CASE
DOCTRINES IN TAXATION LAW 1
(part I)
(part I)
Prepared
by: Glenn Rey Anino
University
of Cebu- College of Law
Manila
Memorial Park, Inc. vs. Secretary of the Department of Social Welfare
and Development, 711 SCRA 302 , December 03, 2013
Constitutional
Law; Courts; Judicial Review; Requisites of Judicial Review.—When
the constitutionality of a law is put in issue, judicial review may
be availed of only if the following requisites concur: “(1) the
existence of an actual and appropriate case; (2) the existence of
personal and substantial interest on the part of the party raising
the [question of constitutionality]; (3) recourse to judicial review
is made at the earliest opportunity; and (4) the [question of
constitutionality] is the lis mota of the case.”
Same;
Same; Same; An actual case or controversy exists when there is “a
conflict of legal rights” or “an assertion of opposite legal
claims susceptible of judicial resolution.”—An actual case or
controversy exists when there is “a conflict of legal rights” or
“an assertion of opposite legal claims susceptible of judicial
resolution.” The Petition must therefore show that “the
governmental act being challenged has a direct adverse effect on the
individual challenging it.” In this case, the tax deduction scheme
challenged by petitioners has a direct adverse effect on them. Thus,
it cannot be denied that there exists an actual case or controversy.
Taxation;
Tax Deductions; Police Power; Thus, even if the current law, through
its tax deduction scheme (which abandoned the tax credit scheme under
the previous law), does not provide for a peso for peso reimbursement
of the 20% discount given by private establishments, no
constitutional infirmity obtains because, being a valid exercise of
police power, payment of just compensation is not warranted.—The
present case, thus, affords an opportunity for us to clarify the
above-quoted statements in Central Luzon Drug Corporation, 456 SCRA
414 (2005) and Carlos Superdrug Corporation, 526 SCRA 130 (2007).
First, we note that the above-quoted disquisition on eminent domain
in Central Luzon Drug Corporation is obiter dicta and, thus, not
binding precedent. As stated earlier, in Central Luzon Drug
Corporation, we ruled that the BIR acted ultra vires when it
effectively treated the 20% discount as a tax deduction, under
Sections 2.i and 4 of RR No. 2-94, despite the clear wording of the
previous law that the same should be treated as a tax credit. We
were, therefore, not confronted in that case with the issue as to
whether the 20% discount is an exercise of police power or eminent
domain. Second, although we adverted to Central Luzon Drug
Corporation in our ruling in Carlos Superdrug Corporation, this
referred only to preliminary matters. A fair reading of Carlos
Superdrug Corporation would show that we categorically ruled therein
that the 20% discount is a valid exercise of police power. Thus, even
if the current law, through its tax deduction scheme (which abandoned
the tax credit scheme under the previous law), does not provide for a
peso for peso reimbursement of the 20% discount given by private
establishments, no constitutional infirmity obtains because, being a
valid exercise of police power, payment of just compensation is not
warranted. We have carefully reviewed the basis of our ruling in
Carlos Superdrug Corporation and we find no cogent reason to
overturn, modify or abandon it. We also note that petitioners’
arguments are a mere reiteration of those raised and resolved in
Carlos Superdrug Corporation. Thus, we sustain Carlos Superdrug
Corporation.
Police
Power; Eminent Domain; “Police Power” and “Eminent Domain,”
Distinguished.—Police power is the inherent power of the State
to regulate or to restrain the use of liberty and property for public
welfare. The only limitation is that the restriction imposed should
be reasonable, not oppressive. In other words, to be a valid exercise
of police power, it must have a lawful subject or objective and a
lawful method of accomplishing the goal. Under the police power of
the State, “property rights of individuals may be subjected to
restraints and burdens in order to fulfill the objectives of the
government.” The State “may interfere with personal liberty,
property, lawful businesses and occupations to promote the general
welfare [as long as] the interference [is] reasonable and not
arbitrary.” Eminent domain, on the other hand, is the inherent
power of the State to take or appropriate private property for public
use. The Constitution, however, requires that private property shall
not be taken without due process of law and the payment of just
compensation.
Same;
In the exercise of police power, a property right is impaired by
regulation, or the use of property is merely prohibited, regulated or
restricted to promote public welfare. In such cases, there is no
compensable taking, hence, payment of just compensation is not
required.—In the exercise of police power, a property right is
impaired by regulation, or the use of property is merely prohibited,
regulated or restricted to promote public welfare. In such cases,
there is no compensable taking, hence, payment of just compensation
is not required. Examples of these regulations are property condemned
for being noxious or intended for noxious purposes (e.g., a building
on the verge of collapse to be demolished for public safety, or
obscene materials to be destroyed in the interest of public morals)
as well as zoning ordinances prohibiting the use of property for
purposes injurious to the health, morals or safety of the community
(e.g., dividing a city’s territory into residential and industrial
areas). It has, thus, been observed that, in the exercise of police
power (as distinguished from eminent domain), although the regulation
affects the right of ownership, none of the bundle of rights which
constitute ownership is appropriated for use by or for the benefit of
the public.
Eminent
Domain; In the exercise of the power of eminent domain, property
interests are appropriated and applied to some public purpose which
necessitates the payment of just compensation therefor.—In the
exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates
the payment of just compensation therefor. Normally, the title to and
possession of the property are transferred to the expropriating
authority. Examples include the acquisition of lands for the
construction of public highways as well as agricultural lands
acquired by the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries. However, it is a
settled rule that the acquisition of title or total destruction of
the property is not essential for “taking” under the power of
eminent domain to be present. Examples of these include establishment
of easements such as where the land owner is perpetually deprived of
his proprietary rights because of the hazards posed by electric
transmission lines constructed above his property or the compelled
interconnection of the telephone system between the government and a
private company. In these cases, although the private property owner
is not divested of ownership or possession, payment of just
compensation is warranted because of the burden placed on the
property for the use or benefit of the public.
Same;
Police Power; It may not always be easy to determine whether a
challenged governmental act is an exercise of police power or eminent
domain.—It may not always be easy to determine whether a
challenged governmental act is an exercise of police power or eminent
domain. The very nature of police power as elastic and responsive to
various social conditions as well as the evolving meaning and scope
of public use and just compensation in eminent domain evinces that
these are not static concepts. Because of the exigencies of rapidly
changing times, Congress may be compelled to adopt or experiment with
different measures to promote the general welfare which may not fall
squarely within the traditionally recognized categories of police
power and eminent domain. The judicious approach, therefore, is to
look at the nature and effects of the challenged governmental act and
decide, on the basis thereof, whether the act is the exercise of
police power or eminent domain. Thus, we now look at the nature and
effects of the 20% discount to determine if it constitutes an
exercise of police power or eminent domain.
Senior
Citizen Discount; The 20% discount is intended to improve the welfare
of senior citizens who, at their age, are less likely to be gainfully
employed, more prone to illnesses and other disabilities, and, thus,
in need of subsidy in purchasing basic commodities.—The 20%
discount is intended to improve the welfare of senior citizens who,
at their age, are less likely to be gainfully employed, more prone to
illnesses and other disabilities, and, thus, in need of subsidy in
purchasing basic commodities. It may not be amiss to mention also
that the discount serves to honor senior citizens who presumably
spent the productive years of their lives on contributing to the
development and progress of the nation. This distinct cultural
Filipino practice of honoring the elderly is an integral part of this
law. As to its nature and effects, the 20% discount is a regulation
affecting the ability of private establishments to price their
products and services relative to a special class of individuals,
senior citizens, for which the Constitution affords preferential
concern. In turn, this affects the amount of profits or income/gross
sales that a private establishment can derive from senior citizens.
In other words, the subject regulation affects the pricing, and,
hence, the profitability of a private establishment. However, it does
not purport to appropriate or burden specific properties, used in the
operation or conduct of the business of private establishments, for
the use or benefit of the public, or senior citizens for that matter,
but merely regulates the pricing of goods and services relative to,
and the amount of profits or income/gross sales that such private
establishments may derive from, senior citizens.
Statutes;
Because all laws enjoy the presumption of constitutionality, courts
will uphold a law’s validity if any set of facts may be conceived
to sustain it.—Because all laws enjoy the presumption of
constitutionality, courts will uphold a law’s validity if any set
of facts may be conceived to sustain it. On its face, we find that
there are at least two conceivable bases to sustain the subject
regulation’s validity absent clear and convincing proof that it is
unreasonable, oppressive or confiscatory. Congress may have
legitimately concluded that business establishments have the capacity
to absorb a decrease in profits or income/gross sales due to the 20%
discount without substantially affecting the reasonable rate of
return on their investments considering (1) not all customers of a
business establishment are senior citizens and (2) the level of its
profit margins on goods and services offered to the general public.
Concurrently, Congress may have, likewise, legitimately concluded
that the establishments, which will be required to extend the 20%
discount, have the capacity to revise their pricing strategy so that
whatever reduction in profits or income/gross sales that they may
sustain because of sales to senior citizens, can be recouped through
higher markups or from other products not subject of discounts.
As a result, the discounts resulting from sales to senior citizens
will not be confiscatory or unduly oppressive.
Same;
A court, in resolving cases before it, may look into the possible
purposes or reasons that impelled the enactment of a particular
statute or legal provision.—A court, in resolving cases before
it, may look into the possible purposes or reasons that impelled the
enactment of a particular statute or legal provision. However,
statements made relative thereto are not always necessary in
resolving the actual controversies presented before it. This was the
case in Central Luzon Drug Corporation, 456 SCRA 414 (2005),
resulting in that unfortunate statement that the tax credit “can be
deemed” as just compensation. This, in turn, led to the erroneous
conclusion, by deductive reasoning, that the 20% discount is an
exercise of the power of eminent domain. The Dissent essentially
adopts this theory and reasoning which, as will be shown below, is
contrary to settled principles in police power and eminent domain
analysis.
Police
Power; Indeed, there is a whole class of police power measures which
justify the destruction of private property in order to preserve
public health, morals, safety or welfare.—The Dissent discusses
at length the doctrine on “taking” in police power which occurs
when private property is destroyed or placed outside the commerce of
man. Indeed, there is a whole class of police power measures which
justify the destruction of private property in order to preserve
public health, morals, safety or welfare. As earlier mentioned, these
would include a building on the verge of collapse or confiscated
obscene materials as well as those mentioned by the Dissent with
regard to property used in violating a criminal statute or one which
constitutes a nuisance. In such cases, no compensation is required.
However, it is equally true that there is another class of police
power measures which do not involve the destruction of private
property but merely regulate its use. The minimum wage law, zoning
ordinances, price control laws, laws regulating the operation of
motels and hotels, laws limiting the working hours to eight, and the
like would fall under this category. The examples cited by the
Dissent, likewise, fall under this category: Article 157 of the Labor
Code, Sections 19 and 18 of the Social Security Law, and Section 7 of
the Pag-IBIG Fund Law. These laws merely regulate or, to use the term
of the Dissent, burden the conduct of the affairs of business
establishments. In such cases, payment of just compensation is not
required because they fall within the sphere of permissible police
power measures.
The
senior citizen discount law falls under this latter category.
Same;
It is a basic postulate of our democratic system of government that
the Constitution is a social contract whereby the people have
surrendered their sovereign powers to the State for the common
good.—That there may be a burden placed on business
establishments or the consuming public as a result of the operation
of the assailed law is not, by itself, a ground to declare it
unconstitutional for this goes into the wisdom and expediency of the
law. The cost of most, if not all, regulatory measures of the
government on business establishments is ultimately passed on to the
consumers but that, by itself, does not justify the wholesale
nullification of these measures. It is a basic postulate of our
democratic system of government that the Constitution is a social
contract whereby the people have surrendered their sovereign powers
to the State for the common good. All persons may be burdened by
regulatory measures intended for the common good or to serve some
important governmental interest, such as protecting or improving the
welfare of a special class of people for which the Constitution
affords preferential concern. Indubitably, the one assailing the law
has the heavy burden of proving that the regulation is unreasonable,
oppressive or confiscatory, or has gone “too far” as to amount to
a “taking.” Yet, here, the Dissent would have this Court nullify
the law without any proof of such nature.
Same;
Senior Citizen Discount; Prior to the sale of goods or services, a
business establishment may be subject to State regulations, such as
the 20% senior citizen discount, which may impact the level or amount
of profits or income/gross sales that can be generated by such
establishment.—Prior to the sale of goods or services, a
business establishment may be subject to State regulations, such as
the 20% senior citizen discount, which may impact the level or amount
of profits or income/gross sales that can be generated by such
establishment. For this reason, the validity of the discount is to be
determined based on its overall effects on the operations of the
business establishment.
