SC Upholds Legality of Senior Citizens 20% as tax deductions

8/11/2019 SC Upholds Legality of Senior Citizens 20% as tax deductions

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SC upholds legality of senior citizens 20%

discount, tax deductionDecember 16, 2013 12:18pm9 61 4 620

Tags:Supreme Court

The Supreme Court has upheld the constitutionalit o! the 20"percent discount and ta# deduction

scheme !or senior citi$ens imposed on business establishments%

&otin' 13"1, the hi'h court (un)ed !or lac) o! merit a petition !or prohibition !iled b t*o !uneral

companies + anila emorial -ar), .nc% and /a uneraria -a$"Sucat + uestionin' the

constitutionalit o! epublic ct 432, as amended b 925, that 'ranted senior citi$enspriile'es%

The rulin' *as *ritten b ssociate 7ustice ariano del Castillo *ith Senior ssociate 7usticentonio Carpio bein' the lone dissenter% ean*hile, ssociate 7ustice rturo rion did not ta)e

part in the otin'%

Thirteen o! the 15 SC ma'istrates are senior citi$ens or 60 ears old or older, *hile Chie! 7ustice

aria /ourdes Sereno is 53 ears old% ssociate 7ustice aric /eonen *ill turn 51 on

December 29%

.n its rulin', the hi'h court said both the 20"percent discount and the ta# deduction scheme *ere

a alid e#ercise o! the police po*er o!the state%

There is no intention to sa that price and rate o! return on inestment control la*s are the

(usti!ication !or the senior citi$en discount la*% ot at all, the (ustices said%

.n its petition, the t*o !uneral homes clari!ied that the *ere contestin' not the le'alit o! the 20"

percent discount !or senior citi$ens but o! the ta# deduction scheme under the Senior Citi$ens

la*, as *ell as the implementin' rules and re'ulations issued b the Department o! Social ;el!are andDeelopment


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.n their de!ense, the DS;D and the D> said the petitioners !ailed to proe that the ta#

deduction scheme *as not !air and !ull euialent o! the loss sustained b their companies%

.n its rulin', the SC ruled: The (usti!ication !or the senior citi$en discount la* is the plenar po*ers o!

Con'ress% The le'islatie po*er to re'ulate business establishment is broad and coers a *ide arra o! areasand sub(ects%

The ma'istrates said: .t is *ell *ithin Con'ressB le'islatie po*ers to re'ulate the pro!its orincome'ross sales o! industries and enterprises, een those *ithout !ranchises% or *hat are

!ranchises but mere le'islatie enactmentsE Mar Merue!as"#S$, M& 'e(s

RA 7432, RA 9257, senior citizens - SC: 20% discount for elderly legl !

"edlines, #e$s, &e '&ili((ine Str ! (&ilstr)co*

see - SC: 20% discount for elderly legal | Headlines, News, The Philiine Star |

hilstar!co"

#$ $ $!

MANILA, Philippines - The Supreme Court (SC) has upheld the legality of the tax

deductionsheme imposed on !usiness esta!lishments under the Senior Citizens

La"#

In a 38-page decision penned by Associate Justice Mariano del Castillo, the SC

held that the 2 percent discount pro!ided under Section " o# $epublic Act %"32,

as a&ended by $A '2(%, is constitutional)

It dismissed the petition filed !y funeral firms Manila Me&orial *ar+In# and La

$uneraria Pa%-Suat In# &uestioning the sheme and its implementing rules !y the

'epartment of Soial elfare and 'eelopment and the epart&ent o# inance#

*A la", "hih has !een in operation for many years and promotes the "elfare of a group

aorded speial onern !y the Constitution, annot and should not !e summarily

inalidated on a mere allegation that it redues the inome or gross salesof !usiness

esta!lishments,+ read the SC ruling#

nder the ta dedution system, priate esta!lishments shoulder ./ perent of the

disount "hile the goernment arries 0/ perent#

The petitioners said the sheme iolates their right to 1ust ompensation under Artile III

of the Constitution#
http://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legalhttp://www.philstar.com/headlines/2013/12/16/1268608/sc-20-discount-elderly-legal


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2eadlines ( Artile M3e ), pagemath4 5, setionmath4 5

3A 6708, 3A 98/6, senior iti%ens - SC4 8:; disount for elderly legal < 2eadlines,

Ne"s, The Philippine Star < philstar#om

see - SC4 8:; disount for elderly legal < 2eadlines, Ne"s, The Philippine Star ./ -H, .C% D /

IG. -J"SICT, .C%, -etitioners, % SGCGTK > TLG

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+#+ 'o+ -./., 1ece3er 0/, 20/

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leisure and amusement, 'iin' 20? discounts to uali!ied senior citi$ens are reuired to

)eep separate and accurate record@sA o! sales made to senior citi$ens, *hich shall

include the name, identi!ication number, 'ross salesreceipts, discounts, dates o!transactions and inoice number !or eer transaction%

The amount o! 20? discount shall be deducted !rom the 'ross income !or income ta#purposes and !rom 'ross sales o! the business enterprise concerned !or purposes o! the

&T and other percenta'e ta#es%

.n Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5the Courtdeclared Sections 2


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Laws Not Amended

by Regulations

Second, the la* cannot be amended b a mere re'ulation% .n !act, a re'ulation that

Ooperates to create a rule out o! harmon *ith the statute is a mere nullitMP it cannotpreail%

.t is a cardinal rule that courts O*ill and should respect the contemporaneousconstruction placed upon a statute b the e#ecutie o!!icers *hose dut it is to en!orce it

# # #%P .n the scheme o! (udicial ta# administration, the need !or certaint and

predictabilit in the implementation o! ta# la*s is crucial% >ur ta# authorities !ill in the

details that OCon'ress ma not hae the opportunit or competence to proide%P There'ulations these authorities issue are relied upon b ta#paers, *ho are certain that

these *ill be !ollo*ed b the courts% Courts, ho*eer, *ill not uphold these authoritiesR

interpretations *hen clearl absurd, erroneous or improper%

.n the present case, the ta# authorities hae 'ien the term ta# credit in Sections 2%i and

4 o! 2"94 a meanin' utterl in contrast to *hat 432 proides% Theirinterpretation has muddled # # # the intent o! Con'ress in 'rantin' a mere discount

priile'e, not a sales discount% The administratie a'enc issuin' these re'ulations ma

not enlar'e, alter or restrict the proisions o! the la* it administersM it cannot en'ra!tadditional reuirements not contemplated b the le'islature%

.n case o! con!lict, the la* must preail% Ore'ulation adopted pursuant to la* is la*%P

Conersel, a re'ulation or an portion thereo! not adopted pursuant to la* is no la*and has neither the !orce nor the e!!ect o! la*%

>n ebruar 26, 2004, 9258amended certain proisions o! 432, to *it:

SGCT.> 4% -riile'es !or the Senior Citi$ens% + The senior citi$ens shall be entitled tothe !ollo*in':

deduction based on the net cost o! the 'oods sold or serices rendered: -roided, That

the cost o! the discount shall be allo*ed as deduction !rom 'ross income !or the sameta#able ear that the discount is 'ranted% -roided, !urther, That the total amount o! the

claimed ta# deduction net o! alue added ta# i! applicable, shall be included in their

'ross sales receipts !or ta# purposes and shall be sub(ect to proper documentation and to

the proisions o! the ational .nternal eenue Code, as amended%


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To implement the ta# proisions o! 925, the Secretar o! inance issued o% 4"

2006, the pertinent proision o! *hich proides:

SGC% 8% &./GT K GST/.SLGTS > S/GS D.SC>ITS SDGDICT.> > F>SS .C>G% + Gstablishments enumerated in subpara'raph

SIGD >

G7>KGD K TLG SG.> C.T.JG shall be eli'ible !or the deductible salesdiscount%

.C./ GCG.-T > S/GS .&>.CG issued b theestablishment !or the sale o! 'oods or serices to the senior citi$en%

nl the actual amount o! the discount 'ranted or a sales discount not e#ceedin'

20? o! the 'ross sellin' price can be deducted !rom the 'ross income, net o! alueadded ta#, i! applicable, !or income ta# purposes, and !rom 'ross sales or 'ross

receipts o! the business enterprise concerned, !or &T or other percenta'e ta#purposes%


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rticle 8% Ta# Deduction o! Gstablishments% + The establishment ma claim the

discounts 'ranted under ule &, Section 4 + Discounts !or Gstablishments, Section 9,edical and Dental Serices in -riate acilities and Sections 10 and 11 + ir, Sea and

/and Transportation as ta# deduction based on the net cost o! the 'oods sold or serices

rendered%Provided, That the cost o! the discount shall be allo*ed as deduction !rom'ross income !or the same ta#able ear that the discount is 'rantedM Provided, furter,

That the total amount o! the claimed ta# deduction net o! alue added ta# i! applicable,

shall be included in their 'ross sales receipts !or ta# purposes and shall be sub(ect toproper documentation and to the proisions o! the ational .nternal eenue Code, as

amendedM -roided, !inall, that the implementation o! the ta# deduction shall be sub(ect

to the eenue e'ulations to be issued b the ureau o! .nternal eenue be declared unconstitutional inso!ar

as these allo* business establishments to claim the 20? discount 'ien to seniorciti$ens as a ta# deductionM that the DS;D and the D> be prohibited !rom en!orcin'

the sameM and that the ta# credit treatment o! the 20? discount under the !ormer Section4 %10

-etitioners posit that the ta# deduction scheme contraenes rticle ..., Section 9 o! the

Constitution, *hich proides that: O@pAriate propert shall not be ta)en !or public use*ithout (ust compensation%P11.n support o! their position, petitioners cite Central Luzon

Drug Corporation,12*here it *as ruled that the 20? discount priile'e constitutes

ta)in' o! priate propert !or public use *hich reuires the pament o! (ust


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compensation,13and Carlos !uperdrug Corporation v. Department of !o"ial #elfare

and Development,14*here it *as ac)no*led'ed that the ta# deduction scheme does not

meet the de!inition o! (ust compensation%15

-etitioners li)e*ise see) a reersal o! the rulin' in Carlos !uperdrug Corporation16that

the ta# deduction scheme adopted b the 'oernment is (usti!ied b police po*er%1

Theassert that O@aAlthou'h both police po*er and the po*er o! eminent domain hae the

'eneral *el!are !or their ob(ect, there are still traditional distinctions bet*een the t*oP18

and that Oeminent domain cannot be made less supreme than police po*er%P19-etitioners!urther claim that the le'islature, in amendin' 432, relied on an erroneous

contemporaneous construction that prior pament o! ta#es is reuired !or ta# credit%20

-etitioners also contend that the ta# deduction scheme iolates rticle &, Section 421and rticle ..., Section 1122o! the Constitution because it shi!ts the StateRs

constitutional mandate or dut o! improin' the *el!are o! the elderl to the priate

sector%23Inder the ta# deduction scheme, the priate sector shoulders 65? o! the

discount because onl 35?

