Pelizloy Realty Corporation v.

Province of Benguet

FACTS:

The petitioner is Pelizloy Realty Corporation, the owner of Palm Grove Resort, located in Asin, Angalisan,
Municipality of Tuba, Province of Benguet. The respondent is the Province of Benguet.

On December 8, 2005, the Provincial Board of the Province of Benguet approved Provincial Tax Ordinance No.
05-107, also known as the Benguet Revenue Code of 2005. Section 59, Article X of this ordinance imposed a ten
percent (10%) amusement tax on gross receipts from admissions to various recreational facilities, including
resorts, swimming pools, bath houses, hot springs, and tourist spots.

Pelizloy contested the imposition of the amusement tax, arguing that it exceeded the authority of the Province
of Benguet under the Local Government Code (LGC). Pelizloy filed an appeal/petition before the Secretary of
Justice, as allowed by Section 187 of Republic Act No. 7160, the Local Government Code. The appeal was filed
within the thirty-day period from the effectivity of the tax ordinance.

The Secretary of Justice failed to render a decision on Pelizloy's appeal within the sixty-day period provided by
Section 187 of the Local Government Code. Pelizloy interpreted this failure as an implied denial of their
appeal/petition.

Considering the implied denial of its appeal, Pelizloy filed a Petition for Declaratory Relief and Injunction before
the Regional Trial Court, Branch 62, La Trinidad, Benguet. The petition challenged the validity of Section 59,
Article X of the Benguet Revenue Code of 2005, arguing that it violated the limitations on the taxing powers of
local government units under the Local Government Code.

ISSUE:

Whether Section 59, Article X of the Benguet Provincial Revenue Code, which imposes a 10% amusement tax
on gross receipts from admissions to resorts, swimming pools, bath houses, hot springs, and tourist spots,
constitutes a prohibited percentage tax under the Local Government Code.

Whether provinces have the authority to impose amusement taxes on admission fees to recreational facilities,
considering the limitations and guidelines set forth in the Local Government Code.

RULING:

Legality of the Amusement Tax: The Court determined that the second paragraph of Section 59, Article X of the
Benguet Provincial Revenue Code, which imposed a 10% amusement tax on gross receipts from admissions to
resorts, swimming pools, bath houses, hot springs, and tourist spots, constituted a prohibited percentage tax
under the Local Government Code. Therefore, this provision was declared null and void.

Authority of Provinces to Impose Amusement Taxes: The Court clarified that while provinces have the authority
to impose amusement taxes, such authority is not unlimited. The scope of amusement taxes that provinces can
impose is subject to the limitations and guidelines set forth in the Local Government Code. In this case, the
Court determined that the amusement tax imposed on admission fees to certain recreational facilities
exceeded the permissible scope of provincial taxation powers.

Therefore, the Supreme Court's ruling affirmed Pelizloy Realty Corporation's position and invalidated the
specific provision of the Benguet Provincial Revenue Code that imposed amusement taxes on admission fees to
resorts, swimming pools, bath houses, hot springs, and tourist spots. The Province of Benguet was permanently
enjoined from enforcing this provision in relation to the specified recreational facilities.
G.R. No. L-1281 May 31, 1949
JOSEPH E. ICARD, petitioner-appellee,
vs.
THE CITY COUNCIL OF BAGUIO and the city of baguio,
Nature of the Case: This is an appeal from a decision rendered by the Court of First Instance of the Mountain
Province. The petitioner, a resident of the City of Baguio, contested the legality of certain ordinances enacted
by the city regarding amusement taxes and property taxes.
Facts:
The City of Baguio enacted Ordinance No. 6-v, imposing an amusement tax on every person entering a night
club licensed in the city.
Ordinance No. 11-V mandated a property tax on motor vehicles kept and operated within the city.
Ordinance No. 12-V imposed a graduated license fee on admission tickets sold by certain enterprises, including
cinematographs.
The petitioner, the owner of a night club called "El Club Monaco," and a holder of a municipal license, paid
under protest the amusement tax and property tax imposed by the ordinances.
Lower Court Decision:
The lower court declared Ordinance No. 11-V and the provision of Ordinance No. 6-V imposing an amusement
tax on night clubs as null and void.
The court ordered the City of Baguio to refund the petitioner the sum of P254.80 paid as amusement tax under
Ordinance No. 6-V.
Issues:
Whether the lower court erred in declaring Ordinance No. 11-V null and void.
Whether the lower court erred in declaring the provision of Ordinance No. 6-V imposing an amusement tax on
night clubs null and void.
Whether the lower court erred in ordering the City of Baguio to refund the petitioner the amusement tax paid
under Ordinance No. 6-V.
Ruling and Analysis:
Municipal Taxation Authority: Municipal corporations do not possess inherent taxation powers. Their authority
to levy taxes must be explicitly granted by law and construed narrowly.
Authority to Levy Taxes: The charter of the City of Baguio, as outlined in section 2553(b) of the Revised
Administrative Code, empowers the city council to impose taxes only as provided by law.
Amusement Tax on Night Clubs: The City of Baguio lacked specific legislative authority to impose an
amusement tax on night clubs. Such authority was absent in its charter, unlike the City of Manila, which had
explicit provisions for similar taxes.
Property Tax on Motor Vehicles: Ordinance No. 11-V, purportedly a property tax on motor vehicles, resembled
a municipal license fee, which was prohibited by the Revised Motor Vehicle Law.
Conclusion: Ordinance No. 6-V's provision for an amusement tax on night clubs and Ordinance No. 11-V's
property tax on motor vehicles exceeded the City of Baguio's authority to enact. Therefore, they were declared
illegal and void.
The judgment of the lower court was affirmed, ordering the City of Baguio to refund the petitioner the
amusement tax paid under Ordinance No. 6-V.
Decision: The Court affirms the decision of the lower court declaring Ordinance No. 6-V and Ordinance No. 11-
V void and ordering the City of Baguio to refund the petitioner the sum of P254.80 paid as amusement tax. No
special pronouncement was made regarding costs.
Mactan Cebu International Airport Authority v Hp. Ferdinand J Marcos
PASEI v DRILON GR No. 81959 June 30, 1988

