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ritbovt ai.tivctiov. 1bi. vigbt iv fact .ovetive. re.vtt iv vveqvat protectiov. !bat tbe ctav.e reqvire. i. eqvatit,
avovg eqvat. a. aetervivea accoraivg to a ratia cta..ificatiov. .. 1ae. are tbe tifebtooa of tbe gorervvevt. t i.
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to revea,. 1be Covrt cavvot .tri/e aorv a tar a. vvcov.titvtiovat .ivpt, becav.e of it. ,o/e..

Mounting budget deicit, reenue generation, inadequate iscal allocation or education,
increased emoluments or health workers, and wider coerage or ull alue-added tax beneits
. these are the reasons why Republic Act No. 933 ,R.A. No. 933, was enacted. Reasons, the
wisdom o which, the Court een with its extensie constitutional power o reiew, cannot
probe. 1he petitioners in these cases, howeer, question not only the wisdom o the law, but
also perceied constitutional inirmities in its passage.

R.A. No. 933 is a consolidation o three legislatie bills namely, louse Bill Nos. 3555
and 305, and Senate Bill No. 1950. Because o the conlicting proisions o the proposed bills
the Senate agreed to the request o the louse o Representaties or a committee conerence.
1he Conerence Committee on the Disagreeing Proisions o louse Bill recommended the
approal o its report, which the Senate and the louse o the Representaties did.

On May 24, 2005, the President signed into law the consolidated louse and Senate
ersions as Republic Act 933. Beore the law was to take eect on July 1, 2005, the Court
issued a temporary restraining order enjoining goernment rom implementing the law in
response to a slew o petitions or certiorari and prohibition questioning the constitutionality
o the new law.

022',2S

PROCLDURAL ISSUL
\hether R.A. No. 933 iolates the ollowing proisions o the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26,2,

SUBS1AN1IVL ISSULS
1. \hether Sections 4, 5 and 6 o R.A. No. 933, amending Sections 106, 10 and 108 o
the NIRC, iolate the ollowing proisions o the Constitution:
a. Article VI, Section 28,1,, and
b. Article VI, Section 28,2,

2. \hether Section 8 o R.A. No. 933, amending Sections 110,A,,2, and 110,B, o the
NIRC, and Section 12 o R.A. No. 933, amending Section 114,C, o the NIRC, iolate
Article VI, Section 28,1,, and Article III, Section 1 o the Constitution:



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T,U$S

Petitions DISMISSLD.

1here being no constitutional impediment to the ull enorcement and implementation
o R.A. No. 933, the temporary restraining order issued by the Court on July 1, 2005 is
LIl1LD upon inality o herein decision.

Procedural Issues

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In the present cases, petitioners admit that it was indeed louse Bill Nos. 3555 and 305
that initiated the moe or amending proisions o the NIRC dealing mainly with the alue-
added tax. Upon transmittal o said louse bills to the Senate, the Senate came out with Senate
Bill No. 1950 proposing amendments not only to NIRC proisions on the alue-added tax but
also amendments to NIRC proisions on other kinds o taxes. Is the introduction by the Senate
o proisions not dealing directly with the alue- added tax, which is the only kind o tax being
amended in the louse bills, still within the puriew o the constitutional proision authorizing
the Senate to propose or concur with amendments to a reenue bill that originated rom the
louse

Since there is no question that the reenue bill exclusiely originated in the louse
o Representaties, the Senate was acting within its constitutional power to introduce
amendments to the louse bill when it included proisions in Senate Bill No. 1950 amending
corporate income taxes, percentage, excise and ranchise taxes. Verily, Article VI, Section 24 o
the Constitution does not contain any prohibition or limitation on the extent o the amendments
that may be introduced by the Senate to the louse reenue bill.

Notably thereore, the main purpose o the bills emanating rom the louse o
Representaties is to bring in sizeable reenues or the goernment to supplement our country`s
serious inancial problems, and improe tax administration and control o the leakages in
reenues rom income taxes and alue-added taxes. As these house bills were transmitted to the
Senate, the latter, approaching the measures rom the point o national perspectie, can
introduce amendments within the purposes o those bills.

1he Senate can propose amendments and in act, the amendments made on proisions
in the tax on income o corporations are germane to the purpose o the house bills which is to
raise reenues or the goernment. 1he sections introduced by the Senate are germane to the
subject matter and purposes o the house bills, which is to supplement our country`s iscal
deicit, among others. 1hus, the Senate acted within its power to propose those amendments.


