and effect in every place where the subject may be
"Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class
shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications
for purposes of taxation.
State Land Investment Corp. vs. CIR
Facts: petitioner filed income tax return for 1997 having an accumulated tax credit of P23,632,959.05 from which
1997 tax credit was deducted, leaving P13,929,793.51 un utilized. Petitioner opted to apply this amount as tax credit
to the succeeding taxable year of 1998.
For the succeeding year, the petitioner still had an un utilized tax credit after deducting 1998 tax, thus it filed for a
CTA ruled that failure of the petitioner to present its 1998 corporate annual income tax return shows that it incurred
a net loss. Therefore there is no tax liability.
Issue: whether or not petitioner is entitled for the refund.

Ruling: yes, the Supreme Court held that under article 69, it clearly provides that a taxable corporation is entitled to
a tax refund when the sum of the quarterly income taxes it paid during the taxable year exceeds its total income tax
due also to that year. Thus if the excess income taxes paid in a given taxable year have not been entirely used by
the taxable corporation against its quarterly income tax liabilities for the the next year, the unused amount if the
excess may still be refunded. Provided, the claim for such refund was made within two years after payment of tax.
Under the principle of solutioindebiti, the BIR have received something when there was no right to demand it.
This it has the obligation to return it.

"Doing" or "Engaging in" or "transacting" business have no specific meaning. Each case has to be judged by its
peculiar circumstances.lt is our considered opinion that BOAC is a resident foreign corporation, There is no
specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged
in the light of its peculiar environmental circumstances. The term implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the
functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of
the business organization. "In order that a foreign corporation may be regarded as doing business within a State,
there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a
local agent, and not one of a temporary character.'
Definition of "gross income" in the Tax Code is broad enough to include proceeds from sales of airline tickets in the
Philippines even if no service or airlifting of passenger or cargo by an airline is done by its planes in the
Philippines.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. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income.
The tickets exchanged hands here and payments for fares were also made here in 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.
British Overseas Airways Corporation (BOAC) is a 100% British Government-owned corporation organized
and existing under the laws of the United Kingdom It is engaged in the international airline business and is a
member-signatory of the Interline Air Transport Association (IATA). BOAC did not carry passengers and/or cargo to
or from the Philippines, although during the period covered by the assessments, it maintained a general sales agent
in the Philippines Wamer Barnes and Company, Ltd., and later Qantas Airways which was responsible for
selling BOAC tickets covering passengers and cargoes.
On May 7, 1968 CIR assessed BOAC with P2,498,358.56 for deficiency income taxes covering the years
1959 to 1963. BOAC protested. Investigation resulted to a assessment in the amount of P858,307.79 covering the
years 1959 to 1967. BOAC paid this new assessment under protest.
BOAC filed a claim for refund in the amount of P858,307.79 with the CIR. However, BOAC did not wait for
the decision of the CIR, filed petition for review with the tax court. Thereafter, CIR denied claim for refund
On November 17, 1971 CIR assessed BOAC with deficiency income taxes, interests, and penalty for the
fiscal years 1968-1969 to 1970-1971 in the aggregate amount of P549,327.43, and the additional amounts of

P1,000.00 and P1,800.00 as compromise penalties for violation of Section 46 (requiring the filing of corporation
returns) penalized under Section 74 of the National Internal Revenue Code (NIRC).
BOAC in a letter requested that the assessment to countermanded and set aside. CIR denied the request
and reissued the deficiency income tax assessment for P534,132.08 for the years 1969 to 1970-71 plus P1,000.00 as
compromise penalty under Section 74 of the Tax Code. BOAC asked for reconsideration but CIR denied the same.
BOAC filed a 2nd petition for review with the tax court. The 2 cases before the CTA were consolidated
Tax Court rendered the assailed joint Decision reversing the CIR. Its position was that income from
transportation is income from services so that the place where services are rendered determines the source. It
further held that the proceeds of sales of BOAC passage tickets in the Philippines by Warner Barnes and Company,
Ltd., and later by Qantas Airways, during the period in question, do not constitute BOAC income from Philippine
sources "since no service of carriage of passengers or freight was performed by BOAC within the Philippines" and,
therefore, said income is not subject to Philippine income tax.
Whether or not during the fiscal years in question BOAC is a resident foreign corporation doing business in
the Philippines or has an office or place of business in the Philippines.
Whether proceeds from the sale of BOAC tickets in the Philippines by Warner Barnes and Company, Ltd are
considered income from sources within the Philippines
Yes, BOAC is a resident foreign corporation.
There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. The term
implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance
of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of
commercial gain or for the purpose and object of the business organization. "In order that a foreign corporation
may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a
continuous business, such as the appointment of a local agent, and not one of a temporary character.
BOAC, during the periods covered by the subject - assessments, maintained a general sales agent in the Philippines,
That general sales agent, from 1959 to 1971, "was engaged in (1) selling and issuing tickets; (2) breaking down the
whole trip into series of trips each trip in the series corresponding to a different airline company; (3) receiving
the fare from the whole trip; and (4) consequently allocating to the various airline companies on the basis of their
participation in the services rendered through the mode of interline settlement as prescribed by Article VI of the
Resolution No. 850 of the IATA Agreement." Those activities were in exercise of the functions which are normally
incident to, and are in progressive pursuit of, the purpose and object of its organization as an international air
carrier. In fact, the regular sale of tickets, its main activity, is the very lifeblood of the airline business, the generation
of sales being the paramount objective. There should be no doubt then that BOAC was "engaged in" business in the
Philippines through a local agent during the period covered by the assessments. Accordingly, it is a resident foreign
corporation subject to tax upon its total net income received in the preceding taxable year from all sources within
the Philippines.
Yes, proceeds from the sale of BOAC tickets in the Philippines by Warner Barnes and Company, Ltd. are
considered income from sources within the Philippines hence taxable by the Philippine government.
The Tax Code defines "gross income" thus:
"Gross income" includes gains, profits, and income derived from salaries, wages or compensation for personal
service of whatever kind and in whatever form paid, or from profession, vocations, trades, business, commerce,
sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such

