February 13

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5. Taxation as the Strongest Power of the State (pages 4-6); Scope of Taxation (pages 21-23)
a. Section 28, Article VI of the Philippine Constitution

Section 28.

1. The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.
2. The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations
and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the national development program of the Government.
3. Charitable institutions, churches and personages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt from taxation.
4. No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members
of the Congress.
b. 71 Am Jur 2nd 394-395, 397-398
c. Sarasola v. Trinidad, 40 Phil 259 (1919)

Facts: The complaint was filed in CFI for the purpose of having an injunction issue to restrain the defendant, the Collector of Internal
Revenue, from the alleged illegal collection of taxes in the amount of P11,739.29. The defendant interposed a demurrer to the complaint,
based on two grounds, namely: (1) that the court had no jurisdiction of the subject-matter of the action because of the provisions of
section 1578 of the Administrative Code of 1917; and (2) that the facts stated in the complaint did not entitle the plaintiff to the relief
demanded. The Honorable James A. Ostrand, Judge of First Instance, sustained the demurrer, holding that "In the opinion of the court,
the case is still controlled by the decision of the Supreme Court in the case of Churchill and Tait vs. Rafferty. The fact that section 1579 of
the Administrative Code of 1917 disallows interest on the internal revenue taxes recovered back is hardly sufficient to vary the rule." It is
from the final order dismissing the complaint, without special finding as to costs, that the plaintiff to this court.

As will be noted, the judge was induced to take such action be reason of his understanding of the decision of this court in the case
of Churchill and Tait vs. Rafferty, in which the plaintiffs likewise endeavor unsuccessfully to have the defendant Collector of Internal
Revenue enjoined from collecting and enforcing against the plaintiffs an internal revenue tax on bill boards.

The Attorney-General, in his brief for the appellee, says that a resolution of the three errors assigned by appellant depends upon the
answer to the question, "Is the legal provision prohibiting the courts from granting an injunction to restrain the collection of internal
revenue taxes constitutional? Sections 1578 and 1579 of the Administrative Code of 1917 read as follows:

SEC. 1578. Injunction not available to restrain collection of tax. - No court shall have authority to grant an injunction to restrain the
collection of any internal-revenue tax.

SEC. 1579. Recovery of tax paid under protest. - When the validity of any tax is questioned, or its amount disputed, or other question raised
as to liability therefor, the person against whom or against whose property the same is sought to be enforced shall pay the tax under
instant protest, or upon protest within ten days, and shall thereupon request the decision of the Collector of Internal Revenue. If the
decision of the Collector of Internal Revenue is adverse, or if no decision is made by him within six months from the date when his decision
was requested, the taxpayer may proceed, at any time within two years after the payment of the tax, to bring an action against the
Collector of Internal Revenue for the recovery without interest of the sum alleged to have been illegally collected, the process to be
served upon him, upon the provincial treasurer, or upon the officer collecting the tax.

The whole question harks back to the legality of sections 1578 and 1579 of the Administrative Code. But in addition, according to the
averments of the plaintiff's complaint which are provisionally admitted by the demurrer of the defendant, the plaintiff's claim is, that he
was not engaged in the business of a commission merchant in the city of Manila, and so was not liable to the payment of a tax as such,
and that he is without means of complying with the demand of the defendant under protest or otherwise. Such, likewise, was one of three
grounds which were suggested as giving equitable jurisdiction to the Supreme Court of the State of Michigan. Regarding it, Judge Cooley
said:
The fact that enforcing the tax may in some cases compel the suspension of business, because it is more than the person taxed can afford
to pay. But if this consideration is sufficient to justify the transfer of a controversy from a court of law to a court of equity, then every
controversy where money is demanded may be made the subject of equitable cognizance. To enforce against a dealer a promissory not
may in some cases as effectually break up his business as to collect from him a tax of equal amount. This is not what is known to the law
as irreparable injury. The courts have never recognized the consequences of the mere enforcement of a money demand as falling within
that category. (Youngblood vs. Sexton) KASI NGA TAXATION IS ALSO THE POWER TO DESTROY.

From whatever direction we look at the subject, therefore, we reach either the conclusion that the law is valid, or that the plaintiff has not
proven such a case of irreparable injury as would warrant the issuance of the extraordinary writ of injunction.

The reason for what superficially seems to be a harsh ruling goes back to the fundamental conception of the nature of taxation. It is but
a truism to restate that taxation is an attribute of sovereignty. It is the strongest of all the powers of government. It involves, as Chief
Justice Marshall in his historical statement said, the power to destroy. (McCulloch vs. Maryland) "The right of taxation where it exists," the
court said in Austin vs. Aldermen, "is necessarily unlimited in its nature. It carriers with it inherently the power to embarrass and destroy."

Public policy decrees that, since upon the prompt collection of revenue there depends the very existence of government itself, whatever
determination shall be arrived at by the Legislature should not be interfered with, unless there be a clear violation of some constitutional
inhibition. KAYA DI PWEDE MAG INJUNCTION SA TAX CASES.

As said in Dows vs. The City of Chicago, supra, "It is upon taxation that the several states chiefly rely to obtain the means to carry on their
respective governments, and it is of the utmost importance to all of them that the modes adopted to enforce the taxes levied should be
interfered with as little as possible. Any delay in the proceedings of the officers, upon whom the duty is devolved of collecting the taxes,
may derange the operations of government, and thereby cause serious detriment to the public." Or as said in Snyder vs. Marks, supra, "The
system prescribed by the United States in regard to both customs duties and internal revenue taxes, of stringent measures, not judicial,
to collect them, with appeals to specified tribunals and suits to recover back moneys illegally exacted, was a system of corrective justice,
intended to be complete and enacted under the right belonging to the Government, to prescribe the conditions on which it would subject
itself to the judgment of the courts in the collection of its revenues." Or as said in Tennesse vs. Sneed, supra, "The Government may fix
the conditions upon which it will consent to litigate the validity of its original taxes." Or as said in a New York case, "The power of taxation
being legislative, all the incidents are within the control of the Legislature." (Genet vs .City of Brooklyn [1885], 99 N.Y., 296.) Or as said by
Chief Justice Marshall in McCulloch vs. Maryland, supra, "The people of a state give to their government a right of taxing themselves and
their property, and as the exigencies of the Government cannot be limited, they prescribe no limit to the exercise of this right, resting
confidently on the interest of the legislator and on the influence of the constituents over their representatives, to guard themselves against
its abuse." ( See to the same effect the Philippine case of De Villata vs. Stanley [1915], 32 Phil., 541; and Churchill and Tait vs. Concepcion
[1916], 34 Phil., 969.)

