Professional Documents
Culture Documents
TAX Principless
TAX Principless
Ruling:
YES. The Society is not really the beneficiary but only the agency
through which the State acts in carrying out what is essentially a
public function. The money is treated as a special fund and as such need
not be appropriated by law.
the press to the same tax burden to which other businesses have long ago
been subject.
Issue: (1995)
WON the law also violates the requirement that "The rule of taxation shall be
uniform and equitable and Congress shall evolve a progressive system of
taxation" for the law imposes a flat rate of 10% and thus places the tax
burden on all taxpayers without regard to their ability to pay.
Ruling:
NO. 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 constitutional provision has been interpreted to mean simply
that "direct taxes are . . . to be preferred [and] as much as possible, indirect
taxes should be minimized." )). Indeed, the mandate to Congress is not
to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes,
which perhaps are the oldest form of indirect taxes, would have been
prohibited with the proclamation of Art. VIII, 17(1) of the 1973 Constitution
from which the present Art. VI, 28(1) was taken. Sales taxes are also
regressive.
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. In the case of
the VAT, the law minimizes the regressive effects of this imposition by
providing for zero rating of certain transactions (R.A. No. 7716, 3, amending
102 (b) of the NIRC), while granting exemptions to other transactions.
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.
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No.
7716 was enacted. R.A. No. 7716 merely expands the base of the tax. As the
Court sees it, EO 273 satisfies all the requirements of a valid tax. It is
uniform. . . .The sales tax adopted in EO 273 is applied similarly on all goods
and services sold to the public, which are not exempt, at the constant rate of
0% or 10%. The disputed sales tax is also equitable. It is imposed only on
sales of goods or services by persons engaged in business with an aggregate
gross annual sales exceeding P200,000.00. Small corner sari-sari stores are
consequently exempt from its application. Likewise exempt from the tax are
sales of farm and marine products, so that the costs of basic food and other
necessities, spared as they are from the incidence of the VAT, are expected
to be relatively lower and within the reach of the general public.
Issue:
WON the law violates the constitutional provision that "No law impairing the
obligation of contracts shall be passed."
Ruling:
NO. It is enough to say that the parties to a contract cannot, through the
exercise of prophetic discernment, fetter the exercise of the taxing power of
the State. For not only are existing laws read into contracts in order to fix
obligations as between parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a basic postulate of the legal
order. The policy of protecting contracts against impairment presupposes the
maintenance of a government which retains adequate authority to secure
the peace and good order of society. The Contract Clause has never been
thought as a limitation on the exercise of the State's power of taxation save
only where a tax exemption has been granted for a valid consideration.
Issue:
WON the airport lands and buildings are subject to real estate tax.
Ruling: (by adopting the findings and conclusions of the MIAA case)
NO. The Court emphasized that the airport lands and buildings of MIAA are
owned by the Republic and belong to the public domain. The Airport Lands
and Buildings are devoted to public use because they are used by
the public for international and domestic travel and transportation.
The fact that the MIAA collects terminal fees and other charges from
the public does not remove the character of the Airport Lands and
Buildings as properties for public use. Such fees are often termed users
tax taxing those among the public who actually use a public facility instead
of taxing all the public including those who never use the particular public
facility. Whether intended for public use or public service, the Airport Lands
and Buildings are properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are owned by the
Republic and thus exempt from real estate tax under Section 234(a)
of the LGC. The only exception is when MIAA leases its real property to a
taxable person as provided in Section 234(a) of the LGC, in which case the
specific real property leased becomes subject to real estate tax. Thus, only
portions of the Airport Lands and Buildings leased to taxable
persons like private parties are subject to real estate tax.
ABAKADA Case
Constitutionality of Sec 4, 5, and 6 of R.A. 9337 amending Sec 106, 107, and
108, respectively, of the NIRC. These questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the
Secretary of Finance, to raise the VAT rate to 12%,
Issue:
WON there is undue delegation of legislative power
Ruling:
NO. The case before the Court is not a delegation of legislative
power. It is simply a delegation of ascertainment of facts upon
which enforcement and administration of the increase rate under
the law is contingent. No discretion would be exercised by the
President. Highlighting the absence of discretion is the fact that the
word shall is
used
in
the
common proviso.
The
use
of
the
word shall connotes a mandatory order. Its use in a statute denotes an
imperative obligation and is inconsistent with the idea of discretion. Thus, it
is the ministerial duty of the President to immediately impose the
12% rate upon the existence of any of the conditions specified by
Congress.
Issue:
WON the law effectively nullified the Presidents power of control over the
Secretary of Finance by mandating the fixing of the tax rate by the President
upon the recommendation of the Secretary of Finance.
Ruling:
NO. In the present case, in making his recommendation to the
President on the existence of either of the two conditions, the
Secretary of Finance is not acting as the alter ego of the President
or even her subordinate. In such instance, he is not subject to the power of
control and direction of the President. He is acting as the agent of the
legislative department, to determine and declare the event upon
which its expressed will is to take effect.[56] The Secretary of Finance
becomes the means or tool by which legislative policy is determined and
implemented. Thus, being the agent of Congress and not of the
President, the President cannot alter or modify or nullify, or set
aside the findings of the Secretary of Finance and to substitute the
judgment of the former for that of the latter.