property; also from interests, rents, dividends, securities, or the transactions of any business carried on for gain or
profile, or gains, profits, and income derived from any source whatever (Sec. 29[3])
"The phrase 'income from any source whatever' discloses a legislative policy to include all income not expressly
exempted within the class of taxable income under our laws." Income means "cash received or its equivalent"; it is
the amount of money coming to a person within a specific time ...; it means something distinct from principal or
capital. For, while capital is a fund, income is a flow. As used in our income tax law, "income" refers to the flow of
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. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income. The tickets
exchanged hands here and payments for fares were also made here in Philippine currency. The site 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.
The absence of flight operations to and from the Philippines is not determinative of the source of income or the site
of income taxation. Admittedly, BOAC was an off-line international airline at the time pertinent to this case. The test
of taxability is the "source"; and the source of an income is that activity ... which produced the income.
Unquestionably, the passage documentations in these cases were sold in the Philippines and the revenue therefrom
was derived from an activity regularly pursued within the Philippines. And even if the BOAC tickets sold covered the
"transport of passengers and cargo to and from foreign cities", it cannot alter the fact that income from the sale of
tickets was derived from the Philippines. The word "source" conveys one essential idea, that of origin, and the origin
of the income herein is the Philippines.
Reyes v. Almanzor
Petitioners JBL Reyes, Edmundo and Milagros are owners of parcels of land situated in Tondo and Sta. Cruz, City
of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants were paying monthly
rental rates not exceeding Php 300.00 per month.
In 1971, there was the provision in Rental Freezing Law which prohibited the increase in rental charge for those
properties which rent does not exceed Php 300.00 and from ejecting the tenants after the expiration of their
contract period of lease. This provision is effective for only a year from the date of the said law became effective.
Then, there was amendment to the aforementioned provision by Presidential No 20 which made the it absolute
and permanent and instead of for a year only and this fact precluded the Reyeses from increasing the rental fees
and from ejecting their tenants.
In 1973 the Assessor of the City of Manila reclassified and re- assessed the value of the subject properties based
on scheduled market value duly reviewed by the Secretary of Finance. Consequently the review resulted an
increase in the corresponding in the corresponding tax rate, prompting the petitioners to file a Memorandum of
Disagreement with the Board of Tax Appeals. They averred that the assessment made were excessive,
unwarranted, inequitable, confiscatory, unconstitutional considering that the taxes imposed upon them greatly
exceeded the annual income derived from their properties. They further averred that the "Income Approach
Method "should have been the basis of the assessment and classification done by the Assessor of the City of Manila.
The Board of Tax Appeals ruled in favor of the Assessor of City of Manila as well as the Central Board of Assessment
Appeals . They affirmed the assessment and classification by the Assessor of the City of Manila were valid in spite of
the fact that the restriction of Presidential decree No 20 on the market value of the properties within its coverage
precluded the petitioners from increasing their income on the said properties and the assessment made by the

assessor which paved the way to unjustifiable, new increased assessed value so high and successive which resulted
to annual real estate taxes that far exceeded the sum total of yearly rentals paid or payable by the dweller tenants.
ISSUE. Whether or not the assessment and classification made by the Assessor of the City of Manila is valid.
Held: The assessor of the City of Manila completely ignored the effects of restriction of Presidential Decree No 20
on the market value of the properties within its coverage and it unjustifiably set new and increased assessed values
so high and successive that the resulting annual real estate taxes exceeded the sum total of yearly rental fees
derived from the properties.
The Ruling of the lower court is reversed and set aside. The Assessor of the City of Manila is ordered to make new
assessment based on the "Income Approach Method" to guarantee a more fairer and more relative basis of
Villegas vs. HiuChiong Tsai Pao Ho
Facts: The Municipal Board of Manila passed an ordinance which was signed by herein petitioner Mayor Villegas.
The said ordinance prohibits aliens from being employed in the city of Manila without first securing an employment
permit from the Mayor of Manila and paying the permit fee of P50.00. Private respondent who was employed in
Manila filed a petition with the CFI of Manila for the issuance of writ of preliminary injunction and restraining order
to stop the enforcement of the ordinance as well as for a judgment declaring the same null and void. He argues that
the ordinance, as a revenue measure imposed on aliens employed in Manila, is discriminatory and violative of the
rule of the uniformity of taxation. Petitioner Villegas, on the other hand, contends that the rule on uniformity f
taxation applies only to purely tax or revenue measures and that the ordinance in question is not a tax or revenue
measure but is an exercise of the police power of the state, it being principally a regulatory measure.
Issue: Whether or not the ordinance in question is violated the cardinal rule on the uniformity of taxation
Held: Yes. While it is true that the first part of the ordinance, which requires aliens to secure a permit from the
Mayor before being employed in Manila, is indeed a regulatory measure because it involves the discretion and
judgment in the processing, approval and disapproval of applications of employment, the second part which
required payment of P50.00 is not a regulatory but a revenue measure. There is no logic or justification in exacting
P50.00 (side note: this case was decided in 1978) from aliens who have been cleared for employment. It is obvious
that the purpose of the ordinance is to raise money under the guise of regulation. The fee is unreasonable not only
because it is excessive but because it fails to consider valid substantial differences in situation among aliens who are
required to pay it.
Shell Co V Municipality of Cordova
94 Phil 387
Doctrine: Installation manager not exempt from tax; ordinance imposing tax on the exercise of privilege of
installation manager, not discriminatory and hostile.
The Municipal Council of Cordova, Cebu adopted Ordinance 10 which imposes an annual tax on occupation or the
exercise of the privilege of installation manager and Ordinance 11 imposing an annual tax on tin can factories having

