Philex Mining Corporation v CIR GR No 125704, August 28, 1998

FACTS:

BIR sent a letter to Philex asking it to settle its tax liabilities amounting to P124 million. Philex protested the demand for payment stating
that it has pending claims for VAT input credit/refund amounting to P120 million. Therefore, these claims for tax credit/refund should be
applied against the tax liabilities.
In reply the BIR found no merit in Philex’s position. On appeal, the CTA reduced the tax liability of Philex.

ISSUES:

1. Whether legal compensation can properly take place between the VAT input credit/refund and the excise tax liabilities of
Philex Mining Corp;

RULING:

1. No, legal compensation cannot take place. The government and the taxpayer are not creditors and debtors of each other.
Debts are due to the Government in its corporate capacity while taxes are due to the Government in its sovereign capacity.
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. It is compulsory rather
than a matter of bargain.

CASE DIGEST: AIR CANADA, Petitioner, vs. COMMISSIONER OF INTERNAL

REVENUE, Respondent. (G.R. No. 169507; January 11, 2016)

FACTS: Air Canada is an offline air carrier selling passage tickets in the Philippines, through
a general sales agent, Aerotel. 

Air Canada filed a claim for refund for more than 5 million pesos. It claims that there was
overpayment, saying that the applicable tax rate against it is 2.5% under the law on tax on
Resident Foreign Corporations (RFCs) for international carriers. It argues that, as
an international carrier doing business in the Philippines, it is not subject to tax at the regular
rate of 32%.

However, the CTA ruled that Air Canada was engaged in business in the Philippines through a
local agent that sells airline tickets on its behalf. As such, it should be taxed as a resident
foreign corporation at the regular rate of 32%.

ISSUES:

[4] Can Air Canada validly refuse to pay its tax deficiency on the ground that there is a
pending tax credit proceeding it has filed?

HELD:

[4] No, it cannot. Even if Air Canada succeeds in claiming tax refund, the general rule prevails
that there can be not setting off of taxes since the Government and the taxpayer are not
creditors and debtors of each other. tAxes are not in the nature of contracts between the party
and party but grow out of duty to, and are positive acts of the government in making and
enforcing of which, the personal consent of individual taxpayers is not required.

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:
Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of 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.

ISSUE: WON there’s undue delegation of taxing authority

HELD: No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an essential and inherent
attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by
the people.  It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive
or judicial department of the government without infringing upon the theory of separation of powers.

The exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers
may be delegated to local governments in respect of matters of local concern. By necessary implication, the legislative power
to create political corporations for purposes of local self-government carries with it the power to confer on such local
governmental agencies the power to tax.
 

Abakada Guro Party-list et. al vs. Executive Secretary (G.R. No. 168056) - Digest

Facts:

On May 24, 2005, the President signed into law Republic Act 9337 or the VAT Reform Act. Before the law took effect on July 1, 2005,
the Court issued a TRO enjoining government from implementing the law in response to a slew of petitions for certiorari and prohibition
questioning the constitutionality of the new law.

The challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6: “That the President, upon the recommendation
of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to 12%, after any of the following
conditions has been satisfied:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth
percent (2 4/5%);

or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1½%)”

Petitioners allege that the grant of stand-by authority to the President to increase the VAT rate is an abdication by Congress of its
exclusive power to tax because such delegation is not covered by Section 28 (2), Article VI Consti. They argue that VAT is a tax levied
on the sale or exchange of goods and services which can’t be included within the purview of tariffs under the exemption delegation
since this refers to customs duties, tolls or tribute payable upon merchandise to the government and usually imposed on
imported/exported goods.
Petitioners further alleged that delegating to the President the legislative power to tax is contrary to republicanism. They insist that
accountability, responsibility and transparency should dictate the actions of Congress and they should not pass to the President the
decision to impose taxes. They also argue that the law also effectively nullified the President’s power of control, which includes the
authority to set aside and nullify the acts of her subordinates like the Secretary of Finance, by mandating the fixing of the tax rate by the
President upon the recommendation of the Secretary of Justice.

Issue:

Whether or not the RA 9337's stand-by authority to the Executive to increase the VAT rate, especially on account of the
recommendatory power granted to the Secretary of Finance, constitutes undue delegation of legislative power?

Ruling:

The powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely
legislative power which can never be delegated is the authority to make a complete law- complete as to the time when it shall take
effect and as to whom it shall be applicable, and to determine the expediency of its enactment. It is the nature of the power and not the
liability of its use or the manner of its exercise which determines the validity of its delegation.