NO. We agree with the RTC and that CA that the levy imposed under LOI No.
1465 was not for a public purpose.
First, the LOI expressly provided that the levy be imposed to benefit PPI, a
private company. Second, the LOI provides that the imposition of the P10
levy was conditional and dependent upon PPI becoming financially viable.
Third, the RTC and the CA held that the levies paid under the LOI were
directly remitted and deposited by FPA to Far East Bank and Trust Company,
the depositary bank of PPI. Fourth, the levy was used to pay the corporate
debts of PPI.
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.[46] 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.
When a tax law is only a mask to exact funds from the public when
its true intent is to give undue benefit and advantage to a private
enterprise, that law will not satisfy the requirement of public
purpose.
In accordance with the rule that the taxing power must be exercised for
public purposes only, money raised by taxation can be expended only for
public purposes and not for the advantage of private individuals.
Inasmuch as the land on which the projected feeder roads were to
be constructed belonged then to respondent Zulueta, the result is
that said appropriation sought a private purpose, and hence, was
null and void. The donation to the Government, over five (5) months after
the approval and effectivity of said Act, made for the purpose of giving a
"semblance of legality", or legalizing, the appropriation in question, did not
cure its aforementioned basic defect. Consequently, a judicial nullification of
said donation need not precede the declaration of unconstitutionality of said
appropriation.
with, but more in obedience to the request and pursuant to the policy of our
Government to allocate lands to the landless. It was the bounden duty of the
Government to pay the agreed compensation after it had persuaded Roxas y
Cia. to sell its haciendas, and to subsequently subdivide them among the
farmers at very reasonable terms and prices. However, the Government
could not comply with its duty for lack of funds. Obligingly, Roxas y Cia.
shouldered the Government's burden, went out of its way and sold lands
directly to the farmers in the same way and under the same terms as would
have been the case had the Government done it itself. For this magnanimous
act, the municipal council of Nasugbu passed a resolution expressing the
people's gratitude.
The power of taxation is sometimes called also the power to
destroy. Therefore it should be exercised with caution to minimize
injury to the proprietary rights of a taxpayer. It must be exercised
fairly, equally and uniformly, lest the tax collector kill the "hen that lays the
golden egg". And, in order to maintain the general public's trust and
confidence in the Government this power must be used justly and not
treacherously. It does not conform to justice for the Government to
persuade the taxpayer to lend it a helping hand and later on to
penalize him for duly answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the
sale in question. Hence, pursuant to Section 34 of the Tax Code the lands
sold to the farmers are capital assets, and the gain derived from the sale
thereof is capital gain, taxable only to the extent of 50%.
Ruling:
NO. The grant in Section 11 of the DECREE of authority to the BOARD to
"solicit the direct assistance of other agencies and units of the government
and deputize, for a fixed and limited period, the heads or personnel of such
agencies and units to perform enforcement functions for the Board" is not a
delegation of the power to legislate but merely a conferment of
authority or discretion as to its execution, enforcement, and
implementation. "The true distinction is between the delegation of power
to make the law, which necessarily involves a discretion as to what it shall
be, and conferring authority or discretion as to its execution to be exercised
under and in pursuance of the law. The first cannot be done; to the latter, no
valid objection can be made." 14 Besides, in the very language of the
decree, the authority of the BOARD to solicit such assistance is for a "fixed
and limited period" with the deputized agencies concerned being "subject to
the direction and control of the BOARD." That the grant of such authority
might be the source of graft and corruption would not stigmatize the DECREE
as unconstitutional. Should the eventuality occur, the aggrieved parties will
not be without adequate remedy in law.
Issue:
WON the levy of 30% tax is for public purpose.
Ruling:
YES. The levy of the 30% tax is for a public purpose. It was imposed
primarily to answer the need for regulating the video industry,
particularly because of the rampant film piracy, the flagrant
violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the
DECREE to protect the movie industry, the tax remains a valid
imposition.
The public purpose of a tax may legally exist even if the motive
which impelled the legislature to impose the tax was to favor one
industry over another.
It is inherent in the power to tax that a state be free to select the
subjects of taxation, and it has been repeatedly held that
"inequities which result from a singling out of one particular class
for taxation or exemption infringe no constitutional limitation".
BAGATSING Case
The chief question to be decided in this case is what law shall govern the
publication of a tax ordinance enacted by the Municipal Board of Manila, the
The court qualified. Those portions of its real property that are leased to
private entities are not exempt from real property taxes as these are not
actually, directly and exclusively used for charitable purposes.
Section 28(3), Article VI of the 1987 Philippine Constitution provides,
thus:
(3) Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly andexclusively used for
religious, charitable or educational purposes shall be exempt from taxation.
The tax exemption under this constitutional provision covers property taxes
only. . . what is exempted is not the institution itself . . .; those exempted
from real estate taxes are lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or educational
purposes.
In order to be entitled to the exemption, the petitioner is burdened to prove,
by clear and unequivocal proof, that (a) it is a charitable institution; and (b)
its real properties are ACTUALLY, DIRECTLY andEXCLUSIVELY used for
charitable purposes. If real property is used for one or more commercial
purposes, it is not exclusively used for the exempted purposes but is subject
to taxation.
