Académique Documents
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EN BANC.
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8241 or the Improved VAT Law, R.A. No. 8424 or the Tax Reform
Act of 1997, and finally, the presently beleaguered R.A. No. 9337,
also referred to by respondents as the VAT Reform Act.
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tality of his own judgment and not through the intervening mind
of another.
Same; Same; Exception to the Non-Delegation of Legislative
Powers; Words and Phrases; The powers which Congress is
prohibited from delegating are those which are strictly, or
inherently and exclusively, legislative—appertaining exclusively to
the legislative department; Purely legislative power has been
described as the authority to make a complete law—complete as to
the time when it shall take effect and as to whom it shall be
applicable—and to determine the expediency of its enactment; It is
the nature of the power, and not the liability of its use or the
manner of its exercise, which determines the validity of its
delegation.—With respect to the Legislature, Section 1 of Article
VI of the Constitution provides that “the Legislative power shall be
vested in the Congress of the Philippines which shall consist of a
Senate and a House of Representatives.” The powers which
Congress is prohibited from delegating are those which are
strictly, or inherently and exclusively, legislative. Purely
legislative power, which can never be delegated, has been
described as the authority to make a complete law—complete as to
the time when it shall take effect and as to whom it shall be
applicable—and to determine the expediency of its enactment.
Thus, the rule is that in order that a court may be justified in
holding a statute unconstitutional as a delegation of legislative
power, it must appear that the power involved is purely legislative
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plementation of the law. The intent and will to increase the VAT
rate to 12% came from Congress and the task of the President is
to simply execute the legislative policy. That Congress chose to do
so in such a manner is not within the province of the Court to
inquire into, its task being to interpret the law.
Judicial Review; The Court does not rule on allegations which
are manifestly conjectural, as these may not exist at all—the Court
deals with facts, not fancies, on realities, not appearances.—The
insinuation by petitioners Pimentel, et al. that the President has
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Same; Same; Due Process; Vested Rights; The input tax is not
a property or a property right within the constitutional purview of
the due process clause—a VAT-registered person’s entitlement to
the creditable input tax is a mere statutory privilege; The right to
credit input tax as against the output tax is clearly a privilege
created by law, a privilege that also the law can remove or limit;
The distinction between statutory privileges and vested rights must
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of the income tax due from the payee on the said income. The
liability for payment of the tax rests primarily on the payor as a
withholding agent. Thus, in case of his failure to withhold the tax
or in case of underwithholding, the deficiency tax shall be
collected from the payor/withholding agent. . . . (B) Creditable
Withholding Tax.—Under the creditable withholding tax system,
taxes withheld on certain income payments are intended to equal
or at least approximate the tax due of the payee on said income. . .
. Taxes withheld on income payments covered by the expanded
withholding tax (referred to in Sec. 2.57.2 of these regulations)
and compensation income (referred to in Sec. 2.78 also of these
regulations) are creditable in nature. As applied to value-added
tax, this means that taxable transactions with the government
are subject to a 5% rate, which constitutes as full payment of the
tax payable on the transaction. This represents the net VAT
payable of the seller. The other 5% effectively accounts for the
standard input VAT (deemed input VAT), in lieu of the actual
input VAT directly or attributable to the taxable transaction.
Same; Same; It is clear that Congress intended to treat
differently transactions with the government; Since it has not been
shown that the class subject to the final 5% final withholding tax
has been unreasonably narrowed, there is no reason to invalidate
the provision.—The Court need not explore the rationale behind
the provision. It is clear that Congress intended to treat
differently taxable transactions with the government. This is
supported by the fact that under the old provision, the 5% tax
withheld by the government remains creditable against the tax
liability of the seller or contractor, to wit: SEC. 114. Return and
Payment of Value-added Tax.—(C) Withholding of Creditable
Value-added Tax.—The Government or any of its political
subdivisions, instrumentalities or agencies, including
government-owned or controlled corporations (GOCCs) shall,
before making payment on account of each purchase of goods from
sellers and services rendered by contractors which are subject to
the value-added tax imposed in Sections 106 and 108 of this Code,
deduct and withhold the value-added tax due at the rate of three
percent (3%) of the gross payment for the purchase of goods and
six percent (6%) on gross receipts for services rendered by
contractors on every sale or installment payment which shall be
creditable against the value-added tax liability of the seller
or contractor: Provided, however, That in the case of government
public works
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articles or
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to pay. This principle was also lifted from Adam Smith’s Canons
of Taxation, and it states: I. The subjects of every state ought to
contribute towards the support of the government, as nearly as
possible, in proportion to their respective abilities; that is, in
proportion to the revenue which they respectively enjoy under the
protection of the state. Taxation is progressive when its rate goes
up depending on the resources of the person affected.
Same; Same; Same; The VAT is an antithesis of progressive
taxation—by its very nature, it is regressive; The principle of
progressive taxation has no relation with the VAT system
inasmuch as the VAT paid by the consumer or business for every
goods bought or services enjoyed is the same regardless of
income.—The VAT is an antithesis of progressive taxation. By its
very nature, it is regressive. The principle of progressive taxation
has no relation with the VAT system inasmuch as the VAT paid
by the consumer or business for every goods bought or services
enjoyed is the same regardless of income. In other words, the VAT
paid eats the same portion of an income, whether big or small.
The disparity lies in the income earned by a person or profit
margin marked by a business, such that the higher the income or
profit margin, the smaller the portion of the income or profit that
is eaten by VAT. A converso, the lower the income or profit
margin, the bigger the part that the VAT eats away. At the end of
the day, it is really the lower income group or businesses with
low-profit margins that is always hardest hit.
Same; Same; Same; The Constitution does not really prohibit
the imposition of indirect taxes, like the VAT.—The Constitution
does not really prohibit the imposition of indirect taxes, like the
VAT. What it simply provides is that Congress shall “evolve a
progressive system of taxation.” The Court stated in the Tolentino
case, thus: The Constitution does not really prohibit the
imposition of indirect taxes which, like the VAT, are regressive.
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mation of Art. VIII, §17 (1) of the 1973 Constitution from which
the present Art. VI, §28 (1) was taken. Sales taxes are also
regressive. Resort to indirect taxes should be minimized but not
avoided entirely because it is difficult, if not impossible, to avoid
them by imposing such taxes according to the taxpayers' ability to
pay. In the case of the VAT, the law minimizes the regressive
effects of this imposition by providing for zero rating of certain
transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC),
while granting exemptions to other transactions. (R.A. No. 7716,
§4 amending §103 of the NIRC)
Same; Same; Judicial Review; The Court cannot strike down a
law as unconstitutional simply because of its yokes.—It has been
said that taxes are the lifeblood of the government. In this case, it
is just an enema, a first-aid measure to resuscitate an economy in
distress. The Court is neither blind nor is it turning a deaf ear on
the plight of the masses. But it does not have the panacea for the
malady that the law seeks to remedy. As in other cases, the Court
cannot strike down a law as unconstitutional simply because of its
yokes. Let us not be overly influenced by the plea that for every
wrong there is a remedy, and that the judiciary should stand
ready to afford relief. There are undoubtedly many wrongs the
judicature may not correct, for instance, those involving political
questions. . . . Let us likewise disabuse our minds from the notion
that the judiciary is the repository of remedies for all political or
social ills; We should not forget that the Constitution has
judiciously allocated the powers of government to three distinct
and separate compartments; and that judicial interpretation has
tended to the preservation of the independence of the three, and a
zealous regard of the prerogatives of each, knowing full well that
one is not the guardian of the others and that, for official wrong-
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are “not immediately involved are not thereby thrown open for a judicial
determination of constitutionality.”
Same; Same; Same; Taxation; The power to adjust the tax rate given
to the President is futuristic and may or may not be exercised—the Court
is therefore beseeched to render a conjectural judgment based on
hypothetical facts.—It is manifest that the constitutional challenge to
sections 4 to 6 of R.A. No. 9337 cannot hurdle the requirement of
ripeness. These sections give the President the power to raise the VAT rate
to 12% on January 1, 2006 upon satisfaction of certain fact-based
conditions. We are not endowed with the infallible gift of prophesy to
know whether these conditions are certain to happen. The power to
adjust the tax rate given to the President is futuristic and may or may
not be exercised. The Court is therefore beseeched to render a conjectural
judgment based on hypothetical facts. Such a supplication has to be
rejected.
that unless its roving powers are reigned in, a Bicameral Conference
Committee can wreck the lawmaking process which is a cornerstone of
the democratic, republican regime established in our Constitution. The
passage of time fortifies my faith that there ought to be no legal u-turn on
this preeminent principle.
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“third” chamber of Congress. Under the clear rules of both the Senate and
House, its power can go no further than settling differences in their bills
or joint resolutions. Sections 88 and 89, Rule XIV of the Rules of the
House of Representatives provide as follows: * * * Under both rules, it is
obvious that a Bicameral Conference Committee is a mere agent of the
House or the Senate with limited powers. The House contingent in the
Committee cannot, on its own, settle differences which are substantial in
character. If it is confronted with substantial differences, it has to go back
to the chamber that created it “for the latter’s appropriate action.” In
other words, it must take the proper instructions from the chambers that
created it. It cannot exercise its unbridled discretion. Where there is no
difference between the bills, it cannot make any change. Where the
difference is substantial, it has to return to the chamber of its origin and
ask for appropriate instructions. It ought to be indubitable that it cannot
create a new law, i.e., that which has never been discussed in either
chamber of Congress. Its parameters of power are not porous, for they are
hedged by the clear limitation that its only power is to settle differences
in bills and joint resolutions of the two chambers of Congress.
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Senate when they are not even in disagreement; The Constitution did not
establish a Bicameral Conference Committee that can act as a “third
house” of Congress with super veto power over bills passed by the Senate
and the House.—The majority further defends the constitutionality of the
above provisions by holding that “all the changes or modifications were
germane to subjects of the provisions referred to it for reconciliation.”
With due respect, it is high time to re-examine the test of germaneness
proffered in Tolentino. The test of germaneness is overly broad and is the
fountainhead of mischief for it allows the Bicameral Conference
Committee to change provisions in the bills of the House and the Senate
when they are not even in disagreement. Worse still, it enables the
Committee to introduce amendments which are entirely new and have
not previously passed through the coils of scrutiny of the members of both
houses. The Constitution did not establish a Bicameral Conference
Committee that can act as a “third house” of Congress with super veto
power over bills passed by the Senate and the House. We cannot concede
that super veto power without wrecking the delicate architecture of
legislative power so carefully laid down in our Constitution. The clear
intent of our fundamental law is to install a lawmaking structure
composed only of two houses whose members would thoroughly debate
proposed legislations in representation of the will of their respective
constituents. The institution of this lawmaking structure is unmistakable
from the following provisions: (1) requiring that legislative power shall be
vested in a bicameral legislature; (2) providing for quorum requirements;
(3) requiring that appropriation, revenue or tariff bills, bills authorizing
increase of public debt, bills of local application, and private bills
originate exclusively in the House of Representatives; (4) requiring that
bills embrace one subject expressed in the title thereof; and (5)
mandating that bills undergo three readings on separate days in each
House prior to passage into law and prohibiting amendments on the last
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alter ego of Congress, but of the President.—I concur with the ponencia in
that there was no undue delegation of legislative power in the increase
from 10 percent to 12 percent of the VAT rate. I respectfully disagree,
however, with the statements therein that, first, the secretary of finance
is “acting as the agent of the legislative department” or an “agent of
Congress” in determining and declaring the event upon which its
expressed will is to take effect; and, second, that the secretary’s
personality “is in reality but a projection of that of Con-gress.” The
secretary of finance is not an alter ego of Congress, but of the President.
The mandate given by RA 9337 to the secretary is not equipollent to an
authority to make laws. In passing this law, Congress did not restrict or
curtail the constitutional power of the President to retain control and
supervision over the entire Executive Department. The law should be
construed to be merely asking the President, with a recommendation
from the President’s alter ego in finance matters, to determine the factual
bases for making the increase in VAT rate operative. Indeed, as I have
mentioned earlier, the fact-finding condition is a mere administrative, not
legislative, function.
indirect tax on consumption, called taxe sur la valeur ajoutée, which was
quickly adopted by the Direction Générale des Impost, the new French tax
authority of which he became joint director. Consequently, taxpayers at
all levels in the production process,
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Same; Same; Same; Same; In the exercise of its inherent power to tax,
the State validly interferes with the right to property of persons, natural or
artificial; The reduction of tax credits is a question of economic policy, not
of legal perlustration.—Petitioners have not been denied due process or,
as I have illustrated earlier, equal protection. In the exercise of its
inherent power to tax, the State validly interferes with the right to
property of persons, natural or artificial. Those similarly situated are
affected in the same way and treated alike, “both as to privileges
conferred and liabilities enforced.” RA 9337 was enacted precisely to
achieve the objective of raising revenues to defray the necessary expenses
of government. The means that this law employs are reasonably related
to the accomplishment of such objective, and not unduly oppressive. The
reduction of tax credits is a question of economic policy, not of legal
perlustration. Its determination is vested in Congress, not in this Court.
Since the purpose of the law is to raise revenues, it cannot be denied that
the means employed is reasonably related to the achievement of that
purpose. Moreover, the proper congressional procedure for its enactment
was followed; neither public notice nor public hearings were denied.
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Same; Same; Unlike the laws of physical science, the VAT system can
always be modified to suit modern fiscal demands.—It is contended that
the VAT should be proportional in nature. I submit that this
proportionality pertains to the rate imposable, not the credit allowable.
Private enterprises are subjected to a proportional VAT rate, but VAT
credits need not be. The VAT is, after all, a human concept that is neither
immutable nor invariable. In fact, it has changed after it was adopted as
a system of indirect taxation by other countries. Again unlike the laws of
physical science, the VAT system can always be modified to suit modern
fiscal demands. The State, through the Legislative Department, may
even choose to do away with it and revert to our previous system of
turnover taxes, sales taxes and compensating taxes, in which credits may
be disallowed altogether.
