Benefits-protection theory

Lorenzo v Posadas (Tax)

FACTS:

Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, brought an action against the
Collector of Internal Revenue Posadas for the refund of P2,052.74 inheritance taxes. The
properties under the will were to pass to Matthew Hanley after 10 years.

ISSUES:
1. When does the inheritance tax accrue and when must it be satisfied?
2. Should the inheritance tax be computed on the basis of the value at the time of the testator's
death or on its value ten years later?
3. In determining the net value of the estate subject to tax, is it proper to deduct the
compensation due to trustees?
4. What law governs the case?
5. Has there been delinquency in the payment of the inheritance tax?

RULING:
1. Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of that date. But
it must be paid before the delivery of the properties in question to PJM Moore as trustee on
March 10, 1924.
2. It should be computed at the time of the decedent's death, regardless of any subsequent
contingency value of any increase or decrease and notwithstanding the postponement of the
actual possession or enjoyment of the estate by the beneficiary and the tax measured by the
value of the property transmitted at that time regardless of its appreciation or depreciation.
3. No. The compensation of a trustee, earned not in the administration of the estate, but in the
management thereof for the benefit of the legatees or devises, does not come properly within
the class or reason for exempting administration expenses.
4. Act 3031 and not Act 3606 applies. Even if Act 3606 is more favorable to the taxpayer,
revenue laws, generally, which impose taxes collected by means ordinarily resorted to for the
collection of taxes are not classes as penal laws.
5. Yes. That taxes must be collected promptly is a policy deeply entrenched in our tax system.
Thus, no court is allowed to grant injunction to restrain the collection of any internal revenue
tax. The mere fact that the estate of the deceased was placed in trust did not remove it from the
operation of our inheritance tax laws or exempt it from the payment of the inheritance tax.

Double taxation
Villanueva V City Of Iloilo

(26 SCRA 578)

FACTS:

Relying on the passage of RA 2264 or the Local Autonomy Act, Iloilo enacted Ordinance 11 Series of 1960, imposing a
municipal license tax on tenement houses in accordance with the schedule of payment provided by therein. Villanueva
and the other appellees are apartment owners from whom the city collected license taxes by virtue of Ordinance 11.
Appellees aver that the said ordinance is unconstitutional for RA 2264 does not empower cities to impose apartment
taxes; that the same is oppressive and unreasonable for it penalizes those who fail to pay the apartment taxes; that it
constitutes not only double taxation but treble taxation; and, that it violates uniformity of taxation.

Issues:
1. Does the ordinance impose double taxation?

2. Is Iloilo city empowered by RA 2264 to impose tenement taxes?

Held:
While it is true that appellees are taxable under the NIRC as real estate dealers, and taxable under Ordinance 11, double
taxation may not be invoked. This is because the same tax may be imposed by the national government as well as by the
local government. The contention that appellees are doubly taxed because they are paying real estate taxes and the
tenement tax is also devoid of merit. A license tax may be levied upon a business or occupation although the land or
property used in connection therewith is subject to property tax. In order to constitute double taxation, both taxes must
be the same kind or character. Real estate taxes and tenement taxes are not of the same character.

RA 2264 confers local governments broad taxing powers. The imposition of the tenement taxes does not fall within the
exceptions mentioned by the same law. It is argued however that the said taxes are real estate taxes and thus, the
imposition of more the 1 per centum real estate tax which is the limit provided by CA 158, makes the said ordinance
ultra vires. The court ruled that the tax in question is not a real estate tax. It does not have the attributes of a real estate
tax. By the title and the terms of the ordinance, the tax is a municipal tax which means an imposition or exaction on the
right to use or dispose of property, to pursue a business, occupation or calling, or to exercise a privilege. Tenement
houses being offered for rent or lease constitute a distinct form of business or calling and as such, the imposition of
municipal tax finds support in Section 2 of RA 2264.

