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No. 158881 April 16, 2008

Taxation, LGC

Petron maintains a depot or bulk plant at the Navotas Fishport

Complex, and through that depot, it has engaged in the selling of
diesel fuels to vessels used in commercial fishing in and around
Manila Bay.

Petron received a letter from the office of Navotas Mayor,

respondent Toby Tiangco, wherein the corporation was assessed
taxes relative to the figures covering sale of diesel, stating the total
amount due of P6,259,087.62, a figure derived from the gross sales
of the depot from 1997 to 2001. The computation sheets that were
attached to the letter made reference to Ordinance 92-03, or the
New Navotas Revenue Code (Navotas Revenue Code), though such
enactment was not cited in the letter itself.

Petron filed with the Malabon RTC a Complaint for Cancellation of

Assessment for Deficiency Taxes with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and/or Preliminary Injunction.
The RTC rendered its Decision dismissing Petron’s complaint and
ordering the payment of the assessed amount.

Petron has opted to assail the RTC Decision directly before this
Court since the matter at hand involves pure questions of law, a
characterization conceded by the RTC Decision itself. Particularly,
the controversy hinges on the correct interpretation of Section
133(h) of the LGC, and the applicability of Article 232 (h) of the

Section 133(h) of the LGC reads as follows:

Sec. 133. Common Limitations on the Taxing Powers of Local

Government Units. – Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and Barangays shall not extend to the levy of the following:

(h) Excise taxes on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or charges on
petroleum products;


Whether a local government unit is empowered under the Local

Government Code to impose business taxes on persons or entities
engaged in the sale of petroleum products.


Evidently, Section 133 prescribes the limitations on the capacity of

local government units to exercise their taxing powers otherwise
granted to them under the LGC. Apparently, paragraph (h) of the
Section mentions two kinds of taxes which cannot be imposed by
local government units, namely: excise taxes on articles
enumerated under the NIRC; and taxes, fees or charges on
petroleum products.

The power of a municipality to impose business taxes is provided

for in Section 143 of the LGC. Under the provision, a municipality
is authorized to impose business taxes on a whole host of business
activities. Suffice it to say, unless there is another provision of law
which states otherwise, Section 143, broad in scope as it is, would
undoubtedly cover the business of selling diesel fuels, or any other
petroleum product for that matter.

As earlier observed, Section 133(h) provides two kinds of taxes

which cannot be imposed by local government units: excise taxes
on articles enumerated under the NIRC, as amended; and taxes,
fees or charges on petroleum products. There is no doubt that
among the excise taxes on articles enumerated under the NIRC are
those levied on petroleum products, per Section 148 of the NIRC.

The power of a municipality to impose business taxes derives from

Section 143 of the Code that specifically enumerates several types
of business on which it may impose taxes, including manufacturers,
wholesalers, distributors, dealers of any article of commerce of
whatever nature; those engaged in the export or commerce of
essential commodities; retailers; contractors and other
independent contractors; banks and financial institutions; and
peddlers engaged in the sale of any merchandise or article of
commerce. This obviously broad power is further supplemented by
paragraph (h) of Section 143 which authorizes the sanggunian to
impose taxes on any other businesses not otherwise specified under
Section 143 which the sanggunian concerned may deem proper to

This ability of local government units to impose business or other

local taxes is ultimately rooted in the 1987 Constitution. Section 5,
Article X assures that [e]ach local government unit shall have the
power to create its own sources of revenues and to levy taxes, fees
and charges, though the power is subject to such guidelines and
limitations as the Congress may provide. There is no doubt that
following the 1987 Constitution and the Code, the fiscal autonomy
of local government units has received greater affirmation than
ever. Previous decisions that have been skeptical of the viability, if
not the wisdom of reposing fiscal autonomy to local government
units have fallen by the wayside.

Respondents cite our declaration in City Government of San Pablo

v. Reyes that following the 1987 Constitution the rule thenceforth
in interpreting statutory provisions on municipal fiscal powers,
doubts will have to be resolved in favor of municipal corporations.
Such policy is also echoed in Section 5(a) of the Code, which states
that any provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of powers and of
the lower local government unit. But somewhat conversely, Section
5(b) then proceeds to assert that [i]n case of doubt, any tax
ordinance or revenue measure shall be construed strictly against
the local government unit enacting it, and liberally in favor of the
taxpayer. And this latter qualification has to be respected as a
constitutionally authorized limitation which Congress has seen fit
to provide. Evidently, local fiscal autonomy should not necessarily
translate into abject deference to the power of local government
units to impose taxes.
ILOILO G.R. No. 109791 July
14, 2003 Real property Tax,
Business Tax
OCTOBER 30, 2017


PPA is created und PD 857 and

under Section 25 of its charter, PPA
is exempted from paying real
property tax.

PPA is engaged in the business of

arrastre and stevedoring and leasing
of real estate. Also, it owns a
warehouse for its operation.

