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 A. Nature and Limitations of the Power of Taxation1. Nature of the power of taxation

a. Inherent in sovereigntyThe power of taxation is an incident of sovereignty as it is inherent in the State, beonging as a matter of

right to every independent government. !t does not need of constitutiona conferment. "onstitutiona

provisions do not give rise to the power to tax but merey impose imitations on what woud otherwise be

an invincibe power.

Roxas v CTA, 23 SCRA 276 (1968)The S" however reminds us that athough the power of taxation is sometimes caed the power to destroy,

in order to maintain the genera pubic#s trust and confidence in the government, this power must be used

 $usty and not treacherousy.

Tanaa v Angara 272 SCRA 18 (1997)Senate#s concurrence to %ATT via a Senate &esoution No. '( is a egitimate exercise of its sovereign

duty and power.

!n the foregoing treaties, the Phiippines has effectivey agreed to imit the exercise of its sovereign

powers of taxation, eminent domain and poice power. The underying consideration in this partia

surrender of sovereignty is the reciproca commitment of the other contracting states in granting the same

priviege and immunities to the Phiippines, its officias and its citi)ens. The same reciprocity characteri)es

the Phiippine commitments under *T+%ATT.!. "x#$%sive$y $egis$ative in nat%re - ony the egisature can impose taxes athough the power may be

deegateda. xtent of the egisative power to tax

Tan v &e$ Rosario, 237 SCRA 32' (199')

+n petitioner#s contention in %& 1/'00 that pubic respondents exceeded their ruema2ing authority in

appying SN!TS to genera professiona partnerships by promugating sec rev reg 3'4, the court hed that

said sec did not ater but merey confirmed sec 34 of the tax code as amended by &A (0' on the extent of

deductions appicabe to a individua income taxpayers on their noncompensation income. There is no

evident intention in the aw, either before or after the amendatory egisation to pace on an une5ua footing orin significant variance the income tax treatment of professionas who practice their respective professions

individuay and of those who do it through a genera professiona partnership.

CIR v Santos, 277 SCRA 617 (1997)

!t is within the power of the egisature whether to tax $ewery or not. *ith the egisature primariy ies the

discretion to determine the nature 62ind7, ob$ect 6purpose7, extent 6rate7, coverage 6sub$ects7, and situs 6pace7

of taxation.

Sison v An#heta, 13 SCRA 6' (198')

The difficuty confronting petitioner is thus apparent. 8e aeges arbitrariness. A mere aegation, as here, does

not suffice. There must be a factua foundation of such unconstitutiona taint. "onsidering that petitioner here

woud condemn such a provision as void on its face, he has not made out a case. This is merey to adhere to

the authoritative doctrine that where the due process and e5ua protection causes are invo2ed, considering

that they are not fixed rues but rather broad standards, there is a need for proof of such persuasive character 

as woud ead to such a concusion.

*a+atiran v Tan, 163 SCRA 371 (1988)

!t shoud be noted that under both the provisions of the 9reedom "onstitution and the 1':( "onstitution, the

President is vested with egisative powers unti a egisature under a new constitution is convened. The 1 st 

congress created and eected under the 1':( constitution was convened on ;uy 3(, 1':(, hence the

enactment of + 3(4 6

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!. Nondeegabiity of power to tax - the power of taxation, being purey egisative, "ongress cannot

deegate such power. This imitation arises from the doctrine of separation of powers among the

three branches of government.

xceptions to the nondeegation rue

1. &e$egation to the +resient2. &e$egation to $o#a$ governent %nits3. &e$egation to ainistrative agen#ies

a#ea v "R/ 192 SCRA 363 (199)

The >oard +rder authori)ing the proceeds generated by the increase to be deposited to the +PS9 is not an

act of taxation. !t is authori)ed by P? No. 1'= as amended by + No. 14(

a#ea v a#araig 197 SCRA 771 (1991)

Non deegation of egisative power, standard test impied under Section 4 of + '4.

The re5uired standards need not be expressed. !n du v ricta and ?e a Lana Aba, this court hed@ The

standard may be either express or impied. !f the former, the nondeegated ob$ection is easiy met. The

standard though does not have to be speed out specificay. !t coud be impied from the poicy and purpose

of the act considered as a whoe.

/as#o v 0ACR, 197 SCRA 2 (1991)

Loca governments have no power to tax instrumentaities of the Nationa %overnment. PA%"+& being an

instrumentaity of the government is therefore exempt from oca taxes.

0e+siCo$a v City o4 /%t%an 2' SCRA 789 (1968)

!t has been hed that the genera principe against the deegation of egisative powers as a conse5uence of

the theory of separation of powers is sub$ect to a weestabished exception, namey, that egisative powers

may be deegated to oca governments. The theory of nondeegation of egisative power does not appy in

matters of oca concern.

0A5 v "% 16' SCRA 32 (1988)

!t is cear from the provisions of Section (4 of "ommonweath Act 134 and Section 1 of the Land

Transportation and Traffic "ode that the egisative intent and purpose behind the aw re5uiring owners of

vehices to pay for their registration is mainy to raise funds for the construction and maintenance of highways

and to a much esser degree, pay for the operating expenses of the administering agency.

There is a vaid deegation to the LT+. Simpy put, if the exaction under 014 were merey a reguatory fee,

the imposition in &A =00: need not be an additionaB tax.

#. ho ay %estion the va$iity o4 a tax eas%re or ex+enit%re o4 taxes

(see one #ase, insert !e$o)

5o-aa v C"5"C, 12 SCRA 337 (1983)

S" reiterated that it is ony when an act compained of, which may incude a egisative enactment of a statue,

invoves the iega expenditure of pubic money that the socaed taxpayer suit may be aowed.

a#ea v a#araig 197 SCRA 771 (1991)

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The purpose to be accompished by taxation need not be excusivey pubic. Athough private individuas are

directy benefited the tax woud sti be vaid provide such benefit is ony incidenta

The test is not as to who receives the money, but the character of the purpose for which ti is expendedC not

the immediate resut of the expenditure, but the utimate resuts.

on-a$es v ar#os, 6 SCRA 62' (197)

Chave- v 0C, 299 SCRA 7'' (1998)

S%!e#t to inherent an #onstit%tiona$ $iitations

2. !nherent Limitationsa. 0%r+ose %st !e +%!$i# in nat%re

This is one of the inherent imitations of the power to tax and is synonymous to governmenta purpose.B A

tax must aways be imposed for a pubic purpose, otherwise, it wi be decared as invaid.The term pubic purposeB has not fixed connotation. The essentia point is that the purpose of the tax

affects the inhabitants as a community and not merey as inhabitants.!t has been said that the best test of rightfu taxation is that the proceeds of the tax must be used@

Dfor the support of the governmentC or Dsome of the recogni)ed ob$ects of governmentC or Dto promote the wefare of the community

0as#%a$ v. Se# o4 0%!$i# or:s, 11 SCRA 331 (196)

The appropriation of pubic money to construct a road on a private and is not a pubic purpose.

0as#%a$ vs. Se#retary o4 0%!$i# or:s, 11 SCRA 331 (196)

0arties;

"

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>e$;

FS.

1. Petitioner has standing. 8e is not merey a taxpayer but the governor of the province of &i)a which is considered oneof the most popuated biggest provinces during that time, its taxpayers bear a substantia portion of the burden of taxationin the country.

Pubic funds can ony be appropriated for a pubic purpose. The test of the constitutionaity of a statute re5uiring the use of pubic funds is whether it is used to promote pubic interest. Goreover, the vaidity of a stature depends on the powers ofthe "ongress at the time of its passage or approva, not upon events occurring, or acts performed subse5uent thereto,uness it is an amendment of the organic aw.

Ratio;

• Pubic funds may be used for pubic purposes ony.

• No appropriation of state funds can be made for other than for a pubic purpose.

•  At the instance of taxpayers, aws providing for the disbursement of pubic funds, upon the theory that

xpenditure of pubic funds by an officer of the Sate for the purpose of administering an unconstitutiona actconstitutes a misappication of such funds.B

•  As taxpayers, shoud have sufficient interest in preventing the iega expenditure of moneys raised by taxation

and may therefore uestion the constitutionaity of statutes re5uiring expenditure of pubic money.

Tio v ieogra Reg%$atory /oar, 11 SCRA 28 (1987)

S" hed that the tax imposed under the decree is not harsh, oppressive, confiscatory and in restraint of trade

but reguatory and a revenue measure. The evy of 4/H tax is for pubic purpose. !t was imposed primariy to

answer the need for reguating the video industry. And whie it was aso an ob$ective of the decree to protect

the movie industry, the tax remains a vaid imposition.

aston v R0/, 18 SCRA 626 (1988)

The stabii)ation fees coected are in the nature of a tax, which is within the power of the State to impose for

the promotion of the sugar industry. The tax coected is not in a pure exercise of the taxing power. !t is evied

with a reguatory purpose, to provide means for the stabii)ation of the sugar industry. The evy is primariy in

the exercise of the poice power of the State.

aston vs. Re+%!$i# 0$anter 1=: S"&A 3

ANJ >F T8

T&ANS9& AN? ?!ST&!>IT!+N +9 T8 S8A&S +9 ST+"J !N T8 SA!? >ANJ.

@a#ts;

Petitioners are sugar producers and panters and miers fied a writ of GAN?AGIS to impement the privati)ation of&epubic Panters >an2, and for the transfer of the shares in the government ban2 to sugar producers and panters.6because they are aegedy the true beneficia owners of the ban2 since they pay P1.//per picu of sugar from theproceeds of sugar producers as STA>!L!EAT!+N 9S7.The shares are currenty hed by Phisucom K Sugar &eguatory

 Admin. The Sogen countered that the stabii)ation fees are considered government funds and that the transfer of sharesto from Phisucom to the sugar producers woud be irreguar.

Iss%es;

*hat is the nature of the P1.// stabii)ation fees coected from sugar producers Are they funds hed in trust for them, orare they pubic funds Are the shares in the ban2 6paid using these fees7 owned by the government Phisucom or privateyby the different sugar panters from whom such fees were coected

R%$ing; The *rit of mandamus is denied and the Petition hereby dismissed.