Constitutionality of Double taxation

City of Baguio v De Leon (1968)

City of Baguio v De Leon

GR No. L-24756, October 31, 1968

FACTS:
The City of Baguio passed a license fee on any person, entity or corporation doing business in the City. The ordinance
sourced its authority from RA 329, thereby amending the city charter empowering it to fix the license fee and regulate
businesses, trades and occupation as may be established in the City. De Leon was assessed for P50 annual fee it being
shown that he was engaged in property rental and deriving income therefrom. The latter assailed the validity of the
ordinance arguing that it is ultra vires for there is no statutory authority which expressly grants the City of Baguio to levy
such tax and that there it imposed double taxation and violates the requirement of uniformity.

ISSUE:
Is the ordinance valid?

RULING:
Yes. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering the City
Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance cannot be considered
ultra vires for there is more than ample statutory for the enactment thereof.
Second, an argument against double taxation may not be invoked where one tax is imposed by the state and the other
imposed by the City.
Third, violation of uniformity is out of place it being widely recognized that there is nothing inherently obnoxious in the
requirement that license fees of taxes be enacted with respect to the same occupation, calling or activity by both the state
and the political subdivision thereof.

CONSOLIDATED TAX DIGESTS (FOR EDIT)

Digested Cases in Taxation Law (set 2)
TIO vs. VRB
151 SCRA 208
GR No. L-75697, June 18, 1987
"The public purpose of a tax may legally exist even if the motive which impelled the legislature
to impose the tax was to favor one industry over another."

FACTS: The petitioner assails the validity of PD 1987 entitled an "Act creating the Videogram
Regulatory Board," citing especially Section 10 thereof, which imposes a tax of 30% on the gross
receipts payable to the local government. Petitioner contends that aside from its being a rider
and not germane to the subject matter thereof, and such imposition was being harsh,
confiscatory, oppressive and/or unlawfully restraints trade in violation of the due process clause
of the Constitution.
ISSUE: Is PD 1987 a valid exercise of taxing power of the state?

HELD: Yes. It is beyond serious question that a tax does not cease to be valid merely because it
regulates, discourages, or even definitely deters the activities taxed. The power to impose taxes
is one so unlimited in force and so searching in extent, that the courts scarcely venture to
declare that it is subject to any restrictions whatever, except such as those rest in the discretion
of the authority which exercises it. In imposing a tax, the legislature acts upon its constituents.
This is, in general, a sufficient security against erroneous and oppressive taxation.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need
for regulating the video industry, particularly because of the rampant film piracy, the flagrant
violation of intellectual property rights, and the proliferation of pornographic video tapes. And
while it was also an objective of the DECREE to protect the movie industry, the tax remains a
valid imposition.
The public purpose of a tax may legally exist even if the motive which impelled the legislature
to impose the tax was to favor one industry over another.

CITY OF BAGUIO vs. DE LEON

25 SCRA 938
GR No. L-24756, October 31, 1968
"There is no double taxation where one tax is imposed by the state and the other is imposed by the city."

FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or
corporation doing business in the City. The ordinance sourced its authority from RA No. 329,
thereby amending the city charter empowering it to fix the license fee and regulate businesses,
trades and occupations as may be established or practiced in the City. De Leon was assessed for
P50 annual fee it being shown that he was engaged in property rental and deriving income
therefrom. The latter assailed the validity of the ordinance arguing that it is ultra vires for there
is no statury authority which expressly grants the City of Baguio to levy such tax, and that there
it imposed double taxation, and violates the requirement of uniformity.

ISSUE: Are the contentions of the defendant-appellant tenable?

HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code
empowering the City Council not only to impose a license fee but to levy a tax for purposes of
revenue, thus the ordinance cannot be considered ultra vires for there is more than ample
statury authority for the enactment thereof.
Second, an argument against double taxation may not be invoked where one tax is imposed
by the state and the other is imposed by the city, so that where, as here, Congress has clearly
expressed its intention, the statute must be sustained even though double taxation results.
And third, violation of uniformity is out of place it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the
same occupation, calling or activity by both the state and the political subdivisions thereof.

