TAXATION LAW II CASE DIGESTS 1

LOCAL TAXATION

I. PRELIMINARY MATTERS

A. Sec. 129, LGC

(1) Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of Tanauan, Leyte, 69 SCRA
460, February 27, 1976

Facts: Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary
injunction before the Court of First Instance of Leyte for that court 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, series of 1962, of the Municipality of
Tanauan, Leyte, null and void.

Issue: Whether or not Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory
and oppressive.

Ruling: NO. 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. This is sanctioned by immemorial practice. 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.

Under the New Constitution, local governments are granted the autonomous authority to create their
own sources of revenue and to levy taxes. Section 5, Article XI provides: “Each local government unit
shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as
may be provided by law.” Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated
from beyond the sphere of the legislative power to enact and vest in local governments the power of
local taxation. The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant’s
pretense, would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the
authority, the State is not limited to the exact measure of that which is exercised by itself. When it is
said that the taxing power may be delegated to municipalities and the like, it is meant that there may be
delegated such measure of power to impose and collect taxes as the legislature may deem expedient.
Thus, municipalities may be permitted to tax subjects, which for reasons of public policy the State has
not deemed wise to tax for more general purposes.

(2) Mactan Cebu International Airport Authority vs. Marcos 261 SCRA 667, September 11, 1996

Facts: Petitioner MCIAA was created by virtue of Republic Act No. 6958. Since the time of its
creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes imposed
by the National Government or any of its political subdivisions, agencies and instrumentalities.
However, in 1994, Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on
several parcels of land belonging to the petitioner.

Petitioner objected to such demand for payment as baseless and unjustified. As the City of Cebu was
about to issue a warrant of levy against the properties of petitioner, the latter was compelled to pay its
tax account “under protest” and thereafter filed a Petition for Declaratory Relief with RTC Cebu.

Issue: Whether or not the City of Cebu may validly impose real property taxes against the petitioner

Ruling: YES. The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may
be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but
pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the
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exercise of the power may be subject to such guidelines and limitations as the Congress may provide
which, however, must be consistent with the basic policy of local autonomy.
There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the
payment of realty ‘taxes imposed by the National Government or any of its political subdivisions,
agencies, and instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the
exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. The only
exception to this rule is where the exemption was granted to private parties based on material
consideration of a mutual nature, which then becomes contractual and is thus covered by the non-
impairment clause of the Constitution.

The LGC, enacted pursuant to Section 3, Article X of the Constitution, provides for the exercise by
local government units of their power to tax, the scope thereof or its limitations, and the exemptions
from taxation.

Here, since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,
exemptions from payment of real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in the said section, and the petitioner
is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such
tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn.

(3) Manila Electric Company vs. Province of Laguna 306 SCRA 750, May 05, 1999

Facts: On various dates, certain municipalities of the Province of Laguna, by virtue of existing laws
then in effect, issued resolutions through their respective municipal councils granting franchise in favor
of petitioner MERALCO for the supply of electric light, heat and power within their concerned areas.

Later on, Republic Act No. 7160, otherwise known as the “Local Government Code of 1991,” was
enacted enjoining local government units to create their own sources of revenue and to levy taxes, fees
and charges, subject to the limitations expressed therein, consistent with the basic policy of local
autonomy. Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial
Ordinance No. 01-92, imposing a tax on businesses enjoying a franchise.

On the basis of the above ordinance, respondent Provincial Treasurer sent a demand letter to
MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then
amounted to P19,520,628.42, under protest. MERALCO claimed that the franchise tax it had paid and
continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax
imposed by the Provincial Tax Ordinance.

Issue: Whether the Province of Manila may validly impose franchise tax on MERALCO.

Ruling: YES. Local governments do not have the inherent power to tax except to the extent that such
power might be delegated to them either by the basic law or by statute. Presently, under Article X of
the 1987 Constitution, a general delegation of that power has been given in favor of local government
units. Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute,
the tax power must be deemed to exist although Congress may provide statutory limitations and
guidelines.

The Local Government Code of 1991 explicitly authorizes provincial governments, notwithstanding
“any exemption granted by any law or other special law, x x x (to) impose a tax on businesses enjoying
a franchise. Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad
tax powers to local government units, the Local Government Code has effectively withdrawn, under
Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. In fine, the
franchise tax is imposable despite any exemption enjoyed under special laws.

