SMART vs City of Davao

Facts: The case involves a special civil action for declaratory relief against the Tax
Code of the herein respondent. Petitioner alleges that its telecenter in said city is
exempt from payment of franchise tax, as shown in ra 7294 specifically sec. 9,
which exempts it from all taxes, except the national franchise tax, income tax and
real property tax. Respondent, in its answer, contested that local governments are
granted expressly by the Constitution to create their own source of revenue. On
trial, the lower court ruled that petitioners reliance to sec. 9 of ra 7294 is untenable.
The court noted the ambiguity in said provision and ratiocinated that tax
exemptions are construed strictissimi juris against the tax payer and liberally in
favor of the taxing authority. Petitioner filed a motion for reconsideration which was
later denied. Hence, this petition.
Issue: Whether or not petitioner is exempted to pay franchise tax imposed by
respondent?
Ruling: No. Petitioner is not exempted from payment of franchise tax. RA 7294 is s
not clear whether the in lieu of all taxes provision in the franchise of smart would
include exemption from local or national taxation. What is clear is that Smart shall
pay franchise tax equivalent to 3% of all gross receipts of the business. The
uncertainty in the clause must be construed strictly against who claims the
exemption. Here, petitioner has the burden of proving why they must be exempted.
Petitioner failed in this regard.
Tax exemptions are never presumed and are strictly against the tax payer and
liberally in favor of taxing authority. They can only be given force when the grant is
clear and categorical.

ANTERO M. SISON, JR. vs. RUBEN B. ANCHETA, et. Al.

G.R. No. L-59431 July 25, 1984
Facts: This case involves a petition for declaratory relief on the validity of sec.1 of
BP Blg. 135, providing for tax rates. Herein petitioner alleges that he is unduly
discriminated by the imposition of higher rates of tax arising from his income in the
exercise of profession, as compared to those of compensation income and the like.
He characterizes such as arbitrary amounting to class legislation, oppressive and
capricious, resulting to transgression of the equal protection and due process
clauses as well as rule requiring uniformity in taxation. Respondents, in its answer,
argued that BP Blg. 135 is a valid exercise of the States power to tax, thus, does
not suffer from any constitutional infirmity. Hence, this petition.

Issue: Whether or not BP Blg. 135, which provides for the rates of tax on citizens or
residents, violates the rule on uniformity of taxation?
Ruling: No. BP Blg. 135 does not violate the rule on uniformity of taxation. The rule
does not call for perfect uniformity or perfect equality. 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 differentiation complained of conforms to the
practical dictates of justice and equity. It is not discriminatory. Hence, there is a
similarity to the standard of equal protection, for all that is required is that the tax
applies to all persons, firms and corporations similarly situated.
Taxpayers who are recipients of compensation income are set apart as class to
those professionals in the practice of their calling. Thus, there is ample justification
to adopt the gross system of income taxation to compensation income.

THE PROVINCE OF ABRA represented by LADISLAO

HONORABLE JUDGE HAROLD M. HERNANDO, et. al.

ANCHETA,

vs.

G.R. No. L-49336 August 31, 1981

Facts: This case involves a tax assessment made by the Provincial assessor on
private respondents properties. A declaratory relief was filed by private respondent
against the assessment alleging that they are exempt from estate tax as it is used
for religious purposes. Petitioner moved to dismiss the relief for lack of jurisdiction
since validity of tax assessment is questioned before the Local Board of
Assessment. However the same was denied by the respondent judge. Petitioner now
alleges that respondent judge virtually ignored provisions of the Rules of Court and
wantonly violated their right to due process, by giving due course to private
respondents motion without any hearing or allowing them to file an answer.
Respondent judge asserts that properties are actually, directly and exclusively used
by private respondents for charitable or religious purposes. Hence, a petition for
certiorari and mandamus was filed.
Issue: Whether or not respondent judge is correct?
Ruling: No. Respondent judge is not correct in not exhausting available
administrative remedies and ignoring the changes in the Constitution with regards
to tax exemptions. Reliance on past decisions would have sufficed were the words
actually as well as directly is not added. There must be proof of the actual and
direct use of the lands, buildings and improvements for religious or charitable
purposes to be exempt from taxation. It is a rule that exemption from taxation is not

favored and is never presumed, so that if granted, it must be strictly construed

against the tax payer.
Here, all that was alleged in the declaratory relief was that they are used actually,
directly and exclusively for the support of the parish and helpers. No other evidence
was adduced.