The exceptions are:

(a) delegation of tariff powers to President under Constitution

(b) delegation of emergency powers to President under Constitution
(c) delegation to the people at large
(d) delegation to local governments
(e) delegation to administrative bodies

For the delegation to be valid, it must be complete and it must fix a standard. A sufficient standard is one which defines legislative
policy, marks its limits, maps out its boundaries and specifies the public agency to apply it.

In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of facts upon which enforcement and
administration of the increased rate under the law is contingent. The legislature has made the operation of the 12% rate effective
January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon
factual matters outside of the control of the executive. No discretion would be exercised by the President. Highlighting the absence of
discretion is the fact that the word SHALL is used in the common proviso. The use of the word SHALL connotes a mandatory order. Its
use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.

Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified
by Congress. This is a duty, which cannot be evaded by the President. It is a clear directive to impose the 12% VAT rate when the
specified conditions are present.

Congress just granted the Secretary of Finance the authority to ascertain the existence of a fact--- whether by December 31, 2005, the
VAT collection as a percentage of GDP of the previous year exceeds 2 4/5 % or the national government deficit as a percentage of
GDP of the previous year exceeds one and 1½%. If either of these two instances has occurred, the Secretary of Finance, by legislative
mandate, must submit such information to the President.

In making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting
as the alter ego of the President or even her subordinate. He is acting as the agent of the legislative department, to determine and
declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which
legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has
a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent
information and verify if any of the two conditions laid out by Congress is present.

Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what
is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward.

There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally
permissible. Congress did not delegate the power to tax but the mere implementation of the law.

PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. THE BUREAU OF

INTERNAL REVENUE, represented by JOSE MARIO BUNAG, in his capacity as Commissioner of the
Bureau of Internal Revenue, and JOHN DOE and JANE DOE, who are Promulgated: persons acting for,
in behalf or under the authority of respondent
G.R. No. 215427          December 10, 2014

FACTS: The Philippine Amusement and Gaming Corporation (PAGCOR) assailed the validity of Section 1 of
Republic Act 9337, amending Section 27(C) of the National Internal Revenue Code (NIRC). The
amendment omitted PAGCOR from the list of government owned or controlled corporations which are exempt
from income taxes.

PAGCOR alleged that RA9337 is unconstitutional for it violates due process for the congress has the exclusive
authority to fix the rate of taxes. The president, upon the recommendation of the Secretary of Finance, has no
authority to raise the VAT to 12%.

ISSUE: WON RA 9337 is unconstitutional for being violative of due process and Equal Protection Clause

RULING:

Due Process – no,  see abakada.

Equal Protection Clause – no.

Legislative bodies are allowed to classify the subjects of legislation.

Rewquisites: (PEGS)
1. Must be under present and future conditions
2. Must apply equally to all members of the same classs
3. Must be germane to the purpose of the law
4. Must be based on substantial distinctions

The previous exemption granted to PAGCOR is not made pursuant to valid classification based on substantial
distinctions. It was only based on PAGCOR’s own request to be exempted.

Manila Electric Company v. Province of Laguna (G.R. No. 131359. May 5, 1999)

18AUG

FACTS:
MERALCO was granted a franchise by several municipal councils and the National Electrification Administration to operate an electric
light and power service in the Laguna. Upon enactment of Local Government Code, the provincial government issued ordinance
imposing local franchise tax. MERALCO paid under protest and later claims for refund because of the duplicity with Section 1 of P.D.
No. 551, payment to National Government. This was denied by the governor (Joey Lina) relying on a more recent law (LGC).
MERALCO filed with the RTC a complaint for refund, but was dismissed. Hence, this petition.

ISSUE: 

Whether or not the imposition of franchise tax under the provincial ordinance is violative of the non-impairment clause of the
Constitution and of P.D. 551.

HELD:

No. There is no violation of the non-impairment clause for the same must yield to the inherent power of the state (taxation). The
provincial ordinance is valid and constitutional.

RATIO:

Tax exemptions contained in special franchises are far from being strictly contractual in nature. Contractual tax exemptions where non
impairment clause can be invoked are those agreed by the taxing authority in contracts such as government bonds or debentures,
lawfully entered into by them under enabling laws in which the government is acting in its private capacity, shed its cloak of authority
and waives it governmental immunity.

Constitution- no franchise shall be granted except under the condition that such privilege shall be subject to amendment, alteration or
repeal by Congress as and when the common good so requries.

SMART COMMUNICATIONS VS. DAVAO

Smart filed a special civil action contenting that its telecenter located at davao city is exempt from local franchise tax due to its issued
franchise which exempt it from provisions of the LGC, that they are only required to pay 5% franchise fee in lieu of all taxes. It further
alleged that the imposition of local fracnhise tax is a violation of the constitutional provision against impairment of contacts for the
franchise is alleged to be in the nature of a contract.