24

o! it is actuall returned b the 'oernment%

25

Conseuentl, the implementation o! the ta# deduction scheme prescribed under Section

4 o! 925 a!!ects the businesses o! petitioners%26Thus, there e#ists an actual case orcontroers o! transcendental importance *hich deseres (udicious disposition on the

merits b the hi'hest court o! the land%2Chanobles&irtuala*librar

Respondents Arguments

espondents, on the other hand, uestion the !ilin' o! the instant -etition directl *ith

the Supreme Court as this disre'ards the hierarch o! courts%28The li)e*ise assert thatthere is no (usticiable controers as petitioners !ailed to proe that the ta# deduction

treatment is not a O!air and !ull euialent o! the loss sustainedP b them% 29s to the

constitutionalit o! 925 and its implementin' rules and re'ulations, respondentscontend that petitioners !ailed to oerturn its presumption o! constitutionalit%30ore

important, respondents maintain that the ta# deduction scheme is a le'itimate e#ercise

o! the StateRs police po*er%31chanroblesirtuala*librar

6ur #uling

The -etition lac)s merit%

There exists an actual case or controversy.

;e shall !irst resole the procedural issue%

;hen the constitutionalit o! a la* is put in issue, (udicial reie* ma be aailed o!

onl i! the !ollo*in' reuisites concur: O


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.n this case, petitioners are challen'in' the constitutionalit o! the ta# deduction scheme

proided in 925 and the implementin' rules and re'ulations issued b the DS;D

and the D>% espondents, ho*eer, oppose the -etition on the 'round that there is noactual case or controers% ;e do not a'ree *ith respondents%

n actual case or controers e#ists *hen there is Oa con!lict o! le'al ri'htsP or Oanassertion o! opposite le'al claims susceptible o! (udicial resolution%P33The -etition must

there!ore sho* that Othe 'oernmental act bein' challen'ed has a direct aderse e!!ect

on the indiidual challen'in' it%P34.n this case, the ta# deduction scheme challen'ed bpetitioners has a direct aderse e!!ect on them% Thus, it cannot be denied that there e#ists

an actual case or controers%

The validity of the 20 senior citi!en discount and tax deduction scheme under RA

"2#$% as an exercise of police po&er of the 'tate% has already (een settled in )arlos

'uperdrug )orporation.

-etitioners posit that the resolution o! this case lies in the determination o! *hether thele'all mandated 20? senior citi$en discount is an e#ercise o! police po*er or eminent

domain% .! it is police po*er, no (ust compensation is *arranted% ut i! it is eminentdomain, the ta# deduction scheme is unconstitutional because it is not a peso !or peso

reimbursement o! the 20? discount 'ien to senior citi$ens% Thus, it constitutes ta)in'

o! priate propert *ithout pament o! (ust compensation%

t the outset, *e note that this uestion has been settled in Carlos !uperdrug

Corporation%35.n that case, *e ruled:

-etitioners assert that Section 4 >pinion, the ta# deduction scheme does not !ullreimburse petitioners !or the discount priile'e accorded to senior citi$ens% This is

because the discount is treated as a deduction, a ta#"deductible e#pense that is

subtracted !rom the 'ross income and results in a lo*er ta#able income% Statedother*ise, it is an amount that is allo*ed b la* to reduce the income prior to the

application o! the ta# rate to compute the amount o! ta# *hich is due% ein' a ta#

deduction, the discount does not reduce ta#es o*ed on a peso !or peso basis but merelo!!ers a !ractional reduction in ta#es o*ed%

Theoreticall, the treatment o! the discount as a deduction reduces the net income o! the

priate establishments concerned% The discounts 'ien *ould hae entered the co!!ers


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and !ormed part o! the 'ross sales o! the priate establishments, *ere it not !or %% o%

925%

The permanent reduction in their total reenues is a !orced subsid correspondin' to the

ta)in' o! priate propert !or public use or bene!it% This constitutes compensable ta)in'

!or *hich petitioners *ould ordinaril become entitled to a (ust compensation%

7ust compensation is de!ined as the !ull and !air euialent o! the propert ta)en !rom its

o*ner b the e#propriator% The measure is not the ta)erRs 'ain but the o*nerRs loss% The*ordAustis used to intensi! the meanin' o! the *ord copensation, and to cone the

idea that the euialent to be rendered !or the propert to be ta)en shall be real,

substantial, !ull and ample%

ta# deduction does not o!!er !ull reimbursement o! the senior citi$en discount% s

such, it *ould not meet the de!inition o! (ust compensation%

Lain' said that, this raises the uestion o! *hether the State, in promotin' the healthand *el!are o! a special 'roup o! citi$ens, can impose upon priate establishments the

burden o! partl subsidi$in' a 'oernment pro'ram%

The Court beliees so%

The Senior Citi$ens ct *as enacted primaril to ma#imi$e the contribution o! senior

citi$ens to nation"buildin', and to 'rant bene!its and priile'es to them !or their

improement and *ell"bein' as the State considers them an inte'ral part o! our societ%

The priorit 'ien to senior citi$ens !inds its basis in the Constitution as set !orth in the

la* itsel!% Thus, the ct proides:

SGC% 2% epublic ct o% 432 is hereb amended to read as !ollo*s:

SGCT.> 1%De"laration of Poli"ies and $b%e"tives% Q -ursuant to rticle &, Section

4 o! the Constitution, it is the dut o! the !amil to ta)e care o! its elderl members*hile the State ma desi'n pro'rams o! social securit !or them% .n addition to this,

Section 10 in the Declaration o! -rinciples and State -olicies proides: OThe State shall

proide social (ustice in all phases o! national deelopment%P urther, rticle ...,

Section 11, proides: OThe State shall adopt an inte'rated and comprehensie approachto health deelopment *hich shall endeaor to ma)e essential 'oods, health and other

social serices aailable to all the people at a!!ordable cost% There shall be priorit !or

the needs o! the underpriile'ed sic), elderl, disabled, *omen and children%PConsonant *ith these constitutional principles the !ollo*in' are the declared policies o!

this ct:

(elfare of senior citizens and to actiBely see their partnership+

To implement the aboe polic, the la* 'rants a t*ent percent discount to senior


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citi$ens !or medical and dental serices, and dia'nostic and laborator !eesM admission

!ees char'ed b theaters, concert halls, circuses, carnials, and other similar places o!

culture, leisure and amusementM !ares !or domestic land, air and sea traelM utili$ation o!serices in hotels and similar lod'in' establishments, restaurants and recreation centersM

and purchases o! medicines !or the e#clusie use or en(oment o! senior citi$ens% s a

!orm o! reimbursement, the la* proides that business establishments e#tendin' thet*ent percent discount to senior citi$ens ma claim the discount as a ta# deduction%

The la* is a le'itimate e#ercise o! police po*er *hich, similar to the po*er o! eminentdomain, has 'eneral *el!are !or its ob(ect% -olice po*er is not capable o! an e#act

de!inition, but has been purposel eiled in 'eneral terms to underscore its

comprehensieness to meet all e#i'encies and proide enou'h room !or an e!!icient and

!le#ible response to conditions and circumstances, thus assurin' the 'reatest bene!its%ccordin'l, it has been described as Othe most essential, insistent and the least

limitable o! po*ers, e#tendin' as it does to all the 'reat public needs%P .t is O@tAhe po*er

ested in the le'islature b the constitution to ma)e, ordain, and establish all manner o!

*holesome and reasonable la*s, statutes, and ordinances, either *ith penalties or*ithout, not repu'nant to the constitution, as the shall (ud'e to be !or the 'ood and

*el!are o! the common*ealth, and o! the sub(ects o! the same%P

or this reason, *hen the conditions so demand as determined b the le'islature,

propert ri'hts must bo* to the primac o! police po*er because propert ri'hts, thou'hsheltered b due process, must ield to 'eneral *el!are%

-olice po*er as an attribute to promote the common 'ood *ould be diluted

considerabl i! on the mere plea o! petitioners that the *ill su!!er loss o! earnin's andcapital, the uestioned proision is inalidated% oreoer, in the absence o! eidence

demonstratin' the alle'ed con!iscator e!!ect o! the proision in uestion, there is no

basis !or its nulli!ication in ie* o! the presumption o! alidit *hich eer la* has inits !aor%

Fien these, it is incorrect !or petitioners to insist that the 'rant o! the senior citi$endiscount is undul oppressie to their business, because petitioners hae not ta)en time

to calculate correctl and come up *ith a !inancial report, so that the hae not been

able to sho* properl *hether or not the ta# deduction scheme reall *or)s 'reatl to

their disadanta'e%

.n treatin' the discount as a ta# deduction, petitioners insist that the *ill incur losses

because, re!errin' to the D> >pinion, !or eer -1%00 senior citi$en discount thatpetitioners *ould 'ie, -0%68 *ill be shouldered b them as onl -0%32 *ill be re!unded

b the 'oernment b *a o! a ta# deduction%

To illustrate this point, petitioner Carlos Super Dru' cited the anti"hpertensie

maintenance dru'Norvas"as an e#ample% ccordin' to the latter, it acuiresNorvas"

!rom the distributors at -3%5 per tablet, and retails it at -39%60


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*ould hae to sellNorvas"at -31%68 *hich translates to a loss !rom capital o! -5%89 per

tablet% Gen i! the 'oernment *ill allo* a ta# deduction, onl -2%53 per tablet *ill be

re!unded and not the !ull amount o! the discount *hich is -%92% .n short, onl 32? o!the 20? discount *ill be reimbursed to the dru'stores%

-etitionersR computation is !la*ed% or purposes o! reimbursement, the la* states thatthe cost o! the discount shall be deducted !rom 'ross income, the amount o! income

deried !rom all sources be!ore deductin' allo*able e#penses, *hich *ill result in net

income% Lere, petitioners tried to sho* a loss on a per transaction basis, *hich shouldnot be the case% n income statement, sho*in' an accountin' o! petitionersR sales,

e#penses, and net pro!it


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e#ercise o! the police po*er o! the State%

*o compelling reason has (een proffered to overturn% modify or a(andon the ruling

in )arlos 'uperdrug )orporation.

