Valentin Tio vs.
Videogram Regulatory Board the law bear no relation to the objective pursued
G.R. No. L-75697, (1987)
A tax does not cease to be valid merely because it
regulates, discourages, or even definitely deters
the activities taxed. The power to impose taxes is
one so unlimited in force and so searching in
extent, that the courts scarcely venture to declare
that it is subject to any restrictions whatever,
except such as rest in the discretion of the
authority which exercises it. In imposing a tax, the
legislature acts upon its constituents. This is, in
general, a sufficient security against erroneous
and oppressive taxation.
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". Taxation has been made the
implement of the state's police power.
WALTER LUTZ vs. J. ANTONIO ARANETA
G.R. No. L-7859 December 22, 1955
The tax is levied with a regulatory purpose, to
provide means for the rehabilitation and
stabilization of the threatened sugar industry. In
other words, the act is primarily an exercise of the
police power.
Sugar production is one of the great industries of
our nation, sugar occupying a leading position
among its export product. Its promotion,
protection and advancement, therefore redounds
greatly to the general welfare. Hence it was
competent for the legislature to find that the
general welfare demanded that the sugar industry
should be stabilized in turn; and in the wide field
of its police power, the lawmaking body could
provide that the distribution of benefits therefrom
be readjusted among its components to enable it
to resist the added strain of the increase in taxes
that it had to sustain.
It follows that the Legislature may determine
within reasonable bounds what is necessary for its
protection and expedient for its promotion. Here,
the legislative discretion must be allowed fully
play, subject only to the test of reasonableness;
and it is not contended that the means provided in
or are oppressive in character. If objective and
methods are alike constitutionally valid, no reason
is seen why the state may not levy taxes to raise
funds for their prosecution and attainment.
Taxation may be made the implement of the
state's police power.
CALTEX vs. COA
G.R. No. 92585 May 8, 1992
Taxation is no longer envisioned as a measure
merely to raise revenue to support the existence
of the government; taxes may be levied with a
regulatory purpose to provide means for the
rehabilitation and stabilization of a threatened
industry which is affected with public interest as
to be within the police power of the state. There
can be no doubt that the oil industry is greatly
imbued with public interest as it vitally affects the
general welfare. Any unregulated increase in oil
prices could hurt the lives of a majority of the
people and cause economic crisis of untold
proportions. It would have a chain reaction in
terms of, among others, demands for wage
increases and upward spiralling of the cost of
basic commodities. The stabilization then of oil
prices is of prime concern which the state, via its
police power, may properly address.
It is settled that a taxpayer may not offset taxes
due from the claims that he may have against the
government. Taxes cannot be the subject of
compensation because the government and
taxpayer are not mutually creditors and debtors of
each other and a claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be
set-off.
PAL vs. EDU
G.R. No. L- 41383 August 15, 1988
Indeed, taxation may be made the implement of
the state's police power.
If the purpose is primarily revenue, or if revenue
is, at least, one of the real and substantial
purposes, then the exaction is properly called a
tax. Such is the case of motor vehicle registration
fees. In the Land Transportation code, it is patent
therefrom that the legislators had in mind a
regulatory tax as the law refers to the imposition
on the registration, operation or ownership of a
motor vehicle as a "tax or fee."
Rep. Act 4136 also speaks of other "fees," such as
the special permit fees for certain types of motor
vehicles and additional fees for change of
registration. These are not to be understood as
taxes because such fees are very minimal to be
revenue-raising.
But it is quite apparent that although vehicle
registration fees were originally intended only
for rigidly purposes in the exercise of the State's
police powers, over the years, however, as
vehicular traffic exploded in number and motor
vehicles became absolute necessities without
which modem life as we know it would stand still,
Congress found the registration of vehicles a very
convenient way of raising much needed revenues.
Without changing the earlier deputy of
registration payments as "fees," their nature has
become that of "taxes."
Motor vehicle registration fees as at present
exacted pursuant to the Land Transportation and
Traffic Code are actually taxes intended for
additional revenues of government even if 1/5 or
less of the amount collected is set aside for the
operating expenses of the agency administering
the program.
CIR vs. CENTRAL LUZON DRUG
G.R. No. 159647, April 15, 2005
The 20% discount required by the law to be given
to senior citizens is a tax credit, not merely a tax
deduction from the gross income or gross sale of
the establishment concerned.
A tax credit is used by a private establishment
only after the tax has been computed; a tax
deduction, before the tax is computed.
RA 7432 unconditionally grants a tax credit to all
covered entities. Thus, the provisions of the
revenue regulation that withdraw or modify such
grant are void. Basic is the rule that administrative
regulations cannot amend or revoke the law.
