Valley trading VS CFI OF ISABELA

Petitioner filed a complaint in the court a quo seeking a declaration of the supposed nullity of oridnance enacted
which imposed a graduated tax on retailers, independent wholesalers and distributors; and for the refund
.Petitioner likewise prayed for the issuance of a writ of preliminary prohibitory injunction to enjoin the collection
of said tax . The court however denied the motion for writ of injunction without hearing. Petitioner countered by
invoking Section 7, Rule 58 of the Rules of Court which provides that" (a)fter hearing on the
merits the court may grant or refuse, continue, modify or dissolve the injunction as justice
may require.
Issue; whether Petitioner is correct?
Held; no. The issuance of a writ of preliminary injunction in the present case is addressed to
the sound discretion of the court, conditioned on the existence of a clear and positive right
of the movant which should be protected. The circumstances required for the writ to issue
do not obtain in the case at bar. The damage that may be caused to the petitioner will not,
of course, be irreparable; where so indicated by subsequent events favorable to it, whatever
it shall have paid is easily refundable. Besides, the damage to its property rights must
perforce take a back seat to the paramount need of the State for funds to sustain
governmental functions. Compared to the damage to the State which may be caused by
reduced financial resources, the damage to petitioner is negligible. The policy of the law is
to discountenance any delay in the collection of taxes because of the oft-repeated but
unassailable consideration that taxes are the lifeblood of the Government and their prompt
and certain availability is an imperious need.

PROGRESSIVE VS QC
Quezon City Council adopted a resolution requiring all private owned and publicly operated
market to pay 10% of gross sales prompting petitioner to file a Petition for Prohibition with
Preliminary Injunction against respondent on the ground that the supervision fee or license tax imposed by the
above-mentioned ordinances is in reality a tax on income which respondent may not impose, the same being
expressly prohibited by Republic Act No. 2264 which state that no city can impose tax on income.

Whether the required amount to be paid is a tax OR LICENSE FEE?

Held no. it is a licensed fee. 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. occupation or
activity that so engages the public interest in health, morals, safety and development as to
require regulation for the protection and promotion of such public interest this is in General,
equivalent to or quite the same as the operation of a government-owned market; both are
established for the rendition of service to the general public, which warrants close
supervision and control by the respondent City, 17 for the protection of the health of the
public by insuring, e.g., the maintenance of sanitary and hygienic conditions in the market,
compliance of all food stuffs sold therein with applicable food and drug and related
standards, for the prevention of fraud and imposition upon the buying public, and so forth

BASCO v PAGCOR

Municipal Corporation – Local Autonomy – imperium in imperio

FACTS: On July 11, 1983, PAGCOR was created under PD 1869 to enable the Government to regulate
and centralize all games of chance authorized by existing franchise or permitted by law. Basco and four
others (all lawyers) assailed the validity of the law creating PAGCOR on constitutional grounds among
others particularly citing that the PAGCOR’s charter is against the constitutional provision on local
autonomy.
Basco et al contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes
and legal fees; that Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder
from paying any “tax of any kind or form, income or otherwise, as well as fees, charges or levies of
whatever nature, whether National or Local” is violative of the local autonomy principle.

ISSUE: Whether or not PAGCOR’s charter is violative of the principle of local autonomy.

HELD: NO. Section 5, Article 10 of the 1987 Constitution provides:

Each local government unit shall have the power to create its own source of revenue and to levy taxes,
fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent
with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the
local government.

A close reading of the above provision does not violate local autonomy (particularly on taxing powers) as
it was clearly stated that the taxing power of LGUs are subject to such guidelines and limitation as
Congress may provide.

Further, the City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. The
Charter of the City of Manila is subject to control by Congress. It should be stressed that “municipal
corporations are mere creatures of Congress” which has the power to “create and abolish municipal
corporations” due to its “general legislative powers”. Congress, therefore, has the power of control over
Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it can
also provide for exemptions or even take back the power.