-etitioners ar'ue that *e hae preiousl ruled in Central Luzon Drug Corporation3

that the 20? discount is an e#ercise o! the po*er o! eminent domain, thus, reuirin' the

pament o! (ust compensation% The ur'e us to re"e#amine our rulin' in Carlos

!uperdrug Corporation38*hich alle'edl reersed the rulin' in Central Luzon DrugCorporation%39The also point out that Carlos !uperdrug Corporation40reco'ni$ed that

the ta# deduction scheme under the assailed la* does not proide !or su!!icient (ust

compensation%

;e a'ree *ith petitionersR obseration that there are statements in Central Luzon Drug

Corporation41des"ribingthe 20? discount as an e#ercise o! the po*er o! eminent

domain, viz%:

@TAhe priile'e en(oed b senior citi$ens does not come dire"tly!rom the State, butrather !rom the priate establishments concerned% ccordin'l, the ta& "reditbene!it

'ranted to these establishments can 3e deeedas their%ust "ompensation!or priatepropert ta)en b the State !or public use%

The concept o!publi" useis no lon'er con!ined to the traditional notion o! use by te

publi", but held snonmous *ithpubli" interest, publi" benefit, publi" welfare,and

publi" "onvenien"e% The discount priile'e to *hich our senior citi$ens are entitled is

actuall a bene!it en(oed b the 'eneral public to *hich these citi$ens belon'% The

discounts 'ien *ould hae entered the co!!ers and !ormed part o! the gross saleso! thepriate establishments concerned, *ere it not !or 432% The permanent reduction in

their total reenues is a !orced subsid correspondin' to the ta)in' o! priate propert

!orpubli" use or benefit%

s a result o! the 20 percent discount imposed b 432, respondent becomes

entitled to a%ust "ompensation% This term re!ers not onl to the issuance o! a ta& "reditcerti!icate indicatin' the correct amount o! the discounts 'ien, but also to the

promptness in its release% Guialent to the pament o! propert ta)en b the State, such

issuance Q *hen not done *ithin a reasonable time!rom the 'rant o! the discounts Q

cannot be considered as%ust "ompensation% .n e!!ect, respondent is made to su!!er theconseuences o! bein' immediatel depried o! its reenues *hile a*aitin' actual

receipt, throu'h the certi!icate, o! the euialent amount it needs to cope *ith the

reduction in its reenues%

esides, the ta#ation po*er can also be used as an implement !or the e#ercise o! the

po*er o! eminent domain% Ta# measures are but Oen!orced contributions e#acted on paino! penal sanctionsP and Oclearl imposed !or apubli" purpose%P .n recent ears, the

po*er to ta# has indeed become a most e!!ectie tool to reali$e social (ustice,publi"

welfare, and the euitable distribution o! *ealth%


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;hile it is a declared commitment under Section 1 o! 432, social (ustice Ocannot be

ino)ed to trample on the ri'hts o! propert o*ners *ho under our Constitution and

la*s are also entitled to protection% The social (ustice consecrated in our @CAonstitution@isA not intended to ta)e a*a ri'hts !rom a person and 'ie them to another *ho is not

entitled thereto%P or this reason, a (ust compensation !or income that is ta)en a*a

!rom respondent becomes necessar% .t is in the ta& "reditthat our le'islators !indsupport to reali$e social (ustice, and no administratie bod can alter that !act%

To put it di!!erentl, a priate establishment that merel brea)s een Q *ithout thediscounts et Q *ill surel start to incur losses because o! such discounts% The same

e!!ect is e#pected i! its mar)"up is less than 20 percent, and i! all its sales come !rom

retail purchases b senior citi$ens% side !rom the obseration *e hae alread raised

earlier, it *ill also be 'rossl un!air to an establishment i! the discounts *ill be treatedmerel as deductions !rom either itsgross in"omeor itsgross sales% >peratin' at a loss

throu'h no !ault o! its o*n, it *ill reali$e that the ta& "reditlimitation under 2"94 is

inutile, i! not improper% ;orse, pro!it"'eneratin' businesses *ill be put in a better

position i! the aail themseles o! ta# credits denied those that are losin', because nota#es are due !rom the latter%42 >pinion, the ta# deduction scheme does not !ull

reimburse petitioners !or the discount priile'e accorded to senior citi$ens% This isbecause the discount is treated as a deduction, a ta#"deductible e#pense that is

subtracted !rom the 'ross income and results in a lo*er ta#able income% Stated

other*ise, it is an amount that is allo*ed b la* to reduce the income prior to the

application o! the ta# rate to compute the amount o! ta# *hich is due% ein' a ta#deduction, the discount does not reduce ta#es o*ed on a peso !or peso basis but merel

o!!ers a !ractional reduction in ta#es o*ed%

Theoreticall, the treatment o! the discount as a deduction reduces the net income o! the

priate establishments concerned% The discounts 'ien *ould hae entered the co!!ers

and !ormed part o! the 'ross sales o! the priate establishments, *ere it not !or %% o%925%

The permanent reduction in their total reenues is a !orced subsid correspondin' to the

ta)in' o! priate propert !or public use or bene!it% This constitutes compensable ta)in'


17/87

!or *hich petitioners *ould ordinaril become entitled to a (ust compensation%

7ust compensation is de!ined as the !ull and !air euialent o! the propert ta)en !rom itso*ner b the e#propriator% The measure is not the ta)erRs 'ain but the o*nerRs loss% The

*ordAustis used to intensi! the meanin' o! the *ord copensation, and to cone the

idea that the euialent to be rendered !or the propert to be ta)en shall be real,substantial, !ull and ample%

ta# deduction does not o!!er !ull reimbursement o! the senior citi$en discount% ssuch, it *ould not meet the de!inition o! (ust compensation%

Lain' said that, this raises the uestion o! *hether the State, in promotin' the health

and *el!are o! a special 'roup o! citi$ens, can impose upon priate establishments theburden o! partl subsidi$in' a 'oernment pro'ram%

The Court beliees so%44

This, not*ithstandin', *e *ent on to rule in Carlos !uperdrug Corporation

45

that the20? discount and ta# deduction scheme is a alid e#ercise o! the police po*er o! the

State%

The present case, thus, a!!ords an opportunit !or us to clari! the aboe"uoted

statements in Central Luzon Drug Corporation46and Carlos !uperdrug Corporation%4

irst, *e note that the aboe"uoted disuisition on eminent domain in Central Luzon

Drug Corporation48is obiter dicta and, thus, not bindin' precedent% s stated earlier, in

Central Luzon Drug Corporation,49*e ruled that the . acted ultra vires*hen ite!!ectiel treated the 20? discount as a ta# deduction, under Sections 2%i and 4 o!

o% 2"94, despite the clear *ordin' o! the preious la* that the same should be treated

as a ta# credit% ;e *ere, there!ore, not con!ronted in that case *ith the issue as to*hether the 20? discount is an e#ercise o! police po*er or eminent domain%

Second, althou'h *e aderted to Central Luzon Drug Corporation50in our rulin' inCarlos !uperdrug Corporation,51this re!erred onl to preliminar matters% !air

readin' o! Carlos !uperdrug Corporation52*ould sho* that *e cate'oricall ruled

therein that the 20? discount is a alid e#ercise o! police po*er% Thus, een i! the

current la*, throu'h its ta# deduction scheme


18/87

!uperdrug Corporation56as to *h the 20? discount is a alid e#ercise o! police po*er

and *h it ma not, under te spe"ifi" "ir"umstan"es of tis "ase, be considered as an

e#ercise o! the po*er o! eminent domain contrar to the obiterin Central Luzon DrugCorporation%5Chanobles&irtuala*librar

Police po&er versus eminent domain.

-olice po*er is the inherent po*er o! the State to re'ulate or to restrain the use o!

libert and propert !or public *el!are%58The onl limitation is that the restrictionimposed should be reasonable, not oppressie%59.n other *ords, to be a alid e#ercise o!

police po*er, it must hae a la*!ul sub(ect or ob(ectie and a la*!ul method o!

accomplishin' the 'oal%60Inder the police po*er o! the State, Opropert ri'hts o!

indiiduals ma be sub(ected to restraints and burdens in order to !ul!ill the ob(ecties o!the 'oernment%P61The State Oma inter!ere *ith personal libert, propert, la*!ul

businesses and occupations to promote the 'eneral *el!are @as lon' asA the inter!erence

@isA reasonable and not arbitrar%P62Gminent domain, on the other hand, is the inherent

po*er o! the State to ta)e or appropriate priate propert !or public use%

63

TheConstitution, ho*eer, reuires that priate propert shall not be ta)en *ithout due

process o! la* and the pament o! (ust compensation%64

Traditional distinctions e#ist bet*een police po*er and eminent domain%

.n the e#ercise o! police po*er, a propert ri'ht is impaired b re'ulation,65or the use o!

propert is merel prohibited, re'ulated or restricted66to promote public *el!are% .n

such cases, there is no compensable ta)in', hence, pament o! (ust compensation is not

reuired% G#amples o! these re'ulations are propert condemned !or bein' no#ious orintended !or no#ious purposes n the other hand, in the e#ercise o! the po*er o! eminent domain, propert interestsare appropriated and applied to some public purpose *hich necessitates the pament o!

