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HELD: No
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ISSUES:
1. Is the imposition of MCIT constitutional?
2. Is the imposition of CWT on income from sales of real
properties classified as ordinary assets constitutional?
HELD:
FIRST ISSUE:
Yes. The imposition of the MCIT is
constitutional. An income tax is arbitrary and confiscatory if it
taxes capital, because it is income, and not capital, which is
subject to income tax. However, MCIT is imposed on gross
income which is computed by deducting from gross sales the
capital spent by a corporation in the sale of its goods, i.e., the
cost of goods and other direct expenses from gross sales.
Clearly, the capital is not being taxed.
Various safeguards were incorporated into the law imposing
MCIT.
Firstly, recognizing the birth pangs of businesses and the
reality of the need to recoup initial major capital expenditures,
the MCIT is imposed only on the 4th taxable year immediately
following the year in which the corporation commenced its
operations.
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HELD: NO.
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ISSUES:
1. WON the universal charge imposed under Sec 34 of
EPIRA is a tax
2. WON there is undue delegation of the legislative power
to tax on the part of ERC
HELD:
FIRST ISSUE
No. the universal charge is not a tax. The power to tax is an
incident of sovereignty; it rests on the principle that taxes are
the lifeblood of the government, and their prompt and certain
availability is an imperious need. Thus, the theory behind the
exercise of the power to tax emanates from necessity; without
taxes, the government cannot fulfill its mandate of promoting
the general welfare of the people.
SECOND ISSUE
No, there is no undue delegation of legislative power to tax
since the universal charge is not a tax.
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HELD:
FIRST ISSUE: It bears stressing that it is not the NTC that
imposed such a fee. It is the legislature itself. Since
Congress has the power to exercise the State inherent powers
of Police Power, Eminent Domain and Taxation, the distinction
between police power and the power to tax, which could be
significant if the exercising authority were mere political
subdivisions (since delegation by it to such political
subdivisions of one power does not necessarily include the
other), would not be of any moment when, as in the case
under consideration, Congress itself exercises the power. All
that is to be done would be to apply and enforce the law when
sufficiently definitive and not constitutional infirm.
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SECOND ISSUE;
No. It should be based on the market
value of PLDTs outstanding capital stock inclusive of stock
dividends and premium, and not on the par value of PLDTs
capital stock excluding stock dividends and premium.
The basis for computation of the fee to be charged is the
capital stock subscribed or paid and not the property and
equipment.
Capital refers to the value of the property or assets of a
corporation. The capital subscribed is the total amount of the
capital that persons (subscribers or shareholders) have agreed
to take and pay for, which need not necessarily be, and can be
more than, the par value of the shares.
In fine, it is the amount that the corporation receives, inclusive
of the premiums if any, in consideration of the original
issuance of the shares. In the case of stock dividends, it is the
amount that the corporation transfers from its surplus profit
account to its capital account. It is the same amount that can
loosely be termed as the trust fund of the corporation.
The Trust Fund doctrine considers this subscribed capital as
a trust fund for the payment of the debts of the corporation, to
which the creditors may look for satisfaction. Until the
liquidation of the corporation, no part of the subscribed capital
may be returned or released to the stockholder (except in the
redemption of redeemable shares) without violating this
principle. Thus, dividends must never impair the subscribed
capital; subscription commitments cannot be condoned or
remitted; nor can the corporation buy its own shares using the
subscribed capital as the consideration therefor.
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Upon the other hand, it has not been suggested that such
basis has no reasonable relationship to the probable costs of
regulation and supervision of the petitioner's kind of business.
For, ordinarily, the higher the amount of stall rentals, the
higher the aggregate volume of foodstuffs and related items
sold in petitioner's privately owned market; and the higher the
volume of goods sold in such private market, the greater the
extent and frequency of inspection and supervision that may
be reasonably required in the interest of the buying public.
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ISSUE: WON the margin fees Esso paid to the Central Bank
on its profit remittances to its New York head office is
deductible and considered ordinary and necessary business
expenses.
HELD: The margin fees are not deductible. The margin fees
are not expenses in connection with the production or earning
of petitioners income in the Philippines. They were expenses
incurred in the disposition of said incomes.
Statutory test of deductibility as a business expense.
1. the expense must be ordinary and necessary
2. it must be paid or incurred within a taxable year
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RULING:
No. The subject of the MIAA case is terminal
fee which goes to the government. Also the issue in the MIAA
case is whether paranaque city can sell at auction property of
the national government. The discussion on the terminal fee is
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just to emphasize the fact that the local government cannot tax
the national government. Two. Petitioners argue that a toll fee
is a users tax and to impose VAT on toll fees is tantamount
to taxing a tax. Actually, petitioners base this argument on the
following discussion in Manila International Airport Authority
(MIAA) v.Court of Appeals: No one can dispute that properties
of public dominion mentioned in Article 420 of the Civil Code,
like roads, canals, rivers, torrents, ports and bridges
constructed by the State, are owned by the State. The term
ports includes seaports and airports. The MIAA Airport Lands
and Buildings constitute a port constructed by the State.
Under Article 420 of the Civil Code, theMIAA Airport Lands
and Buildings are properties of public dominion and thus
owned by the State or the Republic of the Philippines.x x x The
operation by the government of a tollway does not change the
character of the road as one for public use.
Someone must pay for the maintenance of the road, either the
public in directly through the taxes they pay the government,
or only those among the public who actually use the road
through the tollfees they pay upon using the road. The tollway
system is even amore efficient and equitable manner of taxing
the public for the maintenance of public roads. The charging of
fees to the public does not determine the character of the
property whether it is for public dominion or not. Article 420 of
the Civil Code defines property of public dominion as one
intended for public use. Even if the government collects toll
fees, the road is still intended for public use if anyone can
use the road under the same terms and conditions as the rest
of the public. The charging of fees, the limitation on the kind of
vehicles that can use the road, the speed restrictions and
other conditions for the use of the road do not affect the public
character of the road. The terminal fees MIAA charges to
passengers, as well as the landing fees MIAA charges to
airlines, constitute the bulk of the income that maintains the
operations of MIAA. The collection of such fees does not
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is the person liable for VAT. The latter merely shifts the burden
of VAT to the tollway user as part of the toll fees. For this
reason, VAT on tollway operations cannot be a tax on tax even
if toll fees were deemed as a users tax. VAT is assessed
against the tollway operators gross receipts and not
necessarily on the toll fees. Although the tollway operator may
shift the VAT burden to the tollway user, it will not make the
latter directly liable for the VAT. The shifted VAT burden
simply becomes part of the toll fees that one has to pay in
order to use the tollways
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HELD: YES.
Tax Ordinances No. 7988 and No. 8011 were later declared
by the Court null and void.
However, before the Court could declare Tax Ordinance No.
7988 and Tax Ordinance No. 8011 null and void, petitioner
City of Manila assessed respondent on the basis of Section 21
of Tax Ordinance No. 7794, as amended by the
aforementioned tax ordinances, for deficiency local business
taxes, penalties, and interest, in the total amount of
P18,583,932.04, for the third and fourth quarters of the year
2000. Respondent filed a protest with petitioner Toledo
on the ground that the said assessment amounted to
double taxation, as respondent was taxed twice, i.e.,
under Sections 14 and 21 of Tax Ordinance No. 7794, as
amended by Tax Ordinances No. 7988 and No. 8011.
The RTC ruled that the business taxes imposed upon the
respondent under Sections 14 and 21 of Tax Ordinance No.
ISSUE:
WON the enforcement of section 21 of the Tax
Ordinance no. 7794 as amended constitutes DOUBLE
TAXATION
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