POLICE POWER state, which results from the promotion of
Definition
Scope
Power
Who may exercise
Sec 5 Art X, 1987 Constitution
The legislature, also local legislative
bodies
Sec 28 (2) Art VI
To a limited extent, the President when
granted delegated tariff powers
Limitations on the exercise
The fundamental law did not intend the
delegation to be absolute and unconditional;
the constitutional objective obviously is to
ensure that, while the local government units
are being strengthened and made more
autonomous, the legislature must still see to it
that (a) the taxpayer will not be over-burdened
or saddled with multiple and unreasonable
impositions; (b) each local government unit will
have its fair share of available resources; (c)
the resources of the national government will
not be unduly disturbed; and (d) local taxation
will be fair, uniform, and just. (Ferrer, Jr. v.
Bautista)
Due Process
Equal Protection clause
Public Purpose
It is a general rule that the legislature
is without power to appropriate public
revenues for anything but a public purpose. . . .
It is the essential character of the direct object
of the expenditure which must determine its
validity as justifying a tax and not the
magnitude of the interests to be affected nor
the degree to which the general advantage of
the community, and thus the public welfare,
may be ultimately beneted by their promotion.
Incidental advantage to the public or to the
taxation cemeteries, churches and personages
private interests, and the prosperity of private
enterprises or business, does not justify their
aid by the use of public money. (Pascual v.
Secretary of Public Works)
Generally, under the express or implied
provisions of the constitution, public funds may
be used only for a public purpose. The right of
the legislature to appropriate public funds is
correlative with its right to tax, and, under
constitutional provisions against taxation
except for public purposes and prohibiting the
collection of a tax for one purpose and the
devotion thereof to another purpose, no
appropriate of state funds can be made for
other than a public purpose. (Pascual v.
Secretary of Public Works)
Double Taxation
There is double taxation 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
enacted with respect to the same occupation,
calling or activity by both the state and the
political subdivisions thereof. (Punsalan v.
Municipal Board of Manila)
Tax Exemptions
It is a cardinal rule in taxation that
exemptions from payment thereof are highly
disfavored by law, and the party claiming
exemption must justify his claim by a clear,
positive, or express grant of such privilege by
law. (Collector vs. Manila Jockey)
Requisites
Sec 28 (4) Art VI, 1987 Constitution
Sec 28 (31) Art VI
Sec 4 (3) Art XIV
Sec 4 (41) Aart XIV
Section 22 (3), Art. VI of the
Constitution of the Philippines, exempts from
or convents, appurtenants thereto, and all
lands, buildings, and improvements used
exclusively for religious purposes. The
exemption is only from the payment of taxes
assessed on such properties enumerated, as
property taxes, as contra-distinguished from
excise taxes. (Lladoc v. Commissioner of
Internal Revenue)
The phrase `exempt from taxation' as
employed in Section 22(3), Article VI of the
Constitution of the Philippines, should not be
interpreted to mean exemption from all
kinds of taxes. Statutes exempting charitable
and religious property from taxation should be
construed fairly though strictly and in such
manner as to give effect to the main
intent of the lawmakers. (Roman Catholic
Church vs. Hastrings)
Pascual v. Secretary of Public Works
FACTS: In 1953, Republic Act No. 920 was
passed. This law appropriated P85,000.00 for
the construction, reconstruction, repair,
extension and improvement Pasig feeder road
terminals. Wenceslao Pascual, then governor
of Rizal, assailed the validity of the law. He
claimed that the appropriation was actually
going to be used for private use for the
terminals sought to be improved were part of
the Antonio Subdivision. The said Subdivision is
owned by Senator Jose Zulueta who was a
member of the same Senate that passed and
approved the same RA. Pascual claimed that
Zulueta misrepresented in Congress the fact
that he owns those terminals and that his
property would be unlawfully enriched at the
expense of the taxpayers if the said RA would
be upheld. Pascual then prayed that the
Secretary of Public Works and Communications
be restrained from releasing funds for such
purpose. Zulueta, on the other hand, perhaps
as an afterthought, donated the said property
to the City of Pasig.
ISSUE: Whether or not the appropriation is
valid.
HELD: No, the appropriation is void for being
an appropriation for a private purpose. The
subsequent donation of the property to the
government to make the property public does
not cure the constitutional defect. The fact that
the law was passed when the said property
was still a private property cannot be ignored.
In accordance with the rule that the
taxing power must be exercised for public
purposes only, money raised by taxation
can be expanded only for public purposes
and not for the advantage of private
individuals. Inasmuch as the land on which
the projected feeder roads were to be
constructed belonged then to Zulueta, the
result is that said appropriation sought a
private purpose, and, hence, was null and void.
