Chavez v Ongpin (1990)

Chavez v Ongpin
GR No 76778, June 6, 1990
FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year 1978, there shall be a
provincial or city general revision of real property assessments. The general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning January 1, 1987, the 1984
assessments shall be the basis of real property taxes. Francisco Chavez, a taxpayer and landowner, questioned the
constitutionality of EO 74. He alleges that it will bring unreasonable increase in real property taxes.
ISSUE:
Is EO 73 constitutional?
RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property values.
Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in disregard of
the increases in the value of real properties that have occurred since then is not in consonance with a sound tax
system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenue must be
adequate to meet government expenditures and their variations.

CIR v Gotamco (1987)

CIR v Gotamco
GR No L-31092, February 27, 1987
FACTS:
The World Health Organization (WHO) decided to construct a building to house its offices, as well as the other
United
Nations Offices in Manila. Inviting bids for the construction of the building, the WHO informed the bidders of its tax
exemptions. The contract was awarded to John Gotamco and sons. The Commissioner opined that a 3% contractors
tax should be due from the contractor. The WHO issued a certification that Gotamco should be exempted, but the
Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the Court ruled in favor of Gotamco.
ISSUE:
Is Gotamco liable for the tax?
RULING:
No. Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them;

while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention
that he can shift the burden to someone else.
Herein, the contractors tax is payable by the contractor but it is the owner of the building that shoulders the burden of
the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Such tax is an
indirect tax on the organization, as the payment thereof or its inclusion in the bid price would have meant an
increase in the construction cost of the building.
Hence, WHOs exemption from indirect taxes implies that Gotamco is exempt from contractors tax.