BAGATSING vs. RAMIREZ 74 SCRA 306 G.R. No. L-41631 December 17, 1976 MARTIN, J.

: Facts: Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING FEES FOR THE RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR OTHER PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance. Respondent Federation of Manila Market Vendors, Inc. commenced a Civil Case before the CFI by respondent Judge, seeking the declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication requirement under the Revised Charter of the City of Manila has not been complied with; (b) the Market Committee was not given any participation in the enactment of the ordinance, as envisioned by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated; and (d) the ordinance would violate Presidential Decree No. 7 of September 30, 1972 prescribing the collection of fees and charges on livestock and animal products. Private respondent also bewails that the market stall fees imposed in the disputed ordinance are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating Contract." Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent Judge issued an order denying the plea for failure of the respondent Federation of Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the Local Tax Code. After due hearing on the merits, respondent Judge rendered another decision, declaring the nullity of Ordinance No. 7522 of the City of Manila on the primary ground of non-compliance with the requirement of publication under the Revised City Charter. Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-publication is required by the Local Tax Code; and (b) private respondent failed to exhaust all administrative remedies before instituting an action in court. Respondent Judge denied the motion. Hence petitioners brought the matter to the Supreme Court through the a petition for review on certiorari. Issue: What law shall govern the publication of a tax ordinance enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as amended), which requires publication of the ordinance before its enactment and after its approval, or the Local Tax Code (P.D. No. 231), which only demands publication after approval. Held: There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local governments. Blackstone defines general law as a universal rule affecting the entire community and special law as one relating to particular persons or things of a class. And the rule commonly said is that a prior special law is not ordinarily repealed by a subsequent

general law. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. The exactly is the circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. Special provision governs. This is especially true where the law containing the particular provision was enacted later than the one containing the general provision. The City Charter of Manila was promulgated on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973. The law-making power cannot be said to have intended the establishment of conflicting and hostile systems upon the same subject, or to leave in force provisions of a prior law by which the new will of the legislating power may be thwarted and overthrown. Such a result would render legislation a useless and Idle ceremony, and subject the law to the reproach of uncertainty and unintelligibility. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because the imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-raising function, so that the procedure for publication under the Local Tax Code finds no application. The pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object of taxation. Under Section 5, Article XI of the New Constitution, "Each local government unit shall have the power to create its own sources of revenue and to levy taxes, subject to such provisions as may be provided by law." And one of those sources of revenue is what the Local Tax Code points to in particular: "Local governments may collect fees or rentals for the occupancy or use of public markets and premises * * *." 14 They can provide for and regulate market stands, stalls and privileges, and, also, the sale, lease or occupancy thereof. They can license, or permit the use of, lease, sell or otherwise dispose of stands, stalls or marketing privileges. Private respondent bewails that the market stall fees imposed in the disputed ordinance are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating Contract." The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation. ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No. 7522 is held validly enacted. ABAKADA GURO v. EXECUTIVE SECRETARY G.R. No. 168056, 168207, 168461, 168463 and 168730, 1 September 2005, En Banc (Austria-Martinez, J)