SILVESTER M. PUNSALAN, ET AL. vs. THE MUNICIPAL BOARD OF THE CITY

OF MANILA, ET AL.
G.R. No. L-4817

May 26, 1954

Facts: This case seeks to annul ordinance no. 3998 of the City of Manila authorizing
it to impose municipal occupation tax on various professions referred to. Plaintiffs,
having paid their occupation tax under sec 201 of the National Internal Revenue
Code, paid under protest the local occupation tax and alleged that the same
amounts to class legislation and double taxation. The trial court ruled in favor of
defendant, however declared the penalty clause illegal and void. Hence, both
parties appealed said decision before the SC.
Issue: Whether or not the municipal occupation tax amounts to class legislation and
double taxation?
Ruling: No. The ordinance authorizing the collection of municipal occupation tax
does not amount to class legislation and double taxation. The ordinance imposes
tax on every person exercising or pursuing any one of the occupations named, but
does not say such person must have office in Manila. What constitutes exercise or
pursuit of profession is a matter of judicial determination. The argument against
double taxation may not be invoked where one tax is imposed by the state and the
other is imposed by the city, it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with
respect to the same occupation, calling or activity by both the state and the political
subdivisions thereof.

ORMOC SUGAR COMPANY, INC vs. THE TREASURER OF ORMOC CITY, et. al.
G.R. No. L-23794
February 17, 1968
Facts: Herein case refers to the constitutionality of ordinance no. 4 imposing on any
and all productions of centrifugal sugar milled by petitioner a municipal tax.
Petitioner, in its complaint, alleges that the ordinance is unconstitutional for being

violative of the equal protection clause and rule of uniformity on taxation.

Answering the complaint, defendant asserted that the tax ordinance is within its
taxing power, as provided in the Local Autonomy Act. The trial court upheld the
constitutionality of said ordinance. Hence, this appeal.
Issue: Whether or not the ordinance violates the rule on uniformity of taxation?
Ruling: Yes. The ordinance violates the rule on uniformity of taxation. Here, it taxes
only centrifugal sugar produced and exported by the Ormoc Sugar Company and
none other. While it is true that at the time the ordinance is enacted, petitioner was
the only sugar company, still, the classification to be reasonable should be in terms
applicable to future conditions as well. The taxing ordinance should not be singular
and exclusive as to exclude any other sugar company. As it is now, even if later a
similar company is set up, it cannot be subject to the tax because the ordinance
expressly points only to Ormoc City Sugar Company, Inc. as the entity to be levied
upon.

THE COMMISSIONER OF INTERNAL REVENUE vs. LINGAYEN GULF ELECTRIC

POWER CO., INC., et. al.
G.R. No. L-23771 August 4, 1988
Facts: Pursuant to municipal franchises, herein private respondent is allowed to
operate an electric power plant in adjoining municipalities of Pangasinan. Said
franchises provide that private respondent shall pay quarterly in the Provincial
Treasury of Pangasinan, 1% of the gross earnings for the first 20 years and 2%
during the remaining 15 years. Petitioner now demands an assessed value of
deficiency in franchises taxes and surcharges against private respondent applying
the provisions of sec. 259 of the National Internal Revenue Code. Private respondent
requested a reinvestigation of the case, but the same was denied. Thus, an appeal
was made. Pending said cases, RA 3843 was passed granting private respondent a
legislative franchise and providing them an exemption of not paying any other
franchise taxes other than those paid before the municipal where they are supplying
electric current. Thus, because of the passage of said law, respondent court
dismissed claims of Petitioner. Hence, this petition.
Issue: Whether or not R.A. No. 3843 violates the "uniformity and equality of
taxation" clause of the Constitution?
Ruling: No. RA 3843 does not violate the uniformity and equality of taxation clause
of the Constitution. 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 Legislature has the inherent
power not only to select the subjects of taxation but to grant exemptions. Tax
exemptions have never been deemed violative of the equal protection clause. Here,

Tax Code was never intended to have a universal application. The charter granting
franchise, like the one granted to the private respondent, precludes the imposition
of a higher tax. R.A. No. 3843 did not only fix and specify a franchise tax of 2% on
its gross receipts, but made it "in lieu of any and all taxes, all laws to the contrary
notwithstanding," thus, leaving no room for doubt regarding the legislative intent.
Charters or special laws granted and enacted by the legislature are in the nature of
private contracts which is beyond the interpretation of courts.

BRITISH AMERICAN TOBACCO vs. JOSE ISIDRO N. CAMACHO, et. al.

G.R. No. 163583
August 20, 2008
Facts: Herein case involves the validity of the classification freeze provision of RA
8240 recodifying the National Internal Revenue Code. Petitioner contends that said
provision is discriminatory and violates the equal protection and uniformity of
taxation clause of the constitution since it taxes other tobacco brands based on
their 1996 net retail price while new tobacco brands are taxed based on its current
net retail price. Thus, petitioner filed a petition for injunction before the RTC of
Makati which was granted. Herein private respondents filed a motion to intervene
assailing that said provision does not violate any principles of the Constitution. Said
intervenors were allowed by the court. On motion for reconsideration, the writ of
preliminary injunction was lifted upholding the validity of contested provision.
Hence, this petition.
Issue: Whether or not the classification freeze provision violates the equal
protection and uniformity if taxation clause?
Ruling: No. The classification freeze provision does not violate the equal protection
and uniformity of taxation clause. It meets the standards for valid classification
though its germane purpose was not fully satisfied as it failed to promote fair
competition among the players in the industry, this does not make the assailed law
unconstitutional. The current excise tax system on sin products is imperfect. But,
certainly, the courts cannot declare a statute unconstitutional merely because it can
be improved or that it does not tend to achieve all of its stated objectives. This is
especially true for tax legislation which simultaneously addresses and impacts
multiple state interests. Absent a clear showing of breach of constitutional
limitations, Congress, must be given sufficient leeway to formulate and experiment
with different tax systems to address the complex issues and problems related to
tax administration.

