Constitutional Limitations for taxation

CONSTITUTIONAL LIMITATIONSDUE PROCESS (ART III. Sec 1) Section 1.No person shall be deprived of life, liberty, or property without due process of law

COMMISSIONER OF INTERNAL REVENUE vs. METRO STAR SUPERAMA, INC.FACTS: Petitioner is a domestic corporation doing business in the Philippines. On January 26, 2001, the Regional Director of Revenue Region No. 10, Legazpi City, issued Letter of Authority No. 00006561 for Revenue Officer Daisy G. Justiniana to examine petitioners books of accounts and other accounting records for income tax and other internal revenue taxes for the taxable year 1999Petitioner failed to comply with several requests for the presentation of records and Subpoena Duces Tecum. The OIC of BIR Legal Division issued an Indorsement dated September 26, 2001 informing Revenue District Officer of Revenue Region No. 67, Legazpi City to proceed with the investigation based on the best evidence obtainable preparatory to the issuance of assessment noticeRevenue District Officer Socorro O. Ramos-Lafuente issued a Preliminary 15-day Letter which said that a post audit review was held and it was ascertained that there was deficiency value-added and withholding taxes due from petitioner in the amount of P 292,874.16On April 11, 2002, petitioner received a Formal Letter of Demand dated April 3, 2002 from Revenue District No. 67, Legazpi City, assessing petitioner for the said amount. [See full text for computation :)]Subsequently, Revenue District Office No. 67 sent a copy of the Final Notice of Seizure dated May 12, 2003, which petitioner received on May 15, 2003 otherwise respondent BIR shall be constrained to serve and execute the Warrants of Distraint and/or Levy and Garnishment to enforce collectionOn February 6, 2004, petitioner received from Revenue District Office No. 67 a Warrant of Distraint and/or Levy No. 67-0029-23 dated May 12, 2003 demanding payment of deficiency value-added tax and withholding tax payment. Petitioner filed an MR but the Commissioner denied it. Petitioner, through counsel received said Decision on February 18, 2005Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was not accorded due process, Metro Star filed a petition for review with the CTACTA 2nd Division ruled there was denial of due process on the part of Petitioner. It reasoned (1) [w]hile there [is] a disputable presumption that a mailed letter [is] deemed received by the addressee in the ordinary course of mail, a direct denial of the receipt of mail shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee. (2) there was no clear showing that Metro Star actually received the alleged PAN, dated January 16, 2002. It, accordingly, ruled that the Formal Letter of Demand dated April 3, 2002, as well as the Warrant of Distraint and/or Levy dated May 12, 2003 were voidThis decision was affirmed by CTA En Banc; hence this appealISSUE: WON there was denial of due process.Held: Yes. [see other 2 issues below](1) There was a failure to follow the procedure on the proper service of Assessment Notices(2) This failure to strictly comply with the requisites is tantamount to denial of due process.It is an elementary rule enshrined in the 1987 Constitution that no person shall be deprived of property without due process of law. In balancing the scales between the power of the State to tax and its inherent right to prosecute perceived transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and the equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizens right is amply protected by the Bill of Rights under the Constitution. Thus, while taxes are the lifeblood of the government, the power to tax has its limits, in spite of all its plenitude.Commissioner of Internal Revenue v. Algue, Inc.,it was said:Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for the lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of ones hard-earned income to taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate x x x that the law has not been observed. WON CIR sufficiently showed that Metro Inc. received the assessment notices.Held: No.On the matter of service of a tax assessment, a further perusal of our ruling in Barcelon is instructive: Jurisprudence is replete with cases holding that if the taxpayer denies ever having received an assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee. The onus probandi was shifted to respondent to prove by contrary evidence that the Petitioner received the assessment in the due course of mail.Citing Gonzalo P. Nava vs. Commissioner of Internal Revenue, the SC further explained: The facts to be proved to raise this presumption are (a) that the letter was properly addressed with postage prepaid, and (b) that it was mailedBarcelona further rules "What is essential to prove the fact of mailing is the registry receipt issued by the Bureau of Posts or the Registry return card which would have been signed by the Petitioner or its authorized representative. And if said documents cannot be located, Respondent at the very least, should have submitted to the Court a certification issued by the Bureau of Posts and any other pertinent document which is executed with the intervention of the Bureau of Posts"In the case at bar, The Court agrees with the CTA that the CIR failed to discharge its duty and present any evidence to show that Metro Star indeed received the PAN dated January 16, 2002.It could have simply presented the registry receipt or the certification from the postmaster that it mailed the PAN, but failed. Neither did it offer any explanation on why it failed to comply with the requirement of service of the PAN.It merely accepted the letter of Metro Stars chairman dated April 29, 2002, that stated that he had received the FAN dated April 3, 2002, but not the PAN; that he was willing to pay the tax as computed by the CIR; and that he just wanted to clarify some matters with the hope of lessening its tax liability. Is the failure to strictly comply with notice requirements prescribed under Section 228 of the National Internal Revenue Code of 1997 and Revenue Regulations (R.R.) No. 12-99 tantamount to a denial of due process?Held: Yes.Tax Code. SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings ... The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void."Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN. He must be informed of the facts and the law upon which the assessment is made.The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations - that taxpayers should be able to present their case and adduce supporting evidenceThis is in accordance with Revenue Regulation No. 12-99 of the BIR:SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment. 3.1 Mode of procedures in the issuance of a deficiency tax assessment:3.1.1 Notice for informal conference. The Revenue Officer who audited the taxpayer's records shall, among others, state in his report whether or not the taxpayer agrees with his findings that the taxpayer is liable for deficiency tax or taxes. If the taxpayer is not amenable, based on the said Officer's submitted report of investigation, the taxpayer shall be informed, in writing, by the Revenue District Office or by the Special Investigation Division, as the case may be (in the case Revenue Regional Offices) or by the Chief of Division concerned (in the case of the BIR National Office) of the discrepancy or discrepancies in the taxpayer's payment of his internal revenue taxes, for the purpose of "Informal Conference," in order to afford the taxpayer with an opportunity to present his side of the case. If the taxpayer fails to respond within fifteen (15) days from date of receipt of the notice for informal conference, he shall be considered in default, in which case, the Revenue District Officer or the Chief of the Special Investigation Division of the Revenue Regional Office, or the Chief of Division in the National Office, as the case may be, shall endorse the case with the least possible delay to the Assessment Division of the Revenue Regional Office or to the Commissioner or his duly authorized representative, as the case may be, for appropriate review and issuance of a deficiency tax assessment, if warranted.3.1.2 Preliminary Assessment Notice (PAN). If after review and evaluation by the Assessment Division or by the Commissioner or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Officeshallissue to the taxpayer, at least by registered mail, a Preliminary Assessment Notice (PAN) for the proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based (see illustration in ANNEX A hereof). If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN, he shall be considered in default, in which case, a formal letter of demand and assessment notice shall be caused to be issued by the said Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.From the provision quoted above, it is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but part of the due process requirement in the issuance of a deficiency tax assessment, the absence of which renders nugatory any assessment made by the tax authorities. The use of the word shall in subsection 3.1.2 describes the mandatory nature of the service of a PAN.The persuasiveness of the right to due process reaches both substantial and procedural rights and the failure of the CIR to strictly comply with the requirements laid down by law and its own rules is a denial of Metro Stars right to due process.Thus, for its failure to send the PAN stating the facts and the law on which the assessment was made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is void.

