CIR vs. Algue Inc. GR No. L-28896 | Feb. 17, 1988

         Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities         On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959, amtg to

P83,183.85         A letter of protest or reconsideration was filed by Algue Inc on Jan 18         On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who refused to receive

it on the ground of the pending protest         Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent Reyes, who

deferred service of the warrant         On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then that he

accepted the warrant of distraint and levy earlier sought to be served         On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals         CIR contentions:-          the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business

expense-          payments are fictitious because most of the payees are members of the same family in control of Algue and that there is not

enough substantiation of such payments         CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees. These were

collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue as legitimate business expenses in its income tax returns

         Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance, in accordance with law.          RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged         During the intervening period, the warrant was premature and could therefore not be served.         Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but later on conformed to the

decision of CTA         There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the

corresponding taxes thereon. CTA also found, after examining the evidence, that no distribution of dividends was involved         CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction         Algue Inc. was a family corporation where strict business procedures were not applied and immediate issuance of receipts was

not required. at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00. This arrangement was understandable in view of the close relationship among the persons in the family corporation

         The amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties.

         Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered xxx

         the burden is on the taxpayer to prove the validity of the claimed deduction         In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by

the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos.

         Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values

         Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor

Algue Inc.’s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by Algue Inc. was permitted under the Internal Revenue Code and should therefore not have been disallowed by the CIR

ABAKADA Guro Party List vs. ErmitaG.R. No. 168056 September 1, 2005

FACTS: Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition on May 27, 2005 questioning the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniformp ro v is o authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after specified conditions have been satisfied. Petitioners argue that the law is unconstitutional.

ISSUES:

1. Whether or not there is a violation of Article VI, Section 24 of the Constitution.

2. Whether or not there is undue delegation of legislative power in violation of Article VI Sec 28(2) of the Constitution.

3. Whether or not there is a violation of the due process and equal protection under Article III Sec. 1 of the Constitution.

RULING:

1. 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, and excise and franchise taxes.

2. 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.

3. 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.

Compañia General de Tabacos de Filipinas vs. City of Manila

Appeal from the decision of the Court of First Instance of Manila ordering the City Treasurer of Manila to refund the sum of P15,280.00 to Compania General de Tabacos de Filipinas.

Appellee Compania General de Tabacos de Filipinas — hereinafter referred to simply as Tabacalera — filed this action in the Court of First Instance of Manila to recover from appellants, City of Manila and its Treasurer, Marcelino Sarmiento — also hereinafter referred to as the City — the sum of P15,280.00 allegedly overpaid by it as taxes on its wholesale and retail sales of liquor for the period from the third quarter of 1954 to the second quarter of 1957, inclusive, under Ordinances Nos. 3634, 3301, and 3816.

Tabacalera, as a duly licensed first class wholesale and retail liquor dealer paid the City the fixed license fees prescribed by Ordinance No. 3358 for the years 1954 to 1957, inclusive, and, as a wholesale and retail dealer of general merchandise, it also paid the sales taxes required by Ordinances Nos. 3634, 3301, and 3816.

Issue: Whether it is tax or license fee

Ruling: The term "tax" applies — generally speaking — to all kinds of exactions which become public funds. The term is often loosely used to include levies for revenue as well as levies for regulatory purposes. Thus license fees are commonly called taxes. Legally speaking, however, license fee is a legal concept quite distinct from tax; the former is imposed in the exercise of police power for purposes of regulation, while the latter is imposed under the taxing power for the purpose of raising revenues (MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 26).

Ordinance No. 3358 is clearly one that prescribes municipal license fees for the privilege to engage in the business of selling liquor or alcoholic beverages, having been enacted by the Municipal Board of Manila pursuant to its charter power to fix license fees on, and regulate, the sale of intoxicating liquors, whether imported or locally manufactured. (Section 18 [p], Republic Act 409, as amended). The license fees imposed by it are essentially for purposes of regulation, and are justified, considering that the sale of intoxicating liquor is, potentially at least, harmful to public health and morals, and must be subject to supervision or regulation by the state and by cities and municipalities authorized to act in the premises. (MacQuillin, supra, p. 445.)

On the other hand, it is clear that Ordinances Nos. 3634, 3301, and 3816 impose taxes on the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise. (Section 10 [o], Republic Act No. 409, as amended.).

