cta_decision CTA Case No. AC-325AC-325 2026-03-11

DOLE PHILIPPINES INC. STANFILCO DIVISION v. THE SANGGUNIANG PANGLUNGSOD OF THE CITY OF DAVAO, and THE HON. SARA Z. DUTERTE-CARPIO and HON. LAWRENCE D. BANTIDING, in their respective capacities as Mayor and Acting Treasurer of the City of Davao

. REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY SPECIAL SECOND DIVISION DOLE PHILIPPINES, INC.- CTA AC NO. 325 STANFILCO DIVISION, (RTC Civil Case No. R-DV0-21- Petitioner, 05093-CV) vs. Present: THE SANGGUNIANG RINGPIS-LIBAN, P.J., Chairperson, PANLUNGSOD OF THE MODESTO-SAN PEDRO, and CITY OF DAVAO, and the FERRER-FLORES, JJ. HON. SARA Z. DUTERTE- CARPIO and HON. LAWRENCE D. BANTIDING, in their respective capacities as Promulgated: Mayor and Acting Treasurer MAR 11 ZOZ6 of the City of Davao, Respondents. l -��--- . r x-------------------------------------~ f'_ ./)-~ -�- - - - - - X DECISION FERRER-FLORES, J.: Before this Court is a Petition for Review filed by Dole Philippines, Inc. - Stanfilco Division on May 27, 2024, 1 praying for the reversal and setting aside of the Decision dated November 29, 2023 2 (assailed Decision) and Order dated March 13, 2024,3 (assailed Order) promulgated by the Regional Trial Court (RTC) of Davao City- Branch 17, in Civil Case No. R-DV0-21-05093-CV, entitled "Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City ofDavao, and the Hon. Sara Z. Duterte-Carpio and Hon. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer of the City of Davao, " the dispositive portions of which read as fo!lows: ~ Docket, pp. 14 to 75. Docket, pp. 77 to 92; RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, pp. 538 to 553. Docket, p. 93; RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, p. 620.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanjilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Assailed Decision: WHEREFORE, premises considered, the Appeal of DOLE PHILIPPINES INC.- STANFILCO DIVISION from the Davao City's Treasurer's Letter dated 01 October 2021 denying DOLE-Stanfilco's Payment under Protest dated 28 September 2021 is hereby DENIED. The instant appeal is hereby DISMISSED. SO ORDERED. Assailed Order: WHEREFORE, premises considered, the Motion for Reconsideration of the Court's Decision dated 29 November 2023 is hereby DENIED for lack of merit. SO ORDERED. Petitioner likewise prays for the Court to: (1) nullify the Davao City Watershed Code for failure to comply with the procedural requirements to validly enact a tax ordinance or revenue measure under the Local Government Code (LGC) of 1991; (2) declare the collection of the Environmental Tax under Article 17 of the Davao City Watershed Code erroneous and illegal; (3) order the cancellation in full of the Environmental Tax Order of Payment against petitioner for taxable year (TY) 2021; (4) order respondents to refund the amount of P3,324,825.00 to petitioner; or in the alternative, refund the amount of P2,866,922.50 in excess of the Environmental Tax assessed based on the Environmental Clearance Certificates (ECCs) on record and submissions with the Department of Environment and Natural Resources - Environmental Management Bureau (DENR-EMB); (5) order respondents to cease and desist from issuing further notices of assessment for Environmental Taxes based on the assailed provisions of the Watershed Code; and, (6) order respondents to pay attorney's fees and costs of suit.4 THE PARTIES Petitioner is a domestic corporation duly organized and existing by virtue of and under the laws of the Republic of the Philippines with a Stanfilco Division operating its business at Dofia Socorro Street, Belisario Heights Subdivision, Lanang, Davao City.5 It is engaged in the business of planting, growing, cultivating, harvesting and exporting fresh bananas and\ Prayer, Petition for Review, Docket, pp. 68 to 69. Par. 6, The Pm1ies, Appeal, vis-a-vis par. 2, Answer with Affirmative Defense, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. I, pp. 2 to 3 and 277, respectively.