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Part 1: General Principles I. CONCEPT A. Taxation and Tax defined Taxation - The act of laying a tax - The process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of government - The inherent power of the state to demand enforced contributions for public purpose or purposes - Every imposition of charge or burden by the sovereign power upon persons, property, or property rights for the use and support of the government and to enable it to discharge its appropriate functions Tax - The enforced proportional and pecuniary contributions from persons and property levied by the law-making body of the state having jurisdiction over the subject of the burden for the support of the government and all public needs B. Tax as distinguished from other forms of exactions 1. Tax v. Tariff Tariff- duties payable on goods imported or exported 2. Tax v. license fee Tax

License fee

Definition

The enforced proportional and pecuniary contributions from persons and property levied for the support of the government and all public needs

A charge imposed under the police power for purposes of regulation

Purpose

For revenue

For regulation

Power exercised

Taxing power

Police power

Amount

Generally, no limit

Limited to the necessary expenses of inspection and regulation

Subject

Imposed on persons and property

Imposed on the right to exercise a privilege

Effect of failure to pay

Does not make the act or business illegal

Makes the business or act illegal

PAL v. EDU (1988) Issue: What is the nature of motor vehicle registration fees? Are they taxes? Held: Yes. It is possible for an exaction to be both tax and regulation. License fees are often looked to as a source of revenue as well as a means of regulation. This is true, for example, of automobile license fees. In such case, the fees may properly be regarded as taxes even though they also serve as an instrument of regulation. 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. PROGRESSIVE DEVT CORP v. QC (1989) Issue: Whether the tax (supervision fee) imposed by the QC Government on gross receipts of stall rentals (on PDC which owns a public market) is properly characterized as partaking of the nature of an income tax or, alternatively, of a license fee Held: A license fee.

The term "tax" frequently applies to all kinds of exactions of monies which become public funds. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues.Thus, 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 questioned 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 as well. When an activity, occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health, morals and safety, or the general welfare, the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity, and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has been paid. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. We believe and so hold that the five percent (5%) tax imposed in Ordinance No. 9236 constitutes, not a tax on income, not a city income tax (as distinguished from the national income tax

imposed by the National Internal Revenue Code) within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of the business in which the petitioner is engaged. Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a revenue measure exclusively. The lower court correctly held that the gross receipts from stall rentals have been used only as a basis for computing the fees or taxes due respondent to cover the latter's administrative expenses, i.e., for regulation and supervision of the sale of foodstuffs to the public. The use of the gross amount of stall rentals as basis for determining the collectible amount of license tax, does not by itself, upon the one hand, convert or render the license tax into a prohibited city tax on income. OSMENA v. ORBOS (1993) Issue: Is the Oil Prize Stabilization Fund a form of revenue measure imposed in the exercise of the power of taxation? Held: No. 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. The OPSF was established precisely to protect local consumers from the adverse consequences that such frequent oil price adjustments may have upon the economy. It appears to the Court that the establishment and maintenance of the OPSF is well within that pervasive and non-waivable power and responsibility of the government to secure the physical and economic survival and wellbeing of the community, that comprehensive sovereign authority we designate as the

police power of the State. The stabilization, and subsidy of domestic prices of petroleum products and fuel oil clearly critical in importance considering, among other things, the continuing high level of dependence of the country on imported crude oil -are appropriately regarded as public purposes." 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. COMPANIA GENERAL DE TABACOS v. CITY OF MANILA (1963) Issue: Is Tabacalera exempted from paying sales taxes on its liquor sales given that it has been paying license fees for selling liquor? Held: No. 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. That Tabacalera is being subjected to double taxation is more apparent than real. As already stated, what is collected under Ordinance No. 3358 is a license fee for the privilege of engaging in the sale of liquor, a calling in which it is obvious not anyone or anybody may freely engage, considering that the sale of liquor indiscriminately may endanger public health and morals. On the other hand, what the three ordinances mentioned heretofore impose is a tax for revenue purposes based on the sales made of the same article or merchandise. 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. 3. Tax v. Toll Sec. 155 LGC Section 155. Toll Fees or Charges. - The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier, or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office personnel delivering mail, physicallyhandicapped, and disabled citizens who are sixty-five (65) years or older. When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use. Tax

Toll

Definition

The enforced proportional and pecuniary contributions from persons and property levied for the support of the government and all public needs

A sum of money for the use of something usu. of a road, bridge etc.