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Same; Same; Same; Same; Same; Tariff Powers; If the intention of the
Framers of the Constitution is to permit the delegation of the power to fix
tax rates or VAT rates to the President, such could have been easily
achieved by the mere inclusion of the term “tax rates” or “VAT rates” in the
enumeration.—Noteworthy is the absence of tax rates or VAT rates in the
enumeration. If the intention of the Fram-
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ers of the Constitution is to permit the delegation of the power to fix tax
rates or VAT rates to the President, such could have been easily achieved
by the mere inclusion of the term “tax rates” or “VAT rates” in the
enumeration. It is a dictum in statutory construction that what is
expressed puts an end to what is implied. Expressium facit cessare
tacitum. This is a derivative of the more familiar maxim express mention
is implied exclusion or expressio unius est exclusio alterius.
Considering that Section 28 (2), Article VI expressly speaks only of “tariff
rates, import and export quotas, tonnage and wharfage dues and other
duties and imposts,” by no stretch of imagination can this enumeration
be extended to include the VAT.
Same; Same; Same; Same; Same; Control Power; The two conditions
set forth by law would have been sufficient had it not been for the fact that
the President, being at the helm of the entire officialdom, has more than
enough power of control to bring about the existence of such conditions—
that the President’s exercise of an authority is practically within her
control is tantamount to giving no conditions at all.—At first glance, the
two conditions may appear to be definite standards sufficient to guide the
President. However, to my mind, they are ineffectual and malleable as
they give the President ample opportunity to exercise her authority in
arbitrary and discretionary fashion. The two conditions set forth by law
would have been sufficient had it not been for the fact that the President,
being at the helm of the entire officialdom, has more than enough power
of control to bring about the existence of such conditions. Obviously, R.A.
No. 9337 allows the President to determine for herself whether the VAT
rate shall be increased or not at all. The fulfillment of the conditions is
entirely placed in her hands. If she wishes to increase the VAT rate, all
she has to do is to strictly enforce the VAT collection so as to exceed the 2
4/5% ceiling. The same holds true with the national government deficit.
She will just limit government expenses so as not to exceed the 1 1/2%
ceiling. On the other hand, if she does not wish to increase the VAT rate,
she may discourage the Secretary of Finance from making the
recommendation. That the President’s exercise of an authority is
practically within her control is tantamount to giving no conditions at all.
I believe this amounts to a virtual surrender of legislative power to her. It
must be stressed that the validity of a law is not tested by what has been
done but by what may be done under its provisions.
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have forgotten that for every increase of taxes, the burden always redounds
to the people; Taxation is not a power to be exercised at one’s whim.—Why
authorize the President to increase the VAT rate on the premise alone
that she deserves an “incentive” or “reward”? Indeed, why should she be
rewarded for performing a duty reposed upon her by law? The rationale
stated by Senator Recto is flawed. One of the principles of sound taxation
is fiscal adequacy. The proceeds of tax revenue should coincide with, and
approximate the needs of, government expenditures. Neither an excess
nor a deficiency of revenue vis-à–-vis the needs of government would be
in keeping with the principle. Equating the grant of authority to the
President to increase the VAT rate with the grant of additional allowance
to a studious son is highly inappropriate. Our Senators must have
forgotten that for every increase of taxes, the burden always redounds to
the people. Unlike the additional allowance given to a studious son that
comes from the pocket of the granting parent alone, the increase in the
VAT rate would be shouldered by the masses. Indeed, mandating them to
pay the increased rate as an award to the President is arbitrary and
unduly oppressive. Taxation is not a power to be exercised at one’s whim.
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begin or start solely and only in the House. Not the Senate. Not both
Chambers of Congress. But there is more to it than that. It also means
that “an act for taxation must pass the House first.” It is no consequence
what amendments the Senate adds. A perusal of the legislative history of
R.A. No. 9337 shows that it did not “exclusively originate” from the House
of Representatives.
Same; Same; The Senate in passing Senate Bill No. 1950, a tax
measure, merely took into account House Bills No. 3555 and 3705, but did
not concur with or amend either or both bills.—Senate Bill No. 1950 is not
based on any bill passed by the House of Representatives. It has a
legislative identity and existence separate and apart from House Bills
No. 3555 and 3705. Instead of concurring or proposing amendments,
Senate Bill No. 1950 merely “takes into consideration” the two House
Bills. To take into consideration means “to take into account.”
Consideration, in this sense, means “deliberation, attention, observation
or contemplation. Simply put, the Senate in passing Senate Bill No. 1950,
a tax measure, merely took into account House Bills No. 3555 and 3705,
but did not concur with or amend either or both bills. As a matter of fact,
it did not even take these two House Bills as a frame of reference. In
Tolentino, the majority subscribed to the view that Senate may amend
the House revenue bill by substitution or by presenting its own version of
the bill. In either case, the result is “two bills on the same subject.” This is
the source of the “germaneness” rule which states that the Senate bill
must be germane to the bill originally passed by the House of
Representatives. In Tolentino, this was not really an issue as both the
House and Senate Bills in question had one subject—the VAT.
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that the Senate could not, without violating the germaneness rule and
the principle of “exclusive origination,” propose tax matters not included
in the House Bills.
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ture to guard against the consequences of its own future passions, myopia,
or herd behavior.—It is well to recall the rationale for the “no-amendment
rule” and the “three-reading rule” in Article VI, Section 26(2) of the
Constitution. The proscription on amendments upon the last reading is
intended to subject all bills and their amendments to intensive
deliberation by the legislators and the ample ventilation of issues to
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and certain to occur, effective January 1, 2006. All that the President will
do is state which of the two conditions occurred and thereupon implement
the rate increase.
so, since these were precisely the mitigating measures that go hand-on-
hand with E-VAT, and are, therefore, essential—and hopefully sufficient
—means to enable our people to bear the sacrifices they are being asked to
make; The provisions on corporate income taxes, which are not germane to
the E-VAT law, are not found in the Senate and House bills.—The
introduction of the mitigating or cushioning measures through the
Senate or through the Bicameral Conference Committee, is also being
questioned by petitioners as unconstitutional for violating the rule
against amendments after third reading and the rule that tax measures
must originate exclusively in the House of Representatives (Art. VI, Secs.
24 and 26 [2], Constitution). For my part, I would rather give the
necessary leeway to Congress, as long as the changes are germane to the
bill being changed, the bill which originated from the House of
Representatives, and these are so, since these were precisely the
mitigating measures that go hand-on-hand with the E-VAT, and are,
therefore, essential—and hopefully sufficient—means to enable our
people to bear the sacrifices they are being asked to make. Such an
approach is in accordance with the Enrolled Bill Doctrine that is the
prevailing rule in this jurisdiction. (Tolentino v. Secretary of Finance, 249
SCRA 628 [1994]). The exceptions I find are the provisions on corporate
income taxes, which are not germane to the E-VAT law, and are not
found in the Senate and House bills.
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asserted that “the power to tax is not the power to destroy while this
Court sits,” and we should very well live up to this expectation not only of
the revered Holmes, but of the Filipino people who rely on this Court as
the guardian of their rights. At stake is the right to exist and subsist
despite taxes, which is encompassed in the due process clause.
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VAT system.—I cannot agree with the position maintained by the Chief
Justice, Justices Panganiban and Azcuna that the provisions of the law
that do not pertain to VAT should be stricken as unconstitutional. These
would include, for example, the provisions raising corporate income
taxes. The Bicameral Conference Committee, in evaluating the proposed
amendments, necessarily takes into account not just the provisions
relating to the VAT, but the entire revenue generating mechanism in
place. If, for example, amendments to non-VAT related provisions of the
NIRC were intended to offset the expanded coverage for the VAT, then
such amendments are germane to the purpose of the House and Senate
Bills. Moreover, it would be myopic to consider that the subject matter of
the House Bill is solely the VAT system, rather than the generation of
revenue. The majority has sufficiently demonstrated that the legislative
intent behind the bills that led to the E-VAT Law was the generation of
revenue to counter the country’s dire fiscal situation. The mere fact that
the law is popularly known as the E-VAT Law, or that most of its
provisions pertain to the VAT, or indirect taxes, does not mean that any
and all amendments which are introduced by the Bicameral Conference
Committee must pertain to the VAT system.
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Same; Same; Same; The deletion of the two disparate “no pass on”
provisions which were approved by the House in one instance, and only by
the Senate in the other, remains in the sphere of compromise that
ultimately guides the approval of the final version.—I also offer this brief
comment regarding the deletion of the so-called “no pass on” provisions,
which several of my colleagues deem unconstitutional. Both the House
and Senate Bills contained these provisions that would prohibit the
seller/producer from passing on the cost of the VAT payments to the
consumers. However, an examination of the said bills reveal that the “no
pass on” provisions in the House Bill affects a different subject of taxation
from that of the Senate Bill. In the House Bill No. 3705, the taxpayers
who are prohibited from passing on the VAT payments are the sellers of
petroleum products and electricity/power generation companies. In
Senate Bill No. 1950, no prohibition was adopted as to sellers of
petroleum products, but enjoined therein are electricity/power generation
companies but also transmission and distribution companies. I consider
such deletions as valid, for the same reason that I deem the amendments
valid. The deletion of the two disparate “no pass on” provisions which
were approved by the House in one instance, and only by the Senate in
the other, remains in the sphere of compromise that ultimately guides
the approval of the final version. Again, I point out that even while the
two provisions may have been originally approved by the House and
Senate respectively, their subsequent deletion by the Bicameral
Conference Committee is still subject to approval by both chambers of
Congress when the final version is submitted for deliberation and voting.
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wounds to the head, while many others are not. Yet just because the fear
of mortality would be merely speculative, it does not mean that there
should be less compulsion to avoid a situation of getting shot in the head.
Same; Same; Same; Clear and Present Danger Doctrine; One of the
most significant legal principles of the last century, the “clear and present
danger” doctrine in free speech cases, in fact emanates from the
prospectivity, and not the actuality of danger.—The Court has long
responded to strike down prospective actions, even if the injury has not
yet even occurred. One of the most significant legal principles of the last
century, the “clear and present danger” doctrine in free speech cases, in
fact emanates from the prospectivity, and not the actuality of danger. The
Court has not been hesitant to nullify acts which might cause injury,
owing to the presence of a clear and present danger of a substantive evil
which the State has the right to prevent. It has even extended the “clear
and present danger rule” beyond the confines of freedom of expression to
the realm of freedom
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Same; Same; Same; Same; If our society can take cold comfort in the
ability of the legislature to amend its enactments as the defense against
unconstitutional laws, what remains then as the function of judicial
review? The long-standing tradition has been reliance on the judicial
branch, and not the legislative branch, for salvation from unconstitutional
laws.—It is also asserted that if the implementation of the 70% cap
imposes an unequal effect on different types of businesses with varying
profit margins and capital requirements, then the remedy would be an
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the final transaction involving the end user, but on previous stages as
well so long as there was a sale involved. Thus, VAT does not simply
pertain to the extra percentage paid by the buyer of a fast-food meal, but
also that paid by restaurant itself to its suppliers of raw food products.
This multi-stage system is more acclimated to the vagaries of the modern
industrial climate, which has long surpassed the stage when there was
only one level of transfer between the farmer who harvests the crop and
the person who eats the crop. Indeed, from the extraction or production of
the raw material to its final consumption by a user, several transactions
or sales materialize. The VAT system assures that the government shall
reap income for every transaction that is had, and not just on the final
sale or transfer.
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automatic badge of poor business skills, but a reality dictated by the laws
of the marketplace. The probability of profit is lower than that of capital
expenditures, and ultimately, many business establishments end up with
a higher input tax than output tax in a given quarter. This would be
especially true for small to medium enterprises who do not reap sufficient
profits from its business in the first place, and for those firms that opt to
also invest in capital expenses in addition to the overhead. Whatever
miniscule profit margins that can be obtained usually spell the difference
between life and death of the business. The possibility of profit is further
diminished by the fact that businesses have to shoulder the input VAT in
the purchase of their capital expenses. Yet the erstwhile VAT system was
not tainted by the label of oppressiveness and neither did it bear the
confiscatory mode. This was because of the immediate relief afforded from
the input taxes paid by the crediting system. In theory, VAT is not
supposed to affect the profit margin. If such margin is affected, it is only
because of the prepayment of the input taxes, and this should be remedied
by the immediate recovery through the crediting system of the settled input
taxes. The new E-VAT law changes all that, and puts in jeopardy the
survival of small to medium enterprises.
Same; Same; The majority fails to consider one of the most important
concepts in finance, time value for money—the longer the amount remains
unutilized, the higher the degree of its depreciation in value, in accordance
with the concept of time value of money.—The majority fails to consider
one of the most important concepts in finance, time value for money.
Simply put, the value of one peso is worth more today than in 2006.
Money that you hold today is worth more because you can invest it and
earn interest. By reason of the 70% cap, the amount of input VAT credit
Same; Same; The raison d’etre of this 70% cap is to make it appear on
paper that the government is more solvent than it actually is; If the 70%
cap was designed in order to enhance revenue collection, then I submit
that the means employed stand beyond reason.—It would be sad, but fair,
if a business ceases because of its inability to
66
Same; Same; The effect of the 70% cap is to effectively impose a tax
amounting to 3% of gross revenue.—Only stable businesses with
substantial cash flows, or extraordinarily successful enterprises will be
able to remain in operation should the 70% cap be retained. The effect of
the 70% cap is to effectively impose a tax amounting to 3% of gross
revenue. The amount may seem insignificant to those without working
knowledge of the ways of business, but anybody who is actually familiar
with business would be well aware the profit margins of the retailing and
distribution sectors typically amount to less than 1% of the gross
revenues. A taxpayer has to earn a margin of at least 3% on gross
revenue in order to recoup the losses sustained due to the 70% cap. But
as stated earlier, profits are chancy, and the entrepreneur does not have
full control of the conditions that lead to profit.
67
68
69
Same; Same; What the majority fails to mention is that under Section
10 of the E-VAT Law, which amends Section 112 of the NIRC, the tax
credit or refund may not be done while the enterprise remains operational.
