DISSENTING OPINION
CARPIO, J.:
The provisions in contention in the case before the Court are Section 4(a) of Republic Act No. 92571 (R.A. 9257) and Section 32 of Republic Act No. 94422 (R.A. 9442) which grant a 20% discount on the purchase of medicines, respectively, to senior citizens and persons with disability. Southern Luzon Drug Corporation (Southern Luzon Drug) assails the constitutionality of the provisions and the tax treatment of the 20% discount as tax deduction from gross income computed from the net cost of the goods sold or services rendered. Southern Luzon Drug alleges, among other things, that the 20% discount is an invalid exercise of the power of eminent domain insofar as it fails to provide just compensation to establishments that grant the discount.
The majority opinion affirms the constitutionality of the assailed provisions and reiterated the rulings in Carlos Superdrug Corporation v. Department of Social Welfare and Development3and Manila Memorial Park, Inc. v. Secretary of the Department of Social Welfare and Development4that the challenged provisions constitute a valid exercise of police power.
I maintain my dissent in the Manila Memorial Park case. I assert that Carlos Superdrug Corporation barely distinguished between police power and eminent domain. While it is true that police power is similar to the power of eminent domain because both have the general welfare of the people for their object, we need to clarify the concept of taking in eminent domain as against taking in police power to prevent any claim of police power when the power actually exercised is eminent domain. When police power is exercised, there is no just compensation to the citizen who loses his private property. When eminent domain is exercised, there must be just compensation. Thus, the Court must distinguish and clarify taking in police power and taking in eminent domain. Government officials cannot just invoke police power when the act constitutes eminent domain.
In People v. Pomar, 5 the Court acknowledged that "[b ]y reason of the constant growth of public opinion in a developing civilization, the term 'police power' has never been, and we do not believe can be, clearly and definitely defined and circumscribed."6 The Court stated that the "definition of the police power of the [S]tate must depend upon the particular law and the particular facts to which it is to be applied." 7 However, it was considered even then that police power, when applied to taking 1of property without compensation, refers to property that is destroyed pr placed outside the commerce of man. The Court declared in Pomar:
It is believed and confidently asserted that no case can be found, in civilized society and well-organized governments, where individuals have been deprived of their property, under the police power of the state, without compensation, except in cases where the property in question was used for the purpose of violating some law legally adopted, or constitutes a nuisance. Among such cases may be mentioned: Apparatus used in counterfeiting the money of the state; firearms illegally possessed; opium possessed in violation of law; apparatus used for gambling in violation of law; buildings and property used for the purpose of violating laws prohibiting the manufacture and sale of intoxicating liquors; and all cases in which the property itself has become a nuisance and dangerous and detrimental to the public health, morals and general welfare of the state. In all of such cases, and in many more which might be cited, the destruction of the property is permitted in the exercise of the police power of the state. But it must first be established that such property was used as the instrument for the violation of a valid existing law. (Mugler vs. Kansan, 123 U.S. 623; Slaughter House Cases, 16 Wall. [U.S.] 36; Butchers' Union, etc., Co. vs. Crescent City, etc., Co., 111 U.S. 746; John Stuart Mill - "On Liberty," 28, 29)
Without further attempting to define what are the peculiar subjects or limits of the police power, it may safely be affirmed, that every law for the restraint and punishment of crimes, for the preservation of the public peace, health, and morals, must come within this category. But the state, when providing by legislation for the protection of the public health, the public morals, or the public safety, is subject to and is controlled by the paramount authority of the constitution of the state, and will not be permitted to violate rights secured or guaranteed by that instrument or interfere with the execution of the powers and rights guaranteed to the people under their law - the constitution. (Mugler vs. Kansas, 123 U.S. 623)8 (Emphasis supplied)
In City Government of Quezon City v. Hon. Judge Ericta,9the Court quoted with approval the trial court's decision declaring null and void Section 9 of Ordinance No. 6118, S-64, of the Quezon City Council, thus:
We start the discussion with a restatement of certain basic principles. Occupying the forefront in the bill of rights is the provision which states that 'no person shall be deprived of life, liberty or property without due process of law. (Art. III, Section 1 subparagraph 1, Constitution)
On the other hand, there are three inherent powers of government by which the state interferes with the property rights, namely- (1) police power, (2) eminent domain, [and] (3) taxation. These are said to exist independently of the Constitution as necessary attributes of sovereignty.
Police power is defined by Freund as 'the power of promoting the public welfare by restraining and regulating the use of liberty and property' (Quoted in Political Law by Tafiada and Carreon, V-11, p. 50). It is usually exerted in order to merely regulate the use and enjoyment of property of the owner. If he is deprived of his property outright, it is not taken for public use but rather to destroy in order to promote the general welfare. In police power, the owner does not recover from the government for injury sustained in consequence thereof (12 C.J. 623). It has been said that police power is the most essential of government powers, at times the most insistent, and always one of the least !imitable of the powers of government (Ruby vs. Provincial Board, 3 9 Phil. 660; le hong vs. Hernandez, L-7995, May 31, 1957). This power embraces the whole system of public regulation (U.S. vs. Linsuya Fan, 10 Phil. 104). The Supreme Court has said that police power is so far-reaching in scope that it has almost become impossible to limit its sweep. As it derives its existence from the very existence of the state itself, it does not need to be expressed or defined in its scope. Being coextensive with self-preservation and survival itself, it is the most positive and active of all governmental processes, the most essential, insistent and illimitable. Especially it is so under the modern democratic framework where the demands of society and nations have multiplied to almost unimaginable proportions. The field and scope of police power have become almost boundless, just as the fields of public interest and public welfare have become almost all embracing and have transcended human foresight. Since the Court cannot foresee the needs and demands of public interest and welfare, they cannot delimit beforehand the extent or scope of the police power by which and through which the state seeks to attain or achieve public interest and welfare. (Ichong vs. Hernandez, L- 7995, May 31, 1957).
The police power being the most active power of the government and the due process clause being the broadest limitation on governmental power, the conflict between this power of government and the due process clause of the Constitution is oftentimes inevitable.
It will be seen from the foregoing authorities that police power is usually exercised in the form of mere regulation or restriction in the use of liberty or property for the promotion of the general welfare. It does not involve the taking or confiscation of property with the exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting the peace and order and of promoting the general welfare as for instance, the confiscation of an illegally possessed article, such as opium and firearms. 10 (Boldfacing and italicization supplied)
It is very clear that taking under the exercise of police power does not require any compensation because the property taken is either destroyed or placed outside the commerce of man.