The City of Davao invoked the provision of the constitution wherein they are granted to create their own source of revenue locally.

ISSUE: Won there is violation of non-impairment clause due to the imposition of local franchise tax on Smart

RULING: No.

Franchise does not expressly exempt SMART from Local Taxes. In lieu of taxes has so much room for interpretation. Due to
ambiguity, resolve against taxpayer.

Moreover, Smart's franchise was granted with the express condition that it is subject to amendment, alteration, or repeal.[48] As held in
Tolentino v. Secretary of Finance: [49]

It is enough to say that the parties to a contract cannot, through the exercise of prophetic discernment, fetter the exercise of the taxing
power of the State. For not only are existing laws read into contracts in order to fix obligations as between parties, but the reservation of
essential attributes of sovereign power is also read into contracts as a basic postulate of the legal order. The policy of protecting
contracts against impairment presupposes the maintenance of a government which retains adequate authority to secure the peace and
good order of society. In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's power of
taxation save only where a tax exemption has been granted for a valid consideration. x x x.
American Bible Society v. City of Manila, GR No. L-9637, April 30, 1957

CASE DIGEST

Facts: American Bible is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the
Philippines through its Philippine agency. It has sold bibles and other religious materials at a very minimal profit.

The acting City Treasurer of the City of Manila informed American Bible that it was conducting the business of general merchandise
without providing itself with the necessary Mayor's permit and municipal license, in violation of Ordinance No. 3000, as amended, and
Ordinances Nos. 2529, 3028 and 3364, and required American Bible to secure the necessary permit and license.

American Bible paid the said fees under protest, questioning the constitutionality of the imposed taxes. It was alleged that is an
infringement of religious freedom.

Issue: WON the said ordinances are unconstitutional

Held: 2529 YES

3000 NO

Section 1, subsection (7) of Article III of the Constitution, provides that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and
enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. No religion test shall be
required for the exercise of civil or political rights. The provision aforequoted is a constitutional guaranty of the free exercise and
enjoyment of religious profession and worship, which carries with it the right to disseminate religious information.

The imposition of license fee for conducting the business of general merchandise impairs the free exercise of religion. The right to
religious freedom carries with the right to disseminate religious information. Any restraint of such right may only be justified in the
presence of clear and present danger of any substantive evil which the State has the right to prevent.

It is true that the bibles were sold to be a little bit higher than cost but it cannot be inferred that is sold for a profit.

Ordinance 3000 – Mayor’s permit

Upon the other hand, City Ordinance No. 3000, as amended, which requires the obtention of the Mayor's permit before any person can
engage in any of the businesses, trades or occupations enumerated therein, does not impose any charge upon the enjoyment of a right
granted by the

Constitution, nor tax the exercise of religious practices. Hence, it cannot be considered unconstitutional, even if applied to Ameircan
Bible Society.

Law VS Regulation

Secretary of Finance vs Philippine Tobacco

Sin Tax Reform Law was enacted to restructure the excise tax on alcohol and tobacco. It increased the excised tax and allowed
packaging of not more than 20 sticks of tobacco.

Upon the recommendation of CIR, the secretary of finance issued rr17-2012 imposing excise tax per pack of 5’s and 10’s.

PTI filed a petition for declaring the RR of the Secretary of Finance null and void for being unconstitutional and not authorized by Sin
Tax Reform Law.
ISSUE: WON the Regulation issued by Secretary of Finance is null and void.

RULING: Yes.

The lawmakers intended to impose the excise taxes for pack of 20 cigarettes, the bundle of 5’s and 10’s should be computed per 20’s.
the RR issued by the Secretary of Finance went beyond the express provisions of Sin Tax Reform Law.

Administrative rules and regulations has the force and effect of law. It must not contravene the law but must remain consistent with the
law they intend to implement. It is only the Congress which has the power to repeal or amend the law.

It is well settled rule that venue regulations cannot amend the law it seeks to implement.

Whether or not the RTC erred in granting the petition to impose tax on combination pouches of 5’s and 10’s not exceeding 20 sticks
rather than taxing individually pouches of 5’s and 10’s.

RULING:

No, the SC affirmed the decision of the RTC. Basing from the intention and clear interpretation of RA 10351, combined with the
deliberation made during the bicameral conference of Congress, tax should be imposed on cigarette pouched by machine as
packaging combination of 20 cigarette sticks as a whole and not to individual packaging combinations on pouches of 5’s and 10’s. The
SC stated further that the BIR went beyond its jurisdiction by imposing additional burden to the Tobacco Sector through issuance of its
revenue regulations. In so doing, the BIR made an amendment which was not under its functions. The amendments of laws,
according to SC, were one of Congress’ primary concerns and functions.