PI>L!" 9IN?S. *hie it is true that the coected fees were used to buy shares in &P>, it did not coect said fees for theaccount of sugar producers. The stabii)ation fees were charged on sugar produced and mied which A""&I? T+P8!LSI"+G, under P? 44:.The fees coected A& !N T8 NATI& +9 A TAM., which is within the power of the stateto impose 9+& T8 P&+G+T!+N +9 T8 SI%A& !N?IST&F. They constitute sugar iens. The coections accrue to aSP"!AL 9IN?S. !t is evied not purey for taxation, but for reguation, to provide means T+ STA>!L!E T8SI%A&!N?IST&F. The evy is primariy an exercise of poice powers. The fact that the State has ta2en money pursuantto aw is sufficient to constitute them as STAT 9IN?S, even though hed for a specia purpose. 8aving been evied for aspecia purpose, the revenues are treated as a specia fund, administered in trust for the purpose intended. +nce thepurpose has been fufied or abandoned, the baance wi be transferred to the genera funds of the government.

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 !t is a specia fund since the funds are deposited in PN>, not in the Nationa Treasury. The sugar panters are N+T>N9!"!AL +*N&S. The money is coected from them ony because they it is aso they who are to be benefited fromthe expenditure of funds derived from it. The investing of the funds in &P> is not aien to the purpose since the >an2 is acommodity ban2 for sugar, conceived for the sugarindustry# growth and deveopment.

Ratio o4 the Case;Revenues derived from taxes cannot be used purely for private purposes or for the exclusive benefit of private persons. The Stabii)ation 9und is to be utii)ed for the benefit of the NT!& SI%A& !N?IST&F, and a its components,stabii)ation of domestic and foreign mar2ets, since the sugar industry is of vita importance to the country#s economy andnationa interest.

!. 0rohi!ition against e$egation o4 taxing +oer "x#e+tions;i. e$egation to 5=BS - municipa corporations are mere creatures of "ongress which has the power to

create and aboish municipa corporations. "ongress therefore has power of contro over L%I#s. if

congress can grant to a municipa corporation the power to tax certain matters, it can aso provide for

exemptions or even to ta2e bac2 the power.

Se# Art , 1987 Constit%tion

ach oca government unit sha have the power to create its own sources of revenues and to evy taxes,fees, and charges sub$ect to such guideines and imitations as the "ongress may provide, consistent with

the basic poicy of oca autonomy. Such taxes, fees, and charges sha accrue excusivey to the oca

governments.

/oo: II RA 716 oca taxation

/as#o v 0ACR 197SCRA 2 (1991)The power of L%Is to impose taxes and fees is aways sub$ect to the imitations which "ongress may

provide, the former having no inherent power to tax.

a#ea v a#araig 197 SCRA 771 (1991)The re5uired standard# need not be expressed.

ii. deegation to the President"ongress may authori)e, by aw, the President to fix, within specified imits and sub$ect to such imitations

and restrictions as it may impose@1. Tariff ratesC3. !mport and export 5uotasC4. Tonnage and wharfage duesC and0. +ther duties or imposts within the nationa deveopment program of the government

This authori)ation is embodied in section 0/1 of the Tariff and "ustoms "ode which is aso caed the

fexibe tariff cause

Se# 28 (2) Art I, 1987 Constit%tion

The "ongress may, by aw, authori)e the President to fix within the specified imits, and sub$ect to suchimitations and restrictions as it may impose, tariff rates, import and export 5uotas, tonnage and wharfage

dues, and other duties or imposts within the framewor2 of the nationa deveopment program of the

%overnment.

Se# '1, Tari44 an C%stos Coe (or the flexible tariff clause)

!n the interest of nationa economy, genera wefare andKor nationa security, the President, upon

recommendation of the Nationa conomic and ?eveopment Authority, is empowered@

Dto increase , reduce, or remove existing protective rates of import duty, provided that the increase shoud not

be higher than 1//H ad vaorem@

Dto estabish import 5uota or to ban imports of any commodityC and

Dto impose additiona duty on a imports not exceeding 1/H ad vaorem.

ar#ia v "xe#%tive Se#retary 211SCRA 219 (1992)

The power granted under this constitutiona provision to authori)e the president to fix within specified imits

and sub$ect to such imitations and restrictions as it may impose, tariff rates and other duties and imposts

incudes tariff rates even for revenue purposes ony. "ustom duties which are assessed at the prescribed

tariff rates are very much i2e taxes which are fre5uenty imposed for both revenueraising and reguatory

purposes.

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iii. deegation to administrative agencies

"ertain aspects of the taxing process that are not reay egisative in nature are vested in administrative

agencies. !n these cases there reay is no deegation, to wit@ 6a7 power to vaue propertyC 6b7 power to

assess and coect taxesC 6c7 power to perform detais of computation, appraisement or ad$ustmentC

among others.

sena v r!os 22 SCRA 73 (1993)9or deegation to be constitutionay vaid, the aw must be compete in itsef and must set forth sufficient

standards.

a#ea v a#araig 197 SCRA 771 (1991)*ith the growing compexities of modern ife and the many technica fieds of governmenta functions, as in

matters pertaining to tax exemptions, deegation of egisative powers has become the rue and non

deegation the exception. The egisature may not have the competence, et aone the interest and the time, to

provide direct and efficacious soutions to many probems attendant upon present day underta2ings. The

egisature coud not be expected to state a the detaied situations wherein the tax exemption priviege woud

be restored. The tas2 may be assigned to an administrative body i2e the 9isca !ncentives &eview >oard

69!&>7

a#ea v "R/, 192 SCRA 363 (1992)The board of course is not prevented from conducting a hearing on the grant of provisiona authority - which

is of course, the better procedure - however, it can not be stigmati)ed ater if it faied to conduct one.

#. "xe+tion o4 governent entities, agen#ies an instr%enta$itiesSec 3( 6c7 %overnmentowned or -controed corporations, agencies or instrumentaities. - The

provisions of existing specia or genera aws to the contrary notwithstanding, a corporations, agencies,

or instrumentaities owned or controed by the %overnment, except the %S!S, the SSS, the P8!", the

P"S+, and the PA%"+&, sha pay such rate of tax upon their taxabe income as are imposed by this

Section upon corporations or associations engaged in a simiar business, industry or activity.

a#tan Ce!% Air+ort v ar#os DDDDDDDDDDDDDDDDDDDDDDD 

 As an incident of sovereignty, the power to tax has been described as unimited in its range,ac2nowedging in its very nature no imits, so that security against its abuse is to be found ony in the

responsibiity of the egisature which imposes the tax on the constituency who are to pay it.

a#ea v a#araig, 197 SCRA 771 (1991)

" 93*ithdrawing a tax and duty incentives sub$ect to certain exceptions, expanding the powers of the fisca

incentives review board and for other purposes0& 1931?irecting the rationai)ation of duty and tax exemption privieges granted to governmentowned or

controed corporations and a other units of government

. Internationa$ #oity

Se# 2 Art II, 1987 Constit%tion

The Phiippines renounces war as an instrument of nationa poicy, adopts the generay accepted principes of internationa aw as part of the aw of the and and adheres to the poicy of peace, e5uaity, $ustice, freedom,

cooperation, and amity with a nations.

Tanaa v Angara 272 SCRA 18 (1997)

>y the doctrine of incorporation, the country is bound by generay accepted principes of internationa aw,

which are considered to be automaticay part of our own aws. +ne of the odest and most fundamenta rues

in internationa aw is pacta sunt servanda - internationa agreements must be performed in good faith.

e. 5iitation o4 territoria$ %risi#tion

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Tax aws cannot operate beyond a state#s territoria imits.

Property outside one#s $urisdiction does not receive any protection from the state.

CIR v /ritish verseas Airay Cor+ 1'9 SCRA 39 (1987)

!n order that a foreign corporation may be regarded as doing business within a State, there must be continuity

of conduct and intention to engage in a continuous business, such as the appointment of a oca agent, and

not one of a character.

To+i#; $iitation o4 territoria$ %risi#tionE territoria$ vs. +ersona$ %risi#tion

0onente; e$en#io>errera, F.

0arties; Coission on Interna$ Reven%e (+etitioner) an /ritish verseas Airay (res+onent)Nature@ review on certiorari on the $oint decision of "TA which set aside petitioner#s assessment of deficiency income

taxes against respondent as we as its resoution denying their motion for reconsideration.

9acts@

• That >ritish +verseas Airways 6>+A"7 is a 1//H >ritish %overnment owned and controed corporation existing

under the aws of the Inited Jingdom

•

That it operates a transportation service and ses transportation tic2ets over the routes of other airine members• That it was not issued a "ertificate of pubic convenience and necessity to operate in the Phiippines but however,

was maintaining a genera saes agent in the Phiippines originay 2nown as *arner >arnes and "ompany

• That it was assessed by "!& an aggregate amount of P3,0':,4=:.= covering the years 1'=4 to 1'4.

• That upon protest of the respondent, it was issued another assessment of P:=:, 4/(.('

• That >+A" payed the amounts under protest and fied the succeeding actions

@irst A#tionGInitiatory A#tion

9ied by@ >+A", respondent

Jind of action@ a caim for refund of the amount of P:=:,4/(.('

"ourt@ "!&

!ssueKs@

&uing@ denied by the "!&

>+A" then fied for a re5uest for reconsideration with the "!& but they again denied this

Se#onary A#tion; !e4ore the CIR enie their #$ai 4or re4%n

9ied by@ >+A"

Jind of action@ petition for review

"ourt@ "TA

!ssueKs@ assaied the assessment and prayed for the refund of the paid amount under protest

&uing@ "TA reversed the "!&C "TA ordered the petitioner to credit >+A" the sum of P:=:, 4/(.(' and ordered the same

to cance the assessment.

