sec 84-201

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TITLE III

Estate and Donor's Taxes

CHAPTER I

Estate Tax

SECTION 84. Rates of Estate Tax. There shall e le!"ed# assessed#

$olle$ted and %a"d &%on the transfer of the net estate as deter"ned "n a$$ordan$e

("th Se$t"ons 8) and 8* of e!er+ de$edent# (hether res"dent or nonres"dent of the

Ph"l"%%"nes# a tax ased on the !al&e of s&$h net estate# as $o%&ted "n a$$ordan$e("th the follo("n, s$hed&le-

If the net estate "s-

O!er &t Not O!er The Tax Shall e Pl&s Of the Ex$ess O!er

P/00#000 Exe%t

P/00#000 )00#000 0 )1 P/00#000

)00#000 /#000#000 P2)#000 81 )00#000

/#000#000 )#000#000 23)#000 221 /#000#000

)#000#000 20#000#000 4*)#000 2)1 )#000#000

20#000#000 And O!er 2#/2)#000 /01 20#000#000

SECTION 8). ross Estate. The !al&e of the ,ross estate of the de$edent

shall e deter"ned + "n$l&d"n, the !al&e at the t"e of h"s death of all %ro%ert+#

real or %ersonal# tan,"le or "ntan,"le# (here!er s"t&ated- Pro!"ded# ho(e!er# That

"n the $ase of a nonres"dent de$edent (ho at the t"e of h"s death (as not a $"t"5en

of the Ph"l"%%"nes# onl+ that %art of the ent"re ,ross estate (h"$h "s s"t&ated "n the

Ph"l"%%"nes shall e "n$l&ded "n h"s taxale estate.

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MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as

Regional ire!tor, Revenue Region No. "#, $ureau of Internal Revenue, %etitioners, vs.&'N. J'SE (. (ERNANE), Judge of t*e Court of (irst Instan!e of Negros '!!idental,$ran!* V, and (RANCIS A. T'N+', Administrator of t*e Estate of t*e late L-IS .T'N+', res%ondents. +.R. No. L/0"01# Mar!* 02, "343.5

SN'PSIS

In t*e !ourse of t*e intestate %ro!eedings of t*e estate of t*e late Luis . Tongo6, t*e !ourt

dismissed, and later refused to re!onsider its dismissal of, t*e Motion for Allo7an!e ofClaim and (or An 'rder of Pa6ment of Ta8es 96 t*e +overnment of t*e Re%u9li! of t*e

P*ili%%ines in t*e su9:e!t estate for defi!ien!6 in!ome ta8es on t*e ground t*at t*e !laim 7asfiled 9e6ond t*e %eriod %rovided in Se!tion ;, and 7as alread6 9arred under Se!tion < of

Rule =1 of t*e Rules of Court. &en!e, t*is a%%eal.

T*e Su%reme Court reversed t*e assailed orders and ruled t*at t*e invo>ed Rule ma>es nomention of !laims for monetar6 o9ligations of t*e de!edent !reated 96 la7? su!* as ta8es7*i!* is entirel6 of different !*ara!ter from t*e !laims e8%ressl6 enumerated t*erein, t*usne!essaril6 and im%li!ation e8!luding t*e same from its o%eration and effe!t? t*at !laims forta8es against a de!edent@s estate, as 7ell as t*e matter of %res!ri%tion t*ereof are governed96 t*e %rovisions of t*e National Internal Revenue Code? and t*at 9efore t*e in*eritan!e *as

%assed to t*e *eirs, t*e un%aid ta8es due t*e government ma6 9e !olle!ted even 7it*out its*aving 9een %resented under Se!tion ;, Rule =1 of t*e Rules of Court.

SLLA$-S

". STAT-T'R C'NSTR-CTI'N? PRINCIPLE '( EPRESSI' -NI-S ESTECL-SI' ALTERI-S APPLIE T' SECTI'N ness of t*ede!edent and :udgment for mone6 against t*e de!edent,D it ne!essaril6, and 96 im%li!ation

e8!ludes t*e same from its o%eration and effe!t, under t*e familiar rule of statutor6!onstru!tion of e8%ressio unius e8!lusio alterius.

;. TAATI'N? +'VERNIN+ R-LES. B T*e assessment, !olle!tion and re!over6 ofta8es, as 7ell as t*e matter of %res!ri%tion t*ereof are governed 96 t*e %rovisions of t*e

National Internal Revenue Code and not 96 ot*er %rovisions of la7.

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0. I.? CLAIMS ('R TAES A+AINST ECEENT@S ESTATE ARE LIENS IN (AV'R

'( T&E +'VERNMENT B Claims for ta8es against a de!edent@s estate are liens in favor oft*e +overnment of t*e P*ili%%ines from t*e time t*e assessment 7as made 96 t*eCommissioner of Internal Revenue until %aid 7it* interests, %enalties, et!. $6 virtue of su!*lien, t*e %ro%ert6 of t*e estate alread6 in t*e *ands of an *eir or transferee ma6 9e su9:e!t tot*e %a6ment of t*e ta8 due t*e estate. A fortiori, 9efore t*e in*eritan!e *as %assed to t*e*eirs, t*e un%aid ta8es due from t*e de!edent ma6 9e !olle!ted, even 7it*out its *aving 9een

%resented under Se!tion ;, Rule =1 of t*e Rules of Court.

#. I.? I.? REAS'N ('R ECEPTI'N (R'M APPLICA$ILIT '( STAT-TE '(N'N/CLAIMS B T*e reason for t*e more li9eral treatment of !laims for ta8es against ade!edent@s estate in t*e form of e8!e%tion from t*e a%%li!ation of t*e statute of non/!laims, isnot *ard to find. Ta8es are t*e liveli*ood of t*e +overnment and t*eir %rom%t and !ertainavaila9ilit6 are im%erious need. -%on ta8ation de%ends t*e +overnment a9ilit6 to serve t*e

%eo%le for 7*ose 9enefit ta8es are !olle!ted. To safeguard su!* interest, negle!t or omissionof government offi!ials entrusted 7it* t*e !olle!tion of ta8es s*ould not 9e allo7ed to 9ring

*arm or detriment to t*e %eo%le in t*e same manner as %rivate %ersons ma6 9e made tosuffer individuall6 on a!!ount of *is o7n negligen!e, t*e %resum%tion 9eing t*at t*e6 ta>e

good !are of t*eir %ersonal affairs. T*is s*ould not *old true to government offi!ials 7it*res%e!t to matters not of t*eir o7n %ersonal !on!ern. T*is is t*e %*iloso%*6 9e*ind t*e

+overnment@s e8!e%tion, as a general rule, from t*e o%eration of t*e %rin!i%le of esto%%el.

E C I S I ' N

A%%eal from t7o orders of t*e Court of (irst Instan!e of Negros '!!idental, $ran!* V inS%e!ial Pro!eedings No. 443#, entitled DIntestate Estate of Luis . Tongo6,D t*e first dated

Jul6 ;3, "313 dismissing t*e Motion for Allo7an!e of Claim and for an 'rder of Pa6ment ofTa8es 96 t*e +overnment of t*e Re%u9li! of t*e P*ili%%ines against t*e Estate of t*e late

Luis . Tongo6, for defi!ien!6 in!ome ta8es for t*e 6ears "310 and "31# of t*e de!edent int*e total amount of P0,;

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of t*e Rules of Court F%ar. #, '%%osition to Motion for Allo7an!e of Claim, %%. ;0/;#,

RolloG. (inding t*e o%%osition 7ell/founded, t*e res%ondent Judge, Jose (. (ernandeH,dismissed t*e motion for allo7an!e of !laim filed 96 *erein %etitioner, Regional ire!tor oft*e $ureau of Internal Revenue, in an order dated Jul6 ;3, "313 FAnne8 , Petition %. ;1,

RolloG. 'n Se%tem9er "=, "313, a motion for re!onsideration 7as filed, of t*e 'rder of Jul6;3, "313, 9ut 7as denied in an 'rder dated '!to9er 4, "313.

&en!e, t*is a%%eal on !ertiorari, %etitioner assigning t*e follo7ing errors

D". T*e lo7er !ourt erred in *olding t*at t*e !laim for ta8es 96 t*e government againstt*e estate of Luis . Tongo6 7as filed 9e6ond t*e %eriod %rovided in Se!tion ;, Rule =1 of t*e

Rules of Court.

;. T*e lo7er !ourt erred in *olding t*at t*e !laim for ta8es of t*e government 7asalread6 9arred under Se!tion

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of t*e de!edent and :udgment for mone6 against t*e de!edent.D -nder t*e familiar rule of

statutor6 !onstru!tion of e8%ressio unius est e8!lusio alterius, t*e mention of one t*ingim%lies t*e e8!lusion of anot*er t*ing not mentioned. T*us, if a statute enumerates t*e t*ingsu%on 7*i!* it is to o%erate, ever6t*ing else must ne!essaril6, and 96 im%li!ation 9e e8!luded

from its o%eration and effe!t FCra7ford, Statutor6 Constru!tion, %%. 00#/00

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Lodge No. 41", $enevolent and Prote!tive 'rder of t*e El>s, In!. vs. Court of A%%eals, L/

#"22", Se%tem9er 02, "341, 40 SCRA "1;? S6 vs. Central $an> of t*e P*ili%%ines, L/#"#=2,A%ril 02, "341, 42 SCRA

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In t*e instant !ase, %etitioners filed an a%%li!ation FMotion for Allo7an!e of Claim and for

an 'rder of Pa6ment of Ta8esG 7*i!*, t*oug* filed after t*e e8%iration of t*e time %reviousl6limited 9ut 9efore an order of t*e distri9ution is entered, s*ould *ave 9een granted 96 t*eres%ondent !ourt, in t*e a9sen!e of an6 valid ground, as none 7as s*o7n, :ustif6ing denial oft*e motion, s%e!iall6 !onsidering t*at it 7as for allo7an!e of !laim for ta8es due from t*eestate, 7*i!* in effe!t re%resents a !laim of t*e %eo%le at large, t*e onl6 reason given for t*edenial t*at t*e !laim 7as filed out of t*e %reviousl6 limited %eriod, sustaining t*ere96 %rivateres%ondents@ !ontention, erroneousl6 as *as 9een demonstrated.

&ERE('RE, t*e order a%%ealed from is reversed. Sin!e t*e Ta8 Commissioner@sassessment in t*e total amount of P0,;

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6/7 the r",ht# e"ther alone or "n $on:&n$t"on ("th an+ %erson# to des",nate the %erson

(ho shall %ossess or en:o+ the %ro%ert+ or the "n$oe therefro ex$e%t "n $ase of

a ona f"de sale for an ade;&ate and f&ll $ons"derat"on "n one+ or one+'s (orth.

6C7 Re!o$ale Transfer.

627 To the extent of an+ "nterest there"n# of (h"$h the de$edent has at an+ t"e

ade a transfer 6ex$e%t "n $ase of ona f"de sale for an ade;&ate and f&ll

$ons"derat"on "n one+ or one+'s (orth7 + tr&st or other("se# (here the

en:o+ent thereof (as s&:e$t at the date of h"s death to an+ $han,e thro&,h the

exer$"se of a %o(er 6"n (hate!er $a%a$"t+ exer$"sale7 + the de$edent alone or +

the de$edent "n $on:&n$t"on ("th an+ other %erson 6("tho&t re,ard to (hen or fro

(hat so&r$e the de$edent a$;&"red s&$h %o(er7# to alter# aend# re!o9e or

ter"nate# or (here an+ s&$h %o(er "s rel"n;&"shed "n $onte%lat"on of thede$edent's death.

6/7

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637 + deed &nder (h"$h he has reta"ned for h"s l"fe or an+ %er"od not as$erta"nale

("tho&t referen$e to h"s death or for an+ %er"od (h"$h does not "n fa$t end efore

h"s death

6a7 the %ossess"on or en:o+ent of# or the r",ht to the "n$oe fro# the %ro%ert+# or

67 the r",ht# e"ther alone or "n $on:&n$t"on ("th an+ %erson# to des",nate the

%ersons (ho shall %ossess or en:o+ the %ro%ert+ or the "n$oe therefro ex$e%t "n

$ase of a ona f"de sale for an ade;&ate and f&ll $ons"derat"on "n one+ or one+'s

(orth.

6E7 Pro$eeds of L"fe Ins&ran$e. To the extent of the ao&nt re$e"!ale + the

estate of the de$eased# h"s exe$&tor# or ad"n"strator# as "ns&ran$e &nder %ol"$"es

ta9en o&t + the de$edent &%on h"s o(n l"fe# "rres%e$t"!e of (hether or not the

"ns&red reta"ned the %o(er of re!o$at"on# or to the extent of the ao&nt re$e"!ale

+ an+ enef"$"ar+ des",nated "n the %ol"$+ of "ns&ran$e# ex$e%t (hen "t "s

ex%ressl+ st"%&lated that the des",nat"on of the enef"$"ar+ "s "rre!o$ale.

6

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SECTION 8*. Co%&tat"on of Net Estate.

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transfer or devolution of %ro%ert6 of a de!edent, made effe!tive 96 *is deat*. F1" C. J., %.

