Part A: Local Taxation and Real Property Taxation On April 13, 1974, P.D.

4, P.D. 436 was promulgated increasing the

I. Local Taxation specific tax on lubricating oils, gasoline, bunker fuel oil,
A. Taxing Power of the LGUs diesel fuel oil and other similar petroleum products levied
1. Legal Basis under Sections 142, 144 and 145 of the NIRC, and granting
Section 128-196 provinces, cities and municipalities certain shares in the
Section 5, Art. X, 1987 specific tax on such products in lieu of local taxes imposed on
Constitution petroleum products. The questioned Municipal Tax
Ordinance No. 1 was reviewed and approved by the
Phil Petroleum Corp vs Mun of Pililia 1991 Provincial Treasurer of Rizal, but was not implemented
and/or enforced by the Municipality of Pililla because of its
Facts: Petitioner is a business enterprise engaged in the
having been suspended up to now in view of Provincial
manufacture of lubricated oil basestock which is a petroleum
Circular Nos. 26-73 and 26 A-73.
product, with its refinery plant situated at Malaya, Pililla,
Rizal. PPC owns and maintains an oil refinery including 49 On June 3, 1977, P.D. 1158 otherwise known as the National
storage tanks for its petroleum products in Malaya, Pililla, Internal Revenue Code of 1977 was enacted, Section 153 of
Rizal. Under Section 142 of the NIRC of 1939, manufactured which specifically imposes specific tax on refined and
oils and other fuels are subject to specific tax. manufactured mineral oils and motor fuels.

On June 28, 1973, PD 231 (Local Tax Code) was issued Enforcing the provisions of the ordinance, the respondent
enacted. Sections 19 and 19 (a) provide that the municipality filed a complaint against PPC for the collection of the
may impose taxes on business, except on those for which business tax from 1979 to 1986; storage permit fees from
fixed taxes are provided on manufacturers, importers or 1975 to 1986; mayor's permit and sanitary inspection fees
producers of any article of commerce of whatever kind or from 1975 to 1984. PPC, however, have already paid the last-
nature, including brewers, distillers, rectifiers, repackers, named fees starting 1985. The RTC rendered a decision
and compounders of liquors, distilled spirits and/or wines in against petitioner.
accordance with the schedule listed therein.