&easoning@ the proceeds of saes of passage tic2ets by >+A" through its saes agency, Oantas airways, during the

period in 5uestion, do not constitute >+A" income from Phiippine sources since no service of carriage of passengers or

freight was performed by >+A" within the PhiippinesB and therefore, said income is not sub$ect to income tax.

Tertiary a#tion

9ied by@ "!&

Jind of action@ petition for review on certiorari

"ourt@ Supreme "ourt

!ssueKs@ 1. *hether or not the revenue raised by >+A" from saes of air transportation tic2ets in the Phiippines, whie

having no anding rights here, constitute income of >+A" from Phiippine sources, and accordingy, taxabe.

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3. *hether or not, during the fisca years in 5uestion, >+A" is a resident foreign corporation doing business in the

Phiippines or has an office or pace of business in the Phiippines

4. !n the aternative that private respondent may not be considered a resident foreign corporation but a nonresident

foreign corporation, then it is iabe to Phiippine income tax at the rate of 4=H of its gross income received from a

sources within the Phiippines

&uing@ the decision of "TA was set aside

&easoning@ 1. Fes, the revenue raised by >+A" athough not having anding rights in the Phiippines constitute incomefrom Phiippines Sources

3. Fes, >+A" is a resident foreign corporation

4. No, it is not iabe for 4=H of its gross income because it is considered a resident foreign corporation

LawsK;urisprudenceK9urther court ruings

1. *hat may be considered income from Phiippine sources

 The source of an income is the property, activity or service that produced the income. 9or the source of income to beconsidered as coming from the Phiippines, it is sufficient that the income is derived from activity within the Phiippines. !n

>+A"s case, the sae of tic2ets in the Phiippines is the activity that produces the income. The tic2ets exchanged handshere and payments for fares were aso made here in Phiippine currency. The site of the source of payments is thePhiippines. The fow of weath proceeded from, and occurred within, Phiippine territory, en$oying the protection accordedby the Phiippines

True, Section 4(6a7 of the Tax "ode, which enumerates items of gross income from sources within the Phiippines,namey@ 617 interest, 6317 dividends, 647 service, 607 rentas and royaties, 6=7 sae of rea property, and 67 sae of personaproperty, does not mention income from the sae of tic2ets for internationa transportation. 8owever, that does not render itess an income from sources within the Phiippines. Section 4(, by its anguage, does not intend the enumeration to beexcusive. !t merey directs that the types of income isted therein be treated as income from sources within thePhiippines. A cursory reading of the section wi show that it does not state that it is an a incusiveenumeration, and that no other 2ind of income may be so considered.

3. !s >+A" a resident foreign corporation doing business in the Phiippines

!t is our considered opinion that >+A" is a resident foreign corporation. There is no specific criterion as to whatconstitutes QdoingQ or Qengaging inQ or QtransactingQ business. ach case must be $udged in the ight of its pecuiarenvironmenta circumstances. The term impies a continuity of commercia deaings and arrangements, and contempates,to that extent, the performance of acts or wor2s or the exercise of some of the functions normay incident to, and inprogressive prosecution of commercia gain or for the purpose and ob$ect of the business organi)ation. Q!n order that aforeign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention toestabish a continuous business, such as the appointment of a oca agent, and not one of a temporary character.

There shoud be no doubt then that >+A" was Qengaged inQ business in the Phiippines through a oca agent during theperiod covered by the assessments.

4. !t is a resident foreign corporation sub$ect to tax upon its tota net income received in the preceding taxabe year from a

sources within the Phiippines.

CIR v Fa+an Air$ines 22 SCRA ' (1991)

9or the source of income to be considered coming from the Phiippines, it is sufficient that the income is

derived from activities within this country regardess of the absence of fight operations within Phiippine

territory.

To+i#; $iitation o4 territoria$ %risi#tionE territoria$ vs. +ersona$ %risi#tion

0onente; 0aras, F.

0arties; Coission on Interna$ Reven%e (+etitioner) an Fa+an Air$ines(FA5) (res+onent)

Nature@ Petition for review which see2ing the reversa of the decision of the "ourt of Tax Appeas which set aside

petitioner#s assessment of deficiency income tax incusive of interest and surcharge as we as compromise penaty

9acts@

That ;apan Airines is a foreign corporation engaged in the business of internationa air carriage.

That from 1'=' to 1'4, ;AL had not been granted a certificate of pubic convenience and necessity to operate

 

8owever, since mid;uy 1'=(, ;AL had maintained and office at the 9iipinas 8ote, &oxas >ouevard, Gania

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  That there was no seing of tic2ets in this office but was maintained merey for the promotion of the company#s

pubic reations and to hand out brochures, iterature and other information paying up to the attractions of ;apan

as a tourist spot and the services en$oyed in ;AL panes

  That on ;uy 1(, 1'=(, ;AL constituted PAL as its genera saes agent in the Phiippines

 

That PAL sod for and in behaf of ;AL, pane tic2ets and reservations for cargo spaces which were used by

passengers or customers on the faciities of ;AL

 

That on ;une 3, 1'(3, ;AL received deficiency income tax assessment notices and a demand etter from "!& for

a tota amount of P3,/'',:(.=3 incusive of =/H surcharge and interest for the years 1'=' through 1'4

 

That ;AL protested the said assessment through the foowing actions

@irst A#tionGInitiatory A#tion

9ied by@ ;AL

Jind of action@ re5uest for canceation of assessments

"ourt@ "!&

!ssueKs@ that as a nonresident foreign corporation, it was taxabe ony on income from Phiippines sources and that they

had no income in the years covered by the assessments

&uing@ denied by the "!&

;AL eevated the case to "TA

Se#onary A#tion; !e4ore the CIR enie their #$ai 4or re4%n

9ied by@ ;AL

Jind of action@ appea

"ourt@ "TA

!ssueKs@ same issues with the ones raised to the "!&

&uing@ "TA reversed "!s decision and denied the "!s motion for reconsideration

Tertiary a#tion

9ied by@ "!&

Jind of action@ petition for review "TA#s decision

"ourt@ Supreme "ourt

!ssueKs@ 1. *hether or not proceeds from saes of ;AL sod in the Phiippines are taxabe as income from sources within

the Phiippines

3. *hether or not ;apan Airines is a foreign corporation engaged in trade or business in the Phiippines

&uing@ petition was grantedC "TA#s decision was set asideC ;AL was ordered to pay the assessments

&easoning@

1. Fes, the proceeds of ;AL are considered income from sources within the Phiippines

3. Fes, ;AL is a resident foreign corporation under Sec. :0 6g7 of the Nationa !nterna &evenue "ode of 1'4'. The

definition of resident foreign corporationB is provided in sec.3/ of the 1'(( tax code 6refer beow7

LawsK;urisprudenceK9urther court ruings

3. *hat may be considered income from Phiippine sources

 The source of an income is the property, activity or service that produced the income. 9or the source of income to beconsidered as coming from the Phiippines, it is sufficient that the income is derived from activity within the Phiippines. !n>+A"s case, the sae of tic2ets in the Phiippines is the activity that produces the income. The tic2ets exchanged handshere and payments for fares were aso made here in Phiippine currency. The site of the source of payments is thePhiippines. The fow of weath proceeded from, and occurred within, Phiippine territory, en$oying the protection accordedby the Phiippines 6Sec. 3',647 of the Tax "ode7

True, Section 4(6a7 of the Tax "ode, which enumerates items of gross income from sources within the Phiippines,namey@ 617 interest, 6317 dividends, 647 service, 607 rentas and royaties, 6=7 sae of rea property, and 67 sae of persona

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property, does not mention income from the sae of tic2ets for internationa transportation. 8owever, that does not render itess an income from sources within the Phiippines. Section 4(, by its anguage, does not intend the enumeration to beexcusive. !t merey directs that the types of income isted therein be treated as income from sources within thePhiippines. A cursory reading of the section wi show that it does not state that it is an a incusiveenumeration, and that no other 2ind of income may be so considered.

4. !s ;AL a resident foreign corporation doing business in the Phiippines

Inder Section 3/ of the 1'(( Tax "ode@Q6h7 the term Rresident foreign corporation appies to a foreign corporation engaged in trade or business within the Phiippines or having an office or pace of business therein.Q6i7 the term Rnonresident foreign corporation appies to a foreign corporation not engaged in tradeor business within the Phiippines and not having any office or pace of business therein. There is no specific criterion asto what constitutes Rdoing or Rengaging in or Rtransacting business. ach case must be $udged in the ight of its pecuiarenvironmenta circumstances. The term impies continuity of commercia deaings and arrangements, and contempates,to that extent, the performance of acts or wor2s or the exercise of some of the functions normay incident to, and inprogressive prosecution of commercia gain or for the purpose and ob$ect of the business organi)ation.

!n order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conductand intention to estabish a continuous business, such as the appointment of a oca agent, and not one of a temporarycharacter 6Pacific Gicronesian Line, !nc. vs. ?e &osario and Peigon, ' Phi. 34, 4/, citing Thompson on "orporations,

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Air Canaa v CIR Case no. 672, &e#e!er 22, 2'

CTA "n /an#

To+i#; $iitation o4 territoria$ %risi#tionE territoria$ vs. +ersona$ %risi#tion

0onente; 0a$a#a"nri%es, F.