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanjilco Division vs. The Sangguniang Panlungsod of the City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Page 3 of I9 other high-value agricultural crops from out of its offices in Davao City.6 Its Banana Plantations in the barangays of Tawan-Tawan, Cadalian, Carmen, Tamayong, Tamugan and Malagos, all in Davao City, are situated within the delineated watershed areas identified in the Watershed Code. 7 Respondent the Sangguniang Panlungsod of the City of Davao is the local legislative body empowered to enact ordinances levying taxes, fees and charges upon such conditions and for such purposes intended to promote the general welfare of the inhabitants ofthe city.8 Respondent Hon. Sara Z. Duterte-Carpio is being sued in her capacity as Mayor of the City of Davao, who is mandated to enforce laws and ordinances relative to the governance of and the exercise of corporate powers by the city.9 Respondent Hon. Lawrence D. Bantiding is being sued in his capacity as Acting Treasurer of the City of Davao, who is tasked to collect all taxes and fees imposed by the City, and is the custodian of its funds. 10 ANTECEDENTS (ADMINISTRATIVE LEVEL) On February 23, 2007, the former Mayor Rodrigo R. Duterte approved the Watershed Code [Ordinance No. 0310-07], which was enacted by the Sangguniang Panlungsod on January 23, 2007. On September 14, 2021, petitioner received Environmental Tax Order of Payments for TY 2021, all dated September 13, 2021, issued by the Business Tax Assessment Division (BTAD) of the Office of the City Treasurer (OCT) pertaining to the Environmental Tax levied under Article 17 of the Watershed Code and its Implementing Rules and Regulations as follows:''! Par. 4, Pre-Trial Order dated March 22, 2022, RTC Docket (Civil Case No. R-DV0-2 I-05093-CV)- Vol. 2, p. 359. Par. I, Pre-Trial Order dated March 22, 2022, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, p. 359. Par. 7, The Parties, Appeal, vis-a-vis par. 2, Answer with Affirmative Defense, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 1, pp. 6 and 277, respectively. 9 Par. 8, The Parties, Appeal, vis-a-vis par. 2, Answer with Affirmative Defense, RTC Docket (Civil Case No. R-DV0-2 I-05093-CV)- Vol. 1, pp. 6 and 277, respectively. 10 Par. 9, The Parties, Appeal, vis-a-vis par. 2, Answer with Affirmative Defense, RTC Docket (Civil Case No. R-DV0-2 I-05093-CV)- Vol. 1, pp. 6 and 277, respectively. 11 Par. 5, Pre-Trial Order dated March 22,2022, RTC Docket (Civil Case No. R-DV0-2I-05093-CV)- Vol. 2, pp. 359 to 360; Exhibits "D-1" to "D-4", RTC Docket (Civil Case No. R-DV0-21-05093-CV) -Vol. 1, pp. 65 to 68.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfllco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lmvrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Page 4 of I9 BUSINESS LAND 10,000.00 RATE/ ANNUALTAX I ADDRESS AREA TOTAL SQ.M. SQ.M. (for the Taxable I IN Year 2021) HECTARES I ,000,000.00 5,000,000.00 Brgy. Maiagos IOO.OO 3,299,300.00 0.25 250,000.00 Brgy. Tamugan 500.00 4,000,000.00 0.25 1,250,000.00 329.93 Brgy. Tamayong 0.25 824,825.00 400.00 Brgy. 1,329.93 Tawantawan, 0.25 1,000,000.00 Cadaiian and Carmen TOTAL 1"3,324,825.00 The OCT based its computations on the alleged hectarage list furnished by the Watershed Management Council, which in turn, derives its data from the Environmental Management Bureau. I2 The approved total area for each barangay based on the ECCs is as follows: 13 Address ECCs Date Approved Assessed Maximum Land Area Brgy. ECC- XI -00-096- May 22,2001 Total Area Tawantawan 1190a May 28,2001 400 Brgy. Caidaiian Dec.6, 1999 (in and Carmen ECC-XI-00-093- June 1, 2004 Hectares) Brgy. Tamayong I 190c (Caiinan District) 150 Brgy. Tamugan, ECC-XI-03-254 Mariiog District 250 ECC-11-04-05-27- Brgy. Maiagos 0108-1 I90 329.93 329.93 (Baguio District) ECC-11-05-02-0 1- 274.82 500 029-1 I90 February 3, 2005 55 100 ..__ -- - On September 28, 2021, petitioner tendered the manager's check with a cover letter stating that the payment was made under protest and without prejudice to the filing of a formal written protest with the OCT. 14 This was accepted by BTAD as payment for the annual environmental tax as ~ 12 Par. 5, Pre-Trial Order dated March 22,2022, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, p. 360. 13 Par. 6, Pre-Trial Order dated March 22, 2022, RTC Docket (Civil Case No. R-DV0-2I-05093-CV)- Vol. 2, p. 360. 14 See par. I6, Petition for Review, Docket pp. I 8-19.

