Planters products v. Fertiphil Corporation, GR no.

166006, March 14,

2008

FACTS: 
Petitioner PPI and respondent Fertiphil are private corporations incorporated
under Philippine laws, both engaged in the importation and distribution of
fertilizers, pesticides and agricultural chemicals. Marcos issued Letter of
Instruction (LOI) 1465, imposing a capital recovery component of Php10.00 per
bag of fertilizer. The levy was to continue until adequate capital was raised to
make PPI financially viable. Fertiphil remitted to the Fertilizer and
Pesticide Authority (FPA), which was then remitted the depository bank of
PPI. Fertiphil paid P6,689,144 to FPA from 1985 to 1986.

After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the
P10 levy. Fertiphil demanded from PPI a refund of the amount it remitted,
however PPI refused. Fertiphil filed a complaint for collection and damages,
questioning the constitutionality of LOI 1465, claiming that it was unjust,
unreasonable, oppressive, invalid, and an unlawful imposition that amounted
to a denial of due process.

PPI argues that Fertiphil has no locus standi to question the constitutionality
of LOI No. 1465 because it does not have a “personal and substantial interest
in the case or will sustain direct injury as a result of its enforcement.” It
asserts that Fertiphil did not suffer any damage from the imposition because
“incidence of the levy fell on the ultimate consumer or the farmers themselves,
not on the seller fertilizer company.

ISSUE: 
Whether or not, LOI 1465, being a law implemented for the purpose of assuring
the fertilizer supply and distribution in the country, and for benefiting a
foundation created by law to hold in trust for millions of farmers their stock
ownership in PPI constitutes a valid legislation pursuant to the exercise of
taxation and police power for public purposes.

RULING: 
Yes. The levy was imposed to pay the corporate debt of PPI. Fertiphil also
argues that, even if the LOI is enacted under the police power, it is still
unconstitutional because it did not promote the general welfare of the people or
public interest.

Police power and the power of taxation are inherent powers of the State. These
powers are distinct and have different tests for validity. Police power is the
power of the State to enact legislation that may interfere with personal liberty
or property in order to promote the general welfare, while the power of taxation
is the power to levy taxes to be used for public purpose. The main purpose of
police power is the regulation of a behavior or conduct, while taxation is
revenue generation. The “lawful subjects” and “lawful means” tests are used to
determine the validity of a law enacted under the police power. The power of
taxation, on the other hand, is circumscribed by inherent and constitutional
limitations.

While it is true that the power of taxation can be used as an implement of

police power, the primary purpose of the levy is revenue generation. If the
purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax.

An inherent limitation on the power of taxation is public purpose. Taxes are

exacted only for a public purpose. They cannot be used for purely private
purposes or for the exclusive benefit of private persons. The reason for this is
simple. The power to tax exists for the general welfare; hence, implicit in its
power is the limitation that it should be used only for a public purpose. It
would be a robbery for the State to tax its citizens and use the funds generated
for a private purpose.
Gomez vs. Palomar, L-23645, October 29, 1968, 25 SCRA 827

Petitioner questions the validity of the statute, claiming that R.A. No, 1635,
otherwise known as the Anti-TB Stamp Law, charging extra five centavo
charge for t h e u s e o f s e m i - p o s t a l s t a m p v i o l a t i v e o f t h e e q u a l
p r o t e c t i o n c l a u s e o f t h e Constitution because it constitutes mail users
into a class for the purpose of the tax while lea ving u ntaxed the r est of
t he popu la tion and that even am ong posta l patrons the statute
discriminatorily grants exemptions.

R.A. 1635, as amended by R.A. 2631 was enacted to

help raise funds for the Philippine Tuberculosis Society.
It required all mail to bear the semi-postal stamps which
showed the face value showing the regular postage
charge plus the additional amount of five centavos for
the special fund to be raised during the period August 19
to September 30 each year starting in 1958 . Only
newspapers were exempted from the said requirement.
The Postmaster General, in implementation of the law,
thereafter issued 4 administrative orders:
A.O. 3- Mails entitled to franking privilege like those from
the office of the President, members of Congress, and
other offices to which such privilege has been granted,
shall each also bear one such semi-postal stamp if
posted during the said period.
A.O. 7- It amended A.O. 3. Government agencies,
officials, and other persons entitled to the franking
privilege under existing laws may pay in cash such extra
charge intended for said society, instead of affixing the
semi-postal stamps to their mails, provided that such
mails are presented at the post-office window, where the
five-centavo extra charge for said society shall be
collected on each piece of such mail matter.
A.O. 9- It amended A.O. 3 and 7 and exempts exempts
"Government and its Agencies and Instrumentalities
Performing Governmental Functions."
A.O. 10- It amended the previous A.O.s and exempts
"copies of periodical publications received for mailing
under any class of mail matter, including newspapers
and magazines admitted as second-class mail."
On September l5, 1963 the petitioner Benjamin P.
Gomez mailed a letter at the post office in San
Fernando, Pampanga. Because this letter did not bear
the special anti-TB stamp required by the statute, it was
returned to the petitioner.
In view of this development, the petitioner brought suit
for declaratory relief in CFI Pampanga, to test the
constitutionality of the statute, as well as the
implementing A.O.s issued, contending that it violates
the equal protection clause of the Constitution as well as
the rule of uniformity and equality of taxation. The lower
court declared the statute and the orders
unconstitutional; hence this appeal by the respondent
postal authorities

Facts:
R.A. 1635, as amended by R.A. 2631 was enacted to help raise funds for the
Philippine Tuberculosis Society. It required all mail to bear the semi-postal
stamps which showed the face value showing the regular postage charge plus
the additional amount of five centavos for the special fund to be raised during
the period August 19 to September 30 each year starting in 1958. Only
newspapers were exempted from the said requirement. The Postmaster
General, in implementation of the law, thereafter issued administrative orders
A.O. Mails entitled to franking privilege like those from the office of the
President, members of Congress, and other offices to which such privilege has
been granted, shall each also bear one such semi-postal stamp if posted during
the said period.

Government agencies, officials, and other persons entitled to the franking

privilege under existing laws may pay in cash such extra charge intended for
said society, instead of affixing the semi-postal stamps to their mails, provided
that such mails are presented at the post-office window, where the five-centavo
extra charge for said society shall be collected on each piece of such mail
matter .

It amended and exempts "Government and its Agencies and Instrumentalities

Performing Governmental Functions." It amended the previous A.O.s and
exempts "copies of periodical publications received for mailing under any class
of mail matter, including newspapers and magazines admitted as second-class
mail."

On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the
post office in San Fernando, Pampanga. Because this letter did not bear the
special anti-TB stamp required by the statute, it was returned to the petitioner.
In view of this development, the petitioner brought suit or declaratory relief in
CFI Pampanga, to test the constitutionality of the statute, as well as the
implementing A.O.s issued, contending that it violates the equal protection
clause of the Constitution as well as the rule of uniformity and equality of
taxation. The lower court declared the statute and the orders unconstitutional;
hence this appeal by the respondent postal authorities.
Issue/s:
a. WON the RA 1635 violates the equal protection clause and is therefore
unconstitutional ? -NO.
b. WON the tax levied was for a public purpose?- YES.

R uling:
A. No, the legislature has the inherent power to select the subjects of
taxation and to grant exemptions. This power has aptly been
described as "of wide range and flexibility." Indeed, it is said that in
the field of taxation, more than in other areas, the legislature
possesses the greatest freedom in classification. In the case of the
anti-TB stamp, undoubtedly, the single most important and influential
consideration that led the legislature to select mail users as subjects of
the tax is the relative ease and convenience of collecting the tax through
the post offices. The small amount of five centavo does not justify
the great expense and inconvenience of collecting through the
regular means of collection.