Eminent
Domain; Taking; It should be noted though that potential profits or
income/gross sales are relevant in police power and eminent domain
analyses because they may, in appropriate cases, serve as an indicia
when a regulation has gone “too far” as to amount to a “taking”
under the power of eminent domain.—It should be noted though
that potential profits or income/gross sales are relevant in police
power and eminent domain analyses because they may, in appropriate
cases, serve as an indicia when a regulation has gone “too far”
as to amount to a “taking” under the power of eminent domain.
When the deprivation or reduction of profits or income/gross sales is
shown to be unreasonable, oppressive or confiscatory, then the
challenged governmental regulation may be nullified for being a
“taking” under the power of eminent domain. In such a case, it is
not profits or income/gross sales which are actually taken and
appropriated for public use. Rather, when the regulation causes an
establishment to incur losses in an unreasonable, oppressive or
confiscatory manner, what is actually taken is capital and the right
of the business establishment to a reasonable return on investment.
If the business losses are not halted because of the continued
operation of the regulation, this eventually leads to the destruction
of the business and the total loss of the capital invested therein.
But, again, petitioners in this case failed to prove that the subject
regulation is unreasonable, oppressive or confiscatory.
Police
Power; Senior Citizen Discount; The State has, in the past, regulated
prices and profits of business establishments. In other words, this
type of regulatory measures is traditionally recognized as police
power measures so that the senior citizen discount may be considered
as a police power measure as well.—The State has, in the past,
regulated prices and profits of business establishments. In other
words, this type of regulatory measures is traditionally recognized
as police power measures so that the senior citizen discount may be
considered as a police power measure as well. What is more, the
substantial distinctions between price and rate of return on
investment control laws vis-à-vis the senior citizen discount law
provide greater reason to uphold the validity of the senior citizen
discount law. As previously discussed, the ability to adjust prices
allows the establishment subject to the senior citizen discount to
prevent or mitigate any reduction of profits or income/gross sales
arising from the giving of the discount. In contrast, establishments
subject to price and rate of return on investment control laws cannot
adjust prices accordingly.
Constitutional
Law; There is nothing in the Constitution that prohibits Congress
from regulating the profits or income/gross sales of industries and
enterprises without franchises. On the contrary, the social justice
provisions of the Constitution enjoin the State to regulate the
“acquisition, ownership, use, and disposition” of property and
its increments.—There is nothing in the Constitution that
prohibits Congress from regulating the profits or income/gross sales
of industries and enterprises without franchises. On the contrary,
the social justice provisions of the Constitution enjoin the State to
regulate the “acquisition, ownership, use, and disposition” of
property and its increments. This may cover the regulation of profits
or income/gross sales of all businesses, without qualification, to
attain the objective of diffusing wealth in order to protect and
enhance the right of all the people to human dignity. Thus, under the
social justice policy of the Constitution, business establishments
may be compelled to contribute to uplifting the plight of vulnerable
or marginalized groups in our society provided that the regulation is
not arbitrary, oppressive or confiscatory, or is not in breach of
some specific constitutional limitation.
Statutes;
A law, which has been in operation for many years and promotes the
welfare of a group accorded special concern by the Constitution,
cannot and should not be summarily invalidated on a mere allegation
that it reduces the profits or income/gross sales of business
establishments.—We maintain that the correct rule in
determining whether the subject regulatory measure has amounted to a
“taking” under the power of eminent domain is the one laid down
in Alalayan v. National Power Corporation, 24 SCRA 172 (1968), and
followed in Carlos Superdrug Corporation, 526 SCRA 130 (2007),
consistent with long standing principles in police power and eminent
domain analysis. Thus, the deprivation or reduction of profits or
income/gross sales must be clearly shown to be unreasonable,
oppressive or confiscatory. Under the specific circumstances of this
case, such determination can only be made upon the presentation of
competent proof which petitioners failed to do. A law, which has been
in operation for many years and promotes the welfare of a group
accorded special concern by the Constitution, cannot and should not
be summarily invalidated on a mere allegation that it reduces the
profits or income/gross sales of business establishments.
Tio
vs. Videogram Regulatory Board, 151 SCRA 208 , June 18, 1987
Constitutional
Law; Constitutional requirement that “every bill shall embrace only
one subject which shall be expressed in the title thereof’ is
sufficiently complied with if the title be comprehensive enough to
include the general purpose it seeks to achieve and if all the parts
of the statute are related and germane to the subject matter
expressed in the title or as long as they are not inconsistent with
or foreign to the general subject and title.—The Constitutional
requirement that “every bill shall embrace only one subject which
shall be expressed in the title thereof” is sufficiently complied
with if the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not necessary that
the title express each and every end that the statute wishes to
accomplish. The requirement is satisfied if all the parts of the
statute are related, and are germane to the subject matter expressed
in the title, or as long as they are not inconsistent with or foreign
to the general subject and title. An act having a single general
subject, indicated in the title, may contain any number of
provisions, no matter how diverse they may be, so long as they are
not inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the method
and means of carrying out the general object.” The rule also is
that the constitutional requirement as to the title of a bill should
not be so narrowly construed as to cripple or impede the power of
legislation. It should be given a practical rather than technical
construction.
Same;
Same; Section 10 PD 1987 otherwise known as Videogram Regulatory
Board is not a Rider.—Section 10. Tax on Sale, Lease or
Disposition of Videograms. Notwithstanding any provision of law to
the contrary, the province shall collect a tax of thirty percent
(30%) of the purchase price or rental rate, as the case may be, for
every sale, lease or disposition of a videogram containing a
reproduction of any motion picture or audiovisual program. Fifty
percent (50%) of the proceeds of the tax collected shall accrue to
the province, and the other fifty percent (50%) shall accrue to the
municipality where the tax is collected; PROVIDED, That in
Metropolitan Manila, the tax shall be shared equally by the
City/Municipality and the Metropolitan Manila Commission. x x x x”
The foregoing provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the
DECREE, which is the regulation of the video industry through the
Videogram Regulatory Board as expressed in its title. The tax
provision is not inconsistent with, nor foreign to that general
subject and title. As a tool for regulation it is simply one of the
regulatory and control mechanisms scattered throughout the DECREE.
The express purpose of the DECREE to include taxation of the video
industry in order to regulate and rationalize the heretofore
uncontrolled distribution of videograms is evident from Preambles 2
and 5, supra. Those preambles explain the motives of the lawmaker in
presenting the measure. The title of the DECREE, which is the
creation of the Videogram Regulatory Board, is comprehensive enough
to include the purposes expressed in its Preamble and reasonably
covers all its provisions. It is unnecessary to express all those
objectives in the title or that the latter be an index to the body of
the DECREE,
Same;
Same; Same; Tax imposed under the Decree is not harsh; oppressive,
confiscatory and in restraint of trade but regulatory and a revenue
measure; The levy is for a public purpose.—Petitioner also
submits that the thirty percent (30%) tax imposed is harsh and
oppressive, confiscatory, and in restraint of trade. However, it is
beyond serious question that a tax does not cease to be valid merely
because it regulates, discourages, or even definitely deters the
activities taxed. The power to impose taxes is one so unlimited in
force and so searching in extent, that the courts scarcely venture to
declare that it is subject to any restrictions whatever, except such
as rest in the discretion of the authority which exercises it. In
imposing a tax, the legislature acts upon its constituents. This is,
in general, a sufficient security against erroneous and oppressive
taxation. The tax imposed by the DECREE is not only a regulatory but
also a revenue measure prompted by the realization that earnings of
videogram establishments of around P600 million per annum have not
been subjected to tax, thereby depriving the Government of an
additional source of revenue. It is an end-user tax, imposed on
retailers for every videogram they make available for public viewing,
It is similar to the 30% amusement tax imposed or borne by the movie
industry which the theater-owners pay to the government, but which is
passed on to the entire cost of the admission ticket, thus shifting
the tax burden on the buying or the viewing public. It is a tax that
is imposed uniformly on all videogram operators. The levy of the 30%
tax is for a public purpose. It was imposed primarily to answer the
need for regulating the video industry, particularly because of the
rampant film piracy, the flagrant violation of intellectual property
rights, and the proliferation of pornographic video tapes. And while
it was also an objective of the DECREE to protect the movie industry,
the tax remains a valid imposition.
Same;
Same; Same; Same; PD 1987 not an undue delegation of legislative
power.—Neither can it be successfully argued that the DECREE
contains an undue delegation of legislative power. The grant in
Section 11 of the DECREE of authority to the BOARD to “solicit the
direct assistance of other agencies and Units of the government and
deputize, for a fixed and limited period, the heads or personnel of
such agencies and units to perform enforcement functions for the
Board” is not a delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution,
enforcement, and implementation. “The true distinction is between
the delegation of power to make the law, which necessarily involves a
discretion as to what it shall be, and conferring authority or
discretion as to its execution to be exercised under and in pursuance
of the law. The first cannot be done; to the latter, no valid
objection can be made.” Besides, in the very language of the
decree, the authority of the BOARD to solicit such assistance is for
a “fixed and limited period” with the deputized agencies
concerned being “subject to the direction and control of the
BOARD.” That the grant of such authority might be the source of
graft and corruption would not stigmatize the DECREE as
unconstitutional. Should the eventuality occur, the aggrieved parties
will not be without adequate remedy in law.
Lutz
vs. Araneta, 98 Phil. 148 , December 22, 1955
CONSTITUTIONAL
LAW; TAXATION; POWER OF STATE TO LEVY TAX IN AID AND SUPPORT OF SUGAR
INDUSTRY.—As the protection and promotion of the sugar industry
is a matter of public concern, the Legislature may determine within
reasonable bounds what is necessary for its protection and expedient
for its promotion. Here, the legislative discretion must be allowed
full play, subject only to the test of reasonableness; and it is not
contended that the means provided in section 6 of Commonwealth Act
No. 567 bear no relation to the objective pursued or are oppressive
in character. If objective and methods arealike constitutionally
valid, no reason is seen why the state may not levy taxes to raise
funds for their prosecution and attainment. Taxation may be made the
implement of the state’s police power (Great Atl. & Pac. Tea
Co. vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. vs. Butler, 297
U.S. 1, 80 L. Ed. 477; M’Culloch vs. Maryland, 4 Wheat. 316, 4 L.
Ed. 579).
2.ID.
; ID. ; ID.; ; POWER OF STATE TO SELECT SUBJECT OF TAXATION.—It
is inherent in the power to tax that a state be free to select the
subjects of taxation, and it has been repeatedly held that
“inequalities which result from a singling out of one particular
class for taxation or exemption infringe 110 constitutional
limitation (Carmichael vs. Southern Coal & Coke Co., 301 U.S.
495, 81 L. Ed. 1245, citing numerous authorities, at 1251).
Gomez
vs. Palomar, 25 SCRA 827 , October 29, 1968
Declaratory
relief; Remedy cannot be availed of if there has been breach of
statute before filing of action.—The prime specification of an
action for declaratory relief is that it must be brought "before
breach or violation" of the statute has been committed. Rule 64,
section 1 so provides. Section 6 of the same rule, which allows the
court to treat an action for declaratory relief as an ordinary
action, applies only if the breach or violation occurs after the
filing' of the action but before the termination thereof. If there
has been a breach of the statute before the filing of the action, the
remedy of declaratory relief cannot be availed of, much less can the
suit be converted into an ordinary action.
Constitutional
law; Statutory construction; Anti-TB Stamp Law; Not violative of
equal protection clause of the Constitution.—It is claimed that
Republic Act 1635, as amended, otherwise known as the Anti-TB Stamp
Law, is violative of the equal protection clause of the Constitution
because it constitutes mail users into a class f or the purpose of
the tax while leaving untaxed the rest of the population and that
even among postal patrons the statute discriminatorily grants
exemptions. Held: It is settled that the legislature has the inherent
power to select the subjects of taxation and to grant exemptions. The
classification of mail users is based on the ability to pay, the
enjoyment of a privilege and on administrative convenience. Tax
exemptions have never been thought of as raising issues under the
equal protection clause.
Same;
Same; Same; Passed for a public purpose.—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.
Same;
Same; Same; Imposition of flat rate does not violate rule of
uniformity and equality of taxation.—The imposition of a flat
rate rather than a graduated tax does not infringe the rule of
uniformity and equality of taxation. A tax need not be measured by
the weight of the mail or the extent of the service rendered.