"es its 9eing and if, u%on t*e

deat* of t*e de!edent, su!!ession ta>es %la!e and t*e rig*t of t*e state to ta8 vests instantl6,t*e ta8 s*ould 9e measured 96 t*e value of t*e estate as it stood at t*e time of t*e de!edent@sdeat*, regardless of an6 su9seuent !ontingen!6 affe!ting value of an6 su9seuent in!reaseor de!rease in value. F1" C. J., %%. "13;, "130? ;1 R. C. L., ;0;? $la>emore and $an!roft ,

In*eritan!e Ta8es, %. "04. See also no7lton vs. Moore, "4= -. S. #"? ;2 Su%. Ct. Re%., 4#4?## La7.ed., 31=.G

0. I.? I. B DT*e rig*t of t*e state to a in*eritan!e ta8 a!!rues at t*e moment of deat*,

and *en!e is ordinaril6 measured as to an6 9enefi!iar6 96 t*e value at t*at time of su!*%ro%ert6 as %asses to *im. Su9seuent a%%re!iation or de%re!iation is immaterial.D FRoss,In*eritan!e Ta8ation, %. 4;.G

#. I.? I. B *atever ma6 9e t*e rule in ot*er :urisdi!tion, 7e *old t*at atransmission 96 in*eritan!e is ta8a9le at t*e time of t*e %rede!essor@s deat*, not7it*standingt*e %ost%onement of t*e a!tual %ossession or en:o6ment of t*e estate 96 t*e 9enefi!iar6, andt*e ta8 measured 96 t*e value of t*e %ro%ert6 transmitted at t*at time regardless of itsa%%re!iation or de%re!iation.

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*ere 9efore t*e !ourt, are !reated for t*e 9enefit of t*ose to 7*om t*e %ro%ert6 ultimatel6

%asses, are of voluntar6 !reation, and intended for t*e %reservation of t*e estate. No soundreason is given to su%%ort t*e !ontention t*at su!* e8%enses s*ould 9e ta>en into!onsideration in fi8ing t*e value of t*e estate for t*e %ur%ose of t*is ta8.

4. I.? RETR'ACTIVE LE+ISLATI'N. B It is 7ell/settled t*at in*eritan!e ta8ation isgoverned 96 t*e statute in for!e at t*e time of t*e deat* of t*e de!edent F;1 R. C. L., %. ;21?# Coole6 on Ta8ation, #t* ed., %. 0#1"G. T*e ta8%a6er !annot foresee and oug*t not to 9ereuired to guess t*e out!ome of %ending measures. 'f !ourse, a ta8 statute ma6 9e maderetroa!tive in its o%eration. Lia9ilit6 for ta8es under retroa!tive legislation *as 9een Done oft*e in!idents of so!ial life.D FSeattle vs. elle*er, "3< -. S. 0a vs. (irst Trust KSavings $an>, ;dale vs. Insuran!e Co., ;2 all., 0;0? Lun!* vs. Turris*,;#4 -. S., ;;".G DA statute s*ould 9e !onsidered as %ros%e!tive in its o%eration, 7*et*er itena!ts, amends, or re%eals an in*eritan!e ta8, unless t*e language of t*e statute !learl6demands or e8%resses t*at it s*all *ave a retroa!tive effe!t, . . .D F1" C. J., "12;.G

3. I.? I. B T*oug* t*e last %aragra%* of se!tion < of Regulations No. 1< of t*ee%artment of (inan!e ma>es se!tion 0 of A!t No. 0121, amending se!tion "

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";. I.? TR-STS AN TR-STEES. B T*e 7ord DtrustD is not mentioned or used in t*e

7ill 9ut t*e intention to !reate one is !lear. No %arti!ular or te!*ni!al 7ords are reuired to!reate a testamentar6 trust. F13 C. J., %. 4"".G T*e 7ords DtrustD and DtrusteeD, t*oug* a%t fort*e %ur%ose, are not ne!essar6. In fa!t, t*e use of t*ese t7o 7ords is not !on!lusive on t*euestion t*at a trust is !reated. F13 C. J., %. 4"#.G

"0. I.? I. B T*ere is no dou9t t*at t*e testator intended to !reate a trust. &e ordered in*is 7ill t*at !ertain of *is %ro%erties 9e >e%t toget*er undis%osed during a fi8ed %eriod, for a

stated %ur%ose. T*e %ro9ate !ourt !ertainl6 e8er!ised sound :udgment in a%%ointing a trusteeto !arr6 into effe!t t*e %rovision of t*e 7ill. FSee se!.

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*e 9e dire!ted t*at t*e same 9e used onl6 for t*e edu!ation of m6 9rot*er@s !*ildren and t*eir

des!endants.

D1. I dire!t t*at ten F"2G 6ears after m6 deat* m6 %ro%ert6 9e given to t*e a9ove/mentioned Matt*e7 &anle6 to 9e dis%osed of in t*e 7a6 *e t*in>s most advantageous.

888 888 888

D=. I state t*at at t*is time I *ave one 9rot*er living named Mala!*i &anle6, and t*at m6ne%*e7, Matt*e7 &anle6, is a son of m6 9rot*er, Mala!*i &anle6.D

T*e Court of (irst Instan!e of )am9oanga !onsidered it %ro%er for t*e 9est interests of t*eestate to a%%oint a trustee to administer t*e real %ro%erties 7*i!*, under t*e 7ill, 7ere to

%ass to Matt*e7 &anle6 ten 6ears after t*e testator@s deat*. A!!ordingl6, P. J. M. Moore, oneof t*e t7o e8e!utors named in t*e 7ill, 7as, on Mar!* =, "3;#, a%%ointed trustee. Moore

too> *is oat* of offi!e and gave 9ond on Mar!* "2, "3;#. &e a!ted as trustee until (e9ruar6;3, "30;, 7*en *e resigned and t*e %laintiff *erein 7as a%%ointed in *is stead.

uring t*e in!um9en!6 of t*e %laintiff as trustee, t*e defendant Colle!tor of InternalRevenue, alleging t*at t*e estate left 96 t*e de!eased at t*e time of *is deat* !onsisted ofrealt6 valued at P;4,3;2 and %ersonalit6 valued at P",#1

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DIII. In *olding t*at t*e in*eritan!e ta8 in uestion 9e 9ased u%on t*e value of t*e estate

u%on t*e deat* of t*e testator, and not, as it s*ould *ave 9een *eld, u%on t*e value t*ereof att*e e8%iration of t*e %eriod of ten 6ears after 7*i!*, a!!ording to t*e testator@s 7ill, t*e

%ro%ert6 !ould 9e and 7as to 9e delivered to t*e instituted *eir.

DIV. In not allo7ing as la7ful dedu!tions, in t*e determination of t*e net amount of t*eestate su9:e!t to said ta8, t*e amounts allo7ed 96 t*e !ourt as !om%ensation to t*e DtrusteeDand %aid to t*em from t*e de!edent@s estate.

DV. In not rendering :udgment in favor of t*e %laintiff and in den6ing *is motion for ne7trial.D

T*e defendant/a%%ellant !ontradi!ts t*e t*eories of t*e %laintiff and assigns t*e follo7ingerror 9esides

DT*e lo7er !ourt erred in not ordering t*e %laintiff to %a6 to t*e defendant t*e sum ofP","3".;4, re%resenting %art of t*e interest at t*e rate of " %er !ent %er mont* from A%ril "2,"3;#, to June 02, "30", 7*i!* t*e %laintiff *ad failed to %a6 on t*e in*eritan!e ta8 assessed96 t*e defendant against t*e estate of T*omas &anle6.D

T*e follo7ing are t*e %rin!i%al uestions to 9e de!ided 96 t*is !ourt in t*is a%%eal FaG *endoes t*e in*eritan!e ta8 a!!rue and 7*en must it 9e satisfied F9G S*ould t*e in*eritan!e ta89e !om%uted on t*e 9asis of t*e value of t*e estate at t*e time of t*e testator@s deat*, or on itsvalue ten 6ears later F!G In determining t*e net value of t*e estate su9:e!t to ta8, is it %ro%erto dedu!t t*e !om%ensation due to trustees FdG *at la7 governs t*e !ase at 9ar S*ould

t*e %rovisions of A!t No. 0121 favora9le to t*e ta8%a6er 9e given retroa!tive effe!t FeG &ast*ere 9een delinuen!6 in t*e %a6ment of t*e in*eritan!e ta8 If so, s*ould t*e additionalinterest !laimed 96 t*e defendant in *is a%%eal 9e %aid 96 t*e estate 't*er %oints ofin!idental im%ortan!e, raised 96 t*e %arties in t*eir 9riefs, 7ill 9e tou!*ed u%on in t*e!ourse of t*is o%inion.

FaG T*e a!!rual of t*e in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same.Se!tion "

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an!estor. T*e %ro%ert6 9elongs to t*e *eirs at t*e moment of t*e deat* of t*e an!estor as

!om%letel6 as if t*e an!estor *ad e8e!uted and delivered to t*em a deed for t*e same 9efore*is deat*.D F"3 P*il., #0#? $o7a vs. $riones, 0= P*il., ;41? 'sorio vs. 'sorio K n!*austiSteams*i% Co., #" P*il.,

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DIn t*e last t7o !ases, if t*e s!ale of ta8ation a%%ro%riate to t*e ne7 9enefi!iar6 is greater

t*an t*at %aid 96 t*e first, t*e former must %a6 t*e differen!e.

DSEC. " of Court 7it*in t*irt6 da6s after t*eir issuan!e.D

It s*ould 9e o9served in %assing t*at t*e 7ord DtrusteeD, a%%earing in su9se!tion F9G ofse!tion "e in translation from t*e S%anis* to t*e Englis* version.

T*e instant !ase does not fall under su9se!tion FaG, 9ut under su9se!tion F9G, of se!tion "

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t*e state to ta8 vests instantl6, t*e ta8 s*ould 9e measured 96 t*e value of t*e estate as it

stood at t*e time of t*e de!edent@s deat*, regardless of an6 su9seuent !ontingen!6 affe!tingvalue or an6 su9seuent in!rease or de!rease in value. F1" C. J., %%. "13;, "130? ;1 R. C. L.,

%. ;0;? $la>emore and $an!roft, In*eritan!e Ta8es, %. "04. See also no7lton vs. Moore,"4= -. S., #"? ;2 Su%. Ct. Re%., 4#4? ## La7 ed., 313.G DT*e rig*t of t*e state to anin*eritan!e ta8 a!!rues at t*e moment of deat*, and *en!e is ordinaril6 measured as to an69enefi!iar6 96 t*e value at t*at time of su!* %ro%ert6 as %asses to *im. Su9seuenta%%re!iation or de%re!iation is immaterial.D FRoss, In*eritan!e Ta8ation, %. 4;.G.

'ur attention is dire!ted to t*e statement of t*e rule in C6!lo%edia of La7 and Pro!edureFvol. 04, %%. " *as varied and no7 reuires t*e immediate a%%raisal of t*e %ost%oned estate at its!lear mar>et value and t*e %a6ment fort*7it* of t*e ta8 on it out of t*e !or%us of t*e estate

transferred. FIn re Vander9ilt, "4; N. ., 13? 13 N. E., 4=;? In re &o9er, =1 N. . A%%. iv.,#

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A trustee, no dou9t, is entitled to re!eive a fair !om%ensation for *is servi!es F$arne6 vs.

Saunders, "1 &o7.,

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in*eritan!e ta8, unless t*e language of t*e statute !learl6 demands or %resses t*at it s*all

*ave a retroa!tive effe!t, . . . F1" C. J., %. "12;.G T*oug* t*e last %aragra%* of se!tion ofRegulations No. 1< of t*e e%artment of (inan!e ma>es se!tion 0 of A!t No. 0121, amendingse!tion "ing, a statute is %enal 7*en it im%oses %unis*ment for an offense !ommittedagainst t*e state 7*i!*, under t*e Constitution, t*e E8e!utive *as t*e %o7er to %ardon. In!ommon use, *o7ever, t*is sense *as 9een enlarged to in!lude 7it*in t*e term D%enal

statutesD all statutes 7*i!* !ommand or %ro*i9it !ertain a!ts, and esta9lis* %enalties fort*eir violation, and even t*ose 7*i!*, 7it*out e8%ressl6 %ro*i9iting !ertain a!ts, im%ose a

%enalt6 u%on t*eir !ommission F

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T*e defendant maintains t*at it 7as t*e dut6 of t*e e8e!utor to %a6 t*e in*eritan!e ta8 9efore

t*e deliver6 of t*e de!edent@s %ro%ert6 to t*e trustee. Stated ot*er7ise, t*e defendant!ontends t*at deliver6 to t*e trustee 7as deliver6 to t*e !estui ue trust, t*e 9enefi!iar6 int*is !ase, 7it*in t*e meaning of t*e first %aragra%* of su9se!tion F9G of se!tion "en and is sustained. T*ea%%ointment of P. J. M. Moore as trustee 7as made 96 t*e trial !ourt in !onformit6 7it* t*e7is*es of t*e testator as e8%ressed in *is 7ill. It is true t*at t*e 7ord DtrustD is not mentionedor used in t*e 7ill 9ut t*e intention to !reate one is !lear. No %arti!ular or te!*ni!al 7ordsare reuired to !reate a testamentar6 trust F13 C. J., %. 4""G. T*e 7ords DtrustD and DtrusteeD,t*oug* a%t for t*e %ur%ose, are not ne!essar6. In fa!t, t*e use of t*ese t7o 7ords is not!on!lusive on t*e uestion t*at a trust is !reated F13 C. J., %. 4"#G. DTo !reate a trust 96 7illt*e testator must indi!ate in t*e 7ill *is intention so to do 96 using language suffi!ient to

se%arate t*e legal from t*e euita9le estate, and 7it* suffi!ient !ertainl6 designate t*e9enefi!iaries, t*eir interest in t*e trust, t*e %ur%ose or o9:e!t of t*e trust, and t*e %ro%ert6 or

su9:e!t matter t*ereof, Stated ot*er7ise, to !onstitute a valid testamentar6 trust t*ere must9e a !on!urren!e of t*ree !ir!umstan!es F"G Suffi!ient 7ords to raise a trust? F;G a definite

su9:e!t? F0G a !ertain or as!ertained o9:e!t? statutes in some :urisdi!tions e8%ressl6 or ineffe!t so %roviding.D F13 C. J., %%. 42e%t toget*erundis%osed during a fi8ed %eriod, for a stated %ur%ose. T*e %ro9ate !ourt !ertainl6 e8er!ised

sound :udgment in a%%ointing a trustee to !arr6 into effe!t t*e %rovisions of t*e 7ill Fsee se!.