What is meant by actual, direct and exclusive use of the property
for charitable purposes is the direct and immediate and actual
application of the property itself to the purposes for which the
charitable institution is organized. It is not the use of the income from
the real property that is determinative of whether the property is used for
tax-exempt purposes.
The petitioner failed to discharge its burden to prove that the entirety of
its real property is actually, directly and exclusively used for charitable
purposes. While portions of the hospital are used for the treatment of
patients and the dispensation of medical services to them, whether paying or
non-paying, other portions thereof are being leased to private individuals for
their clinics and a canteen. Further, a portion of the land is being leased to a
private individual for her business enterprise under the business name
Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows
that it collected rentals from the said lessees.
Accordingly, we hold that the portions of the land leased to private
entities as well as those parts of the hospital leased to private individuals are
not exempt from such taxes.[45] On the other hand, the portions of the land
occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes.
CIR v CA, CTA and YMCA (Young Mens Christian Assoc. of the Phil.)
The crux of this case is the income derived from rentals of real property
owned by the Young Mens Christian Association of the Philippines, Inc.
(YMCA) established as a welfare, educational and charitable non-profit
corporation whether it is subject to income tax under the National Internal
Revenue Code (NIRC) and the Constitution.
Issue:
WON the rental income of YMCA is txable
Held:
YES. Because taxes are the lifeblood of the nation, the Court has always
applied the doctrine of strict interpretation in construing tax exemptions.
[18]
Furthermore, a claim of statutory exemption from taxation should be
manifest and unmistakable from the language of the law on which it is
based. Thus, the claimed exemption must expressly be granted in a statute.
SEC. 27 of NIRC. Exemptions from tax on corporations. -- The following
organizations shall NOT be taxed under this Title in respect to INCOME
received by them as such -xxxxxxxxx
(g) Civic league or organization not organized for profit but operated
exclusively for the promotion of social welfare;
(h) Club organized and operated exclusively for pleasure, recreation, and
other non-profitable purposes, no part of the net income of which inures to
the benefit of any private stockholder or member;
xxxxxxxxx
Notwithstanding the provision in the preceding paragraphs, the income of
whatever kind and character of the foregoing organization from any of their
properties, real or personal, or from any of their activities conducted for
WON the respondent IS ENTITLED TO THE MOST FAVORED NATION TAX RATE
OF 10% ON ROYALTIES AS PROVIDED IN THE RP-US TAX TREATY IN RELATION
TO THE RP-WEST GERMANY TAX TREATY.
Held:
NO. The RP-US Tax Treaty is just one of a number of bilateral treaties which
the Philippines has entered into for the avoidance of double taxation.[9] The
tax conventions are drafted with a view towards the elimination
of international juridical double taxation, which is defined as the
imposition of comparable taxes in two or more states on the same taxpayer
in respect of the same subject matter and for identical periods. The apparent
rationale for doing away with double taxation is to encourage the free flow
of goods and services and the movement of capital, technology and persons
between countries, conditions deemed vital in creating robust and dynamic
economies.
Double taxation usually takes place when a person is resident of a
contracting state and derives income from, or owns capital in, the other
contracting state and both states impose tax on that income or capital. In
order to eliminate double taxation, a tax treaty resorts to several methods.
There are two methods of relief- the exemption method and the credit
method. In the exemption method, the income or capital which is taxable
in the state of source or situs is exempted in the state of residence, although
in some instances it may be taken into account in determining the rate of tax
applicable to the taxpayers remaining income or capital. On the other hand,
in the credit method, although the income or capital which is taxed in the
state of source is still taxable in the state of residence, the tax paid in the
former is credited against the tax levied in the latter. The basic difference
between the two methods is that in the exemption method, the
focus is on the income or capital itself, whereas the credit method
focuses upon the tax.
In negotiating tax treaties, the underlying rationale for reducing the tax
rate is that the Philippines will give up a part of the tax in the
expectation that the tax given up for this particular investment is
not taxed by the other country.
In the case at bar, the state of source is the Philippines because
the royalties are paid for the right to use property or rights, i.e.
trademarks, patents and technology, located within the Philippines.
[17]
The United States is the state of residence since the taxpayer, S.
C. Johnson and Son, U. S. A., is based there. Under the RP-US Tax
Treaty, the state of residence and the state of source are both permitted to
tax the royalties, with a restraint on the tax that may be collected by the
state of source.[18] Furthermore, the method employed to give relief
from double taxation is the allowance of a tax credit to citizens or
residents of the United States (in an appropriate amountbased upon the
taxes paid or accrued to the Philippines) against the United States tax, but
such amount shall not exceed the limitations provided by United States law
for the taxable year.
The concessional tax rate of 10 percent provided for in the RP-Germany
Tax Treaty should apply only if the taxes imposed upon royalties in the RP-US
Tax Treaty and in the RP-Germany Tax Treaty are paid under similar
circumstances. This would mean that private respondent must prove that the
RP-US Tax Treaty grants similar tax reliefs to residents of the United States in
respect of the taxes imposable upon royalties earned from sources within the
Philippines as those allowed to their German counterparts under the RPGermany Tax Treaty.