FACTS:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm
"engaged principally in the recruitment of Filipino workers, male and female, for overseas placement,"
challenges the Constitutional validity of Department Order No. 1, Series of 1988, of the Department of
Labor and Employment, in the character of "GUIDELINES GOVERNING THE TEMPORARY SUSPENSION
OF DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD WORKERS," through petition for certiorari
and prohibition. Specifically, the measure is assailed for "discrimination against males or females;"
that it "does not apply to all Filipino workers but only to domestic helpers and females with similar
skills;" and that it is violative of the right to travel. It is held likewise to be an invalid exercise of the
lawmaking power, police power being legislative, and not executive, in character.

On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and
Administrator of the Philippine Overseas Employment Administration, filed a Comment informing the
Court that on March 8, 1988, the respondent Labor Secretary lifted the deployment ban in the states
of Iraq, Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway, Austria, and Switzerland. In
submitting the validity of the challenged "guidelines," the Solicitor General invokes the police power
of the Philippine State.

ISSUE:
WON D.O. No. 1 is unconstitutional it being an invalid exercise of the lawmaking power since police
power is legislative and not executive in nature.

RULING:
NO. The concept of police power is well-established in this jurisdiction. It has been defined as the
"state authority to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare." As defined, it consists of (1) an imposition of restraint upon liberty or
property, (2) in order to foster the common good. It is not capable of an exact definition but has been,
purposely, veiled in general terms to underscore its all-comprehensive embrace.

As a general rule, official acts enjoy a presumed validity. In the absence of clear and convincing
evidence to the contrary, the presumption logically stands. The petitioner has shown no satisfactory
reason why the contested measure should be nullified. There is no question that Department Order
No. 1 applies only to "female contract workers," but it does not thereby make an undue
discrimination between the sexes. It is well-settled that "equality before the law" under the
Constitution does not import a perfect Identity of rights among all men and women. It admits of
classifications, provided that (1) such classifications rest on substantial distinctions; (2) they are
germane to the purposes of the law; (3) they are not confined to existing conditions; and (4) they
apply equally to all members of the same class.

The Court is satisfied that the classification made-the preference for female workers — rests on
substantial distinctions.
The Court took judicial notice of the unhappy plight that has befallen our female labor force abroad,
especially domestic servants, amid exploitative working conditions marked by, in not a few cases,
physical and personal abuse. The sordid tales of maltreatment suffered by migrant Filipina workers,
even rape and various forms of torture, confirmed by testimonies of returning workers, are
compelling motives for urgent Government action. As precisely the caretaker of Constitutional rights,
the Court is called upon to protect victims of exploitation. In fulfilling that duty, the Court sustains the
Government's efforts.
The same, however, cannot be said of our male workers. In the first place, there is no evidence that,
except perhaps for isolated instances, Filipino men abroad have been afflicted with an Identical
predicament. PASEI has proffered no argument that the Government should act similarly with respect
to male workers. The Court, of course, is not impressing some male chauvinistic notion that men are
superior to women. What the Court is saying is that it was largely a matter of evidence (that women
domestic workers are being ill-treated abroad in massive instances) and not upon some fanciful or
arbitrary yardstick that the Government acted in this case. It is evidence capable indeed of
unquestionable demonstration and evidence this Court accepts. The Court cannot, however, say the
same thing as far as men are concerned. There is simply no evidence to justify such an inference.
Suffice it to state, then, that insofar as classifications are concerned, this Court is content that
distinctions are borne by the evidence. Discrimination, in this case, is justified.

