01 Digests - Local Taxation

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Section 19(a) “Municipality may impose taxes on business, EXCEPT on those for which fixed taxes are provided, as follows: (a) Manufacturers, importers, or producers of any article of commerce of whatever kind or nature including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits, or wines in accordance with the schedule listed therein..”

b. SOF Provincial Circular No. 26-73 (December 1973) and SOF Circular No 26A-73: orders all City Treasurers to refrain from collecting local taxes imposed in tax ordinances before or after the effectivity of the Local Tax Code on business of manufacturers, wholesalers, retailers, dealers of petroleum products subject to specific tax…

c. P.D. 426 (April 1974) was passed amending portions of P.D. 231 BUT RETAINING Section 19(a) with adjusted rates.

d. SOF Provincial Circular 6-77 (March 1977). Ordering municipalities to refrain from collecting storage fees on petroleum products.

e. P.D. 1158 (June 1977). Specific tax imposed on manufactured mineral oils and motor fuels.

(3) Local Ordinances

a. Tax Ordinance 1-S1974 (Pililla Tax Code) imposing business taxes on all businesses except for those on which fixed taxes are provided, as well as mayor’s permit, sanitary inspection fee, and storage permit for flammable or combustible substances.

(4) From 1974 to 1986, the municipality of Pililla did not collect taxes or fees. (5) ACTION: In 1986, Pililla filed the present civil action against PPC to collect the

following:

a. Business Taxes from 1979 to 1986 b. Storage Permit Fees from 1975 to 1986

c. Mayor’s and Sanitary Inspection Fees from 1975 to 1984. d. Side issue: Mayor’s permit fees were waived by the Mayor.

PPC Defense

(1) SOF Circulars prohibited the imposition of taxes and fees on manufacturers of petroleum products.

(2) P.D. 1158 imposed a fixed tax on petroleum products which places manufacturers of such under the exception provided for in P.D. 231.

ISSUE before SC: WON PPC whose oil products are subject to specific tax under a National Law is still liable to be pay local business taxes and fees. (Business taxes – yes, but prescriptive period; storage fees – no; Mayor’s Fees - yes).

SIDE ISSUE: Mayor’s permit fees were waived by the Mayor. SC:

RE Business Taxes

(1) P.D. 426 which amended P.D. 231 but which did not expressly provided an exemption for BUSINESSES in the petroleum industry is deemed to have repealed all prior SOF Circulars.

(2) An administrative regulation must be in harmony with provisions of law. In case of discrepancy, the law prevails over the administrative regulation.

(3) A tax on business is different from a tax on the article or product. While a fixed tax is provided on the petroleum products itself, this does not prevent local government units from imposing taxes on the business.

(4) Power of LGUs to tax is ordained in Article X, Section 5 of the 1987 Constitution. Only Congress may provide guidelines and limitations on such power, and in this case, P.D. 231 as amended expressly provides LGUs the power to tax businesses.

(5) HOWEVER: Local Tax Code does not provide the prescriptive period of local taxes so Article 1143 of Civil Code applies. Action upon obligation created by law prescribes within 10 years from time right of action accrues. In this case, action filed 1986 so can only collect business taxes from 1976 to 1986.

RE storage fees

(1) According to the ordinance, the fee being imposed is a fee for installation and keeping in storage flammable, combustible, or explosive materials. As such it is a service fee, and since PPC owns and maintains its own tanks, it is not subject to storage fee.

RE mayor’s permit fees

(1) Imposition of Mayor’s permit fee is provided for in the Pililla Tax Code AND it does not provide authority to the Mayor to unilaterally withdraw the requirement to pay such fees.

(2) Waiver provided by the Mayor is a form of exemption. Exemptions from taxation are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.

(3) Only the legislative has the power to grant exemptions and not the executive like the mayor.

(3)

MCI AA V. MARCOS DOCTRINE

The power to tax is primarily vested in the Congress; however, in our jurisdictions, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Sec 5, Article X of the Consti. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy. The LGC, enacted pursuant to Sec 3, Article X of the Consti, provides for the exercise by LGUs of their power to tax, the scope thereof or its limitations, and the exemptions from taxation. Sec 133 of the LGC prescribes the common limitations on the taxing powers of LGUs.

FACTS

 MCIAA enjoyed the privilege of exemption from payment of realty taxes [Sec 14 of RA 6958]

 Oct 11, 1994, the City Treasurer demanded payment for realty taxes on several parcels of land belonging to the petitioner located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu City [P2,229,078.79]

 Petitioner invoked:

o Sec 14 of RA 6958 which exempts it from payment of realty taxes. o it is an instrumentality of the gov’t performing governmental functions

(LGC 133)

 As the City of Cebu was about to issue a warrant of levy against the properties of petitioner, petitioner

o Paid under protest

o Filed a Petition for Declaratory Relief before the RTC

 RTC: LGC 1991 revoked the tax exemption of MCIAA.

MCIAA

 Although it is a GOCC, it is mandated to perform functions in the same category as an instrumentality of Gov’t. An instrumentality of Gov’t is one created to perform governmental functions primarily to promote certain aspects of the economic life of the people. Considering its task "not merely to operate the Airport, but more importantly, to carry out the Gov’t policies of promoting and developing the Central Visayas and Mindanao regions as centers of international trade and tourism," and that it is an attached agency of the DOTC, the petitioner "may stand in [sic] the same footing as an agency or instrumentality of the Nat’l gov’t."

 Its tax exemption privilege under Sec 14 of its Charter "cannot be considered withdrawn by the LGC of 1991 because Sec 133 thereof specifically states that the 'taxing powers of LGUs shall not extend to the levy of taxes or fees or charges of any kind on the Nat’l gov’t, its agencies and instrumentalities.'"