Basis

A demand of sovereignty

A demand of proprietorship

Purpose

For the support of the government

For the use of another’s property

Amount

Generally, no limit is imposed

Depends upon the cost of construction or maintenance of the public improvement

Who may impose

The government

The government or private individuals or entities

4. Tax v. Special Assessment Sec. 240 LGC Section 240. Special Levy by Local Government Units. - A province, city or municipality may impose a special levy on the lands comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the local government unit concerned: Provided, however, That the special levy shall not exceed sixty percent (60%) of the actual cost of such projects and improvements, including the costs of acquiring land and such other real property in connection therewith: Provided, further, That the special levy shall not apply to lands exempt from basic real property tax and the remainder of the land portions of which have been donated to the local government unit concerned for the construction of such projects or improvements. Tax

Special Assessment

Definition

The enforced proportional and pecuniary contributions from persons and property levied for the support of the government and all public needs

An enforced proportional contribution from owners of lands especially or peculiarly benefited by public improvements

Subject

Property, rights, privilege etc.

Levied only on land

Liability

Personal liability of the person assessed

Limited to the land involved

Basis

Necessity

Benefits

Applicatio n

General application

Exceptional both as to the time and place

Note: An exemption from taxation does not include exemption from special assessment. But the power to tax carries with it the power to levy a special assessment.

REPUBLIC v. BACOLOD MURCIA MILLING CO. (1966) Issue: Can the sugar centrals refuse to contribute to the 'Sugar Research and Stabilization Fund,' on the ground that the said fund does not benefit them? Held: No. The special assessment at bar may be considered 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. 5. Tax v. Ordinary debt Tax

Ordinary debt

Basis

Law

Contract

Assignability

Not assignable

Assignable

Payment

In money

May be in kind

Set-off

May not be the subject of set-off

May be

Imprisonment

A person cannot be imprisoned for nonpayment of debt

Imprisonment is a sanction for non-payment of tax

Prescription

Special prescriptive periods in Tax Code

Ordinary periods of prescription

Interest

Does not draw interest except when delinquent

Draws interest when it is so stipulated or when there is default

PHILEX MINING CORP. v. CIR (1998) Issue: Can a taxpayer refuse to pay its excise tax liabilities on the ground that it has pending claim for refund or credit VAT input taxes? Held: No. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a

tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. It must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. Hence, a tax does not depend upon the consent of the taxpayer. If any payer can defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax is contingent on the result of the lawsuit it filed against the government. CALTEX PHILIPPINES v. COA (1992) Issue: Whether or not the amounts due to the OPSF from Caltex may be offset against its outstanding claims from said fund Held: No. It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set- off. We may even further state that technically, in respect to the taxes for the OPSF, the oil companies merely act as agents for the Government in the latter's collection since the taxes are, in reality, passed unto the end-users -- the consuming public. In that capacity, the petitioner, as one of such companies, has the primary obligation to account for and remit the taxes collected to the administrator of the OPSF. This duty stems from the fiduciary relationship between the two; petitioner certainly cannot be considered merely as a debtor.

II. THEORY AND BASIS OF TAXATION A. Lifeblood Theory B. Necessity Theory - The existence of government is a necessity; it cannot continue without means to pay its expenses; and that for these means it has a right to compel all its citizens and property within its limits to contribute. Marcos II v. CA Issue: Whether or not the BIR has the authority to collect by the summary remedy of levying upon, and sale of real properties of the decedent, estate tax deficiencies, without the cognition and authority the probate court Held: Yes. It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the collection of taxes, is of paramount importance for the sustenance of government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. In the Philippine experience, the enforcement and collection of estate tax, is executive in character, as the legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Thus, it was in Vera vs. Fernandez that the court recognized the liberal treatment of claims for taxes charged against the estate of the decedent. Such taxes, we said, were exempted from the application of the statute of non-claims, and this is justified by the necessity of government funding, immortalized in the maxim

that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae — taxes are the sinews of the state. From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced and collected. NPC v. City of Cabanatuan (2003) Issue: Is NPB liable to pay franchise tax to the City of Cabanatuan? Held: Yes. Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and wellbeing of the people. C. Benefits-Protection Theory (Symbiotic Relationship) - Reciprocal duties of protection and support between the state and its inhabitants - In return for his contribution, the taxpayer receives the general advantages and protection which the government affords the taxpayer and his property