There is no doubt that such a classification is germane to the purpose behind the measure.
Unquestionably, it is the avowed objective of Department Order No. 1 to "enhance the protection for
Filipino female overseas workers" the SC has no quarrel that in the midst of the terrible mistreatment
Filipina workers have suffered abroad, a ban on deployment will be for their own good and welfare.

The Order does not also narrowly apply to existing conditions. Rather, it is intended to apply
indefinitely so long as those conditions exist. This is clear from the Order itself ("Pending review of the
administrative and legal measures, in the Philippines and in the host countries . . ."18), meaning to say
that should the authorities arrive at a means impressed with a greater degree of permanency, the ban
shall be lifted.

There is also no merit in the contention that Department Order No. 1 constitutes an invalid exercise of
legislative power. It is true that police power is the domain of the legislature, but it does not mean
that such an authority may not be lawfully delegated. As we have mentioned, the Labor Code itself
vests the Department of Labor and Employment with rulemaking powers in the enforcement whereof.

In view of the foregoing, the petition was dismissed.

Mactan-Cebu International Airport Authority and Air Transportation Office v. Bernardo L.
Lozada,Sr., and the heirs of Rosario Mercado
G.R. No. 176625 | February 25, 2010
Doctrine
:
The taking of private property, consequent to the Government’s exercise of its power of eminent
domain,
is always subject to the condition that the property be devoted to the specific public purpose for
which it was taken.Corollarily, if this particular purpose or intent is not initiated or not at all pursued,
and is peremptorily abandoned,then the former owners, if they so desire, may seek the reversion of
the property, subject to the return of the amountof just compensation received.
FACTS
: Respondents were the registered owners of Lot No. 88 situated in the City of Cebu, the subjectlot.
The property was expropriated in favor of the Republic of the Philippines by virtue of a decision ofthe
CFI of Cebu in a civil case. The public purpose for which the property was expropriated was for
theexpansion and improvement of theLahugAirport. The affected landowners appealed. Pending
appeal, theAir Transportation Office (ATO) proposed a compromise settlement that the expropriated
lots would beresold at the price they were expropriated in the event that the ATO would abandon the
Lahug Airport.Because of this, Lozada did not pursue his appeal.Then President Corazon Aquino
directed the Department of Transportation and Communication totransfer general aviation operations
of the Lahug Airport to the Mactan-Cebu International AirportAuthority and to close the Lahug Airport
after such transfer, therefore, the public purpose of the saidexpropriation (expansion of the airport)
was never actually initiated, realized, or implemented.Herein respondents initiated a complaint for
the recovery of possession and reconveyance of ownershipof Lot No. 88. The RTC rendered judgment
in their favor. This was affirmed by the CA.
ISSUE
: Whether the ownership and possession of Lot No. 88 should be restored to respondents.
HELD
:Yes, the ownership and possession of Lot No. 88 should be restored to respondents.
The taking of private property by the Government’s power of eminent domain is subject to two
mandatory requirements: (1) that it is for a particular public purpose; and (2) that just compensation
bepaid to the property owner. These requirements partake of the nature of implied conditions that
shouldbe complied with to enable the condemnor to keep the property expropriated.More
particularly, with respect to the element of public use, the expropriator should commit to use
theproperty pursuant to the purpose stated in the petition for expropriation filed, failing which, it
should fileanother petition for the new purpose. If not, it is then incumbent upon the expropriator to
return the saidproperty to its private owner, if the latter desires to reacquire the same, subject to the
return of theamount of just compensation received. Otherwise, the judgment of expropriation suffers
an intrinsic flaw,as it would lack one indispensable element for the proper exercise of the power of
eminent domain,namely, the particular public purpose for which the property will be devoted.
Accordingly, the privateproperty owner would be denied due process of law, and the judgment would
violate the property
owner’s right to justice, fairness, and equity
 Lutz vs. Araneta (98 Phil. 148), G.R. No. L-7859, December 22, 1955

Facts:
Walter Lutz, as the Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover
from J. Antonio Araneta, the Collector of Internal Revenue, the sum of money paid by the estate as taxes,
pursuant to the Sugar Adjustment Act.
Under Section 3 of said Act, taxes are levied on the owners or persons in control of the lands devoted to the
cultivation of sugar cane. Furthermore, Section 6 states all the collections made under said Act shall be for aid
and support of the sugar industry exclusively.
Lutz contends that such purpose is not a matter of public concern hence making the tax levied for that cause
unconstitutional and void. The Court of First Instance dismissed his petition, thus this appeal before the
Supreme Court.