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trust of t*e t6%e at *and, t*e result 7ould 9e %lainl6 disastrous. Testators ma6 %rovide, as

T*omas &anle6 *as %rovided, t*at t*eir estates 9e not delivered to t*eir 9enefi!iaries untilafter t*e la%se of a !ertain %eriod of time. In t*e !ase at 9ar, t*e %eriod is ten 6ears. In ot*er!ases, t*e trust ma6 last for fift6 6ears, or for a longer %eriod 7*i!* does not offend t*e ruleagainst %er%etuities. T*e !olle!tion of t*e ta8 7ould t*en 9e left to t*e 7ill of a %rivateindividual. T*e mere suggestion of t*is result is a suffi!ient 7arning against t*e a!!e%tan!eof t*e !ontention of t*e %laintiff in t*e !ase at 9ar. Ta8es are essential to t*e ver6 e8isten!e of

government. Fo99ins vs. Erie Count6, "1 Pet., #0

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u%on 7*om t*e dut6 is devolved of !olle!ting t*e ta8es, ma6 derange t*e o%erations of

government, and t*ere96 !ause serious detriment to t*e %u9li!.D Fo7s vs. C*i!ago, ""all., "2=? ;2 La7. ed., 1

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Adding to t*ese t7o sums an additional t7o *undred %er !entum, or P3

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T*e %a6ment of in*eritan!e ta8 !annot 9e %ost%oned or dela6ed 96 t*e !reation of a trust.Testators ma6 %rovide t*at t*eir estates 9e not delivered to t*eir 9enefi!iaries until aftert*e la%se of a !ertain %eriod of time. T*e !olle!tion of t*e ta8 7ould t*en 9e left to t*e7ill of a %rivate individual. Ta8es are essential to t*e ver6 e8isten!e of government.

Pa9lo LorenHo vs. Juan Posadas, Jr., +.R. No. #02=;, June "=, "304

Com%ensation of trustee is not dedu!ti9le e8%ense.

T*e !om%ensation of a trustee, earned, not in t*e administration of t*e estate, 9ut in t*emanagement t*ereof for t*e 9enefit of t*e legatees or devisees, does not !ome %ro%erl67it*in t*e !lass or reason for e8em%ting administration e8%enses. Servi!es rendered int*at 9e*alf *ave no referen!e to !losing t*e estate for t*e %ur%ose of a distri9utiont*ereof to t*ose entitled to it and are not reuired or essential to t*e %erfe!tion of t*erig*ts of t*e *eirs or legatees.


A!!rual of in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same.

T*e a!!rual of t*e in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same. It is inrealit6 an e8!ise or %rivilege ta8 im%osed on t*e rig*t to su!!eed to, re!eive, or ta>e

%ro%ert6 96 or under a 7ill or t*e intesta!6 la7, or deed, grant, or gift, to 9e!omeo%erative at or after deat*.


Premiums %aid on t*e 9ond filed 96 administrator is not dedu!ti9le as administratione8%ense.

T*e %remiums %aid on t*e 9ond filed 96 t*e administrator is not dedu!ti9le as an e8%enseof administration sin!e t*e giving of a 9ond is in t*e nature of a ualifi!ation for t*eoffi!e, and not ne!essar6 in t*e settlement of t*e estate. A %erson ma6 a!!e%t t*e %osition

of e8e!utor or administrator 7it* all t*e in!idents a%%ertaining t*ereto *aving in mindt*e !om%ensation 7*i!* t*e la7 allo7s for t*e %ur%ose, 9ut *e ma6 7aive t*is!om%ensation in t*e same manner as *e ma6 refuse to serve 7it*out it.

Carlos Moran Sison vs. Nar!isa (. Teodoro, +.R. No. L/3;4", Mar!* ;3, "3

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T*e notarial fee %aid for t*e e8tra:udi!ial settlement is !learl6 a dedu!ti9le e8%ense sin!esu!* settlement effe!ted a distri9ution of t*e de!edentOs estate to *is la7ful *eirs.Similarl6, t*e attorne6@s fees %aid to PN$ for a!ting as t*e guardian of t*e de!edentOs

%ro%ert6 during *is lifetime s*ould also 9e !onsidered as a dedu!ti9le administration

e8%ense. PN$ %rovided a detailed a!!ounting of de!edent@s %ro%ert6 and gave advi!e asto t*e %ro%er settlement of t*e latter@s estate, a!ts 7*i!* !ontri9uted to7ards t*e!olle!tion of de!edent@s assets and t*e su9seuent settlement of t*e estate.

Commissioner of Internal Revenue vs. Court of A%%eals, et al., +.R. No. ";0;21, Mar!*;;, ;222

6$7

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0. I.? I.? C'MPENSATI'N $ETEEN TAES AN CLAIMS '( INTESTATE

REC'+NI)E AN APPR'PRIATE ('R $ LA. B T*e fa!t t*at t*e !ourt *aving:urisdi!tion of t*e estate *ad found t*at t*e !laim of t*e estate against t*e +overnment *as9een a%%ro%riated for t*e %ur%ose 96 a !orres%onding la7 FRe% A!t No. ;422G s*o7s t*at9ot* t*e !laim of t*e +overnment for in*eritan!e ta8es and t*e !laim of t*e intestate for

servi!es rendered *ave alread6 9e!ome overdue and demanda9le as 7ell as full6 liuidated.Com%ensation, t*erefore, ta>es %la!e 96 o%eration of la7, in a!!ordan!e 7it* t*e Provisionsof Arti!les ";43 and ";32 of t*e Civil Code, and 9ot* de9ts are e8tinguis*ed to t*e!on!urrent amount.

E C I S I ' N

LA$RA'R, J %

T*is is a %etition for !ertiorari and mandamus against t*e Judge of t*e Court of (irst

Instan!e of Le6te, &on. LorenHo C. +arlitos, %residing, see>ing to annul !ertain orders of t*e!ourt and for an order in t*is Court dire!ting t*e res%ondent !ourt 9elo7 to e8e!ute t*e

:udgment in favor of t*e +overnment against t*e estate of alter S!ott Pri!e for internalrevenue ta8es.

It a%%ears t*at in Mele!io R. omingo vs. &on. Judge S. C. Mos!oso, "21 P*il., ""0=, t*is

Court de!lared as final and e8e!utor6 t*e order for t*e %a6ment 96 t*e estate of t*e estateand in*eritan!e ta8es, !*arges and %enalties amounting to P#2,2

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due t*e Colle!tor of Internal Revenue as ordered %aid 96 t*is Court on Jul6 of merit. T*e ordinar6

%ro!edure 96 7*i!* to settle !laims or inde9tedness against t*e estate of a de!eased %erson,as an in*eritan!e ta8, is for t*e !laimant to %resent a !laim 9efore t*e %ro9ate !ourt so t*at

said !ourt ma6 order t*e administrator to %a6 t*e amount t*ereof. To su!* effe!t is t*ede!ision of t*is Court in AldamiH vs. Judge of t*e Court of (irst Instan!e of Mindoro, +.R.

No. L/;012, e!. ;3, "3#3, t*us

D. . . a 7rit of e8e!ution is not t*e %ro%er %ro!edure allo7ed 96 t*e Rules of Court for t*e

%a6ment of de9ts and e8%enses of administration. T*e %ro%er %ro!edure is for t*e !ourt toorder t*e sale of %ersonal estate or t*e sale or mortgage of real %ro%ert6 of t*e de!eased and

all de9ts or e8%enses of administration s*ould 9e %aid out of t*e %ro!eeds of t*e sale ormortgage. T*e order for t*e sale or mortgage s*ould 9e issued u%on motion of t*e

administrator and 7it* t*e 7ritten noti!e to all t*e *eirs, legatees and devisees residing int*e P*ili%%ines, a!!ording to Rule =3, se!tion 0, and Rule 32, se!tion ;. And 7*en sale or

mortgage of real estate is to 9e made, t*e regulations !ontained in Rule 32, se!tion 4, s*ould9e !om%lied 7it*.

DE8e!ution ma6 issue onl6 7*ere t*e devisees, legatees or *eirs *ave entered into %ossession

of t*eir res%e!tive %ortions in t*e estate %rior to settlement and %a6ment of t*e de9ts ande8%enses of administration and it is later as!ertained t*at t*ere are su!* de9ts and e8%ensesto 9e %aid, in 7*i!* !ase @t*e !ourt *aving :urisdi!tion of t*e estate ma6, 96 order for t*at

%ur%ose, after *earing, settle t*e amount of t*eir several lia9ilities, and order *o7 mu!* andin 7*at manner ea!* %erson s*all !ontri9ute, and ma6 issue e8e!ution if !ir!umstan!es

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reuire@ FRule =3 se!tion 1? see also Rule 4#, se!tion #? Em%*asis ours.G And t*is is not t*e

instant !ase.D

T*e legal 9asis for su!* a %ro!edure is t*e fa!t t*at in t*e testate or intestate %ro!eedings tosettle t*e estate of a de!eased %erson, t*e %ro%erties 9elonging to t*e estate are under t*e

:urisdi!tion of t*e !ourt and su!* :urisdi!tion !ontinues until said %ro%erties *ave 9eendistri9uted among t*e *eirs entitled t*ereto. uring t*e %enden!6 of t*e %ro!eedings all t*eestate is in !ustodia legis and t*e %ro%er %ro!edure is not to allo7 t*e s*eriff, in !ase of a!ourt :udgment, to seiHe t*e %ro%erties 9ut to as> t*e !ourt for an order to reuire t*eadministrator to %a6 t*e amount due from t*e estate and reuired to 9e %aid.

Anot*er ground for den6ing t*e %etition of t*e %rovin!ial fis!al is t*e fa!t t*at t*e !ourt*aving :urisdi!tion of t*e estate *ad found t*at t*e !laim of t*e estate against t*e

+overnment *as 9een re!ogniHed and an amount of P;1;,;22 *as alread6 9een a%%ro%riatedfor t*e %ur%ose 96 a !orres%onding la7 FRe%. A!t No. ;422G. -nder t*e a9ove!ir!umstan!es, 9ot* t*e !laim of t*e +overnment for in*eritan!e ta8es and t*e !laim of t*eintestate for servi!es rendered *ave alread6 9e!ome overdue and demanda9le as 7ell as full6liuidated. Com%ensation, t*erefore, ta>es %la!e 96 o%eration of la7, in a!!ordan!e 7it* t*e

%rovisions of Arti!les ";43 and ";32 of t*e Civil Code, and 9ot* de9ts are e8tinguis*ed tot*e !on!urrent amount, t*us

DArt. ";22. *en all t*e reuisites mentioned in arti!le ";43 are %resent, !om%ensationta>es effe!t 96 o%eration of la7, and e8tinguis*es 9ot* de9ts to t*e !on!urrent amount, event*oug* t*e !reditors and de9tors are not a7are of t*e !om%ensation.D

It is !lear, t*erefore, t*at t*e %etitioner *as no !lear rig*t to e8e!ute t*e :udgment for ta8esagainst t*e estate of t*e de!eased alter S!ott Pri!e. (urt*ermore, t*e %etition for !ertiorariand mandamus is not t*e %ro%er remed6 for t*e %etitioner. A%%eal is t*e remed6.

T*e %etition is, t*erefore, dismissed, 7it*out !osts.

6d7

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The ded&$t"on here"n allo(ed "n the $ase of $la"s a,a"nst the estate# &n%a"d

ort,a,es or an+ "ndetedness shall# (hen fo&nded &%on a %ro"se or a,reeent#

e l""ted to the extent that the+ (ere $ontra$ted ona f"de and for an ade;&ate and

f&ll $ons"derat"on "n one+ or one+'s (orth.

There shall also e ded&$ted losses "n$&rred d&r"n, the settleent of the estate

ar"s"n, fro f"res# stors# sh"%(re$9# or other $as&alt"es# or fro roer+# theft or

ee55leent# (hen s&$h losses are not $o%ensated for + "ns&ran$e or

other("se# and "f at the t"e of the f"l"n, of the ret&rn s&$h losses ha!e not een

$la"ed as a ded&$t"on for "n$oe tax %&r%oses "n an "n$oe tax ret&rn# and

%ro!"ded that s&$h losses (ere "n$&rred not later than the last da+ for the %a+ent

of the estate tax as %res$r"ed "n S&se$t"on 6A7 of Se$t"on >2.