BAGATSING vs. RAMIREZ

74 SCRA 306
GR No. L-41631, December 17, 1976
"The entrusting of the tax collection to private entities does not destroy the public purpose of a tax ordinance."

FACTS: Aside from the issue on publication, private respondent bewails that the market stall
fees imposed in the disputed City Ordinance No. 7522, which regulates public markets and
prescribes fees for rentals of stalls, 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."

ISSUE: Does the delegation of the collection of taxes to a private entity invalidates a tax
ordinance and defeats its public purpose?

HELD: No. 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.

PASCUAL vs. SECRETARY OF PUBLIC WORKS

110 PHIL 331
GR No. L-10405, December 29, 1960
"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure, is
merely incidental in the promotion of a particular enterprise."

FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with
injunction, upon the ground that RA No. 920, which apropriates funds for public works
particularly for the construction and improvement of Pasig feeder road terminals. Some of the
feeder roads, however, as alleged and as contained in the tracings attached to the petition, were
nothing but projected and planned subdivision roads, not yet constructed within the Antonio
Subdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal; and which
projected feeder roads do not connect any government property or any important premises to
the main highway. The respondents' contention is that there is public purpose because people
living in the subdivision will directly be benefitted from the construction of the roads, and the
government also gains from the donation of the land supposed to be occupied by the streets,
made by its owner to the government.

ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of
justifying an expenditure of the government?

HELD: No. It is a general rule that the legislature is without power to appropriate public revenue
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
interest to be affected nor the degree to which the general advantage of the community, and
thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public
or to the state, which results from the promotion of private interest and the prosperity of private
enterprises or business, does not justify their aid by the use public money.
The test of the constitutionality of a statute requiring the use of public funds is whether the
statute is designed to promote the public interest, as opposed to the furtherance of the
advantage of individuals, although each advantage to individuals might incidentally serve the
public.

COMMISSIONER vs. BOAC

149 SCRA 395
GR No. L-65773-74 April 30, 1987
"The source of an income is the property, activity or service that produced the income. For such source to be considered
as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines."

FACTS: Petitioner CIR seeks a review of the CTA's decision setting aside petitioner's assessment
of deficiency income taxes against respondent British Overseas Airways Corporation (BOAC) for
the fiscal years 1959 to 1971. BOAC is a 100% British Government-owned corporation organized
and existing under the laws of the United Kingdom, and is engaged in the international airline
business. During the periods covered by the disputed assessments, it is admitted that BOAC had
no landing rights for traffic purposes in the Philippines. Consequently, it did not carry passengers
and/or cargo to or from the Philippines, although during the period covered by the assessments,
it maintained a general sales agent in the Philippines — Wamer Barnes and Company, Ltd., and
later Qantas Airways — which was responsible for selling BOAC tickets covering passengers and
cargoes. The CTA sided with BOAC citing that the proceeds of sales of BOAC tickets do not
constitute BOAC income from Philippine sources since no service of carriage of passengers or
freight was performed by BOAC within the Philippines and, therefore, said income is not subject
to Philippine income tax. The CTA position was that income from transportation is income from
services so that the place where services are rendered determines the source.

ISSUE: Are the revenues derived by BOAC from sales of ticket for air transportation, while
having no landing rights here, constitute income of BOAC from Philippine sources, and
accordingly, taxable?
HELD: Yes. The source of an income is the property, activity or service that produced the
income. For the source of income to be considered as coming from the Philippines, it is sufficient
that the income is derived from activity within the Philippines. In BOAC's case, the sale of tickets
in the Philippines is the activity that produces the income. The tickets exchanged hands here and
payments for fares were also made here in Philippine currency. The site of the source of
payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine
territory, enjoying the protection accorded by the Philippine government. In consideration of
such protection, the flow of wealth should share the burden of supporting the government.

ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR

524 SCRA 73, 103
GR Nos. 141104 & 148763, June 8, 2007
"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic or statute law and
should not be permitted to stand on vague implications."
"Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes."

FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and

sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its
purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990
and 1992. BIR did not immediately act on the matter prompting the petitioner to file a petition
for review before the CTA. The latter denied the claims on the grounds that for zero-rating to
apply, 70% of the company's sales must consists of exports, that the same were not filed within
the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on
April 20, 1994), and that petitioner failed to submit substantial evidence to support its claim for
refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to
PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period
should be counted from the date of filing of the last adjustment return which was April 15, 1993,
and not on every end of the applicable quarters; and that the certification of the independent
CPA attesting to the correctness of the contents of the summary of suppliers’ invoices or receipts
examined, evaluated and audited by said CPA should substantiate its claims.

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications
for refund/credit of input VAT?

HELD: No. Although the Court agreed with the petitioner corporation that the two-year
prescriptive period for the filing of claims for refund/credit of input VAT must be counted from
the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the
EPZA are taxed as exports because these export processing zones are to be managed as a
separate customs territory from the rest of the Philippines, and thus, for tax purposes, are
effectively considered as foreign territory, it still denies the claims of petitioner corporation for
refund of its input VAT on its purchases of capital goods and effectively zero-rated sales during
the period claimed for not being established and substantiated by appropriate and sufficient
evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the
sovereign authority, and should be construed in strictissimi juris against the person or entity
claiming the exemption. The taxpayer who claims for exemption must justify his claim by the
clearest grant of organic or statute law and should not be permitted to stand on vague
implications.

BOARD OF ASSESSMENT APPEALS OF LAGUNA vs. CTA, NWSA

8 SCRA 224
GR No. L-18125, May 31, 1963
"A tax on property of the Government, whether national or local, would merely have the effect of taking money from
one pocket to put it in another pocket."

FACTS: National Waterworks and Sewerage Authority (NWSA), a public corporation owned by
the Government of the Philippines as well as all property comprising waterworks and sewerage
systems placed under it, took over the Cabuyao-Sta. Rosa-Biñan Waterworks System in 1956.
It was assessed by the Provincial Assessor of Laguna, for purposes of real estate taxes, on the
real properties owned by Cabuyao Waterworks. The respondent protested claiming it is
exempted from the payment of real estate taxes in view of the nature and kind of said property
and functions and activities of petitioner. The petitioner denied the protest arguing that such real
properties are subject to real estate tax because although said properties belong to the Republic
of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, but
in a private, proprietary or patrimonial character, which, allegedly, is not covered by the
exemption contained in section 3(a) of Republic Act No. 470.

ISSUE: Are the real properties owned by the respondent public corporation subject to real estate
tax?

HELD: No. Republic Act No. 470 makes no distinction between property held in a sovereign,
governmental or political capacity and those possessed in a private, proprietary or patrimonial
character. And where the law does not distinguish neither may we, unless there are facts and
circumstances clearly showing that the lawmaker intended the contrary, but no such facts and
circumstances have been brought to our attention. Indeed, the noun "property" and the verb
"owned" used in said section 3(a) strongly suggest that the object of exemption is considered
more from the view point of dominion, than from that of domain.
Moreover, taxes are financial burdens imposed for the purpose of raising revenues with which
to defray the cost of the operation of the Government, and a tax on property of the Government,
whether national or local, would merely have the effect of taking money from one pocket to put
it in another pocket. Hence, it would not serve, in the final analysis, the main purpose of
taxation. What is more, it would tend to defeat it, on account of the paper work, time and
consequently, expenses it would entail.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. CITY OF BUTUAN

24 SCRA 789
GR No. L-22814, August 28, 1968
"The classification made in the exercise of power to tax, to be valid, must be reasonable ."

FACTS: Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the
City of Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which
plaintiff assails as null and void because it partakes of the nature of an import tax, amounts to
double taxation, highly unjust and discriminatory, excessive, oppressive and confiscatory, and
constitutes an invlaid delegation of the power to tax. The ordinance imposes taxes for every case
of softdrinks, liquors and other carbonated beverages, regardless of the volume of sales, shipped
to the agents and/or consignees by outside dealers or any person or company having its actual
business outside the City.