The RP-US and the RP-West Germany Tax Treaties do not contain similar
provisions on tax crediting. Article 24 of the RP-Germany Tax Treaty, supra,
expressly allows crediting against German income and corporation tax of
20% of the gross amount of royalties paid under the law of the
Philippines. On the other hand, Article 23 of the RP-US Tax Treaty, which
is the counterpart provision with respect to relief for double
taxation, does not provide for similar crediting of 20% of the gross
amount of royalties paid.
Thus, if the rates of tax are lowered by the state of source, in this
case, by the Philippines, there should be a concomitant commitment
on the part of the state of residence to grant some form of tax
relief, whether this be in the form of a tax credit or exemption. If the
state of residence does not grant some form of tax relief to the
investor, no benefit would redound to the Philippines .
The most favored nation clause is intended to establish the principle
of equality of international treatment by providing that the citizens or
subjects of the contracting nations may enjoy the privileges accorded by
either party to those of the most favored nation. [26] The essence of the
principle is to allow the taxpayer in one state to avail of more liberal
provisions granted in another tax treaty to which the country of residence of
such taxpayer is also a party provided that the subject matter of
taxation, in this case royalty income, is the same as that in the tax
treaty under which the taxpayer is liable. Both Article 13 of the RP-US
Tax Treaty and Article 12 (2) (b) of the RP-West Germany Tax Treaty, abovequoted, speaks of tax on royalties for the use of trademark, patent, and
technology. The entitlement of the 10% rate by U.S. firms despite the
absence of a matching credit (20% for royalties) would derogate from the
design behind the most favored nation clause to grant equality of
international treatment. The similarity in the circumstances of payment
of taxes is a condition for the enjoyment of most favored nation
treatment precisely to underscore the need for equality of
treatment.
Since the RP-US Tax Treaty does not give a matching tax credit of 20
percent for the taxes paid to the Philippines on royalties as allowed
under the RP-West Germany Tax Treaty, private respondent cannot be
deemed entitled to the 10 percent rate granted under the latter treaty
for the reason that there is no payment of taxes on royalties under
similar circumstances.
It bears stress that tax refunds are in the nature of tax exemptions. As
such they are regarded as in derogation of sovereign authority and to be
construed strictissimi juris against the person or entity claiming the
exemption.[27] The burden of proof is upon him who claims the exemption in
his favor. Private respondent is claiming for a refund of the alleged
overpayment of tax on royalties; however, there is nothing on record to
support a claim that the tax on royalties under the RP-US Tax Treaty is paid
under similar circumstances as the tax on royalties under the RP-West
Germany Tax Treaty.
DEUTSCHE BANK AG MANILA BRANCH v CIR
Section 143(h) of the LGC, are subject to excise tax, value-added tax (VAT),
or percentage tax under the National Internal Revenue Code (NIRC). Thus,
there can be no double taxation when respondent is being taxed under both
Sections 14 and 21 of Tax Ordinance No. 7794, for under the first, it is being
taxed as a manufacturer; while under the second, it is being taxed as a
person selling goods in the course of trade or business subject to excise, VAT,
or percentage tax.
Contrary to the assertions of petitioners, the Coca-Cola case is indeed
applicable to the instant case. The pivotal issue raised therein was whether
Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void,
which this Court resolved in the affirmative. Tax Ordinance No. 7988 was
declared by the Secretary of the Department of Justice (DOJ) as null and void
and
without
legal
effect
due
to
the
failure
of
herein petitioner City of Manila to satisfy the requirement under the law that
said
ordinance
be
published
for
three
consecutive
days. Petitioner City of Manila never appealed said declaration of the DOJ
Secretary; thus, it attained finality after the lapse of the period for appeal of
the same. The passage of Tax Ordinance No. 8011, amending Tax Ordinance
No. 7988, did not cure the defects of the latter, which, in any way, did not
legally exist.
By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and Tax
Ordinance No. 8011 are null and void and without any legal effect. Therefore,
respondent cannot be taxed and assessed under the amendatory laws--Tax
Ordinance No. 7988 and Tax Ordinance No. 8011.
Petitioners insist that even with the declaration of nullity of Tax
Ordinance No. 7988 and Tax Ordinance No. 8011, respondent could still
be made liable for local business taxes under both Sections 14 and 21
of Tax Ordinance No. 7944 as they were originally read, without the
amendment by the null and void tax ordinances.
With the pronouncement by this Court in theCoca-Cola case that Tax
Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void
and without legal effect, then Section 21 of Tax Ordinance No. 7794, as
it has been previously worded, with its exempting proviso, is back in
effect
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
Subsequently, the two sales were openly made with the execution of public
documents and the declaration of taxes for 1989. However, these
circumstances do not negate the existence of fraud. As earlier discussed
those
two
transactions
were
tainted
with
fraud.
And
even
assuming arguendo that there was no fraud, we find that the income tax
return filed by CIC for the year 1989 was false. It did not reflect the true or
actual amount gained from the sale of the Cibeles property. Obviously, such
was done with intent to evade or reduce tax liability.
As stated above, the prescriptive period to assess the correct taxes in
case of false returns is ten years from the discovery of the falsity. The false
return was filed on 15 April 1990, and the falsity thereof was claimed to have
been discovered only on 8 March 1991. [37] The assessment for the 1989
deficiency income tax of CIC was issued on 9 January 1995. Clearly, the
issuance of the correct assessment for deficiency income tax was well within
the prescriptive period.