On the other hand, the power of eminent domain has been described as –
x x x 'the highest and most exact idea of property remaining in the government' that may be acquired for some public purpose through a method in the nature of a forced purchase by the State. It is a right to take or reassert dominion over property within the state for public use or to meet public exigency. It is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty. The only direct constitutional qualification is that 'private property should not be taken for public use without just compensation.' This proscription is intended to provide a safeguard against possible abuse and so to protect as well the individual against whose property the power is sought to be enforced. 11
In order to be valid, the taking of private property by the government under eminent domain has to be for public use and there must be just compensation. 12
Fr. Joaquin G. Bernas, SJ., expounded:
Both police power and the power of eminent domain have the general welfare for their object. The former achieves its object by regulation while the latter by "taking". When property right is impaired by regulation, compensation is not required; whereas, when property is taken, the Constitution prescribes just compensation. Hence, a sharp distinction must be made between regulation and taking.
When title to property is transferred to the expropriating authority, there is a clear case of compensable taking. However, as will be seen, it isa settled rule that neither acquisition of title nor total destruction of value is essential to taking. It is in cases where title remains with the private owner that inquiry must be made whether the impairment of property right is merely regulation or already amounts to compensable taking.
An analysis of existing jurisprudence yields the rule that when a property interest is appropriated and applied to some public purpose, there is compensable taking. Where, however, a property interest is merely restricted because continued unrestricted use would be injurious to public welfare or where property is destroyed because continued existence of the property would be injurious to public interest, there is no compensable taking. 13(Emphasis supplied)
Both Section 4(a) of R.A. 9257 and Section 32 of R.A. 9442 undeniably contemplate taking of property for public use. Private property is anything that is subject to private ownership. The property taken for public use applies not only to land but also to other proprietary property, including the mandatory discounts given to senior citizens and persons with disability which form part of the gross sales of the private establishments that are forced to give them. The amount of mandatory discount is money that belongs to the private establishment. For sure, money or cash is private property because it is something of value that is subject to private ownership. The taking of property under Section 4(a) of R.A. 9257 and Section 32 of R.A. 9442 is an exercise of the power of eminent domain and not an exercise of the police power of the State. A clear and sharp distinction should be made because private property owners will be left at the mercy of government officials if these officials are allowed to invoke police power when what is actually exercised is the power of eminent domain.
Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It does not state that there should be profit before the taking of property is subject to just compensation. The private property referred to for purposes of taking could be inherited, donated, purchased, mortgaged, or as in this case, part of the gross sales of private establishments. They are all private property and any taking should be attended by a corresponding payment of just compensation. The 20% discount granted to senior citizens and persons with disability belongs to private establishments, whether these establishments make a profit or suffer a loss.
Just compensation is "the full and fair equivalent of the property taken from its owner by the expropriator." 14 The Court explained:
x x x. The measure is not the taker's gain, but the owner's loss. The word 'just' is used to qualify the meaning of the word 'compensation' and to convey thereby the idea that the amount to be tendered for the property to be taken shall be real, substantial, full and ample. x x x. 15 (Emphasis supplied)
The 32% of the discount that the private establishments could recover under the tax deduction scheme cannot be considered real, substantial, full, and ample compensation. In Carlos Superdrug Corporation, the Court conceded that "[t]he permanent reduction in [private establishments'] total revenue is a forced subsidy corresponding to the taking of private property for public use or benefit." 16The Court ruled that "[t]his constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation." 17Despite these pronouncements admitting there was compensable taking, the Court still proceeded to rule that "the State, in promoting the health and welfare of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a government program."
There may be valid instances when the State can impose burdens on private establishments that effectively subsidize a government program. However, the moment a constitutional threshold is crossed - when the burden constitutes a taking of private property for public use - then the burden becomes an exercise of eminent domain for which just compensation is required.
An example of a burden that can be validly imposed on private establishments is the requirement under Article 157 of the Labor Code that employers with a certain number of employees should maintain a clinic and employ a registered nurse, a physician, and a dentist, depending on the number of employees. Article 157 of the Labor Code provides:
Art. 157. Emergency medical and dental services. - It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of:
a. The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case, the services of a graduate first-aider shall be provided for the protection of workers, where no registered nurse is available. The Secretary of Labor and Employment shall provide by appropriate regulations, the services that shall be required where the number of employees does not exceed fifty (50) and shall determine by appropriate order, hazardous workplaces for purposes of this Article;
b. The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300); and
c. The services of a full-time physician, dentist and a full-time registered nurse as well as a dental clinic and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred (300). x x x.
x x x x
Article 157 of the Labor Code is a burden imposed by the State on private employers to complement a government program of promoting a healthy workplace.1âwphi1 The employer itself, however, benefits fully from this burden because the health of its workers while in the workplace is a legitimate concern of the private employer. Moreover, the cost of maintaining the clinic and staff is part of the legislated wages for which the private employer is fully compensated by the services of the employees. In the case of discounts to senior citizens and persons with disability, private establishments are compensated only in the equivalent amount of 32% of the mandatory discount. There are no services rendered by the senior citizens, or any other form of payment, that could make up for the 68% balance of the mandatory discount. Clearly, private establishments cannot recover the full amount of the discount they give and thus there is taking to the extent of the amount that cannot be recovered.
Another example of a burden that can be validly imposed on private establishments is the requirement under Section 19 in relation to Section 18 of the Social Security Law 18 and Section 7 of the Pag-IBIG Fund19 for the employer to contribute a certain amount to fund the benefits of its employees. The amounts contributed by private employers form part of the legislated wages of employees. The private employers are deemed fully compensated for these amounts by the services rendered by the employees.
Here, the private establishments are only compensated about 32% of the 20% discount granted to senior citizens and persons with disability.1avvphi1 They shoulder 68% of the discount they are forced to give to senior citizens. The Court should correct this situation as it clearly violates Section 9, Article III of the Constitution which provides that "[p]rivate property shall not be taken for public use without just compensation." I reiterate that Carlos Superdrug Corporation should be abandoned by this Court and Commissioner of Internal Revenue v. Central Luzon Drug Corporation,20holding that "the tax credit benefit granted to these establishments can be deemed as their just compensation for private property taken by the State for public use" should be reaffirmed.
Carlos Superdrug Corporation admitted that the permanent reduction in the total revenues of private establishments is a "compensable taking for which petitioners would ordinarily become entitled to a just compensation."21However, Carlos Superdrug Corporation considered that there was sufficient basis for taking without compensation by invoking the exercise of police power of the State. In doing so, the Court failed to consider that a permanent taking of property for public use is an exercise of eminent domain for which the government must pay compensation. Eminent domain is distinct from police power and its exercise is subject to certain conditions, that is, the taking of property for public use and payment of just compensation.
