?Table of Contents GENERAL PRINCIPLES & LIMITATIONS Republic vs Cocofed GR 147062-64, 14 December 2001 Elements of a tax; coco-levy as tax FACTS: R. A 6260 was enacted creating the Coconut Investment Company (CIC) to administer the Coconut Investment Fund (CIF) which was to be sourced from a fund levied based upon every sale of copra. Charged with the collection of the fund is the PCA. One of the purposes of the law was to acquire a commercial bank in order to provide readily available credit to coconut farmers at a preferential rate.
Because of this, PCA acquired a commercial bank (which we now know as UCPB) and deposited the coco-levy funds and collections in the said bank. In addition, it is also provided in the law that the funds shall not be construed as special and/or fiduciary funds, or as part of the general funds of the National Government. ISSUE: What are the elements of taxation? Is the coco-levy fund a tax? RULING: The court ruled that the coconut levy was imposed in the exercise of the State’s power to tax.Order now
Coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional contributions from persons and properties, exacted by the State for the support of the government and the public. A tax has three elements: a) It is an enforced proportional contributions from persons and properties; b) It is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into the elements. The funds were imposed for a public purpose and were collected to advance the government’s policy of protecting the coconut industry.
The court further pointed that taxes are thus imposed only for a public purpose and cannot be used for purely private purposes. Osmena vs Orbos GR 99886, 31 March 1993 Tax if primary purpose is revenue generation; requisites of valid delegation of legislative power FACTS: Petitioner Osmena challenges the constitutionality of the PD 1956, which created a special account in the general fund for the Oil Price Stabilization Fund (OSPF) as buffer mechanism to protect the domestic oil industry from frequent fluctuations of crude oil prices in the world market.
PD 1529 created a “trust account” in the books of the Ministry of Energy. He alleges that the law is unconstitutional because: 1. The monies collected are supposed to treated as a special fund, not a trust fund considering that it is a “special tax collected for a specific purpose” 2. PD 1529 unduly delegates legislative power by conferring the Energy Regulatory Board the authority to impose additional amounts on petroleum products without a sufficient standard by which such authority may be exercised.
ISSUES: 1) Was the Oil Price Stabilization Fund (OSPF) a tax? 2) What are the requisites for a valid delegation of the taxation power? Was there undue delegation of such power? RULING: 1) No. Petitioner assumed that PD 1956 was enacted to collect taxes for a fund for a special purpose. The purpose for the fund, however, is not to generate revenue. The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. As such, establishment and maintenance of the OPSF is well within that pervasive and non-waivable power and responsibility of the government to secure the physical and economic survival and well-being of the community, that comprehensive sovereign authority we designate as the police power of the State, because its purpose is to regulate the oil industry pursuant to public policy. That a portion of the fund is taken from collections of ad valorem taxes and the increases thereon does not change its primary purpose.
Hence, if the primary purpose of the law is to regulate but has incidental taxing effects, then it is legislated by virtue of the police power. If the primary purpose of the law is to generate revenue but has incident regulatory effects, then it is legislated by virtue of the power to tax. The OSPF law falls under the first type. 2) The power to tax is reposed in the legislative, but the latter may delegate it to the executive provided that the law delegating the power: i. is complete in itself, that is, it must set forth the policy to be executed by the delegate ii. ixes a standard, the limits of which are sufficiently determinate or determinable to which the delegate must conform. There was no undue delegation in this case because a standard was fixed, albeit impliedly, as when the law intended to permit the additional impositions as long as there exists a need to protect the general public and the petroleum industry from price fluctuations. Tan vs Del Rosario GR 109290, 3 October 1994 Uniformity rule FACTS: These two consolidated special civil actions for prohibition challenge, in G. R. No. 09289, the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxationn Scheme (“SNIT”), amending certain provisions of the National Internal Revenue Regulations No. 293, promulgated by public respondents pursuant to said law. Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation “shall be uniform and equitable” in that the law would now attempt to tax single proprietorships and professionals differently from the manner it imposes the tax on corporations and partnerships.
Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory legislation. ISSUE: Does Republic Act No. 7496 violate the Constitution for imposing taxes that are not uniform and equitable. RULING: The Petition is dismissed. Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan Luna Subdivision vs.
Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as: (1) the standards that are used therefor are substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both present and future conditions, and (4) the classification applies equally well to all those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 771).
What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable corporations. We certainly do not view this classification to be arbitrary and inappropriate. Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for being violative of due process must perforce fail.
The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power. Shell Co. vs Vano GR L-6093, 24 February 1954 Occupational tax via local ordinance; non-discrimination rule; uniformity rule; specific tax; percentage tax FACTS: The municipality of Cordova in Cebu adopted the following ordinances: 1. No. 10, series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the privilege of installation manager; 2. No. , series of 1947, which imposes an annual tax of P40 for local deposits in drums of combustible and inflammable materials and an annual tax of P200 for tin can factories; and 3. No. 11, series of 1948, which imposes an annual tax of P150 on tin can factories having a maximum output capacity of 30,000 tin cans. Shell Co. of P. I. Ltd. , a foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the ordinances imposing such taxes are ultra vires. Defendant, as Municipal Treasurer, denies such allegation. ISSUES: 1.