The equal protection clause does not require the universal application of the laws on all persons or things without distinction. This might in fact sometimes result in unequal protection. What the clause requires is equality among equals as determined according to a valid classification. .. Taxes are the lifeblood of the government. It is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. The Court cannot strike down a law as unconstitutional simply because of its yokes. Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased emoluments for health workers, and wider coverage for full value-added tax benefits ... these are the reasons why Republic Act No. 9337 (R.A. No. 9337) was enacted. Reasons, the wisdom of which, the Court even with its extensive constitutional power of review, cannot probe. The petitioners in these cases, however, question not only the wisdom of the law, but also perceived constitutional infirmities in its passage. R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, and Senate Bill No. 1950. Because of the conflicting provisions of the proposed bills the Senate agreed to the request of the House of Representatives for a committee conference. The Conference Committee on the Disagreeing Provisions of House Bill recommended the approval of its report, which the Senate and the House of the Representatives did. On May 24, 2005, the President signed into law the consolidated House and Senate versions as Republic Act 9337. Before the law was to take effect on July 1, 2005, the Court issued a temporary restraining order enjoining government from implementing the law in response to a slew of petitions for certiorari and prohibition questioning the constitutionality of the new law. ISSUES: PROCEDURAL ISSUE Whether R.A. No. 9337 violates the following provisions of the Constitution: a. Article VI, Section 24, and b. Article VI, Section 26(2) SUBSTANTIVE ISSUES 1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article VI, Section 28(2) 2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate Article VI, Section 28(1), and Article III, Section 1 of the Constitution: RECENT JURISPRUDENCE POLITICAL LAW HELD: Petitions DISMISSED. There being no constitutional impediment to the full enforcement and implementation of R.A. No. 9337, the temporary restraining order issued by the Court on July 1, 2005 is LIFTED upon finality of herein decision. Procedural Issues A. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination of Revenue Bills In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705 that initiated the move for amending provisions of the NIRC dealing mainly with the value- added tax. Upon transmittal of said House bills to the Senate, the Senate came out with Senate Bill No. 1950 proposing amendments not only to NIRC provisions on the value-added tax but also amendments to NIRC provisions on other kinds of taxes. Is the introduction by the Senate of provisions not dealing directly with the value- added tax, which is the only kind of tax being amended in the House bills, still within the purview of the constitutional provision authorizing the Senate to propose or concur with amendments to a revenue bill that originated from the House? Since there is no question that the revenue bill exclusively originated in the House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the House bill when it included provisions in Senate

Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation on the extent of the amendments that may be introduced by the Senate to the House revenue bill. Notably therefore, the main purpose of the bills emanating from the House of Representatives is to bring in sizeable revenues for the government to supplement our countrys serious financial problems, and improve tax administration and control of the leakages in revenues from income taxes and value-added taxes. As these house bills were transmitted to the Senate, the latter, approaching the measures from the point of national perspective, can introduce amendments within the purposes of those bills. The Senate can propose amendments and in fact, the amendments made on provisions in the tax on income of corporations are germane to the purpose of the house bills which is to raise revenues for the government. The sections introduced by the Senate are germane to the subject matter and purposes of the house bills, which is to supplement our countrys fiscal deficit, among others. Thus, the Senate acted within its power to propose those amendments. B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on the No-Amendment Rule The no-amendment rule refers only to the procedure to be followed by each house of Congress with regard to bills initiated in each of said respective houses, before said bill is RECENT JURISPRUDENCE POLITICAL LAW transmitted to the other house for its concurrence or amendment. Verily, to construe said provision in a way as to proscribe any further changes to a bill after one house has voted on it would lead to absurdity as this would mean that the other house of Congress would be deprived of its constitutional power to amend or introduce changes to said bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to mean that the introduction by the Bicameral Conference Committee of amendments and modifications to disagreeing provisions in bills that have been acted upon by both houses of Congress is prohibited. Petitioners allege that the Bicameral Conference Committee exceeded its authority by: (1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No. 9337; (2) Deleting entirely the no pass-on provisions found in both the House and Senate bills; (3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against the output tax; and (4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes in addition to the value-added tax. It should be borne in mind that the power of internal regulation and discipline are intrinsic in any legislative body. Thus, Article VI, Section 16 (3) of the Constitution provides that each House may determine the rules of its proceedings. Pursuant to this inherent constitutional power to promulgate and implement its own rules of procedure, the respective rules of each house, the Rule XIV, sec 88 & 889 of the House of the Representatives and Rule XII sec 35 of the Rules of the Senate, provided for the creation of a Bicameral Conference Committee. The creation of such conference committee was apparently in response to a problem, not addressed by any constitutional provision, where the two houses of Congress find themselves in disagreement over changes or amendments introduced by the other house in a legislative bill. In the present petitions, the issue is not whether provisions of the rules of both houses creating the bicameral conference committee are unconstitutional, but whether the bicameral conference committee has strictly complied with the rules of both houses, thereby remaining within the jurisdiction conferred upon it by Congress. In the case of Farias vs. The Executive Secretary, the Court En Banc, unanimously reiterated and emphasized its adherence to the enrolled bill doctrine, thus, declining therein petitioners plea for the Court to go behind the enrolled copy of the bill. Akin to the Farias case, the present petitions also raise an issue regarding the actions taken by the conference committee on matters regarding Congress compliance with its own internal rules. One of the most basic and inherent power