 Being an instrumentality of the Nat’l Gov’t, City of Cebu has no power nor authority to impose realty taxes.

CITY OF CEBU

 While it may be true that under its Charter the petitioner was exempt from the payment of realty taxes, this exemption was withdrawn by Sec 234 of the LGC.

 MCIAA is a FOCC, and Sec 234 thereof does not distinguish between GOCCs performing governmental and purely proprietary functions.

ISSUE #1. W HETHER MCIAA CAN INVOKE SEC 133 LGC PAR (O) TO CLAIM TAX EXEMPTION. NO.

 As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including GOCCs, Sec 193 of the LGC prescribes the general rule: they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC.

 The latter proviso could refer to Sec 234 which enumerates the properties exempt from RPT. But the last par. of Sec 234 further qualifies the retention of the exemption insofar as RPTs are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Even as to real property owned by the RP or any of its political subdivisions covered by item (a) of the first par. of Sec 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise.

 Since the last par. of Sec 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of RPTs granted to natural or juridical persons, including GOCCs, except as provided in the said Sec, and the petitioner is, undoubtedly, a GOCC., it necessarily follows that its exemption from such tax granted it in Sec 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Sec 234, but not under Sec 133, as it now asserts, since, as shown above, the said Sec is qualified by Secs 232 and 234. congress removed the phrase “and any gocc so exempt by its charter”

 The old law includes “any GOCC so exempt by its charter” [Sec 40(a) of P.D. No. 464 -RPT Code]

 But it was deleted in LGC. The justification for this restricted exemption is to limit further tax exemption privileges, especially in light of the general provision on withdrawal of tax exemption privileges in Sec 193 and the special provision on withdrawal of exemption from payment of RPTs in the last par. of Sec 234.

 These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of nat’l goals.

 The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of LGUs 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.

 The original reasons for the withdrawal of tax exemption privileges granted to GOCCs and all other units of gov’t were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises,

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and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them.

ISSUE #2: W HETHER THE PETITIONER IS A "TAXABLE PERSON." NO.

 The petitioner cannot claim that it was never a "taxable person" under its Charter. It was only exempted from the payment of RPTs. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except RPT.

 Even if the petitioner was originally not a taxable person for purposes of RPT, it had already become, even if it be conceded to be an "agency" or "instrumentality" of the Gov’t, a taxable person for such purpose in view of the withdrawal in the last par. of Sec 234 of exemptions from the payment of RPTs.

 Reliance on Basco vs. PAGCOR is unavailing since it was decided before the effectivity of the LGC. Nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Gov’t performing governmental functions may be subject to tax.

Petition DENIED. RTC AFFIRMED. OTHER NOTES

AGENCY AS DISTINGUISHED FROM INSTRUMENTALITY.

 "Agency" of the Gov’t refers to "any of the various units of the Gov’t, including a department, bureau, office, instrumentality, or GOCC, or a local gov’t or a distinct unit

 "Instrumentality" - "any agency of the Nat’l Gov’t, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually, through a charter. This term includes regulatory agencies, chartered institutions and GOCCs."

RPT EXEMPTIONS

(a) Ownership Exemptions. Exemptions from RPTs on the basis of ownership are real properties owned by:

a. the Republic, b. a province, c. a city, d. a municipality, e. a barangay, and f. registered cooperatives. (b) Character Exemptions. a. charitable institutions,

b. houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and

c. non-profit or religious cemeteries.

(c) Usage exemptions. Exempted from RPTs on the basis of the actual, direct and exclusive use to which they are devoted are:

a. all lands, buildings and improvements which are actually directly and exclusively used for religious, charitable or educational purposes;

b. all machineries and equipment actually, directly and exclusively used by local water districts or by GOCCs engaged in the supply and distribution of water and/or generation and transmission of electric power; and

c. all machinery and equipment used for pollution control and environmental protection.

EXEMPTION FROM PAYMENT OF TAX MAY BE WITHDRAWN AT THE PLEASURE OF THE TAXING AUTHORITY; EXCEPTION.

 GR: Since taxation is the rule and exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority.

 E: where the exemption was granted to private parties based on material consideration of a mutual nature, which then becomes contractual and is thus covered by the non-impairment claim of the Consti.

RP AS DISTINGUISHED FROM NAT’L GOV’T.

 RP is broader and synonymous with "Gov’t of the RP" which the Admin Code of 1987 defines as the "corporate governmental entity through which the functions of gov’t are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous regions, or LGYs.

 "Nat’l Gov’t" refers "to the entire machinery of the central gov’t, as distinguished from the different forms of local gov’t." It is composed of the three great departments: the executive, the legislative and the judicial.

NPC VS. CI TY OF CABA NATUAN [2003] FACTS:

National Power Corporation, a GOCC was assessed by the City of Cabanatuan for franchise tax pursuant to sec. 37 of Ordinance No. 165-92. NPC refused to pay the tax assessment on the grounds that the City of Cabanatuan has no authority to impose tax on government entities and also that it is exempted as a non-profit organization. For its part, the City government alleged that NPC’s exemption from local taxes has been repealed by sec. 193 of RA 7160.

ISSUE: W ON NPC IS LIABLE TO PAY AN ANNUAL FRANCHISE TAX TO THE CITY GOVERNMENT.

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

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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.

As commonly used, a franchise tax is "a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state." It is not levied on the corporation simply for existing as a corporation, upon its property or its income, but on its exercise of the rights or privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and exercise its franchise. It is within this context that the phrase "tax on businesses enjoying a franchise" in section 137 of the LGC should be interpreted and understood. Verily, to determine whether the petitioner is covered by the franchise tax in question, the following requisites should concur:

(1) That petitioner has a "franchise" in the sense of a secondary or special franchise; and

(2) That it is exercising its rights or privileges under this franchise within the territory of the city government.