—Nonetheless, the majority notes that the excess creditable input tax
may be the subject of a tax credit certificate, which then could be used in
payment of internal revenue taxes, or a refund to the extent that such
input taxes have not been applied against output taxes. What the
majority fails to mention is that under Section 10 of the E-VAT Law,
which amends Section 112 of the NIRC, such credit or refund may not be
done while the enterprise remains operational.
70
Same; Same; Due Process; Assets would fall under the purview of
property under the due process clause, and if the taxing arm of the State
recognizes that such property belongs to the taxpayer and not to the State,
then due respect should be given to such expert opinion.— The BIR itself
has recognized that unutilized input VAT is one of those assets, corporate
attributes or property rights that, in the event of a merger, are
transferred to the surviving corporation by operation of law. Assets would
fall under the purview of property under the due process clause, and if
the taxing arm of the State recognizes that such property belongs to the
taxpayer and not to the State, then due respect should be given to such
expert opinion. Even under the International Accounting Standards I
adverted to above, the unutilized input VAT credit may be recognized as
an asset “to the extent that it is probable that future taxable profit will
be available against which the unused tax losses and unused tax credits
can be utilised” If not probable, it would be recognized as a loss. Since
these international standards, duly recognized by the Securities and
Exchange Commission as controlling in this jurisdiction, attribute
tangible gain or loss to the VAT credit, it necessarily follows that there is
proprietary value attached to such gain or loss.
Same; Same; Same; To assert that the input VAT is merely a privilege
is to correspondingly claim that the business profit is similarly a mere
privilege.—The prepaid input tax represents unutilized profit, which can
only be utilized if it is refunded or credited to output taxes. To assert that
the input VAT is merely a privilege is to correspondingly claim that the
business profit is similarly a mere privilege. The Constitution itself
recognizes the right to profit by private enterprises. As I stated earlier,
one of the enunciated State policies under the Constitution is the
recognition of the indispensable role of the private sector, the
encouragement of private enterprise, and the provision of incentives to
needed investments. Moreover, the Constitution also requires the State to
recognize the right of
71
Same; Same; For some lucky enterprises who may be able to survive
the injury brought about by the 70% cap, this 60 month amortization
period might instead provide the mortal head wound.—Even existing
small to medium enterprises are imperiled by this 60 month amortization
restriction, especially considering the application of the 70% cap. The
additional purchase of capital goods bears as a means of adding value to
the consumer good, as a means to justify the increased selling price.
However, the purchase of capital goods in excess of P1,000,000.00 would
impose another burden on the small to medium enterprise by further
restricting their ability to immediately recover the entire prepaid input
VAT (which would exceed at least
72
73
74
same thing or activity twice, when it should be taxed but once, for the
same purpose and with the same kind of character of tax. Double
taxation is not expressly forbidden in our constitution, but the Court has
recognized it as obnoxious “where the taxpayer is taxed twice for the
benefit of the same governmental entity or by the same jurisdiction for
the same purpose.” Certainly, both the 5% final tax withheld and the
general corporate income tax are both paid for the benefit of the national
government, and for the same incidence of taxation, the sale/lease of
goods and services to the government.
Same; Same; Intelligent tax policy should extend beyond the singular-
minded goal of raising State funds—the old-time philosophy behind the
taxing schemes of war-mongering monarchs and totalitarian states—and
should sincerely explore the concept of taxation as a means of providing
genuine incentives to private enterprise to spur economic growth, of
promoting egalitarian social justice that would allow everyone to their fair
share of the nation’s wealth.—The VAT system, in itself, is intelligently
designed, and stands as a fair means to raise revenue. It has been
adopted worldwide by countries hoping to employ an efficient means of
taxation. The concerns I have raised do not detract from my general
approval of the VAT system. I do lament though that our government’s
wholehearted adoption of the VAT system is endemic of what I deem a
flaw in our national tax policy in the last few decades. The power of
taxation, inherent in the State and ever so powerful, has been generally
employed by our financial planners for a solitary purpose: the raising of
revenue. Revenue generation is a legitimate purpose of taxation, but
standing alone, it is a woefully unsophisticated design. Intelligent tax
policy should extend beyond the singular-minded goal of raising State
funds—the old-time philosophy behind the taxing schemes of war-
mongering monarchs and totalitarian states—and should sincerely
explore the concept of taxation as a means of providing genuine
incentives to private enterprise to spur economic growth; of promoting
egalitarian social justice that would allow everyone to their fair share of
the nation’s wealth. Instead, we are condemned by a national policy
driven by the monomania for State revenue. It may be beyond my oath as
a Justice to compel the government to adopt an economic policy in
consonance with my personal views, but I offer these observations since
they lie at the very heart of the noxiousness of the assailed provisions of
the E-VAT law. The 70% cap, the 60-month amortization period and the
5% withholding tax on govern-
75
Same; Same; Under the device employed in the E-VAT law, the price
to be paid for a more sustainable liquidity of the government’s finances
will be the death of local business, and correspondingly, the demise of our
society.—I am not insensitive to the concerns raised by the respondents
as to the dire consequences to the economy should the E-VAT law be
struck down. I am aware that the granting of the petition in G.R. No.
168461 will negatively affect the cash flow of the government. If that
were the only relevant concern at stake, I would have no problems
denying the petition. Unfortunately, under the device employed in the
E-VAT law, the price to be paid for a more sustainable liquidity of the
government’s finances will be the death of local business, and
correspondingly, the demise of our society. It is a measure just as
draconian as the standard issue taxes of medieval tyrants.
Same; Same; Taxes may be the lifeblood of the state, but never at the
expense of the life of its subjects.—I am not normally inclined towards the
language of the overwrought, yet if the sky were indeed truly falling, how
else could that fact be communicated. The E-VAT Law is of multiple fatal
consequences. How are we to survive as a nation without the bulwark of
private industries? Perhaps the larger scale, established businesses may
ultimately remain standing, but they will be unable to sustain the void
left by the demise of small to medium enterprises. Or worse, domestic
industry would be left in the absolute control of monopolies, combines or
cartels, whether dominated by foreigners or local oligarchs. The
destruction of subsisting industries would be bad enough, the destruction
of opportunity and the entrepreneurial spirit would be even more
grievous and tragic, as it would mark as well the end of hope. Taxes may
be the lifeblood of the state, but never at the expense of the life of its
subjects.
76
believe that it is more prudent for this Court to remain conservative and
to continue its adherence to the enrolled bill doctrine, for to abandon the
said doctrine would be to open a Pandora’s Box, giving rise to a situation
more fraught with evil and mischief. Statutes enacted by Congress may
not attain finality or conclusiveness unless declared so by this Court.
This would undermine the authority of our statutes because despite
having been signed and certified by the designated officers of Congress,
their validity would still be in doubt and their implementation would be
greatly hampered by allegations of irregularities in their passage by the
Legislature. Such an uncertainty in the statutes would indubitably result
in confusion and disorder. In all probability, it is the contemplation of
such a scenario that led an American judge to proclaim, thus—. . . Better,
far better, that a provision should occasionally find its way into the
statute through mistake, or even fraud, than, that every Act, state and
national, should at any and all times be liable to put in issue and
impeached by the journals, loose papers of the Legislature, and parol
evidence. Such a state of uncertainty in the statute laws of the land
would lead to mischiefs absolutely intolerable. . . .
77
Taxation; Germaneness Rule; If we have one Code for all our national
internal revenue taxes, then there is no reason why we cannot have a
single statute amending provisions thereof even if they involve different
taxes under separate titles.—Although House Bills No. 3555 and 3705
were limited to the amendments of the provisions on VAT of the National
Internal Revenue Code of 1997, Senate Bill No. 1950 had a much wider
scope and included amendments of other provisions of the said Code,
such as those on income, percentage, and excise taxes. It should be borne
in mind that the very purpose of these three Bills and, subsequently, of
Rep. Act No. 9337, was to raise additional revenues for the government to
address the dire economic situation of the country. The National Internal
Revenue Code of 1997, as its title suggests, is the single Code that
governs all our national internal revenue taxes. While it does cover
different taxes, all of them are imposed and collected by the national
government to raise revenues. If we have one Code for all our national
internal revenue taxes, then there is no reason why we cannot have a
single statute amending provisions thereof even if they involve different
taxes under separate titles. I hereby submit that the amendments
introduced by the Bicameral Conference Committee to non-VAT
provisions of the National Internal Revenue Code of 1997 are not
unconstitutional for they are germane to the purpose of House Bills No.
3555 and 3705 and Senate Bill No. 1950, which is to raise national
revenues.
78
constitute an additional cost for him. While it is true that input VAT
credits are reported as assets in a VAT-registered person’s financial
statements and books of account, this accounting treatment is still based
on the statutory provision recognizing the input VAT as a credit. Without
Section 110 of the National Internal Revenue Code of 1997, then the
accounting treatment of any input VAT will also change and may no
longer be booked outright as an asset. Since the privilege of an input VAT
credit is granted by law, then an amendment of such law may limit the
exercise of or may totally withdraw the privilege.
Same; Same; To say that Congress may not trifle with Section 110 of
the National Internal Revenue Code of 1997 would be to violate a basic
precept of constitutional law—that no law is irrepealable; There can be no
vested right to the continued existence of a statute, which precludes its
change or repeal.—The amendment of Section 110 of the National
Internal Revenue Code of 1997 by Rep. Act No. 9337, which imposed the
70% cap on input VAT credits, is a legitimate exercise by Congress of its
law-making power. To say that Congress may not trifle with Section 110
of the National Internal Revenue Code of 1997 would be to violate a basic
precept of constitutional law—that no law is irrepealable. There can be
no vested right to the continued existence of a statute, which precludes
its change or repeal.
79
accorded to it by Rep. Act No. 9337, the petroleum dealers reject the
limitation imposed by the very same law on such use. It should be
remembered that prior to Rep. Act No. 9337, the petroleum dealers’ input
VAT credits were inexistent—they were unrecognized and disallowed by
law. The petroleum dealers had no such property called input VAT
credits. It is only rational, therefore, that they cannot acquire vested
rights to the use of such input VAT credits when they were never entitled
to such credits in the first place, at least, not until Rep. Act No. 9337. My
view, at this point, when Rep. Act No. 9337 has not yet even been
implemented, is that petroleum dealers’ right to use their input VAT as
credit against their output VAT unlimitedly has not vested, being a mere
expectancy of a future benefit and being contingent on the continuance of
Section 110 of the National Internal Revenue Code of 1997, prior to its
amendment by Rep. Act No. 9337.
Same; Same; The 70% cap on input VAT credits was not imposed by
Congress arbitrarily—members of the Bicameral Conference Committee
settled on the said percentage so as to ensure that the government can
collect a minimum of 30% output VAT per taxpayer, to put a VAT-
taxpayer, at least, on equal footing with a VAT-exempt taxpayer under
Section 109(V) of the National Internal Revenue Code, as amended by
Rep. Act No. 9337.—I find that the 70% cap on input VAT credits was not
imposed by Congress arbitrarily. Members of the Bicameral Conference
Committee settled on the said percentage so as to ensure that the
government can collect a minimum of 30% output VAT per taxpayer. This
is to put a VAT-taxpayer, at least, on equal footing with a VAT-exempt
taxpayer under Section 109(V) of the National Internal Revenue Code, as
amended by Rep. Act No. 9337. The latter taxpayer is exempt from VAT
on the basis that his sale or lease of goods or properties or services do not
exceed P1,500,000; instead, he is subject to pay a three percent (3%) tax
on his gross receipts in lieu of the VAT. If a taxpayer with presumably a
smaller business is required to pay three percent (3%) gross receipts tax,
a type of tax which does not even allow for any crediting, a VAT-taxpayer
with a bigger business should be obligated, likewise, to pay a minimum of
30% output VAT (which should be equivalent to 3% of the gross selling
price per good or property or service sold). The cap assures the
government a collection of at least 30% output VAT, contributing to an
improved cash flow for the government.
80
AUSTRIA-MARTINEZ, J.:
_______________
1
Entitled “An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111,
112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237, and 288 of the National
Internal Revenue Code of 1997, As Amended and For Other Purposes.”
81
LEGISLATIVE HISTORY
_______________
2
Entitled, “An Act Restructuring the Value-Added Tax, Amending for
the Purpose Sections 106, 107, 108, 110 and 114 of the National Internal
Revenue Code of 1997, As Amended, and For Other Purposes.”
3
Entitled, “An Act Amending Sections 106, 107, 108, 109, 110 and 111
of the National Internal Revenue Code of 1997, As Amended, and For
Other Purposes.”
82
_______________
4
Entitled, “An Act Amending Sections 27, 28, 34, 106, 108, 109, 110,
112, 113, 114, 116, 117, 119, 121, 125, 148, 151, 236, 237 and 288 of the
National Internal Revenue Code of 1997, As Amended, and For Other
Purposes.”
5
Section 26, R.A. No. 9337.
83
84
85
_______________
6
TSN, July 14, 2005.
86
_______________
7
Section 125 of the National Internal Revenue Code, as amended, was
not amended by R.A. No. 9337, as can be gleaned from the title and body
of the law.
89
RESPONDENTS’ COMMENT
measure
90
ISSUES
PROCEDURAL ISSUE
SUBSTANTIVE ISSUES
_______________
8
Section 105, National Internal Revenue of the Philippines, as
amended.
9
Ibid.
10
Deoferio, Jr., V.A. and Mamalateo, V.C., The Value Added Tax in the
92
PROCEDURAL ISSUE
I.
_______________
15
Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipi-nas, Inc.
vs. Tan, G.R. Nos. L-81311, L-81820, L-81921, L-82152, June 30, 1988,
163 SCRA 371.
16
Entitled, “An Act Restructuring the Value-Added Tax (VAT) System,
Widening its Tax Base and Enhancing its Administration, And for these
Purposes Amending and Repealing the Relevant Provisions of the
National Internal Revenue Code, as amended, and for other Purposes.”
17
Entitled, “An Act Amending Republic Act No. 7716, otherwise known
as the Value-Added Tax Law and Other Pertinent Provisions of the
National Internal Revenue Code, as Amended.”
18
Entitled, “An Act Amending the National Internal Revenue Code, as
Amended, and for other Purposes.”