Tax Liability Required for Tax Credit
Since 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.
Prior Tax Payments Not
Required for Tax Credit
While a tax liability is essential to the availment or
use of any tax credit, prior tax payments are not.
On the contrary, for the existence or grant solely
of such credit, neither a tax liability nor a prior tax
payment is needed. The Tax Code is in fact replete
with provisions granting or allowing tax credits,
even though no taxes have been previously paid.
Moreover, a tax liability is certainly important in
the availment or use, not the existence or grant, of
a tax credit.
Business Discounts
A cash discount is one granted by business
establishments to credit customers for their
prompt payment. It is a reduction in price offered
to the purchaser if payment is made within a
shorter period of time than the maximum time
specified; also referred to as a sales discount on
the part of the seller and a purchase discount on
the part of the buyer.
A quantity discount is a reduction in price
allowed for purchases made in large quantities,
justified by savings in packaging, shipping, and
handling. It is also called a volume or bulk
discount.
A percentage reduction from the list price allowed
by manufacturers to wholesalers and by
wholesalers to retailers is known as a trade
discount. The purpose for the discount is to
encourage trading or increase sales, and the prices
at which the purchased goods may be resold are
also suggested.
A chain discount is a series of discounts from one
list price.
Akin to a trade discount is a functional discount.
It is a supplier’s price discount given to a
purchaser based on the latter’s role in the former’s
distribution system. This role usually involves
warehousing or advertising.
What RA 7432 grants the senior citizen is a mere
discount privilege, not a sales discount or any of
the above discounts in particular. Prompt
payment is not the reason for (although a
necessary consequence of) such grant. To be sure,
the privilege enjoyed by the senior citizen must be
equivalent to the tax credit benefit enjoyed by the
private establishment granting the discount.
In other words, the tax credit benefit is not the
same as a sales discount. To repeat, this benefit
cannot and should not be treated as a tax
deduction.
To stress, the effect of a sales discount on the
income statement and income tax return of an
establishment covered by RA 7432 is different
from that resulting from the availment or use of its
tax credit benefit. While the former is a deduction
before, the latter is a deduction after, the income
tax is computed.
Carlos Superdrug vs. DSWD
G.R. No. 166494, June 29, 2007
(the ruling on eminent domain in this case is
obiter dicta; ruling on police power stands)
The permanent reduction in their total revenues is
a forced subsidy corresponding to the taking of
private property for public use or benefit. This
constitutes compensable taking for which
petitioners would ordinarily become entitled to a
just compensation.
A tax deduction does not offer full reimbursement
of the senior citizen discount. As such, it would not
meet the definition of just compensation.
The Senior Citizens Act was enacted primarily to
maximize the contribution of senior citizens to
nation-building, and to grant benefits and
privileges to them for their improvement and
well-being as the State considers them an integral
part of our society.
The law is a legitimate exercise of police power
which, similar to the power of eminent domain,
has general welfare for its object. Police power is
not capable of an exact definition, but has been
purposely veiled in general terms to underscore
its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible
response to conditions and circumstances, thus
assuring the greatest benefits.
For this reason, when the conditions so demand as
determined by the legislature, property rights
must bow to the primacy of police power because
property rights, though sheltered by due process,
must yield to general welfare.
It is incorrect to insist that the grant of the senior
citizen discount is unduly oppressive to one’s
business, when one has not taken time to calculate
correctly and come up with a financial report, so
that they have not been able to show properly
whether or not the tax deduction scheme really
works greatly to their disadvantage.
Manila Memorial vs. Secretary of DSWD
G.R. No. 175356 December 3, 2013
The 20% discount is intended to improve the
welfare of senior citizens who, at their age, are
less likely to be gainfully employed, more prone to
illnesses and other disabilities, and, thus, in need
of subsidy in purchasing basic commodities. It
may not be amiss to mention also that the
discount serves to honor senior citizens who
presumably spent the productive years of their
lives on contributing to the development and
progress of the nation. This distinct cultural
Filipino practice of honoring the elderly is an
integral part of this law. As to its nature and
effects, the 20% discount is a regulation affecting
the ability of private establishments to price their
products and services relative to a special class of
individuals, senior citizens, for which the
Constitution affords preferential concern.
In turn, this affects the amount of profits or
income/gross sales that a private establishment
can derive from senior citizens. In other words,
the subject regulation affects the pricing, and,
hence, the profitability of a private establishment.
