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CITY OF CABANATUAN “It is our view that petitioners correctly rely on provisions of
G.R. No. 149110 April 9, 2003 Sections 137 and 193 of the LGC to support their position that
MERALCO’s tax exemption has been withdrawn. The explicit
FACTS: Petitioner is a government-owned and controlled language of section 137 which authorizes the province to
corporation created under Commonwealth Act No. 120, as impose franchise tax ‘notwithstanding any exemption granted
amended. by any law or other special law’ is all-encompassing and
For many years now, petitioner sells electric power to the clear. The franchise tax is imposable despite any exemption
residents of Cabanatuan City, posting a gross income of enjoyed under special laws.
P107,814,187.96 in 1992.7 Pursuant to section 37 of Section 193 buttresses the withdrawal of extant tax exemption
Ordinance No. 165-92,8 the respondent assessed the privileges. By stating that unless otherwise provided in this
petitioner a franchise tax amounting to P808,606.41, Code, tax exemptions or incentives granted to or presently
representing 75% of 1% of the latter’s gross receipts for the enjoyed by all persons, whether natural or juridical, including
preceding year. government-owned or controlled corporations except (1) local
Petitioner refused to pay the tax assessment arguing that the water districts, (2) cooperatives duly registered under R.A.
respondent has no authority to impose tax on government 6938, (3) non-stock and non-profit hospitals and educational
entities. Petitioner also contended that as a non-profit institutions, are withdrawn upon the effectivity of this code, the
organization, it is exempted from the payment of all forms of obvious import is to limit the exemptions to the three
taxes, charges, duties or fees in accordance with sec. 13 of enumerated entities. It is a basic precept of statutory
Rep. Act No. 6395, as amended. construction that the express mention of one person, thing,
The respondent filed a collection suit in the RTC, demanding act, or consequence excludes all others as expressed in the
that petitioner pay the assessed tax due, plus surcharge. familiar maxim expressio unius est exclusio alterius. In the
Respondent alleged that petitioner’s exemption from local absence of any provision of the Code to the contrary, and we
taxes has been repealed by section 193 of the LGC, which find no other provision in point, any existing tax exemption or
reads as follows: incentive enjoyed by MERALCO under existing law was clearly
“Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless intended to be withdrawn.
otherwise provided in this Code, tax exemptions or incentives Reading together sections 137 and 193 of the LGC, we conclude
granted to, or presently enjoyed by all persons, whether that under the LGC the local government unit may now impose
natural or juridical, including government owned or controlled a local tax at a rate not exceeding 50% of 1% of the gross
corporations, except local water districts, cooperatives duly annual receipts for the preceding calendar based on the
registered under R.A. No. 6938, non-stock and non-profit incoming receipts realized within its territorial jurisdiction. The
hospitals and educational institutions, are hereby withdrawn legislative purpose to withdraw tax privileges enjoyed under
upon the effectivity of this Code.” existing law or charter is clearly manifested by the language
RTC upheld NPC’s tax exemption. On appeal the CA reversed used on (sic) Sections 137 and 193 categorically withdrawing
the trial court’s Order on the ground that section 193, in such exemption subject only to the exceptions enumerated.
relation to sections 137 and 151 of the LGC, expressly withdrew Since it would be not only tedious and impractical to attempt
the exemptions granted to the petitioner. to enumerate all the existing statutes providing for special tax
ISSUE: W/N the respondent city government has the authority exemptions or privileges, the LGC provided for an express,
to issue Ordinance No. 165-92 and impose an annual tax on albeit general, withdrawal of such exemptions or privileges. No
“businesses enjoying a franchise more unequivocal language could have been
HELD: YES. Taxes are the lifeblood of the government, for used.” 76
(emphases supplied)
without taxes, the government can neither exist nor endure. A Doubtless, the power to tax is the most effective instrument to
principal attribute of sovereignty, the exercise of taxing power raise needed revenues to finance and support myriad activities
derives its source from the very existence of the state whose of the local government units for the delivery of basic services
social contract with its citizens obliges it to promote public essential to the promotion of the general welfare and the
interest and common good. The theory behind the exercise of enhancement of peace, progress, and prosperity of the people.
the power to tax emanates from necessity;32 without taxes, As this Court observed in the Mactan case, “the original reasons
government cannot fulfill its mandate of promoting the general for the withdrawal of tax exemption privileges granted to
welfare and well-being of the people. government-owned or controlled corporations and all other
Section 137 of the LGC clearly states that the LGUs can impose units of government were that such privilege resulted in serious
franchise tax “notwithstanding any exemption granted by any tax base erosion and distortions in the tax treatment of
law or other special law.” This particular provision of the LGC similarly situated enterprises.” With the added burden of
does not admit any exception. In City Government of San devolution, it is even more imperative for government entities
Pablo, Laguna v. Reyes, 74
MERALCO’s exemption from the to share in the requirements of development, fiscal or
payment of franchise taxes was brought as an issue before this otherwise, by paying taxes or other charges due from them.