On June 11, 1984, PD 1931 withdrew

all tax exemptions privileges granted
to GOCC.

Thus, the city of Iloilo seeks to

collect from PPA business tax and
real property tax from the last
quarter of 1984 up to the year 1986.

However, PPA claims the ff:

1. The City of Iloilo cannot collect

real property taxes from PPA
because the warehouse is part of
the port. Under Sec 420 of Civil
Code, ports are part of public

2. PPA is not subject to business

tax because they are not engage
in business. Their leasing of its
property was not motivated by
profit but duly to manage and
control port operations.


Whether or not Philippine Ports

Authority is exempt from the
payment of real property tax and
business tax.


NO. The records show that the

theory of petitioner before the trial
court was different from that of the
present petition. Initially, it argued
that as a government-owned
corporation, it is exempt from paying
real property taxes by virtue of its
specific exemption in its charter,
Section 40 of the Real Property Tax
Code and Executive Order No. 93.
Subsequently, in the memorandum it
filed with the trial court, it omitted
its earlier argument and changed its
theory by alleging that it is a
government instrumentality, which,
according to applicable
jurisprudence, may not be taxed by
the local government.

PPA cannot claim that their

warehouse is a public dominion
because such theory is different
from the theory they adopted and
decided by the lower court.

Thus, PPA is bound by its admission

of ownership of the warehouse. It is
therefore liable to pay real property

Also, under Sec 420 of the CC, the

ports mentioned are those
“constructed by the state”. Thus,
PPA should prove that its port was
constructed by the state in order to
conclude that such property is a
public dominion. However, PPA
failed to prove such.

Also, granting that its port is a

public dominion, its warehouse
which they constructed is considered
to be an improvement. And
improvement s made by the
occupants is not exempted from
payment of tax.

On their second claim, PPA is liable

for business tax for the lease of their
buildings to private corporations.
During pre-trial, they did not refute
the claims of the city of Iloilo that
they are engage in business nor did
they present proof of exemption
from tax.

PPA admitted that their act of

leasing is not necessarily for
government function of
administering ports but for
convenience. Therefore, any income
or profit generated by the entity,
even without any intention of
realizing profit is still subject to
business tax. What matters is that
PPA leased its properties to private
entities and from which PPA earned
substantial income.
AQUINO VS QUEZON CITY G.R. No. 137534 March 3, 2006 Tax Delinquency, Notice of Delinquency,
Real Property Tax
OCTOBER 6, 2017

This case involves two petitions for review on certiorari involving the decisions declaring valid the
auction sales of two real properties by the Quezon City Local Gov’t for failure to pay real property

The first case deals with a lot formerly owned by petitioners Aquino. Petitioners withheld payment of
the real property taxes as a form of protest for the gov’t of then President Marcos. As a result of the
nonpayment, the property was sold by the Quezon City local government, through the Treasurer’s
Office, at public auction to private respondent Aida Linao, the highest bidder. Petitioners claimed that
they learned of the sale about 2 years later. They fixed as action for annulment of title, reconveyance,
and damages against the respondents.

The seconds case deals with a property located In Cubao, Quezon City in the name of Solomon
Torrado. According to petitioner heirs, Torrado paid taxes on the improvements on Lot 8 but not on
the lot itself because the Treasurer’s Office could not locate the index card for that property. For
failure to pay real property taxes from 1976 to 1982, the City Treasurer sent a Notice of Intent to Sell
to Torrado to his address indicated in the tax register, which simply states as ‘ButuanCity. The notice
was returned by reason of ‘Insufficient Address. Next sent was a Notice of Sale of Delinquent Property.
This was sent to the same address and similarly returned unclaimed. Thereafter, a public auction was
held and the lot was sold to Veronica Baluyot, who mortgaged the property to Spouses Uy who then
sold it to DNX Corp for failure to pay the mortgaged debt. Also, a Notice of Sold Property was
subsequently sent to Torrado which was returned unclaimed.


Was there a failure on the part of the Quezon City Local Gov’t to satisfy the notice requirements
before selling the property for tax delinquency?


Definitely, there is no more logical way to construe the whole chapter on ‘Collection of Real Property
Tax (Sections 56 to 85) than to stress that while three methods are provided to enforce collection on
real property taxes, a notice of delinquency is a requirement regardless of the method or methods

It is incorrect for the respondents to claim that notice of delinquency has limited application only to
distraint of personal property. They mistakenly lumped Section 65 exclusively with Sections 68 to 72
and, in so doing, restricted its application from the other tax remedies. Section 65 is to be construed
together with Sections 66 and 78 and all three operate in reference to tax methods in general.

Petitioners are correct in insisting that two notices must be sent to the taxpayer concerned.
Nevertheless, respondents still prevail because the Court is satisfied that the two-notice requirement
has been complied with by the Treasurer’s Office.