(4) National Power Corporation vs. City of Cabanatuan 401 SCRA 259, April 09, 2003

Facts: Petitioner is a government-owned and controlled corporation created under Commonwealth Act
No. 120, as amended. For many years now, petitioner sells electric power to the residents of
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Cabanatuan City. Pursuant to section 37 of Ordinance No. 165-92, the respondent assessed the
petitioner a franchise tax representing 75% of 1% of the latter’s gross receipts for the preceding year.

Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax
on government entities. Petitioner also contended that as a non-profit organization, it is exempted from
the payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No.
6395, as amended.

The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due,
plus surcharge. Respondent alleged that petitioner’s exemption from local taxes has been repealed by
section 193 of the LGC, which provided for withdrawal of tax exemption privileges to certain entities.

RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground
that section 193, in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions
granted to the petitioner.

Issue: Whether or not the respondent city government has the authority to issue Ordinance No. 165-92
and impose an annual tax on businesses enjoying a franchise.

Ruling: YES. One of the most significant provisions of the LGC is the removal of the blanket
exclusion of instrumentalities and agencies of the national government from the coverage of local
taxation. Although as a general rule, LGUs cannot impose taxes, fees or charges of any kind on the
National Government, its agencies and instrumentalities, this rule now admits an exception, i.e., when
specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the
aforementioned entities, viz.: “Section 133. Common Limitations on the Taxing Powers of the Local
Government Units.—Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following: x x x (o) Taxes, fees,
or charges of any kind on the National Government, its agencies and instrumentalities, and local
government units.” (emphasis supplied)

Section 137 of the LGC clearly states that the LGUs can impose franchise tax “ notwithstanding any
exemption granted by any law or other special law.” This particular provision of the LGC does not
admit any exception. Section 193, on the other hand, buttresses the withdrawal of extant tax exemption
privileges. By stating that unless otherwise provided in this Code, tax exemptions or incentives granted
to or presently enjoyed by all persons, whether natural or juridical, including government-owned or
controlled corporations except (1) local water districts, (2) cooperatives duly registered under R.A.
6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the
effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It
is a basic precept of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio
alterius. In the absence of any provision of the Code to the contrary, and we find no other provision in
point, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly
intended to be withdrawn.

Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local
government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual
receipts for the preceding calendar based on the incoming receipts realized within its territorial
jurisdiction. The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is
clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such
exemption subject only to the exceptions enumerated. Since it would be not only tedious and
impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or
privileges. No more unequivocal language could have been used.”76 (emphases supplied)

Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and
support myriad activities of the local government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.
As this Court observed in the Mactan case, “the original reasons for the withdrawal of tax exemption
privileges granted to government-owned or controlled corporations and all other units of government
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were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of
similarly situated enterprises.” With the added burden of devolution, it is even more imperative for
government entities to share in the requirements of development, fiscal or otherwise, by paying taxes or
other charges due from them.

(5) City Government of Quezon City vs. Bayan Telecommunications, Inc. 484 SCRA 169, March
06, 2006

Facts: Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under
Republic Act (R.A.) No. 3259 (1961) to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and telecasting.  Section 14 (a) of R.A. No. 3259
states: “The grantee shall be liable to pay the same taxes on its real estate, buildings and
personal property, exclusive of the franchise, xxx”. In 1992, R.A. No. 7160, otherwise known as the
“Local Government Code of 1991” (LGC) took effect. Section 232 of the Code grants local
government units within the Metro Manila Area the power to levy tax on real properties. Barely few
months after the LGC took effect, Congress enacted R.A. No. 7633, amending Bayantel’s original
franchise. The Section 11 of the amendatory contained the following tax provision: “The grantee, its
successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, xxx“. In 1993, the government of Quezon City enacted an
ordinance otherwise known as the Quezon City Revenue Code withdrawing tax exemption privileges.

Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city
from the roll of taxable real properties. With its request having been denied, Bayantel interposed an
appeal with the Local Board of Assessment Appeals (LBAA). And, evidently on its firm belief of its
exempt status, Bayantel did not pay the real property taxes assessed against it by the Quezon City
government.

Issue: Whether or not Bayantel’s real properties in Quezon City are exempt from real property taxes
under its franchise.