B. YES. The eradication of a dreaded disease is a public purpose, but if

by public purpose the petitioner means benefit to a taxpayer as a
return for what he pays, then it is sufficient answer to say that the
only benefit to which the taxpayer is constitutionally entitled is that
derived from his enjoyment of the privileges of living in an organized
society, established and safeguarded by the devotion of taxes to public
purposes. Any other view would preclude the levying of taxes except
as they are used to compensate for the burden on those who pay them
and would involve the abandonment of the most fundamental
principle of government — that it exists primarily to provide for the
common good.
Citizen’s Alliance for Consumer Protection vs. ERB, G.R. Nos. 78888-90,
23 June 1988

Facts:

Private respondent Caltex filed with the public respondent Energy Regulatory
Board (ERB) an Application formally seeking a provisional increase in the
prices of its petroleum products. Similar applications for provisional price
increases were submitted by Petrophil Corporation and Shell. Public
respondent Board issued Orders in the ERB cases authorizing the increase of
the prices of their petroleum products. A part of this increase in the value of
P0.311 per liter shall paid to the Oil Price Stabilization Fund (OPSF).

Petitioners filed a petition seeking to enjoin enforcement of that portion

directing private respondent oil companies to pay P0.311 out of the price
increases granted to the OPSF. Petitioner assailed the constitutionality of
both the OPSF and the laws establishing said fund.

Issue: WON the OPSF and the laws, which establish it should be declared
unconstitutional.

Held:

NO, it is not unconstitutional.

In fact, Petitioners have not undertaken to Identify the provisions in the

Constitution which they claim to have been violated by that statute. This
Court, however, is not compelled to speculate and to imagine how the assailed
legislation may possibly offend some provision of the Constitution. The Court
notes, further, in this respect that petitioners have in the main put in question
the wisdom, justice and expediency of the establishment of the OPSF, issues
which are not properly addressed to this Court and which this Court may not
constitutionally pass upon. Those issues should be addressed rather to the
political departments of government: the President and the Congress.

The OPSF is a trust account, which was established for the purpose of
minimizing frequent price changes brought about by exchange rate
adjustment and/or changes in World market prices of crude oil and imported
petroleum products. The fact that the world market prices of oil vary from day
to day is of judicial notice. These fluctuations in world market prices and in
tanker rates and foreign exchange rates would in a completely free market
translate into corresponding adjustments in domestic prices of oil and
petroleum products with sympathetic frequency. But domestic prices which
vary from day to day or even only from week to week would result in a chaotic
market with unpredictable effects upon the country's economy in general.

The OPSF was established precisely to protect local consumers from the
adverse consequences that such frequent oil price adjustments may have
upon the economy. It appears to the Court that the establishment and
maintenance of the OPSF is well within that pervasive and non-waivable
power and responsibility of the government to secure the physical and
economic survival and well-being of the community, that comprehensive
sovereign authority we designate as the police power of the state. The
stabilization and subsidy of domestic prices of petroleum products and fuel
oil - clearly critical in importance considering, among other things, the
continuing high level of dependence of the country on imported crude oil - are
appropriately regarded as public purposes
Thus, the establishment and maintenance of the OPSF is a public purpose,
for the OPSF was created precisely to protect local consumers from the
adverse effects of frequent oil price adjustments on our economy.
 ABAKADA vs Ermita G.R. No. 168056

FACTS:
Before R.A. No. 9337 (amendment to NIRC) took effect on July 1, 2005,
petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition.
Petitioners argue that the law is unconstitutional, as it constitutes
abandonment by Congress of its exclusive authority to fix the rate of taxes
under Article VI, Section 28(2) of the 1987 Philippine Constitution. They
further contend that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the NIRC giving the President the stand-by
authority to raise the VAT rate from 10% to 12% when a certain condition is
met, constitutes undue delegation of the legislative power to tax. It states…
That the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been satisfied:
i. Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2
4/5%); or
ii. National government deficit as a percentage of GDP of the previous
year exceeds one and one-half percent (1 ½%).

Lastly, respondents manifest that R.A. No. 9337 is the anchor of the
government’s fiscal reform agenda. A reform in the value-added system of
taxation is the core revenue measure that will tilt the balance towards a
sustainable macroeconomic environment necessary for economic growth.

ISSUE: Do Sections 4, 5 and 6 of R.A. No. 9337, giving the President the stand-
by authority to raise the VAT rate from 10% to 12% when a certain condition is
met, constitutes undue delegation of the legislative power to tax?
RULING:
There is no undue delegation of legislative power but only of the discretion as
to the execution of a law. Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must do it, and
what is the scope of his authority. It is simply a delegation of ascertainment of
facts upon which enforcement and administration of the increase rate under
the law is contingent. A (permissible delegation) is valid only if the law (a) is
complete in itself, setting forth therein the policy to be executed, carried out, or
implemented by the delegate; and (b) fixes a standard — the limits of which are
sufficiently determinate and determinable — to which the delegate must
conform in the performance of his functions. In this case, the legislature has
made the operation of the 12% rate effective January 1, 2006, contingent upon
a specified fact or condition. It leaves the entire operation or non-operation of
the 12% rate upon factual matters outside of the control of the executive. No
discretion would be exercised by the President. Thus, it is the ministerial duty
of the President to immediately impose the 12% rate upon the existence of any
of the conditions specified by Congress.
 GEROCHI VS. DEPARTMENT OF ENERGY, G.R. NO. 159796, JULY 17,
2007
Doctrine: Inherent Limitations and Taxation vs. Other Forms of Exactions,
Police Power

Facts:
The Congress enacted Republic Act No. 9136 or the Electric Power
Industry Act of 2001 or the EPIRA Law on June 8, 2001. The petitioners in this
case are Romeo P. Gerochi, Katulong ng Bayan, and the Environmentalist
Consumers Network, files to assail the validity of Section 34 of the said law for
being an undue delegation of the power of taxation. Petitioners contest the
constitutionality of the EPIRA, stating that the imposition of the universal
charge on all end-users is oppressive and confiscatory and amounts to taxation
without representation for not giving the consumers a chance to be heard and
represented. According to Section 34 of the EPIRA law, it provides for the
imposition of a universal charge to all electricity end users after a period of one
year after the effectivity of the EPIRA Law. The universal charge under this law
that will be collected would serve as a payment for government debts,
missionary electrification, equalization of taxes and royalties applied to
renewable and imported energy, environmental charge and among others, for
being an undue delegation of the power of taxation.

ISSUE:
1. Whether or not the Universal Charge imposed under Section 34 of the
EPIRA law is a tax;

2. Whether or not there is an undue delegation of legislative power to tax on

the part of the ERC.
RULING:

1. No. The Supreme Court said that the Universal Charge is not a tax, the
provision of the law that is being contested upon is a valid exercise of
police power that in its regular dimension, is invoked. Such can be
deduced from section 34 which enumerates the purposes for which the
Universal Charge is imposed and which can amply discern as regulatory
in character.The purpose in Section 34, states that it can be gleaned that
the assailed Universal Charge is not a tax, but it is an exaction in the
exercise of the State’s police power and public welfare can be promoted.

2. No. The Supreme Court said that there is undue delegation of legislative
power to the ERC. The Supreme Court said that the principle of
separation of powers ordains that each of the three branches of
government has exclusive cognizance of and is supreme in matters
falling within its own constitutionally allocated sphere. It applied the
principle of non-delegation of powers and potestas delegatanon delegari
potest (what has been delegated cannot be delegated). This is based on
the ethical principle that such delegated power constitutes not only a
right but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening
mind of another.