(ust compensation there!or% ormall, the title to and possession o! the propert are

trans!erred to the e#propriatin' authorit% G#amples include the acuisition o! lands !orthe construction o! public hi'h*as as *ell as a'ricultural lands acuired b the

'oernment under the a'rarian re!orm la* !or redistribution to uali!ied !armer

bene!iciaries% Lo*eer, it is a settled rule that the acuisition o! title or total destructiono! the propert is not essential !or Ota)in'P under the po*er o! eminent domain to be

present%0G#amples o! these include establishment o! easements such as *here the land

o*ner is perpetuall depried o! his proprietar ri'hts because o! the ha$ards posed b

electric transmission lines constructed aboe his propert1or the compelled


19/87

interconnection o! the telephone sstem bet*een the 'oernment and a priate

compan%2.n these cases, althou'h the priate propert o*ner is not diested o!

o*nership or possession, pament o! (ust compensation is *arranted because o! theburden placed on the propert !or the use or bene!it o! the public%

The 20 senior citi!en discount is an exercise of police po&er.

.t ma not al*as be eas to determine *hether a challen'ed 'oernmental act is an

e#ercise o! police po*er or eminent domain% The er nature o! police po*er as elasticand responsie to arious social conditions3as *ell as the eolin' meanin' and scope

o! public use4and (ust compensation5in eminent domain einces that these are not

static concepts% ecause o! the e#i'encies o! rapidl chan'in' times, Con'ress ma be

compelled to adopt or e#periment *ith di!!erent measures to promote the 'eneral*el!are *hich ma not !all suarel *ithin the traditionall reco'ni$ed cate'ories o!

police po*er and eminent domain% The (udicious approach, there!ore, is to loo) at the

nature and e!!ects o! the challen'ed 'oernmental act and decide, on the basis thereo!,

*hether the act is the e#ercise o! police po*er or eminent domain% Thus, *e no* loo) atthe nature and e!!ects o! the 20? discount to determine i! it constitutes an e#ercise o!

police po*er or eminent domain%

The 20? discount is intended to improe the *el!are o! senior citi$ens *ho, at their a'e,

are less li)el to be 'ain!ull emploed, more prone to illnesses and other disabilities,and, thus, in need o! subsid in purchasin' basic commodities% .t ma not be amiss to

mention also that the discount seres to honor senior citi$ens *ho presumabl spent the

productie ears o! their lies on contributin' to the deelopment and pro'ress o! the

nation% This distinct cultural ilipino practice o! honorin' the elderl is an inte'ral parto! this la*%

s to its nature and e!!ects, the 20? discount is a re'ulation a!!ectin' the abilit o!priate establishments to price their products and serices relatie to a special class o!

indiiduals, senior citi$ens, !or *hich the Constitution a!!ords pre!erential concern%6.n

turn, this a!!ects the amount o! pro!its or income'ross sales that a priate establishmentcan derie !rom senior citi$ens% .n other *ords, the sub(ect re'ulation a!!ects the pricin',

and, hence, the pro!itabilit o! a priate establishment% Lo*eer, it does not purport to

appropriate or burden speci!ic properties, used in the operation or conduct o! the

business o! priate establishments, !or the use or bene!it o! the public, or senior citi$ens!or that matter, but merel re'ulates the pricin' o! 'oods and serices relatie to, and the

amount o! pro!its or income'ross sales that such priate establishments ma derie

!rom, senior citi$ens%

The sub(ect re'ulation ma be said to be similar to, but *ith substantial distinctions

!rom, price control or rate o! return on inestment control la*s *hich are traditionallre'arded as police po*er measures%These la*s 'enerall re'ulate public utilities or

industriesenterprises imbued *ith public interest in order to protect consumers !rom

e#orbitant or unreasonable pricin' as *ell as temper corporate 'reed b controllin' the

rate o! return on inestment o! these corporations considerin' that the hae a
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20/87

monopol oer the 'oods or serices that the proide to the 'eneral public% The sub(ect

re'ulation di!!ers there!rom in that n its !ace, there!ore, the sub(ect re'ulation is a police po*er measure%

The obiterin Central Luzon Drug Corporation,8ho*eer, describes the 20? discount

as an e#ercise o! the po*er o! eminent domain and the ta# credit, under the preious

la*, euialent to the amount o! discount 'ien as the (ust compensation there!or% Thereason is that


21/87

or *hether the loss should remain concentrated on those !e* persons sub(ect to the

public action%81

The impact or e!!ect o! a re'ulation, such as the one under consideration, must, thus, bedetermined on a case"to"case basis% ;hether that line bet*een permissible re'ulation

under police po*er and Ota)in'P under eminent domain has been crossed must, under

the speci!ic circumstances o! this case, be sub(ect to proo! and the one assailin' theconstitutionalit o! the re'ulation carries the hea burden o! proin' that the measure

is unreasonable, oppressie or con!iscator% The time"honored rule is that the burden o!

proin' the unconstitutionalit o! a la* rests upon the one assailin' it and Othe burdenbecomes heaier *hen police po*er is at issue%P82Chanobles&irtuala*librar

The 20 senior citi!en discount has not (een sho&n to (e unreasona(le% oppressive

or confiscatory.

.nAlalayan v. National Power Corporation,83petitioners, *ho *ere !ranchise holders o!

electric plants, challen'ed the alidit o! a la* limitin' their allo*able net pro!its to no

more than 12? per annum o! their inestments plus t*o"month operatin' e#penses% .nre(ectin' their plea, *e ruled that, in an earlier case, it *as !ound that 12? is a

reasonable rate o! return and that petitioners !ailed to proe that the a!oresaid rate iscon!iscator in ie* o! the presumption o! constitutionalit%84

;e adopted a similar line o! reasonin' in Carlos !uperdrug Corporation85*hen *eruled that petitioners therein !ailed to proe that the 20? discount is arbitrar,

oppressie or con!iscator% ;e noted that no eidence, such as a!inancial report , to

establish the impact o! the 20? discount on the oerall pro!itabilit o! petitioners *as

presented in order to sho* that the *ould be operatin' at a loss due to the sub(ectre'ulation or that the continued implementation o! the la* *ould be unconscionabl

detrimental to the business operations o! petitioners% .n the case at bar, petitioners

proceeded *ith a hpothetical computation o! the alle'ed loss that the *ill su!!ersimilar to *hat the petitioners in Carlos !uperdrug Corporation86did% -etitioners *ent

directl to this Court *ithout !irst establishin' the !actual bases o! their claims% Lence,

the present recourse must, li)e*ise, !ail%

ecause all la*s en(o the presumption o! constitutionalit, courts *ill uphold a la*Rs

alidit i! an set o! !acts ma be conceied to sustain it% 8>n its !ace, *e !ind that there

are at least t*o conceiable bases to sustain the sub(ect re'ulationRs alidit absent clearand conincin' proo! that it is unreasonable, oppressie or con!iscator% Con'ress ma

hae le'itimatel concluded that business establishments hae the capacit to absorb a

decrease in pro!its or income'ross sales due to the 20? discount *ithout substantialla!!ectin' the reasonable rate o! return on their inestments considerin'


22/87

not sub(ect o! discounts% s a result, the discounts resultin' !rom sales to senior citi$ens

*ill not be con!iscator or undul oppressie%

.n sum, *e sustain our rulin' in Carlos !uperdrug Corporation88that the 20? senior

citi$en discount and ta# deduction scheme are alid e#ercises o! police po*er o! the

State absent a clear sho*in' that it is arbitrar, oppressie or con!iscator%

)onclusion

.n closin', *e note that petitioners hpothesi$e, consistent *ith our preious

ratiocinations, that the discount *ill !orce establishments to raise their prices in order to

compensate !or its impact on oerall pro!its or income'ross sales% The 'eneral public,

or those not belon'in' to the senior citi$en class, are, thus, made to e!!ectiel shoulderthe subsid !or senior citi$ens% This, in petitionersR ie*, is un!air%

s alread mentioned, Con'ress ma be reasonabl assumed to hae !oreseen this

eentualit% ut, more importantl, this 'oes into the *isdom, e!!icac and e#pedienco! the sub(ect la* *hich is not proper !or (udicial reie*% .n a *a, this la* pursues its

social euit ob(ectie in a non"traditional manner unli)e past and e#istin' directsubsid pro'rams o! the 'oernment !or the poor and mar'inali$ed sectors o! our

societ% &eril, Con'ress must be 'ien su!!icient lee*a in !ormulatin' *el!are

le'islations 'ien the enormous challen'es that the 'oernment !aces relatie to, amon'others, resource adeuac and administratie capabilit in implementin' social re!orm

measures *hich aim to protect and uphold the interests o! those most ulnerable in our

societ% .n the process, the indiidual, *ho en(os the ri'hts, bene!its and priile'es o!

liin' in a democratic polit, must bear his share in supportin' measures intended !orthe common 'ood% This is onl !air%

.n !ine, *ithout the reuisite sho*in' o! a clear and uneuiocal breach o! theConstitution, the alidit o! the assailed la* must be sustained%

Refutation of the +issent

The main points o! 7ustice CarpioRs Dissent ma be summari$ed as !ollo*s:


23/87

s preiousl discussed, in Central Luzon Drug Corporation,92the ., pursuant to

Sections 2%i and 4 o! o% 2"94, treated the senior citi$en discount in the preious

la*, 432, as a ta# deduction instead o! a ta# credit despite the clear proision inthat la* *hich stated +

SGCT.> 4%Privileges for te !enior Citizens% + The senior citi$ens shall be entitled to

the !ollo*in':

a= The 'rant o! t*ent percent


24/87

..