NPC fulfills both requisites. 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.

SC also did not find merit in the petitioner's contention that its tax exemptions under its charter subsist despite the passage of the LGC.

As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly and categorically, and supported by clear legal provisions. In the case at bar, the petitioner's sole refuge is section 13 of Rep. Act No. 6395 exempting from, among others, "all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities." It is worth mentioning that section 192 of the LGC empowers the LGUs, through ordinances duly approved, to grant tax exemptions, initiatives or reliefs. But in enacting section 37 of Ordinance No. 165-92 which imposes an annual franchise tax "notwithstanding any exemption granted by law or other special law," the respondent city government clearly did not intend to exempt the petitioner from the coverage thereof.

CI TY OF SAN PABLO VS . REYES [1999]

G.R. No. 127708. March 25, 1999 | 3rd_{Div. | Gonzaga-Reyes, J.} FACTS:

Act No. 36481_{granted the Escudero Electric Service Company a legislative franchise} to maintain and operate an electric light and power system in the City of San Pablo. Escudero's franchise was transferred to MERALCO under RA 2340. PD 5512_was enacted exempting it from municipal taxes. RA 71603_{(LGC) then took effect.}

Then the Sangguniang Panglunsod enacted Ordinance No. 56 (Revenue Code of the City of San Pablo)4_{which imposes franchise tax on Meralco.}

The City Treasurer sent a letter demanding payment of franchise tax. Meralco paid "under protest" a total amount of P1,857,711.67.

Meralco filed this action before the RTC to declare the ordinance null and void and to claim for a refund of the taxes paid. The latter decided in favor of Meralco. The city appealed directly to the SC.

ISSUE: W ON THE CITY MAY IMPOSE A LOCAL FRANCHISE TAX PURSUANT TO THE LGC? (YES)

Implied repeal—

Sec. 534 (f)5_{, the repealing clause of the LGC partakes of the nature of a general} repealing clause. Nonetheless, there’s an implied repeal by LGC of the MERALCO

1_{. . . In consideration of the franchise and rights hereby granted, the grantee shall pay unto the}

municipal treasury of each municipality in which it is supplying electric current to the public under this franchise, a tax equal to two percentum of the gross earnings from electric current sold or supplied under this franchise in each said municipality. Said tax shall be due and payable quarterly and shall be in lieu of any and all taxes of any kind nature or description levied, established or collected by any authority whatsoever, municipal, provincial or insular, now or in the future, on its poles, wires, insulator, switches, transformers, and structures, installations, conductors, and accessories placed in and over and under all public property, including public streets and highways, provincial roads, bridges and public squares, and on its franchise, rights. privileges, receipts, revenues and profits from which taxes the grantee is hereby expressly exempted.

2_{Sec. 1. Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax}

payable by all grantees of franchise to generate, distribute and sell electric current for light, heat and power shall be two percent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current.

Such franchise tax shall be payable to the Commissioner of Internal Revenue of his duly authorized representative on or before the twentieth day of the month following the end of each calendar quarter or month as may be provided in the respective franchise or pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings, receipts, income and privilege of generation, distribution and sale of electric current.

3_{LGC authorizes the province/city to impose a tax on business enjoying a franchise at a rate not}

exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year realized within its jurisdiction.

4_{Sec. 2.09. Franchise Tax — There is hereby imposed a tax on business enjoying a franchise, at a rate of}

fifty percent (50%) of one percent (1%) of the cross annual receipts, which shall include both cash sales and sales on account realized during the preceding calendar year within the city.

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franchise insofar as the latter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature”.

The city correctly rely on the provisions of Sections 1376_{and 193}7_{of the LGC to} support their position that MERALCO`s tax exemption has been withdrawn. The explicit language of Section 137 which authorizes the province to impose franchise tax "notwithstanding any exemption granted by any law or other special law" is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws.

Sec. 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons whether natural or juridical, including government-owned or controlled corporations except 1) local water districts, 2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio untus est exclusio alterius.

Legislative purpose—

Reading together Sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to withdraw tax privileges enjoy under existing law or charter is clearly manifested by the language used in Sections 137 end 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges.

Meaning of in lieu of all taxes—

It is true that the phrase "in lieu of all taxes" found in special franchises has been held in several cases to exempt the franchise holder from payment of tax on its corporate

5_{Sec. 534 (f) — Repealing Clause — All general and special law, acts, city charters, decrees, executive}

orders, proclamation and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this code are hereby repealed or modified accordingly.

6_{Sec. 137 — Franchise Tax — Notwithstanding any exemption granted by any law or other special law,}

the province may impose a tax on business enjoying a franchise, at a rate not exceeding fifty percent 50% of one percent 1% of the gross annual receipts for the preceding calendar year based on the incoming receipts, or realized, within its territorial jurisdiction. . . .

7_{Sec. 193 — Withdrawal of Tax Exemption Privileges — Unless otherwise provided in this Code, tax}

exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non- stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

franchise imposed of the Internal Revenue Code, as the charter is in the nature of a private contract and the exemption is part of the inducement for the acceptance of the franchise, and that the imposition of another franchise tax by the local authority would constitute an impairment of contract between the government and the corporation. But these "magic words" contained in the phrase "shall be in lieu of all taxes'' have to give way to the peremptory language of the LGC specifically providing for the withdrawal of such exemption privileges.