Considerations of administrative convenience and cost afford an
adequate ground for classification. The same considerations may
induce the legislature to impose a flat tax which in effect is a
charge for the transaction, operating equally on all persons with the
class regardless of the amount involved.
Same;
Same; Same; The issuance of administrative orders by the Postmaster
General with the approval of the Secretary of Public Works and
Communications to implement the Anti-TB Stamp Law does not amount to
undue delegation of legislative power.—It is true that the law
does not expressly authorize the collection of five centavos except
through the sale of anti-TB stamps, but such authority may be implied
in so far as it may be necessary to prevent a failure of the
undertaking. The authority given to the Postmaster General to raise f
unds through the mails must be liberally construed, consistent with
the principle that where the end is required the appropriate means is
given.
Anti-TB Stamp Law; Money raised from the sales of the anti-TB stamps not for the benefit of the Philippine Tuberculosis Society.—The Society is not really the beneficiary but only the agency through which the State acts in carrying out what is essentially a public function. The money is treated as a special fund and as such need not be appropriated by law.
Anti-TB Stamp Law; Money raised from the sales of the anti-TB stamps not for the benefit of the Philippine Tuberculosis Society.—The Society is not really the beneficiary but only the agency through which the State acts in carrying out what is essentially a public function. The money is treated as a special fund and as such need not be appropriated by law.
Same;
Five centavo charge levied by Republic Act 1635 an excise tax.—The
f ive centavo charge levied by Republic Act 1635, as amended, is in
the nature of an excise tax, laid upon the exercise of a privilege,
the privilege of using the mails.
Planters
Products, Inc. vs. Fertiphil Corporation, 548 SCRA 485 , March 14,
2008
Judicial
Review; Locus Standi; In private suits, locus standi requires a
litigant to be a “real party in interest,” which is defined as
“the party who stands to be benefited or injured by the judgment in
the suit or the party entitled to the avails of the suit”; In this
jurisdiction, We have adopted the “direct injury test” to
determine locus standi in public suits; The “direct injury test”
in public suits is similar to the “real party in interest” rule
for private suits under Section 2, Rule 3 of the 1997 Rules of Civil
Procedure.
Same;
Same; The fact of payment by a seller of the levy imposed by Letter
of Instruction (LOI) 1465 is sufficient injury—the harm occasioned
on its business is sufficient injury for purposes of locus standi
Same;
Same; The doctrine of standing, being a mere procedural technicality,
should be waived, if at all, to adequately thresh out an important
constitutional issue.—
Same;
Jurisdictions; Regular courts have jurisdiction over cases involving
the validity or constitutionality of a rule or regulation issued by
administrative agencies.
Same;
Lis Mota; The constitutionality of Letter of Instruction (LOI) No.
1465 is also the very lis mota of the complaint for collection.
Taxation;
Police Power; Words and Phrases; 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.—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. We agree
with the RTC that the imposition of the levy was an exercise by the
State of its taxation power. 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.
Same;
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.—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. As an old United States case bluntly put it: “To
lay with one hand, the power of the government on the property of the
citizen, and with the other to bestow it upon favored individuals to
aid private enterprises and build up private fortunes, is nonetheless
a robbery because it is done under the forms of law and is called
taxation.”
Same;
Words and Phrases; Public purpose is the heart of a tax law; Public
purpose is an elastic concept that can be hammered to fit modern
standards—it does not only pertain to those purposes which are
traditionally viewed as essentially government functions, such as
building roads and delivery of basic services, but also includes
those purposes designed to promote social justice; While the
categories of what may constitute a public purpose are continually
expanding in light of the expansion of government functions, the
inherent requirement that taxes can only be exacted for a public
purpose still stands.—The term “public purpose” is not
defined. It is an elastic concept that can be hammered to fit modern
standards. Jurisprudence states that “public purpose” should be
given a broad interpretation. It does not only pertain to those
purposes which are traditionally viewed as essentially government
functions, such as building roads and delivery of basic services, but
also includes those purposes designed to promote social justice.
Thus, public money may now be used for the relocation of illegal
settlers, low-cost housing and urban or agrarian reform. While the
categories of what may constitute a public purpose are continually
expanding in light of the expansion of government functions, the
inherent requirement that taxes can only be exacted for a public
purpose still stands. Public purpose is the heart of a tax law. When
a tax law is only a mask to exact funds from the public when its true
intent is to give undue benefit and advantage to a private
enterprise, that law will not satisfy the requirement of “public
purpose.” The purpose of a law is evident from its text or
inferable from other secondary sources. Here, We agree with the RTC
and that CA that the levy imposed under LOI No. 1465 was not for a
public purpose.
Same;
It is utterly repulsive that a tax law would expressly name a private
company as the ultimate beneficiary of the taxes to be levied from
the public—it is a clear case of crony capitalism.—It is a
basic rule of statutory construction that the text of a statute
should be given a literal meaning. In this case, the text of the LOI
is plain that the levy was imposed in order to raise capital for PPI.
The framers of the LOI did not even hide the insidious purpose of the
law. They were cavalier enough to name PPI as the ultimate
beneficiary of the taxes levied under the LOI. We find it utterly
repulsive that a tax law would expressly name a private company as
the ultimate beneficiary of the taxes to be levied from the public.
This is a clear case of crony capitalism.
Police
Power; Test for Valid Exercise; Letter of Instruction (LOI) No. 1695
is invalid because it did not promote public interest.—Even if
We consider LOI No. 1695 enacted under the police power of the State,
it would still be invalid for failing to comply with the test of
“lawful subjects” and “lawful means.” Jurisprudence states
the test as follows: (1) the interest of the public generally, as
distinguished from those of particular class, requires its exercise;
and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon
individuals. For the same reasons as discussed, LOI No. 1695 is
invalid because it did not promote public interest. The law was
enacted to give undue advantage to a private corporation.
Statutes;
Operative Fact Doctrine; The general rule is that an unconstitutional
law is void—it produces no rights, imposes no duties and affords no
protection, it has no legal effect, and it is, in legal
contemplation, inoperative as if it has not been passed.—The
general rule is that an unconstitutional law is void. It produces no
rights, imposes no duties and affords no protection. It has no legal
effect. It is, in legal contemplation, inoperative as if it has not
been passed. Being void, Fertiphil is not required to pay the levy.
All levies paid should be refunded in accordance with the general
civil code principle against unjust enrichment. The general rule is
supported by Article 7 of the Civil Code, which provides: ART. 7.
Laws are repealed only by subsequent ones, and their violation or
non-observance shall not be excused by disuse or custom or practice
to the contrary. When the courts declare a law to be inconsistent
with the Constitution, the former shall be void and the latter shall
govern.
Same;
Same; Unjust Enrichment; The doctrine of operative fact, as an
exception to the general rule, only applies as a matter of equity and
fair play—there is nothing iniquitous in ordering the beneficiary
of an unconstitutional law where it unduly benefited from it,
otherwise it would be unjustly enriched at the expense of others.—The
doctrine of operative fact, as an exception to the general rule, only
applies as a matter of equity and fair play. It nullifies the effects
of an unconstitutional law by recognizing that the existence of a
statute prior to a determination of unconstitutionality is an
operative fact and may have consequences which cannot always be
ignored. The past cannot always be erased by a new judicial
declaration. The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who have
relied on the invalid law. Thus, it was applied to a criminal case
when a declaration of unconstitutionality would put the accused in
double jeopardy or would put in limbo the acts done by a municipality
in reliance upon a law creating it. Here, We do not find anything
iniquitous in ordering PPI to refund the amounts paid by Fertiphil
under LOI No. 1465. It unduly benefited from the levy. It was proven
during the trial that the levies paid were remitted and deposited to
its bank account. Quite the reverse, it would be inequitable and
unjust not to order a refund. To do so would unjustly enrich PPI at
the expense of Fertiphil. Article 22 of the Civil Code explicitly
provides that “every person who, through an act of performance by
another comes into possession of something at the expense of the
latter without just or legal ground shall return the same to him.”
We cannot allow PPI to profit from an unconstitutional law. Justice
and equity dictate that PPI must refund the amounts paid by
Fertiphil.
Abakada
Guro Party List vs. Ermita, 469 SCRA 14 , September 01, 2005
Taxation;
Value-Added Tax (VAT); Words and Phrases; The VAT is a tax on
spending or consumption—it is levied on the sale, barter, exchange
or lease of goods or properties and services; Being an indirect tax
on expenditure, the seller of goods or services may pass on the
amount of tax paid to the buyer; In contrast, a direct tax is a tax
for which a taxpayer is directly liable on the transaction or
business it engages in, without transferring the burden to someone
else.—As a prelude, the Court deems it apt to restate the
general principles and concepts of value-added tax (VAT), as the
confusion and inevitably, litigation, breeds from a fallacious notion
of its nature. The VAT is a tax on spending or consumption. It is
levied on the sale, barter, exchange or lease of goods or properties
and services. Being an indirect tax on expenditure, the seller of
goods or services may pass on the amount of tax paid to the buyer,
with the seller acting merely as a tax collector. The burden of VAT
is intended to fall on the immediate buyers and ultimately, the
end-consumers. In contrast, a direct tax is a tax for which a
taxpayer is directly liable on the transaction or business it engages
in, without transferring the burden to someone else. Examples are
individual and corporate income taxes, transfer taxes, and residence
taxes.
Same;
Same; Same; In the Philippines, the value-added system of sales
taxation has long been in existence, albeit in a different mode—prior
to 1978, the system was a single-stage tax computed under the “cost
deduction method” and was payable only by the original sellers,
then the single-stage system was subsequently modified, and a mixture
of the “cost deduction method” and “tax credit method” was
used to determine the value-added tax payable; Under the “tax
credit method,” an entity can credit against or subtract from the
VAT charged on its sales or outputs the VAT paid on its purchases,
inputs and imports.—In the Philippines, the value-added system
of sales taxation has long been in existence, albeit in a different
mode. Prior to 1978, the system was a single-stage tax computed under
the “cost deduction method” and was payable only by the original
sellers. The single-stage system was subsequently modified, and a
mixture of the “cost deduction method” and “tax credit method”
was used to determine the value-added tax payable. Under the “tax
credit method,” an entity can credit against or subtract from the
VAT charged on its sales or outputs the VAT paid on its purchases,
inputs and imports. It was only in 1987, when President Corazon C.
Aquino issued Ex-ecutive Order No. 273, that the VAT system was
rationalized by imposing a multi-stage tax rate of 0% or 10% on all
sales using the “tax credit method.” E.O. No. 273 was followed by
R.A. No. 7716 or the Expanded VAT Law, R.A. No. 8241 or the Improved
VAT Law, R.A. No. 8424 or the Tax Reform Act of 1997, and finally,
the presently beleaguered R.A. No. 9337, also referred to by
respondents as the VAT Reform Act.
Congress;
Bicameral Conference Committee; Legislative Rules; It should be borne
in mind that the power of internal regulation and discipline are
intrinsic in any legislative body, and pursuant to this inherent
constitutional power to promulgate and implement its own rules of
procedure, the respective rules of each house of Congress provided
for the creation of a Bicameral Conference Committee.—
Petitioners now beseech the Court to define the powers of the
Bi-cameral Conference Committee. It should be borne in mind that the
power of internal regulation and discipline are intrinsic in any
legislative body for, as unerringly elucidated by Justice Story,
“[i]f the power did not exist, it would be utterly impracticable to
transact the business of the nation, either at all, or at least with
decency, deliberation, and order.” Thus, Article VI, Section 16 (3)
of the Constitution provides that “each House may determine the
rules of its proceed-ings.” Pursuant to this inherent
constitutional power to promulgate and implement its own rules of
procedure, the respective rules of each house of Congress provided
for the creation of a Bicameral Conference Committee.