It is already settled in this connection that both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article, this not being in violation of the rule against double taxation.

Osmeña Vs. Orbos 220 SCRA 703G.R. No. 99886March 31, 1993 

Facts: On October 10, 1984, Pres. Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. 

Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O. 1024, and ordered released from the National Treasury to the Ministry of Energy. 

Pres. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the underrecovery being left for determination by the Ministry of Finance. 

The petition avers that the creation of the trust fund violates 29(3), Article VI of the Constitution, reading as follows: 

(3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purposes only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. 

The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated as a special fund' to be used only for the purpose indicated, and not channeled to another government objective." Petitioner further points out that since "a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created." 

He also contends that the "delegation of legislative authority" to the ERB violates 28 (2). Article VI of the Constitution, viz.: 

(2) The Congress may, by law, authorize the President to fix, within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government; 

and, inasmuch as the delegation relates to the exercise of the power of taxation, "the limits, limitations and restrictions must be quantitative, that is, the law must not only specify how to tax, who (shall) be taxed (and) what the tax is for, but also impose a specific limit on how much to tax." 12 

Issue: 

Whether or Not the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry of Energy (now, the Office of Energy Affairs), created pursuant to § 8, paragraph 1, of P.D. No. 1956, as amended, "said creation of a trust fund being contrary to Section 29 (3), Article VI of the Constitution. 

Whether or Not the unconstitutionality of 8, paragraph 1 (c) of P.D. No. 1956, as amended by Executive Order No. 137, for "being an undue and invalid delegation of legislative power to the Energy Regulatory Board. 

Held: The OPSF is a "Trust Account" which was established "for the purpose of minimizing the frequent price changes brought about by exchange rate adjustment and/or changes in world market prices of crude oil and imported petroleum products." Under P.D. No. 1956, as amended by Executive Order No. 137 dated 27 February 1987, this Trust Account may be funded from any of the following sources: 

a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister of Finance in consultation with the Board of Energy; 

b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy; 

c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products; 

d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. 

Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA.

The Court is satisfied that these measures comply with the constitutional description of a "special fund." Indeed, the practice is not without precedent. 

With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, § 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. 

What petitioner would wish is the fixing of some definite, quantitative restriction, or "a specific limit on how much to tax." The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State. 

The interplay and constant fluctuation of the various factors involved in the determination of the price of oil and petroleum products, and the frequently shifting need to either augment or exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law as proposed by the petitioner. To do so would render the ERB unable to respond effectively so as to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as it is expressed suffices to guide the delegate in the exercise of the delegated power, taking account of the circumstances under which it is to be exercised.

PHILIPPINE AIRLINES, INC. v. EDUG.R. No. L- 41383, August 15, 1988

FACTS:The Philippine Airlines (PAL) is a corporation engaged in the air transportation business

under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the payment of taxes.

Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate (Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees.

Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu and National Treasurer Ubaldo Carbonell (Carbonell).

The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which in turn certified the case to the Supreme Court.

ISSUE:            Whether or not motor vehicle registration fees are considered as taxes.

RULING:Yes. 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. Such is the case of motor vehicle registration fees. The motor vehicle registration fees are actually taxes intended for additional revenues of the government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program. 

Progressive Development Corporation vs. Quezon City

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

In case of failure of the owners of the market spaces to pay the tax for three consecutive months, the City shall revoke the permit of the privately-owned market to operate.

Progressive Development Corp, owner and operator of Farmer’s Market, filed a petition for prohibition against QC on the ground that the tax imposed by the Market Code was in reality a tax on income, which the municipal corporation was prohibited by law to impose.

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

Held: It is a license fee. A LICENSE FEE is imposed in the exercise of the police power primarily for purposes of regulation, while TAX is imposed under the taxing power primarily for purposes of raising revenues.

If the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally, revenue is also obtained does not make the imposition a tax.

To be considered a license fee, the imposition must relate to an occupation or activity that so engages the public interest in health, morals, safety, and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences.

In this case, the Farmers’ Market is a privately-owned market established for the rendition of service to the general public. It warrants close supervision and control by the City for the protection of the health of the public by insuring the maintenance of sanitary conditions, prevention of fraud upon the buying public, etc.