Power to tax—

The power to tax is primarily vested in Congress. However, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution8_{. The} important legal effect of Section 5 is that henceforth, in interpreting statutory provision on municipal fiscal powers, doubts will have to resolved in favor of municipal corporations.

Constitutional Background—

There is further basis for the conclusion that the non-impairment of contract clause cannot be invoked to uphold Meralco's exemption from the local tax. Escudero Electric Co. was originally given the legislative franchise under Act. 3648 to operate an electric light and power system in the City of San Pablo and nearby municipalities. The term of the franchise under Act. No. 3648 is a period of fifty years from the Act's approval in 1929. The said law provided that the franchise is granted upon the condition that it shall be subject to amendment, or repeal by the Congress of the United States. Under the 1935, the 1973, and the 1987 Constitutions, no franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration or repeal by the National Assembly when the public interest so requires. With or without the reservation clause, franchises are subject to alterations through a reasonable exercise of the police power; they are also subject to alteration by the power to tax, which like police power cannot be contracted away.

Future taxes—

Whereas the original Escudero franchise exempted the franchise holder from all taxes levied or collected "now or in the future" this phrase is noticeably omitted in the counterpart provision of P.D. 551; that said omission is intended not to foreclose future taxes may reasonably be deduced by statutory construction.

ILOILO BOTTL ERS INC. VS CI TY OF IL OIL O FACTS

Plaintiff Iloilo Bottlers Inc. is engaged in the business of bottling soft drinks (Pepsi Cola and 7-Up.) It has its bottling plant in Barrio Ungca, Municipality of Pavia, Iloilo, which is outside the jurisdiction of defendant, City of Iloilo. Previously, the plant was in

8_{Sec. 5 — Each Local Government unit shall have the power to create its own sources of revenue and to}

levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments.

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Muelle Loney St., Iloilo City, during which time the municipal license fees were still being paid by the former owner (Santiago Syjuco Inc.), followed by herein plaintiff. When the plant was transferred to Pavia, Iloilo Bottlers stopped paying the fees because (1) its principal business is bottling of softdrinks, to which selling is merely incidental, and (2) only bottlers with plants inside the territorial jurisdiction of the city are covered by the ordinance.

However, defendant still demanded from the plaintiff payment of its back taxes from the time its plant was transferred, on the basis of Ordinance No. 45. The said ordinance orders those engaged in the distribution, manufacture or bottling of soft drinks within the territorial jurisdiction of the City of Iloilo to pay a municipal license tax of P0.10 for every 24 bottles, or a P0.015 per case of 24 bottles (for softdrinks sold to the public at not more than P0.05).

Plaintiff does not maintain any store or commercial establishment in the City of Iloilo from which its products are distributed. Instead, a fleet of delivery trucks is used to distribute its products from its plant to the different parts of Iloilo.

ISSUE: w/n Iloilo Bottlers Inc. is liable for a municipal tax license under Iloilo City tax Ordinance No. 5

HELD: YES, Iloilo Bottlers Inc. is liable for said tax RATIO:

The tax imposed under Ordinance No. 5 is an EXCISE TAX, a tax on the privilege of distributing, manufacturing, or bottling soft drinks. It can only be levied by the taxing authority when the acts, privileges or businesses are done WITHIN the jurisdiction of the said authority. In this case, the situs of the act of distributing, bottling or manufacturing soft.drinks must be within city limits, before an entity engaged in any of the activities may be taxed in Iloilo City. Since sales were made by the plaintiff in Iloilo City, by virtue of the marketing system it adopted (explained below), then it can be lawfully taxed by Iloilo City under Ordinance No. 5.

The Court ruled that plaintiff's delivery trucks were not used solely for the purpose of delivering soft drinks previously sold at Pavia (the plant site). The delivery trucks themselves served as selling units or "rolling stores," wherein route salesmen perfected and consummated sales transactions. Plaintiff is thus engaged in the separate business of selling or distributing soft drinks, independently of its business of bottling them.

It must be noted that there are two types of marketing systems or sales operations which determine whether or not the entity is engaged in the separate business of selling:

(1) Manufacturer enters into sales transactions and invoices at its main office and the orders are thereafter delivered. No warehouse sales are made; nor are separate stores maintained where products may be sold independently from the main office.

The warehouses only serve as storage sites and delivery points of the products earlier sold at the main office.

(2) Sales transactions are entered into and perfected at stores/warehouses maintained by the company, with these stores/warehouses serving as selling centers. Entities adopting this marketing system are thus engaged in the separate business of selling. Iloilo Bottlers Inc. thus falls under this category.

PEPSI- COL A BOTTLING CO. V. CI TY OF BUTUA N Sourced from Internet

Concepcion G.R. No. L-22814, August 28, 1968

RATIO DECIDENDI The uniformity required under the Constitution is not absolute uniformity. It only requires that people belonging to the same class be taxed uniformly. For classification to be valid, the following must concur: (1) it is based upon substantial distinctions; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies to present conditions and future ones substantially identical to those of the present; and (4) the classification applies equally to those belonging to the same class.

FACTS:

Pepsi-Cola Bottling Co. of the Philippines (Pepsi-Cola) has a storage facility in the City of Butuan for its soft drinks manufactured in Cebu. Products from this facility are sold to consumers in the said city. The City of Butuan (Butuan) enacted Ordinance No. 110, which imposed a tax on dealers engaged in selling soft drinks or carbonated drinks. Ordinance No. 110 was later amended by Ordinance No. 122. Consequently, the tax was now imposed on any agent and/or consignee of any person, association, partnership, company, or corporation engaged in selling x x x soft drinks or carbonated drinks. According to the Court, this obviously pertains to a situation wherein an outside dealer taps a local agent and/or consignee to sell his products in said agent’s and/or consignee’s locality. Since Pepsi-Cola has a storage facility in the city receiving soft drinks from Cebu, and since said facility sells the same carbonated beverages to the people of the city, it was assessed the tax imposed by Ordinance 110, as amended by Ordinance 122 (Ordinance 110, as amended). Pepsi-Cola paid under protest. Pepsi-Cola brought the matter of recovering the amounts paid before the lower court. It dismissed the complaint, hence this appeal.