COMMISSIONER v. ALGUE (1988) Issue: Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue as legitimate business expenses (promotional fees) in its income tax returns Held: No. It is said that taxes are what we pay for civilized 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. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it 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. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed. D. Jurisdiction over Subjects and Objects III. PURPOSES/OBJECTIVES OF TAXATION A. Revenue-raising B. Non-revenue/special or regulatory

CALTEX v. COA, Ibid. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the state. IV. GENERAL PRINCIPLES OF A SOUND TAX SYSTEM A. Fiscal adequacy - The sources of revenue should be sufficient to meet the demands of public expenditure - The revenues should be elastic or capable of expanding or contracting annually in response to variations in public expenditures B. Theoretical justice (or equality) - taxation should be uniform and equitable - The tax burden should be distributed in proportion to the taxpayer’s ability to pay (ability-to-pay principle) - Similarly situated taxpayers should pay equal taxes C. Administrative feasibility - tax laws should be capable of convenient, just and effective administration or enforcement at a reasonable cost V. SCOPE AND LIMITATIONS OF TAXATION A. Inherent Limitations- those which restrict the power although they are not embodied in the Constitution 1. Public Purpose - a purpose affecting the inhabitants of the state or taxing district as a community and not merely as individuals

- A tax levied for a private purpose constitutes a taking of property without due process of law - The government is established for public purpose - Although private individuals are directly benefited, the tax would still be valid provided such benefit is only incidental Pascual v. Sec. of Public Works (1960) Issue: May public funds be appropriated for a private purpose? Held: No. (T)he legislature is without power to appropriate public revenue for anything but a public purpose. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interests, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. Needless to say, this Court is fully in accord with the foregoing views which, apart from being patently sound, are a necessary corollary to our democratic system of government, which, as such, exists primarily for the promotion of the general welfare. The expenditure of public funds by an officer of the State for the purpose of administering an unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the request of a taxpayer. Planters Products, Inc. v. Fertiphil Corp. (2008) Issue: Whether or not the levy imposed under LOI No. 1465 is for a public purpose Held: No. An inherent limitation on the power of taxation is public purpose. Taxes are exacted only for a public purpose. They cannot be used for purely private purposes or for the exclusive

benefit of private persons. The reason for this is simple. The power to tax exists for the general welfare; hence, implicit in its power is the limitation that it should be used only for a public purpose. It would be a robbery for the State to tax its citizens and use the funds generated for a private purpose. As an old United States case bluntly put it: To lay with one hand, the power of the government on the property of the citizen, and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes, is nonetheless a robbery because it is done under the forms of law and is called taxation. The term public purpose is not defined. It is an elastic concept that can be hammered to fit modern standards. Jurisprudence states that public purpose should be given a broad interpretation. It does not only pertain to those purposes which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform. Public purpose is the heart of a tax law. When a tax law is only a mask to exact funds from the public when its true intent is to give undue benefit and advantage to a private enterprise, that law will not satisfy the requirement of public purpose. The purpose of a law is evident from its text or inferable from other secondary sources. Here, We agree with the RTC and that CA that the levy imposed under LOI No. 1465 was not for a public purpose. The LOI expressly provided that the levy be imposed to benefit PPI, a private company. Tio v. Videogram Regulatory Board (1987) Issue: WON the levy of the tax imposed on the sale, lease or disposition of videograms (PD 1987) is for a public purpose Held: Yes

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that 'inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation.” Taxation has been made the implement of the state's police power. 2. Inherently Legislative General Rule: Power to tax may not be delegated Commissioner v. Santos and Guild of Philippine Jewellers Inc. (1997) Issue: WON the NIRC and Tariff and Customs Code provisions imposing taxes on jewelry are unconstitutional for being confiscatory and oppressive Held: No. In citing as basis for his decision unproven comparative data pertaining to differences between tax rates of various Asian countries, and concluding that the jewelry industry in the Philippines suffers as a result, the respondent judge took it upon himself to supplant legislative policy regarding jewelry taxation. In advocating the abolition of local tax and duty on jewelry simply because other countries have adopted such policies, the respondent judge overlooked the fact that such

matters are not for him to decide. There are reasons why jewelry, a non-essential item, is taxed as it is in this country, and these reasons, deliberated upon by our legislature, are beyond the reach of judicial questioning. Granting arguendo that the private respondents may have provided convincing arguments why the jewelry industry in the Philippines should not be taxed as it is, it is to the legislature that they must resort to for relief, since with the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This Court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative judgment. Kapatiran v. Tan (1988) Issue: WON EO 273 (VAT Law) is valid Held: Yes. In any event, if petitioners seriously believe that the adoption and continued application of the VAT are prejudicial to the general welfare or the interests of the majority of the people, they should seek recourse and relief from the political branches of the government. The Court, following the time-honored doctrine of separation of powers, cannot substitute its judgment for that of the President as to the wisdom, justice and advisability of the adoption of the VAT. The Court can only look into and determine whether or not EO 273 was enacted and made effective as law, in the manner required by, and consistent with, the Constitution, and to make sure that it was not issued in grave abuse of discretion amounting to lack or excess of jurisdiction; and, in this regard, the Court finds no reason to impede its application or continued implementation. Exceptions from prohibition against delegation of power to tax: a) Delegation to local governments