6/7 Pro%ert+ Pre!"o&sl+ Taxed. An ao&nt e;&al to the !al&e s%e$"f"ed elo( ofan+ %ro%ert+ for"n, a %art of the ,ross estate s"t&ated "n the Ph"l"%%"nes of an+

%erson (ho d"ed ("th"n f"!e 6)7 +ears %r"or to the death of the de$edent# or

transferred to the de$edent + ,"ft ("th"n f"!e 6)7 +ears %r"or to h"s death# (here

s&$h %ro%ert+ $an e "dent"f"ed as ha!"n, een re$e"!ed + the de$edent fro the

donor + ,"ft# or fro s&$h %r"or de$edent + ,"ft# e;&est# de!"se or "nher"tan$e#

or (h"$h $an e "dent"f"ed as ha!"n, een a$;&"red "n ex$han,e for %ro%ert+ so

re$e"!ed-

One h&ndred %er$ent 620017 of the !al&e# "f the %r"or de$edent d"ed ("th"n one 627

+ear %r"or to the death of the de$edent# or "f the %ro%ert+ (as transferred to h" +

,"ft ("th"n the sae %er"od %r"or to h"s death

E",ht+ %er$ent 68017 of the !al&e# "f the %r"or de$edent d"ed ore than one 627

+ear &t not ore than t(o 6/7 +ears %r"or to the death of the de$edent# or "f the

%ro%ert+ (as transferred to h" + ,"ft ("th"n the sae %er"od %r"or to h"s death

S"xt+ %er$ent 6*017 of the !al&e# "f the %r"or de$edent d"ed ore than t(o 6/7 +ears

&t not ore than three 637 +ears %r"or to the death of the de$edent# or "f the


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and

T(ent+ %er$ent 6/017 of the !al&e# "f the %r"or de$edent d"ed ore than fo&r 647

+ears &t not ore than f"!e 6)7 +ears %r"or to the death of the de$edent# or "f the%ro%ert+ (as transferred to h" + ,"ft ("th"n the sae %er"od %r"or to h"s death.

These ded&$t"ons shall e allo(ed onl+ (here a donor's tax or estate tax "%osed

&nder th"s T"tle (as f"nall+ deter"ned and %a"d + or on ehalf of s&$h donor# or

the estate of s&$h %r"or de$edent# as the $ase a+ e# and onl+ "n the ao&nt

f"nall+ deter"ned as the !al&e of s&$h %ro%ert+ "n deter"n"n, the !al&e of the

,"ft# or the ,ross estate of s&$h %r"or de$edent# and onl+ to the extent that the !al&e

of s&$h %ro%ert+ "s "n$l&ded "n the de$edent's ,ross estate# and onl+ "f "n

deter"n"n, the !al&e of the estate of the %r"or de$edent# no ded&$t"on (asallo(ale &nder %ara,ra%h 6/7 "n res%e$t of the %ro%ert+ or %ro%ert"es ,"!en "n

ex$han,e therefore.

?here a ded&$t"on (as allo(ed of an+ ort,a,e or other l"en "n deter"n"n, the

donor's tax# or the estate tax of the %r"or de$edent# (h"$h (as %a"d "n (hole or "n

%art %r"or to the de$edent's death# then the ded&$t"on allo(ale &nder sa"d

S&se$t"on shall e red&$ed + the ao&nt so %a"d. S&$h ded&$t"on allo(ale shall

e red&$ed + an ao&nt (h"$h ears the sae rat"o to the ao&nts allo(ed as

ded&$t"ons &nder %ara,ra%hs 627 and 637 of th"s S&se$t"on as the ao&nt other("se

ded&$t"le &nder sa"d %ara,ra%h 6/7 ears to the !al&e of the de$edent's estate.

?here the %ro%ert+ referred to $ons"sts of t(o or ore "tes# the a,,re,ate !al&e

of s&$h "tes shall e &sed for the %&r%ose of $o%&t"n, the ded&$t"on.

637 Transfers for P&l"$ =se. The ao&nt of all e;&ests# le,a$"es# de!"ses or

transfers to or for the &se of the o!ernent of the Re%&l"$ of the Ph"l"%%"nes# or

an+ %ol"t"$al s&d"!"s"on thereof# for ex$l&s"!el+ %&l"$ %&r%oses.

647 The

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6)7 Standard Ded&$t"on. An ao&nt e;&"!alent to One "ll"on %esos

6P2#000#0007.

6*7 @ed"$al Ex%enses. @ed"$al ex%enses "n$&rred + the de$edent ("th"n one

627 +ear %r"or to h"s death (h"$h shall e d&l+ s&stant"ated ("th re$e"%ts-Pro!"ded# That "n no $ase shall the ded&$t"le ed"$al ex%enses ex$eed 2. An+ ao&nt

re$e"!ed + the he"rs fro the de$edent's e%lo+er as a $onse;&en$e of the death

of the de$edentBe%lo+ee "n a$$ordan$e ("th Re%&l"$ A$t No. 4>2- Pro!"ded#

That s&$h ao&nt "s "n$l&ded "n the ,ross estate of the de$edent.

67 Ded&$t"ons Allo(ed to Nonres"dent Estates. In the $ase of a nonres"dent not

a $"t"5en of the Ph"l"%%"nes# + ded&$t"n, fro the !al&e of that %art of h"s ,ross

estate (h"$h at the t"e of h"s death "s s"t&ated "n the Ph"l"%%"nes-

627 Ex%enses# Losses# Indetedness and Taxes. That %ro%ort"on of the

ded&$t"ons s%e$"f"ed "n %ara,ra%h 627 of S&se$t"on 6A7 of th"s Se$t"on (h"$h the

!al&e of s&$h %art ears to the !al&e of h"s ent"re ,ross estate (here!er s"t&ated

6/7 Pro%ert+ Pre!"o&sl+ Taxed. An ao&nt e;&al to the !al&e s%e$"f"ed elo( of

an+ %ro%ert+ for"n, %art of the ,ross estate s"t&ated "n the Ph"l"%%"nes of an+

%erson (ho d"ed ("th"n f"!e 6)7 +ears %r"or to the death of the de$edent# or

transferred to the de$edent + ,"ft ("th"n f"!e 6)7 +ears %r"or to h"s death# (here

s&$h %ro%ert+ $an e "dent"f"ed as ha!"n, een re$e"!ed + the de$edent fro the

donor + ,"ft# or fro s&$h %r"or de$edent + ,"ft# e;&est# de!"se or "nher"tan$e#

or (h"$h $an e "dent"f"ed as ha!"n, een a$;&"red "n ex$han,e for %ro%ert+ so

re$e"!ed-

One h&ndred %er$ent 620017 of the !al&e# "f the %r"or de$edent d"ed ("th"n one 627

+ear %r"or to the death of the de$edent# or "f the %ro%ert+ (as transferred to h" +

,"ft# ("th"n the sae %er"od %r"or to h"s death

E",ht+ %er$ent 68017 of the !al&e# "f the %r"or de$edent d"ed ore than one 627

+ear &t not ore than t(o 6/7 +ears %r"or to the death of the de$edent# or "f the


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S"xt+ %er$ent 6*017 of the !al&e# "f the %r"or de$edent d"ed ore than t(o 6/7 +ears

&t not ore than three 637 +ears %r"or to the death of the de$edent# or "f the

%ro%ert+ (as transferred to h" + ,"ft ("th"n the sae %er"od %r"or to h"s death-

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637 Transfers for P&l"$ =se. The ao&nt of all e;&ests# le,a$"es# de!"ses or

transfers to or for the &se of the o!ernent of the Re%&l"$ of the Ph"l"%%"nes or

an+ %ol"t"$al s&d"!"s"on thereof# for ex$l&s"!el+ %&l"$ %&r%oses.

6C7 Share "n the Con:&,al Pro%ert+. The net share of the s&r!"!"n, s%o&se "n the$on:&,al %artnersh"% %ro%ert+ as d""n"shed + the ol",at"ons %ro%erl+ $har,eale

to s&$h %ro%ert+ shall# for the %&r%ose of th"s Se$t"on# e ded&$ted fro the net

estate of the de$edent.

6D7 @"s$ellaneo&s Pro!"s"ons. No ded&$t"on shall e allo(ed "n the $ase of a

nonres"dent not a $"t"5en of the Ph"l"%%"nes# &nless the exe$&tor# ad"n"strator# or

an+one of the he"rs# as the $ase a+ e# "n$l&des "n the ret&rn re;&"red to e f"led

&nder Se$t"on >0 the !al&e at the t"e of h"s death of that %art of the ,ross estate of

the nonres"dent not s"t&ated "n the Ph"l"%%"nes.

6E7 Tax Cred"t for Estate Taxes Pa"d to a

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6C7 The trans"ss"on fro the f"rst he"r# le,atee or donee "n fa!or of another

enef"$"ar+# "n a$$ordan$e ("th the des"re of the %rede$essor and

6D7 All e;&ests# de!"ses# le,a$"es or transfers to so$"al (elfare# $&lt&ral and

$har"tale "nst"t&t"ons# no %art of the net "n$oe of (h"$h "n&res to the enef"t ofan+ "nd"!"d&al- Pro!"ded# ho(e!er# That not ore than th"rt+ %er$ent 63017 of the

sa"d e;&ests# de!"ses# le,a$"es or transfers shall e &sed + s&$h "nst"t&t"ons for

ad"n"strat"on %&r%oses.

SECTION 88. Deter"nat"on of the al&e of the Estate.

6A7 =s&fr&$t. To deter"ne the !al&e of the r",ht of &s&fr&$t# &se or ha"tat"on#

as (ell as that of ann&"t+# there shall e ta9en "nto a$$o&nt the %roale l"fe of the

enef"$"ar+ "n a$$ordan$e ("th the latest as"$ Standard @ortal"t+ Tale# to e

a%%ro!ed + the Se$retar+ of . Not"$e of Death to e

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defi!ien!6 in!ome ta8. It furt*er la!>s a%%li!a9ilit6 sin!e P*iltrust F7*i!* managed t*e9usiness affairs of t*e de!easedG 7as never t*e e8e!utor, administrator of t*e de!edent@sestate, and, as su!*, never *ad t*e legal o9ligation, 9ased on t*e a9ove %rovision, toinform t*e Commissioner of Internal Revenue of *er deat*.

Estate of t*e Late Juliana ieHvda.de +a9riel vs. Commissioner of Internal Revenue,+.R. No. "

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6$7 The ao&nt of tax d&e (hether %a"d or st"ll d&e and o&tstand"n,.

67 T"e for

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67 Extens"on of T"e. ?hen the Co"ss"oner f"nds that the %a+ent on the

d&e date of the estate tax or of an+ %art thereof (o&ld "%ose &nd&e hardsh"% &%on

the estate or an+ of the he"rs# he a+ extend the t"e for %a+ent of s&$h tax or

an+ %art thereof not to ex$eed f"!e 6)7 +ears# "n $ase the estate "s settled thro&,h the

$o&rts# or t(o 6/7 +ears "n $ase the estate "s settled extra:&d"$"all+.

In s&$h $ase# the ao&nt "n res%e$t of (h"$h the extens"on "s ,ranted shall e %a"d

on or efore the date of the ex%"rat"on of the %er"od of the extens"on# and the

r&nn"n, of the Stat&te of L""tat"ons for assessent as %ro!"ded "n Se$t"on /03 of

th"s Code shall e s&s%ended for the %er"od of an+ s&$h extens"on.

?here the taxes are assessed + reason of ne,l",en$e# "ntent"onal d"sre,ard of r&les

and re,&lat"ons# or fra&d on the %art of the tax%a+er# no extens"on ("ll e ,ranted

+ the Co"ss"oner.

If an extens"on "s ,ranted# the Co"ss"oner a+ re;&"re the exe$&tor# or

ad"n"strator# or enef"$"ar+# as the $ase a+ e# to f&rn"sh a ond "n s&$h ao&nt#

not ex$eed"n, do&le the ao&nt of the tax and ("th s&$h s&ret"es as the

Co"ss"oner dees ne$essar+# $ond"t"oned &%on the %a+ent of the sa"d tax "n

a$$ordan$e ("th the ters of the extens"on.

6C7 L"a"l"t+ for Pa+ent. The estate tax "%osed + Se$t"on 84 shall e %a"d +

the exe$&tor or ad"n"strator efore del"!er+ to an+ enef"$"ar+ of h"s d"str"&t"!eshare of the estate. S&$h enef"$"ar+ shall# to the extent of h"s d"str"&t"!e share of

the estate# e s&s"d"ar"l+ l"ale for the %a+ent of s&$h %ort"on of the estate tax as

h"s d"str"&t"!e share ears to the !al&e of the total net estate.

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"s ade efore the ret&rn "s f"led# then ("th"n one 627 +ear after the ret&rn "s f"led#

&t not after the ex%"rat"on of the %er"od %res$r"ed for the assessent of the tax "n

Se$t"on /03 shall not"f+ the exe$&tor or ad"n"strator of the ao&nt of the tax. The

exe$&tor or ad"n"strator# &%on %a+ent of the ao&nt of (h"$h he "s not"f"ed#

shall e d"s$har,ed fro %ersonal l"a"l"t+ for an+ def"$"en$+ "n the tax thereafterfo&nd to e d&e and shall e ent"tled to a re$e"%t or (r"t"n, sho("n, s&$h

d"s$har,e.

SECTION >3 Def"n"t"on of Def"$"en$+. As &sed "n th"s Cha%ter# the ter

'def"$"en$+' eans-

6a7 The ao&nt + (h"$h the tax "%osed + th"s Cha%ter ex$eeds the ao&nt

sho(n as the tax + the exe$&tor# ad"n"strator or an+ of the he"rs &%on h"s ret&rn

&t the ao&nt so sho(n on the ret&rn shall f"rst e "n$reased + the ao&nts%re!"o&sl+ assessed 6or $olle$ted ("tho&t assessent7 as a def"$"en$+ and

de$reased + the ao&nts %re!"o&sl+ aated# ref&nded or other("se re%a"d "n

res%e$t of s&$h tax or

67 If no ao&nt "s sho(n as the tax + the exe$&tor# ad"n"strator or an+ of the

he"rs &%on h"s ret&rn# or "f no ret&rn "s ade + the exe$&tor# ad"n"strator# or an+

he"r# then the ao&nt + (h"$h the tax ex$eeds the ao&nts %re!"o&sl+ assessed 6or

$olle$ted ("tho&t assessent7 as a def"$"en$+ &t s&$h ao&nts %re!"o&sl+

assessed or $olle$ted ("tho&t assessent shall f"rst e de$reased + the ao&nts

%re!"o&sl+ aated# ref&nded or other("se re%a"d "n res%e$t of s&$h tax.