ISSUE:

W/N the tax imposed by Ordinance 110, as amended, violates the uniformity requirement.

HELD:

YES, Ordinance 110, as amended, unfairly singles out agents and/or consignees of outside dealers.

The Constitution (what is being referred to here is the 1935 Constitution) provides: “The rule of taxation shall be uniform and equitable. x x x” (See also par. 1, Sec. 28, Art. VI, 1987 Constitution) Ordinance 110, as amended, defines what it means by “agent” or “consignee,” to wit: “any person, association, partnership, company, or corporation who acts in the place of another x x x or one entrusted with the business

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of another or to whom is consigned or shipped x x x cases of hard liquor[s] or soft drinks every month for resale, either retail or wholesale.”

For classification to be valid, the following must concur: (1) it is based upon substantial distinctions; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies to present conditions and future ones substantially identical to those of the present; and (4) the classification applies equally to those belonging to the same class. The ordinance exempts local dealers not acting for or in behalf of outside merchants from paying the tax it imposes. It only applies to local dealers acting for or in behalf of outside merchants. Butuan did not offer any explanation as to why a distinction between the two was made. If the purpose of the tax measure was merely to create a new revenue source by levying tax upon the sale of soft drinks, there is no reason for favoring one over the other.

WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered annulling Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan to refund to plaintiff herein the amounts collected from and paid under protest by the latter, with interest thereon at the legal rate from the date of the promulgation of this decision, in addition to the costs, and defendants herein are, accordingly, restrained and prohibited permanently from enforcing said Ordinance, as amended. It is so ordered.

CI TY OF BAGUI O VS. D E LEON 25 SCRA 938

GR No. L-24756, October 31, 1968

"There is no double taxation where one tax is imposed by the state and the other is imposed by the city."

FACTS:

• The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation doing business in the City.

• The ordinance sourced its authority from RA No. 329, thereby amending the city charter empowering it to fix the license fee and regulate businesses, trades and occupations as may be established or practiced in the City.

• De Leon was assessed for P50 annual fee it being shown that he was engaged in property rental and deriving income therefrom.

• The latter assailed the validity of the ordinance arguing that it is ultra vires for there is no statury authority which expressly grants the City of Baguio to levy such tax, and that there it imposed double taxation, and violates the requirement of uniformity.

ISSUE:

• Are the contentions of the defendant-appellant tenable? HELD:

• No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering the City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance cannot be considered ultra vires for there is more than ample statury authority for the enactment thereof. • Second, an argument against double taxation may not be invoked where one tax is

imposed by the state and the other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation results.

• And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof.

ASSOCIATI ON OF CUSTO MS BROKERS, INC AND MANLAPI T V. MUNICIPAL BOARD OF M ANILA

Topic: local taxation – fundamental principles Facts:

- In 1950, the Association of Customs Brokers (composed of all brokers and public service operators of motor vehicles in Manila) and Manlapit, an operator-member of said association filed a petition for declaratory relief challenging the validity of Manila City Ordinance No. 3379:

o While the ordinance levies a so-called property tax, it is in reality a license tax beyond the power of the Municipal Board

o The ordinance is offensive against the rule of uniformity of taxation o The levy constitutes double taxation

- City Fiscal

o Ordinance imposes a property tax within the power of the City of Manila under its Revised Charter (RA 409, se. 18(p))

 The municipal board has the power “to tax motor and other vehicles operating within the City of Manila, the provisions of any existing law to the contrary notwithstanding.”

o No violation of other 2 grounds - CFI: petition dismissed; ordinance is valid Issue(s):

w/n Ordinance No. 3379 is valid SC Ratio:

No, it is invalid for levying an excise tax which is not within the scope of the City’s powers and for violating the rule on uniformity.

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Under section 70(b) of the Motor Vehicles Law (Act No. 3392):

“No further fees than those fixed in this Act shall be exacted or demanded by any public highway, bridge or ferry, or for the exercise of the profession of chauffeur, or for the operation of any motor vehicle by the owner thereof: Provided, however, That nothing in this Act shall be construed to exempt any motor vehicle from the payment of any lawful and equitable insular, local or municipal property tax imposed thereupon. . .”

This provision should be construed as limiting the broad grant of power conferred upon the City of Manila by its Charter to impose taxes, such that only property taxes may be imposed on motor vehicles operating within its territorial jurisdiction.

Sec. 1 of Ordinance No. 3379 denominates the tax imposed as ad valorem (meaning tax proportional to value of the property) and while as a rule an ad valorem tax is a property tax, such rule is not absolute. Rather, the character of the tax (property v. excise) must be determined by its incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the mode adopted in fixing its amount. Excise taxes are those imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation.

The purpose of the ordinance is to raise funds for the repair, maintenance and improvement of the streets and bridges in said city, something which the Motor Vehicles Law already addresses. The prohibition under sec. 70(b) is meant to prevent municipal corporations from duplicating the levy since under sec. 73 of the same act, they already participate in the distribution of the proceeds collected under the Motor Vehicles Law. “It is for this reason that we believe that the ordinance in question merely imposes a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to.”