0arties; Air Canaa (+etitioner) an CIR (res+onent)

Nature@ Petition for review fied by Air "anada which see2s the reversa of the decision of the "TA first division in denying

the motion for reconsideration and decaring Air "anada as a resident foreign corporation and denying petitioner#s caim

for refund of erroneousy paid income

9acts@

• Petitioner, Air "anada, a foreign corporation organi)ed and existing under the aws of "anada, was granted an

authority to operate as an offine carrier by the "ivi Aeronautics >oard 6"A>7 sub$ect to certain conditions, on Apri 30, 3///, with said authority to expire on Apri 30, 3//=

• +n ;uy 1, 1''', petitioner and Aerote Ltd., "orporation 6hereafter QAeroteQ7, entered into a Passenger genera

Saes Agency Agreement, whereby Aerote Ltd., "orporation was appointed as petitioners Passenger %eneraSaes Agent for the territory defined in the said Agreement

• Petitioner fied and paid its 5uartery and annua income tax returns

• +n November 3:, 3//3, petitioner fied its administrative caim for refund with the >ureau of !nterna revenue in

the tota amount of 9!!&

!ssueKs@ erroneous payment of income taxes

&uing@ no response from the >!&

*ith no response received from the >ureau of !nterna &evenue and before it coud be barred by prescription, petitionerdeemed it proper to eevate its caim to the "TA through a Petition for &eviewSe#onary A#tion;

9ied by@ Air "anada

Jind of action@ petition for review

"ourt@ "TA 6first division7

"TA 6first division7 rendered a decision in favour of respondent 6"!&7. Petitioner fied a motion for reconsideration but was

denied by "TA 6first division7 thus, the subse5uent action to "TA n >anc

!ssueKs@

&uing@ The petition has no merit

&easoning@

Tertiary a#tion

9ied by@ Air "anada 6petitioner7

Jind of action@ petition for review

"ourt@ "TA n >anc

!ssueKs@ 1. that the 8onourabe court erred in hoding the petitioner as a resident foreign corporation sub$ect to 43H

income tax under Sec 3: 6A7617 of the 1''( Tax "ode

3. That the honourabe court erred in finding that a petitioner maintained a permanent estabishment in the Phiippines

pursuant to Artice < of the &P"anada Tax treaty by the appointment of a oca genera saes agent in the Phiippines

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4. that the honourabe court erred in denying the refund of erroneousy paid income tax

&uing@ The petition has no merit

&easoning@ 1.

9or tax purposes, a manufacturer does not necessariy become engage in the separate business of seing

simpy because it ses the products at manufactures. !oio city tax ordinance no. = series of 1'/ which is an

excise tax imposes a municipa icense tax on distributors of soft drin2s. Since the corporation was engaged in

the separate business of seing or distributing sofdrin2s, it is iabe under the tax ordinance and aso it is

within the situs because its business activity extends to !oio city even if they transferred their pant to Pavia

from !oio.

I5I5 /TT5"RS I" CAS";

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This is an appea by the "ity of !oio see2ing the reversa of the decision of the "ourt of 9irst !nstance 6&T"7 of !oio

which rendered decision in favor of paintiffappeee decaring it not iabe under city ordinance no. =.

@ACTS;

1. That paintiff is engaged in the business of botting softdrin2s under the trade name of Pepsi "oa And (up and

seing the same to its customers, with a botting pant situated at >arrio Ingca Gunicipaity of Pavia, !oio,

Phiippines and which is outside the $urisdiction of defendantC3. That defendant enacted an ordinance on ;anuary 11, 1'/ 2nown as +rdinance No. =, Series of 1'/ which

ordinance was successivey amended by +rdinance No. 3:, Series of 1'/C +rdinance No. 1=, Series of 1'0Cand +rdinance No. 0=, Series of 1'0C which provides as foows@Section . Any person, firm or corporation engaged in the distribution, manufacture or botting of cocacoa,

pepsi coa, truorange, sevenup and other soft drin2s within the $urisdiction of the "ity of !oio, sha pay a

municipa icense tax of ten 6P/.1/7 centavos for every case of twentyfour bottesC P&+

softdrin2s sod to the pubic at not more than five 6P/./=7 centavos per botte sha pay a tax of one and one haf

6P/./1=7 6centavos7 per case of twenty four bottes.Section 1A9or purposes of this +rdinance, a deiveries andKor dispatches emanating or made at the pant and

a goods or stoc2s ta2en out of the pant for distribution, sae or exchange irrespective of where it woud ta2e

pace sha be covered by the operation of this +rdinance.

The tax ordinance imposes a tax on persons, firms, and corporations engaged in the business of@

a7 distribution of softdrin2sb7 manufacture of softdrin2s, andc7 botting of softdrin2s within the territoria $urisdiction of the "ity of !oio.

4. That prior to September, 1', Santiago Sy$uco !nc., owned and operated a botting pant at Guee Loney Street,

!oio "ity, which was doing business under the name of Sevenup >otting "ompany of the Phiippines and botted

the softdrin2s Pepsi"oa and (upC however sometime on September 10,1', Santiago Sy$uco, !nc., informed

a its empoyees that it was cosing its !oio Pant due to financia osses and in fact cosed the same and ater

sod the pant to the paintiff !oio >otters, !nc.0. That thereafter, paintiff operated the said pant by botting the soft drin2s Pepsi"oa and (upC however,

sometime in ;uy 1':, paintiff cosed said botting pant at Guee Loney, !oio "ity, and transferred its botting

operations to its new pant in >arrio Ingca, Gunicipaity of Pavia, Province of !oio, and which is outside the

 $urisdiction of the "ity of !oioC=. That from the time of the enactment of the ordinance, the Seven Ip >otting "ompany of the Phiippines under

Santiago Sy$uco !nc., had been reigiousy paying the defendant "ity of !oio the above mentioned municipa

icense tax due therefrom for botter because its botting pant was then sti situated at Guee Loney St., !oio

"ityC but the paintiff stopped paying the municipa icense tax after +ctober 31, 1': when it transferred its pant

to >arrio Ingca Gunicipaity of Pavia, !oio which is outside the $urisdiction of the "ity of !oioC. The defendant demanded from the paintiff the payment of the municipa icense tax under the abovementioned

ordinance(. That paintiff expained in a etter to the defendant that it coud not anymore be iabe to pay the municipa icense

fee because its botting pant was not anymore inside the "ity of !oio, and that moreover, since it itsef sod its

own products to its customers directy, it coud not be considered as a distributor. As a resut of the said etter of

the paintiff, the defendant did not anymore press the paintiff to pay the said municipa icense taxC:. That sometime on ;anuary 3=, 1'(3, the defendant demanded from the paintiff compiance with the said

ordinance for 1'(3 in view of the fact that it was engaged in distribution of the softdrin2s in the "ity of !oio, and it

further demanded from the paintiff payment of bac2 taxes from the time it transferred its botting pant to the

Gunicipaity of Pavia, !oioC'. ?ue to insistence of the defendant, the paintiff paid on Apri 3/, 1'(3, the first 5uarter payment of the municipa

icense tax in the sum of P4,43'.3/, under protest, and thereafter has been paying defendant every 5uarter under

protestC1/. That on ;une =, 1'(3,the defendant informed the paintiff that it must pay a the taxes due otherwise it sha be

constrained to cance the operation of the business of the paintiff, and because of this threat, and so as not to

occasion disruption of its business operation, the paintiff under protest agreed to the payment of the bac2 taxes,

on staggered basis, which was acceded to by the defendantC11. That the paintiff does not maintain any store or commercia estabishment in the "ity of !oio from which it

distributes its products, but by means of a feet of deivery truc2s, paintiff distributes its products from its botting

pant at >arrio Ingca Gunicipaity of Pavia, !oio, directy to its customers in the different towns of the Province of

!oio as we as the "ity of !oioC13. +n the basis of the above stipuations, the court a 5uo rendered on ;anuary 3, 1'(4 a decision in favor of !oio

>otters, !nc. decaring the "orporation not iabe under the ordinance.14. The "ity of !oio appeaed to the "ourt of Appeas which certified the case to the Supreme "ourt.

ISS=";

*hether the !oio >otters !nc. is iabe under !oio "ity Tax +rdinance no. = which imposes a municipa icense tax on

distributors of soft - drin2s. ?"S 6S ?"!S!+N7.

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C

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3. Constit%tiona$ 5iitations

&%e 0ro#ess o4 5a

"%a$ 0rote#tion o4 the 5as

R%$e o4 =ni4ority an "%ity in Taxation

0rohi!ition against i+risonent 4or non+ayent o4 +o$$ tax

0rohi!ition against i+airent o4 o!$igations o4 #ontra#ts

0rohi!ition against a++ro+riation o4 +ro#ees

0rohi!ition against taxation o4 re$igio%s, #harita!$e an e%#ationa$ entities

0rohi!ition against taxation o4 nonsto#:, non+ro4it e%#ationa$ instit%tions

thers rant o4 tax exe+tion

eto o4 a++ro+riation, reven%e or tari44 !i$$s

o%se o4 Re+resentative

In4ringeent o4 0ress @reeo

rant o4 @ran#hise

a. &%e +ro#ess o4 $a

• There must be a vaid aw

• Tax measure shoud not be unconscionabe and un$ust as to amount to confiscation of property

• Tax statute must not be arbitrary as to find no support in the "onstitution

When does the power of taxation impinge the due process clause? 

The due process cause may be invo2ed where a taxing statute is so arbitrary that it finds no support in the

"onstitution, as where it can be shown to amount to a confiscation of property, [Reyes v. Almanzor !"# $%RA &''( .

Se#. 1, Art. III, 1987 Constit%tion

No person shall be deprived of life liberty or property %ithout due process of la% , nor sha any person be denied

e5ua protection of the aws.

R"H=IR""7 coection

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&=" 0RC"SS I< TAATI< &"S amount of tax to be imposed2 Notice of hearin) as to,

 A amount of the tax> manner of apportionment

Tan v. e$ Rosario, s%+ra.

The due process cause may correcty be invo2ed ony when there is a cear contravention of inherent or 

constitutiona imitations in the exercise of tax power.

Sison v. An#heta, s%+ra.

  It is %no%!te that the %e +ro#ess #$a%se ay !e invo:e here a taxing stat%te is so ar!itrary that it

4ins no s%++ort in the Constit%tion. An o!vio%s exa+$e is here it #an !e shon to ao%nt to the #on4is#ation

o4 +ro+erty. That o%$ !e a #$ear a!%se o4 +oer. It then !e#oes the %ty o4 this Co%rt that s%#h an ar!itrary

a#t ao%nte to the exer#ise o4 an a%thority not #on4erre. That +ro+erty #a$$s 4or the a++$i#ation o4 the >o$es

i#t% The +oer to tax is not the +oer to estroy hi$e this Co%rt sits.