ISSUE: Does the tax ordinance violate the uniformity requirement of taxation?

HELD: Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a
tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative
of the uniformity required by the Constitution and the law therefor, since only sales by "agents
or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting
for or on behalf of other merchants, regardless of the volume of their sales, and even if the
same exceeded those made by said agents or consignees of producers or merchants established
outside the City of Butuan, would be exempt from the disputed tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not
require identity or equality under all circumstances, or negate the authority to classify the
objects of taxation. The classification made in the exercise of this authority, to be valid, must,
however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based
upon substantial distinctions which make real differences; (2) these are germane to the purpose
of the legislation or ordinance; (3) the classification applies, not only to present conditions, but,
also, to future conditions substantially identical to those of the present; and (4) the classification
applies equally to all those who belong to the same class.

PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs. MUNICIPALITY OF TANAUAN

69 SCRA 460
GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax.

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to

declare Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act,
unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos.
23 and 27 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null
and void. Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of
one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27 levies
and collects on soft drinks produced or manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. Aside from the undue delegation of authority, appellant contends that it allows double
taxation, and that the subject ordinances are void for they impose percentage or specific tax.

ISSUE: Are the contentions of the appellant tenable?

HELD: No. On the issue of undue delegation of taxing power, it is settled that the power of
taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to
every independent government, without being expressly conferred by the people. It is a power
that is purely legislative and which the central legislative body cannot delegate either to the
executive or judicial department of the government without infringing upon the theory of
separation of powers. The exception, however, lies in the case of municipal corporations, to
which, said theory does not apply. Legislative powers may be delegated to local governments in
respect of matters of local concern. By necessary implication, the legislative power to create
political corporations for purposes of local self-government carries with it the power to confer on
such local governmental agencies the power to tax.
Also, there is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. It must be observed that the delegating
authority specifies the limitations and enumerates the taxes over which local taxation may not
be exercised. The reason is that the State has exclusively reserved the same for its own
prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, so
that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit
of the same governmental entity or by the same jurisdiction for the same purpose, but not in a
case where one tax is imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on
sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold
or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on the products, but there is not set
ratio between the volume of sales and the amount of the tax.

OSMEÑA vs. ORBOS

220 SCRA 703
GR No. 99886, March 31, 1993
" To avoid the taint of unlawful delegation of the power to tax, there must be a standard which
implies that the legislature determines matter of principle and lays down fundamental policy."

FACTS: Senator John Osmeña assails the constitutionality of paragraph 1c of PD 1956, as

amended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the increase of
fuel prices or impose additional amounts on petroleum products which proceeds shall accrue to
the Oil Price Stabilization Fund (OPSF) established for the reimbursement to ailing oil companies
in the event of sudden price increases. The petitioner avers that the collection on oil products
establishments is an undue and invalid delegation of legislative power to tax. Further, the
petitioner points out that since a 'special fund' consists of monies collected through the taxing
power of a State, such amounts belong to the State, although the use thereof is limited to the
special purpose/objective for which it was created. It thus appears that the challenge posed by
the petitioner is premised primarily on the view that the powers granted to the ERB under P.D.
1956, as amended, partake of the nature of the taxation power of the State.

ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are
exacted in the exercise of the police power of the State. Moreover, that the OPSF as a special
fund is plain from the special treatment given it by E.O. 137. It is segregated from the general
fund; and while it is placed in what the law refers to as a "trust liability account," the fund
nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that
these measures comply with the constitutional description of a "special fund." With regard to
the alleged undue delegation of legislative power, the Court finds that the provision conferring
the authority upon the ERB to impose additional amounts on petroleum products provides a
sufficient standard by which the authority must be exercised. In addition to the general policy of
the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D.
1956 expressly authorizes the ERB to impose additional amounts to augment the resources of
the Fund.