It is incorrect to say that private establishments only suffer a minimal loss when they give a 20% discount to senior citizens and persons with disability. Under R.A. 9257, the 20% discount applies to "all establishments relative to the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens;"22 "admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement for the exclusive use or enjoyment of senior citizens;"23 "medical and dental services, and diagnostic and laboratory fees provided under Section 4(e) including professional fees of attending doctors in all private hospitals and medical facilities, in accordance with the rules and regulations to be issued by the Department of Health, in coordination with the Philippine Health Insurance Corporation;"24 "fare for domestic air and sea travel for the exclusive use or enjoyment of senior citizens;"25 and "public railways, skyways and bus fare for the exclusive use and enjoyment of senior citizens. "26
Likewise, the 20% discount under R.A. 9442 applies to "all establishments relative to the utilization of all services in hotels and similar lodging establishments; restaurants and recreation centers for the exclusive use or enjoyment of persons with disability;"27 admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement for the exclusive use or enjoyment of persons with disability;"28 "purchase of medicines in all drugstores for the exclusive use or enjoyment of persons with disability; "29 "medical and dental services including diagnostic and laboratory fees such as, but not limited to, x-rays, computerized tomography scans and blood tests in all government facilities, in accordance with the rules and regulations to ,be issued by the Department of Health (DOH), in coordination with the Philippine Health Insurance Corporation (PHILHEALTH);"30 "medical and dental services including diagnostic and laboratory fees, and professional 'fees of attending doctors in all private hospitals and medical facilities, in accordance with the rules and regulations issued by the DOH, in coordination with the PHILHEALTH;31 "fare for domestic air and sea travel for the exclusive use or enjoyment of persons with disability,"32and "public railways, skyways and bus fare for the exclusive use or enjoyment of persons with disability."33 The 20% discount cannot be considered minimal because not all private establishments make a 20% margin of profit. Besides, on its face alone, a 20% mandatory discount based on the gross selling price is huge. The 20% mandatory discount is more than the 12%Value Added Tax, itself not an insignificant amount.
According to the majority opinion, R.A. Nos. 9257 and 9442 are akin to regulatory laws which are within the ambit of police power, such as the minimum wage law, zoning ordinances, price control laws, laws regulating the operation of motels or hotels, law limiting the working hours to eight, and similar laws falling under the same category.34 The majority opinion states that private establishments cannot protest that the imposition of the minimum wage law is confiscatory, or that the imposition of the price control law deprives the affected establishments of their supposed gains.35
There are instances when the State can regulate the profits of establishments but only in specific cases. For instance, the profits of public utilities can be regulated because they operate under franchises granted by the State. Only those who are granted franchises by the State can operate public utilities, and these franchisees have agreed to limit their profits as condition for the grant of the franchises. The profits of industries imbued with public interest, but which do not enjoy franchises from the State, can also be regulated but only temporarily during emergencies like calamities. There has to be an emergency to trigger price control on businesses and only for the duration of the emergency. The profits of private establishments which are non-franchisees cannot be regulated permanently, and there is no such law regulating their profits permanently. The State can take over private property without compensation in times of war or other national emergency under Section 23(2), Article VI of the Constitution but only for a limited period and subject to such restrictions as Congress may provide. Under its police power, the State may also temporarily limit or suspend business activities. One example is the two-day liquor ban during elections under Article 261 of the Omnibus Election Code but this, again, is only for a limited period. This is a valid exercise of police power of the State.
However, any form of permanent taking of private property is an exercise of eminent domain that requires the State to pay just compensation. The police power to regulate business cannot negate another provision of the Constitution like the eminent domain clause, which requires just compensation to be paid for the taking of private property for public use. The State has the power to regulate the conduct of the business of private establishments as long as the regulation is reasonable, but when the regulation amounts to permanent taking of private property for public use, there must be just compensation because the regulation now reaches the level of eminent domain.
The majority opinion states that the laws do not place a cap on the amount of markup that private establishments may impose on their prices. 36 Hence, according to the majority opinion, the laws per se do not cause the losses but bad business judgment on the part of the establishments. 37 The majority opinion adds that a level adjustment in the pricing of items is a reasonable business measure and could even make establishments earn more.38 However, such an economic justification is self-defeating, for more consumers will suffer from the price increase than will benefit from the 20% discount. Even then, such ability to increase prices cannot legally validate a violation of the eminent domain clause.
I maintain that while the 20% discount granted to senior citizens and persons with disability is not per se unreasonable, the tax treatment of the 20% discount as tax deduction from gross income computed from the net cost of the goods sold or services rendered is oppressive and confiscatory. Section 4(a) of R.A. 9257, providing that private establishments may claim the 20% discount to senior citizens as tax deduction, is patently unconstitutional. As such, Section 4 of R.A. 7432, the old law prior to the amendment by R.A. No. 9257, which allows the 20% discount as tax credit, should be automatically reinstated. I reiterate that where amendments to a statute are declared unconstitutional, the original statute as it existed before the amendment remains in force. 39 An amendatory law, if declared null and void, in legal contemplation does not exist.40 The private establishments should therefore be allowed to claim the 20% discount granted to senior citizens as tax credit. Likewise, Section 32 of R.A. 9442, providing that the establishments may claim the discounts given as tax deductions based on the net cost of the goods sold or services rendered, is also, unconstitutional. Instead, establishments should be allowed to claim the 20o/o discount given to persons with disability as tax credit.
ACCORDINGLY, I vote to GRANT the petition.
ANTONIO T. CARPIO
Associate Justice
Footnotes
1 An Act Granting Additional Benefits and Privileges to Senior Citizens Amending for the Purpose Republic Act No. 7432, Otherwise Known as "An Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant Benefits and Special Privileges and For Other Purposes." It was further amended by R.A. No. 9994, the "Expanded Senior Citizens Act of 2010."
2 An Act Amending Republic Act No. 7277, Otherwise Known as the "Magna Carta for Disabled Persons, and For Other Purposes."
3 553 Phil. 120 (2007).
4 722Phil.538(2013).
546 Phil. 440 (1924).
6 Id. at 445.
7 Id.
8 Id. at 454-455.
9 207 Phil. 648 (1983).
10 Id. at 654-655.
11 Manosca v. CA, 322 Phil. 442, 448 (1996).
12 Modayv. CA,335 Phil. 1057(1997).
13 J. Bernas, S.J., THE 1987 CoNSTITUT10N OF THE P111uPPINES, A COMMENTARY 379 (1996 ed.)
14 National Power Corporation v. Spouses Zabala, 702 Phil. 491 (2013).
15 Id. at 499-500.
16 Supra note 3, at 129-130.
17 Id.at130.
18 Republic Act No. 8282, otherwise known as the Social Security Act of 1997, which amended Republic Act No.1161.
19 Republic Act No. 9679, otherwise known as the Home Development Mutual Fund Law of2009.
20 496 Phil. 307 (2005).