It has !een he$ that here the assai$e tax eas%re is !eyon the %risi#tion o4 the state, or is not 4or a

+%!$i# +%r+ose, or in #ase a retroa#tive stat%te is so harsh an %nreasona!$e , it is sub$ect to attac2 on due process

grounds.

!. "%a$ +rote#tion o4 the $as

No person shall be deprived of life liberty or property %ithout due process of la% , nor sha any person be denied e5ua

protection of the aws. Se#. 1, Art. III, 1987 Constit%tion

Sison v. An#heta, s%+ra.

The taxing power has the authority to ma2e reasonabe and natura cassification for purposes of taxation, but the

government#s act must not be prompted by spirit of hostiity, or at the very east discrimination that finds no support in

reason. !t suffices then that the aws operate e5uay and uniformy on a persons under simiar circumstances or that a

persons must be treated in the same manner, the conditions not being different both in privieges conferred and iabiities

imposed, [$ison v. Ancheta !& $%RA #*+( .

i$$egas vs, >i% Chiong Tsai 0ao >oR 5296'6, 1 oard of Gania enacted +rdinance =4( re5uiring aiens 6except those empoyed in the

dipomatic and consuar missions of foreign countries, in technica assistance programs of the government and another 

country, and members of reigious orders or congregations7 to procure the re5uisite mayor#s permit so as to be empoyed

or engage in trade in the "ity of Gania. The permit fee is P=/, and the penaty for the vioation of the ordinance is 4 to

months imprisonment or a fine of P1// to P3//, or both.

Iss%e; *hether the ordinance imposes a reguatory fee or a tax.

>e$; The ordinance#s purpose is ceary to raise money under the guise of reguation by exacting P=/ from aiens who

have been ceared for empoyment. The amount is unreasonabe and excessive because it fais to consider difference in

situation among aiens re5uired to pay it, i.e. being casua, permanent, parttime, ran2 andfie or executive.

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The +rdinance was decared invaid as it is arbitrary, oppressive and unreasonabe, being appied ony to aiens who are

thus deprived of their rights to ife, iberty and property and therefore vioates the due process and e5ua protection

causes of the "onstitution. 9urther, the ordinance does not ay down any criterion or standard to guide the Gayor in the

exercise of his discretion, thus conferring upon the mayor arbitrary and unrestricted powers. U

N%A%? !N ANF J!N? +9 T&A?, >IS!NSS +& +""IPAT!+N *!T8!N T8 "!TF +9 GAN!LA *!T8+IT

9!&ST S"I&!N% AN GPL+FGNT P&G!T 9&+G T8 GAF+& +9 GAN!LAC AN? 9+& +T8&

PI&P+SSB was passed by the Gunicipa >oard of Gania on 9ebruary 33, 1': and signed by the herein

petitioner Gayor Antonio ;. ranch !, denominated as "ivi "ase No. (3('(, praying for the issuance of the

writ of preiminary in$unction and restraining order to stop the enforcement of +rdinance No. =4( as we as for a

 $udgment decaring said +rdinance No. =4( nu and void on the foowing grounds@

17 As a revenue measure imposed on aiens empoyed in the "ity of Gania, +rdinance No. =4( is

discriminatory and vioative of the rue of the uniformity in taxationC

37 As a poice power measure, it ma2es no distinction between usefu and nonusefu occupations,

imposing a fixed P=/.// empoyment permit, which is out of proportion to the cost of registration and that

it fais to prescribe any standard to guide andKor imit the action of the Gayor, thus, vioating the

fundamenta principe on iega deegation of egisative powers@

47 !t is arbitrary, oppressive and unreasonabe, being appied ony to aiens who are thus, deprived of their 

rights to ife, iberty and property and therefore, vioates the due process and e5ua protection causes of the "onstitution.

• +n Gay 30, 1':, respondent ;udge issued the writ of preiminary in$unction and on September 1(, 1':

rendered $udgment decaring +rdinance No. =4( nu and void and ma2ing permanent the writ of preiminary

in$unction.

Iss%es;

!

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T8 &SP+N?NT ;I?% "+GG!TT? A S&!+IS AN? PATNT &&+& +9 LA* !N &IL!N%

T8AT +&?!NAN" N+. =4(

T8AT +&?!NAN" N+. =4(

&IL!N% T8AT +&?!NAN" N+. =4(

"LAISS +9 T8 "+NST!TIT!+N.

R%$ing;

!. The contention that +rdinance No. =4( is not a purey tax or revenue measure because its principa purpose

is reguatory in nature has no merit. *hie it is true that the first part which re5uires that the aien sha secure

an empoyment permit from the Gayor invoves the exercise of discretion and $udgment and is therefore

reguatory in character, the second part which re5uires the payment of P=/.// as empoyees fee is not

reguatory but a revenue measure. There is no ogic or $ustification in exacting P=/.// from aiens who have

been ceared for empoyment. !t is obvious that the purpose of the ordinance is to raise money under the

guise of reguation.

The P=/.// fee is unreasonabe not ony because it is excessive but because it fais to consider vaid

substantia differences in situation among individua aiens who are re5uired to pay it. Athough the e5ua

protection cause of the "onstitution does not forbid cassification, it is imperative that the cassification shoud

be based on rea and substantia differences having a reasonabe reation to the sub$ect of the particuar 

egisation. The same amount of P=/.// is being coected from every empoyed aien whether he is casua or 

permanent, part time or fu time or whether he is a owy empoyee or a highy paid executive

!!. +rdinance No. =4( does not ay down any criterion or standard to guide the Gayor in the exercise of his

discretion. !t has been hed that where an ordinance of a municipaity fais to state any poicy or to set up any

standard to guide or imit the mayors action, expresses no purpose to be attained by re5uiring a permit,

enumerates no conditions for its grant or refusa, and entirey ac2s standard, thus conferring upon the Gayor 

arbitrary and unrestricted power to grant or deny the issuance of buiding permits, such ordinance is invaid,

being an undefined and unimited deegation of power to aow or prevent an activity  per se  awfu.

!!!. &e5uiring a person before he can be empoyed to get a permit from the "ity Gayor of Gania who may

withhod or refuse it at wi is tantamount to denying him the basic right of the peope in the Phiippines to

engage in a means of iveihood. *hie it is true that the Phiippines as a State is not obiged to admit aienswithin its territory, once an aien is admitted, he cannot be deprived of ife without due process of aw. This

guarantee incudes the means of iveihood. The sheter of protection under the due process and e5ua

protection cause is given to a persons, both aiens and citi)ens.

Tan v. e$ Rosario, s%+ra.

The court cannot freey deve into those matters which, by constitutiona fiat, righty rest on egisative $udgment.

+f course, where a tax measure becomes so unconscionabe and un$ust as to amount to confiscation of property, courts

wi not hesitate to stri2e it down, for, despite a its penitude, the power to tax cannot override constitutiona proscriptions.

The egisative intent to increasingy shift the income tax system towards the scheduar approach   in the income

taxation of individua taxpayers and to maintain, by and arge, the present goba treatment  on taxabe corporations, we

certainy do not view this cassification to be arbitrary and inappropriate.

CIR v. CA J A$ha!ra In., 267 SCRA 7 (1997)

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CISSI

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61=H7 ad vaorem tax due on its removas of cigarettes from 3 November 1''/ to 33 ;anuary 1''1C aowing the

excusion of the vaueadded tax 6!& &uing 0(4:: dated 0 +ctober 

1'::, stating to the effect that Section 103 must perforce prevai over Section 13( 6b7 which is a genera provision

of aw insofar as the imposition of the ad vaorem tax on cigar and cigarettes is concerned.

Private respondent did not 5uestion the correctness of the above >!& ruing. !n fact, upon 2nowedge of the

effectivity of >!& &uing No. /1('1, private respondent immediatey impemented the method of computation

mandated therein by restoring the ureau of !nterna

&evenueC b7 where the facts subse5uenty gathered by the >ureau of !nterna &evenue are materiay different

from the facts on which the ruing is basedC or c7 where the taxpayer acted in bad faith.

*ithout doubt, private respondent woud be pre$udiced by the retroactive appication of the revocation as it woud

be assessed deficiency excise tax.

• *hat is eft to be resoved is petitioner#s caim that private respondent fas under the third exception in Sec. 30,

i.e., that the taxpayer has acted in bad faith.

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>ad faith imports a dishonest purpose or some mora obi5uity and conscious doing of wrong. !t parta2es of the

nature of fraudC a breach of a 2nown duty through some motive of interest or i wi. *e find no convincing

evidence that private respondent#s impementation of the computation mandated by >!& &uing 0(4:: was i

motivated or attended with a dishonest purpose. To the contrary, as a sign of good faith, private respondent

immediatey reverted to the computation mandated by >!& &uing /1('1 upon 2nowedge of its issuance on 11

9ebruary 1''1.

 As regards petitioners argument that private respondent shoud have made consutations with it before private

respondent used the computation mandated by >!& &uing 0(4::, suffice it to state that the aforesaid >!& &uingwas cear and categorica thus eaving no room for interpretation. The faiure of private respondent to consut

petitioner does not impy bad faith on the part of the former.

   Admittedy the government is not estopped from coecting taxes egay due because of mista2es or errors of its

agents. >ut i2e other principes of aw, this admits of exceptions in the interest of $ustice and fair pay, as where

in$ustice wi resut to the taxpayer. 6reate to constitutiona provision7

Ti% v. CA, 31 SCRA 278 (1999)

  The "onstitutiona right to e5ua protection of the aw is not vioated by an executive order, issued pursuant to aw,

granting tax and duty incentives ony to businesses within the secured areaB of the Subic Specia conomic Eone and

denying them to those who ive within the Eone but outside such fenced in  territory. The "onstitution does not re5uire

absoute e5uaity among residents. !t is enough that a persons under i2e circumstances or conditions are given the same

privieges and re5uired to foow the same obigations. !n short, a cassification based on vaid and reasonabe standards

does not vioate the e5ua protection cause.