93
Sec. 88. Conference Committee.—In the event that the House does
not agree with the Senate on the amendment to any bill or joint
resolution, the differences may be settled by the conference
_______________
19
Story, Commentaries 835 (1833).
94
Sec. 35. In the event that the Senate does not agree with the
House of Representatives on the provision of any bill or joint
resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten (10) days
after their composition. The President shall designate the
members of the Senate Panel in the conference committee with
the approval of the Senate.
Each Conference Committee Report shall contain a detailed
and sufficiently explicit statement of the changes in, or
amendments to the subject measure, and shall be signed by a
majority of the members of each House panel, voting separately.
A comparative presentation of the conflicting House and
Senate provisions and a reconciled version thereof with the
explanatory statement of the conference committee shall be
attached to the report.
...
_______________
20
G.R. No. 147387, December 10, 2003, 417 SCRA 503.
96
_______________
21
Id., pp. 529-530.
22
Supra., Note 20.
97
_______________
23
G.R. No. 115455, August 25, 1994, 235 SCRA 630.
24
Id., p. 670.
98
99
100
101
102
. . . the thinking was just to keep the VAT law or the VAT bill
simple. And we were thinking that no sector should be a
beneficiary of legislative grace, neither should any sector be
discriminated on. The VAT is an indirect tax. It is a pass on-tax.
_______________
25
Webster’s Third New International Dictionary, p. 1897.
103
plain and simple. Let’s not confuse the bill and put a no pass-on
provision. Two-thirds of the world have a VAT system and in this
two-thirds of the globe, I have yet to see a VAT with a no pass-
though provision. So, the thinking of the Senate is basically
26
simple, let’s keep the VAT simple. (Emphasis supplied)
_______________
26
TSN, Bicameral Conference Committee on the Disagreeing
Provisions of Senate Bill No. 1950 and House Bill Nos. 3705 and 3555,
104
_______________
29
G.R. No. 105371, November 11, 1993, 227 SCRA 703.
30
Supra, Note 23.
31
Id., p. 668.
105
Nor is there any reason for requiring that the Committee’s Report
in these cases must have undergone three readings in each of the
two houses. If that be the case, there would be no end to
negotiation since each house may seek modification of the
compromise bill . . . .
Art. VI. § 26 (2) must, therefore, be construed as
referring only to bills introduced for the first time in
either house of Congress, not to the conference committee
32
report. (Emphasis supplied)
_______________
32
Id., p. 671.
106
Section
27 Rates of Income Tax on Domestic Corporation
28(A)(1) Tax on Resident Foreign Corporation
28(B)(1) Inter-corporate Dividends
34(B)(1) Inter-corporate Dividends
116 Tax on Persons Exempt from VAT
117 Percentage Tax on domestic carriers and keepers
ofGarage
119 Tax on franchises
121 Tax on banks and Non-Bank Financial
Intermediaries
148 Excise Tax on manufactured oils and other fuels
151 Excise Tax on mineral products
236 Registration requirements
237 Issuance of receipts or sales or commercial
invoices
288 Disposition of Incremental Revenue
108
_______________
33
Id., pp. 661-663.
109
_______________
34
Transcript of Session Proceedings, January 7, 2005, pp. 19-20.
110
_______________
35
Journal of the Senate, Session No. 67, March 7, 2005, pp. 727-728.
111
However, for power plants that run on oil, we will reduce to zero
the present excise tax on bunker fuel, to lessen the effect of a VAT
on this product.
For electric utilities like Meralco, we will wipe out the
franchise tax in exchange for a VAT.
And in the case of petroleum, while we will levy the VAT on oil
products, so as not to destroy the VAT chain, we will however
bring down the excise tax on socially sensitive products such as
diesel, bunker, fuel and kerosene.
...
What do all these exercises point to? These are not contortions
of giving to the left hand what was taken from the right. Rather,
these sprang from our concern of softening the impact of VAT, so
that the people can cushion the blow of higher prices they will
36
have to pay as a result of VAT.
_______________
36
Id., p. 726.
112
SUBSTANTIVE ISSUES
I.
(A) Rate and Base of Tax.—There shall be levied, assessed and collected
on every sale, barter or exchange of goods or properties, a value-added
tax equivalent to ten percent (10%) of the gross selling price or gross
value in money of the goods or properties sold, bartered or exchanged,
such tax to be paid by the seller or transferor: provided, that the
President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax
to twelve percent (12%), after any of the following conditions has
been satisfied.
113
114
They argue that the VAT is a tax levied on the sale, barter
or exchange of goods and properties as well as on the sale
or exchange of services, which cannot be included within
the purview of tariffs under the exempted delegation as the
latter refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on
goods or merchandise imported or exported.
Petitioners ABAKADA GURO Party List, et al., further
contend that delegating to the President the legislative
power to tax is contrary to republicanism. They insist that
accountability, responsibility and transparency should
dictate the actions of Congress and they should not pass to
the President the decision to impose taxes. They also argue
that the law
115
_______________
37
See Angara vs. Electoral Commission, No. 45081, July 15, 1936, 63
Phil. 139, 156.
116
_______________
38
Defensor-Santiago vs. Commission on Elections, G.R. No. 127325,
March 19, 1997, 270 SCRA 106, 153; People vs. Rosenthal, Nos. 46076 &
46077, June 12, 1939, 68 Phil. 328; ISAGANI A. CRUZ, Philippine
Political Law 86 (1996). Judge Cooley enunciates the doctrine in the
following oft-quoted language: “One of the settled maxims in
constitutional law is, that the power conferred upon the legislature to
make laws cannot be delegated by that department to any other body or
authority. Where the sovereign power of the state has located the
authority, there it must remain; and by the constitutional agency alone
the laws must be made until the Constitution itself is changed. The power
to whose judgment, wisdom, and patriotism this high prerogative has been
intrusted cannot relieve itself of the responsibility by choosing other
agencies upon which the power shall be devolved, nor can it substitute the
judgment, wisdom, and patriotism of any other body for those to which
alone the people have seen fit to confide this sovereign trust.” (Cooley on
Constitutional Limitations, 8th ed., Vol. I, p. 224)
39
United States vs. Barrias, No. 4349, September 24, 1908, 11 Phil.
327, 330.
40
16 Am Jur 2d, Constitutional Law, § 337.
117
_______________
41
Pelaez vs. Auditor General, No. L-23825, December 24, 1965, 122
Phil. 965, 974; 15 SCRA 569, 577, citing Calalang vs. Williams, No. 47800,
December 2, 1940, 70 Phil. 726; Pangasinan Transp. Co. vs. Public Service
Commission, No. 47065, June 26, 1940, 70 Phil. 221; Cruz vs. Youngberg,
No. 34674, October 26, 1931, 56 Phil. 234; Alegre vs. Collector of Customs,
No. 30783, August 27, 1929, 53 Phil. 394 et seq.
42
Pelaez vs. Auditor General, supra, citing People vs. Lim Ho, No.
L-12091-2, January 28, 1960, 106 Phil. 887; People vs. Jolliffee, No.
L-9553, May 13, 1959, 105 Phil 677; People vs. Vera, No. 45685, November
16, 1937, 65 Phil. 56; U.S. vs. Nag Tang Ho, No. L-17122, February 27,
1922, 43 Phil. 1; Compañia General de Tabacos vs.
118
_______________
Board of Public Utility, No. 11216, March 6, 1916, 34 Phil. 136 et seq.
43
Edu vs. Ericta, No. L-32096, October 24, 1970, 35 SCRA 481, 497.
44
Eastern Shipping Lines, Inc. vs. Philippine Overseas Employment
Administration, No. L-76633, October 18, 1988, 166 SCRA 533, 543-544.
45
No. 45685, November 16, 1937, 65 Phil. 56.
119
_______________
46
Id., pp. 115-120.
120
to make laws and to alter and repeal them; the test is the
completeness of the statute in all its terms and provisions when it
leaves the hands of the legislature. To determine whether or not
there is an undue delegation of legislative power, the inquiry
must be directed to the scope and definiteness of the measure
enacted. The legislative does not abdicate its functions
when it describes what job must be done, who is to do it,
and what is the scope of his authority. For a complex
economy, that may be the only way in which the legislative
process can go forward. A distinction has rightfully been
made between delegation of power to make the laws which
necessarily involves a discretion as to what it shall be,
which constitutionally may not be done, and delegation of
authority or discretion as to its execution to be exercised
under and in pursuance of the law, to which no valid
objection can be made. The Constitution is thus not to be
regarded as denying the legislature the necessary resources of
48
flexibility and practicability. (Emphasis supplied).
_______________
47
Supra, note 43.
48
Id., pp. 496-497.
49
16 C.J.S., Constitutional Law, § 138.
50
Ibid.
121
_______________
51
16 Am. Jur. 2d, Constitutional Law § 340.
52
Yajus vs. United States, 321 US 414, 88 L.Ed. 834, 64 S Ct. 660, 28
Ohio Ops 220.
122
_______________
53
Province of Batangas vs. Romulo, G.R. No. 152774, May 27, 2004, 429
SCRA 736; Enriquez vs. Court of Appeals, G.R. No. 140473, January 28,
2003, 396 SCRA 377; Codoy vs. Calugay, G.R. No. 123486, August 12,
1999, 312 SCRA 333.
54
Province of Batangas vs. Romulo, supra; Quisumbing vs. Meralco,
G.R. No. 142943, April 3, 2002, 380 SCRA 195; Agpalo, Statutory
Construction, 1990 ed., p. 45.
123
_______________
55
Villena vs. Secretary of Interior, No. 46570, April 21, 1939, 67 Phil
451, 463-464.
56
Alunan vs. Mirasol, G.R. No. 108399, July 31, 1997, 276 SCRA 501,
513-514, citing Panama Refining Co. vs. Ryan, 293 U.S. 388, 79 L.Ed. 469
(1935).
124
_______________
57
Compañia General de Tabacos de Filipinas vs. The Board of Public
Utility Commissioners, No. 11216, 34 Phil. 136; Cruz vs. Youngberg, No.
34674, October 26, 1931, 56 Phil. 234; People vs. Vera, No. 45685,
November 16, 1937, 65 Phil. 56, 113; Edu vs. Ericta, No. L-32096, October
24, 1970, 35 SCRA 481; Tatad vs. Secretary of the Department of Energy,
G.R. No. 124360, November 5, 1997, 281 SCRA 330; Alunan vs. Mirasol,
supra.
125
_______________
58
Bowles vs. Willinghan, 321 US 503, 88 l Ed 892, 64 S Ct 641, 28 Ohio
Ops 180.
59
United Residents of Dominican Hill, Inc. vs. Commission on the
Settlement of Land Problems, G.R. No. 135945, March 7, 2001, 353 SCRA
782; Commissioner of Internal Revenue vs. Santos, G.R. No. 119252,
August 18, 1997, 277 SCRA 617, 630.
126
_______________
60
Commissioner of Internal Revenue vs. American Express
International, Inc. (Philippine Branch), G.R. No. 152609, June 29, 2005,
462 SCRA 197.
61
Acting Commissioner of Customs vs. MERALCO, No. L-23623, June
30, 1977, 77 SCRA 469, 473.
127
The condition set for increasing VAT rate to 12% have economic or
fiscal meaning. If VAT/GDP is less than 2.8%, it means that
government has weak or no capability of implementing the VAT
or that VAT is not effective in the function of the tax collection.
Therefore, there is no value to increase it to 12% because such
action will also be ineffectual.
_______________
62
Respondents’ Memorandum, pp. 168-169.
128
First, let me explain the position that the Philippines finds itself
in right now. We are in a position where 90 percent of our revenue
is used for debt service. So, for every peso of revenue that we
currently raise, 90 goes to debt service. That’s interest plus
amortization of our debt. So clearly, this is not a sustainable
situation. That’s the first fact.
The second fact is that our debt to GDP level is way out of line
compared to other peer countries that borrow money from that
international financial markets. Our debt to GDP is
approximately equal to our GDP. Again, that shows you that this
is not a sustainable situation.
The third thing that I’d like to point out is the environment
that we are presently operating in is not as benign as what it used
to be the past five years.
What do I mean by that?
In the past five years, we’ve been lucky because we were
operating in a period of basically global growth and low interest
rates. The past few months, we have seen an inching up, in fact, a
rapid increase in the interest rates in the leading economies of the
world. And, therefore, our ability to borrow at reasonable prices is
going to be challenged. In fact, ultimately, the question is our
ability to access the financial markets.
_______________
63
The Wealth of Nations, Book V, Chapter II.
64
Chavez vs. Ongpin, G.R. No. 76778, June 6, 1990, 186 SCRA 331,
338.
129
When the President made her speech in July last year, the
environment was not as bad as it is now, at least based on the
forecast of most financial institutions. So, we were assuming that
raising 80 billion would put us in a position where we can then
convince them to improve our ability to borrow at lower rates. But
_______________
65
TSN, Bicameral Conference Committee on the Disagreeing Provisions of
Senate Bill No. 1950 and House Bill Nos. 3705 and 3555, April 25, 2005, pp. 5-6.
130
66
cognizance.
In the same vein, the Court in this case will not dawdle on
the purpose of Congress or the executive policy, given that
it is not for the judiciary to “pass upon questions of wisdom,
justice or expediency of legislation.”67
II.
_______________
66
G.R. No. 147387, December 10, 2003, 417 SCRA 503, 524.
67
National Housing Authority vs. Reyes, G.R. No. L-49439, June 29,
1983, 123 SCRA 245, 249.
131
_______________
68
Sison vs. Ancheta, G.R. No. L-59431, July 25, 1984, 130 SCRA 654,
661.
132
the extent that such input taxes have not been applied
against the output taxes. Such unused input tax may be
used in payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a
given quarter is not ad infinitum, as petitioners
exaggeratedly contend. Their analysis of the effect of the
70% limitation is incomplete and one-sided. It ends at the
net effect that there will be unapplied/unutilized inputs
VAT for a given quarter. It does not proceed further to the
fact that such unapplied/unutilized input tax may be
credited in the subsequent periods as allowed by the carry-
over provision of Section 110(B) or that it may later on be
refunded through a tax credit certificate under Section
112(B).