Sec. 5, Art. X, Phil. Const. Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. LTO v. City of Butuan (2000) Issue: Whether the authority to register tricycles, the issuance of tricycle drivers' license, and the collection of fees therefor had all been vested in the LGUs Held: No. The reliance made by respondents on the broad taxing power of local government units, specifically under Section 133 of the Local Government Code, is tangential. The power over tricycles granted under Section 458(a)(3)(VI) of the LGC to LGUs is the power to regulate their operation and to grant franchises for the operation thereof. The exclusionary clause contained in the tax provisions of Section 133(1) of the Local Government Code must not be held to have had the effect of withdrawing the express power of LTO to cause the registration of all motor vehicles and the issuance of licenses for the driving thereof. These functions of the LTO are essentially regulatory in nature, exercised pursuant to the police power of the State, whose basic objectives are to achieve road safety by insuring the road worthiness of these motor vehicles and the competence of drivers prescribed by R. A. 4136. Basco v. PAGCOR (1991) Issue: Whether or not the charter of PAGCOR (PD 1869) which exempts it from the payment of local taxes is violative of the principle of local autonomy

Held: No. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it.” Its "power to tax" therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the "inherent power to tax.” And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy. b) Delegation to the President Sec. 28(2), Art. VI, Const. Section 28(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. 
 Sec. 1608, CMTA Sec. 1608. Flexible Clause. (a) In the interest of the general welfare and national security, and, subject to the limitations prescribed under this Act, the President, upon the recommendation of the NEDA, is hereby empowered to:

(1) Increase, reduce, or remove existing rates of import duty including any necessary change in classification. The existing rates may be increased or decreased to any level, in one or several stages, but in no case shall the increased rate of import duty be higher than a maximum of one hundred percent (100%) ad valorem; (2) Establish import quotas or ban imports of any commodity, as may be necessary; and (3) Impose an additional duty on all imports not exceeding ten percent (10%) ad valorem whenever necessary: Provided, That upon periodic investigations by the Commission and recommendation of the NEDA, the President may cause a gradual reduction of rates of import duty granted in Section 1611 of this Act, including those subsequently granted pursuant to this section. (b) Before any recommendation is submitted to the President by the NEDA pursuant to the provisions of this section, except in the imposition of an additional duty not exceeding ten percent (10%) ad valorem, the Commission shall conduct an investigation and shall hold public hearings wherein interested parties shall be afforded reasonable opportunity to be present, to produce evidence and to be heard. The Commission shall also hear the views and recommendations of any government office, agency, or instrumentality. The Commission shall submit its findings and recommendations to the NEDA within thirty (30) days after the termination of the public hearings. (c) The power of the President to increase or decrease rates of import duty within the limits fixed in subsection (a) hereof shall include the authority to modify the form of duty. In modifying the form of duty, the corresponding ad valorem or specific equivalents of the duty with respect to imports from the principal competing foreign country for the most recent representative period shall be used as basis. (d) Any order issued by the President pursuant to the provisions of this section shall take effect thirty (30) days after

promulgation, except in the imposition of additional duty not exceeding ten percent (10%) ad valorem which shall take effect at the discretion of the President. (e) The power delegated to the President as provided for in this section shall be exercised only when Congress is not in session. (f) The power herein delegated may be withdrawn or terminated by Congress through a joint resolution. The NEDA shall promulgate rules and regulations necessary to carry out the provisions of this section. Garcia v. Executive Secretary (1992) Issue: Whether or not the President can impose additional duties on imported products to raise additional revenue for the government Held: Yes. There is thus explicit constitutional permission (Section 28(2), Article VI of the Constitution) to Congress to authorize the President "subject to such limitations and restrictions as [Congress] may impose" to fix "within specific limits" "tariff rates x x x and other duties or imposts x x x." There is nothing in the language of either Section 104 or of 401 of the Tariff and Customs Code that suggest such a sharp and absolute limitation of authority (that the President is authorized to act under the Tariff and Customs Code only "to protect local industries and products for the sake of the national economy, general welfare and/or national security”). Accordingly, we believe and so hold that Executive Orders Nos. 475 and 478 which may be conceded to be substantially moved by the desire to generate additional public revenues, are not, for that reason alone, either constitutionally flawed, or legally infirm under Section 401 of the Tariff and Customs Code ABAKADA v. Ermita

