1. DUE PROCESS OF LAW FACTS: Batas Pambansa 135 was enacted. Sison, as
There must be a valid law taxpayer, alleged that its provision (Section 1) unduly
Tax measure should not be unconscionable discriminated against him by the imposition of higher
rates upon his income as a professional, that it
and unjust as to amount to confiscation of
amounts to class legislation, and that it transgresses
property. against the equal protection and due process clauses
Tax statute must not be arbitrary as to find of the Constitution as well as the rule requiring
no support in the Constitution. uniformity in taxation.
Sec. 1 Art. III 1987 - No person shall be deprived of Issue: Whether BP 135 violates the due process and
life, liberty, or property without due process of law, equal protection clauses, and the rule on uniformity
nor shall any person be denied the equal protection in taxation.
of the laws.
HELD: No, there was no violation of the due process
Tan v. Del Rosario, supra – (SNITS); and equal protection clause, since petitioner did not
made a case, only allegations.
FACTS: Petitioners challenge the constitutionality of
RA 7496 or the simplified income taxation scheme The Congress has the power to determine
(SNIT) under Arts (26) and (28) and III (1). The SNIT the rates of taxation; thus, the due process
contained changes in the tax schedules and different clause may be invoked where a taxing
statute is so arbitrary that it finds no support
treatment in the professionals which petitioners assail
in the Constitution. An obvious example is
as unconstitutional for being isolative of the equal where it can be shown to amount to the
protection clause in the constitution. Petitioner confiscation of property. That would be a
contends that the tile of House Bill No. 34314 clear abuse of power. It then becomes the
progenitor of RA 7496, is a misnomer or, at least, duty of this Court to say that such an
deficient for being merely entitled, “Simplified Net arbitrary act amounted to the exercise of an
Income Taxation Scheme for the Self-Employed and authority not conferred. That properly calls
for the application of the Holmes dictum.
Professional Engaged in the Practice of their
Profession”. It has also been held that where the assailed
tax measure is beyond the jurisdiction of the
HELD: Tax law is constitutional. Uniformity of state, or is not for a public purpose, or, in
taxation, like the hindered concept of equal case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due
protection, merely require that all subjects or objects
process grounds.
of taxation similarly situated are to be treated alike
both privileges and liabilities. Uniformity, does not
2. EQUAL PROTECTION OF THE LAWS
offend classification as long as it rest on substantial
distinctions, it is germane to the purpose of the law. It – Right to be treated under like circumstance.
is not limited to existing only and must apply equally All persons subject to legislation shall be
to all members of the same class. The due process treated alike under similar circumstances
clause may correctly be invoked only when there is a and conditions both in the privileges
clear contravention of inherent or constitutional conferred and liabilities imposed.
limitations in the exercise of the tax power. No such The doctrine does not require that persons
transgression is evident to us. or properties different in fact be treated in
law as though they were the same. What it
prohibits is “Class Legislation” which
discriminates against some and favors purposes of taxation. Where the
others. differentiation conforms to the practical
As long as there are rational or reasonable dictates of justice and equity, similar to the
standards of equal protection, it is not
grounds for so doing. Congress may group
discriminatory within the meaning of the
persons or property to be taxed and it is clause and is therefore uniform.
sufficient if all members of the same class
are subject to the same rate and the tax is It suffices then that the laws
administered impartially upon them. operate equally and uniformly on all persons
under similar circumstances or that all
Requisites of a Valid Classification: persons must be treated in the same
manner, he conditions nt being different,
1. Must be based on Substantial both in the privileges conferred and liabilities
Distinctions. imposed.
2. Germane to the purpose of law
3. Classification must not be limited to It is inherent in the power to tax
existing conditions only but must also that a state be free to select the subjects of
taxation and it has been repeatedly held that
apply to future conditions substantially
inequalities which result from a singling out
identical to those of the present. of one particular class for taxation, or
4. It must apply equally to all members of exemption infringes no constitutional
the same class. limitation.