DECISION CTA AC No. 325 Dole Philippines, Inc.- Stanfilco Division vs. The Sangguniang Panlungsod of the City of Davao, and the Hon. Sara Z. Duterte-Carpio and Hon. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Page5of19 evidenced by Official Receipt Nos. 5687920, 5687921, 5687922 and 5687923 all dated September 28, 2021 _IS On October 1, 2021, petitioner received the letter dated September 28, 2021 of the OCT through Acting City Treasurer Lawrence D. Bantiding, denying petitioner's cover letter on the ground that the assessment is proper and made with legal basis. The Acting City Treasurer treated the cover letter as petitioner's formal protest letter and held that, since the assailed Ordinance has not been declared invalid or annulled by any competent court, the Ordinance is enforceable and, it is their mandate to continue to assess and collect said Environmental Tax. 16 Petitioner filed on October 19, 2021 its formal Payment under Protest dated October 18, 2021 via private courier. 17 PROCEEDINGS BEFORE THE COURT A QUO On November 11, 2021, petitioner filed an Appeal with the RTC of Davao City. 18 The case was initially raffled to the RTC of Davao City - Branch 16. Upon petitioner's motion, however, the case was transferred to Branch 17 of the RTC ofDavao City. After trial, the RTC of Davao City - Branch 17 promulgated the assailed Decision on November 29, 2023. 19 On February 15, 2024, petitioner filed a Motion for Reconsideration.20 Respondents filed their Comments/Opposition to the Motion for Reconsideration dated January 23, 2024 on February 28, 2024.21 The RTC Davao City - Branch 17 issued the assailed Order dated March 13, 2024,22 denying petitioner's Motion for Reconsideration.\ 15 Par. 8, Pre-Trial Order dated March 22, 2022, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, p. 360; Exhibits "E-1" to "E-4", RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. I, pp. 69 to 70. 16 Par. 9, Pre-Trial Order dated March 22, 2022, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, pp. 360 to 361. 17 Par. 10, Pre-Trial Order dated March 22, 2022, RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, p. 361; Exhibit "B-1", RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. I, pp. 46 to 63. 18 RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. I, pp. 4 to 39. 19 RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, pp. 538 to 553. 20 RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, pp. 554 to 599. 21 RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, pp. 602 to 618. 22 RTC Docket (Civil Case No. R-DV0-21-05093-CV)- Vol. 2, p. 620.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao In support of the substantive matters, petitioner asserts that first, the Watershed Code is an ultra vires ordinance and therefore, null and void; second, that the Environmental Tax imposed by the Watershed Code is a tax ordinance and not a regulatory fee; third, that the RTC erred in ruling that petitioner was not able to overcome the presumption of validity in favor of local ordinances; fourth, that even assuming that the Watershed Code is valid, respondents erroneously computed its Environmental Tax due thereby making the computation unreasonable; and, lastly, assuming that the Environmental Tax is a regulatory fee and not a tax ordinance, the Watershed Code is invalid and unjust for imposing a fee in excess of the cost of regulation. Respondents' counter-arguments: Procedurally, respondents argue that this Court lacks jurisdiction over the subject matter. � Anent the substantive aspect, respondents submit the following contentions: First, Section 17 of Ordinance No. 0310-07 imposes Environmental Tax on corporate entities and persons engaged in agricultural and other economic undertakings in the Agroforestry/Non-Tillage area and Prime Agricultural Areas of not less than 50 hectares. The sole purpose of the imposition of Environmental Tax is the implementation of the Watershed Code, thus, cannot be considered as a tax ordinance. Second, as to the publication, respondents aver that the Ordinance's publication has sufficiently complied with Sections 54, 56 and 59 of the LGC of 1991 and that, compliance with Section 188 is not needed, as the Watershed Code is not a Tax Ordinance. Third, reliance on the Joint DENR-DILG Memorandum Circular No. 1998-01 and Joint DENR-DILG Memorandum Circular No. 2003-01 to invalidate the Watershed Code is misplaced. Respondents remain firm that the Watershed Code is not an exercise of power in ultra vires as it went through the process outlined in LGC of 1991. Fourth, the filing of a claim for refund with the intention to have the Watershed Code invalidated is a collateral attack on the said Ordinance, which is not allowed under existing laws and jurisprudence. \