WON Ordinance No. 10 is ultra vires considering that “installation manager” is merely a designation created by plaintiff and the same is a salaried employee which may not be taxed by the municipality under CA No. 472? 2. WON Ordinance No. 10 is discriminatory and hostile because there is no other person in the locality who is an “installation manager”? 3. WON Ordinance No. 9 is ultra vires considering that the same is in violation of Sec. 2244 of the Revised Administrative Code limiting the amount of the permit to P10 per annum? 4. WON Ordinance No. 1 is ultra vires? RULING: 1. The ordinance is not ultra vires. The municipal ordinance was enacted in pursuance of CA 472 which authorizes municipal councils and municipal district councils “to impose license taxes upon persons engaged in any occupation or business, or exercising privileges in the municipality or municipal district, by requiring them to secure licenses at rates fixed by the municipal council or municipal district council, xxx. ” Even if the “installation manager” is a salaried employee, it does not take away the fact that it is an occupation.
Further, the fact that the occupation is exercised in relation to another occupation which pays an occupation tax does not exempt an individual exercising the occupation to pay a separate occupation tax. 2. No, it is not discriminatory and hostile. The fact that there is no other person in the locality who exercises such a “designation” or calling does not make the ordinance discriminatory and hostile for the ordinance is and will be applicable to any person or firm who exercises such calling or occupation named or designated as “installation manager. 3. The ordinance is not ultra vires. It was enacted by the municipality in the exercise of its regulative authority as supported by the aforementioned provision of CA 472 and as long as they are just and uniform and not “percentage taxes and taxes on specified articles”. 4. The ordinance is not ultra vires. It is neither a percentage tax nor a tax on specified articles.
Specific tax under the NIRC are those imposed on things manufactured or produced in the Philippines for domestic sale or consumption” and upon “things imported from the United States and foreign countries,” such as distilled spirits, domestic denatured alcohol, fermented liquors, products of tobacco, cigars and cigarettes, matches, mechanical lighters, firecrackers, skimmed milk, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine. Tin can factories do not fall under any of these as enumerated.
It is also not a percentage tax as it is tax on business and the maximum annual output capacity is not a percentage, because it is not a share or a tax based on the amount of the proceeds realized out of the sale of the tin cans manufactured but on the business of manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans. Tolentino vs Sec. of Finance GR 115455, 30 October 1995 VAT vs license tax; tax exemption is a privilege; equality and uniformity
FACTS: The Value Added Tax (VAT) is levied on the sale, barter, or exchange of goods as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code. Among the petitioners was the Philippine Press which claims RA 7716 violates their press freedom and liberty having removed them from the exemption to pay Value Added Tax.
They maintain that by withdrawing the exemption granted to print media transactions involving printing, publication, importation or sale of newspapers, R. A. No. 7716 is a license tax which singled out the press for discriminatory treatment and that within the class of mass media the law discriminates against print media by giving broadcast media favoured treatment. ISSUE: Whether or not the purpose of the VAT is similar to a license tax. RULING: No. A license tax, unlike any ordinary tax, is mainly for regulation.
Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others, such those selling goods, is valid, its application to the press or to religious groups, such as the Jehovah’ s Witnesses, in connection with the latter’ s sale of religious books and pamphlets, is unconstitutional. As the U. S. Supreme Court put it, “it is one thing to impose a tax on income or property of a preacher. I t is quite another thing to ex act a tax on him for delivering a sermon. In withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long ago been subject. The VAT is, however, different. It is not a license tax, it is not a tax on the exercise of a privilege, much less than a constitutional right. It is imposed on the sale, barter, lease, or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its pay its income tax or subject it to general regulation is not to violate its freedom under the Constitution.
The exemption of the press was a privilege granted by the State, which has the right to revoke it by including the Press under the VAT system without offending press freedom under the Constitution. “Equality and uniformity of taxation” means that all taxable articles or kinds of property of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar situation.
The VAT is “regressive,” because it is indirect—in other words, its imposition may be transferred to a person other than it is directed to. In comparison, income tax is “progressive,” because it is direct—it is imposed directly on a person and his ability to pay, which accordingly puts him in the proper bracket on a previously-fixed scale. ABAKADA vs Ermita GR 168056, 1 September 2005 Delegation of taxation power; input and output tax; uniform and equitability of EVAT FACTS: Before R. A. No. 9337 took effect (July 1, 2005, petitioners ABAKADA GURO Party List, et al. filed a petition for prohibition. Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. They further contend that Sections 4, 5 and 6 of R. A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax.
It states… . . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (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 (1 ? %).
ISSUE: Do Sections 4, 5 and 6 of R. A. No. 9337, giving the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax? RULING: There is no undue delegation of legislative power but only of the discretion as to the execution of a law. 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.
It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. A (permissible delegation) is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the delegate; and (b) fixes a standard — the limits of which are sufficiently determinate and determinable — to which the delegate must conform in the performance of his functions.
In this case, 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. 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.
Notes: There was no delegation of legislative power at all, because the legislature merely specified factual conditions that must concur before the executive may apply the provision of the law. Fact-finding processes may be delegated by the Congress to the Executive. The phrase “upon the recommendation of the Sec. of Finance” makes the latter an agent of the Legislature, so his functions as an alter-ego of the Executive are not necessarily affected by the provision. FISCAL ADEQUACY—the sources of tax should coincide with the needs of government expenditures.