of the legislature is the power to formulate rules for its proceedings and the discipline of its members. Congress is the best judge of how it should conduct its own business expeditiously and in the most orderly manner. It is also the sole concern of Congress to instill discipline among the members of its conference committee if it believes that said members violated any of its rules of proceedings. Even the expanded jurisdiction of this Court cannot apply to questions regarding only the internal operation of Congress, thus, the Court is wont to deny a review of the internal proceedings of a co-equal branch of government. Moreover, in the case of Tolentino vs. Secretary of Finance, the Court already made the pronouncement that if a change is desired in the practice of the Bicameral Conference Committee it must be sought in Congress since this question is not covered by any constitutional provision but is only an internal rule of each house. To date, Congress has not seen it fit to make such changes adverted to by the Court. It seems, therefore, that Congress finds the RECENT JURISPRUDENCE POLITICAL LAW practices of the bicameral conference committee to be very useful for purposes of prompt and efficient legislative action. In the present case, the changes introduced by the Bicameral Conference Committee on disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it did not inject any idea or intent that is wholly foreign to the subject embraced by the original provisions. The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT wanted by the Senate is retained until such time that certain conditions arise when the 12% VAT wanted by the House shall be imposed, appears to be a compromise to try to bridge the difference in the rate of VAT proposed by the two houses of Congress. Nevertheless, such compromise is still totally within the subject of what rate of VAT should be imposed on taxpayers. The no pass-on provision was deleted altogether. The reason for deleting the no pass-on provision was just to keep the VAT law or the VAT bill simple and that no sector should be a beneficiary of legislative grace, neither should any sector be discriminated on. With regard to the amount of input tax to be credited against output tax, the Bicameral Conference Committee came to a compromise on the percentage rate of the limitation or cap on such input tax credit, but again, the change introduced by the Bicameral Conference Committee was totally within the intent of both houses to put a cap on input tax that may be credited against the output tax. As to the amendments to NIRC provisions on taxes other than the value-added tax proposed in Senate Bill No. 1950, since said provisions were among those referred to it, the conference committee had to act on the same and it basically adopted the version of the Senate. Thus, all the changes or modifications made by the Bicameral ConferenceCommittee were germane to subjects of the provisions referred to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion amounting to lack or excess of jurisdiction committed by the Bicameral Conference Committee. Substantial Issues I. A. Uniformity and Equitability of Taxation Article VI, Section 28(1) of the Constitution reads: The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is uniform on the same class everywhere with all people at all times. The tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. It must be stressed that the rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation, and only demands uniformity within the particular class. R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or 10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1, 500, 000.00. Also, basic marine and agricultural food products in their RECENT JURISPRUDENCE POLITICAL LAW

original state are still not subject to tax, thus ensuring the prices at the grassroots level remain accessible. Lastly, petitioners contend that the limitation on the creditable input tax is anything but regressive. It is the smaller business with higher input tax-output tax ratio that will suffer the consequences. Progressive taxation is built on the principle of the taxpayers ability to pay. Taxation is progressive when its rate goes up depending on the resources of the person affected. The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of progressive taxation has no relation with the VAT system inasmuch as the VAT paid by the consumer or business for every goods bought or services enjoyed is the same regardless of income. In other words, the VAT paid eats the same portion of an income, whether big or small. Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted to mean simply that direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized. Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. I. B. No Undue Delegation of Legislative Power The principle of separation of powers ordains that each of the three great branches of government has exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated sphere. A logical corollary to the doctrine of separation of powers is the principle of non-delegation of powers, potestas delegata non delegari potest. In the present case, the challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6 which reads as follows: That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 12%). The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that the word shall is used in the common proviso. The use of the word shall connote a mandatory order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion. Where the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed. RECENT JURISPRUDENCE POLITICAL LAW Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty, which cannot be evaded by the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the President does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the legislature itself. When one speaks of the Secretary of Finance as the alter ego of the President, it simply means that as head of the Department of Finance he is the assistant and agent of the Chief Executive. In the present case, the Secretary of Finance, in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is not subject to the power

