TAXATION LAW 1: ATTY. R. ONG ABRANTES, CPA
DELFIN
PART A. GENERAL PRINCIPLES OF TAXATION
I. INTRODUCTON TO TAXATION
CASES:
PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs.
MUNICIPALITY OF TANAUAN
69 SCRA 460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local
self-government carries with it the power to confer on such local
governmental agencies the power to tax.
FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with
preliminary injunction to declare Section 2 of Republic Act No. 2264,
otherwise known as the Local Autonomy Act, unconstitutional as an
undue delegation of taxing authority as well as to declare Ordinances
Nos. 23 and 27 denominated as "municipal production tax" of the
Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and
collects from soft drinks producers and manufacturers a tax of one-
sixteenth (1/16) of a centavo for every bottle of soft drink corked, and
Ordinance 27 levies and collects on soft drinks produced or
manufactured within the territorial jurisdiction of this municipality a
tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity. Aside from the undue delegation of authority,
appellant contends that it allows double taxation, and that the subject
ordinances are void for they impose percentage or specific tax.
ISSUE: Are the contentions of the appellant tenable?
RULIG:
No. On the issue of undue delegation of taxing power, it is settled that
the power of taxation is an essential and inherent attribute of
sovereignty, belonging as a matter of right to every independent
government, without being expressly conferred by the people. It is a
power that is purely legislative and which the central legislative body
cannot delegate either to the executive or judicial department of the
government without infringing upon the theory of separation of powers.
The exception, however, lies in the case of municipal corporations, to
which, said theory does not apply. Legislative powers may be delegated
to local governments in respect of matters of local concern. By
necessary implication, the legislative power to create political
corporations for purposes of local self-government carries with it the
power to confer on such local governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority
can be declared unconstitutional on the theory of double taxation. It
must be observed that the delegating authority specifies the limitations
and enumerates the taxes over which local taxation may not be
exercised. The reason is that the State has exclusively reserved the
same for its own prerogative. Moreover, double taxation, in general, is
not forbidden by our fundamental law, so that double taxation becomes
obnoxious only where the taxpayer is taxed twice for the benefit of the
same governmental entity or by the same jurisdiction for the same
purpose, but not in a case where one tax is imposed by the State and
the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature
of a percentage tax on sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or not) and not on the
sales. The volume capacity of the taxpayer's production of soft drinks
is considered solely for purposes of determining the tax rate on the
products, but there is not set ratio between the volume of sales and the
amount of the tax.
TIO VS VIDEOGRAM REGULATORY BOARD 151 SCRA 208, G.R.
NO. L-75697, JUNE 18, 1987
FACTS:
Tio is a videogram operator who assailed the constitutionality of PD
1987 entitled “An Act Creating the Videogram Regulatory Board” with
broad powers to regulate and supervise the videogram industry. The
Presidential Decree was also reinforced by Presidential Decree 1994
which amended the National Internal Revenue Code.
The amendment provides that “there shall be collected on each
processed video-tape cassette, ready for playback, regardless of length,
an annual tax of five pesos; Provided, that locally manufactured or
imported blank video tapes shall be subject to sales tax.”
The said law was brought about by the need to regulate the sale of
videograms as it has adverse effects to the movie industry. The
proliferation of videograms has significantly lessened the revenue being
acquired from the movie industry, and that such loss may be recovered
if videograms are to be taxed. Sec 10 of the PD imposes a 30% tax on
the gross receipts payable to the LGUs.
AD MAJOREM DEI GLORIAM +
JENNICA GYRL G.
Tio countered, among others, that the tax imposition provision is a rider
and is not germane to the subject matter of the PD.PD 1994 issued a
month thereafter reinforced PD 1987 and in effect amended the
National Internal Revenue Code (NIRC).
Petitioner's attack on the constitutionality of the DECREE on the
ground that there is undue delegation of power and authority.
ISSUE:
Whether or not the PD 1987 is unconstitutional due to the tax provision
included.
RULING:
No. The title of the decree, which calls for the creation of the VRB is
comprehensive enough to include the purposes expressed in its
Preamble and reasonably covered in all its provisions. It is unnecessary
to express all those objectives in the title or that the latter be an index
to the body of the decree. The foregoing provision is allied and germane
to, and is reasonably necessary for the accomplishment of the general
object of the decree, which is the regulation of the video industry
through the VRB as expressed in its title. The tax provision is not
inconsistent with nor foreign to the general subject and title. As a tool