ii. Equal Protection (Art III, Sec. 1) nor shall any person be denied the equal protection of the laws.

iii. Uniformity and Equity in Taxation (Art VI, Sec. 21)The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in, or affected by, such inquiries shall be respected.

SISON VS ANCHETA

Facts:-Petitioner as taxpayer alleged that by virtue of Section I of Batas Pambansa Blg. 135 amending Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted gross income, he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He alleged that the section is arbitrary amounting to class legislation, oppressive and capricious in character; an allegation of transgression of both the equal protection and due process clauses ofIssue: whether or not uniformity and equity in taxation were observed. YESRuling:-The power to tax is an inherent prerogative which has to be availed of to assure the performance of vital state functions.-The petitioner alleges arbitrariness. A mere allegation does not suffice. There must be a factual foundation of such unconstitutional taint. This is merely to adhere to the authoritative doctrine that were 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 of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail.-It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds.- With regard to equal protection, it suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumtances which if not Identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest." The Constitution does not require things which are different in fact or opinion to be treated in law as though they were the same. In the case of Lutz V. Araneta, the court provided that at any rate, it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.'"-The rule of uniformity does not call for perfect uniformity or perfect equality, because this is hardly attainable. 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-What misled petitioner is his failure to take into consideration the distinction between a tax rate and a tax base. There is no legal objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing the applicable tax rate. Taxpayers may be classified into different categories. To repeat, it is enough that the classification must rest upon substantial distinctions that make real differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible basis of classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them. As there is practically no overhead expense, these taxpayers are not entitled to make deductions for income tax purposes because they are in the same situation more or less. On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. There is ample justification then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional and business income.

TIU vs COURT OF APPEALSTiu vs CAG.R. No. 127410 January 20, 1999Facts:Congress passed into law RA 7227 entitled "An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes." Section 12 thereof created the Subic Special Economic Zone and granted there to special privileges. President Ramos issued Executive Order No. 97, clarifying the applicationof the tax and duty incentives. The President issued Executive Order No. 97-A, specifying the area within which the tax-and-duty-free privilege was operative.The petitioners challenged before this Court the constitutionality of EO 97-A for allegedly being violative of their right to equal protection of the laws. This Court referred the matter to the Court of Appeals. Proclamation No. 532 was issued by President Ramos. It delineated the exact metes and bounds of the Subic Special Economic and Free Port Zone, pursuant to Section 12 of RA 7227. Respondent Court held that "there is no substantial difference between the provisions of EO 97-A and Section 12 of RA 7227. In both, the 'Secured Area' is precise and well-defined as '. . . the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended . . .'"Issue: WON Executive Order No. 97-A violates the equal protection clause of the Constitution NoHeld:The Court found real and substantive distinctions between the circumstances obtaining inside and those outside the Subic Naval Base, thereby justifying a valid and reasonable classification. The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another. The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class.Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class.The Supreme Court believed it was reasonable for the President to have delimited the application of some incentives to the confines of the former Subic military base. It is this specific area which the government intends to transform and develop from its status quo ante as an abandoned naval facility into a self-sustaining industrial and commercial zone, particularly for big foreign and local investors to use as operational bases for their businesses and industries.

RUFINO R. TAN, petitioner, vs. RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as COMMISSIONER OF INTERNAL REVENUE, respondents.

(G.R. No. 109446, October 3, 1994)CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A. CARAG, MANUELITO O. CABALLES, ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA, JR., petitioners, vs. RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE and JOSE U. ONG, in his capacity as COMMISSIONER OF INTERNAL REVENUE, respondents.FACTS:G.R. No. 109289Petitioner here assails the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code. Petitioner asserted that the enactment of said law violates certain constitutional provisions, one of which is Article VI, Section 28(1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.In this law, a tax is imposed upon the taxable net income as determined received during each taxable year from all sources, other than income covered by paragraphs (b), (c), (d) and (e) of section 21 by every individual whether a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his profession, determined in accordance with a list of schedule (tax computation per net income), among other things.According to petitioner, R.A. 7496 desecrates the constitutional requirement that taxation "shall be uniform and equitable" in that the law would now attempt to tax single proprietorships and professionals differently from the manner it imposes the tax on corporations and partnerships.G.R. No. 109446Petitioners here assail Section 6 of Revenue Regulations No. 2-93. They argue that public respondents have exceeded their rule-making authority in applying SNIT to general professional partnerships.The questioned regulation reads:Sec. 6. General Professional Partnership The general professional partnership (GPP) and the partners comprising the GPP are covered by R. A. No. 7496. Thus, in determining the net profit of the partnership, only the direct costs mentioned in said law are to be deducted from partnership income. Also, the expenses paid or incurred by partners in their individual capacities in the practice of their profession which are not reimbursed or paid by the partnership but are not considered as direct cost, are not deductible from his gross income.

ISSUES:1. WON RA 7496 is not unconstitutional YES. (more related to the topic)

2. WON public respondents have exceeded their authority in promulgating Section 6, Revenue Regulations No. 2-93, to carry out Republic Act No. 7496. - NOHELD:First IssuePetitioners contention clearly forgets that such a system of income taxation (taxing single proprietorships and professionals differently from corporations and partnerships) has long been the prevailing rule even prior to R.A. 7496.Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities. Uniformity does not forfend classification as long as:(1) the standards that are used therefor are substantial and not arbitrary,(2) the categorization is germane to achieve the legislative purpose,(3) the law applies, all things being equal, to both present and future conditions, and(4) the classification applies equally well to all those belonging to the same class(Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52).What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable corporations. SC certainly does not view this classification to be arbitrary and inappropriate.