Under the first test, the law must be complete in all its terms and conditions
when it leaves the legislature such that when it reaches the delegate, the only
thing he will have to do is to enforce it. The second test mandates adequate
guidelines or limitations in the law to determine the boundaries of the
delegate's authority and prevent the delegation from running riot. The Court
finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34
thereof, is complete in all its essential terms and conditions, and that it
contains sufficient standards.
1st test - Although Sec. 34 of the EPIRA merely provides that within one (1)
year from the effectivity thereof, a Universal Charge to be determined, fixed and
approved by the ERC, shall be imposed on all electricity end-users, and
therefore, does not state the specific amount to be paid as Universal Charge,
the amount nevertheless is made certain by the legislative parameters provided
in the law itself. Moreover, contrary to the petitioner’s contention, the ERC
does not enjoy a wide latitude of discretion in the determination of the
Universal Charge. Thus, the law is complete and passes the first test for valid
delegation of legislative power.
2nd test - Provisions of the EPIRA such as, among others, to ensure the total
electrification of the country and the quality, reliability, security and
affordability of the supply of electric power and watershed rehabilitation and
management meet the requirements for valid delegation, as they provide the
limitations on the ERCs power to formulate the IRR. These are sufficient
standards. From the foregoing disquisitions, we therefore hold that there is no
undue delegation of legislative power to the ERC. Petitioners failed to pursue in
their Memorandum the contention in the Complaint that the imposition of the
Universal Charge on all end-users is oppressive and confiscatory, and amounts
to taxation without representation. Hence, such contention is deemed waived
or abandoned. Moreover, the determination of whether or not a tax is excessive,
oppressive or confiscatory is an issue which essentially involves questions of
fact, and thus, this Court is precluded from reviewing the same. Finally, every
law has in its favor the presumption of constitutionality, and to justify its
nullification, there must be a clear and unequivocal breach of the Constitution
and not one that is doubtful, speculative, or argumentative. Indubitably,
petitioners failed to overcome this presumption in favor of the EPIRA. We find
no clear violation of the Constitution which would warrant a pronouncement
that Sec. 34 of the EPIRA and Rule18 of its IRR are unconstitutional and void.
AMERICAN BIBLE SOCIETY VS. CITY OF MANILA, G.R. NO. L-9637, APRIL
30, 1957

FACTS:
The American Bible Society is a foreign, non-stock, religious and
missionary corporation duly registered and doing business in the Philippines
through the Philippine Agency established in Manila in November 1898. The
American Bible Society has been distributing and selling bibles and/or gospel
portions throughout the Philippines translating the Bibles into several
Philippine dialects. The City Treasurer of Manila informed the American Bible
Society that it violated two ordinances (2529 and 3000) as it has conducted
business of general merchandise without the necessary Mayor’s Permit and
municipal license within three days together with the compromise. To avoid the
closure of their business, they paid under protest.
The American bible society filed a complaint, questioning the
constitutionality and legality of the Ordinances (2529 and 3000), and prayed
that a refund of the payment be made in the City of Manila. The American
Bible Society contended that they were not required to pay for any license fee
or sales tax since 1899 and that it never made any profit from the sale of its
bibles.
The City of Manila prayed that the complaint be dismissed and it
reiterated that the constitutionality of the Ordinances is in question. The Trial
Court dismissed the complaint for lack of merit and the American Bible Society
appealed to the Court of Appeals and it certified the case to the Supreme Court
for the reason that the errors assigned to the lower court are only questions of
law.

ISSUE:
 Whether or not there will be an impairment of the free exercise and
enjoyment of its religious profession and worship if the City of Manila will
require American Bible Society to pay license fee?

RULING:
Yes. The Supreme Court said that the constitutional guaranty to free
exercise and enjoyment of religious profession and worship carries with it the
right to disseminate religious information. Any restraints of such right can only
be justified like other restraints of the freedom of expression on the ground
that there is a clear and present danger of any of the substantive evil which the
State has the right to prevent.
In the case at bar, the price asked for the bibles and other religious
pamphlets was in some instances is a little bit higher than the actual cost of
the same but this cannot mean that the appellant was engaged in the business
or occupation of selling the said merchandise for profit. For this reason, the
Supreme Court believe that the Ordinance No. 2529 of the City of Manila
required the payment of the license fee cannot be applied to the appellant, and
for doing so it would impair for the free exercise and enjoyment of its religious
profession and worship as well as its rights of dissemination of religious beliefs.
As to the Ordinance No. 3000, it requires the obtention of the Mayor’s
Permit before any person can engage in any of the business, trades or
occupations enumerated therein. The Supreme Court do not find that it
imposes any charge upon the enjoyment of a right granted by the Constitution,
nor the tax exercise of religious practices. But the City of Manila is powerless
on license or tax the business of plaintiff society. The Supreme Court is also
inapplicable to said business, trade or occupation of the plaintiff.
 Tolentino vs Sec of Finance, GR No. 115455, 25 Aug 1994

Facts:
A petition was filed declaring RA no 7716 or the Expanded Value-added tax
law unconstitutional.
Grounds - The Philippine Press Institute, Inc. (PPI) contends that by removing
the exemption of the press from the VAT while maintaining those granted to
others, the law discriminates against the press. At any rate, it is averred, “even
nondiscriminatory taxation of constitutionally guaranteed freedom is
unconstitutional”, citing in support of the case of Murdock v. Pennsylvania.
The petitioner cites the violation of RA 7716 in that it violates the rule that
taxes should be uniform and equitable.

ISSUE:

Whether or not, based on the aforementioned grounds of the petitioners, the

Expanded Value-Added Tax Law should be declared unconstitutional.
Ruling:
No. Equality and uniformity of taxation mean that all taxable articles or kinds
of property of the same class be taxed at the same rate. The taxing power has
the authority to make reasonable and natural classifications for purposes of
taxation. To satisfy this requirement it is enough that the statute or ordinance
applies equally to all persons, firms, and corporations placed in similar
situation. Furthermore, the Constitution does not really prohibit the imposition
of indirect taxes which, like the VAT, are regressive. What it simply provides is
that Congress shall “evolve a progressive system of taxation.” The
constitutional provision has been interpreted to mean simply that “direct taxes
are to be preferred and as much as possible, indirect taxes should be
minimized.” The mandate to Congress is not to prescribe, but to evolve, a
progressive tax system.
CREBA vs. Sec. Romulo, GR No. 160756, 9 March 2010
 PAGCOR vs. BIR, GR No. 172087, 15 March 2011

DOCTRINE: Exemption from corporate income tax and VAT via R.A. 9337 of
Government-Owned and Controlled Corporations (GOCCs)

FACTS:
PAGCOR was created pursuant to P.D. No. 1067-A, simultaneous to its
creation, P.D. No. 1067-B was issued exempting PAGCOR from payment of any
type of tax, except of franchise tax of 5% of the gross revenue. Thereafter, P.D.
No. 1399 was issued expanding the scope of PAGCOR’s exemption.
To consolidate the laws pertaining to the franchise and powers of PAGCOR,
P.D. No. 1869 was then issued. PAGCOR’s tax exemption was removed after a
few years through P.D. No. 1931, but it was then again later restored by Letter
of Instruction No. 1430. Years after, R.A. No. 8424, otherwise known as the
National Internal Revenue Code of 1997 took effect. Sec. 27 of R.A. No. 8424
provides that government-owned and controlled corporations (GOCCs) shall
pay corporate income tax, except PAGCOR, GSIS, SSS, PHIC, and PCSO.
With the enaction of R.A. No. 9337, certain sections of the said Code were
amended. The particular amendment that is at issue in this case is Sec. 1 of
R.A. No. 9337, which amended Sec. 27 of R.A. No. 8424 by excluding PAGCOR
from the enumeration of GOCCs that are exempt from payment of corporate
income tax.
Various groups came to assail the validity and constitutionality of R.A. No.
9337, particularly:
Sec. 4, 5, and 6 were alleged to be violative of Sec. 28 (2), Art. VI of the
Constitution, which section vests in Congress the exclusive authority to fix the
rate of taxes, and a couple of other provisions from the Constitution (*no longer
included since it is irrelevant to the subject). The Court dismissed all petitions
and upheld the constitutionality of R.A. No. 9337. BIR then issued Revenue
Regulations (RR) No. 16-2005, specifically identifying PAGCOR as one of the
franchises subject to 10% VAT imposed under Sec. 108 of the NIR code of
1997, as amended by R.A. No. 9337.
These instances prompted the present petition by PAGCOR.