for regulation it is simply one of the regulatory and control mechanisms
scattered throughout the decree.
The express purpose of PD 1987 to include taxation of the video
industry in order to regulate and rationalize the heretofore uncontrolled
distribution of videos is evident from Preambles 2 and 5. Those
preambles explain the motives of the lawmaker in presenting the
measure. Neither can it be successfully argued that the DECREE
contains an undue delegation of legislative power.
The grant in Section 11 of the DECREE of authority to the BOARD to
"solicit the direct assistance of other agencies and units of the
government and deputize, for a fixed and limited period, the heads or
personnel of such agencies and units to perform enforcement functions
for the Board" is not a delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution, enforcement,
and implementation. "The true distinction is between the delegation of
power to make the law, which necessarily involves a discretion as to
what it shall be, and conferring authority or discretion as to its
execution to be exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be made."
PHILIPPINE HEALTH CARE PROVIDERS V CIR G.R. NO. 167330
JUNE 12, 2008
J. CORONA
FACTS:
The petitioner, a prepaid health-care organization offering benefits to
its members. The CIR found that the organization had a deficiency in
the payment of the DST under Section 185 of the 1997 Tax Code which
stipulated its implementation:
“On all policies of insurance or bonds or obligations of the nature of
indemnity for loss, damage, or liability made or renewed by any person,
association or company or corporation transacting the business of
accident, fidelity, employer's liability, plate, glass, steam boiler, burglar,
elevator, automatic sprinkler, or other branch of insurance (except life,
marine, inland, and fire insurance)”
The CIR sent a demand for the payment of deficiency taxes, including
surcharges and interest, for 1996-1997 in the total amount of
P224,702,641.18.
The petitioner protested to the CIR, but it didn’t act on the appeal.
Hence, the company had to go to the CTA. The latter declared judgment
against them and reduced the taxes. It ordered them to pay 22 million
pesos for deficiency VAT for 1997 and 31 million deficiency VAT for
1996.
CA denied the company’s appeal an d increased taxes to 55 and 68
million for 1996 to 1997.
ISSUES:
WON a health care agreement in the nature of an insurance contract
and therefore subject to the documentary stamp tax (DST) imposed
under Section 185 of Republic Act 8424 (Tax Code of 1997)
RULING:
Yes. Petition dismissed.
Ratio:
The DST is levied on the exercise by persons of certain privileges
conferred by law for the creation, revision, or termination of specific
legal relationships through the execution of specific instruments.
The DST is an excise upon the privilege, opportunity, or facility offered
at exchanges for the transaction of the business. In particular, the DST
under Section 185 of the 1997 Tax Code is imposed on the privilege of
making or renewing any policy of insurance (except life, marine, inland
and fire insurance), bond or obligation in the nature of indemnity for
loss, damage, or liability.
Petitioner's health care agreement is primarily a contract of indemnity.
And in the recent case of Blue Cross Healthcare, Inc. v. Olivares, this
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 TAXATION LAW 1: ATTY. R. ONG ABRANTES, CPA
Court ruled that a health care agreement is in the nature of a non-life
insurance policy.
Its health care agreement is not a contract for
the provision of medical services. Petitioner does not actually
provide medical or hospital services but merely arranges for the same
It is also incorrect to say that the health care agreement is not based
on loss or damage because, under the said agreement, petitioner
assumes the liability and indemnifies its member for
hospital, medical and related expenses (such as professional fees of
physicians). The term "loss or damage" is broad enough to cover the
monetary expense or liability a member will incur in case of illness or
injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was
in the nature of non-life insurance, which is primarily a contract of
indemnity.
Similarly, the insurable interest of every member of petitioner's health
care program in obtaining the health care agreement is his own health.
Under the agreement, petitioner is bound to indemnify any member
who incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingency to the extent agreed
upon under the contract.
CIR VS SM PRIME HOLDINGS INC.
FACTS:
 In a number of CTA cases, the BIR sent SM Prime and First
Asia a Preliminary Assessment Notice (PAN) for VAT deficiency
on cinema ticket sales for taxable year 2000 (SM), 1999 (First
Asia), 2000 (First Asia), 2002 (First Asia), and 2003 (First
Asia).
o SM and First Asia filed for protest but the BIR just
denied them and sent them a Letter of Demand
subsequently.
o All the PANs were subjected to a Petition for Review
filed by SM and First Asia to the CTA.
 The CTA First Division ruled that there should only be one
business tax applicable to theater and movie houses, the 30%
amusement tax. Hence, the CIR is wrong in collecting VAT
from the ticket sales.
o CIR appealed the case to the CTA En Banc.
 The CTA En Banc affirmed the ruling of the CTA First Division.
ISSUE: Whether the cinema ticket sales are subject to VAT and thus
included in the meaning of “Sale or Exchange of Services”?