However, it does not purport to appropriate or
burden specific properties, used in the operation
or conduct of the business of private
establishments, for the use or benefit of the public,
or senior citizens for that matter, but merely
regulates the pricing of goods and services relative
to, and the amount of profits or income/gross
sales that such private establishments may derive
from, senior citizens. The subject regulation may
be said to be similar to, but with substantial
distinctions from, price control or rate of return
on investment control laws which are traditionally
regarded as police power measures.
The 20% senior citizen discount has not been
shown to be unreasonable, oppressive or
confiscatory.
Churchill vs. Concepcion
G.R. No. 11572 September 22, 1916
The power to impose taxes is one so unlimited in
force and so searching in extent, that the courts
scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the
discretion of the authority which exercises it. It
reaches to every trade or occupation; to every
object of industry, use, or enjoyment; to every
species of possession; and it imposes a burden
which, in case of failure to discharge it, may be
followed by seizure and sale or confiscation of
property. No attribute of sovereignty is more
pervading, and at no point does the power of the
government affect more constantly and intimately
all the relations of life than through the exactions
made under it.
If a case were presented where the abuse of the
taxing power of the local legislature was too
extreme as to make it plain to the judicial mind
that the power had been exercised for the sole
purpose of destroying rights which could not be
rightfully destroyed consistently with the
principles of freedom and justice upon which the
Philippine Government rests, then it would be the
duty of the courts to say that such an arbitrary act
was not merely an abuse of the power, but was the
exercise of an authority not conferred.
Paseo Realty vs. CA
G.R. No. 119286. October 13, 2004
The grant of a refund is founded on the
assumption that the tax return is valid, i.e., that the
facts stated therein are true and correct. Without
the tax return, it is error to grant a refund since it
would be virtually impossible to determine
whether the proper taxes have been assessed and
paid.
Once the taxpayer has exercised the option to
carry-over and to apply the excess quarterly
income tax against income tax due for the taxable
quarters of the succeeding taxable years, such
option is irrevocable for that taxable period and
no application for cash refund or issuance of a tax
credit certificate shall be allowed.
Taxation is a destructive power which interferes
with the personal and property rights of the
people and takes from them a portion of their
property for the support of the government. And
since taxes are what we pay for civilized society,
or are the lifeblood of the nation, the law frowns
against exemptions from taxation and statutes
granting tax exemptions are thus construed
strictissimi juris against the taxpayer and liberally
in favor of the taxing authority. A claim of refund
or exemption from tax payments must be clearly
shown and be based on language in the law too
plain to be mistaken. Elsewise stated, taxation is
the rule, exemption therefrom is the exception.
Roxas vs. CTA
G.R. No. L-25043 April 26, 1968
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 with Our
sense of justice in the instant case 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.
Sison vs. Ancheta
G.R. No. L-59431 July 25, 1984
Justice Holmes: “The power to tax is not the power
to destroy while this Court sits.”
On uniformity:
Taxpayers who are recipients of compensation
income are set apart as a class. As there is
practically no overhead expense, these taxpayers
are e not entitled to make deductions for income
tax purposes because they are in the same
situation more or less.
On the other hand, in the case of professionals in
the practice of their calling and businessmen,
there is no uniformity in the costs or expenses
necessary to produce their income. It would not be
just then to disregard the disparities by giving all
of them zero deduction and indiscriminately
impose on all alike the same tax rates on the basis
of gross income.
Pascual vs. Secretary of DPWH
G.R. No. L-10405 December 29, 1960
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.
Under the express or implied provisions of the
constitution, public funds may be used only for
public purpose. The right of the legislature to
appropriate funds is correlative with its right to
tax, and, under constitutional provisions against
taxation except for public purposes and
prohibiting the collection of a tax for one purpose
and the devotion thereof to another purpose, no
appropriation of state funds can be made for other
than for a public purpose.
Mañosca vs. CA
G.R. No. 106440 January 29, 1996
The term "public use," not having been otherwise
defined by the constitution, must be considered in
its general concept of meeting a public need or a
public exigency.
The idea that "public use" is strictly limited to
clear cases of "use by the public" has long been
discarded.
"Public use" is one which confers same benefit or
advantage to the public; it is not confined to actual
use by public. It is measured in terms of right of
public to use proposed facilities for which
condemnation is sought and, as long as public has
right of use, whether exercised by one or many
members of public, a "public advantage" or "public
benefit" accrues sufficient to constitute a public
use.
The term may be said to mean public usefulness,
utility, or advantage, or what is productive of
general benefit. It may be limited to the
inhabitants of a small or restricted locality, but
must be in common, and not for a particular
individual. The use must be a needful one for the
public, which cannot be surrendered without
obvious general loss and inconvenience.