SECTION >4. Pa+ent efore Del"!er+ + Exe$&tor or Ad"n"strator. No

:&d,e shall a&thor"5e the exe$&tor or :&d"$"al ad"n"strator to del"!er a d"str"&t"!e

share to an+ %art+ "nterested "n the estate &nless a $ert"f"$at"on fro the

Co"ss"oner that the estate tax has een %a"d "s sho(n.

A%%roval of %ro9ate !ourt is not a mandator6 reuirement in !olle!tion of estate ta8es.

T*e a%%roval of t*e !ourt, sitting in %ro9ate, or as a settlement tri9unal over t*ede!eased is not a mandator6 reuirement in t*e !olle!tion of estate ta8es. T*ere isnot*ing in t*e Ta8 Code, and in t*e %ertinent remedial la7s t*at im%lies t*e ne!essit6 oft*e %ro9ate or estate settlement !ourt@s a%%roval of t*e state@s !laim for estate ta8es,9efore t*e same !an 9e enfor!ed and !olle!ted. -nder t*e NIRC, it is t*e %ro9ate or

settlement !ourt 7*i!* is 9idden not to aut*oriHe t*e e8e!utor or :udi!ial administrator of

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t*e de!edent@s estate to deliver an6 distri9utive s*are to an6 %art6 interested in t*e estate,unless it is s*o7n a Certifi!ation 96 t*e Commissioner of Internal Revenue t*at t*e estateta8es *ave 9een %aid. T*is %rovision dis%roves t*e !ontention t*at it is t*e %ro9ate !ourt7*i!* a%%roves t*e assessment and !olle!tion of t*e estate ta8.

(erdinand R. Mar!os II vs. Court of A%%eals, et al., +.R. No. ";2==2, June ). D&t"es of Certa"n Off"$ers and Detors. Re,"sters of Deeds

shall not re,"ster "n the Re,"str+ of Pro%ert+ an+ do$&ent transferr"n, real

%ro%ert+ or real r",hts there"n or an+ $hattel ort,a,e# + (a+ of ,"fts "nter !"!os

or ort"s $a&sa# le,a$+ or "nher"tan$e# &nless a $ert"f"$at"on fro the

Co"ss"oner that the tax f"xed "n th"s T"tle and a$t&all+ d&e thereon had een

%a"d "s sho(n# and the+ shall "ed"atel+ not"f+ the Co"ss"oner# Re,"onal

D"re$tor# Re!en&e D"str"$t Off"$er or Re!en&e Colle$t"on Off"$er or Treas&rer of

the $"t+ or &n"$"%al"t+ (here the"r off"$es are lo$ated# of the non%a+ent of the

tax d"s$o!ered + the.

An+ la(+er# notar+ %&l"$# or an+ ,o!ernent off"$er (ho# + reason of h"s off"$"al

d&t"es# "nter!enes "n the %re%arat"on or a$9no(led,ent of do$&ents re,ard"n,

%art"t"on or d"s%osal of donat"on "nter !"!os or ort"s $a&sa# le,a$+ or "nher"tan$e#

shall ha!e the d&t+ of f&rn"sh"n, the Co"ss"oner# Re,"onal D"re$tor# Re!en&e

D"str"$t Off"$er or Re!en&e Colle$t"on Off"$er of the %la$e (here he a+ ha!e h"s%r"n$"%al off"$e# ("th $o%"es of s&$h do$&ents and an+ "nforat"on (hatsoe!er

(h"$h a+ fa$"l"tate the $olle$t"on of the aforeent"oned tax.

Ne"ther shall a detor of the de$eased %a+ h"s dets to the he"rs# le,atee# exe$&tor

or ad"n"strator of h"s $red"tor# &nless the $ert"f"$at"on of the Co"ss"oner that

the tax f"xed "n th"s Cha%ter had een %a"d "s sho(n &t he a+ %a+ the exe$&tor

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or :&d"$"al ad"n"strator ("tho&t sa"d $ert"f"$at"on "f the $red"t "s "n$l&ded "n the

"n!entor+ of the estate of the de$eased.

SECTION >*. Rest"t&t"on of Tax =%on Sat"sfa$t"on of O&tstand"n,

Ol",at"ons. If# after the %a+ent of the estate tax# ne( ol",at"ons of thede$edent shall a%%ear# and the %ersons "nterested shall ha!e sat"sf"ed the + order

of the $o&rt# the+ shall ha!e a r",ht to the rest"t&t"on of the %ro%ort"onal %art of the

tax %a"d.

SECTION >. Pa+ent of Tax Ante$edent to the Transfer of Shares# onds or

R",hts. There shall not e transferred to an+ ne( o(ner "n the oo9s of an+

$or%orat"on# so$"edadanon"a# %artnersh"%# &s"ness# or "nd&str+ or,an"5ed or

estal"shed "n the Ph"l"%%"nes an+ share# ol",at"on# ond or r",ht + (a+ of ,"ft

"nter !"!os or ort"s $a&sa# le,a$+ or "nher"tan$e# &nless a $ert"f"$at"on fro theCo"ss"oner that the taxes f"xed "n th"s T"tle and d&e thereon ha!e een %a"d "s

sho(n.

If a an9 has 9no(led,e of the death of a %erson# (ho a"nta"ned a an9 de%os"t

a$$o&nt alone# or :o"ntl+ ("th another# "t shall not allo( an+ ("thdra(al fro the

sa"d de%os"t a$$o&nt# &nless the Co"ss"oner has $ert"f"ed that the taxes "%osed

thereon + th"s T"tle ha!e een %a"d

Pro!"ded# ho(e!er# That the ad"n"strator of the estate or an+ one 627 of the he"rsof the de$edent a+# &%on a&thor"5at"on + the Co"ss"oner# ("thdra( an

ao&nt not ex$eed"n, T(ent+ tho&sand %esos 6P/0#0007 ("tho&t the sa"d

$ert"f"$at"on.

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6A7 There shall e le!"ed# assessed# $olle$ted and %a"d &%on the transfer + an+

%erson# res"dent or nonres"dent# of the %ro%ert+ + ,"ft# a tax# $o%&ted as %ro!"ded

"n Se$t"on >>.

67 The tax shall a%%l+ (hether the transfer "s "n tr&st or other("se# (hether the,"ft "s d"re$t or "nd"re$t# and (hether the %ro%ert+ "s real or %ersonal# tan,"le or

"ntan,"le.

SECTION >> Rates of Tax Pa+ale + Donor.

6A7 In eneral. The tax for ea$h $alendar +ear shall e $o%&ted on the as"s of

the total net ,"fts ade d&r"n, the $alendar +ear "n a$$ordan$e ("th the follo("n,

s$hed&le-

If the net ,"ft "s-

O!er &t Not O!er The Tax Shall e Pl&s Of the Ex$ess O!er

P100,000 Exempt

P100,000 200,000 0 2% P100,000

200,000 500,000 2,000 4% 200,000

500,000 1,000,000 14,000 6% 500,000

1,000,000 3,000,000 44,000 8% 1,000,000

3,000,000 5,000,000 204,000 10% 3,000,000

5,000,000 10,000,000 404,000 12% 5,000,000

10,000,000 1,004,000 15% 10,000,000

67 Tax Pa+ale + Donor "f Donee "s a Stran,er ?hen the donee or enef"$"ar+

"s a stran,er# the tax %a+ale + the donor shall e th"rt+ %er$ent 63017 of the net

,"fts.

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6C7 An+ $ontr"&t"on "n $ash or "n 9"nd to an+ $and"date# %ol"t"$al %art+ or $oal"t"on

of %art"es for $a%a",n %&r%oses shall e ,o!erned + the Ele$t"on Code# as

aended.

REVEN-E RE+-LATI'NS N'. 22=/23 '!to9er ;;, ;223

Amending (urt*er Se!s. ;.

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ho(e!er# That not ore than th"rt+ %er$ent 63017 of sa"d ,"fts shall e &sed +

s&$h donee for ad"n"strat"on %&r%oses.

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net ,"fts s"t&ated ("th"n s&$h $o&ntr+ taxale &nder th"s T"tle ears to h"s ent"re net

,"fts and

67 The total ao&nt of the $red"t shall not ex$eed the sae %ro%ort"on of the tax

a,a"nst (h"$h s&$h $red"t "s ta9en# (h"$h the donor's net ,"fts s"t&ated o&ts"de thePh"l"%%"nes taxale &nder th"s T"tle ears to h"s ent"re net ,"fts.

Elements of a !*arita9le institutionentit6.

In t*e legal sense, a !*arit6 ma6 9e full6 defined as a gift, to 9e a%%lied !onsistentl6 7it*e8isting la7s, for t*e 9enefit of an indefinite num9er of %ersons, eit*er 96 9ringing t*eirminds and *earts under t*e influen!e of edu!ation or religion, 96 assisting t*em toesta9lis* t*emselves in life or ot*er7ise lessening t*e 9urden of government. It ma6 9ea%%lied to almost an6t*ing t*at tend to %romote t*e 7ell/doing and 7ell/9eing of so!ial

man. It em9ra!es t*e im%rovement and %romotion of t*e *a%%iness of man. To determine7*et*er an enter%rise is a !*arita9le institutionentit6 or not, t*e elements 7*i!* s*ould9e !onsidered in!lude t*e statute !reating t*e enter%rise, its !or%orate %ur%oses, its!onstitution and 96/la7s, t*e met*ods of administration, t*e nature of t*e a!tual 7or>

%erformed, t*e !*ara!ter of t*e servi!es rendered, t*e indefiniteness of t*e 9enefi!iaries,and t*e use and o!!u%ation of t*e %ro%erties. T*e 7ord D!*arita9leD is not restri!ted torelief of t*e %oor or si!>. T*e test of a !*arit6 and a !*arita9le organiHation are in la7t*e same. T*e test 7*et*er an enter%rise is !*arita9le or not is 7*et*er it e8ists to !arr6out a %ur%ose reorganiHed in la7 as !*arita9le or 7*et*er it is maintained for gain,

%rofit, or %rivate advantage. %rem2

Lung Center of t*e P*il. vs. QueHon Cit6, et al., +.R. No. "##"2#, June ;3, ;22#

A !*arita9le institution does not lose its !*ara!ter as su!* and its e8em%tion from ta8essim%l6 9e!ause it derives in!ome from %a6ing %atients.

As a general %rin!i%le, a !*arita9le institution does not lose its !*ara!ter as su!* and itse8em%tion from ta8es sim%l6 9e!ause it derives in!ome from %a6ing %atients, 7*et*erout/%atient, or !onfined in t*e *os%ital, or re!eives su9sidies from t*e government, so

long as t*e mone6 re!eived is devoted or used altoget*er to t*e !*arita9le o9:e!t 7*i!* itis intended to a!*ieve? and no mone6 inures to t*e %rivate 9enefit of t*e %ersonsmanaging or o%erating t*e institution.

Lung Center of t*e P*il. vs. QueHon Cit6, et al., +.R. No. "##"2#, June ;3, ;22#

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SECTION 20/. al&at"on of "fts @ade "n Pro%ert+. If the ,"ft "s ade "n

%ro%ert+# the fa"r ar9et !al&e thereof at the t"e of the ,"ft shall e $ons"dered the

ao&nt of the ,"ft. In $ase of real %ro%ert+# the %ro!"s"ons of Se$t"on 8867 shall

a%%l+ to the !al&at"on thereof.

SECTION 203.

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67 "f the la(s of the fore",n $o&ntr+ of (h"$h the de$edent or donor (as a $"t"5en

and res"dent at the t"e of h"s death or donat"on allo(s a s""lar exe%t"on fro

transfer or death taxes of e!er+ $hara$ter or des$r"%t"on "n res%e$t of "ntan,"le

%ersonal %ro%ert+ o(ned + $"t"5ens of the Ph"l"%%"nes not res"d"n, "n that fore",n

$o&ntr+.

The ter 'def"$"en$+' eans- 6a7 the ao&nt + (h"$h the tax "%osed + th"s

Cha%ter ex$eeds the ao&nt sho(n as the tax + the donor &%on h"s ret&rn &t the

ao&nt so sho(n on the ret&rn shall f"rst e "n$reased + the ao&nt %re!"o&sl+

assessed 6or $olle$ted ("tho&t assessent7 as a def"$"en$+# and de$reased + the

ao&nts %re!"o&sl+ aated# ref&nded or other("se re%a"d "n res%e$t of s&$h tax# or

67 "f no ao&nt "s sho(n as the tax + the donor# then the ao&nt + (h"$h the

tax ex$eeds the ao&nts %re!"o&sl+ assessed 6or $olle$ted ("tho&t assessent7 as a

def"$"en$+# &t s&$h ao&nt %re!"o&sl+ assessed# or $olle$ted ("tho&t assessent#

shall f"rst e de$reased + the ao&nt %re!"o&sl+ aated# ref&nded or other("se

re%a"d "n res%e$t of s&$h tax.