COCONUT OIL REFINERS ASSOCIATION, INC. vs. HON. RUBEN TORRES, et.
al.

[G.R. No. 132527. July 29, 2005]

Facts: RA 7227 was enacted providing for the sound and balanced conversion of the
Clark and Subic military reservations and their extensions into alternative
productive uses in the form of special economic zones. Subsequently, President
Ramos issued EO 80 declaring Clark (CSEZ) shall have all the applicable incentives
granted to the Subic Special Economic and Free Port Zone (SSEZ) under RA 7227.
Herein Petitioners now claims that the E.O as well as RA 7227 are replete with
constitutional infirmities and must be declared unconstitutional and void for the taxfree shopping privileges granted by the provisions to SSEZ residents living outside
the Secured Area of the SSEZ and to Filipinos aged 15 and over residing outside the
SSEZ. Hence, this petition.
Issue: Whether or not said laws violates the equal protection and uniformity of
taxation clause?
Ruling: No. It is well-settled that the equal-protection guarantee does not require
territorial uniformity of laws. As long as there are actual and material differences
between territories, there is no violation of the constitutional clause. A significant
distinction between the two groups is that enterprises outside the zones maintain
their businesses within Philippine customs territory, while private respondents and
the other duly-registered zone enterprises operate within the so-called separate
customs territory. To grant the same tax incentives given to enterprises within the
zones to businesses operating outside the zones, as petitioners insist, would clearly
defeat the statutes intent to carve a territory out of the military reservations in
Subic Bay where free flow of goods and capital is maintained.

ABAKADA, et. al. vs. Ermita, et. al.

GR No. 168056
Facts: Herein case refers to the passage of RA 9337. Said law authorizes the
President, upon the recommendation of the Secretary Of Finance, to raise the VAT
rate to 12% effective January 1, 2006, if conditions are satisfied. It also inserted a
provision imposing a 70% limit on the amount of input tax to be credited against the
output tax. Thus, herein petitioners assail the validity of the law. One point raised
was that the law is inconsistent with the principle of uniformity and equitability of
Taxation. Herein respondents interposed R.A. No. 9337 is a reform in the valueadded system of taxation which is the core revenue measure that will tilt the
balance towards a sustainable macroeconomic environment necessary for economic
growth. Thus, within the provisions of the Constitution. Hence, this petition.

Issue: Whether or not RA 9337 is inconsistent with principle of uniformity and

equitability of taxation?
Ruling: No. Uniformity in taxation means that all taxable articles or kinds of property
of the same class shall be taxed at the same rate. Different articles may be taxed at
different amounts provided that the rate is uniform on the same class everywhere
with all people at all times. Here, the tax law is uniform as it provides a standard
rate of 0% or 10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A.
No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC, provide
for a rate of 10% (or 12%) on sale of goods and properties, importation of goods,
and sale of services and use or lease of properties. These same sections also
provide for a 0% rate on certain sales and transaction.
Further, the constitution does not prohibit the imposition of indirect taxes / a
regressive system of taxation. It simply provides that Congress shall evolve a
progressive system of taxation, meaning direct taxes must be preferred to indirect
taxes. In the case of the VAT, the law minimizes the regressive effects of this
imposition by providing for zero rating of certain transactions.
ARTURO M. TOLENTINO vs. SECRETARY OF FINANCE, et. al.
GR. No. 115455 October 30, 1995
Facts: This case assails the constitutionality of RA 7716, otherwise known as the
Expanded Value Added Tax which widens the tax base of the existing vat system.
Petitioners allege that the application of the tax would result to oppressive,
discriminatory, unjust and regressive effect since it contravenes the mandate of
Congress to provide for a progressive system of taxation. Further, they aver that the
law imposes a flat rate of 10% and thus places the tax burden on all taxpayers
without regard to their ability to pay. Respondent, on the other hand, claims that
Issue: Whether or not RA 7716 violates the rule on progressive taxation?
Ruling: No. RA 7716 does not violate any constitutional rule. It is clear that the
constitution does not really prohibit the imposition of indirect taxes, which like VAT
in this case, are regressive. What it simply provides is that Congress shall evolve a
progressive system of taxation. The constitutional provision has been interpreted to
mean simply that direct taxes are to be preferred as much as possible, indirect
taxes should be minimized.
Thus, the rule of taxation shall be uniform and equitable. The Congress shall evolve
a progressive system of taxation. Equality and uniformity of taxation means that all
taxable articles or kinds of property of the same class be taxed at the same rate.
The taxing power has the authority to make reasonable and natural classifications
for purposes of taxation. To satisfy this requirement it is enough that the statute or

ordinance applies equally to all persons, forms and corporations placed in similar
situation.