The Dissent discusses at len'th the doctrine on Ota)in'P in police po*er *hich occurs*hen priate propert is destroed or placed outside the commerce o! man% .ndeed,

there is a *hole class o! police po*er measures *hich (usti! the destruction o! priate

propert in order to presere public health, morals, sa!et or *el!are% s earliermentioned, these *ould include a buildin' on the er'e o! collapse or con!iscated

obscene materials as *ell as those mentioned b the Dissent *ith re'ard to propert

used in iolatin' a criminal statute or one *hich constitutes a nuisance% .n such cases,no compensation is reuired%

Lo*eer, it is euall true that there is another class o! police po*er measures *hich do

not inole the destruction o! priate propert but merel re'ulate its use% The minimum*a'e la*, $onin' ordinances, price control la*s, la*s re'ulatin' the operation o! motels

and hotels, la*s limitin' the *or)in' hours to ei'ht, and the li)e *ould !all under this

cate'or% The e#amples cited b the Dissent, li)e*ise, !all under this cate'or: rticle

15 o! the /abor Code, Sections 19 and 18 o! the Social Securit /a*, and Section o!the -a'"..F und /a*% These la*s merel re'ulate or, to use the term o! the Dissent,

burden the conduct o! the a!!airs o! business establishments% .n such cases, pament o!(ust compensation is not reuired because the !all *ithin the sphere o! permissible

police po*er measures% The senior citi$en discount la* !alls under this latter cate'or%

...

The Dissent proceeds !rom the theor that the permanent reduction o! pro!its orincome'ross sales, due to the 20? discount, is a Ota)in'P o! priate propert !or public

purpose *ithout pament o! (ust compensation%

t the outset, it must be emphasi$ed that petitioners neBerpresented any eBidenceto

establish that the *ere !orced to su!!er enormous losses or operate at a loss due to the

e!!ects o! the assailed la*% The came directl to this Court and proided a hpotheticalcomputation o! the loss the *ould alle'edl su!!er due to the operation o! the assailed

la*% The central premise o! the DissentRs ar'ument that the 20? discount results in a

permanent reduction in pro!its or income'ross sales, or !orces a business establishment

to operate at a loss is, thus, (holly unsupportedb competent eidence% To be sure, theCourt can inalidate a la* *hich, on its !ace, is arbitrar, oppressie or con!iscator%9

ut this is not the case here%

.n the case at bar, eidence is indispensable be!ore a determination o! a constitutional

iolation can be made because o! the !ollo*in' reasons%

irst, the assailed la*, b imposin' the senior citi$en discount, does not ta)e an o! the

properties used b a business establishment li)e, sa, the land on *hich a manu!acturin'

plant is constructed or the euipment bein' used to produce 'oods or serices%

Second, rather than ta)in' speci!ic properties o! a business establishment, the senior

citi$en discount la* merely regulatesthe prices o! the 'oods or serices bein' sold to


25/87

senior citi$ens b mandatin' a 20? discount% Thus, i! a product is sold at -10%00 to the

'eneral public, then it shall be sold at -8%00 n the other

hand, i! the product costs -9%00 to produce and is reuired to be sold at -8%00 to seniorciti$ens, then the business *ould e#perience a loss o! -1%00%104ut note that since not all

customers o! a business establishment are senior citi$ens, the business establishmentma continue to earn -1%00 !rom non"senior citi$ens *hich, in turn, can o!!set an loss

arisin' !rom sales to senior citi$ens%

ourth, *hen the la* imposes the 20? discount in !aor o! senior citi$ens, it does not

preent the business establishment !rom reisin' its pricin' strate'% reisin' its

pricin' strate', a business establishment can recoup an reduction o! pro!its or

income'ross sales *hich *ould other*ise arise !rom the 'iin' o! the 20? discount%To illustrate, suppose has t*o customers: , a senior citi$en, and K, a non"senior

citi$en% -rior to the la*, sells his products at -10%00 a piece to and K resultin' in

income'ross sales o! -20%00


26/87

be!ore the implementation o! %% 432% Such an economic (usti!ication is sel!"

de!eatin', !or more consumers *ill su!!er !rom the price increase than *ill bene!it !rom

the 20? discount% Gen then, such abilit to increase prices cannot le'all alidate aiolation o! the eminent domain clause%106

ut, i! it is possible that the business establishment, b ad(ustin' its prices, *ill su!!er

no reduction in its pro!its or income'ross sales


27/87


28/87

su!!er a si'ni!icant loss or to operate at a loss%

Second, this ar'ument su!!ers !rom the same !la* as the DissentRs ori'inal ar'uments% .tis an erroneous characteri$ation o! the 20? discount%

ccordin' to the Dissent, the 20? discount is part o! the 'ross sales and, hence, priatepropert belon'in' to business establishments% Lo*eer, as preiousl discussed, the

20? discount is not priate propert actuall o*ned andor used b the business

establishment% .t should be distin'uished !rom properties li)e lands or buildin's actuallused in the operation o! a business establishment *hich, i! appropriated !or public use,

*ould amount to a Ota)in'P under the po*er o! eminent domain%

.nstead, the 20? discount is a re'ulator measure *hich impacts the pricin' and, hence,the pro!itabilit o! business establishments% t the time the discount is imposed, no

particular propert o! the business establishment can be said to be Ota)en%P That is, the

State does not acuire or ta)e anthin' !rom the business establishment in the *a that

it ta)es a piece o! priate land to build a public road% ;hile the 20? discount ma !ormpart o! the potential pro!its or income'ross sales114o! the business establishment, as

similarl characteri$ed b 7ustice ersamin in his Concurrin' >pinion, potential pro!itsor income'ross sales are not priate propert, speci!icall cash or mone, alread

belon'in' to the business establishment% The are a mere e#pectanc because the are

potential !ruits o! the success!ul conduct o! the business%

-rior to the sale o! 'oods or serices, a business establishment ma be sub(ect to State

re'ulations, such as the 20? senior citi$en discount, *hich ma impact the leel or

amount o! pro!its or income'ross sales that can be 'enerated b such establishment% orthis reason, the alidit o! the discount is to be determined based on its oerall e!!ects

on the operations o! the business establishment%

'ain, as preiousl discussed, the 20? discount does not automaticall result in a 20?

reduction in pro!its, or, to ali'n it *ith the term used b the Dissent, the 20? discount

does not mean that a 20? reduction in 'ross sales necessaril results% ecause pinion, is that the business establishment merel has a ri'ht


29/87

to pro!its% The Constitution aderts to it as the ri'ht o! an enterprise to a reasonable

return on inestment%115Indeniabl, this ri'ht, li)e an other ri'ht, ma be re'ulated

under the police po*er o! the State to achiee important 'oernmental ob(ecties li)eprotectin' the interests and improin' the *el!are o! senior citi$ens%

.t should be noted thou'h that potential pro!its or income'ross sales are releant inpolice po*er and eminent domain analses because the ma, in appropriate cases,

sere as an indicia *hen a re'ulation has 'one Otoo !arP as to amount to a Ota)in'P

under the po*er o! eminent domain% ;hen the depriation or reduction o! pro!its orincome'ross sales is sho*n to be unreasonable, oppressie or con!iscator, then the

challen'ed 'oernmental re'ulation ma be nulli!ied !or bein' a Ota)in'P under the

po*er o! eminent domain% .n such a case, it is not pro!its or income'ross sales *hich

are actuall ta)en and appropriated !or public use% ather, *hen the re'ulation causes anestablishment to incur losses in an unreasonable, oppressie or con!iscator manner,

*hat is actuall ta)en is capital and the ri'ht o! the business establishment to a

reasonable return on inestment% .! the business losses are not halted because o! the

continued operation o! the re'ulation, this eentuall leads to the destruction o! thebusiness and the total loss o! the capital inested therein% ut, a'ain, petitioners in this

case !ailed to proe that the sub(ect re'ulation is unreasonable, oppressie orcon!iscator%

&%

The Dissent !urther ar'ues that *e erroneousl used price and rate o! return on

inestment control la*s to (usti! the senior citi$en discount la*% ccordin' to theDissent, onl pro!its !rom industries imbued *ith public interest ma be re'ulated

because this is a condition o! their !ranchises% -ro!its o! establishments *ithout

!ranchises cannot be re'ulated permanentl because there is no la* re'ulatin' theirpro!its% The Dissent concludes that the permanent reduction o! total reenues or 'ross

sales o! business establishments *ithout !ranchises is a ta)in' o! priate propert under

the po*er o! eminent domain%

.n ma)in' this ar'ument, it is un!ortunate that the Dissent uotes onl a portion o! the

ponen"ia+

The sub(ect re'ulation ma be said to be similar to, but *ith substantial distinctions!rom, price control or rate o! return on inestment control la*s *hich are traditionall

re'arded as police po*er measures% These la*s 'enerall re'ulate public utilities or

industriesenterprises imbued *ith public interest in order to protect consumers !rome#orbitant or unreasonable pricin' as *ell as temper corporate 'reed b controllin' the


monopol oer the 'oods or serices that the proide to the 'eneral public% The sub(ectre'ulation di!!ers there!rom in that


30/87

!rom, price control or rate o! return on inestment control la*s *hich are traditionall

re'arded as police po*er measures% These la*s 'enerall re'ulate public utilities or

industriesenterprises imbued *ith public interest in order to protect consumers !rome#orbitant or unreasonable pricin' as *ell as temper corporate 'reed b controllin' the




31/87

non"!ranchisees cannot be re'ulated peranently, and there is no such la* re'ulatin'

their pro!its permanentl,P119it is assumin' *hat it ou'ht to proe% irst, there arela*s

