COMMISSIONER OF IR VS CENTRAL LUZON DRUG CORP GR 148512 June 26, 2006
Azcuna, J.: FACTS:
This is a petition for review under Rule 45 of Rules of Court seeking the nullification of CA decision granting respondent‘s claim for tax equal to the amount of the 20% that it extended to senior citizens on the latter‘s purchases pursuant to Senior Citizens Act. Respondent deducted the total amount of Php219,778 from its gross income for the taxable year 1995 whereby respondent did not pay tax for that year reporting a net loss of Php20,963 in its corporate income tax. In 1996, claiming that the Php219,778 should be applied as a tax credit, respondent claimed for refund in the amount of Php150, 193.
ISSUE:
Whether or not the 20% discount granted by the respondent to qualified senior citizens may be claimed as tax credit or as deduction from gross sales?
RULING:
―Tax credit‖ is explicitly provided for in Sec4 of RA 7432. The discount given to Senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. The tax credit that is contemplated under this Act is a form of just compensation, not a remedy for taxes that were erroneously or illegally assessed and collected. In the same vein, prior payment of any tax liability is a pre-condition before a taxable entity can benefit from tax credit. The credit may be availed of upon payment, if any. Where there is no tax liability or where a private establishment reports a net loss for the period, the tax credit can be availed of and carried over to the next taxable year.
CIR v. Central Luzon Drug Corp., G.R. No. 159647, April 15, 2005
EMINENT DOMAIN: The concept of public use is no longer confined to the traditional notion of use by the public, but held synonymous with public interest, public benefit, public welfare, and public convenience. The discount privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to which these citizens belong. The discounts given would have entered the coffers and formed part of the gross sales of the private establishments concerned, were it not for RA 7432. The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private
property for public use or benefit.
As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just compensation. This term refers not only to the issuance of a tax credit certificate indicating the correct amount of the discounts given, but also to the promptness in its release. Equivalent to the payment of property taken by the State, such issuance -- when not done within a reasonable time from the grant of the discounts -- cannot be considered as just compensation. … Besides, the taxation power can also be used as an implement for the exercise of the power of eminent domain. Tax measures are but ―enforced contributions exacted on pain of penal sanctions‖ and ―clearly imposed for a public purpose.‖ In recent years, the power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution of wealth.
Southern Cross Cement Corp. v. Cement Manufacturers Association of the Phils., G.R. No. 158540, Aug. 3, 2005 ―Cement is hardly an exciting subject for litigation. Still, the parties in this case have done their best to put up a spirited advocacy of their respective positions, throwing in everything including the proverbial kitchen sink. At present, the burden of
passion, if not proof, has shifted to public respondents Department of Trade and Industry (DTI) and private respondent Philippine Cement Manufacturers Corporation (Philcemcor),[1] who now seek reconsideration of our Decision dated 8 July 2004 (Decision), which granted the petition of petitioner Southern Cross Cement Corporation (Southern Cross). This case, of course, is ultimately not just about cement. For respondents, it is about love of country and the future of the domestic industry in the face of foreign competition. For this Court, it is about elementary statutory construction, constitutional limitations on the executive power to impose tariffs and similar measures, and obedience to the law. Just as much was asserted in the Decision, and the same holds true with this present Resolution.‖ POWER OF PRESIDENT TO IMPOSE TARIFF RATES: Without Section 28(2), Article VI, the executive branch has no authority to impose tariffs and other similar tax levies involving the importation of foreign goods. Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA by Congress would be voided on the ground that it would constitute an undue delegation of the legislative power to tax. The constitutional provision shields such delegation from constitutional infirmity, and should be recognized as an exceptional grant of legislative power to the President, rather than the affirmation
of an inherent executive power.
QUALIFIERS: This being the case, the qualifiers mandated by the Constitution on this presidential authority attain primordial consideration: (1) there must be a law; (2) there must be specified limits; and (3) Congress may impose limitations and
restrictions on this presidential authority.
POWER EXERCISED BY ALTER EGOS OF PRES: The Court recognizes that the authority delegated to the President under Section 28(2), Article VI may be exercised, in accordance with legislative sanction, by the alter egos of the President, such as department secretaries. Indeed, for purposes of the President‘s exercise of power to impose tariffs under Article VI, Section 28(2), it is generally the Secretary of Finance who acts as alter ego of the President. The SMA provides an exceptional instance wherein it is the DTI or Agriculture Secretary who is tasked by Congress, in their capacities as alter egos of the President, to impose such measures. Certainly, the DTI Secretary has no inherent power, even as alter ego of
the President, to levy tariffs and imports.
TARIFF COMMISSION AND DTI SEC ARE AGENTS: Concurrently, the tasking of the Tariff Commission under the SMA should be likewise construed within the same context as part and parcel of the legislative delegation of its inherent power to impose tariffs and imposts to the executive branch, subject to limitations and restrictions. In that regard, both the Tariff Commission and the DTI Secretary may be regarded as agents of Congress within their limited respective spheres, as ordained in the SMA, in the implementation of the said law which significantly draws its strength from the plenary legislative power of taxation. Indeed, even the President may be considered as an agent of Congress for the purpose of imposing safeguard measures. It is Congress, not the President, which possesses inherent powers to impose tariffs and imposts. Without legislative authorization through statute, the President has no power, authority or right to impose such safeguard
measures because taxation is inherently legislative, not executive.