Planters Products vs. Fertiphil
G.R. No. 166006 March 14, 2008
The term public purpose is not defined. It is an
elastic concept that can be hammered to fit
modern standards. Jurisprudence states that
public purpose should be given a broad
interpretation. It does not only pertain to those
purposes which are traditionally viewed as
essentially government functions, such as building
roads and delivery of basic services, but also
includes those purposes designed to promote
social justice. Thus, public money may now be
used for the relocation of illegal settlers, low-cost
housing and urban or agrarian reform.

While the categories of what may constitute a

public purpose are continually expanding in light
of the expansion of government functions, the
inherent requirement that taxes can only be
exacted for a public purpose still stands.

In this case, the text of the LOI is plain that the

levy was imposed in order to raise capital for PPI.
They were cavalier enough to name PPI as the
ultimate beneficiary of the taxes levied under the
LOI. Thus, the levy is unconstitutional.
CIR vs. Marubeni
G.R. No. 137377. December 18, 2001
A contractors tax is a tax imposed upon the
privilege of engaging in business. It is generally in
the nature of an excise tax on the exercise of a
privilege of selling services or labor rather than a
sale on products; and is directly collectible from
the person exercising the privilege.
Being an excise tax, it can be levied by the taxing
authority only when the acts, privileges or
business are done or performed within the
jurisdiction of said authority. Like property taxes,
it cannot be imposed on an occupation or privilege
outside the taxing district.
While the construction and installation work were
completed within the Philippines, the evidence is
clear that some pieces of equipment and supplies
were completely designed and engineered in
Japan. They were already finished products when
shipped to the Philippines. These services were
rendered outside the taxing jurisdiction of the
Philippines and are therefore not subject to
contractor’s tax.
Reagan vs. CIR
G.R. No. L-26379 December 27, 1969
There is nothing in the Military Bases Agreement
that lends support to the assertion that Clark Field
Air Base has become foreign soil or territory. This
country's jurisdictional rights therein, certainly
not excluding the power to tax, have been
preserved. As to certain tax matters, an
appropriate exemption was provided for.
Petitioner is liable for the income tax arising from
a sale of his automobile in the Clark Field Air Base,
which clearly is and cannot otherwise be other
than, within our territorial jurisdiction to tax.
MERALCO vs. Yatco
G.R. No. 45697 November 1, 1939
A company, by making and carrying out policies
covering risks located in this country which might
require adjustment or the making of proof of loss
therein, did business in the Philippines and
subjected itself to its jurisdiction.
Where the insured is within the Philippines, the
risk insured against also within the Philippines,
and certain incidents of the contract are to be
attended to in the Philippines, such as payment of
dividends, sending of an unjuster into the
Philippines in case of dispute, or making of proof
of loss, the Philippines has the power to impose
the tax upon the insured, regardless of whether
the contract is executed in a foreign country and
with a foreign corporation.
ABAKADA vs. Ermita
G.R. No. 168056 September 1, 2005
The imposition of 12% VAT is not an undue
delegation of legislative power but only of the
discretion as to the execution of a law. This is
constitutionally permissible. Congress does not
abdicate its functions or unduly delegate power
when it describes what job must be done, who
must do it, and what is the scope of his authority;
in our complex economy that is frequently the
only way in which the legislative process can go
forward.
The intent and will to increase the VAT rate to
12% came from Congress and the task of the
President is to simply execute the legislative
policy.
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.’
Misamis Oriental vs. DOF Secretary
G.R. No. 108524 November 10, 1994
As the government agency charged with the
enforcement of the law, the opinion of the CIR, in
the absence of any showing that it is plainly
wrong, is entitled to great weight. Indeed, the
ruling was made by the CIR in the exercise of his
power under Sec. 245 of the NIRC to "make rulings
or opinions in connection with the
implementation of the provisions of internal
revenue laws, including rulings on the
classification of articles for sales tax and similar
purposes."
To distinguish:
A legislative rule is in the nature of subordinate
legislation, designed to implement a primary
legislation by providing the details thereof. In the
same way that laws must have the benefit of
public hearing, it is generally required that before
a legislative rule is adopted there must be hearing.
In considering a legislative rule a court is free to
make three inquiries:
(1) whether the rule is within the delegated
authority of the administrative agency;
(2) whether it is reasonable; and
(3) whether it was issued pursuant to proper
procedure.
On the other hand, interpretative rules are
designed to provide guidelines to the law which
the administrative agency is in charge of
enforcing.
In the case of an interpretative rule, the inquiry is
not into the validity but into the correctness or
propriety of the rule. As a matter of power a court,
when confronted with an interpretative rule, is
free to:
(1) give the force of law to the rule;
(2) go to the opposite extreme and substitute
its judgment; or
(3) give some intermediate degree of
authoritative weight to the interpretative
rule.