There is a need for proof of such persuasive HELD: The ordinance’s purpose is clearly to raise
character as would lead to a conclusion that money under the guise of regulation by exacting P50
there was a violation of the due process and from aliens who have been cleared for employment.
equal protection clauses. Absent such
showing, the presumption of validity must The amount is unreasonable and excessive
prevail. because it fails to consider difference in
Equality and uniformity in taxation means situation among aliens required to pay it, i.e.
that all taxable articles or kinds of property being casual, permanent, part-time, rank-
of the same class shall be taxed at the same and-file or executive.
rate. The Ordinance was declared invalid as it is
The taxing power has the authority to make arbitrary, oppressive and unreasonable,
reasonable and natural classifications for being applied only to aliens who are thus
deprived of their rights to life, liberty and Alhambra. CA affirming such decision, hence, this
property and therefore violates the due appeal.
process and equal protection clauses of the
Constitution. ISSUE: whether private respondent's reliance on a
Further, the ordinance does not lay down void BIR ruling conferred upon the latter a vested
any criterion or standard to guide the Mayor right to apply the same in the computation of its ad
in the exercise of his discretion, thus valorem tax and claim for tax refund
conferring upon the mayor arbitrary and
unrestricted powers. HELD: The government is not stopped from
collecting taxes legally due because of mistake/errors
Tan v. Del Rosario, supra. of its agents, this admits of exceptions in the interest
of justice and fair play, as where injustice will result to
The said law is not arbitrary; it is germane to the taxpayer. As regards, petitioner’s argument the
the purpose of the law and; applies to all private respondent should have made consultations
things of equal conditions and of same class. with it before private respondent used the
computation mandated by BIR ruling 473-88 suffice it
to state that the BIR ruling was clear and categorical,
It is neither violative of equal protection
there leaving no room for interpretation. The failure
clause due to the existence of substantial
of private respondent to consult petitioner does not
difference between one who practice his
imply bad faith on the part of the former.
profession alone and one who is engaged to
proprietorship.
Further, the SC said that RA 7496 is just an Tiu v. Court of Appeals, 301 SCRA 278 (1999) – The
amendatory provision of the code of Subic Special Economic Zone case.
taxpayers where it classifies taxpayers in to
four main groups: Individuals, Corporations, The Constitutional right to equal protection
Estate under Judicial Settlement and
of the law is not violated by an executive
Irrevocable Trust. The court would have
appreciated the contention of the petitioner order, issued pursuant to law, granting tax
if RA 7496 was an independent law. But since and duty incentives only to business within
it is attached to a law that has already the “secured area” of the Subic Special
classified taxpayers, there is no violation of Economic Zone and denying them to those
equal protection clause. who live within the Zone but outside such
“fenced in” territory.
CIR VS. CA AND ALHAMBRA 267 SCRA 557 (1997) The Constitution does not require absolute
equality among residents. It is enough that
FACTS : Alhambra industries, Inc. (Alhambra) is a
domestic corporation engaged in the manufacture all persons under like circumstances or
and sale of cigar and cigarette products. On May 7, conditions are given the same privileges and
1991 private respondent received a letter dated April required to follow the same obligations. In
26, 1991 from the Commissioner of Internal Revenue short, a classification based on valid and
assessing its deficiency Ad Valorem Tax (AVT) in the reasonable standards does not violate the
total amount of P488,396.62, inclusive of increments, equal protection clause.
on the removals of cigarette products from their
We find real and substantial distinctions
place of production during the period Nov. 2, 1990 to
January 22, 1991.Alhambra filed protest against between the circumstances obtaining inside
amount assessed by the CIR, however, it was denied and those outside the Subic Naval Base,
by the latter at the same time increasing the amount thereby justifying a valid and reasonable
assessed to P520,835.29. Alhambra filed a petition for classification.
review with the CTA, despite payment under protest
the amount of P520,835.29. On December 1, 1993, Classification based on:
CTA ordered petitioner to refund said amount to 1. Valid & Does not violate
2. Reasonable Standards equal protection
clause
· The concept of equity in taxation requires
that the apportionment of the tax burden
3. UNIFORMITY AND EQUITY IN TAXATION be, more or less, just in the light of the
- same class, same rate
taxpayer’s ability to shoulder the tax burden
- classification of taxpayers, subject or items
and, if warranted, on the basis of the
to be taxed
benefits received from the government. Its
cornerstone is the taxpayer’s ability to pay.
