consti_Tio vs Videogram Regulatory Board.doc

7/29/2019 consti_Tio vs Videogram Regulatory Board.doc

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TIO vs VIDEOGRAM REGULATORY BOARDG.R. No. L-75697 June 18, 1987

FACTS: A petition filed by petitioner on his ownbehalf and purportedly on behalf of other videogramoperators adversely affected. It assails theconstitutionality of Presidential Decree No. 1987entitled "An Act Creating the Videogram RegulatoryBoard" with broad powers to regulate and supervisethe videogram industry. On November 5, 1985,Presidential Decree No. 1994 amended the NationalInternal Revenue Code providing:

SEC. 134. Video Tapes. There shall becollected on each processed video-tapecassette, ready for playback, regardless oflength, an annual tax of five pesos; Provided,That locally manufactured or imported blankvideo tapes shall be subject to sales tax.

Section 10. Tax on Sale, Lease or Dispositionof Videograms. Notwithstanding anyprovision of law to the contrary, the provinceshall collect a tax of thirty percent (30%) ofthe purchase price or rental rate, as the casemay be, for every sale, lease or disposition ofa videogram containing a reproduction of anymotion picture or audiovisual program.

Petitioner contended that the tax imposed is harsh,confiscatory, oppressive and/or in unlawful restraintof trade in violation of the due process clause of theConstitution.

ISSUE: Whether or not the tax imposed by theDECREE is a valid exercise of police power

HELD: Yes. Taxation has been made the implement ofthe state's police power. The levy of the 30% tax isfor a public purpose. It was imposed primarily toanswer the need for regulating the video industry,particularly because of the rampant film piracy, theflagrant violation of intellectual property rights, andthe proliferation of pornographic video tapes. Andwhile it was also an objective of the DECREE toprotect the movie industry, the tax remains a validimposition.


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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-75697 June 18, 1987

VALENTIN TIO doing business under the nameand style of OMI ENTERPRISES, petitioner,vs.VIDEOGRAM REGULATORY BOARD, MINISTER OFFINANCE, METRO MANILA COMMISSION, CITYMAYOR and CITY TREASURER OFMANILA, respondents.

Nelson Y. Ng for petitioner.

The City Legal Officer for respondents City Mayor andCity Treasurer.

MELENCIO-HERRERA, J.:

This petition was filed on September 1, 1986 bypetitioner on his own behalf and purportedly onbehalf of other videogram operators adverselyaffected. It assails the constitutionality of PresidentialDecree No. 1987 entitled "An Act Creating theVideogram Regulatory Board" with broad powers toregulate and supervise the videogram industry(hereinafter briefly referred to as the BOARD). TheDecree was promulgated on October 5, 1985 andtook effect on April 10, 1986, fifteen (15) days aftercompletion of its publication in the Official Gazette.

On November 5, 1985, a month after thepromulgation of the abovementioned decree,Presidential Decree No. 1994 amended the NationalInternal Revenue Code providing, inter alia:

SEC. 134. Video Tapes. There shallbe collected on each processedvideo-tape cassette, ready forplayback, regardless of length, anannual tax of five pesos; Provided,That locally manufactured orimported blank video tapes shall besubject to sales tax.

On October 23, 1986, the Greater Manila TheatersAssociation, Integrated Movie Producers, Importersand Distributors Association of the Philippines, andPhilippine Motion Pictures Producers Association,hereinafter collectively referred to as the Intervenors,were permitted by the Court to intervene in the case,over petitioner's opposition, upon the allegations thatintervention was necessary for the completeprotection of their rights and that their "survival andvery existence is threatened by the unregulatedproliferation of film piracy." The Intervenors werethereafter allowed to file their Comment inIntervention.

The rationale behind the enactment of the DECREE, isset out in its preambular clauses as follows:

1. WHEREAS, the proliferation andunregulated circulation of videogramsincluding, among others, videotapes,discs, cassettes or any technicalimprovement or variation thereof,have greatly prejudiced theoperations of moviehouses and

theaters, and have caused a sharpdecline in theatrical attendance by atleast forty percent (40%) and atremendous drop in the collection ofsales, contractor's specific,amusement and other taxes, therebyresulting in substantial lossesestimated at P450 Million annually ingovernment revenues;

2. WHEREAS, videogram(s)establishments collectively earnaround P600 Million per annum fromrentals, sales and disposition ofvideograms, and such earnings havenot been subjected to tax, therebydepriving the Government ofapproximately P180 Million in taxeseach year;