The Secretary of Finance issued Provincial Circular No. 26-73

(December 27, 1973) directed to all provincial, city and Issue: WON PPC whose oil products are subject to specific
municipal treasurers to refrain from collecting any local tax tax under the NIRC, is still liable to pay (a) tax on business
imposed in old or new tax ordinances in the business of and (b) storage fees, considering Provincial Circular No. 6-
manufacturing, wholesaling, retailing, or dealing in 77; and mayor's permit and sanitary inspection fee unto the
petroleum products subject to the specific tax under the respondent Municipality of Pililla, Rizal, based on Municipal
NIRC. Provincial Circular No. 26 A-73 (January 9, 1973)was Ordinance No. 1
also issued instructing all City Treasurers to refrain from
collecting any local tax imposed in tax ordinances enacted Held: Yes
before or after the effectivity of the Local Tax Code, on the
Ratio: PPC contends that: (a) Provincial Circular No. 2673
businesses of manufacturing, wholesaling, retailing, or
declared as contrary to national economic policy the
dealing in, petroleum products subject to the specific tax
imposition of local taxes on the manufacture of petroleum
under the NIRC.
products as they are already subject to specific tax under the
Respondent enacted Municipal Tax Ordinance No. 1, S-1974 National Internal Revenue Code; (b) the above declaration
otherwise known as "The Pililla Tax Code of 1974" which covers not only old tax ordinances but new ones, as well as
took effect on July 1, 1974. Sections 9 and 10 of the said those which may be enacted in the future; (c) both Provincial
ordinance imposed a tax on business, except for those for Circulars (PC) 26-73 and 26 A-73 are still effective, hence,
which fixed taxes are provided in the Local Tax Code on unless and until revoked, any effort on the part of the
manufacturers, importers, or producers of any article of respondent to collect the suspended tax on business from
commerce of whatever kind or nature, including brewers, the petitioner would be illegal and unauthorized; and (d)
distillers, rectifiers, repackers, and compounders of liquors, Section 2 of P.D. 436 prohibits the imposition of local taxes
distilled spirits and/or wines in accordance with the on petroleum products.
schedule found in the Local Tax Code, as well as mayor's
PC No. 26-73 and PC No. 26 A-73 suspended the effectivity of
permit, sanitary inspection fee and storage permit fee for
local tax ordinances imposing a tax on business under
flammable, combustible or explosive substances, while
Section 19 (a) of the Local Tax Code, with regard to
Section 139 of the disputed ordinance imposed surcharges
manufacturers, retailers, wholesalers or dealers in
and interests on unpaid taxes, fees or charges .
petroleum products subject to the specific tax under the municipality as what is envisioned in Section 37 of the same
NIRC, in view of Section 22 (b) of the Code regarding non- Code.
imposition by municipalities of taxes on articles, subject to
specific tax under the provisions of the NIRC. Section 10 (z) (13) of Pililla's Municipal Tax Ordinance No. 1
prescribing a permit fee is a permit fee allowed under
There is no question that Pililla's Municipal Tax Ordinance Section 36 of the amended Code.
No. 1 imposing the assailed taxes, fees and charges is valid
especially Section 9 (A) which according to the trial court As to the authority of the mayor to waive payment of the
"was lifted in toto and/or is a literal reproduction of Section mayor's permit and sanitary inspection fees, the trial court
19 (a) of the Local Tax Code as amended by P.D. No. 426." It did not err in holding that "since the power to tax includes
conforms with the mandate of said law. the power to exempt thereof which is essentially a legislative
prerogative, it follows that a municipal mayor who is an
But P.D. No. 426 amending the Local Tax Code is deemed to executive officer may not unilaterally withdraw such an
have repealed Provincial Circular Nos. 26-73 and 26 A-73 expression of a policy thru the enactment of a tax." The
issued by the Secretary of Finance when Sections 19 and 19 waiver partakes of the nature of an exemption. It is an
(a), were carried over into P.D. No. 426 and no exemptions ancient rule that exemptions from taxation are construed in
were given to manufacturers, wholesalers, retailers, or strictissimi juris against the taxpayer and liberally in favor of
dealers in petroleum products. the taxing authority. Tax exemptions are looked upon with
disfavor. Thus, in the absence of a clear and express
Well-settled is the rule that administrative regulations must exemption from the payment of said fees, the waiver cannot
be in harmony with the provisions of the law. In case of be recognized. As already stated, it is the law-making body,
discrepancy between the basic law and an implementing rule and not an executive like the mayor, who can make an
or regulation, the former prevails. Furthermore, while exemption. Under Section 36 of the Code, a permit fee like
Section 2 of P.D. 436 prohibits the imposition of local taxes the mayor's permit, shall be required before any individual
on petroleum products, said decree did not amend Sections or juridical entity shall engage in any business or occupation
19 and 19 (a) of P.D. 231 as amended by P.D. 426, wherein under the provisions of the Code.
the municipality is granted the right to levy taxes on
business of manufacturers, importers, producers of any However, since the Local Tax Code does not provide the
article of commerce of whatever kind or nature. A tax on prescriptive period for collection of local taxes, Article 1143
business is distinct from a tax on the article itself. Thus, if the of the Civil Code applies. Said law provides that an action
imposition of tax on business of manufacturers, etc. in upon an obligation created by law prescribes within ten (10)
petroleum products contravenes a declared national policy, years from the time the right of action accrues. The
it should have been expressly stated in P.D. No. 436. Municipality of Pililla can therefore enforce the collection of
the tax on business of petitioner PPC due from 1976 to 1986,
The exercise by local governments of the power to tax is and NOT the tax that had accrued prior to 1976.
ordained by the present Constitution. To allow the
continuous effectivity of the prohibition set forth in PC No. 2. Power to Create Sources of
26-73 (1) would be tantamount to restricting their power to Funds
tax by mere administrative issuances. Under Section 5, Section 129, LGC
Article X of the 1987 Constitution, only guidelines and
limitations that may be established by Congress can define Mactan Cebu Airport vs Marcos (See Lucy’s notes)
and limit such power of local governments.
The power to tax is primarily vested in the Congress but our
Provincial Circular No. 6-77 enjoining all city and municipal jurisdiction, it may be exercised by local legislative bodies,
treasurers to refrain from collecting the so-called storage fee no longer merely by virtue of a valid delegation but pursuant
on flammable or combustible materials imposed in the local to direct authority conferred by the Constitution.
tax ordinance of their respective locality frees petitioner PPC
NPC vs City of Cabanatuan 2003
from the payment of storage permit fee.
Section 3 of Article X of the Consti mandates Congress to
The storage permit fee being imposed by Pililla's tax
enact a local government code that will, consistent with the
ordinance is a fee for the installation and keeping in storage
basic policy of local autonomy, set the guidelines and
of any flammable, combustible or explosive substances.
limitations to this grant of taxing powers.
Inasmuch as said storage makes use of tanks owned not by
the municipality of Pililla, but by petitioner PPC, same is Considered as the most revolutionary piece of legislation on
obviously not a charge for any service rendered by the local autonomy, the LGC effectively deals with the fiscal
constraints faced by the LGUs. It widens the tax base of LGUs manifest and it must be convincingly demonstrated that the
to include taxes which were prohibited by previous laws two laws are so clearly repugnant and patently inconsistent
such as the imposistion of taxes on forest products, forest that they cannot co-exist.
concessionarires, mineral products, mining operations and
the like. The magic words contained in the phrase shall be in lieu of
all taxes have to give way to the peremptory language of the
The LGC likewise provides enough flexibility to impose tax LGC specifically providing for the withdrawal of such
rates in accordance with their need and capabilities. It does exemption privileges.
not prescribe graduated fixed rates but merely specifies the
minimum and maximum tax rates and leaves the The LGC was enacted in pursuance of the constitutional
determination of the actual rates to the respective policy to ensure autonomy to local governments and to
sanggunian. enable them to attain fullest development of self-reliant
communities.
One of the most significant provisions of the LGC is the
removal of the blanket exclusion of instrumentalities and These policy considerations are consistent with the State
agencies of the national government from the coverage of policy to ensure autonomy to local governments and the
local taxation. Although as a general rule, LGUs cannot objective of the LGC that they enjoy genuine and meaningful
impose taxes, fees, or charges of any kind on the National local autonomy to enable them to attain their fullest
Government, its agencies and instrumentatlies, this rule now development as self-reliant communities and make them
admits an exception, i.e. when specific provisions of the LGC effective partners in the attainment of national goals. The
authorize the LGUs to impose taxes, fees or charges on the power to tax is the most effective instrument to raise needed
aforementioned entities. revenues to finance and support myriad activities of local
government units for the delivery of basic services essential
Section 133 (o), Section 151 in relation to section 137 clearly to the promotion of the general welfare and the
authorizes the respondent city govt to impose on the enhancement of peace, progress, and prosperity of the
petitioner the franchise tax in question. people.