Issue:
Whether or not the tax levied under the Sugar Adjustment Act (Commonwealth Act 567) is unconstitutional.
Ruling:
The tax levied under the Sugar Adjustment Act is constitutional. The tax under said Act is levied with a
regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry.
Since sugar production is one of the great industries of our nation, its promotion, protection, and
advancement, therefore redounds greatly to the general welfare. Hence, said objectives of the Act is a public
concern and is therefore constitutional.
It follows that the Legislature may determine within reasonable bounds what is necessary for its protection and
expedient for its promotion. If objectives and methods are alike constitutionally valid, no reason is seen why
the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made with
the implement of the state’s police power. In addition, it is only rational that the taxes be obtained from those
that will directly benefit from it. Therefore, the tax levied under the Sugar Adjustment Act is held to be
constitutional.

Summary of Principles:
1. The State has the power to levy tax in aid and support of sugar industry.
As the protection and promotion of the sugar industry is a matter of public concern, the Legislature may
determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Here,
the legislative discretion must be allowed full play, subject only to the test of reasonableness; and it is not
contended that the means provided in section 6 of Commonwealth Act No. 567 bear no relation to the
objective pursued or are oppressive in character. If objective and methods arealike constitutionally valid, no
reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation
may be made the implement of the state’s police power.
2. The State has the power to select subject of taxation.
It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been
repeatedly held that “inequalities which result from a singling out of one particular class for taxation or
exemption infringe constitutional limitation.
G.R. No. 158540

July 8, 2004

SOUTHERN CROSS CEMENT CORPORATION vs. THE PHILIPPINE CEMENT MANUFACTURERS CORP., THE
SECRETARY OF THE DEPARTMENT OF TRADE & INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF
FINANCE, and THE COMMISSIONER OF THE BUREAU OF CUSTOMS TINGA, J.:

FACTS:
The Philippines, upon joining the General Agreement on Tariffs and Trade (GATT) and the World Trade
Organization (WTO) Agreement, enacted laws including the Safeguard Measures Act (SMA). The SMA allows
the imposition of emergency measures, such as tariffs, to protect domestic industries from increased imports
causing serious injury.
The petitioner, Southern Cross Cement Corporation ("Southern Cross"), is a domestic cement
manufacturing company. The private respondent, Philippine Cement Manufacturers Corporation
("Philcemcor"), represents domestic cement manufacturers.
Philcemcor filed an application with the Department of Trade and Industry (DTI) alleging that increased
imports of gray Portland cement had caused declines in domestic production, capacity utilization, market share,
sales, and employment. The DTI initiated a preliminary investigation and imposed provisional measures based
on the Bureau of Import Services' determination of critical circumstances.
The DTI requested a formal investigation from the Tariff Commission to determine whether definitive
safeguard measures should be imposed. The Tariff Commission concluded that the elements of serious injury
and imminent threat of serious injury were not established, recommending against imposing definitive
safeguard measures.
The DTI Secretary disagreed with the Tariff Commission's conclusion. The DTI sought a legal opinion
from the Department of Justice (DOJ) regarding the scope of options available to the DTI Secretary. The DOJ
opined that the SMA precluded the DTI Secretary from reviewing the Tariff Commission's negative finding. The
DTI denied Philcemcor's application for safeguard measures against the importation of gray Portland cement.
Philcemcor filed a petition with the Court of Appeals seeking to set aside the DTI Decision and the Tariff
Commission's Report.
The Court of Appeals asserted jurisdiction over the petition and refused to annul the Tariff
Commission's findings. However, it held that the DTI Secretary had the power to make a final decision on the
Tariff Commission's recommendation.
Southern Cross filed a petition with the Supreme Court, challenging the Court of Appeals' decision for
departing from judicial proceedings and not deciding substantial questions in accordance with law and
jurisprudence.
While the petition was pending, the DTI Secretary issued a new decision determining that the local cement
industry had suffered serious injury due to import surges. Consequently, a definitive safeguard duty was
imposed on the importation of gray Portland cement for three years.

ISSUE: Whether or not the DTI Secretary is bound to adopt the negative recommendation of the Tariff
Commission on the application for safeguard measure.