When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions, the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature. It is basic agency law that the agent may not act beyond the specifically delegated powers or disregard the restrictions imposed by the principal. In short, Congress may establish the procedural framework under which such safeguard measures may be imposed, and assign the various offices in the government bureaucracy respective tasks pursuant to the imposition of such measures, the task assignment including the factual determination of whether the necessary conditions exists to warrant such impositions. Under the SMA, Congress assigned the DTI Secretary and the Tariff Commission their respective functions in the legislature‘s scheme of things. There is only one viable ground for challenging the legality of the limitations and restrictions imposed by Congress under Section 28(2) Article VI, and that is such limitations and restrictions are themselves violative of the Constitution. Thus, no matter how distasteful or noxious these limitations and restrictions may seem, the Court has no choice but to uphold their
What are these limitations and restrictions that are material to the present case? The entire SMA provides for a limited framework under which the President, through the DTI and Agriculture Secretaries, may impose safeguard measures in the
form of tariffs and similar imposts.
POWER BELONGS TO CONGRESS: …the cited passage from Fr. Bernas actually states, ―Since the Constitution has given the President the power of control, with all its awesome implications, it is the Constitution alone which can curtail such power.‖ Does the President have such tariff powers under the Constitution in the first place which may be curtailed by the executive power of control? At the risk of redundancy, we quote Section 28(2), Article VI: ―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.‖ Clearly the power to impose tariffs belongs to Congress and not to the President.
Diaz vs. Secretary of Finance (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. Court treated the case as one of prohibition.
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 "user's 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; 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 State's sovereign taxing power which is generally read into contracts.
Issue:
May toll fees collected by tollway operators be subjected to VAT (Are tollway operations a franchise and/or a service that is subject to VAT)?
Ruling:
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latter's use of the tollway facilities over which the operator enjoys private proprietary rights that its contract and the law recognize. In this sense, the tollway operator is no different from the service providers under Section 108 who allow others to use their properties or facilities for a fee. Tollway operators are franchise grantees and they do not belong to exceptions that Section 119 spares from the payment of VAT. The word "franchise" broadly covers government grants of a special right to do an act or series of acts of public concern. Tollway operators are, owing to the nature and object of their business, "franchise grantees." The construction, operation, and maintenance of toll facilities on public improvements are activities of public consequence that necessarily require a special grant of authority from the state.
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.
PBCom v. CIR
Petitioner reported a net loss in 1986 and thus declared no tax payable. On 1987, petitioner requested the respondent, among others, for a tax credit representing the overpayment of taxes in the first and second quarters of 1985.
Thereafter, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 and in 1986. Pending investigation, petitioner instituted a Petition for Review before the Court of Tax Appeals (CTA).
CTA denied the request of petitioner for a tax refund or credit for 1985 on the ground that it was filed beyond the two-year reglementary period provided for by law. The petitioner‘s claim for refund in 1986 was likewise denied on the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year. MR was denied.
CA affirmed the decision in toto hence this petition.
Petitioner argues that the government is barred from asserting a position contrary to its declared circular if it would result to injustice to taxpayers. Citing ABS CBN Broadcasting Corporation vs. Court of Tax Appeals (1981), petitioner claims that rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive effect if it would be prejudicial to taxpayers.
Respondent argues that the two-year prescriptive period for filing tax cases in court concerning income tax payments of Corporations is reckoned from the date of filing the Final Adjusted Income Tax Return, which is generally done on April 15 following the close of the calendar year. Further, respondent Commissioner stresses that when the petitioner filed the case before the CTA on November 18, 1988, the same was filed beyond the time fixed by law, and such failure is fatal to petitioner‘s cause of action.
Issue:
Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription Held:
No. The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.
Basic is the principle that ―taxes are the lifeblood of the nation.‖ Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.
From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.
Any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year.
The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.
A memorandum-circular of a bureau head could not operate to vest a taxpayer with shield against judicial action. For there are no vested rights to speak of respecting a wrong construction of the law by the administrative officials and such wrong interpretation could not place the Government in estoppel to correct or overrule the same
Basic is the principle that “taxes are the lifeblood of the nation.” Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the
government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.
NPC v. Cabanatuan FACTS:
NAPOCOR, the petitioner, is a government-owed and controlled corporation created under Commonwealth Act 120. It is tasked to undertake the ―development of hydroelectric generations of power and the production of electricity from nuclear, geothermal, and other sources, as well as, the transmission of electric power on a nationwide basis.‖
For many years now, NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross income of P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the former‘s gross receipts for the preceding year.
Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contend 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 RA 6395, as amended.
The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed tax, plus surcharge equivalent to 25% of the amount of tax and 2% monthly interest. Respondent alleged that petitioner‘s exemption from local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code). The trial court issued an order dismissing the case. On appeal, the Court of Appeals reversed the decision of the RTC and ordered the petitioner to pay the city government the tax assessment.
ISSUES:
(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the National Government and its charter characterized is as a ‗non-profit organization‘?
(2) Is the NAPOCOR‘s exemption from all forms of taxes repealed by the provisions of the Local Government Code (LGC)?
HELD:
(1) NO. To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the National Government. It can sue and be sued under its own name, and can exercise all the powers of a corporation under the Corporation Code.
To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that petitioner is no engage din business.
(2) YES. One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the National Government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e. when specific provisions of the LGC authorize the LGUs to impose taxes, fees, or charges on the aforementioned entities. The legislative purpose to withdraw tax privileges enjoyed under existing laws or charter is clearly
manifested by the language used on Sec. 137 and 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be 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.
Taxes are the lifeblood of the government,[30] for without taxes, the government can neither exist nor endure. A principal attribute of sovereignty,[31] the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity;[32] without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people.