Section 137 of the LGC clearly states that the LGUs can Reason for the withdrawal: the tax exemption resulted in
impose franchise tax “notwithstanding any exemption serious tax base erosion and distortions in the tax treatment
granted by any law or other special law.” This particular of similarly situated enterprises, and there was a need for
provision of the LGC does not admit any exception. these entities to share in the requirements of development,
fiscal or otherwise, by paying the taxes and other charges
Section 193 buttresses the withdrawal of extant tax due from them.
exemption privileges by stating that unless otherwise
provided in this Coe, tax exemptions or incentives granted to Iloilo Bottlers Inc vs City of Iloilo 1998
or presently enjoyed by all person, whether natural or
juridical, including government-owned or controlled The tax imposed under Ordinance No.. 5 is an excise tax. It is
corporations except (1) local water districts (2) cooperatives a tax on the privilege of distributing, manufacturing or
duly registered under RA 6938, (3) nonstick and non-profit bottling softdrinks. Being an excise tax, it can be levied bu
hospitals and educational institutions, are withdrawn upon the taxing authority only when the acts, privileges or
the effectivity of this code, the obvious import is to limit the businesses are done or performed within the jurisdiction of
exemptions to the three enumerated entities. said authority. Specifically, the situs of the act of distributing,
bottling or manufacturing softdrinks must be within city
Section 192: empowers the LGU through ordinances duly limits, before an entity engaged in any of the activities may
approved, to grant tax exemptions, initiatives or reliefs. be taxed in Iloilo.