RULING: NO!
When VAT was enacted it replaced the tax on original and subsequent
sales tax and percentage tax on certain services. When the VAT law was
implemented, it exempted persons subject to amusement tax under the
NIRC from the coverage of VAT. When the Local Tax Code was repealed
by the Local Government Code of 1991, the local government continued
to impose amusement tax on admission tax on ticket sales. The
following amendments to the VAT law have been consistent that those
subject to amusement tax is no liable under VAT. Only lessors or
distributors of cinematographic films are included in the coverage of
VAT.
It can be seen from the foregoing that the legislative intent was not to
impose VAT on persons already covered by the amusement tax. To hold
otherwise would impose an unreasonable burden on cinema/theater
houses operators and proprietors, who would be paying an additional
10% VAT on top of the 30% amusement tax.
**Yung susunod the discussion ay yung sinabi ng court bago nila
inalam yung legislative intent na nakamention sa itaas**
Sec. 108 of the NIRC provides that, there shall be levied, assessed and
collected, a VAT equivalent to 10% of gross receipts derived from the
sale or exchange of services, including the use or lease of properties.
The phrase “sale or exchange of services” means the performance of all
kinds of services in the Philippines for others for a fee, remuneration or
consideration, including those…….lessors or distributors of
cinematographic films……..and similar services regardless of whether
or not the performance thereof calls for the exercise or use of the
physical or mental faculties. The phrase “sale or exchange of services”
shall likewise include: (7) lease of motion picture films, films, tapes and
discs.
A reading of the foregoing provision clearly shows that the enumeration
of the “sale or exchange of services” subject to VAT is not exhaustive.
The words, “including,” “similar services,” and “shall likewise include,”
indicate that the enumeration is by way of example only.
REPUBLIC OF THE PHILIPPINES V. CAGUIOA
October 15, 2007| Carpio-Morales, J. | Non-impairment
AD MAJOREM DEI GLORIAM +
JENNICA GYRL G. DELFIN
PETITIONER: Republic of the Philippines represented by Secretary of
Finance, Commissioner of BIR, Commissioner of Customs, and the
Collector of Customs of the Port of Subic
RESPONDENTS: Indigo Distribution Corporation, W Star Trading and
Warehousing Corporation, Freedom Brands Philippines Corporation,
Branded Warehouse, Inc., Altasia, Inc., Tainan Trade (Taiwan) Inc.,
Subic Park 'N Shop, Incorporated, Trading Gateways International
Philippines, Inc., Duty Free Superstore (DFS) Inc., Chijmes Trading,
Inc., Premier Freeport, Inc., Future Trade Subic Freeport, Inc., Grand
Comtrade Int'l., Corp., and First Platinum International, Inc.,
SUMMARY: Congress enacted RA 7227 that provides that no taxes
shall be imposed within the Subic Special Freeport and Economic
Zone. The companies listed as respondents applied for certificates of
exemption which were granted. RA 9334 was subsequently passed
which provided that all taxes, duties, charges, including excise taxes
shall be applied to cigars and cigarettes, distilled spirits, fermented
liquors and wines brought to the freeports of Subic Economic Freeport
Zone. Indigo, et. al. sought for reconsideration but were denied. They
filed a petition for declaratory relief with RTC Olongapo and Judge
Caguioa granted it as well as the injunction bond of P1M. The issue
is whether the tax exemption is contractual in nature and the right to
non-impairment of contracts may be invoked. While the tax
exemption contained in the Certificates of Registration of private
respondents may have been part of the inducement for carrying
on their businesses in the SBF, this exemption, nevertheless, is
far from being contractual in nature in the sense that the non-
impairment clause of the Constitution can rightly be invoked.
DOCTRINE: Certificates of Tax Exemption are not absolute and
is far from being contractual in nature in the sense that the non-
impairment clause of the Constitution can rightly be invoked.
FACTS:
1. In 1992, Congress enacted Republic Act (R.A) No. 7227 or the
BASES CONVERSION AND DEVELOPMENT ACT OF 1992
which created the Subic Special Economic and Freeport Zone
(SBF) and the Subic Bay Metropolitan Authority (SBMA). R.A.
No. 7227 envisioned the SBF to be developed into a "self-
sustaining, industrial, commercial, financial and investment
center to generate employment opportunities in and around
the zone and to attract and promote productive foreign
investments."
2. Section 12 of the law provided that “(b) The Subic Special
Economic Zone shall be operated and managed as a
separate customs territory ensuring free flow or
movement of goods and capital within, into and exported
out of the Subic Special Economic Zone, as well as provide
incentives such as tax and duty-free importations of raw
materials, capital and equipment. However, exportation
or removal of goods from the territory of the Subic Special
Economic Zone to the other parts of the Philippine
territory shall be subject to customs duties and taxes
under the Customs and Tariff Code and other relevant tax
laws of the Philippines;” and “(c) The provisions of existing
laws, rules and regulations to the contrary
notwithstanding, no taxes, local and national, shall be
imposed within the Subic Special Economic Zone.”
3. Indigo Distribution Corporation, W Star Trading and