Applying these well-known principles to the case at bar, it would seem that the legislature has considered that a law providing for the
payment of a tax with a right to bring a suit before a tribunal to recover back the same without interest is a full and adequate remedy for
the aggrieved taxpayer. The disallowance of interest in such case, like the other steps prescribed as conditional to recovery, has been
made one of the conditions which the lawmakers have seen fit to attach to the remedy provided. As the Legislature in the exercise of its
wide discretionary power, has deemed the remedy provided in section 1579 of the Administrative Code to be an adequate mode of testing
the validity of an internal revenue tax and has willed that such a remedy shall be exclusive, the courts not only owe it to a coordinate
branch of the government to respect the opinion thus announced, but have no right to interfere with the enforcement of such a law.

To conclude - in answer to the argument made by appellant, we can say that sections 1578 and 1579 of the Administrative Code establish
an adequate remedy at law and that we are not convinced that the enforcement of the tax will produce irreparable injury, and, in answer
to the argument of appellee, that sections 1578 and 1579 of the Administrative Code of 1917 are valid. The result is, thus, to affirm the
final order appealed from.
 d. Sison v. Ancheta, 130 SCRA 654 (1984)

Facts:

Petitioner assailed sec 1 of BP 135 amending the Old Tax Code on the ground that he would be unduly discriminated against by the
imposition of higher tax rates upon his income arising from the exercise of his profession as a lawyer vis-à-vis those which were
imposed upon fixed income or salaried individual taxpayers. For petitioner, there was transgression of the due process clause.

At the outset the SC ruled for the validity of BP 135 thus: where the due process and equal protection clauses are invoked, considering
that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail.

Held:

The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here, does not suffice. There must
be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a provision as void on its
face, he has not made out a case. This is merely to adhere to the authoritative doctrine that where the due process and equal protection
clauses are invoked, considering that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive
character as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail.

The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. Where the
differentiation conforms to the practical dictates of justice and equity, similar to the standards of equal protection, it is not discriminatory
within the meaning of the clause and is therefore uniform. Taxpayers may be classified into different categories, such as recipients
of compensation income as against professionals.

Taxpayers who are recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers
are 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. There is ample justification then for the Batasang Pambansa to adopt
the gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional
and business income.

Apparently, what misled petitioner is his failure to take into consideration the distinction between a tax rate and a tax base. There is no
legal objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing the applicable
tax rate. Taxpayers may be classified into different categories. To repeat, it is enough that the classification must rest upon substantial
distinctions that make real differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the discernible
basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all
taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them.

e. Reyes v. Almanzor, 196 SCRA 322 (1991)

Facts:

Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila,
which are leased and entirely occupied as dwelling sites by tenants. Said tenants were paying monthly rentals not exceeding three
hundred pesos (P300.00) in July, 1971.

On July 14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in
monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed three hundred
pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of
Article 1673 of the Civil Code for two years from its effectivity thereby disallowing the ejectment of lessees upon the expiration of the
usual legal period of lease. On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition
to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting
leases with a definite period.

Consequently, the Reyeses, petitioners herein, were precluded from raising the rentals and from ejecting the tenants. In 1973,
respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on the schedule of market
values duly reviewed by the Secretary of Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting
petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They averred that the reassessments made
were "excessive, unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed upon them greatly
exceeded the annual income derived from their properties.

Petitioners: maintain that the "Income Approach" method would have been more realistic for in disregarding the effect of the restrictions
imposed by P.D. 20 on the market value of the properties affected, respondent Assessor of the City of Manila unlawfully and
unjustifiably set increased new assessed values at levels so high and successive that the resulting annual real estate taxes would
admittedly exceed the sum total of the yearly rentals paid or payable by the dweller tenants under P.D. 20. Hence, petitioners
protested against the levels of the values assigned to their properties as revised and increased on the ground that they were arbitrarily
excessive, unwarranted, inequitable, confiscatory and unconstitutional (Rollo, p. 10-A).

Respondent: Board of Tax Assessment Appeals admits in its decision that the income approach is used in determining land values in
some vicinities, it maintains that when income is affected by some sort of price control, the same is rejected in the consideration and
study of land values as in the case of properties affected by the Rent Control Law for they do not project the true market value in the
open market. Thus, respondents opted instead for the "Comparable Sales Approach" on the ground that the value estimate of the
properties predicated upon prices paid in actual, market transactions would be a uniform and a more credible standards to use
especially in case of mass appraisal of properties

Held:

Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only be uniform, but must also be
equitable and progressive. Uniformity has been defined as that principle by which all taxable articles or kinds of property of the same
class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]).

Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is progressive when its rate goes up depending
on the resources of the person affected (Ibid.).

it is unquestionable that both the “Comparable Sales Approach” and the “Income Approach” are generally acceptable methods of appraisal
for taxation purposes. However, it is conceded that the propriety of one as against the other would of course depend on several factors.

By no stretch of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties
not so covered. The former has naturally a much lesser market value in new of the rental restrictions.

Ironically, in the case at bar, not even the factors determinant of the assessed value of subject properties under the "comparable sales
approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between
a willing seller and a willing buyer and (2) the property must be comparable property (Rollo, p. 27). Nothing can justify or support their
view as it is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing
buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were
comparable with other residential properties not burdened by P.D. 20. Neither can the given circumstances be nonchalantly dismissed by
public respondents as imposed under distressed conditions clearly implying that the same were merely temporary in character. At this
point in time, the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has existed for around
twenty (20) years with no end to it in sight

f. Plenary and Unlimited - Chamber of Real Estate and Builder’s Associations, Inc. v. Romulo, G.R. No. 160756, 09 March 2010

Facts: Petitioner is an association of real estate developers and builders in the Philippines. It impleaded former Executive Secretary Alberto
Romulo, then acting Secretary of Finance Juanita D. Amatong and then Commissioner of Internal Revenue Guillermo Parayno, Jr. as
respondents.

Petitioner assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations and creditable
withholding tax (CWT) on sales of real properties classified as ordinary assets.

Section 27(E) of RA 8424 provides for MCIT on domestic corporations and is implemented by RR 9-98. Petitioner argues that the MCIT
violates the due process clause because it levies income tax even if there is no realized gain.

Petitioner also seeks to nullify Sections 2.57.2(J) (as amended by RR 6-2001) and 2.58.2 of RR 2-98, and Section 4(a)(ii) and (c)(ii) of RR 7-
2003, all of which prescribe the rules and procedures for the collection of CWT on the sale of real properties categorized as ordinary
assets.
Petitioner contends that these revenue regulations are contrary to law for two reasons:

first, they ignore the different treatment by RA 8424 of ordinary assets and capital assets and second, respondent Secretary of Finance
has no authority to collect CWT, much less, to base the CWT on the gross selling price or fair market value of the real properties classified
as ordinary assets.