21 Supra note 3, at 130.
22 Section 4(a).
23 Section 4(b).
24 Section 4(f).
25Section 4(g).
26 Section 4(h).
27 Section 32(a),
28 Section 32(b).
29 Section 32(c).
30Section 32(d).
31Section 32(e).
32Section 32(t).
33Section 32(g).
34Decision, p. 24.
35Id.
36 Id.atl9.
37 Id. at 20.
38 Id. at 21.
39 See Government of the Philippine Islands v. Agoncillo, 50 Phil. 348 (1927), citing Eberle v. Michigan, 232 U.S. 700 [1914], People v. Mensching, 187 N.Y.S., 8, 10 L.R.A., 625 [1907].
40 See Coca-Cola Bottlers Phils., Inc. v. City of Manila, 526 Phil. 249 (2006).
The Lawphil Project - Arellano Law Foundation
CONCURRING and DISSENTING OPINION
LEONEN, J.:
This case involves a Petition for Review on Certiorari questioning the constitutionality of Section 4(a) of Republic Act No. 9257 (Expanded Senior Citizens Act of2003), Section 32 of Republic Act No. 9442 (Magna Carta of Persons with Disability), and Sections 5.1 and 6.1.d of the Implementing Rules and Regulations of Republic Act No. 9442.
I concur in the ponencia's finding that the subject provisions are constitutional.
In Manila Memorial Park, Inc. et al. vs. Secretary of Department of Social Welfare and Development, et al., 1 this Court has ruled on the constitutionality of Republic Act No. 9257, and the validity of the 20% discount granted to senior citizens and of the Tax Deduction Scheme, in which the cost of the discount is allowed as a deduction from the establishment's gross income. 2
This case presents the same questions, except it includes as an issue the grant of the same benefits to persons with disability.
Thus, I restate my opinion in Manila Memorial Park. 3 I concur that the subject provisions are constitutional. The grant of the 20% discount to senior citizens and persons with disability is a valid exercise of police power. However, I opine that the Tax Deduction Scheme is an exercise of the State's power of taxation. Moreover, I insist that establishments are not entitled to just compensation, whether there is proof of loss of profits or "oppressive taking," as the subject of the taking is not property, but a mere inchoate right.
I
The subject provisions grant senior citizens and persons with disability a 20% discount on medicine purchases.4 Establishments giving the discount may claim the costs of the discount as tax deductions from their gross income.5
For senior citizens, Section 4(a) of Republic Act No. 92576 provides:
SECTION 4. Privileges for the Senior Citizens. - The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens;
. . . .
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended. (Emphasis supplied)
For persons with disability, Republic Act No. 94427 amended Republic Act No. 7277 (Magna Carta for Disabled Persons) to grant personswith disability a 20% discount on the purchase of medicines. It also allowed establishments to deduct the cost of the discount from their gross income:
SECTION 32. Persons with disability shall be entitled to the following:
. . . .
(c) At least twenty percent (20%) discount for the purchase of medicines in all drugstores for the exclusive use or enjoyment of persons with disability;
. . . .
The establishments may claim the discounts granted in sub-sections (a), (b), (c), (e), (f) and (g) as tax deductions based on the net cost of the goods sold or services rendered: Provided, however, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted: Provided, further, That the total amount of the claimed tax deduction net of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as amended. (Emphasis supplied)
Thus, the Department of Social Welfare and Development, the Department of Education, the Department of Finance, the Department of Tourism, and the Department of Transportation promulgated the Implementing Rules and Regulations of Republic Act No. 9442 (Implementing Rules). Sections 5.1 and 6.1.d of the Implementing Rules state:
5.1 Persons with Disability- are those individuals defined under Section 4 of RA 7277 "An Act Providing for the Rehabilitation, Self-Development and Self-Reliance of Persons with Disability as amended and Their Integration into the Mainstream of Society and for Other Purposes". This is defined as a person suffering from restriction or different abilities, as a result of a mental, physical or sensory impairment, to perform an activity in a manner or within the range considered normal for human being. Disability shall mean (1) a physical or mental impairment that substantially limits one or more psychological, physiological or anatomical function of an individual or activities of such individual; (2) a record of such an impairment; or (3) being regarded as having such an impairment.
SECTION 6. Other Privileges and Incentives. - Persons with disability shall be entitled to the following:
6.1 Discounts from All Establishments - At least twenty percent (20%) discount from all establishments relative to the utilization of all services in hotels and similar lodging establishments, restaurants and recreation centers for the exclusive use or enjoyment of persons with disability.
….
6.1.d Purchase of Medicine - at least twenty percent (20%) discount on the purchase of medicine for the exclusive use and enjoyment of persons with disability. All drug stores, hospitals, pharmacies, clinics and other similar establishments selling medicines are required to provide at least twenty percent (20%) discount subject to the guidelines issued by DOH and PHILHEAL TH. (Emphasis supplied)
II
In Manila Memorial Park, 8 this Court already upheld the constitutionality of Republic Act No. 9257 and of the Tax Deduction Scheme. It strengthened its ruling in Carlos Superdrug Corporation v. Department of Social Welfare and Development. 9 It has held that the tax treatment is a valid exercise of police power:
The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less likely to be gainfully employed, more prone to illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic commodities. It may not be amiss to mention also that the discount serves to honor senior citizens who presumably spent the productive years of their lives on contributing to the development and progress of the nation. This distinct cultural Filipino practice of honoring the elderly is an integral part of this law.
As to its nature and effects, the 20% discount is a regulation affecting the ability of private establishments to price their products and services relative to a special class of individuals, senior citizens, for which the Constitution affords preferential concern. In turn, this affects the amount of profits or income/gross sales that a private establishment can derive from senior citizens. In other words, the subject regulation affects the pricing, and, hence, the profitability of a private establishment. However, it does not purport to appropriate or burden specific properties, used in the operation or conduct of the business of private establishments, for the use or benefit of the public, or senior citizens for that matter, but merely regulates the pricing of goods and services relative to, and the amount of profits or income/gross sales that such private establishments may derive from, senior citizens.
. . . .
On its face, therefore, the subject regulation is a police power measure.10
I agree with the ponencia in reiterating this ruling in the present case. The imposition of the 20% discount to senior citizens and persons with disability is a valid exercise of police power. It is a regulatory function toimprove the public welfare, which imposes a differentiated pricing system for two (2) types of customers: (1) those who are subject to the regular price, and (2) those who are senior citizens and persons with disability. The public purpose in granting this discount to the two (2) classifications cannot be denied.