Issue: Whether the provisions of RA 9337 giving the President the standby authority to raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax Held: No. Clearly, the legislature may delegate to executive officers or bodies the power to determine certain facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations on their authority. While the power to tax cannot be delegated to executive agencies, details as to the enforcement and administration of an exercise of such power may be left to them, including the power to determine the existence of facts on which its operation depends. The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of legislation is not of itself a legislative function, but is simply ancillary to legislation. Thus, the duty of correlating information and making recommendations is the kind of subsidiary activity which the legislature may perform through its members, or which it may delegate to others to perform. c) Delegation to administrative agencies Maceda v. Macaraig Issue: Whether or not the powers conferred upon the FIRB by Sections 2(a), (b), (c), and (d) of Executive Order No. 93 (to recommend the restoration of tax exemption privileges of government and private entities) constitute undue delegation of legislative power and is therefore unconstitutional Held: No. The legislative authority could not or is not expected to state all the detailed situations wherein the tax exemption privileges of

persons or entities would be restored. The task may be assigned to an administrative body like the FIRB. E. O. No. 93 is complete in itself and constitutes a valid delegation of legislative power to the FIRB. Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case of exemptions in favor of a government political subdivision or instrumentality. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies. Osmena v. Orbos Ibid. Issue: Does the provision conferring the authority upon the ERB to impose additional amounts on petroleum products to augment OPSF constitute an undue delegation of legislative power Held: No 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[18] expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. 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. For a valid delegation of power, it is essential that the law delegating the power must be (1) complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it must fix a standard - limits of which are sufficiently determinate or determinable -- to which the delegate must conform. Commissioner v. CA and Fortune Tobacco Corp. Issue: WON RMC 37-93 (which classified Hope Luxury, Premium More and Champion as locally manufactured cigarettes bearing foreign brands) which was issued without prior notice and hearing was valid Held: No. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. When, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance

to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. 3. Territorial Reasons: a) Tax laws do not operate beyond a country’s territorial limits b) Property within the jurisdiction of another state receives none of the protection for which a tax is supposed to be a compensation Iloilo Bottlers Inc. v. City of Iloilo Issue: Whether the company may be considered engaged in the distribution of softdrinks in Iloilo City, even after it had transferred its bottling plant to Pavia, so as to be within the purview of the tax ordinance Held: Yes. In the case at bar, the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in Iloilo province. Sales transactions with customers were entered into and sales were perfected and consummated by route salesmen. Truck sales were made independently of transactions in the main office. The delivery trucks were not used solely for the purpose of delivering softdrinks previously sold at Pavia. They served as selling units. They were what were called, until recently, "rolling stores". The delivery trucks were therefore much the same as the stores and warehouses under the second marketing system. Iloilo Bottlers, Inc. thus falls under the second category above. That is, the corporation was engaged in the separate business of selling or distributing softdrinks, independently of its business of bottling them. The tax imposed under Ordinance No. 5 is an excise tax. It is a tax on the privilege of distributing, manufacturing or bottling softdrinks. Being an excise tax, it can be levied by the taxing

authority only when the acts, privileges or businesses are done or performed within the jurisdiction of said authority. Smith v. CIR (CTA) Issue: Whether or not aliens working within the Subic Special Economic Zone are subject to Philippine income taxes on income earned from such employment Held: Yes. Individual aliens employed within the Subic Special Economic Zone (SSEZ) are not exempt from the awesome power of Philippine taxation especially so that they sourced out their earnings from within the Philippines. All subjects over which the Philippines can exercise dominion are necessarily objects of taxation. As such, all subjects of taxation within its jurisdiction are required to pay tax in exchange of the protection that the state gives.Thus, the SSEZ, being within the territorial boundaries of the Philippines, the aliens residing therein, who enjoy the benefits and protection from the said state are not exempt from contributing their share in the running of the government. They have the bounden duty to surrender part of their hard-earned income to the taxing authorities. 4. International Comity The property of a foreign state may not be taxed by another Bases: a) Sovereign equality among states b) Usage among states c) A foreign government may not be sued without its consent Sec. 2, Art. II, Const