a maximum output capacity of 30,000 tin cans. Shell, a foreign corporation, disputed the ordinances and contended
that: first, installation manager is a designation made by the company and such designation cannot be deemed
to be a calling as defined in Sec 178 of NIRC and that the installation manager employed by Shell is a salaried
employee which may not be taxed by the municipal council under the provisions of NIRC; second, the ordinance is
discriminatory and hostile because there is no other person in the locality who exercises such designation or calling;
and third, the imposition of tax on tin can factories having a 30,000 maximum output capacity is unlawful because it
is a percentage tax and falls under the exceptions provided in the Tax Code.
Issue: W/N an installation manager, although a salaried employee, is liable for occupation tax
Yes. Even if the installation manager is a salaried employee of the corporation, still it is an occupation. Further, one
occupation or line of business does not become exempt by being conducted with some other occupation or
business for which such tax has been paid. The occupation tax must be paid by each individual engaged in a calling
subject to it.
Issue 2: W/N the ordinance is unconstitutional because it is hostile and discriminatory
No. The fact that there is no other person in the locality who exercises such a designation or calling does not
make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person or firm who
exercises such calling or occupation named or designated as installation manager.
Issue 3: W/N the annual tax imposition on tin can factories having an annual output capacity of 30,000 is valid
Yes. It is not a percentage tax because the maximum annual output capacity is not a percentage. It is not a share or
a tax based on the amount of the proceeds realized out of the sale of the tin cans manufactured therein but on the
business of manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans.
Tolentino v. Secretary of Finance
*composed of 9 consolidated cases. Divided the case into 3 parts which are relevant in connection with the alleged
violation of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law with the Constitutional
limitations on the power of taxation

Appropriations, revenue, and tariff bills shall originate exclusively from the House of Representatives (HoR)


Some of the petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines (PAL), Roco, and Chamber of Real
Estate and Builders Association (CREBA)) claims that R.A. No. 7716 did not "originate exclusively" in the House of
Representatives as required by Art. VI, 24 of the Constitution. Although they admit that H. No. 11197 was filed in
the House of Representatives.

Senate did not pass it on second and third readings. Instead what the Senate did was to pass its own
version. Petitioner Tolentino adds that what the Senate committee should have done was to amend H. No. 11197 by
striking out the text of the bill and substituting it with the text of S. No. 1630. That way, it is said, "the bill remains a
House bill and the Senate version just becomes the text (only the text) of the House bill.

Whether or not R.A. No. 7716 is unconstitutional for violation of the Constitutional limitation that
appropriations, revenue, and tariff bills shall originate exclusively from the House of Representatives

The Senate has the power to propose amendments to bills required to originate in the House and pass its
own version of a House revenue measure. Art. VI, 24 of our Constitution reads: All appropriation, revenue or
tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Revenue bills must originate from the HoR. However, when this is already initiated by the HoR, the Senate
may propose amendments by making its own version or by just striking out the text of the house bill. Nevertheless,
the pertaining House Bill and Senate Bill shall be taken altogether with the Conference Committee to resolve
conflicts and for it to be an enrolled bill.

Amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere matter of form.

Freedom of the press


Philippine Press Institute (PPI) contends that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press

Whether or not R.A. No. 7716 is discriminatory and violates freedom of the press

Court ruled that since the law granted the press a privilege, the law could take back the privilege anytime
without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever waive
the exercise of its sovereign prerogative.

In withdrawing the exemption, the law merely subjects the press to the same tax burden to which other
businesses have long ago been subject. To subject the press to its payment of E-VAT is not to burden the exercise of
its right any more than to make the press pay income tax or subject it to general regulation is not to violate its
freedom under the Constitution.

Non- impairment of contracts, equal protection, and progressive tax system


Chamber of Real Estate and Builders Association (CREBA) contends that the additional amount is something
that the buyer did not anticipate at the time he entered into the contract.

It is next pointed out that while 4 of R.A. No. 7716 exempts such transactions as the sale of agricultural
products, food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real
property which is equally essential.

