Gomez vs.

Palomar
GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827
FACTS: Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando,
Pampanga. It did not bear the special anti-TB stamp required by the RA 1635. It was returned to
the petitioner. Petitioner now assails the constitutionality of the statute claiming that RA 1635
otherwise known as the Anti-TB Stamp law is violative of the equal protection clause because it
constitutes mail users into a class for the purpose of the tax while leaving untaxed the rest of the
population and that even among postal patrons the statute discriminatorily grants exemptions.
The law in question requires an additional 5 centavo stamp for every mail being posted, and no
mail shall be delivered unless bearing the said stamp.
ISSUE: Is the Anti-TB Stamp Law unconstitutional, for being allegedly violative of the equal
protection clause?
HELD: No. It is settled that the legislature has the inherent power to select the subjects of
taxation and to grant exemptions. This power has aptly been described as "of wide range and
flexibility." Indeed, it is said that in the field of taxation, more than in other areas, the legislature
possesses the greatest freedom in classification. The reason for this is that traditionally,
classification has been a device for fitting tax programs to local needs and usages in order to
achieve an equitable distribution of the tax burden.
The classification of mail users is based on the ability to pay, the enjoyment of a privilege and
on administrative convenience. Tax exemptions have never been thought of as raising revenues
under the equal protection clause.

CIR v CTA (1994)

CIR v CTA
GR No 106611, July 21, 1994
FACTS:
Citytrust filed a petition with the Court of Tax Appeals claiming the refund of its income tax
overpayments for the years 1983, 1984 and 1985 in the total amount of P19,971,745. The CIR
could not present any evidence due to the repeated failure of the tax credit/refund division of the
BIR to transmit the records of the case and the investigation report to the Solicitor General. The
case was decided in favor of City Trust. Upon motion of reconsideration, petitioner alleged that
through an inter-office memorandum of the Tax Credit/Refund Division, dated August 8, 1991,
he came to know only that Citytrust had outstanding tax liabilities for 1984 in the amount of
P56,588,740.91 representing deficiency income and business taxes.
ISSUES:
1. Whether the BIR was denied its day in court
2. Whether the CTA erred in denying petitioners supplemental motion for reconsideration
alleging bringing to said courts attention the existence of deficiency income and business taxes
RULING:
1. Yes, the BIR is denied its day in court. When it was petitioners turn to present evident
evidence, several postponements were sought by its counsel, the Solicitor General, due to the
unavailability of the necessary records which were not transmitted by the Refund Audit Division
of the BIR to said counsel. It was under such predicament and in deference to the tax court that
the counsel was constrained to submit the case for decision without presenting any evidence. It is
a long and firmly settled rule of law that the Government is not bound by the errors committed
by its agents.
2. Yes. The fact of such deficiency assessment is intimately related and inextricably intertwined
with the right of the bank. The private respondent cannot be entitled to refund and at the same
time be liable for a deficiency tax assessment for the same year.

PHIL. GUARANTY CO., INC. v. CIR

GR No. L-22074, April 30, 1965
13 SCRA 775
FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered
into reinsurance contracts with foreign insurance companies not doing business in the country,
thereby ceding to foreign reinsurers a portion of the premiums on insurance it has originally
underwritten in the Philippines. The premiums paid by such companies were excluded by the
petitioner from its gross income when it file its income tax returns for 1953 and 1954.
Furthermore, it did not withhold or pay tax on them. Consequently, the CIR assessed against the
petitioner withholding taxes on the ceded reinsurance premiums to which the latter protested the
assessment on the ground that the premiums are not subject to tax for the premiums did not
constitute income from sources within the Philippines because the foreign reinsurers did not
engage in business in the Philippines, and CIR's previous rulings did not require insurance
companies to withhold income tax due from foreign companies.
ISSUE: Are insurance companies not required to withhold tax on reinsurance premiums ceded to
foreign insurance companies, which deprives the government from collecting the tax due from
them?
HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating from
necessity. It is a necessary burden to preserve the State's sovereignty and a means to give the
citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of
civil servants to serve, public improvement designed for the enjoyment of the citizenry and those
which come within the State's territory, and facilities and protection which a government is
supposed to provide. Considering that the reinsurance premiums in question were afforded
protection by the government and the recipient foreign reinsurers exercised rights and privileges
guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of
maintaining the state.
The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding
of tax due on reinsurance premiums may free the taxpayer from the payment of surcharges or
penalties imposed for failure to pay the corresponding withholding tax, but it certainly would not
exculpate it from liability to pay such withholding tax. The Government is not estopped from
collecting taxes by the mistakes or errors of its agents.

