Baguio v De Leon

Facts:

The lower court decision upholds the validity of an ordinance 1 of the City of Baguio imposing a license fee
on any person, firm, entity or corporation doing business in the City of Baguio is assailed by defendant-
appellant Fortunato de Leon. He was held liable as a real estate dealer with a property therein worth more
than P10,000, but not in excess of P50,000, and therefore obligated to pay under such ordinance the P50
annual fee. The source of authority for the challenged ordinance is supplied by Republic Act No. 329,
amending the city charter of Baguio2 empowering it to fix the license fee and regulate "businesses, trades
and occupations as may be established or practiced in the City." The challenged ordinance cannot be
considered ultra vires as there is more than ample statutory authority for the enactment thereof.
Nonetheless, its validity on constitutional grounds is challenged because of the allegation that it imposed
double taxation, which is repugnant to the due process clause, and that it violated the requirement of
uniformity.

SC:

No violation of due process. Double taxation is not violative of due process.

At any rate, it has been expressly affirmed by us that such an "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."11

To satisfy this requirement then, all that is needed as held in another case decided two years later, 15 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 16 that "inequalities
which result from a singling out of one particular class for taxation or exemption infringe no constitutional
limitation."17

It is thus apparent from the above that in much the same way that the plea of double taxation is unavailing,
the allegation that there was a violation of the principle of uniformity is inherently lacking in persuasiveness.
There is no need to pass upon the other allegations to assail the validity of the above ordinance, it being
maintained that the license fees therein imposed "is excessive, unreasonable and oppressive" and that
there is a failure to observe the mandate of equal protection. A reading of the ordinance will readily disclose
their inherent lack of plausibility.
CIR vs MJ Lhuiller

Are pawnshops included in the term lending investors for the purpose of imposing the 5% percentage tax
under then Section 116 of the National Internal Revenue Code (NIRC) of 1977, as amended by Executive
Order No. 273?

On 11 March 1991, CIR Jose U. Ong issued Revenue Memorandum Order (RMO) No. 15-91 imposing a
5% lending investor’s tax on pawnshops. This RMO was clarified by Revenue Memorandum Circular (RMC)
No. 43-91 on 27 May 1991.

pawnshop owners or operators shall become liable to the lending investor’s tax on their gross income
beginning January 1, 1991.

Pursuant to these issuances, the Bureau of Internal Revenue (BIR) issued Assessment Notice No. 81-PT-
13-94-97-9-118 against Lhuillier demanding payment of deficiency percentage tax in the sum of
P3,360,335.11 for 1994 inclusive of interest and surcharges

We are therefore called upon to resolve the issue of whether pawnshops are subject to the 5% lending
investor’s tax. Corollary to this issue are the following questions: (1) Are RMO No. 15-91 and RMC No. 43-
91 valid? (2) Were they issued to implement Section 116 of the NIRC of 1977, as amended? (3) Are
pawnshops considered "lending investors" for the purpose of the imposition of the lending investor’s tax?
(4) Is publication necessary for the validity of RMO No. 15-91 and RMC No. 43-91.

SC:

We rule in the negative.

While it is true that pawnshops are engaged in the business of lending money, they are not considered
"lending investors" for the purpose of imposing the 5% percentage taxes

Let us first distinguish between two kinds of administrative issuances: the legislative rule and the
interpretative rule. A legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof. An interpretative rule, on the other hand, is designed to
provide guidelines to the law which the administrative agency is in charge of enforcing.

RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as implementing rules or corrective measures
revoking in the process the previous rulings of past Commissioners. Specifically, they would have been
amendatory provisions applicable to pawnshops. Without these disputed CIR issuances, pawnshops would
not be liable to pay the 5% percentage tax, considering that they were not specifically included in Section
116 of the NIRC of 1977, as amended. In so doing, the CIR did not simply interpret the law. The due
observance of the requirements of notice, hearing, and publication should not have been ignored.

RMO No. 15-91 and RMC No. 43-91 are hereby declared null and void. Consequently, Lhuillier is not liable
to pay the 5% lending investor’s tax.
Abra vs Hernando

FACTS:

it clearly appears that the actuation of respondent Judge Harold M. Hernando of the Court of First Instance
of Abra left much to be desired. First, there was a denial of a motion to dismiss 2 an action for declaratory
relief by private respondent Roman Catholic Bishop of Bangued desirous of being exempted from a real
estate tax followed by a summary judgment 3granting such exemption, without even hearing the side of
petitioner(ABRA THRU ASSESSOR)

Respondent Judge "virtually ignored the pertinent provisions of the Rules of Court; ... wantonly violated the
rights of petitioner to due process, by giving due course to the petition of private respondent for declaratory
relief, and thereafter without allowing petitioner to answer and without any hearing, adjudged the case;

It was pointed out to respondent Judge that he failed to abide by the pertinent provision of such Presidential
Decree which provides as follows: "No court shall entertain any suit assailing the validity of a tax assessed
under this Code until the taxpayer, shall have paid, under protest, the tax assessed against him nor shall
any court declare any tax invalid by reason of irregularities or informalities in the proceedings of the officers
charged with the assessment or collection of taxes, or of failure to perform their duties within this time herein
specified for their performance unless such irregularities, informalities or failure shall have impaired the
substantial rights of the taxpayer; nor shall any court declare any portion of the tax assessed under the
provisions of this Code invalid except upon condition that the taxpayer shall pay the just amount of the tax,
as determined by the court in the pending proceeding

respondent Judge began with the allegation that there "is no question that the real properties sought to be
taxed by the Province of Abra are properties of the respondent Roman Catholic Bishop of Bangued, Inc.