ISSUE:
Whether or not PAGCOR is still exempt from corporate income tax and VAT
with the enactment of R.A. No. 9337.

RULING:
No. Under Sec. 1 of R.A. 9337, PAGCOR is no longer exempted from corporate
income tax as it has been effectively omitted from the list of GOCCs that are
exempt from it. Taxation is the rule and exemption is the exception. The
burden of proof rests upon the party claiming exemption to prove that it is
covered by the exemption so claimed. Exemptions must be shown to exist
clearly and categorically, and supported by clear legal provision. In this case,
PAGCOR failed to prove that it is still exempt from the payment of corporate
income tax, considering that Sec. 1 of R.A. No. 9337 amended Sec. 27 © of the
NIR code of 1997 by omitting PAGCOR from exemption.

The legislative intent, as shown by the discussions in the Bicameral Conference

Meeting, is to require PAGCOR to pay corporate income tax; hence, the
omission or removal of PAGCOR from exemption from the payment of corporate
income tax. 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 unius est exclusio alterius. Thus,
the express mention of the GOCCs exempted from payment of corporate
income tax excludes all others. Not being excepted, petitioner PAGCOR
must be regarded as coming within the purview of the general rule that
GOCCs shall pay corporate income tax.
Anent the validity of RR No. 16-2005, the Court holds that the provision
subjecting PAGCOR to 10% VAT is invalid for being contrary to R.A. No. 9337.
Nowhere in R.A. No. 9337 is it provided that petitioner can be subjected to
VAT. R.A. No. 9337 is clear only as to the removal of petitioner's exemption
from the payment of corporate income tax, which was already addressed above
by this Court.
As pointed out by the OSG, R.A. No. 9337 itself exempts petitioner from VAT
pursuant to Section 7 (k) thereof, which reads:
Sec. 7. Section 109 of the same Code, as amended, is hereby further amended
to read as follows:
“Section 109. Exempt Transactions. - (1) Subject to the provisions of
Subsection (2) hereof, the following transactions shall be exempt from the
value-added tax:
(k) Transactions which are exempt under international agreements to which
the Philippines is a signatory or under special laws, except Presidential Decree
No. 529.37”

Petitioner is exempt from the payment of VAT, because PAGCOR’s

charter, P.D. No. 1869, is a special law that grants petitioner exemption
from taxes.

Indeed, by extending the exemption to entities or individuals dealing with

PAGCOR, the legislature clearly granted exemption also from indirect taxes. It
must be noted that the indirect tax of VAT, as in the instant case, can be
shifted or passed to the buyer, transferee, or lessee of the goods, properties, or
services subject to VAT. Thus, by extending the tax exemption to entities or
individuals dealing with PAGCOR in casino operations, it is exempting
PAGCOR from being liable to indirect taxes.
The manner of charging VAT does not make PAGCOR liable to said tax.
It is true that VAT can either be incorporated in the value of the goods,
properties, or services sold or leased, in which case it is computed as 1/11 of
such value, or charged as an additional 10% to the value. Verily, the seller or
lessor has the option to follow either way in charging its clients and customer.
In the instant case, Acesite followed the latter method, that is, charging an
additional 10% of the gross sales and rentals. Be that as it may, the use of
either method, and in particular, the first method, does not denigrate the fact
that PAGCOR is exempt from an indirect tax, like VAT.

It is settled rule that in case of discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic law prevails, because the
said rule or regulation cannot go beyond the terms and provisions of the basic
law. RR No. 16-2005, therefore, cannot go beyond the provisions of R.A. No.
9337. Since PAGCOR is exempt from VAT under R.A. No. 9337, the BIR
exceeded its authority in subjecting PAGCOR to 10% VAT under RR No.
16-2005; hence, the said regulatory provision is hereby nullified.
 CIR vs. CA, YMCA, G.R. NO. 123043
G.R. No. 124043, October 14, 1998

DOCTRINE: Exemption of non-stock, non-profit educational institutions from

taxes on its properties and income

FACTS:
Young Men’s Christian Association of the Philippines, Inc. (YMCA) is a non-
stock, non-profit institution, which conducts various programs and activities
that are beneficial to the public, especially the young people, pursuant to its
religious, educational and charitable objectives.
YMCA, among others, earned an income from the leasing out of a portion of its
premises to small shop owners, like restaurants and canteen operators and
parking fees collected from non-members. The Commissioner of internal
revenue (CIR) issued an assessment for deficiency income tax, deficiency
expanded withholding taxes on rentals and professional fees and deficiency
withholding tax on wages, claiming that it should be taxed.
YMCA protested the assessment, but CIR denied the claims of YMCA
considering that it was not engaged in the business of operating or contracting
parking lot as it is only for members with stickers. Adding also that the rentals
and parking fees were only enough to cover the costs of operation and
maintenance (of which they did not even gain profit from). YMCA also invoked
Sec. 28 (3), Art. VI of the Constitution, which exempts charitable institutions
from the payment, not only of property taxes, but also of income tax from any
source.

ISSUE:
Whether or not the rental income of YMCA from its real estate subject to tax.

RULING:
No. CIR argues that while the income received by the organizations enumerated
in Sec. 27 of the NIRC is, as a rule, exempted from the payment of tax "in
respect to income received by them as such," the exemption does not apply to
income derived "from any of their properties, real or personal, or from any of
their activities conducted for profit, regardless of the disposition made of such
income"

Petitioner adds that "rental income derived by a tax-exempt organization from

the lease of its properties, real or personal, is not, therefore, exempt from
income taxation, even if such income is exclusively used for the
accomplishment of its objectives."

Because taxes are the lifeblood of the nation, the Court has always applied
the doctrine of strict in interpretation in construing tax exemptions.
Furthermore, a claim of statutory exemption from taxation should be manifest
and unmistakable from the language of the law on which it is based. Thus, the
claimed exemption "must expressly be granted in a statute stated in a language
too clear to be mistaken."

In the instant case, the exemption claimed by the YMCA is expressly disallowed
by the very wording of the last paragraph of then Sec. 27 of the NIRC which
mandates that the income of exempt organizations (such as the YMCA) from
any of their properties, real or personal, be subject to the tax imposed by the
same Code. Because the last paragraph of said section unequivocally subjects
to tax the rent income of the YMCA from its real property, the Court is duty-
bound to abide strictly by its literal meaning and to refrain from resorting to
any convoluted attempt at construction. It is axiomatic that where the
language of the law is clear and unambiguous, its express terms must be
applied.
As for the invoked constitutional provisions, the debates, interpellations
and expressions of opinion of the framers of the Constitution reveal their intent
which, in turn, may have guided the people in ratifying the Charter. Such
intent must be effectuated.

Accordingly, Justice Hilario G. Davide, Jr., a former constitutional

commissioner, who is now a member of this Court, stressed during the
Concom debates that "what is exempted is not the institution itself; those
exempted from real estate taxes are lands, buildings and improvements
actually, directly and exclusively used for religious, charitable or educational
purposes." Father Joaquin G. Bernas adhered to the same view that the
exemption created by said provision pertained only to property taxes. In his
treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that "the tax
exemption covers property taxes only." Indeed, the income tax exemption
claimed by private respondent finds no basis in Article VI, Section 26, par. 3 of
the Constitution.
With that, this court reiterates that YMCA is exempt from the payment of
property tax, but not income tax on the rentals from its property. The
bare allegation alone that it is a non-stock, non-profit educational
institution is insufficient to justify its exemption from the payment of
income tax.
Lastly, for the question of whether YMCA is an educational institution within
the purview of Art. XIV, Sec. 4, par. 3 of the Constitution. The Court rules that
it is not. The term "educational institution" or "institution of learning" has
acquired a well-known technical meaning, of which the members of the
Constitutional Commission are deemed cognizant.
Furthermore, under the Education Act of 1982, even non-formal education is
understood to be school-based and "private auspices such as foundations and
civic-spirited organizations" are ruled out. It is settled that the term
"educational institution," when used in laws granting tax exemptions, refers to
a "school seminary, college or educational establishment" Therefore, the private
respondent cannot be deemed one of the educational institutions covered by
the constitutional provision under consideration.

