Bagatsing v Ramirez (1976)

GR No L-41631, December 17, 1976

FACTS:
In 1974, the Municipal Board of Manila enacted Ordinance 7522, regulating the
operation of public markets and prescribing fees for the rentals of stalls and providing
penalties for violation thereof. The Federation of Manila Market Vendors Inc. assailed
the validity of the ordinance, alleging among others the noncompliance to the
publication requirement under the Revised Charter of the City of Manila. CFI-Manila
declared the ordinance void. Thus, the present petition.

ISSUE:

1. What law should govern the publication of a tax ordinance, the Revised City
Charter, which requires publication of the
ordinance before its enactment and after its approval, or the Local Tax Code,
which only demands publication after
approval?

2. Is the ordinance valid?

RULING:

1. The Local Tax Code prevails. There is no question that the Revised Charter of
the City of Manila is a special act since it relates only to the City of Manila
whereas the Local Tax Code is a general law because it applies universally to all
local governments. The fact that one is special and the other general creates a
presumption that the special is to be considered as remaining an exception of
the general, one as a general law of the land, the other as the law of a
particular case. However, the rule readily yields to a situation where the special
statute refers to a subject in general, which the general statute treats in
particular. The Revised Charter of the City prescribes a rule for the publication
of ordinance in general, while the Local Tax Code establishes a rule for the
publication of ordinance levying or imposing taxes fees or other charges in
particular.

2. The ordinance is valid.

Commissioner of Internal Revenue vs Central Luzon Drug

Corporation GR No 159647 April 15, 2005
Facts:
Respondents operated six drugstores under the business name Mercury Drug. From
January to December 1996 respondent granted 20% sales discount to qualified senior
citizens on their purchases of medicines pursuant to RA 7432 for a total of 904,769.
On April 15, 1997, respondent filed its annual Income Tax Return for taxable year 1996
declaring therein net losses. On Jan. 16, 1998 respondent filed with petitioner a claim
for tax refund/credit of 904,769.00 allegedly arising from the 20% sales discount.
Unable to obtain affirmative response from petitioner, respondent elevated its claim to
the Court of Tax Appeals. The court dismissed the same but upon reconsideration, the
latter reversed its earlier ruling and ordered petitioner to issue a Tax Credit Certificate
in favor of respondent citing CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug
Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected
or erroneously paid taxes but that there are other situations which may warrant a tax
credit/refund.

CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required neither a
tax liability nor a payment of taxes by private establishments prior to the availment of
a tax credit. Moreover, such credit is not tantamount to an unintended benefit from
the law, but rather a just compensation for the taking of private property for public
use.

Issue:
Whether or not respondent, despite incurring a net loss, may still claim the 20% sales
discount as a tax credit.

Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of
obtaining a 20% discount on their purchase of medicine from any private
establishment in the country. The latter may then claim the cost of the discount as a
tax credit. Such credit can be claimed even if the establishment operates at a loss.

A tax credit generally refers to an amount that is subtracted directly from ones total
tax liability. It is an allowance against the tax itself or a deduction from what is
owed by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One of these is tax
deduction which is subtraction from income for tax purposes, or an amount that is
allowed by law to reduce income prior to the application of the tax rate to compute
the amount of tax which is due. In other words, whereas a tax credit reduces the tax
due, tax deduction reduces the income subject to tax in order to arrive at the taxable
income.

A tax credit is used to reduce directly the tax that is due, there ought to be a tax
liability before the tax credit can be applied. Without that liability, any tax credit
application will be useless. There will be no reason for deducting the latter when there
is, to begin with, no existing obligation to the government. However, as will be
presented shortly, the existence of a tax credit or its grant by law is not the same as
the availment or use of such credit. While the grant is mandatory, the availment or
use is not. If a net loss is reported by, and no other taxes are currently due from, a
business establishment, there will obviously be no tax liability against which any tax
credit can be applied. For the establishment to choose the immediate availment of a
tax credit will be premature and impracticable.
TIO VS. VIDEOGRAM REGULATORY BOARD [151 SCRA 208; G.R. No.
L-75697; 18 Jun 1987]
Friday, January 30, 2009 Posted by Coffeeholic Writes

Facts: The case is a petition filed by petitioner on behalf of videogram operators

adversely affected by Presidential Decree No. 1987, An Act Creating the Videogram
Regulatory Board" with broad powers to regulate and supervise the videogram
industry.