CIR v PLDT
Commissioner on Internal Revenue v PLDT
PDLT paid the BIR about P164k+ for equipment and spare parts it imported for its business. The amount included compensating, advance sales and other internal revenue taxes. PLDT also paid VAT.
As a franchise holder, PLDT was entitled to a tax exemption privilege under RA7082 (grant of franchise), which provided that the grantee should pay a franchise tax equivalent to 3% of all gross receipts, and that the said percentage shall be in LIEU of all taxes on the franchise/ its earnings.
PLDT wrote to the BIR requesting confirmation of its exemption privilege, and BIR confirmed this, saying that PLDT was liable for the 3% franchise tax and exempt from VAT on its importation of equipment.
PLDT filed a claim for tax refund of the VAT, compensating taxes, advance sales taxes and other taxes it had been paying erroneously from October, 1992- December, 1994.
CTA granted the petition (although ruling that a portion from Oct-Dec16, 1992 had already prescribed and was beyond the 2-yr period allowed by law for refunds), ordering CIR to REFUND or to ISSUE in favor of petitioner a Tax Credit Certificate in the reduced amount of about P223k+ representing erroneously paid VAT and other taxes (compensating, advance sales, importation) from 1992 to 1994.
Judge Saga dissented, saying who clarified that the ―in lieu of‖ provision of Sec12 refers only to DIRECT taxes and not to indirect taxes such as VAT, compensating tax, and advance sales tax.
BIR moved for reconsideration and the same was denied. CA also dismissed its appeal.
I: W/n PLDT is exempt from payment of VAT other taxes by virtue of the provision in its franchise that the 3% franchise tax on its gross receipts shall be in lieu of all taxes on its franchise / earnings
R: NO, PLDT is not exempt from VAT and other taxes
Court has always ruled that TAXATION is the RULE, and exemption is the exception.
Thus, statutes granting tax exemptions must be construed strictly against the taxpayer and liberally in favor of the taxing authority. The burden of justfying exemption is imposed on the one who claims a refund. The clause ―in lieu of all taxes‖ in Sec 12 of RA 7082 is immediately followed by the limiting or qualifying clause ―on this franchise or earnings thereof‖, suggesting that the exemption is limited to taxes imposed DIRECTLY on PLDT since taxes pertaining to PLDT‘s franchise or earnings are its direct liability. Thus, indirect taxes, not being taxes on PLDT‘s franchise or earnings, are OUTSIDE the purview of the ―in lieu‖ provision. The 10% VAT on importation of goods partakes of an excise tax levied on the privilege of importing articles. It is NOT a tax on the franchise of a business enterprise, but is imposed on all taxpayers who import goods whether or not the goods will eventually be sold, bartered, exchanged or utilized for personal consumption.
The VAT on importation replaces the advance sales tax payable by regular importers who import articles for sale or as raw materials in the manufacture of finished articles for sale.
Direct taxes - impositions for which a taxpayer is directly liable on the transaction or business he is engaged in
Indirect taxes - those where the liability for the payment of the tax falls on one person but the burden can be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it
In this case, advance sales tax has the attributes of an indirect tax because the tax-paying importer of goods for sale or of raw materials to be processed into merchandise can shift the tax / lay the ―economic burden of the tax‖ on the purchaser, by subsequently adding the tax to the selling price of the imported article or finished product. Compensating tax also partakes of the nature of an excise tax payable by all persons who import articles, whether in the course of business or not. (Purpose: to place, for tax purposes, persons purchasing from merchants in the Philippines.
FELS ENERGY vs. BATANGAS
Power energy leased its power barge to NPC for a period of 5 years. In the agreement, NPC was made to shoulder any tax expenses related to the power barge then Polar assigned its rights to FELS. Batangas assessed the property and FELS referred the matter to NPC pursuant to the Agreement. NPC sought reconsideration to Provincial Assessor but was denied. LBAA affirmed provincial assessor while CBAA found the power barges exempt from real property tax, consequently reversed its own ruling. FELS & NPC separately filed a petition for review before CA.
The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it.57 The right of local government units to collect taxes due must always be upheld to
avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments58 and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to
empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.
Chamber of Real Estate and Builders‘ Associations, Inc., v. The Hon. Executive Secretary Alberto Romulo, et al
Petitioner Chamber of Real Estate and Builders‘ Associations, Inc. (CREBA), an association of real estate developers and builders in the Philippines, questioned the validity of Section 27(E) of the Tax Code which imposes the minimum corporate income tax (MCIT) on corporations.
Under the Tax Code, a corporation can become subject to the MCIT at the rate of 2% of gross income, beginning on the 4th taxable year immediately following the year in which it commenced its business operations, when such MCIT is greater than the normal corporate income tax. If the regular income tax is higher than the MCIT, the corporation does not pay the MCIT. CREBA argued, among others, that the use of gross income as MCIT base amounts to a confiscation of capital because gross income, unlike net income, is not realized gain.
CREBA also sought to invalidate the provisions of RR No. 2-98, as amended, otherwise known as the Consolidated Withholding Tax Regulations, which prescribe the rules and procedures for the collection of CWT on sales of real properties classified as ordinary assets, on the grounds that these regulations:
Ø Use gross selling price (GSP) or fair market value (FMV) as basis for determining
the income tax on the sale of real estate classified as ordinary assets, instead of the entity‘s net taxable income as provided for under the Tax Code;
Ø Mandate the collection of income tax on a per transaction basis, contrary to the Tax Code provision which imposes income tax on net income at the end of the taxable period;
Ø Go against the due process clause because the government collects income tax even when the net income has not yet been determined; gain is never assured by mere receipt of the selling price; and
Ø Contravene the equal protection clause because the CWT is being charged upon real estate enterprises, but not on other business enterprises, more particularly, those in the manufacturing sector, which do business similar to that of a real estate enterprise.