3. WHEREAS, the unregulatedactivities of videogramestablishments have also affected theviability of the movie industry,particularly the more than 1,200movie houses and theatersthroughout the country, andoccasioned industry-widedisplacement and unemployment due

to the shutdown of numerousmoviehouses and theaters;

4. "WHEREAS, in order to ensurenational economic recovery, it isimperative for the Government tocreate an environment conducive togrowth and development of allbusiness industries, including themovie industry which has anaccumulated investment of about P3Billion;

5. WHEREAS, proper taxation of theactivities of videogramestablishments will not only alleviatethe dire financial condition of themovie industry upon which more than75,000 families and 500,000 workersdepend for their livelihood, but alsoprovide an additional source ofrevenue for the Government, and atthe same time rationalize theheretofore uncontrolled distribution ofvideograms;


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6. WHEREAS, the rampant andunregulated showing of obscenevideogram features constitutes aclear and present danger to the moraland spiritual well-being of the youth,and impairs the mandate of theConstitution for the State to supportthe rearing of the youth for civicefficiency and the development ofmoral character and promote theirphysical, intellectual, and social well-being;

7. WHEREAS, civic-minded citizensand groups have called for remedialmeasures to curb these blatantmalpractices which have flaunted ourcensorship and copyright laws;

8. WHEREAS, in the face of thesegrave emergencies corroding themoral values of the people andbetraying the national economicrecovery program, bold emergencymeasures must be adopted withdispatch; ... (Numbering ofparagraphs supplied).

Petitioner's attack on the constitutionality of theDECREE rests on the following grounds:

1. Section 10 thereof, which imposesa tax of 30% on the gross receiptspayable to the local government is aRIDER and the same is not germaneto the subject matter thereof;

2. The tax imposed is harsh,

confiscatory, oppressive and/or inunlawful restraint of trade in violationof the due process clause of theConstitution;

3. There is no factual nor legal basisfor the exercise by the President ofthe vast powers conferred upon himby Amendment No. 6;

4. There is undue delegation of powerand authority;

5. The Decree is an ex-post facto law;and

6. There is over regulation of thevideo industry as if it were anuisance, which it is not.

We shall consider the foregoing objectionsin seriatim.

1. The Constitutional requirement that "every billshall embrace only one subject which shall beexpressed in the title thereof" 1 is sufficiently

complied with if the title be comprehensive enough toinclude the general purpose which a statute seeks toachieve. It is not necessary that the title expresseach and every end that the statute wishes toaccomplish. The requirement is satisfied if all theparts of the statute are related, and are germane tothe subject matter expressed in the title, or as longas they are not inconsistent with or foreign to thegeneral subject and title. 2 An act having a singlegeneral subject, indicated in the title, may containany number of provisions, no matter how diversethey may be, so long as they are not inconsistentwith or foreign to the general subject, and may beconsidered in furtherance of such subject byproviding for the method and means of carrying outthe general object." 3 The rule also is that theconstitutional requirement as to the title of a billshould not be so narrowly construed as to cripple orimpede the power of legislation. 4 It should be givenpractical rather than technical construction. 5

Tested by the foregoing criteria, petitioner'scontention that the tax provision of the DECREE is arider is without merit. That section reads, inter alia:

Section 10. Tax on Sale, Lease orDisposition of Videograms. Notwithstanding any provision of lawto the contrary, the province shallcollect a tax of thirty percent (30%) othe purchase price or rental rate, asthe case may be, for every sale, leaseor disposition of a videogramcontaining a reproduction of anymotion picture or audiovisualprogram. Fifty percent (50%) of theproceeds of the tax collected shallaccrue to the province, and the otherfifty percent (50%) shall acrrue to the

municipality where the tax iscollected; PROVIDED, That inMetropolitan Manila, the tax shall beshared equally by theCity/Municipality and the MetropolitanManila Commission.

xxx xxx xxx

The foregoing provision is allied and germane to, andis reasonably necessary for the accomplishment of,the general object of the DECREE, which is theregulation of the video industry through theVideogram Regulatory Board as expressed in its title.