Taxpayer’s suit

Mamba V. Lara

 Sangguniang Panlalawigan of Cagayan passed several resolutions authorizing Governor Edgar R. Lara to negotiate, sign and
execute contracts with

1. Preferred Ventures Corp. - as financial advisor of the province of Cagayan regarding the bond floatation undertaken
2. Asset Builders Corporation - rewarded the right to plan, design, construct and develop the proposed town center
3. RCBC as trustee of the bond undertaken
4. MICO as guarantor 
5. LBP as official depositary bank of the province

 In total, the provincial will incur a total cost of  P 231, 908, 232.39 and P 187M for the 7 years of subsidizing the interest of the
bonds from which the construction will be primarily sourced
 Petitioners. Mamba, filed a Petition for Annulment of Contracts or Injunction with prayer for Temporary Restraining
Order against Edgar R. Lara, Jenerwin C. Bacuyag et al, as members of the Sangguniang Panlalawigan of Cagayan and other
contracting parties as indispenable and necessary parties.
  Respondent filed their Answers and Motion to Dismiss stating as one of the grounds that petition lack locus standi in court.
And furthered that the proceeds from the bond will be used.
 RTC: dismissed the petition for Lack of Cause of Action or locus standi due to failure of the petitioners to show that their rights
were prejudiced.  -  sustained even on petitioner's Motion for Reconsideration
ISSUE: Whether or not petitioners have locus standi

HELD: YES.   A taxpayer is allowed to sue whether there is a claim that public funds are illegally disbursed or that the public money is
being deflected to any improper purpose, or that there is wastage of public funds through the enforcement of an invalid or
unconstitutional law

 2 requisites must be met: 

 (1) public funds derived from taxation are disbursed by a political subdivision or instrumentality and in doing so, a law
is violated or some irregularity is committed - Records show an appropriation of P25 M for the interest of the bond
 (2) the petitioner is directly affected by the alleged act - the court has relaxed the stringent direct injury test bearing in
mind that locus standi is a procedural technicality. By invoking transcendental importance, paramount public interest,
or far-reaching implications, ordinary citizens and taxpayers were allowed to sue even if they failed to show direct
injury.  In cases where serious legal issues were raised or where public expenditures of millions of pesos were
involved, the court did not hesitate to give standing to taxpayers

 Another point to consider is that local government units now possess more powers, authority and resources at their disposal,
which in the hands of unscrupulous officials may be abused and misused to the detriment of the public. To protect the interest
of the people and to prevent taxes from being squandered or wasted under the guise of government projects, a liberal
approach must therefore be adopted in determining locus standi in public suits.

Land Bank of the Philippines v Cacayuran

Municipality’s Sangguniang Bayan passed a resolution to redevelop the Agoo plaza, authorizing then Mayor to obtain loan from Land
Bank, to serve as a security, he mortaggaed portion of agoo plaza and assigned portion of its internal revenue allotment and monthly
invceom from the propsed subject.

SB issued another resolution authorizing the Mayor to obtain another loan with the samae securities.

The residents, Cacayuran, protested with the conversion of agoo plaza as a commercial center as it was funded by the proceeds from
the loans secured by funds derived from taxes. Cacayuran, receiving no response, filed a complaint as a taxpayer alleging the validity
of the conversion.

ISSUE: WON Cacayuran has legal standing to sue.

RULING; YES>

Remedial Law; Civil Procedure; Taxpayer’s Suits;For a taxpayer’s suit to prosper, two requisites must bemet namely, (1) public funds
derived from taxation aredisbursed by a political subdivision or instrumentalityand in doing so, a law is violated or some irregularityis
committed; and (2) the petitioner is directly affectedby the alleged act.—It

1. Misused Public Funds

Instruction of the APC would be primarily sourced fromthe proceeds of the Subject Loans, which Land Bankinsists are not taxpayer’s
money, there is no denyingthat public funds derived from taxation are bound tobe expended as the Municipality assigned a portion ofits
IRA as a security for the foregoing loans. Needlessto state, the Municipality’s IRA, which serves as thelocal government unit’s just
share in the nationaltaxes, is in the nature of public funds derived fromtaxation. The Court believes, however, that althoughthese funds
may be posted as a security, itscollateralizationshould only be deemed effectiveduring the incumbency of the public officers
whoapproved the same, else those who succeed them beeffectively deprived of its use. In any event, it isobserved that the proceeds
from the Subject Loanshad already been converted into public funds by theMunicipality’s receipt thereof. Funds coming fromprivate
sources become impressed with thecharacteristics of public funds when they are underofficial custody.

2. Directly affected
Yes, it is a plaza, for public use.