R: As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in its very nature no limits, so that the principal check against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its constituency who are to pay it.[37] Nevertheless, it is circumscribed by constitutional limitations. At the same time, like any other statute, tax legislation carries a presumption of constitutionality.
COCOFED (PHIL COCONUT PRODEUCERS FEDEDATION) v Republic
In 1971, Republic Act No. 6260 was enacted creating the Coconut Investment Fund (CIF). The source of the CIF was a P0.55 levy on the sale of every 100 kg. of copra. The Philippine Coconut Administration was tasked to collect and administer the Fund. Out of the 0.55 levy, P0.02 was placed at the disposition of the COCOFED, the recognized national association of coconut producers declared by the PCA. Cocofund receipts were ought to be issued to every copra seller.
During the Martial Law regime, then President Ferdinand Marcos issued several Presidential Decrees purportedly for the improvement of the coconut industry. The most relevant among these is P.D. No. 755 which permitted the use of the Fund for the ―acquisition of a commercial bank for the benefit of coconut farmers and the distribution of the shares of the stock of the bank it [PCA] acquired free to the coconut farmers‖ (Sec.2).
Thus, the PCA acquired the First United Bank, later renamed the United Coconut Planters Bank (UCPB). The PCA bought the 72.2% of PUB‘s outstanding capital stock or 137,866 shares at P200 per share (P27, 573,200.00) from Pedro Cojuangco in behalf of the coconut farmers.” The rest of the Fund was deposited to the UCPB interest free.
Farmers who had paid the CIF and registered their receipts with PCA were given their corresponding UCPB stock certificates. Only 16 million worth of COCOFUND receipts were registered and a large number of the coconut farmers opted to sell all/part of their UCPB shares to private individuals.
Simply put, parts of the coconut levy funds went directly or indirectly to various projects and/or was converted into different assets or investments through the years.
After the EDSA Revolution, President Corazon Aquino issued Executive Order 1 which created the Presidential Commission on Good Government (PCGG).
The PCGG aimed to assist the President in the recovery of ill-gotten wealth accumulated by the Marcoses and their cronies. PCGG was empowered to file cases for sequestration in the Sandiganbayan.
Among the sequestered properties were the shares of stock in the UCPB registered in the name of ―over a million coconut farmers‖ held in trust by the PCA. The Sandiganbayan allowed the sequestration by ruling in a Partial Summary Judgment that the Coconut Levy Funds are prima facie public funds and that Section 1 and 2 of PD No. 755 (and some other PDs) were unconstitutional.
The COCOFED representing the ―over a million coconut farmers‖ via Petition for review under Rule 45 sought the reversal of the ruling contending among others that the sequestration amounted to ―taking of private property without just compensation and impairment of vested right of ownership.‖
ISSUE: What is the NATURE of the Coconut Levy Fund?
RULING: The coconut levy funds are in the nature of taxes and can only be used for public purpose. Consequently, they cannot be used to purchase shares of stocks to be given for free to private individuals.
They were clearly imposed for a public purpose. There is absolutely no question that they were collected to advance the government’s avowed policy of protecting the coconut industry. This Court takes judicial notice of the fact that the coconut industry is one of the great economic pillars of our nation, and coconuts and their byproducts occupy a leading position among the country‘s export products….
Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State….
Even if the money is allocated for a special purpose and raised by special means, it is still public in character…. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises ―were organized and
financed with revenues derived from coconut levies imposed under a succession of law of the late dictatorship … with deposed Ferdinand Marcos and his cronies as the suspected authors and chief beneficiaries of the resulting coconut industry monopoly.‖ The Court continued: ―…. It cannot be denied that the coconut industry is one of the major industries supporting the national economy. It is, therefore, the State‘s concern to make it a strong and secure source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability.
REPUBLIC V. COCOFED
Immediately after the 1986 EDSA Revolution, then President Corazon C. Aquino issued Executive Orders 1, 5 2 6 and 14. On the explicit premise that vast resources of the government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad, the Presidential Commission on Good Government (PCGG) was created by Executive Order 1 to assist the President in the recovery of the ill-gotten wealth thus accumulated whether located in the Philippines or abroad. Executive Order 2 stated that the ill-gotten assets and properties are in the form of bank accounts, deposits, trust accounts, shares of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds of real and personal properties in the Philippines and in various countries of the world. Executive Order 14, on the other hand, empowered the PCGG, with the assistance of the Office of the Solicitor General and other government agencies, inter alia, to file and prosecute all cases investigated by it under EOs 1 and 2. Pursuant to these laws, the PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal.
Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the alleged ―one million coconut farmers,‖ the so-called Coconut Industry Investment Fund companies (CIIF companies) and Eduardo Cojuangco Jr. In connection with the sequestration of the said UCPB shares, the PCGG, on 31 July 1987, instituted an action for reconveyance, reversion, accounting, restitution and damages (Case 0033) in the Sandiganbayan. On 15 November 1990, upon Motion of COCOFED, the Sandiganbayan issued a Resolution lifting the sequestration of the subject UCPB shares on the ground that COCOFED and the so-called CIIF companies had not been impleaded by the PCGG as parties-defendants in its 31 July 1987 Complaint for reconveyance, reversion, accounting, restitution and damages. The Sandiganbayan ruled that the Writ of Sequestration issued by the Commission was automatically lifted for PCGG‘s failure to commence the corresponding judicial action within the six-month period ending on 2 August 1987 provided under Section 26, Article XVIII of the 1987 Constitution. The anti-graft court noted that though these entities were listed in an annex appended to the Complaint, they had not been named as parties-respondents. The Sandiganbayan Resolution was challenged by the PCGG in a Petition for Certiorari (GR 96073) in the Supreme Court. Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the holding of elections for the Board of Directors of UCPB. However, the PCGG applied for and was granted by this Court a Restraining Order enjoining the holding of the election. Subsequently, the Court lifted the Restraining Order and ordered the UCPB to proceed with the election of its board of directors. Furthermore, it allowed the sequestered shares to be voted by their registered owners. The victory of the registered shareholders was fleeting because the Court, acting on the solicitor general‘s Motion for Clarification/Manifestation, issued a Resolution on 16 February 1993, declaring that ―the right of COCOFED, et. al. to vote stock in their names at the meetings of the UCPB cannot be conceded at this time. That right still has to be established by them before the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB stock and cannot be accorded the right to vote them.‖ On 23 January 1995, the Court rendered its final Decision in GR 96073, nullifying and setting aside the 15 November 1990 Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares.
A month thereafter, the PCGG — pursuant to an Order of the Sandiganbayan — subdivided Case 0033 into eight Complaints (Cases 0033-A to 0033-H). Six years later, on 13 February 2001, the Board of Directors of UCPB received from the ACCRA Law Office a letter written on behalf of the COCOFED and the alleged nameless one million coconut farmers, demanding the holding of a stockholders‘ meeting for the purpose of, among others, electing the board of directors. In response, the board approved a Resolution calling for a stockholders‘ meeting on 6 March 2001 at 3 p.m. On 23 February
2001, ―COCOFED, et al. and Ballares, et al.‖ filed the ―Class Action Omnibus Motion‖ in Sandiganbayan Civil Cases 0033-A, 0033-B and 0033-F, asking the Sandiganbayan to enjoin the PCGG from voting the UCPB shares of stock registered in the respective names of the more than one million coconut farmers; and to enjoin the PCGG from voting the SMC shares registered in the names of the 14 CIIF holding companies including those registered in the name of the PCGG. On 28 February 2001, the Sandiganbayan, after hearing the parties on oral argument, issued the Order, authorizing COCOFED, et. al. and Ballares, et. al. as well as Cojuangco, as are all other registered stockholders of the United Coconut Planters Bank, until further orders from the Court, to exercise their rights to vote their shares of stock and themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled Stockholders‘ Meeting on 6 March 2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will normally follow in the exercise of these rights as registered stockholders. The Republic of the Philippines represented by the PCGG filed the petition for certiorari.
REPUBLIC v. BACOLOD MURCIA MILLING CO
During the 5 crop years mentioned in the law, namely 1951-1952, 1952-1953, 1953-1954, 1954-1955 and 1955-1956, defendant Bacolod-Murcia Milling Co., Inc., has paid P267,468.00 but left an unpaid balance of P216,070.50; defendant Ma-ao Sugar Central Co., Inc., has paid P117,613.44 but left unpaid balance of P235,800.20; defendant Talisay-Silay Milling Company has paid P251,812.43 but left unpaid balance of P208,193.74; and defendant Central Azucarera del Danao made a payment of P49,897.78 but left unpaid balance of P48,059.77. There is no question regarding the correctness of the amounts paid and the amounts that remain unpaid.
From the evidence presented, on which there is no controversy, it was disclosed that on September 3, 1951, the Philippine Sugar Institute, known as the PHILSUGIN for short, acquired the Insular Sugar Refinery for a total consideration of P3,070,909.60 payable, in accordance with the deed of sale Exhibit A, in 3 installments from the process of the sugar tax to be collected, under Republic Act 632. The evidence further discloses that the operation of the Insular Sugar Refinery for the years, 1954, 1955, 1956 and 1957 was disastrous in the sense that PHILSUGIN incurred tremendous losses as shown by an examination of the statements of income and expenses marked Exhibits 5, 6, 7 and 8. Through the testimony of Mr. Cenon Flor Cruz, former acting general manager of PHILSUGIN and at present technical consultant of said entity, presented by the defendants as witnesses, it has been shown that the operation of the Insular Sugar Refinery has consumed 70% of the thinking time and effort of the PHILSUGIN management
The plaintiff in the above case, Walter Lutz, contended that the aforementioned tax or special assessment was unconstitutional because it was being "levied for the aid and support of the sugar industry exclusively," and therefore, not for a public purpose. In rejecting the theory advanced by the said plaintiff, this Court said:
The basic defect in the plaintiff's position in his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power.
This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation, sugar occupying a leading position among its export products; that it gives employment to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one, of the important sources to foreign exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Hence, it was competent for the Legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the law-making body could provide that the distribution of benefits therefrom be readjusted among its components, to enable it to resist the added strain of the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U.S. 52, 59 L. Ed. 835; Johnson vs. State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Marcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121)
As stated in Johnson vs. State ex rel. Marcy, with reference to the citrus industry in Florida —
"The protection of a large industry constituting one of the great source of the state's wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police power of the sovereign." (128 So. 857).