Philippine Health Care Providers v CIR G.R. No. 167330 June 12, 2008
Facts:
The petitioner, a prepaid health-care organization offering benefits to its members. The CIR
found that the organization had a deficiency in the payment of the DST under Section 185 of the
1997 Tax Code which stipulated its implementation:
On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage,
or liability made or renewed by any person, association or company or corporation transacting
the business of accident, fidelity, employer'sliability, plate, glass, steam boiler, burglar, elevator,
automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance)
The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest,
for 1996-1997 in the total amount of P224,702,641.18.
The petitioner protested to the CIR, but it didnt act on the appeal. Hence, the company had to go
to the CTA. The latter declared judgment against them and reduced the taxes. It ordered them to
pay 22 million pesos for deficiency VAT for 1997 and 31 million deficiency VAT for 1996.
CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to 1997.
Issues: WON a health care agreement in the nature of an insurance contract and therefore subject
to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax
Code of 1997)
Held: Yes. Petition dismissed.
The DST is levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of specific
instruments.
The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the
transaction of the business. In particular, the DST under Section 185 of the 1997 Tax Code is
imposed on the privilege of making or renewing any policy of insurance (except life, marine,
inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage,
or liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of
Blue Cross Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the
nature of a non-life insurance policy.
Its health care agreement is not a contract for the provision of medical services. Petitioner does
not actually provide medical or hospital services but merely arranges for the same
It is also incorrect to say that the health care agreement is not based on loss or damage because,
under the saidagreement, petitioner assumes the liability and indemnifies its member for hospital,
medical and related expenses (such as professional fees of physicians). The term "loss or
damage" is broad enough to cover the monetary expense or liability a member will incur in case
of illness or injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity.
Similarly, the insurable interest of every member of petitioner's health care program in obtaining
the health careagreement is his own health. Under the agreement, petitioner is bound to
indemnify any member who incurs hospital, medical or any other expense arising from sickness,
injury or other stipulated contingency to the extent agreed upon under the contract.
Chavez v Ongpin
GR No 76778, June 6, 1990
FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year 1978,
there shall be a provincial or city general revision of real property assessments. The general
revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning January
1, 1987, the 1984 assessments shall be the basis of real property taxes. Francisco Chavez, a
taxpayer and landowner, questioned the constitutionality of EO 74. He alleges that it will bring
unreasonable increase in real property taxes.
ISSUE:

Is EO 73 constitutional?
RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision
of property values. Certainly, to continue collecting real property taxes based on valuations
arrived at several years ago, in disregard of the increases in the value of real properties that have
occurred since then is not in consonance with a sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources
of revenue must be adequate to meet government expenditures and their variations.

Gerochi vs. DOE

Facts: RA 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA),
which sought to impose a universal charge on all end-users of electricity for the purpose
of fundingNAPOCORs projects, was enacted and took effect in 2001.
Petitioners contest the constitutionality of the EPIRA, stating that theimposition of the universal
charge on all end-users is oppressive and confiscatory and amounts to taxation without
representation for not giving the consumers a chance to be heard and be represented.
Issue: Whether or not the universal charge is a tax.
Held: NO. The assailed universal charge is not a tax, but anexaction in the exercise of the States
police power. That public welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which
enumerates the policies of the State regarding electrification. Moreover, the Special Trust Fund
feature of the universal charge reasonably serves and assures the attainment and perpetuity of the
purposes for which the universal charge is imposed (e.g. to ensure the viability of the
countrys electric power industry), further boosting the position that the same is
an exaction primarily in pursuit of the States police objectives
If generation of revenue is the primary purpose and regulation is merely incidental,
the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is
incidentally raised does not make the imposition a tax.
The taxing power may be used as an implement of police power. The theory behind the exercise
of the power to tax emanates from necessity; without taxes, government cannot fulfill its
mandate of promoting the general welfare and well-being of the people.