The rule of taxation shall be uniform and
equitable (Sec.28 (1), Art. III, 1987
Tolentino v. Sec. of Finance, supra, -
Constitution).
The tax is uniform when it operates with
Equity and uniformity in taxation means that
the same force and effect in every place
all the taxable articles or kinds of properties
where the subject of it is found.
of the same class be taxed at the same rate.
"Uniformity" means all property
The taxing power has the authority to make
belonging to the same class shall be
reasonable and natural classifications for
taxed alike. It does not signify an
purposes of taxation. To satisfy this
intrinsic, but simply a geographic,
requirement, it is enough that the statute or
uniformity (Churchill & Tait vs.
ordinance applies equally to all persons,
Conception, 34 Phil. 969). Uniformity
firms, and corporations placed in a similar
does not require the same treatment; it
situation.
simply requires reasonable basis for
It is inherent in the power to tax that the
classification.
state be free to select the subjects of
The concept of equality in taxation
taxation & it has been repeatedly held that
requires that the apportionment of the
the inequalities which result from a singling
tax burden be more or less just in the
out of 1 particular class for taxation or
light of the taxpayer’s ability to shoulder
exception infringe no constitutional
the tax burden and if warranted, on the
limitation.
basis of the benefits received from the
government. Its cornerstone is the Manila Race Horse v. Dela Fuente – No arbitrary
taxpayer’s ability to pay. classification
4. PROHIBITION AGAINST IMPRISONMENT FOR (1) For every Five thousand pesos (P5,000.00) worth
NON-PAYMENT OF POLL TAX of real property in the Philippines owned by it during
the preceding year based on the valuation used for
Section 20, Article III, Constitution. No person shall the payment of real property tax under existing laws,
be imprisoned for debt or non-payment of poll tax. found in the assessment rolls of the city or
municipality where the real property is situated - Two
The non-imprisonment rule applies to non-payment pesos (P2.00); and
of poll tax which is punishable only by a surcharge,
but not to other violations like falsification of
(2) For every Five thousand pesos (P5,000.00) of gross
community tax certificate and non-payment of other
receipts or earnings derived by it from its business in
taxes.
the Philippines during the preceding year - Two pesos
Community Tax v. Poll Tax (P2.00).
Poll tax is a tax of fixed amount imposed on The dividends received by a corporation from another
residents within a specific territory corporation however shall, for the purpose of the
additional tax, be considered as part of the gross
regardless of citizenship, business or
receipts or earnings of said corporation.
profession. Example is community tax.
Community tax – Cities or municipalities may Section 159. Exemptions. - The following are exempt
levy a community tax in accordance with the from the community tax:
provisions of this article. 156 RA 7160.
(1) Diplomatic and consular representatives; and
Section 157. Individuals Liable to Community Tax. -
(18) or over who has been regularly employed on a (2) Transient visitors when their stay in the Philippines
wage or salary basis for at least thirty (30) does not exceed three (3) months.
consecutive working days, or who is engaged in
business or occupation, or who owns real property Section 160. Place of Payment. - The community tax
with an aggregate assessed value of One thousand shall be paid in the place of residence of the
pesos (P1,000.00) or more, or who is required by law individual, or in the place where the principal office of
to file an income tax return shall pay an annual the juridical entity is located.
additional tax of Five pesos (P5.00) and an annual
additional tax of One peso (P1.00) for every One
164 (c) The proceeds of the community tax actually
thousand pesos (P1,000.00) of income regardless of
and directly collected by the city or municipal
whether from business, exercise of profession or from
treasurer shall accrue entirely to the general fund of
property which in no case shall exceed Five thousand
the city or municipality concerned. However,
pesos (P5,000.00).
