Kasamahan Realty Development Corporation (Now Known As Stag Trading Corporation) v. Commissioner of Internal Revenue, CTA Case No.

6204, February 16, 2005 OMISSION TO COMPLY WITH A MATERIAL REQUIREMENT OF TAX-FREE EXCHANGE RULING ISSUED TO TAXPAYER CONSTITUTES SUFFICIENT GROUND TO APPLY 10-YEAR PRESCRIPTIVE PERIOD TO ASSESS DEFICIENCY TAXES. Facts: In 1992, Company A assigned two parcels of land in favor of Company B in exchange B shares of stock in a tax-free exchange. The companies obtained a ruling confirming the tax-free nature of the transaction (the Tax-Free Exchange Ruling). Thereafter, in 1995, Company A and Company B executed a reformation of instrument to reflect the true intent of the parties to include in the tax-free exchange not only the transfer of lots but also the improvements. Held: Company B failed to furnish the BIR a copy of the reformation instrument including the improvements in the tax-free exchange transaction. It also did not offer to pay the corresponding deficiency DST, or amend the return to reflect the true and correct value of properties transferred in its name. Company B also failed to comply with RMO No. 26-92, as well as the Tax-Free Exchange Ruling issued to it, requiring it to file, together with its income tax return, the following: (i) a complete description of the properties received pursuant to the tax-free exchange; (ii) a statement of the original acquisition cost or other basis of the properties in the hands of the transferor and the adjusted cost basis thereof at the time of the transfer; and (iii) information with respect to the capital stock of the corporation. Furthermore, the Deed of Exchange filed with the BIR is false, incomplete and erroneous. The material omission constitutes sufficient ground to apply the 10-year prescriptive period. CARLOS SUPERDRUG CORP., ET. AL. vs. DSWD G.R. No. 166494 June 29, 2007 FACTSPetitioners are domestic corporations and proprietors operating drugstores in the Philippines. Meanwhile, AO 171 or the Policies and Guidelines to Implement the Relevant Provisions of Republic Act 9257, otherwise known as the Expanded Senior Citizens Act of 2003 was issued by the DOH, providing the grant of twenty percent (20%) discount in the purchase of unbranded generic medicines from all establishments dispensing medicines for the exclusive use of the senior citizens. DOH issued Administrative Order No 177 amending A.O. No. 171. Under A.O.No. 177, the twenty percent discount shall not be limited to the purchase of unbranded generic medicines only, but shall extend to both prescription and non-prescription medicines whether branded or generic. Thus, it stated that [t]he grant of twenty percent(20%) discount shall be provided in the purchase of medicines from all establishments dispensing medicines for the exclusive use of the senior citizens. Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of private property. Compelling drugstore owners and establishments to grant the discount will result in a loss of profit and capital because 1)drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated for the discount. RULING:The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit. This constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation. Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a government program. The Court believes so. The law grants a twenty percent discount to senior citizens for medical and dental services, and diagnostic and laboratory fees; admission fees charged by theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments, restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that business establishments extending the twenty percent discount to senior citizens may claim the discount as a tax deduction. The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response to conditions and circumstances, thus assuring the greatest benefits. Accordingly, it has been described as the most essential, insistent and the least limitable of powers, extending as it does to all the great public needs. It is [t]he power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the subjects of the same.

For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the primacy of police power because property rights, though sheltered by due process, must yield to general welfare. Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the provision in question, there is no basis for its nullification in view of the presumption of validity which every law has in its favor. Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is unduly oppressive to their business, because petitioners have not taken time to calculate correctly and come up with a financial report, so that they have not been able to show properly whether or not the tax deduction scheme really works greatly to their disadvantage. The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing component of the business. While the Constitution protects property rights, petitioners must accept the realities of business and the State, in the exercise of police power, can intervene in the operations of a business which may result in an impairment of property rights in the process. Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept for the protection of property, various laws and jurisprudence, particularly on agrarian reform and the regulation of contracts and public utilities, continuously serve as a reminder that the right to property can be relinquished upon the command of the State for the promotion of public good.