However, as I maintained in my separate opinion in Manila Memorial Park, the Tax Deduction Scheme is an exercise of the State's power to tax. 11
The power of taxation is an inherent and indispensable power of the State. 12 As taxes are the "lifeblood of the government", the power of the legislature is unlimited and plenary. 13 The legislature is given a wide range of discretion in determining what to tax, the purpose of the tax, how much the tax will be, who will be taxed, and where the tax will be imposed. 14
Included in this discretion is the power to determine the method of collection of the taxes imposed.15 In Abakada Gura Party List v. Ermita: 16
The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the State's power is entitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or arbitrariness. 17
The State's power to tax is limited by the Constitution. 18 Taxes must be uniform and equitable,19 and must not be confiscatory or arbitrary.20 It must be "exercised reasonably and in accordance with the prescribed procedure. "21
Nonetheless, the exercise of the power to tax is presumed valid absent any proof of violation of these limitations.22 In Chamber of Real Estate and Builders' Association, Inc. v. Romulo:23
The principal check against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its constituency who are to pay it. Nevertheless, it is circumscribed by constitutional limitations. At the same time, like any other statute, tax legislation carries a presumption of constitutionality.
The constitutional safeguard of due process is embodied in the fiat "[no] person shall be deprived of life, liberty or property without due process of law." In Sison, Jr. v. Ancheta, et al., we held that the due process clause may properly be invoked to invalidate, in appropriate cases, a revenue measure when it amounts to a confiscation of property. But in the same case, we also explained that we will not strike down a revenue measure as unconstitutional (for being violative of the due process clause) on the mere allegation of arbitrariness by the taxpayer. There must be a factual foundation to such an unconstitutional taint. This merely adheres to the authoritative doctrine that, where the due process clause is invoked, considering that it is not a fixed rule but rather a broad standard, there is a need for proof of such persuasive character. 24(Emphasis supplied)
The determination that the cost of the 20% discount will be recoverea as a tax deduction instead of a tax credit is within the legislative's power to tax.25 It is a determination of the method of collection of taxes.26 The legislative has the power to determine if particular costs should be treated as deductions or if it entitles taxpayers to credits. 27
In this case, the Congress deemed the tax deduction as the better option. There is no showing that this option is violative of any of the constitutional limitations on the power to tax.
The Tax Deduction Scheme is uniform and equitable. Uniformity of taxation means that all subjects of taxation similarly situated are to be treated alike both in privileges and liabilities. 28 The taxes are uniform if: (1) the standards used are substantial and not arbitrary, (2) the categorization is germane to the purpose of the law, (3) the law applies, all things being equal, to both present and future conditions, and (4) the classification applies equally well to all those belonging to the same class. 29 Since the 20%discount applies to all senior citizens and persons with disability equally, and the tax deduction scheme applies to all establishments granting the discounts, there is no issue on the uniformity of the tax measure.
Likewise, the tax deduction is not confiscatory or arbitrary. While the establishments cannot recover the full cost of the granted discount, they are still not at a full loss as they may claim the cost as a tax deduction from their gross income, and they are free to adjust prices and costs of their products.
III
There is no merit in the contention that the State deprived them of their profits. Establishments can always increase their price to recover their costs and increase their profitability. They can avoid losses altogether such that it can be said that the State took nothing from them.
My opinion in Manila Memorial Park discussed the impact of the senior citizen's discount to an establishment's revenue for the sale of memorial lots.30
This same principle applies to the sale of medicine to senior citizens and persons with disability. Revenue still depends on the1 price, quantity, and costs of the items sold. 31
To illustrate, if Company XYZ sells medicine, and for the sake of argument, we assume that the medicine is acquired at zero cost, revenue is acquired multiplying the price and the quantity sold.32 Thus:
R = PxQ
Where:
R = Revenue
P = Price per unit
Q = Quantity sold
Before the discounts are granted to senior citizens and persons with disability, let us assume that Company XYZ sells 16,000 bottles of antibiotic syrup at the price of Pl 00.00. Its profit is thus ₱1,600,000.00:
R = P x Q
R = Pl00.00 x 16,000
R = Pl,600,000.00
Assuming that out of the 16,000 bottles sold, 2,200 bottles are bought by senior citizens and 1,000 bottles are purchased by persons with disability. Thus, 12,800 bottles are bought by ordinary customers.
The subject provisions require that a 20% discount be given to senior citizens and persons with disability. Necessarily, there will be two (2) types of revenue received by Company XYZ: (1) revenue from ordinary customers, and (2) revenue from senior citizens and persons with disability. Thus, a bottle of antibiotic syrup will be sold to ordinary customers at ₱100.00, and to senior citizens and persons with disability at only ₱80.00.
The formula of the revenue of Company XYZ then becomes:
RT = RSD + RC
RSD = PSD x QSD
RC = PC x QC
RT = (PSD x QSD) +(PC x QC)
| Where |
RT = Total Revenue
RSD = Revenue from Senior Citizens and
Persons with Disability
RC = Revenue from Ordinary Customers
PSD = Price per Unit for Senior Citizens and Persons with Disability
QSD = Quantity Sold to Senior Citizens and Persons with Disability
PC = Price for Ordinary Customers per Unit
QC = Quantity Sold to Ordinary Customers |
Given this equation, the total revenue of Company XYZ becomes ₱ l,536,000.00:
RT1 = RSD + RC
RT1 = (PSD x QSD) + (PC x QC)
RT1 = (80 x 3,200) + (100 x 12,800)
RT1 = 256,000 + 1,280,000
RT1 = ₱1,536,000.00
Clearly, an increase in the item's price results to an increase in the establishment's profitability, even after the implementation of the 20% discount. As shown in the example, the price increase may even be less than the discount given to the senior citizens and persons with disability.
The change in the price also augments the· tax implications of the subject provisions. If we treat the discount as a tax credit after the implementation of the subject provisions, Company XYZ will have the net income of ₱l,335,480.00:
| Gross Income (RT1) |
1,536,000 |
|
Less: Deductions |
(600.000) |
| Taxable Income |
936,000 |
|
Income Tax Rate |
₱125,000 + 32% of excess
over ₱500,000
|
| Income Tax Liability |
264,520 |
|
Less: Discount for Senior |
(64,000) |
|
Citizens/Persons with |
|
Disability (Tax Credit) |
| Final Income Tax Liability |
200,520
|
| Net Income | ₱1,335,480 |
Without the adjustments, the net income in the Tax Deduction Scheme is less than the net income if the discounts are treated as tax credits. Thus, if the discount is treated as a tax deduction, its income is ₱1,291,960.00:
| Gross Income (RT1) |
₱ 1,536,000 |
|
Less: Deductions |
(600,000) |
|
Less: Discount for Senior |
(64,000) |
|
Citizens and Persons with |
|
Disability |
| Taxable Income |
872,000 |
|
Income Tax Rate |
₱125,000 + 32% of excess
over ₱500,000
|
| Income Tax Liability |
244,040 |
|
Less: Discount for Senior |
0 |
|
Citizens/Persons with |
|
Disability (Tax Credit) |
| Final Income Tax Liability |
244,040
|
| Net Income | ₱1,291,960 |
However, if the price is adjusted as discussed in the earlier example, the net income becomes:
Gross Income (RT2
| 1,689,600 | |
|
Less: Deductions |
(600,000) |
|
Less: Discount for Senior |
(70,400) |
|
Citizens and Persons with |
|
Disability |
| Taxable Income |
1,019,200 |
|
Income Tax Rate |
₱125,000 + 32% of excess
over ₱500,000
|
| Income Tax Liability |
291,144 |
|
Less: Discount for Senior |
|
Citizen/Person with Disability |
|
(Tax Credit) |
| Final Income Tax Liability |
291,144
|
| Net Income |
₱ 1,398,456 |
Thus, the tax deduction scheme can still allow the improvement of net income in case of a price increase. Losses are not unavoidable. Br increasing the price of the items, establishments may be able to gain more. I Moreover, bettering the efficiency of the business by minimizing costs may maintain or improve profits.34 In such cases, there is no confiscatory taking that justifies the payment of just compensation.