This is a question of wisdom, which the judiciary cannot take cognizance of. Output vs Input Tax OUTPUT VAT—tax paid when selling a product INPUT VAT—tax paid when buying the materials of the thing sold; it is not a property, it is a statutory privilege which the legislative may remove at any time VAT Payable = Output VAT – Input VAT Is the EVAT uniform and equitable? Yes. A uniform rate of 0%, 12%, or exemption, are respectively imposed on the same class of goods. Coconut Oil vs Torres GR 132527, 29 July 2005 Delegation of taxation power to the executive
FACTS: On March 13, 1992, RA No. 7227 was enacted, providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. The law contains provisions on tax exemptions for importations of raw materials, capital and equipment. After which the President issued several Executive Orders as mandated by the law for the implementation of RA 7227.
Herein petitioners contend the validity of the tax exemption provided for in the law. ISSUE: Whether or not the Executive Orders issued by President for the implementation of the tax exemptions constitutes executive legislation. RULING: To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the “free flow of goods or capital within, into, and out of the zones” is insured. The phrase “tax and duty-free importations of raw aterials, capital and equipment” was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. It is obvious from the wording of RA No. 7227, particularly the use of the phrase “such as,” that the enumeration only meant to illustrate incentives that the SSEZ is authorized to grant, in line with its being a free port zone.
The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of RA No. 7227 that “. . . the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments. ” However, the Court reiterates that the second sentences of paragraphs 1. and 1. 3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of RA No. 7227. Said Section clearly provides that “exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. It is public policy that the zones have a different tax policy with the rest of the country. This classification is valid, as long as it is: 1. Germane to the purpose of the law, RA 7227 2. Not limited to the existing conditions 3. Apply equally to all retailers found within the “secured area,” i. e the SEZ John Hay Alternative vs Lim GR 119775, 19 March 2002 Strict application of tax exemption; power to exempt comes from power to tax FACTS: Then President Ramos issued Proclamation No. 420 which created the
John Hay Special Economic Zone pursuant to Republic Act No. 7227 entitled Bases and Development Act of 1992. Said Republic Act created the Subic Special Economic Zone and also granting it exemptions from local and national taxes. Proclamation No. 420 also grants tax exemptions similar to that which is granted to the Subic SEZ by RA 7227. ISSUE: Is this constitutional? RULING: No. Under RA 7227 it is only the Subic SEZ2 which was granted by Congress with tax exemptions, investment incentives and the like.
The grant of economic incentives to John Hay SEZ cannot be sustained. The incentives under RA 7227 are exclusive only to Subic SEZ, hence the extension of the same to the John Hay SEZ finds no support. More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislature—unless limited by the provision of the state Constitution—that has full power to exempt any person or corporation or class of property from taxation, its power to exempt3 being as broad as its power to tax.
Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may pass ordinance on exemption only from local taxes. The challenged grant of tax exemption would circumvent the Constitution’s imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress. Tax exempt character of an SEZ proceeds from statutory provision; hence, an SEZ may not necessarily be tax exempt CIR vs Lincoln GR 119176, 19 March 2002 Documentary stamp tax
FACTS: Private respondent Lincoln Philippine Life Insurance Co. , Inc. is a domestic corporation engaged in life insurance business. In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the “Junior Estate Builder Policy,” the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984.
Documentary stamp taxes due on the policy were paid by petitioner only on the initial sum assured. Sec173 of the National Internal Revenue Code provides that for any documents, instruments, and papers, there there shall be levied, collected and paid for the corresponding documentary stamp taxes. Section183 of the same code also imposes tax on life insurance policies. ISSUE 1: Whether or not the automatic increase clause is distinct and separate from that of the original agreement, and thus the payment of documentary stamp taxes should also be imposed.
RULING: No, the SC affirmed the ruling of the Court of Tax Appeals which stated that there was only one transaction involved, and that the automatic increase clause is an integral part of the policy. It is clear from Section 49 and 50, Title VI of the Insurance Code that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance. Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance.
The distinctive feature of the “junior estate builder policy” called the “automatic increase clause” already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age. ISSUE 2: How should the documentary stamp tax be computed? RULING: Section 183 states that it is to be computed in the amount fixed in the policy. However, there was no fixed amount computed on the additional increase based on the automatic increase clause since it is a suspensive condition.
The SC ruled that Although the automatic increase in the amount of life insurance coverage was to take effect later on, the date of its effectivity, as well as the amount of the increase, was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy. Philex Mining vs CIR GR 125704, 28 August 1998 No off-setting in tax collection FACTS: Petitioner Philex Mining Corp. ssails the decision of the Court of Appeals affirming the Court of Tax Appeals decision ordering it to pay the amount of P110. 7 M as excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977. Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P120 M plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the petitioner? RULING: No. Philex’s claim is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other.
There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. Southern Cross vs CMAP GR 158540, 3 August 2005 Jurisdiction of Court on Tax Appeals; Delegability of tariff power to President
FACTS: Philcemcor, an association of at least eighteen (18) domestic cement manufacturers filed with the Department of Trade and Industry (DTI) a petition seeking the imposition of safeguard measures on gray Portland cement, in accordance with the Safeguard Measures Act (SMA). After the (DTI) issued a provisional safeguard measure, the application was referred to the Tariff Commission for a formal investigation pursuant to Section 9 of the SMA and its Implementing Rules and Regulations, in order to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement.
