Case Digest: ABAKADA Guro Party List v. Purisima, G.R. No. 166715, August 14, 2008

Taxation | Constitutional Limitation: Equal Protection of the Laws

Facts:

• RA 9335 (Attrition Act of 2005) was enacted to optimize the revenue-generation capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). 
• The law intends to encourage BIR and BOC officials and employees to exceed their revenue targets by providing a system of rewards and sanctions through the creation of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation Board (Board).
• The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for the year, as determined by the Development Budget and Coordinating Committee (DBCC). Any incentive or reward is taken from the fund and allocated to the BIR and the BOC in proportion to their contribution in the excess collection of the targeted amount of tax revenue.
• Petitioners, invoking their right as taxpayers filed a petition challenging the constitutionality of RA 9335, a tax reform legislation.

Issue: Whether limiting the scope of the system of rewards and incentives only to officials and employees of the BIR and the BOC violates the constitutional guarantee of equal protection. NO

Held:

Equality guaranteed under the equal protection clause is equality under the same conditions and among persons similarly situated; it is equality among equals, not similarity of treatment of persons who are classified based on substantial differences in relation to the object to be accomplished.

When things or persons are different in fact or circumstance, they may be treated in law differently. In Victoriano v. Elizalde Rope Workers' Union, this Court declared:

The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the State. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. It does not prohibit legislation which is limited either in the object to which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. The very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality. All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for real differences, that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary.

In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not necessary that the classification be based on scientific or marked differences of things or in their relation. Neither is it necessary that the classification be made with mathematical nicety. Hence, legislative classification may in many cases properly rest on narrow distinctions, for the equal protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear.

The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable foundation or rational basis and not arbitrary. With respect to RA 9335, its expressed public policy is the optimization of the revenue-generation capability and collection of the BIR and the BOC. Since the subject of the law is the revenue- generation capability and collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should logically pertain to the said agencies. Moreover, the law concerns only the BIR and the BOC because they have the common distinct primary function of generating revenues for the national government through the collection of taxes, customs duties, fees and charges.

The BIR performs the following functions:

Sec. 18.  The Bureau of Internal Revenue. - The Bureau of Internal Revenue, which shall be headed by and subject to the supervision and control of the Commissioner of Internal Revenue, who shall be appointed by the President upon the recommendation of the Secretary [of the DOF], shall have the following functions:

1. Assess and collect all taxes, fees and charges and account for all revenues collected;
2. Exercise duly delegated police powers for the proper performance of its functions and duties;
3. Prevent and prosecute tax evasions and all other illegal economic activities;
4. Exercise supervision and control over its constituent and subordinate units; and
5. Perform such other functions as may be provided by law.

  xxx xxx xxx (emphasis supplied)

On the other hand, the BOC has the following functions:

Sec. 23. The Bureau of Customs.– The Bureau of Customs which shall be headed and subject to the management and control of the Commissioner of Customs, who shall be appointed by the President upon the recommendation of the Secretary[of the DOF] and hereinafter referred to as Commissioner, shall have the following functions:

1. Collect custom duties, taxes and the corresponding fees, charges and penalties;
2. Account for all customs revenues collected;
3. Exercise police authority for the enforcement of tariff and customs laws;
4. Prevent and suppress smuggling, pilferage and all other economic frauds within all ports of entry;
5. Supervise and control exports, imports, foreign mails and the clearance of vessels and aircrafts in all ports of entry;
6. Administer all legal requirements that are appropriate;
7. Prevent and prosecute smuggling and other illegal activities in all ports under its jurisdiction;
8. Exercise supervision and control over its constituent units;
9. Perform such other functions as may be provided by law.

xxx xxx xxx (emphasis supplied)

Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of being the instrumentalities through which the State exercises one of its great inherent functions—taxation. Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence, the classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands of equal protection.

Ratio:

The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different.