Moreover, without conceding that Private Respondent YMCA is an educational

institution, the Court also notes that the former did not submit proof of the
proportionate amount of the subject income that was actually, directly and
exclusively used for educational purposes. Art. XIII, Sec. 5 of the YMCA by-
laws, which formed part of the evidence submitted, is patently insufficient,
since the same merely signified that "the net income derived from the rentals of
the commercial buildings shall be apportioned to the Federation and Member
Associations as the National Board may decide." In sum, the Court finds no
basis for granting the YMCA exemption from income tax under the
constitutional provision invoked
 CIR VS. DLSU, GR NO 196596, 9 Nov 2016

FACTS: On 2004, the BIR assessed DLSU the following deficiency taxes:
(1) income tax on rental earnings from restaurants and bookstores operating
within the campus;
(2) value-added tax (VAT) on business income; and
(3) documentary stamp tax on loans and lease contracts.

DLSU protested and filed a petition for review with the CTA invoking Art. XIV,
Sec. 4 (3) of the Constitution:
(3) All revenues and assets of non-stock, non-profit educational institutions
used actually, directly, and exclusively for educational purposes shall be
exempt from taxes and duties.

The Commissioner posits that a tax-exempt organization like DLSU is exempt

only from property tax but not from income tax on the rentals earned from
property. Thus, its income from the leases of its real properties is not exempt
from taxation even if the income would be used for educational purposes.

ISSUE: WON DLSU's income, revenues, and assets as a non-stock, non-profit

educational institution proved to have been used actually, directly, and
exclusively for educational purposes are exempt from duties and taxes

RULING: Yes. They are exempt from duties and taxes.

Art. XIV, Sec. 4 (3) of the Constitution refers to two kinds of educational
institutions: (1) non-stock, non-profit educational institutions and (2)
proprietary educational institutions. DLSU falls under the first category.
The requisites for availing the tax exemption under Art. XIV, Sec. 4 (3) are:
(1) the taxpayer falls under the classification non-stock, non-profit educational
institution; and
(2) the income it seeks to be exempted from taxation is used actually, directly,
and exclusively for educational purposes.
This tax-exemption is not subject to limitations imposed by law. This was seen
as beneficial to students who may otherwise be charged unreasonable tuition
fees if not for the tax exemption extended to all revenues and assets of non-
stock, non-profit educational institutions.

The above provision does not require that the revenues and income must have
been sourced from educational activities. So long as the revenues and income
are used actually, directly, and exclusively for educational purposes, then said
revenues and income shall be exempt from taxes and duties.
La Sallian Educational Innovators Foundation vs. CIR, GR No. 202792 27
Feb 2019

FACTS: Respondent CIR issued two (2) Assessment Notices with demand
letters against petitioner La Sallian for deficiency income tax. CIR alleged that
it has already lost its tax-exempt status because it may be a non-stock entity
but it is also a profit-oriented organization wherein allegedly, majority of its
activities are generating huge amount of profit from tuition fees.
La Sallian protested invoking Art. XIV, Sec. 4 (3) of the Constitution:
(3) All revenues and assets of non-stock, non-profit educational institutions
used actually, directly, and exclusively for educational purposes shall be
exempt from taxes and duties.

ISSUE: WON La Sallian has lost its tax-exempt status under the 1987
Constitution

RULING: La Sallian has NOT lost its tax-exempt status under the 1987
Constitution.
La Sallian has fulfilled the requisites for availing the tax exemption under Art.
XIV, Sec. 4 (3), to wit:
(1) the taxpayer falls under the classification non-stock, non-profit educational
institution; and
(2) the income it seeks to be exempted from taxation is used actually, directly,
and exclusively for educational purposes.
Also, petitioner has no capital divided into shares and members of the Board of
Trustees do not receive any compensation for the performance of their duties.
The tax exemption was seen as beneficial to students who may otherwise be
charged unreasonable tuition fees if not for the tax exemption extended to all
revenues and assets of non-stock, non-profit educational institutions (CIR v.
DLSU).
The tax exempt status of La Sallian under the 1987 Constitution is clear.
 G.R. No. L-39086 June 15, 1988
ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner, vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA,
Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra;
HEIRS OF PATERNO MILLARE, respondents.

Facts:
Petitioner filed a complaint in the court a quo to annul and declare void the “Notice of
Seizure’ and the “Notice of Sale” of its lot and building located at Bangued, Abra, for
non-payment of real estate taxes and penalties. The “Notice of Sale” was caused to be
served upon the petitioner by the respondent treasurers for the sale at public auction
of said college lot and building, which sale was held on the same date. Dr. Paterno
Millare, then Municipal Mayor of Bangued, Abra, offered the highest bid, which was
duly accepted.
The respondent filed through counsel a motion to dismiss the complaint. Nonetheless,
the trial court disagreed because of the use of the second floor by the Director of
petitioner school for residential purposes. He thus ruled for the government and
rendered the assailed decision. Hence petitioner instead availed of the instant petition
for review on certiorari with prayer for preliminary injunction before the Supreme
Court. Adrian Avilado Antazo.

Issue:
Whether the Educational Institution Properties, which is not exclusively used for
educational purposes, is not eligible for tax exemption.

Held:
Yes, Under the 1935 Constitution, the trial court correctly arrived at the conclusion
that the school building as well as the lot where it is built, should be taxed, not
because the second floor of the same is being used by the Director and his family for
residential purposes, but because the first floor thereof is being used for commercial
purposes.
However, since only a portion is used for purposes of commerce, it is only fair that half
of the assessed tax be returned to the school involved.
Moreover, the exemption in favor of property used exclusively for charitable or
educational purposes is ‘not limited to property actually indispensable’ therefor but
extends to facilities, which are incidental to and reasonably necessary for the
accomplishment of said purposes.
But it must be stressed however, that while the court allows a more liberal and non-
restrictive interpretation of the phrase “exclusively used for educational purposes”,
reasonable emphasis has always been made that exemption extends to facilities which
are incidental to and reasonably necessary for the accomplishment of the main
purposes.
Otherwise stated, the use of the school building or lot for commercial purposes is
neither contemplated by law, nor by jurisprudence, The lease of the first floor thereof
to the Northern Marketing Corporation cannot by any stretch of the imagination be
considered incidental to the purpose of education.
 G.R. No. 144104 June 29, 2004
LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO
P. ROSAS, in his capacity as City Assessor of Quezon City, respondents.

FACTS: Petitioner is a non-stock, non-profit entity established by virtue of PD No.

1823, seeks exemption from real property taxes when the City Assessor issued Tax
Declarations for the land and the hospital building. Petitioner predicted on its claim
that it is a charitable institution. The request was denied, and a petition hereafter filed
before the Local Board of Assessment Appeals of Quezon City (QC-LBAA) for reversal of
the resolution of the City Assessor. Petitioner alleged that as a charitable institution, is
exempted from real property taxes under Sec 28(3) Art VI of the Constitution. QC-
LBAA dismissed the petition, and the decision was likewise affirmed on appeal by the
Central Board of Assessment Appeals of Quezon City. The Court of Appeals affirmed
the judgment of the CBAA.