Further still, local governments have no power to tax instrumentalities of the National Government.
PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its
shares of stocks are owned by the National Government. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government.

This doctrine emanates from the “supremacy” of the National Government over local governments.

First Philippine Industrial Corp. v. CA, Paterno Tac-an, Bantangas City, and Adoracion Arellano
(treasurer of Batangas)
G.R. No. 125948 December 29, 1998
Martinez, J.

FACTS:
FPIC – grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and
operate oil pipelines
It applied for a mayor’s permit with the Office of the Mayor of Batangas City. Before the permit could be
issued, it was required by the City Treasurer to pay a local tax based on its gross receipts for the fiscal
year 1993 pursuant to the Local Government Code. It paid the tax under protest.
It filed a complaint for tax refund alleging that 1) the imposition and collection of the business tax on its
gross receipts violates Section 133 of the Local Government Code which grants tax exemption to
common carriers; 2) the authority of cities to impose and collect a tax on the gross receipts of “contractors
and independent contractors” under Sec. 141 (e) and 151 does not include the authority to collect such
taxes on transportation contractors for, as defined under Sec. 131 (h), the term “contractors” excludes
transportation contractors; and, 3) the City Treasurer illegally and erroneously imposed and collected the
said tax, thus meriting the immediate refund of the tax paid.

ISSUES: 1. WON FPIC is a common carrier; 2. WON it is exempted from paying the taxes required by the
City Treasurer

HELD: 1. Yes. FPIC is engaged in the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all
persons who choose to employ its services, and transports the goods by land and for compensation.
FPIC - considered a common carrier under Art. 86 of the Petroleum Act of the Philippines (RA 387), which
provides that: Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated
to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as
may be offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources.
FPIC is also a public utility pursuant to Art. 7 of RA 387 which states that “everything relating to the
exploration for and exploitation of petroleum . . . and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is hereby declared to be a public utility”
2. Yes. Legal basis is Section 133 (j), of the Local Government Code which provides that “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: Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code”.
Reason for the exception: to avoid duplication of tax

Mactan Cebu Interational Airport Authority vs. Marcos

FACTS:
Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act No. 6958, mandated to
“principally undertake the economical, efficient and effective control, management and supervision of the Mactan
International Airport in the Province of Cebu and the Lahug Airport in Cebu City and such other airports as may be
established in the Province of Cebu.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in
accordance with Section 14 of its Charter:
Sec. 14. Tax Exemptions. -- The Authority shall be exempt from realty taxes imposed by the National Government
or any of its political subdivisions, agencies and instrumentalities.
On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of the City of
Cebu, demanded payment for realty taxes on several parcels of land belonging to the petitioner.
Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the aforecited
Section 14 of RA 6958 which exempts it from payment of realty taxes.
The petitioner was compelled to pay its tax account “under protest” and thereafter filed a Petition for Declaratory
Relief with the Regional Trial Court of Cebu.
ISSUE:
Whether the MCIAA as an instrumentality of the government is exempted from payment of realty taxes as
imposed by the City of Cebu.
HELD:
There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment of
realty taxes imposed by the National Government or any of its political subdivisions, agencies, and
instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the exception, the exemption
may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the
exemption was granted to private parties based on material consideration of a mutual nature, which then
becomes contractual and is thus covered by the non-impairment clause of the Constitution.
Even if the petitioner was originally not a taxable person for purposes of real property tax, in light of the foregoing
disquisitions, it had already become, even if it be conceded to be an “agency” or “instrumentality” of the
Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section 234 of
exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the petitioner.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN

69 SCRA 460
GR No. L-31156, February 27, 1976

"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.
FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of
Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of
taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal production tax" of the
Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft drinks producers and
manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27
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. Aside from the undue
delegation of authority, appellant contends that it allows double taxation, and that the subject ordinances are void
for they impose percentage or specific tax.

ISSUE: Are the contentions of the appellant tenable?