CIR vs. CA and Fortune Tobacco
G.R. No. 119761 August 29, 1996
When an administrative rule is merely
interpretative in nature, its applicability needs
nothing further than its bare issuance for it gives
no real consequence more than what the law itself
has already prescribed.
When, upon the other hand, the administrative
rule goes beyond merely providing for the means
that can facilitate or render least cumbersome the
implementation of the law but substantially adds
to or increases the burden of those governed, it
behooves the agency to accord at least to those
directly affected a chance to be heard, and
thereafter to be duly informed, before that new
issuance is given the force and effect of law.
RMC 37-93 had new tax rate consequences on
Fortune’s products. In so doing, the BIR did not
simply interpret the law; verily, it legislated under
its quasi-legislative authority. The due observance
of the requirements of notice, of hearing, and of
publication should not have been then ignored.
Board of Assessment Appeals v. CTA
G.R. No. L-18125 May 31, 1963
In exempting from taxation "property owned by
the Republic of the Philippines, any province, city,
municipality or municipal district," Section 3(a) of
R.A. No. 470 makes no distinction between
property held in a sovereign, governmental or
political capacity and those possessed in a private,
proprietary or patrimonial character. And where
the law does not distinguish, neither may the
Court, unless there are facts and circumstances
clearly showing that the lawmaker intended the
contrary.
Moreover, taxes are financial burdens imposed for
the purpose of raising revenues with which to
defray the cost of the operation of the
Government, and a tax on property of the
Government, whether national or local, would
merely have the effect of taking money from one
pocket to put it in another pocket.
PPA vs. City of Iloilo
G.R. No. 109791 July 14, 2003
Improvements are not exempt
The warehouse of the PPA may not be held as part
of the port, considering its separable nature as an
improvement upon the port, and the fact that it is
not open for use by everyone and freely accessible
to the public.
The exemption of public property from taxation
does not extend to improvements made thereon
by homesteaders or occupants at their own
expense; likewise, the taxability of the warehouse
stands, it being a mere improvement built on an
alleged property of public dominion.
The fact that tax exemptions of GOCCs have been
expressly withdrawn by the present LGC clearly
attests against petitioner’s claim of absolute
exemption of government instrumentalities from
local taxation.
Basco vs. PAGCOR
G.R. No. 91649 May 14, 1991
Supremacy of the NG over the LG
PAGCOR has a dual role, to operate and to regulate
gambling casinos. The latter role is governmental,
which places it in the category of an agency or
instrumentality of the Government. Being such,
PAGCOR should be and actually is exempt from
local taxes. Otherwise, its operation might be
burdened, impeded or subjected to control by a
mere Local government.
The states have no power by taxation or
otherwise, to retard, impede, burden or in any
manner control the operation of constitutional
laws enacted by Congress to carry into execution
the powers vested in the federal government.
This doctrine emanates from the "supremacy" of
the National Government over local governments.
Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local
authorities may perceive to be undesirable
activities or enterprise using the power to tax as
"a tool for regulation".
The power of local government to "impose taxes
and fees" is always subject to "limitations" which
Congress may provide by law. It cannot therefore
be violative but rather is consistent with the
principle of local autonomy.
MIAA vs. CA
G.R. No. 155650 July 20, 2006
Taxability of portions leased to private entities
The Airport Lands and Buildings of MIAA are
property of public dominion and therefore owned
by the State or the Republic of the Philippines.
Properties of public dominion mentioned in
Article 420 of the Civil Code, like roads, canals,
rivers, torrents, ports and bridges constructed by
the State, are owned by the State. The term ports
includes seaports and airports.
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.
The operation by the government of a tollway
does not change the character of the road as one
for public use.
The real properties owned by the Republic, titled
either in the name of the Republic itself or in the
name of agencies or instrumentalities of the
National Government, continue to be exempt from
real estate tax.
They lose their tax exemption only if the beneficial
use thereof has been granted, for consideration or
otherwise, to a taxable person.
Thus, portions of the Airport Lands and Buildings
that MIAA leases to private entities are not exempt
from real estate tax. For example, the land area
occupied by hangars that MIAA leases to private
corporations is subject to real estate tax. In such a
case, MIAA has granted the beneficial use of such
land area for a consideration to a taxable person
and therefore such land area is subject to real
estate tax.
Philippine Trust Company vs. Yatco
G.R. Nos. L-46255 January 23, 1940
A tax is considered uniform when it operates with
the same force and effect in every place where the
subject may be found.