RULING: YES. Undoubtedly, Section 13 prescribes certain limitations and restrictions before general safeguard
measures may be imposed. However, the most fundamental restriction on the DTI Secretary's power in that
respect is contained in Section 5 of the SMA that there should first be a positive final determination of the Tariff
Commission. Sec. 5. Conditions for the Application of General Safeguard Measures. – The Secretary shall apply
a general safeguard measure upon a positive final determination of the [Tariff] Commission that a product is
being imported into the country in increased quantities, whether absolute or relative to the domestic
production, as to be a substantial cause of serious injury or threat thereof to the domestic industry; however, in
the case of non-agricultural products, the Secretary shall first establish that the application of such safeguard
measures will be in the public interest. (emphasis supplied) The plain meaning of Section 5 shows that it is the
Tariff Commission that has the power to make a "positive final determination." This power lodged in the Tariff
Commission, must be distinguished from the power to impose the general safeguard measure which is properly
vested on the DTI Secretary. All in all, there are two condition precedents that must be satisfied before the DTI
Secretary may impose a general safeguard measure on grey Portland cement. First, there must be a positive
final determination by the Tariff Commission that a product is being imported into the country in increased
quantities, as to be a substantial cause of serious injury or threat to the domestic industry. Second, in the case
of non-agricultural products the Secretary must establish that the application of such safeguard measures is in
the public interest. Section 5 plainly evinces legislative intent to restrict the DTI Secretary's power to impose a
general safeguard measure by preconditioning such imposition on a positive determination by the Tariff
Commission. Section 28(2), Article VI of the 1987 Constitution confirms the delegation of legislative power, yet
ensures that the prerogative of Congress to impose limitations and restrictions on the executive exercise of this
power: The Congress may, by law, authorize the President to fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national development program of the
Government.

This delegation of the taxation power by the legislative to the executive is authorized by the Constitution itself.
At the same time, the Constitution also grants the delegating authority (Congress) the right to impose
restrictions and limitations on the taxation power delegated to the President. The restrictions and limitations
imposed by Congress take on the mantle of a constitutional command, which the executive branch is obliged to
observe. The SMA empowered the DTI Secretary, as alter ego of the President, to impose definitive general
safeguard measures, which basically are tariff imposts of the type spoken of in the Constitution. However, the
law did not grant him full, uninhibited discretion to impose such measures. The DTI Secretary authority is
derived from the SMA; it does not flow from any inherent executive power. Thus, the limitations imposed by
Section 5 are absolute, warranted as they are by a constitutional fiat. Moreover, the DTI Secretary does not
have the power to review the findings of the Tariff Commission for it is not subordinate to the Department of
Trade and Industry, but of the National Economic Development Authority, an independent planning agency of
the government of coequal rank as the DTI. DTI Secretary generally cannot exercise review authority over
actions of the Tariff Commission. Neither does the SMA specifically authorize the DTI Secretary to alter, amend
or modify in any way the determination made by the Tariff Commission. The most that the DTI Secretary could
do to express displeasure over the Tariff Commission's actions is to ignore its recommendation, but not its
determination. The Court of Appeals erred in remanding the case back to the DTI Secretary, with the instruction
that the DTI Secretary may impose a general safeguard measure even if there is no positive final determination
from the Tariff Commission. More crucially, the Court of Appeals could not have acquired jurisdiction over
Philcemcor's petition for certiorari in the first place, as Section 29 of the SMA properly vests jurisdiction on the
CTA. Consequently, the assailed Decision is an absolute nullity, and we declare it as such. It is clear then that
the 25 June 2003 Decision of the DTI Secretary is a product of the void Decision, it being an attempt to carry out
such null judgment.
Caltex Philippines, Inc. v COA (1992)

Caltex Philippines, Inc. v Commission on Audit GR No. 92585, May 8, 1992

FACTS:
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund (OPSF),
excluding that unremitted for the years 1986 and 1988, of the additional tax on petroleum products authorized
under the PD 1956. Pending such remittance, all of its claims for reimbursement from the OPSF shall be held in
abeyance. The grant total of its unremitted collections of the above tax is P1,287,668,820.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the proposal
but prohibited Caltex from further offsetting remittances and reimbursements for the current and ensuing
years. Caltex moved for reconsideration but was denied. Hence, the present petition.

ISSUE:
Whether the amounts due from Caltex to the OPSF may be off setted against Caltex’s outstanding claims from
said funds

RULING:
No. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of
government. Taxes may be levied with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public interest as to be within the police power of
the State.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may not
offset taxes due from the claims he may have against the government. Taxes cannot be subject of
compensation because the government and taxpayer are not mutually creditors and debtors of each other and
a claim for taxes is not such a debt, demand,, contract or judgment as is allowed to be set-off.
Hence, COA decision is affirmed except that Caltex’s claim for reimbursement of under recovery arising from
sales to the National Power Corporation is allowed.
Francisco I. Chavez vs. Jaime B. Ongpin and Fidelina Cruz,
G.R. No. 76778. June 6, 1990.
FACTS:
Section 21 of Presidential Decree No. 464 provides that every five years starting calendar year 1978, there shall
be a provincial or city general revision of real property assessments. The revised assessment shal be
the basis for the computation of real property taxes for the five succeeding years.