Issue: WON respondent estate is liable for the deficiency income tax.
Held:
YES. A corporation has a juridical personality distinct and separate from the
persons owning or composing it. Thus, the owners or stockholders of a
corporation may not generally be made to answer for the liabilities of a
corporation and vice versa. It is worth noting that when the late Toda sold his
shares of stock to Le Hun T. Choa, he knowingly and voluntarily held himself
personally liable for all the tax liabilities of CIC and the buyer.
Paragraph g of the Deed of Sale of Shares of Stocks specifically provides:
x x x SELLER undertakes and agrees to hold the BUYER and Cibeles
free from any and all income tax liabilities of Cibeles for the fiscal
years 1987, 1988 and 1989.
When the late Toda undertook and agreed to hold the BUYER and Cibeles
free from any all income tax liabilities of Cibeles for the fiscal years 1987,
1988, and 1989, he thereby voluntarily held himself personally liable
therefor. Respondent estate cannot, therefore, deny liability for CICs
deficiency income tax for the year 1989 by invoking the separate corporate
personality of CIC, since its obligation arose from Todas contractual
undertaking, as contained in the Deed of Sale of Shares of Stock.
"In re: Petition for Entry of New Certificate of Title" filed by Ho Fernandez.
Francia filed a complaint to annul the auction sale.
Issue:
WON PETITIONER'S OBLIGATION TO PAY FOR SUPPOSED TAX DELINQUENCY
can be SET-OFF BY THE AMOUNT OF P4,116.00 WHICH THE GOVERNMENT IS
INDEBTED TO THE FORMER.
Held:
NO. There can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to
pay a tax on the ground that the government owes him an amount equal to
or greater than the tax being collected
By legal compensation, obligations of persons, who in their own right are
reciprocally debtors and creditors of each other, are extinguished.
A claim for taxes is not such a debt, demand, contract or judgment
as is allowed to be set-off under the statutes of set-off. Neither are
they a proper subject of recoupment since they do not arise out of the
contract or transaction sued on. ... The general rule based on grounds of
public policy is well-settled that no set-off 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 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.
"... internal revenue taxes can not be the subject of compensation:
Reason: government and taxpayer are not mutually creditors and
debtors of each other' under Article 1278 of the Civil Code and a "claim
for taxes is not such a debt, demand, contract or judgment as is allowed to
be set-off.
There are other factors which compel us to rule against the petitioner. The
tax was due to the city government while the expropriation was effected by
the national government. Moreover, the amount of P4,116.00 paid by the
national government for the 125 square meter portion of his lot was
deposited with the Philippine National Bank long before the sale at public
auction of his remaining property.
Petitioner contends that "the auction sale in question was made without
complying with the mandatory provisions of the statute governing tax sale.
No evidence was presented that the procedure outlined by law on sales of
property for tax delinquency was followed. We agree with the petitioner's
claim that Ho Fernandez, the purchaser at the auction sale, has the burden of
proof to show that there was compliance with all the prescribed requisites for
a tax sale.
There is no presumption of the regularity of any administrative
action which results in depriving a taxpayer of his property through
a tax sale. This is actually an exception to the rule that administrative
proceedings are presumed to be regular.
DOMINGO v GARLITOS
It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No.
L-14674, January 30, 1960, this Court declared as final and executory the
order for the payment by the estate of the estate and inheritance
taxes, charges and penalties, amounting to P40,058.55, issued by the
Court of First Instance of Leyte. In order to enforce the claims against the
estate the fiscal presented a petition to the court below for the execution of
the judgment. The petition was, however, denied by the court which held
that the execution is not justifiable as the Government is indebted to the
estate under administration in the amount of P262,200. The orders of
the court below dated August 20, 1960 and September 28, 1960,
respectively, are as follows:
x x x Considering these facts, the Court orders that the payment of
inheritance taxes in the sum of P40,058.55 due the Collector of Internal
Revenue as ordered paid by this Court on July 5, 1960 in accordance with
the order of the Supreme Court promulgated July 30, 1960 in G.R. No. L14674, be deducted from the amount of P262,200.00 due and
payable to the Administratrix Simeona K. Price, in this estate, the
balance to be paid by the Government to her without further delay. (Order of
August 20, 1960)
The Court has nothing further to add to its order dated August 20, 1960 and
it orders that the payment of the claim of the Collector of Internal Revenue
be deferred until the Government shall have paid its accounts to the
administratrix herein amounting to P262,200.00. It may not be amiss to
repeat that it is only fair for the Government, as a debtor, to its
accounts to its citizens-creditors before it can insist in the prompt
payment of the latter's account to it, specially taking into consideration
that the amount due to the Government draws interests while the credit due
to the present state does not accrue any interest. (September 28, 1960)
Issue:
WON the petition to set aside the above order must be denied.