Warehousing Corporation, Freedom Brands Philippines
Corporation, Branded Warehouse, Inc., Altasia, Inc., Tainan
Trade (Taiwan) Inc., Subic Park 'N Shop, Incorporated,
Trading Gateways International Philipines, Inc., Duty Free
Superstore (DFS) Inc., Chijmes Trading, Inc., Premier
Freeport, Inc., Future Trade Subic Freeport, Inc., Grand
Comtrade Int'l., Corp., and First Platinum International, Inc.,
which are all domestic corporations doing business at the
SBF, applied for and were granted Certificates of Registration
and Tax Exemption 6 by the SBMA. This allowed them to
trade, retail, wholesale, import, export, etc. and uniformly
granted them tax exemptions for such importations according
to the certificates that “The Company shall be entitled to
tax and duty-free importation of raw materials, capital
equipment, and household and personal items for use
solely within the Subic Bay Freeport Zone”.
4. Congress subsequently passed R.A. No. 9334 which amended
the NIRC and said that articles brought into the Philippines
tax-free subsequently sold to non-exempt persons, the
purchasers shall be liable for the duty and internal revenue
tax and the provision of any special or general law to the
contrary notwithstanding, the importation of cigars and
cigarettes, distilled spirits, fermented liquors and wines
into the Philippines, even if destined for tax and duty free
shops, shall be subject to all applicable taxes, duties,
charges, including excise taxes due thereon. This shall
apply to cigars and cigarettes, distilled spirits, fermented
liquors and wines brought directly into the duly chartered
or legislated freeports of the Subic Economic Freeport
Zone, created under Republic Act No. 7227;
5. Based on Sec. 6 of R.A. No. 9334, SBMA issued a
Memorandum declaring that all importations of cigars,
cigarettes, distilled spirits, fermented liquors and wines into
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 TAXATION LAW 1: ATTY. R. ONG ABRANTES, CPA
the SBF, including those intended to be transshipped to other
free ports in the Philippines, shall be treated as ordinary
importations subject to all applicable taxes, duties and
charges, including excise taxes.
6. Meanwhile, former BIR Commissioner Guillermo L. Parayno,
Jr. requested then Customs Commissioner George M. Jereos
to immediately collect the excise tax due on imported alcohol
and tobacco products brought to the Duty Free Philippines
(DFP) and Freeport zones. The Collector of Customs of the port
of Subic directed the SBMA Administrator to require payment
of all appropriate duties and taxes on all importations of cigars
and cigarettes, etc.
7. SBMA issued a Memorandum directing the departments
concerned to require locators/importers in the SBF to pay the
corresponding duties and taxes on their importations of
cigars, cigarettes, etc.
8. Private respondents wrote the offices of respondent Collector
of Customs and the SBMA Administrator requesting for a
reconsideration of the directives on the imposition of duties
and taxes, particularly excise taxes on their cigarettes, etc.
Despite these, they were not allowed to file any warehousing
entry for their shipments. Thus, they filed a petition for
declaratory relief to have certain provisions of RA 9334
declared as unconstitutional.
9. Indigo, et. al. claimed that repeals by implication are not
favored, a general law cannot amend a special law, and that it
violates the one-bill-one-subject rule as well as the
constitutional proscription against the impairment of the
obligation of contracts. They also prayed for the issuance of a
writ of preliminary injunction and/or TRO.
10. The trial court granted these and issued a Writ of Preliminary
Injunction directing petitioners and the SBMA Administrator
as well as all persons assisting or acting for and in their behalf
to allow the operations, file warehousing entries, and not
compelling them to pay the taxes. An injunction bond of P1M
was approved.
ISSUE:
1. Whether the writ of preliminary injunction was properly
issued - NO
2. Whether the certificates of tax exemption may be used to
invoke the non-impairment of contracts - NO
RATIO:
1. For a writ of preliminary injunction to issue, the plaintiff must
be able to establish that (1) there is a clear and unmistakable
right to be protected, (2) the invasion of the right sought to be
protected is material and substantial, and (3) there is an
urgent and paramount necessity for the writ to prevent
serious damage.
2. R.A. No. 7227 granted private respondents exemption from
local and national taxes, including excise taxes, on their
importations of general merchandise, for which reason they
enjoyed tax-exempt status until the effectivity of R.A. No.
9334. However, by subsequently enacting R.A. No. 9334,
however, Congress expressed its intention to withdraw private
respondents' tax exemption privilege on their importations of
cigars, cigarettes, distilled spirits, fermented liquors and
wines.
3. The old Section 131 of the NIRC expressly provided that all
taxes, duties, charges, including excise taxes shall not apply
to importations of cigars, cigarettes, fermented spirits and
wines brought directly into the duly chartered or legislated
freeports of the SBF but Section 131, as amended by R.A. No.
9334, now provides that such taxes shall apply.
4. The Court stated basic principles:
a. Every presumption must be indulged in favor of the
constitutionality of a statute. The burden of proving