For him then: "The proper remedy of the petitioner is appeal and not this special civil action."

SUPREME COURT:

There was a violation of due process.

Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural due process.
If there is any case where proof is necessary to demonstrate that there is compliance with the constitutional
provision that allows an exemption, this is it. Instead, respondent Judge accepted at its face the allegation
of private respondent. All that was alleged in the petition for declaratory relief filed by private respondents,
after mentioning certain parcels of land owned by it, are that they are used "actually, directly and
exclusively" as sources of support of the parish priest and his helpers and also of private respondent Bishop

It clearly appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding
the case immediately in favor of private respondent, respondent Judge failed to abide by the constitutional
command of procedural due process.
Francis Churchhill vs Venancio Conception

FACTS:

Section 100 of Act No. 2339, passed February 27, 1914, effective July 1, 1914, imposed an annual tax of
P4 per square meter upon "electric signs, billboards, and spaces used for posting or displaying temporary
signs, and all signs displayed on premises not occupied by buildings. Francis A. Churchill and Stewart Tait,
copartners doing business under the firm name and style of the Mercantile Advertising Agency, owners of
a sign or billboard containing an area of 52 square meters constructed on private property in the city of
Manila and exposed to public view, were taxed thereon P104. The tax was paid under protest and the
plaintiffs having exhausted all their administrative remedies instituted the present action under section 140
of Act No. 2339 against the Collector of Internal Revenue to recover back the amount thus paid.

In not holding that the tax as imposed by virtue of Act No. 2339, as amended by Act No. 2432, as amended
by Act No. 2445, constitutes deprivation of property without compensation or due process of law, because
it is confiscatory and unjustly discriminatory

SC

It is not violative of due process clause. Therefore, it is constitutional.

So testimony has been given regarding the amount of expenses that the company incurs and why the
imposition of the tax is confiscatory. Court said, If these contentions rested upon a sound basis it might be
said that the tax is, in a sense, confiscatory; but they do not. It is seen that the contention that the rates
charged for advertising cannot be raised is purely hypothetical, based entirely upon the opinion of the
plaintiffs, unsupported by actual test, and that the plaintiffs themselves admit that a number of other persons
have voluntarily and without protest paid the tax herein complained of.

It is further alleged that the tax in question is unconstitutional because "the law herein complained of was
enacted for the sole purpose of destroying billboards and advertising business depending on the use of
signs or billboards."

If a case were presented where the abuse of the taxing power of the local legislature was so extreme as to
make it plain to the judicial mind that the power had been exercised for the sole purpose of destroying rights
which could not be rightfully destroyed consistently with the principles of freedom and justice upon which
the Philippine Government rests, then it would be the duty of the courts to say that such an arbitrary act
was not merely an abuse of the power, but was the exercise of an authority not conferred. (McCray v. U.
S., supra.) But the instant case is not one of that character, for the reason that the tax herein complained
of falls far short of being confiscatory. Consequently, it cannot be held that the Legislature has gone beyond
the power conferred upon it by the Philippine Bill in so far as the amount of the tax is concerned.
BRITISH AMERICAN TOBACCO VS CAMACHO

FACTS:

The Lower court declares that: Section 145 of the NIRC, as amended by Republic Act No. 9334, is
CONSTITUTIONAL;- AN ACT INCREASING THE EXCISE TAX RATES

Petitioner insists that the assailed provisions (1) violate the equal protection and uniformity of taxation
clauses of the Constitution. Petitioner argues that the classification freeze provision violates the equal
protection and uniformity of taxation clauses because Annex "D" brands are taxed based on their 1996 net
retail prices while new brands are taxed based on their present day net retail prices

Issue: Whether assailed provision is constitutional?

SC: Yes, it is constitutional.

These contentions are without merit and a rehash of petitioner's previous arguments before this Court. The
instant case neither involves a suspect classification nor impinges on a fundamental right. Consequently,
the rational basis test was properly applied to gauge the constitutionality of the assailed law in the face of
an equal protection challenge. It has been held that "in the areas of social and economic policy, a statutory
classification that neither proceeds along suspect lines nor infringes constitutional rights must be upheld
against equal protection challenge if there is any reasonably conceivable state of facts that could provide a
rational basis for the classification."3 Under the rational basis test, it is sufficient that the legislative
classification is rationally related to achieving some legitimate State interest.

The classification freeze provision addressed Congress's administrative concerns in the simplification of
tax administration of sin products, elimination of potential areas for abuse and corruption in tax collection,
buoyant and stable revenue generation, and ease of projection of revenues. Consequently, there can be
no denial of the equal protection of the laws since the rational-basis test is amply satisfied.

Petitioner's contention that the assailed provisions violate the uniformity of taxation clause is similarly
unavailing

In the instant case, there is no question that the classification freeze provision meets the geographical
uniformity requirement because the assailed law applies to all cigarette brands in the Philippines. And, for
reasons already adverted to in our August 20, 2008 Decision, the above four-fold test has been met in the
present case. The classification freeze provision uniformly applies to all cigarette brands whether existing
or to be introduced in the market at some future time. It does not purport to exempt any brand from its
operation nor single out a brand for the purpose of imposition of excise taxes.