On the strength of the aforementioned law, the general revision of assessments was completed in 1984.
However, Executive Order No. 1019 was issued, which deferred the collection of real property taxes based on
the 1984 values to January 1, 1988 instead of January 1, 1985.
On November 25, 1986, President Corazon Aquino issued Executive order No. 73. It states that beginning
January 1, 1987, the 1984 assessments shall be the basis of the real property collection. Thus, it effectively
repealed Executive Order No. 1019. Francisco Chavez, a taxpayer and a land-owner, questioned the
constitutionality of Executive Order No. 73. He alleges that it will bring unreasonable increase in real property
taxes. In fact, according to him, the application of the assailed order will cause an excessive increase in real
property taxes by 100% to 400% on improvements and up to 100% on land.

ISSUE:
Whether or not Executive Order no. 73 imposes unreasonable increase in real property taxes, thus,
should be declared unconstitutional.

HELD:
No. The attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a
continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No.
464 which should be challenged as constitutionally infirm. However, Chavez failed to raise any objection
against said decree. Without Executive Order No. 73, the basis for collection of real property taxes will still be
the 1978 revision of property values. Certainly, to continue collecting real property taxes based on
valuations arrived at several years ago, in disregard of the increases in the value of real properties that
have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of
the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet
government expenditures and their variations
Renato Diaz v. Secretary of Finance GR No. 193007 July 19, 2011
Facts:
Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for declaratory relief
assailing the validity of the impending imposition of value-added tax (VAT) by the Bureau of Internal Revenue
(BIR) on the collections of tollway operators. Petitioners claim that, since the VAT would result in increased toll
fees, they have an interest as regular users of tollways in stopping the BIR action. Petitioners hold the view that
Congress did not, when it enacted the NIRC, intend to include toll fees within the meaning of sale of services
that are subject to VAT; that a toll fee is a users tax, not a sale of services; that to impose VAT on toll fees would
amount to a tax on public service; and that, since VAT was never factored into the formula for computing toll
fees, its imposition would violate the non-impairment clause of the constitution. The government avers that
the NIRC imposes VAT on all kinds of services of franchise grantees, including tollway operations, except where
the law provides otherwise; that the Court should seek the meaning and intent of the law from the words used
in the statute; and that the imposition of VAT on tollway operations has been the subject as early as 2003 of
several BIR rulings and circulars. The government also argues that petitioners have no right to invoke the non-
impairment of contracts clause since they clearly have no personal interest in existing toll operating
agreements (TOAs) between the government and tollway operators. At any rate, the non-impairment clause
cannot limit the States sovereign taxing power which is generally read into contracts.

Issue: (Issue relevant to our topic only, so I excluded the VAT issue.)
1. Whether or not the imposition of VAT on tollway operators a) amounts to a tax on tax and not a tax on
services;
b) will impair the tollway operators right to a reasonable return of investment under their TOAs;
and
c) is not administratively feasible and cannot be implemented.

Ruling: a. No, the imposition of VAT on toll way operators does not amount to a tax on a tax but only to a tax
on services. What the government seeks to tax here are fees collected from tollways that are constructed,
maintained, and operated by private tollway operators at their own expense under the build, operate, and
transfer scheme that the government has adopted for expressway. Except for a fraction given to the
government, the toll fees essentially end up as earnings of the tollway operators. In sum, fees paid by the
public to tollway operators for use of the tollways, are not taxes in any sense. A tax is imposed under the taxing
power of the government principally for the purpose of raising revenues to fund public expenditures. Toll fees,
on the other hand, are collected by private tollway operators as reimbursement for the costs and expenses
incurred in the construction, maintenance and operation of the tollways, as well as to assure them a reasonable
margin of
income. Although toll fees are charged for the use of public facilities, therefore, they are not government
exactions that can be properly treated as a tax. Taxes may be imposed only by the government under its
sovereign authority, toll fees may be demanded by either the government or private individuals or entities, as
an attribute of ownership. Parenthetically, VAT on tollway operations cannot be deemed a tax on tax due to the
nature of VAT as an indirect tax. In indirect taxation, a distinction is made between the liability for the tax and
burden of the tax. The seller who is liable for the VAT may shift or pass on the amount of VAT it paid on goods,
properties or services to the buyer. In such a case, what is transferred is not the sellers liability but merely the
burden of the VAT. Consequently, VAT on tollway operations is not really a tax on the tollway user, but on the
tollway operator. Under Section 105 of the Code, [31] VAT is imposed on any person who, in the course of
trade or business, sells or renders services for a fee. In other words, the seller of services, who in this case is the
tollway operator, is the person liable for VAT. The latter merely shifts the burden of VAT to the tollway user as
part of the toll fees. For this reason, VAT on tollway operations cannot be a tax on tax even if toll fees were
deemed as a users tax. VAT is assessed against the tollway operators gross receipts and not necessarily on the
toll fees. Although the tollway operator may shift the VAT burden to the tollway user, it will not make the latter
directly liable for the VAT. The shifted VAT burden simply becomes part of the toll fees that one has to pay in
order to use the tollways.