Moreover, the ordinance violates the rule of uniformity since “[i]t does not distinguish between a motor vehicle hire and one which is purely for private use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one registered in another place but occasionally comes to Manila and uses its streets and public highways. The distinction is important if we note that the ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the word "operating" used therein. The word "operating" denotes a connotation which is akin to a registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees”.

ORMOC SUGAR COMPANY V ORMOC CI TY FACTS

- The Municipal Board of Ormoc passed Ordinance 4stating:

o imposing "on any and all productions of centrifugal sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal t ax equivalent to one per centum (1%) per export sale to the United States of America and other foreign countries."

- Payments for said tax were made, under protest, by Ormoc Sugar Co mpany, Inc.

o ordinance is unconstitutional for being violative of the equal protecti

on clause (Sec. 1[1], Art. III, Constitution) and the

o rule of uniformity of taxation (Sec. 22[1], Art. VI, Constitution), o export tax forbidden under Section 2287 of the Revised Administrati

ve Code

o tax amounts to a customs duty, fee or charge in violation of paragra ph 1 of Section 2 of Republic Act 2264 because the tax is on both t he sale and export of sugar.

ISSUE: w/n Ordinance 4 is valid by reason of: Export Tax? Yes

Equal Protection? No

HELD: Ordinance is unconstitutional RATIO:

Doctrine: -Constitution does not bar a reasonable classification of the subject of legislation, and a classification is reasonable where (1) it is based on substantial distinctions which make real differences; (2) these are germane to the purpose of the law; (3) the classification applies not only to present conditions but also to future conditions which are substantially identical to those of the present; (4) the classification applies only to those who belong to the same class.

Export Tax Issue

- Though referred to as a "production tax", the imposition actually amoun ts to a tax on the export of centrifugal sugar produced at Ormoc Suga r Company, Inc. For production of sugar alone is not taxable;

- only time the tax applies is when the sugar produced is exported. - HOWEVER, while Section 2287 of the Revised Administrative Code

which denies from municipal councils the power to impose an ex port tax. Section 2 of Republic Act 2264, effective June 19, 1959, g ave chartered cities, municipalities and municipal districts authority to levy for public purposes just and uniform taxes, licenses or fees. Anent the inconsistency between Section 2287 of the Revised Admini strative Code and Section 2 of Republic Act 2264, this Court has alread y ruled that that the former to have been repealed by the latter Equal Protection Clause

- Constitution does not bar a reasonable classification of the subject of legislat ion, and a classification is reasonable where (1) it is based on substant ial distinctions which make real differences; (2) these are germane to t he purpose of the law; (3) the classification applies not only to present conditions but also to future conditions which are substantially identical t o those of the present; (4) the classification applies only to those who belong to the same class.

- Here, the requisite was not met, considering:

o it taxes only centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and none other.

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Ormoc.

- The taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff, fr om the coverage of the tax. As it is now, even if later a similar company is se t up, it cannot be subject to the tax because the ordinance expressly points o nly to Ormoc Sugar Company, Inc. as the entity to be levied upon.

GASTON V. REPUBL IC P LANTERS BANK J. Melencio-Herrera

Syllabus Topic: Prohibition on use of tax levied for special purpose: all money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance if any shall be transferred to the general funds of the government (Sec. 29, Art. VI, Constitution)

Facts:

- Republic Planters Bank is a commercial banking corporation. Philippine Sugar Commission (Philsucom) is the government agency tasked with regulating the sugar industry, which was eventually abolished

in favour of the Sugar Regulatory Administration (SRA).

- Petitioners are sugar producers who filed a writ of mandamus asking that that respondent bank be privatized and that shares of stock held by Philsucom in the bank be distributed to petitioners. Petitioners’ argument is based on Sec. 7 of PD 388 which created Philsucom. According to petitioners, Sec. 7 creates a Stabilization Fund, and that this stabilization fund is to be administered in trust

by Philsucom in favour of petitioners.

- Respondents argue that the stabilization fees resulting from Sec. 7 are government funds under that Government Auditing Code.

Issue: WON the stabilization fees collected from sugar planters and millers pursuant to Sec. 7 are funds in trust for them, or public funds? (Public Funds) WON the stocks of Philsucom in respondent bank belongs to Philsucom or petitioners? (Philsucom) Held:

 Re formation of implied trust: there is no implied trust. While an element of intent to create a trust is present, a resulting trust did not happen because the intention of the parties was not reasonably ascertainable from the language of the statute itself.

 Petitioner also invoked the history of respondent bank. Bank used to have difficulties in funding, so they had funds infused from a

certain Benedicto group. Petitioners argued that the funds were placed in stocks just because it was convenient for the Benedicto group. The court held that this was not supported by the circumstances, because the agreement to support this was not ratified or approved by Philscuom.

 Tax issue! The court approves of the COA’s opinion on the situation, i.eie, that the stabilization fees are charges/levies on sugar produced and milled which accrued to Philsucom.

 The court characterized the stabilization funds as follows: the stabilization fees collected are in the nature of tax, which is within the power of the state to impose for the promotion of the sugar industry. The tax collected is not a pure exercise of the taxing powers of the state. It was also levied with a regulatory purpose, to provide the means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the state.

 Relating this to the syllabus topic: SC said that the stabilization fund, having been levied for a special purpose, the revenues collected are to be treated as a special fund to be administered in trust for the purpose intended (stabilization). Once the purpose has been fulfilled or abandoned, the balance is to be transferred to the general funds of the government. Just because the fees were collected from the sugar planters does not mean the fund belongs to them. To rule in their favour is to contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons.