VILLEGAS vs. HIU CHIONG

86 SCRA 270
GR No. L-29646, November 10, 1978
"A tax law should be declared invalid if it fails to lay down standards to guide or limit the actions of the taxing authority."

FACTS: The Municipal Board of Manila enacted Ordinance No. 6537 which prohibits aliens from
being employed or to engage or participate in any position or occupation or business, without
first securing an employment permit from the Mayor of Manila and paying the permit fee of
P50.00. The respondent challenged the validity of the ordinance upon the contention that it does
not qualify as a valid exercise of the power to tax for, as a revenue measure imposed on aliens
employed in the City of Manila, the ordinance is discriminatory and violative of the rule of the
uniformity in taxation, and as a police power measure, it makes no distinction between useful
and non-useful occupations, imposing a fixed P50.00 employment permit, which is out of
proportion to the cost of registration and that it fails to prescribe any standard to guide and/or
limit the action of the Mayor, thus, violating the fundamental principle on delegation of
legislative powers:

ISSUE: Is there a valid exercise of the taxing power of the local government?

HELD: None. First, the ordinance is not a regulatory or police power measure; it is but a revenue
measure guised in a police power measure. Second, the P50.00 fee is unreasonable not only
because it is excessive but because it fails to consider valid substantial differences in situation
among individual aliens who are required to pay it. Although the equal protection clause of the
Constitution does not forbid classification, it is imperative that the classification should be based
on real and substantial differences having a reasonable relation to the subject of the particular
legislation. The same amount of P50.00 is being collected from every employed alien whether he
is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid
executive.
On the illegal delegation part of the argument, Ordinance No. 6537 is void for it does not lay
down any criterion or standard to guide the Mayor in the exercise of his discretion. It has been
held that where an ordinance of a municipality fails to state any policy or to set up any standard
to guide or limit the mayor's action, expresses no purpose to be attained by requiring a permit,
enumerates no conditions for its grant or refusal, and entirely lacks standard, thus conferring
upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of permits, such
ordinance is invalid, being an undefined and unlimited delegation of power to allow or prevent an
activity per se lawful.

ESSO STANDARD EASTERN, INC. vs. ACTING COMMISSIONER OF CUSTOMS

18 SCRA 488
GR No. L-21841, October 28, 1966
"Exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority."

FACTS: Petitioner, engaged in the industry of processing gasoline, oils etc., claims for the refund
of special import taxes paid pursuant to the provision of RA 1394 which imposed a special import
tax "on all goods, articles or products imported or brought into the Philippines." Exempt from
this tax, by express mandate of Section 6 of the same law are "machinery, equipment,
accessories, and spare parts, for the use of industries, miners, mining enterprises, planters and
farmers". Petitioner argued that the importation it made of gas pumps used by their gasoline
station operators should fall under such exemptions, being directly used in its industry. The
Collector of Customs of Manila rejected the claim, and so as the Court on Tax Appeals. The CTA
noted that the pumps imported were not used in the processing of gasoline and other oil
products but by the gasoline stations, owned by the petitioner, for pumping out, from
underground barrels, gasoline sold on retail to customers.

ISSUE: Is the contention of the petitioner tenable? Does the subject imports fall into the
exemptions?

HELD: No. The contention runs smack against the familiar rules that exemption from taxation is
not favored, and that exemptions in tax statutes are never presumed. Which are but statements
in adherence to the ancient rule that exemptions from taxation are construed in strictissimi juris
against the taxpayer and liberally in favor of the taxing authority. Tested by this precept, we
cannot indulge in expansive construction and write into the law an exemption not therein set
forth. Rather, we go by the reasonable assumption that where the State has granted in express
terms certain exemptions, those are the exemptions to be considered, and no more. Since the
law states that, to be tax-exempt, equipment and spare parts should be "for the use of
industries", the coverage herein should not be enlarged to include equipment and spare parts for
use in dispensing gasoline at retail.