PASCUAL VS. SEC. OF PUBLIC WORKS [110 PHIL 331; G.R. NO.L-10405; 29 DEC 1960] Facts: Petitioner, the governor of the Province of Rizal, filed an action for declaratory relief with injunction on the ground that RA 920, Act appropriating funds for public works, providing P85,000 for the construction, reconstruction, repair, extension and improvement of Pasig feeder road terminals, were nothing but projected and planned subdivision roads within Antonio Subdivision. Antonio Subdivision is owned by the respondent, Jose Zulueta, a member of the Senate of the Philippines. Respondent offered to donate the said feeder roads to the municipality of Pasig and the offer was accepted by the council, subject to a condition that the donor would submit plan of the roads and an agreement to change the names of two of the street. However, the donation was not executed, which prompted Zuleta to write a letter to the district engineer calling attention the approval of RA 920. The district engineer, on the other hand, did not endorse the letter that inasmuch the feeder roads in question were private property at the time of passage and approval of RA 920, the appropriation for the construction was illegal and therefore, void ab initio. Petitioner, prayed for RA 920 be declared null and void and the alleged deed of donation be declared unconstitutional. Lower court dismissed the case and dissolved the writ of preliminary injunction. Issue: Whether or Not the deed of donation and the appropriation of funds stipulated in RA 920 are constitutional. Held: The ruling case law rules that the legislature is without power to appropriate public revenue for anything but public purpose. The taxing power must be exercised for public purposes only and the money raised by taxation can be expended only for public purposes and not for the advantage of private individuals. In the case at bar, the legality of the appropriation of the feeder roads depend upon whether the said roads were public or private property when the bill was passed by congress or when it became effective. The land which was owned by Zulueta, the appropriation sought a private purpose and hence, null and void. The donation did not cure the nullity of the appropriation; therefore a judicial nullification of a said donation need not precede the declaration of unconstitutionality of the said appropriation. The decision appealed from is reversed. Lutz vs. Araneta GR L-7859, 22 December 1955First Division, Reyes JBL (J): 8 concur Facts: Walter Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, sought to recover the sum ofP14,6666.40 paid by the estate as taxes from the Commissioner under Section e of Commonwealth Act 567 (the Sugar Adjustment Act), alleging that such tax is unconstitutional as it levied for the aid and support of the sugar industry exclusively, which is in his opinion not a public purpose. Issue: Whether the tax is valid in supporting an industry. Held: The tax is levied with a regulatory prupose, i.e. toprovide means for the rehabilitation and stabilization of the threatened sugar industry. The act is primarily an exercise of police power, and is not a pure exercise of taxing power. As sugar production is one of the great industries of the Philippines; and that its promotion, protection and advancement redounds greatly to the general welfare, the legislature found that the general welfare demanded that the industry should be stabilized, and provided that the distribution of benefits therefrom be readjusted among its component to enable it to resist the added strain of the increase in tax that it had to sustain. Further, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by-products, etc., as well as to the improvement of living and working conditions in sugarmills and plantations, without any part of such money being channeled directly to private persons, constitute expenditure oftax money for private purposes. The tax is valid. Pascual vs. Secretary of Public Works and Communications GR L-10405, 29 December 1960