PROGRESSI VE DEVEL OPMENT CORPORATI ON VS. QUEZ ON CI TY GR 36081, 24 April 1989

Third Division, Feliciano (J): 4 concur

Facts:

The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned and operated public markets to pay 10% of the gross receipts from stall rentals to the City, as supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which imposed a 5% tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon City. Progressive Development Corp., owned and operator of Farmer’s Market and Shopping Center, filed a petition for prohibition against the city on the ground that the supervision fee or license tax imposed is in reality a tax on income the city cannot impose.

Issue:

Whether the supervision fee / license tax is a tax on income. NO.

Held:

The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city income tax (distinguished from the national income tax by the Tax Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of business in which the company is engaged. To be considered a license fee, the imposition must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulations for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of the regulation, taking into account not only the costs of direct regulation but also its incidental

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consequences as well. The gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due to the city to cover the latter’s administrative expenses. The use of the gross amount of stall rentals, as basis for the determination of the collectible amount of license tax, does not by itself convert or render the license tax into a prohibited city tax on income. For ordinarily, the higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related items sold in the privately owned market; and the higher the volume of goods sold in such market, the greater extent and frequency of inspection and supervision that may be reasonably required in the interest of the buying public

ANCHETA V SISON (198 4) July 25, 1984 | Fernando, CJ

FACTS:

 This is a suit for declaratory relief or prohibition assailing Section I of BP 135,the provision amends Section 21 of the NIRC of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, xxxx

 Petitioneras taxpayer alleges "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers

o section is arbitrary amounting to class legislation, oppressive and capricious in character; a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation

ISSUE: WoN Section I of BP 135 is unconstitutional (NO) / WoN the imposition of a higher tax rate on taxable net income derived from business or profession than on compensation is unconstitutional (NO)

HELD: petition dismissed

RATIO:

1. It is manifest that the field of state activity has assumed a much wider scope. Hence, the need for more revenues.

2. The power to tax, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all the powers of government."

a. The power to tax is not unconfined. The Constitution sets forth such limits.

b. Adversely affecting as it does property rights, both the due process and equal protection clauses may properly be invoked. Otherwise, there would be truth to the 1803 dictum of Chief Justice Marshall that "the power to tax involves the power to destroy."

c. Justice Frankfurter: "The web of unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmes’s pen: 'The power to tax is not the power to destroy while this Court sits." So it is in the Philippines.

3. The Constitution as the fundamental law overrides any legislative or executive, act that runs counter to it.

4. Petitioner alleges arbitrariness. A mere allegation, as here, does not suffice. There must be a factual foundation of such unconstitutional taint.

5. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property. 6. For equal protection, it suffices that the laws operate equally and uniformly

on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed.

a. Justice Frankfurter: The Constitution does not require things which are different in fact or opinion to be treated in law as though they were the same."

b. Classification if rational in character is allowable.

7. According to the Constitution: "The rule of taxation shag be uniform and equitable."

a. Requirement is met according to Philippine Trust Company v. Yatco when the tax "operates with the same force and effect in every place where the subject may be found. "

b. Justice Tuason: where "the differentiation" complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of this clause and is therefore uniform."

8. What misled petitioner is his failure to take into consideration the distinction between a tax rate and a tax base.

a. There is no legal objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing the applicable tax rate. Taxpayers may be classified into different categories.

b. The gross income taxation embodied in BP 135, the discernible basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them.

c. Taxpayers who are recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers are not entitled to make deductions for income tax purposes because they are in the same situation more or less. d. On the other hand, in the case of professionals in the practice

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costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income.

CONCLUSION: There is ample justification then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional and business income.

ABAD SANTOS, J., This is a frivolous suit. While the tax rates for compensation income are lower than those for net income such circumstance does not necessarily result in lower tax payments for those receiving compensation income. In fact, the reverse will most likely be the case; those who file returns on the basis of net income will pay less taxes because they claim all sort of deduction justified or not I vote for dismissal.

MATALI N V. MUN. COUN CIL OF MAL ABANG (198 6 ) Yap, J.

Petitioner: Matalin Coconut Co. Inc.

Respondents: The Municipal Council of Malabang, Lanao Del Sur, Amir M. Balindong and Hadji Pangilamun Manalocon, Municipal Mayor and Municipal Treasurer Of Malabang, Lanao Del Sur

Concept: Power to tax vis-à-vis police power

Brief Facts: Municipal Council of Malabang imposed a Police Inspection Fee. Matalin claimed that the ordinance should be declared void for being unjust and confiscatory. Doctrine: The grant of power to tax is sufficiently plenary to cover "everything, excepting those which are mentioned", subject only to the limitation that the tax so levied is for public purposes, just and uniform.”

FACTS:

1. 08/24/1966: Municipal Council of Malabang, Lanao del Sur, invoking the authority of Section 2 of RA No. 2264, otherwise known as the Local Autonomy Act, enacted Municipal Ordinance No. 45-46, entitled "An Ordinance Imposing A Police Inspection Fee Of P.30 Per Sack Of Cassava Starch Produced And Shipped out of the Municipality of Malabang and Imposing Penalties for Violations Thereof."

2. The ordinance:

a. made it unlawful for any person, company or group of persons "to ship out of the Municipality of Malabang, cassava starch or flour without paying to the Municipal Treasurer or his authorized representatives the corresponding fee imposed a "police inspection fee" of P.30 per sack of cassava starch or flour,

which shall be paid by the shipper before the same is transported or shipped outside the municipality

b. imposed a fine of not less than P100.00, but not more than P1,000.00, and to pay P1.00 for every sack of flour being illegally shipped outside the municipality, or to suffer imprisonment of 20 days, or both, in the discretion of the court.

3. Matalin Coconut Inc challenges the validity of the ordinance alleging that the ordinance is not only ultra vires, being violative of Republic Act No. 2264, but also unreasonable, oppressive and confiscatory. Matalin claimed for a refund and prayed for a preliminary injunction pending the resolution of the case.