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Fifth, DENR Administrative Order No. 30, Series of 1992 does not explicitly prohibit LGUs from managing watershed areas found within their jurisdiction. In fact, Joint Memorandum Circular No. 98-01 operationalizes and makes effective the devolution of forest management functions from DENR to the LGUs. Joint Memorandum DENR-DILG Memorandum Circular No. 2003-01 only provides for administrative disciplinary sanctions in cases of non-compliance Lastly, Section 17 of the Watershed Code of Davao City is imposed based on a valid and reasonable classification, and that the Watershed Code is not unfair and oppressive. The computation assessed by respondent City Treasurer under the said ordinance is correct and reasonable, and all those statements regarding excess of cost of regulation or disparity of charges made against respondents are all speculative in nature. THE COURT'S RULING The present Petition for Review must be dismissed. Jurisdiction is defined as the power and authority of a court to hear, try, and decide a case. In order for the court or an adjudicative body to have authority to dispose of the case on the merits, it must acquire, among others, jurisdiction over the subject matter. It is axiomatic that jurisdiction over the subject matter is the power to hear and determine the general class to which the proceedings in question belong; it is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists.33 Thus, when a court has no jurisdiction over the subject matter, the only power it has is to dismiss the action. Perforce, it is important that a court or tribunal should first determine whether or not it has jurisdiction over the subject matter presented before it, considering that any act that it performs without jurisdiction shall be null and void, and without any binding legal effects.34 This Court, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction.35 Section 7(a)(3) of Republic Act (R.A.) No. 1125,36 as amended by R.A. No. 9282,37 confers No. 221815, Novcmbec29, 2017. \ 34 Bilag, et al. vs. Ay-ay, eta!., G.R. No. 189950, April 24, 2017. 35 Allied Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 175097, February 5, 2010. 36 AN ACT CREATING THE COURT OF TAX APPEALS. 37 AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Page II of 19 jurisdiction on this Court relative to decisions, orders or resolutions of regional trial courts in local tax cases, to wit: SEC. 7. Jurisdiction.- The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: XXX XXX XXX (3) Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction; (Emphases and underscoring added) Under the foregoing provision, the appellate jurisdiction of this Court over decisions, orders, or resolutions of the RTC becomes operative when the latter has ruled on a local tax case, i.e., one which is in the nature of a tax or which primarily involves a tax issue. Local taxes include those involving real property tax (RPT), which is governed by Book II, Title II of R.A. No. 7160, or LGC of 1991, as amended. Among the possible issues are the legality or validity of the RPT assessment; protests of assessments; disputed assessments, surcharges, or penalties; legality or validity of a tax ordinance; claims for tax refund/credit; claims for tax exemption; actions to collect the tax due; and, even prescription of assessments.38 Moreover, it must be emphasized that when the appeal comes from a judicial remedy which questions the authority of the local government to impose the tax, the aforequoted Section 7(a)(3) applies.39 Hence, for purposes of deciding whether this Court has jurisdiction over the present case, it is crucial to determine whether the Environmental Tax imposed under Section 17 of Davao City Ordinance No. 0310-07 is in fact a tax. We rule in the negative.~ CERTAIN SECTIONS OF REPUBLIC ACT NO. 1125, AS AMENDED, OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES. 38 Herarc Realty Corporation vs. The Provincial Treasurer of Batangas, et a!., G.R. No. 210736, September 5, 2018, citing Salva vs. Magpile, G.R. No. 220440, November 8, 2017, and Ignacio vs. Office ofthe City Treasurer ofQuezon City, eta!., G.R. No. 221620, September II, 2017. 39 National Power Corporation vs. Municipal Government of Navotas, et a!., G.R. No. 192300, November 24, 2014.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao In Smart Communications, Inc. vs. Municipality of Malvar, Batangas ,40 one of the issues raised was: whether the fees imposed under a particular ordinance are in fact taxes. The Supreme Court held: Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the identified special projects, which included 'cell sites' or telecommunications towers, the fees imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily revenue- raising. While the fees may contribute to the revenues of the Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes. In Progressive Development Corporation v. Quezon City,41 the Court declared that 'if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax.' In Victorias Milling Co., Inc. v. Municipality of Victorias,42 the Court reiterated that the purpose and efTect of the imposition determine whether it is a tax or a fee, and that the lack of any standards for such imposition gives the presumption that the same is a tax. We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Thus, '[w]hen no police inspection, supervision, or regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is strong that the power of taxation, and not the police power, is being exercised.' (Emphases added) Relative thereto, it has been held that the power to "regulate" means the power to protect, foster, promote, preserve, and control, with due regard for the interests, first and foremost, of the public, then of the utility and of its patrons.43 The nature and the parameters of the exercise of police power \ 40 G.R. No. 204429, February 18,2014. 