The Supreme Court ruled that Tax Ordinance No. 7988 of Manila, known as the Revised Revenue Code, was invalid due to the city’s failure to publish it for three consecutive days as required by the Local Government Code. This decision affirmed that strict adherence to publication requirements is essential for the validity of local tax ordinances. The ruling protects businesses from unlawful tax burdens imposed by ordinances not properly enacted, reinforcing the importance of due process in local taxation.

The Case of the Unpublicized Tax: Can Manila Enforce a Flawed Ordinance?

Coca-Cola Bottlers Philippines, Inc. challenged Tax Ordinance No. 7988, the Revised Revenue Code of Manila, arguing that the city failed to publish the ordinance as mandated by the Local Government Code. This case brings to light the critical role of publication in ensuring transparency and fairness in local taxation. The central question is whether a tax ordinance can be enforced if it does not strictly comply with the procedural requirements of publication.

The controversy began when Manila increased tax rates applicable to businesses, including Coca-Cola, through Tax Ordinance No. 7988. Coca-Cola questioned the legality of Section 21 of the ordinance, arguing that it imposed additional business taxes exceeding the city’s taxing power under Section 143(h) of the Local Government Code of 1991. They contended that deleting a provision exempting businesses already paying taxes under other sections of the code was a violation of the Local Government Code and the Constitution.

The Department of Justice (DOJ) initially declared Tax Ordinance No. 7988 null and void due to the city’s failure to publish it for three consecutive days in a newspaper of local circulation, as required by Section 188 of the Local Government Code. Section 188 explicitly states:

“Section 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10) days after their approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation; Provided, however, that in provinces, cities, and municipalities where there are no newspapers or local circulations the same may be posted in at least two (2) conspicuous and publicly accessible places.”

The DOJ emphasized that the requirement of publication is mandatory, intended to inform affected entities of the tax measure’s existence and allow them to voice objections. The city’s failure to prove compliance with the publication requirement led the DOJ to invalidate the ordinance. The Bureau of Local Government Finance (BLGF) also directed Manila to cease and desist from enforcing Tax Ordinance No. 7988, citing Section 190 of the Local Government Code, which penalizes the enforcement of void tax ordinances.

Despite these directives, Manila continued to assess Coca-Cola business taxes based on the rates in Tax Ordinance No. 7988. Coca-Cola then filed a complaint with the Regional Trial Court (RTC) of Manila, seeking to enjoin the city from implementing the tax ordinance. The RTC initially ruled in favor of Coca-Cola, declaring the injunction permanent, but later dismissed the case based on the enactment of Tax Ordinance No. 8011, which purportedly amended Tax Ordinance No. 7988.

However, Tax Ordinance No. 8011 was also challenged by Coca-Cola and subsequently declared null and void by the DOJ. The DOJ reasoned that an invalid ordinance cannot be amended and that the city should have enacted a new tax measure complying with all legal requirements. The Supreme Court, in the case of People v. Lim, clarified that an invalid law does not legally exist, thus negating any attempt to amend it. The Supreme Court would eventually rule that the initial tax ordinance was in fact void because the city failed to publish the changes as required by law.

The key issue before the Supreme Court was whether Tax Ordinance No. 7988 was indeed null and void. The Court clarified that the petition raised questions of law, not fact, focusing on the correctness of the conclusions drawn from undisputed facts. It pointed out that it was the respondents who raised factual questions regarding the publication of the ordinance, which the Court, as a non-trier of facts, declined to address. The Supreme Court also addressed concerns about the verification of the petition, finding that Nelson Empalmado, who verified the petition, was authorized to do so through a Special Power of Attorney.

The Supreme Court emphasized that Tax Ordinance No. 7988 had already been declared null and void by the DOJ due to the city’s failure to comply with the publication requirements of Section 188 of the Local Government Code. Moreover, the RTC of Manila had also found that the city failed to follow the correct procedure in enacting tax measures. The Court noted that the amending ordinance, Tax Ordinance No. 8011, was also declared null and void, meaning it had no legal effect. Building on this principle, the Supreme Court stated that the passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way, does not legally exist.

The Court ruled that the RTC erred in dismissing Coca-Cola’s case based on the enactment of Tax Ordinance No. 8011, as the amending law was itself invalid. The Supreme Court, citing People v. Lim, reiterated that an invalid law does not legally exist, and therefore, there is no basis to amend it. In effect, the Supreme Court protected the corporation’s rights and secured the rule of law by preventing the enforcement of an ordinance that did not adhere to the strict procedural requirements of the Local Government Code. Strict adherence to procedural requirements is crucial, as it ensures transparency, fairness, and due process in the imposition of local taxes.

FAQs

What was the key issue in this case?	The key issue was whether Tax Ordinance No. 7988 of the City of Manila was valid, considering it was not published for three consecutive days as required by the Local Government Code.
Why did the DOJ declare Tax Ordinance No. 7988 null and void?	The DOJ declared the ordinance null and void because the City of Manila failed to publish it for three consecutive days in a newspaper of local circulation, violating Section 188 of the Local Government Code.
What did the Bureau of Local Government Finance (BLGF) do?	The BLGF directed the City Treasurer of Manila to cease and desist from implementing Tax Ordinance No. 7988, citing the DOJ’s resolution and Section 190 of the Local Government Code.
What was the effect of Tax Ordinance No. 8011?	Tax Ordinance No. 8011, which attempted to amend Tax Ordinance No. 7988, was also declared null and void by the DOJ, as an invalid ordinance cannot be validly amended.
What was the Supreme Court’s ruling in this case?	The Supreme Court ruled that Tax Ordinance No. 7988 was indeed null and void, reversing the RTC’s order dismissing Coca-Cola’s case and setting aside the orders dated May 8, 2002, and December 5, 2002.
Why is the publication of tax ordinances important?	Publication ensures transparency and allows affected parties to be informed of the tax measures, enabling them to voice objections and ensuring due process in local taxation.
What does Section 188 of the Local Government Code require?	Section 188 requires that all provincial, city, and municipal tax ordinances or revenue measures be published in full for three consecutive days in a newspaper of local circulation.
Can an invalid tax ordinance be amended?	No, an invalid tax ordinance does not legally exist and cannot be amended; instead, a new tax measure that complies with all legal requirements must be enacted.

In conclusion, the Supreme Court’s decision underscores the importance of strict compliance with the procedural requirements for enacting local tax ordinances. This ruling ensures that local governments do not overstep their taxing powers and that businesses are protected from unlawful tax burdens. The stringent adherence to the publication requirement safeguards the rights of taxpayers and upholds the principles of transparency and fairness in local governance.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Coca-Cola Bottlers Philippines, Inc. vs. City of Manila, G.R. NO. 156252, June 27, 2006