Therefore, petitioners’ argument must be rejected.
On the other hand, it appears that petitioner Garcia
failed to comprehend the operation of the 70% limitation on
the input tax. According to petitioner, the limitation on the
creditable input tax in effect allows VAT-registered
establishments to retain a portion of the taxes they collect,
which violates the principle that tax collection and revenue
should be for public purposes and expenditures
As earlier stated, the input tax is the tax paid by a
person, passed on to him by the seller, when he buys goods.
Output tax meanwhile is the tax due to the person when he
sells goods. In computing the VAT payable, three possible
scenarios may arise:
First, if at the end of a taxable quarter the output taxes
charged by the seller are equal to the input taxes that he
paid and passed on by the suppliers, then no payment is
required;
133
Second, when the output taxes exceed the input taxes, the
person shall be liable for the excess, which has to be paid to
the Bureau of Internal Revenue (BIR);69 and
Third, if the input taxes exceed the output taxes, the
excess shall be carried over to the succeeding quarter or
quarters. Should the input taxes result from zero-rated or
effectively zero-rated transactions, any excess over the
output taxes shall instead be refunded to the taxpayer or
credited against other internal revenue taxes, at the
taxpayer’s option.70
_______________
69
Section 8, R.A. No. 9337, amending Section 110(A)(B),NIRC.
70
Ibid.
71
Commissioner of Internal Revenue vs. Benguet Corp., G.R. Nos.
134587 & 134588, July 8, 2005, 463 SCRA 28.
134
_______________
72
United Paracale Mining Co. vs. Dela Rosa, G.R. Nos. 63786-87, April 7, 1993,
221 SCRA 108, 115.
73
E.O. No. 273, Section 1.
74
Section 5.
75
Section 110(B).
135
_______________
76
Journal of the Senate, Session No. 71, March 15, 2005, p. 803.
77
Id., Session No. 67, March 7, 2005, p. 726.
78
Id., Session No. 71, March 15, 2005, p. 803.
136
remitted within ten (10) days following the end of the month the
withholding was made.
_______________
79
Revenue Regulations No. 14-2005, 4.114-2(a).
80
Commissioner of Internal Revenue vs. Philipine American Accident
Insurance Company, Inc., G.R. No. 141658, March 18, 2005, 453 SCRA
668.
138
the cost. Equally, should the actual input tax be less than
5%, the difference is treated as income.81
Petitioners also argue that by imposing a limitation on
the creditable input tax, the government gets to tax a profit
or value-added even if there is no profit or value-added.
Petitioners’ stance is purely hypothetical,
argumentative, and again, one-sided. The Court will not
engage in a legal joust where premises are what ifs,
arguments, theoretical and facts, uncertain. Any
disquisition by the Court on this point will only be, as
Shakespeare describes life in Macbeth,82 “full of sound and
fury, signifying nothing.”
What’s more, petitioners’ contention assumes the
proposition that there is no profit or value-added. It need
not take an astute businessman to know that it is a matter
of exception that a business will sell goods or services
without profit or value-added. It cannot be overstressed
_______________
81
Revenue Regulations No. 14-2005, Sec. 4. 114-2.
82
Act V, Scene V.
83
Philippine Rural Electric Cooperatives Association, Inc. vs.
Department of Interior and Local Government, G.R. No. 143076, June 10,
2003, 403 SCRA 558, 565.
140
_______________
84
Aban, Benjamin, Law of Basic Taxation in the Philippines (First
Edition 1994).
85
Philippine Judges Association case, supra., note 29.
141
_______________
86
Commissioner of Internal Revenue vs. Court of Appeals, G.R. No.
119761, August 29, 1996, 261 SCRA 236, 249.
87
Kee vs. Court of Tax Appeals, No. L-18080, April 22, 1963, 117 Phil.
682, 688; 7 SCRA 670, 676.
142
_______________
88
Section 7, R.A. No. 9337.
89
Ibid.
90
No. L-81311, June 30, 1988, 163 SCRA 371, 383.
91
Section 17, R.A. No. 9337, amending Section 148, NIRC.
143
C. Progressivity of Taxation
_______________
92
Section 18, amending Section 151, NIRC.
93
Section 14, amending Section 117, NIRC.
94
Section 15, amending Section 119, NIRC.
95
Sections 1 and 2, amending Sections 27 and 28, NIRC.
96
Section 2, amending Section 28, NIRC.
97
Section 1, amending Section 27(C), NIRC.
144
thus:
_______________
98
Reyes vs. Almanzor, G.R. Nos. 49839-46, April 26, 1991, 196 SCRA 322, 327.
145
the oldest form of indirect taxes, would have been prohibited with
the proclamation of Art. VIII, §17 (1) of the 1973 Constitution
from which the present Art. VI, §28 (1) was taken. Sales taxes are
also regressive.
Resort to indirect taxes should be minimized but not avoided
entirely because it is difficult, if not impossible, to avoid them by
imposing such taxes according to the taxpayers’ ability to pay. In
the case of the VAT, the law minimizes the regressive effects of
this imposition by providing for zero rating of certain transactions
(R.A. No. 7716, §3, amending §102 (b) of the NIRC), while
granting exemptions to other transactions. (R.A. No. 7716, §4
99
amending §103 of the NIRC)”
CONCLUSION
Let us not be overly influenced by the plea that for every wrong
_______________
99
Tolentino vs. Secretary of Finance, G.R. No. 115455, October 30, 1995, 249
SCRA 628, 659.
146
_______________
100
Vera vs. Avelino, G.R. No. L-543, August 31, 1946, 77 Phil. 365.
101
Ibid.
147
SEPARATE CONCURRING
AND DISSENTING OPINION
_______________
1
Tolentino v. Secretary of Finance, G.R. No. 115455, 25 August 1994,
235 SCRA 630, and companion cases.
148
_______________
2
ISAGANI A. CRUZ, POLITICAL LAW 154 (2002 ed.) citing U.S. v.
Nortorn, 91 U.S. 566.
149
_______________
3
G.R. No. 105371, 11 November 1993, 27 SCRA 703, 708, citing Davies,
Legislative Law and Process: In a Nutshell 81 (1986 ed.)
4
Supra note 1.
151
PUNO, J.:
_______________
1
Angara v. Electoral Commission, 63 Phil. 139 (1936); See also Tribe,
American Constitutional Law, pp. 311-314 (3rd ed.).
2
Mendoza, Judicial Review of Constitutional Questions: Cases and
Materials, p. 86 (2004).
153
_______________
3
Id., at p. 87.
4
Abbott Laboratories v. Gardner, 387 U.S. 136 (1967); I Tribe,
American Constitutional Law, p. 334 (3rd ed.).
5
Texas v. United States, 523 U.S. 296 (1998); Thomas v. Union Carbide
Agricultural Products Co., 473 U.S. 568 (1985); I Tribe, American
Constitutional Law, pp. 335-336 (3rd ed.).
6
Communist Party of the United States v. Subversive Activities Control
Bd., 367 U.S. 1, 71 (1961); I Tribe, American Constitutional Law, p. 336
(3rd ed.); See also concurring opinion of Justice Brandeis in Ashwander v.
Tennessee Valley Authority, 297 U.S. 288 (1936).
154
In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the
differences shall be settled by a conference committee of both Houses which
shall meet within ten days after their composition.
Each Conference Committee Report shall contain a detailed and
sufficiently explicit statement of the changes in or amendments to the
subject measure, and shall be signed by the conferees. (Emphasis
supplied)
In the event that the House does not agree with the Senate on the
_______________
7
235 SCRA 630 (1994).
8
See Opinion in 235 SCRA 630, 805-825.
155
wield ex post veto power does not only contravene the rules of both
the Senate and the House. It wages war against our settled ideals
of representative democracy. For the inevitable, catastrophic
effect of the thesis is to install a Bicameral Conference Committee
as the Third Chamber of our Congress, similarly vested with the
power to make laws but with the dissimilarity that its laws are
not the sub-
156
for ill, hence, our Constitution carefully laid out a plan and a
procedure for its exercise. Firstly, it vouchsafed that the power to
make laws should be exercised by no other body except the Senate
and the House. It ought to be indubitable that what is
contemplated is the Senate acting as a full Senate and the House
acting as a full House. It is only when the Senate and the House
act as whole bodies that they truly represent the people. And it is
only when they represent
157
the people that they can legitimately pass laws. Laws that are not
enacted by the people’s rightful representatives subvert the
people’s sovereignty. Bicameral Conference Committees, with
their ad hoc character and limited membership, cannot pass laws
for they do not represent the people. The Constitution does not
allow the tyranny of the majority. Yet, the respondents will
impose the worst kind of tyranny—the tyranny of the minority
over the majority. Secondly, the Constitution delineated in deft
strokes the steps to be followed in making laws. The overriding
purpose of these procedural rules is to assure that only bills that
successfully survive the searching scrutiny of the proper
committees of Congress and the full and unfettered deliberations
of both Houses can become laws. For this reason, a bill has to
undergo three (3) mandatory separate readings in each House. In
the case at bench, the additions and deletions made by the
Bicameral Conference Committee did not enjoy the enlightened
studies of appropriate committees. It is meet to note that the
complexities of modern day legislations have made our committee
system a significant part of the legislative process. Thomas Reed
called the committee system as “the eye, the ear, the hand, and
very often the brain of the house.” President Woodrow Wilson of
the United States once referred to the government of the United
States as “a government by the Chairmen of the Standing
Committees of Congress …”” Neither did these additions and
deletions of the Bicameral Conference Committee pass through
the coils of collective deliberation of the members of the two
Houses acting separately. Due to this short-circuiting of the
constitutional procedure of making laws, confusion shrouds the
enactment of R.A. No. 7716. Who inserted the additions and
deletions remains a mystery. Why they were inserted is a riddle.
To use a Churchillian phrase, lawmaking should not be a riddle
wrapped in an enigma. It cannot be, for Article II, section 28 of
the Constitution mandates the State to adopt and implement a
158
Their power lies chiefly in the fact that reports of conference committees
must be accepted without amendment or else rejected in toto. The
impulse is to get done with the matter and so the motion to accept has
undue advantage, for some members are sure to prefer swallowing
unpalatable provisions rather than prolong controversy. This is the more
likely if the report comes in the rush of business toward the end of a
session, when to seek further conference might result in the loss of the
measure altogether. At any time in the session there is some risk of such
a result following the rejection of a conference report, for it may not be
possible to secure a second con-
159
xxx
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.
g. Customs and usages.
160
prevails over the rule from the source listed later. Thus, where the
Constitution requires three readings of bills, this provision controls over
any provision of statute, adopted rules, adopted manual, or of
parliamentary law, and a rule of parliamentary law controls over a local
usage but must give way to any rule from a higher source of authority.
(Emphasis ours)
xxx
Where the failure of constitutional compliance in the enactment of
statutes is not discoverable from the face of the act itself but may be
demonstrated by recourse to the legislative journals, debates, committee
reports or papers of the governor, courts have used several conflicting
theories with which to dispose of the issue. They have held: (1) that the
enrolled bill is conclusive and like the sheriff’s return cannot be attacked;
(2) that the enrolled bill is prima facie correct and only in case the
legislative journal shows affirmative contradiction of the constitutional
requirement will the bill be held invalid; (3) that although the enrolled
bill is prima facie correct, evidence from the journals, or other extrinsic
sources is admissible to strike the bill down; (4) that the legislative
journal is conclusive and the enrolled bills is valid only if it accords with
the recital in the journal and the constitutional procedure.
161
that the evidence of the sheriff was not of unusual weight was
demonstrated by the fact that in an action against the sheriff no
presumption of its authenticity prevailed.
162
Sec. 88. Conference Committee.—In the event that the House does
not agree with the Senate on the amendment to any bill or joint
resolution, the differences may be settled by the conference
committees of both chambers.
In resolving the differences with the Senate, the House panel
shall, as much as possible, adhere to and support the House Bill.
If the differences with the Senate are so substantial that they
materially impair the House Bill, the panel shall report such fact
to the House for the latter’s appropriate action.
163
Sec. 35. In the event that the Senate does not agree with the
House of Representatives on the provision of any bill or joint
resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten (10) days
after their composition. The President shall designate the
members of the Senate Panel in the conference committee with
the approval of the Senate.
Each Conference Committee Report shall contain a detailed
and sufficiently explicit statement of the changes in, or
amendments to the subject measure, and shall be signed by a
majority of the members of each House panel, voting separately.
_______________
9
H.B. No. 3555 has no “no pass on provision.” House Bill No. 3705 expresses
the latest intent of the House on the matter.
165
166
Even the faintest eye contact with the above provisions will
reveal that: (a) both the House bill and the Senate bill
prohibited the passing on to consumers of the VAT on sales
of electricity and (b) the House bill prohibited the passing
on to consumers of the VAT on sales of petroleum products
while the Senate bill is silent on the prohibition.
bestowed on them.
b. Even more constitutionally obnoxious are the added
restrictions on local government’s use of incremental
revenue from the VAT in Section 21 of R.A. No. 9337 which
were not present in the Senate or House Bills. Section 21 of
R.A. No. 9337 provides:
Fifty percent of the local government unit’s share from VAT shall
be allocated and used exclusively for the following purposes:
_______________
10
1 Sutherland Statutory Construction § 6:2 (6th ed.): The provision
requiring that legislative power shall be vested in a bicameral legislature
seeks to “assure sound judgment that comes from sepa-
169
_______________
rate deliberations and actions in the respective bodies that check and
balance each other.”
11
Const., Article VI, Section 16(2) (1987): “(2) A majority of each House
shall constitute a quorum to do business, but a smaller number may
adjourn from day to day and may compel the attendance of absent
Members in such manner, and under such penalties, as such House may
provide.”
12
Const., Article VI, Section 24 (1987); 1 Sutherland Statutory
Construction § 9:6 (6th ed.): The provision helps guarantee that the
exercise of the taxing power is well studied as the lower house is
“presumably more representative in character.”
