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ANNOTATION
DOUBLE TAXATION

I. Nature
Double taxation has been otherwise described as "direct
duplicate taxation". It exists when the same property is
taxed twice, when it should be taxed but once (Victorias
Milling Co., Inc. v. Mun. of Victorias, Negros Occidental, L
21183 Sept. 27, 1968. 25 SCRA 192, 209, citing Cooley on
Taxation, 4th ed., Vol. I, p. 475 and Attorney General v.
Supervisors of Sanilac County, 71 Mich. 16, 38 N.E. 639).
It has also been defined as "taxing the same person
twice by the same jurisdiction for the same thing".
(Victorias Milling Co., Inc. v. Mun. of Victorias, Negros
Occidental,
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supra, citing Cooley, supra, and Harvey Coal & Coke Co. v.
Dillon, 59 W.Va. 605, 53 S.E. 928.) As stated in Spanish,
there is double taxation "cuando la misma propriedad se
sujeta a dos impuestos por la misma entidad e Gobierno,
para el mismo fin y durante el mismo periodo de tiempo"
(Manila Motor Co., Inc. v. Ciudad de Manila, [1941] 72
Phil. 336, 339, citing Cooley, supra, at 475479 cited in
Victorias Milling Co., Inc. v. Mun. of Victorias, Negros

Occidental, supra, at 209210).

II. Requisites
A. Taxpayer Must be Taxed Twice.As the definition of the
term implies, there is double taxation when the same
person is taxed twice (See definition in Victorias Milling
Co., Inc. v. Mun. of Victorias, Negros Occidental, supra, at
209210 see also Commissioner of Internal Revenue v.
Lednicky, L18169, L18262, L21434, July 31, 1964).
B. By the same Government or Jurisdiction.For double
taxation to exist, the taxpayer must be taxed twice for the
benefit of the same governmental entity (Commissioner of
Internal Revenue v. Lednicky, supra Cf. Manila
InterIsland Gas Service, Inc., [1956] 99 Phil. 847, and
Manufacturers Life Ins. Co. v. Meer, [1951] 89 Phil. 451).
Where an American taxpayer is made to pay two taxes for
the same income by the Philippine government where the
income is derived and by his own national government, the
United States, there is no double taxation (Commissioner of
Internal Revenue v. Lednicky, supra). And even if there is,
"as between the Philippines, where the income was earned
and where the taxpayer is domiciled, and the United
States, where that income was not earned and where the
taxpayer did not reside, it is indisputable that justice and
equity demand that the tax on the income should accrue to
the benefit of the Philippines. Any relief from the alleged
double taxation should come from the United States, and
not from the Philippines since the former's right to burden
the taxpayer is solely predicated on his citizenship, without
contributing to the production of
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the wealth that is being taxed" (Commissioner of Internal

Revenue v. Lednicky, supra).
Double taxation cannot be invoked "where on tax is
imposed by the state and the other is imposed by the city"
(Punsalan v. Municipal Board of Manila, supra, citing
Cooley, supra, at p. 492) it being widely recognized that

taxes maybe exacted on the same occupation, calling or

activity by both the state and its political subdivisions
(Punsalan v. Municipal Board of Manila, supra, citing 51
Am. Jur. 341).
Thus, an ordinance of the City of Manila imposing a
municipal occupation tax on persons exercising various
professions in the city was held as not violative of the rule
on double taxation even if the taxpayers were already
subjected to occupation tax under Section 201 of the Tax
Code (Punsalan v. Municipal Board of Manila, supra).
C. Exaction Must be a Tax, Not a License.It is in the
essence of double taxation that the exaction on the
taxpayer on the same object must be a tax as distinguished
from a license. A license fee is imposed in the exercise of
police power by the state for the purpose of regulating a
calling or occupation while a tax is imposed by the state in
the exercise of its power of taxation for the purpose of
raising revenues.
Where a municipal ordinance imposes a license fee on
storage, installations, use and transportation of
compressed and liquified inflammable gases in the exercise
of police power of the state while another municipal
ordinance imposes a sales tax based upon gross receipts in
the exercise of its inherent taxing power, there is no double
taxation (City of Manila v. InterIsland Gas Service, Inc.,
supra, at 853854).
The rule on double taxation does not invalidate a city
ordinance imposing a license fee for the privilege of
engaging in the sale of liquor which is justified as in the
exercise of police power by the city for the purpose of
regulating the selling of liquoran activity which may
endanger health and moralseven if another ordinance
already imposes taxes on the sales of general merchandise
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for revenue purposes based on the sales made of the same

