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Tio v. Videogram

The Supreme Court upheld the constitutionality of the law imposing a 30% tax on the sale, lease, or disposition of videograms. The tax was imposed to regulate the largely unsupervised videogram industry, curb film piracy, and protect government revenues that declined as theatrical attendance dropped by 40%. While the tax may discourage the videogram industry, taxation is within the state's broad powers and does not violate due process. Further, the tax pursues public purposes of industry regulation and generating tax income, even if it also aims to favor the movie industry. The tax rate is a legislative decision that does not override the law's constitutionality.

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65 views2 pages

Tio v. Videogram

The Supreme Court upheld the constitutionality of the law imposing a 30% tax on the sale, lease, or disposition of videograms. The tax was imposed to regulate the largely unsupervised videogram industry, curb film piracy, and protect government revenues that declined as theatrical attendance dropped by 40%. While the tax may discourage the videogram industry, taxation is within the state's broad powers and does not violate due process. Further, the tax pursues public purposes of industry regulation and generating tax income, even if it also aims to favor the movie industry. The tax rate is a legislative decision that does not override the law's constitutionality.

Uploaded by

Nezte Virtudazo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Tio v Videogram Regulatory board

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

Facts:
The case is a petition filed by petitioner on behalf of videogram operators adversely affected by
Presidential Decree No. 1987, “An Act Creating the Videogram Regulatory Board" with broad
powers to regulate and supervise the videogram industry.

The said law provides that:

"SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette,
ready for playback, regardless of length, an annual tax of five pesos; Provided, that locally
manufactured or imported blank video tapes shall be subject to sales tax."

"Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision
of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase
price or rental rate, as the case may be, for every sale, lease or disposition of a videogram
containing a reproduction of any motion picture or audiovisual program.”

“Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the
other fifty percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED,
That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.”

The rationale behind the tax provision is to curb the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or any technical improvement
or variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such
unregulated circulation have caused a sharp decline in theatrical attendance by at least forty
percent (40%) and a tremendous drop in the collection of sales, contractor's specific,
amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million
annually in government revenues.

The unregulated activities of videogram establishments have also affected the viability of the
movie industry.

The petitioner contends that the said law is unconstitutional because the tax imposed is harsh,
confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process
clause of the Constitution.

Issue:
 Whether or not the law is unconstitutional because the tax imposed is harsh,
confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due
process clause of the Constitution.

Held:

The law is constitutional. It is beyond serious question that a tax does not cease to be
valid merely because it regulates, discourages, or even definitely deters the activities
taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that
the courts scarcely venture to declare that it is subject to any restrictions whatever, except such
as rest in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature
acts upon its constituents. This is, in general, a sufficient security against erroneous and
oppressive taxation.

The tax imposed by the DECREE is not only a regulatory but also a revenue measure
prompted by the realization that earnings of videogram establishments of around P600 million
per annum have not been subjected to tax, thereby depriving the Government of an additional
source of revenue. It is an end-user tax, imposed on retailers for every videogram they make
available for public viewing. It is similar to the 30% amusement tax imposed or borne by the
movie industry which the theater-owners pay to the government, but which is passed on to the
entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing
public. It is a tax that is imposed uniformly on all videogram operators.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the
need for regulating the video industry, particularly because of the rampant film piracy, the
flagrant violation of intellectual property rights, and the proliferation of pornographic video
tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax
remains a valid imposition.

The public purpose of a tax may legally exist even if the motive which impelled the
legislature to impose the tax was to favor one industry over another.
It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has
been repeatedly held that "inequities which result from a singling out of one particular class for
taxation or exemption infringe no constitutional limitation". Taxation has been made the
implement of the state's police power.At bottom, the rate of tax is a matter better addressed to
the taxing legislature.

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