Ruling: YES. A clash between the inherent taxing power of the legislature, which necessarily includes
the power to exempt, and the local government’s delegated power to tax under the aegis of the 1987
Constitution must be ruled in favor of the former. The grant of taxing powers to LGUs under the
Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons,
pursuant to a declared national policy. The legal effect of the constitutional grant to local governments
simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be
resolved in favor of municipal corporations.

Since R. A. No. 7633 was enacted subsequent to the LGC, perfectly aware that the LGC has already
withdrawn Bayantel’s former exemption from realty taxes, the Congress using, Section 11 thereof with
exactly the same defining phrase “exclusive of this franchise” is the basis for Bayantel’s exemption
from realty taxes prior to the LGC. In plain language, the Court views this subsequent piece of
legislation as an express and real intention on the part of Congress to once again remove from the
LGC’s delegated taxing power, all of the franchisee’s (Bayantel’s) properties that are actually, directly
and exclusively used in the pursuit of its franchise.

Other notes:
The legislative intent expressed in the phrase “exclusive of this franchise” cannot be construed other
than distinguishing between two (2) sets of properties, be they real or personal, owned by the
franchisee, namely, (a) those actually, directly and exclusively used in its radio or telecommunications
business, and (b) those properties which are not so used. It is worthy to note that the properties subject
of the present controversy are only those which are admittedly falling under the first category.

(6) Film Development Council of the Philippines vs. Colon Heritage Realty Corporation 758
SCRA 536, June 16, 2015 (Sec. 129 & 130)

Facts: Sometime in 1993, respondent City of Cebu, in its exercise of its power to impose amusement
taxes under Section 140 of the Local Government Code (LGC) anchored on the constitutional policy on
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local autonomy, passed City Ordinance No. LXIX otherwise known as the “Revised Omnibus Tax
Ordinance of the City of Cebu (tax ordinance).” Central to the case at bar are Sections 42 and 43,
Chapter XI thereof which require proprietors, lessees or operators of theatres, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement, to pay an amusement tax equivalent to thirty
percent (30%) of the gross receipts of admission fees to the Office of the City Treasurer of Cebu City.

Almost a decade later, or on June 7, 2002, Congress passed RA 9167, creating the Film Development
Council of the Philippines (FDCP) and abolishing the Film Development Foundation of the
Philippines, Inc. and the Film Rating Board. Secs. 13 and 14 of RA 9167 provided for the tax treatment
of certain graded films. According to these assailed provisions, all revenue from the amusement tax on
the graded film which may otherwise accrue to the cities and municipalities in Metropolitan Manila and
highly urbanized and independent component cities in the Philippines pursuant to Section 140 of
Republic Act No. 7160 during the period the graded film is exhibited, shall be deducted and withheld
by the proprietors, operators or lessees of theaters or cinemas and remitted within thirty (30) days from
the termination of the exhibition to the Council which shall reward the corresponding amusement tax to
the producers of the graded film within fifteen (15) days from receipt thereof.

Later on, petitioner sent demand letters for unpaid amusement tax reward due to the produces of Grade
“A” or “B” films to the cinema proprietors and operators, including private respondent Colon Heritage,
in Cebu City. However, the same were unheeded. Because of the persistent refusal of the proprietors
and cinema operators to remit the said amounts as FDCP demanded, on one hand, and Cebu City’s
assertion of a claim on the amounts in question, the city finally filed on May 18, 2009 before the RTC,
a petition for declaratory relief with application for a writ of preliminary injunction. In said petition,
Cebu City sought the declaration of Secs. 13 and 14 of RA 9167 as invalid and unconstitutional.
Similarly, Colon Heritage filed a petition seeking to declare Sec. 14 of RA 9167 as unconstitutional.
RTC ruled the unconstitutionality of the assailed provisions, among others.

Issue: Whether or not the RTC gravely erred in declaring Secs. 13 and 14 of RA 9167 invalid for being
unconstitutional.

Ruling: NO. Material to the case at bar is the concept and scope of local fiscal autonomy. In Pimentel
v. Aguirre, 336 SCRA 201 (2000), fiscal autonomy was defined as “the power [of LGUs] to create their
own sources of revenue in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their own priorities. It
extends to the preparation of their budgets, and local officials in turn have to work within the
constraints thereof.” With the adoption of the 1973 Constitution, and later the 1987 Constitution,
municipal corporations were granted fiscal autonomy via a general delegation of the power to tax.
Section 5, Article XI of the 1973 Constitution gave LGUs the “power to create its own sources of
revenue and to levy taxes, subject to such limitations as may be provided by law.” This authority was
further strengthened in the 1987 Constitution, through the inclusion in Section 5, Article X thereof of
the condition that “[s]uch taxes, fees, and charges shall accrue exclusively to local governments.”

