Taxation I

Case Digest Compilation

Contention: Petitioner submits that the thirty
Tio vs. Videogram Regulatory Board percent (30%) tax imposed is harsh and
1987 oppressive, confiscatory, and in restraint of
[En Banc] trade.

Facts: Issue:
Petitioner Tio filed this petition on his own Whether or not the tax imposed is harsh,
behalf and purportedly on behalf of other confiscatory, oppressive and/or in unlawful
videogram operators adversely affected. It restraint of trade in violation of the due process
assails the constitutionality of Presidential clause of the Constitution. – NO.
Decree No. 1987 entitled "An Act Creating the
Videogram Regulatory Board" with broad Ruling:
powers to regulate and supervise the It is beyond serious question that a tax does
videogram industry (the board). It was not cease to be valid merely because it
promulgated on October 5, 1985 and took regulates, discourages, or even definitely deters
effect on April 10, 1986. the activities taxed. The power to impose taxes
is one so unlimited in force and so searching in
The rationale behind the enactment of the P.D. extent, that the courts scarcely venture to
1987 are the following: declare that it is subject to any restrictions
 the proliferation and unregulated whatever, except such as rest in the discretion
circulation of videograms including, of the authority which exercises it.
among others, videotapes, discs,
cassettes or any technical improvement In imposing a tax, the legislature acts upon its
or variation thereof, have greatly constituents. This is, in general, a sufficient
prejudiced the operations of movie security against erroneous and oppressive
houses and theaters, and have caused a taxation.
sharp decline in theatrical attendance by
at least 40% and a tremendous drop in The tax imposed by P.D. 1987 is not only a
the collection of sales, contractor's regulatory but also a revenue measure
specific, amusement and other taxes, prompted by the realization that earnings of
thereby resulting in substantial losses videogram establishments of around P600
estimated at P450 million annually in million per annum have not been subjected to
government revenues; tax, thereby depriving the Government of an
 videogram establishments collectively additional source of revenue. It is an end-user
earn around P600 million per annum tax, imposed on retailers for every videogram
from rentals, sales, and disposition of they make available for public viewing.
videograms, and such earnings have not
been subjected to tax, thus depriving It is similar to the 30% amusement tax
the government of approximately P180 imposed or borne by the movie industry which
million in taxes each year; the theater-owners pay to the government, but
 the unregulated activities of videogram which is passed on to the entire cost of the
establishments have also affected the admission ticket, thus shifting the tax burden
viability of the movie industry, on the buying or the viewing public. It is a tax
particularly the more than 1,200 movie that is imposed uniformly on all videogram
houses and theaters throughout the operators.
country, and occasioned industry-wide
displacement and unemployment due to The levy of the 30% tax is for a public purpose.
the shutdown of numerous moviehouses It was imposed primarily to answer the
and theaters; need for regulating the video industry,
 in order to ensure national economic particularly because of the rampant film piracy,
recovery, it is imperative for the the flagrant violation of intellectual property
Government to create an environment rights, and the proliferation of pornographic
conducive to growth and development of video tapes.
all business industries, including the
movie industry which has an While it was also an objective of P.D. 1987 to
accumulated investment of about P3 protect the movie industry, the tax remains a
Billion; x x x valid imposition. The public purpose of a tax
may legally exist even if the motive which
1
Based on the syllabus of Atty. Kriska Marna A. Buena
Ateneo De Davao University S.Y. 2020-2021
Digested by: Ampatuan, Ballos, Mahusay, Malicay, Nono, Paclibar, Picot, Teng
 Taxation I
Case Digest Compilation
impelled the legislature to impose the tax was they are not inconsistent with or foreign to
to favor one industry over another. the general subject and title.