b. Petitioner Timbol has no personality to invoke the non-impairment of contract clause on behalf of private
investors in the tollway projects. She will neither be prejudiced by nor be affected by the alleged diminution in
return of investments that may result from the VAT imposition. She has no interest at all in the profits to be
earned under the TOAs. The interest in and right to recover investments solely belongs to the private tollway
investors.

c. Administrative feasibility is one of the canons of a sound tax system. It simply means that the tax system
should be capable of being effectively administered and enforced with the least inconvenience to the taxpayer.
Non-observance of the canon, however, will not render a tax imposition invalid except to the extent that
specific constitutional or statutory limitations are impaired. Thus, even if the imposition of VAT on tollway
operations may seem burdensome to implement, it is not necessarily invalid unless some aspect of it is shown
to violate any law or the Constitution. Here, it remains to be seen how the taxing authority will actually
implement the VAT on tollway operations. Any declaration by the Court that the manner of its implementation
is illegal or unconstitutional would be premature. Although the transcript of the August 12, 2010 Senate
hearing provides some clue as to how the BIR intends to go about it,[35] the facts pertaining to the matter are
not sufficiently established for the Court to pass judgment on. Besides, any concern about how the VAT on
tollway operations will be enforced must first be addressed to the BIR on whom the task of implementing tax
laws primarily and exclusively rests. The Court cannot preempt the BIRs discretion on the matter, absent any
clear violation of law or the Constitution.
Commissioner of Internal Revenue vs. Fortune Tobacco Corporation
G.R. Nos. 167274-75, July 21, 2008

FACTS:
Fortune Tobacco is a manufacturer and producer of some cigarette brands. Prior to January 1, 1997, its
cigarette brands were subject to ad valorem tax but on January 1, 1997, R.A. No. 8240 took effect whereby a
shift from the ad valorem tax (AVT) system to the specific tax system was made and subjecting its cigarette
brands to specific tax.

For the period covering January 1-31, 2000, Fortune Tobacco paid specific taxes on all brands manufactured so
it filed a claim for refund or tax credit of its overpaid excise tax for the month of January 2000.

The Court of Tax Appeals (CTA) and the Court of Appeals, granted the tax refund or tax credit representing
specific taxes erroneously collected from its tobacco products. However, the Commissioner of Internal Revenue
reclaims the grant of tax refund. Hence, this petition.

ISSUE:
Whether or not Fortune Tobacco is entitled to tax refund.

RULING:
Yes. Although tax refund partakes the nature of a tax exemption, this rule does not apply to Fortune Tobacco’s
claim. The parity between tax refund and tax exemption exists only when the former is based either on a tax
exemption statute or a tax refund statute. In the present case, Fortune Tobacco’s claim for refund is premised
on its erroneous payment of the tax, or the government’s exaction in the absence of a law.

Tax exemption is granted by the legislature thus, the one who claims an exemption from the burden of taxation
must justify his claim by showing that the legislature intended to exempt him by words too plain to be
mistaken. In the same manner, a claim for tax refund may also be based on statutes granting tax exemption or
tax refund. In this case, the rule of strict interpretation against the taxpayer is applicable as the claim for refund
partakes of the nature of an exemption.