41 254 Phil. 635, 643 (1989). See also City ofIloilo vs. Villanueva, 105 Phil. 337 (1959). 42 134 Phil. 180, 189-190 (1968). 43 Gerochi, eta!. vs. Department ofEnergy, eta!., G.R. No. 159796, July 17, 2007.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao were explained by the Supreme Court in Acebedo Optical Company, Inc. vs. The Honorable Court ofAppeals, et al., 44 as follows: Police power as an inherent attribute of sovereignty is the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the people. The State, through the legislature, has delegated the exercise of police power to local government units, as agencies of the State, in order to effectively accomplish and carry out the declared objects of their creation. This delegation of police power is embodied in the general welfare clause of the Local Government Code which provides: SEC. 16. General Welfare. - Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. The scope of police power has been held to be so comprehensive as to encompass almost all matters affecting the health, safety, peace, order, morals, comfort and convenience of the community. Police power is essentially regulatory in nature and the power to issue licenses or grant business permits, if exercised for a regulatory and not revenue-raising purpose, is within the ambit of this power. XXX XXX XXX ... [T]he issuance of business licenses and permits by a municipality or city is essentially regulatory in nature. The authority, which devolved upon local government units to issue or grant such licenses or permits, is essentially in the exercise of the police power of the State within the contemplation of the general welfare clause of the Local Government Code. (Emphases added) Additionally, the Supreme Court, in Progressive Development Corporation vs. Quezon City,45 distinguished tax from a license or permit 1 fee in this wise: 44 G.R. No. 100152, March 31,2000. 45 G.R. No. L-36081, April 24, 1989.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanjilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao The term 'tax' frequently applies to all kinds of exactions of monies which become public funds. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. When an activity, occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health, morals and safety, or the general welfare, the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity, and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has been paid. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power. (Emphases added) Based on the foregoing jurisprudential pronouncements, it can be deduced that the purpose of an imposition will determine its nature as either a tax or a fee. If the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly classified as an exercise of the power to tax. On the other hand, if the purpose is primarily to regulate, then it is deemed an exercise of police power in the form of a fee, even though revenue is incidentally generated. Stated otherwise, if generation of revenue is the primary purpose, the imposition is a tax but, if regulation is the primary purpose, the imposition is properly categorized as a regulatory fee. 46 Guided by the foregoing pronouncements, the Court finds that the Environmental Tax imposed under Section 17 of Davao City Ordinance No. 0310-07 is not a tax.~ 46 City ofCagayan De Oro vs. Cagayan Electric Power & Light Co., Inc., G.R. No. 224825, October 17, 2018.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao Indeed, under Section 5, Article X ofthe 1987 Constitution, LGUs have the power to create their own revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy, to wit: Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. Consistent with this constitutional mandate, the LGC of 1991 grants the taxing powers to each LGU. Specifically, Section 151 of the LGC of 1991 grants cities the power to levy taxes, fees, and charges which provinces or municipalities may impose. Section 143 of the LGC of 1991 provides for the scale of taxes on business that may be imposed by cities and municipalities, while Section 147 of the same law provides for the fees and charges that may be imposed by cities and municipalities on business and occupation, to wit: SECTION 147. Fees and Charges. - The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling. (Emphases added) The tenn "charges" in the LGC of 1991 refers to pecuniary liability, as rents or fees against persons or property, while the term "fee" means "a charge fixed by law or ordinance for the regulation or inspection of a business or activity" as follows: SECTION 131. Definition of Terms. -When used in this Title, the term: XXX XXX XXX (g) 'Charges' refers to pecuniary liability, as rents or fees against persons or property; XXX XXX XXX (1) 'Fee' means a charge fixed by law or ordinance for the regulation or inspection of a business or activity; XXX XXX xxx (Emphases added) 1