Second Issue:The Court, first of all, should like to correct the apparent misconception that general professional partnerships are subject to the payment of income tax or that there is a difference in the tax treatment between individuals engaged in business or in the practice of their respective professions and partners in general professional partnerships. The fact of the matter is that a general professional partnership, unlike an ordinary business partnership (which is treated as a corporation for income tax purposes and so subject to the corporate income tax), is not itself an income taxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but on the partners themselves in their individual capacity computed on their distributive shares of partnership profits. Section 23 of the Tax Code, which has not been amended at all by Republic Act 7496, is explicit on this.There is, then and now, no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through partnership (whether registered or not) with others in the exercise of a common profession. Indeed, outside of the gross compensation income tax and the final tax on passive investment income, under the present income tax system all individuals deriving income from any source whatsoever are treated in almost invariably the same manner and under a common set of rules.Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing rule as now so modified by R.A No. 7496 on basically the extent of allowable deductions applicable to all individual income taxpayers on their non-compensation income. There is no evident intention of the law, either before or after the amendatory legislation, to place in an unequal footing or in significant variance the income tax treatment of professionals who practice their respective professions individually and of those who do it through a general professional partnership.

ABAKADA vs ERMITA(Please refer General Facts of iii, iv and v here in this case) FACTS:Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition on May 27, 2005 questioning the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviionss authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after specified conditions have been satisfied. Petitioners argue that the law is unconstitutional.

II. Equal Protection (Art III, Sec 1)Petitioners Association ofPilipinasShell Dealers, Inc.,et al.argue that Section 8 of R.A. No. 9337, amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114 (C) of the NIRC are arbitrary, oppressive, excessive and confiscatory. Their argument is premised on the constitutional right against deprivation of life, liberty of property without due process of law, as embodied in Article III, Section 1 of the Constitution.Petitioners also contend that these provisions violate the constitutional guarantee of equal protection of the law. Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of input tax, or invests in capital equipment, or has several transactions with the government, is not based on real and substantial differences to meet a valid classification.

ISSUE: Whether or not it violates the Due Process and Equal Protection Clauses? NOHELD: 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 prevailThe 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 argument is pedantic, if not outright baseless. The law does not make any classification in 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. Petitioners alleged distinctions are based on variables that bear different consequences. While the implementation of the law may yield varying end results depending on ones profit margin and value-added, the Court cannot go beyond what the legislature has laid down and interfere with the affairs of business.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.III. Uniformity and Equity in Taxation (Art. VI Sec 21) Issue: Whether or not the law imposes a uniform and equitable imposition? YESUNIFORMITY: 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. In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and sale of services and use or lease of properties. These same sections also provide for a 0% rate on certain sales and transaction.Neither does the law make any distinction as to the type of industry or trade that will bear the 70% limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital goods or the 5% final withholding tax by the government. 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.EQUITABILITY: 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 exceedingP1,500,000.00. Also, basic marine and agricultural food products in their original state are still not subject to the tax,thus ensuring that prices at the grassroots level will remain accessible. It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly favors those with high profit margins. Congress was not oblivious to this. Thus, to equalize the weighty burden the law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-exempt persons under Section 109(v),i.e., transactions with gross annual sales and/or receipts not exceedingP1.5 Million. This acts as a equalizer because in effect, bigger businesses that qualify for VAT coverage and VAT-exempt taxpayers stand on equal-footing.Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the tax on those previously exempt. Excise taxes on petroleum productsand natural gaswere reduced. Percentage tax on domestic carriers was removed.Power producers are now exempt from paying franchise tax. Aside from these, Congress also increased the income tax rates of corporations, in order to distribute the burden of taxation. Domestic, foreign, and non-resident corporations are now subject to a 35% income tax rate, from a previous 32%.Intercorporate dividends of non-resident foreign corporations are still subject to 15% final withholding tax but the tax credit allowed on the corporations domicile was increased to 20%.The Philippine Amusement and Gaming Corporation (PAGCOR) is not exempt from income taxes anymore.Even the sale by an artist of his works or services performed for the production of such works was not spared.Churchill and Tait v ConcepcionFACTS:Herein petitioners are businessmen engages in advertising (billboards/signs) . In this petitioner, they assail the validity of Act No. 2339 as amended by Act No. 2423 which imposed a tax of P2 per square meter on signs and billboards. They alleged that In not holding that the tax constitutes deprivation of property without compensation or due process of law, because it is confiscatory and unjustly discriminatory and (2) said tax is void for lack of uniformity, because it is not graded according to value; because the classification on which it is based on any reasonable ground; and furthermore, because it constitutes double taxation.ISSUE: WON Act 2423 violates the uniformity in taxation provided for by the Constitution . NOHELD:The only limitation, in so far as these questions are concerned, placed upon the Philippine Legislature in the exercise of its taxing power is that found in section 5 of the Philippine Bill, wherein it is declared "that the rule of taxation in said Islands shall be uniform."Uniformity in taxation says Black on Constitutional Law, page 292 means that all taxable articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and luxuries, shall all be assessed at the same rate. Different articles may be taxed at different amounts, provided the rate is uniform on the same class everywhere, with all people, and at all times.A tax is uniform when it operates with the same force and effect in every place where the subject of it is found The words "uniform throughout the United States," as required of a tax by the Constitution, do not signify an intrinsic, but simply a geographical, uniformity, and such uniformity is therefore the only uniformity which is prescribed by the Constitution. A tax is uniform, within the constitutional requirement, when it operates with the same force and effect in every place where the subject of it is found. "Uniformity," as applied to the constitutional provision that all taxes shall be uniform, means that all property belonging to the same class shall be taxed alike. The statute under consideration imposes a tax of P2 per square meter or fraction thereof upon every electric sign, bill-board, etc., wherever found in the Philippine Islands. Or in other words, "the rule of taxation" upon such signs is uniform throughout the Islands. The rule, which we have just quoted from the Philippine Bill, does not require taxes to be graded according to the value of the subject or subjects upon which they are imposed, especially those levied as privilege or occupation taxes. We can hardly see wherein the tax in question constitutes double taxation. The fact that the land upon which the billboards are located is taxed at so much per unit and the billboards at so much per square meter does not constitute "double taxation." Double taxation, within the true meaning of that expression, does not necessarily affect its validity. And again, it is not for the judiciary to say that the classification upon which the tax is based "is mere arbitrary selection and not based upon any reasonable grounds." The Legislature selected signs and billboards as a subject for taxation and it must be presumed that it, in so doing, acted with a full knowledge of the situation.iv. Progressive Taxation (Art VI, Sec 21) Congress is required to evolve a progressive system of taxation.