Held:
YES. A ground for denying the petition of the provincial fiscal is the fact that
the claim of the estate against the Government has been recognized and an
amount of P262,200 has already been appropriated for the purpose by a
corresponding law (Rep. Act No. 2700). Apparently, both the claim of the
Government for inheritance taxes and the claim of the intestate for
services rendered have already become overdue and demandable is
well as fully liquidated. Compensation, therefore, takes place by
operation of law, in accordance with the provisions of Articles 1279 and
1290 of the Civil Code, thus:
ART. 1200. When all the requisites mentioned in article 1279 are present,
compensation takes effect by operation of law, and extinguished both debts
to the concurrent amount, eventhough the creditors and debtors are
not aware of the compensation.
Art. 1279. In order that compensation may be proper, it is
necessary:
(1) That each one of the obligors be bound principally, and that he
be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due
are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
Fees paid by the public to tollway operators for use of the tollways, are not
taxes in any sense. A tax is imposed under the taxing power of the
government principally for the purpose of raising revenues to fund public
expenditures.[27] Toll fees, on the other hand, are collected by private tollway
operators as reimbursement for the costs and expenses incurred in the
construction, maintenance and operation of the tollways, as well as to assure
them a reasonable margin of income. Although toll fees are charged for the
use of public facilities, therefore, they are not government exactions that can
be properly treated as a tax. Taxes may be imposed only by the government
under its sovereign authority, toll fees may be demanded by either the
government or private individuals or entities, as an attribute of ownership. [28]
VAT on tollway operations cannot be deemed a tax on tax due to the nature
of VAT as an indirect tax. In indirect taxation, a distinction is made between
the liability for the tax and burden of the tax. The seller who is liable for the
VAT may shift or pass on the amount of VAT it paid on goods, properties or
services to the buyer. In such a case, what is transferred is not the sellers
liability but merely the burden of the VAT.
Thus, the seller remains directly and legally liable for payment of the
VAT, but the buyer bears its burden since the amount of VAT paid by the
former is added to the selling price. Once shifted, the VAT ceases to be a
tax[30] and simply becomes part of the cost that the buyer must pay in order
to purchase the good, property or service.
Consequently, VAT on tollway operations is not really a tax on the
tollway user, but on the tollway operator. Under Section 105 of the
Code, [31] VAT is imposed on any person who, in the course of trade or
business, sells or renders services for a fee. In other words, the seller of
services, who in this case is the tollway operator, is the person liable for VAT.
The latter merely shifts the burden of VAT to the tollway user as part of the
toll fees.
For this reason, VAT on tollway operations cannot be a tax on tax even if toll
fees were deemed as a users tax. VAT is assessed against the tollway
operators gross receipts and not necessarily on the toll fees. Although the
tollway operator may shift the VAT burden to the tollway user, it will not
make the latter directly liable for the VAT. The shifted VAT burden simply
becomes part of the toll fees that one has to pay in order to use the tollways.
Finally, petitioners assert that the substantiation requirements for claiming
input VAT make the VAT on tollway operations impractical and incapable of
implementation. They cite the fact that, in order to claim input VAT, the
name, address and tax identification number of the tollway user must be
indicated in the VAT receipt or invoice. The manner by which the BIR intends
to implement the VAT by rounding off the toll rate and putting any excess
collection in an escrow account is also illegal, while the alternative of giving
change to thousands of motorists in order to meet the exact toll rate would
be a logistical nightmare. Thus, according to them, the VAT on tollway
operations is not administratively feasible.
Administrative feasibility is one of the canons of a sound tax
system. It simply means that the tax system should be capable of being
effectively administered and enforced with the least inconvenience to the
taxpayer. Non-observance of the canon, however, will not render a tax
imposition invalid except to the extent that specific constitutional or
statutory limitations are impaired. [34] Thus, even if the imposition of VAT on
tollway operations may seem burdensome to implement, it is not necessarily
invalid unless some aspect of it is shown to violate any law or the
Constitution.
The Commissioner of Internal Revenue did not usurp legislative
prerogative or expand the VAT laws coverage when she sought to impose
VAT on tollway operations. Section 108(A) of the Code clearly states that
services of all other franchise grantees are subject to VAT, except as may be
provided under Section 119 of the Code. Tollway operators are not among
the franchise grantees subject to franchise tax under the latter
provision. Neither are their services among the VAT-exempt transactions
under Section 109 of the Code.
If the legislative intent was to exempt tollway operations from VAT, as
petitioners so strongly allege, then it would have been well for the law to
clearly say so. Tax exemptions must be justified by clear statutory grant and
based on language in the law too plain to be mistaken.
The grant of tax exemption is a matter of legislative policy that is within the
exclusive prerogative of Congress.
ABAYA v EBDANE
The crux of this case is about taxpayers suit. The assailed resolution
recommended the award to private respondent China Road & Bridge
Corporation of the contract for the implementation of civil works for Contract
Package No. I (CP I).
Issue:
WON petitioners have standing to file the instant petition as taxpayers.
Held:
YES. Locus standi is "a right of appearance in a court of justice on a given
question."38 More particularly, it is a partys personal and substantial interest
in a case such that he has sustained or will sustain direct injury as a result of
the governmental act being challenged. Consequently, the Court, in a catena
of cases,44 has invariably adopted a liberal stance on locus standi, including
those cases involving taxpayers.
The prevailing doctrine in taxpayers suits is to allow taxpayers to question
contracts entered into by the national government or government- owned or
controlled corporations allegedly in contravention of law.45 A taxpayer is
allowed to sue where there is a claim that public funds are illegally
disbursed, or that public money is being deflected to any improper purpose,
or that there is a wastage of public funds through the enforcement of an
invalid or unconstitutional law.46 Significantly, a taxpayer need not be a party
to the contract to challenge its validity.