In every well-regulated and enlightened state or
government, certain descriptions of property and
also certain institutions are exempt from taxation,
but these exemptions have never been regarded
as disturbing the rules of taxation, even where
the fundamental law had ordained that it should
be uniform.
The method of assessment prescribed in the
Revised Administrative Code for domestic banks,
while different from that prescribed for foreign
banks, is permissible.
The rule of uniformity does not call for perfect
uniformity or perfect equality, because this is
hardly attainable.
Eastern Theatrical vs. Alfonso
G.R. No. L-1104 May 31, 1949
Uniformity on amusement taxes
The fact that some places of amusement are not
taxed while others, such as cinematographs,
theaters, vaudeville companies, theatrical shows,
and boxing exhibitions and other kinds of
amusements or places of amusement are taxed, is
no argument at all against the equality and
uniformity of the tax imposition.
Equality and uniformity in taxation means that all
taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing
power has the authority to make reasonable and
natural classifications for purposes of taxation;
and the appellants cannot point out what places of
amusement taxed by the ordinance do not
constitute a class by themselves and which can be
confused with those not included in the ordinance.
British American Tobacco vs. Camacho
G.R. No. 163583 April 15, 2009
Classification Freeze Provision
A legislative classification that is reasonable does
not offend the constitutional guaranty of the equal
protection of the laws. The classification is
considered valid and reasonable provided that:
(1) it rests on substantial distinctions;
(2) it is germane to the purpose of the law;
(3) it applies, all things being equal, to both
present and future conditions; and
(4) it applies equally to all those belonging to
the same class.
The classification freeze provision could hardly be
considered arbitrary, or motivated by a hostile or
oppressive attitude to unduly favor older brands
over newer brands. It was the result of Congress’s
earnest efforts to improve the efficiency and
effectivity of the tax administration over sin
products while trying to balance the same with
other State interests.
Domingo vs. Carlitos
G.R. No. L-18994 June 29, 1963
Set-off or Compensation allowed
Where 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 takes place by operation of law.
Philex Mining vs. CIR
G.R. No. 125704 August 28, 1998
Set-off or Compensation
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. The collection of a tax cannot await the
results of a lawsuit against the government.
Taxes cannot be subject to compensation for the
simple reason that the government and the
taxpayer are not creditors and debtors of each
other. There is a material distinction between a
tax and debt. Debts are due to the Government in
its corporate capacity, while taxes are due to the
Government in its sovereign capacity.
People vs. Kintanar
CTA Crim. Case No. 006
Willful Blindness Doctrine
An act or omission is “willfully” done if done
voluntarily and intentionally and with specific
intent to do something the law forbids, or with
specific intent to fail to do something the law
requires to be done; that is, with bad purpose to
either disobey or disregard the law.
Gloria’s sole reliance on her husband to file their
ITRs is not a valid reason to justify her non-filing.
Being an experienced businesswoman, she ought
to know and be aware of her tax obligations in
connection with her business. Such neglect or
omission is tantamount to “deliberate ignorance”
or “conscious avoidance”.
People vs. Santos
CTA Crim. Case no. 012
By virtue of trust, respect and confidence, she has
entrusted her professional, financial and tax
responsibilities to her manager since she was 12
years old. She participated and maintained her
intention to settle the case, and thus provided all
the documents needed as well as payment of her
taxes. The element of willfulness was not
established and the CTA found her to be merely
negligent. The CTA also noted the intention of Ms.
Santos to settle the case, which negates any
motive to commit fraud.
CIR vs. Hantex Trading
G.R. No. 136975. March 31, 2005
Best Evidence Obtainable
The best evidence envisaged in Sec. 6, NIRC
includes the corporate and accounting records of
the taxpayer who is the subject of the assessment
process, the accounting records of other taxpayers
engaged in the same line of business, including
their gross profit and net profit sales.
The best evidence obtainable may consist of
hearsay evidence, such as the testimony of third
parties or accounts or other records of other
taxpayers similarly circumstanced as the taxpayer
subject of the investigation, which might be
inadmissible in a regular proceeding in the regular
courts. The general rule is that administrative
agencies such as the BIR are not bound by the
technical rules of evidence.
However, the best evidence obtainable does not
include mere photocopies of records/documents.
Medicard vs. CIR
G.R. No. 222743 April 5, 2017
Letter of Authority vs. Letter Notice
(1) an LOA addressed to a revenue officer is
specifically required under the NIRC
before an examination of a taxpayer may
be had; while an LN is not found in the
NIRC and is only for the purpose of
notifying the taxpayer that a discrepancy
is found based on the BIR's RELIEF
System.