*e find rea and substantia distinctions between the circumstances obtaining inside and those outside the Subic

Nava >ase, thereby $ustifying a vaid and reasonabe cassification.

TI= vs. C=RT @ A00"A5S

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• +n +ctober 3, 1''0, the petitioners chaenged before this "ourt the constitutionaity of + '(A for aegedy

being vioative of their right to e5ua protection of the aws.

•  !n a &esoution dated ;une 3(, 1''=, this "ourt referred the matter to the "ourt of Appeas, pursuant to &evised

 Administrative "ircuar No. 1'=.

• !ncidentay, on 9ebruary 1, 1''=, Procamation No. =43 was issued by President &amos. !t deineated the exact

metes and bounds of the Subic Specia conomic and 9ree Port Eone, pursuant to Section 13 of &A (33(.

• &espondent "ourt hed that there is no substantia difference between the provisions of + '(A and Section 13

of &A (33(. !n both, the VSecured Area# is precise and wedefined as Vxxx the ands occupied by the Subic

Nava >ase and its contiguous extensions as embraced, covered and defined by the 1'0( Giitary >ases

 Agreement between the Phiippines and the Inited States of America, as amended, xxx.#B The appeate court

concuded that such being the case, petitioners coud not caim that + '(A is unconstitutiona, whie at the same

time maintaining the vaidity of &A (33(. The court a +uo aso expained that the intention of "ongress was to

confine the coverage of the SSE to the secured areaB and not to incude the entire +ongapo "ity and other 

areas mentioned in Section 13 of the aw.B

Iss%es;

*hether or not xecutive +rder No. '(A vioates the e5ua protection cause of the "onstitution. Specificay the issue is

whether the provisions of xecutive +rder No. '(A confining the appication of &.A. (33( within the secured area and

excuding the residents of the )one outside of the secured area is discriminatory or not.B

R%$ing;

• *e rue in favor of the constitutionaity and vaidity of the assaied +. Said +rder is not vioative of the e5ua

protection causeC neither is it discriminatory. &ather, we find rea and substantive distinctions between the

circumstances obtaining inside and those outside the Subic Nava >ase, thereby $ustifying a vaid and reasonabe

cassification.

  The fundamenta right of e5ua protection of the aws is not absoute, but is sub$ect to reasonabe cassification. !f 

the groupings are characteri)ed by substantia distinctions that ma2e rea differences, one cass may be treated

and reguated differenty from another. The cassification must aso be germane to the purpose of the aw and

must appy to a those beonging to the same cass.

• *e beieve it was reasonabe for the President to have deimited the appication of some incentives to the

confines of the former Subic miitary base. !t is this specific area which the government intends to transform and

deveop from its status +uo ante as an abandoned nava faciity into a sefsustaining industria and commercia

)one, particuary for big foreign and oca investors to use as operationa bases for their businesses and

industries. *hy the seeming bias for big investors Indeniaby, they are the ones who can pour huge

investments to spur economic growth in the country and to generate empoyment opportunities for the 9iipinos,

the utimate goas of the government for such conversion. The cassification is, therefore, germane to the

purposes of the aw. And as the ega maxim goes, The intent of a statute is the aw.B

• "ertainy, there are substantia differences between the big investors who are being ured to estabish and operate

their industries in the socaed secured areaB and the present business operators outside the area. +n the one

hand, we are ta2ing of biionpeso investments and thousands of ne%  $obs. +n the other hand, definitey none of 

such magnitude. !n the first, the economic impact wi be nationaC in the second, ony oca. ven more

important, at this time the business activities outside the secured areaB are not i2ey to have any impact in

achieving the purpose of the aw, which is to turn the former miitary base to productive use for the benefit of the

Phiippine economy. There is, then, hardy any reasonabe basis to extend to them the benefits and incentives

accorded in &A (33(. Additionay, as the "ourt of Appeas pointed out, it wi be easier to manage and monitor 

the activities within the secured area,B which is aready fenced off, to prevent frauduent importation of merchandiseB or smugging.

• !t is wesetted that the e5uaprotection guarantee does not re5uire territoria uniformity of aws, As ong as there

are actua and materia differences between territories, there is no vioation of the constitutiona cause.

• *e beieve that the cassification set forth by the executive issuance does not appy merey to existing

conditions. As aid down in &A (33(, the ob$ective is to estabish a sefsustaining, industria, commercia,

financia and investment centerB in the area. There wi, therefore, be a ongterm difference between such

investment center and the areas outside it.

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• Lasty, the cassification appies e5uay to a the resident individuas and businesses within the secured

area.B The residents, being in i2e circumstances or contributing directy to the achievement of the end purpose of 

the aw, are not categori)ed further. !nstead, they are a simiary treated, both in privieges granted and in

obigations re5uired.

c =ni4ority an e%ity in taxation

Se#. 28 #, Art. I of the "onstitution provides that the rule of taxation shall be uniform and e+uitableB.

=ni4ority in Taxation

The concept of uniformity in taxation impies that a taxabe artices or properties of the same cass sha be taxed at thesame rate. !t re5uires the uniform appication and operation, without discrimination, of the tax in every pace where the

sub$ect of the tax is found. !t does not, however, re5uire absoute identity or e5uaity under a circumstances, but sub$ect

to reasonabe cassification.

"%ity in Taxation

The concept of e5uity in taxation re5uires that the apportionment of the tax burden be, more or ess, $ust in the ight of the

taxpayer#s abiity to shouder the tax burden and, if warranted, on the basis of the benefits received from the government.!ts cornerstone is the taxpayer#s abiity to pay.

C$assi4i#ation o4 tax+ayers, s%!e#t or ites to !e taxe

R"H=ISIT"S @ A A5I& C5ASSI@ICATI< (S A " )

! !t must be based on substantial distinction.'  /ermane0relevant to the purpose of the la%0ordinance.&  $pplies not only to the present condition, but aso to future substantiay identica conditions.0 +ually applicable to a members of the same cass.

To$entino v. Se#. o4 @inan#e, s%+ra., s%+ra.

The #onstit%tion oes not rea$$y +rohi!it the i+osition o4 inire#t taxes hi#h $i:e AT are regressive.

hat is si+$y +rovies is that the #ongress sha$$ evo$ve a +rogressive syste o4 taxation. Inee, the anate

o4 #ongress is not to +res#ri!e, !%t to evo$ve a +rogressive tax syste. therise, sa$es taxes, hi#h +erha+s

are the o$est 4or inire#t tax o%$ have !een +rohi!ite.

$a. Ra#e >orse v. e$a @%ente, 88 0hi$ 6 (191)

rinan#e

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s%#h eans heavy !%ren o4 reso%r#e 4ro the governent s%#h as +o$i#e s%+ervision. >en#e, ta:ing into

everything into a##o%nt, the i44erentiation against hi#h the +$ainti44s #o+$ain #on4or to the +ra#ti#a$ i#tates

o4 %sti#e an e%ity, an is not is#riinatory ithin the eaning o4 the #onstit%tion.

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Asso. o4 C%stos /ro:ers v. %n. /oar, s%+ra.

An orinan#e hi#h i+oses tax %+on oners o4 vehi#$es o+erating insie ani$a is an in4ringeent o4 

r%$e o4 %ni4ority o4 taxation as oraine !y the #onstit%tion !e#a%se it oes not isting%ish the vehi#$e 4or hire

or 4or +rivate %se, neither oes it isting%ish vehi#$e registere in the City o4 ani$a or o%tsie.

The oners o4 vehi#$es resiing o%tsie ani$a ho a$so %se the streets are not ae to share the

#orres+oning !%ren. In this #ase, those oners o4 the vehi#$es hi#h %se the streets o4 ani$a, regar$ess

hether they are #iti-en or not 4a$$ ithin the sae #$ass.

0rohi!ition against i+risonent 4or non+ayent o4 +o$$ tax

No person sha be imposed for debt or nonpayment of po tax. Sec. 3/, Art. !!!, "onstitutionU

• The nonimprisonment rue appies to nonpayment of po tax which is punishabe ony by a surcharge, but not to

other vioations i2e fasification of community tax certificate and nonpayment of other taxes.

,oll tax 

• Po tax is a tax of fixed amount imposed on residents within a specific territory regardess of citi)enship, business

or profession. e.g. community tax

Se#. 2, Art. III, 1987 Constit%tion

#o%nity tax v. +o$$ tax

Se#. 1616', R. A. 716

16. Co%nity TaxCities or %ni#i+a$ities ay $evy a #o%nity tax in a##oran#e ith the +rovisions o4 this

arti#$e.

17. Inivi%a$ 5ia!$e to Co%nity Tax"very inha!itants o4 the 0hi$i++ines 18 yrs or over that has !eenreg%$ar$y e+$oye on a age or sa$ary !ase 4or at $east 3 ays....

18. F%rii#a$ 0ersons 5ia!$e to CT "very Cor+ no atter ho #reate or organi-e, oesti# or 4oreign, engage

in or oing !%siness in the 0hi$s.

19. "xe+tions1.&i+$oati# an #ons%$ar re+resentatives, 2.Transient visitors staying not ore than 3 onths

6 0rohi!ition against i+airent o4 o!$igation o4 #ontra#ts

Se#. 1, Art. III, 1987 Constit%tion

No aw impairing the obigation of contracts sha be passed.B

The obigation of a contract is impaired when its terms or conditions are changed by aw or by party without the consent of 

the other, thereby wea2ening the position or rights of the atter.

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 An exampe of impairment by aw is when a ater taxing statute revo2es a tax exemption based on a contract. >ut this ony

appies when the tax exemption has been granted for a vaid consideration.

 A ater statute may revo2e exemption from taxation provided for in a franchise because the "onstitution provides that a

franchise is sub$ect to amendment, ateration or repea.