ARTURO M. TOLENTINO, petitioner,vs.THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents. G.R. No. 115455 August 25, 1994

The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code.

FACTS: These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act No. 7716.The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-Added Tax Law, Congress violated the Constitution.

Petitioners Arguments:1. That VAT is regressive and that it violates the requirement that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive system of taxation."2. Chamber of Real Estate and Builders Association (CREBA), petitioner in G.R. 115754, argued that the VAT will reduce the mark up of its members by as much as 85% to 90%.3. Cooperative Union of the Philippines (CUP) contended that the VAT is regressive in the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich".

RULING:Claims of Regressivity, Denial of Due Process, Equal Protection, and Impairmentof ContractsThere is, however, no justification for passing upon the claims that the law also violates the rule that taxation must be progressive and that it denies petitioners' right to due process and that equal protection of the laws. The reason for this different treatment has been cogently stated by an eminent authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law, it is freedom that commands a momentum of respect; when property is imperiled it is the lawmakers' judgment that commands respect. This dual standard may not precisely reverse the presumption of constitutionality in civil liberties cases, but obviously it does set up a hierarchy of values within the due process clause." 41Indeed, the absence of threat of immediate harm makes the need for judicial intervention less evident and underscores the essential nature of petitioners' attack on the law on the grounds of regressivity, denial of due process and equal protection and impairment of contracts as a mere academic discussion of the merits of the law. For the fact is that there have even been no notices of assessments issued to petitioners and no determinations at the administrative levels of their claims so as to illuminate the actual operation of the law and enable us to reach sound judgment regarding so fundamental questions as those raised in these suits.Thus, the broad argument against the VAT is that it is regressive and that it violates the requirement that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive system of taxation." 42 Petitioners in G.R. No. 115781 quote from a paper, entitled "VAT Policy Issues: Structure, Regressivity, Inflation and Exports" by Alan A. Tait of the International Monetary Fund, that "VAT payment by low-income households will be a higher proportion of their incomes (and expenditures) than payments by higher-income households. That is, the VAT will be regressive." Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption goods of those who are in the higher-income bracket, which before were taxed at a rate higher than 10%, has been reduced, while basic commodities, which before were taxed at rates ranging from 3% to 5%, are now taxed at a higher rate.Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by respondents that in fact it distributes the tax burden to as many goods and services as possible particularly to those which are within the reach of higher-income groups, even as the law exempts basic goods and services. It is thus equitable. The goods and properties subject to the VAT are those used or consumed by higher-income groups. These include real properties held primarily for sale to customers or held for lease in the ordinary course of business, the right or privilege to use industrial, commercial or scientific equipment, hotels, restaurants and similar places, tourist buses, and the like. On the other hand, small business establishments, with annual gross sales of less than P500,000, are exempted. This, according to respondents, removes from the coverage of the law some 30,000 business establishments. On the other hand, an occasional paper 43 of the Center for Research and Communication cities a NEDA study that the VAT has minimal impact on inflation and income distribution and that while additional expenditure for the lowest income class is only P301 or 1.49% a year, that for a family earning P500,000 a year or more is P8,340 or 2.2%.Lacking empirical data on which to base any conclusion regarding these arguments, any discussion whether the VAT is regressive in the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich," as the Cooperative Union of the Philippines (CUP) claims in G.R. No. 115873, is largely an academic exercise. On the other hand, the CUP's contention that Congress' withdrawal of exemption of producers cooperatives, marketing cooperatives, and service cooperatives, while maintaining that granted to electric cooperatives, not only goes against the constitutional policy to promote cooperatives as instruments of social justice (Art. XII, 15) but also denies such cooperatives the equal protection of the law is actually a policy argument. The legislature is not required to adhere to a policy of "all or none" in choosing the subject of taxation. 44Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in G.R. 115754, that the VAT will reduce the mark up of its members by as much as 85% to 90% any more concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute, petitioner in G.R. No. 115544, that the VAT will drive some of its members out of circulation because their profits from advertisements will not be enough to pay for their tax liability, while purporting to be based on the financial statements of the newspapers in question, still falls short of the establishment of facts by evidence so necessary for adjudicating the question whether the tax is oppressive and confiscatory.Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the Constitution to do is to "evolve a progressive system of taxation." This is a directive to Congress, just like the directive to it to give priority to the enactment of laws for the enhancement of human dignity and the reduction of social, economic and political inequalities (Art. XIII, 1), or for the promotion of the right to "quality education" (Art. XIV, 1). These provisions are put in the Constitution as moral incentives to legislation, not as judicially enforceable rights.We have endeavored to discuss, within limits, the validity of Republic Act No. 7716 in its formal and substantive aspects as this has been raised in the various cases before us. To sum up, we hold:(1) That the procedural requirements of the Constitution have been complied with by Congress in the enactment of the statute;(2) That judicial inquiry whether the formal requirements for the enactment of statutes beyond those prescribed by the Constitution have been observed is precluded by the principle of separation of powers;(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the free exercise of religion, nor deny to any of the parties the right to an education; and(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive, oppressive and confiscatory and that it violates vested rights protected under the Contract Clause are prematurely raised and do not justify the grant of prospective relief by writ of prohibition.ABAKADA vs ERMITAARGUMENTS: 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.Issue: WON the law meets the requirement for a progressive taxation? YESHELD: Progressive taxation is built on the principle of the taxpayers ability to pay. This principle was also lifted from Adam SmithsCanons of Taxation, and it states:The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.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. The disparity lies in the income earned by a person or profit margin marked by a business, such that the higher the income or profit margin, the smaller the portion of the income or profit that is eaten by VAT.A converso, the lower the income or profit margin, the bigger the part that the VAT eats away. At the end of the day, it is really the lower income group or businesses with low-profit margins that is always hardest hit.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 Court stated in theTolentino case, thus:The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. 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. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, 17 (1) of the 1973 Constitution from which the present Art. VI, 28 (1) was taken. Sales taxes are also regressive.v. Origin of Appropriation, Revenue and Tariff Bills (Art VI, Sec. 24)