The Tariff Commission held public hearing and conducted its own investigation and issued its Formal Investigation Report that “no definitive general safeguard measure be imposed on the importation of gray Portland cement. ” The DTI Secretary then promulgated a decision expressing its disagreement with the conclusions of the Tariff Commission but at the same time denying Philcemcor’s application for safeguard measures in light of the Tariff Commission’s negative findings.
Philcemcor challenged this decision of the DTI Secretary by filing with the Court of Appeals a petition for certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision as sell as the Tariff Commission’s Report. The appellate court partially granted the petition and ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion and also held that DTI Secretary was not bound by the factual findings of the Tariff Commission.
The Southern Cross then filed the present petition, arguing that the Court of Appeals has no jurisdiction over Philcemcor’s petition. Despite the fact the Court of Appeal’s Decision had not yet became final, its binding force was cited by the DTI Secretary when he issued a new Decision, wherein he imposed a definitive safeguard measure on the importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20. 60/40 kg. bag for three years on imported gray Portland Cement.
Southern Cross filed a Temporary Restraining Order and/or A Writ of Preliminary Injunction with the Court, seeking to enjoin the DTI Secretary from enforcing his new issued Decision. Philcemcor then filed its opposition stating that it is not the CA but the Court of Tax Appeals (CTA) that has jurisdiction over the application under the law. Southern Cross then filed with the CTA a Petition for Review against the Decision which imposed the definite safeguard measure but did not promptly inform CA about the filing.
Philcemcor argued with the CTA that Southern Cross resorted to forum shopping. The Court in its decision granted Southern Cross’s Petition which nullified the Decision of the DTI secretary and declared the Decision of the Court of Appeals null and void, and also concluded that the same had not committed forum shopping for there was no malicious intent to subvert procedural rules. Philcemcor and the DTI Secretary then promptly filed their respective motions for reconsideration.
The Court En Banc then resolve the two central issues pertaining to the jurisdictional aspect and to the substantive aspect of whether the DTI Secretary may impose a general safeguard measure despite a negative determination by the Tariff Commission and whether the Tariff Commission could validly exercise quasi-judicial powers in the exercise of its mandate under the SMA. In its resolution, the Court directed the parties to maintain the status quo and until further orders from this Court. ISSUES: I. Jurisdiction to Review the Secretary’s Decisions II. Reviewability of the Tariff Commission’s Report
RULING: I. On the Issue of jurisdiction, the DTI secretary’s decisions – whether imposing safeguard measures or not – are subject to review by the Court of Tax Appeals pursuant to Section 29 of RA 8800. Under section 29, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein (1) there must be a ruling by the DTI Secretary (2) the petition must be filed by an interested party adversely affected by the ruling and (3) such ruling must be in “in connection with the imposition of a safeguard measure. Obviously, there are differences between “a ruling for the imposition of a safeguard measure,” and one issued “in connection with imposition of a safeguard measure. ” The first adverts to a singular type of ruling, namely one that imposes a safeguard measure. The second does not contemplate only one kind of ruling, but a myriad of rulings issued “in connection with the imposition of a safeguard measure. II. The DTI Secretary is not bound by the Tariff Commission’s recommendations. The Power to impose Tariffs is essentially legislative; it is delegable only to the president.
The application of safeguard measures, while primarily intended to protect domestic industries, is essentially in the nature of a tariff imposition. Pursuant to the Constitution, the imposition of tariffs and taxes is a highly prized legislative prerogative. Pursuant also to the Constitution, such power to fix tariffs may as an exception, be delegated by Congress to the President. Section 28 of Article VI of the Constitution provides for that exception. *The motivation behind many taxation measures is the implementation of police power goals.
Progressive income taxes alleviate the margin between the rich and the poor. Taxation is distinguishable from police power as to the means employed to implement these public good goals. Those doctrines that are unique to taxation arose from peculiar considerations such as those especially punitive effects of taxation, and the belief that taxes are the lifeblood of the state. These considerations necessitated the evolution of taxation as a distinct legal concept from police power. Yet at the same time, it has been recognized that taxation may be made the implement of the state’s police power. CIR vs Marubeni GR 137377, 18 December 2001 Situs rule/taxing jurisdiction FACTS: On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency taxes. CIR claims that the income respondent derived were income from Philippine sources, hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for review with CTA: the first, questioned the deficiency income, branch profit remittance and contractor’s tax assessments and second questioned the deficiency commercial broker’s assessment.
ISSUE: W/N Marubeni should be exempted from tax. RULING: Yes. CIR argues that since the two agreements are turn-key, they call for the supply of both materials and services to the client, they are contracts for a piece of work and are indivisible. The situs of the two projects is in the Philippines, and the materials provided and services rendered were all done and completed within the territorial jurisdiction of the Philippines. Accordingly, respondent’s entire receipts from the contracts, including its receipts from the Offshore Portion, constitute income from Philippine sources.
The total gross receipts covering both labor and materials should be subjected to contractor’s tax (a tax on the exercise of a privilege of selling services or labor rather than a sale on products). Marubeni, however, was able to sufficiently prove in trial that not all its work was performed in the Philippines because some of them were completed in Japan (and in fact subcontracted) in accordance with the provisions of the contracts. All services for the design, fabrication, engineering and manufacture of the materials and equipment under Japanese Yen Portion I were made and completed in Japan.