ISSUE:
1. Whether or not petitioner is a charitable institution within the context of PD 1823
and the 1973 and 1987 Constitution and Section 234(b) of RA 7160.
2. Whether or not petitioner is exempted from real property taxes.

RULING: 1. Yes. The Court hold that the petitioner is a charitable institution within
the context of the 1973 and 1987 Constitution. Under PD 1823, the petitioner is a
non-profit and non-stock corporation, which, subject to the provisions of the decree, is
to be administered by the Office of the President with the Ministry of Health and the
Ministry of Human Settlements. The purpose for which it was created was to render
medical services to the public in general including those who are poor and also the
rich, and become a subject of charity. Under PD 1823, petitioner is entitled to receive
donations, even if the gift or donation is in the form of subsidies granted by the
government.

2. Partly No. Under PD 1823, the lung center does not enjoy any property tax
exemption privileges for its real properties as well as the building constructed thereon.
The property tax exemption under Sec. 28(3), Art. VI of the Constitution of the
property taxes only. This provision was implanted by Sec.243 (b) of RA 7160.which
provides that in order to be entitled to the exemption, the lung center must be able to
prove that: it is a charitable institution and; its real properties are actually, directly
and exclusively used for charitable purpose.
Accordingly, the portions occupied by the hospital used for its patients are exempt
from real property taxes while those leased to private entities are not exempt from
such taxes.
 G.R. No. L-15270 September 30, 1961

JOSE V. HERRERA and ESTER OCHANGCO HERRERA, petitioners, vs. THE

QUEZON CITY BOARD OF ASSESSMENT APPEALS, respondent.

FACTS:

In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester
Ochangco Herrera to establish and operate the St. Catherine’s Hospital. In 1953, the
Herreras sent a letter to the Quezon City Assessor requesting exemption from payment
of real estate tax on the hospital, stating that the same was established for charitable
and humanitarian purposes and not for commercial gain. The exemption was granted
effective years 1953 to 1955. In 1955, however, the Assessor reclassified the properties
from “exempt” to “taxable” effective 1956, as it was ascertained that out of the 32 beds
in the hospital, 12 of which are for pay-patients. A school of midwifery is also operated
within premises of the hospital.

ISSUE: Whether St. Catherine’s is exempt from realty tax

RULING: Yes. The admission of pay-patients does not detract from the charitable
character of a hospital, if all its funds are devoted exclusively to the maintenance of
the institution as a public charity. The exemption extends to facilities, which are
incidental to and reasonably necessary for the accomplishment of said purpose – a
school for training nurses, nurses’ home, etc.
 G.R. Nos. 199802 and 208488

Cong. Hermilando Mandanas, et. al. vs. Exec. Sec. Paquito Ochoa, et. al.

Facts:
Congress enacted Republic Act No. 7160, otherwise known as Local
Government Code in order to guarantee the fiscal autonomy of the LGU by
having a share at the National Internal Revenue Taxes based on collection of
the third year preceding the current fiscal year by 40% and in event that the
National Government incurs unimaginable public sector debt.
The President shall make adjustments in internal revenue allotment of LGU not
less than 30% of the collection, in addition to the 30% internal revenue
allotment including the cost of devolved functions for essential public services.

Petitioners challenged the manner in which the just share in the national
taxes of the LGU has been computed.

Mandanas, et. al., alleges that certain collections (excise tax, VATs,
documentary stamp taxes) of National Internal Revenue Taxes has not included
in the base amounts for the computation of the Internal Revenue Allotment
(IRA) and such taxes should form part of the base from which the IRA should
be computed.

Garcia, et. al., seeks to mandate respondents to compute the just share
of the LGU based on all national taxes. The insertion of the phrase “internal
revenue” in between the phrase “national taxes” caused the diminution of the
base for determining the just share of the LGU and should be declared
unconstitutional.

The two cases were consolidated.

Issue:
Whether or not the existing shares of the LGU’s by virtue of the General
Appropriations Act (GAA) is consistent with the constitutional mandate of just
share to the LGUs?

Ruling:
No. Although the Congress has the power to make laws (in taxation), they
are still subject to limitations stated in the 1987 Constitution.

The phrase “national internal revenue taxes” in Section 284 is more

restrictive than the term “national taxes” provided in Section 6, Art. X of the
1987 Constitution.

The Constitution provides that national taxes be based from which the
just share of the LGU comes, and not national internal revenue taxes engulfed
in Section 284 of the Local Government Code. Congress shall not depart from
the words of the statute.

National taxes are those levied by the National Government, local taxes
are those levied by the LGUs. Within the phrase “national internal revenue
taxes”, included are all taxes enumerated in Section 21 of National Internal
Revenue Code, and exclusion of other national taxes (i.e. custom duties) from
the base for determining the just share contravenes the constitutional edict in
Section6, Art. X of the Constitution.
 G.R. Nos. 199802 and 208488

Cong. Hermilando Mandanas, et. al. vs. Exec. Sec. Paquito Ochoa, et. al.
(Motion for Reconsideration)

Facts:
Petitioners aver that the deletion of the phrase “internal revenue” in
between the phrase “national taxes” is an encroachment of the exclusive power
of Congress to determine the just share of the LGUs in national taxes.

Issue:
Whether the motion for reconsideration of the respondents be tenable.

Ruling:
The Constitution extended to Congress the power to determine, by law,
the just share, and not to determine the just share and the base amount other
than national taxes.

The construction of the respondents in Section 6, Art X of the Constitution can

lead Congress to change the base amount despite the Constitution having already
pegged it to national taxes. We should remember that between two possible
interpretations one of which will be free from constitutional infirmity and the other
tainted by such grave defect, the former is to be preferred. A construction that will
save rather than one that will affix the seal of doom certainly commends
itself. Moreover, it is a rule in statutory construction that every part of the law must be
interpreted with reference to the context, i.e., every part of the law must be considered
together with the other parts, and kept subservient to the general intent of the whole
enactment. The law must not be read in truncated parts; its provisions must be read
in relation to its entirety.
 PROGRESSIVE DEVELOPMENT CORPORATION vs. QUEZON CITY
G.R No. L-36081- 24 April 1989

Facts:
City Council of respondent Quezon City passed an ordinance known
as Market Code of QC, which imposed a 5% supervision fee on gross receipts
on rentals or lease of privately-owned market space in QC.

In case of failure of the owners of the market spaces to pay the tax for
three consecutive months, the City shall revoke the permit of the privately-
owned market to operate.
Petitioner Progressive Development Corporation, owner and operator
of a public market known as the "Farmers Market & Shopping Center" filed a
Petition for Prohibition with Preliminary Injunction against respondent before
the CFI of Rizal on the ground that the supervision fee or license tax
imposed by the above-mentioned ordinances is in reality a tax on income
which respondent may not impose, the same being expressly prohibited by
Republic Act No. 2264, as amended.

Respondent contended that it had authority to enact the questioned

ordinance, not having paid the supervision fee prescribed by Ordinance, it had
no personality to question, and was estopped from questioning

Petitioner alleged having paid under protest the five percent (5%) tax
under Ordinance No. 9236 moved for judgment on the pleadings.

TC dismissed the petition. Hence this petition.

Issue: Whether or not the supervision fee is an income tax or license fee.
Held: It is a license fee.

License fee is a legal concept distinguishable from tax: the former is

imposed in the exercise of police power primarily for purposes of regulation,
while the latter is imposed under the taxing power primarily for purposes of
raising revenues.

The SC held that the five percent (5%) tax imposed in Ordinance No.
9236 constitutes, not a tax on income, not a city income tax (as distinguished
from the national income tax imposed by the National Internal Revenue Code)
within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a
license tax or fee for the regulation of the business in which the
petitioner 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 regulation for the protection and
promotion of such public interest; the imposition must also bear a reasonable
relation to the probable expenses of regulation, taking into account not only
the costs of direct regulation but also its incidental consequences. 