Accordingly, under the present Constitution, where there is neither a grant nor a prohibition by statute,
the tax power of municipal corporations must be deemed to exist although Congress may provide
statutory limitations and guidelines. The basic rationale for the current rule on local fiscal autonomy is
the strengthening of LGUs and the safeguarding of their viability and self- sufficiency through a direct
grant of general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation
to be absolute and unconditional. The legislature must still see to it that (a) the taxpayer will not be
over-burdened or saddled with multiple and unreasonable impositions; (b) each LGU will have its fair
share of available resources; (c) the resources of the national government will not be unduly disturbed;
and (d) local taxation will be fair, uniform, and just.

In the case at bar, through the application and enforcement of Sec. 14 of RA 9167, the income from the
amusement taxes levied by the covered LGUs did not and will under no circumstance accrue to them,
not even partially, despite being the taxing authority therefor. Congress, therefore, clearly overstepped
its plenary legislative power, the amendment being violative of the fundamental law’s guarantee on
local autonomy, as echoed in Sec. 130(d) of the LGC.

(7) Petron Corporation vs. Tiangco 551 SCRA 484, April 16, 2008
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Facts: Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Through
that depot, it has engaged in the selling of diesel fuels to vessels used in commercial fishing in and
around Manila Bay. In 2002, Petron was assessed by the respondents for business taxes for sale of
diesel declared by its Navotas Terminal from 1997 to 2001. Petron protested the assessment based on
the exemptions stated in Section 133(h) of the LGC (i.e., excise taxes on articles enumerated under the
NIRC, and taxes, fees or charges on petroleum products. The Supreme Court ruled that while Petron’s
sale transactions are not exempt under the first one (excise taxes), the transactions are exempted under
the second one (taxes, fees, or charges on petroleum products. The assessment was declared ultra vires
and void.

Issue: WON a local government unit is empowered under the Local Government Code to impose
business taxes on persons or entities engaged in the sale of petroleum products.

Ruling: NO. The policy in San Pablo is also echoed in Section 5(a) of the Code, which states that “any
provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of
doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local
government unit. But somewhat conversely, Section 5(b) of the LGC, then proceeds to assert that “in
case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local
government unit enacting it, and liberally in favor of the taxpayer.” And this latter qualification has to
be respected as a constitutionally authorized limitation, which Congress has seen fit to provide.
Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of
local government units to impose taxes.

If the phrase actually pertains to excise taxes, then it would be an exercise in utter redundancy, since
the preceding phrase already prohibits the imposition of excise taxes on articles already subject to such
taxes under the NIRC, such as petroleum products. There would be no sense on the part of the
legislature to twice emphasize in the same sentence that excise taxes on petroleum products are beyond
the pale of local government taxation. The language of Section 133(h) makes plain that the prohibition
with respect to petroleum products extends not only to excise taxes thereon, but all “taxes, fees and
charges.”

(8) Hagonoy Market Vendor Association vs. Municipality of Hagonoy, Bulacan 376 SCRA 376,
February 06, 2002

Facts: On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance,
Kautusan Blg. 28, which increased the stall rentals of the market vendors in Hagonoy. Article 3
provided that it shall take effect upon approval. The subject ordinance was posted from November 4-
25, 1996

In the last week of November 1997, the petitioner’s members were personally given copies of
the approved Ordinance and were informed that it shall be enforced in January, 1998. On December 8,
1997, the petitioner’s President filed an appeal with the Secretary of Justice assailing the
constitutionality of the tax ordinance. Petitioner claimed it was unaware of the posting of the ordinance.
Respondent opposed the appeal. It contended that the ordinance took effect on October 6, 1996 and
that the ordinance, as approved, was posted as required by law. Hence, it was pointed out that
petitioner’s appeal, made over a year later, was already time-barred.

The Secretary of Justice dismissed the appeal on the ground that it was filed out of time, i.e.,
beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as prescribed under
Section 187 of the 1991 Local Government Code.

Issue: Whether the appeal of the petitioner should be dismissed.