Finally, it is contended, for the reasons that it imposed a fixed tax rate, that R.A. No. 7716 also violates Art.
VI, 28(1) which provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.

Whether or not R.A. No. 7716 is violative of the non- impairment of contract clause, equal protection
clause, and the rule on taxation that taxes must be progressive

As to the first issue, the Court ruled that even though such taxation may affect particular contracts, as it
may increase the debt of one person and lessen the security of another, or may impose additional burdens upon
one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor
can it be said that it impairs the obligation of any existing contract in its true legal sense.

With regard to second issue, the Court held that equality and uniformity of taxation means that all taxable
articles or kinds of property of the same class be taxed at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation. To satisfy this requirement it is enough that the
statute or ordinance applies equally to all persons, forms and corporations placed in similar situation.

As regards to the third issue, the Court contended that the Constitution does not really prohibit the
imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall "evolve
a progressive system of taxation. The mandate to Congress is not to prescribe, but to evolve, a progressive tax
system. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not
impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay.
G.R. No. 195909
September 26, 2012
On 16 December 2002, St. Luke's Medical Center, Inc. (St. Luke's), a hospital organized as a non- stock and nonprofit corporation was assessed by the Bureau of Internal Revenue (BIR) for deficiency taxes amounting
toP76,063,116.06 for 1998, comprised of deficiency income tax, value-added tax, withholding tax on compensation
and expanded withholding tax.
Subsequently, St. Luke's filed an administrative protest with the BIR against the deficiency tax assessments. The BIR
did not act on the protest on time. Thus, St. Luke's appealed to the Court Tax Appeals.
The BIR contended that Section 27(B) of the NIRC, which imposes a 10% preferential tax rate on the income of
proprietary non-profit hospitals, should be applicable to St. Luke's and not the general exemption on income tax
granted under Section 30(E) and (G) for non-stock, non-profit charitable institutions and civic organizations
promoting social welfare as St. Luke's was actually operating for profit. Moreover, the hospital's board of trustees,
officers and employees directly benefit from its profits and assets. St. Luke's maintained that it is a non-stock and
non-profit institution for charitable and social welfare purposes under Section 30(E) and (G) of the NIRC. It argued
that the making of profit per se does not destroy its income tax exemption.
Whether St. Luke's is liable for deficiency income tax in 1998 under Section 27(B) of the NIRC, which imposes a
preferential tax rate of 10% on the income of proprietary non-profit hospitals.
Ruling of the Court
The court ruled that St. Luke's is organized as a non-stock and non-profit charitable institution. However, this does
not automatically exempt St. Luke's from paying taxes. Even if St. Luke's meets the test of charity, a charitable
institution is not ipso facto tax exempt. To be exempt from income taxes, Section 30(G) of the NIRC requires that the
institution be "operated exclusively" for social welfare.
In 1998, St. Luke's had total revenues of P1,730,367,965 from services to paying patients. It cannot be disputed that
a hospital which receives approximately P1.73 billion from paying patients is not an institution "operated
exclusively" for charitable purposes. Clearly, revenues from paying patients are income received from "activities
conducted for profit. Hence, St. Luke's is a corporation that is not "operated exclusively" for charitable or social
welfare purposes insofar as its revenues from paying patients are concerned. Section 30(E) and (G) of the NIRC
requires that an institution be "operated exclusively" for charitable or social welfare purposes to be completely

exempt from income tax. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns income
from its for-profit activities. Such income from for-profit activities, under the last paragraph of Section 30, is merely
subject to income tax, previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to
Section 27(B).
June 8, 2007
Respondent Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization organized under the laws
of the Republic of the Philippines and is the owner of Chong Hua Hospital in Cebu City.
In the late 1990s, respondent constructed the CHH Medical Arts Center .Petitioner City Assessor of Cebu City
assessed the CHHMAC building as commercial with an assessed value of PhP 9,821,180 at the assessment level of
35% for commercial buildings, and not at the 10% special assessment currently imposed for CHH and its other
separate buildings -the CHHs Dietary and Records Departments.
Rulings of the following admin. agencies:
the LBAA pointed to the fact that respondents Dietary and Records Departments which are housed in separate
buildings were similarly imposed with CHH the special assessment level of 10%, ratiocinating in turn that there is no
reason therefore why a higher level would be imposed for CHHMAC as it is similarly situated with the Dietary and
Records Departments of the CHH.
The COURT OF APPEALS confirmed the CBAA'S decision and ruled that:
the courts generally will not interfere in matters which are addressed to the sound discretion of the government
agencies entrusted with the regulation of activities under their special technical knowledge and trainingtheir
findings and conclusions are accorded not only respect but even finality.
The SC point with approbation the appellate courts application of Sec. 216 in relation with Sec. 215 of the Local
Government Code on the proper classification of the subject CHHMAC building as special and not commercial. Secs.
215 and 216 pertinently provide:
SEC. 215. Classes of Real Property for Assessment Purposes.For purposes of assessment, real property shall be
classified as residential, agricultural, commercial, industrial, mineral, timberland or special.
SEC. 216. Special Classes of Real Property.All lands, buildings, and other improvements thereon actually, directly and
exclusively used for hospitals, cultural or scientific purposes, and those owned and used by local water districts, and
government-owned or controlled corporations rendering essential public services in the supply and distribution of
water and/or generation and transmission of electric power shall be classified as special. (Emphasis supplied.)
Thus, applying the above provisos in line with City Tax Ordinance LXX of Cebu City, the 10% special assessment
should be imposed for the CHHMAC building which should be classified as special.