*hich, in e!!ect, permanentl re'ulate pro!its or income'ross sales o! establishments*ithout !ranchises, and 925 is one such la*% nd, second, Con'ress "anre'ulate

such pro!its or income'ross sales because, as preiousl noted, there is nothin' in the

Constitution to preent it !rom doin' so% Lere, a'ain, it must be emphasi$ed thatpetitioners !ailed to present an proo! to sho* that the e!!ects o! the assailed la* on

their operations has been unreasonable, oppressie or con!iscator%

Thepermanentre'ulation o! pro!its or income'ross sales o! business establishments,

een those *ithout !ranchises, is not as uncommon as the Dissent depicts it to be%

or instance, the minimum *a'e la* allo*s the State to set the minimum *a'e o!emploees in a 'ien re'ion or 'eo'raphical area% ecause o! the added labor costs

arisin' !rom the minimum *a'e, a permanent reduction o! pro!its or income'ross sales

*ould result, assumin' that the emploer does not increase the prices o! his 'oods or

serices% To illustrate, suppose it costs a compan -5%00 to produce a product and it sellsthe same at -10%00 *ith a 50? pro!it mar'in% /ater, the State increases the minimum

*a'e% s a result, the compan incurs 'reater labor costs so that it no* costs -%00 toproduce the same product% The pro!it per product o! the compan *ould be reduced to

-3%00 *ith a pro!it mar'in o! 30?% The net e!!ect *ould be the same as in the earlier

e#ample o! 'rantin' a 20? senior citi$en discount% s can be seen, the minimum *a'ela* could, li)e*ise, lead to a permanent reduction o! pro!its% Does this mean that the

minimum *a'e la* should, li)e*ise, be declared unconstitutional on the mere plea that

it results in a permanent reduction o! pro!itsE Ta)in' it a step !urther, suppose the

compan decides to increase the price o! its product in order to o!!set the e!!ects o! theincrease in labor costM does this mean that the minimum *a'e la*, !ollo*in' the

reasonin' o! the Dissent, is unconstitutional because the consumin' public is e!!ectiel

made to subsidi$e the *a'e o! a 'roup o! laborers, i%e%, minimum *a'e earnersE

The same reasonin' can be adopted relatie to the e#amples cited b the Dissent *hich,

accordin' to it, are alid police po*er re'ulations% rticle 15 o! the /abor Code,Sections 19 and 18 o! the Social Securit /a*, and Section o! the -a'"..F und /a*

*ould e!!ectiel increase the labor cost o! a business establishment% This *ould, in

turn, be inte'rated as part o! the cost o! its 'oods or serices% 'ain, i! the establishment

does not increase its prices, the net e!!ect *ould be a permanent reduction in its pro!itsor income'ross sales% ollo*in' the reasonin' o! the Dissent that Oan !orm o!

peranentta)in' o! priate propert


32/87

income'ross sales%123.! the Court *ere to sustain the DissentRs theor, then a *holesale

nulli!ication o! such measures *ould ineitabl result% The police po*er o! the State and

the social (ustice proisions o! the Constitution *ould, thus, be rendered nu'ator%

There is nothin' sacrosanct about pro!its or income'ross sales% This, *e made clear in

Carlos !uperdrug Corporation:124

-olice po*er as an attribute to promote the common 'ood *ould be diluted

considerabl i! on the mere plea o! petitioners that the *ill su!!er loss o! earnin's and

capital, the uestioned proision is inalidated% oreoer, in the absence o! eidencedemonstratin' the alle'ed con!iscator e!!ect o! the proision in uestion, there is no

basis !or its nulli!ication in ie* o! the presumption o! alidit *hich eer la* has in

its !aor%

# # #

The Court is not obliious o! the retail side o! the pharmaceutical industr and the

competitie pricin' component o! the business% ;hile the Constitution protects propertri'hts, petitioners must accept the realities o! business and the State, in the e#ercise o!

police po*er, can interene in the operations o! a business *hich ma result in animpairment o! propert ri'hts in the process%

oreoer, the ri'ht to propert has a social dimension% ;hile rticle ... o! theConstitution proides the precept !or the protection o! propert, arious la*s and

(urisprudence, particularl on a'rarian re!orm and the re'ulation o! contracts and public

utilities, continuousl sere as a reminder that the ri'ht to propert can be relinuished

upon the command o! the State !or the promotion o! public 'ood%

Indeniabl, the success o! the senior citi$ens pro'ram rests lar'el on the support

imparted b petitioners and the other priate establishments concerned% This bein' thecase, the means emploed in ino)in' the actie participation o! the priate sector, in

order to achiee the purpose or ob(ectie o! the la*, is reasonabl and directl related%

;ithout su!!icient proo! that Section 4


33/87

?>)#)96#),the -etition is hereb 14SM4SS)1!or lac) o! merit% chanoblesirtual/a*librar

S6 6#1)#)1+

!ereno, C.(., Abad, *illarama, (r., Perez, 'endoza, Reyes, andPerlas+ernabe, ((.,

concur%Carpio, (., see dissentin' opinion%

*elas"o, (r., ersamin, andLeonen, ((., see concurrin' opinion%

Leonardo+De Castro, (., . certi! that(% De Castro le!t her ote concurrin' o! ponenciao!(.Del Castillo%

rion, (., no part%

Peralta, (., . certi! that(% -eralta le!t his ote concurrin' o! ponencia o!(% Del Castillo%

,ndnotes:

1Cordillera road Coalition v. Commission on Audit, 260 -hil% 528, 535 SG.> C.T.JGS, ITLG

GD.F G-I/.C CT >% 432, S GDGD, >TLG;.SG H>;

S O CT T> ..JG TLG C>T.IT.> > SG.> C.T.JGS T>T.> I./D.F, FT GG.TS D S-GC./ -.&./GFGS D >

>TLG -I->SGS%P


34/87

9Rollo, p% 392%

10.d% at 383%

11.d% at 401"420%

12Supra note 5%

13Rollo, pp% 402"403%

14553 -hil% 120


35/87

28.d% at 363"364%

29.d% at 359"363%

30

.d% at 368"30%

31.d% at 364"368%

32-eneral v. rro, F%% o% 191560, arch 29, 2011, 646 SC 56, 5%

33Republi" /ele"ommuni"ations 0oldings, In". v. !antiago, F%% o% 140338, u'ust ,

200, 529 SC 232, 242%

34Aba1ada -uro Party List v. Purisima, F%% o% 16615, u'ust 14, 2008, 562 SC

251, 20%

35Supra note 14%

36.d% at 128"14%

3Supra note 5%

38Supra note 14%

39Supra note 5%

40Supra note 14%

41Supra note 5%

42.d% at 335"33%

43Supra note 14%

44.d% at 128"130%

45Supra note 14%

46Supra note 5%

4Supra note 14%

48Supra note 5%

49.d%


36/87

50.d%

51Supra note 14%

52

.d%

53.d%

54.d%

55.d%

56.d%

5Supra note 5%

58-ero"i v. Department of )nergy, 554 -hil% 563, 59


37/87

0.d% at 420%

1National Power Corporation v. -utierrez, 21 -hil% 1


38/87

86.d%

8as"o v. Pilippine Amusements and -aming Corporation, 24 -hil% 323, 335


39/87

105This merel illustrates ho* a compan can ad(ust its prices to recoup or miti'ate an

possible reduction o! pro!its or income'ross sales under the operation o! the assailed

la*% Lo*eer, to be more accurate, i! *ere to raise the price o! his products to -11%11a piece, he *ould not onl retain his preious income'ross sales o! -20%00 but *ould

be better o!! because he *ould be able to claim a ta# deduction euialent to the 20?

discount he 'ae to %

106Dissentin' >pinion, p% 14%

10'ar"os v. 'anglapus, 258 -hil% 49, 504


40/87

political po*er !or the common 'ood%

To this end, the State shall re'ulate the acuisition, o*nership, use, and disposition o!propert and its increments%

118

.d%


120-arenthetical comment supplied%


122ccordin' to the Dissent, these statutoril mandated emploee bene!its are alid

police po*er measures because the emploer is deemed !ull compensated there!or as

the !orm part o! the emploeeRs le'islated *a'e%

The Dissent con!uses police po*er *ith eminent domain%

.n police po*er, no compensation is reuired, and it is not necessar, as the Dissent

mista)enl assumes, to sho* that the emploer is deemed !ull compensated in order

!or the statutoril mandated bene!its to be a alid e#ercise o! police po*er% .t isimmaterial *hether the emploer is deemed !ull compensated because the (usti!ication

!or these statutoril mandated bene!its is the oerridin' State interest to protect and

uphold the *el!are o! emploees% This State interest is principall rooted in the

historical abuses su!!ered b emploees *hen emploers solel determined the termsand conditions o! emploment% urther, the direct or incidental bene!it deried b the

emploer


41/87

123See De /eon and De /eon, 7r%,Pilippine Constitutional Law9 Prin"iples and Cases

*ol. 5, at 61"63


42/87

documentation and to the proisions o! the ational .nternal eenue Code, as

amended%


43/87

discounts so 'ranted% The establishment shoulders the remainin' portion o! the 'ranted

discounts%4


44/87

e#ercise o! police po*er or eminent domain%

The sole issue, accordin' to the CourtRs decision in Central Luzon Drug Corporation,*as *hether a priate establishment ma claim the cost o! the 20? discount 'ranted to

senior citi$ens as a ta# credit een thou'h an establishment operates at a loss% Lo*eer,

a readin' o! the decision sho*s that petitioner raised the issue o! O(Dhether the Courtof &ppeals erred in holding that respondent ay clai the 20% sales discount as a

tax credit instead of as a tax deduction fro gross incoe or gross sales+P9.n that

case, the . erroneousl treated the 20? discount as a ta# deduction under Sections 2%iand 4 o! eenue e'ulations o% 2"94


45/87

la*s are also entitled to protection% The social (ustice consecrated in our @CAonstitution