However, tax refunds (or tax credits) are not founded principally on legislative grant but on the legal principle
of solutio indebiti, the government cannot unjustly enrich itself at the expense of the taxpayers. Under the Tax
Code, in recognition of the pervasive quasi-contract principle, a claim for tax refund may be based on the
following:
(a) erroneously or illegally assessed or collected internal revenue taxes;
(b) penalties imposed without authority; and
(c) any sum alleged to have been excessive or in any manner wrongfully collected.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.ALGUE, INC., and THE COURT OF TAX
APPEALS, respondents
G.R. No. L-28896 February 17, 1988
FACTS:
Algue Incorporation is a domestic corporation engaged in engineering,construction and other
allied activities, received a letter from CIR assessing itwith delinquency income taxes of a total of Php
83,183.85 as for the years 1958and 1959. Algue filed a request for reconsideration.
On March 12, 1965, a warrant of distraint and levy was presented to Algue Inc. ,through its counsel,
Atty Guevara, Jr., who refused to receive it on the ground of the pending protest.
However, when Atty. Guevara was finally informed that the BIR was not taking any action on the
protest, he accepted the warrant of distraint and levy earlier sought to be served.
Algue, then, sought to claim a Php 75,000 deduction, but was denied by the CIR. The CTA, however,
ruled in favor of Algue and allowed the deduction, stating that the said amount had been legitimately
paid by Algue, Inc. as promotional fees for the work in the formation of Vegetable Oil Investment
Corporation ofthe Philippines and its subsequent purchase of the properties of the Philippines Sugar
Estate Development Corporation.
ISSUE:
WON the Collector of Internal Revenue correctly disallowed the P75,000.00deduction claimed by
Algue as legitimate business expenses in its income tax returns.
RULING:NEGATIVE.
The SC upheld the ruling of the CTA and allowed the deduction claimed by Algue Inc. It has been
established that the Philippine Sugar Estate Development Company had earlier appointed Algue as
its agent, authorizing it to sell its land, factories and oil manufacturing process. In addition to
this, testimonies of witness has shown that the said amount was not made in one lump sum but
periodically and in different amounts as each payee's need arose. It should be remembered that this
was a family corporation where strict business procedures were not applied and immediate issuance
of receipts was not required. Even so, at the end of the year, when the books were to be closed, each
payee made an accounting of all of the fees received by him or her, to make up the total of
P75,000.00. Admittedly, everything seemed to be informal. This arrangement was understandable,
however, in view of the close relationship among the persons in the family corporation. Moreover, the
SC agreed with the CTA that the amount of the promotional fees was not excessive. As correctly
stated by the Solicitor General, the taxpayer has the burden to prove the validity of the claimed
deduction.
And in the present case, the onus has been discharged satisfactorily. Algue has proved that the
payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees
in inducing investors and prominent businessmen to venture in an experimental enterprise
and involve themselves in a new business requiring millions of pesos. This was no mean feat and
should be, as it was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one's hard earned income to the taxing authorities, every person who
is able to must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the lives of
the people and enhance their moral and material values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in
the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.
If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For
all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.
However, such collection should be made in accordance with law as any arbitrariness will negate the
very reason for government itself. It is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.

FACTS:
Pursuant to section 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax.
Petitioner refused to pay the tax assessment. It argued 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. Petitioner further alleges that it is an instrumentality of the National Government, and as such, may
not be taxed by the respondent city government. It cites the doctrine in Basco vs. Philippine Amusement and
Gaming Corporation where SC held that local governments have no power to tax instrumentalities of the
National Government.
Respondent filed a collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed
tax due, plus a surcharge. Respondent alleged that petitioner's exemption from local taxes has been repealed
by section 193 of Rep. Act No. 7160. The trial court issued an Order dismissing the case.
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. The petitioner filed a Motion
for Reconsideration on the Court of Appeal's Decision. This was denied by the appellate court.
Hence, instant petition for review.

ISSUE:
Whether CA erred in reversing 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.

RULING:
No. In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city
government to impose on the petitioner the franchise tax in question.
Sec. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the province
may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent
(1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized,
within its territorial jurisdiction.
x x x
Sec. 151. Scope of Taxing Powers.- Except as otherwise provided in this Code, the city, may levy the taxes, fees,
and charges which the province or municipality may impose: Provided, however, That the taxes, fees and
charges levied and collected by highly urbanized and independent component cities shall accrue to them and
distributed in accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes."
Ruling in favor of the local government. We ruled that the franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special laws.
They correctly rely on provisions of Sections 137 and 193 of the LGC to support their position that MERALCO's
tax exemption has been withdrawn. The explicit language of section 137 which authorizes the province to
impose franchise tax 'notwithstanding any exemption granted by any law or other special law' is all-
encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws.
Sec. 193. Withdrawal of Tax Exemption Privileges.- 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 local water districts, cooperatives duly registered under R.A. No.
6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the
effectivity of this Code." (emphases supplied)
Section 193 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."
Thus, in enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax "notwithstanding
any exemption granted by law or other special law," the respondent city government clearly did not intend to
exempt the petitioner from the coverage thereof.
Furthermore, the doctrine in Basco vs. Philippine Amusement and Gaming Corporation relied upon by the
petitioner to support its claim no longer applies. To emphasize, the Basco case was decided prior to the
effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the
National Government was in effect. However, as this Court ruled in the case of Mactan Cebu International
Airport Authority (MCIAA) vs. Marcos, nothing prevents Congress from decreeing that even instrumentalities or
agencies of the government performing governmental functions may be subject to tax. In enacting the LGC,
Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit. Thus, after
reviewing the specific provisions of the LGC, this Court held that MCIAA, although an instrumentality of the
national government, was subject to real property tax.
The instant petition is DENIED and the assailed Decision and Resolution of the CA are hereby AFFIRMED.