TITLE I

al&eBAdded Tax

CHAPTER I

I%os"t"on of Tax

SECTION 20). Persons L"ale. An+ %erson (ho# "n the $o&rse of trade or

&s"ness# sells# arters# ex$han,es# leases ,oods or %ro%ert"es# renders ser!"$es# and

an+ %erson (ho "%orts ,oods shall e s&:e$t to the !al&eBadded tax 6AT7

"%osed "n Se$t"ons 20* to 208 of th"s Code.

The !al&eBadded tax "s an "nd"re$t tax and the ao&nt of tax a+ e sh"fted or

%assed on to the &+er# transferee or lessee of the ,oods# %ro%ert"es or ser!"$es.

Th"s r&le shall l"9e("se a%%l+ to ex"st"n, $ontra$ts of sale or lease of ,oods#

%ro%ert"es or ser!"$es at the t"e of the effe$t"!"t+ of Re%&l"$ A$t No. 2*.

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The %hrase '"n the $o&rse of trade or &s"ness' eans the re,&lar $ond&$t or %&rs&"t

of a $oer$"al or an e$ono"$ a$t"!"t+# "n$l&d"n, transa$t"ons "n$"dental thereto#

+ an+ %erson re,ardless of (hether or not the %erson en,a,ed there"n "s a

nonsto$9# non%rof"t %r"!ate or,an"5at"on 6"rres%e$t"!e of the d"s%os"t"on of "ts net

"n$oe and (hether or not "t sells ex$l&s"!el+ to eers or the"r ,&ests7# or,o!ernent ent"t+.

The r&le of re,&lar"t+# to the $ontrar+ not("thstand"n,# ser!"$es as def"ned "n th"s

Code rendered "n the Ph"l"%%"nes + nonres"dent fore",n %ersons shall e

$ons"dered as e"n, rendered "n the $o&rse of trade or &s"ness.

A$AAA +-R' PART LIST '((ICER SAMS'N S. ALCANTARA, ET AL.,%etitioners, vs. T&E &'N. EEC-TIVE SECRETAR E-AR' R. ERMITA,

res%ondents. +.R. No. "1=2

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(or resolution are t*e follo7ing motions for re!onsideration of t*e Court@s e!isiondated Se%tem9er ", ;22< u%*olding t*e !onstitutionalit6 of Re%u9li! A!t No. 3004 or t*eVAT Reform A!t "

"G Motion for Re!onsideration filed 96 %etitioners in +.R. No. "1=#10, Es!udero, et

al., on t*e follo7ing grounds

A. T&E ELETI'N '( T&E DN' PASS 'N PR'VISI'NSD ('R T&E SALE '(PETR'LE-M PR'-CTS AN P'ER +ENERATI'N SERVICES C'NSTIT-TE+RAVE A$-SE '( ISCRETI'N AM'-NTIN+ T' LAC 'R ECESS '(

J-RISICTI'N 'N T&E PART '( T&E $ICAMERAL C'N(ERENCE C'MMITTEE.

$. REP-$LIC ACT N'. 3004 +R'SSL VI'LATES T&E C'NSTIT-TI'NALIMPERATIVE 'N ECL-SIVE 'RI+INATI'N '( REVEN-E $ILLS -NER ;#,ARTICLE VI, "3=4 P&ILIPPINE C'NSTIT-TI'N.

C. REP-$LIC ACT N'. 3004@S STAN/$ A-T&'RIT T' T&E EEC-TIVE T'INCREASE T&E VAT RATE, ESPECIALL 'N ACC'-NT '( T&E E((ECTIVEREC'MMENAT'R P'ER +RANTE T' T&E SECRETAR '( (INANCE,C'NSTIT-TES -N-E ELE+ATI'N '( LE+ISLATIVE A-T&'RIT.

;G Motion for Re!onsideration of %etitioner in +.R. No. "1=402, $ataan +overnorEnriue T. +ar!ia, Jr., 7it* t*e argument t*at 9urdening t*e !onsumers 7it* signifi!antl6*ig*er %ri!es under a VAT regime vis//vis a 0 gross ta8 renders t*e la7

un!onstitutional for 9eing ar9itrar6, o%%ressive and ineuita9le.

and

0G Motion for Re!onsideration 96 %etitioners Asso!iation of Pili%inas S*ell ealers,In!. in +.R. No. "1=#1", on t*e grounds t*at

I. T*is &onora9le Court erred in u%*olding t*e !onstitutionalit6 of Se!tion ""2FAGF;G and Se!tion ""2F$G of t*e NIRC, as amended 96 t*e EVAT La7, im%osing limitationson t*e amount of in%ut VAT t*at ma6 9e !laimed as a !redit against out%ut VAT, as 7ell

as Se!tion ""#FCG of t*e NIRC, as amended 96 t*e EVAT La7, reuiring t*e governmentor an6 of its instrumentalities to 7it**old a

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$. do not violate t*e eual %rote!tion !lause %res!ri9ed under Arti!le III, Se!tion " oft*e "3=4 P*ili%%ine Constitution? and

C. a%%l6 uniforml6 to all t*ose 9elonging to t*e same !lass and do not violate Arti!leVI, Se!tion ;=F"G of t*e "3=4 P*ili%%ine Constitution.

II. T*is &onora9le Court erred in u%*olding t*e !onstitutionalit6 of Se!tion ""2F$G oft*e NIRC, as amended 96 t*e EVAT La7, im%osing a limitation on t*e amount of in%utVAT t*at ma6 9e !laimed as a !redit against out%ut VAT not7it*standing t*e finding t*att*e ta8 is not %rogressive as e8*orted 96 Arti!le VI, Se!tion ;=F"G of t*e "3=4 P*ili%%ineConstitution.

Res%ondents filed t*eir Consolidated Comment. Petitioner +ar!ia filed *is Re%l6.

Petitioners Es!udero, et al., insist t*at t*e 9i!ameral !onferen!e !ommittee s*ould not

even *ave a!ted on t*e no %ass/on %rovisions sin!e t*ere is no disagreement 9et7een&ouse $ill Nos. 042< and 0

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Re%resentatives ma>e t*e sellers of %etroleum 9ear t*e 9urden of t*e VAT. T*us, t*ere areindeed t7o o%%osing for!es on one side, t*e &ouse of Re%resentatives 7*i!* 7ants

%etroleum dealers to 9e saddled 7it* t*e 9urden of %a6ing VAT and on t*e ot*er, t*eSenate 7*i!* does not see it %ro%er to ma>e t*at %arti!ular industr6 9ear said 9urden.

Clearl6, su!* !onfli!ts and differen!es 9et7een t*e no %ass/on %rovisions in t*e Senateand &ouse 9ills *ad to 9e a!ted u%on 96 t*e 9i!ameral !onferen!e !ommittee asmandated 96 t*e rules of 9ot* *ouses of Congress.

Moreover, t*e deletion of t*e no %ass/on %rovision made t*e %resent VAT la7 more in!onsonan!e 7it* t*e ver6 nature of VAT 7*i!*, as stated in t*e e!ision %romulgated onSe%tem9er ", ;22 to t*e &ouse if t*ere are su9stantial differen!es in t*e &ouse and Senate 9ills *adindeed 9een introdu!ed after Tolentino, t*e Court stands 96 its ruling t*at t*e issue of7*et*er or not t*e &ouse %anel in t*e 9i!ameral !onferen!e !ommittee !om%lied 7it*

said internal rule !annot 9e inuired into 96 t*e Court. To reiterate, Dmere failure to!onform to %arliamentar6 usage 7ill not invalidate t*e a!tion Fta>en 96 a deli9erative

9od6G 7*en t*e reuisite num9er of mem9ers *ave agreed to a %arti!ular measure.D 0

Es!udero, et. al., also !ontend t*at Re%u9li! A!t No. 3004 grossl6 violates t*e!onstitutional im%erative on e8!lusive origination of revenue 9ills under Se!tion ;# of

Arti!le VI of t*e Constitution 7*en t*e Senate introdu!ed amendments not !onne!ted7it* VAT.

T*e Court is not %ersuaded.

Arti!le VI, Se!tion ;# of t*e Constitution %rovides

Se!. ;# All a%%ro%riation, revenue or tariff 9ills, 9ills aut*oriHing in!rease of t*e%u9li! de9t, 9ills of lo!al a%%li!ation, and %rivate 9ills s*all originate e8!lusivel6 in t*e&ouse of Re%resentatives, 9ut t*e Senate ma6 %ro%ose or !on!ur 7it* amendments.

Se!tion ;# s%ea>s of origination of !ertain 9ills from t*e &ouse of Re%resentatives 7*i!**as 9een inter%reted in t*e Tolentino !ase as follo7s

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. . . To 9egin 7it*, it is not t*e la7 B 9ut t*e revenue 9ill B 7*i!* is reuired 96 t*eConstitution to Doriginate e8!lusivel6D in t*e &ouse of Re%resentatives. It is im%ortant toem%*asiHe t*is, 9e!ause a 9ill originating in t*e &ouse ma6 undergo su!* e8tensive!*anges in t*e Senate t*at t*e result ma6 9e a re7riting of t*e 7*ole . . . At t*is %oint,

7*at is im%ortant to note is t*at, as a result of t*e Senate a!tion, a distin!t 9ill ma6 9e%rodu!ed. To insist t*at a revenue statute B and not onl6 t*e 9ill 7*i!* initiated t*elegislative %ro!ess !ulminating in t*e ena!tment of t*e la7 B must su9stantiall6 9e t*e

same as t*e &ouse 9ill 7ould 9e to den6 t*e Senate@s %o7er not onl6 to D!on!ur 7it*amendmentsD 9ut also to D%ro%ose amendments.D It 7ould 9e to violate t*e !oeualit6 oflegislative %o7er of t*e t7o *ouses of Congress and in fa!t ma>e t*e &ouse su%erior tot*e Senate.

. . . +iven, t*en, t*e %o7er of t*e Senate to %ro%ose amendments, t*e Senate !an %ro%oseits o7n version even 7it* res%e!t to 9ills 7*i!* are reuired 96 t*e Constitution tooriginate in t*e &ouse.

888 888 888

Indeed, 7*at t*e Constitution sim%l6 means is t*at t*e initiative for filing revenue, tariff,or ta8 9ills, 9ills aut*oriHing an in!rease of t*e %u9li! de9t, %rivate 9ills and 9ills of lo!ala%%li!ation must !ome from t*e &ouse of Re%resentatives on t*e t*eor6 t*at, ele!ted ast*e6 are from t*e distri!ts, t*e mem9ers of t*e &ouse !an 9e e8%e!ted to 9e more

sensitive to t*e lo!al needs and %ro9lems. 'n t*e ot*er *and, t*e senators, 7*o are

ele!ted at large, are e8%e!ted to a%%roa!* t*e same %ro9lems from t*e national%ers%e!tive. $ot* vie7s are t*ere96 made to 9ear on t*e ena!tment of su!* la7s.

Clearl6, after t*e &ouse 9ills as a%%roved on t*ird reading are dul6 transmitted to t*eSenate, t*e Constitution states t*at t*e latter !an %ro%ose or !on!ur 7it* amendments.T*e Court finds t*at t*e su9:e!t %rovisions found in t*e Senate 9ill are 7it*in t*e %urvie7of su!* !onstitutional %rovision as de!lared in t*e Tolentino !ase.

T*e intent of t*e &ouse of Re%resentatives in initiating &ouse $ill Nos. 0age of revenue measures. T*ese measures in!ludeim%rovement of ta8 administration and !ontrol and lea>ages in revenues from in!ometa8es and value added ta8. It is also stated t*at one o%%ortunit6 t*at !ould 9e 9enefi!ialto t*e overall status of our e!onom6 is to revie7 e8isting ta8 rates, evaluating t*erelevan!e given our %resent !onditions. T*us, 7it* t*ese %ur%oses in mind and to

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a!!om%lis* t*ese %ur%oses for 7*i!* t*e *ouse 9ills 7ere filed, i.e., to raise revenues fort*e government, t*e Senate introdu!ed amendments on in!ome ta8es, 7*i!* as admitted96 Senator Ral%* Re!to, 7ould 6ield a9out P"2.< 9illion a 6ear.

Moreover, sin!e t*e o9:e!tive of t*ese *ouse 9ills is to raise revenues, t*e in!rease in

!or%orate in!ome ta8es 7ould 9e a great *el% and 7ould also soften t*e im%a!t of VATmeasure on t*e !onsumers 96 distri9uting t*e 9urden a!ross all se!tors instead of %uttingit entirel6 on t*e s*oulders of t*e !onsumers.

As to t*e ot*er National Internal Revenue Code FNIRCG %rovisions found in Senate $illNo. "3 ne!essaril6 and in*erentl6 reuired e8tended anal6sis and evaluation, as 7ellas %oli!6 ma>ing.

T*ere is no merit in t*is !ontention. T*e Court reiterates t*at in ma>ing *isre!ommendation to t*e President on t*e e8isten!e of eit*er of t*e t7o !onditions, t*eSe!retar6 of (inan!e is not a!ting as t*e alter ego of t*e President or even *er

su9ordinate. &e is a!ting as t*e agent of t*e legislative de%artment, to determine andde!lare t*e event u%on 7*i!* its e8%ressed 7ill is to ta>e effe!t. T*e Se!retar6 of (inan!e9e!omes t*e means or tool 96 7*i!* legislative %oli!6 is determined and im%lemented,

!onsidering t*at *e %ossesses all t*e fa!ilities to gat*er data and information and *as amu!* 9roader %ers%e!tive to %ro%erl6 evaluate t*em. &is fun!tion is to gat*er and !ollate

statisti!al data and ot*er %ertinent information and verif6 if an6 of t*e t7o !onditionslaid out 96 Congress is %resent. Congress granted t*e Se!retar6 of (inan!e t*e aut*orit6to as!ertain t*e e8isten!e of a fa!t, namel6, 7*et*er 96 e!em9er 0", ;22

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fift* %er!ent F; #

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di!tate t*eir moves. it* or 7it*out t*ese VAT %rovisions, an entre%reneur 7*o does not*ave t*e >en to ada%t to e!onomi! varia9les 7ill surel6 %eris* in t*e !om%etition. T*earguments %osed are 7it*in t*e realm of 9usiness, and t*e solution lies also in 9usiness.