4. Application for prelim. Injunction was denied. The municipal treasurer was ordered to allow payment of taxes under protest.

5. Purakan plantation (intervener), alleged that while its cassava flour factory was situated in another municipality ( Balabagan, Lanao del Sur), it had to transport the cassava starch and flour it produced to the seashore through the Malabang for loading in coastwise vessels. Due to the ordinance, it had to refrain from transporting its products through the Malabang in order to ship them by sea to other places.

6. TC: declared the ordinance null and void. Mun. Treasurer ordered to refund the petitioners.

7. Mun. Council of Malabang maintain that it was erroneous for the TC to order refund in an action for declaratory relief and contend that the municipality has the power and authority to approve the ordinance in question pursuant to Section 2 of the Local Autonomy Act (RA No. 2264).

ISSUES:

1. WON TC may order tax refund in an action for declaratory relief (YES) 2. WON Ordinance No. 45-66 is valid (NO)

RATIO:

1.YES. Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary action and the parties allowed to file such pleadings as may be necessary or proper, if before the final termination of the case "a breach or violation of an... ordinance, should take place."

2. NO. The tax imposed is unjust and unreasonable. It has been shown that Matalin was merely realizing a marginal profit of P.40 per bag of cassava flour. To impose P0.30 tax per bag would force Matalin to close down or stop its cassava flour starch milling business considering that it is maintaining a big labor force in its operation, including a force of security guards to guard its properties.

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Since the enactment of the Local Autonomy Act, a liberal rule has been followed by this Court in construing municipal ordinances enacted pursuant to the taxing power granted under Section 2 of said law. This Court has construed the grant of power to tax under the above-mentioned provision as sufficiently plenary to cover "everything, excepting those which are mentioned" therein, subject only to the limitation that the tax so levied is for public purposes, just and uniform.

SC agreed with the finding of the trial court that the amount collected under the ordinance in question partakes of the nature of a tax, although denominated as "police inspection fee" since its undeniable purpose is to raise revenue. However, TC is incorrect in holding that the tax imposed is percentage tax hence municipalities are prohibited to impose such. The tax imposed under the ordinance in question is not a percentage tax on sales or any other form of tax based on sales. It is a fixed tax of P.30 per bag of cassava starch or flour "shipped out" of the municipality. It is not based on sales. Regardless WON it’s a percentage tax or not, it may still be stricken down for being "unjust and unreasonable. According to Section 2 of the Local Autonomy Act, the tax levied must be "for public purposes, just and uniform".

DISPOSITIVE: Petition Dismissed

VILLANUEVA V. CI TY OF ILOILO Castro | Dec. 28, 1968 | En banc

Facts:

The municipal board of Iloilo City enacted Ordinance 86, imposing license tax fees on certain tenement houses. The validity and constitutionality of this ordinance were challenged by the spouses Eusebio Villanueva and Remedies Sian Villanueva, owners of four tenement houses containing 34 apartments. The SC, in a prior case, had declared the ordinance ultra vires, "it not appearing that the power to tax owners of tenement houses is one among those clearly and expressly granted to the City of Iloilo by its Charter."

Later, the municipal board, believing that with the passage of RA 2264, the Local Autonomy Act, it had acquired the authority or power to enact an ordinance similar to that previously declared as ultra vires, enacted Ordinance 11. By virtue of the ordinance, the City collected from sums from the tenement owners.

The plaintiffs filed a complaint against the City in the CFI praying that Ordinance 11 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 said ordinance. The CFI declared the ordinance illegal, saying that (a) RA 2264 does not empower cities to impose apartment taxes, (b) the same is oppressive and unreasonable, for the reason that it penalizes owners of tenement houses who fail to pay the tax, (c) it constitutes not only double taxation, but treble at that and (d) it violates the rule of uniformity of taxation.

ISSUES

1. Is the City empowered by the Local Autonomy Act to impose tenement taxes? YES.

2. Is Ordinance 11 illegal because it imposes double taxation? NO.

3. Is Ordinance 11 oppressive and unreasonable because it carries a penal clause? NO.

4. Does Ordinance 11 violate the rule of uniformity of taxation? NO.

HELD: The judgment is reversed, and, the ordinance in question being valid, the complaint is hereby dismissed.

1. Sec. 2 of the Local Autonomy Act confer on local governments broad taxing authority which extends to almost "everything, excepting those which are mentioned therein," provided that the tax so levied is "for public purposes, just and uniform," and does not transgress any constitutional provision or is not repugnant to a controlling statute. Thus, when a tax, levied under the authority of a city or municipal ordinance, is not within the exceptions and limitations aforementioned, the same comes within the ambit of the general rule, pursuant to the rules of expressio unius est exclusio alterius, and exceptio firmat regulum in casibus non excepti.

Does the tax imposed by the ordinance in question fall within any of the exceptions provided for in section 2? For this purpose, it is necessary to determine the true nature of the tax. It is our view, contrary to the appellees' contention, that the tax in question is not a real estate tax. A real estate tax is a direct tax on the ownership of lands and buildings or other improvements thereon, not specially exempted, and is payable regardless of whether the property is used or not, although the value may vary in accordance with such factor. The tax imposed by the ordinance in question does not possess the aforestated attributes. Clearly, therefore, the tax in question is not a real estate tax.

2. While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of the NIRC as real estate dealers, and still taxable under the ordinance in question, the argument against double taxation may not be invoked. The same tax may be imposed by the national government as well as by the local government. There is nothing inherently obnoxious in the exaction of license fees or taxes with

01 Digests - Local Taxation

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