Petitioner also asserts that the enumerated provisions of the subject revenue regulations violate the due process clause because, like the
MCIT, the government collects income tax even when the net income has not yet been determined. They contravene the equal
protection clause as well because the CWT is being levied upon real estate enterprises but not on other business enterprises, more
particularly those in the manufacturing sector.

Issue:

Whether or not the imposition of the MCIT on domestic corporations is unconstitutional?

Held:The petition is dismissed.

POLITICAL LAW: constitutionality of MCIT

Petitioner claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because it is highly oppressive, arbitrary and confiscatory
which amounts to deprivation of property without due process of law. It explains that gross income as defined under said provision only
considers the cost of goods sold and other direct expenses; other major expenditures, such as administrative and interest expenses which
are equally necessary to produce gross income, were not taken into account.[31]Thus, pegging the tax base of the MCIT to a
corporations gross income is tantamount to a confiscation of capital because gross income, unlike net income, is not realized
gain. The Court disagrees.

Taxes are the lifeblood of the government. Without taxes, the government can neither exist nor endure. The exercise of taxing power
derives its source from the very existence of the State whose social contract with its citizens obliges it to promote public interest and the
common good.

Taxation is an inherent attribute of sovereignty. It is a power that is purely legislative. Essentially, this means that in the legislature
primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place)
of taxation .It has the authority to prescribe a certain tax at a specific rate for a particular public purpose on persons or things within its
jurisdiction. In other words, the legislature wields the power to define what tax shall be imposed, why it should be imposed, how much
tax shall be imposed, against whom (or what) it shall be imposed and where it shall be imposed.

As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in its very nature no limits, so that the
principal check against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its
constituency who are to pay it. Nevertheless, it is circumscribed by constitutional limitations. At the same time, like any other
statute, tax legislation carries a presumption of constitutionality.

The constitutional safeguard of due process is embodied in the fiat [no] person shall be deprived of life, liberty or property without due
process of law.

Income means all the wealth which flows into the taxpayer other than a mere return on capital. Capital is a fund or property existing at
one distinct point in time while income denotes a flow of wealth during a definite period of time. Income is gain derived and severed from
capital. For income to be taxable, the following requisites must exist: (1) there must be gain; (2) the gain must be realized or received and
(3)the gain must not be excluded by law or treaty from taxation.

Certainly, an income tax is arbitrary and confiscatory if it taxes capital because capital is not income. In other words, it is income,
not capital, which is subject to income tax. However, the MCIT is not a tax on capital.

The MCIT is imposed on gross income which is arrived at by deducting the capital spent by a corporation in the sale of its goods,
i.e., the cost of goods and other direct expenses from gross sales. Clearly, the capital is not being taxed.

Furthermore, the MCIT is not an additional tax imposition. It is imposed in lieuofthe normal net income tax, and only if the normal
income tax is suspiciously low. The MCIT merely approximates the amount of net income tax due from a corporation, pegging the rate
at a very much reduced 2% and uses as the base the corporations gross income.

The United States has a similar alternative minimum tax (AMT) system which is generally characterized by a lower tax rate but a broader
tax base. Since our income tax laws are of American origin, interpretations by American courts of our parallel tax laws have persuasive
effect on the interpretation of these laws. Although our MCIT is not exactly the same as the AMT, the policy behind them and the procedure
of their implementation are comparable. American courts have also emphasized that Congress has the power to condition, limit or deny
deductions from gross income in order to arrive at the net that it chooses to tax. This is because deductions are a matter of legislative
grace.

Absent any other valid objection, the assignment of gross income, instead of net income, as the tax base of the MCIT, taken with the
reduction of the tax rate from 32% to 2%, is not constitutionally objectionable

Moreover, petitioner does not cite any actual, specific and concrete negative experiences of its members nor does it present empirical
data to show that the implementation of the MCIT resulted in the confiscation of their property

In sum, petitioner failed to support, by any factual or legal basis, its allegation that the MCIT is arbitrary and confiscatory. The
Court cannot strike down a law as unconstitutional simply because of its yokes. Taxation is necessarily burdensome because, by its nature,
it adversely affects property rights. The party alleging the laws unconstitutionality has the burden to demonstrate the supposed violations
in understandable terms.

On the other hand, RR 9-98, in declaring that MCIT should be imposed whenever such corporation has zero or negative taxable income,
merely defines the coverage of Section 27(E).This means that even if a corporation incurs a net loss in its business operations or reports
zero income after deducting its expenses, it is still subject to an MCIT of 2% of its gross income. This is consistent with the law which
imposes the MCIT on gross income notwithstanding the amount of the net income. But the law also states that the MCIT is to be paid
only if it is greater than the normal net income. Obviously, it may well be the case that the MCIT would be less than the net income of the
corporation which posts a zero or negative taxable income.

The withholding tax system is a procedure through which taxes (including income taxes) are collected. Under Section 57 of RA 8424, the
types of income subject to withholding tax are divided into three categories: (a) withholding of final tax on certain incomes; (b) withholding
of creditable tax at source and (c) tax-free covenant bonds

6. Taxation as an Implement of Eminent Domain and Police Power (pages 2-4)

a. 71 Am Jur 2nd 395-397
b. Lutz v. Araneta, 98 Phil 48

FACTS: This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed by
Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.

Promulgated in 1940, the due to the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the
Tydings-McDuffe Act, and the "eventual loss of its preferential position in the United States market"; wherefore, the national policy was
expressed "to obtain a readjustment of the benefits derived from the sugar industry by the component elements thereof" and "to stabilize
the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the United States market and the
imposition of the export taxes."

In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on a graduated basis, on
each picul of sugar manufactured; while section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar cane
and ceded to others for a consideration, on lease or otherwise a tax equivalent to the difference between the money value of the rental
or consideration collected and the amount representing 12 per centum of the assessed value of such land.

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from the
Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949
and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively,
which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action having been dismissed by the
Court of First Instance, the plaintiffs appealed the case directly to this Court (Judiciary Act, section 17).

ISSUE: Whether or not the CA No. 567 or Sugar Adjustment Act is constitutional and for public purpose.

HELD: The basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth Act No. 567 is a pure
exercise of the taxing power. Analysis of the Act, and particularly of section 6, will show that 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.

This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation, sugar occupying a leading
position among its export products; that it gives employment to thousands of laborers in fields and factories; that it is a great source of
the state's wealth, is one of the important sources of foreign exchange needed by our government, and is thus pivotal in the plans of a
regime committed to a policy of currency stability. 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.

Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of public concern, 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 section 6 of the law bear no relation to the objective pursued 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.

That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint; indeed, it appears rational
that the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. At any rate, 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 "inequalities which
result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation".

From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act, now in question,
should be exclusively spent in aid of the sugar industry, since it is that very enterprise that is being protected. It may be that other
industries are also in need of similar protection; that the legislature is not required by the Constitution to adhere to a policy of "all or
none." As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil where it is
most felt, it is not to be overthrown because there are other instances to which it might have been applied;" and that "the legislative
authority, exerted within its proper field, need not embrace all the evils within its reach".

c. Gerochi v. Bautista, G.R. No. 159796, 17 July 2007

Facts:
Petitioners praying that Section 34 of Republic Act (RA) 9136, otherwise known as the “Electric Power Industry Reform
Act of 2001” (EPIRA), imposing the Universal Charge,1 and Rule 18 of the Rules and Regulations (IRR)2 which seeks to
implement the said imposition, be declared unconstitutional.

Respondents contend that Universal Charge is levied for a specific regulatory purpose, which is to ensure the viability of the
country’s electric power industry. Thus, it is exacted by the State in the exercise of its inherent police power.

Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor General (OSG), share the same view
that the Universal Charge is not a tax because it is levied for a specific regulatory purpose, which is to ensure the viability of the
country’s electric power industry, and is, therefore, an exaction in the exercise of the State’s police power.

ISSUE: Whether or not the universal charge is a tax.

RULING: NO. The assailed universal charge is not a tax, but an exaction in the exercise of the State’s police power. That public
welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the State regarding electrification.
Moreover, the Special Trust Fund feature of the universal charge reasonably serves and assures the attainment and perpetuity
of the purposes for which the universal charge is imposed (e.g. to ensure the viability of the country’s electric power industry),
further boosting the position that the same is an exaction primarily in pursuit of the State’s police objectives
If generation 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 revenue is incidentally raised does not make the imposition a tax.

The taxing power may be used as an implement of police power. The theory behind the exercise of the power to tax emanates
from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the
people

Held:
 From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the
exercise of the State’s police power. Public welfare is surely promoted.

Police Power; Taxation; Police power is the power of the state to promote public welfare by restraining and regulating the use of
liberty and property—it is the most pervasive, the least limitable, and the most demanding of the three fundamental powers of
the State and the justification is found in the Latin maxims salus populi est suprema lex (the welfare of the people is the supreme
law) and sic utere tuo ut alienum non laedas (so use your property as not to injure the property of others); The theory behind
the exercise of the power to tax emanates from necessity, without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people; That the power to “regulate” means the power to protect, foster, promote, preserve,
and control, with due regard for the interests, first and foremost, of the public, then of the utility and of its patrons.—The power
to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against
its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency that is to pay it. It
is based on the principle that taxes are the lifeblood of the government, and their prompt and certain availability is an imperious
need.

Thus, the theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its
mandate of promoting the general welfare and well-being of the people. On the other hand, police power is the power of the
state to promote public welfare by restraining and regulating the use of liberty and property. It is the most pervasive, the least
limitable, and the most demanding of the three fundamental powers of the State. The justification is found in the Latin maxims
salus populi est suprema lex (the welfare of the people is the supreme law) and sic utere tuo ut alienum non laedas (so use your
property as not to injure the property of others). As an inherent attribute of sovereignty which virtually extends to all public
needs, police power grants a wide panoply of instruments through which the State, as parens patriae, gives effect to a host of
its regulatory powers. We have held that the power to “regulate” means the power to protect, foster, promote, preserve, and
control, with due regard for the interests, first and foremost, of the public, then of the utility and of its patrons.

7. Characteristics of Taxation (page 7)

a. Enforced Contribution
b. Progressive - Article VI, Section 28(a) of the Constitution
c. Generally payable in money - Borja v. Gella, 8 SCRA 602 (1963)

Facts:

Jose de Borja has been delinquent in the payment of his real estate taxes since 1958 for properties located in the City of Manila and
Pasay City and has offered to pay them with two negotiable certificates of indebtedness Nos. 3064 and 3065 in the amounts of
P793.40 and P717.69, respectively. Borja, was, however, a mere assignee of the aforesaid negotiable certificates, the applicants for
backpay rights covered by them being respectively Rafael Vizcaya and Pablo Batario Luna.

The offers to pay the real estate taxes in question were rejected by the city treasurers of both Manila and Pasay cities on the ground
of their limited negotiability under Section 2, Republic Act No. 304, as amended by Republic Act 800, and in the case of the city treasurer
of Manila on the further ground that he was ordered not to accept them by the city mayor, for which reason Borja was prompted to
bring the question to the Treasurer of the Philippines who opined, among others, that the negotiable certificates cannot be accepted as
payment of real estate taxes inasmuch as the law provides for their acceptance from their backpay holder only or the original applicant
himself, but not his assignee.

Lower court ordered to accept petitioner's Negotiable Certificates of Indebtedness.

Issue: w/n De Borja may use the negotiable certificate to pay for his real estate taxes – NO.

Held:

The law is explicit that in order that a certificate may be used in payment of an obligation the same must be subsisting at the time of its
approval even if we hold that a tax partakes of this character, neither can it be contended that appellee can compel the government to
accept the alleged certificates of indebtedness in payment of his real estate taxes under proviso No. 2 above quoted also for the reason
that in order that such payment may be allowed the tax must be owed by the applicant himself.
This is the correct implication that may be drawn from the use by the law of the words "his taxes". Verily, the right to use the backpay
certificate in settlement of taxes is given only to the applicant and not to any holder of any negotiable certificate to whom the
law only gives the right to have it discounted by a Filipino citizen or corporation under certain limitations.

He is merely an assignee thereof, Or a subsequent holder whose right is at most to have it discounted upon maturity—or to negotiate it
in the meantime. A fortiori, it may be included that, not having the right to use said certificates to pay his taxes, appellee cannot compel
appellants to accept them as he requests in the present petition for mandamus

compensation cannot be effected with regard to the two obligations in question. In the first place, the debtor insofar as the certificates of
indebtedness are concerned is the Republic of the Philippines, whereas the real estate taxes owed by appellee are due to the City of
Manila and Pasay City, each one of which having a distinct and separate personality from our Republic.