Se#. 11, Art. II, 1987 Constit%tion

 No franchise, certificate, or any other form of authori)ation for the operation of a pubic utiity sha be granted

except to citi)ens of the Phiippines or to corporations or associations organi)ed under the aws of the Phiippines, at east

sixty  per centum of whose capita is owned by such citi)ensC nor sha such franchise, certificate, or authori)ation be

excusive in character or for a onger period than fifty years. Neither sha any such franchise or right be %&ANT? except

under the condition that it sha be sub$ect to amendment, ateration, or repea by the "ongress when the common good

so re5uires. The State sha encourage e5uity participation in pubic utiities by the genera pubic. The participation of 

foreign investors in the governing body of any pubic utiity enterprise sha be imited to their proportionate share in its

capita, and a the executive and managing officers of such corporation or association must be citi)ens of the Phiippines.

To$entino v. Se#. o4 @inan#e, (199') s%+ra.

"&>A contends !mposition of the ut when, for instance, a taxpayer enters into a compromise with the

>!&, the obigation of the taxpayer becomes one based on contract

The rue does not appy to pubic utiity franchises. According to Sec 11, Art M! of the constitution, no pubic utiity franchise

or right sha be granted except under the condition that it sha be granted that it is sub$ect to amendment, ateration or 

repea by the "ongress when the common good so re5uires.

"ongress coud impair the company#s egisative franchise by ma2ing it iabe for income tax. The "onstitution providesthat a franchise is sub$ect to amendment, ateration or repea by the "ongress when the pubic interest so re5uires.

hen #an a grant o4 taxin#entive !e ta:en aay !y the governent itho%t vio$ating the r%$e on non

i+airent o4 #ontra#tsL

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!t depends on whether the grant is uniateray or biateray given by the government. !f uniateray given, there is no

impairment. !t constitutes a mere revocation of a grant of priviege. !f biateray given, there is impairment 6Art. !!!, Sec.

1/, "onstitution7. "x#e+tion@ !n case of grant of franchise to pubic utiities when common good so re5uires 6Art. M!!,

Sec. 11, "onstitution7

7 0rohi!ition against in4ringeent o4 re$igio%s 4reeoNo aw sha be made respecting an estabishment of reigion, or prohibiting the free exercises thereof.

Se#. , Art. III, 1987 Constit%tion

The free exercise and en$oyment of reigious profession and worship, without discrimination or preference, sha

forever be aowed. No reigious test sha be re5uired for the exercise of civi or poitica rights.B

A. /i!$e So#iety v. City o4 ani$a, 11 0hi$ 386 (197)

The payment of icense fees for the distribution and sae of bibes by a nonstoc2, nonprofit, missionary

organi)ation at minima profit suppresses the constitutiona right of free exercise of reigion which is guaranteed by the"onstitution.

>ut a tax on the sae of reigious materias is not unconstitutiona because it is imposed after the activity 6sae7

taxed is done.

To$entino v. Se#. o4 @inan#e, (199) s%+ra.

The power to impose a icense tax on the exercise of these freedoms is indeed as potent as the power of 

censorship which this "ourt has repeatedy struc2 down

 A tax on the income of one who engages in reigious activities is different from a tax on property used or empoyed in

connection with those activities.

8 0rohi!ition against a++ro+riation o4 +ro#ees o4 taxationNo money sha be paid out of the Treasury except in pursuance of an appropriation made by aw.

taxes #an on$y !e $evie 4or +%!$i# +%r+ose

Se#. 29, (2) Art. I, 1987 Constit%tion

No pubic money or property sha be appropriated, appied, paid, or empoyed directy or indirecty, for the use,

benefit, or support of any church, denomination, sectarian institution or system of reigion, or of any priest, preacher,

minister or other reigious teacher, or dignitary as such except when such priest, preacher, minister or dignitary is

assigned to the armed forces, or to any pena institution, or government orphanage or eprosarium.B

($ec. '" 0&) AR1 2 ) =se o4 tax $evie 4or a s+e#ia$ +%r+ose

 A money coected on any tax evied for a specia purpose sha be treated as a specia fund and paid out for such purpose ony. !f the purpose for which a specia fund was created has been fufied or abandoned, the baance, if 

any, sha be transferred to the genera funds of the government.

Se+aration o4 the Ch%r#h an State

D !f a President of the Phiippines spent a specia fund for a genera purpose, he can be charged with cupabevioation of the "onstitution.

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17 !t must be a private educationa institution

37 !t must be nonstoc2 and nonprofit

47 !t#s assets 6property7 and revenues 6income7 must be used actuay, directy and excusivey for educationa purposes

R=5"S;

17 !f the first re5uisite is absent 6meaning, it#s a government educationa institution7, it is nonetheess exempt from income

tax

37 !f the second re5uirement is absent 6meaning, it is stoc2 and profit7 as ong as the third re5uirement is present, it is

nonetheess exempt from rea estate tax

47 !f the third re5uirement is absent, as ong as it is nonstoc2 and nonprofit, it is nonetheess exempt from income tax

07 !f the third re5uirement is absent, but it is private and nonprofit, it is sub$ect to income tax, but at the preferentia rate of 

ten percent 61/H7

• W Inder the present tax code, for a private educationa institution to be exempt from the payment of income tax,

a it has to be is nonstoc2 and nonprofit. 8owever, a governmenta educationa institution is exempt from incometax without any condition

""0TI< &"S ) A nonstoc2 and nonprofit educationa institutionC

 

• Note however the ast paragraph of Sec. 4/, which states@ Not%ithstandin) the provisions in the precedin) 

 para)raphs the income of %hatever ind and character of the fore)oin) or)ani3ations form any of their property

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real or personal or from any of their activities conducted for profit re)ardless of the disposition made of suchincome shall be sub*ect to tax imposed under this Code. 

3epartment of /inance -rder !+*45* 

Nonstoc2, nonprofit educationa institutions are exempt from taxes on a their revenues and assets used actuay,

directy and excusivey for educationa purposes.

8owever, they sha be sub$ect to interna revenue tax on income from trade, business or other activity, the conduct of 

which is not reated to the exercise or performance by such educationa institutions of its educationa purposes or 

functions.

!nterest income sha be exempt ony when used directy and excusivey for educationa purposes. To substantiate this

caim, the institution must submit annua information return and duy audited financia statement. A certification of actua

utii)ation and the >oard resoution or the proposed pro$ect to be funded out of the money deposited in ban2s sha aso be

submitted.

3epartment of /inance -rder !&6456 

 An educationa institution means a nonstoc2, nonprofit corporation or association duy registered under Phiippine

aw, and operated excusivey for educationa purposes, maintained and administered by a private individua or group

offering forma education, and with an issued permit to operate by the ?"S.

&evenues derived from and assets used in the operation of cafeteriaKcanteens, dormitories, and boo2stores are

exempt from taxation provided they are owned and operated by the educationa institution as anciary activities and the

same are ocated within the schoo premises.

CIR v. CA, CTA an ?CA, 298 SCRA 83 (1998)

!n this case, the S" hed that the income derived by FG"A from easing out a portion of its premises to sma shop

owners, i2e restaurants and canteen operators, and from par2ing fees coected from nonmembers are taxabe income

CIR v. CA, CTA an Ateneo, 271 SCRA 6 (1997)

0etitioner asserte that Ateneo e ani$a =niversity in #on%#ting resear#hes an st%ies o4 so#ia$

organi-ations an #%$t%ra$ va$%es thr% one o4 its %nit, the Instit%te 4or 0hi$i++ines C%$t%re th%s s%!e#t to 3M

ine+enent #ontra#tors tax %ner Se#. 2 o4

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ARTIC5" I A

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The President sha have the power to veto any particuar item or items in an appropriation, revenue, or tariff bi,

but the veto sha not affect the item or items to which he does not ob$ect, Sec. 3(637, Art.

invoving the egaity of any tax imposed, assessment, or to, or any penaty imposed in reation thereto.B

"ongress cannot ta2e away from the Supreme "ourt the power given to it by the "onstitution as the fina arbiter of the tax

cases.

The decisions of >!& are appeaabe to "TA. "ourt of Tax Appeas may be appeaed to the "ourt of Appeas. ?ecision

rendered by the "A may be eevated to the Supreme "ourt.

CIR v. Santos, 277 SCRA 617 (1997)

5oer Co%rts (C@I) has the a%thority to e#ies %estions o4 #onstit%tiona$ity o4 a $a oes not exten on

e#iing %estions hi#h +ertains to $egis$ative +o$i#y.

San ig%e$ Cor+. v. Ave$ino, 89 SCRA 69 (1979)

C@I %ge has the a%thority to +ass %+on the va$iity o4 a #ity tax orinan#e even a4ter its va$iity ah

!een #onteste !e4ore the Se#retary o4 F%sti#e ho renere a e#ision thereon. The e#ision o4 Se#. F%sti#e

that the orinan#e in %estions I o4 o%!t4%$ va$iityK is not a e#$aration that it is %n$a4%$.

 

iv. Reven%e !i$$s sha$$ originate 4ro the >o%se o4 Re+resentatives

Se#. 2', Art. I, 1987 Constit%tion

A appropriation, revenue or tariff bis, bis authori)ing increase of the pubic debt, bis of oca appication, and

private bis sha originate excusivey in the 8ouse of &epresentatives, but the Senate may propose or concur with

amendments.B

• !t is not the revenue aw but the revenue bi which is re5uired by the constitution to originate excusivey in the

8ouse of &epresentative.

To$entino v. Se#. o4 @inan#e, s%+ra., s%+ra.

The "onstitution simpy re5uires that there must be that initiative coming from the 8ouse of &epresentatives

reative to appropriation, revenue and tariff bis on the theory that, eected as they were from the districts, the members of 

the 8ouse can be expected to be more sensitive to the oca needs and probems.

!t is not the aw, but the revenue bi, which is re5uired by the "onstitution to originate excusivey in the 8&,

because a bi originating in the 8ouse may undergo such extensive change in the Senate that resut may be rewriting of 

the whoe, and a distinct bi may be produced. 6amendment by substitution7

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The "onstitution does not aso prohibit the fiing in the Senate of a substitute bi in anticipation of its receipt of the

bi from the 8ouse, as ong as action by the Senate is withhed unti receipt of said bi

v. In4ringeent o4 +ress 4reeo

Se#. 2', Art. III, 1987 Constit%tion

No aw sha be passed abridging the freedom of speech, of expression, or of the press, or the right of the peope

peaceaby to assembe and petition the government for redress of grievances.B

To$entino v. Se#. o4 @inan#e, (199) s%+ra.