Once it is conceded, as it must that the protection and promotion of the sugar industry is a matter of public concern, it follows that 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 the law (above quoted) bear no relation to the objective pursued or are oppressive in character. If objective 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 the implement of the state's police power.
BASCO V. PAGCOR
On July 11, 1983, PAGCOR was created under PD 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law. Basco and four others (all lawyers) assailed the validity of the law creating PAGCOR on constitutional grounds among others particularly citing that the PAGCOR‘s charter is against the constitutional provision on local autonomy.
Basco et al contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any ―tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local‖ is violative of the local autonomy principle.
The power of local government to “impose taxes and fees” is always subject to “limitations” which Congress may provide by law. Since PD 1869 remains an “operative” law until “amended, repealed or revoked” (Sec. 3, Art. XVIII, 1987 Constitution), its “exemption clause” remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy. Besides, the principle of local autonomy under the 1987 Constitution simply means “decentralization”. It does not make local governments sovereign within the state or an “imperium in imperio.” The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax"
VILLANUEVA V. CITY OF ILOILO
On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86. The Supreme Court, however, declared theordinance ultra vires. On January 15, 1960 the municipal board of Iloilo City, believing that with the passage of Republic Act 2264, otherwise known as the Local Autonomy Act, it had acquired the authority or power to enact an ordinance similar to that previously declared by the Supreme Court as ultra vires, enacted Ordinance 11 (eleven), series of 1960, imposing municipal license tax on persons engaged in the business of operating tenement houses.
In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five tenement houses, aggregately containing 43 apartments, while the other appellees and the same Remedios S. Villanueva are owners of ten apartments. By virtue of the ordinance in question, the appellant City collected from spouses Eusebio Villanueva and
Remedios S. Villanueva, for the years 1960-1964, the sum of P5,824.30, and from the appellees Pio Sian Melliza, Teresita S. Topacio, and Remedios S. Villanueva, for the years 1960-1964, the sum of P1,317.00.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended complaint, respectively, against the City of Iloilo, praying that Ordinance 11, series of 1960, be declared "invalid for being beyond the powers of the Municipal Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as to uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the Constitution," and that the City be ordered to refund the amounts collected from them under the saidordinance. The lower court rendered judgment declaring theordinance illegal. R: In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed twice when it should be taxed but once; both taxes must be imposed on the same property or subject-matter, for the same purpose, by the same State, Government, or taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax."23 It has been shown that a real estate tax and the
tenement tax imposed by the ordinance, although imposed by the same taxing authority, are not of the same kind or character.
At all events, there is no constitutional prohibition against double taxation in the Philippines.24 It is something not favored,
but is permissible, provided some other constitutional requirement is not thereby violated, such as the requirement that taxes must be uniform.
CIR V. SC JOHNSON AND SON
S.C. JOHNSON AND SON, INC., a domestic corporation organized and operating under the Philippine laws, entered into a license agreement with SC Johnson and Son, United States of America (USA), a non-resident foreign corporation based in the U.S.A. pursuant to which the [respondent] was granted the right to use the trademark, patents and technology owned by the latter including the right to manufacture, package and distribute the products covered by the Agreement and secure assistance in management, marketing and production from SC Johnson and Son, U. S. A.
The said License Agreement was duly registered with the Technology Transfer Board of the Bureau of Patents, Trade Marks and Technology Transfer under Certificate of Registration No. 8064.For the use of the trademark or technology, [respondent] was obliged to pay SC Johnson and Son, USA royalties based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments which [respondent] paid for the period covering July 1992 to May 1993 in the total amount of P1,603,443.00
On October 29, 1993, [respondent] filed with the International Tax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties arguing that, ―the antecedent facts attending [respondent's] case fall squarely within the same circumstances under which said MacGeorge and Gillete rulings were issued. Since the agreement was approved by the Technology Transfer Board, the preferential tax rate of 10% should apply to the [respondent]. We therefore submit that royalties paid by the [respondent] to SC Johnson and Son, USA is only subject to 10% withholding tax pursuant to the most-favored nation clause of the RP-US Tax Treaty [Article 13 Paragraph 2 (b) (iii)] in relation to the RP-West Germany Tax Treaty [Article 12 (2) (b)]‖ (Petition for Review [filed with the Court of Appeals]
The RP-US Tax Treaty states that:
1) Royalties derived by a resident of one of the Contracting States from sources within the other Contracting State may be taxed by both Contracting States.
2) However, the tax imposed by that Contracting State shall not exceed.
a) In the case of the United States, 15 percent of the gross amount of the royalties, and b) In the case of the Philippines, the least of:
(ii) 15 percent of the gross amount of the royalties, where the royalties are paid by a corporation registered with the Philippine Board of Investments and engaged in preferred areas of activities; and
(iii) the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances to a
resident of a third State.
The RP-Germany Tax Treaty provides:
(2) However, such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed:
b) 10 percent of the gross amount of royalties arising from the use of, or the right to use, any patent, trademark, design or model, plan, secret formula or process, or from the use of or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.
For as long as the transfer of technology, under Philippine law, is subject to approval, the limitation of the tax rate mentioned under b) shall, in the case of royalties arising in the Republic of the Philippines, only apply if the contract giving rise to such royalties has been approved by the Philippine competent authorities.