Section 2. The Philippines xxx adopts the generally accepted principles of international law as part of the law of the land xxx. Sec. 32(B)(7)(a) NIRC (B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall be exempt from taxation under this Title: (7) Miscellaneous Items. (a) Income Derived by Foreign Government. - Income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from foreign governments, and (iii) international or regional financial institutions established by foreign governments. Tanada v. Angara (1997) Issue: Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty hence invalid Held: No. While sovereignty has traditionally been deemed absolute and all encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. In its Declaration of Principles and State Policies, the Constitution adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." By the doctrine of incorporation, the

country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute rights. In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. 5. Exemption of Government Entities, Agencies and Instrumentalities Reasons a) Government would be taxing itself to raise money to pay over to itself b) In order that functions of government shall not be unduly impeded Sec. 32(B)(7)(b) (B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall be exempt from taxation under this Title: (7) Miscellaneous Items. (b) Income Derived by the Government or its Political Subdivisions. - Income derived from any public utility or from the exercise of any essential governmental function accruing to the

Government of the Philippines or to any political subdivision thereof. Sec. 27(C) SEC. 27. Rates of Income tax on Domestic Corporations. (C) Government-owned or -Controlled Corporations, Agencies or Instrumentalities. - The provisions of existing special or general laws to the contrary notwithstanding, all corporations, agencies, or instrumentalities owned or controlled by the Government, except the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), and the local water districts (LWDs), shall pay such rate of tax upon their taxable income as are imposed by this Section upon corporations or associations engaged in s similar business, industry, or activity. MIAA v. CA (2006) Issue: Whether the MIAA is exempt from payment of local taxes Held: Yes. MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code. Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide."

When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Philippine Fisheries Development Authority v. CA (2007) Issue: Is the Authority liable to pay real property tax to the City of Iloilo? Held: Yes but only with respect to portions of the IFPC leased to private entities. The Court rules that the Authority is not a GOCC but an instrumentality of the national government which is generally

exempt from payment of real property tax. However, said exemption does not apply to the portions of the IFPC which the Authority leased to private entities. With respect to these properties, the Authority is liable to pay real property tax. Nonetheless, the IFPC, being a property of public dominion cannot be sold at public auction to satisfy the tax delinquency. B. Constitutional Limitations- those expressly found in the Constitution or implied from its provisions 1. Provisions directly affecting Taxation a. Non-imprisonment for non-payment of poll tax (Sec. 20 Art. III Const.) b. Uniformity and Equity in Taxation Sec. 28(1) Art. VI Const. The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. 
 Uniformity in Taxation City of Baguio v. de Leon (1968) Issue: WON the tax ordinance enacted by the City of Baguio which prescribes different amounts of tax depending on the value of the property of a real estate dealer violates the rule of uniformity established by the Constitution Held: No. In Philippine Trust Company v. Yatco, Justice Laurel, speaking for the Court, stated: "A tax is considered uniform when it operates with their same force and effect in every place where the subject may be found."

There was no occasion in that case to consider the possible effect on such a constitutional requirement where there is a classification. The opportunity came in Eastern Theatrical Co. v. Alfonso. Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall 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 then, all that is needed as held in another case decided two years later, is that the statute or ordinance in question "applies equally to all persons, firms and corporations placed in similar situation." This Court is on record as accepting the view in a leading American case that "inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation.” Commissioner v. Lingayen Gulf Electric Issue: Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and equality of taxation" clause of the Constitution. 
 Held: No. A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class shall be taxed alike. The benefits of the tax reduction provided by law (Act No. 3636 as amended by C.A. No. 132 and R.A. No. 3843) apply to the respondent's power plant and others circumscribed within this class. R.A. No. 3843 merely transferred the petitioner's power plant from that class provided for in Act No. 667, as amended, to which it belonged until the approval of R.A. No. 3843, and placed it within the class falling under Act No. 3636, as amended. Thus, it only effected the transfer of a taxable property from one class to another.