of control and direction of the President. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. His personality in such instance is in reality but a projection of that of Congress. Thus, being the agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of Finance and to substitute the judgment of the former for that of the latter. Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by December 31, 2005, the value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and fourfifth percent (24/5%) or the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (112%). If either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then the 12% VAT rate must be imposed by the President effective January 1, 2006. There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward. II.A. Due Process and Equal Protection Clauses The doctrine is that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail. Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the amount of input tax that may be credited against the output tax. It states, in part: [P]rovided, that the input tax inclusive of the input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: ... RECENT JURISPRUDENCE POLITICAL LAW Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax due from or paid by a VAT-registered person on the importation of goods or local purchase of good and services, including lease or use of property, in the course of trade or business, from a VAT-registered person, and Output Tax is the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under the law. Petitioners claim that the contested sections impose limitations on the amount of input tax that may be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited against the output tax. This argument is not absolute. It assumes that the input tax exceeds 70% of the output tax, and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still creditable. The non-application of the unutilized input tax in a given quarter is not ad infinitum, as petitioners exaggeratedly contend. Their analysis of the effect of the 70 per cent limitation is incomplete and one-sided. It ends at the net effect that there will be unapplied/unutilized inputs VAT for a given quarter. It does not proceed further to the fact that such unapplied/unutilized input tax may be credited in the subsequent periods as allowed by the carry-over provision of Section 110(B) or that it may later on be refunded through a tax credit certificate under Section 112(B). Therefore, petitioners argument must be rejected. The equal protection clause under the Constitution means that no person or class of persons shall be deprived of the same protection of laws

which is enjoyed by other persons or other classes in the same place and in like circumstances. The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the States power is entitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or arbitrariness. The equal protection clause does not require the universal application of the laws on all persons or things without distinction. This might in fact sometimes result in unequal protection. What the clause requires is equality among equals as determined according to a valid classification. By classification is meant the grouping of persons or things similar to each other in certain particulars and different from all others in these same particulars. It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes. Eastern Theatrical Co. vs. Alfonso GR L-1104, 31 May 1944 Second Division, Perfecto (J): 5 concur Facts: The municipal board of Manila enacted Ordinance 2958 (series of 1946) imposing a fee on the price of every admission ticket sold by cinematograph theaters, vaudeville companies, theatrical shows and boxing exhibitions, in addition to fees imposed under Sections 633 and 778 of Ordinance 1600. Eastern Theatrical Co., among others, question the validity of ordinance, on the ground that it is unconstitutional for being contrary to the provisions on uniformity and equality of taxation and the equal protection of the laws inasmuch as the ordinance does not tax other kinds of amusement, such as race tracks, cockpits, cabarets, concert halls, circuses, and other places of amusement. Issue: Whether the ordinance violates the rule on uniformity and equality of taxation. Held: Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation; and the theater companies cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be confused with those not included in the ordinance. The fact that somew places of amusement are not taxed while others, like the ones herein, are taxed is no argument at all against the equality and uniformity of the tax imposition.

British American Tobacco v Camacho R.A. 8240 was passed recodifying the NIRC where Sec 142 was renumbered Sec 145. British American Tobacco assailed the validity of Sec. 145 of the NIRC (amended by RA 8240), arguing that the said provisions are violative of the equal protection and uniformity clause of the Constitution. Section 145 provides for a four-tier tax rate based on net retail price per pack of cigarettes: (1) low-priced, (2) medium-priced, (3) highpriced, and (4) premium-priced. Section 145 further provides that NEW BRANDS (registered after January 1, 1997) of cigarettes shall be taxed at their current retail price. If the current net retail price has not been established, the suggested net retail price shall be used to determine the specific tax classification. On the other hand, old or existing brands (registered before January 1, 1997) shall be taxed at their net retail price as of October 1, 1996. Net retail price = price @ which cigarettes are sold on retail in 20 supermarkets in MM