All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills, shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

ARTURO M. TOLENTINO, petitioner,vs.THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents. G.R. No. 115455 August 25, 1994

FACTS: The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had originated in the House of Representatives, it was not passed by the Senate but was simply consolidated with the Senate version (S. No. 1630) in the Conference Committee to produce the bill which the President signed into law. The following provisions of the Constitution are cited in support of the proposition that because Republic Act No. 7716 was passed in this manner, it did not originate in the House of Representatives and it has not thereby become a law:Art. VI, 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.Id., 26(2): No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal.It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were introduced in the House of Representatives seeking to amend certain provisions of the National Internal Revenue Code relative to the value-added tax or VAT. These bills were referred to the House Ways and Means Committee which recommended for approval a substitute measure, H. No. 11197, entitledAN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237 AND 238 OF TITLE IX, AND REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED

The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on November 17, 1993, it was approved by the House of Representatives after third and final reading.It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee on Ways and Means.On February 7, 1994, the Senate Committee submitted its report recommending approval of S. No. 1630, entitledAN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 107, 108, AND 110 OF TITLE IV, 112 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND REPEALING SECTIONS 113, 114 and 116 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES

It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197."On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates on the bill and approved it on second reading on March 24, 1994. On the same day, it approved the bill on third reading by the affirmative votes of 13 of its members, with one abstention.H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached copy of the bill as reconciled and approved by the conferees."The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES," was thereafter approved by the House of Representatives on April 27, 1994 and by the Senate on May 2, 1994. The enrolled bill was then presented to the President of the Philippines who, on May 5, 1994, signed it. It became Republic Act No. 7716. On May 12, 1994, Republic Act No. 7716 was published in two newspapers of general circulation and, on May 28, 1994, it took effect, although its implementation was suspended until June 30, 1994 to allow time for the registration of business entities. It would have been enforced on July 1, 1994 but its enforcement was stopped because the Court, by the vote of 11 to 4 of its members, granted a temporary restraining order on June 30, 1994.Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI, 24 of the Constitution, because it is in fact the result of the consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection, petitioners point out that although Art. VI, SS 24 was adopted from the American Federal Constitution, 2 it is notable in two respects: the verb "shall originate" is qualified in the Philippine Constitution by the word "exclusively" and the phrase "as on other bills" in the American version is omitted. This means, according to them, that to be considered as having originated in the House, Republic Act No. 7716 must retain the essence of H. No. 11197.

RULING: This argument will not bear analysis. To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. The possibility of a third version by the conference committee will be discussed later. At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senate's power not only to "concur with amendments" but also to "propose amendments." It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate.The contention that the constitutional design is to limit the Senate's power in respect of revenue bills in order to compensate for the grant to the Senate of the treaty-ratifying power 3 and thereby equalize its powers and those of the House overlooks the fact that the powers being compared are different. We are dealing here with the legislative power which under the Constitution is vested not in any particular chamber but in the Congress of the Philippines, consisting of "a Senate and a House of Representatives." 4 The exercise of the treaty-ratifying power is not the exercise of legislative power. It is the exercise of a check on the executive power. There is, therefore, no justification for comparing the legislative powers of the House and of the Senate on the basis of the possession of such nonlegislative power by the Senate. The possession of a similar power by the U.S. Senate 5 has never been thought of as giving it more legislative powers than the House of Representatives.In the United States, the validity of a provision ( 37) imposing an ad valorem tax based on the weight of vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheld against the claim that the provision was a revenue bill which originated in the Senate in contravention of Art. I, 7 of the U.S. Constitution. 6 Nor is the power to amend limited to adding a provision or two in a revenue bill emanating from the House. The U.S. Senate has gone so far as changing the whole of bills following the enacting clause and substituting its own versions. In 1883, for example, it struck out everything after the enacting clause of a tariff bill and wrote in its place its own measure, and the House subsequently accepted the amendment. The U.S. Senate likewise added 847 amendments to what later became the Payne-Aldrich Tariff Act of 1909; it dictated the schedules of the Tariff Act of 1921; it rewrote an extensive tax revision bill in the same year and recast most of the tariff bill of 1922. 7 Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House.It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of another Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take [H. No. 11197] into consideration" in enacting S. No. 1630. There is really no difference between the Senate preserving H. No. 11197 up to the enacting clause and then writing its own version following the enacting clause (which, it would seem, petitioners admit is an amendment by substitution), and, on the other hand, separately presenting a bill of its own on the same subject matter. In either case the result are two bills on the same subject.Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House, so long as action by the Senate as a body is withheld pending receipt of the House bill. The Court cannot, therefore, understand the alarm expressed over the fact that on March 1, 1993, eight months before the House passed H. No. 11197, S. No. 1129 had been filed in the Senate. After all it does not appear that the Senate ever considered it. It was only after the Senate had received H. No. 11197 on November 23, 1993 that the process of legislation in respect of it began with the referral to the Senate Committee on Ways and Means of H. No. 11197 and the submission by the Committee on February 7, 1994 of S. No. 1630. For that matter, if the question were simply the priority in the time of filing of bills, the fact is that it was in the House that a bill (H. No. 253) to amend the VAT law was first filed on July 22, 1992. Several other bills had been filed in the House before S. No. 1129 was filed in the Senate, and H. No. 11197 was only a substitute of those earlier bills.ABAKADA vs ERMITAARGUMENT: Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from the House. They aver that House Bill No. 3555 proposed amendments only regarding Sections 106, 107, 108, 110 and 114 of the NIRC, while House Bill No. 3705 proposed amendments only to Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the other sections of the NIRC which the Senate amended but which amendments were not found in the House bills are not intended to be amended by the House of Representatives. Hence, they argue that since the proposed amendments did not originate from the House, such amendments are a violation of Article VI, Section 24 of the Constitution.

ISSUE:Whether or not there is a violation of Article VI, Section 24 of the Constitution. NOHeld: 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? In theTolentinocase, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. . . . At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced.To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senates power not only to "concur with amendments" but also to "propose amendments."It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate.Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House.Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts,the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.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.Furthermore, the amendments introduced by the Senate to the NIRC provisions that had not been touched in the House bills are still in furtherance of the intent of the House in initiating the subject revenue bills. vi. Voting requirements for Tax Exemptions (Art. VI Sec 28 (4) No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress.