Ruling: YES. The petition should be dismissed, as the appeal of the petitioner with the Secretary of
Justice is already time-barred. The applicable law is Section 187 of the 1991 Local Government Code.
The law requires that an appeal of a tax ordinance or revenue measure should be made to the Secretary
of Justice within thirty (30) days from effectivity of the ordinance and even during its pendency, the
effectivity of the assailed ordinance shall not be suspended. In the case at bar, Municipal Ordinance
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No. 28 took effect in October 1996. Petitioner filed its appeal only in December 1997, more than a
year after the effectivity of the ordinance in 1996. Clearly, the Secretary of Justice correctly dismissed
it for being time-barred.

At this point, it is apropos to state that the timeframe fixed by law for parties to avail of their legal
remedies before competent courts is not a “mere technicality” that can be easily brushed aside. The
periods stated in Section 187 of the Local Government Code are mandatory. Ordinance No. 28 is a
revenue measure adopted by the municipality of Hagonoy to fix and collect public market stall rentals.
Being its lifeblood, collection of revenues by the government is of paramount importance. The funds
for the operation of its agencies and provision of basic services to its inhabitants are largely derived
from its revenues and collections. Thus, it is essential that the validity of revenue measures is not left
uncertain for a considerable length of time. Hence, the law provided a time limit for an aggrieved party
to assail the legality of revenue measures and tax ordinances.

(9) Victorias Milling Co., Inc. vs. Mun. of Victorias, Negros Occidental 25 SCRA 192, September
27, 1968

Facts: Ordinance 1 (1956) was approved by the municipal council of Victorias by way of an
amendment to 2 municipal ordinances separately imposing license taxes on operators of sugar centrals
and sugar refineries. The changes were: (1) with respect to sugar centrals, by increasing the rates of
license taxes; and (2) as to sugar refineries, by increasing the rates of license taxes as well as the range
of graduated schedule of annual output capacity. Of importance are the provisions of Section 1(m)
relating to sugar centrals and Section 2(m) covering sugar refineries with specific reference to the
maximum annual license tax. Victorias Milling questioned the validity of Ordinance 1 because the
national government has preempted the field of taxation with respect to sugar centrals or refineries,
among others.

Issue: Whether or not the municipality is bereft of authority to enact the ordinance in question.

Ruling: YES. What can be said at most is that the national government has preempted the field of
percentage taxation. Section 1 of C. A. 472, while granting municipalities power to levy taxes,
expressly removes from them the power to exact "percentage taxes". It is correct to say that preemption
in the matter of taxation simply refers to an instance where the national government elects to tax a
particular area, impliedly withholding from the local government the delegated power to tax the same
field. This doctrine primarily rests upon the intention of Congress. Conversely, should Congress allow
municipal corporations to cover fields of taxation it already occupies, then the doctrine of preemption
will not apply. In the case at bar, Section 4 (1) of C. A. 472 clearly and specifically allows municipal
councils to tax persons engaged in "the same businesses or occupation" on which "fixed internal
revenue privilege taxes" are "regularly imposed by the Government".

(10) AGUSTIN PANALIGAN, et al. vs. THE CITY OF TACLOBAN and THE CITY
TREASURER OF THE CITY OF TACLOBAN, 102 Phil. 1162, September 27, 1957

Facts: The petition alleged that pursuant to Ordinance No. 13, as amended by Ordinance No. 18, series
of 1999, and further amended by Ordinances Nos. 34 and 42, series of 1952, imposing inspection fees
for every head of hog, cattle and carabao that was shipped or transported between the months of April
and December 1952, from Tacloban to other places, respondents City of Tacloban and the Treasurer
thereof collected from petitioners, duly receipted that the so-called "inspection fees" imposed by said
ordinances, which in reality partook of the nature of an export tax which under Section 2287 of the
Administrative Code a municipal council cannot impose.

Petitioners therefore, prayed that the ordinances in question be declared null and void and that
respondents be ordered to refund to petitioners the respective amounts due them.

Respondents maintain that the fees in question fall under the first class of licenses, it being required
purely as a regulatory measure enacted in the exercise of the police power of the municipal corporation,
and the most that the courts can do is merely to reduce the amount of fees, if they are deemed
excessive, but not to declare the same as illegal.
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Issue: Whether the municipal council of Tacloban can impose an "inspection fee" on certain animals
shipped or transported from said place to another.