Suggested net retail price = net retail price @ which brands of cigarettes are intended by the manufacturer to be sold To implement RA 8240, BIR issued a Revenue Regulation (RR No. 197) classifying existing brands of cigarettes as those existing or active (old) brands prior to January 1, 1997, while new brands of cigarettes are those registered after January 1, 1997. Another Revenue Regulation was issued amending the first (RR No. 9-2003) by providing BIR with the power to periodically review every two years / earlier the current net retail price of new brands to ESTABLISH / UPDATE their tax classification. In June 2001, British American Tobacco introduced the Lucky Strike Filter, Lucky Strike Lights and Lucky Strike Menthol Lights. Lucky Strike was taxed based on its suggested gross retail price from the time of its introduction in the market in 2001 until the BIR market survey in 2003. The brands were sold at P22.54, P22.61 and P21.23 so the applicable tax rate is P13.44 per pack. BAT now argues that the "classification freeze provision" violates the equal protection and uniformity of taxation clauses because the Lucky Strike brands are taxed based on their 1996 net retail prices while new brands are taxed based on their present day net retail prices. Thus, Lucky Strike suffers from higher taxes while its competitors pay a lower amount. BAT further argued that the tobacco excise law was discriminatory because under it, brands that entered the market after 1996 were imposed taxes based on their current retail prices while older brands paid taxes based on their 1996 retail prices. Meanwhile, Philip Morris, Fortune Tobacco, Mighty Corp. and JT International (respondents-in-intervention) claim that no inequality exists between cigarettes and that nullification of said annex would bring about tremendous loss. I: 1. W/n Sec. 145 of the NIRC violates EPC and uniformity of taxation clauses W/N the Revenue Regulations are invalid in so far as they empower BIR to reclassify and update the classification of new brands every two years or earlier R: Sec 145 NIRC is constitutional but the RRs are invalid for granting the BIR the power to reclassify and update the classification. 1) NIRC is constitutional The classification freeze provision does not violate the equal protection and uniformity of taxation. It meets the standards for valid classification: rests on a substantial distinction, is germane to the purpose of the law, applies to present and future conditions and applies equally to all those belonging to the same class. (NOTE: The second condition, however, was not fully satisfied as it failed to promote fair competition among the players in the industry. However, this does not make the assailed law unconstitutional) The classification freeze provision was done in good faith and is germane to the purpose of the law. It was inserted for reasons of practicality and expediency. Since a new brand was not yet in existence at the time of the passage of RA 8240, then Congress needed a uniform mechanism to fix the tax bracket of a new brand. The current net retail price, similar to what was used to classify the brands as of October 1, 1996, was thus the logical and practical choice. With the amendments introduced by RA 9334, the freezing of the tax classifications now expressly applies not just to old brands (cigarettes which are taxed on the basis of average net retail price as of October 1, 1996) but to newer brands introduced after the effectivity of RA 8240 on January 1, 1997 and any new brand that will be introduced in the future. Thus, the classification freeze provision could hardly be considered biased toward older brands over newer brands. Congress was even willing to delegate the power to periodically adjust the excise tax rate and tax brackets as well as to periodically resurvey and reclassify the cigarette brands based on the increase in the consumer price index to the DOF and the BIR. Thus, the provision was the result of Congresss earnest efforts to improve the efficiency and effectivity of the tax administration over sin products while trying to balance the same with other State interests. On Uniformity: Uniformity of taxation requires that all

subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities. In the instant case, there is no question that the CFP meets the geographical uniformity requirement because the assailed law applies to ALL CIGARETTE BRANDS n the Philippines. On Inequitablity and Regressivity: BAT claims that the use of different tax bases for old brands as against new brands is discriminatory / inequitable, and that the CFP is regressive in character. This cannot be sustained because the CFP meets the requirements of the EPC. On regressivity -- the excise tax imposed on cigarettes is an indirect tax, and thus, regressive in character. HOWEVER, this does not mean that the law may be declared unconstitutional because the Constitution does not prohibit the imposition of indirect taxes but merely provides that Congress shall EVOLVE progressive system of taxation. 2) The BIR RR is invalid because the NIRC does NOT authorize the BIR to update the tax classification of new brands every 2 years or earlier. The power to reclassify cigarette brands remains in Congress. Allowing the periodic reclassification of brands might tempt cigarette manufacturers to manipulate their brands' price levels or bribe the tax implementers to allow their brands to be classified as a lower tax bracket.