These services were rendered outside Philippines’ taxing jurisdiction and are therefore not subject to contractor’s tax. Petition denied. Republic vs CA & Precision GR 109193, 1 February 2000 Tax amnesty FACTS: On June 10, 1985, the BIR issued an assessment notice and letter against Precision Printing, Inc. , demanding payment of the sum of P248, 406. 11. Despite repeated demands, however, the latter failed to pay within the period prescribed by law and as a result the tax assessment became final and demandable. But pursuant to Executive Order No. 1, on October 31, 1986, Precision Printing, Inc. filed a Tax Amnesty Return together with the Statements of Net Worth, covering the period for which taxes were demanded. The same was certified. As a result, BIR filed a case for collection in the RTC which was ruled in favor of the Precision Printing, Inc. On appeal in the CA, the lower court’s decision was affirmed. Hence, this present petition for review on the ground that the respondent corporation was already assessed of its tax deficiency on June 10, 1985 prior to the promulgation of Revenue Memorandum 4-87 which implemented E.
O. 41 that only covers tax assessments after August 21, 1986. ISSUE: Whether or not the respondent court erred in affirming the trial court’s finding that private respondent’s tax liability was extinguished when it availed of tax amnesty under Executive Order no. 41? RULING: No. The decision of the respondent court is correct. Executive Order No. 41 declaring a tax amnesty on unpaid income taxes which was promulgated on August 22, 1986 covers estate and donor’s taxes and taxes on business, for the taxable years 1981-1985. This was later amended by Revenue Memorandum 4-87 stating: 1. 2. A certification by the Tax Amnesty Implementation Officer of the fact of availment of the said tax amnesty shall be a sufficient basis for: x x x x x x x x x 1. 02. 3. In appropriate cases, the cancellation/withdrawal of assessment notice and letters of demand, issued after August 21, 1986 for the collection of income, business, estate or donor’s taxes during the taxable years. It is therefore decisively clear that R. O. 4-87 reckoned the applicability of the tax amnesty from August 22, 1986 — the date when E. O. 41 took effect. However, Executive Order No. 1 contained no limitation whatsoever delimiting its applicability to assessments made prior to its effectivity. Rather, the said E. O. 41 merely provided for a general statement covering all tax liabilities incurred from 1981-1985. If Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to cases specifically excepted by it.
Indeed, administrative issuances seeking to carry into effect an act of Congress must be in harmony with the provisions of the law, it cannot modify nor supplant the same. CIR vs Santos GR 119252, 18 August 1997 Wisdom of tax policy not a justiciable issue FACTS: On August 5, 1988, the then Regional Director of Region 4-A, acting for and in behalf of the Commissioner of Internal Revenue, issued Regional Mission Order directing BIR officers to conduct surveillance, monitoring, and inventory of all imported articles of Hans Brumann, Inc. , a member of the Guild of Philippine Jewelers, Inc. and place the same under preventive embargo. This was to see if the proper taxes have been paid. The duration of the mission was from August 8-20, 1988. The BIR officers inventoried the articles, requested for proof of necessary payments for excise and VAT taxes on said articles, and requested not to sell the articles until it can be proven that the necessary taxes thereon have been paid. The owner, Brumann, signed a receipt acknowledging that the articles inventoried have been seized and left in his possession, and promising not to dispose of the same without authority of the CIR pending investigation.
The BIR requested that certain documents be presented for “stocktaking investigation for excise tax purposes” but Brumann did not produce them. Other members of the Guild (Miladay Jewels, Mercelles, Solid Gold, Diagem Traders) were also subjected to the same request. On Nov. 29, 1988, private respondents prayed that Sec. 126, 127(a)(b), 150(a) of the National Internal Revenue Code and Hdg. No 71. 01, 71. 02, 71. 03, 71. 04, Chapter 71 of the Tariff and Customs Code be declared unconstitutional and void, and that the CIR and Customs be prevented or enjoined from issuing mission orders and other orders of similar nature.
The RTC declared Sec 104 of the Tariff and Custom Code of the Philippines, Hdg, 71. 01, 71. 02,71. 03,71. 04, Chapter 71 as amended by EO 470, imposing 3%-10% tariff and customs duty on natural and cultured pearls and precious or semi-precious stones, and Sec. 150(1) of the National Internal Revenue Code of 1977, as amended, renumbered and rearranged by EO 273, imposing 20% excise tax on jewelry, pearls, and other precious stones, as inoperative and without force and effect insofar as petitioners are concerned.
ISSUE: Whether or not the RTC has authority to pass judgment upon taxation policy of the government. RULING: Passing judgment on the wisdom of the laws is a matter on which the RTC is not competent to rule. It is a matter for the legislature to decide. “The Judiciary does not pass upon question of wisdom, justice or expediency of legislation” (Angara vs. Electoral Commission). Judicial power only allows “to settle actual controversies involving rights which are legally demandable and enforceable” and may not annul an act of the political departments simply because the judiciary feel it unwise or impractical.
Respondent RTC judge encroached upon matters properly falling within the province of legislative functions. In citing as basis for his decision unproven comparative data pertaining to differences between tax rates of various Asian countries, and concluding that the jewelry industry in the Philippines suffers as a result, the respondent judge took it upon himself to supplant legislative policy regarding jewelry taxation.