In the present case, the petitioners are suing as taxpayers. They have
sufficiently demonstrated that, notwithstanding the fact that the CP I project
is primarily financed from loans obtained by the government from the JBIC,
nonetheless, taxpayers money would be or is being spent on the project
considering that the Philippine Government is required to allocate a pesocounterpart therefor. The public respondents themselves admit that
GONZALES v MARCOS
The issue centered on the validity of the creation in Executive Order No. 30
of a trust for the benefit of the Filipino people under the name and style of
the Cultural Center of the Philippines entrusted with the task to construct a
national theatre, a national music hall, an arts building and facilities, to
awaken our people's consciousness in the nation's cultural heritage and to
encourage its assistance in the preservation, promotion, enhancement and
development thereof, with the Board of Trustees to be appointed by the
President, the Center having as its estate the real and personal property
vested in it as well as donations received, financial commitments that could
thereafter be collected, and gifts that may be forthcoming in the future. 2 It
was likewise alleged that the Board of Trustees did accept donations from the
private sector and did secure from the Chemical Bank of New York a loan of
$5 million guaranteed by the National Investment & Development
Corporation as well as $3.5 million received from President Johnson of the
United States in the concept of war damage funds, all intended for the
construction of the Cultural Center building estimated to cost P48 million.
The Board of Trustees has as its Chairman the First Lady, Imelda Romualdez
Marcos, who is named as the principal respondent
Issue:
WON petitioner has locus standi as taxpayer.
Held:
NO. Petitioner did not have the requisite personality to contest as a taxpayer
the validity of the executive order in question, as the funds held by the
Cultural Center came from donations and contributions, not one centavo
being raised by taxation It is only to make clear that petitioner has not
satisfied the elemental requisite for a taxpayer's suit.
Thus, the rule restated is that an individual cannot have a particular action
against a public officer without a particular injury, or a particular right, which
are the grounds upon which all actions are founded.[18]
Juxtaposed with Article 32[19] of the Civil Code, the principle may now
translate into the rule that an individual can hold a public officer personally
liable for damages on account of an act or omission that violates a
constitutional right only if it results in a particular wrong or injury to the
former.
In the instant case, what is involved is a public officers duty owing to the
public in general. But it is a duty owed not to the respondent alone, but to
the entire body politic who would be affected, directly or indirectly, by the
administrative rule.
Furthermore, as discussed above, to have a cause of action for damages
against the petitioner, respondent must allege that it suffered a particular or
special injury on account of the non-performance by petitioner of the public
duty. A careful reading of the complaint filed with the trial court reveals that
no particular injury is alleged to have been sustained by the respondent. In
contrast, the facts of the case eloquently demonstrate that the petitioner
took nothing from the respondent, as the latter did not pay a single centavo
on the tax assessment levied by the former by virtue of RMC 37-93.
The complaint in this case does not impute bad faith on the petitioner.
Without any allegation of bad faith, the cause of action in the respondents
complaint (specifically, paragraph 2.02 thereof) for damages under Article 32
of the Civil Code would be premised on the findings of this Court
in Commissioner of Internal Revenue v. Court of Appeals (CIR v. CA),
[33]
where we ruled that RMC No. 37-93, issued by petitioner in her capacity
as Commissioner of Internal Revenue, had fallen short of a valid and
effective administrative issuance. But this does not mean that such
lehislative action was unconstitutional.
Furthermore, in an action for damages under Article 32 of the Civil Code
premised on violation of due process, it may be necessary to harmonize the
Civil Code provision with subsequent legislative enactments, particularly
those related to taxation and tax collection. Judicial notice may be taken of
the provisions of the National Internal Revenue Code, as amended, and of
the law creating the Court of Tax Appeals. Both statutes provide ample
remedies to aggrieved taxpayers; remedies which, in fact, were availed of by
the respondentwithout even having to pay the assessment under protest
The availability of the remedies against the assailed administrative action,
the opportunity to avail of the same, and actual recourse to these remedies,
contradict the respondents claim of due process infringement.
Because the respondents complaint does not impute negligence or
bad faith to the petitioner, any money judgment by the trial court against her
will have to be assumed by the Republic of the Philippines. As such, the
complaint is in the nature of a suit against the State.[46]
Court ruled in favor of CIR. The civil case pending in the RTC was ordered
dismissed.
There was an old law (RA 8240) in which a 4tier scheme was laid down to
determine the tax rate of cigarette packs depending on its net retail price. A
survey of the net retail prices per pack of cigarettes was conducted as of
October 1, 1996, the results of which were embodied in Annex "D" of the
NIRC as the duly registered, existing or active brands of cigarettes. IN
SHORT, NEW brands of cigarettes shall be taxed according to
their CURRENT net retail price while existing or "OLD" brands shall
be taxed based on their NET retail price as of October 1, 1996.
To implement RA 8240, the BIR issued Revenue Regulations No. 197,2 which classified the existing brands of cigarettes as those duly
registered or active brands prior to January 1, 1997. New brands, or those
registered AFTER January 1, 1997, shall be initially assessed at their
suggested retail price until such time that the appropriate survey to
determine their current net retail price is conducted.