@isA not intended to ta)e a*a ri'hts !rom a person and 'ie them to another *ho is not

entitled thereto%P or this reason, a (ust compensation !or income that is ta)en a*a!rom respondent becomes necessar% .t is in the ta& "reditthat our le'islators !ind

support to reali$e social (ustice, and no administratie bod can alter that !act%

To put it di!!erentl, a priate establishment that merel brea)s een Q *ithout thediscounts et Q *ill surel start to incur losses because o! such discounts% The same

e!!ect is e#pected i! its mar)"up is less than 20 percent, and i! all its sales come !rom

retail purchases b senior citi$ens% side !rom the obseration *e hae alread raisedearlier, it *ill also be 'rossl un!air to an establishment i! the discounts *ill be treated

merel as deductions !rom either itsgross in"omeor itsgross sales% >peratin' at a loss

throu'h no !ault o! its o*n, it *ill reali$e that the ta& "reditlimitation under 2"94 is

inutile, i! not improper% ;orse, pro!it"'eneratin' businesses *ill be put in a betterposition i! the aail themseles o! ta& "reditsdenied those that are losin', because no

ta#es are due !rom the latter%10


46/87

buildin's and propert used !or the purpose o! iolatin' la*s prohibitin' the

manu!acture and sale o! into#icatin' liuorsM and all cases in *hich the propert itsel!

has become a nuisance and dan'erous and detrimental to the public health, morals and'eneral *el!are o! the state% .n all o! such cases, and in man more *hich mi'ht be

cited, the destruction o! the propert is permitted in the e#ercise o! the police po*er o!

the state% ut it must !irst be established that such propert *as used as the instrument!or the iolation o! a alid e#istin' la*% n /ibert,P 28, 29=

;ithout !urther attemptin' to de!ine *hat are the peculiar sub(ects or limits o! the police

po*er, it ma sa!el be a!!irmed, that eer la* !or the restraint and punishment o!

crimes, !or the preseration o! the public peace, health, and morals, must come *ithinthis cate'or% ut the state, *hen proidin' b le'islation !or the protection o! the

public health, the public morals, or the public sa!et, is sub(ect to and is controlled b

the paramount authorit o! the constitution o! the state, and *ill not be permitted to

iolate ri'hts secured or 'uaranteed b that instrument or inter!ere *ith the e#ecution o!the po*ers and ri'hts 'uaranteed to the people under their la* + the constitution%

rdinance o%

6118, S"64, o! the Nue$on Cit Council, thus:;e start the discussion *ith a restatement o! certain basic principles% >ccupin' the

!ore!ront in the bill o! ri'hts is the proision *hich states that Wno person shall be

depried o! li!e, libert or propert *ithout due process o! la*%


47/87

ein' coe#tensie *ith sel!"preseration and surial itsel!, it is the most positie and

actie o! all 'oernmental processes, the most essential insistent and illimitable%

Gspeciall it is so under the modern democratic !rame*or) *here the demands o!societ and nations hae multiplied to almost unima'inable proportions% The !ield and

scope o! police po*er hae become almost boundless, (ust as the !ields o! public interest

and public *el!are hae become almost all embracin' and hae transcended human!oresi'ht% Since the Court cannot !oresee the needs and demands o! public interest and

*el!are, the cannot delimit be!orehand the e#tent or scope o! the police po*er b

*hich and throu'h *hich the state see)s to attain or achiee public interest and *el!are%ence, a sharp


48/87

distinction ust 3e ade 3et(een regulation and taing+

;hen title to propert is trans!erred to the e#propriatin' authorit, there is a clear caseo! compensable ta)in'% Lo*eer, as *ill be seen, it is a settled rule that neither

acuisition o! title nor total destruction o! alue is essential to ta)in'% .t is in cases

*here title remains *ith the priate o*ner that inuir must be made *hether theimpairment o! propert ri'ht is merel re'ulation or alread amounts to compensable

ta)in'%

&n analysis of existing Aurisprudence yields the rule that (hen a property interest

is appropriated and applied to soe pu3lic purpose, there is copensa3le taing+

?here, ho(eBer, a property interest is erely restricted 3ecause continued

unrestricted use (ould 3e inAurious to pu3lic (elfare or (here property is

destroyed 3ecause continued existence of the property (ould 3e inAurious to pu3lic

interest, there is no copensa3le taing+20


49/87

deduction scheme cannot be considered real, substantial, !ull and ample compensation%

.n Carlos !uperdrug Corporation, the Court conceded that OtDhe peranent reduction

in priBate esta3lishentsD total reBenue is a forced su3sidy corresponding to the

taing of priBate property for pu3lic use or 3enefit %P24The Court ruled that OtDhisconstitutes copensa3le taing for (hich petitioners (ould ordinarily 3ecoe

entitled to a Aust copensation%P25

Despite these pronouncements admittin' there *ascompensable ta)in', the Court still proceeded to rule that Kthe State, in prooting

the health and (elfare of a special group of citizens, can ipose upon priBate

esta3lishents the 3urden of partly su3sidizing a goBernent progra+L

There ma be alid instances *hen the State can impose burdens on priate

establishments that e!!ectiel subsidi$e a 'oernment pro'ram% Lo*eer, the moment

a constitutional threshold is crossed + *hen the burden constitutes a ta)in' o! priatepropert !or public use + then the burden becomes an e#ercise o! eminent domain !or

*hich (ust compensation is reuired%

n e#ample o! a burden that can be alidl imposed on priate establishments is thereuirement under rticle 15 o! the /abor Code that emploers *ith a certain number

o! emploees should maintain a clinic and emplo a re'istered nurse, a phsician, and adentist, dependin' on the number o! emploees% rticle 15 o! the /abor Code proides:

rt% 15% Gmer'enc medical and dental serices% + .t shall be the dut o! eer

emploer to !urnish his emploees in an localit *ith !ree medical and dentalattendance and !acilities consistin' o!:

a% The serices o! a !ull"time re'istered nurse *hen the number o! emploees

e#ceeds !i!t


50/87

clinic and sta!! is part o! the legislated (ages!or *hich the priate emploer is fullycopensatedb the serices o! the emploees% .n the case o! the senior citi$enRs

discount, the priate establishment is compensated onl in the euialent amount o!32? o! the mandator discount% There are no serices rendered b the senior citi$ens, or

an other !orm o! pament, that could ma)e up !or the 68? balance o! the mandator

discount% Clearl, the priate establishments cannot recoer the !ull amount o! thediscount the 'ie and thus there is ta)in' to the e#tent o! the amount that cannot be

recoered%

nother e#ample o! a burden that can be alidl imposed on a priate establishment is

the reuirement under Section 19 in relation to Section 18 o! the Social Securit /a*26

and Section o! the -a'"..F und2!or the emploer to contribute a certain amount to

!und the bene!its o! its emploees% The amounts contributed b priate emploers !ormpart o! the legislated (ageso! emploees% The priate emploers are deemed fullycopensated!or these amounts b the serices rendered b the emploees%

.n the present case, the priate establishments are onl compensated about 32? o! the20? discount 'ranted to senior citi$ens% The shoulder 68? o! the discount the are

!orced to 'ie to senior citi$ens% The Court should correct this situation as it clearliolates Section 9, rticle ... o! the Constitution *hich proides that O@pAriate propert

shall not be ta)en !or public use *ithout (ust compensation%P Carlos !uperdrug

Corporationshould be abandoned b this Court and Central Luzon Drug Corporationre"a!!irmed%

Carlos !uperdrug Corporationadmitted that the permanent reduction in the total

reenues o! priate establishments is a Ocopensa3le taing for (hich petitioners

(ould ordinarily 3ecoe entitled to a Aust copensation%P28Lo*eer, Carlos

!uperdrug Corporationconsidered that there *as su!!icient basis !or ta)in' *ithout

compensation b ino)in' the e#ercise o! police po*er o! the State% .n doin' so, theCourt !ailed to consider that a peranentta)in' o! propert !or public use is an

e#ercise o! eminent domain !or *hich the 'oernment must pa compensation% Gminent

domain is a sub"class o! police po*er and its e#ercise is sub(ect to certain conditions,that is, the ta)in' o! propert !or public use and pament o! (ust compensation%

.t is incorrect to sa that priate establishments onl su!!er a minimal loss *hen the

'ie a 20? discount to senior citi$ens% Inder %% 925, the 20? discount applies toOall esta3lishentsrelatie to the utili$ation o! serices in hotels and similar lod'in'

establishment, restaurants and recreation centers, and purchase o! medicines in all

establishments !or the e#clusie use or en(oment o! senior citi$ens, includin' !uneraland burial serices !or the death o! senior citi$ensMP29Oadmission !ees char'ed b

theaters, cinema houses and concert halls, circuses, carnials, and other similar places o!

culture, leisure and amusement !or the e#clusie use or en(oment o! senior citi$ensMP30Omedical and dental serices, and dia'nostic and laborator !ees proided under Section

4


51/87

domestic air and sea trael !or the e#clusie use or en(oment o! senior citi$ensMP 32and

Opublic rail*as, s)*as and bus !are !or the e#clusie use and en(oment o! senior

citi$ens%P33The 20% discount cannot 3e considered inial 3ecause not all priBate

esta3lishents ae a 20% argin of profit+ *esides, on its face alone, a 20%

andatory discount 3ased on the gross selling price is huge+ The 20% andatory

discount is ore than the 2% @alue &dded Tax, itself not an insignificant aount+

The ma(orit opinion states that the 'rant o! 20? discount to senior citi$ens is a

re'ulation o! businesses similar to the re'ulation o! public utilities and businessesimbued *ith public interest% The ma(orit opinion states:

The sub(ect re'ulation ma be said to be similar to, but *ith substantial distinctions