In advocating the abolition of local tax and duty on jewelry simply because other countries have adopted such policies, the respondent judge overlooked the fact that such matters are not for him to decide. There are reasons why jewelry, a non-essential item, is taxed as it is and these reasons are deliberated by our legislature, are beyond the reach of judicial questioning. As held in Macasiano vs. National Housing Authority: The policy of our courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain, this presumption is based on the doctrine of separation of powers…The theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted. ” BUT, this is not to say that the RTCs have no power to declare a law unconstitutional. The Constitution contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of appellate review of final judgments of inferior courts in cases where such constitutionality happens to be in issue. ” But this authority does not extend to deciding questions which pertain to legislative policy. The RTC can only look into the validity of a provision, that is, whether or not it has been passed according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence.
Judges can only interpret and apply the law, they cannot repeal or amend it. Pepsi vs Municipality of Tanauan GR L-31156, 27 February 1976 Double taxation; delegation of tax powers FACTS: In 1963 Pepsi-Cola Bottling Company of the Philippines, Inc. , (herein petitioner) commenced a complaint with preliminary injunction before the CFI Leyte 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. 3 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void. Municipal Ordinance No. 23 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 of volume capacity” while Municipal Ordinance No. 27 levies and collects “on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one centavo P0. 1) on each gallon of volume capacity. ” The tax imposed in both Ordinances Nos. 23 and 27 is denominated as “municipal production tax. ” It was also alleged by petitioner that the aforementioned municipal ordinances constitute double taxation in two instances: a) double taxation because Ordinance No. 27 covers the same subject matter and impose practically the same tax rate as with Ordinance No. 23, b) double taxation because the two ordinances impose percentage or specific taxes.
The CFI of Leyte dismissed the complaint and upheld the constitutionality of declaring Ordinance Nos. 23 and 27 legal and constitutional. From this judgment, Pepsi-Cola Bottling Company appealed to the CA which, in turn elevated the case to the SC. ISSUES: a. Whether or not there is undue delegation of taxing powers b. Whether or not there is double taxation. RULING: A. No. The Constitution even allows such delegation. 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. 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. 264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation. B. No. The argument of the Municipality is well taken. Further, Pepsi Cola’s assertion that the delegation of taxing power in itself constitutes double taxation cannot be merited. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same for its own prerogative.
Moreover, double taxation, in general, is not forbidden by our fundamental law unlike in other jurisdictions. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality. Kilosbayan, Inc. et al vs Guingona GR 113375, 5 May 1994 FACTS: Pursuant to Section 1 of the charter of the PCSO (R. A. No. 1169, as amended by B. P. Blg. 2) which grants it the authority to hold and conduct “charity sweepstakes races, lotteries and other similar activities,” the PCSO decided to establish an on-line lottery system for the purpose of increasing its revenue base and diversifying its sources of funds. The Philippine Gaming Management Corporation (PGMC) which is organized by Berhad group, a multinational company and one of the ten largest public companies in Malaysia, was granted to provide the technical and management services for the needed for project in the form of a lease contract approved by the President. KILOSBAYAN sent an open letter to President Fidel V.
Ramos strongly opposing the setting up of the on-line lottery system on the basis of serious moral and ethical considerations. The protest was denied by the Office of the President, contemplating that “only a court injunction can stop Malacanang” . Hence, this petition. ISSUES: 1. Whether or not the petitioners have locus standi. 2. Whether or not the Contract of Lease in the light of Section 1 of R. A. No. 1169, as amended by B. P. Blg. 42, which prohibits the PCSO from holding and conducting lotteries “in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign. is legal and valid. RULING: 1. The Court ruled that petitioners have legal standing considering that the ramifications of such issues immeasurably affecting the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition, setting aside its procedural technicality. 2. Section 1 of R. A. No. 1169, as amended by B. P. Blg. 2, prohibits the PCSO from holding and conducting lotteries “in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign. ” There is undoubtedly a collaboration between PCSO and PGMC and not merely a contract of lease. The relations between PCSO and PGMC cannot be defined simply by the designation they used, i. e. , a contract of lease. The contract’s nature can be understood to form the intent of the parties as evident in the provisions of the contract. Article 1371 of the CC provides that the intent of contracting parties are determined in part through their acts.
The only contribution PCSO will be giving is the authority to operate. PCSO bears no risk and all it does is to provide its franchise. Pursuant to the wordings of their agreement, PGMC at its own expense shall build, operate, and manage the network system including its facilities needed to operate a nationwide online lottery system. Indeed, PCSO cannot share the franchise in any way. Clearly, the challenged Contract of Lease violates the exception provided for in paragraph B, Section 1 of R. A. No. 1169, as amended by B. P. Blg. 42, and is, therefore, invalid for being contrary to law.
MCIAA vs Marcos—ARCIDE Republic vs ICC GR 141667, 17 July 2006 Regulatory nature of permit fees FACTS: On April 4, 1995, respondent ICC, holder of a legislative franchise under Republic Act (RA) No. 7633 to operate domestic telecommunications, filed with the NTC an application for a Certificate of Public Convenience and Necessity to install, operate, and maintain an international telecommunications leased circuit service between the Philippines and other countries, and to charge rates therefor, with provisional authority for the purpose.