Same;
Same; Same; Separation of Powers; Judicial Review; Congress is the
best judge of how it should conduct its own business expeditiously
and in the most orderly manner; If a change is desired in the
practice [of the Bicameral Conference Committee] it must be sought in
Congress since this question is not covered by any constitutional
provision but is only an internal rule of each house; Even the
expanded jurisdiction of the Supreme Court cannot apply to questions
regarding only the internal operation of Congress, thus, the Court is
wont to deny a review of the internal proceedings of a co-equal
branch of government.—Akin to the Fariñas case, the present
petitions also raise an issue regarding the actions taken by the
conference committee on matters regarding Congress’ compliance with
its own internal rules. As stated earlier, one of the most basic and
inherent power of the legislature is the power to formulate rules for
its proceedings and the discipline of its members. Congress is the
best judge of how it should conduct its own business expeditiously
and in the most orderly manner. It is also the sole concern of
Congress to instill discipline among the members of its conference
committee if it believes that said members violated any of its rules
of proceedings. Even the expanded jurisdiction of this Court cannot
apply to questions regarding only the internal operation of Congress,
thus, the Court is wont to deny a review of the internal proceedings
of a co-equal branch of government. Moreover, as far back as 1994 or
more than ten years ago, in the case of Tolentino vs. Secretary of
Finance, the Court already made the pronouncement that “[i]f a
change is desired in the practice [of the Bicameral Conference
Committee] it must be sought in Congress since this question is not
covered by any constitutional provision but is only an internal rule
of each house.”To date, Congress has not seen it fit to make such
changes adverted to by the Court. It seems, therefore, that Congress
finds the practices of the bicameral conference committee to be very
useful for purposes of prompt and efficient legislative action.
Same;
Same; Same; Words and Phrases; The term “settle” is synonymous to
“reconcile” and “harmonize”; To reconcile or harmonize
disagreeing provisions, the Bicameral Conference Committee may then
(a) adopt the specific provisions of either the House bill or Senate
bill, (b) decide that neither provisions in the House bill or the
provisions in the Senate bill would be carried into the final form of
the bill, and/or (c) try to arrive at a compromise between the
disagreeing provisions.—Under the provisions of both the Rules
of the House of Representatives and Senate Rules, the Bicameral
Conference Committee is mandated to settle the differences between
the disagreeing provisions in the House bill and the Senate bill. The
term “settle” is synonymous to “reconcile” and “harmonize.”
To reconcile or harmonize disagreeing provisions, the Bicameral
Conference Committee may then (a) adopt the specific provisions of
either the House bill or Senate bill, (b) decide that neither
provisions in the House bill or the provisions in the Senate bill
would be carried into the final form of the bill, and/or (c) try to
arrive at a compromise between the disagreeing provisions.
Same;
Same; Same; It is within the power of a conference committee to
include in its report an entirely new provision that is not found
either in the House bill or in the Senate bill—if the committee can
propose an amendment consisting of one or two provisions, there is no
reason why it cannot propose several provisions, collectively
considered as an “amendment in the nature of a substitute,” so
long as such amendment is germane to the subject of the bills before
the committee.—All the changes or modifications made by the
Bicameral Conference Committee were germane to subjects of the
provisions referred to it for reconciliation. Such being the case,
the Court does not see any grave abuse of discretion amounting to
lack or excess of jurisdiction committed by the Bicameral Conference
Committee. In the earlier cases of Philippine Judges Association vs.
Prado and Tolentino vs. Secretary of Finance, the Court recognized
the longstanding legislative practice of giving said conference
committee ample latitude for compromising differences between the
Senate and the House. Thus, in the Tolentino case, it was held that:
. . . it is within the power of a conference committee to include in
its report an entirely new provision that is not found either in the
House bill or in the Senate bill. If the committee can propose an
amendment consisting of one or two provisions, there is no reason why
it cannot propose several provisions, collectively considered as an
“amendment in the nature of a substitute,” so long as such
amendment is germane to the subject of the bills before the
committee. After all, its report was not final but needed the
approval of both houses of Congress to become valid as an act of the
legislative department. The charge that in this case the Conference
Committee acted as a third legislative chamber is thus without any
basis.
Same;
Same; Same; “No Amendment” Rule; The “no-amend-ment rule”
refers only to the procedure to be followed by each house of Congress
with regard to bills initiated in each of said respective houses,
before said bill is transmitted to the other house for its
concurrence or amendment—Art. VI, Sec. 26 (2) of the Constitution
cannot be taken to mean that the introduction by the Bicameral
Conference Committee of amendments and modifications to disagreeing
provisions in bills that have been acted upon by both houses of
Congress is prohibited.—The Court reiterates here that the
“no-amendment rule” refers only to the procedure to be followed
by each house of Congress with regard to bills initiated in each of
said respective houses, before said bill is transmitted to the other
house for its concurrence or amendment. Verily, to construe said
provision in a way as to proscribe any further changes to a bill
after one house has voted on it would lead to absurdity as this would
mean that the other house of Congress would be deprived of its
constitutional power to amend or introduce changes to said bill.
Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to
mean that the introduction by the Bicameral Conference Committee of
amendments and modifications to disagreeing provisions in bills that
have been acted upon by both houses of Congress is prohibited.
Same;
Origin of Bills; Revenue Bills; Since there is no question that the
revenue bill originated in the House of Representatives, the Senate
was acting within its constitutional power to introduce amendments to
the House bill when it included provisions in Senate Bill No. 1950
amending corporate income taxes, percentage, excise and franchise
taxes—Article VI, Section 24 of the Constitution does not contain
any prohibition or limitation on the extent of the amendments that
may be introduced by the Senate to the House revenue bill.—In
the present cases, petitioners admit that it was indeed House Bill
Nos. 3555 and 3705 that initiated the move for amending provisions of
the NIRC dealing mainly with the value-added tax. Upon transmittal of
said House bills to the Senate, the Senate came out with Senate Bill
No. 1950 proposing amendments not only to NIRC provisions on the
value-added tax but also amendments to NIRC provisions on other kinds
of taxes. Is the introduction by the Senate of provisions not dealing
directly with the value-added tax, which is the only kind of tax
being amended in the House bills, still within the purview of the
constitutional provision authorizing the Senate to propose or concur
with amendments to a revenue bill that originated from the House? * *
* Since there is no question that the revenue bill exclusively
originated in the House of Representatives, the Senate was acting
within its constitutional power to introduce amendments to the House
bill when it included provisions in Senate Bill No. 1950 amending
corporate income taxes, percentage, excise and franchise taxes.
Verily, Article VI, Section 24 of the Constitution does not contain
any prohibition or limitation on the extent of the amendments that
may be introduced by the Senate to the House revenue bill.
Same;
Same; Same; The main purpose of the bills emanating from the House of
Representatives is to bring in sizeable revenues for the government
to supplement our country’s serious financial problems, and improve
tax administration and control of the leakages in revenues from
income taxes and value-added taxes, and the Senate, approaching the
measures from the point of national perspective, can introduce
amendments within the purposes of those bills, like providing ways
that would soften the impact of the VAT measure on the consumer.—The
main purpose of the bills emanating from the House of Representatives
is to bring in sizeable revenues for the government to supplement our
country’s serious financial problems, and improve tax
administration and control of the leakages in revenues from income
taxes and value-added taxes. As these house bills were transmitted to
the Senate, the latter, approaching the measures from the point of
national perspective, can introduce amendments within the purposes of
those bills. It can provide for ways that would soften the impact of
the VAT measure on the consumer, i.e., by distributing the burden
across all sectors instead of putting it entirely on the shoulders of
the consumers.
Same;
Same; Same; Germaneness Rule; The amendments made on provisions in
the tax on income of corporations are germane to the purpose of the
house bills which is to raise revenues for the government, and the
sections referring to other percentage and excise taxes are germane
to the reforms to the VAT system, as these sections would cushion the
effects of VAT on consumers.—As the Court has said, the Senate
can propose amendments and in fact, the amendments made on provisions
in the tax on income of corporations are germane to the purpose of
the house bills which is to raise revenues for the government.
Likewise, the Court finds the sections referring to other percentage
and excise taxes germane to the reforms to the VAT system, as these
sections would cushion the effects of VAT on consumers. Considering
that certain goods and services which were subject to percentage tax
and excise tax would no longer be VAT-exempt, the consumer would be
burdened more as they would be paying the VAT in addition to these
taxes. Thus, there is a need to amend these sections to soften the
impact of VAT.
Separation
of Powers; Delegation of Powers; A logical corollary to the doctrine
of separation of powers is the principle of non-delegation of powers,
a doctrine based on the ethical principle that such as 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.—The principle of
separation of powers ordains that each of the three great branches of
government has exclusive cognizance of and is supreme in matters
falling within its own constitutionally allocated sphere. A logical
corollary to the doctrine of separation of powers is the principle of
non-delegation of powers, as expressed in the Latin maxim: potestas
delegata non delegari potest which means “what has been delegated,
cannot be delegated.” This doctrine is based on the ethical
principle that such as 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.
Same;
Same; Exception to the Non-Delegation of Legislative Powers; Words
and Phrases; The powers which Congress is prohibited from delegating
are those which are strictly, or inherently and exclusively,
legislative—appertaining exclusively to the legislative department;
Purely legislative power has been described as the authority to make
a complete law—complete as to the time when it shall take effect
and as to whom it shall be applicable—and to determine the
expediency of its enactment; It is the nature of the power, and not
the liability of its use or the manner of its exercise, which
determines the validity of its delegation.—With respect to the
Legislature, Section 1 of Article VI of the Constitution provides
that “the Legislative power shall be vested in the Congress of the
Philippines which shall consist of a Senate and a House of
Representatives.” The powers which Congress is prohibited from
delegating are those which are strictly, or inherently and
exclusively, legislative. Purely legislative power, which can never
be delegated, has been described as the authority to make a complete
law—complete as to the time when it shall take effect and as to
whom it shall be applicable—and to determine the expediency of its
enactment. Thus, the rule is that in order that a court may be
justified in holding a statute unconstitutional as a delegation of
legislative power, it must appear that the power involved is purely
legislative in nature—that is, one appertaining exclusively to the
legislative department. It is the nature of the power, and not the
liability of its use or the manner of its exercise, which determines
the validity of its delegation. Nonetheless, the general rule barring
delegation of legislative powers is subject to the following
recognized limitations or exceptions: (1) Delegation of tariff powers
to the President under Section 28 (2) of Article VI of the
Constitution; (2) Delegation of emergency powers to the President
under Section 23 (2) of Article VI of the Constitution; (3)
Delegation to the people at large; (4) Delegation to local
governments; and (5) Delegation to administrative bodies.
Same;
Same; Same; Tests of Valid Delegation; A 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; A sufficient standard is one which
defines legislative policy, marks its limits, maps out its boundaries
and specifies the public agency to apply it.—In every case of
permissible delegation, there must be a showing that the delegation
itself is valid. It 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. A
sufficient standard is one which defines legislative policy, marks
its limits, maps out its boundaries and specifies the public agency
to apply it. It indicates the circumstances under which the
legislative command is to be effected. Both tests are intended to
prevent a total transference of legislative authority to the
delegate, who is not allowed to step into the shoes of the
legislature and exercise a power essentially legislative.
Same;
Same; Taxation; While the power to tax cannot be delegated to
executive agencies, details as to the enforcement and administration
of an exercise of such power may be left to them, including the power
to determine the existence of facts on which its operation depends,
the rationale being that the preliminary ascertainment of facts as
basis for the enactment of legislation is not of itself a legislative
function but is simply ancillary to legislation; The Constitution as
a continuously operative charter of government does not require that
Congress find for itself every fact upon which it desires to base
legislative action or that it make for itself detailed determinations
which it has declared to be prerequisite to application of
legislative policy to particular facts and circumstances impossible
for Congress itself properly to investigate.—The legislature
may delegate to execu-tive officers or bodies the power to determine
certain facts or conditions, or the happening of contingencies, on
which the operation of a statute is, by its terms, made to depend,
but the legislature must prescribe sufficient standards, policies or
limitations on their authority. While the power to tax cannot be
delegated to executive agencies, details as to the enforcement and
administration of an exercise of such power may be left to them,
including the power to determine the existence of facts on which its
operation depends. The rationale for this is that the preliminary
ascertainment of facts as basis for the enactment of legislation is
not of itself a legislative function, but is simply ancillary to
legislation. Thus, the duty of correlating information and making
recommendations is the kind of subsidiary activity which the
legislature may perform through its members, or which it may delegate
to others to perform. Intelligent legislation on the complicated
problems of modern society is impossible in the absence of accurate
information on the part of the legislators, and any reasonable method
of securing such information is proper. The Constitution as a
continuously operative charter of government does not require that
Congress find for itself every fact upon which it desires to base
legislative action or that it make for itself detailed determinations
which it has declared to be prerequisite to application of
legislative policy to particular facts and circumstances impossible
for Congress itself properly to investigate.