The tax provision is not inconsistent with, nor foreignto that general subject and title. As a tool forregulation 6 it is simply one of the regulatory andcontrol mechanisms scattered throughout theDECREE. The express purpose of the DECREE toinclude taxation of the video industry in order toregulate and rationalize the heretofore uncontrolleddistribution of videograms is evident from Preambles2 and 5, supra. Those preambles explain the motivesof the lawmaker in presenting the measure. The titleof the DECREE, which is the creation of theVideogram Regulatory Board, is comprehensiveenough to include the purposes expressed in itsPreamble and reasonably covers all its provisions. It


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is unnecessary to express all those objectives in thetitle or that the latter be an index to the body of theDECREE. 7

2. Petitioner also submits that the thirty percent(30%) tax imposed is harsh and oppressive,confiscatory, and in restraint of trade. However, it isbeyond serious question that a tax does not cease tobe valid merely because it regulates, discourages, oreven definitely deters the activities taxed. 8 The

power to impose taxes is one so unlimited in forceand so searching in extent, that the courts scarcelyventure to declare that it is subject to any restrictionswhatever, except such as rest in the discretion of theauthority which exercises it. 9 In imposing a tax, thelegislature acts upon its constituents. This is, ingeneral, a sufficient security against erroneous andoppressive taxation. 10

The tax imposed by the DECREE is not only aregulatory but also a revenue measure prompted bythe realization that earnings of videogramestablishments of around P600 million per annumhave not been subjected to tax, thereby depriving theGovernment of an additional source of revenue. It isan end-user tax, imposed on retailers for everyvideogram they make available for public viewing. Itis similar to the 30% amusement tax imposed orborne by the movie industry which the theater-owners pay to the government, but which is passedon to the entire cost of the admission ticket, thusshifting the tax burden on the buying or the viewingpublic. It is a tax that is imposed uniformly on allvideogram operators.

The levy of the 30% tax is for a public purpose. It wasimposed primarily to answer the need for regulatingthe video industry, particularly because of therampant film piracy, the flagrant violation of

intellectual property rights, and the proliferation ofpornographic video tapes. And while it was also anobjective of the DECREE to protect the movieindustry, the tax remains a valid imposition.

The public purpose of a tax maylegally exist even if the motive whichimpelled the legislature to impose thetax was to favor one industry overanother. 11

It is inherent in the power to tax thata state be free to select the subjectsof taxation, and it has beenrepeatedly held that "inequities whichresult from a singling out of oneparticular class for taxation orexemption infringe no constitutionallimitation". 12Taxation has beenmade the implement of the state'spolice power. 13

At bottom, the rate of tax is a matter betteraddressed to the taxing legislature.

3. Petitioner argues that there was no legal norfactual basis for the promulgation of the DECREE by

the former President under Amendment No. 6 of the1973 Constitution providing that "whenever in thejudgment of the President ... , there exists a graveemergency or a threat or imminence thereof, orwhenever the interim Batasang Pambansa or theregular National Assembly fails or is unable to actadequately on any matter for any reason that in hisjudgment requires immediate action, he may, inorder to meet the exigency, issue the necessarydecrees, orders, or letters of instructions, which shallform part of the law of the land."

In refutation, the Intervenors and the SolicitorGeneral's Office aver that the 8th "whereas" clausesufficiently summarizes the justification in that graveemergencies corroding the moral values of thepeople and betraying the national economic recoveryprogram necessitated bold emergency measures tobe adopted with dispatch. Whatever the reasons "inthe judgment" of the then President, considering thatthe issue of the validity of the exercise of legislativepower under the said Amendment still pendsresolution in several other cases, we reserveresolution of the question raised at the proper time.

4. Neither can it be successfully argued that theDECREE contains an undue delegation of legislativepower. The grant in Section 11 of the DECREE ofauthority to the BOARD to "solicit the directassistance of other agencies and units of thegovernment and deputize, for a fixed and limitedperiod, the heads or personnel of such agencies andunits to perform enforcement functions for the Board"is not a delegation of the power to legislate butmerely a conferment of authority or discretion as toits execution, enforcement, and implementation. "Thetrue distinction is between the delegation of power tomake the law, which necessarily involves a discretionas to what it shall be, and conferring authority or

discretion as to its execution to be exercised underand in pursuance of the law. The first cannot be done;to the latter, no valid objection can bemade." 14 Besides, in the very language of thedecree, the authority of the BOARD to solicit suchassistance is for a "fixed and limited period" with thedeputized agencies concerned being "subject to thedirection and control of the BOARD." That the grant ofsuch authority might be the source of graft andcorruption would not stigmatize the DECREE asunconstitutional. Should the eventuality occur, theaggrieved parties will not be without adequateremedy in law.

