Pepsi-Cola Bottling Company v Tanauan (1976)

Pepsi-Cola Bottling Company of the Phils, Inc v Tanauan GR No. L-31156, February 27, 1976

FACTS:
Pepsi Cola Bottling Company commenced a complaint with preliminary injunction before the Court of First Instance of
Leyte for the court to declare Section 2 of RA 2264 (Local Autonomy Act) unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos 23 and 27 of municipality of Tanauan, Leyte. Municipal Ordinance No. 23 (9/25/1962) levies and collects from softdrinks producers and manufacturers a tax of 1/16 of a centavo for every bottle of softdrink corked. Municipal ordinance no. 27 (10/28/1962) levies and collects on softdrinks produced or manufactured within the territorial jurisdiction of this municipality a tax of 1 centavo on each gallon of volume capacity. The taxes imposed are denominated as “municipal production tax”. CFI-Leyte dismissed the complaint. Hence, this petition.

ISSUES:

1. Is Section 2 of RA 2264 an undue delegation of power, confiscatory and oppressive?
   
2. Do ordinances nos. 23 and 27 constitute double taxation and impose percentage or specific taxes?
   
3. Are ordinance nos. 23 and 27 unjust and unfair?
   

RULING:

1. No. Under the New Constitution, local governments are granted the autonomous authority to create their own sources of
   revenue and to levy taxes. Section 5, Article XI provides: “Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law.” Thus, legislative powers may be delegated to local governments in respect of matters of local concern.
   
2. No. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior ordinance no. 23 and operates as a repeal of the latter, even without words to that effect. The tax is not a percentage tax as the volume capacity of the taxpayer’s production of softdrinks is considered solely for purposes of determining the tax rate on the products but there is no set ratio between volume of sales and amount of the tax. Nor can the tax levied be treated as a specific tax. Softdrink is not one of those specified articles.
   
3. No. Municipal corporations are allowed much discretion in determining the rates of imposable taxes. This is in line with the constitutional policy of according the widest possible autonomy to local governments in matters of local taxation, an aspect that is given expression in the Local Tax Code.