G.R. No. L-44007

March 20, 1991

A legislative franchise partakes of the nature of a contract. Franchises spring from contracts between the sovereign
power and private citizens made upon valuable considerations, for purposes of individual advantage as well as
public benefit. It is generally considered that the obligation resting upon the grantee to comply with the terms and
conditions of the grant constitutes a sufficient consideration. It can also be said that the benefit to the community
may constitute the sole consideration for the grant of a franchise by the state. Such being the case, the franchise is
the law between the parties and they are bound by the terms thereof.
Eastern Extension Australasia and China Telegraph Co., Ltd. is a foreign corporation, organized and existing under
the laws of Great Britain and is engaged in international telecommunications and was given a concession for the
construction, operation and maintenance of submarine telegraph cable from Hongkong to Manila by a Royal Decree
of the Spanish Government dated March 30, 1898. Upon the concessions expiration in 1952, RA No. 808 was
approved granting Eastern Extension a legislative franchise "to land, construct, maintain and operate at Manila in
the Philippines a submarine telegraph cable connecting Manila with Hongkong." Section 8 thereof granted to the
Corporation a tax exemption from the payment of taxes whether municipal, provincial, or national except a
franchise tax of 5% on the gross earnings and the tax on its real property. In 1967, RA No. 808 was amended by RA
No. 5002 leaving Sec. 8 unchanged.
In 1971, CIR assessed Eastern Extension with a deficiency income tax for the years 1952 to 1971 on the ground that
RA No. 808 as amended is inoperative for it violates the Section 8, Art. XIV of the 1935 Constitution. Said provision
provides that corporations or other entities to be granted franchise for public utility should be organized under the
laws of the Philippines 60% of the capital of which is owned by citizens of the Philippines. CIR argued that since
private respondent is 100% owned by British citizens, it is illegally operating its business in the Philippines. On the
other hand, Eastern Extension questioned CIRs authority to assess it pointing out the franchise and its exclusive
tax feature. It contends further that the assessment is incorrect and without basis and that prescription had set in
on part of the assessment assuming that the assessment is valid.
Eastern Extension filed a complaint against CIR questioning the legality of its assessment. The CTA ruled that while
the franchise was unconstitutional, CIRs assessment has no legal effect because it was made beyond the
prescribed period required by the Tax Code. Hence, this petition.
WON RA 808, as amended by RA 5002 is unconstitutional.
WON the CIR assessment is illegal.
First Issue:
No, the SC held that RA 808 as amended by RA 5002 is not unconstitutional. RA 808 was enacted in 1952 and was
amended by RA 5002 in 1967 during the effectivity of the 1935 constitution. These acts are persuasive indication
that the Congress excluded international telecommunication from the coverage of the constitutional prohibition.
A legislative franchise partakes of the nature of a contract. Franchises spring from contracts between the sovereign
power and private citizens made upon valuable considerations, for purposes of individual advantage as well as
public benefit. It is generally considered that the obligation resting upon the grantee to comply with the terms and
conditions of the grant constitutes a sufficient consideration. It can also be said that the benefit to the community
may constitute the sole consideration for the grant of a franchise by the state. Such being the case, the franchise is
the law between the parties and they are bound by the terms thereof.
Second Issue:
Since, RA 808 as amended is an operative act, Eastern Extension is exempted from the payment of all taxes whether
local, provincial or national, except franchise and real property taxes. It goes without saying that the assessment

cannot be held valid against the income derived from private respondent's operation authorized by the franchise. It
can only stand valid insofar as the assessment is for income derived from services within the Philippines and which is
beyond the scope of R.A. 808.
SSS vs. Bacolod City
GR L-35726, 21 July 1982
The Social Security System (SSS) is a government agency created under RA 1161. In pursuance of its operations, SSS
maintains a number of regional offices, one of which is a 5-storey building occupying 4 parcels of land in Bacolod
City. Said building and lands were assessed for taxation. For failure to pay the realty taxes thereon, the city levid
upon said properties. SSS sought reconsideration on the ground that SSS is a government-owned and -controlled
corporation and is exempt from payment of real estate taxes.
Whether SSS property in Bacolod City is tax-exempt.
The distinction whether the government-owned or controlled corporation exercises ministrant or proprietory
function is of no relevance as the exemption does not relate to legal fees but on realty taxes. The Charter of Bacolod
City does not contain any qualification whatsoever in providing for the exemption from real estate taxes of lands
and building owned by the Government. It is axiomatic that when public property is involved, exemption is the rule
and taxation is the exception.
PROVINCE OF MISAMIS ORIENTAL v. Cagayan Electric Power and Light Co., Inc. (CEPALCO)
GR No. L-45355, Jan. 12, 1990
CEPALCO was granted a franchise for the installation, operation, and electric light, heat, and power system in
Cagayan De Oro under RA 3247. The franchise was later amended to expand their coverage in other areas, under
RA 3570 and RA 6020. They were required to pay a FRANCHISE TAX (3% of the gross earnings for electric current
sold under the franchise; 2% of which shall be given to the National Treasury and 1% will go to municipal
treasures, provided that the 3% shall be IN LIEU OF ALL TAXES AND ASSESSMENTS OF WHATEVER AUTHORITY
upon privileges, earnings, income, franchise, and poles, wires, transformers, and insulations of the grantee).
Pursuant to the enactment of PD No. 231 or the Local Tax Code, the Province of Misamis Oriental enacted
Provincial Revenue Ordinance No. 19, which demanded the collection of of 1% of the gross annual receipts as
Franchise Tax. CEPALCO refused to pay at first the provincial franchise tax, alleging exemption except that which is
required by RA 6020, but later paid under protest.
ISSUE: Whether CEPALCO is exempted from the payment of Provincial Franchise Tax
YES. There is no provision in P.D. No. 231 expressly or impliedly amending or repealing Section 3 of R.A. No. 6020.
The perceived repugnancy between the two statutes should be very clear before the Court may hold that the
prior one has been repealed by the later, since there is no express provision to that effect (Manila Railroad Co. vs.
Rafferty, 40 Phil. 224). The rule is that a special and local statute applicable to a particular case is not repealed
by a later statute which is general in its terms, provisions and application even if the terms of the general act are
broad enough to include the cases in the special law (id.) unless there is manifest intent to repeal or alter the
special law.