(2) an LOA is valid only for 30 days from date
of issue while an LN has no such
limitation.
(3) an LOA gives the revenue officer only a
period of 10 days from receipt of LOA to
conduct his examination of the taxpayer;
whereas an LN does not contain such a
limitation.
Simply put, LN is entirely different and serves a
different purpose than an LOA.
Due process demands, as recognized under RMO
No. 32-2005, that after an LN has serve its
purpose, the revenue officer should have properly
secured an LOA before proceeding with the
further examination and assessment.
Gross Receipts
As an HMO, MEDICARD primarily acts as an
intermediary between the purchaser of healthcare
services (its members) and the healthcare
providers (the doctors, hospitals and clinics) for a
fee. By enrolling membership with MEDICARD, its
members will be able to avail of the pre-arranged
medical services from its accredited healthcare
providers without the necessary protocol of
posting cash bonds or deposits prior to being
attended to or admitted to hospitals or clinics,
especially during emergencies, at any given time.
Apart from this, MEDICARD may also directly
provide medical, hospital and laboratory services,
which depends upon its member's choice.
Thus, in the course of its business as such,
MEDICARD members can either avail of medical
services from MEDICARD's accredited healthcare
providers, or directly from MEDICARD.
In the former, MEDICARD members obviously
knew that beyond the agreement to pre-arrange
the healthcare needs of its ·members, MEDICARD
would not actually be providing the actual
healthcare service. Thus, based on industry
practice, MEDICARD informs its would-be
member beforehand that 80% of the amount
would be earmarked for medical utilization and
only the remaining 20% comprises its service fee.
The 80% is exempt from VAT, while the 20%
service fee is taxable at 12%.
In the latter case, MEDICARD's sale of its services
is entirely exempt from VAT under Section 109(G).
Oceanic vs CIR
G.R. No. 148380,
A demand letter for payment of delinquent taxes
may be considered a decision on a disputed or
protested assessment. The determination on
whether or not a demand letter is final is
conditioned upon the language used or the tenor
of the letter being sent to the taxpayer.
The general rule is that the Commissioner of
Internal Revenue may delegate any power vested
upon him by law to Division Chiefs or to officials of
higher rank. He cannot, however, delegate the four
powers granted to him under Sec. 7, NIRC:
(a) The power to recommend the
promulgation of rules and regulations by
the Secretary of Finance;
(b) The power to issue rulings of first
impression or to reverse, revoke or
modify any existing ruling of the Bureau;
(c) The power to compromise or abate under
Section 204(A) and (B); and
(d) The power to assign or reassign internal
revenue officers to establishments where
articles subject to excise tax are produced
or kept.
Thus, the authority to make tax assessments may
be delegated to subordinate officers. Said
assessment has the same force and effect as that
issued by the Commissioner himself, if not
reviewed or revised by the latter.
CIR vs. Aquafresh
G.R. No. 170389, October 20, 2010
The Commissioner is authorized to divide the
Philippines into different zones or area and shall,
upon consultation with competent appraisers both
from the private and public sectors, determine the
fair market value of real properties located in each
zone or area. For purposes of computing internal
revenue tax, the value of the property shall be,
whichever is higher of:
(1) the fair market value as determined by
the Commissioner; or
(2) the fair market value as shown in the
schedule of values of the Provincial and
City Assessors.
While the CIR has the authority to prescribe real
property values and divide the Philippines into
zones, the law is clear that the same has to be
done upon consultation with competent
appraisers both from the public and private
sectors.
Soriano vs. Secretary
G.R. No. 184450, January 24, 2017
The policy of full taxable year treatment,
especially of the personal and additional
exemptions, is clear under Section 35 of R.A. 8424.
It does not allow the prorating of the personal and
additional exemptions, even in case a status-
changing event occurs during the taxable year.
Rather, it allows the fullest benefit to the
individual taxpayer. This manner of reckoning the
taxpayer's status for purposes of the personal and
additional exemptions clearly demonstrates the
legislative intention; that is, for the state to give
the taxpayer the maximum exemptions that can be
availed, notwithstanding the fact that the latter's
actual status would qualify only for a lower
exemption if prorating were employed.
There is no legal basis for the BIR to reintroduce
the prorating of the new personal and additional
exemptions. It is unjust, as incomes do not remain
the same from month to month, especially for the
MWEs.
CIR vs. St. Luke’s
G.R. No. 203514, February 13, 2017
Section 27(B) of the NIRC imposes a 10%
preferential tax rate on the income of (1)
proprietary non-profit educational institutions
and (2) proprietary non-profit hospitals.