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1he no-amendment rule` reers only to the procedure to be ollowed by each house o
Congress with regard to bills initiated in each o said respectie houses, beore said bill is
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transmitted to the other house or its concurrence or amendment. Verily, to construe said
proision in a way as to proscribe any urther changes to a bill ater one house has oted on it
would lead to absurdity as this would mean that the other house o Congress would be depried
o its constitutional power to amend or introduce changes to said bill. 1hus, Art. VI, Sec. 26 ,2,
o the Constitution cannot be taken to mean that the introduction by the Bicameral Conerence
Committee o amendments and modiications to disagreeing proisions in bills that hae been
acted upon by both houses o Congress is prohibited.

Petitioners allege that the Bicameral Conerence Committee exceeded its authority by:
,1, Inserting the .tavab, avtborit, in aor o the President in Sections 4, 5, and 6 o R.A. No.
933, ,2, Deleting entirely the vo pa..ov proisions ound in both the louse and Senate bills, ,3,
Inserting the proision imposing a 0 limit on the amount o input tax to be credited against
the output tax, and ,4, Including the amendments introduced only by Senate Bill No. 1950
regarding other kinds o taxes in addition to the alue-added tax.

It should be borne in mind that the power o internal regulation and discipline are
intrinsic in any legislatie body. 1hus, Article VI, Section 16 ,3, o the Constitution proides
that each louse may determine the rules o its proceedings.` Pursuant to this inherent
constitutional power to promulgate and implement its own rules o procedure, the respectie
rules o each house, the Rule XIV, sec 88 & 889 o the louse o the Representaties and Rule
XII sec 35 o the Rules o the Senate, proided or the creation o a Bicameral Conerence
Committee.

1he creation o such conerence committee was apparently in response to a problem,
not addressed by any constitutional proision, where the two houses o Congress ind
themseles in disagreement oer changes or amendments introduced by the other house in a
legislatie bill. In the present petitions, the issue is not whether proisions o the rules o both
houses creating the bicameral conerence committee are unconstitutional, but whether the
bicameral conerence committee has strictly complied with the rules o both houses, thereby
remaining within the jurisdiction conerred upon it by Congress.

In the case o ariva. r.. 1be ecvtire ecretar,, the Court v avc, unanimously reiterated
and emphasized its adherence to the enrolled bill doctrine,` thus, declining therein petitioners`
plea or the Court to go behind the enrolled copy o the bill. Akin to the ariva. case, the
present petitions also raise an issue regarding the actions taken by the conerence committee on
matters regarding Congress` compliance with its own internal rules. One o the most basic and
inherent power o the legislature is the power to ormulate rules or its proceedings and the
discipline o its members. Congress is the best judge o how it should conduct its own business
expeditiously and in the most orderly manner. It is also the sole concern o Congress to instill
discipline among the members o its conerence committee i it beliees that said members
iolated any o its rules o proceedings. Len the expanded jurisdiction o this Court cannot
apply to questions regarding only the internal operation o Congress, thus, the Court is wont to
deny a reiew o the internal proceedings o a co-equal branch o goernment.

Moreoer, in the case o 1otevtivo r.. ecretar, of ivavce, the Court already made the
pronouncement that i a change is desired in the practice o the Bicameral Conerence
Committee it must be sought in Congress since this question is not coered by any constitutional
proision but is only an internal rule o each house.` 1o date, Congress has not seen it it to
make such changes aderted to by the Court. It seems, thereore, that Congress inds the
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practices o the bicameral conerence committee to be ery useul or purposes o prompt and
eicient legislatie action.

In the present case, the changes introduced by the Bicameral Conerence Committee on
disagreeing proisions were meant only to reconcile and harmonize the disagreeing proisions
or it did not inject any idea or intent that is wholly oreign to the subject embraced by the
original proisions. 1he so-called .tavab, avtborit, in aor o the President, whereby the rate o
10 VA1 wanted by the Senate is retained until such time that certain conditions arise when the
12 VA1 wanted by the louse shall be imposed, appears to be a compromise to try to bridge
the dierence in the rate o VA1 proposed by the two houses o Congress. Neertheless, such
compromise is still totally within the subject o what rate o VA1 should be imposed on
taxpayers.

1he vo pa..ov prori.iov was deleted altogether. 1he reason or deleting the vo pa..ov
proision was just to keep the VA1 law or the VA1 bill simple and that no sector should be a
beneiciary o legislatie grace, neither should any sector be discriminated on.

\ith regard to the amount o input tax to be credited against output tax, the Bicameral
Conerence Committee came to a compromise on the percentage rate o the limitation or cap on
such input tax credit, but again, the change introduced by the Bicameral Conerence Committee
was totally within the intent o both houses to put a cap on input tax that may be
credited against the output tax.

As to the amendments to NIRC proisions on taxes other than the alue-added tax
proposed in Senate Bill No. 1950, since said proisions were among those reerred to it, the
conerence committee had to act on the same and it basically adopted the ersion o the Senate.
1hus, all the changes or modiications made by the Bicameral Conerence Committee
were germane to subjects o the proisions reerred to it or reconciliation. Such being the case,
the Court does not see any grae abuse o discretion amounting to lack or excess o jurisdiction
committed by the Bicameral Conerence Committee.