HELD: No. On the issue of undue delegation of taxing power, it is settled that 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. 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. 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.
Also, there is no validity to the assertion that the delegated authority can be declared unconstitutional on the
theory of double taxation. It must be observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively
reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our
fundamental law, so that double taxation becomes obnoxious only where the taxpayer is taxed twice for the
benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where
one tax is imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales, or other taxes
in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume
capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on
the products, but there is not set ratio between the volume of sales and the amount of the tax.

Misamis Oriental vs Cagayan Electric (1990)

February 15, 2013 markerwins Tax Law
Facts: Cagayan Electric Power and light Co, Inc. (CEPALCO) was granted a franchise in 1961 under RA 3247 to
install, operate and maintain an electric light, heat and power system in Cagayan de Oro and its suburbs. In 1973,
the Local Tax Code (PD 231) was promulgated, where Section 9 thereof providing for a franchise tax. Pursuant
thereto, the province of Misamis Oriental enacted Provincial Revenue Ordinance 19, whose Section 12 also
provides for a franchise tax. The Provincial Treasurer demanded payment of the provincial franchise tax from
CEPALCO. CEPALCO paid under protest.

Issue: Whether CEPALCO is exempt from the provincial franchise tax.

Held: Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it clear that the franchise tax
provided in the Local Tax Code may only be imposed on companies with franchise that do not contain the
exempting clause, i.e. “in-lieu-of-all-taxes-proviso.” CEPALCO’s franchise i.e. RA 3247, 3571 and 6020 (Section 3
thereof), uniformly provides that “in consideration of the franchise and rights hereby granted, the grantee shall
pay a franchise tax equal to 3% of the gross earnings for electric current sold under the franchise, of which 2% goes
to the national Treasury and 1% goes into the treasury of the municipalities of Tagoloan, Opol, Villanueva, Jasaan,
and Cagayan de Oro, as the case may be: Provided, that the said franchise tax of 3% of the gross earnings shall be
in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income, franchise and poles,
wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby
expressly exempted
Drilon v Lim 235 SCRA 135, GR No. 112497 (04 August 1994)

FACTS: Then Secretary of Justice Franklin M. Drilon, pursuant to the authority granted upon him by Section 187 of
the LGC and upon appeal of concerned parties, declared the Manila Revenue Code null and void for non-
compliance with the prescribed procedure in thge enactment of local tax ordinances and for containing provisions
contrary to law and public policy.

Upon appeal to the RTC, the trial judge reversed the order of petitioner and, in addition, declared Section 187 of
the LGC unconstitutional as it gave the Secretary of Justice the power of control over local governments in
violation of the principle of local autonomy mandated by the Constitution. The RTC ruled that the Executive only
had the power of supervision and not control.

HELD: The SC overruled the trial court insofar as it declared Section 187 unconstitutional. The power of control
encompasses the power to lay down the rules in the accomplishment of an act. If they are not followed, the one in
control may order the act done, re-done, or do it himself. On the other hand, the power to supervise only entails a
determination of WON the rules were followed and to have the work done or re-done in accordance with the
prescribed rules.

Contrary to the holding of the lower court, the SC said that the provision only gave the Secretary of Justice the
power to supervise, not control, in that the Secretary of Justice could only determine the constitutionality or
legality of the local tax ordinance and revoke them on such grounds. The provision did not em power the Secretary
to substitute his own judgment for the judgment of the LGU; the Secretary was not authorized by Section 187 to
determine whether the law was wise or reasonable or otherwise a generally bad law. He was given no discretion in
the matter.

That notwithstanding, the SC agreed with the trial court in that the procedural requirements for the passage of the
ordinance were fulfilled. The initial decision of the Secretary, it said, was a result of the insufficient time it gave to
the respondents to procure the necessary evidence of such procedural compliance. The Manila Revenue Code was
upheld.

(Note: No mention was made in the final decision regarding the provisions contrary to law and public policy earlier
cited by the Secretary as additional grounds.)