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MUNICIPALITY OF TANAUAN
February 27, 1976| Martin, J. | Appeal | Taxing Power of LGUs
PETITIONER: PEPSI COLA BOTTLING CO.
RESPONDENT: MUNICIPALITY OF TANAUAN
SUMMARY: The Pepsi Cola Bottling Company commenced a complaint for the court to declare the Local Autonomy Act
unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos 23 and 27 of municipality of
Tanauan, Leyte. Municipal Ordinance No. 23 (9/25/1962) levies and collects from softdrinks producers and manufacturers a tax of
1/16 of a centavo for every bottle of softdrink corked. Municipal ordinance no. 27 (10/28/1962) levies and collects on softdrinks
produced or manufactured within the territorial jurisdiction of this municipality a tax of 1 centavo on each gallon of volume
capacity. The taxes imposed are denominated as municipal production tax. CFI-Leyte dismissed the complaint. Court held that
Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue
and to levy taxes. Thus, legislative powers may be delegated to local governments in respect of matters of local concern. The
intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for
the prior ordinance no. 23 and operates as a repeal of the latter, even without words to that effect. The tax is not a percentage
tax as the volume capacity of the taxpayers production of softdrinks is considered solely for purposes of determining the tax rate
on the products but there is no set ratio between volume of sales and amount of the tax. Nor can the tax levied be treated as a
specific tax. Softdrink is not one of those specified articles.
DOCTRINE: Municipalities may be permitted to tax subjects which for reasons of public policy the State has not deemed wise to
tax for more general purposes. An increase in the tax alone would not support the claim that the tax is oppressive, unjust and
confiscatory. Municipal corporations are allowed much discretion in determining the rates of imposable taxes. This is in line with
the constitutional policy of according the widest possible autonomy to local governments in matters of local taxation. Unless the
amount is so excessive as to be prohibitive, courts will go slow in writing off an ordinance as unreasonable.