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Article VI, Section 28,1, o the Constitution reads: 1he rule o taxation shall be
uniorm and equitable. 1he Congress shall eole a progressie system o taxation.`

Uniormity in taxation means that all taxable articles or kinds o property o the same
class shall be taxed at the same rate. Dierent articles may be taxed at dierent amounts
proided that the rate is uniorm on the same class eerywhere with all people at all times. 1he
tax law is uniorm as it proides a standard rate o 0 or 10 ,or 12, on all goods and
serices.

It must be stressed that the rule o uniorm taxation does not deprie Congress o the
power to classiy subjects o taxation, and only demands uniormity within the particular class.
R.A. No. 933 is also equitable. 1he law is equipped with a threshold margin. 1he VA1 rate o
0 or 10 ,or 12, does not apply to sales o goods or serices with gross annual sales or
receipts not exceeding P1, 500, 000.00. Also, basic marine and agricultural ood products in their
RECENT JURISPRUDENCE POLITICAL LAW
original state are still not subject to tax, thus ensuring the prices at the grassroots leel remain
accessible.

Lastly, petitioners contend that the limitation on the creditable input tax is anything but
regressie. It is the smaller business with higher input tax-output tax ratio that will suer the
consequences. Progressie taxation is built on the principle o the taxpayer`s ability to pay.
1axation is progressie when its rate goes up depending on the resources o the person aected.

1he VA1 is an antithesis o progressie taxation. By its ery nature, it is regressie. 1he
principle o progressie taxation has no relation with the VA1 system inasmuch as the VA1 paid
by the consumer or business or eery goods bought or serices enjoyed is the same regardless
o income. In other words, the VA1 paid eats the same portion o an income, whether big or
small.

Neertheless, the Constitution does not really prohibit the imposition o indirect taxes,
like the VA1. \hat it simply proides is that Congress shall "eole a progressie system o
taxation." 1he constitutional proision has been interpreted to mean simply that direct taxes are
. . . to be preerred |and[ as much as possible, indirect taxes should be minimized.` Indeed, the
mandate to Congress is not to prescribe, but to eole, a progressie tax system.

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1he principle o separation o powers ordains that each o the three great branches o
goernment has exclusie cognizance o and is supreme in matters alling within its own
constitutionally allocated sphere. A logical corollary to the doctrine o separation o powers is
the principle o non-delegation o powers, pote.ta. aetegata vov aetegari pote.t.

In the present case, the challenged section o R.A. No. 933 is the common prori.o in
Sections 4, 5 and 6 which reads as ollows: 1hat the President, upon the recommendation o
the Secretary o linance, shall, eectie January 1, 2006, raise the rate o alue-added tax to
twele percent ,12,, ater any o the ollowing conditions has been satisied:

,i, Value-added tax collection as a percentage o Gross Domestic Product ,GDP, o the
preious year exceeds two and our-ith percent ,2 4,5,, or ,ii, National goernment deicit
as a percentage o GDP o the preious year exceeds one and one-hal percent ,1 ',.

1he case beore the Court is not a delegation o legislatie power. It is simply a
delegation o ascertainment o acts upon which enorcement and administration o the increase
rate under the law is contingent. 1he legislature has made the operation o the 12 rate eectie
January 1, 2006, contingent upon a speciied act or condition. It leaes the entire operation or
non-operation o the 12 rate upon actual matters outside o the control o the executie.

No discretion would be exercised by the President. lighlighting the absence o
discretion is the act that the word .batt is used in the common prori.o. 1he use o the word .batt
connote a mandatory order. Its use in a statute denotes an imperatie obligation and is
inconsistent with the idea o discretion.

\here the law is clear and unambiguous, it must be
taken to mean exactly what it says, and courts hae no choice but to see to it that the mandate is
obeyed.

RECENT JURISPRUDENCE POLITICAL LAW
1hus, it is the ministerial duty o the President to immediately impose the 12 rate upon
the existence o any o the conditions speciied by Congress. 1his is a duty, which cannot be
eaded by the President. Inasmuch as the law speciically uses the word .batt, the exercise o
discretion by the President does not come into play. It is a clear directie to impose the 12
VA1 rate when the speciied conditions are present. 1he time o taking into eect o the 12
VA1 rate is based on the happening o a certain speciied contingency, or upon the
ascertainment o certain acts or conditions by a person or body other than the legislature itsel.