IV
In any case, I reiterate that whether or not there is proof of loss of profits, establishments are still not entitled to just compensation under the power of eminent domain.
Petitioners submitted financial statements to prove that they incurred losses because of the imposition of the subject provisions. They thus claim they are entitled to just compensation.
In Manila Memorial Park, it was held that Republic Act No. 9257 was not shown to have been unreasonable, oppressive or confiscatory enough as to amount to a "taking" of private property subject to just compensation.35 It emphasized that there was no proof of the losses incurred, and that petitioners merely relied on a hypothetical computation:
The impact or effect of a regulation, such as the one under consideration, must, thus, be determined on a case-to-case basis. Whether that line between permissible regulation under police power and "taking" under eminent domain has been crossed must, under the specific circumstances of this case, be subject to proof and the one assailing the constitutionality of the regulation carries the heavy burden of proving that the measure is unreasonable, oppressive or confiscatory. The time-honored rule is that the burden of proving the unconstitutionality of a law rests upon the one assailing it and "the burden becomes heavier when police power is at issue."
….
We adopted a similar line of reasoning in Carlos Superdrug Corporation when we ruled that petitioners therein failed to prove that the 20% discount is arbitrary, oppressive or confiscatory. We noted that no evidence, such as a financial report, to establish the impact of the 20% discount on the overall profitability of petitioners was presented in order to show that they would be operating at a loss due to the subject regulation or that the continued implementation of the law would be unconscionably detrimental to the business operations of petitioners. In the case at bar, petitioners proceeded with a hypothetical computation of the alleged loss that they will suffer similar to what the petitioners in Carlos Superdrug Corporation did. Petitioners went directly to this Court without first establishing the factual bases of their claims. Hence, the present recourse must, likewise, fail.
….
In sum, we sustain our ruling in Carlos Superdrug Corporation that the 20% senior citizen discount and tax deduction scheme are valid exercises of police power of the State absent a clear showing that it is arbitrary, oppressive or confiscatory.36
The ponencia reiterated this rule in this case. It found that it must be proven that the State regulation is so oppressive as to amount to a compensable taking. In applying this principle to the case at bar, it held that petitioners failed to prove the oppressive and confiscatory nature of the subject provisions. The financial statements were deemed not enough to show the confiscatory taking warranting just compensation. 37
I maintain my opinion in Manila Memorial Park. I disagree insofar as the rule is premised on the of the losses caused by the discount.
I opine that whether or not there is sufficient proof of actual losses,1 there is no compensable taking. The provisions are still not an exercise of the power of eminent domain that requires the payment of just compensation.
The power of eminent domain is found in the Constitution under Article III, Section 9 of the Constitution: "Private property shall not be taken for public use without just compensation."
The requisites for the exercise of eminent domain are: (1) there must be a genuine necessity for its exercise;38 (2) what is taken must be private property; (3) there is taking in the constitutional sense; 39 (4) the taking is for public use; 40 and (5) there must be payment of just compensation.41
The difference between police power and eminent domain was discussed in Didipio Earth-Savers' Multi-Purpose Association, Inc. v. Gozun: 42
The power of eminent domain is the inherent right of the state (and of those entities to which the power has been lawfully delegated) to condemn private property to public use upon payment of just compensation. On the other hand, police power is the power of the state to promote public welfare by restraining and regulating the use of liberty and property. Although both police power and the power of eminent domain have the general welfare for their object, and recent trends show a mingling of the two with the latter being used as an implement of the former, there are still traditional distinctions between the two.
Property condemned under police power is usually noxious or intended for a noxious purpose; hence, no compensation shall be paid. Likewise, in the exercise of police power, property rights of private individuals are subjected to restraints and burdens in order to secure the general comfort, health, and prosperity of the state. Thus, an ordinance prohibiting theaters from selling tickets in excess of their seating capacity (which would result in the diminution of profits of the theater-owners) was upheld valid as this would promote the comfort, convenience and safety of the customers. In US. v. Toribio, the court upheld the provisions of Act No. 1147, a statute regulating the slaughter of carabao for the purpose of conserving an adequate supply of draft animals, as a valid exercise of police power, notwithstanding the property rights impairment that the ordinance imposed on cattle owners.
….
According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its police power regulation, the state restricts the use of private property, but none of the property interests in the bundle of rights which constitute ownership is appropriated for use by or for the benefit of the public. Use of the property by the owner was limited, but no aspect of the property is used by or for the public. The deprivation of use can in fact be total and it will not constitute compensable taking if nobody else acquires use of the property or any interest therein.
If, however, in the regulation of the use of the property, somebody else acquires the use or interest thereof, such restriction constitutes compensable taking.43 (Emphasis supplied, citations omitted)
The exercise of the power of eminent domain requires that there is property that is taken from the owner. In this case, there is no private property that may be the subject of a constitutional taking. The subject of the alleged "taking" is the establishments' possible profits. Possible profits cannot be acquired by the State through the exercise of the power of eminent domain. Possible profits are yet to be earned; hence, they are yet to be owned. They are intangible property for which establishments do not have a j vested right.
A vested right is a fixed or established interest in a property that can no longer be doubted or questioned.44 It is an "immediate fixed right of present or future enjoyment."45 It is the opposite of an expectant or contingent right. 46
In Benguet Consolidated Mining Co. v. Pineda, 47 this Court, citing Corpus Juris Secundum, elaborated:
Rights are vested when the right to enjoyment, present or prospective, has become the property of some particular person or persons as a present interest. The right must be absolute, complete, and unconditional, independent of a contingency, and a mere expectancy of future benefit, or a contingent interest in property founded on anticipated continuance of existing laws, does not constitute a vested right. So, inchoate rights which have not been acted on are not vested. (16 C. J. S. 214-215.)48
Establishments do not have a vested right on possible profits. Their right is not yet absolute, complete, and unconditional. Profits are earned only after the sale of their products, and after deducting costs. These sales may or may not occur. The existence of the profit or the loss is not certain. It cannot be assumed that the profits will be earned or that losses will be incurred. Assuming there are profits or losses, its amount is undeterminable.