Facts: RA 920 (Act appropriating funds for public works) was enacted in 1953 containing an item (Section 1 c[a]) for the construction, reconstruction, repair, extension and improvement of Pasig feeder road terminals (the projected and planned subdivision roads, which were not yet constructed, within Antonio Subdivision owned by Senator Jose C. Zulueta). Zulueta donated said parcels of land to the Government 5 months after the enactment of RA 920, on the condition that if the Government violates such condition the lands would revert to Zulueta. The provincial governor of Rizal, Wenceslao Pascual, questioned the validity of the donation and the Constitutionality of the item in RA 920, it being not for a public purpose. Issue: Whether the item in the appropriation is valid. Held: The right of the legislature to appropriate funds is correlative with its right to tax, under constitutional provisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose, no appropriation of state funds can be made for other than a public purpose. The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon events occupying, or acts performed, subsequently thereto, unless the latter consist of an amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said statute. Herein, inasmuch as the land on which the projected feeder roads were to be constructed belonged to Senator Zulueta at the time RA 920 was passed by Congress, or approved by the President, and the disbursement of said sum became effective on20 June 1953 pursuant to Section 13 of the Act, the result is that the appropriating sough a private purpose and hence, null and void. Republic v. Bacolod-Murcia Milling Co., Inc., et al. Date: 9 July 1966 Ponente: Justice Regala Parties: Bacolod-Murcia Milling Co., Inc., Ma-ao Sugar Central Co., Inc., Talisay-Silay Milling Co., petitioners,v The Republic of the Philippines, respondent Action: Joint Appeal from Court of First Instance of Manila Summary: The three sugar centrals are sister companies under single ownership and management. They were required to pay 10 centavos per picul (around 5-6 kilos) of sugar collected for 5 crop years under Sec. 15 of RA 632. The sugar tax was levied to create Philsugin (Philippine Sugar Institute), to conduct research and development for sugar and sugar by-products. Philsugin acquired the Insular Sugar Refinery and lost a lot of money Appellants stopped paying the levy because they said that the purchase was unauthorized by RA 632. They had unpaid balances The Court of First Instance said that they had to pay the balance, and the Supreme Court affirmed its decision Definitions: Special assessments: a levy on property where the property against which it islevied derives special benefits from how the money was used (in normal peoplespeak: whatever this tax is spent on will benefit those who paid the tax) RA 632: Philippine Sugar Institute charter; where Philsugin is a semi-public corporation meant to advance the Philippine sugar industry (research, marketing, etc.) O Section 15 of RA 632: to raise funds for Philsugin, annual sugar production will be levied 10c per picul of sugar collected for 5 crop years, (c.y. 1951-52 to 1956). The amount will be borne by sugar centrals and sugar cane planters Facts: CFI case: O Appellants and another sugar central, Central Azucarera del Danao, had unpaid balance: Bacolod-Murcia:P216,070.50 Ma-ao:P235,800.20 Talisay-Silay:P208,193.74 Danao:P48,059.77 O 3 Sept 1951: Philsugin acquired the Insular Sugar Refinery through the sugar tax imposed by RA632 O 1954-57: Philsugin lots a LOT of money, and at that time, 70% of Philsugins time and effort had gone into the operation of Insular Sugar Refinery O Appellants contend that the purchase of the Insular Sugar Refinery, using money from the Philsugin fund, was not authorized by RA632 and refused to contribute to it 10c/picul is a special assessment, not a tax, and property owners who pay the assessment dont have to be forced to pay if the proceeds have been misapplied to their prejudice O Lower courts Decision: Apellants are liable for special assessments and have to pay the balance Appellants are liable under RA632 Section 3 authorizes Philsugin to buy things for sugar and its by-products, including sugar refineries Decision to purchase was made the board of directors, and the appellants were duly represented by the Philippine Sugar Association, of which the appellants are members All of Philsugins transactions pass through the General Auditor, the Office of the President, and other pertinent authorities and safeguards in order to ensure that purchases (including that of the refinery) had been legal and proper

Appellants refusal to pay is like a taxpayer refusing to pay taxes; itsdangerous to allow their motion because they were essentially takingthe law into their own hands In the PRESENT, the appellants say that: O Under Section 3 of RA632, Philsugin had no authority to acquire the refinery. Philsugin is empowered to purchase a central experiment station or at most a sugar central, not a sugar refinery. Cited Collector v Ledesma: definition; sugar central=sugar mill that manufacture sugar for a number of plantations O Refusal to pay an assessment is different from refusal to pay a tax, since a tax is different from an assessment O The imposition of a special assessment on property owners who wont benefit from it is a denial of due process Issue: Did the CFI make the right call in ruling that the defendants are liable for the special assessments under RA 632? Ruling: Supreme Court finds for the appellee; CFI decision is AFFIRMED, with costs Cited Lutz v Araneta: Section 6 of CA 567 (sugar adjustment act) levies a tax to accrue to the Sugar Adjustment and Stabilization Fund O SC said that the assailed tax was levied to help rehabilitate and stabilize the threatened sugar industry (history lesson: before, the Philippines was a sugar cartel with the US as its top customer, but the Act that enabled it to supply the US with sugar was expiring) O The sugar industry was a leading exporter and employer and a prime source of foreign exchange and state wealth such that its welfare redounds to general welfare O The assailed act is therefore an exercise of POLICE POWER because of its importance to general welfare Like in the Lutz v Araneta case, Section 5 of RA632 is an exercise of police power Under Section 2 of RA632, Philsugin is authorized to do research for the sugarindustry in all its phases, which justifies its acquisition of the Insular SugarRefinery The experience is technically NOT a loss to the industry: through Philsugins purchase, there is now a better appreciation for the management problems faced by sugar centrals Bagatsing vs. Ramirez GR L-41631, 17 December 1976En Banc, Martin (J): 7 concur, 1 concur withqualification, 1 reserved vote Facts: In 1974, the Municipal Board of Manila enacted Ordinance7522, regulating the operation of public markets and prescribing fees for the rentals of stalls and providing penalties forviolation thereof. The Federation of Manila Market Vendors Inc.assailed the validity of the ordinance, alleging among othersthe non-compliance to the publication requirement under the Revised Charter of the City of Manila. Issue: Whether the publication requirement was complied with. Held: The Revised Charter of the City of Manila is a special actsince it relates only to the City of Manila, whereas the LocalTax Code id a general law because it applies universally to alllocal governments. Section 17 of the Charter speaks ofordinance in general. Whereas, Section 43 of the Local TaxCode relates to ordinances levying or imposing taxes, fees orother charges in particular. While the Charter requires publication, before the enactment of the ordinance and afterapproval thereof, in two daily newspapers of the generalcirculation in the city, the Local Tax Code only prescribes forpublication widely circulated within the jurisdiction of thelocal government or by posting the ordinance in the locallegislative hall or premises and in two other conspicuous placeswithin the territorial jurisdiction of the local government.Being a general law with a special provision applicable in thecase, the Local Tax Code prevails.