JOHN HAY VS LIM GR 119775FACTS:By the present petition for prohibition, mandamus and declaratory relief with prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction, petitioners assail, in the main, the constitutionality of Presidential Proclamation No. 420, Series of 1994, CREATING AND DESIGNATING A PORTION OF THE AREA COVERED BY THE FORMER CAMP JOHN [HAY] AS THE JOHN HAY SPECIAL ECONOMIC ZONE PURSUANT TO REPUBLIC ACT NO. 7227.Republic Act No. 7227, AN ACT ACCELERATING THE CONVERSION OF MILITARY RESERVATIONS INTO OTHER PRODUCTIVE USES, CREATING THE BASES CONVERSION AND DEVELOPMENT AUTHORITY FOR THIS PURPOSE, PROVIDING FUNDS THEREFOR AND FOR OTHER PURPOSES, otherwise known as the Bases Conversion and Development Act of 1992, which was enacted on March 13, 1992, set out the policy of the government to accelerate the sound and balanced conversion into alternative productive uses of the former military bases under the 1947 Philippines-United States of America Military Bases Agreement, namely, the Clark and Subic military reservations as well as their extensions including the John Hay Station (Camp John Hay or the camp) in the City of Baguio.[1]As noted in its title, R.A. No. 7227 created public respondent Bases Conversion and Development Authority[2] (BCDA), vesting it with powers pertaining to the multifarious aspects of carrying out the ultimate objective of utilizing the base areas in accordance with the declared government policy.R.A. No. 7227 likewise created the Subic Special Economic [and Free Port] Zone (Subic SEZ) the metes and bounds of which were to be delineated in a proclamation to be issued by the President of the Philippines.[3]R.A. No. 7227 granted the Subic SEZ incentives ranging from tax and duty-free importations, exemption of businesses therein from local and national taxes, to other hallmarks of a liberalized financial and business climate.[4]And R.A. No. 7227 expressly gave authority to the President to create through executive proclamation, subject to the concurrence of the local government units directly affected, other Special Economic Zones (SEZ) in the areas covered respectively by the Clark military reservation, the Wallace Air Station in San Fernando, La Union, and Camp John Hay.[5]On August 16, 1993, BCDA entered into a Memorandum of Agreement and Escrow Agreement with private respondents Tuntex (B.V.I.) Co., Ltd (TUNTEX) and Asiaworld Internationale Group, Inc. (ASIAWORLD), private corporations registered under the laws of the British Virgin Islands, preparatory to the formation of a joint venture for the development of Poro Point in La Union and Camp John Hay as premier tourist destinations and recreation centers. Four months later or on December 16, 1993, BCDA, TUNTEX and ASIAWORD executed a Joint Venture Agreement[6] whereby they bound themselves to put up a joint venture company known as the Baguio International Development and Management Corporation which would lease areas within Camp John Hay and Poro Point for the purpose of turning such places into principal tourist and recreation spots, as originally envisioned by the parties under their Memorandum of Agreement.On May 11, 1994, the sanggunian passed a resolution requesting the Mayor to order the determination of realty taxes which may otherwise be collected from real properties of Camp John Hay.[13] The resolution was intended to intelligently guide the sanggunian in determining its position on whether Camp John Hay be declared a SEZ, it (the sanggunian) being of the view that such declaration would exempt the camps property and the economic activity therein from local or national taxation.ISSUE :Whether Proclamation No. 420 is constitutional by providing for national and local tax exemption within and granting other economic incentives to the John Hay Special Economic Zone; andRULING:As gathered from the earlier-quoted Section 12 of R.A. No. 7227, the privileges given to Subic SEZ consist principally of exemption from tariff or customs duties, national and local taxes of business entities therein (paragraphs (b) and (c)), free market and trade of specified goods or properties (paragraph d), liberalized banking and finance (paragraph f), and relaxed immigration rules for foreign investors (paragraph g). Yet, apart from these, Proclamation No. 420 also makes available to the John Hay SEZ benefits existing in other laws such as the privilege of export processing zone-based businesses of importing capital equipment and raw materials free from taxes, duties and other restrictions;[39] tax and duty exemptions, tax holiday, tax credit, and other incentives under the Omnibus Investments Code of 1987;[40] and the applicability to the subject zone of rules governing foreign investments in the Philippines.[41]While the grant of economic incentives may be essential to the creation and success of SEZs, free trade zones and the like, the grant thereof to the John Hay SEZ cannot be sustained. The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support therein. Neither does the same grant of privileges to the John Hay SEZ find support in the other laws specified under Section 3 of Proclamation No. 420, which laws were already extant before the issuance of the proclamation or the enactment of R.A. No. 7227.More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax.[42] Other than Congress, the Constitution may itself provide for specific tax exemptions,[43] or local governments may pass ordinances on exemption only from local taxes.[44]The challenged grant of tax exemption would circumvent the Constitutions imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress.[45] In the same vein, the other kinds of privileges extended to the John Hay SEZ are by tradition and usage for Congress to legislate upon.Contrary to public respondents suggestions, the claimed statutory exemption of the John Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based; it must be expressly granted in a statute stated in a language too clear to be mistaken.[46] Tax exemption cannot be implied as it must be categorically and unmistakably expressed.[47]If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption and incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227.This Court no doubt can void an act or policy of the political departments of the government on either of two groundsinfringement of the Constitution or grave abuse of discretion.[48]This Court then declares that the grant by Proclamation No. 420 of tax exemption and other privileges to the John Hay SEZ is void for being violative of the Constitution. This renders it unnecessary to still dwell on petitioners claim that the same grant violates the equal protection guarantee.vii. Delegation to President to fix Tariff Rates, etc. (Art VI Sec 28 (2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.

viii. Presidents Veto Power on Appropriation Revenue, Tariff (Art. VI, Sec. 27 (2) )The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object.