Republic Acts Nos. 3247, 3570 and 6020 are special laws applicable only to CEPALCO, while P.D. No. 231 is a
general tax law. The presumption is that the special statutes are exceptions to the general law (P.D. No. 231)
because they pertain to a special charter granted to meet a particular set of conditions and circumstances.
The franchise of respondent CEPALCO expressly exempts it from payment of "all taxes of whatever
authority" except the three per centum (3%) tax on its gross earnings.
In an earlier case, the phrase "shall be in lieu of all taxes and at any time levied, established by, or collected
by any authority" found in the franchise of the Visayan Electric Company was held to exempt the company
from payment of the 5% tax on corporate franchise provided in Section 259 of the Internal Revenue Code
(Visayan Electric Co. vs. David, 49 O.G. [No. 4] 1385).
Local Tax Regulation No. 3-75 issued by the Secretary of Finance on June 26, 1976, has made it crystal
clear that the franchise tax provided in the Local Tax Code (P.D. No. 231, Sec. 9) may only be imposed on
companies with franchises that do not contain the exempting clause.
G.R. No. 95022 March 23, 1992COMMISSIONER OF INTERNAL REVENUE,,vs.
Facts: GCL Retirement Plan is an employees' trust maintained by the employer, GCL Inc., toprovide retirement,
pension, disability and death benefits to its employees. The Plan assubmitted was approved and qualified as exempt
from income tax by Petitioner Commissioner of Internal Revenue in accordance with Rep. Act No. 4917.In 1984,
Respondent GCL made investsments and earned therefrom interest incomefrom which was witheld the fifteen per
centum (15%) final witholding tax imposed byPres. Decree No. 1959,which took effect on 15 October 1984GCL filed
with Petitioner a claim for refund in the amounts of P1,312.66 withheld by Anscor Capital and Investment Corp., and
P2,064.15 by Commercial Bank of Manila.On 12 February 1985, it filed a second claim for refund of the amount of
P7,925.00withheld by Anscor, stating in both letters that it disagreed with the collection of the 15%final withholding
tax from the interest income as it is an entity fully exempt from incometax asprovided under Rep. Act No. 4917 in
relation to Section 56 (b)of the Tax Code.CIR denied the refund, Petitioner elevated the matter to CTACTA - ruled
in favor of GCL, holding that employees' trusts are exempt from the 15%final withholding tax on interest income and
ordering a refund of the tax withheld.CA - upheld the CTA Decision.

Whether GCL is exempted from Income Tax

Held: GCL Plan was qualified as exempt from income tax by the Commissioner of InternalRevenue in accordance
with Rep. Act No. 4917 approved on 17 June 1967. In so far asemployees' trusts are concerned, the foregoing
provision should be taken in relation tothen Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act
No.1983,supra,which took effect on 22 June 1957.The tax-exemption privilege of employees' trusts, as distinguished
from any other kindof property held in trust, springs from the foregoing provision. It is unambiguous.Manifest
therefrom is that the tax law has singled out employees' trusts for taxexemption.
Employees' trusts or benefit plans normally provide economic assistance to employeesupon the occurrence of
certain contingencies, particularly, old age retirement, death,sickness, or disability. It provides security against
certain hazards to which members of the Plan may be exposed. It is an independent and additional source of
protection for the working group. What is more, it is established for their exclusive benefit and for noother purpose.
The deletion in Pres. Decree No. 1959 of the provisos regarding tax exemption andpreferential tax rates under the
old law, therefore, cannot be deemed to extent toemployees' trusts. Said Decree, being a general law, cannot repeal
by implication aspecific provision, Section 56(b) now 53 [b]) in relation to Rep. Act No. 4917 grantingexemption from
income tax to employees' trusts. Rep. Act 1983, which exceptedemployees' trusts in its Section 56 (b) was effective
on 22 June 1957 while Rep. Act No.4917 was enacted on 17 June 1967, long before the issuance of Pres. Decree No.