With regard to the certificates, the creditor is the appellee while the debtor is the Republic of the Philippines. And with regard to the taxes,
the creditors are the City of Manila and Pasay City while the debtor is the appellee. It appears, therefore, that each one of the obligors
concerning the two obligations is not at the same time the principal creditor of the other

d. Legislative - The power to tax is inherent in the State, such power being inherently legislative, based on the principle that
taxes are a grant of the people who are taxed, and the grant must be made by the immediate representatives of the people;
and where the people have laid the power, there it must remain and be exercised. (CIR vs. Fortune, 2008)

e. For public purpose

8. Purposes of Taxation (pages 8-10)

a. Revenue-raising
i. Fels Energy v. The Province of Batangas, G.R. No. 168557, 16 Feb 2007

b. Non-revenue/special or regulatory
i. 71 Am Jur 2nd 371-372
ii. Planters Products, Inc. v. Fertiphil Corporation, 564 SCRA 385 (2008)

FACTS:

President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among others, for the imposition
of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers which resulted in having Fertiphil paying P
10/bag sold to the Fertilizer and Perticide Authority (FPA).

FPA remits its collection to Far East Bank and Trust Company who APPLIES THE PAYMENT of corporate debts of Planters Products
Inc. (PPI)

After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Upon return of democracy, Fertiphil demanded a
refund but PPI refused. Fertiphil filed a complaint for collection and damages against FPA and PPI with the RTC on the ground that LOI
No. 1465 is unjust, unreasonable oppressive, invalid and unlawful resulting to denial of due process of law.

FPA answered that it is a valid exercise of the police power of the state in ensuring the stability of the fertilizing industry in the
country and that Fertiphil did NOT sustain damages since the burden imposed fell on the ultimate consumers.

RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because it is NOT for public purpose as
PPI is a private corporation.

ISSUE:

2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power

Held:
Yes. Taxes are exacted only for a public purpose. The P10 levy is unconstitutional because it was not for a public purpose. The levy was imposed to give undue benefit to PPI. The purpose of a law is evident
from its text or inferable from other secondary sources. Here, We agree with the RTC and that CA that the levy imposed under LOI No. 1465 ws 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.” This suggests that the levy was actually imposed to benefit PPI. The LOI
notably does not fix a maximum amount when PPI is deemed financially “viable.” Worse, the liability of Fertiphil and other domestic sellers of fertilizer to pay the levy is made indefinite. They are required to
continuously pay the levy until adequate capital is raised for PPI.

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.49 This proves that PPI benefited
from the LOI. It is also proves that the main purpose of the law was to give undue benefit and advantage to PPI.

Fourth, the levy was used to pay the corporate debts of PPI.

PPI insists that LOI No. 1465 is a valid exercise either of the police power or the power of taxation. It claims that the LOI was implemented for the purpose of assuring the fertilizer supply and distribution in
the country and for benefiting a foundation created by law to hold in trust for millions of farmers their stock ownership in PPI.

Fertiphil counters that the LOI is unconstitutional because it was enacted to give benefit to a private company. The levy was imposed to pay the corporate debt of PPI. Fertiphil also argues that, even if the
LOI is enacted under the police power, it is still unconstitutional because it did not promote the general welfare of the people or public interest.

Police power and the power of taxation are inherent powers of the State. These powers are distinct and have different tests for validity.
Police power is the power of the State to enact legislation that may interfere with personal liberty or property in order to promote the
general welfare,39 while the power of taxation is the power to levy taxes to be used for public purpose.

The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The “lawful subjects”
and “lawful means” tests are used to determine the validity of a law enacted under the police power.40 The power of taxation, on the
other hand, is circumscribed by inherent and constitutional limitations

We agree with the RTC that the imposition of the levy was an exercise by the State of its taxation power. While it is true that the power of
taxation can be used as an implement of police power,41 the primary purpose of the levy is revenue generation. 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.

The P10 levy under LOI No. 1465 is too excessive to serve a mere regulatory purpose. The levy, no doubt, was a big burden on the
seller or the ultimate consumer. It increased the price of a bag of fertilizer by as much as five percent.45 A plain reading of the LOI also
supports the conclusion that the levy was for revenue generation. The LOI expressly provided that the levy was imposed “until adequate
capital is raised to make PPI viable.”

9. Basis of Taxation
a. Lifeblood Theory (pages 7-8)
i. Marcos II v. CA, 273 SCRA 47 (1997)

Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the deficiency income tax assessments and estate tax
assessments upon the estate and properties of his late father final despite the pendency of the probate proceedings of the will of the
late President. On the other hand, the BIR argued that the State's authority to collect internal revenue taxes is paramount.

HELD:

The approval of the court, sitting in probate or as a settlement tribunal over the deceased's estate, is not a mandatory requirement in the
collection of estate taxes. The enforcement of tax laws and the collection of taxes are of paramount importance for the sustenance of
government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection
should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is, therefore, necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of common good, may be achieved.

This is a Petition for Review on Certiorari assailing the decision of the Court of Appeals (CA) dated November 29,1994 where the said
court held:

In view of all the foregoing, we rule that the deficiency income tax assessments and estate tax assessment, are already final and not
subject to appeal. Thus, the subsequent levy of real properties is a tax remedy resorted to by the government, sanctioned by Section 213
and 218 of the National Internal Revenue Code. This summary tax remedy is distinct and

separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded by the pendency
of any other tax remedies instituted by the government.

Seven (7) years after the death of former President Ferdinand E. Marcos, the matter of the settlement of his estate, and its dues to the
government in estate taxes, are still unresolved, the latter issue being now before this Court for resolution. Ferdinand R. Marcos II, the
eldest son of the

decedent, questions the actuations of the respondent Commissioner of Internal Revenue in assessing, and collecting through the summary
remedy of Levy on Real Properties, estate and income tax delinquencies upon the estate and properties of his father, despite the pendency
of the proceedings on probate of the will of the late president, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court of
Pasig, Branch 156.

Criminal charges were filed against Mrs. Imelda R. Marcos before the Regional Trial of Quezon City for violations of Sections 82, 83 and
84 (has penalized under Sections 253 and 254 in relation to Section 252 - a &b) of the National Internal Revenue Code (NIRC).

The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate Tax Return for the estate of the late
president, the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and the Income Tax Returns of petitioner Ferdinand
"Bongbong" Marcos II for the years 1982 to 1985.

On July 26, 1991, the BIR issued the following:

(1) Deficiency estate tax assessment against the estate of the late president Ferdinand Marcos in the amount of P23, 293,607,638.00 Pesos;

(2) Deficiency income tax assessments against the Spouses Ferdinand and Imelda Marcos in the amounts of PI49, 551.70 and
P184,009,737.40 representing deficiency income tax for the years

1985 and 1986);

(3) Deficiency income tax assessment against petitioner Ferdinand "Bongbong" Marcos II in the amounts ofP258. 70 pesos; P9, 386-40
Pesos; P 4,388.30 Pesos; and P6, 376.60 Pesos representing his deficiency income taxes for the years 1982 to 1985).Copies of the deficiency
estate and income tax assessments were all personally and constructively but to no

avail. The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the other heirs of the late president, within
30 days from service of said assessments.