The Commissioner did not act on said claim for refund. Private respondent S.C. Johnson & Son, Inc. (S.C. Johnson) then filed a petition for review before the Court of Tax Appeals (CTA).The Court of Tax Appeals rendered its decision in favor of S.C. Johnson and ordered the Commissioner of Internal Revenue to issue a tax credit certificate in the amount of P963,266.00 representing overpaid withholding tax on royalty payments, beginning July, 1992 to May, 1993.2
The Commissioner of Internal Revenue thus filed a petition for review with the Court of Appeals which rendered the decision finding no merit in the petition and affirming in toto the CTA ruling.
R: International juridical double taxation is defined as the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods. The apparent rationale for doing away with double taxation is to encourage the free flow of goods and services and the movement of capital, technology and persons between countries, conditions deemed vital in creating robust and dynamic economies.
PEPSI COLA BOTTLING V. TANAUAN
Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null and void. Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27 levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. Aside from the undue delegation of authority, appellant contends that it allows double taxation, and that the subject ordinances are void for they impose percentage or specific tax.
R: This is not to say though that the constitutional injunction against deprivation of property without due process of law may be passed over under the guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are provided. 11 Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally not necessary to due process of law.
TIU V. CA
On March 13, 1992, Congress, with the approval of the President, passed into law RA 7227. This was for the conversion of former military bases into industrial and commercial uses. Subic was one of these areas. It was made into a special economic zone.
In the zone, there were no exchange controls. Such were liberalized. There was also tax incentives and duty free importation policies under this law.
On June 10, 1993, then President Fidel V. Ramos issued Executive Order No. 97 (EO 97), clarifying the application of the tax and duty incentives. It said that
On Import Taxes and Duties. — Tax and duty-free importations shall apply only to raw materials, capital goods and equipment brought in by business enterprises into the SSEZ
On All Other Taxes. — In lieu of all local and national taxes (except import taxes and duties), allbusiness enterprises in the SSEZ shall be required to pay the tax specified in Section 12(c) of R.A. No. 7227.
Nine days after, on June 19, 1993, the President issued Executive Order No. 97-A (EO 97-A), specifying the area within which the tax-and-duty-free privilege was operative.
Section 1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free.
Petitioners challenged the constitutionality of EO 97-A for allegedly being violative of their right toequal protection of the laws. This was due to the limitation of tax incentives to Subic and not to the entire area of Olongapo. The case was referred to the Court of Appeals.
The appellate court concluded that such being the case, petitioners could not claim that EO 97-A is unconstitutional, while at the same time maintaining the validity of RA 7227.
The court a quo also explained that the intention of Congress was to confine the coverage of the SSEZ to the "secured area" and not to include the "entire Olongapo City and other areas mentioned in Section 12 of the law.
Hence, this was a petition for review under Rule 45 of the Rules of Court.
R: Certainly, there are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called ―secured area‖ and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands of new jobs. On the other hand, definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local. Even more important, at this time the business activities outside the ―secured area‖ are not likely to have any impact in achieving the purpose of the law, which is to turn the former military base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and incentives accorded in RA 7227. Additionally, as the Court of Appeals pointed out, it will be easier to manage and monitor the activities within the ―secured area,‖ which is already fenced off, to prevent ―fraudulent importation of merchandise‖ or smuggling.
It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws.[13] As long as there are
actual and material differences between territories, there is no violation of the constitutional clause. And of course, anyone, including the petitioners, possessing the requisite investment capital can always avail of the same benefits by channeling his or her resources or business operations into the fenced-off free port zone.
We believe that the classification set forth by the executive issuance does not apply merely to existing conditions. As laid down in RA 7227, the objective is to establish a ―self-sustaining, industrial, commercial, financial and investment center‖ in the area. There will, therefore, be a long-term difference between such investment center and the areas outside it.
Lastly, the classification applies equally to all the resident individuals and businesses within the ―secured area.‖ The residents, being in like circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. Instead, they are all similarly treated, both in privileges granted and in obligations required.
All told, the Court holds that no undue favor or privilege was extended. The classification occasioned by EO 97-A was not unreasonable, capricious or unfounded. To repeat, it was based, rather, on fair and substantive considerations that were germane to the legislative purpose.
ORMOC SUGAR Co V. CIR
This is a companion case to G.R. No. L-23794, Ormoc Sugar Co., Inc. vs. Treasurer of Ormoc City, et al., wherein this Court hold through Associate Justice Jose P. Bengzon, that Ordinance No. 4, Series of 1964, enacted by the Municipal Board of Ormoc City, is unconstitutional and void.
Section 1 of the said ordinance provides:
Municipal Tax. — There shall be paid to the City Treasurer of any and all productions of centrifugal sugar milled at the Ormoc Sugar Company, Incorporated, in Ormoc City a municipal tax equivalent to one percentum (1%) per export sale to the United States of America and other foreign countries.
In G.R. No. L-23794 suit was brought by the Ormoc Sugar Co., to seek a refund of the sum of P12,087.50 which it had paid under protest in 1964 pursuant to the ordinance in question. Our decision in said case holds that the ordinance imposes a tax on export, and that it infringes the equal protection clause of the Constitution, since it refers exclusively to the Ormoc Sugar Company.