Thus, for purposes of eminent domain, there is still no property that can be taken. There is no property owned. There is nothing to compensate.
The ponencia shares the same view. However, I maintain that to be: consistent with this view, the proof of losses (or the lack of profits) must be irrelevant. No matter the evidence, petitioners cannot be entitled to just compensation.
Assuming there was a "taking," what was taken is not property contemplated by the exercise of eminent domain. Eminent domain pertains to physical property. In my opinion in Manila Memorial Park: 49
Most if not all jurisprudence on eminent domain involves real property, specifically that of land. Although Rule 67 of the Rules of Court, the rules governing expropriation proceedings, requires the complaint to "describe the real or personal property sought to be expropriated," this refers to tangible personal property for which the court will deliberate as to its value for purposes of just compensation.
In a sense, the forced nature of a sale under eminent domain is more justified for real property such as land. The common situation is that the government needs a specific plot, for the construction of a public highway for example, and the private owner cannot move his land to avoid being part of the project. On the other hand, most tangible personal or movable property need not be subject of a forced sale when the government can procure these items in a public bidding with several able and willing private sellers.
In Republic of the Philippines v. Vda. de Castellvi, this Court also laid down five (5) "circumstances [that] must be present in the 'taking' of property for purposes of eminent domain" as follows:
First, the expropriator must enter a private property[.]
Second, the entrance into private property must be for more than a momentary period[.]
Third, the entry into the property should be under warrant or color of legal authority[.]
Fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously affected[.]
Fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property[.]
The requirement for "entry" or the element of "oust[ing] the owner" is not possible for intangible personal property such as profits.
….
At most, profits can materialize in the form of cash, but even then, this is not the private property contemplated by the Constitution and whose value will be deliberated by courts for purposes of just compensation. We cannot compensate cash for cash. 50
The right to profit is an intangible right, which cannot be appropriated for public use. In fact, it is a right and not property in itself.1âwphi1 Moreover, the right was merely restricted, not taken. The establishment still is given a wide discretion on how to address the changes caused by the subject provisions, and how to ensure their profits. As shown in the above example, they may adjust their pricing, and improve on the costs of goods or their f efficiency to manage potential outcomes. Profits may thus still be earned.
Losses and profits are still highly dependent on business judgments based on the economic environment. Whether or not losses are incurred cannot be attributable to the law alone. In fact, the law is one (1) of the givens that businesses must adjust to. It is not the law that must adjust for businesses. Businesses cannot claim compensation for a regulatory measure which caused dips in their profit. Pricing and costs may be adjust accordingly, and it cannot be the law that will be limited by business decisions, which establishments refuse to change.
V
Thus, in the exercise of its police power, the State may make variances in the pricing of goods to accommodate public policy, and to promote social justice. The State's determination of how establishments can recover the cost of the discounted prices is also a valid exercise of its power to tax. In this instance, the legislative chose to allow establishments a partial recovery of the granted discount through a tax deduction instead of a tax credit.
Both tax deductions and tax credits are valid options for the Congress, although the impacts of the two (2) are different.
As shown above, a tax deduction will naturally cause establishments to increase their prices to fully recover the cost of the discounts, and prevent losses. The burden of the cost is thus passed on to ordinary customers - to non-senior citizens with no disability.
However, the Philippine market is not homogenous. The impact of prices on ordinary customers from various sectors in society is different. It is possible that the poorer sectors in society are denied options because they can no longer afford the items that used to be available to them before the price increase caused by the granting of the discounts.
In the example above, a bottle of antibiotic syrup costs ₱100.00 prior to the grant of the discount. When the discount was imposed, Company XYZ adjusted its price by increasing it to ₱110.00. Under the subject provisions, a 78-year-old business tycoon earning billions every year is entitled to a 20% senior citizen discount. Thus, the business tycoon will be I charged with only ₱88.00. On the other hand, an ordinary customer will have to allot a bigger portion of his wage to buy antibiotics. This 10-peso difference may be a bigger burden for the ordinary customer belonging t1 the poorer sectors of society. It may not be felt by some ordinary customers, but it may cause budgetary strains or may make it completely unaffordable for others.
Another example is the grant of free admissions in cinemas to senior citizens. Again, the cost of this discount is passed on to the ordinary consumer. While there may be those who do not feel the impact of the price increase, those who are living on small wages, who used to be able to watch films in the theatres, may no longer have enough in their budgets to pay for the difference in the price.
Necessarily, the public good is affected. The subject provisions seek the betterment of public welfare by improving the lives of its senior citizens and persons with disability. However, the practical effect of the Tax Deduction Scheme may be prejudicial to those ordinary customers who cannot keep up with the price increase. As a consequence, citizens may be denied certain goods and services because the burden falls on all ordinary customers, without considering their resources or their ability to pay. There may be thus an issue on equitability and progressiveness in terms of its effects.
A tax credit, on the other hand, allows the cost to be shouldered completely by the government. In such a case, establishments will not need to adjust its prices to recover the cost of the discount. Moreover, when it is the government who shoulders the cost through taxes paid by its people, the issue on equitability and progressiveness is better addressed. Taxes are constitutionally mandated to be equitable.51 Congress is directed to evolve a progressive system of taxation. 52Thus, when the government carries the burden of the discount through taxes collected in an equitable and progressive manner, the objective of improving the public welfare may still be achieved without much prejudice to the poorer sectors of society.
Nonetheless, this is a question of policy, and one which pertains to the wisdom of the legislative.
ACCORDINGLY, I vote to DENY the Petition, and to declare that Section 4(a) of Republic Act No. 9257 and Section 32 of Republic Act No. 9442 are CONSTITUTIONAL.
MARVIC M.V.F. LEONEN
Associate Justice
Footnotes
1 722 Phil. 538 (2013) [Per J. Del Castillo, En Banc].
2 Id. at 602.
3 Dissenting Opinion of J. Leonen in Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, 722 Phil. 538, 621-644 (2013) [Per J. Del Castillo, En Banc].
4 Rep. Act No. 9257, sec. 4(a) or the Expanded Senior Citizens Act of2003, Rep. Act No. 9442, sec. 32 or the Magna Carta of Persons with Disability, and Implementing Rules and Regulations of Rep. Act No. 9442, sec. 5.1 and 6.1.d.