Punsalan v. Municipal Board of Manila
FACTS: Petitioners, who are professionals (2
lawyers, a medical practitioner, a public
accountant, a dental surgeon and a donated P10,000 in cash to Reverend Father
pharmacist) in the city, assail Ordinance No.
3398 together with the law authorizing it
(Section 18 of the Revised Charter of the City
of Manila). The ordinance imposes a municipal
occupation tax on persons exercising various
professions in the city and penalizes non-
payment of the same. The law authorizing
said ordinance empowers the Municipal Board
of the city to impose a municipal occupation
tax on persons engaged in various professions.
Petitioners, having already paid their
occupation tax under section 201 of the
National Internal Revenue Code, paid the tax
under protest as imposed by Ordinance No.
3398. The lower
court declared the ordinance invalid and
affirmed the validity of the law authorizing it.
ISSUE: Whether or Not the ordinance and law
authorizing it constitute class legislation, and
authorize what amounts to double taxation.
HELD: The Legislature may, in its
discretion, select what occupations shall be
taxed, and in its discretion may tax all,
or select classes of occupation for taxation,
and leave others untaxed. It is not for the
courts to judge which cities or
municipalities should
be empowered to impose occupation
taxes aside from that imposed by the
National Government. That matter is
within the domain of political
departments. The argument against
double taxation may not be invoked if one
tax is imposed by the state and the other
is imposed by the city. It is widely
recognized that there is nothing inherently
terrible in the requirement that taxes be
exacted with respect to the same occupation
by both the state and the political subdivisions
thereof. Judgment of the lower court is
reversed with regards to the ordinance and
affirmed as to the law authorizing it.
Lladoc v Commissioner of Internal
Revenue
FACTS: In 1957, MB Estate Inc. of Bacolod City
Ruiz, then parish priest of Victorias, Negros
Occidental for the construction of a new
Catholic Church. Under date of April 29, 1960,
the Commissioner of Internal Revenue issued
an assessment amounting to P 1,370 for
donees gift tax against the Catholic Parish of
Victorias. Petitioner lodged a protest to the
assessment. CIR denied the protest which was
substantially affirmed by the Court of Tax
Appeals. Hence, this petition.
ISSUE: Whether or not the Catholic Parish is
exempt from tax
RULING: The phrase exempt from taxation
should not be interpreted to mean exemption
from all kinds of taxes. The exemption is
only from the payment of taxes assessed
on such properties as property taxes as
contradistinguished from excise taxes. A
donees gift tax is not a property tax but
an excise tax imposed on the transfer of
property by way of gift inter vivos. It does
not rest upon general ownership, but an excise
upon the use made of the properties, upon the
exercise of the privilege of receiving the
properties. The imposition of such excise tax on
property used for religious purpose do not
constitute an impairment of the Constitution.
Abra Valley College v. Aquino
FACTS: Petitioner, an educational corporation
and institution of higher learning duly
incorporated with the Securities and Exchange
Commission, filed a complaint to annul and
declare void the Notice of Seizure and the
Notice of Sale of its lot and building located
at Banguet, Abra, for non-payment of real
estate taxes and penalties. Said Notice of
Seizure by respondents Municipal Treasurer
and Provincial Treasurer, defendants below,
was issued for the satisfaction of the said taxes
thereon.
The parties entered into a stipulation of facts
adopted and embodied by the trial court in its
questioned decision. The trial court ruled for
the government, holding that the second
floor of the building is being used by the
director for residential purposes and that
the ground floor used and rented by
Northern Marketing Corporation, a
commercial establishment, and thus the
property is not being used exclusively for
educational purposes. Instead of perfecting
an appeal, petitioner availed of the instant
petition for review on certiorari with prayer for
preliminary injunction before the Supreme
Court.

ISSUE: Whether or not the lot and building are
used exclusively for educational purposes.
HELD: While the Court allows a more
liberal and non-restrictive interpretation
of the phrase exclusively used for
educational purposes, reasonable
emphasis has always been made that
exemption extends to facilities which are
incidental to and reasonably necessary
for the accomplishment of the main
purposes.
The test of exemption from taxation is the use
of the property for purposes mentioned in the
Constitution. While the use of the second floor
of the main building in the case at bar for
residential purposes of the Director of the
school and his family may find justification
under the concept of INCIDENTAL USE, which is
complimentary to the main or primary purpose
which is educational, the lease of the first floor
thereof to the Northern Marketing Corporation
cannot by any stretch of imagination be
considered incidental to the purpose of
education.