In this case, the Farmers’ Market is a privately-owned market

established for the rendition of service to the general public. It warrants
close supervision and control by the City for the protection of the health of the
public by insuring the maintenance of sanitary conditions, prevention of fraud
upon the buying public, etc.

Since the purpose of the ordinance is primarily regulation and not

revenue generation, the tax is a license fee. The use of the gross amount of
stall rentals as basis for determining the collectible amount of license tax does
not, by itself, convert the license tax into a prohibited tax on income.

Such basis actually has a reasonable relationship to the probable costs

of regulation and supervision of Progressive’s kind of business, since ordinarily,
the higher the amount of rentals, the higher the volume of items sold.

The gross receipts from stall rentals have been used only as a basis for
computing the fees or taxes due respondent to cover the latter's administrative
expenses, i.e., for regulation and supervision of the sale of foodstuffs to the
public.

The use of the gross amount of stall rentals as basis for determining the
collectible amount of license tax, does not by itself, upon the one hand, convert
or render the license tax into a prohibited city tax on income.

The higher the volume of goods sold, the greater the extent and
frequency of supervision and inspection may be required in the interest of the
buying public.

Accordingly, the decision of the then Court of First Instance of Rizal,

Quezon City, Branch 18, is hereby AFFIRMED and the Court Resolved to
DENY the Petition for lack of merit.
 GEROCHI VS. DEPARTMENT OF ENERGY, G.R. NO. 159796, JULY 17,
2007
Doctrine: Inherent Limitations and Taxation vs. Other Forms of Exactions,
Police Power

Facts:
The Congress enacted Republic Act No. 9136 or the Electric Power
Industry Act of 2001 or the EPIRA Law on June 8, 2001. The petitioners in this
case are Romeo P. Gerochi, Katulong ng Bayan, and the Environmentalist
Consumers Network, files to assail the validity of Section 34 of the said law for
being an undue delegation of the power of taxation. Petitioners contest the
constitutionality of the EPIRA, stating that the imposition of the universal
charge on all end-users is oppressive and confiscatory and amounts to taxation
without representation for not giving the consumers a chance to be heard and
represented. According to Section 34 of the EPIRA law, it provides for the
imposition of a universal charge to all electricity end users after a period of one
year after the effectivity of the EPIRA Law. The universal charge under this law
that will be collected would serve as a payment for government debts,
missionary electrification, equalization of taxes and royalties applied to
renewable and imported energy, environmental charge and among others, for
being an undue delegation of the power of taxation.

ISSUE:
1. Whether or not the Universal Charge imposed under Section 34 of the
EPIRA law is a tax;

2. Whether or not there is an undue delegation of legislative power to tax on

the part of the ERC.
RULING:
1. No. The Supreme Court said that the Universal Charge is not a tax, the
provision of the law that is being contested upon is a valid exercise of
police power that in its regular dimension, is invoked. Such can be
deduced from section 34 which enumerates the purposes for which the
Universal Charge is imposed and which can amply discern as regulatory
in character.
The purpose in Section 34, states that it can be gleaned that the assailed
Universal Charge is not a tax, but it is an exaction in the exercise of the
State’s police power and public welfare can be promoted.

2. No. The Supreme Court said that there is undue delegation of legislative
power to the ERC. The Supreme Court said that the principle of
separation of powers ordains that each of the three branches of
government has exclusive cognizance of and is supreme in matters
falling within its own constitutionally allocated sphere. It applied the
principle of non-delegation of powers and potestas delegatanon delegari
potest (what has been delegated cannot be delegated). This is based on
the ethical principle that such delegated power constitutes not only a
right but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening
mind of another.

Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches the
delegate, the only thing he will have to do is to enforce it. The second test
mandates adequate guidelines or limitations in the law to determine the
boundaries of the delegate's authority and prevent the delegation from
running riot. The Court finds that the EPIRA, read and appreciated in its
entirety, in relation to Sec. 34 thereof, is complete in all its essential
terms and conditions, and that it contains sufficient standards.
 1st test - Although Sec. 34 of the EPIRA merely provides that
within one (1) year from the effectivity thereof, a Universal Charge to be
determined, fixed and approved by the ERC, shall be imposed on all
electricity end-users, and therefore, does not state the specific amount to
be paid as Universal Charge, the amount nevertheless is made certain by
the legislative parameters provided in the law itself. Moreover, contrary to
the petitioner’s contention, the ERC does not enjoy a wide latitude of
discretion in the determination of the Universal Charge. Thus, the law is
complete and passes the first test for valid delegation of legislative power.
2nd test - Provisions of the EPIRA such as, among others, to
ensure the total electrification of the country and the quality, reliability,
security and affordability of the supply of electric power and watershed
rehabilitation and management meet the requirements for valid
delegation, as they provide the limitations on the ERCs power to
formulate the IRR. These are sufficient standards. From the foregoing
disquisitions, we therefore hold that there is no undue delegation of
legislative power to the ERC. Petitioners failed to pursue in their
Memorandum the contention in the Complaint that the imposition of the
Universal Charge on all end-users is oppressive and confiscatory, and
amounts to taxation without representation. Hence, such contention is
deemed waived or abandoned. Moreover, the determination of whether or
not a tax is excessive, oppressive or confiscatory is an issue which
essentially involves questions of fact, and thus, this Court is precluded
from reviewing the same. Finally, every law has in its favor the
presumption of constitutionality, and to justify its nullification, there
must be a clear and unequivocal breach of the Constitution and not one
that is doubtful, speculative, or argumentative. Indubitably, petitioners
failed to overcome this presumption in favor of the EPIRA. We find no
clear violation of the Constitution which would warrant a pronouncement
that Sec. 34 of the EPIRA and Rule18 of its IRR are unconstitutional and
void.
 G.R. No. 173863 September 15, 2010
CHEVRON PHILIPPINES, INC. vs.
BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK
DEVELOPMENT CORPORATION

Facts:

Chevron Philippines, herein petitioner, is a domestic corporation which has

been supplying fuel to Nanox Philippines, a locator inside Clark Special
Economic zone.

On October 1, 2002, Clark Development Corporaion wrote a letter to Chevron

Philippines, informing them that a royalty of o.50 per liter shall be assessed on
its deliveries to Nanox Philippines effective August 1, 2002.
Claiming that nothing in the law authorizes CDC to impose royalty fees or any
fees based on a per unit measurement of any commodity sold within the
special economic zone, petitioner sent a letter to the officers of CDC, to protest
the assessment for royalty fees. Petitioner nevertheless paid the said fees under
protest.

Petitioner argues that CDC does not have any power to impose royalty fees on
sale of fuel inside the CSEZ on the basis of purely income generating functions
and its exclusive right to market and distribute goods inside the CSEZ. Such
imposition of royalty fees for revenue generating purposes would amount to a
tax, which the respondents have no power to impose. Petitioner stresses that
the royalty fee imposed by CDC is not regulatory in nature but a revenue
generating measure to increase its profits and to further enhance its exclusive
right to market and distribute fuel in CSEZ.
Issue: Whether or not Clark Development Corporation has the power to impose
the questioned royalty fees.

Ruling: Yes. In the case at bar, we hold that the subject royalty fee was
imposed primarily for regulatory purposes, and not for the generation of
income or profits as petitioner claims

The Policy Guidelines was issued, first and foremost, to ensure the safety,
security, and good condition of the petroleum fuel industry within the CSEZ.
The questioned royalty fees form part of the regulatory framework to ensure
"free flow or movement" of petroleum fuel to and from the CSEZ.