5 Rep. Act No. 9257, sec. 4(a), Rep. Act No. 9442, sec. 32, and Implementing Rules and Regulations of Rep. Act No. 9442, sec. 5.1 and 6.1.d.
6 Republic Act No. 9257 amended Republic Act No. 7432 (Senior Citizens Act) which had an income ceiling for the grant of the discount to senior citizens and which allowed establishments to claim the cost of the discount as a tax credit. Rep. Act No. 7432, sec. 4 provides:
Section 4. Privileges for the Senior Citizens. - The senior citizens shall be entitled to the following: a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation services, hotels and similar lodging establishment, restaurants and recreation centers and purchase of medicine anywhere in the country: Provided, That private establishments may claim the cost as tax credit[.]
7 An Act Amending Republic Act No. 7277 (2007).
8 722 Phil. 538 (2013) [Per J. Del Castillo, En Banc].
9 553 Phil. 120 (2007) [Per J. Azcuna, En Banc].
10 Id. at 578-579.
11 Dissenting Opinion of J. Leonen in Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, 722 Phil. 538, 632-636 (2013) [Per J. Del Castillo, En Banc].
12 Chamber of Real Estate and Builders" Association, Inc. v. Romulo, 628 Phil. 508, 529-530 (2010) [Per J. Corona, En Banc].
13 Id.
14 Id.
15 Abakada Gura Party List v. Ermita, 506 Phil. 1, 306 (2005) [Per J. Austria-Martinez, En Banc].
16 506 Phil. 1 (2005) [Per J. Austria-Martinez, En Banc].
17 Abakada Gura Party List v Ermita, 506 Phil. 1, 306 (2005) [Per J.Austria-Martinez, En Banc].
18 Chamber of Real Estate and Builders' Association, Inc. v. Romulo, 628 Phil. 508, 529-530 (2010) [Per J. Corona, En Banc].
19 CONST. (1987), art. VI, sec. 28 provides:
Section 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.n ...
20 Commissioner v. Algue, Inc., 241 Phil. 829, 836 (1988) [Per J. Cruz, First Division].
21 Id.
22 Chamber of Real Estate and Builders" Association, Inc. v. Romulo, 628 Phil. 508, 530 (2010) [Per J. Corona, En Banc].
23 Id.
24 Id.
25 Dissenting Opinion of J. Leonen in Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, 722 Phil. 538, 633 (2013) [PerJ. Del Castillo, En Banc].
26 Id.
27 Id.
28 Tan v. Del Rosario, Jr., 307 Phil. 342, 349-350 (1994) [Per J. Vitug, En Banc].
29 Id.
30 Dissenting Opinion of J. Leonen in Manila Memorial Park, Inc. v. Secretary of Social Welfare and J Development, 722 Phil. 538, 627-632(2013) [Per J. Del Castillo, En Banc].
31 Id.
32 Id.
Footnote 23: Revenue in the economic sense is not usually subject to such simplistic treatment. Costs must be taken into consideration. In economics, to evaluate the combination of factors to be used by a profit-maximizing firm, an analysis of the marginal product of inputs is compared to the marginal revenue. Economists usually compare if an additional unit of labor will contribute to additional productivity. For a more comprehensive explanation, refer to P.A. SAMUELSON AND W.D. NORDHAUS, ECONOMICS 225-239 (Eighteenth Edition, 2005).
33 Dissenting Opinion of Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, 722 Phil. 538, 627-632 (2013) [Per J. Del Castillo, En Banc].
Footnote 24: To determine the price for both ordinary customers and senior citizens and persons with disability that will retain the same level of profitability, the formula for the price for ordinary customers is Pc= Ro/(0.8Qs + Qc) where Ro is the total revenue before the senior citizen discount was given.
34 Dissenting Opinion of J. Leonen in Manila Memorial Park, Inc. v. Secretary of Social Welfare and I Development, 722 Phil. 538, 627--632 (2013) [Per J. Del Castillo, En Banc].
Footnote 26: Another algebraic formula will show us how costs should be minimized to retain the same level of profitability. The formula is C1 = C0 -[(20% x Pc) x Qs] where:
C1 =Cost of producing all quantities after the discount policy
C0 =Cost of producing all quantities before the discount policy
PC = Price per unit for Ordinary Citizens
QS =Quantity Sold to Senior Citizens
35 Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, 722 Phil. 538, 581 (2013) [Per J. Del Castillo, En Banc].
36 Id.at581-583.
37 Ponencia, pp. 17-I 8; The ponencia found that the financial statements of the petitioners do not show : that their incurred losses were due to the discounts. It noted that what depeleted the income of the company was its direct costs and operating expenses. It also observed that the records did not show the percentage of regular customers vis-a-vis the senior citizens and persons with disability. Additionally, it found that the entire sales and other services offered to the public must be considered. A singular transaction or the purchases made by senior citizens and persons with disability alone cannot be the sole basis of the law's effect on the profitability of the business. It likewise pointed out that the petitioners did not show how it adjusted to the changes brought by the provisions. It noted the admission that the losses were due to its failure take measures tp address the new circumstances brought by the provisions. It asserted that it is inaccurate that the petitioners are not provided a means to recoup their losses. It is not automatic that the change in tax treatment will result in loss of profits considering the law does not place a limit on the amount that they may charge for their items. It also failed to note that business decisions must consider laws in effect.
38 Lagcao vs. Judge Labra, 483 Phil. 303, 312 (2004) [Per J. Corona, En Banc].
39 Republic v. Vda. de Castel/vi, 157 Phil. 329, 344-347 [Per J. Zaldivar, En Banc].
40 Reyes vs. National Housing Authority, 443 Phil. 603, 610-611 (2003) [Per J. Puno, Third Division].
41 CONST. (1987), art. III, sec. 9.
42 520 Phil. 457 (2006) [Per J. Chico-Nazario, First Division].
43 Id. at 476-478.
44 Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711-739, 722 (1956) [Per J. J.B.L. Reyes, Second Division]; See also Heirs of Zari v. Santos, 137 Phil. 79 (1969) [Per J. Sanchez, En Banc].
45 Id.; See also Heirs of Zari v. Santos, 137 Phil. 79 (1969) [Per J. Sanchez, En Banc].
46 Id.; See also Heirs of Zari v. Santos, 137 Phil. 79 (1969) [Per J. Sanchez, En Banc].
47 Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711-739 (1956) [Per J. J.B.L. Reyes, Second Division].
48 Id. at 722.
49 Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, 722 Phil. 538 (2013) [Per J. Del Castillo, En Banc].
50 Id. at 640--642.
51 CONST. (1987), art. VI, sec. 28 provides:
Section 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.n ...
52 CONST. (1987), art. VI, sec. 28 provides:
Section 28. (I) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.
The Lawphil Project - Arellano Law Foundation