Same;
Same; Same; Statutory Construction; The case before the Court is not
a delegation of legislative power—it is simply a delegation of
ascertainment of facts upon which enforcement and administration of
the increase rate under the law is contingent; No discretion would be
exercised by the President; The use of the word “shall” connotes
a mandatory order.—The case before the Court is not a
delegation of legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and administration of
the increase rate under the law is contingent. 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. Highlighting the absence of discretion is
the fact that the word shall is used in the common proviso. The use
of the word shall connotes a mandatory order. Its use in a statute
denotes an imperative obligation and is inconsistent with the idea of
discretion. Where the law is clear and unambiguous, it must be taken
to mean exactly what it says, and courts have no choice but to see to
it that the mandate is obeyed. 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. This is a duty which
cannot be evaded by the President. Inasmuch as the law specifically
uses the word shall, the exercise of discretion by the President does
not come into play. It is a clear directive to impose the 12% VAT
rate when the specified conditions are present. The time of taking
into effect of the 12% VAT rate is based on the happening of a
certain specified contingency, or upon the ascertainment of certain
facts or conditions by a person or body other than the legislature
itself.
Same;
Same; Presidency; Control Power; Doctrine of Qualified Political
Agency; When one speaks of the Secretary of Finance as the alter ego
of the President, it simply means that as head of the Department of
Finance he is the assistant and agent of the Chief Executive—as
such, he occupies a political position and holds office in an
advisory capacity, and, in the language of Thomas Jefferson, “should
be of the President's bosom confidence” and, in the language of
Attorney-General Cushing, is “subject to the direction of the
President.”— When one speaks of the Secretary of Finance as
the alter ego of the President, it simply means that as head of the
Department of Finance he is the assistant and agent of the Chief
Executive. The multifarious executive and administrative functions of
the Chief Executive are performed by and through the executive
departments, and the acts of the secretaries of such departments,
such as the Department of Finance, performed and promulgated in the
regular course of business, are, unless disapproved or reprobated by
the Chief Executive, presumptively the acts of the Chief Executive.
The Secretary of Finance, as such, occupies a political position and
holds office in an advisory capacity, and, in the language of Thomas
Jefferson, “should be of the President’s bosom confidence” and,
in the language of Attorney-General Cushing, is “subject to the
direction of the President.”
Same;
Same; Same; Same; Same; In the present case, in making his
recommendation to the President on the existence of either of the two
conditions, the Secretary of Finance is not acting as the alter ego
of the President or even her subordinate, and he is not subject to
the power of control and direction of the President—he is acting as
the agent of the legislative department, to determine and declare the
event upon which its expressed will is to take effect, becoming the
means or tool by which legislative policy is determined and
implemented.—In the present case, in making his recommendation
to the President on the existence of either of the two conditions,
the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate. In such instance, he is not
subject to the power of control and direction of the President. He is
acting as the agent of the legislative department, to determine and
declare the event upon which its expressed will is to take effect.
The Secretary of Finance becomes the means or tool by which
legislative policy is determined and implemented, considering that he
possesses all the facilities to gather data and information and has a
much broader perspective to properly evaluate them. His function is
to gather and collate statistical data and other pertinent
information and verify if any of the two conditions laid out by
Congress is present. His personality in such instance is in reality
but a projection of that of Congress. Thus, being the agent of
Congress and not of the President, the President cannot alter or
modify or nullify, or set aside the findings of the Secretary of
Finance and to substitute the judgment of the former for that of the
latter.
Same;
Same; 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—in our complex economy that is
frequently the only way in which the legislative process can go
forward.—Congress simply granted the Secretary of Finance the
authority to ascertain the existence of a fact, namely, whether by
December 31, 2005, the 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 the national government deficit as a
percentage of GDP of the previous year exceeds one and one-half
percent (1 1/2%). If either of these two instances has occurred, the
Secretary of Finance, by legislative mandate, must submit such
information to the President. Then the 12% VAT rate must be imposed
by the President effective January 1, 2006. There is no undue
delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. 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; in our complex economy that is frequently the
only way in which the legislative process can go forward.
Same;
Same; Taxation; Value-Added Tax; The intent and will to increase the
VAT rate to 12% came from Congress and the task of the President is
to simply execute the legislative policy.—As to the argument of
petitioners ABAKADA GURO Party List, et al. that delegating to the
President the legislative power to tax is contrary to the principle
of republicanism, the same deserves scant consideration. Congress did
not delegate the power to tax but the mere implementation of the law.
The intent and will to increase the VAT rate to 12% came from
Congress and the task of the President is to simply execute the
legislative policy. That Congress chose to do so in such a manner is
not within the province of the Court to inquire into, its task being
to interpret the law.
Judicial
Review; The Court does not rule on allegations which are manifestly
conjectural, as these may not exist at all—the Court deals with
facts, not fancies, on realities, not appearances.—The
insinuation by petitioners Pimentel, et al. that the President has
ample powers to cause, influence or create the conditions to bring
about either or both the conditions precedent does not deserve any
merit as this argument is highly speculative. The Court does not rule
on allegations which are manifestly conjectural, as these may not
exist at all. The Court deals with facts, not fancies; on realities,
not appearances. When the Court acts on appearances instead of
realities, justice and law will be short-lived.
Same;
Separation of Powers; Statutory Construction; Rewriting the law is a
forbidden ground that only Congress may tread upon.— Under the
common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of
the two conditions set forth therein are satisfied, the President
shall increase the VAT rate to 12%. The provisions of the law are
clear. It does not provide for a return to the 10% rate nor does it
empower the President to so revert if, after the rate is increased to
12%, the VAT collection goes below the 2 4/5 of the GDP of the
previous year or that the national government deficit as a percentage
of GDP of the previous year does not exceed 1 1/2%. Therefore, no
statutory construction or interpretation is needed. Neither can
conditions or limitations be introduced where none is provided for.
Rewriting the law is a forbidden ground that only Congress may tread
upon.
Taxation;
Value-Added Tax; Fiscal Adequacy; Words and Phrases; The principle of
fiscal adequacy as a characteristic of a sound tax system, which was
originally stated by Adam Smith in his Canons of Taxation, simply
means that sources of revenues must be adequate to meet government
expenditures and their variations.— That the first condition
amounts to an incentive to the President to increase the VAT
collection does not render it unconstitutional so long as there is a
public purpose for which the law was passed, which in this case, is
mainly to raise revenue. In fact, fiscal adequacy dictated the need
for a raise in revenue. The principle of fiscal adequacy as a
characteristic of a sound tax system was originally stated by Adam
Smith in his Canons of Taxation (1776), as: IV. Every tax ought to be
so contrived as both to take out and to keep out of the pockets of
the people as little as possible over and above what it brings into
the public treasury of the state. It simply means that sources of
revenues must be adequate to meet government expenditures and their
variations.
Same;
Same; Due Process; Equal Protection; Where the due process and equal
protection clauses are invoked, considering that they are not fixed
rules but rather broad standards, there is a need for proof of such
persuasive character as would lead to such a conclusion.—The
doctrine is that where the due process and equal protection clauses
are invoked, considering that they are not fixed rules but rather
broad standards, there is a need for proof of such persuasive
character as would lead to such a conclusion. Absent such a showing,
the presumption of validity must prevail.
Same;
Same; Words and Phrases; Input Tax is defined under Section 110(A) of
the NIRC, as amended, as the value-added tax due from or paid by a
VAT-registered person on the importation of goods or local purchase
of good and services, including lease or use of property, in the
course of trade or business, from a VAT-registered person, and Output
Tax is the value-added tax due on the sale or lease of taxable goods
or properties or services by any person registered or required to
register under the law.—Section 8 of R.A. No. 9337, amending
Section 110(B) of the NIRC imposes a limitation on the amount of
input tax that may be credited against the output tax. It states, in
part: “[P]rovided, that the input tax inclusive of the input VAT
carried over from the previous quarter that may be credited in every
quarter shall not exceed seventy percent (70%) of the output VAT: …””
Input Tax is defined under Section 110(A) of the NIRC, as amended, as
the value-added tax due from or paid by a VAT-registered person on
the importation of goods or local purchase of good and services,
including lease or use of property, in the course of trade or
business, from a VAT-registered person, and Output Tax is the
value-added tax due on the sale or lease of taxable goods or
properties or services by any person registered or required to
register under the law.
Same;
Same; Due Process; Vested Rights; The input tax is not a property or
a property right within the constitutional purview of the due process
clause—a VAT-registered person’s entitlement to the creditable
input tax is a mere statutory privilege; The right to credit input
tax as against the output tax is clearly a privilege created by law,
a privilege that also the law can remove or limit; The distinction
between statutory privileges and vested rights must be borne in mind
for persons have no vested rights in statutory privileges.—The
input tax is not a property or a property right within the
constitutional purview of the due process clause. A VAT-registered
person’s entitlement to the creditable input tax is a mere
statutory privilege. The distinction between statutory privileges and
vested rights must be borne in mind for persons have no vested rights
in statutory privileges. The state may change or take away rights,
which were created by the law of the state, although it may not take
away property, which was vested by virtue of such rights. Under the
previous system of single-stage taxation, taxes paid at every level
of distribution are not recoverable from the taxes payable, although
it becomes part of the cost, which is deductible from the gross
revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10%
multi-stage tax on all sales, it was then that the crediting of the
input tax paid on purchase or importation of goods and services by
VAT-registered persons against the output tax was introduced. This
was adopted by the Expanded VAT Law (R.A. No. 7716), and The Tax
Reform Act of 1997 (R.A. No. 8424). The right to credit input tax as
against the output tax is clearly a privilege created by law, a
privilege that also the law can remove, or in this case, limit.
Same;
Same; Congress admitted that the spread-out of the creditable input
tax in this case amounts to a 4-year interest-free loan to the
government; For whatever is the purpose of the 60-month amortization,
this involves executive economic policy and legislative wisdom in
which the Court cannot intervene.—It is worth mentioning that
Congress admitted that the spread-out of the creditable input tax in
this case amounts to a 4-year interest-free loan to the government.
In the same breath, Congress also justified its move by saying that
the provision was designed to raise an annual revenue of 22.6
billion. The legislature also dispelled the fear that the provision
will fend off foreign investments, saying that foreign investors have
other tax incentives provided by law, and citing the case of China,
where despite a 17.5% non-creditable VAT, foreign investments were
not deterred. Again, for whatever is the purpose of the 60-month
amortization, this involves executive economic policy and legislative
wisdom in which the Court cannot intervene.
Same;
Same; With regard to the 5% creditable withholding tax imposed on
payments made by the government for taxable transactions, Section 114
(C) of the National Internal Revenue Code merely provides a method of
collection, or as stated by respondents, a more simplified VAT
withholding system—the government in this case is constituted as a
withholding agent with respect to their payments for goods and
services.—With regard to the 5% creditable withholding tax
imposed on payments made by the government for taxable transactions,
Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC,
reads: * * * Section 114(C) merely provides a method of collection,
or as stated by respondents, a more simplified VAT withholding
system. The government in this case is constituted as a withholding
agent with respect to their payments for goods and services. Prior to
its amendment, Section 114(C) provided for different rates of
value-added taxes to be withheld—3% on gross payments for purchases
of goods; 6% on gross payments for services supplied by contractors
other than by public works contractors; 8.5% on gross payments for
services supplied by public work contractors; or 10% on payment for
the lease or use of properties or property rights to nonresident
owners. Under the present Section 114(C), these different rates,
except for the 10% on lease or property rights payment to
nonresidents, were deleted, and a uniform rate of 5% is applied.
Same;
Same; Words and Phrases; In tax usage, “final,” as opposed to
creditable, means full; As applied to value-added tax, taxable
transactions with the government are subject to a 5% tax rate, which
constitutes as full payment of the tax payable on the
transaction.—The Court observes, however, that the law used the
word final. In tax usage, final, as opposed to creditable, means
full. Thus, it is provided in Section 114(C): “final value-added
tax at the rate of five percent (5%).” In Revenue Regulations No.
02-98, implementing R.A. No. 8424 (The Tax Reform Act of 1997), the
concept of final withholding tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax at Source. (A) Final Withholding
Tax.—Under the final withholding tax system the amount of income
tax withheld by the withholding agent is constituted as full and
final payment of the income tax due from the payee on the said
income. The liability for payment of the tax rests primarily on the
payor as a withholding agent. Thus, in case of his failure to
withhold the tax or in case of underwithholding, the deficiency tax
shall be collected from the payor/withholding agent. . . . (B)
Creditable Withholding Tax.—Under the creditable withholding tax
system, taxes withheld on certain income payments are intended to
equal or at least approximate the tax due of the payee on said
income. . . . Taxes withheld on income payments covered by the
expanded withholding tax (referred to in Sec. 2.57.2 of these
regulations) and compensation income (referred to in Sec. 2.78 also
of these regulations) are creditable in nature. As applied to
value-added tax, this means that taxable transactions with the
government are subject to a 5% rate, which constitutes as full
payment of the tax payable on the transaction. This represents the
net VAT payable of the seller. The other 5% effectively accounts for
the standard input VAT (deemed input VAT), in lieu of the actual
input VAT directly or attributable to the taxable transaction.