Petitioners also reiterate t*eir argument t*at t*e in%ut ta8 is a %ro%ert6 or a %ro%ert6

rig*t. In t*e same 9reat*, t*e Court reiterates its finding t*at it is not a %ro%ert6 or a%ro%ert6 rig*t, and a VAT/registered %erson@s entitlement to t*e !redita9le in%ut ta8 is amere statutor6 %rivilege.

Petitioners also !ontend t*at even if t*e rig*t to !redit t*e in%ut VAT is merel6 a statutor6%rivilege, it *as alread6 evolved into a vested rig*t t*at t*e State !annot remove.

As t*e Court stated in its e!ision, t*e rig*t to !redit t*e in%ut ta8 is a mere !reation ofla7. Prior to t*e ena!tment of multi/stage sales ta8ation, t*e sales ta8es %aid at ever6level of distri9ution are not re!overa9le from t*e ta8es %a6a9le. it* t*e advent of

E8e!utive 'rder No. ;40 im%osing a "2 multi/stage ta8 on all sales, it 7as onl6 t*ent*at t*e !rediting of t*e in%ut ta8 %aid on %ur!*ase or im%ortation of goods and servi!es96 VAT/registered %ersons against t*e out%ut ta8 7as esta9lis*ed. T*is !ontinued 7it* t*e

E8%anded VAT La7 FR.A. No. 44"1G, and T*e Ta8 Reform A!t of "334 FR.A. No. =#;#G.T*e rig*t to !redit in%ut ta8 as against t*e out%ut ta8 is !learl6 a %rivilege !reated 96 la7,a %rivilege t*at also t*e la7 !an limit. It s*ould 9e stressed t*at a %erson *as no vestedrig*t in statutor6 %rivileges.

T*e !on!e%t of Dvested rig*tD is a !onseuen!e of t*e !onstitutional guarant6 of due

%ro!ess t*at e8%resses a %resent fi8ed interest 7*i!* in rig*t reason and natural :usti!e is%rote!ted against ar9itrar6 state a!tion? it in!ludes not onl6 legal or euita9le title to t*eenfor!ement of a demand 9ut also e8em%tions from ne7 o9ligations !reated after t*erig*t *as 9e!ome vested. Rig*ts are !onsidered vested 7*en t*e rig*t to en:o6ment is a

%resent interest, a9solute, un!onditional, and %erfe!t or fi8ed and irrefuta9le. = Asade%tl6 stated 96 Asso!iate Justi!e Minita V. C*i!o/NaHario in *er Con!urring '%inion,7*i!* t*e Court ado%ts, %etitioners@ rig*t to t*e in%ut VAT !redits *as not 6et vested, t*us

B

It s*ould 9e remem9ered t*at %rior to Re%. A!t No. 3004, t*e %etroleum dealers@ in%utVAT !redits 7ere ine8istent B t*e6 7ere unre!ogniHed and disallo7ed 96 la7. T*e

%etroleum dealers *ad no su!* %ro%ert6 !alled in%ut VAT !redits. It is onl6 rational,t*erefore, t*at t*e6 !annot a!uire vested rig*ts to t*e use of su!* in%ut VAT !redits 7*ent*e6 7ere never entitled to su!* !redits in t*e first %la!e, at least, not until Re%. A!t No.3004.

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M6 vie7, at t*is %oint, 7*en Re%. A!t No. 3004 *as not 6et even 9een im%lemented, is t*at%etroleum dealers@ rig*t to use t*eir in%ut VAT as !redit against t*eir out%ut VATunlimitedl6 *as not vested, 9eing a mere e8%e!tan!6 of a future 9enefit and 9eing!ontingent on t*e !ontinuan!e of Se!tion ""2 of t*e National Internal Revenue Code of

"334, %rior to its amendment 96 Re%. A!t No. 3004.T*e elu!idation of Asso!iate Justi!e Artemio V. Pangani9an is li>e7ise 7ort*6 of note, to7it

Moreover, t*ere is no vested rig*t in generall6 a!!e%ted a!!ounting %rin!i%les. T*eserefer to a!!ounting !on!e%ts, measurement te!*niues, and standards of %resentation in a!om%an6@s finan!ial statements, and are not rooted in la7s of nature, as are t*e la7s of

%*6si!al s!ien!e, for t*ese are merel6 develo%ed and !ontinuall6 modified 96 lo!al andinternational regulator6 a!!ounting 9odies. To state ot*er7ise and re!ogniHe su!* asset

a!!ount as a vested rig*t is to limit t*e ta8ing %o7er of t*e State. -nlimited, %lenar6,!om%re*ensive and su%reme, t*is %o7er !annot 9e undul6 restri!ted 96 mere !reations oft*e State.

More im%ortantl6, t*e assailed %rovisions of R.A. No. 3004 alread6 involve legislative%oli!6 and 7isdom. So long as t*ere is a %u9li! end for 7*i!* R.A. No. 3004 7as %assed,t*e means t*roug* 7*i!* su!* end s*all 9e a!!om%lis*ed is for t*e legislature to !*oose

so long as it is 7it*in !onstitutional 9ounds. As stated in Carmi!*ael vs. Sout*ern CoalK Co>e Co.

If t*e uestion 7ere ours to de!ide, 7e !ould not sa6 t*at t*e legislature, in ado%ting t*e%resent s!*eme rat*er t*an anot*er, *ad no 9asis for its !*oi!e, or 7as ar9itrar6 orunreasona9le in its a!tion. $ut, as t*e state is free to distri9ute t*e 9urden of a ta87it*out regard to t*e %arti!ular %ur%ose for 7*i!* it is to 9e used, t*ere is no 7arrant int*e Constitution for setting t*e ta8 aside 9e!ause a !ourt t*in>s t*at it !ould *avedistri9uted t*e 9urden more 7isel6. T*ose are fun!tions reserved for t*e legislature.

&ERE('RE, t*e Motions for Re!onsideration are *ere96 ENIE IT& (INALIT.T*e tem%orar6 restraining order issued 96 t*e Court is LI(TE.

S' 'RERE.

FT*e Justi!es 7*o filed t*eir res%e!tive !on!urring and dissenting o%inions maintaint*eir res%e!tive %ositions. Justi!e ante '. Tinga filed a dissenting o%inion to t*e %resent

Resolution? 7*ile Justi!e Consuelo nares/Santiago :oins *im in *is dissenting o%inion.G

Se%arate '%inions

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TIN+A, J., dissenting

'n!e again, t*e ma:orit6 *as refused to engage and refute in an6 meaningful fas*ion t*earguments raised 96 t*e %etitioners in +.R. No. "1=#1". T*e de minimis a%%re!iatione8*i9ited 96 t*e ma:orit6 of t*e issues of 42 !a%, t*e 12/mont* amortiHation %eriod,

and froman6 of t*e vie7s e8%ressed in m6 issenting '%inion, and I a!!ordingl6 dissent from t*edenial of t*e Motion for Re!onsideration filed 96 t*e %etitioners in +.R. No. "1=#1".

T*e reasons for m6 vote *ave 9een !om%re*ensivel6 dis!ussed in m6 %revious issenting'%inion, and I do not see t*e need to re%li!ate t*em *erein. &o7ever, I 7is* to stress a

fe7 %oints.

Ta8 Statutes Ma6 $e Invalidated

If T*e6 Pose a Clear and Present anger

To t*e e%rivation of Life, Li9ert6 and

Pro%ert6 it*out ue Pro!ess of La7

T*e ma:orit6 again dismisses t*e arguments of t*e %etitioners as Dt*eoreti!alD,D!on:e!turalD or merel6 Danti!i%ator6,D not7it*standing t*at t*e in:ur6 to t*e ta8%a6ersresulting from Se!tion = and "; of t*e E/VAT La7 is as!ertaina9le 7it* mat*emati!al

!ertaint6. In su%%ort of t*is vie7, t*e ma:orit6 !ites t*e Court@s Resolution dated "< June;22< in Information Te!*nolog6 (oundation v. C'MELEC, one of t*e rulings issued int*at !ase su9seuent to t*e main e!ision rendered on "0 Januar6 ;22#. T*e referen!e is

grievousl6 ironi!, !onsidering t*at in t*e "0 Januar6 ;22# e!ision, t*e Court, overvigorous dissents, !*ose an67a6 to intervene and grant t*e %etition des%ite t*e fa!t t*att*e %etitioners t*erein did not allege an6 violation of an6 !onstitutional %rovision orletter of statute. In t*is !ase, t*e %etitioners *ave suarel6 invo>ed t*e violation of t*e

$ill of Rig*ts of t*e Constitution, and 6et t*e ma:orit6 is suddenl6 timid, unli>e inInfote!*.

Still, t*e formulation of t*e ma:orit6 unfortunatel6 leaves t*e im%ression t*at an6 statute,ta8ing or ot*er7ise, is 9e6ond :udi!ial atta!> %rior to its im%lementation. If t*e ta8measure in uestion %rovided t*at t*e ta8%a6er s*all remit all in!ome earned to t*e

government 9eginning " Januar6 ;22=, 7ould t*is mean t*at t*e Court !an ta>e!ogniHan!e of t*e legal !*allenge onl6 starting ; Januar6 ;22=

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I do not s*are t*e ma:orit6@s %en!*ant for a7aiting t*e 9lood s%urts 9efore ta>ing a!tioneven 7*en t*e >nife@s edge alread6 dangles. As I maintained in m6 issenting '%inion, ata8 measure ma6 9e validl6 !*allenged and stri!>en do7n even 9efore its im%lementationif it %oses a !lear and %resent danger to t*e de%rivation of life, li9ert6 or %ro%ert6 of t*e

ta8%a6er 7it*out due %ro!ess of la7. T*is is t*e e8%e!tation of ever6 !itiHen 7*o 7is*esto maintain trust in all t*e 9ran!*es of government. In t*e enfor!ement of t*e!onstitutional rig*ts of all %ersons, t*e !ommonsense e8%e!tation is t*at t*e Court, as

guardian of t*ese rig*ts, is em%o7ered to ste% in even 9efore t*e %ros%e!tive violationta>es %la!e. &en!e, t*e evolution of t*e D!lear and %resent dangerD do!trine and ot*eranalogous %rin!i%les, 7it*out 7*i!*, t*e Court 7ould 9e seen as inutile in t*e fa!e of!onstitutional violation.

'f !ourse, not ever6 anti!i%ator6 t*reat to !onstitutional li9erties !an 9e assailed %rior toim%lementation, *en!e t*e em%lo6ment of t*e D!lear and %resent dangerD standard to

se%arate t*e 7*eat from t*e !*aff. Still, t*e Court s*ould not 9e so readil6 dismissive oft*e %etitioners@ %osture *erein merel6 9e!ause it is anti!i%ator6. T*ere s*ould *ave 9een ameaningful engagement 96 t*e ma:orit6 of t*e fa!ts and formulae %resented 96 t*e

%etitioners 9efore t*e reasona9le !on!lusion !ould *ave 9een rea!*ed on t*e maturit6 oft*e !laim. T*at t*e ma:orit6 *as not 9ot*ered to do so is ultimatel6 of tragi!!onseuen!e.

42 In%ut VAT Credit

An Im%aired AssetT*e %onen!ia, :oined 96 Justi!es Pangani9an and C*i!o/NaHario, e8%ress t*e 9elief t*atno %ro%ert6 rig*ts atta!* to t*e in%ut VAT %aid 96 t*e ta8%a6er. T*is is a 9iHarre vie7 t*atassumes t*at all in!ome earned 96 %rivate %ersons %reternaturall6 9elongs to t*e

government, and 7*atever is retained 96 t*e %erson after ta8es is a!uired as a matter of%rivilege. T*is is t*e sort of t*in>ing t*at *as fermented revolutions t*roug*out *istor6,su!* as t*e Ameri!an Revolution of "441.

I %ointed out in m6 issenting '%inion t*at under !urrent a!!e%ted international

a!!ounting standards, t*e 02 %re%aid in%ut VAT 7ould 9e re!orded as a loss in t*ea!!ounting 9oo>s, sin!e t*e %ossi9ilit6 of its re!over6 is im%ro9a9le, !onsidering t*at t*e

E/VAT La7 allo7s its re!over6 onl6 after t*e 9usiness *as !eased to e8ist. Even t*e$ureau of Internal Revenue itself *as long re!ogniHed t*e unutiliHed in%ut VAT as anasset.