In June 2001, Lucky strike Filter, Lucky Strike lights and Lucky strike Menthol
cigarettes were newly introduced by the plaintiff (British American Tobacco)
and were taxed at P8.96 since its SRP was pegged at P9.90.
A revenue order (Revenue Regulations No 9-2003) was issued by the BIR
which provides that there shall be a periodic review conducted once every 2
years to determine the current retail price of the taxable new brands.
However, notwithstanding any increase in the current net retail
price, the tax classification of such NEW brands shall remain in force
UNTIL the same is altered or changed through the issuance of an appropriate
Revenue Regulations.
Subsequently, Revenue Regulations No 22-2003 was issued to
implement the revised tax classification of certain new brands introduced in
the market AFTER January 1, 1997, based on the survey of their current
net retail price. It was found out that the current retail price of Lucky
cigarette is P22. Respondent Commissioner of the BIR thus recommended
the applicable tax rate of P13.44 per pack inasmuch as Lucky Strikes
average net retail price is above P10.00 per pack.
Thus, on September 1, 2003, petitioner filed before the Regional Trial Court
(RTC) of Makati, a petition for injunction with prayer for the issuance of a
temporary restraining on the ground that they discriminate against new
brands of cigarettes, in violation of the equal protection and uniformity
provisions of the Constitution.
Court DENIED the application for TRO, holding that it has no
authority to restrain the collection of tax.
Meanwhile, respondent Secretary of Finance filed a Motion to
Dismiss, contending that the petition is premature for lack of an
actual controversy or urgent necessity to justify judicial
intervention.
In an Order dated March 4, 2004, the trial court DENIED the motion to
dismiss and issued a writ of preliminary injunction to enjoin the
only later on filing the subject case praying for the declaration of its
unconstitutionality when the circumstances change and the law results in
what it perceives to be unlawful discrimination. The mere fact that a law has
been relied upon in the past and all that time has not been attacked as
unconstitutional is not a ground for considering petitioner estopped from
assailing its validity.
As can be seen, the law creates a four-tiered system which we may refer to
as the low-priced,33medium-priced,34 high-priced,35 and premium-priced36 tax
brackets. When a brand is introduced in the market, the current net retail
price is determined through the aforequoted specified procedure. The current
net retail price is then used to classify under which tax bracket the brand
belongs in order to finally determine the corresponding excise tax rate on a
per pack basis. The assailed feature of this law pertains to the mechanism
where, after a brand is classified based on its current net retail price, the
classification is frozen and only Congress can thereafter reclassify the same.
From a practical point of view, Annex "D" is merely a by-product of the whole
mechanism and philosophy of the assailed law. That is, the brands under
Annex "D" were also classified based on their current net retail price, the
only difference being that they were the first ones so classified since they
were the only brands surveyed as of October 1, 1996, or prior to the
effectivity of RA 8240 on January 1, 1997.37
AND
GENERAL
INSURANCE
adequate consideration is not subject to donors tax; and that donors tax
does not apply to saleof shares sold in an open bidding process.
On January 4, 2012, however, respondent CIR denied Philamlifes request
through BIR Ruling No. 015-12. As determined by the Commissioner, the
selling price of the shares thus sold was lower than their book value
based on the financial statements of PhilamCare as of the end of
2008.6 As such, the Commisioner held, donors tax became imposable on the
price difference pursuant to Sec. 100 of the National Internal Revenue Code
(NIRC):
SEC. 100. Transfer for Less Than Adequate and full Consideration.- Where
property, other than real property referred to in Section 24(D), is transferred
for less than an adequate and full consideration in money or moneys worth,
then the amount by which the fair market value of the property exceeded the
value of the consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift x x x.
In view of the foregoing, the Commissioner ruled that the difference between
the book value and the selling price in the sales transaction is taxable
donation subject to a 30% donors tax under Section 99(B) of the NIRC.
Aggrieved, petitioner requested respondent Secretary of Finance to review
BIR Ruling No. 015-12, but to no avail. For on November 26, 2012,
respondent Secretary affirmed the Commissioners assailed ruling in its
entirety.
Not contented with the adverse results, petitioner elevated the case to the
CA via a petition for review under Rule 43. The CA issued the assailed
Resolution dismissing the CA Petition. It ruled that it is the Court of Tax
Appeals (CTA), pursuant to Sec. 7(a)(1) of RA 1125, 11 which has jurisdiction
over the issues raised. The outright dismissal is predicated on the postulate
that BIR Ruling No. 015-12 was issued in the exercise of the Commissioners
power to interpret the NIRC and other tax laws. Consequently, requesting for
its review can be categorized as "other matters arising under the NIRC or
other laws administered by the BIR," which is under the jurisdiction of the
CTA, not the CA.
Philamlife eventually sought reconsideration but the CA, in its equally
assailed January 21, 2014 Resolution, maintained its earlier position. Hence,
the instant recourse.
Issue:
Whether or not the CA erred in dismissing the CA Petition for lack of
jurisdiction
Held:
NO.
Reviews by the Secretary of Finance pursuant to Sec. 4 of the NIRC
are appealable to the CTA.