1959on 15 October 1984. A subsequent statute, general in character as to its terms andapplication, is not to be
construed as repealing a special or specific enactment, unlessthe legislative purpose to do so is manifested. This is
so even if the provisions of thelatter are sufficiently comprehensive to include what was set forth in the special
act(Villegas v. Subido, G.R. No. L-31711, 30 September 1971, 41 SCRA 190
WHEREFORE, the Writ of Certiorari prayed for is DENIED. The judgment of respondentCourt of Appeals, affirming
that of the Court of Tax Appeals is UPHELD.
G.R. No. L-31156 February 27, 1976
LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a
complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2
of Republic Act No. 2264. 1 otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of
taxing authority as well as declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte,
null and void.
On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state that, first, both
Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed therein
are practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as
per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce
compliance by the latter of the provisions of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects
"from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft
drink corked."
On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on
soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity."
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'
CFI Leyte dismissed the case for lack merit. CA then elevated the case to the Supreme Court.

Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive?
Do Ordinances Nos. 23 and 27 constitute double taxation?
Are Ordinances Nos. 23 and 27 unjust and unfair?

No. Under the New Constitution, local governments are granted the autonomous authority to create their
own sources of revenue and to levy taxes
The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every
independent government, without being expressly conferred by the people. 6 It is a power that is purely legislative
and which the central legislative body cannot delegate either to the executive or judicial department of the
government without infringing upon the theory of separation of powers. The exception, however, lies in the case of
municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. 7 This is sanctioned by immemorial practice. 8 By necessary
implication, the legislative power to create political corporations for purposes of local self-government carries with
it the power to confer on such local governmental agencies the power to tax. 9 Under the New Constitution, local
governments are granted the autonomous authority to create their own sources of revenue and to levy taxes.
Section 5, Article XI provides: "Each local government unit shall have the power to create its sources of revenue and
to levy taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of

Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local
governments the power of local taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice
to invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not limited 6 the
exact measure of that which is exercised by itself. When it is said that the taxing power may be delegated to
municipalities and the like, it is meant that there may be delegated such measure of power to impose and collect
taxes as the legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for
reasons of public policy the State has not deemed wise to tax for more general purposes. 10 This is not to say
though that the constitutional injunction against deprivation of property without due process of law may be passed
over under the guise of the taxing power, except when the taking of the property is in the lawful exercise of the
taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either
the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment
and collection of certain kinds of taxes notice and opportunity for hearing are provided.
No. It does constitute double taxation.
The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two
ordinances cover the same subject matter and impose practically the same tax rate. The thesis proceeds from its
assumption that both ordinances are valid and legally enforceable. This is not so. As earlier quoted, Ordinance No.
23, which was approved on September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax
of one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used.
When it was discovered that the producer or manufacturer could increase the volume contents of the bottle and
still pay the same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28, 1962,
imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference
between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16
of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus
clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter,
even without words to that effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only
seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting
Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of
said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of
1962 is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits
in his brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of
the latter are inconsistent with the provisions of the former."
3. No. Municipal corporations are allowed much discretion in determining the rates of imposable taxes..
The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or
manufactured, or an equivalent of 1- centavos per case, 23 cannot be considered unjust and unfair. 24 an increase
in the tax alone would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal
corporations are allowed much discretion in determining the reates of imposable taxes. 25 This is in line with the
constutional policy of according the widest possible autonomy to local governments in matters of local taxation, an
aspect that is given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so excessive
as to be prohibitive, courts will go slow in writing off an ordinance as unreasonable. 27 Reluctance should not deter
compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to further strengthen local
autonomy were to be realized. 28
G.R. No. 181277
July 3, 2013

On 20 October 2001, petitioner paid business taxes in the total amount of P470,932.21. The assessed amount was
based on Sections 14 and 21 of Ordinance No. 7794, otherwise known as the Manila Revenue Code, as amended by
Ordinance Nos. 7988 and 8011. Out of that amount, P164,552.04 corresponded to the payment under Section 21.
[Section 14 of said ordinance pertains to Tax on Manufacturers, Assemblers and other Processors while Section 21
pertains to Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under the NIRC. Both provisions
were based on Sections 143(a) and 143(h) of the LGC respectively.]
Assenting that it was not liable to pay taxes under Section 21, petitioner claimed for a refund claiming that payment
under section 21 constituted double taxation, to which no action was made by the respondent. Petitioner then
sought the action of the Court and filed a Petition for Refund of Taxes.
Whether or not payment of taxes under Sections 14 and 21 of the Manila Revenue Code constitutes double taxation
Double taxation means taxing the same property twice when it should be taxed only once; that is, "taxing the same
person twice by the same jurisdiction for the same thing." It is obnoxious when the taxpayer is taxed twice, when it
should be but once. Otherwise described as "direct duplicate taxation," the two taxes must be imposed on the same
subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same
taxing period; and the taxes must be of the same kind or character.
Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is subjected to the
taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same
subject matter the privilege of doing business in the City of Manila; (2) for the same purpose to make persons
conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority
petitioner City of Manila; (4) within the same taxing jurisdiction within the territorial jurisdiction of the City of
Manila; (5) for the same taxing periods per calendar year; and (6) of the same kind or character a local
business tax imposed on gross sales or receipts of the business.
When a municipality or city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits,
wines, and any other article of commerce, pursuant to Section 143(a) of the LGC, said municipality or city may no
longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section
143(h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC,
and that are "not otherwise specified in preceding paragraphs." In the same way, businesses such as respondents,
already subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on Section 143(a)
of the LGC], can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which
is based on Section 143(h) of the LGC].
Ericsson vs City of Pasig
Ericsson Telecommunications, Inc. (petitioner), a corporation with principal office in Pasig City, is engaged in the
design, engineering, and marketing of telecommunication facilities/system. In an Assessment Notice dated October
25, 2000 issued by the City Treasurer of Pasig City, petitioner was assessed a business tax deficiency for the years
1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively, based on its gross revenues as
reported in its audited financial statements for the years 1997 and 1998. Petitioner filed a Protest dated December
21, 2000, claiming that the computation of the local business tax should be based on gross receipts and not on gross