Court. The same issue was involved in the subsequent case
of Manila Electric Company v. Province of Laguna.75 Ruling in
favor of the local government in both instances, we ruled that
the franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special laws, viz:
COMMISSIONER v. ALGUE, INC. matter and impose practically the same tax rate as with
GR No. L-28896, February 17, 1988 Ordinance No. 23, b) double taxation because the two
158 SCRA 9 ordinances impose percentage or specific taxes.
because it was not an ordinary, reasonable and necessary Cola. It argued, among others, that only Ordinance No. 27 is
ISSUE: Should an uncommon business expense be disallowed ISSUE: Whether or not there is undue delegation of taxing
as a proper deduction in computation of income taxes, corollary powers. Whether or not there is double taxation.
to the doctrine that taxes are the lifeblood of the government?
HELD: No. There is no undue delegation. The Constitution
even allows such delegation. Legislative powers may be
HELD: No. Private respondent has proved that the payment of
delegated to local governments in respect of matters of local
the fees was necessary and reasonable in the light of the efforts
concern. By necessary implication, the legislative power to
exerted by the payees in inducing investors and prominent
create political corporations for purposes of local self-
businessmen to venture in an xperimental enterprise and
government carries with it the power to confer on such local
involve themselves in a new business requiring millions of
governmental agencies the power to tax. Under the New
pesos. This was no mean feat and should be, as it was,
Constitution, local governments are granted the autonomous
sufficiently recompensed.
authority to create their own sources of revenue and to levy
It is well-settled that taxes are the lifeblood of the
taxes. Section 5, Article XI provides: “Each local government
government and so should be collected without unnecessary
unit shall have the power to create its sources of revenue and
hindrance On the other hand, such collection should be made
to levy taxes, subject to such limitations as may be provided
in accordance with law as any arbitrariness will negate the very
by law.” Withal, it cannot be said that Section 2 of Republic Act
reason for government itself. It is therefore necessary to
No. 2264 emanated from beyond the sphere of the legislative
reconcile the apparently conflicting interests of the authorities
power to enact and vest in local governments the power of local
and the taxpayers so that the real purpose of taxation, which
taxation.
is the promotion of the common good, may be achieved.
But even as we concede the inevitability and indispensability There is no double taxation. The argument of the Municipality
of taxation, it is a requirement in all democratic regimes that it is well taken. Further, Pepsi Cola’s assertion that the delegation
be exercised reasonably and in accordance with the prescribed of taxing power in itself constitutes double taxation cannot be
procedure. If it is not, then the taxpayer has a right to complain merited. It must be observed that the delegating authority
and the courts will then come to his succor. For all the awesome specifies the limitations and enumerates the taxes over which
power of the tax collector, he may still be stopped in his tracks local taxation may not be exercised. The reason is that the
if the taxpayer can demonstrate, as it has here, that the law State has exclusively reserved the same for its own
has not been observed. prerogative. Moreover, double taxation, in general, is not
forbidden by our fundamental law unlike in other jurisdictions.
PEPSI COLA BOTTLING COMPANY VS MUNICIPALITY OF Double taxation becomes obnoxious only where the taxpayer
TANAUAN is taxed twice for the benefit of the same governmental entity
69 SCRA 460 – Taxation – Delegation to Local Governments or by the same jurisdiction for the same purpose, but not in a
– Double Taxation case where one tax is imposed by the State and the other by
the city or municipality.
FACTS: Pepsi Cola has a bottling plant in the Municipality of PHILIPPINE PETROLEUM CORPORATION VS
Tanauan, Leyte. In September 1962, the Municipality approved MUNICIPALITY OF PILILLA RIZAL
Ordinance No. 23 which levies and collects “from soft drinks 198 SCRA 82 [GR No. 90776 June 3, 1991]
producers and manufacturers a tai of one-sixteenth (1/16) of
a centavo for every bottle of soft drink corked.” FACTS: Philippine Petroleum Corporation is a business
In December 1962, the Municipality also approved Ordinance enterprise engaged in the manufacture of lubricated oil base
No. 27 which levies and collects “on soft drinks produced or stocks which is a petroleum product, with its refinery plant
manufactured within the territorial jurisdiction of this situated at Malaya, Pilillia Rizal, conducting its business
municipality a tax of one centavo P0.01) on each gallon of activities within the territorial jurisdiction of municipality of
ISSUE: Whether or not the Municipality may validly impose with as little as possible.