proceeds of the community tax collected through the
barangay treasurers shall be apportioned as follows:
(1) (50%) shall accrue to the general fund of OPOSA vs. FACTORAN
the city or municipality concerned; and
Police power prevails over the non-
(2) (50%) shall accrue to the barangay where impairment clause
the tax is collected. LA INSULAR vs. MANCHUCA
A lawful tax on a new subject or an increased
5. PROHIBITION AGAINST IMPAIRMENT OF tax on an old one, does not interfere with a
OBLIGATION OF CONTRACTS contract or impairs its obligation.
The constitutional guarantee of the non-
No law impairing the obligation of contracts shall be impairment clause can only invoked in the
passed. [Section 10, Article III, Constitution] grant of tax exemption.
Department of Finance Order 137-87 Second, even if it be exempt under Section 30 of the
NIRC as a non-profit, non-stock educational
An educational institution means a corporation, the income from the rent of its premises
non-stock, non-profit corporation or and parking fees is not covered by the exemption,
association duly registered under according to the last paragraph of the same section.
Philippine law, and operated Section 30 provides that income of whatever kind and
exclusively for educational character from any of its properties, real or personal,
purposes, maintained and
or from any of its activities for profit are not exempt a certain extent, in the local legislative
from income tax. bodies.
Section 28 (4), Article VI of the Constitution,
specifically provides: "No law granting any
Finally, Section 28(3), Article VI of the Constitution
tax exemption shall be passed without the
does not apply as it extends exemption only from real concurrence of a majority of all the Member
property taxes – not from income taxes. of the Congress."
The PCGG has absolutely no power to grant
CIR v. CA, CTA, and ATENEO tax exemptions, even under the cover of its
authority to compromise ill-gotten wealth
cases. Even granting that Congress enacts a
The Supreme Court denied the petition and
law exempting the Marcoses form paying
affirmed the assailed Decision of the Court taxes on their properties, such law will
of Appeals. The Court ruled that the private definitely not pass the test of the equal
respondent is not a contractor selling its protection clause under the Bill of Rights.
services for a fee but an academic institution Any special grant of tax exemption in favor
conducting these researches pursuant to its only of the Marcos heirs will constitute class
commitments to education and, ultimately, legislation. It will also violate the
constitutional rule that "taxation shall be
to public service.
uniform and equitable."
For the institute to have tenaciously
continued operating for so long despite its
2. Veto of appropriation, revenue, or tariff bills
accumulation of significant losses, we can
by the President
only agree with both the Court of Tax
Appeals and the Court of Appeals that
The President shall have the power to veto any
“education and not profit is motive for
particular item or items in an appropriation, revenue,
undertaking the research projects
or tariff bill, but the veto shall not affect the item or
items to which he does not object. [Section 27 (2)
10. Other Constitutional Limitations
Article VI, Constitution]
FACTS: City Treasurer, on April 1, 1974, demanded It would be therefore premature for the
from SMC payment of the made specific tax on the corrective power of this Tribunal to be
total volume of beer it produced in the City of interposed, just because he did not grant the
Mandaue. SMC on April 8,1974, contested the motion to dismiss on the allegation that
correction of said specific tax "on the ground that there was lack of jurisdiction. Authorities
Section 12(e) (7) in relation to Section 12(e) (1) and support the municipal power to impose
(2), Mandaue City Ordinance No. 97, is illegal and void specific taxes on beverages manufactured
because it imposed a specific tax beyond its territorial within its territorial boundaries.
jurisdiction.”
