Yu Cong Eng et al vs. Trinidad
GR No. L-20479 | Feb. 6, 1925
History:
·
The sales tax has
been in force in the Philippines for a number of years. Our law provides for
privilege taxes to be levied on certain businesses and occupations. These
percentage taxes on business are payable at the end of each calendar quarter in
the amount lawfully due on the business transacted during the past quarter. It
is made the duty of every person conducting a business subject to such tax,
within the same period as is allowed for the payment of the quarterly
installments of the fixed taxes without penalty, to make a true and complete
return of the amount of the receipts or earnings of his business during the
preceding quarter and pay the tax due thereon. All merchants not specifically
exempted must pay a tax of one and one-half per cent on the gross value in
money of the commodities, goods, wares, merchandise sold, bartered, exchanged,
or consigned abroad by them, such tax to be based on the actual selling price
or value of the things in question at the time they are disposed of or
consigned
·
The income tax has
also been established here for sometime, first pursuant to an Act of Congress
and later pursuant to an Act of the Philippine Legislature (Act No. 2833, as
amended by Act No. 2926). The customary returns are required from individuals
and corporations. The tax is computed and the assessments are made by the
Collector of Internal Revenue and his agents.
·
The Spanish Code of
Commerce, which was in force at that time, requires that merchants shall keep: A book of inventories and balances;
(2) a daybook; (3) a ledger; (4) a copying book for letters and telegrams; and
(5) the other books required by special laws. However, it was silent as to the
language which the books must be kept
·
CIR issued a Circular
Letter requiring that the record of sales of merchants subject to the
merchant’s tax must either be in English or Spanish
-
Challenged in the
case of Young vs. Rafferty
-
SC: CIR is not
empowered to designate the language which the entries in the books should be
made. Such initiative should not be taken by the CIR, arguing that it is to
protect the govt against evasion
Facts:
·
On 1921, Act No. 2972 or the Chinese
Bookkeeping Law was passed, regulating that the account books should not be in
any other language exc. English, Spanish or any dialect, otherwise a penalty of
fine of not more than 10K or imprisonment for not more than 2 years will be
imposed
-
fiscal measure
intended to facilitate the work of the government agents and to prevent fraud
in the returns of merchants, in conformity with the sales tax and the income
tax
·
On March 1923, BIR inspected the books
of account of Yu Cong Eng where it was found out that it is not in accordance
with Act 2972
·
A criminal case was filed against Yu
Cong Eng before the CFI Manila for keeping his books of account in Chinese
·
Yu’s defense:
·
Yu Cong Eng et al are Chinese
merchants, claiming that they represent the other 12K filed a petition for
prohibition and injunction against the CIR, questioning the constitutionality
of Act No. 2972 or the Chinese Bookkeeping Law
Issue: W/N Act No. 2972 is constitutional?
Ruling:
·
As a general rule,
the question of constitutionality must be raised in the lower court and that
court must be given an opportunity to pass upon the question before it may be
presented to the appellate court for resolution
·
Power of taxation
-
strongest of all the
powers of government, practically absolute and unlimited
-
It is a legislative
power. All its incidents are within the control of the legislature. It is the
Legislature which must questions of state necessarily involved in ordering a
tax, which must make all the necessary rules and regulations which are to be
observed in order to produce the desired results, and which must decide upon
the agencies by means of which collections shall be made
·
The power to tax is
not judicial power and that a strong case is required for the judiciary to
declare a law relating to taxation invalid. If, of course, so great an abuse is
manifest as to destroy natural and fundamental rights, it is the duty of the
judiciary to hold such an Act unconstitutional
·
The Chinese
petitioners are accorded treaty rights of the most favored nation
·
Their constitutional
rights are those accorded all aliens, which means that the life, liberty, or
property of these persons cannot be taken without due process of law, and that
they are entitled to the equal protection of the laws, without regard to their
race
·
Act No. 2972 is a
fiscal measure which seeks to prohibit not only the Chinese but all merchants
of whatever nationality from making entries in the books of account or forms
subject to inspection for taxation purposes in any other language than either
the English or Spanish language or a local dialect
·
the law only intended
to require the keeping of such books as were necessary in order to facilitate
governmental inspection for tax purposes
·
The Chinese will not
be singled out as a special subject for discriminating and hostile legislation
since there are other aliens doing business in the Phils. There will be no
arbitrary deprivation of liberty or arbitrary spoliation of property. There
will be no unjust and illegal discrimination between persons in similar
circumstances. The law will prove oppressive to the extent that all tax laws
are oppressive, but not oppressive to the extent of confiscation
·
Act No. 2972 as
meaning that any person, company, partnership, or corporation, engaged in
commerce, industry, or any other activity for the purpose of profit in the
Philippine Islands, shall keep its account books, consisting of sales books and
other records and returns required for taxation purposes by regulations of the
Bureau of Internal Revenue, in effect when this action was begun, in English,
Spanish, or a local dialect, thus valid and constitutional
Johns, J. Dissenting
·
Both in the title and
the body of the act, the legislature has said that it shall be unlawful for any
person, firm or corporation engaged in certain lines of business to keep its
account books in any language other than English, Spanish or any local dialect,
and has expressly imposed a penalty for a violation of the act. There are no
exceptions or limitations in the language, and it is not confined or limited to
any specific purpose. It is broad and general and applies to any and all
account books which may be kept or used in connection with the business.
Assuming, as the majority opinion does, that Act No. 2972 should read
that account books, for taxation purposes, should be kept in their English,
Spanish or any local dialect, the act does not specify or define what books
shall be kept or how and in what manner they shall be kept. Neither does it
delegate that power to anyone else
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