Subsequently, a total of twenty-six notices of levy on real property against certain parcels of land owned by the Marcoses to satisfy the
alleged estate tax and deficiency income taxes of Spouses Marcos.

Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition with an application for writ of preliminary
injunction and/or temporary restraining order on June 28,1993, seeking to annul and set aside the Notices of Levy on real property dated
February 22, 1993 and May 20, 1993, issued by respondent Commissioner of Internal Revenue; annul and set aside the Notices of Sale
dated May 26, 1993; and, enjoin the Head Revenue Executive Assistant Director II (Collection Service), from proceeding with the Auction
of the real properties covered by Notices of Sale.

ISSUE:

Whether or not BIR has the authority to collect by the summary remedy of levying upon, and sale of real properties of the decedent,
estate tx deficiencies, without the cognition and authority of the court sitting in probate over the supposed will of the deceased?

Whether or not BIR's Notices of Levy are null and void for having been issued beyond the allowed period? and

Whether or not BIR's Notices of Levy are null and void for

having been issued without valid service upon the petitioner?

There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court's
approval of the state's claim for estate taxes, before the same can be enforced and collected. On the contrary, under Section 87 of the
NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate
to deliver any distributive

share to any party interested in the estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxes
have been paid.

The omission to file an estate tax return, and the subsequent failure to contest or appeal the assessment made by the BIR is fatal to the
petitioner's cause, as under the provision of Article 223 of the NIRC, in case of failure to file a return, the tax may be assessed at any time
within ten years after the omission, and any tax so assessed may be collected by levy upon real property within three years following the
assessment of the tax.

Since the estate tax assessment had become final and unappealable by the petitioner's default as regards protesting the validity of the
said assessment, there is now no reason why the BIR cannot continue with the collection of the said tax. Any objection against the
assessment should have been pursued following the avenue paved in Section 229 of the NIRC on
protests on assessments of internal revenue taxes.

Under Section 213 of the NIRC, in the case of notices of levy issued to satisfy the delinquent estate tax, the delinquent taxpayer is the
Estate of the decedent, and not necessarily, and exclusively, the petitioner as heir of the deceased. In the same vein, in the matter of
income tax delinquency of the late president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service of notices of
levy in satisfaction of

these tax delinquencies upon the petitioner is not required by law. The foregoing notwithstanding, the record shows that notices of
warrants of distrait and levy of sale were furnished the counsel of petitioner on April 7, 1993, and June 10, 1993, and thepetitioner himself
on April 12, 1993 at his office at the Batasang Pambansa. We cannot therefore, countenance petitioner's insistence that he was denied
due process.

ii. Valera v. Office of the Ombudsman, 547 SCRA 43 (2008)

b. Necessity Theory (page 8)
i. National Power Corporation v. City of Cabanatuan, 401 SCRA 259 (2003)
c. Symbiotic relationship
i. CIR v. Algue, 158 SCRA 9 (1988)

Facts:

On January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities,
received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and
1959. 1 On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same
day in the office of the petitioner. 2 On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through
its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. 3 A search of the protest in the
dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred
service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it
was only then that he accepted the warrant of distraint and levy earlier sought to be served. 5Sixteen days later, on April 23, 1965, Algue
filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals.

Issue:

Whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in
accordance with law.

Held:

The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty
days after receipt of the decision or ruling challenged. It is true that as a rule the warrant of distraint and levy is "proof of the finality of
the assessment" and renders hopeless a request for reconsideration," being "tantamount to an outright denial thereof and makes the
said request deemed rejected." But there is a special circumstance in the case at bar that prevents application of this accepted doctrine.

The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest.
This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located
in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax
authorities. During the intervening period, the warrant was premature and could therefore not be served.

As the Court of Tax Appeals correctly noted," the protest filed by private respondent was not pro forma and was based on strong legal
considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the
date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private
respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the
appeal was filed on April 23, 1965, only 20 days of the reglementary period had been consumed

10. Principles of Sound Tax System (pages 23-24)

a. Fiscal Adequacy
i. Chavez v. Ongpin, 186 SCRA 331 (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.

Executive Order No. 73 accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating
an excessive increase in real property taxes by 100% to 400% on improvements, and up to 100% on land; that any increase in the value
of real property brought about by the revision of real property values and assessments would necessarily lead to a proportionate increase
in real property taxes; that sheer oppression is the result of increasing real property taxes at a period of time when harsh economic
conditions prevail; and that the increase in the market values of real property as reflected in the schedule of values was brought about
only by inflation and economic recession.

Petitioner Chavez and intervenor ROAP question the constitutionality of Executive Order No. 73 insofar as the revision of the assessments
and the effectivity thereof are concerned.

Chavez argues further that the unreasonable increase in real property taxes brought about by Executive Order No. 73 amounts to
a confiscation of property repugnant to the constitutional guarantee of due process, invoking the cases of Ermita-Malate Hotel, et
al. v. Mayor of Manila

The reliance on these two cases is certainly misplaced because the due process requirement called for therein applies to the “power to
tax.” Executive Order No. 73 does not impose new taxes nor increase taxes. Indeed, the government recognized the financial burden
to the taxpayers that will result from an increase in real property taxes. Hence, Executive Order No. 1019 was issued on April 18, 1985,
deferring the implementation of the increase in real property taxes resulting from the revised real property assessments, from January 1,
1985 to January 1, 1988.

Issue: w/n EO 73 is unconstitutional

Held: No.

the attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a continuing process mandated by
Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as constitutionally
infirm. However, Chavez failed to raise any objection against said decree.

Moreover, within sixty days from the date of receipt of the written notice of assessment, any owner who doubts the assessment of his
property, may appeal to the Local Board of Assessment Appeals. In case the owner or administrator of the property or the assessor is
not satisfied with the decision of the Local Board of Assessment Appeals, he may, within thirty days from the receipt of the decision,
appeal to the Central Board of Assessment Appeals. The decision of the Central Board of Assessment Appeals shall become final and
executory after the lapse of fifteen days from the date of receipt of the decision

Without Executive Order No. 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 revenues must be adequate to meet government expenditures and
their variations.

b. Administrative Feasibility
i. Diaz v. Sec. of Finance, G.R. No. 193007, 19 July 2011

Facts: Petitioners Renata Diaz and Aurora Timbol filed a petition assailing the validity of the impending imposition of VAT by the BIR on
the collection of tollway operators contending that. The VAT would result in increased toll fees and that they have an interest as
regular users of tollways in stopping the BIR. Petitioners hold the view that the toll fee is a “user’s tax” not a sale of services and 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.