The storage permit fee being imposed by Pilillia’s tax ordinance Petitioner argues that the government is barred from asserting
is a fee for the installation and keeping in storage of any a position contrary to its declared circular if it would result to
flammable, combustible or explosive substances. In as much injustice to taxpayers. Citing ABS CBN Broadcasting
as said storage makes use of tanks owned not by the Corporation vs. Court of Tax Appeals (1981), petitioner claims
Municipality of Pilillia but by petitioner PPC, same is obviously that rulings or circulars promulgated by the Commissioner of
not a charge for any service rendered by the municipality as Internal Revenue have no retroactive effect if it would be
what is envisioned in section 37 of the same code. prejudicial to taxpayers.
From the same perspective, claims for refund or tax credit and germane to, and is reasonably necessary for the
should be exercised within the time fixed by law because the accomplishment of, the general object of the PD, which is the
BIR being an administrative body enforced to collect taxes, its regulation of the video industry through the VRB as expressed
functions should not be unduly delayed or hampered by in its title. The tax provision is not inconsistent with, nor foreign
incidental matters. to that general subject and title. As a tool for regulation it is
simply one of the regulatory and control mechanisms scattered
Any excess of the total quarterly payments over the actual throughout the PD.
income tax computed in the adjustment or final corporate 2. There is no undue delegation of legislative powers to the
income tax return, shall either (a) be refunded to the VRB. VRB is not being tasked to legislate. What was conferred
corporation, or (b) may be credited against the estimated to the VRB was the authority or discretion to seek assistance
quarterly income tax liabilities for the quarters of the in the execution, enforcement, and implementation of the
succeeding taxable year. law. Besides, in the very language of the decree, the authority
of the BOARD to solicit such assistance is for a “fixed and
The corporation must signify in its annual corporate adjustment
limited period” with the deputized agencies concerned being
return (by marking the option box provided in the BIR form)
“subject to the direction and control of the [VRB].”
its intention, whether to request for a refund or claim for an
automatic tax credit for the succeeding taxable year. To ease
BATANGAS POWER CORPORATION v NAPOCOR
the administration of tax collection, these remedies are in the
GR No. 152675 April 28, 2004
alternative, and the choice of one precludes the other.
credits denied those that are losing, because no taxes are due was later amended by Ordinance 122. This Ordinance imposes
from the latter. a tax on any person, association, etc., of P0.10 per case of 24
Grant of Tax Credit bottles of Pepsi- Cola. Pepsi operates within Butuan and it paid
Intended by the Legislature under protest the amount of P4.926.63 from August 16 to
Fifth, RA 7432 itself seeks to adopt measures whereby senior December 31, 1960 and the amount of P9,250.40 from January
citizens are assisted by the community as a whole and to 1 to July 30, 1961 pursuant to said ordinance. Pepsi filed a
establish a program beneficial to them.86 These objectives are complaint for the recovery of the total amount of P14,177.03
consonant with the constitutional policy of making "health x x paid under protest and those that it may later on pay until the
of giving "priority for the needs of the x x x elderly."88 Sections as amended of the City of Butuan is illegal, that the tax
2.i and 4 of RR 2-94, however, contradict these constitutional imposed is excessive and that it is unconstitutional. Pepsi
policies and statutory objectives. averred it is unconstitutional because of the following reasons:
Furthermore, Congress has allowed all private establishments 1. it partakes of the nature of an import tax because the tax
a simple tax credit, not a deduction. In fact, no cash outlay is “shall be based and computed from the cargo manifest or bill
required from the government for the availment or use of such of lading . . . showing the number of cases” — not sold;
credit. The deliberations on February 5, 1992 of the Bicameral
2. it is highly unjust and discriminatory because some dealers
Conference Committee Meeting on Social Justice, which
engaged in selling of carbonated drinks are exempt while
finalized RA 7432, disclose the true intent of our legislators to
others are covered and such exemption is not justified in the
treat the sales discounts as a tax credit, rather than as a
ordinance.
deduction from gross income. We quote from those
deliberations as follows: ISSUE: Whether or not the Ordinance is valid.
xxxxxxxx
HELD: No, it is invalid. The tax prescribed in said Ordinance,
Special Law
as originally approved, was imposed upon dealers “engaged in
Over General Law
selling” soft drinks or carbonated drinks. Thus, it would seem
Sixth and last, RA 7432 is a special law that should prevail over
that the intent was then to levy a tax upon the sale of said
the Tax Code -- a general law. "x x x [T]he rule is that on a
merchandise. As amended by Ord No. 122, the tax is, however,
specific matter the special law shall prevail over the general
imposed only upon “any agent and/or consignee of any person,
law, which shall
association, partnership, company or corporation engaged in
be resorted to only to supply deficiencies in the former."90 In
selling . . . soft drinks or carbonated drinks.” As a consequence,
addition, "[w]here there are two statutes, the earlier special
merchants engaged in the sale of soft drinks or carbonated
and the later general -- the terms of the general broad enough
drinks, are not subject to the tax, unless they are agents
to include the matter provided for in the special -- the fact that
and/or consignees of another dealer, who, in the very nature
one is special and the other is general creates a presumption
of things, must be one engaged in business outside the City.