the unconstitutionality of a law rests on the party
assailing the law.
b. There is no vested right in a tax exemption. The
power to impose taxes is one so unlimited in force
and so searching in extent, it is subject only to
restrictions which rest on the discretion of the
authority exercising it.
c. Generally, tax exemptions are construed strictly
against the taxpayer and liberally in favor of the
taxing authority. The burden of proof is with the one
claiming exemption.
d. A tax exemption cannot be grounded upon the
continued existence of a statute which precludes its
change or repeal because no law is irrepealable.
e. . The rights granted under the Certificates of
Registration and Tax Exemption of private
respondents are not absolute and unconditional as
to constitute rights in esse — those clearly founded
on or granted by law or is enforceable as a matter of
law.
These certificates granting private respondents a "permit to
operate" their respective businesses are in the nature of licenses,
which the bulk of jurisprudence considers as neither a property
nor a property right. The licensee takes his license subject to such
AD MAJOREM DEI GLORIAM +
JENNICA GYRL G. DELFIN
conditions as the grantor sees fit to impose, including its
revocation at pleasure. A license can thus be revoked at any time
since it does not confer an absolute right.
While the tax exemption contained in the Certificates of
Registration of private respondents may have been part of the
inducement for carrying on their businesses in the SBF, this
exemption, nevertheless, is far from being contractual in nature in
the sense that the non-impairment clause of the Constitution can
rightly be invoked.
f. Whatever right may have been acquired on the basis
of the Certificates of Registration and Tax Exemption
must yield to the State's valid exercise of police
power.
g. As a rule, courts should avoid issuing a writ of
preliminary injunction which would in effect dispose
of the main case without trial.
h. A court may issue a writ of preliminary injunction
only when the petitioner assailing a statute has
made out a case of unconstitutionality or invalidity
strong enough to overcome the presumption of
validity, in addition to a showing of a clear legal right
to the remedy sought.
i. The feared injurious effects of the imposition of
duties, charges and taxes on imported cigars,
cigarettes, distilled spirits, fermented liquors and
wines on private respondents' businesses cannot
possibly outweigh the dire consequences that the
non-collection of taxes, not to mention the unabated
smuggling inside the SBF, would wreak on the
government.
5. The possibility of irreparable damage without proof of an
actual existing right would not justify an injunctive relief.
Besides, private respondents are not altogether lacking an
appropriate relief under the law. As petitioners point out in
their Petition before this Court, they may avail themselves of
a tax refund or tax credit should R.A. No. 9334 be finally
declared invalid.
6. Indeed, Sections 204 and 229 of the NIRC provide for the
recovery of erroneously or illegally collected taxes which would
be the nature of the excise taxes paid by private respondents
should Section 6 of R.A. No. 9334 be declared
unconstitutional or invalid.
7. Any injunction that restrains the collection of taxes, which is
the inevitable result of the suspension of the implementation
of the assailed Section 6 of R.A. No. 9334, is a limitation upon
the right of the government to its lifeline and wherewithal. 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 enforcement of
tax laws and the collection of taxes are of paramount
importance for the sustenance of government has been
repeatedly observed. Taxes being the lifeblood of the
government that should be collected without unnecessary
hindrance, 60 every precaution must be taken not to unduly
suppress it.
8. WHEREFORE, the Petition is PARTLY GRANTED. The writ
of certiorari to nullify and set aside the Order of May 4,
2005 as well as the Writ of Preliminary Injunction issued
by respondent Judge Caguioa on May 11, 2005 is
GRANTED. The assailed Order and Writ of Preliminary
Injunction are hereby declared NULL AND VOID and
accordingly SET ASIDE. The writ of prohibition prayed for
is, however, DENIED.
CIR v. Santos, 277 SCRA 617 (1997)
G.R. No. 119252 August 18, 1997
COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER
OF CUSTOMS, petitioners,
vs.
HON. APOLINARIO B. SANTOS, in his capacity as Presiding Judge
of the Regional Trial Court, Branch 67, Pasig City; ANTONIO M.
MARCO; JEWELRY BY MARCO & CO., INC., and GUILD OF
PHILIPPINE JEWELLERS, INC., respondents.
HERMOSISIMA, JR., J.:
Facts:
Guild of Phil. Jewelers, Inc. questions the constitutionality of certain
provisions of the NIRC and Tariff and Customs Code of the Philippines.
It is their contention that the present Tariff and tax structure increases
manufacturing costs and render local jewelry manufacturers
uncompetitive against other countries, in support of their position, they
submitted what they purported to be an exhaustive study of the tax
rates on jewelry prevailing in other Asian countries, in comparison to
tax rates levied in the country.
Judge Santos of RTC Pasig, ruled that the laws in question are
confiscatory and oppressive and declared them INOPERATIVE and
WITHOUT FORCE AND EFFECT insofar as petitioners are concerned.
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 TAXATION LAW 1: ATTY. R. ONG ABRANTES, CPA JENNICA GYRL G. DELFIN