In an opinion the City Fiscal upheld its validity which
was reversed by the Secretary of Justice,
4. Revenue bills shall originate exclusively from
the House of Representatives
Section 24, Article VI, Constitution - All removed them from the exemption to pay
appropriation, revenue or tariff bills, bills authorizing VAT. Suffice it to say that since the law
an increase of the public debt, bills of local granted the press a privilege, the law could
application, and private bills shall originate exclusively take back the privilege anytime without
in the House of Representatives, but the Senate may offense to the Constitution. By granting
propose or concur with amendments. exemptions, the State does not forever
waive the exercise of its sovereign
Tolentino v. Secretary of Finance prerogative.
This limitation does not mean that the press Meaning of Situs – The source of the tax, or
is exempt from taxation. the place of taxation. Literally, situs of
Taxation constitutes an infringement of taxation means place of taxation. It is the
press freedom when it operates as a prior State or political unit which has jurisdiction
restraint to the exercise of this to impose a particular tax.
constitutional right. The determination of the situs of taxation
depends on various factors including the:
When the tax is imposed on the receipts or
the income of the press it is a valid exercise 1. Nature of the tax;
of the sovereign prerogative. 2. Subject matter thereof (i.e. person,
property, act or activity;
Tolentino v. Sec. of Finance, supra
3. Possible protection and benefit that
Petitioners claim that the R.A. violates their may accrue both to the government
and the taxpayer;
press freedom and religious liberty, having
4. Residence or citizenship of the General rule: Situs is the domicile of the
taxpayer; and owner pursuant to the principle of mobilia
5. Source of the income. sequuntur personam. This rule is based on
the fact that such property does not admit of
A. Situs of tax on persons (poll tax) any actual location and that such property
Poll tax may be properly levied upon persons receives the protection and benefits of the
who are inhabitants or residents of the State, law where they are located.
whether or not they are citizens.
Exceptions:
The relaxation of the original rule rests on either Commissioner vs. British Overseas Airways Corp.
of two fundamental considerations:
The source of an income is the property,
activity or service that produced the income.
1. Upon the recognition of the inherent For the source of income to be considered
power of each government to tax persons, as coming from the Philippines, it is
properties and rights within its jurisdiction and sufficient that the income is derived from
enjoying the protection of its laws; or activity within the Philippines. Herein, the
sale of tickets in the Philippines is the respect to her intangibles so as to avail
activity that produced the income. The herself of the protection and benefit of the
tickets exchanged hands here and payments Philippine laws
for fares were also made here in Philippine
currency.
The situs of the source of payments is the 3. MULTIPLICITY OF SITUS
Philippines. The flow of wealth proceeded
from, and occurred within, Philippine
Multiplicity of situs, or the taxation of the
territory, enjoying the protection accorded
by the Philippine Government. In same income or intangible subject in several
consideration of such protection, the flow of taxing jurisdictions, arises from various
wealth should share the burden of factors:
supporting the government.
PD 68, in relation to PD 1355, ensures that 1. The variance in the concept of domicile for tax
international airlines are taxed on their purposes;
income from Philippine sources.
1. taxing twice; The apparent rationale for doing away with double
taxation is of encourage the free flow of goods and
2. by the same taxing authority; services and the movement of capital, technology and
3. within the same jurisdiction or persons between countries, conditions deemed vital
in creating robust and dynamic economies.
taxing district;
4. for the same purpose; Double taxation usually takes place when a person is
resident of a contracting state and derives income
5. in the same year or taxing period;
from, or owns capital in, the other contracting state
6. some of the property in the and both states impose tax on that income or capital.
territory. In order to eliminate double taxation, a tax treaty
resorts to several methods. First, it sets out the
In its broad sense, referred to as indirect
respective rights to tax of the state of source or situs
double taxation, double taxation is taxation
and of the state of residence with regard to certain
other than direct duplicate taxation. It
classes of income or capital. In some cases, an
extends to all cases in which there is a
exclusive right to tax is conferred on one of the
burden of two or more impositions.
contracting states; however, for other items
of income or capital, both states are given the right to 7. of the same kind or character of tax.
tax, although the amount of tax that may be imposed
by the state of source is limited. C. Constitutionality of Double Taxation