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.
ISSUE:
1. Whether or not the imposition of VAT on tollway operators is administratively feasible
HELD:

MAIN ISSUE:

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.

Here, it remains to be seen how the taxing authority will actually implement the VAT on tollway operations. Any declaration by
the Court that the manner of its implementation is illegal or unconstitutional would be premature. Although the transcript of the August
12, 2010 Senate hearing provides some clue as to how the BIR intends to go about it,35 the facts pertaining to the matter are not
sufficiently established for the Court to pass judgment on.

The matter on how the VAT on tollway operations will be enforced must first be addressed to the BIR on whom the task of
implementing tax laws primarily and exclusively rests. The Court cannot preempt the BIR’s discretion on the matter, absent any
clear violation of law or the Constitution.

The executive exercises exclusive discretion in matters pertaining to the implementation and execution of tax laws. Consequently, the
executive is more properly suited to deal with the immediate and practical consequences of the VAT imposition. (See first meeting digests
for other issue)

c. Uniformity and Equality in Taxation

i. CIR v. Fortune Tobacco Corporation, G.R. No. 180006, 28 Sept 2011

Facts:

Under our tax laws, manufacturers of cigarettes are subject to pay excise taxes on their products. Prior to January 1, 1997, the excises
taxes on these products were in the form of ad valorem taxes, pursuant to Section 142 of the 1977 Tax Code.

Beginning January 1, 1997, Republic Act No. 8240 (1997 Tax Code) took effect and a shift from ad valorem to specific taxes was made.
Section 142 was renumbered as Section 145.

Sec 145, as amended by RA 8240, contained a proviso that “the rates of specific tax on cigars and cigarettes under paragraphs (1), (2), (3)
and (4) hereof, shall be increased by twelve percent (12%) on January 1, 2000”

To implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax Code and, pursuant to its rule-making
powers, the CIR issued Revenue Regulation No. (RR) 17-99, which also provided “ that the new specific tax rate for any existing brand of
cigars [and] cigarettes packed by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that
is actually being paid prior to January 1, 2000.”

Fortune Tobacco Corporation paid advance excise taxes for the year 2003 in the amount of P11.15 billion, and for the period covering
January 1 to May 31, 2004 in the amount of P4.90 billion

In June 2004, Fortune Tobacco filed an administrative claim for tax refund with the CIR for erroneously and/or illegally collected taxes in
the amount of P491 million. Without waiting for the CIR's action on its claim, Fortune Tobacco filed with the CTA a judicial claim for tax
refund

The CTA First Division ruled in favor of Fortune Tobacco and granted its claim for refund. The CTA En Banc upheld the ruling of the division.
The CIR's motion for reconsideration was denied.

Fortune Tobacco's claim for refund of overpaid excise taxes is based primarily on what it considers as an "unauthorized administrative
legislation" on the part of the CIR. Specifically, it assails the proviso in Section 1 of RR 17-99 that requires the payment of the "excise
tax actually being paid prior to January 1, 2000" if this amount is higher than the new specific tax rate (i.e., the rates of specific
taxes imposed in 1997 for each category of cigarette, plus 12%). It claimed that by including the proviso, the CIR went beyond
the language of the law and usurped Congress' power. The CTA sided with Fortune Tobacco and allowed the latter to claim the refund.
The CIR, on the other hand, posits that the inclusion of the proviso in Section 1 of RR 17-99 was made to carry into effect the law's intent
and is well within the scope of his delegated legislative authority. The CIR claims that the CTA's strict interpretation of the law ignored
Congress' intent "to increase the collection of excise taxes by increasing specific tax rates on `sin' products.

Held:

Following the principle of stare decisis, our ruling in the present case should no longer come as a surprise. The proviso in Section 1 of RR
17-99 clearly went beyond the terms of the law it was supposed to implement, and therefore entitles Fortune Tobacco to claim a refund
of the overpaid excise taxes collected pursuant to this provision.

Previous ruling: By adding the qualification that the tax due after the 12% increase becomes effective shall not be lower than the
tax actually paid prior to 1 January 2000, Revenue Regulation No. 17-99 effectively imposes a tax which is the higher amount
between the ad valorem tax being paid at the end of the three (3)-year transition period and the specific tax under
paragraph C, sub-paragraph (1)-(4), as increased by 12% - a situation not supported by the plain wording of Section 145 of the Tax
Code.

Rule of uniformity of taxation violated by the proviso in Section 1, RR 17-99

The Constitution requires that taxation should be uniform and equitable.[20] Uniformity in taxation requires that all subjects or objects
of taxation, similarly situated, are to be treated alike both in privileges and liabilities.[21] This requirement, however, is unwittingly violated
when the proviso in Section 1 of RR 17-99 is applied in certain cases.

Although the brands all belong to the same category, the proviso in Section 1, RR 17-99 authorized the imposition of different
(and grossly disproportionate) tax rates (see column [D]). It effectively extended the qualification stated in the third paragraph of
Section 145(c) of the 1997 Tax Code that was supposed to apply only during the transition period:

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the
tax, which is due from each brand on October 1, 1996.

In the process, the CIR also perpetuated the unequal tax treatment of similar goods that was supposed to be cured by the shift from ad
valorem to specific taxes.

11. Aspects of Taxation (pages 12-15)

a. Levy – power of taxation is vested on and exercised by the legislative department. The determination of what should be
taxed, when, how, or where lies in the legislative department.
b. Assessment and Collection – exercised by executive department
i. Powers and Duties of the BIR (pages 17-20)
1. Genato v. Silapan, A.C. No. 4078 dated 14 July 2003

Facts:

A complaint was filed Emmanuel Romero against Atty. Essex Silapan who

The conflict between the parties started when respondent borrowed two hundred thousand pesos (P200,000.00) from complainant which
he intended to use as downpayment for the purchase of a new car. In return, respondent issued to complainant a postdated check in the
amount of P176,528.00 to answer for the six (6) months interest on the loan. He likewise mortgaged to complainant his house and lot in
Quezon City but did not surrender its title claiming that it was the subject of reconstitution proceedings before the Quezon City Register
of Deeds.

With the money borrowed from complainant, respondent purchased a new car. However, the document of sale of the car was issued
in complainant’s name and financed through City Trust Company.

Subsequently, respondent failed to pay the amortization on the car and the financing firm sent demand letters to complainant.
Complainant tried to encash respondent’s postdated check with the drawee bank but it was dishonored as respondent’s account therein
was already closed.