article or merchandise (Compaia General de Tabacos De
Filipinas v. City of Manila, L16619, June 29, 1963). "It is
already well 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. This is
precisely the case of the ordinances involved in the case at
bar" (Compaia General de Tabacos de Filipinas v. City of
Manila, supra, citing Bentley Gray Dry Goods Co. v. City of
Tampa, 137 Fla. 641, 188 So. 758, McQuillin, Municipal
Corporations, Vol. 9, 3rd ed., p. 83).
D. Same object of Taxation.The two or more taxes
objected to must cover the same object to constitute double
or multiple taxation (See Victorias Milling Co., Inc. v. Mun.
of Victorias, Negros Occidental, supra, at 210).
There is no double taxation in the following cases:
(1) Where an owner of a fishpond is subjected to real
estate tax on his fishpond and a merchant's tax because it
is apparent that the real estate tax is a tax on the property
itself while the merchant's tax is a tax upon the occupation
or industry of the taxpayer in which he is engaged (Molina
v. Rafferty [1918] 37 Phil. 545, 557).
(2) Where the taxpayer who is engaged both in the
manufacture of sugar and in the warehousing business
which is carried on in relation to the operation of his sugar
central, the two taxes imposed upon him namely, one on
his warehousing business and the other on the operations
of his sugar central, do not constitute double taxation. "As
is clear from the facts, respondent's warehousing business,
although carried on the relation to the operation of its
sugar central, is a distinct and separate business taxable
under a different provision of the Tax Code. There can be
no double taxation where the state merely imposes a tax on
every separate and distinct business in which a party is
engaged" (Commissioer of Internal Revenue v. Hawaiian
Philippine Co., L16315, May 30, 1964),
(3) Where a mercantile partnership which is taxed for
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its business consigns its merchandise to a commission

merchant to sell it on commission, the two may be
subjected separately to two different taxes on their
respective businesses. The fact that the tax to be paid by
the commission merchant and the tax to be paid by the

merchant for carrying on their businesses is determined in

the same way does not constitute in any sense double
taxation (Gil Hermanos v. Hord, [1908] 10 Phil. 218, 220
221).
(4) Where municipal license taxes are imposed by an
ordinance on operators of sugar centrals and sugar
refineries, the fact that in computing the amount of taxes
to be paid by the sugar refinery the cost of the raw sugar
coming from the sugar central is not deducted does not
necessarily mean that the taxpayers are taxed twice on the
raw sugar. "First. The two taxes cover two different objects.
Section 1 of the ordinance taxes a person operating sugar
centrals or engaged in the manufacture of centrifugal
sugar. While under Section 2, those taxed are the operators
of sugar refinery mills. One occupation or business is
different from the other. Second. The disputed taxes are
imposed on occupation or business. Both taxes are not on
sugar. The amount thereof depends on the annual sugar
output capacity of the mills concerned, regardless of the
actual sugar milled. Plaintiffs argument perhaps could
make out a point if the object of taxation here were the
sugar it produces, not the business of producing. There is
no double taxation" (Victorias Milling Co., Inc. v. Mun. of
Victorias, Negros Occidental, supra, at 209210).
(5) A taxpayer who is already paying real estates taxes
on his property as well as income tax on the income derived
therefrom may be subjected to the real estate dealers' tax
on his rentals. "It is well settled rule that license tax may
be levied upon a business or occupation although the land
or property used therein is subject to property tax, and that
the state may collect an ad valorem tax on property used in
a calling, and at the same time impose a license tax on the
pursuit of that calling, the imposition of the latter kind of
tax being in no sense a double tax"
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(Sanchez v. Collector of Internal Revenue, [1955] 97 Phil.

