ASSESSOR OF QUEZON CITY

G.R. No. 210551, June 30, 2015, J. Peralta

The levy of Socialized Housing Tax is primarily for urban development and housing program; thus, for the general welfare of the entire city. It is therefore in the exercise of police power implemented through taxation. In the exercise of police power, property rights of individuals may be subjected to restraints and burdens in order to fulfill the objectives of the government.

Facts:

The Quezon City Council enacted Ordinance which imposes upon real properties a Socialized Housing Tax which shall accrue to the Socialized Housing Programs of the Quezon City Government. Jose Ferrer, a registered owner of a residential property in Quezon City filed the instant petition for

certiorari, assailing the subject ordinance. He asserts that it does not find basis in the social justice principle enshrined in the Constitution. For him, the SHT cannot be viewed as a “charity” from real property owners since it is forced, not voluntary; thereby burdening them with the expenses to provide funds for housing of informal settlers.

Issue:

Whether the imposition of SHT shall be struck down for arbitrary intrusion into private rights of real property owners.

Ruling:

NO. The Constitution explicitly espouses the view that the use of property bears a social function and that all economic agents shall contribute to the common good. In this case, the imposition of SHT on real property is primarily for urban development and housing program; thus, for the general welfare. Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless constituents but advantageous to the real property owners as well. The situation will improve the value of the their property investments, fully enjoying the same in view of an orderly, secure, and safe community, and will enhance the quality of life of the poor, making them law-abiding constituents and better consumers of business products.

Consequently, the levy of SHT is primarily in the exercise of police power for the general welfare of the entire city. In the exercise of police power, property rights of individuals may be subjected to restraints and burdens in order to fulfill the objectives of the government. In this case, it is taxation that made the implement of the state’s police power.

PHILIPPINE HEALTH CARE PROVIDERS, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 167330, September 18, 2009, J. Corona

While the power to tax is an incident of sovereignty and is, as a general rule, unlimited in its range, it must be exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg."

Facts:

Philippine Health Care Providers, Inc. is a domestic corporation with a net worth of P259 million. The Commissioner of Internal Revenue sent PHCPI a final assessment notice demanding the payment of deficiency documentary stamp taxes (DST) amounting to P376 million. PHCPI claimed that the assessed DST to date which amounts to P376 million is way beyond its net worth of P259 million.

Issue:

Whether the exercise of the power of taxation in this case would be oppressive.

Ruling:

Yes. As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range. However, it is so potent that it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg."

Applying the aforesaid principle, imposing the DST on PHCPI would be highly oppressive, given the reality that the DST is way beyond the company’s net worth. It is not the purpose of the government to throttle private business. On the contrary, the government ought to encourage private enterprise. PHCPI, just like any concern organized for a lawful economic activity, has a right to maintain a legitimate business. Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses because of a tax imposition may be an acceptable consequence but killing the business of an entity is another matter and should not be allowed.

NATIONAL POWER CORPORATION v. CITY OF CABANATUAN, REPRESENTED BY ITS CITY MAYOR, HON. HONORATO PEREZ

G.R. No. 177332, October 01, 2014, J. Leonen

Taxes are not and should not be construed to drive businesses into insolvency. A reasonable surcharge will provide incentive to pay; an unreasonable one delays payment and engages government in unnecessary litigation and expense.

Facts:

The City of Cabanatuan assessed the National Power Corporation (NAPOCOR) of franchise tax. NAPOCOR refused to pay, arguing that it is exempt from paying the franchise tax. So, the City filed a complaint demanding NAPOCOR to pay the assessed tax due plus 25% surcharge and interest. On appeal, the CA held that since the franchise tax due was computed yearly, the 25% surcharge should also be computed yearly, that means, the computation of the surcharge would be based on the total unpaid tax for each year (proper tax for the year + unpaid tax of the previous year/s). Hence, the instant petition for certiorari. NAPOCOR insisted on a one-time application of the 25% surcharge based on the total franchise tax due and unpaid, not cumulative.

Issue:

Whether the yearly accrual of the 25% surcharge is unconscionable.

Ruling:

Yes. The imposition of the 25% surcharge in this case resulted in an aggregate penalty that is way higher than NAPOCOR’s basic tax liabilities.

Furthermore, it effectively exceeded the prescribed 72% ceiling for interest under Section 168 of the Local Government Code. The law allows the local government to collect an interest at the rate not exceeding 2% per month of the unpaid taxes, fees, or charges including surcharges, but in no case shall the total interest on the unpaid amount or portion thereof should not exceed thirty-six months or three years. In other words, the CIR cannot collect a total interest on the unpaid tax including surcharge that is effectively higher than 72%. Here, the CIR applied the 25% cumulative surcharge for more than three years. Its computation undoubtedly exceeded the 72% ceiling imposed under Section 168 of the Local Government Code. Hence, CIR's computation of the surcharge is oppressive and unconscionable.

Taxes and its surcharges and penalties cannot be construed in such a way as to become oppressive and confiscatory. A healthy balance should be maintained such that laws are interpreted in a way that these burdens do not amount to a confiscatory outcome. Taxes are not and should not be construed to drive businesses into insolvency. To a certain extent, a reasonable surcharge will provide incentive to pay; an unreasonable one delays payment and engages government in unnecessary litigation and expense.

PEOPLE OF THE PHILIPPINES v. ANDRE MARTI G.R. No. 81561, January 18, 1991, J. Bidin

The protection against unreasonable searches and seizures cannot be extended to acts committed by private individuals so as to bring it within the ambit of alleged unlawful intrusion by the government. The constitutional proscription could only be invoked against the State to whom the restraint against arbitrary and unreasonable exercise of power is imposed.

Facts:

Andre Marti carried four gift wrapped packages to Manila Packing and Export Forwarders. He informed the clerk therein that he was sending the packages to a friend. He also assured that the packages simply contained books, cigars, and gloves and were gifts to his friend. Before delivery to the Customs, the proprietor of Forwarders, following standard operating procedure, opened the boxes for final inspection. When he opened the box, a peculiar odor emitted therefrom. So, he squeezed one of the bundles allegedly containing gloves and felt dried leaves inside. Thereafter, he took samples of the same to the NBI and later summoned the NBI to his place of business. Upon inspection, the NBI agents found dried marijuana leaves inside the packages. Subsequently, an Information was filed against Marti for violation of the Dangerous Drugs Act. On the other hand, Marti contended that the evidence against him had been obtained in violation of his constitutional rights against unreasonable search and seizure, therefore inadmissible in evidence.

Issue:

Whether the evidence obtained by a private person, allegedly in violation of constitutional rights may be invoked against the State.

Ruling:

No. The contraband in the case at bar came into possession of the Government without the latter transgressing Marti's rights against unreasonable search and seizure. It was the proprietor of the forwarding agency who made the search/inspection of the packages. Said inspection was reasonable and a standard operating procedure. Clearly, the NBI agents made no search and seizure, much less an illegal one. Furthermore, the mere presence of the NBI agents did not convert the reasonable search effected by the proprietor into a warrantless search and seizure proscribed by the Constitution. Merely to observe and look at that which is in plain sight is not a search. Having observed that which is open, where no trespass has been committed in aid thereof, is not search. In view of the foregoing, the evidence against Marti is admissible.

In conclusion, the protection against unreasonable searches and seizures cannot be extended to acts committed by private individuals so as to bring it within the ambit of alleged unlawful intrusion by the government. The constitutional proscription against unlawful searches and seizures therefore applies as a restraint directed only against the government and its agencies tasked with the enforcement of the law. It could only be invoked against the State to whom the restraint against arbitrary and unreasonable exercise of power is imposed.