Ruling: NO. Granting arguendo that the respondent City enacted the questioned ordinances in virtue of
its police power and that in the exercise of the same a municipal corporation has the right to grant
licenses and impose license fees (City of Birmingham vs. Hood-McPherson Realty Co., 172 So. 114
108 ALR 1140), yet such power may be restricted by statutory provisions, and nowhere in the Charter
of the City of Tacloban (Republic Act No. 760, enacted long after the effectivity of the Revised
Administrative Code), can be found; any specific provision bestowing on the Municipal Board the
power to impose tax or fees of any kind on goods, merchandise or commodities destined to be exported
from that City to other parts of the country. Therefore, Section 2287 of the Revised Administrative
Code aforequoted, which takes away from the municipal council (or board) the power to impose export
taxes, remains to be the rule on the matter.

In order that an act or ordinance imposing an excise or license tax may be sustained as a valid exercise
of the police power, it must be intended to promote or be sufficiently related to the public health,
morals, safety or welfare. An act or ordinance imposing a license or license tax under the police power
as a means of regulation is valid only when it is within the limits of such power and is intended for
regulation, otherwise, it is invalid as where the license or tax is unnecessarily imposed on an
occupation or business not inherently subject to police regulation (Southwest Utility Ice Co. vs.
Liebmann, 52 P. 2d 349), for an act' or ordinance imposing a license or license tax for revenue
purposes, under the guise of a police or regulatory measure, is invalid.

While it is true that Section 14 (e) of Republic Act No. 760 confers on the Municipal Board the power
(e) To fix the tariff of fees and charges for all services rendered by the city, or any of its department,
branches or officials, a close scrutiny of the ordinances complained of reveals that the fees therein
imposed are not by reason of the services performed by the Mayor or the Veterinary Officer, but as an
imposition on every head of the specified animals to be transported. The fact that the ordinances in
question make no reference to the purpose for which they were enacted, and that such purpose was to
preserve the public health or welfare of the residents and people of the City of Tacloban is a clear
indication that leads Us to believe that the fees exacted were not as "a regulatory measure in the:
exercise of its police power, but for the purpose of raising revenue under the guise of license or
inspection fees. Therefore, the assailed ordinance is invalid.

(11) Palma Development Corporation vs. Municipality of Malangas, Zamboanga del Sur 413
SCRA 572, October 16, 2003

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to
wholesalers in Zamboanga City. It uses the municipal port of Malangas, Zamboanga del Sur as
transshipment port for its goods. The port, as well as the surrounding roads leading to it, belong to and
are maintained by the Municipality of Malangas, Zamboanga del Sur. On January 16, 1994, the
municipality passed municipal revenue code no. 09 series of 1993, which was subsequently approved
by the Sangguniang Panlalawigan of Zamboanga del Sur in resolution no. 1330 dated August 4, 1994.
Section 56.01 of the ordinance reads as follows:
Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the municipal
roads or streets leading to the wharf and to any point along the shorelines within the
jurisdiction of the municipality and for police surveillance on all goods and all equipment
harboured or sheltered in the premises of the wharf and other within the jurisdiction of the
municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by petitioner under
protest. It contended that under Republic Act No. 7160, otherwise known as the local government code
of 1991, municipal governments did not have authority to tax goods and vehicles that passed through
their jurisdictions. Thereafter, before the Regional Trial Court of Pagadian City, petitioner filed against
the Municipality of Malangas on November 29, 1995, an action for declaratory relief assailing the
validity of section 56.01 of the municipal ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.
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Ruling: No. By the express language of section 153 and 155 RA 7160, local government units, through
their sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for
the use of any public road, pier or wharf funded and constructed by them. A service fee imposed on
vehicles using municipal roads leading to the wharf is thus valid, however, section 133 (e) of RA 7160
prohibits the imposition, in the guise of wharfage fees — as well as other taxes or charges in any form
whatsoever on goods or merchandise. It is therefore irrelevant if the fee imposed are actually for police
surveillance on the goods, because any other form of imposition on goods passing through the
territorial jurisdiction of the municipality is clearly prohibited by section 133 (e)

(12) City of Cebu vs. IAC 144 SCRA 710, October 10, 1986

Facts:

Issue:

Ruling: The aforequoted provision prohibits a local government from imposing an inspection fee on
agricultural products and fish is an agricultural product. Contrary to the claim of petitioners, under
Section 102 of City Ordinance No. 1 a fisherman selling his fish within the city has to pay the
inspection fee of P0.03 for every kilo of fish sold. Furthermore, the imposition of the tax will definitely
restrict the free flow of fresh fish to Cebu City because the price of fish will have to increase.

