Double Taxation under the Local Government Code

Swedish Match v. City Treasurer (2013): There is double taxation if the taxpayer is subjected to the taxes pursuant to different provisions of an ordinance, i.e., where one provision is levied pursuant to Section 143 (a) and another provision is levied pursuant to Section 143(h) of the Local Government Code. (G.R. No. 181277)

As to the substantive issues, petitioner maintains that the enforcement of Section 21 of the Manila Revenue Code constitutes double taxation in view of the taxes collected under Section 14 of the same code. Petitioner points out that Section 21 is not in itself invalid, but the enforcement of this provision would constitute double taxation if business taxes have already been paid under Section 14 of the same revenue code. Petitioner further argues that since Ordinance Nos. 7988 and 8011 have already been declared null and void in Coca-Cola Bottlers Philippines, Inc. v. City of Manila, all taxes collected and paid on the basis of these ordinances should be refunded.

In turn, respondent argues that Sections 14 and 21 pertain to two different objects of tax; thus, they are not of the same kind and character so as to constitute double taxation. Section 14 is a tax on manufacturers, assemblers, and other processors, while Section 21 applies to businesses subject to excise, value-added, or percentage tax. Respondent posits that under Section 21, petitioner is merely a withholding tax agent of the City of Manila.

At the outset, it must be pointed out that the issue of double taxation is not novel, as it has already been settled by this Court in The City of Manila v. Coca-Cola Bottlers Philippines, Inc., in this wise:
[QUOTE] Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their own detriment. Said exempting proviso was precisely included in said section so as to avoid double taxation.

Double taxation means taxing the same property twice when it should be taxed only once; that is, “taxing the same person twice by the same jurisdiction for the same thing.” It is obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as “direct duplicate taxation,” the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind or character.

Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the same subject matter – the privilege of doing business in the City of Manila; (2) for the same purpose – to make persons conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority – petitioner City of Manila; (4) within the same taxing jurisdiction – within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods – per calendar year; and (6) of the same kind or character – a local business tax imposed on gross sales or receipts of the business. (Emphasis by Project Jurisprudence)

The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of municipalities and cities to impose a local business tax, and to which any local business tax imposed by petitioner City of Manila must conform. It is apparent from a perusal thereof that when a municipality or city has already imposed a business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce, pursuant to Section 143(a) of the LGC, said municipality or city may no longer subject the same manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section 143(h) may be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are “not otherwise specified in preceding paragraphs.” In the same way, businesses such as respondent’s, already subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on Section 143(a) of the LGC], can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which is based on Section 143(h) of the LGC]. [UNQUOTE]

Based on the foregoing reasons, petitioner should not have been subjected to taxes under Section 21 of the Manila Revenue Code for the fourth quarter of 2001, considering that it had already been paying local business tax under Section 14 of the same ordinance. (G.R. No. 181277)