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

Such basis actually has a reasonable relationship to the probable costs of regulation and supervision of Progressive’s kind of business, since ordinarily, the higher the amount of rentals, the higher the volume of items sold.

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

Tolentino vs Secretary of Finance

Political Law – Origination of Revenue Bills – EVAT – Amendment by Substitution

Tolentino et al is questioning the constitutionality of RA 7716 otherwise known as the Expanded Value Added Tax (EVAT) Law. Tolentino averred that this revenue bill did not exclusively originate from the House of Representatives as required by Section 24, Article 6 of the Constitution. Even though RA 7716 originated as HB 11197 and that it passed the 3 readings in the HoR, the same did not complete the 3 readings in Senate for after the 1st reading it was referred to the Senate Ways & Means Committee thereafter Senate passed its own version known as Senate Bill 1630. Tolentino averred that what Senate could have done is amend HB 11197 by striking out its text and substituting it w/ the text of SB 1630 in that way “the bill remains a House Bill and the Senate version just becomes the text (only the text) of the HB”. Tolentino and co-petitioner Roco [however] even signed the said Senate Bill.

ISSUE: Whether or not EVAT originated in the HoR.

HELD: By a 9-6 vote, the SC rejected the challenge, holding that such consolidation was consistent with the power of the Senate to propose or concur with amendments to the version originated in the HoR. What the Constitution simply means, according to the 9 justices, is that the initiative must come from the HoR. Note also that there were several instances before where Senate passed its own version rather than having the HoR version as far as revenue and other such bills are concerned. This practice of amendment by substitution has always been accepted. The proposition of Tolentino concerns a mere matter of form. There is no showing that it would make a significant difference if Senate were to adopt his over what has been done.

Tolentino vs. Secretary of Finance GR 115455 Oct. 30 1995

Facts: 

                The VAT is levied on the sale, barter, or exchanged of the goods and properties as well as on the sale of services. RA7116 seeks to wider the tax base of the existing VAT system and enhance it administration on by amending the NIRC. CRTBA asserts that R.A. 7116 is unconstitutional as it violate the rule that taxes should be uniform and equitable.

Issue: is it meritorious?

Ruling:

                 No. Equity and uniformity in taxation means that all the taxable articles or kinds of properties of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this

requirement, it is enough that the statute or ordinance applies equally to all persons, firms, and corporations placed in a similar situation.

Republic of the Philippines v. Bacolod-Murcia Milling Co., Inc.

G.R. Nos. L-19824, L-19825 and 19826             July 9, 1966REPUBLIC OF THE PHILIPPINES v. BACOLOD-MURCIA MILLING CO., INC., MA-AO SUGAR CENTRAL CO., INC., and TALISAY-SILAY MILLING COMPANY, REGALA, J.:

FACTS:This is a joint appeal by three sugar centrals, Bacolod Murcia Milling Co., Inc., Ma-ao Sugar Central Co., Inc., and Talisay-Silay Milling Co., sister companies under one controlling ownership and management, from a decision of the Court of First Instance of Manila finding them liable for special assessments under Section 15 of Republic Act No. 632.Republic Act No. 632 is the charter of the Philippine Sugar Institute, Philsugin for short, a semi-public corporation.Sections 15 and 16 of the aforementioned law provide:Sec. 15. Capitalization. — To raise the necessary funds to carry out the provisions of this Act and the purposes of the corporation, there shall be levied on the annual sugar production a tax of TEN CENTAVOS [P0.10] per picul of sugar to be collected for a period of five (5) years beginning the crop year 1951-1952. The amount shall be borne by the sugar cane planters and the sugar centrals in the proportion of their corresponding milling share, and said levy shall constitute a lien on their sugar quedans and/or warehouse receipts.Sec. 16. Special Fund. — The proceeds of the foregoing levy shall be set aside to constitute a special fund to be known as the "Sugar Research and Stabilization Fund," which shall be available exclusively for the use of the corporation. All the income and receipts derived from the special fund herein created shall accrue to, and form part of the said fund to be available solely for the use of the corporation.