The trial court correctly arrived at the
conclusion that the school building as well as
the lot where it is built, should be taxed, not
because the second floor of the same is
being used by the Director and his family
for residential purposes, but because the
first floor thereof is being used for
commercial purposes. However, since only
a portion is used for purposes of
commerce, it is only fair that half of the
assessed tax be returned to the school
involved.
Ferrer v. Bautista
FACTS: Quezon City Council
enacted Ordinance No. SP-2095, S-2011,or
the Socialized Housing Tax of Quezon City,
Section 3 of which provides:
A special assessment equivalent to one-half
percent (0.5%) on the assessed value of land in
excess of One Hundred Thousand Pesos
(Php100,000.00) shall be collected by the City
Treasurer which shall accrue to the Socialized
Housing Programs of the Quezon City
Government.
Effective for five (5) years, the Socialized
Housing Tax (SHT) shall be utilized by the
Quezon City Government for the following
projects: (a) land purchase/land banking; (b)
improvement of current/existing socialized
housing facilities; (c) land development; (d)
construction of core houses, sanitary cores,
medium-rise buildings and other similar
structures; and (e) financing of public-private
partnership agreement of the Quezon City
Government and National Housing Authority
(NHA) with the private sector.
On the other hand, Ordinance No. SP-2235,
S-2013. The proceeds collected from the
garbage fees on residential properties shall be
deposited solely and exclusively in an
earmarked special account under the general
fund to be utilized for garbage collections.
Section 1 of the Ordinance set forth the
schedule and manner for the collection of
garbage fees:
The collection of the garbage fee shall accrue
on the first day of January and shall be paid
simultaneously with the payment of the real
property tax, but not later than the first quarter
installment.8 In case a household owner refuses
to pay, a penalty of 25% of the garbage fee
due, plus an interest of 2% per month or a
fraction thereof, shall be charged.
The SHT and the garbage fee are actually
increases in the property tax which are not
based on the assessed value of the property or
its reassessment every three years; hence, in
violation of Sections 232 and 233 of the
LGC.rtualawlibrary
ISSUE: Whether or not the tax ordinances are
valid
HELD: Ordinance No. SP-2095, S-2011, the
Socialized Housing Tax is valid. Ordinance
No. SP-2235, S-2013, which collects an
annual garbage fee on all domestic
households in Quezon City, is hereby
declared as UNCONSTITUTIONAL AND
ILLEGAL
The 1987 Constitution explicitly espouses the
view that the use of property bears a social
function and that all economic agents shall
contribute to the common good.Property has
not only an individual function, insofar as it has
to provide for the needs of the owner, but also
a social function insofar as it has to provide for
the needs of the other members of society.
Property rights of individuals may be subjected
to restraints and burdens in order to fulfill the
objectives of the government in the exercise of
police power. In this jurisdiction, it is well-
entrenched that taxation may be made the
implement of the states police power.
The SHT charged by the Quezon City
Government is a tax which is within its power
to impose. Cities are allowed to exercise
such other powers and discharge such
other functions and responsibilities as are
necessary, appropriate, or incidental to
efficient and effective provision of the
basic services and facilities which include,
among others, programs and projects for
low-cost housing and other mass
dwellings. The collections made accrue to its
socialized housing programs and projects.
The tax is not a pure exercise of taxing
power or merely to raise revenue; it is
levied with a regulatory purpose. The levy
is primarily in the exercise of the police
power for the general welfare of the
entire city. It is greatly imbued with
public interest. Removing slum areas in
Quezon City is not only beneficial to the
underprivileged and homeless constituents but
advantageous to the real property owners as
well. The situation will improve the value of the
their property investments, fully enjoying the
same in view of an orderly, secure, and safe
community, and will enhance the quality of life
of the poor, making them law-abiding
constituents and better consumers of business
products.
Assessments for garbage collection services
have been consistently treated as a fee and
not a tax. Hence, not being a tax, the
contention that the garbage fee under
Ordinance No. SP-2235 violates the rule on
double taxation must necessarily fail. In the
subject ordinance imposing garbage collection
fee, the rates of the imposable fee depend on
land or floor area and whether the payee is an
occupant of a lot, condominium, social housing
project or apartment; and the same amount of
garbage fee is imposed regardless of whether
the resident is from a condominium or from a
socialized housing project.
Indeed, the classifications under Ordinance No.
S-2235 are not germane to its declared
purpose of "promoting shared responsibility
with the residents to attack their common
mindless attitude in over-consuming the
present resources and in generating waste.
With respect to utility rates set by
municipalities, a municipality has the right to
classify consumers under reasonable
classifications based upon factors such as the
cost of service, the purpose for which the
service or the product is received, the quantity
or the amount received, the different character
of the service furnished, the time of its use or
any other matter which presents a substantial
difference as a ground of distinction.