Same;
Same; It is clear that Congress intended to treat differently
transactions with the government; Since it has not been shown that
the class subject to the final 5% final withholding tax has been
unreasonably narrowed, there is no reason to invalidate the
provision.—The Court need not explore the rationale behind the
provision. It is clear that Congress intended to treat differently
taxable transactions with the government. This is supported by the
fact that under the old provision, the 5% tax withheld by the
government remains creditable against the tax liability of the seller
or contractor, to wit: SEC. 114. Return and Payment of Value-added
Tax.—(C) Withholding of Creditable Value-added Tax.—The
Government or any of its political subdivisions, instrumentalities or
agencies, including government-owned or controlled corporations
(GOCCs) shall, before making payment on account of each purchase of
goods from sellers and services rendered by contractors which are
subject to the value-added tax imposed in Sections 106 and 108 of
this Code, deduct and withhold the value-added tax due at the rate of
three percent (3%) of the gross payment for the purchase of goods and
six percent (6%) on gross receipts for services rendered by
contractors on every sale or installment payment which shall be
creditable against the value-added tax liability of the seller or
contractor: Provided, however, That in the case of government public
works contractors, the withholding rate shall be eight and one-half
percent (8.5%): Provided, further, That the payment for lease or use
of properties or property rights to nonresident owners shall be
subject to ten percent (10%) withholding tax at the time of payment.
For this purpose, the payor or person in control of the payment shall
be considered as the withholding agent. The valued-added tax withheld
under this Section shall be remitted within ten (10) days following
the end of the month the withholding was made. (Emphasis supplied) As
amended, the use of the word final and the deletion of the word
creditable exhibits Congress’s intention to treat transactions with
the government differently. Since it has not been shown that the
class subject to the 5% final withholding tax has been unreasonably
narrowed, there is no reason to invalidate the provision.
Petitioners, as petroleum dealers, are not the only ones subjected to
the 5% final withholding tax. It applies to all those who deal with
the government.
Same;
Same; Judicial Review; The Court will not engage in a legal joust
where premises are what ifs, arguments, theoretical and facts,
uncertain—any disquisition by the Court on this point will only be,
as Shakespeare describes life in Macbeth, “full of sound and fury,
signifying nothing”; It need not take an astute businessman to know
that it is a matter of exception that a business will sell goods or
services without profit or value-added.—Petitioners also argue
that by imposing a limitation on the creditable input tax, the
government gets to tax a profit or value-added even if there is no
profit or value-added. Petitioners’ stance is purely hypothetical,
argumentative, and again, one-sided. The Court will not engage in a
legal joust where premises are what ifs, arguments, theoretical and
facts, uncertain. Any disquisition by the Court on this point will
only be, as Shake-speare describes life in Macbeth, “full of sound
and fury, signifying nothing.” What’s more, petitioners’
contention assumes the proposition that there is no profit or
value-added. It need not take an astute businessman to know that it
is a matter of exception that a business will sell goods or services
without profit or value-added. It cannot be overstressed that a
business is created precisely for profit.
Same;
Same; Equal Protection; The power of the State to make reasonable and
natural classifications for the purposes of taxation has long been
established.—The equal protection clause under the Constitution
means that “no person or class of persons shall be deprived of the
same protection of laws which is enjoyed by other persons or other
classes in the same place and in like circumstances.” The power of
the State to make reasonable and natural classifications for the
purposes of taxation has long been established. Whether it relates to
the subject of taxation, the kind of property, the rates to be
levied, or the amounts to be raised, the methods of assessment,
valuation and collection, the State’s power is entitled to
presumption of validity. As a rule, the judiciary will not interfere
with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.
Same;
Same; Same; The equal protection clause does not require the
universal application of the laws on all persons or things without
distinction; While the implementation of the law may yield varying
end results depending on one’s profit margin and value-added, the
Court cannot go beyond what the legislature has laid down and
interfere with the affairs of business.—Petitioners point out
that the limitation on the creditable input tax if the entity has a
high ratio of input tax, or invests in capital equipment, or has
several transactions with the government, is not based on real and
substantial differences to meet a valid classification. The argument
is pedantic, if not outright baseless. The law does not make any
classification in the subject of taxation, the kind of property, the
rates to be levied or the amounts to be raised, the methods of
assessment, valuation and collection. Petitioners’ alleged
distinctions are based on variables that bear different consequences.
While the implementation of the law may yield varying end results
depending on one’s profit margin and value-added, the Court cannot
go beyond what the legislature has laid down and interfere with the
affairs of business. The equal protection clause does not require the
universal application of the laws on all persons or things without
distinction. This might in fact sometimes result in unequal
protection. What the clause requires is equality among equals as
determined according to a valid classification. By classification is
meant the grouping of persons or things similar to each other in
certain particulars and different from all others in these same
particulars.
Same;
Same; Same; Uniformity of Taxation; The rule of uniform taxation does
not deprive Congress of the power to classify subjects of taxation,
and only demands uniformity within the particular class.—Uniformity
in taxation means that all taxable articles or kinds of property of
the same class shall be taxed at the same rate. Different articles
may be taxed at different amounts provided that the rate is uniform
on the same class everywhere with all people at all times. In this
case, the tax law is uniform as it provides a standard rate of 0% or
10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A.
No. 9337, amending Sections 106, 107 and 108, respectively, of the
NIRC, provide for a rate of 10% (or 12%) on sale of goods and
properties, importation of goods, and sale of services and use or
lease of properties. These same sections also provide for a 0% rate
on certain sales and transaction. Neither does the law make any
distinction as to the type of industry or trade that will bear the
70% limitation on the creditable input tax, 5-year amortization of
input tax paid on purchase of capital goods or the 5% final
withholding tax by the government. It must be stressed that the rule
of uniform taxation does not deprive Congress of the power to
classify subjects of taxation, and only demands uniformity within the
particular class.
Same;
Same; Equitable Taxation; R.A. No. 9337 is equitable.— R.A. No.
9337 is also equitable. The law is equipped with a threshold margin.
The VAT rate of 0% or 10% (or 12%) does not apply to sales of goods
or services with gross annual sales or receipts not exceeding
P1,500,000.00. Also, basic marine and agricultural food products in
their original state are still not subject to the tax, thus ensuring
that prices at the grassroots level will remain accessible. As was
stated in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas,
Inc. vs. Tan: The disputed sales tax is also equitable. It is imposed
only on sales of goods or services by persons engaged in business
with an aggregate gross annual sales exceeding P200,000.00. Small
corner sari-sari stores are consequently exempt from its application.
Likewise exempt from the tax are sales of farm and marine products,
so that the costs of basic food and other necessities, spared as they
are from the incidence of the VAT, are expected to be relatively
lower and within the reach of the general public.
Same;
Same; Progressive Taxation; Progressive taxation is built on the
principle of the taxpayer’s ability to pay—taxation is
progressive when its rate goes up depending on the resources of the
person affected.—Petitioners contend that the limitation on the
creditable input tax is anything but regressive. It is the smaller
business with higher input tax-output tax ratio that will suffer the
consequences. Progressive taxation is built on the principle of the
taxpayer’s ability to pay. This principle was also lifted from Adam
Smith’s Canons of Taxation, and it states: I. The subjects of every
state ought to contribute towards the support of the government, as
nearly as possible, in proportion to their respective abilities; that
is, in proportion to the revenue which they respectively enjoy under
the protection of the state. Taxation is progressive when its rate
goes up depending on the resources of the person affected.
Same;
Same; Same; The VAT is an antithesis of progressive taxation—by its
very nature, it is regressive; The principle of progressive taxation
has no relation with the VAT system inasmuch as the VAT paid by the
consumer or business for every goods bought or services enjoyed is
the same regardless of income.—The VAT is an antithesis of
progressive taxation. By its very nature, it is regressive. The
principle of progressive taxation has no relation with the VAT system
inasmuch as the VAT paid by the consumer or business for every goods
bought or services enjoyed is the same regardless of income. In other
words, the VAT paid eats the same portion of an income, whether big
or small. The disparity lies in the income earned by a person or
profit margin marked by a business, such that the higher the income
or profit margin, the smaller the portion of the income or profit
that is eaten by VAT. A converso, the lower the income or profit
margin, the bigger the part that the VAT eats away. At the end of the
day, it is really the lower income group or businesses with
low-profit margins that is always hardest hit.
Same;
Same; Same; The Constitution does not really prohibit the imposition
of indirect taxes, like the VAT.—The Constitution does not
really prohibit the imposition of indirect taxes, like the VAT. What
it simply provides is that Congress shall “evolve a progressive
system of taxation.” The Court stated in the Tolentino case, thus:
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.’ (E. FERNANDO, THE CONSTITUTION
OF THE PHILIPPINES 221 [Second ed. 1977]) Indeed, the mandate to
Congress is not to prescribe, but to evolve, a progressive tax
system. Otherwise, sales taxes, which perhaps are the oldest form of
indirect taxes, would have been prohibited with the proclamation of
Art. VIII, §17 (1) of the 1973 Constitution from which the present
Art. VI, §28 (1) was taken. Sales taxes are also regressive. Resort
to indirect taxes should be minimized but not avoided entirely
because it is difficult, if not impossible, to avoid them by imposing
such taxes according to the taxpayers' ability to pay. In the case of
the VAT, the law minimizes the regressive effects of this imposition
by providing for zero rating of certain transactions (R.A. No. 7716,
§3, amending §102 (b) of the NIRC), while granting exemptions to
other transactions. (R.A. No. 7716, §4 amending §103 of the
NIRC)
Same; Same; Judicial Review; The Court cannot strike down a law as unconstitutional simply because of its yokes.—It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes. Let us not be overly influenced by the plea that for every wrong there is a remedy, and that the judiciary should stand ready to afford relief. There are undoubtedly many wrongs the judicature may not correct, for instance, those involving political questions. . . . Let us likewise disabuse our minds from the notion that the judiciary is the repository of remedies for all political or social ills; We should not forget that the Constitution has judiciously allocated the powers of government to three distinct and separate compartments; and that judicial interpretation has tended to the preservation of the independence of the three, and a zealous regard of the prerogatives of each, knowing full well that one is not the guardian of the others and that, for official wrong-doing, each may be brought to account, either by impeachment, trial or by the ballot box.
Same; Same; Judicial Review; The Court cannot strike down a law as unconstitutional simply because of its yokes.—It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes. Let us not be overly influenced by the plea that for every wrong there is a remedy, and that the judiciary should stand ready to afford relief. There are undoubtedly many wrongs the judicature may not correct, for instance, those involving political questions. . . . Let us likewise disabuse our minds from the notion that the judiciary is the repository of remedies for all political or social ills; We should not forget that the Constitution has judiciously allocated the powers of government to three distinct and separate compartments; and that judicial interpretation has tended to the preservation of the independence of the three, and a zealous regard of the prerogatives of each, knowing full well that one is not the guardian of the others and that, for official wrong-doing, each may be brought to account, either by impeachment, trial or by the ballot box.
Manila
International Airport Authority vs. City of Pasay, 583 SCRA 234 ,
April 02, 2009
By
express mandate of the Local Government Code, local governments
cannot impose any kind of tax on national government
instrumentalities like the MIAA. (Manila International Airport
Authority vs. Court of Appeals, 495 SCRA 591 [2006])
The
determinative test whether MIAA is exempt from local taxation is not
whether MIAA is a juridical person, but whether it is a national
government instrumentality under Section 133(o) of the Local
Government Code. (I [Manila International Airport Authority vs. City
of Pasay, 583 SCRA 234(2009)]
Administrative
Agencies; Manila International Airport Authority; Manila
International Airport Authority (MIAA) is a government
“instrumentality” that does not qualify as a “government-owned
or controlled corporation.”—A close scrutiny of the
definition of “government-owned or controlled corporation” in
Section 2(13) will show that MIAA would not fall under such
definition. MIAA is a government “instrumentality” that does not
qualify as a “government-owned or controlled corporation.” As
explained in the 2006 MIAA case: “A government-owned or controlled
corporation must be “organized as a stock or non-stock
corporation.” MIAA is not organized as a stock or non-stock
corporation. MIAA is not a stock corporation because it has no
capital stock divided into shares. MIAA has no stockholders or voting
shares. x x x”
Same;
Same; Taxation; Tax Exemptions; Local Government Code; Manila
International Airport Authority (MIAA) is not a government-owned or
controlled corporation but a government instrumentality which is
exempt from any kind of tax from the local governments.—MIAA is
not a government-owned or controlled corporation but a government
instrumentality which is exempt from any kind of tax from the local
governments. Indeed, the exercise of the taxing power of local
government units is subject to the limitations enumerated in Section
133 of the Local Government Code. Under Section 133(o) of the Local
Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence,
MIAA is not liable to pay real property tax for the NAIA Pasay
properties.