13
Const., Article VI, Section 26(1) (1987); I Cooley, A Treatise on
Constitutional Limitations, p. 143; Central Capiz v. Ramirez, 40 Phil. 883
(1920): “In the construction and application of this constitutional
restriction the courts have kept steadily in view the correction of the
mischief against which it was aimed. The object is to prevent the practice,
which was common in all legislative bodies where no such restrictions
existed of embracing in the same bill incongruous matters having no
relation to each other or to the subject specified in the title, by which
measures were often adopted without attracting attention. Such distinct
subjects represented diverse interests, and were combined in order to
unite the members of the legislature who favor either in support of all.
These combinations were corruptive of the legislature and dangerous to
the State. Such omnibus bills sometimes included more than a hundred
sections on as many different subjects, with a title appropriate to the first
section, and for other purposes.”
“The failure to indicate in the title of the bill the object intended to be
accomplished by the legislation often resulted in members voting
ignorantly for measures which they would not knowingly have approved;
and not only were legislators thus misled, but the public also; so that
legislative provisions were steadily pushed through in the closing hours of
a session, which, having no merit to commend them, would have been
made odious by popular discussion
170
_______________
171
_______________
15
235 SCRA 630, 783-784 citing Luce, Legislative Procedure, pp.
404-405, 407 (1922); See also Davies, Legislative Law and Process, p. 81
(2nd ed.): “conference reports are returned to assembly and Senate on a
take-it or leave-it-basis, and the bodies are generally placed in the position
that to leave-it is a practical impossibility.” Thus, he concludes that
“conference committee action is the most undemocratic procedure in the
legislative process.”
172
_______________
16
268 SCRA 269, 289 (1997).
17
The Manila Standard Today, August 26, 2005, p. 1.
173
SEPARATE OPINION
PANGANIBAN, J.:
Precedence of Mandatory
Constitutional Provisions
Over the Enrolled Bill Doctrine
_______________
1
235 SCRA 630, August 25, 1994; and 249 SCRA 628, October 30, 1995.
The second case is an en banc Resolution on the Motions for
Reconsideration of the first case.
2
417 SCRA 503, December 10, 2003.
3
“[I]t is well-settled that the enrolled bill doctrine is conclusive upon
the courts as regards the tenor of the measure passed by Con-
174
_______________
175
_______________
176
First, the BCC had the option of adopting the House bills
either in part or in toto, endorsing them without changes.
_______________
12
Arroyo v. De Venecia, 343 Phil. 42, 61-62; 277 SCRA 268, 286, August
14, 1997, per Mendoza, J.
13
These refer to House Bill Nos. 3555 & 3705; and Senate Bill No.
1950.
177
_______________
14
§26(2) of Article VI of the 1987 Constitution.
15
“The purpose for which three readings on separate days is required is
said to be two-fold: (1) to inform the members of Congress of what they
must vote on and (2) to give them notice that a measure is progressing
through the enacting process, thus enabling them and others interested in
the measure to prepare their positions with reference to it.” Tolentino v.
Secretary of Finance, supra, p. 647, October 30, 1995, per Mendoza, J.
16
§24 of Article VI of the 1987 Constitution.
17
§24 of Article VI of the 1987 Constitution. The power of the Senate to
propose or concur with amendments is, apparently, without restriction. By
virtue of this power, the Senate can practically rewrite a bill that is
required to come from the House and leave only a trace of the original bill.
See Flint v. Stone Tracy Co., 220 US 107, 31 S.Ct. 342, March 13, 1911.
18
§24 of Article VI of the 1987 Constitution.
178
_______________
19
Tolentino v. Secretary of Finance, supra, p. 661, August 25, 1994.
20
Garner (ed. in chief), Black’s Law Dictionary (8th ed., 2004), p.
708.
21
Statsky, West’s Legal Thesaurus/Dictionary (1986), p. 348.
22
To argue that the raising of revenues makes the non-VAT provisions
of a VAT bill automatically germane is to bring legal analysis within the
penumbra of economic scrutiny. The burden or impact of any tax depends
on the relative elasticities of supply and demand and is chiefly a matter of
policy confined within the august halls of Congress. See Pindyck and
Rubinfeld, Microeconomics (5th ed., 2003), pp. 314-317.
23
Exxon Mobil Corp. v. Allapattah Services, Inc., 125 S. Ct. 2611, 2622,
June 23, 2005, per Kennedy, J.
179
Compromising
by Consolidating
_______________
24
Tolentino v. Secretary of Finance, supra, p. 663, August 25, 1994. See
Cruz, Philippine Political Law (2002), p. 154.
25
Tolentino v. Secretary of Finance, supra, August 25, 1994, per
Mendoza, J.
26
Cruz, Philippine Political Law (2002), p. 155.
27
Tolentino v. Secretary of Finance, supra, August 25, 1994.
28
Cruz, Philippine Political Law (2002), p. 111.
180
_______________
29
Tolentino v. Secretary of Finance, supra, p. 668, August 25, 1994.
There is no allegation in any of the memoranda submitted to this Court
that the consolidated bill was not approved. In fact, both houses of
Congress voted separately and majority of each house approved it.
30
On the one hand, §§1-3 of House Bill (HB) No. 3555 seek to amend
§§106, 107 & 108 the Tax Code by increasing the VAT rate to 12% on
every sale, barter or exchange of goods or properties; importation of goods;
and sale or exchange of services, including the use or lease of properties.
§§1-3 of HB 3705, on the other, seek to amend §§106, 107 & 108 the Tax
Code by also increasing the VAT rate to 12% on every sale, barter or
exchange of goods or properties; importation of goods; and sale or
exchange of services, including the use or lease of properties, but
decreasing such rate to 8% on every importation of certain goods; 6% on
the sale, barter or exchange of certain locally manufactured goods; and 4%
on the sale, barter or exchange, as well as importation, of petroleum
products subject to excise tax and raw materials to be used in their
manufacture (subject to subsequent increases of such reduced rates), and
on the gross receipts derived from services rendered on the sale of
generated power. The Tax Code referred to in this case is RA 8424,
otherwise known as the “Tax Reform Act of 1997.”
31
§§4-5 of Senate Bill (SB) No. 1950 seek to amend §§106 & 108 of the
Tax Code by retaining the VAT rate of 10% on every sale, barter or
exchange of goods or properties; and on the sale or exchange of services,
including the use or lease of properties, and the sale of electricity by
generation, transmission, and distribution companies.
181
standards have
_______________
32
§§4-6 of the consolidated bill amending §§106-108 of the Tax Code,
respectively. Conference Committee Report on HBs 3555 & 3705, and SB
1950, pp. 4-7.
The predetermined factual scenario in the above-cited sections of the
consolidated bill also appears in §§4-6 of Republic Act (RA) No. 9337,
amending the same provisions of the Tax Code. Mathematically, it is
expressed as follows:
33
A negative budget surplus, or an excess of expenditure over revenues,
is a budget deficit. Dornbusch, Fischer, and Startz, Macroeconomics (9th
ed., 2005), p. 231.
34
GDP refers to the value of all goods and services produced
domestically; the sum of gross value added of all resident institutional
units engaged in production (plus any taxes, and minus any subsidies, on
products not included in the values of their outputs). www.nscb.
gov.ph/sna/default.asp (Last visited July 14, 2005 10am PST).
182
_______________
35
See Pelaez v. Auditor General, 122 Phil. 965, 974; 15 SCRA 569,
576-577, December 24, 1965.
36
The acts of retroactively implementing the 12 percent VAT rate,
should the finance secretary be able to make recommendation only weeks
or months after the end of fiscal year 2005, or reverting to 10 percent if
both conditions are not met, are best addressed to the political branches of
government.
The following excerpts from the Transcript of the Oral Arguments in
G.R. Nos. 168461, 168463, 168056, and 168207, held on July 14, 2005 at
the Supreme Court Session Hall, are instructive on the position of
petitioners:
“Atty. Gorospe:
[It’s] supposed to be 2005, Your Honor, but apparently, it [will] be
impossible to determine GDP the first day of 2006, Your Honor.”
(p. 57);
xxx
“Justice Panganiban:
Now [let’s see] when it is possible then to determine this formula. It
cannot be on the first day of January 2006, because the year [2005]
ended just the midnight before, isn’t it?
“Atty. Gorospe:
Yes, Your Honor.
“Justice Panganiban:
x x x if it’s only determined on March 1[,] then how can the law
become effective January 1[.] In other words, how will the [people be]
able to pay the tax if ever that formula is exceeded x x x?” (pp. 59-60);
xxx
“Atty. Gana:
Well, x x x it would take a grace period of 6 to 8 months[,]
because obviously, determination could not be made on
January 1, 2006. Yes, they were under the impression that at the
earliest it would take 30 days.
“Justice Panganiban:
Historically, when [will] these figures [be] available[:] the GDP, [VAT]
collection?” (p. 192);
xxx
“Justice Panganiban:
But certainly not on January 1. Therefore, by January 1, people
would not know whether the rate would be increased or not,
even if there is no discretion?
“Atty. Gana:
That’s true, Your Honor, even if there is no discretion.
“Justice Panganiban:
It will take weeks, or months to be able to determine that?
183
_______________
“Atty. Gana:
Well, they anticipated it, would take at most by March.” (p. 193);
and
xxx
“Justice Panganiban:
March, I will ask the government later on when they argue.
“Atty. Gana:
As early as January but not later than 60 to 90 days.” (boldface
supplied; p. 194). Culled from the same record, the following excerpts
show the position of public respondents:
“Justice Panganiban:
It will be based on actual figures?
“Usec. Bonoan:
It will be based on actual figures.
“Justice Panganiban:
That creates a problem[,] because where do you get the actual
figures[?]
“Usec. Bonoan:
I understand that[,] traditionally[,] we can come in March, but
there is no impediment to speeding up the gathering.
“Justice Panganiban:
Speed it up. February 15?
“Usec. Bonoan:
Even within January, Your Honor, I think this can be….
“Justice Panganiban:
Alright at the end of January, it’s just estimate to get the figures
in January.
“Usec. Bonoan:
Yes, Your Honor (pp. 661-662); and
xxx
“Justice Panganiban:
My only point is, I raised this earlier and I promised counsel for the
petitioner whom I was questionin[g] that I will raise it with you,
whether the date January 1, 2006 would present an
impossibility of a condition happening.
“Usec. Bonoan:
It will not, Your Honor.
“Justice Panganiban:
So, your position [is] it will not present an impossibility. Elaborate on
it in your memorandum.
“Usec. Bonoan:
Yes, Your Honor.
“Justice Panganiban:
Because it is important. The administrative regulations are
important[,] because they clarify the law and it will guide
taxpayers. So[,] by January 1[,] [taxpayers] would not be wondering.
37
Using available statistics, it is approximated that the 2 4/5 percent
has been reached. VAT collection (in million pesos) for the first quarter
alone of 2004 is 83,542.83, or 83 percent of revenue collections amounting
to 100,654.01. Divided into GDP of 13,053, the
184
_______________
185
_______________
Manufacturers Corp., G.R. No. 158540, August 3, 2005, 465 SCRA 532,
660.
40
Escudero Memorandum, pp. 38-39.
GDP data are far from perfect measures of either economic output or
welfare. There are three major problems: (1) some outputs are poorly
measured because they are not traded in the market, and government
services are not directly priced by such market; (2) some activities
measured as additions to GDP in fact only represent the use of resources
in order to avoid crime or risks to national security; and (3) it is difficult to
account correctly for improvements in the quality of goods. Dornbusch,
Fischer, and Startz, Macroeconomics (9th ed., 2005), pp. 35-36.
41
Fariñas v. Executive Secretary, 417 SCRA, 503, 530, December 10,
2003.
42
“Any meaningful change in the method and procedures of Congress
or its committees must x x x be sought in that body itself.”
186
_______________
45
Flint v. Stone Tracy Co., 220 US 107, 167, 31 S. Ct. 342, 355, March
13, 1911, per Day, J.
46
§16(3) of Article VI of the 1987 Constitution.
“Parliamentary rules are merely procedural, and with their observance,
the courts have no concern. They may be waived or disregarded by the
legislative body.” Arroyo v. De Venecia, supra, p. 61, August 14, 1997, per
Mendoza, J.; (citing Osmeña, Jr. v. Pendatun, 109 Phil. 863, 870-871,
October 28, 1960, per Bengzon, J.).
187
_______________
47
HBs 3555 & 3705 do not contain any provision that seeks to revise
non-VAT provisions of the Tax Code, but SB 1950 has §§1-3 that seek to
amend the rates of income tax on domestic, resident foreign and
nonresident foreign corporations at 35% (30% in 2009), with a tax credit
on intercorporate dividends at 20% (15% in 2009); and to reduce the
allowable deductions for interest expense by 42% (33% in 2009) of the
interest income subject to final tax.
48
The amendments to income taxes also partake of the nature of
taxation without representation. As I will discuss in the succeeding
paragraphs of this Opinion, they did not emanate from the House of
Representatives that, under §24 of Article VI of the 1987 Constitution, is
the only body from which revenue bills should exclusively originate.
49
Mamalateo, Philippine Income Tax (2004), p. 1.
50
Commissioner of Internal Revenue v. American Express International,
Inc. (Philippine Branch), G.R. No. 152609, 462 SCRA 197, 215, June 29,
2005, per Panganiban, J. See Deoferio, Jr. & Mamalateo, The Value Added
Tax in the Philippines (2000), p. 36.
51
De Leon, The Fundamentals of Taxation (12th ed., 1998), pp. 92 &
132.
188
_______________
52
Mamalateo, Philippine Income Tax (2004), p. 379.
53
Vitug, Tax Law and Jurisprudence (2nd ed., 2000), p. 188.
54
Mamalateo, Philippine Income Tax (2004), p. 380.
55
De Leon, The Law on Transfer and Business Taxation with
Illustrations, Problems, and Solutions (1998), pp. 195-196 & 222-224.
189
_______________
56
Mamalateo, Philippine Income Tax (2004), p. 173.
57
See §78 of Revenue Regulations No. 2-1940, recommended by Bibiano
L. Meer, then Collector of Internal Revenue, and promulgated by Manuel
Roxas, then Secretary of Finance, later President of the Republic of the
Philippines, on February 11, 1941, XXXIX OG 18, 325.