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao In this regard, Section 458 of the LGC grants the Sangguniang Panlungsod the power to enact ordinances for the general welfare of the city and its inhabitants, including the regulation to protect the environment as well as to establish, maintain, protect, and conserve watersheds, to wit: SECTION 458. Powers, Duties, Functions and Compensation. - (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: XXX XXX XXX (1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this connection, shall: XXX XXX XXX (vi) Protect the environment and impose appropriate penalties for acts which endanger the environment, such as dynamite fishing and other forms of destructive fishing, illegal logging and smuggling of logs, smuggling of natural resources products and of endangered species of flora and fauna, slash and burn farming, and such other activities which result in pollution, acceleration of eutrophication of rivers and lakes, or of ecological imbalance; (5) Approve ordinances which shall ensure the efficient and effective delivery of the basic services and facilities as provided for under Section 17 of this Code, and in addition to said services and facilities, shall: (i) Provide for the establishment, maintenance, protection, and conservation of communal forests and watersheds, tree parks, greenbelts, mangroves, and other similar forest development projects; (Emphases and underscoring added) Based on the foregoing provisions, the Sangguniang Panlungsod can enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants in the proper exercise of the corporate powers of the city. Further, the Sangguniang Panlungsod can enact ordinances necessary for an efficient and effective city government and to ensure the efficient and effective delivery of the basic services and facilities. One of the matters under the scope of such power is the protection of the\

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod of the City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lawrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao environment from ecological imbalance and the establishment, maintenance, protection and conservation of watersheds. In this case, on February 23, 2007, the Sangguniang Panlungsod of Davao City passed Ordinance No. 0310-07 entitled "Watershed Protection, Conservation and Management Ordinance hereinafter referred to as the Watershed Code",47 with the following declared policies, to wit: ARTICLE 2. DECLARATION OF POLICY - The City Government of Davao hereby declares the following as its policies: a. Recognize that a healthy and ecologically sound watershed area is vital to ecological balance where man and nature thrive in perfect harmony with each other; b. Recognize the watershed areas are central to the aspirations of a livable City for the Dabaweynos who must maintain its sustainability through a participative, empowered and environmentally conscious community; c. Recognize that the watershed areas are recharge areas for the City's aquifers which are sources of the City's drinking water that must be protected, conserved and managed for the continued and full enjoyment of the present and future generations; To help implement these policies, Article 17 of the said Ordinance imposed an Environmental Tax on agricultural and other economic undertakings in the Agro-forestry/Non-Tillage Areas and Prime Agricultural Areas, viz.: ARTICLE 17. ENVIRONMENTAL FUND- For the purpose of implementing the provisions of this Code, an annual Environmental Tax shall be imposed on all agricultural and other economic undertakings in the Agro-forestryINon-Tillage Areas and Prime Agricultural Areas of not less than 50 hectares at the rate of Twenty Five Centavos (0.25) per square meter, provided that: (i) The Environmental Tax shall also be imposed on corporate entities and persons engaged in agricultural and other economic undertakings on lands covered by growership contracts and other agreements; (ii) The Environmental Tax collected shall accrue to the General Fund and shall be appropriate in the Annual Budget solely for the purpose of the implementation of this Code, the operational expenses of the Watershed Management Council, ---------------------- 47 Exhibit "F", RTC Docket (Civil Case No. R-DV0-18-01176-CV)- Vol. I, pp. 71 to 74.

DECISION CTA AC No. 325 Dole Philippines, Inc. - Stanfilco Division vs. The Sangguniang Panlungsod ofthe City of Davao, and the Han. Sara Z. Duterte-Carpio and Han. Lmvrence D. Bantiding, in their respective capacities as Mayor and Acting Treasurer ofthe City ofDavao CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ~-~ - ? - MA. BELEN M. RINGPIS-LIBAN Presiding Justice

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