CIR v Gotamco
GR No L-31092, February 27, 1987
FACTS:
The World Health Organization (WHO) decided to construct a building to house its offices, as well as the other United
Nations Offices in Manila. Inviting bids for the construction of the building, the WHO informed the bidders of its tax exemptions. The contract was awarded to John Gotamco and sons. The Commissioner opined that a 3% contractor’s tax should be due from the contractor. The WHO issued a certification that Gotamco should be exempted, but the Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the Court ruled in favor of Gotamco.
ISSUE:
Is Gotamco liable for the tax?
RULING:
No. Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else.
Herein, the contractor’s tax is payable by the contractor but it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Such tax is an “indirect tax” on the organization, as the payment thereof or its inclusion in the bid price would have meant an increase in the construction cost of the building.
Hence, WHO’s exemption from “indirect taxes” implies that Gotamco is exempt from contractor’s tax.
GR No L-31092, February 27, 1987
FACTS:
The World Health Organization (WHO) decided to construct a building to house its offices, as well as the other United
Nations Offices in Manila. Inviting bids for the construction of the building, the WHO informed the bidders of its tax exemptions. The contract was awarded to John Gotamco and sons. The Commissioner opined that a 3% contractor’s tax should be due from the contractor. The WHO issued a certification that Gotamco should be exempted, but the Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the Court ruled in favor of Gotamco.
ISSUE:
Is Gotamco liable for the tax?
RULING:
No. Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them; while indirect taxes are those that are demanded in the first instance from one person in the expectation and intention that he can shift the burden to someone else.
Herein, the contractor’s tax is payable by the contractor but it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Such tax is an “indirect tax” on the organization, as the payment thereof or its inclusion in the bid price would have meant an increase in the construction cost of the building.
Hence, WHO’s exemption from “indirect taxes” implies that Gotamco is exempt from contractor’s tax.
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