A month after the promulgation of the said Presidential Decree, the amended the
National Internal Revenue Code provided that:

"SEC. 134. Video Tapes. There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject to
sales tax."

"Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any

provision of law to the contrary, the province shall collect a tax of thirty percent (30%)
of the purchase price or rental rate, as the case may be, for every sale, lease or
disposition of a videogram containing a reproduction of any motion picture or
audiovisual program.

Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province,
and the other fifty percent (50%) shall accrue to the municipality where the tax is
collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by
the City/Municipality and the Metropolitan Manila Commission.

The rationale behind the tax provision is to curb the proliferation and unregulated
circulation of videograms including, among others, videotapes, discs, cassettes or any
technical improvement or variation thereof, have greatly prejudiced the operations of
movie houses and theaters. Such unregulated circulation have caused a sharp decline
in theatrical attendance by at least forty percent (40%) and a tremendous drop in the
collection of sales, contractor's specific, amusement and other taxes, thereby resulting
in substantial losses estimated at P450 Million annually in government revenues.

Videogram(s) establishments collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and these earnings have not been
subjected to tax, thereby depriving the Government of approximately P180 Million in
taxes each year.

The unregulated activities of videogram establishments have also affected the

viability of the movie industry.

Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
(2) Whether or nor the DECREE is constitutional.

Held: Taxation has been made the implement of the state's police power. 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.

We find no clear violation of the Constitution which would justify us in pronouncing

Presidential Decree No. 1987 as unconstitutional and void. While the underlying
objective of the DECREE is to protect the moribund movie industry, there is no
question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the
viewing public brought about by the availability of unclassified and unreviewed video
tapes containing pornographic films and films with brutally violent sequences; and
losses in government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually untaxed since
mere payment of Mayor's permit and municipal license fees are required to engage in
business."

WHEREFORE, the instant Petition is hereby dismissed. No costs.

MANILA RACE HORSE TRAINERS ASSOCIATION, INC vs. MANUEL DE

LA FUENTE G.R. No. L-2947 January 11, 1951

Facts: Manila Race Horses Trainers Association, Inc., a non-stock corporation, alleged
that they are owners of boarding stables for race horses and that their rights as such
are affected by Ordinance No. 3065 of the City of Manila. They pleaded that said
ordinance be declared invalid as it is violative under the Constitution.
On appeal, it is upheld that the ordinance is a tax on race horses as distinct from
boarding stables.
Under Ordinance No. 3065, the tax is assessed not on the owners of the horses but on
the owners of the stables, as counsel admitted in their brief. It is ordinary that the
number of horses is used in the assessment purely as a method of fixing an equitable
and practical distribution of the burden imposed by the measure.

Issue: Weather or not the Ordinance is constitutional and valid as has been enacted in
accordance with the powers of the Municipal Board granted by the Charter of the City
of Manila.
 Held: The Court did not believe that the Ordinance made arbitrary classification.
There is equality and uniformity in taxation if all articles or kinds of property of the
same class are taxed at the same rate. Thus, it was held that, the fact that some
places of amusement are not taxed while others are taxed, is not argument at all
against the equality and uniformity of tax imposition." In applying this to the case,
there would be discrimination if some boarding stables of the same class used for the
same number of horses were not taxed or were made to pay less or more than others.

Lutz v Araneta (1955)

GR No L-7859 December 22, 1955

FACTS:
Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme
Ledesma, sought to recover the sum of
P14,666.40 paid by the estate as taxes from the Commissioner under Section e of
Commonwealth Act 567 or the Sugar Adjustment Act, alleging that such tax is
unconstitutional as it levied for the aid and support of the sugar industry exclusively,
which is in his opinion not a public purpose.

ISSUE:
Is the tax valid?

HELD:
Yes. The tax is levied with a regulatory purpose, i.e. to provide means for the
rehabilitation and stabilization of the threatened sugar industry. The act is primarily an
exercise of police power and is not a pure exercise of taxing power.
As sugar production is one of the great industries of the Philippines and its promotion,
protection and advancement redounds greatly to the general welfare, the legislature
found that the general welfare demanded that the industry should be stabilized, and
provided that the distribution of benefits had to sustain.
Further, it cannot be said that the devotion of tax money to experimental stations to
seek increase of efficiency in sugar production, utilization of by-products, etc., as well
as to the improvement of living and working conditions in sugar mills and plantations
without any part of such money being channeled directly to private persons,
constitute expenditure of tax money for private purposes.
Hence, the tax is valid.