It is inherent in the power to tax that a state be The rule also is that the constitutional
free to select the subjects of taxation, and it requirement as to the title of a bill should
has been repeatedly held that "inequities which not be so narrowly construed as to cripple
result from a singling out of one particular class or impede the power of legislation. It should
for taxation or exemption infringe no be given practical rather than technical
constitutional limitation". Taxation has been construction. Tested by the foregoing
made the implement of the state's police criteria, petitioner's contention that the tax
power. provision of P.D. 1987 is a rider is without
merit. That section reads, inter alia:
At bottom, the rate of tax is a matter better
addressed to the taxing legislature. Section 10. Tax on Sale, Lease or
Disposition of Videograms. —
The enactment of P.D. 1987 since April 10, Notwithstanding any provision of law to
1986 has not brought about the "demise" of the the contrary, the province shall collect a
video industry. On the contrary, video tax of thirty percent (30%) of the
establishments are seen to have proliferated in purchase price or rental rate, as the case
many places notwithstanding the 30% tax may be, for every sale, lease or
imposed. disposition of a videogram containing a
reproduction of any motion picture or
In fine, petitioner has not overcome the audiovisual program. Fifty percent
presumption of validity which attaches to a (50%) of the proceeds of the tax
challenged statute. We find no clear violation of collected shall accrue to the province,
the Constitution which would justify us in and the other fifty percent (50%) shall
pronouncing Presidential Decree No. 1987 as acrrue to the municipality where the tax
unconstitutional and void. is collected; PROVIDED, That in
Metropolitan Manila, the tax shall be
shared equally by the City/Municipality
Ancillary issues: and the Metropolitan Manila
1. Whether or not Section 10 of the decree, Commission.
which imposes a tax of 30% on the gross
receipts payable to the local government is x x x           x x x          x x x
a rider and the same is not germane to the
subject matter thereof. – NO. The foregoing provision is allied and
2. Whether or not there is undue delegation of germane to, and is reasonably necessary for
power and authority. – NO. the accomplishment of, the general object
3. Whether or not P.D. 1987 is an ex-post of P.D. 1987, which is the regulation of
facto law. – NO. the video industry through the Videogram
4. Whether there is over regulation of the Regulatory Board as expressed in its title.
video industry as if it were a nuisance. –
NO. The tax provision is not inconsistent with,
nor foreign to that general subject and title.
Ruling: As a tool for regulation it is simply one of
1. The Constitutional requirement that "every the regulatory and control mechanisms
bill shall embrace only one subject which scattered throughout P.D. 1987. The
shall be expressed in the title thereof" is express purpose of P.D. 1987 to include
sufficiently complied with if the title be taxation of the video industry is in order to
comprehensive enough to include the regulate and rationalize the heretofore
general purpose which a statute seeks to uncontrolled distribution of videograms. The
achieve. It is not necessary that the title title of P.D. 1987, which is the creation of
express each and every end that the statute the Videogram Regulatory Board, is
wishes to accomplish. The requirement is comprehensive enough to include the
satisfied if all the parts of the statute are purposes expressed in its Preamble and
related, and are germane to the subject reasonably covers all its provisions. It is
matter expressed in the title, or as long as unnecessary to express all those objectives

2
Based on the syllabus of Atty. Kriska Marna A. Buena
Ateneo De Davao University S.Y. 2020-2021
Digested by: Ampatuan, Ballos, Mahusay, Malicay, Nono, Paclibar, Picot, Teng
 Taxation I
Case Digest Compilation
in the title or that the latter be an index to of innocence". And the "legislature may
the body of P.D. 1987. enact that when certain facts have been
proved that they shall be prima facie
2. Neither can it be successfully argued that evidence of the existence of the guilt of
P.D. 1987 contains an undue delegation of the accused and shift the burden of
legislative power. The grant in Section 11 of proof provided there be a rational
P.D. 1987 of authority to the Board to: connection between the facts proved and
"solicit the direct assistance of other the ultimate facts presumed so that the
agencies and units of the government inference of the one from proof of the
and deputize, for a fixed and limited others is not unreasonable and arbitrary
period, the heads or personnel of such because of lack of connection between
agencies and units to perform the two in common experience".
enforcement functions for the Board"
is not a delegation of the power to legislate Applied to the challenged provision, there is
but merely a conferment of authority or no question that there is a rational
discretion as to its execution, enforcement, connection between the fact proved, which
and implementation. is non-registration, and the ultimate fact
presumed which is violation of P.D. 1987,
In the very language of P.D. 1987, the besides the fact that the prima
authority of the board to solicit such facie presumption of violation of P.D. 1987
assistance is for a "fixed and limited period" attaches only after a forty-five-day period
with the deputized agencies concerned counted from its effectivity and is,
being "subject to the direction and control of therefore, neither retrospective in character.
the board." That the grant of such authority
might be the source of graft and corruption 4. The Court does not share petitioner's fears
would not stigmatize P.D. 1987 as that the video industry is being over-
unconstitutional. Should the eventuality regulated and being eased out of existence
occur, the aggrieved parties will not be as if it were a nuisance.
without adequate remedy in law.
Being a relatively new industry, the need for
3. P.D. 1987 is not violative of the ex post its regulation was apparent. While the
facto principle. An ex post facto law is, underlying objective of P.D. 1987 is to
among other categories, one which "alters protect the moribund movie industry, there
the legal rules of evidence, and authorizes is no question that public welfare is at
conviction upon less or different testimony bottom of its enactment, considering "the
than the law required at the time of the unfair competition posed by rampant film
commission of the offense." piracy; the erosion of the moral fiber of the
viewing public brought about by the
It is petitioner's position that Section 15 of availability of unclassified and unreviewed
P.D. 1987 raises immediately a prima video tapes containing pornographic films
facie evidence of violation of P.D. 1987 and films with brutally violent sequences;
when the required proof of registration of and losses in government revenues due to
any videogram cannot be presented and the drop in theatrical attendance, not to
thus partakes of the nature of an ex post mention the fact that the activities of video
facto law. establishments are virtually untaxed since
mere payment of Mayor's permit and
The argument is untenable. As this Court municipal license fees are required to
held in the recent case of Vallarta vs. Court engage in business.
of Appeals, et al.:

... it is now well settled that "there is no

constitutional objection to the passage of
a law providing that the presumption of
innocence may be overcome by a
contrary presumption founded upon the
experience of human conduct, and
enacting what evidence shall be
sufficient to overcome such presumption
3
Based on the syllabus of Atty. Kriska Marna A. Buena
Ateneo De Davao University S.Y. 2020-2021
Digested by: Ampatuan, Ballos, Mahusay, Malicay, Nono, Paclibar, Picot, Teng