58
Mamalateo, Philippine Income Tax (2004), p. 196.
59
RA 8424 refers to the Tax Reform Act of 1997.
60
The 42 percent reduction rate under §3 of RA 9337, amending
§34(B)(1) of the Tax Code, is derived by first subtracting the 20 percent
tax on interest income from the increased tax rate of 35 percent imposed
on domestic, resident foreign, and nonresident foreign corporations, and
then dividing the difference obtained by the increased rate. Hence, it is
computed as follows:
35% - 20% = 15%
15% : 35% = 42%, the amount of reduction.
190
_______________
61
§§1-3 of HB 3705.
62
§5 of SB 1950. There seems to be a discrepancy between the
Conference Committee Report and the various pleadings before this Court.
While such report, attaching a copy of the bill as reconciled and approved
by its conferees, as well as the report submitted by the Senate’s
Committee on Ways & Means to the Senate President on March 7, 2005,
show that SB 1950 does not contain a no-pass on provision, the petitioners
191
_______________
63
§4 of HB 3555 seeks to amend §110(A) of the Tax Code by limiting to
5% and 11% of their respective total amounts the claim for input tax credit
of capital goods, through equal distribution of the amount of such claim
over their depreciable lives; and of goods and services other than capital
goods, and goods purchased by persons engaged in retail trade.
64
§7 of SB 1950 seeks to amend §110 of the Tax Code by also limiting
the claim for input tax credit of goods purchased or imported for use in
trade or business, through an even depreciation or amortization over the
month of acquisition and the 59 succeeding months, if the aggregate
acquisition cost of such goods exceeds P 660,000.
The depreciation or amortization in the amendments is referred to as a
“spread-out” in an unnumbered Revenue Memorandum Circular dated
July 12, 2005, submitted to this Court by public respondents in their
Compliance dated August 16, 2005. Such spread-out recognizes industries
where capital assets are constructed or assembled.
65
No cap is found in HB 3705.
66
§5 of HB 3555 seeks to amend §114 of the Tax Code by requiring that
the VAT be deducted and withheld by the government or by any of its
political subdivisions, instrumentalities or agencies—including
government-owned-and-controlled corporations (GOCCs)—before making
any payment on account of each purchase of goods from sellers and
services rendered by contractors. The VAT deducted and withheld shall be
at the rates of 5% of the gross payment for the purchase of goods and 8%
of the gross receipts for services rendered by contractors on every sale or
installment payment. The VAT that is deducted and withheld shall be
creditable against their respective VAT liabilities—10.5%, in case of
government public works contrac-
192
_______________
tors; and 12% of the payments for the lease or use of properties orproperty
rights to nonresident owners.
67
§11 of SB 1950 seeks to amend §114 of the Tax Code by requiring
that the VAT be deducted and withheld by the government or by any of its
political subdivisions, instrumentalities or agencies—including
government-owned or controlled corporations (GOCCs)—before making
any payment on account of each purchase of goods from sellers and
services rendered by contractors. The VAT deducted and withheld shall be
at the rates of 5% of the gross payment for the purchase of goods and on
the gross receipts for services rendered by contractors, including public
works contractors. The VAT that is deducted and withheld shall be
creditable against the VAT liability of the seller; and 10% of the gross
payment for the lease or use of properties or property rights to
nonresident owners.
68
Deoferio, Jr. & Mamalateo, The Value Added Tax in the Philippines
(2000), pp. 34-35 & 44.
69
http://explanation-guide.info/meaning/Maurice-Lauré.html (Last
visited August 23, 2005, 3:25pm PST).
193
_______________
70
This refers to a “tax on value added”—TVA in French and VAT in
English.
71
http://en.wikipedia.org/wiki/ Maurice-Lauré (Last visited August
23, 2005, 3:20pm PST).
72
The Transcript of the Oral Arguments in G.R. Nos. 168461, 168463,
168056, and 168207, held on July 14, 2005 at the Supreme Court Session
Hall, show that the act of passing on to consumers is a mere cash flow
problem, as agreed to by counsel for petitioners in G.R. No. 168461:
“Justice Panganiban:
So, the final consumer pays the tax?
“Atty. Baniqued:
Yes, Your Honor.
“Justice Panganiban:
The trade people in between the middlemen just take it as an input and
then [collect] it as output, isn’t it?
Atty. Baniqued:
Yes, Your Honor.
“Justice Panganiban:
It’s just a cash flow problem for them, essentially?
“Atty. Baniqued:
Yes x x x.” (p. 375).
73
The 5 percent final withholding tax may also be charged as part of a
supplier’s Cost of Sales.
194
_______________
74
This refers to RA 8424, as amended.
75
In fact, §112(B) of the Tax Code, prior to and after its amendment by
§10 of RA 9337, does not at all prohibit the application of unused input
taxes against other internal revenue taxes. The manner of application is
determined though by the BIR through §4.112-1(b) of Revenue
Regulations No. 14-2005, otherwise known as the “Consolidated VAT
Regulations of 2005,” dated June 22, 2005.
76
That the unutilized input VAT can be considered an ordinary and
necessary expense for which a corresponding deduction will be allowed
against gross income under §34(A)(1) of the Tax Code—instead of a
195
_______________
79
These are based on pronouncements of recognized bodies involved in
setting accounting principles. Greatest weight shall be given to their
pronouncements in the order listed below:
196
_______________
80
Meigs & Meigs, Accounting: The Basis for Business Decisions (1981),
pp. 28 & 515.
Under §9(b) & (g) of RA 9298, the PRBOA shall supervise the practice
of accountancy in the Philippines and adopt measures—such as the
promulgation of accounting and auditing standards, rules and regulations,
and best practices—that may be deemed proper for the enhancement and
maintenance of high professional, ethical, accounting, and auditing
197
_______________
stages in the distribution process, and culminating with the sale to the
final consumer. This is the essence of a VAT; it is a tax on the value
added, that is, on the excess of sales over purchases. See Deoferio Jr. &
Mamalateo, The Value Added Tax in the Philippines (2000), pp. 33-34.
With the 70 percent cap on output tax that is allowable as an input tax
credit, the remaining 30 percent becomes an outright expense that is,
however, immediately payable and remitted by the business
establishment to the government. This amount can never be recovered or
passed on to the consumer, but it can be an allowable deduction from gross
income under §34(A)(1) of the Tax Code. In effect, it is a tax computed by
multiplying 30 percent to the 10 percent VAT that is imposed on gross
sales, receipts or revenues. It is not a tax on tax and, mathematically, it is
derived as follows:
82
“Double taxation means taxing the same property [or subject matter]
twice when it should be taxed only once; that is, ‘taxing the same person
twice by the same jurisdiction for the same thing.’” Commissioner of
Internal Revenue v. Solidbank Corp., 416 SCRA 436, November 25, 2003,
per Panganiban, J.; (citing Afisco Insurance Corp. v. Court of Appeals, 361
Phil. 671, 687; 302 SCRA 1, 16, January 25, 1999, per Panganiban, J.).
198
_______________
of Appeals, 403 SCRA 634, 664, June 10, 2003, per Carpio, J. Cruz,
Constitutional Law (1998), p. 89.
84
§116 of the Tax Code as amended.
85
“[C]ourts accord the presumption of constitutionality to legislative
enactments, not only because the legislature is presumed to abide by the
Constitution[,] but also because the judiciary[,] in the determination of
actual cases and controversies[,] must reflect the wisdom and justice of the
people as expressed through their representatives in the executive and
legislative departments of the government.” Angara v. Electoral
Commission, 63 Phil. 139, 158-159, July 15, 1936, per Laurel, J.; (cited in
Francisco, Jr. v. House of Representatives, supra, pp. 121-122.)
86
Cawaling, Jr. v. Commission on Elections, 420 Phil. 524, 530; 368
199
_______________
88
De Leon, The Fundamentals of Taxation (12th ed., 1998), p. 1.
89
Except, as earlier discussed, for Sections 1, 2 and 3 of the law.
200
“Atty. Baniqued:
But if your profit margin is low as i[n] the case of the
petroleum dealers, x x x then we would have a serious
problem, Your Honor.
201
“Justice Panganiban:
Isn’t the solution to increase the price then?
“Atty. Baniqued:
If you increase the price which you can very well do,
Your Honor, then that [will] be deflationary and it
[will] have a cascading effect on all other basic
commodities[, especially] because what is involved
here is pet roleum, Your Honor.
“Justice Panganiban:
That may be true[,] but it’s not unconstitutional?
“Atty. Baniqued:
That may be true, Your Honor, but the very
limitation of the [seventy percent] input [VAT], when
applied to the case of the petroleum dealers[,] is
oppressive[.] [I]t’s unjust and it’s unreasonable, Your
Honor.
“Justice Panganiban:
But it can be passed as a part of sales, sales costs
rather.
“Atty. Baniqued:
But the petroleum dealers here themselves……
interrupted
“Justice Panganiban:
In your [b]alance [s]heet, it could be reflected as Cost
of Sales and therefore the price will go up?
“Atty. Baniqued:
Even if it were to be reflected as part of the Cost of
Sales, Your Honor, the [input VAT] that you cannot
claim, the benefit to you is only to the extent of the
corporate tax rate which is 32 now 35 [percent].
“Justice Panganiban:
Yes.
“Atty. Baniqued:
It’s not 100 [percent] credi[ta]bility[,] unlike if it were
applied against your [output VAT], you get to claim
202
203
“Atty. Baniqued:
Yes, we believe it is unconstitutional, Your Honor.
“Justice Panganiban:
You have a right to complain that it is oppressive, it is
excessive, it burdens the people too much, but is it
unconstitutional?
“Atty. Baniqued:
Besides, passing it on, Your Honor, may not be as
simple as it may seem. As a matter of fact, at the
strike of midnight on June 30, when petroleum prices
were being changed upward, the [s]ecretary of [the]
Department of Energy was going around[.] [H]e was
204
“Justice Panganiban:
Why, you will not pass it on?
“Atty. Baniqued:
“Atty. Baniqued:
Yes, Your Honor.
“Justice Panganiban:
When you made your presentation on the balance
sheet, it is as if every capital expenditure you made is
subject to the 5 [percent,] rather the [five year]
depreciation schedule[.] [T]hat’s not so. So, the
presentation you made is a little inaccurate and
misleading.
“Atty. Baniqued:
At the start of our presentation, Your Honor[,] we
stated clearly that this applies only to capital goods
costing more than one [million].
205
“Justice Panganiban:
Yes, but you combined it later on with the 70 [percent]
cap to show that the dealers are so disadvantaged. But
you didn’t tell us that that will apply only when capital
equipment or goods is one million or more. And in your
case, what kind of capital goods will be worth one
million or more in your existing gas stations?
“Atty. Baniqued:
Well, you would have petroleum dealers, Your Honor,
who would have[,] aside from sale of petroleum[,] they
would have their service centers[,] like[…] to service
cars and they would have those equipments, they are,
Your Honor.
“Justice Panganiban:
But that’s a different profit center, that’s not from the
sale of…
“Atty. Baniqued:
No, they would form part of their [VATable] sale, Your
Honor.
Justice Panganiban:
It’s a different profit center[;] it’s not in the sale of
petroleum products. In fact the mode now is to put up
super stores in huge gas stations. I do not begrudge
206
207
final VAT on you so[,] therefore, for every tank full you
buy[,] we’ll just have to [charge] you 5 [percent] more.
Well, the Supreme Court will probably say, well,
anyway, that 5 [percent] that we will pay the gas
dealer, will be paid back to the government, isn’t it[?]
So, how [will] you be affected?
“Atty. Baniqued:
I hope the passing on of the burden, Your Honor,
doesn’t come back to party litigants by way of increase
in docket fees, Your Honor.
“Justice Panganiban:
But that’s quite another m[a]tter, though…(laughs)
[W]hat I am saying, Mr. [C]ounsel is, you still have to
show to us that your remedy is to declare the law
unconstitutional[,] and it’s not business in character.
“Atty. Baniqued:
Yes, Your Honor, it is our submission that this
limitation in the input [VAT] credit as well as the
amortization…….
“Justice Panganiban:
All you talk about is equal protection clause, about due
process, depreciation of property without observance of
due process[,] could really be a remedy than a business
way.
“Atty. Baniqued:
Business in the level of the petroleum dealers, Your
Honor, or in the level of Congress, Your Honor.
“Justice Panganiban:
Yes, you can pass them on to customers[,] in other
words. It’s the customers who should [complain].
“Atty. Baniqued:
208
“Justice Panganiban:
Yes, it’s inflationary[,] brings up the prices of
everything…
“Atty. Baniqued:
And it is our submission that[,] if the petroleum
dealers cannot absorb it and they pass it on to the
customers, a lot of consumers would neither be in a
position to absorb it too and that[’s] why we patronize,
Your Honor.
“Justice Panganiban:
There might be wisdom in what you’re saying, but is
that unconstitutional?
“Atty. Baniqued:
Yes, because as I said, Your Honor, there are even
constraints in the petroleum dealers to pass it on, and
we[‘]re not even sure whether….interrupted
“Justice Panganiban:
Are these constraints [--] legal constraints?
“Atty. Baniqued:
Well, it would be a different story, Your Honor[.]
[T]hat’s something we probably have to take up
with the Department of Energy, lest [we may] be
accused of …..
“Justice Panganiban:
In other words, that’s your remedy [--] to take it up
with the Department of Energy
“Atty. Baniqued:
…..unreasonable price increases, Your Honor.
“Justice Panganiban:
Not for us to declare those provisions unconstitutional.
“Atty. Baniqued:
We, again, wish to stress that the petroleum dealers
went to this Court[,] both as businessmen and as
consumers. And as consumers, [we’re] also going to
bear the burden of whatever they themselves pass on.
“Justice Panganiban:
You know[,] as a consumer, I wish you can really show
that the laws are unconstitutional, so I don’t have to
pay it. But as a magistrate of this Court, I will have to
pass upon judgment on the basis of [--] whether the
law is unconstitutional or not. And I hope you can in
your memorandum show that.