Chavez v Ongpin (1990)

GR No 76778, June 6, 1990

FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar
year 1978, there shall be a provincial or city general revision of real property
assessments. The general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning
January 1, 1987, the 1984 assessments shall be the basis of real property taxes.
Francisco Chavez, a taxpayer and landowner, questioned the constitutionality of EO
74. He alleges that it will bring unreasonable increase in real property taxes.

ISSUE:
Is EO 73 constitutional?

RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978
revision of property values. Certainly, to continue collecting real property taxes based
on valuations arrived at several years ago, in disregard of the increases in the value of
real properties that have occurred since then is not in consonance with a sound tax
system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires
that sources of revenue must be adequate to meet government expenditures and
their variations.

Kapatiran ng mga Naglilingkod sa Pamahalaan v Tan (1988)

GR No 81311 June 30, 1988

FACTS:
EO 372 was issued by the President of the Philippines which amended the Revenue
Code, adopting the value-added tax (VAT) effective January 1, 1988. Four petitions
assailed the validity of the VAT Law from being beyond the President to enact; for
being oppressive, discriminatory, regressive and violative of the due process and
equal protection clauses, among others, of the Constitution. The Integrated Customs
Brokers Association particularly contend that it unduly discriminate against customs
brokers (Section 103r) as the amended provision of the Tax Code provides that
service performed in the exercise of profession or calling (except custom brokers)
subject to occupational tax under the Local Tax Code and professional services
performed by registered general professional partnerships are exempt from VAT.

ISSUE:
Whether the E-VAT law is void for being discriminatory against customs brokers

RULING:
No. The phrase except custom brokers is not meant to discriminate against custom
brokers but to avert a potential conflict between Sections 102 and 103 of the Tax
Code, as amended. The distinction of the customs brokers from the other professionals
who are subject to occupation tax under the Local Tax Code is based on material
differences, in that the activities of customs partake more of a business, rather than a
profession and were thus subjected to the percentage tax under Section 174 of the
Tax Code prior to its amendment by EO 273. EO 273 abolished the percentage tax and
replaced it with the VAT. If the Association did not protest the classification of customs
brokers then, there is no reason why it should protest now.

RENATO V. DIAZ AND AURORA MA. F. TIMBOL vs. THE SECRETARY OF FINANCE
and THE COMMISSIONER of the INTERNAL REVENUE

Facts: Petitioners Renato Diaz and Aurora Ma. F. Timbol filed a petition for declaratory
relief assailing the validity of the impending imposition of value-added tax (VAT) by
the Bureau of Internal Revenue (BIR) on the collections of tollway operators. They
alleged that the Congress when it enacted the NIRC did not intend to include toll fees
within the meaning of "sale of services" that are subject to VAT; that a toll fee is a
"users tax," not a sale of services; that to impose VAT on toll fees would amount to a
tax on public service; and that, since VAT was never factored into the formula for
computing toll fees, its imposition would violate the non-impairment clause of the
constitution. The government averred that the NIRC imposes VAT on all kinds of
services of franchise grantees, including tollway operations, except where the law
provides otherwise; that the Court should seek the meaning and intent of the law from
the words used in the statute; and that the imposition of VAT on tollway operations
has been the subject as early as 2003 of several BIR rulings and circulars.
Issue: Whether or not toll fees collected by tollway operators may be subjected to
value- added tax.

Ruling: Yes.

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 operation by the government of a tollway does not
change the character of the road as one for public use. Someone must pay for the
maintenance of the road, either the public indirectly through the taxes they pay the
government, or only those among the public who actually use the road through the toll
fees they pay upon using the road. The tollway system is even a more efficient and
equitable manner of taxing the public for the maintenance of public roads.

The charging of fees to the public does not determine the character of the property
whether it is for public dominion or not. Article 420 of the Civil Code defines property
of public dominion as "one intended for public use." Even if the government collects
toll fees, the road is still "intended for public use" if anyone can use the road under the
same terms and conditions as the rest of the public. The charging of fees, the
limitation on the kind of vehicles that can use the road, the speed restrictions and
other conditions for the use of the road do not affect the public character of the road.