Respondent failed to heed complainant’s repeated demands for payment. Complainant then filed a criminal case against respondent for
violation of Batas Pambansa Blg. 22 and a civil case for judicial foreclosure of real estate mortgage.
Respondent raised as a defense that Romero asked him to bribe the DOJ, the prosecutor, and the judge in relation to Romero’s BP22
case.

Issue: w/n respondent committed a breach of trust and confidence by imputing to complainant illegal practices and disclosing
complainant’s alleged intention to bribe government officials in connection with a pending case.

Held:

The long-established rule is that an attorney is not permitted to disclose communications made to him in his professional character by a
client, unless the latter consents. This obligation to preserve the confidences and secrets of a client arises at the inception of their of a
client arises at the inception of their relationship relationship The protection given to the client is perpetual and does not cease with the
termination of the litigation, nor is it affected by the party’s ceasing to employ the attorney and retaining another, or by any other change
of relation between them. It even survives the death of the client.

It must be stressed, however, that the privilege against disclosure of confidential communications or information is limited only to
communications which are legitimately and properly within the scope of a lawful employment of a lawyer. It does not extend to those
made in contemplation of a crime or perpetration of a fraud.

If the unlawful purpose is avowed, as in this case, the complainant’s alleged intention to bribe government officials in relation to his case,
the communication is not covered by the privilege as the client does not consult the lawyer professionally. It is not within the profession
of a lawyer to advise a client as to how he may commit a crime as a lawyer is not a gun for hire. Thus, the attorney-client privilege does
not attach, there being no professional employment in the strict sense.

However, The disclosures were not indispensable to protect his rights as they were not pertinent to the foreclosure case. Atty. Essex L.
Silapan is ordered suspended from the practice of law for a period of six (6) months effective upon receipt of this Decision.

2. CIR v. CTA, G.R. No. 207843, 15 July 2015

Petron, which is engaged in the manufacture and marketing of petroleum products, imports alkylate as a raw material or blending
component for the manufacture of ethanol-blended motor gasoline.

In June 2012, Petron imported 12,802,660 liters of alkylate and paid value-added tax (VAT) in the total amount of P41,657,533.00

Based on the Final Computation, said importation was subjected by the Collector of Customs of Port Limay, Bataan, upon instructions of
the Commissioner of Customs (COC), to excise taxes of P4.35 per liter, or in the aggregate amount of P55,691,571.00, and consequently,
to an additional VAT of 12% on the imposed excise tax in the amount of P6,682,989.00.

The imposition of the excise tax was supposedly premised on Customs Memorandum Circular (CMC) No. 164-2012 dated July 18, 2012,
implementing the Letter dated June 29, 2012 issued by the CIR, which states that: [A]lkylate which is a product of distillation similar to
that of naphta, is subject to excise tax under Section 1 48(e) of the National Internal Revenue Code (NIRC) of 1997

Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012, which gave effect to the CIR's June 29, 2012 Letter
interpreting Section 148 (e) of the NIRC as to include alkylate among the articles subject to customs duties, hence, Petron's petition before
the CTA ultimately challenging the legality and constitutionality of the CIR's aforesaid interpretation of a tax provision.

In view of the CIR's assessment, Petron filed before the CTA a petition for review

Issue: whether or not the CTA properly assumed jurisdiction over the petition assailing the imposition of excise tax on Petron's importation
of alkylate based on Section 148 (e) of the NIRC.

Held:

Jurisdiction Issue:

Thee CIR correctly argues that the CTA had no jurisdiction to take cognizance of the petition as its resolution would necessarily involve a
declaration of the validity or constitutionality of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject to the exclusive
review by the Secretary of Finance and ultimately by the regular courts. In British American Tobacco v. Camacho, [24] the Court ruled that
the CTA's jurisdiction to resolve tax disputes excludes the power to rule on the constitutionality or validity of a law, rule or
regulation.

the phrase "other matters arising under this Code," as stated in the second paragraph of Section 4 of the NIRC, should be understood as
pertaining to those matters directly related to the preceding phrase "disputed assessments, refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation thereto" and must therefore not be taken in isolation to invoke the jurisdiction of the CTA.[27]
In other words, the subject phrase should be used only in reference to cases that are, to begin with, subject to the exclusive appellate
jurisdiction of the CTA, i.e., those controversies over which the CIR had exercised her quasi-judicial functions or her power to decide
disputed assessments, refunds or internal revenue taxes, fees or other charges, penalties imposed in relation thereto, not to those that
involved the CIR's exercise of quasi-legislative powers.

Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative functions, the proper recourse against the
subject tax ruling expressed in CMC No. 164-2012 is a review by the Secretary of Finance and ultimately the regular courts.

Petron prematurely invoked the jurisdiction of the CTA. Under Section 7 of RA 1125, as amended by RA 9282, what is appealable to the
CTA is the decision of the COC over a customs collector's adverse ruling on a taxpayer's protest:

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure,
detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under
the Customs Law or other laws administered by the Bureau of Customs

Section 11 of the same law is no less categorical in stating that what may be the subject of an appeal to the CTA is a decision, ruling or
inaction of the CIR or the COC, among others:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or inaction of
the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and
Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an
appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed
by law for action as referred to in Section 7(a)(2) herein.

In this case, there was even no tax assessment to speak of. While customs collector Federico Bulanhagui himself admitted during the
CTA's November 8, 2012 hearing that the computation he had written at the back page of the IEIRD served as the final assessment
imposing excise tax on Petron's importation of alkylate,[33] the Court concurs with the CIR's stance that the subject IEIRD was not yet the
customs collector's final assessment that could be the proper subject of review. And even if it were, the same should have been brought
first for review before the COC and not directly to the CTA. It should be stressed that the CTA has no jurisdiction to review by appeal,
decisions of the customs collector.[34] The TCC prescribes that a party adversely affected by a ruling or decision of the customs collector
may protest such ruling or decision upon payment of the amount due[35] and, if aggrieved by the action of the customs collector on the
matter under protest, may have the same reviewed by the COC.[36] It is only after the coc shall have made an adverse ruling on the matter
may the aggrieved party file an appeal to the CTA.

Notably, Petron admitted to not having filed a protest of the assessment before the customs collector and elevating a possible adverse
ruling therein to the COC, reasoning that such a procedure would be costly and impractical, and would unjustly delay the resolution of
the issues which, being purely legal in nature anyway, were also beyond the authority of the customs collector to resolve with finality.[38]
This admission is at once decisive of the issue of the CTA's jurisdiction over the petition. There being no protest ruling by the customs
collector that was appealed to the COC, the filing of the petition before the CTA was premature as there was nothing yet to review

c. Payment
d. Refund