On the other hand the instant case is a petition for declaratory judgment filed by the Ormoc Sugarcane Planters Association, Inc. the rights of whose members are also affected by the ordinance. No other relief than a declaration of its nullity is prayed for, and the same must be granted in accordance with and for the reason already set forth in the other case. For purposes of our decision herein, however, one other ground may be cited, namely, that the taxing power granted to chartered cities, municipalities and municipal districts Section 2 of Republic Act No. 2264 (June 19, 1959) was amended on June 19, 1965 by R.A. No. 4497, as follows:
Sec. 1. Section two of Republic Act Numbered Twenty-two hundred sixty-four is amended to read as follows:
Sec. 2. Taxation. — Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon person engaged in any occupation or business, or exercising privileges in chartered cities, municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city, the municipal council of the municipality, or the municipal district council of the municipal district; to collect fees and charges for service rendered by the city, municipality or municipal district; to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation being conducted within the city, municipality or municipal district and otherwise to levy for public purposes, just and uniform taxes, licenses or fees: Provided, That municipalities and municipal districts shall, in no case, impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax, except gasoline, under the provisions of the National Internal Revenue Code: Provided, however, That no city, municipality or municipal district may levy or impose any of the following:
x x x x x x x x x
(1) Taxes, fees or levies, of any kind, which in effect impose a burden on exports of Philippine finished, manufactured or processed products and products of Philippine cottage industries.
Subsection 1 of section 2 just quoted did not exist in R.A. No. 2264 before it was amended. The amendment is clearly a denial of the power to impose export taxes, and in effect repeals the Ormoc City ordinance subject of this case.
CIR v. CA & YMCA
The main question in this case is: ―is the income derived from rentals of real property owned by Young Men‘s Christian Association of the Philippines (YMCA) – established as ―a welfare, educational and charitable non-profit corporation‖ – subject to income tax under the NIRC and the Constitution? In 1980, YMCA earned an income of P676,829 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators and P44k form parking fees.
Issue: Is the rental income of the YMCA taxable?
Held: Yes. The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Sec. 27 of the NIRC; court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. The said provision mandates that the income of exempt organizations (such as YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Private respondent is exempt from the payment of property tax, but nit income tax on rentals from its property.
LUNG CENTER V. QC
Lung Center of the Philippines is a non-stock and non-profit entity established by virtue of PD No. 1823. It is the registered owner of the land on which the Lung Center of the Philippines Hospital is erected. A big space in the ground floor of the hospital is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics. Also, a big portion on the right side of the hospital is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center.
When the City Assessor of Quezon City assessed both its land andhospital building for real property taxes, the Lung Center of the Philippines filed a claim for exemption on its averment that it is a charitable institution with a minimum of 60% of its hospital beds exclusively used for charity patients and that the major thrust of itshospital operation is to serve charity patients. The claim for exemption was denied, prompting a petition for the reversal of the resolution of the City Assessor with the Local Board of Assessment Appeals of Quezon City, which denied the same. On appeal, the Central Board of Assessment Appeals of Quezon City affirmed the local board‘s decision, finding that Lung Center of the Philippines is not a charitable institution and that its properties were not actually, directly and exclusively used for charitable purposes. Hence, the present petition for review with averments that the Lung Center of the Philippines is a charitable institution under Section 28(3), Article VI of the Constitution, notwithstanding that it accepts paying patients and rents out portions of the hospital building to private individuals and enterprises.
Issue: Is the Lung Center of the Philippines a charitable institution within the context of the Constitution, and therefore, exempt fromreal property tax?
Held: The Lung Center of the Philippines is a charitable institution. To determine whether an enterprise is a charitable institution or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, that character of the services rendered, the indefiniteness of the beneficiaries and the use and occupation of the properties.
However, under the Constitution, in order to be entitled to exemption from real property tax, there must be clear and unequivocal proof that (1) it is a charitable institution and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. While portions of the hospital are used for treatment of patients and the
dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals and enterprises.
Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from participation or enjoyment. If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.
ANGELES UNIVERSITY FOUNDATION v. CITY OF ANGELES
Angeles University was converted into a non-stock, non-profit education foundation under the provisions of Republic Act (R.A.) No. 6055. Petitioner filed with the Office of the City Building Official an application for a building permit for the construction of an 11-storey building of the Angeles University Foundation Medical Center in its main campus the said office issue a Building permit fee and Locational Clearance Fee. Petitioner made a letter to respondent City Treasurer Juliet G. Quinssat and City Building Official Donato Z. Dizon alleging that it is exempt from payment of the building permit and locational clearance fee. Petitioner also reminded the respondent that they have previously issued building permit acknowledging such exemption from payment of building permit fees. The DOJ and trial court render decision in favor to petitioner for exempting in payment. But the CA reverse the decision of court in favor to respondent. Petitioner file a MR but it was denied by CA
R: Petitioner failed to discharge its burden to prove that its real property is actually, directly and exclusively used for educational purposes. While there is no allegation or proof that petitioner leases the land to its present occupants, still there is no compliance with the constitutional and statutory requirement that said real property is actually, directly and exclusively used for educational purposes. The respondents correctly assessed the land for real property taxes for the taxable period during which the land is not being devoted solely to petitioner‘s educational activities.
As to petitioner‘s argument that the building permit fees collected by respondents are in reality taxes because the primary purpose is to raise revenues for the local government unit, the same does not hold water.
That a building permit fee is a regulatory imposition is highlighted by the fact that in processing an application for a building permit, the Building Official shall see to it that the applicant satisfies and conforms with approved standard requirements on zoning and land use, lines and grades, structural design, sanitary and sewerage, environmental health, electrical and mechanical safety as well as with other rules and regulations implementing the National Building Code.[24] Thus, ancillary permits such as electrical permit, sanitary permit and zoning clearance must also be secured and the corresponding fees paid before a building permit may be issued. And as can be gleaned from the implementing rules and regulations of the National Building Code,clearances from various government authorities exercising and enforcing regulatory functions affecting buildings/structures, like local government units, may be further required before a building permit may be issued.