Same;
Same; Same; Property; The airport lands and buildings of Manila
International Airport Authority (MIAA) are properties of public
dominion intended for public use; and as such are exempt from real
property tax under Section 234(a) of the Local Government Code (LGC);
Only those portions of the Ninoy Aquino International Airport (NAIA)
Pasay properties which are leased to taxable persons like private
parties are subject to real property tax by the City of Pasay.—The
airport lands and buildings of MIAA are properties of public dominion
intended for public use, and as such are exempt from real property
tax under Section 234(a) of the Local Government Code. However, under
the same provision, if MIAA leases its real property to a taxable
person, the specific property leased becomes subject to real property
tax. In this case, only those portions of the NAIA Pasay properties
which are leased to taxable persons like private parties are subject
to real property tax by the City of Pasay. [Manila International
Airport Authority vs. City of Pasay, 583 SCRA 234(2009)]
Tolentino
vs. Secretary of Finance, 249 SCRA 629 , October 30, 1995
Constitutional
Law; Bill Drafting; All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application,
and private bills must “originate exclusively in the House of
Representatives” but the Senate may propose or concur with
amendments.—In sum, while Art. VI, §24 provides that all
appropriation, revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and private bills must
“originate exclusively in the House of Representatives,” it also
adds, “but the Senate may propose or concur with amendments.” In
the exercise of this power, the Senate may propose an entirely new
bill as a substitute measure. As petitioner Tolentino states in a
high school text, a committee to which a bill is referred may do any
of the following: (1) to endorse the bill without changes; (2) to
make changes in the bill omitting or adding sections or altering its
language; (3) to make and endorse an entirely new bill as a
substitute, in which case it will be known as a committee bill; or
(4) to make no report at all.
Same;
Same; Presidential Certification; Art. VI, Sec. 26(2) qualifies the
requirement that “printed copies of a bill in its final form must
be distributed to the members three days before its passage” and
that before a bill can become a law it must have three readings on
separate days.—As to what Presidential certification can
accomplish, we have already explained in the main decision that the
phrase “except when the President certifies to the necessity of its
immediate enactment, etc.” in Art. VI, §26(2) qualifies not only
the requirement that “printed copies [of a bill] in its final form
[must be] distributed to the members three days before its passage”
but also the requirement that before a bill can become a law it must
have passed “three readings on separate days.” There is not only
textual support for such construction but historical basis as well.
Same;
Same; Same; Exception in cases of Public Calamity and Emergency.—This
provision of the 1973 document, with slight modification, was adopted
in Art. VI §26(2) of the present Constitution, thus: (2) No bill
passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final
form have been distributed to its Members three days before its
passage, except when the President certifies to the necessity of its
immediate enactment to meet a public calamity or emergency. Upon the
last reading of a bill, no amendment thereto shall be allowed, and
the vote thereon shall be taken immediately thereafter, and the yeas
and nays entered in the Journal.
Same;
Same; Same; Same.—The exception is based on the prudential
consideration that if in all cases three readings on separate days
are required and a bill has to be printed in final form before it can
be passed, the need for a law may be rendered academic by the
occurrence of the very emergency or public calamity which it is meant
to address.
Same;
Same; Same; Purpose of Three Readings on Separate Days.—The
purpose for which three readings on separate days is required is said
to be two-fold: (1) to inform the members of Congress of what they
must vote on and (2) to give them notice that a measure is
progressing through the enacting process, thus enabling them and
others interested in the measure to prepare their positions with
reference to it. (1 J.G. SUTHERLAND, STATUTES AND STATUTORY
CONSTRUCTION §10.04, p. 282 (1972)).
Same;
Same; Same; Conference Committee; Conference committee has the power
to insert new provisions as long as these are germane to the subject
of the conference.—Nor is there any doubt about the power of a
conference committee to insert new provisions as long as these are
germane to the subject of the conference. As this Court held in
Philippine Judges Association v. Prado, 227 SCRA 703 (1993), in an
opinion written by then Justice Cruz, the jurisdiction of the
conference committee is not limited to resolving differences between
the Senate and the House. It may propose an entirely new provision.
What is important is that its report is subsequently approved by the
respective houses of Congress. This Court ruled that it would not
entertain allegations that, because new provisions had been added by
the conference committee, there was thereby a violation of the
constitutional injunction that “upon the last reading of a bill, no
amendment thereto shall be allowed.”
Same;
Same; It is the bill which becomes a law that is required to express
in its title the subject of legislation.—PAL asserts that the
amendment of its franchise must be reflected in the title of the law
by specific reference to P.D. No. 1590. It is unnecessary to do this
in order to comply with the constitutional requirement, since it is
already stated in the title that the law seeks to amend the pertinent
provisions of the NIRC, among which is §103(q), in order to widen
the base of the VAT. Actually, it is the bill which becomes a law
that is required to express in its title the subject of legislation.
The titles of H. No. 11197 and S. No. 1630 in fact specifically
referred to §103 of the NIRC as among the provisions sought to be
amended. We are satisfied that sufficient notice had been given of
the pendency of these bills in Congress before they were enacted into
what is now R.A. No. 7116.
Same;
Same; Taxation; The press is not exempt from the taxing power of the
State.—VI. Claims of press freedom and religious liberty. We
have held that, as a general proposition, the press is not exempt
from the taxing power of the State and that what the constitutional
guarantee of free press prohibits are laws which single out the press
or target a group belonging to the press for special treatment or
which in any way discriminate against the press on the basis of the
content of the publication, and RA. No. 7716 is none of these.
Same;
Same; Same; Exceptions; By granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative.—Now it
is contended by the PPI 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.” With respect to the first contention, it would
suffice to say that since the law granted the press a privilege, the
law could take back the privilege anytime without offense to the
Constitution. The reason is simple: by granting exemptions, the State
does not forever waive the exercise of its sovereign prerogative.
Same;
Same; Same; Same; In withdrawing the exemption, the law merely
subjects the press to the same tax burden to which other businesses
have long ago been subject.—Indeed, in withdrawing the
exemption, the law merely subjects the press to the same tax burden
to which other businesses have long ago been subject. It is thus
different from the tax involved in the cases invoked by the PPI. The
license tax in Grosjean v. American Press Co.,297 U.S. 233, 80 L.Ed.
660 (1936) was found to be discriminatory because it was laid on the
gross advertising receipts only of newspapers whose weekly
circulation was over 20,000 with the result that the tax applied only
to 13 out of 124 publishers in Louisiana. These large papers were
critical of Senator Huey Long who controlled the state legislature
which enacted the license tax. The censorial motivation for the law
was thus evident.
Same;
Same; Same; Same; The VAT is imposed on the sale, barter, lease or
exchange of goods or properties or the sale or exchange of services
and the lease of properties purely for revenue purposes.—The
VAT is, however, different. It is not a license tax. It is not a tax
on the exercise of a privilege, much less a constitutional right. It
is imposed on the sale, barter, lease or exchange of goods or
properties or the sale or exchange of services and the lease of
properties purely for revenue purposes. To subject the press to its
payment is not to burden the exercise of its right any more than to
make the press pay income tax or subject it to general regulation is
not to violate its freedom under the Constitution.
Same;
Same; Same; “It is inherent in the power to tax that the State be
free to select the subjects of taxation, and it has been repeatedly
held that ‘inequalities which result from a singling out of one
particular class for taxation, or exemption infringe no
constitutional limitation.’ ”—The sale of food items,
petroleum, medical and veterinary services, etc., which are essential
goods and services was already exempt under §103, pars. (b) (d) (1)
of the NIRC before the enactment of R.A. No. 7716. Petitioner is in
error in claiming that R.A. No. 7716 granted exemption to these
transactions, while subjecting those of petitioner to the payment of
the VAT. Moreover, there is a difference between the “homeless
poor” and the “homeless less poor” in the example given by
petitioner, because the second group or middle class can afford to
rent houses in the meantime that they cannot yet buy their own homes.
The two social classes are thus differently situated in life. “It
is inherent in the power to tax that the State be free to select the
subjects of taxation, and it has been repeatedly held that
‘inequalities which result from a singling out of one particular
class for taxation, or exemption infringe no constitutional
limitation.’ ” (Lutz v. Araneta, 98 Phil. 148, 153 (1955).
Accord, City of Baguio v. De Leon, 134 Phil. 912 (1968); Sison, Jr.
v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga Naglilingkod
sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA.
Same;
Same; Same; Equality and uniformity of taxation means that all
taxable articles or kinds of property of the same class be taxed at
the same rate.—Equality and uniformity of taxation means 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, forms and corporations placed in
similar situation. (City of Baguio v. De Leon, 134 Phil. 912 (1968);
Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984)).
Same;
Same; Same; Congress shall “evolve a progressive system of
taxation” has been interpreted to mean that “direct taxes are to
be preferred and as much as possible indirect taxes should be
minimized.”—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.” (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221
(Second ed. 1977)) Indeed, the mandate to Congress is not to
prescribe, but to revolve, a progressive tax system. Otherwise, sales
taxes, which perhaps are the oldest form of indirect taxes, would
have been prohibited with the proclamation of Art. VIII, §17(1) of
the 1973 Constitution from which the present Art. VI, §28(1) was
taken. Sales taxes are also regressive. Resort to indirect taxes
should be minimized but not avoided entirely because it is difficult,
if not impossible, to avoid them by imposing such taxes according to
the taxpayers’ ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition by providing for
zero rating of certain transactions (R.A. No. 7716, §3, amending
§102(b) of the NIRC), while granting exemptions to other
transactions. (R.A. No. 7716, §4, amending §103 of the NIRC).
Same; Same; Same; Charitable institutions, churches and parsonages by reason of Art. VI, §28 (3), and non-stock, non-profit educational institutions by reason of Art. XIV, §4(3) which under the Constitution are the only exempt from taxation.—Indeed, petitioner’s theory amounts to saying that under the Constitution cooperatives are exempt from taxation. Such theory is contrary to the Constitution under which only the following are exempt from taxation: charitable institutions, churches and parsonages, by reason of Art. VI, §28(3), and non-stock, non-profit educational institutions, by reason of Art. XIV, §4(3).
Same; Same; Same; Charitable institutions, churches and parsonages by reason of Art. VI, §28 (3), and non-stock, non-profit educational institutions by reason of Art. XIV, §4(3) which under the Constitution are the only exempt from taxation.—Indeed, petitioner’s theory amounts to saying that under the Constitution cooperatives are exempt from taxation. Such theory is contrary to the Constitution under which only the following are exempt from taxation: charitable institutions, churches and parsonages, by reason of Art. VI, §28(3), and non-stock, non-profit educational institutions, by reason of Art. XIV, §4(3).
British
American Tobacco vs. Camacho, 562 SCRA 511 , August 20, 2008
Taxation;
Legislative Classification Freeze Scheme; The assailed feature of
this law pertains to the mechanism where, after a brand is classified
based on its current net retail price, the classification is frozen
and only Congress can thereafter reclassify the same.—As can be
seen, the law creates a four-tiered system which we may refer to as
the low-priced, medium-priced, high-priced, and premium-priced tax
brackets. When a brand is introduced in the market, the current net
retail price is determined through the aforequoted specified
procedure. The current net retail price is then used to classify
under which tax bracket the brand belongs in order to finally
determine the corresponding excise tax rate on a per pack basis. The
assailed feature of this law pertains to the mechanism where, after a
brand is classified based on its current net retail price, the
classification is frozen and only Congress can thereafter reclassify
the same. From a practical point of view, Annex “D” is merely a
by-product of the whole mechanism and philosophy of the assailed law.