\hen one speaks o the Secretary o linance as the alter ego o the President, it simply
means that as head o the Department o linance he is the assistant and agent o the Chie
Lxecutie. In the present case, the Secretary o linance, in making his recommendation to the
President on the existence o either o the two conditions, the Secretary o linance is not acting
as the alter ego o the President or een her subordinate. In such instance, he is not subject to
the power o control and direction o the President. le is acting as the agent o the legislatie
department, to determine and declare the eent upon which its expressed will is to take eect.
1he Secretary o linance becomes the means or tool by which legislatie policy is determined
and implemented, considering that he possesses all the acilities to gather data and inormation
and has a much broader perspectie to properly ealuate them. lis unction is to gather and
collate statistical data and other pertinent inormation and eriy i any o the two conditions laid
out by Congress is present. lis personality in such instance is in reality but a projection o that
o Congress. 1hus, being the agent o Congress and not o the President, the President cannot
alter or modiy or nulliy, or set aside the indings o the Secretary o linance and to substitute
the judgment o the ormer or that o the latter.

Congress simply granted the Secretary o linance the authority to ascertain the existence
o a act, namely, whether by December 31, 2005, the alue-added tax collection as a percentage
o Gross Domestic Product ,GDP, o the preious year exceeds two and our-ith percent
,2
4
,5, or the national goernment deicit as a percentage o GDP o the preious year exceeds
one and one-hal percent ,1',. I either o these two instances has occurred, the Secretary o
linance, by legislatie mandate, must submit such inormation to the President. 1hen the 12
VA1 rate must be imposed by the President eectie January 1, 2006. 1here is no undue
delegation o legislatie power but only o the discretion as to the execution o a law. 1his is
constitutionally permissible. Congress does not abdicate its unctions or unduly delegate power
when it describes what job must be done, who must do it, and what is the scope o his authority,
in our complex economy that is requently the only way in which the legislatie process can go
orward.

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1he doctrine is that where the due process and equal protection clauses are inoked,
considering that they are not ixed rules but rather broad standards, there is a need or proo o
such persuasie character as would lead to such a conclusion. Absent such a showing, the
presumption o alidity must preail.

Section 8 o R.A. No. 933, amending Section 110,B, o the NIRC imposes a limitation
on the amount o input tax that may be credited against the output tax. It states, in part:
|P[roriaea, that the input tax inclusie o the input VA1 carried oer rom the preious quarter
that may be credited in eery quarter shall not exceed seenty percent ,0, o the output VA1:
.`

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vpvt 1a is deined under Section 110,A, o the NIRC, as amended, as the alue-added
tax due frov or paia by a VA1-registered person on the importation o goods or local purchase o
good and serices, including lease or use o property, in the course o trade or business, rom a
VA1-registered person, and Ovtpvt 1a is the alue-added tax ave on the sale or lease o taxable
goods or properties or serices by any person registered or required to register under the law.

Petitioners claim that the contested sections impose limitations on the amount o input
tax that may be claimed. In eect, a portion o the input tax that has already been paid cannot
now be credited against the output tax. 1his argument is not absolute. It assumes that the input
tax exceeds 0 o the output tax, and thereore, the input tax in excess o 0 remains
uncredited. loweer, to the extent that the input tax is less than 0 o the output tax, then
100 o such input tax is still creditable.

1he non-application o the unutilized input tax in a gien quarter is not aa ivfivitvv, as
petitioners exaggeratedly contend. 1heir analysis o the eect o the 0 per cent limitation is
incomplete and one-sided. It ends at the net eect that there will be unapplied,unutilized inputs
VA1 or a gien quarter. It does not proceed urther to the act that such unapplied,unutilized
input tax may be credited in the subsequent periods as allowed by the carry-oer proision o
Section 110,B, or that it may later on be reunded through a tax credit certiicate under Section
112,B,.

1hereore, petitioners` argument must be rejected. 1he equal protection clause under the
Constitution means that no person or class o persons shall be depried o the same protection
o laws which is enjoyed by other persons or other classes in the same place and in like
circumstances.`

1he power o the State to make reasonable and natural classiications or the purposes
o taxation has long been established. \hether it relates to the subject o taxation, the kind o
property, the rates to be leied, or the amounts to be raised, the methods o assessment,
aluation and collection, the State`s power is entitled to presumption o alidity. As a rule, the
judiciary will not interere with such power absent a clear showing o unreasonableness,
discrimination, or arbitrariness.

1he equal protection clause does not require the uniersal application o the laws on all
persons or things without distinction. 1his might in act sometimes result in unequal protection.
\hat the clause requires is equality among equals as determined according to a alid
classiication. By classiication is meant the grouping o persons or things similar to each other in
certain particulars and dierent rom all others in these same particulars.

It has been said that taxes are the lieblood o the goernment. In this case, it is just an
enema, a irst-aid measure to resuscitate an economy in distress. 1he Court is neither blind nor
is it turning a dea ear on the plight o the masses. But it does not hae the panacea or the
malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as
unconstitutional simply because o its yokes.