FREEDOM OF RELIGION

FREE EXERCISE CLAUSE

Case: American Bible Society v. City of
Manila
Q: If the LGU had enacted an
ordinance requiring taxpayer to obtain
municipal licenses or permit prior to
the sale of bible,will there be a
violation of the freedom of religion? Or
will there be prior restraint if the LGU
will require the American Bible Society
to obtain municipal license or permit
first before the sale of the bible?
A: YES. If there is a prior restraint,
there will be a violation of the free
exercise clause.
Q: If VAT will be impose on the income
earned on the sale of the bible; will
there be a prior restraint?
A: NONE. Will there be a violation of
the free exercise clause? NONE.
MUST REMEMBER:
If the imposition of taxes will cause a
prior restraint on the exercise of
religious belief then there is a violation
of the free exercise clause. If there is
no prior restraint then there would be
no violation of the free exercise
clause.
Case: Tolentino v. Secretary of Finance
1. We also apply the rule on prior
restraint in freedom of the
press. If there is no prior
restraint then there would be no
violation of such freedom.
2. Regressive
taxes
are
not
prohibited within the Philippine

taxing system because the

Constitution merely states that
Congress
shall
evolve
a
progressive system of taxation.
3 Types of Taxes according to
subject matter:
Poll
Tax/
Personal
Tax/
Capitation Tax
Property Tax
Excise Tax

Subject matter
persons

property
Breach of action,
right
or
a
privilege

Can a person be imprisoned for

non-payment of:
Income tax? YES, because it
is in the nature of an Excise
tax.
Donors tax YES. It is an
excise tax
Community
tax

NO,
because it is in the nature of
the contract However, if an
individual has fabricated or
has falsified an information
in
the
community
tax
certificate is equivalent to
non-payment of poll tax
NON-IMPAIRMENT CLAUSE
Q: What is the coverage of nonimpairment clause?
A: Contracts
Q: Can the non-impairment clause be
raised if the government had entered
into a contract with an individual
taxpayer or private individual?

A: YES.
However, this Consti provision will only
be applied if the government had
entered into that particular contract in
its proprietary capacity because the
government in entering into that
contract then it is technically waiving
its governmental immunity.
Problem No. 1
A corporation has been granted a
legislative franchise of an electric
company and the legislative franchise
of A corporation was granted through
an enactment of a law. The charter of
A
corporation
provides
for
A
corporations tax exemption. After 5
years of operation, the tax exemption
granted
to
A
corporation
was
removed. Can A corporation raise nonimpairment clause as a defense?
Answer: Under the Constitution, a
legislative franchise can be revoked or
subject to alteration, modification or
revocation. The Congress can revoke
this legislative franchise and the tax
exemption is merely a component of a
legislative franchise that had been
granted to A corporation. Second, the
tax
exemption
granted
to
A
corporation is merely in the nature of
privilege which can be revoked
anytime.
Problem No. 2
A corporation is a foreign corporation.
In 2010, the Congress enacted a law,
RA 8510 which provides that if foreign
corporation
would
infuse
direct
investment in the Philippines by
establishing pioneer enterprise then
this corporation shall enjoy tax holiday

for a period of 10 years. And in order

to be treated as a pioneer enterprise
there has to be a direct investment in
the amount of 10 million pesos. A
corporation has decided to put up a
pioneer enterprise in the Philippines.
After 5 years, the Congress revoked
the law granting the tax holiday. Can A
corporation raise the non-impairment
clause?
DISCUSSION OF ANSWER:
Was there a specific law granting tax
exemption in this case? NONE. There
is only a law granting tax holiday.
There was no contract between A
corporation and the government. In
this case, the granting of the tax
holiday is only in the nature of a
privilege
granted
to
pioneer
enterprise.
So, can non-impairment clause be
raised? NO, because there is no
contractual tax exemption.
Problem No. 3
The Congress has enacted a law. The
law provides that income derived from
government bonds shall be exempt
from tax. By reason of this law, Diero
invested 1 million pesos. But before
Diero had decided to withdraw his
investment, the congress had enacted
a law revoking the tax exemption
granted under this particular Republic
Act. Can Diero question the new law
revoking the tax exemption granted to
investors in government bonds?
DISCUSSION OF ANSWER
There is no special franchise in this
case. If we talked about a franchise,

there has been an explicit grant in

favor of the taxpayer and there was
none in this case. However, there is a
contract that has been entered into by
Diero and the government in the form
of the government bond. In a
government bond, the government
stands to be the debtor and the
investor stands to be the creditor.
Will the non-impairment clause be
applicable?
Yes.
Can
the
tax
exemption be revoked? NO. Otherwise,
there is a violation of non-impairment
clause.
Case: Casanova v. Hord
The SC ruled that the non-impairment
clause is applicable because the
government has entered into a
concession with the private entity.
Case: Cagayan Power
Corporation v. CIR

and

Light

If there has been a legislative

franchise granting tax exemption then
that legislative franchise shall apply.
Meaning the entity shall not be subject
to tax.
But if there has been legislation of the
exemption or there has been a law
repealing the granting of the tax
exemption then that would mean that
the taxpayer shall be liable for taxes
beginning from the effectivity of that
repeal.
If there has been revocation, the
remedy is not to go to court to
question the legislation but to ask the
Congress to pass a new law reinstating
the tax exemption after the implied
repeal.

Case: Meralco v. Province of Laguna

Can the non-impairment clause be
raised as a defense?
Q: Difference between a legislative
franchise and a special franchise
Legislative franchise is granted upon a
private
individual
or
a
private
corporation which request to operate
certified public property like electric
company
and
Telecommunication
Company.
Special franchise these franchises
were granted in favor of private
individuals or Private Corporation who
or which are induced by the
government to directly invest in the
Philippines.
Basically legislative franchises are
granted to taxpayer who would
directly invest in the Philippines.
Special franchises are covered by the
non-impairment clause. On the other
hand legislative franchise is not
covered
by
the
non-impairment
clause. Why? Because the nonimpairment clause can only be
applicable if there is contractual tax
exemption because in a contractual
tax exemption, the government had
entered into a transaction for or in
consideration
of
its
proprietary
capacity and if the government had
performed in its proprietary capacity,
then the government had waived its
governmental immunity.
A special franchise is on the same
standing
as
contractual
tax
exemption.