CIR vs CTA and MANILA GOLFFACTS: Herein private respondent, Manila Golf & Country Club, Inc. is a non-stock corporation. True, it maintains a golf course and operates a clubhouse with a lounge, bar and dining room, but these facilities are for the exclusive use of its members and accompanied guests, and it charges on cost-plus-expense basis. As such, it claims it should have been exempt from payment of privilege taxes were it not for the last paragraph of Section 191-A of R.A. No. 6110, otherwise known as the "Omnibus Tax Law." Section 191-A reads:Sec. 191-A. Caterer. A caterer's tax is hereby imposed as follows:(1) On proprietors or operators of restaurants, refreshment parlors and other eating places, including clubs, and caterers, three per cent of their gross receipts.(2) On proprietors or operators of restaurants, bars, cafes and other eating places, including clubs, where distilled spirits, fermented liquors, or wines are served, three per cent of their gross receipts from sale of food or refreshments and seven per cent of their gross receipts from sale of distilled spirits, fermented liquors or wines. Two sets of commercial invoices or receipts serially numbered in duplicate shall be separately prepared and issued, one for sale of refreshments served, and another for each sale of distilled spirits, fermented liquors or wines served, the originals of the invoices or receipts to be issued to the purchaser or customer.(3) On proprietors or operators of restaurants, refreshment parlors, bars, cafes and other eating places which are maintained within the preferences or compound of a hotel, motel, resthouse, cockpit, race track, jai-alai, cabaret, night or day club by means of a connecting door or passage twenty per cent of their gross receipts.Where the establishments are operated or maintained by clubs of any kind or nature (irrespective of the disposition of their net income and whether or not they cater exclusively to members or their guests) the keepers of the establishments shall pay the corresponding tax at the rate fixed above. (Emphasis supplied)Republic Act No. 6110 took effect on September 1, 1969. By this virtue, petitioners CIR assessed the club fixed taxes as operators of golf links and restaurants, and also percentage tax (caterer's tax) for its sale of foods and fermented liquors/wines for the period covering September 1969 to December 1970 in the amount of P32,504.96. The club protested claiming the assessment to be without basis because Section 42 was vetoed by then President Marcos.Sec. 42 Reads:SEC. 42. Inserting a new Section 191-A which imposes a caterer's tax of three percent of the gross receipts of proprietors or operators of restaurants, refreshment parlors and other eating places; three percent of gross receipts from sale of food or refreshment and seven percent on gross receipts from the sale of distilled spirits, fermented liquors or wines, on proprietors or operators of restaurants, bars, cafes and other eating places, including clubs, where distilled spirits, fermented liquors, or wines are served; and twenty percent of gross receipts on proprietor or operators of restaurants, refreshment parlors, bars, cafes and other eating places maintained within the premises or compound of a hotel, motel, resthouse, cockpit, race track, jai-alai, cabaret, night or day club, or which are accessible to patrons of said establishments by means of a connecting door or passage.The protestation of the club was denied by the petitioner CIR who maintains that Section 42 was not entirely vetoed but merely the words "hotels, motels, resthouses" on the ground that it might restrain the development of hotels which is essential to the tourism industry.

ISSUE: whether the presidential veto referred to the entire section or merely to the imposition of 20% tax on gross receipts of operators or proprietors of restaurants, refreshment parlors, bars and other eating places which are maintained within the premises or compound of a hotel, motel or resthouses.

HELD: The presidential veto referred merely to the inclusion of hotels, motels and resthouses in the 20% caterer's tax bracket but not to the whole section. But, as mentioned earlier also, the CTA opined that the President could not veto words or phrases in a bill but only an entire item. Obviously, what the CTA meant by "item" was an entire section. We do not agree. But even assuming it to be so, it would also be to petitioner's favor. The ineffectual veto by the President rendered the whole section 191-A as not having been vetoed at all and it, therefore, became law as an unconstitutional veto has no effect, whatsoever.However, the Court agrees with then Solicitor General Estelito Mendoza and his associates that inclusion of hotels, motels and resthouses in the 20% caterer's tax bracket are "items" in themselves within the meaning of Sec. 20(3), Art. VI of the 1935 Constitution which, therefore, the President has the power to veto. An "item" in a revenue bill does not refer to an entire section imposing a particular kind of tax, but rather to the subject of the tax and the tax rate. In the portion of a revenue bill which actually imposes a tax, a section identifies the tax and enumerates the persons liable therefor with the corresponding tax rate. To construe the word "item" as referring to the whole section would tie the President's hand in choosing either to approve the whole section at the expense of also approving a provision therein which he deems unacceptable or veto the entire section at the expense of foregoing the collection of the kind of tax altogether. The evil which was sought to be prevented in giving the President the power to disapprove items in a revenue bill would be perpetrated rendering that power inutile

ix. Taxes Levied for Special Purpose (Art VI, Sec 29 (3) )All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government.

CIR vs CTA and MANILA GOLFx. Grant to LGUs to create its own source of Revenue (Art. X Sec. 5) Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

xi. Flexible Tariff Clause (Art. VI, Sec 28 (2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.