Valid Classification of taxpayers/subject matter to be taxed Pepsi Cola v. City of Butuan (1968) Issue: Won the disputed ordinance is null and void Held: Yes. Even, however, if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class. These conditions are not fully met by the ordinance in question. Indeed, if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason

why sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. c. Grant by Congress of Authority to President to Impose Tariff Rates Sec. 28 (2) Art. VI Const 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. 
 d. Tax Exemption of Religious, Charitable Entities and Educational Entities Sec. 28 (3) Art. VI Const Charitable institutions, churches and personages or convents appurtenant thereto, mosques, nonprofit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation. 
 Abra Valley College v. Aquino Issue: WON the college lot and building in question are used exclusively for educational purposes and thus exempt from real property tax considering that the second floor serves as the permanent residence of the President and Director thereof and his family while the ground floor is being used and rented by a commercial establishment Held: No. The exemption in favor of property used exclusively for charitable or educational purposes is 'not limited to property actually indispensable' therefor, but extends to facilities which

are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, "a school for training nurses, a nurses' home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns, and residents', such as "Athletic fields" including "a farm used for the inmates of the institution. The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 Phil, 547 [1941]). It must be stressed however, that while this Court allows a more liberal and nonrestrictive interpretation of the phrase "exclusively used for educational purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar for residential purposes of the Director and his family, may find justification under the concept of incidental use, which is complimentary to the main or primary purpose—educational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. Lung Center of the Philippines v. QC (2004) Issue: WON the real properties of the Lung Center are exempt from RPT Held: The portions of the land leased to private entities as well as those parts of the hospital leased to private

individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or nonpaying, are exempt from RPT. The petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the nature of the actual work performed, the character of the services rendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties. It (charity) may be applied to almost anything that tend to promote the well-doing and well-being of social man. It embraces the improvement and promotion of the happiness of man. The word charitable is not restricted to relief of the poor or sick.The test of a charity and a charitable organization are in law the same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose recognized in law as charitable or whether it is maintained for gain, profit, or private advantage. As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether outpatient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution. The tax exemption under this constitutional provision covers property taxes only. As Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: . . . what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and

improvements actually, directly and exclusively used for religious, charitable or educational purposes. Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. Exclusive is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a privilege exclusively. If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. The words dominant use or principal use cannot be substituted for the words used exclusively without doing violence to the Constitutions and the law. Solely is synonymous with exclusively. What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes. e. Tax Exemption of Non-Stock, Non-Profit Institutions Sec. 4(3) and (4) Art. XIV Const (3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. 
 Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to such

exemptions, subject to the limitations provided by law, including restrictions on dividends and provisions for reinvestment. (4) Subject to conditions prescribed by law, all grants, endowments, donations, or contributions used actually, directly, and exclusively for educational purposes shall be exempt from tax. 
 Sec. 28(3) 1987 Const. Sec. 27(B) NIRC
 SEC. 27. Rates of Income tax on Domestic Corporations. (B) Proprietary Educational Institutions and Hospitals. Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of ten percent (10%) on their taxable income except those covered by Subsection (D) hereof: Provided, that if the gross income from 'unrelated trade, business or other activity' exceeds fifty percent (50%) of the total gross income derived by such educational institutions or hospitals from all sources, the tax prescribed in Subsection (A) hereof shall be imposed on the entire taxable income. For purposes of this Subsection, the term 'unrelated trade, business or other activity' means any trade, business or other activity, the conduct of which is not substantially related to the exercise or performance by such educational institution or hospital of its primary purpose or function. A 'proprietary educational institution' is any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education, Culture and Sports (DECS), or the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations. Sec. 30(H) NIRC

SEC. 30. Exemptions from Tax on Corporations. - The following organizations shall not be taxed under this Title in respect to income received by them as such: (H) A non-stock and non-profit educational institution;
 RR 13-98 f. Majority Vote of Congress for Grant of Tax Exemption Sec. 28(4), Art. VI, Const. No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress. g. Use of Tax Levied For Special Purpose Sec. 29 Art. VI Const Section 29. All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose 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. Gaston v. Republic Planters Bank Issue: Whether the stabilization fees collected from sugar planters and millers pursuant to Section 7 of P.D. No. 388 are funds in trust for them or public funds Held: Public funds. The stabilization fees collected 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 collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State.

The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of "financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market". The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose. The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law. h. President’s Veto Power On Appropriation, Revenue and Tariff Bills Sec. 25(2) Art. VI Const Section 25 (2). No provision or enactment shall be embraced in the general appropriations bill unless it relates specifically to some particular appropriation therein. Any such provision or enactment shall be limited in its operation to the appropriation to which it relates. Sec. 27(2) Art VI Const
 The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object. 
 Gonzales v. Macaraig Issue: WON the veto by the President of Section 55 of the 1989 Appropriations Bill, and subsequently of its counterpart Section 16 of the 1990 Appropriations Bill is unconstitutional and without effect Held: No.