City Government of San Pablo Laguna vs Reyes 1999 3. Fundamental Principles

Section 130 and 132, LGC
Section 543 (f): general repealing clause.
Pepsi-Cola Bottling Co. vs City of Cabanatuan 1968
Issue: WON there was an implied repeal by RA 7160 of the
MERALCO’s franchise insofar as the latter imposes a 2% tax It is true that the uniformity essential to the valid exercise of
in lieu of all taxes and assessments of whatever nature. YES. the power of taxation does not require identity or equality
under all circumstances, or negate the authority to classify
A general law cannot be construed to have repealed a special the objects of taxation. The classification made in the
law by mere implication unless the intent to repeal or alter is exercise of this authority to be valid must however be
reasonable and this requirement is not deemed satisfied purpose—that of “financing the growth and development of
unless: the sugar industry and all its components, stabilization of the
domestic market including the foreign market.” The fact that
1) It is based upon substantial distinctions which make the State has taken possession of moneys pursuant to law is
real differences sufficient to constitute them state funds, even though they
2) These are germane to the purpose of the legislation are held for a special purpose.
or ordinance
3) The classification applies, not only to present Having been levied for a special purpose, the revenues
conditions, but also, to future conditions collected are to be treated as a special fund, to be, in the
substantially identical to those of the present language of the statue, “administered in trust” for the
4) The classification applies equally to all those who purpose intended. Once the purpose has been fulfilled or
belong to the same class. abandoned, the balance, if any is to be transferred to the
general funds of the Government.
These conditions are not fully met by the ordinance in
question. Indeed, if its purpose were merely to levy a burden Stabilization Fund as a special fund is emphasized by the fact
upon the sale of soft drinks or carbonated beverages, there is that the funds are deposited in the Philippine National Bank
no reason why sales thereof by dealers other than agents or and not in the Philippine treasury, which may be paid out
consignees of producers or merchants established outside only in pursuance of an appropriation made by law.
the City of Butuan should be exempt from tax.
Progressive Development Corporation vs QC 1989
City of Baguio vs De Leon 1968
Both the Local Autonomy Act and the Charter of responded
Where, as here, Congress has expressed its intention, the clearly show that respondent is authorized to fix the lices fee
statute must be sustained even though double taxation collective from and regulate the business of petitioner as
results. operator of privately owned market.

Argument against double taxation may not be invoked where License fee distinguished from tax: The former is imposed in
one tax is imposed by the state and the other is imposed by the exercise of police power primarily for the purposes of
the city xxx it being widely recognized that there is nothing regulation, while the latter is imposed under the taxing
inherently obnoxious in the requirement that license fees or power primarily for purposes of raising revenues. Thus if the
taxes be exacted with respect to the same occupation, calling generating of revenue is the primary purpose and regulation
or activity by both the state and the political subdivisions is merely incidental, the imposition is a tax; but if regulation
thereof. is the primary purpose, the fact that incidentally revenue is
also obtained does not make the imposition a tax.
A tax is considered uniform when it operates with the same
force and effect in every place where the subject may be To be considered a license fee, the imposition questioned
found. must relate to an occupation or activity that so engages the
pulic interest in healt morals, safety and development as to
Equality in taxation means that all taxable articles or kinds of require regulation for the protection and promotion of such
property of the same class shall be taxed at the same rate. public interest; the imposition must also bear a reasonable
The taxing power has the authority to make reasonable and realtion to the probably expenses of regulation, taking into
natural classifications for purposes of taxation. account not only the costs of direct regulation but also its
incidental consequences as well.
Gaston vs Republic Planters Bank 1988
When an activity, occupation or profession is of such a
The stabilization fees collected are in the nature of a tax,
character that inspection or superviosn by public officials is
which is within the power of the State to impose for the
reasonable necessary for the safeguarding and fuhterance of
promotion of the sugar industry.
pulci health, morals, and safety or the general welfare, the
The tax collected is not in a pure exercise of the taxing legislatire may provide that such inspection or supervision
power. It is levied with a regulatory purpose, to provide or other form of regulation shall be carried out at the
means for the stabilization of the sugar industry. The levy is expense of the persons engaged in such occupation or
primarily in the exercise of the police power of the State. performing such activity until a fee or charge sufficient to
cover the cost of the inspection or supervision has been paid.
The stabilization fees in question are levied by the State Accordingly, the charge of a fixed sum which bears no
upon sugar millers, planters, and producers for a special
relation at all to the cost of inspection and regulation may be and they must be the same kind or character of tax. It has
held to be tax rather than an exercise of the police power. been shown that a real estate tax and the tenement tax
imposed by the ordinance, although imposed by the same
The operation of a privately owned market, is correctly taxing authority, are not of the same kind of character.
noted by the Solicitor General, equivalent to or quite the
same as the operation of a government-owned market; both Taxes are uniform and equal when imposed upon all
are established for the rendition of service to the general property of the same class or character within the taxing
public, which warrants close supervision and control by the authority. The fact that the owners of other classes of
respondent City for the protection of the health of the public. buildings in the City do not pay the taxes imposed by the
Eg. Maintenance of sanitary and hygienic conditions in the ordinance in question is no argument at all against
market, compliance of all food stuffs sold therein with uniformity and equality of the tax imposition.
applicable food and drug and related standards, for the
prevention of fraud and imposition upon buying public. Ericsson Telecommunications Inc vs City of Pasig 2007