Ratio:

In distinguishing tax and regulation as a form of police power, the determining

factor is the purpose of the implemented measure. If the purpose is primarily to
raise revenue, then it will be deemed a tax even though the measure results in
some form of regulation. On the other hand, if the purpose is primarily to
regulate, then it is deemed a regulation and an exercise of the police power of
the state, even though incidentally, revenue is generated. Thus, in Gerochi v.
Department of Energy the Court stated:

The conservative and pivotal distinction between these two (2) powers
rests in the purpose for which the charge is made. If generation of revenue is
the primary purpose and regulation is merely incidental, the imposition is a
tax; but if regulation is the primary purpose, the fact that revenue is
incidentally raised does not make the imposition a tax.
 G.R. No. 189999 June 27, 2012
Angeles University Foundation vs City of Angeles

Facts:
Angeles University Foundation (AUF) is an educational institution established
on May 25, 1962 and was converted into a non-stock, non-profit education
foundation under the provisions of Republic Act (R.A.) No. 60554.
In August 2005, 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. Said office issued a
Building Permit Fee Assessment and an Order of Payment.
AUF wrote a letter to the city government requesting to reverse assessment,
they claimed that it is exempt from the payment of the building permit and
locational clearance fees.
Despite petitioner’s plea, however, respondents refused to issue the building
permits, so AUF paid the building permit fees but it did so under protest.

Respondent’s argument: Respondents asserted that the claim of petitioner

cannot be granted because its structures are not among those mentioned in
Sec. 209 of the National Building Code as exempted from the building permit
fee. Respondents argued that R.A. No. 6055 should be considered repealed on
the basis of Sec. 2104 of the National Building Code. Since the disputed
assessments are regulatory in nature, they are not taxes from which petitioner
is exempt.
Petitioner’s argument: Petitioner countered that the subject building permit
are being collected on the basis of Art. 244 of the Implementing Rules and
Regulations of the Local Government Code, which impositions are really taxes
considering that they are provided under the chapter on "Local Government
Taxation" in reference to the "revenue raising power" of local government units
(LGUs). In any case, petitioner pointed out that the Local Government Code of
1991 provides in Sec. 193 that non-stock and non-profit educational
institutions like petitioner retained the tax exemptions or incentives which
have been granted to them. Under Sec. 8 of R.A. No. 6055 and applicable
jurisprudence and DOJ rulings, petitioner is clearly exempt from the payment
of building permit fees.
Issue: Whether petitioner is exempt from the payment of building permit and
related fees imposed under the National Building Code.

Ruling:
Ruling: Building permit fees are not charges on property, they are not
impositions from which petitioner is exempt. Building permit fees are not
impositions on property but on the activity subject of government regulation.
While it may be argued that the fees relate to particular properties, i.e.,
buildings and structures, they are actually imposed on certain activities the
owner may conduct either to build such structures or to repair, alter, renovate
or demolish the same.

Ratio:
R.A. No. 6055 granted tax exemptions to educational institutions like petitioner
which converted to non-stock, non-profit educational foundations. Section 8 of
said law provides that the Foundation shall be exempt from the payment of all
taxes, import duties, assessments, and other charges imposed by the
Government on all income derived from or property, real or personal, used
exclusively for the educational activities of the Foundation.
On February 19, 1977, Presidential Decree (P.D.) No. 1096 was issued adopting
the National Building Code of the Philippines. The said Code requires every
person, firm or corporation, including any agency or instrumentality of the
government to obtain a building permit for any construction, alteration or
repair of any building or structure.
Exempted from the payment of building permit fees are:
(1) public buildings and
(2) traditional indigenous family dwellings.21 Not being expressly included in
the enumeration of structures to which the building permit fees do not apply,
petitioner’s claim for exemption rests solely on its interpretation of the term
"other charges imposed by the National Government" in the tax exemption
clause of R.A. No. 6055.
A "charge" is broadly defined as the "price of, or rate for, something,"
while the word "fee" pertains to a "charge fixed by law for services of public
officers or for use of a privilege under control of government." As used in the
Local Government Code of 1991, charges refers to pecuniary liability, as rents
or fees against persons or property, while fee means a charge fixed by law or
ordinance for the regulation or inspection of a business or activity.
That "charges" in its ordinary meaning appears to be a general term which
could cover a specific "fee" does not support petitioner’s position that building
permit fees are among those "other charges" from which it was expressly
exempted.
 CIR vs. Puregold Duty Free, Inc. G.R. No. 202789, June 22, 2015

Doctrine:
A tax amnesty is a general pardon or the intentional overlooking by the State of
its authority to impose penalties on persons otherwise guilty of violation of a
tax law. It partakes of an absolute waiver by the government of its right to
collect what is due it and to give tax evaders who wish to relent a chance to
start with a clean slate.

Facts:
As an enterprise located within Clark Special Economic Zone (CSEZ) and
registered with the CDC, Puregold had been issued Certificate of Tax
Exemption pursuant to Sec. 5 (EO) 80, under RA 7227, otherwise known as the
"Bases Conversion and Development Act of 1992."
Sec. 12 of RA 7227 provides duty-free importations and exemptions of
businesses within the Subic Special Economic Zone (SSEZ) from local and
national taxes.
On July 25, 2005, in Coconut Oil Refiners v. Torre, however, this Court
annulled the adverted Sec. 5 of EO 80, in effect withdrawing the preferential
tax treatment heretofore enjoyed by all businesses located in the CSEZ.
Deputy Commissioner of the (BIR) issued a Preliminary Assessment Notice
regarding unpaid VAT and excise tax on wines, liquors and tobacco products
imported by Puregold. Pending the resolution of Puregold's protest, Congress
enacted RA 9399, specifically to grant a tax amnesty to business enterprises
affected by this Court's rulings in John Hay People's Coalition v. Lim and
Coconut Oil Refiners.
Puregold availed itself of the tax amnesty under RA 9399. Nonetheless,
Puregold received a formal letter of demand from the BIR for the payment of
(P2,780,610,174.51), supposedly representing deficiency VAT and excise taxes
on its importations of alcohol and tobacco products.
Issue:
Whether RA 9399 grants amnesty from liability to pay VAT and excise tax
under Section 131 of the 1997 NIRC? Yes.

Held:
The issue on the coverage and applicability of RA 9399 to Puregold has already
been addressed and disposed of by the CTA when it pointed out that RA 9399
covers all applicable tax and duty liabilities, inclusive of fines, penalties,
interests and other additions thereto. Consequently, the government, through
the enactment of RA 9399, has expressed its intention to waive its right to
collect taxes, which in this case is the tax imposed under Sec. 131(A) of the
1997 NIRC.
It is worthy to note that Sec. 1 of RA 9399 explicitly and unequivocally
mentions businesses within the CSEZ as among the beneficiaries of the tax
amnesty provided by RA 9399.
Puregold enjoyed duty free importations and exemptions from local and
national taxes under EO 80. Hence, Puregold was repeatedly issued tax
exemption certificates and the BIR itself did not assess any deficiency taxes
from the time the 1997 NIRC took effect in January 1998.
Furthermore, a tax amnesty, by nature, is designed to be a general grant of
clemency and the only exceptions are those specifically mentioned.
A tax amnesty is a general pardon or the intentional overlooking by the State of
its authority to impose penalties on persons otherwise guilty of violation of a
tax law. It partakes of an absolute waiver by the government of its right to
collect what is due it and to give tax evaders who wish to relent a chance to
start with a clean slate.
It is significant to note that there is nothing in Sec. 1 of RA 9399 that excludes
Sec. 131(A) of the 1997 NIRC from the amnesty. In fact, there is no mention at
all of any tax or duty imposed by the 1997 NIRC as being specifically excluded
from the coverage of the tax amnesty.
Hence, not being excepted, the taxes imposed under Sec. 131(A) of the 1997
NIRC must be regarded as coming within the purview of the general amnesty
granted by RA 9399, expressed in the maxim: exception firmat regulam in
casibus non exceptis.