G.R. No. 173863 September 15, 2010

CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES, INC.), Petitioner,

vs.
BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK DEVELOPMENT
CORPORATION, Respondents
Facts:
On June 28, 2002, the Board of Directors of respondent Clark Development Corporation (CDC)
issued and approved Policy Guidelines on the Movement of Petroleum Fuel to and from the
Clark Special Economic Zone. In one of its provisions, it levied royalty fees to suppliers
delivering Coastal fuel from outside sources for Php0.50 per liter for those delivering fuel to
CSEZ locators not sanctioned by CDC and Php1.00 per litter for those bringing-in petroleum
fuel from outside sources. The policy guidelines were implemented effective July 27, 2002.
The petitioner Chevron Philippines Inc (formerly Caltex Philippines Inc) who is a fuel supplier
to Nanox Philippines, a locator inside the CSEZ, received a Statement of Account from CDC
billing them to pay the royalty fees amounting to Php115,000 for its fuel sales from Coastal
depot to Nanox Philippines from August 1 to September 21, 2002.
Petitioner, contending that nothing in the law authorizes CDC to impose royalty fees based on a
per unit measurement of any commodity sold within the special economic zone, protested against
the CDC and Bases Conversion Development Authority (BCDA). They alleged that the royalty
fees imposed had no reasonable relation to the probably expenses of regulation and that the
imposition on a per unit measurement of fuel sales was for a revenue generating purpose, thus,
akin to a tax.
BCDA denied the protest. The Office of the President dismissed the appeal as well for lack of
merit.
Upon appeal, CA dismissed the case. CA held that in imposing the royalty fees, CDC was
exercising its right to regulate the flow of fuel into CSEZ under the vested exclusive right to
distribute fuel within CSEZ pursuant to its Joint Venture Agreement (JVA) with Subic Bay
Metropolitan Authority (SBMA) and Coastal Subic Bay Terminal, Inc. (CSBTI) dated April 11,
1996. The appellate court also found that royalty fees were assessed on fuel delivered, not on the
sale, by petitioner and that the basis of such imposition was petitioners delivery receipts to
Nanox Philippines. The fact that revenue is incidentally also obtained does not make the
imposition a tax as long as the primary purpose of such imposition is regulation.
When elevated in SC, petitioner argued that: 1) CDC has no power to impose fees on sale of fuel
inside CSEZ on the basis of income generating functions and its right to market and distribute
goods inside the CSEZ as this would amount to tax which they have no power to impose, and
that the imposed fee is not regulatory in nature but rather a revenue generating measure; 2) even
if the fees are regulatory in nature, it is unreasonable and are grossly in excess of regulation
costs.
Respondents contended that the purpose of royalty fees is to regulate the flow of fuel to and from
the CSEZ and revenue (if any) is just an incidental product. They viewed it as a valid exercise of
police power since it is aimed at promoting the general welfare of public; that being the CSEZ
administrator, they are responsible for the safe distribution of fuel products inside the CSEZ.
Issue:
Whether the act of CDC in imposing royalty fees can be considered as valid exercise of the
police power.
Held:
Yes. SC held that CDC was within the limits of the police power of the State when it imposed
royalty fees.
In distinguishing tax and regulation as a form of police power, the determining factor is the
purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be
deemed a tax even though the measure results in some form of regulation. On the other hand, if
the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police
power of the state, even though incidentally, revenue is generated.
In this case, SC held that the subject royalty fee was imposed for regulatory purposes and not for
generation of income or profits. The Policy Guidelines was issued to ensure the safety, security,
and good condition of the petroleum fuel industry within the CSEZ. The questioned royalty fees
form part of the regulatory framework to ensure free flow or movement of petroleum fuel to
and from the CSEZ. The fact that respondents have the exclusive right to distribute and market
petroleum products within CSEZ pursuant to its JVA with SBMA and CSBTI does not diminish