It is our considered opinion that, notwithstanding the elimination in Article VI, Section 27(2) of the 1987 Constitution of any reference to the veto of a provision, the extent of the President's veto power as previously defined by the 1935 Constitution has not changed (the President may veto a provision without vetoing the entire bill). This is because the eliminated proviso merely pronounces the basic principle that a distinct and severable part of a bill may be the subject of a separate veto. Explicit is the requirement that a provision in the Appropriations Bill should relate specifically to some "particular appropriation" therein. The challenged "provisions" fall short of this requirement. Firstly, the vetoed "provisions" do not relate to any particular or distinctive appropriation. They apply generally to all items disapproved or reduced by Congress in the Appropriations Bill. Secondly, the disapproved or reduced items are nowhere to be found on the face of the Bill. Section 55 (FY '89) and Section 16 (FY '90) although labelled as "provisions," are actually inappropriate provisions that should be treated as items for the purpose of the President's veto power. i. Non-impairment of Jurisdiction of the Supreme Court Sec. 2 Art VIII Const Section 2. The Congress shall have the power to define, prescribe, and apportion the jurisdiction of the various courts but may not deprive the Supreme Court of its jurisdiction over cases enumerated in Section 5 hereof. Xxx Sec. 5 Art VIII Const Section 5. The Supreme Court shall have the following powers: (2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in: 
 b. All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed in relation thereto.

j. Grant of Power to LGUs to Create Its Own Sources of Revenue
 Sec. 5 Art X Const Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. 2. Provisions indirectly affecting Taxation a. Due Process Sec. 1 Art III Const Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws. Tan v. Del Rosario The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power. Sison v. Ancheta It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property. That would be a clear abuse of power. It then becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is

so harsh and unreasonable, it is subject to attack on due process grounds. b. Religious freedom Sec. 5 Art. III Const Section 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. xxx Sec. 29(2) Art VI Const No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, other religious teacher, or dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium. 
 American Bible Society v. City of Manila Issue: Whether said ordinances (which impose license fees upon appellant for its distribution and sale of bibles and other religious literature) are invalid Held: Yes. The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to disseminate religious information. In the case at bar the license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious literature.

The tax imposed by the City is a flat license tax, payment of which is a condition of the exercise of these constitutional privileges. The power to tax the exercise of a privilege is the power to control or suppress its enjoyment. * * * Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance. Tolentino v. Sec. of Finance Issue: WON the VAT Law is invalid for impairing the freedom of religion Held: No. The Free Exercise of Religion Clause does not prohibit imposing a generally applicable sales and use tax on the sale of religious materials by a religious organization. This brings us to the question whether the registration provision of the law, although of general applicability, nonetheless is invalid when applied to the press because it lays a prior restraint on its essential freedom. The case of American Bible Society v. City of Manila is cited by both the PBS and the PPI in support of their contention that the law imposes censorship. There, this Court held that an ordinance of the City of Manila, which imposed a license fee on those engaged in the business of general merchandise, could not be applied to the appellant's sale of bibles and other religious literature. This Court relied on Murdock v. Pennsylvania, in which it was held that, as a license fee is fixed in amount and unrelated to the receipts of the taxpayer, the license fee, when applied to a religious sect, was actually being imposed as a condition for the exercise of the sect's right under the Constitution. For that reason, it was held, the license fee "restrains in advance those constitutional liberties of press and religion and inevitably tends to suppress their exercise." But, in this case, the fee in § 107, although a fixed amount (P1,000), is not imposed for the exercise of a privilege but only

for the purpose of defraying part of the cost of registration. The registration requirement is a central feature of the VAT system. It is designed to provide a record of tax credits because any person who is subject to the payment of the VAT pays an input tax, even as he collects an output tax on sales made or services rendered. The registration fee is thus a mere administrative fee, one not imposed on the exercise of a privilege, much less a constitutional right. c. Non-impairment of obligations of contracts Sec. 10 Art. III Const Section 10. No law impairing the obligation of contracts shall be passed. Sec. 11 Art. XII Const Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted xxx Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. Xxx Tolentino v. Sec. of Finance Ibid Issue: WON the imposition of the VAT on the sales and leases of real estate by virtue of contracts entered into prior to the effectivity of the law would violate the nonimpairment of obligations clause Held: No. In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's power of taxation save only where a tax exemption has been granted for a valid consideration.