Petitioner CIR assailed decision rendered by respondent judge

contending that the latter has no authority to pass judgment upon the
taxation policy of the Government. Petitioners also impugn the decision
by asserting that there was no showing that the tax laws on jewelry are
confiscatory.

Issue:

I. Whether RTC has authority to pass judgment upon taxation

policy of the government.

II. WON the state has the power to select the subjects of taxation.

Ruling:

I. The policy of the court is to avoid ruling on constitutional

questions and to presume that the acts of the political departments are
valid in the absence of a clear and unmistakable showing to the
contrary.

This is not to say that RTC has no power whatsoever to declare a law
unconstitutional. But this authority does not extend to deciding
questions which pertain to legislative policy.

RTC have the power to declare the law unconstitutional but this
authority does not extend to deciding questions which pertain to
legislative policy. RTC can only look into the validity of a provision, that
is whether or not it has been passed according to the provisions laid
down by law, and thus cannot inquire as to the reasons for its
existence.

II. YES. The respondents presented an exhaustive study on

the tax rates on jewelry levied by different Asian countries. This is
meant to convince us that compared to other countries; the tax rates
imposed on said industry in the Philippines is oppressive and
confiscatory. This Court, however, cannot subscribe to the theory that
the tax rates of other countries should be used as a yardstick in
determining what may be the proper subjects of taxation in our own
country. It should be pointed out that in imposing the aforementioned
taxes and duties, the State, acting through the legislative and executive
branches, is exercising its sovereign prerogative. It is inherent in the
power to tax that the State be free to select the subjects of taxation, and
it has been repeatedly held that "inequalities which result from a
singling out or one particular class for taxation, or exemption, infringe
no constitutional limitation." 25

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AD MAJOREM DEI GLORIAM +