the regulatory purpose of the royalty fee for fuel products supplied by petitioner to its client at
the CSEZ.
However, it was erroneous for petitioner to argue that such exclusive right of respondent CDC to
market and distribute fuel inside CSEZ is the sole basis of the royalty fees imposed under the
Policy Guidelines. Being the administrator of CSEZ, the responsibility of ensuring the safe,
efficient and orderly distribution of fuel products within the Zone falls on CDC. Addressing
specific concerns demanded by the nature of goods or products involved is encompassed in the
range of services which respondent CDC is expected to provide under Sec. 2 of E.O. No. 80, in
pursuance of its general power of supervision and control over the movement of all supplies and
equipment into the CSEZ.
There can be no doubt that the oil industry is greatly imbued with public interest as it vitally
affects the general welfare. Fuel is a highly combustible product which, if left unchecked, poses
a serious threat to life and property. Also, the reasonable relation between the royalty fees
imposed on a per liter basis and the regulation sought to be attained is that the higher the
volume of fuel entering CSEZ, the greater the extent and frequency of supervision and inspection
required to ensure safety, security, and order within the Zone.
Respondents submit that the increased administrative costs were triggered by security risks that
have recently emerged, such as terrorist strikes. The need for regulation is more evident in the
light of 9/11 tragedy considering that what is being moved from one location to another are
highly combustible fuel products that could cause loss of lives and damage to properties.
As to the issue of reasonableness of the amount of the fees, SC held that no evidence was
adduced by the petitioner to show that the fees imposed are unreasonable. Administrative
issuances have the force and effect of law. They benefit from the same presumption of validity
and constitutionality enjoyed by statutes. These two precepts place a heavy burden upon any
party assailing governmental regulations. Petitioners plain allegations are simply not enough to
overcome the presumption of validity and reasonableness of the subject imposition.
WHEREFORE, the petition is DENIED for lack of merit and the Decision of the Court of
Appeals dated November 30, 2005 in CA-G.R. SP No. 87117 is hereby AFFIRMED.

Tio v Videogram
G.R. No. L-75697 June 18, 1987

Melencio-Herrera, J.:
Facts:
1. Petitioner on his own behalf and purportedly on behalf of other videogram operators
adversely affected assailed the constitutionality of PD 1987 entitled "An Act Creating the
Videogram Regulatory Board" with broad powers to regulate and supervise the videogram
industry. The Decree promulgated on October 5, 1985, took effect on April 10, 1986, fifteen (15)
days after completion of its publication in the Official Gazette.
2. PD 1994 issued a month thereafter reinforced PD 1987 and in effect amended the National
Internal Revenue Code (NIRC). Petitioner contended among others that the tax provision of the
decree is a rider.
ISSUE: Whether or not the PD 1987 is unconstitutional due to the tax provision included
RULING: PD 1987 is constitutional.
1. The title of the decree, which calls for the creation of the VRB is comprehensive enough to
include the purposes expressed in its Preamble and reasonably covered in all its provisions. It is
unnecessary to express all those objectives in the title or that the latter be an index to the body of
the decree.
2. The foregoing provision is allied and germane to, and is reasonably necessary for the
accomplishment of the general object of the decree, which is the regulation of the video industry
through the VRB as expressed in its title. The tax provision is not inconsistent with nor foreign to
the general subject and title. As a tool for regulation it is simply one of the regulatory and
control mechanisms scattered throughout the decree.
3. The express purpose of PD 1987 to include taxation of the video industry in order to regulate
and rationalize the heretofore uncontrolled distribution of videos is evident from Preambles 2
and 5. Those preambles explain the motives of the lawmaker in presenting the measure.

MIAA vs. City of Paraaque

GR 155650 July 20, 2006

Facts:
MIAA operates the NAIA complex in paraaque under EO 903. On June 28, 2001
MIAA received final notices of real estate tax delinquency from the city for the taxable year
1992-2001. Consequently, the city issue notice for levy on the airport land and buildings. MIAA
opposed the levy and contended that SEC. 21 of EO 903 specifically exempts it from the
payment of real estate tax. MIAA invokes the principle that the government cannot tax itself.
Issue: Is the MIAA liable for real estate taxes?
Ruling:
No. MIAA is not a GOCC but a government instrumentality vested with corporate
powers to perform efficiently government functions. A government instrumentality falls under
sec 133(o) of the LGC which limits the taxing powers of LGUs. The LGC recognize that the
LGUs cannot tax the national government, which delegated the power to tax. Moreover, the
airport lands and buildings of MIAA are owned by the republic is not taxable pursuant to Sec
234 (a) of the LGC.