that the special is to be considered as remaining an exception
Besides, the tax would not be applicable to such agent and/or
consignee, if less than 1,000 cases of soft drinks are consigned MCIAA filed a Petition of Declaratory Relief with the RTC
or shipped to him every month. contending that the taxing power of local government units do
not extend to the levy of taxes or fees on an instrumentality of
When we consider, also, that the tax “shall be based and
the national government. It contends that by the nature of its
computed from the cargo manifest or bill of lading . . . showing
powers and functions, it has the footing of an agency or
the number of cases” — not sold — but “received” by the
instrumentality of the national government; which claim the
taxpayer, the intention to limit the application of the ordinance
City rejects. The trial court dismissed the petition, citing that
to soft drinks and carbonated drinks brought into the City from
close reading of the LGC provides the express cancellation and
outside thereof becomes apparent. Viewed from this angle, the
withdrawal of tax exemptions of Government Owned and
tax partakes of the nature of an import duty, which is beyond
Controlled Corporations.
defendant’s authority to impose by express provision of law. It
is true that the uniformity essential to the valid exercise of the
ISSUE: Whether the MCIAA is exempted from realty taxes.
power of taxation does not require identity or equality under
all circumstances, or negate the authority to classify the
RULING: Tax statutes are construed strictly against the
objects of taxation.
government and liberally in favor of the taxpayer. But since
The classification made in the exercise of this authority, to be taxes are paid for civilized society, or are the lifeblood of the
valid, must, however, be reasonable and this requirement is nation, the law frowns against exemptions from taxation and
not deemed satisfied unless: (1) it is based upon substantial statutes granting tax exemptions are thus construed
distinctions which make real differences; (2) these are strictissimi juris against the taxpayer and liberally in favor of
germane to the purpose of the legislation or ordinance; (3) the the taxing authority.
classification applies, not only to present conditions, but, also,
to future conditions substantially identical to those of the A claim of exemption from tax payments must be clearly shown
present; and (4) the classification applies equally to all those and based on language in the law too plain to be mistaken.
who belong to the same class. These conditions are not fully Taxation is the rule, exemption therefrom is the exception.
met by the ordinance in question. However, if the grantee of the exemption is a political
subdivision or instrumentality, the rigid rule of construction
Indeed, if its purpose were merely to levy a burden upon the
does not apply because the practical effect of the exemption is
sale of soft drinks or carbonated beverages, there is no reason
merely to reduce the amount of money that has to be handled
why sales thereof by dealers other than agents or consignees
by the government in the course of its operations.
of producers or merchants established outside the City of
Butuan should be exempt from the tax.
Further, since taxation is the rule and exemption therefrom the
exception, the exemption may be withdrawn at the pleasure of
MCIAA vs. MARCOS the taxing authority. The only exception to this rule is where
G.R. No. 120082, Sept 11, 1996 261 SCRA 667 Public the exemption was granted to private parties based on material
Corporation, Taxation, Local Government Code, Realty Tax, consideration of a mutual nature, which then becomes
OCTOBER 30, 2017 contractual and is thus covered by the non-impairment clause
of the Constitution.
its creation, MCIAA enjoyed the privilege of exemption from was only exempted from the payment of real property taxes.
payment of realty taxes in accordance with Section 14 of its The grant of the privilege only in respect of this tax is
Charter. However on 11 October 1994, the Office of the conclusive proof of the legislative intent to make it a taxable
Treasurer of Cebu, demanded for the payment of realty taxes person subject to all taxes, except real property tax.
Petitioner objected to such demand for payment as baseless expressly provides that “All general and special laws, acts, city
and unjustified and asserted that it is an instrumentality of the charters, decrees [sic], executive orders, proclamations and
government performing governmental functions, which puts administrative regulations, or part of parts thereof which are
limitations on the taxing powers of local government units. inconsistent with any of the provisions of this Code are hereby
repealed or modified accordingly.”
The City refused to cancel and set aside petitioner’s realty tax
account, insisting that the MCIAA is a government controlled With that repealing clause in the LGC, the tax exemption
corporation whose tax exemption privilege has been withdrawn provided for in RA 6958 had been expressly repealed by the
by virtue of Sections 193 and 234 of the Local Government provisions of the LGC. Therefore, MCIAA has to pay the
Code (LGC), and not an instrumentality of the government but assessed realty tax of its properties effective after January 1,