5. The DECREE is not violative of the ex postfacto principle. An ex post facto law is, among othercategories, one which "alters the legal rules ofevidence, and authorizes conviction upon less ordifferent testimony than the law required at the timeof the commission of the offense." It is petitioner'sposition that Section 15 of the DECREE in providingthat:

All videogram establishments in thePhilippines are hereby given a periodof forty-five (45) days after theeffectivity of this Decree within whichto register with and secure a permit


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from the BOARD to engage in thevideogram business and to registerwith the BOARD all their inventoriesof videograms, including videotapes,discs, cassettes or other technicalimprovements or variations thereof,before they could be sold, leased, orotherwise disposed of. Thereafter anyvideogram found in the possession ofany person engaged in the videogrambusiness without the required proof ofregistration by the BOARD, shall beprima facie evidence of violation ofthe Decree, whether the possessionof such videogram be for privateshowing and/or public exhibition.

raises immediately aprima facie evidence of violationof the DECREE when the required proof of registrationof any videogram cannot be presented and thuspartakes of the nature of an ex post facto law.

The argument is untenable. As this Court held in therecent case ofVallarta vs. Court of Appeals, et al. 15

... it is now well settled that "there isno constitutional objection to thepassage of a law providing that thepresumption of innocence may beovercome by a contrary presumptionfounded upon the experience ofhuman conduct, and enacting whatevidence shall be sufficient toovercome such presumption ofinnocence" (People vs. Mingoa 92Phil. 856 [1953] at 858-59, citing 1COOLEY, A TREATISE ON THECONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact

that when certain facts have beenproved that they shall be prima facieevidence of the existence of the guiltof the accused and shift the burden ofproof provided there be a rationalconnection between the facts provedand the ultimate facts presumed sothat the inference of the one fromproof of the others is notunreasonable and arbitrary becauseof lack of connection between the twoin common experience". 16

Applied to the challenged provision, there is no

question that there is a rational connection betweenthe fact proved, which is non-registration, and theultimate fact presumed which is violation of theDECREE, besides the fact that theprimafacie presumption of violation of the DECREEattaches only after a forty-five-day period countedfrom its effectivity and is, therefore, neitherretrospective in character.

6. We do not share petitioner's fears that the videoindustry is being over-regulated and being eased outof existence as if it were a nuisance. Being arelatively new industry, the need for its regulation

was apparent. While the underlying objective of theDECREE is to protect the moribund movie industry,there is no question that public welfare is at bottomof its enactment, considering "the unfair competitionposed by rampant film piracy; the erosion of themoral fiber of the viewing public brought about bythe availability of unclassified and unreviewed videotapes containing pornographic films and films withbrutally violent sequences; and losses in governmentrevenues due to the drop in theatrical attendance,not to mention the fact that the activities of videoestablishments are virtually untaxed since merepayment of Mayor's permit and municipal license feesare required to engage in business. 17

The enactment of the Decree since April 10, 1986 hasnot brought about the "demise" of the video industry.On the contrary, video establishments are seen tohave proliferated in many places notwithstanding the30% tax imposed.

In the last analysis, what petitioner basicallyquestions is the necessity, wisdom and expediency ofthe DECREE. These considerations, however, areprimarily and exclusively a matter of legislativeconcern.

Only congressional power orcompetence, not the wisdom of theaction taken, may be the basis fordeclaring a statute invalid. This is asit ought to be. The principle ofseparation of powers has in the mainwisely allocated the respectiveauthority of each department andconfined its jurisdiction to such asphere. There would then be intrusionnot allowable under the Constitutionif on a matter left to the discretion of

a coordinate branch, the judiciarywould substitute its own. If there beadherence to the rule of law, as thereought to be, the last offender shouldbe courts of justice, to which rightlylitigants submit their controversyprecisely to maintain unimpaired thesupremacy of legal norms andprescriptions. The attack on thevalidity of the challenged provisionlikewise insofar as there may beobjections, even if valid and cogenton its wisdom cannot besustained. 18

In fine, petitioner has not overcome the presumptionof validity which attaches to a challenged statute. Wefind no clear violation of the Constitution which wouldjustify us in pronouncing Presidential Decree No.1987 as unconstitutional and void.

WHEREFORE, the instant Petition is hereby dismissed

No costs.

SO ORDERED.


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Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez,Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,Sarmiento and Cortes, JJ., concur.

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consti_Tio vs Videogram Regulatory Board.doc