Respondent ICC filed a motion for partial reconsideration of the Order insofar as the same required the payment of a permit fee. In a subsequent Order dated June 25, 1997, the NTC denied the motion. Therefrom, ICC went to the CA on a petition for certiorari with prayer for a temporary restraining order and/or writ of preliminary injunction, questioning the NTC’s imposition against it of a permit fee of P1,190,750. 50 as a condition for the grant of the provisional authority applied for.
In its original decision, dated January 29, 1999, the CA ruled in favor of the NTC whose challenged orders were sustained, and accordingly denied ICC’s certiorari petition. In time, ICC moved for a reconsideration. This time, the CA, in its Amended Decision dated September 30, 1999, reversed itself, granting ICC its motion for reconsideration. Petitioner NTC filed a motion for reconsideration, but its motion was denied by the CA. ISSUES: 1. Whether the fee in question is in the nature of a tax, or is merely a regulatory measure. 2.
Whether or not there is a repeal of Section 40 of the Public Service Act. RULING: 1. Section 40(g) of the Public Service Act is not a tax measure but a simple regulatory provision for the collection of fees imposed pursuant to the exercise of the State’s police power. A tax is imposed under the taxing power of government principally for the purpose of raising revenues. The law in question, however, merely authorizes and requires the collection of fees for the reimbursement of the Commission’s expenses in the authorization, supervision and/or regulation of public services.
There can be no doubt then that petitioner NTC is authorized to collect such fees. However, the amount thereof must be reasonably related to the cost of such supervision and/or regulation. 2. The CA ratiocinated that while Section 40(g) of the Public Service Act (CA 146, as amended), supra, allowed NTC to impose fees as reimbursement of its expenses related to, among other things, the “authorization” of public services, Section 5(g), above, of R. A. No. 7921 no longer speaks of “authorization” but only of “regulation” and supervision. To the CA, the omission by Section 5(g) of R. A. No. 7921 of the word “authorization” found in Section 40(g) of the Public Service Act, as amended, meant that the fees which NTC may impose are only for reimbursement of its expenses for regulation and supervision but no longer for authorization purposes. We find, however, that NTC is correct in saying that there is no showing of legislative intent to repeal, even impliedly, Section 40(g), supra, of the Public Service Act, as amended. An implied repeal is predicated on a substantial conflict between the new and prior laws.
In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior one unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and old laws. The two laws must be absolutely incompatible such that they cannot be made to stand together. CIR vs Benguet Corp. GR 134587-77, 8 July 2006 Prospective application of VAT FACTS: Benguet Corp. (“Benguet”) is a domestic corporation engaged in mining. It is a VAT-registered enterprise. Benguet filed an application for zero-rating of its sales of mine products.
The application was approved. The CIR issued the 1st VAT Ruling which declared that the sale of gold to the Central Bank (“CB”) is considered an export sale and therefor subject to 0% VAT. In reliance to the CIR’s position, Benguet sold gold to the CB and treated these sales as 0% VAT rated. In this same period, Benguet incurred input taxes attributable to its sale of gold to the CB. Consequently, Benguet filed with the CIR applications for the issuance of Tax Credit Certificates for input VAT Credits attributable to its export sales.
The CIR issued the second VAT Ruling declaring that the sales of gold to the CB are considered domestic sales subject to 10% VAT (instead of 0% in the 1ST VAT RULING). Subsequently, the CIR issued another VAT Ruling. It stated the retroactive application of the 2ND VAT RULING to all such prior sales. Hence, Benguet prayed for the issuance of Tax Credit Certificates with the CTA. ISSUES: Whether or not the 2nd VAT RULING (subjecting sales of gold to the CB to 10% VAT) would be prejudicial to Benguet since it retroacts to prior sales.
RULING: Benguet’s claim of the tax credit of input tax amounting to P50M represents the costs or expenses incurred by Benguet in connection with its gold production. Relying on the 1ST VAT RULING (sales of gold to the CB are considered export sales subject to 0%), Benguet sold gold to the CB without passing on CB its input VAT costs, obviously intending to obtain a refund or credit thereof from the BIR at the end of the taxable period. However, by the time Benguet applied for credit of its input VAT costs, the 2ND VAT RULING treated sales of gold to the CB as domestic sales subject to 10% VAT.
And the 3RD VAT RULING retroactively applied the 2ND VAT RULING to such prior sales made. By reason of the denial of its claim for credit, Benguet has been precluded from recovering its input VAT costs. (1) Benguet has clearly shown that it has no “other transactions” subject to 10% VAT and CIR has failed to prove the existence of such “other transactions” against which to set off Benguet’s input VAT. (2) Treating the input VAT as an income tax deduction will yield only to a partial benefit. The use of input VAT as a tax deductions results in a loss of 65% of the input VAT which could have otherwise fully utilized as a tax credit.