Planters Products v. Fertiphil Corp. G.R. 166006 March 14, 2008 FACTS: Philippine Planters Products (PPI) and Fertiphil Corp. are private corporations incorporated under Philippine laws, which are both engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals. On June 3, 1985, Pres. Ferdinand Marcos issued LOI No. 1465 which provided, among others, for the imposition of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers in the Philippines. Pursuant to the aforementioned LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the domestic market to the Fertilizer and Pesticide Authority (FPA), which remitted the amount collected to the Far East Bank and Trust Company, the depository bank of PPI. After the 1986 EDSA revolution, FPA voluntarily stopped the imposition of the P10 levy, for which Fertiphil demanded PPI a refund of the amounts it paid under LOI No. 1465. But then, PPI refused to give in to the demand. With that, Fertiphil filed a complaint for collection and damages against FPA and PPI with the RTC in Makati. It questioned the constitutionality of LOI No. 1465 for being unjust and unreasonable, and favoring one privately owned corporation, which is the PPI. RTC's decision on November 20, 1991 favored Fertiphil and ordered the latter to pay a certain sum of the previously collected amount with an interest, and some other fees. ISSUE: Is the P10 assessment on fertilizer sale a valid exercise of taxation?

HELD: No. An inherent limitation on the power of taxation is public purpose. Taxes are exacted on for a public purpose and cannot be used for purely private purposes or for exclusive benefit of private persons. The LOI expressly provided that the levy be imposed to benefit PPI, a private company. Thus, this already exceeded the limitation which taxes are supposed to be limited to, inherently and naturally. Even if the levy was acted for the enforcement of police powers, it is still unconstitutional because it did not promote public interest. Being void, Fertiphil is not required to pay the levy. All levies paid should be refunded in accordance with the general civil code principle against unjust enrichment: "Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary. When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern." The petition was denied.