That is, the brands under Annex “D” were also classified based on
their current net retail price, the only difference being that they
were the first ones so classified since they were the only brands
surveyed as of October 1, 1996, or prior to the effectivity of RA
8240 on January 1, 1997. Due to this legislative classification
scheme, it is possible that over time the net retail price of a
previously classified brand, whether it be a brand under Annex “D”
or a new brand classified after the effectivity of RA 8240 on January
1, 1997, would increase (due to inflation, increase of production
costs, manufacturer’s decision to increase its prices, etc.) to a
point that its net retail price pierces the tax bracket to which it
was previously classified. Consequently, even if its present day net
retail price would make it fall under a higher tax bracket, the
previously classified brand would continue to be subject to the
excise tax rate under the lower tax bracket by virtue of the
legislative classification freeze.
Same;
Same; Equal Protection; Requisites; In our jurisdiction, the standard
and analysis of equal protection challenges in the main have followed
the “rational basis” test, coupled with a deferential attitude to
legislative classifications and a reluctance to invalidate a law
unless there is a showing of a clear and unequivocal breach of the
Constitution; A legislative classification, to survive an equal
protection challenge, must be shown to rationally further a
legitimate state interest—the classifications must be reasonable
and rest upon some ground of difference having a fair and substantial
relation to the object of the legislation.—We have held that
“in our jurisdiction, the standard and analysis of equal protection
challenges in the main have followed the ‘rational basis’ test,
coupled with a deferential attitude to legislative classifications
and a reluctance to invalidate a law unless there is a showing of a
clear and unequivocal breach of the Constitution.” Within the
present context of tax legislation on sin products which neither
contains a suspect classification nor impinges on a fundamental
right, the rational-basis test thus finds application. Under this
test, a legislative classification, to survive an equal protection
challenge, must be shown to rationally further a legitimate state
interest. The classifications must be reasonable and rest upon some
ground of difference having a fair and substantial relation to the
object of the legislation. Since every law has in its favor the
presumption of constitutionality, the burden of proof is on the one
attacking the constitutionality of the law to prove beyond reasonable
doubt that the legislative classification is without rational basis.
The presumption of constitutionality can be overcome only by the most
explicit demonstration that a classification is a hostile and
oppressive discrimination against particular persons and classes, and
that there is no conceivable basis which might support it. A
legislative classification that is reasonable does not offend the
constitutional guaranty of the equal protection of the laws. 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.
Same;
Same; Same; It is quite evident that the classification freeze
provision could hardly be considered arbitrary, or motivated by a
hostile or oppressive attitude to unduly favor older brands over
newer brands; 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.—It is quite
evident that the classification freeze provision could hardly be
considered arbitrary, or motivated by a hostile or oppressive
attitude to unduly favor older brands over newer brands. Congress was
unequivocal in its unwillingness to delegate the power to
periodically adjust the excise tax rate and tax brackets as well as
to periodically resurvey and reclassify the cigarette brands based on
the increase in the consumer price index to the DOF and the BIR.
Congress doubted the constitutionality of such delegation of power,
and likewise, considered the ethical implications thereof. Curiously,
the classification freeze provision was put in place of the periodic
adjustment and reclassification provision because of the belief that
the latter would foster an anti-competitive atmosphere in the market.
Yet, as it is, this same criticism is being foisted by petitioner
upon the classification freeze provision. To our mind, 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. In particular, the
questioned provision addressed Congress’s administrative concerns
regarding delegating too much authority to the DOF and BIR as this
will open the tax system to potential areas for abuse and corruption.
Congress may have reasonably conceived that a tax system which would
give the least amount of discretion to the tax implementers would
address the problems of tax avoidance and tax evasion.
Same;
Same; Same; Administrative concerns may provide a legitimate,
rational basis for legislative classification.—Congress sought
to, among others, simplify the whole tax system for sin products to
remove these potential areas of abuse and corruption from both the
side of the taxpayer and the government. Without doubt, the
classification freeze provision was an integral part of this overall
plan. This is in line with one of the avowed objectives of the
assailed law “to simplify the tax administration and compliance
with the tax laws that are about to unfold in order to minimize
losses arising from inefficiencies and tax avoidance scheme, if not
outright tax evasion.” RA 9334 did not alter this classification
freeze provision of RA 8240. On the contrary, Congress affirmed this
freezing mechanism by clarifying the wording of the law. We can thus
reasonably conclude, as the deliberations on RA 9334 readily show,
that the administrative concerns in tax administration, which moved
Congress to enact the classification freeze provision in RA 8240,
were merely continued by RA 9334. Indeed, administrative concerns may
provide a legitimate, rational basis for legislative classification.
In the case at bar, these administrative concerns in the measurement
and collection of excise taxes on sin products are readily apparent
as afore-discussed.
Same;
Same; Same; The legislative deliberations also show that the
classification freeze provision was intended to generate buoyant and
stable revenues for government; Since the classification freeze
provision addressed Congress’s administrative concerns in the
simplification of tax administration of sin products, elimination of
potential areas for abuse and corruption in tax collection, buoyant
and stable revenue generation, and ease of projection of revenues,
there can be no denial of the equal protection of the laws as the
rational-basis test is amply satisfied.—Aside from the major
concern regarding the elimination of potential areas for abuse and
corruption from the tax administration of sin products, the
legislative deliberations also show that the classification freeze
provision was intended to generate buoyant and stable revenues for
government. With the frozen tax classifications, the revenue inflow
would remain stable and the government would be able to predict with
a greater degree of certainty the amount of taxes that a cigarette
manufacturer would pay given the trend in its sales volume over time.
The reason for this is that the previously classified cigarette
brands would be prevented from moving either upward or downward their
tax brackets despite the changes in their net retail prices in the
future and, as a result, the amount of taxes due from them would
remain predictable. The classification freeze provision would, thus,
aid in the revenue planning of the government. All in all, the
classification freeze provision addressed Congress’s administrative
concerns in the simplification of tax administration of sin products,
elimination of potential areas for abuse and corruption in tax
collection, buoyant and stable revenue generation, and ease of
projection of revenues. Consequently, there can be no denial of the
equal protection of the laws since the rational-basis test is amply
satisfied.
Same;
Same; Same; Due Process; Verily, where there is a claim of breach of
the due process and equal protection clauses, considering that they
are not fixed rules but rather broad standards, there is a need for
proof of such persuasive character as would lead to such a
conclusion—absent such a showing, the presumption of validity must
prevail.—Petitioner did not, however, clearly demonstrate the
exact extent of such impact. It has not been shown that the net
retail prices of other older brands previously classified under this
classification system have already pierced their tax brackets, and,
if so, how this has affected the overall competition in the market.
Further, it does not necessarily follow that newer brands cannot
compete against older brands because price is not the only factor in
the market as there are other factors like consumer preference, brand
loyalty, etc. In other words, even if the newer brands are priced
higher due to the differential tax treatment, it does not mean that
they cannot compete in the market especially since cigarettes contain
addictive ingredients so that a consumer may be willing to pay a
higher price for a particular brand solely due to its unique
formulation. It may also be noted that in 2003, the BIR surveyed 29
new brands that were introduced in the market after the effectivity
of RA 8240 on January 1, 1997, thus negating the sweeping
generalization of petitioner that the classification freeze provision
has become an insurmountable barrier to the entry of new brands.
Verily, where there is a claim of breach of the due process and equal
protection clauses, considering that they are not fixed rules but
rather broad standards, there is a need for proof of such persuasive
character as would lead to such a conclusion. Absent such a showing,
the presumption of validity must prevail.
Same;
Same; Same; For as long as the legislative classification is
rationally related to furthering some legitimate state interest, the
rational-basis test is satisfied and the constitutional challenge is
perfunctorily defeated.—Whether Congress acted improvidently in
derogating, to a limited extent, the state’s interest in promoting
fair competition among the players in the industry, while pursuing
other state interests regarding the simplification of tax
administration of sin products, elimination of potential areas for
abuse and corruption in tax collection, buoyant and stable revenue
generation, and ease of projection of revenues through the
classification freeze provision, and whether the questioned provision
is the best means to achieve these state interests, necessarily go
into the wisdom of the assailed law which we cannot inquire into,
much less overrule. 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.
On the contrary, we must reasonably assume, owing to the respect due
a co-equal branch of government and as revealed by the Congressional
deliberations, that the 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.
Same;
Separation of Powers; The Court does not sit in judgment as a
supra-legislature to decide, after a law is passed by Congress, which
state interest is superior over another, or which method is better
suited to achieve one, some or all of the state’s interests, or
what these interests should be in the first place—the judiciary
does not settle policy issues.—We do not sit in judgment as a
supra-legislature to decide, after a law is passed by Congress, which
state interest is superior over another, or which method is better
suited to achieve one, some or all of the state’s interests, or
what these interests should be in the first place. This
policy-determining power, by constitutional fiat, belongs to Congress
as it is its function to determine and balance these interests or
choose which ones to pursue. Time and again we have ruled that the
judiciary does not settle policy issues. The Court can only declare
what the law is and not what the law should be. Under our system of
government, policy issues are within the domain of the political
branches of government and of the people themselves as the repository
of all state power. Thus, the legislative classification under the
classification freeze provision, after having been shown to be
rationally related to achieve certain legitimate state interests and
done in good faith, must, perforce, end our inquiry.
Same;
Same; Certainly, the Court cannot declare a statute unconstitutional
merely because it can be improved or that it does not tend to achieve
all of its stated objectives.—The finding that the assailed law
seems to derogate, to a limited extent, one of its avowed objectives
(i.e. promoting fair competition among the players in the industry)
would suggest that, by Congress’s own standards, the current excise
tax system on sin products is imperfect. But, certainly, we cannot
declare a statute unconstitutional merely because it can be improved
or that it does not tend to achieve all of its stated objectives.
This is especially true for tax legislation which simultaneously
addresses and impacts multiple state interests. Absent a clear
showing of breach of constitutional limitations, Congress, owing to
its vast experience and expertise in the field of taxation, must be
given sufficient leeway to formulate and experiment with different
tax systems to address the complex issues and problems related to tax
administration. Whatever imperfections that may occur, the same
should be addressed to the democratic process to refine and evolve a
taxation system which ideally will achieve most, if not all, of the
state’s objectives.
Same;
Administrative Law; Unless expressly granted to the Bureau of
Internal Revenue (BIR), the power to reclassify cigarette brands
remains a prerogative of the legislature which cannot be usurped by
the former.—It is clear that the afore-quoted portions of
Revenue Regulations No. 1-97, as amended by Section 2 of Revenue
Regulations 9-2003, and Revenue Memorandum Order No. 6-2003
unjustifiably emasculate the operation of Section 145 of the NIRC
because they authorize the Commissioner of Internal Revenue to update
the tax classification of new brands every two years or earlier
subject only to its issuance of the appropriate Revenue Regulations,
when nowhere in Section 145 is such authority granted to the Bureau.
Unless expressly granted to the BIR, the power to reclassify
cigarette brands remains a prerogative of the legislature which
cannot be usurped by the former.
Same;
Legislative Classification Freeze Scheme; Equal Protection; The
classification freeze provision uniformly applies to all newly
introduced brands in the market, whether imported or locally
manufactured. It does not purport to single out imported cigarettes
in order to unduly favor locally produced ones.—The
classification freeze provision uniformly applies to all newly
introduced brands in the market, whether imported or locally
manufactured. It does not purport to single out imported cigarettes
in order to unduly favor locally produced ones. Further, petitioner’s
evidence was anchored on the alleged unequal tax treatment between
old and new brands which involves a different frame of reference
vis-à-vis local and imported products. Petitioner has, therefore,
failed to clearly prove its case, both factually and legally, within
the parameters of the GATT.
Public
International Law; Treaties; The General Agreement on Tariffs and
Trade (GATT), a treaty duly ratified by the Philippine Senate and
under Article VII, Section 21 of the Constitution, merely acquired
the status of a statute; In case of irreconcilable conflict between
statutes, RA 8240, as amended by RA 9334, would prevail over the
General Agreement on Tariffs and Trade (GATT) either as a later
enactment by Congress or as a special law dealing with the taxation
of sin products.—Even assuming arguendo that petitioner was
able to prove that the classification freeze provision violates the
GATT, the outcome would still be the same. The GATT is a treaty duly
ratified by the Philippine Senate and under Article VII, Section 21
of the Constitution, it merely acquired the status of a statute.
Applying the basic principles of statutory construction in case of
irreconcilable conflict between statutes, RA 8240, as amended by RA
9334, would prevail over the GATT either as a later enactment by
Congress or as a special law dealing with the taxation of sin
products.
Niceeee. Thanks atty!
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