The

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1 eaning o4 sit%s

Sit%s +$a#e here a thing is #onsiere 4or taxation. It is ne#essary 4or the exer#ise o4 oinionGa%thority o4 a

state over a s%!e#t atter.

 

• The determination of the situs of taxation depends on various factors incuding the@

1 Nature of the taxC3 Sub$ect matter thereof 6e.g. persons, property, act or or activity7C

4 Possibe protection and benefit that may accrue both to the government and the taxpayerC0 &esidence or citi)enship of the taxpayerC and= Source of income.

3 Sit%s o4 s%!e#ts o4 taxation

*Iusiness Tax Pace of >usiness

xcise or Priviege Tax *here the act is performed or where occupation is pursued

Saes Tax *here the sae is consummated

!ncome Tax "onsider@ 617 citi)enship, 637 residence,

647 source of income 6Sec 03, 34, N!&" of 1''(7

Transfer Tax &esidence or citi)enship of the taxpayer  

or ocation of the property

?onor#s Tax Location of the property

and the citi)enship of the donor 6Sec ':, N!&" 1''(7

state Tax Location and citi)enship of the decedent.6Sec :=, N!&"7

9ranchise Tax state which granted the franchise

O5ex Rei Sit%s where the property is ocated

D o!i$ia Se%%nt%r 0ersona - movabes foow the personB. According to this maxim, the situs of persona property is

the domicie of the owner. This is a merey a fiction of aw intended for convenience and not to be controing where $usticedoes not demand it.

DD the foowing intangibe properties are considered as properties with a situs in the Phiippines@

a 9ranchise which must be exercised in the Phiippinesb Shares, obigations or bonds issued by any corporation or sociedad anonima organi)ed or constituted in the

Phiippines in accordance with its aws.c Shares, obigations or bonds issued by any foreign corporation :=H of business which is ocated in the

Phiippines

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d Shares, obigations, or bonds issued by any foreign corporation if such shares, obigations or bonds haveac5uired a business situs in the PhiippinesC and

e Shares or rights in any partnership business or industry estabished in the Phiippines.

Se#. '2, 1'

CIR v. /ritish verseas Airay Cor+., s%+ra.

&evenue derived by an ofine internationa carrier without any fight from the Phiippines, from tic2et saes through

its oca agent are sub$ect to tax on gross Phiippine biings

CIR v. Fa+an Air$ines, s%+ra.

FA5 ae 0A5 its sa$es ti#:et agent in the 0hi$i++ines. @or the so%r#e o4 in#oe to !e #onsiere #oing

4ro the 0hi$i++ines, it is s%44i#ient that the in#oe is erive 4ro the a#tivities ithin this #o%ntry regar$ess o4 

the a!sen#e o4 4$ight o+erations ithin 0hi$i++ine territory.

 

e$$s @argo /an: v. Co$$e#tor, 7 0hi$ 32 (19')

The shares of stoc2 are sub$ect to Phiippine inheritance tax considering that the decedent was domicied in

"aifornia

Tan v. e$ Rosario, s%+ra.

  A$$ s%!e#ts o4 taxation sii$ar$y sit%ate are to !e treate a$i:e !oth in +rivi$eges #on4ire an $ia!i$ities

i+ose.

3. %$ti+$i#ity o4 Sit%s, Co$$e#tor v. e 5ara, 12 0hi$ 813 (198)

CIR v. &e 5ara, 12 0hi$ 813

The Supreme "ourt did not sub$ect to estate and inheritance taxes the shares of stoc2 issued by Phiippine

corporations which were eft by a nonresident aien after his death. "onsidering that he is a resident of a foreign country,

his estate is entited to exemption from inheritance tax on the intangibe persona property found in the Phiippines. This

exemption is granted to nonresidents to reduce the burdens of mutipe taxation, which otherwise woud sub$ect a

decedent#s intangibe persona property to the inheritance tax both in his pace of residence and domicie and the pace

where those are found.

This is, therefore, an exception to the decision of the Supreme "ourt in Wells /argo v. %2R. This has since been

incorporated in Sec. 1/0 of the N!&".

Se#. 1',

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4 The use to which the property may have been devoted a of which may receive the protection of the awsof $urisdictions other than the domicie of the owner thereto.

The remedy to avoid or reduce the conse5uent burden in case of mutipicity of situs is either to@

1 Provide exemptions or aowance of deduction or tax credit for foreign taxesC or 3 nter into tax treaties with other States.

'. &o%!$e Taxation

&e4inition; Taxing the same person, property, business, ob$ect twice when it shoud ony be taxed once.

Is &o%!$e Taxation 0rohi!ite In The 0hi$sL

No, there is no "onstitutiona prohibition against doube taxation. !t is not favored but permissibe. 6Pepsi "oa

>otting "o. v. "ity of >utuan, %& L33:10, 3: August 1':7 ?oube taxation becomes obnoxious ony when the taxpayer is taxed twice for the benefit of the same

government entity. 6"ommissioner vs. Lednic2y 6%& L1:1', L1:3:, L31040C 41 ;uy 1'07

1 *ins o4 &o%!$e Taxationa &ire#t &o%!$e or &%+$i#ate Taxation - this is ob$ectionabe or prohibited because this constitutes a vioation of 

substantive due process.

LGNTS@ 6i$$an%eva v. City o4 I$oi$o, s%+ra)

• Taxing twice

• >y the same taxing authority

• *ithin the same $urisdiction or taxing district

• 9or the same purpose

• !n the same taxing period

• The same sub$ect or ob$ect

• +f the same 2ind or character of tax.

b Inire#t &%+$i#ate Taxation  - not egay ob$ectionabe. The absence of one or more of the abovementionedeements ma2es the doube taxation indirect.

78A9,:7$;

 A The taxpayers warehousing business athough carried on in reation to the operation of its sugar centra is adistinct and separate taxabe business.

> A icense tax may be evied upon a business or occupation athough the and or property used in connectiontherewith is sub$ect to property tax.

" >oth a icense fee and a tax may be imposed on the same business or occupation for seing the same artice andthis is not in vioation of the rues against doube taxation.

? *hen every botte or container of intoxicating beverages is sub$ect to oca tax and at the same time the businessof seing such product is aso sub$ect to i5uors icense.

A tax imposed on both on the occupation of fishing and of the fishpond itsef 

c &oesti# - this arises when the taxes are imposed by the oca or nationa government 6within the same state7d Internationa$ - refers to the imposition of comparabe taxes in two or more states on the same taxpayer in

respect of of the same sub$ect matter for identica periods

a. eaning

!n its strict sense, referred to as direct dupicate taxation, doube taxation means@

1 Taxing twiceC3 by the same taxing authorityC4 within the same $urisdiction or taxing districtC

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0 for the same purposeC= in the same year or taxing periodC same property in the territory.

CIR v. S.C. Fohnson an Son, In#., 39 SCRA 87 (1999)

&o%!$e TaxationNta:es +$a#e hen a +erson is resient o4 a #ontra#ting state an erives in#oe 4ro,

or ons #a+ita$ in the other #ontra#ting state an !oth states i+ose tax on that in#oe or #a+ita$.

 

b &o%!$e taxation in its !roa sense

!n its broad sense, referred to as indirect doube taxation, doube taxation is taxation other than direct dupicate taxation. !t

extends to a cases in which there is a burden of two or more impositions.

i$$an%eva v. City o4 I$oi$o, s%+ra.

 An ordinance imposing a municipa tax on tenement houses was chaenged because the owners aready pay reaestate taxes and aso income taxes under the N!&". The Supreme "ourt hed that there was no doube taxation , so ong

as it does not vioates any other constitutiona provision. The same tax may be imposed by the Nationa %overnment as

we as the oca government. There is nothing inherenty obnoxious in the exaction of icense fees or taxes with respect to

the same occupation, caing or activity by both the state and a poitica subdivision thereof. 9urther, a icense tax may be

evied upon a business or occupation athough the and used in connection therewith is sub$ect to property tax.

b Constit%tiona$ity o4 o%!$e taxation

City o4 /ag%io v. e 5eon, s%+ra.

The argument against doube taxation may not be invo2ed where one tax is imposed by the state and the other 

imposed by the city, it being widey recogni)ed that there is nothing inherenty obnoxious in the re5uirement that icense

fees or taxes be exacted with respect to the same occupation, caing or activity by both the state and a poitica

subdivision thereof. And where the statute or ordinance in 5uestion appies e5uay to a persons, firms and corporations

paced in a simiar situation, there is no infringement of the rue on e5uaity.

0e+si Co$a /ott$ing v. City o4 /%t%an, s%+ra.

An orinan#e i+osing sa$es tax on agentsG#onsignee se$$ing er#hanise 4ro o%tsie ea$ers oes not

ao%nt to o%!$e taxation. &o%!$e taxation, in genera$, is not 4or!ien !y o%r 4%naenta$ $a. >oever, theorinan#e is ar!itrary to other e!er o4 the sae taxa!$e #$ass hen#e the $a vio$ates the r%$e o4 %ni4ority in

taxation. There is no constitutiona prohibition against doube taxation in the Phiippines. !t is something not favored but

is permissibe, provided that the other constitutiona re5uirements is not thereby vioated

San#he- v. Co$$e#tor, 97 0hi$ 687 (19)

A $i#ense tax ay !e $evie %+on a !%siness or o##%+ation a$tho%gh the $an or +ro+erty %se therein is

s%!e#t to +ro+erty tax. The state ay #o$$e#t an a vo$are tax on +ro+erty %se in a #a$$ing, an at the sae

tie i+ose a $i#ense tax on the +%rs%it o4 that #a$$ing, the i+osition o4 the $ater :in o4 tax that !eing no sense

as