The only qualifications for hospitals are that they
must be proprietary and non-profit. 'Proprietary'
means private. 'Non-profit' means no net income
or asset accrues to or benefits any member or
specific person, with all the net income or asset
devoted to the institution's purposes and all its
activities conducted not for profit.
An organization may be considered as non-profit if
it does not distribute any part of its income to
stockholders or members. However, despite its
being a tax exempt institution, any income such
institution earns from activities conducted for
profit is taxable.
Thus, even if the charitable institution must be
'organized and operated exclusively' for charitable
purposes, it is nevertheless allowed to engage in
'activities conducted for profit' without losing its
tax exempt status for its not-for-profit activities.
The only consequence is that the 'income of
whatever kind and character' of a charitable
institution 'from any of its activities conducted for
profit, regardless of the disposition made of such
income, shall be subject to tax.'
Clearly, revenues from paying patients are income
received from 'activities conducted for profit,
subject to income tax.
CIR vs. DLSU
G.R. No. 196596 November 9, 2016
Tax exemption granted to non-stock, non-profit
educational institutions
When a non-stock, non-profit educational
institution proves that it uses its revenues
actually, directly, and exclusively for educational
purposes, it shall be exempted from income tax,
VAT, and LBT. On the other hand, when it also
shows that it uses its assets in the form of real
property for educational purposes, it shall be
exempted from RPT.
To be clear, proving the actual use of the taxable
item will result in an exemption, but the specific
tax from which the entity shall be exempted shall
depend on whether the item is an item of revenue
or asset.
To illustrate, if a university leases a portion of its
school building to a bookstore or cafeteria, the
leased portion is not ADE used for educational
purposes, even if the bookstore or canteen caters
only to university students, faculty and staff. The
leased portion of the building may be subject to
real property tax.
The test of exemption from taxation is the use of
the property for purposes mentioned in the
Constitution. The exemption extends to
facilities which are incidental to and
reasonably necessary for the accomplishment
of the main purposes.
In concrete terms, the lease of a portion of a
school building for commercial purposes, removes
such asset from the property tax exemption
granted under the Constitution. There is no
exemption because the asset is not used ADE for
educational purposes. The commercial use of the
property is also not incidental to and
reasonably necessary for the accomplishment of
the main purpose of a university, which is to
educate its students.
However, if the university ADE uses for
educational purposes the revenues earned from
the lease of its school building, such revenues shall
be exempt from taxes and duties. The tax
exemption no longer hinges on the use of the asset
from which the revenues were earned, but on the
actual, direct and exclusive use of the revenues for
educational purposes.
Parenthetically, income and revenues of non-
stock, non-profit educational institution not used
ADE for educational purposes are not exempt
from duties and taxes. To avail of the exemption,
the taxpayer must factually prove that it used
ADE for educational purposes the revenues or
income sought to be exempted.
Non-Stock, Non-Profit Educational Institutions
vs. Proprietary Educational Institutions
While a non-stock, non-profit educational
institution is classified as a tax-exempt entity, a
proprietary educational institution is covered by
Section 27, NIRC.
Proprietary educational institutions which are
nonprofit shall pay a tax of 10% on their taxable
income, Provided, that if the gross income from
unrelated trade, business or other activity exceeds
fifty percent (50%) of the total gross income
derived by such educational institutions, the
regular corporate income tax of 30% shall be
imposed on the entire taxable income.
(Predominance Test)
By the Tax Code's clear terms, a proprietary
educational institution is entitled only to the
reduced rate of 10% corporate income tax. The
reduced rate is applicable only if:
(1) the proprietary educational institution is
nonprofit and
(2) its gross income from unrelated trade,
business or activity does not exceed 50%
of its total gross income.
Letter of Authority, RMO No. 43-90
A Letter of Authority [LOA] should cover a taxable
period not exceeding one taxable year. The
practice of issuing LOA as covering audit of
unverified prior years is hereby prohibited. If the
audit of a taxpayer shall include more than one
taxable period, the other periods or years shall be
specifically indicated in the LOA.
What this provision clearly prohibits is the
practice of issuing LOAs covering audit of
unverified prior years. RMO 43-90 does not say
that a LOA which contains unverified prior years
is void. It merely prescribes that if the audit
includes more than one taxable period, the other
periods or years must be specified. The provision
read as a whole requires that if a taxpayer is
audited for more than one taxable year, the BIR
must specify each taxable year or taxable period
on separate LOAs.
If the LOA does not strictly comply with RMO 43-
90 because it includes unverified prior years, it
does not mean that the entire LOA is void. Only the
assessments for the unverified/unspecified are
void.