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British American Tobacco Corporation v. Finance Secretary Camacho, BIR Commissioner Parayno (2009)

The Supreme Court denied the petitioner's motion for reconsideration, upholding the constitutionality of Section 145 of the National Internal Revenue Code. The Court found that (1) the tax classification freeze provision was rationally related to improving tax administration efficiency; (2) the law did not violate equal protection as the classification was based on reasonable distinctions and applied equally; and (3) regressive indirect taxes like excise taxes on cigarettes are not inherently unconstitutional. The Court will not overturn tax laws unless they clearly violate constitutional rights.

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75 views2 pages

British American Tobacco Corporation v. Finance Secretary Camacho, BIR Commissioner Parayno (2009)

The Supreme Court denied the petitioner's motion for reconsideration, upholding the constitutionality of Section 145 of the National Internal Revenue Code. The Court found that (1) the tax classification freeze provision was rationally related to improving tax administration efficiency; (2) the law did not violate equal protection as the classification was based on reasonable distinctions and applied equally; and (3) regressive indirect taxes like excise taxes on cigarettes are not inherently unconstitutional. The Court will not overturn tax laws unless they clearly violate constitutional rights.

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robby
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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British American Tobacco Corporation v.

Finance Secretary Camacho, BIR


Commissioner Parayno (2009)

Facts:
The 2008 Decision partially granted PET’s petition declaring that:

(1) Section 145 of the NIRC, as amended by Republic Act No. 9334, is CONSTITUTIONAL; and that

 The classification freeze provision has not been shown to be precipitated by


a veiled attempt, or hostile attitude on the part of Congress to unduly favor
older brands over newer brands. xxx [T]he enactment of the questioned
provision was impelled by an earnest desire to improve the efficiency and
effectivity of the tax administration of sin products. For as long as the
legislative classification is rationally related to furthering some legitimate
state interest, as here, the rational-basis test is satisfied and the
constitutional challenge is perfunctorily defeated
(2) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended, insofar as
pertinent to cigarettes packed by machine, are INVALID insofar as they grant the BIR the power to
reclassify or update the classification of new brands every two years or earlier.

PET filed a Motion for Reconsideration for the Court’s decision in 2008 on the ground that
the assailed provisions: (1) violate the equal protection and uniformity of taxation clauses
of the Constitution; (2) contravene Section 19, Article XII of the Constitution on unfair
competition, and (3) infringe the constitutional provisions on regressive and inequitable
taxation.
 Petitioner argues that assuming the assailed provisions are constitutional, it is
entitled to a downward reclassification of Lucky Strike from the premium-priced to
the high-priced tax bracket; and the classification freeze provision violates the equal
protection and uniformity of taxation clauses because older brands are taxed based
on their 1996 net retail prices while new brands are taxed based on their present
day net retail prices.

W/N Section 145 is unconstitutional- NO


RULING:

SC: MR is without merit and a rehash of petitioner’s previous arguments before this Court

The rational basis test was properly applied to gauge the constitutionality of the assailed
law in the face of an equal protection challenge
 The classification is considered valid and reasonable provided that: (1) it
rests on substantial distinctions; (2) it is germane to the purpose of the
law; (3) it applies, all things being equal, to both present and future
conditions; and (4) it applies equally to all those belonging to the same
class.
 The classification freeze provision was inserted in the law for reasons of practicality
and expediency.
o since a new brand was not yet in existence at the time of the passage of RA
8240, then Congress needed a uniform mechanism to fix the tax bracket of a
new brand.
o The current net retail price, similar to what was used to classify the brands
under Annex “D” as of October 1, 1996, was thus the logical and practical
choice
 The classification freeze provision was in the main the result of Congress’s earnest
efforts to improve the efficiency and effectivity of the tax administration over sin
products while trying to balance the same with other State interests

A levy of tax is not unconstitutional because it is not intrinsically equal and uniform in its
operation.The uniformity rule does not prohibit classification for purposes of taxation

The assailed law does not transgress the constitutional provisions on regressive and inequitable
taxation.

SC: It may be conceded that the assailed law imposes an excise tax on cigarettes which is a form of
indirect tax, and thus, regressive in character. The tax does not take into account the person's
ability to pay because every consumer, whether rich or poor, of a cigarette brand within a specific
tax bracket pays the same tax rate.
 It does not mean that the assailed law may be declared unconstitutional for being
regressive in character because the Constitution does not prohibit the imposition of indirect
taxes but merely provides that Congress shall evolve a progressive system of taxation

Tolentino v. Secretary of Finance: “[R]egressivity is not a negative standard for courts to enforce.
What Congress is required by the Constitution to do is to "evolve a progressive system of taxation."
This is a directive to Congress xxx These provisions are put in the Constitution as moral incentives
to legislation, not as judicially enforceable rights”

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