Tio vs Videogram Regulatory Commission (G.R. No.

75697)
Facts: The case is a petition filed by petitioner on behalf of videogram operators
adversely affected by Presidential Decree No. 1987, An Act Creating the Videogram
Regulatory Board with broad powers to regulate and supervise the videogram
industry.
A month after the promulgation of the said Presidential Decree, the amended the
National Internal Revenue Code provided that:
SEC. 134. Video Tapes. There shall be collected on each processed video-tape
cassette, ready for playback, regardless of length, an annual tax of five pesos;
Provided, That locally manufactured or imported blank video tapes shall be subject
to sales tax.
Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding
any provision of law to the contrary, the province shall collect a tax of thirty percent
(30%) of the purchase price or rental rate, as the case may be, for every sale, lease
or disposition of a videogram containing a reproduction of any motion picture or
audiovisual program.
Fifty percent (50%) of the proceeds of the tax collected shall accrue to the
province, and the other fifty percent (50%) shall accrue to the municipality where
the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared
equally by the City/Municipality and the Metropolitan Manila Commission.
The rationale behind the tax provision is to curb the proliferation and unregulated
circulation of videograms including, among others, videotapes, discs, cassettes or
any technical improvement or variation thereof, have greatly prejudiced the
operations of movie houses and theaters. Such unregulated circulation have caused
a sharp decline in theatrical attendance by at least forty percent (40%) and a
tremendous drop in the collection of sales, contractors specific, amusement and
other taxes, thereby resulting in substantial losses estimated at P450 Million
annually in government revenues.
Videogram(s) establishments collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and these earnings have not been
subjected to tax, thereby depriving the Government of approximately P180 Million
in taxes each year.
The unregulated activities of videogram establishments have also affected the
viability of the movie industry.
Issues:
(1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
In legislative procedure, a rider is an additional provision added to a bill or other measure under the consideration by a legislature,
having little connection with the subject matter of the bill.[1] Riders are usually created as a tactic to pass a controversial provision
that would not pass as its own bill. Occasionally, a controversial provision is attached to a bill not to be passed itself but to prevent
the bill from being passed (in which case it is called a wrecking amendment or poison pill).

(2) Whether or nor the DECREE is constitutional.

Held: Taxation has been made the implement of the states police power. The levy
of the 30% tax is for a public purpose. It was imposed primarily to answer the need
for regulating the video industry, particularly because of the rampant film piracy,
the flagrant violation of intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an objective of the DECREE to
protect the movie industry, the tax remains a valid imposition.
We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void. While the underlying
objective of the DECREE is to protect the moribund movie industry, there is no
question that public welfare is at bottom of its enactment, considering the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the
viewing public brought about by the availability of unclassified and unreviewed
video tapes containing pornographic films and films with brutally violent sequences;
and losses in government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually untaxed
since mere payment of Mayors permit and municipal license fees are required to
engage in business.
WHEREFORE, the instant Petition is hereby dismissed. No costs.

PHIL. HEALTH CARE PROVIDERS, INC vs.

COMMISSIONER OF INTERNAL REVENUE
July 2, 2014 Leave a comment
GR. NO. 1677330 September 18, 2009, SPECIAL FIRST DIVISION (CORONA, J.)
FACTS:
Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and
operate a prepaid group practice health care delivery system or a health maintenance organization to
take care of the sick and disabled persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the organization. On January 27, 2000,
respondent CIR sent petitioner a formal deman letter and the corresponding assessment notices
demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years
1996 and 1997 in the total amount of P224,702,641.18. The deficiency assessment was imposed on
petitioners health care agreement with the members of its health care program pursuant to Section
185 of the 1997 Tax Code. Petitioner protested the assessment in a letter dated February 23, 2000. As
respondent did not act on the protest, petitioner filed a petition for review in the Court of Tax Appeals
(CTA) seeking the cancellation of the deficiency VAT and DST assessments. On April 5, 2002, the CTA
rendered a decision, ordering the petitioner to PAY the deficiency VAT amounting to P22,054,831.75
inclusive of 25% surcharge plus 20% interest from January 20, 1997 until fully paid for the 1996 VAT
deficiency and P31,094,163.87 inclusive of 25% surcharge plus 20% interest from January 20, 1998

until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No. [231]-88 is declared void and
without force and effect. The 1996 and 1997 deficiency DST assessment against petitioner is hereby
CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from collecting the said DST
deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it cancelled the DST
assessment. He claimed that petitioners health care agreement was a contract of insurance subject to
DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that petitioners health care agreement
was in the nature of a non-life insurance contract subject to DST. Respondent is ordered to pay the
deficiency Documentary Stamp Tax. Petitioner moved for reconsideration but the CA denied it.

ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.
(2) Whether or not the agreements between petitioner and its members possess all elements
necessary in the insurance contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said in June
12, 2008 decision that it is irrelevant that petitioner is an HMO and not an insurer because its
agreements are treated as insurance contracts and the DST is not a tax on the business but an excise
on the privilege, opportunity or facility used in the transaction of the business. Petitioner, however,
submits that it is of critical importance to characterize the business it is engaged in, that is, to
determine whether it is an HMO or an insurance company, as this distinction is indispensable in turn to
the issue of whether or not it is liable for DST on its health care agreements. Petitioner is admittedly an
HMO. Under RA 7878 an HMO is an entity that provides, offers or arranges for coverage of designated
health services needed by plan members for a fixed prepaid premium. The payments do not vary with
the extent, frequency or type of services provided. Section 2 (2) of PD 1460 enumerates what
constitutes doing an insurance business or transacting an insurance businesswhich are making or
proposing to make, as insurer, any insurance contract; making or proposing to make, as surety, any
contract of suretyship as a vocation and not as merely incidental to any other legitimate business or
activity of the surety; doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning of this Code; doing
or proposing to do any business in substance equivalent to any of the foregoing in a manner designed
to evade the provisions of this Code.
Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its
curative medical services), but these are incidental to the principal activity of providing them medical
care. The insurance-like aspect of petitioners business is miniscule compared to its noninsurance
activities. Therefore, since it substantially provides health care services rather than insurance services,
it cannot be considered as being in the insurance business.

Mactan Cebu International Airport Authority v. Marcos 261 SCRA 667 (1996)
Facts:
Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A.
6958, mandated to principally undertake the economical, efficient, and effective

control, management, and supervision of the Mactan International Airport and

Lahug Airport, and such other airports as may be established in Cebu.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption
from payment of realty taxes in accordance with Section 14 of its charter. However,
on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the
Treasurer of the City of Cebu, demanded payment from realty taxes in the total
amount of P2229078.79. Petitioner objected to such demand for payment as
baseless and unjustified claiming in its favor the afore cited Section 14 of R.A. 6958.
It was also asserted that it is an instrumentality of the government performing
governmental functions, citing Section 133 of the Local Government Code of 1991.
Section 133. Common limitations on the Taxing Powers of Local Government Units.
The exercise of the taxing powers of the provinces, cities, barangays, municipalities
shall not extend to the levi of the following:
xxx Taxes, fees or charges of any kind in the National Government, its agencies and
instrumentalities, and LGUs. xxx
Respondent City refused to cancel and set aside petitioners realty tax account,
insisting that the MCIAA is a government-controlled corporation whose tax
exemption privilege has been withdrawn by virtue of Sections 193 and 234 of Labor
Code that took effect on January 1, 1992.
Issue:
Whether or not the petitioner is a taxable person
Rulings:
Taxation is the rule and exemption is the exception. MCIAAs exemption from
payment of taxes is withdrawn by virtue of Sections 193 and 234 of Labor Code.
Statutes granting tax exemptions shall be strictly construed against the taxpayer
and liberally construed in favor of the taxing authority.
The petitioner cannot claim that it was never a taxable person under its Charter. It
was only exempted from the payment of realty taxes. The grant of the privilege only
in respect of this tax is conclusive proof of the legislative intent to make it a taxable
person subject to all taxes, except real property tax.

National Power Corporation vs. City of Cabanatuan

GR. No. 149110

April 9, 2003
FACTS:
NAPOCOR, the petitioner, is a government-owed and controlled corporation created
under Commonwealth Act 120. It is tasked to undertake the development of
hydroelectric generations of power and the production of electricity from nuclear,
geothermal, and other sources, as well as, the transmission of electric power on a
nationwide basis.
For many years now, NAPOCOR sells electric power to the resident Cabanatuan City,
posting a gross income of P107,814,187.96 in 1992. Pursuant to Sec. 37 of
Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax
amounting to P808,606.41, representing 75% of 1% of the formers gross receipts
for the preceding year.
Petitioner, whose capital stock was subscribed and wholly paid by the Philippine
Government, refused to pay the tax assessment. It argued that the respondent has
no authority to impose tax on government entities. Petitioner also contend that as a
non-profit organization, it is exempted from the payment of all forms of taxes,
charges, duties or fees in accordance with Sec. 13 of RA 6395, as amended.
The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that
petitioner pay the assessed tax, plus surcharge equivalent to 25% of the amount of
tax and 2% monthly interest. Respondent alleged that petitioners exemption from
local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code).
The trial court issued an order dismissing the case. On appeal, the Court of Appeals
reversed the decision of the RTC and ordered the petitioner to pay the city
government the tax assessment.
ISSUES:
(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because
its stocks are wholly owned by the National Government and its charter
characterized is as a non-profit organization?
(2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions
of the Local Government Code (LGC)?
HELD:
(1) NO. To stress, a franchise tax is imposed based not on the ownership but on the
exercise by the corporation of a privilege to do business. The taxable entity is the
corporation which exercises the franchise, and not the individual stockholders. By
virtue of its charter, petitioner was created as a separate and distinct entity from
the National Government. It can sue and be sued under its own name, and can
exercise all the powers of a corporation under the Corporation Code.

To be sure, the ownership by the National Government of its entire capital stock
does not necessarily imply that petitioner is no engage din business.
(2) YES. One of the most significant provisions of the LGC is the removal of the
blanket exclusion of instrumentalities and agencies of the National Government
from the coverage of local taxation. Although as a general rule, LGUs cannot impose
taxes, fees, or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e. when specific provisions of
the LGC authorize the LGUs to impose taxes, fees, or charges on the
aforementioned entities. The legislative purpose to withdraw tax privileges enjoyed
under existing laws or charter is clearly manifested by the language used on Sec.
137 and 193 categorically withdrawing such exemption subject only to the
exceptions enumerated. Since it would be tedious and impractical to attempt to
enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal language could have been used.