(13) Province of Bulacan vs. Court of Appeals 299 SCRA 442, November 27, 1998

Facts: On June 26, 1992, the Sangguniang Panlalawigan passed provincial ordinance no. 3 known as
“Ordinance Enacting The Revenue Code Of The Bulacan Province” which was to take effect on July 1,
1992 Section 21 of the ordinance provides as follows:

Sec 21. Imposition of Tax – There is hereby levied and collected a tax of 10% of the fair
market value in the locality per cubic meter of ordinary stores, sand, gravel, earth and other
quarry resources, such but not limited to marble, granite, volcanic cinders, basalt, tuff and
rock phosphate, extracted from public lands or from beds of seas, lakes, rivers, streams,
creeks and other public waters within its territorial jurisdiction.

Pursuant thereto, the provincial treasurer of Bulacan in a letter dated November 11, 1992, assessed
private respondent Republic Cement Corporation Php2,524,692.13 for extracting lime stones, shale and
silica from several parcels of private land in the province during the third quarter of 1992 until the
second quarter of 1993. Believing that the province, on the bases of the above-said ordinance, had no
authority to impose taxes on quarry resources extracted from private lands, Republic Cement formally
contested the same on December 23, 1993. The same was, however, denied by the provincial treasurer
on January 17, 1994. Republic Cement, consequently filed a petition for declaratory relief with the
Regional Trial Court (RTC) of Bulacan on February 14, 1993. The province filed a motion to dismiss
Republic Cement’s petition which was granted by the trial court on May 13, 1993, which ruled that
declaratory relief was improper, allegedly because a breach of the ordinance had been committed by
Republic Cement.

Issue: Whether or not provincial ordinance no. 3 is valid to allow the petitioner to impose taxes on
ordinary stones, sand, gravel, earth, and other quarry resources.

Ruling: No. On the basis of section 134 of Republic Act No. 7169, the local government code, ruled
that a province was empowered to impose taxes only on sand, gravel, and other quarry resources
extracted from public lands, its authority to tax being limited to by said provision only to those taxes,
fees and charges provided in article 1, chapter 2, title I of Book II of the local government code.

As correctly pointed out by petitioners, section 186 of the same code allows petitioners to levy taxes
other than those specifically enumerated under the code, subject to the conditions specified therein.

The tax imposed by the province of Bulacan is an excise tax, being a tax upon the performance,
carrying or an excise of an activity. Under section 133 of the local government code, a province may
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not, therefore, levy excise taxes on articles already taxed by the National Internal Revenue Code
(NIRC).

The NIRC levies a tax on all quarry resources, regardless of origin, whether extracted from public or
private land. Thus, a province may not ordinarily impose taxes on stones, sand,gravel, earth and other
quarry resources, as the same are already taxed under NIRC. The province can, however, impose a tax
on stones, sand, gravel, earth and other quarry resources extracted from public lands because it is
expressly empowered to do so under the local government code. As to stones, sand, gravel, earth and
other quarry resources extracted from private land, however it may not do so, because of the limitation
provided by section 133 of the code in relation to section 151 of the NIRC.

Given the above disquisition, petitioners cannot claim that the appellate court unjustly deprived them of
the power to create their sources of revenue, their assessment of taxes against Republic Cement being
ultra vires, traversing as it does the limitations set by the local government code.

Furthermore, section 21 of provincial ordinance no. 3 is practically only a reproduction of section 138
of the local government code. A cursory reading of both could show that both refer to ordinary sand,
gravel, stone, earth and other quarry resources extracted from public lands. Even if we disregard the
limitation set by section 133 of the local government code, petitioners, may not impose taxes on stone,
sand, gravel, earth and other quarry resources extracted from private lands. Petitioners may not involve
the regalian doctrine to extend coverage of their ordinance to quarry resources extracted from private
lands, for taxes, being burdens, are not to be presumed beyond what the applicable statute expressly
and clearly declares, tax statutes being construed strictissimi juris against the government.