The City of Pasig (respondent) issued another Notice of Assessment to petitioner on November 19, 2001, this time
based on business tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93,
respectively, based on its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest on January
21, 2002, reiterating its position that the local business tax should be based on gross receipts and not gross revenue.
The RTC set aside the assessment, while the CA set aside the ruling of RTC and dismissing plaintiffs complaint
without prejudice.
Whether the local business tax on contractors should be based on gross receipts or gross revenue.
The Supreme Court ruled in favor of Ericsson that local business tax on contractors should be based on gross
receipts and NOT on gross revenue.
Gross Sales or Receipts include the total amount of money or its equivalent representing the contract price,
compensation or service fee, including the amount charged or materials supplied with the services and the deposits
or advance payments actually or constructively received during the taxable quarter for the services performed or to
be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax,
and value-added tax (VAT).
In contrast, gross revenue covers money or its equivalent actually or constructively received, including the value of
services rendered or articles sold, exchanged or leased, the payment of which is yet to be received.
The imposition of local business tax based on petitioners gross revenue will inevitably result in the constitutionally
proscribed double taxation taxing of the same person twice by the same jurisdiction for the same thing inasmuch as
petitioners revenue or income for a taxable year will definitely include its gross receipts already reported during
the previous year and for which local business tax has already been paid.

G.R. No. 165109, December 14, 2009
Decision to entertain a taxpayers suit is discretionary upon the Court. When the issue hinges on the
illegal disbursement of public funds, a liberal approach should be preferred as it is more in keeping with truth and
The Sangguniang Panlalawigan of Cagayan passed a resolution authorizing Governor Edgar R. Lara to
engage the services of and appoint Preferred Ventures Corporation as financial advisor or consultant for the

issuance and flotation of bonds to fund the priority projects of the governor without cost and commitment. It also
ratified the Memorandum of Agreement (MOA) entered into by Gov. Lara and Preferred Ventures Corporation
which provides that the provincial government of Cagayan shall pay Preferred Ventures Corporation a one-time fee
of 3% of the amount of bonds floated. In addition, the Sangguniang Panlalawigan, authorized Gov. Lara to negotiate,
sign and execute contracts or agreements pertinent to the flotation of the bonds of the provincial government in an
amount not to exceed P500 million for the construction and improvement of his priority projects, including the
construction of the New Cagayan Town Center, to be approved by the Sangguniang Panlalawigan. Subsequently,
Lara issued the Notice of Award to Asset Builders Corporation, giving to the latter the planning, design, construction
and site development of the town center project.
Petitioners Manuel N. Mamba, Raymund P. Guzman and Leonides N. Fausto filed a Petition for Annulment of
Contracts and Injunction with prayer for a Temporary Restraining Order/Writ of Preliminary Injunction against the
respondents (Gov. Lara et al.). The RTC, however, dismissed their petition on the grounds that the (1) petitioners
have no locus standi to file a case as they are not party to the contract and (2) that the controversy is in the nature
of a political question, thus, the court cant take cognizance of it.

Whether or not the petitioners have locus standi to sue as taxpayers


Yes, the petitioners have legal standing to sue as taxpayers.

Ratio Decidendi:

A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that the
public money is being deflected to any improper purpose, or that there is wastage of public funds through the
enforcement of an invalid or unconstitutional law.
For a taxpayers suit to prosper, two requisites must be met: (1) public funds derived from taxation are disbursed
by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed and
(2) the petitioner is directly affected by the alleged act.
In the case at bar, although the construction of the town center would be primarily sourced from the proceeds of
the bonds, which respondents insist are not taxpayers money, a government support in the amount of P187
million would still be spent for paying the interest of the bonds. The governor requested the Sangguniang
Panlalawigan to appropriate an amount of P25 million for the interest of the bond. So clearly, the first requisite has
been met.
As to the second requisite, the Supreme Court explained that the court, in recent cases, has relaxed the stringent
direct injury test bearing in mind that locus standi is a procedural technicality. By invoking transcendental
importance, paramount public interest, or far-reaching implications, ordinary citizens and taxpayers were allowed to
sue even if they failed to show direct injury. In cases where serious legal issues were raised or where public
expenditures of millions of pesos were involved, the court did not hesitate to give standing to taxpayers.
It argued that, to protect the interest of the people and to prevent taxes from being squandered or wasted under
the guise of government projects, a liberal approach must be adopted in determining locus standi in public suits.