Matalin Coconut Co. Inc vs Municipal Council of WON assessed deficiency of local business taxes should be
Malabang Lanao Del Sur 1986 based on gross receipts.

Ordinance on police inspection fee Gross receipts include money or its equivalient actually or
constructively received in consideration of services rendered
The grant of power to tax under the provision of the Local or articles sold, exchanged, or leased whether actual or
Autonomy Act, which a liberal rule has been followed in constructive.
construing municipal ordinances, is sufficiently plenary to
cover everything excepting those which are mentioned Gross revenue covers money or its equivalent actually or
therein subject only to the limitation that the tax so levied is constructively received, including the value of services
for public purposes just and uniform. rendered or articles old, exchanged or leased, the payment of
which is yet to be received.
The ordinance in question partakes of the nature of a tax
although denominated as police inspection fee since its The imposition of local business tax based on petitioner’s
undeniable purpose is to raise revenue. We cannot agree gross revenue will inevitably result in the constitutionally
with the RTC that the tax imposed is a percentage tax on proscribed double taxation—taxing of the same person twice
sales which is beyong the scope of the municipalitie’s by the same jurisdiction for the same thing—inasmuch as
authority to levy under Section 2 of the LAA. Municipalities, petitioner’s revenue or income for a taxable year will
and municipal districts are prohibited from imposing any definitely include its gross receipts already reported during
percentage tax on sales or other taxes in any form based the previous year and for which local business tax has
thereon. The tax imposed in the ordinance in question is not already been paid.
a percentage tax. It is a fixed tax of P.30 per bag of cassava
Bagatsing vs Ramirez 1976
starch or flour shipped out of the municipality. It is not based
on sales. Raising of revenue is the principal object of taxation. An
ordinance which imposes rentals, permit fees, tolls and other
The tax levied must be for public purpose, just and uniform.
fees is a tax ordinance.
Police inspection fee is unjust and unreasonable.
The entrusting of the collection of market stall fees to a
Villanueva vs City of Iloilo 1968
private firm does not destroy the public purpose of a tax
A municipal license tax means an imposition or exaction on ordinance. Asiatic Integrated Corporation collects the fees
the right to use or dispose of property, to pursue a business, under a management and operating contract. The fees
occupation or calling or to exercise a privilege. collected do not go direct to the private coffers of the
coporation. The Ordinance was not for the corporation but
Double taxation: when permissible and when prohibited: for the purpose of raising revenues for the city.
Equality and uniformity of taxation: In order to constitute
double taxation in the objectionable or prohibited sense the Asiatic Integrated Corporation vs Alikpala 1975
same property must be taxed twice when it should be taxed
4. Common Limitations
but once; both taxes must be imposed on the same property
Section 133, LGC
or subject matter, for the same purpose, by the same State,
Government, or taxing authority, within the same BLGF Nov 26, 2007
jurisdiction or taxing districts during the same taxing period,
Progressive Development Corporation vs QC 1989

Philippine Petroleum Corporation vs Municipality of

Pililia

Pepsi-Cola Bottling Company vs Municipality of Tanauan

People vs Nazario

First Philippine Industrial Corporation vs CA

LTO vs City of Butuan

MCIAA vs Marcos

MIAA vs CA

B. Levy of Tax; Tax Ordinance

Section 186-193