The facts of this case bearing relevance to the issue under consideration, as recited by the lower court and accepted by the appellants, are the following:x x x during the 5 crop years mentioned in the law, namely 1951-1952, 1952-1953, 1953-1954, 1954-1955 and 1955-1956, defendant Bacolod-Murcia Milling Co., Inc., has paid P267,468.00 but left an unpaid balance of P216,070.50; defendant Ma-ao Sugar Central Co., Inc., has paid P117,613.44 but left unpaid balance of P235,800.20; defendant Talisay-Silay Milling Company has paid P251,812.43 but left unpaid balance of P208,193.74; and defendant Central Azucarera del Danao made a payment of P49,897.78 but left unpaid balance of P48,059.77. There is no question regarding the correctness of the amounts paid and the amounts that remain unpaid.From the evidence presented, on which there is no controversy, it was disclosed that on September 3, 1951, the Philippine Sugar Institute, known as the PHILSUGIN for short, acquired the Insular Sugar Refinery for a total consideration of P3,070,909.60 payable, in accordance with the deed of sale Exhibit A, in 3 installments from the process of the sugar tax to be collected, under Republic Act 632. The evidence further discloses that the operation of the Insular Sugar Refinery for the years, 1954, 1955, 1956 and 1957 was disastrous in the sense that PHILSUGIN incurred tremendous losses as shown by an examination of the statements of income and expenses marked Exhibits 5, 6, 7 and 8. Through the testimony of Mr. Cenon Flor Cruz, former acting general manager of PHILSUGIN and at present technical consultant of said entity, presented by the defendants as witnesses, it has been shown that the operation of the Insular Sugar Refinery has consumed 70% of the thinking time and effort of the PHILSUGIN management. x x x .

ISSUES:First. It is fallacious to argue that no mismanagement or abuse of corporate power could have been committed by Philsugin solely because its charter incorporates so many devices or safeguards to preclude such abuse. 

Second. The appellants' refusal to continue paying the assessment under Republic Act 632 may not rightly be equated with a taxpayer's refusal to pay his ordinary taxes precisely because there is a substantial distinction between a "special assessment" and an ordinary tax. The purpose of the former is to finance the improvement of particular properties, with the benefits of the improvement accruing or inuring to the owners thereof who, after all, pay the assessment. The purpose of an ordinary tax, on the other hand, is to provide the Government with revenues needed for the financing of state affairs. Thus, while the refusal of a citizen to pay his ordinary taxes may not indeed be sanctioned because it would impair government functions, the same would not hold true in the case of a refusal to comply with a special assessment.

Third. Upon a host of decisions of the United States Supreme Court, the imposition or collection of a special assessment upon property owners who receive no benefit from such assessment amounts to a denial of due process. 

RULING:We find for the appellee.The nature of a "special assessment" similar to the case at bar has already been discussed and explained by this Court in the case of Lutz vs. Araneta, 98 Phil. 148. For in this Lutz case, Commonwealth Act 567, otherwise known as the Sugar Adjustment Act, levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others for a consideration, on lease or otherwise —a tax equivalent to the difference between the money value of the rental or consideration collected and the amount representing 12 per centum of the assessed value of such land. (Sec. 3).

Under Section 6 of the said law, Commonwealth Act 567, all collections made thereunder "shall accrue to a special fund in the Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid out only for any or all of the following purposes or to attain any or all of the following objectives, as may be provided by law." It then proceeds to enumerate the said purposes, among which are "to place the sugar industry in a position to maintain itself; ... to readjust the benefits derived from the sugar industry ... so that all might continue profitably to engage therein; to limit the production of sugar to areas more economically suited to the production thereof; and to afford laborers employed in the industry a living wage and to improve their living and working conditions.The plaintiff in the above case, Walter Lutz, contended that the aforementioned tax or special assessment was unconstitutional because it was being "levied for the aid and support of the sugar industry exclusively," and therefore, not for a public purpose. In rejecting the theory advanced by the said plaintiff, this Court said:The basic defect in the plaintiff's position in his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly Section 6, will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power.It was competent for the Legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the law-making body could provide that the distribution of benefits therefrom be readjusted among its components, to enable it to resist the added strain of the increase in taxes that it had to sustain Once it is conceded, as it must that the protection and promotion of the sugar industry is a matter of public concern, it follows that 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 the law (above quoted) bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike 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.

On the authority of the above case, then, We hold that the special assessment at bar may be considered as similarly as the above, that is, that the levy for the Philsugin Fund is not so much an exercise of the power of taxation, nor the imposition of a special assessment, but, the exercise of the police power for the general

welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen may lawfully resist.