There is substantial difference between a tax credit and a tax deduction. A tax credit reduces tax liability, while a tax deduction only reduces taxable income Prejudice is all the more highlighted by the fact that it has been issued assessments for deficiency output VAT. Benguet relied on the formal assurances of the BIR’s 1st VAT RULING. To retroact a later ruling revoking the grant of 0% rating status and applying a new and contrary position that such sales are now subject to 10% is inconsistent with justice and fair play. CIR vs Benguet Corp. GR 145559, 14 July 2006
Non-retroactive application of taxes; “Passing on” of indirect taxes like VAT FACTS: Since the inception of the VAT in 1988, sale of gold to Central Bank has been considered by the BIR to be zero-rated. (VAT Ruling 378-88 and RMC No. 59—88). On January 23, 1992, Commissioner Ong issued VAT Ruling No. 008-92 declaring and holding that the sale of gold to the CB are considered domestic sales subject to the 10% VAT. Subsequently, VAT Ruling No. 59-92 dated April 28, 1992 was issued reiterating the treatment of sales of gold to CB and expressly countenancing the retroactive application of VAT Ruling No. 08-92 to all such sales made starting January 1, 1988. ISSUES: (1) Can a ruling, changing the tax treatment of a transaction from one subject to 0% to one subject to 10%, be given a retroactive application? (2) Is there really an actual and imminent injury to the taxpayer if the ruling is given a retroactive application? RULING: (1) The SC ruled in the negative. Well-entrenched is the rule that rulings and circulars, rules and regulations, promulgated by the Commissioner of Internal Revenue, would have no retroactive application if to so apply them would be prejudicial to the taxpayers.
There is no question, therefore, as to the prohibition against the retroactive application of the revocation, modification or reversal, as the case maybe, of previously established Bureau on Internal Revenue (BIR) Rulings when the taxpayer’s interest would be prejudiced thereby. The CIR is precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom, or when there has been a misrepresentation to the taxpayer. (citing ABS-CBN Broadcasting Corp. s. CTA and CIR, 108 SCRA 142) (2) While the CTA said there is none, the CA had taken a contrary view which was affirmed by the SC. The VAT system of taxation allows a VAT-registered taxpayer to recover its input VAT either by (1) passing on the 10% output VAT on the gross selling price or gross receipts, as the case may be, to its buyer, or (2) if the input tax is attributable to the purchase of capital goods or to zero-rated sales, by filing a claim for refund or tax credit with the BIR.
Simply stated, a taxpayer subject to 10% output VAT on its sales of goods and services may recover its input VAT costs by passing on said costs as output VAT to its buyers of goods and services but it cannot claim the same as a refund or tax credit, while a taxpayer subject to 0% on its sales of goods and services may only recover its input costs by filing a refund or tax credit with the BIR. The SC is correct in holding that a retroactive imposition of the VAT on the sale of gold to Central Bank will definitely result to substantial economic prejudice to respondent.
First, the respondent could no longer pass-on to CB the 10% output VAT which would be retroactively imposed on said transactions, and second, it will also be prevented from claiming the refund because the sale is no longer zero rated. If this happens the entire cost of the input VAT will be borne by respondent Benguet without any avenue for recovery. Indeed, respondent stands to suffer substantial economic prejudice by the retroactive application of the VAT Ruling in question. Planters Products vs Fertiphil GR 166006, 14 March 2008 Police power and power to tax distinguished; tests to determine which power is used
FACTS: On June 3, 1985, for the purpose of rehabilitating Philippine Planters, Inc. , the then President Ferdinand E. Marcos issued Letter of Instruction (LOI) No. 1465 which imposed a charge of P10. 00 per bag of fertilizer on all domestic sales of fertilizer in the Philippines. Respondent Fertiphil Corporation, a domestic entity engaged in the fertilizer business, questioned the constitutionality of LOI NO. 1465 and brought an action to recover its accumulated payment thereunder in the amount of P6,698,144. 00, the case docketed as Civil Case No. 17835 before Branch 147 of the Regional Trial Court of Makati.
ISSUE: Whether or not, LOI 1465 constitutes valid legislation pursuant to the exercise of the power of taxation and police power of the state RULING: No. Court said, “It is clear from the Letter of Understanding that the levy was imposed precisely to pay the corporate debts of PPI. We cannot agree with PPI that the levy was imposed to ensure the stability of the fertilizer industry in the country. The letter of understanding and the plain text of the LOI clearly indicate that the levy was exacted for the benefit of a private corporation, therefore not for public purpose. Also, even if We consider LOI No. 465 enacted under the police power of the State, it would still be invalid for failing to comply with the test of “lawful subjects” and “lawful means. ” Jurisprudence states the test as follows: (1) the interest of the public generally, as distinguished from those of particular class, requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. For the same reasons as discussed, LOI No. 1465 is invalid because it did not promote public interest. The law was enacted to give undue advantage to a private corporation. Gerochi vs DOE GR 159796, 17 July 2007 Regulatory exactions are not taxes FACTS: RA 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), which sought to impose a universal charge on all end-users of electricity for the purpose of funding NAPOCOR’s projects, was enacted and took effect in 2001. Petitioners contest the constitutionality of the EPIRA, stating that the imposition of the universal charge on all end-users is oppressive and confiscatory and amounts to taxation without representation for not giving the consumers a chance to be heard and be represented.
ISSUE: Whether or not the universal charge is a tax. RULING: NO. The assailed universal charge is not a tax, but an exaction in the exercise of the State’s police power. That public welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the State regarding electrification. Moreover, the Special Trust Fund feature of the universal charge reasonably serves and assures the attainment and perpetuity of the purposes for which the universal charge is imposed (e. . to ensure the viability of the country’s electric power industry), further boosting the position that the same is an exaction primarily in pursuit of the State’s police objectives If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax. The taxing power may be used as an implement of police power.
The theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people. CIR vs Central Luzon Drug GR 148512, 26 June 2006 Tax credit and tax deductions in Senior Citizens Act FACTS: Central Luzon Drug Corporation is a retailer of medicine