(14) Batangas City vs. Pilipinas Shell Petroleum Corporation, GR No. 187631, July 8, 2015

Facts:

Issue:

Ruling:

(15) Matalin Coconut Co, Inc. vs. The Municipal Council of Malabang, Lanao del Sur, GR No. L-
28138 August 13, 1986

Facts:

Issue:

Ruling:

REAL PROPERTY TAXES

(1) Villanueva vs. City of Iloilo 26 SCRA 578, December 28, 1968

Facts: On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, imposing
license tax fees as follows: (1) tenement house (casa de vecindad), P25.00 annually; (2) tenement
house, partly or wholly engaged in or dedicated to business in the streets of J.M. Basa, Iznart and
Aldeguer, P24.00 per apartment; (3) tenement house, partly or wholly engaged in business in any other
streets, P12.00 per apartment. The validity and constitutionality of this ordinance were challenged by
the spouses Eusebio Villanueva and Remedies Sian Villanueva, owners of four tenement houses
containing 34 apartments. On January 15, 1960 the municipal board of Iloilo City, believing,
obviously, that with the passage of Republic Act 2264, otherwise known as the Local Autonomy Act, it
had acquired the authority or power to enact an ordinance similar to that previously declared by this
Court as ultra vires, thus enacted an “Ordinance Imposing Municipal License Tax on Persons Engaged
in the Business of Operating Tenement-Houses”.
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Issue: Whether or not the tax imposed by the ordinance falls within any of the exception provided in
Section 2 of the Local Autonomy Act, thus imposing a double taxation.

Ruling: It is necessary to determine the true nature of the tax. The appellees strongly maintain that it is
a “property tax” or “real estate tax,” and not a “tax on persons engaged in any occupation or business or
exercising privileges,” or a license tax, or a privilege tax, or an excise tax. The tax in question is not a
real estate tax. A real estate tax is a direct tax on the ownership of lands and buildings or other
improvements thereon and is payable regardless of whether the property is used or not. The tax is
usually single or indivisible, although the land and building or improvements erected thereon are
assessed separately, except when the land and building or improvements belong to separate owners. It
is a fixed proportion of the assessed value of the property taxed, and requires, therefore, the
intervention of assessors. It is collected or payable at appointed times, and it constitutes a superior lien
on and is enforceable against the property subject to such taxation, and not by imprisonment of the
owner. The tax imposed by the ordinance in question does not possess the aforestated attributes.
Clearly, therefore, the tax in question is not a real estate tax. “The spirit, rather than the letter, or an
ordinance determines the construction thereof, and the court looks less to its words and more to the
context, subject-matter, consequence, and effect. Accordingly, what is within the spirit is within the
ordinance although it is not within the letter thereof, while that which is in the letter, although not
within the spirit, is not within the ordinance.” It is within neither the letter nor the spirit of the
ordinance that an additional real estate tax is being imposed, otherwise, the subject-matter would have
been not merely tenement houses. It is plain from the context of the ordinance that the intention is to
impose a license tax on the operation of tenement houses, which is a form of business or calling. Thus,
there is no double taxation.

(2) City of Baguio vs. Busuego 100 SCRA 116, September 18, 1980

(3) National Power Corporation vs. Province of Quezon 593 SCRA 47, July 15, 2009

(4) National Power Corporation vs. Province of Quezon and Municipality of Pagbilao, 611 SCRA 71,
January 25, 2010

(5) Government Service Insurance System vs. City Treasurer of the City of Manila 609 SCRA 330,
December 23, 2009

(6) Mindanao Bus Co. vs. City Assessor and Treasurer 6 SCRA 197, September 29, 1962

(7) Caltex (Phil.) Inc. vs. Central Board of Assessment Appeals 114 SCRA 296, May 31, 1982

(8) Manila Electric Co. vs. Central Board of Assessment Appeals 114 SCRA 273, May 31, 1982

(9) Manila Electric Company vs. The City Assessor 765 SCRA 52, August 05, 2015

(10) Provincial Assessor of Agusan del Sur vs. Filipinas Palm Oil Plantation, Inc. 805 SCRA 112,
October 05, 2016

(11) Capitol Wireless, Inc. vs. Provincial Treasurer of Batangas 791 SCRA 272, May 30, 2016

(12) Patalinghug vs. Court of Appeals 229 SCRA 554, January 27, 1994

(13) Sesbreño vs. Central Board of Assessment Appeals 270 SCRA 360, March 24, 1997

(14) Lopez vs. City of Manila 303 SCRA 448, February 19, 1999

(15) City Assessor of Cebu City vs. Association of Benevola de Cebu, Inc. 524 SCRA 128, June 08,
2007
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