COMMISSIONER OF IR VS CENTRAL LUZON DRUG CORP GR 148512June 26, 2006 FACTS: This is a petition for review under Rule 45 of Rules of Court seeking the nullification of CA decision granting respondents claim for tax equal to the amount of the 20% that it extended to senior citizens on the latters purchases pursuant to Senior Citizens Act. Respondent deducted the total amount of Php219,778 from its gross income for the taxable year 1995 whereby respondent did not pay tax for that year reporting a net loss of Php20,963 in its corporate income tax. In 1996, claiming that the Php219,778 should be applied as a tax credit, respondent claimed for refund in the amount of Php150, 193. ISSUE: Whether or not the 20% discount granted by the respondent to qualified senior citizens may be claimed as tax credit or as deduction from gross sales? RULING: Tax credit is explicitly provided for in Sec4 of RA 7432. The discount given to Senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. The tax credit that is contemplated under this Act is a form of just compensation, not a remedy for taxes that were erroneously or illegally assessed and collected.In the same vein, prior payment of any tax liability is a pre-condition before a taxable entity can benefit from tax credit.The credit may be availed of upon payment, if any. Where there is no tax liability or where a private establishment reports a net loss for the period, the tax credit can be availed of and carried over to the next taxable year. CIR vs FORTUNE TOBACCO G.R. Nos. 167274-75 July 21, 2008 Ruling: Finally, the Commissioners contention that a tax refund partakes the nature of a tax exemption does not apply to the tax refund to which Fortune Tobacco is entitled. There is parity between tax refund and tax exemption only when the former is based either on a tax exemption statute or a tax refund statute. Obviously, that is not the situation here. Quite the contrary, Fortune Tobaccos claim for refund is premised on its erroneous payment of the tax, or better still the governments exaction in the absence of a law. Tax exemption is a result of legislative grace. And he who claims an exemption from the burden of taxation must justify his claim by showing that the legislature intended to exempt him by words too plain to be mistaken.[27] The rule is that tax exemptions must be strictly construed such that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention.[28] A claim for tax refund may be based on statutes granting tax exemption or tax refund. In such case, the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes of the nature of an exemption, a legislative grace, which cannot be allowed unless granted in the most explicit and categorical language. The taxpayer must show that the legislature intended to exempt him from the tax by words too plain to be mistaken. Tax refunds (or tax credits), on the other hand, are not founded principally on legislative grace but on the legal principle which underlies all quasi-contracts abhorring a persons unjust enrichment at the expense of another.[30] The dynamic of erroneous payment of tax fits to a tee the prototypic quasi-contract, solutio indebiti, which covers not only mistake in fact but also mistake in law.[31] The Government is not exempt from the application of solutio indebiti.[32] Indeed, the taxpayer expects fair dealing from the Government, and the latter has the duty to refund without any unreasonable delay what it has erroneously collected.[33] If the State expects its taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjustly enrich itself at the expense of taxpayers.[34] And so, given its essence, a claim for tax refund necessitates only preponderance of evidence for its approbation like in any other ordinary civil case. Under the Tax Code itself, apparently in recognition of the pervasive quasi-contract principle, a claim for tax refund may be based on the following: (a) erroneously or illegally assessed or collected internal revenue taxes; (b) penalties imposed without authority; and (c) any sum alleged to have been excessive or in any manner wrongfully collected.[35] cralawWhat is controlling in this case is the well-settled doctrine of strict interpretation in the imposition of taxes, not the similar doctrine as applied to tax exemptions. The rule in the interpretation of tax laws is that a statute will not be

construed as imposing a tax unless it does so clearly, expressly, and unambiguously. A tax cannot be imposed without clear and express words for that purpose. Accordingly, the general rule of requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication. In answering the question of who is subject to tax statutes, it is basic that in case of doubt, such statutes are to be construed most strongly against the government and in favor of the subjects or citizens because burdens are not to be imposed nor presumed to be imposed beyond what statutes expressly and clearly import.[36] As burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax laws.[37]

Abakada Guro v. Ermita G.R. No. 168056, July 5, 2005 Facts: Motions for Reconsideration filed by petitioners, ABAKADA Guro party List Officer and et al., insist that the bicameral conference committee should not even have acted on the no pass-on provisions since there is no disagreement between House Bill Nos. 3705 and 3555 on the one hand, and Senate Bill No. 1950 on the other, with regard to the no pass-on provision for the sale of service for power generation because both the Senate and the House were in agreement that the VAT burden for the sale of such service shall not be passed on to the end-consumer. As to the no pass-on provision for sale of petroleum products, petitioners argue that the fact that the presence of such a no pass-on provision in the House version and the absence thereof in the Senate Bill means there is no conflict because a House provision cannot be in conflict with something that does not exist. Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional imperative on exclusive origination of revenue bills under Section 24 of Article VI of the Constitution when the Senate introduced amendments not connected with VAT. Petitioners Escudero, et al., also reiterate that R.A. No. 9337s stand- by authority to the Executive to increase the VAT rate, especially on account of the recommendatory power granted to the Secretary of Finance, constitutes undue delegation of legislative power. They submit that the recommendatory power given to the Secretary of Finance in regard to the occurrence of either of two events using the Gross Domestic Product (GDP) as a benchmark necessarily and inherently required extended analysis and evaluation, as well as policy making. Petitioners also reiterate their argument that the input tax is a property or a property right. Petitioners also contend that even if the right to credit the input VAT is merely a statutory privilege, it has already evolved into a vested right that the State cannot remove. Issue: Whether or not the R.A. No. 9337 or the Vat Reform Act is constitutional? Held: The Court is not persuaded. Article VI, Section 24 of the Constitution provides that 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. The Court reiterates that in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. In the same breath, the Court reiterates its finding that it is not a property or a property right, and a VAT-registered persons entitlement to the creditable input tax is a mere statutory privilege. As the Court stated in its Decision, the right to credit the input tax is a mere creation of law. More importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through which such end shall be accomplished is for the legislature to choose so long as it is within constitutional bounds. The Motions for Reconsideration are hereby DENIED WITH FINALITY. The temporary restraining order issued by the Court is LIFTED.