AKBAYAN vs AQUINOAKBAYAN VS AQUINO JULY 16, 2008

FACTS:Petitioners non-government organizations, Congresspersons, citizens and taxpayers seek via the present petition for mandamus and prohibition to obtain from respondents the full text of the Japan-Philippines Economic Partnership Agreement (JPEPA) including the Philippine and Japanese offers submitted during the negotiation process and all pertinent attachments and annexes thereto.The JPEPA, which will be the first bilateral free trade agreement to be entered into by the Philippines with another country in the event the Senate grants its consent to it, covers a broad range of topics which respondents enumerate as follows: trade in goods, rules of origin, customs procedures, paperless trading, trade in services, investment, intellectual property rights, government procurement, movement of natural persons, cooperation, competition policy, mutual recognition, dispute avoidance and settlement, improvement of the business environment, and general and final provisions.[5]Petitioner emphasize that the refusal of the government to disclose the said agreement violates there right to information on matters of public concern and of public interest. That the non-disclosure of the same documents undermines their right to effective and reasonable participation in all levels of social, political and economic decision making.Respondent herein invoke executive privilege. They relied on the ground that the matter sought involves a diplomatic negotiation then in progress, thus constituting an exception to the right to information and the policy of full disclosure of matters that are of public concern like the JPEPA. That diplomatic negotiation are covered by the doctrine of executive privilege.(While the final text of the JPEPA has now been made accessible to the public since September 11, 2006,[6] respondents do not dispute that, at the time the petition was filed up to the filing of petitioners Reply when the JPEPA was still being negotiated the initial drafts thereof were kept from public view.)ISSUES: Whether or not executive privilege may be invoked. YESWhether or not the President can validly exclude Congress from the JPEPA negotiations. YESRULING:1.JPEPA, A Matter of Public ConcernTo be covered by the right to information, the information sought must meet the threshold requirement that it be a matter of public concern xxxFrom the nature of the JPEPA as an international trade agreement, it is evident that the Philippine and Japanese offers submitted during the negotiations towards its execution are matters of public concern. This, respondents do not dispute. They only claim that diplomatic negotiations are covered by the doctrine of executive privilege, thus constituting an exception to the right to information and the policy of full public disclosure.Privileged Character of Diplomatic Negotiations RecognizedThe privileged character of diplomatic negotiations has been recognized in this jurisdiction. In discussing valid limitations on the right to information, the Court in Chavez v. PCGG held that information on inter-government exchanges prior to the conclusion of treaties and executive agreements may be subject to reasonable safeguards for the sake of national interest.Applying the principles adopted in PMPF v. Manglapus, it is clear that while the final text of the JPEPA may not be kept perpetually confidential since there should be ample opportunity for discussion before [a treaty] is approved the offers exchanged by the parties during the negotiations continue to be privileged even after the JPEPA is published. It is reasonable to conclude that the Japanese representatives submitted their offers with the understanding that historic confidentiality would govern the same. Disclosing these offers could impair the ability of the Philippines to deal not only with Japan but with other foreign governments in future negotiations.Diplomatic negotiations are recognized as privileged in this jurisdiction, the JPEPA negotiations constituting no exception. It bears emphasis, however, that such privilege is only presumptive. For as Senate v. Ermita holds, recognizing a type of information as privileged does not mean that it will be considered privileged in all instances. Only after a consideration of the context in which the claim is made may it be determined if there is a public interest that calls for the disclosure of the desired information, strong enough to overcome its traditionally privileged status.2. Treaty-making power of the PresidentPetitioner-members of the House of Representatives additionally anchor their claim to have a right to the subject documents on the basis of Congress inherent power to regulate commerce, be it domestic or international. They allege that Congress cannot meaningfully exercise the power to regulate international trade agreements such as the JPEPA without being given copies of the initial offers exchanged during the negotiations thereof. In the same vein, they argue that the President cannot exclude Congress from the JPEPA negotiations since whatever power and authority the President has to negotiate international trade agreements is derived only by delegation of Congress, pursuant to Article VI, Section 28(2) of the Constitution and Sections 401 and 402 of Presidential Decree No. 1464.[55]The subject of Article VI Section 28(2) of the Constitution is not the power to negotiate treaties and international agreements, but the power to fix tariff rates, import and export quotas, and other taxes. Thus it provides:(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.As to the power to negotiate treaties, the constitutional basis thereof is Section 21 of Article VII the article on the Executive Department which states:No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate.The doctrine in PMPF v. Manglapus that the treaty-making power is exclusive to the President, being the sole organ of the nation in its external relations, was echoed in BAYAN v. Executive Secretary[56] where the Court held:By constitutional fiat and by the intrinsic nature of his office, the President, as head of State, is the sole organ and authority in the external affairs of the country. In many ways, the President is the chief architect of the nation's foreign policy; his "dominance in the field of foreign relations is (then) conceded." Wielding vast powers and influence, his conduct in the external affairs of the nation, as Jefferson describes, is executive altogether.As regards the power to enter into treaties or international agreements, the Constitution vests the same in the President, subject only to the concurrence of at least two thirds vote of all the members of the Senate. In this light, the negotiation of the VFA and the subsequent ratification of the agreement are exclusive acts which pertain solely to the President, in the lawful exercise of his vast executive and diplomatic powers granted him no less than by the fundamental law itself. Into the field of negotiation the Senate cannot intrude, and Congress itself is powerless to invade it. x x x (Italics in the original; emphasis and underscoring supplied)

The same doctrine was reiterated even more recently in Pimentel v. Executive Secretary[57] where the Court ruled:In our system of government, the President, being the head of state, is regarded as the sole organ and authority in external relations and is the country's sole representative with foreign nations. As the chief architect of foreign policy, the President acts as the country's mouthpiece with respect to international affairs. Hence, the President is vested with the authority to deal with foreign states and governments, extend or withhold recognition, maintain diplomatic relations, enter into treaties, and otherwise transact the business of foreign relations. In the realm of treaty-making, the President has the sole authority to negotiate with other states.Nonetheless, while the President has the sole authority to negotiate and enter into treaties, the Constitution provides a limitation to his power by requiring the concurrence of 2/3 of all the members of the Senate for the validity of the treaty entered into by him. x x x (Emphasis and underscoring supplied)While the power then to fix tariff rates and other taxes clearly belongs to Congress, and is exercised by the President only by delegation of that body, it has long been recognized that the power to enter into treaties is vested directly and exclusively in the President, subject only to the concurrence of at least two-thirds of all the Members of the Senate for the validity of the treaty. In this light, the authority of the President to enter into trade agreements with foreign nations provided under P.D. 1464[58] may be interpreted as an acknowledgment of a power already inherent in its office. It may not be used as basis to hold the President or its representatives accountable to Congress for the conduct of treaty negotiations.This is not to say, of course, that the Presidents power to enter into treaties is unlimited but for the requirement of Senate concurrence, since the President must still ensure that all treaties will substantively conform to all the relevant provisions of the Constitution.It follows from the above discussion that Congress, while possessing vast legislative powers, may not interfere in the field of treaty negotiations. While Article VII, Section 21 provides for Senate concurrence, such pertains only to the validity of the treaty under consideration, not to the conduct of negotiations attendant to its conclusion. Moreover, it is not even Congress as a whole that has been given the authority to concur as a means of checking the treaty-making power of the President, but only the Senate.Thus, as in the case of petitioners suing in their capacity as private citizens, petitioners-members of the House of Representatives fail to present a sufficient showing of need that the information sought is critical to the performance of the functions of Congress, functions that do not include treaty-negotiation.Right to information vis-a-vis Executive Privilegexxx the Court holds that, in determining whether an information is covered by the right to information, a specific showing of need for such information is not a relevant consideration, but only whether the same is a matter of public concern. When, however, the government has claimed executive privilege, and it has established that the information is indeed covered by the same, then the party demanding it, if it is to overcome the privilege, must show that that information is vital, not simply for the satisfaction of its curiosity, but for its ability to effectively and reasonably participate in social, political, and economic decision-making.ConclusionTo recapitulate, petitioners demand to be furnished with a copy of the full text of the JPEPA has become moot and academic, it having been made accessible to the public since September 11, 2006. As for their demand for copies of the Philippine and Japanese offers submitted during the JPEPA negotiations, the same must be denied, respondents claim of executive privilege