687, 690, citing People v. Mendaros, L6975, May 27, 1955,
[unrep.] 97 Phil. 958959).
(6) A, secures a 20year endowment policy for P5,000

from A Co. and pay an annual premium of P250. A pays the

first ten yearly premium amounting to P2,500 and on this
amount, A Co. pays the corresponding taxes under Section
250 of the Tax Code. Suppose also that the cash value of
said policy after the payment of the 10th annual premium
amounts to P1,000. When on the 11th year, the annual
premium fell due and the insured A, remitted no money
within the month's grace, the insurer then treated the
premium overdue as paid from the cash surrender value.
the amount being a loan to the policy holder who could
discharge it at any time with interest at 6 per cent. The
insurance contract therefor continued in force for the 11th
year. In such a case, taxing this P250 anew as premium
collected will not amount to double taxation although taxes
had already been collected on the cash value of P1,000 as
part of the P2,500 collected as premiums for the first 10
years. The reason is that the premium paid and on which
taxes had already been collected were those for the 10
years. The tax demanded is on the premium for the 11th
year (Manufacturers Life Ins. Co. v. Meer, [1951] 89 Phil.
351).
(7) Where a stockholder receives a gain from the
distribution of the assets in liquidation of the corporation
in exchange for his stocks. The fact that the same money
while in the hands of the corporation as part of its income
was already taxed to it under the law does not constitute
double taxation when the same money taxed as income on
the stockholder when paid to him in exchange of the stock.
"When the corporation was dissolved and in the process of
complete liquidation and its stockholders surrendered their
stock to it and it paid the same in question to them in
exchange, a transaction took place, which was no different
in its essence from a sale of the same stock to a third party
who paid therefor. In either case the shareholder who
received the consideration for or the stock earned that
much money as income of his own, which again
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was properly taxable to him under the same Income Tax

Law. In the case of the sale to a third person, it is not

perceived how the objection of double taxation could have

been successfully raised. Neither can we conceive how it
could be available where, as in this case, the stock was
transferred back to the dissolved corporation" (Wise & Co.
v. Meer, [1947] 78 Phil. 655, 672673).
III No Prohibition Against Double Taxation
There is no prohibition in the Constitution against double
or multiple taxation in the Philippines (Commissioner of
Internal Revenue v. HawaiianPhilippine Co., supra City of
Manila v. InterIsland Gas Service, Inc., supra
Manufacturers Life Ins. Co. v. Meer, supra).
We have not adopted as part of our fundamental
fundamental law the injunction against double taxation.
found in the Constitution of the United States and of some
States of the Union (PepsiCola Bottling Co. of the
Philippines, Inc. v. City of Butuan, L22814, Aug. 28, 1968,
24 SCRA 789, 793, citing De Villata v. Stanley, 32 Phil.
541 City of Manila v. InterIsland Gas Service, Inc. supra
Syjuco v. Municipality of Paraaque, L11265, Nov.
27,1959,106 Phil. 1167 [unrep.] City of Bacolod v. Gruet,
L18290, Jan. 31, 1963).
Where Congress has clearly expressed its intention to
tax by passing a law for that purpose, the statute must be
sustained even though double taxation results. (Wise & Co.
11. Meer, supra at 692 citing Hellmich v. Hellman, 276 U.S.
233, 72 L. ed. 544).Atty. AMBROSIO R. BLANCO
Notes.There is no prohibition against double or
multiple taxation in this jurisdiction. (Commissioner of
Internal Revenue vs. HawaiianPhilippine Company, L
16315, May SO, 1964, citing the cases of Manufacturer's
Life Insurance Co. vs. Meer, L2910, June 29, 1951 and City
of Manila vs. InterIsland Gas Service, L8799, Aug.
31,1956.)
The government is not bound by the errors or mistakes
committed by its agents. (See Collector of Internal Revenue
vs. McGrath, L12710, and L12721, Feb. 28, 1961, 1 SCRA
638, and the notes thereunder Luzon Stevedoring Corp. vs.
Court of Tax Appeals, L21005, Oct. 22, 1966, 18
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Constantino vs. Reyes

SCRA 436 Central Azucarera de Tarlac vs. Collector of

Internal Revenue, L11092, Sept. 30, 1958 Pineda vs. CFI
of Tayabas, 52 Phil. 803 Bachrach Motor Co. vs. Uson, 50
Phil. 981 Commissioner of Internal Revenue vs. Abad,
L19627, June 27, 1968, 23 SCRA 1132 Tan Guan vs. Court
of Tax Appeals, L23676, April 27, 1967, 19 SCRA 903
Philippine American Drug Co. vs. Collector of Internal
Revenue, L13032, Aug. 31, 1966, 17 SCRA 1053 Pacific
Oxygen & Acetylene Co. vs, Commissioner of Internal
Revenue, L1708, April 30, 1965.)
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