Batangas Power Corporation vs. Batangas City, G.R. No. 152675, April 28, 2004 Facts: In the early 1990s, power outages lasted 8-12 hours daily and power generation was badly needed. Thegovernment, through the National Power Corporation (NPC), sought to attract investors in power plant operations byproviding them with incentives, one of which was through the NPCs assumption of payment of their taxes in the BuildOperate and Transfer (BOT) Agreement.On June 29, 1992, Enron Power Development Corporation (Enron) and petitioner NPC entered into a Fast Track BOTProject. Enron agreed to supply a power station to NPC and transfer its plant to the latter after ten (10) years of operation.Section 11.02 of the BOT Agreement provided that NPC shall be responsible for the payment of all taxes that may beimposed on the power station, except income taxes and permit fees. Subsequently, Enron assigned its obligation under the BOT Agreement to petitioner Batangas Power

Corporation (BPC). On September 23, 1992, the BOI issued a certificate of registration to BPC as a pioneer enterprise entitled to a taxholiday for a period of six (6) years. On October 12, 1998, Batangas City sent a letter to BPC demanding payment of business taxes and penalties, commencing from the year 1994, BPC refused to pay, citing its tax-exempt status as apioneer enterprise for six (6) years under Section 133 (g) of the Local Government Code (LGC). The citys tax claimwas modified and demanded payment of business taxes from BPC only for the years 1998-1999. BPC still refused to paythe tax. It insisted that its 6-year tax holiday commenced from the date of its commercial operation on July 16,1993, not from the date of its BOI registration in September 1992.In the alternative, BPC asserted that the city should collect the tax from the NPC as the latter assumed responsibilityfor its payment under their BOT Agreement. On August 26, 1999, the NPC intervened. While admitting assumption of BPCs tax obligations under their BOT Agreement, NPC refused to pay BPCs business tax as it allegedly constituted anindirect tax on NPC which is a tax-exempt corporation under its Charter. BPC filed a petition for declaratory relief12 with the Makati RTC against Batangas City and NPC. It alleged that under theBOT Agreement, NPC is responsible for the payment of such taxes but as NPC is exempt from taxes, both the BPC and NPC are not liable for its payment. Makati RTC dismissed the petition and held that: (1) BPC is liable to pay business taxes to the city; (2) NPCs taxexemption was withdrawn with the passage of R.A. No. 7160 (The Local Government Code) ; and, (3) the 6-year taxholiday granted to pioneer business enterprises starts on the date of registration with the BOI as provided in Section 133(g) of R.A. No. 7160, and not on the date of its actual business operations. Issue: Whether or not NPCs tax exemption privileges under its Charter were withdrawn by Section 193 of the LocalGovernment Code (LGC). Held: Yes. The effect of the LGC on the tax exemption privileges of the NPC has already been extensively discussed andsettled in the recent case of National Power Corporation v. City of Cabanatuan. In said case, this Court recognized theremoval of the blanket exclusion of government instrumentalities from local taxation as one of themost significant provisions of the 1991 LGC. Specifically, we stressed that Section 193 of the LGC, an express andgeneral repeal of all statutes granting exemptions from local taxes,withdrew the sweeping tax privileges previouslyenjoyed by the NPC under its Charter. The power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority tolevy taxes, fees and other charges pursuant to Article X, section 5 of the 1987 Constitution. The LGC is considered as themost revolutionary piece of legislation on local autonomy, the LGC effectively deals with the fiscal constraints faced byLGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws.Neither can the NPC successfully rely on the Basco case as this was decided prior to the effectivity of the LGC, whenthere was still no law empowering local government units to tax instrumentalities of the national government. Thus, while BPC remains to be the entity doing business in said city, it is the NPC that is ultimately liable to pay saidtaxes under the provisions of both the 1992 BOT Agreement and the 1991 Local Government Code. Other Issue: Whether BPCs 6-year tax holiday commenced on the date of its BOI registration as a pioneer enterprise oron the date of its actual commercial operation as certified by the BOI. Sec. 133 (g) of the LGC, which proscribes local government units (LGUs) from levying taxes on BOI-certified pioneer enterprises for a period of six years from the date of registration, applies specifically to taxes imposed by the local government, like the business tax imposed by Batangas City on BPC in the case at bar. The 6-year tax exemption of BPC should thus commence from the date of BPCs registration with the BOI