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T*e ma:orit6 fails to realiHe t*at even under t*e ne7 E/VAT La7, t*e State re!ogniHes t*att*e %ersons 7*o %re/%a6 t*at in%ut VAT, usuall6 t*e dealers or retailers, are not t*e

%ersons 7*o are lia9le to %a6 for t*e ta8. T*e VAT s6stem, as im%lemented t*roug* t*e%revious VAT la7 and t*e ne7 E/VAT La7, suarel6 *olds t*e end !onsumer as t*e

ta8%a6er lia9le to s*oulder t*e in%ut VAT. Nonet*eless, under t*e me!*anism foisted int*e ne7 E/VAT La7, t*e dealer or retailer 7*o %re/%a6s t*e in%ut VAT is virtuall6%re!luded from re!overing t*e %re/%aid in%ut VAT, sin!e t*e la7 onl6 allo7s su!*re!over6 u%on t*e !essation of t*e 9usiness. Indeed, t*e onl6 7a6 said !lass of ta8%a6ers!an re!over t*is %re/%aid in%ut VAT 7as if it 7ere to !ease o%erations at t*e end of ever6uarter.

T*e illusion t*at 9linds t*e ma:orit6 to t*is state of affairs is t*e !laim t*at t*e %re/%aidin%ut VAT ma6 an67a6 9e !arried over into t*e su!!eeding uarter, a !*imera en*an!ed96 t*e grossl6 misleading %resentation of t*e 'ffi!e of t*e Soli!itor +eneral. *at t*isde!e%tion fosters, and 7*at t*e ma:orit6 fails to realiHe, is t*at sin!e t*e ta8%a6er is

%er%etuall6 o9liged to remit t*e 02 in%ut VAT ever6 uarter, t*ere 7ould 9e a!ontinuous a!!umulation of e8!ess in%ut VAT. It is not true t*en t*at t*e in%ut VAT

%re%aid for t*e first uarter !an 9e re!overed in t*e se!ond, t*ird or fourt* uarter oft*at 6ear, or at an6 time in t*e ne8t 6ear for t*at matter sin!e t*e amount of %re%aid in%utVAT a!!umulates 7it* ever6 su!!eeding %re%a6ment of in%ut VAT. Moreover, t*ea!!umulation of t*e %re%aid in%ut VAT diminis*es t*e a!tual value of t*e refunda9leamounts, !onsidering t*e esta9lis*ed %rin!i%le of Dtime/value of mone6D, as e8%lained inm6 issenting '%inion.

T*us, t*e %re/%aid in%ut VAT, for 7*i!* t*e %etitioners and ot*er similarl6 situatedta8%a6ers are not even ultimatel6 lia9le in t*e first %la!e, re%resents in tangi9le terms ana!tual loss. To %ut it more su!!in!tl6, 7*en t*e ta8%a6er %re%a6s t*e 02 in%ut VAT,t*ere is no !*an!e for its re!over6 e8!e%t until after t*e ta8%a6er !eases to 9e su!*. T*is

%oint is !ru!ial, as it goes in t*e *eart of t*e !onstitutional !*allenge raised 96 t*e%etitioners. A re!ognition t*at t*e in%ut VAT is a %ro%ert6 asset %la!es it suarel6 in t*eam9it of t*e due %ro!ess !lause.

T*e ma:orit6 no7 stresses t*at %rior to E8e!utive 'rder No. ;40 sales ta8es %aid 96 t*eretailer or dealers 7ere not re!overa9le. T*e nature of a sales ta8 %re!isel6 is t*at it iss*ouldered 96 t*e seller, not t*e !onsumer. In t*at !ase, t*e !lear legislative intent is toen!um9er t*e retailer 7it* t*e end ta8. -nder t*e VAT s6stem, as ens*rined under Re%.

A!t No. 3004, t*e ne7 E/VAT La7, t*ere is %re!isel6 a legislative re!ognition t*at it is t*eend user, not t*e seller, 7*o s*oulders t*e E/VAT. T*e %ro9lem 7it* t*e ne7 E/VAT la7 is

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t*at it !orres%ondingl6 im%oses a defeatist me!*anism t*at o9viates t*is entitlement oft*e seller 96 for!i9l6 7it**olding in %er%etua t*is %re/%aid in%ut VAT.

T*e ma:orit6 !ites 7it* a%%roval Justi!e C*i!o/NaHario@s argument, as e8%ressed in *er!on!urring o%inion, t*at %rior to t*e ne7 E/VAT La7, t*e %etroleum dealers in %arti!ular

*ad no in%ut VAT !redits to s%ea> of, and t*erefore, !ould not assert an6 %ro%ert6 rig*tsto t*e in%ut VAT !redits under t*e ne7 la7. 'f !ourse t*e %etroleum dealers *ad no in%utVAT !redits %rior to t*e E/VAT La7 9e!ause %re!isel6 t*e6 7ere not !overed 96 t*e VAT

s6stem in t*e first %la!e. *at 7ould no7 9e !lassified as Din%ut VAT !reditsD 7as, in realterms, %rofit o9taina9le 96 t*e %etroleum dealers %rior to t*e ne7 E/VAT La7. T*e E/VAT

La7 stands to diminis* su!* %rofit, not 96 outrig*t ta>ing %er*a%s, 9ut 96 ad infinitum!onfis!ation 7it* t*e illusor6 %romise of eventual return. '9viousl6, t*ere is ade%rivation of %ro%ert6 in su!* !ase? 6et is it seriousl6 !ontended t*at su!* de%rivation isi%so fa!to s*eltered if it is not !lassified as a ta>ing, 9ut instead re!lassified as aD!reditD

It is *ig*l6 distressful t*at t*e Court, in its *aste to de!ree %etitioners as 9ereft of an6vested %ro%ert6 rig*ts, re:e!ts t*e notion t*at a %erson *as a vested rig*t to t*e earningsand %rofits in!urred in 9usiness. $efore, no legal 9asis !ould 9e found to %ro% u% su!* a

%al%a9l6 outlandis* !laim? 9ut t*e e!ision, as affirmed 96 t*e ma:orit6@s Resolution,no7 ens*rines a temerarious %ro%osition 7it* do!trinal status.

In t*e e!ision, and also in Justi!e Pangani9an@s Se%arate '%inion t*erein, t*e !ase of

-nited Para!ale Mining Co. v. e la Rosa 7as !ited in su%%ort of t*e %ro%osition t*att*ere is no vested rig*t to t*e in%ut VAT !redit. Justi!e Pangani9an 7ent as far as to !itet*at !ase to su%%ort t*e !ontention t*at Dt5*ere is no vested rig*t in a deferred in%ut ta8a!!ount? it is a mere statutor6 %rivilege.D Relian!e on t*e !ase is uite mis%la!ed. (irst,as %ointed out in m6 issenting '%inion, it does not even %ertain to ta8 !redits involvingas it does, uestions on t*e :urisdi!tion of t*e $ureau of Mines. Se!ond, t*e %utativevested rig*ts t*erein %ertained to mining !laims, 6et all mineral resour!es indis%uta9l69elong to t*e State. &erein, t*e rig*ts %ertain to %rofit in!urred 96 %rivate enter%rise, and!ertainl6 t*e ma:orit6 !annot !ontend t*at su!* %rofits a!tuall6 9elong to t*e State.

As stated in m6 issenting '%inion, t*e Constitution itself re!ogniHes a rig*t to in!omeand %rofit 7*en it re!ogniHes Dt*e rig*t of enter%rises to reasona9le returns oninvestments, and to e8%ansion and gro7t*.D Se!tion ;2, Arti!le II of t*e Constitution

furt*er mandates t*at t*e State re!ogniHe t*e indis%ensa9le role of t*e %rivate se!tor, t*een!ouragement of %rivate enter%rise, and t*e %rovision of in!entives to neededinvestments. Indeed, t*ere is a fundamental re!ognition in an6 form of demo!rati!

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government t*at re!ogniHes a !a%italist e!onom6 t*at t*e enter%rise *as a rig*t to its%rofits. Toda6, t*e Court instead affirms t*at t*ere is no su!* rig*t. S*ould !a%ital flig*tensue, t*e %*enomenom s*ould not 9e 9lamed on investors in vie7 of our :udi!ial

s6stem@s re:e!tion of !a%italism@s fundamental %re!e%t.

Mainstream enun!iation of 42 Ca%

T*e fa!t t*at %etitioners are dealers of %etroleum %rodu!ts ma6 *ave left t*e im%ressiont*at t*e 42 !a% singularl6 affe!ts t*e %etroleum industr6? or t*at ot*er !lasses ofdealers or retailers do not %ose t*e same o9:e!tions to t*ese DinnovationsD in t*e E/VATla7. T*is is far from t*e trut*.

In fa!t, t*e !lamor against t*e 42 !a% *as 9een 7ides%read among t*e %la6ers and!om%onents in t*e finan!ial mainstream. enun!iations *ave 9een registered 96 t*e

P*ili%%ine C*am9er of Commer!e and Industr6, t*e Joint (oreign C*am9ers of t*eP*ili%%ines F!om%rising of t*e Ameri!an C*am9er of Commer!e in t*e P*ili%%ines, t*eAustralian/Ne7 )ealand C*am9er Commer!e of t*e P*ili%%ines, In!., t*e CanadianC*am9er of Commer!e of t*e P*ili%%ines, In!., t*e Euro%ean C*am9er of Commer!e oft*e P*ili%%ines, In!., t*e Ja%anese C*am9er of Commer!e of t*e P*ili%%ines, In!., t*e

orean C*am9er of Commer!e and Industr6 of t*e P*ili%%ines, and t*e P*ili%%ineAsso!iation of Multinational Com%anies Regional &eaduarters, In!.G, t*e (ili%ino/C*inese C*am9er of Commer!e and Industr6, t*e (ederation of P*ili%%ine Industries, t*eConsumer and 'il Pri!e at!*, t*e Asso!iation of Certified Pu9li! A!!ountants in

Pu9li! Pra!ti!e, t*e P*ili%%ine To9a!!o Institute, and t*e auditing firm ofPri!e7ater*ouseCoo%er.

Even ne7l6 installed (inan!e Se!retar6 Margarito Teves *as e8%ressed !on!ern t*at t*e42 in%ut VAT Dma6 not 7or> a!ross all industries 9e!ause of var6ing %rofit marginsD.'t*er e8%erts 7*o *ave voi!ed !on!erns on t*e 42 in%ut VAT are former NEA

ire!tors Cielito &a9ito and Solita Monsod, Peter alla!e of t*e alla!e $usiness(orum, and Paul R. Coo%er, dire!tor of Pri!e7ater*ouseCoo%er.

In fa!t, Mr. Coo%er %u9lis*ed in t*e P*ili%%ine ail6 Inuirer a lengt*6 disuisition on

t*e %ro9lems surrounding t*e 42 !a%, %ortions of 7*i!* I re%li!ate 9elo7

Poli!6 !on!erns on t*e !a%

*en t*e idea of %utting a !a% 7as originall6 introdu!ed on t*e floor of t*e Senate. T*eidea 7as to address to some e8tent t*e under/re%orting of out%ut VAT 96 non/!om%liantta8%a6ers. T*e original suggestion 7as a 32 %er!ent !a%, or effe!tivel6 a "/%er!ent

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minimum VAT. At t*at level, t*e rule s*ould not im%a!t adversel6 on !om%laint ta8%a6ers,9ut 7ould result in non/!om%liant ta8%a6ers *aving to a!!ount for !loser to t*eir true ta8lia9ilit6.

As a general %oli!6 !onsideration, one s*ould uestion 7*6 our legislators are

%enaliHing !om%laint ta8%a6ers 7*en t*e fundamental issue is at t*e a%%arent ina9ilit6 oft*e $ureau of Internal Revenue F$IRG to im%lement ta8 la7 effe!tivel6.

At a 32/%er!ent !a%, t*e measure mig*t still *ave 9een defensi9le as a roug* %ro86 forVAT. &o7ever, some7*ere in t*e 9i!ameral %ro!ess, t*e rule *as 9e!ome even more

%unitive 7it* a 42/%er!ent !a%. As 7it* most amendments introdu!ed at t*e 9i!ameralstage, t*ere is no %u9li! indi!ation a9out 7*at la7ma>ers 7ere t*in>ing 7*en t*e6 %utt*e travest6 in %la!e.

888 888 888

'ne of t*e arguments in Senate de9ates for ta8ing t*e %o7er and %etroleum se!tors 7ast*at if it 7as good enoug* for mom/and/%o% stores to *ave to a!!ount for t*e VAT, it 7as

good enoug* for t*e 9iggest !om%anies in t*e !ountr6 to do t*e same. A similar argument*ere is t*at if small 9usinesses *ave to %a6 a minimum 0/%er!ent ta8, 7*6 s*ould largerVAT/registered %ersons get a7a6 7it* %a6ing less

T*e %ro9lem 7it* t*is t*in>ing is t*reefold

T*e %er!entage ta8 a%%lies to small 9usinesses in t*e *ard/to/ta8 se!tor and a fe79elieve t*e $IR !olle!ts !lose to 7*at it s*ould from t*is. Nor s*ould 7e 9e overl6!on!erned if t*is is t*e !ase B t*e revenues are small, and t*e $IR@s efforts 7ould 9e alot 9etter fo!used on larger ta8%a6ers 7*ere more signifi!ant revenues 7ill 9e at issue.

VAT/registered %ersons in!ur !om%lian!e !osts. T*e 0/%er!ent ta8 mig*t 9e 9etter!on!eived as a slig*tl6 more e8%ensive o%tion to allo7 ta8%a6ers to o%t out of t*e VAT,rat*er t*an a %unitive rule for small 9usinesses. FIf t*e %er!entage ta8 is !onsideredundul6 %unitive, 7*6 is it not :ust re%ealedG

Ironi!all6, one of t*e ne7 measures in t*e Senate 9ill 7as to allo7 ta8%a6ers 7it*turnovers 9elo7, t*e registration t*res*old to register voluntaril6 for VAT if t

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