!rom, price control or rate o! return on inestment control la*s *hich are traditionall

re'arded as police po*er measures% These la*s 'enerall re'ulate public utilities orindustriesenterprises imbued *ith public interest in order to protect consumers !rom

e#orbitant or unreasonable pricin' as *ell as temper corporate 'reed b controllin' the

rate or return on inestment o! these corporations considerin' that the hae a



52/87

teporarilylimit or suspend business actiities% >ne e#ample is the t*o"da liuor ban

durin' elections under rticle 261 o! the >mnibus Glection Code but this, a'ain, is onl

for a liited period% This is a alid e#ercise o! police po*er o! the State%

Lo*eer, an !orm o! peranentta)in' o! priate propert is an e#ercise o! eminent

domain that reuires the State to pa (ust compensation% The police po(er to regulate3usiness cannot negate another proBision of the Constitution lie the einent

doain clause, (hich reFuires Aust copensation to 3e paid for the taing of

priBate property for pu3lic use+ The State has the po(er to regulate the conduct of

the 3usiness of priBate esta3lishents as long as the regulation is reasona3le, 3ut

(hen the regulation aounts to peranent taing of priBate property for pu3lic

use, there ust 3e Aust copensation 3ecause the regulation no( reaches the leBel

of einent doain+

The e#planation b the ma(orit that priate establishments can al*as increase their

prices to recoer the mandator discount *ill onl encoura'e priate establishments to

ad(ust their prices up*ards to the pre(udice o! customers *ho do not en(o the 20?discount% .t *as li)e*ise su''ested that i! a compan increases its prices, despite the

application o! the 20? discount, the establishment becomes more pro!itable than it *asbe!ore the implementation o! %% 432% Such an economic (usti!ication is sel!"

de!eatin', !or more consumers *ill su!!er !rom the price increase than *ill bene!it !rom

the 20? discount% Gen then, such abilit to increase prices cannot le'all alidate aiolation o! the eminent domain clause%

inall, the 20? discount 'ranted to senior citi$ens is not per se unreasonable% .t is the

proision that the 20? discount ma be claimed b priate establishments as ta#deduction, and no lon'er as ta# credit, that is oppressie and con!iscator%

-rior to its amendment, Section 4 o! %% 432 reads:SGC% 4%Privileges for te !enior Citizens% " The senior citi$ens shall be entitled to the

!ollo*in':


53/87

senior citi$ensM

# # #

The establishment ma claim the discounts 'ranted under

sae taxa3le year that the discount is granted+-roided, !urther, That the total

amount o! the claimed ta# deduction net o! alue added ta# i! applicable, shall beincluded in their 'ross sales receipts !or ta# purposes and shall be sub(ect to proper

documentation and to the proisions o! the ational .nternal eenue Code, as

amended% ther -urposes%

2n ct Frantin' dditional ene!its and -riile'es to Senior Citi$ens mendin' !or

the -urpose epublic ct o% 432, >ther*ise Hno*n as On ct to a#imi$e theContribution o! Senior Citi$ens to ation uildin', Frant ene!its and Special

-riile'es and or >ther -urposes%P .t *as !urther amended b %% o% 9994, or the

OG#panded Senior Citi$ens ct o! 2010%

3553 -hil% 120


54/87

8.d%

9.d% at 318%

10

.d% at 335"33% Citations omitted%

11.n !ta. Lu"ia Realty and Development, In". v. Cabrigas, 411 -hil% 369, 382"383


55/87

2epublic ct o% 969, other*ise )no*n as the Lome Deelopment utual und

/a* o! 2009%

28Supra note 3, at 130%

29Section 4

)berle v. 'i"igan232 I%S% 00 @1914A,People v. 'ens"ing, 18 %K%S%, 8, 10 /%%%,625 @190A%

3See Co"a+Cola ottlers Pils., In". v. City of 'anila, 526 -hil% 249 CI.F >-..>

&G/SC>, 7%,(.:

The issue in the present case hin'es upon the conseuence o! a reclassi!ication o! a

mandated discount as a deduction !rom the 'ross income instead o! a ta# credit

deductible !rom the ta# liabilit o! a!!ected ta#paers% .n particular, the petitionuestions the constitutionalit o! Section 4 o! epublic ct o%


56/87

.ndeed, the practice o! allo*in' ta)in' o! priate propert *ithout (ust compensation is

an abhorrent polic% Lo*eer, . do not a'ree that such polic underpins Sec% 4 o!

925% ather, it is m humble opinion that Sec% 4 o! 925 is no more than are'ulation o! the ri'ht to pro!its o! certain ta#paers in order to bene!it a si'ni!icant

sector o! societ% .t is, thus, a alid e#ercise o! the police po*er o! the State%

The ri'ht to pro!it, as distin'uished !rom pro!it itsel!, is not sub(ect to e#propriation as it

is o! a mercurial character that denies the possibilit o! ta)in' !or a public purpose% .t is

a ri'ht solel *ithin the discretion o! the ta#paers that cannot be appropriated b the'oernment% The mandated 20? discount !or the bene!it o! senior citi$ens is not a

propert alread ested *ith the ta#paer be!ore the sale o! the product or serice% Such

percenta'e o! the sale price ma include both the mar)up on the cost o! the 'ood or

serice and the income to be 'ained !rom the sale% ;ithout the sale and correspondin'purchase b senior citi$ens, there is no 'ain deried b the ta#paer% This nebulous

nature o! the !inancial 'ain o! the seller deters the acuisition b the state o! the

OdomainP or o*nership o! the ri'ht to such !inancial 'ain throu'h e#propriation% t best,

the State is empo*ered to regulate this rightto the acFuisition of this financial gainto bene!it senior citi$ens b ensurin' that the 'ood or serice be sold to them at a price

20? less than the re'ular sellin' price%

Time and a'ain, this Court has reco'ni$ed the !undamental police po*er o! the State to

re'ulate the e#ercise o! arious ri'hts holdin' that Oeuall !undamental *ith the priateri'ht is that o! the public to re'ulate it in the common interest%P1This Court has, !or

instance, reco'ni$ed the po*er o! the State to re'ulate and temper the ri'ht o!

emploers to dismiss their emploees%2Similarl, ;e hae sustained the StateRs po*er

to re'ulate the ri'ht to acuire and possess arms%3Contractual ri'hts are also sub(ect tothe re'ulator police po*er o! the State%4The ri'ht to pro!it is not immune !rom this

re'ulator po*er o! the State intended to promote the common 'ood and the attainment

o! social (ustice% s earl as the !irst hal! o! the past centur, this Court has re(ected thedoctrine o! laissez faireas an a#iom o! economic theor and has upheld the po*er o! the

State to re'ulate businesses een to the e#tent o! limitin' their pro!it%5Thus, the

imposition o! price control is reco'ni$ed as a alid e#ercise o! police po*er that doesnot 'ie businessmen the ri'ht to be compensated !or the amount o! *hat the could

hae earned considerin' the demand o! the mar)et% The e!!ect o! 925 is not

dissimilar to a price control la*%

The !act that the State has not !i#ed an amount to be deducted !rom the sellin' price o!

certain 'oods and serices to senior citi$ens indicates that 925 is a re'ulator la*

under the police po*er o! the State% .t is an ac)no*led'ment that proprietors can and*ill !actor in the potential deduction o! 20? o! the price 'ien to some o! their

customers, i%e%, the senior citi$ens, in the oerall pricin' strate' o! their products and

serices% 925 has to be sure not obliterated the ri'ht o! ta#paers to pro!it nordiested them o! pro!its alread earnedM it simpl re'ulated the ri'ht to the attainment o!

these pro!its% The en!orcement o! the 20? discount in !aor o! senior citi$ens does not,

there!ore, parta)e the nature o! Ota)in'P in the conte#t o! eminent domain% s such,

proprietors li)e petitioners cannot insist that the are entitled to a peso"!or"peso


57/87

compensation !or complin' *ith the alid re'ulation embodied in 925 that

restricts their ri'ht to pro!it%

s it is a re'ulator la*, not a la* implementin' the po*er o! eminent domain, the

assertion that the use o! the 20? discount as a deduction ne'ates its role as a O(ust

compensationP is mislaid and irreleant% .n the !irst place, as 925 is a re'ulatorla*, the allo*ance to use the 20? discount, as a deduction !rom the 'ross income !or

purposes o! computin' the income ta# paable to the 'oernment, is not intended as

compensation% ather, it is simpl a reco'nition o! the !act that no income *as reali$edb the ta#paer to the e#tent o! the 20? o! the sellin' price b irtue o! the discount

'ien to senior citi$ens% e that as it ma, the lo'ical result is that no ta# on income can

be imposed b the State% .n other *ords, b !orcin' some businesses to 'ie a 20?

discount to senior citi$ens, the 'oernment is li)e*ise !ore'oin' the ta#es it could haeother*ise earned !rom the earnin's pertinent to the 20? discount% This is the real import

o! Sec% 4 o! 925% s 925 does not sanction an ta)in' o! priate propert, the

re'ulator la* does not reuire the pament o! compensation%

inall, it must be noted that the issue o! alidit o! Sec% 4 o! 925 has alread been

settled% !ter ears o! implementation o! the la*, economic pro'ress has not been put toa halt% .n !act, it has not been alle'ed that a business establishment commonl

patroni$ed b senior citi$ens and coered b 925 had shut do*n because o! the

mandate to 'ie the 20? discount and the supposed de!icient OcompensationP underSec% 4 o! 925% This clearl sho*s that the re'ulation made in the sub(ect la* is a

minimal encumbrance to businesses that must not be emploed to oerthro* an

other*ise reasonable, lo'ical, and (ust instrument o! the social (ustice polic o! our

Constitution%

,ndnotes:

1Pilippine Ameri"an Life Insuran"e Company v. Auditor -eneral, o% /"19255,

7anuar 18, 1968M citin'Nebbia v. New >or1, 291 I%S% 502, 523, 8 /% ed% 940, 948"949%

2-elmart Industries, In". v. National Labo

Documents

SC Upholds Legality of Senior Citizens 20% as tax deductions