“Atty. Baniqued:
We recognized that, Your Honor.” (boldface supplied,
pp. 386-410).
_______________
90
§§13-20 of SB 1950 seek to amend Tax Code provisions on percentage
taxes on domestic carriers and keepers of garages in §117, and on
international carriers in §118; franchise taxes in §119; amusement taxes
in §125; excise taxes on manufactured oils and other fuels in §148;
registration requirements in §236; issuance of receipts or sales or
commercial invoices in §237; and disposition of incremental revenues in
§288.
91
“[T]he removal of the excise tax on diesel x x x and other socially
sensitive products such as kerosene and fuel oil substantially lessened the
impact of VAT. The reduction in import duty x x x also eased the impact of
VAT.” Manila Bulletin, “Impact of VAT on prices of oil products should be
less than 10%, says DoE,” by James A. Loyola, Business Bulletin B-3,
Friday, July 1, 2005, attached as Annex A to the Memorandum filed by
the Association of Pilipinas Shell Dealers, Inc.
The Transcript of the Oral Arguments in G.R. Nos. 168461, 168463,
168056, and 168207 on July 14, 2005 also reveals the effect of mitigating
measures upon petitioners in G.R. No. 168461:
“Justice Panganiban:
As a matter of fact[,] a part of the mitigating measures would be the
elimination of the [e]xcise [t]ax and the import duties. That is [why] it
is not correct to say that the [VAT] as to petroleum dealers increase to
10 [percent].
“Atty. Baniqued:
Yes, Your Honor.
“Justice Panganiban:
And[,] therefore, there is no justification for increasing the retail price
by 10 [percent] to cover the E-[VAT.] [I]f you consider the excise tax
and the import duties, the [n]et [t]ax would probably be in the
neighborhood of 7 [percent]? We are not going into exact figures[.] I
am just trying to deliver a point that different industries, different
210
Rejecting Non-Conflicting
Provisions
_______________
products, different services are hit differently. So it’s not correct to
say that all prices must go up by 10 [percent].
“Atty. Baniqued:
You’re right, Your Honor.
“Justice Panganiban:
Now. For instance, [d]omestic [a]irlinecompanies, Mr. Counsel, are at
present imposed a [s]ales [t]ax of 3 [percent]. When this E-[VAT] law
took effect[,] the [s]ales [t]ax was also removed as a mitigating
measure. So, therefore, there is no justif ication to increase the fares
by 10 [percent;] at best 7 [percent], correct?
“Atty. Baniqued:
I guess so, Your Honor, yes.” (pp. 367-368).
92
§28(1) of Article VI of the 1987 Constitution.
93
§26(2) of Article VI of the 1987 Constitution.
211
Summary
_______________
94
These bills refer to HB 3705 and SB 1950.
95
§26(2), supra.
212
_______________
96
“Each house may not by its rules ignore constitutional restraints or
violate fundamental rights, and there should be a reasonable relation
between the mode or method of proceeding established by the rule and the
result which is sought to be attained.” US v. Ballin, 144 US 1, 5, 12 S.Ct.
507, 509, February 29, 1892, per Brewer, J.
213
_______________
97
Panganiban, Leveling the Playing Field (2004), PRINT-TOWN Group
of Companies, pp. 46-47.
214
YNARES-SANTIAGO, J.:
_______________
98
338 Phil. 546, 604-605; 272 SCRA 18, 80, May 2, 1997, per
Panganiban, J.
99
420 Phil. 525, 531; 368 SCRA 453, 457, October 26, 2001, per
Sandoval-Gutierrez, J.; (citing The Philippine Judges Association v.
Prado, 227 SCRA 703, 706, November 11, 1993, per Cruz, J.).
100
Veterans Federation Party v. Commission on Elections, 396 Phil.
419, 452-453; 342 SCRA 244, 283, October 6, 2000, per Panganiban, J.;
(citing Garcia v. Commission on Elections, 227 SCRA 100, 107-108,
October 5, 1993).
215
_______________
1
Cooley on Constitutional Limitations, 8th Ed., Vol. I, p. 332.
2
Angara v. Electoral Commission, 63 Phil. 139, 158 (1936).
216
_______________
3
G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852,
115873, 115931, 25 August 1994, 235 SCRA 630, 750.
217
SANDOVAL-GUTIERREZ, J.:
_______________
4
Supra, p. 811.
219
_______________
1
Book V of The Wealth of Nations.
220
_______________
2
ABAKADA GURO Party List (Formerly AASJAS), officers Samson S.
Alcantara and Ed Vincent S. Albano.
3
Aquilino Q. Pimentel, Jr., Luisa P. Ejercito-Estrada, Jinggoy E.
Estrada, Panfilo M. Lacson, Alfredo S. Lim, Jamby A.S. Madrigal and
Sergio R. Osmenña III.
4
Francis Joseph G. Escudero, Vincent Crisologo, Emmanuel Joel J.
Villanueva, Rodolfo G. Plaza, Darlene Antonino-Custodio, Oscar G.
Malapitan, Benjamin C. Agarao, Jr., Juan Edgardo M. Angara, Justin
Marc SB. Chipeco, Florencio G. Noel, Mujiv S. Hataman, Renato B.
Magtubo, Joseph A. Santiago, Teofisto DL. Guingona III, Ruy Elias C.
Lopez, Rodolfo Q. Agbayani and Teodoro A. Casiño.
5
Luzon Stevedoring Co. vs. Court of Tax Appeals, L-302332, July 29,
1998, 163 SCRA 647 cited in Vitug, Acosta, Tax Law and Jurisprudence,
Second Edition, at p. 7.
221
_______________
6
Pepsi Cola Bottling Company of the Philippines vs. Municipality of
Tanauan, Leyte, G.R. No. L-31156, February 27, 1976, 69 SCRA 460. See
also National Power Corporation vs. Albay, G.R. No. 87479, June 4, 1990,
186 SCRA 198.
7
Bernas, S.J., The 1987 Constitution of the Republic of the Philippines,
A Commentary, 1996 Edition, at p. 687.
222
“One of the settled maxims in constitutional law is, that the power
conferred upon the legislature to make laws cannot be delegated
by that department to any other body or authority. Where the
sovereign power of the state has located the authority,
there it must remain; and by the constitutional agency
alone the laws must be made until the Constitution itself is
changed. The power to whose judgment, wisdom, and patriotism
this high prerogative has been entrusted cannot relieve itself of
the responsibility by choosing other agencies upon which the
power shall be devolved, nor can it substitute the judgment,
wisdom, and patriotism of any other body for those to which alone
9
the people have seen fit to confide this sovereign trust.”
_______________
8
People vs. Vera, 65 Phil. 56 (1937).
9
Cooley on Constitutional Limitations, 8th ed., Vol. I, p. 224.
10
Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at pp.
8-9.
223
_______________
11
Espiritu vs. Cipriano, G.R. No. 32743, February 15, 1974, 55 SCRA
533, 538, citing Sutherlands Statutory Construction, Vol. 2, Section 4945,
p. 412.
12
A tariff is a list or schedule of articles on which a duty is imposed
upon their importation, with the rates at which they are severally taxed, it
is also the custom or duty payable on such articles. (Black’s Law
Dictionary [6th Edition], 1990, at p. 1456).
13
An import quota is a quantitative restriction on the importation of an
article into a country, and is a remedy available to the executive
department upon its determination that an imported article threatens
serious injury to a domestic industry. (Id., at p. 755).
14
An export quota is an amount of specific goods which may be
exported and are set by the government for purposes of national defense,
economic stability and price support. (Id., at p. 579).
15
Tonnage dues are duties laid upon vessels according to their tonnage
or cubical capacity. (Id., at p. 1488).
224
_______________
16
Wharfage dues are generally understood to be the fees paid for
landing goods upon or loading them from a wharf. It is a charge for the
use of the wharf and may be treated either as rent or compensation.
(Marine Lighterage Corp. vs. Luckenbach S.S. Co., 119 Misc. 612, 248 NYS
71).
17
A duty is generally understood to be a tax on the importation or
exportation of goods, merchandise and other commodities, while imposts
are duties or impositions levied for various reasons. (Crew Levick Co. vs.
Commonwealth of Pennsylvania, 245 US 292, 62 L. Ed. 295, 38 S. Ct. 126).
18
People vs. Vera, supra.
225
_______________
19
Walter E. Olsen & Co. vs. Aldanese and Trinidad (1922), 43 Phil.,
259; 12 C.J., p. 786.
20
Cruz, Constitutional Law, 1987 Edition, at p. 101.
226
Senator Lacson.
Thank you, Mr. President. Now, I will go back to my
original question, my first question. Who are we
threatening to punish on the imposed condition No.
1—the public or the President?
Senator Recto.
That is not a punishment, that is supposed to be
a reward system.
Senator Lacson.
Yes, an incentive. So we are offering an
incentive to the Chief Executive.
Senator Recto.
That is right.
Senator Lacson.
—In order for her to be able to raise the VAT to
12 %.
Senator Recto.
That is right. That is the intention, yes.
x x x x x x
227
Senator Osmeña.
All right. Therefore, with the lifting of
exemptions it stands to reason that Value-added
tax collections as a percentage of GDP will be
much higher than . . . Now, if it is higher than
2.5%, in other words, because they collected
more, we will allow them to even tax more. Is
that the meaning of this particular phrase?
Senator Recto.
Yes, Mr. President, that is why it is as low as
2.8%. It is like if a person has a son and his son
asks him for an allowance, I do not think that he
would immediately give his son an increase in
allowance unless he tells his son, You better imp
rove your grades and I will give you an
_______________
21
TSN, May 10, 2005, Annex ‘E” of the Petition in G.R. No. 168056.
228
_______________
22
Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at p. 3.
23
G.R. No. 115455, August 25, 1994, 235 SCRA 630.
229
that a revenue statute—and not only the bill which initiated the
legislative process culminating in the enactment of the law—must
substantially be the same as the House Bill would be to deny the
Senate’s power not only to ‘concur with amendments: but also to
‘propose amendments.’ It would be to violate the co-equality of the
legislative power of the two houses of Congress and in fact, make
the House superior to the Senate.”
_______________
24
Merriam-Webster’s Third New International Dictionary (1993 Ed.),
at p. 793.
25
Id.
26
City Mayor vs. The Chief of Philippine Constabulary, G.R. No. 20346,
October 31, 1967, 21 SCRA 665, 673.
27
Merriam-Webster’s Third New International Dictionary (1993 Ed.),
at p. 1592.
28
Davies, Legislative Law and Process, (2d. Ed. 1986), at p. 89.
231
_______________
29
Entitled “An Act Restructuring the Value-Added Tax, Amending for
the Purpose Sections 106, 107, 108, 110 and 114 of the National Internal
Revenue Code of 1997, As amended, and For Other Purposes.” Approved on
January 27, 2005.
30
Entitled “An Act Amending Sections 106, 107, 108, 109, 110 and 111
of the National Internal Revenue Code of 1997, As Amended, and For
Other Purposes.” Approved on February 28, 2005.
31
Entitled “An Act Amending Sections 27, 28, 34, 106, 108, 109, 110,
112, 113, 114, 116, 117, 119, 121, 125, 148, 151, 236, 237 and 288 of the
National Internal Revenue Code of 1997, As Amended, and For Other
Purposes.” Approved on April 13, 2005.
232
_______________
32
Merriam-Webster’s Third New International Dictionary (1993 Ed.),
at p. 484.
33
Supra.
233
_______________
1
G.R. No. 115455, 25 August 1994, 235 SCRA 630.
234
235
[1] All Bills for raising Revenue shall originate in the House of
Representatives; but the Senate may propose or concur with
Amendments as on other Bills.
[2] Every Bill which shall have passed the House of
Representatives and the Senate, shall, before it become a Law, be
presented to the President of the United States; If he approve he
shall
_______________
2
Tolentino v. Secretary of Finance, supra, at pp. 667-668.
236
it, but if not he shall return it, with his Objections to the House in
which it shall have originated, who shall enter the Objections at
large on their Journal, and proceed to reconsider it. If after such
Reconsideration two thirds of that House shall agree to pass the
Bill, it shall be sent together with the Objections, to the other
House, by which it shall, likewise, be reconsidered, and if
approved by two thirds of that House, it shall become a Law. But
in all such Cases the Votes of both Houses shall be determined by
yeas and nays, and the Names of the Persons voting for and
against the Bill shall be entered on the Journal of each House
respectively. If any Bill shall not be returned by the President
within ten Days (Sundays excepted) after it shall have been
presented to him, the Same shall be a Law, in like Manner as if
he had signed it, unless the Congress by their Adjournment
prevent its return in which Case it shall not be a Law.
[3] Every Order, Resolution, or Vote to Which the Concurrence
of the Senate and House of Representatives may be necessary
(except on a question of Adjournment) shall be presented to the
President of the United States; and before the Same shall take
Effect, shall be approved by him, or being disapproved by him,
shall be repassed by two thirds of the Senate and House of
Representatives, according to the Rules and Limitations
prescribed in the Case of a Bill.
Sec. 26. (1) Every bill passed by Congress shall embrace only one
subject which shall be expressed in the title thereof.
(2) No bill passed by either House shall become a law unless it
has passed three readings on separate days, and printed copies
thereof in its final form have been distributed to its Members three
days before its passage, except when the President certifies to the
necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto
shall be allowed, and the vote thereon shall be taken immediately
thereafter, and the yeas and nays entered in the Journal.
Sec. 27. (1) Every bill passed by Congress shall, before it
becomes a law, be presented to the President. If he approves the
same, he shall sign it; otherwise, he shall veto it and return the
same with his objections to the House where it originated, which
237
_______________
3
See, for example, Vermuele, A., The Constitutional Law of
Congressional Procedure, 71 U. Chi. L. Rev. 361 (Spring 2004).
238
Conference Committees
239
240
_______________
4
Galloway, G., Congress at the Crossroads, pp. 98-100.
241
only rule that binds the Federal Congress is that it may formulate
its own rules of procedure. For this reason, the Federal Congress
is master of its own procedures. It is different with the Philippine
Congress. Our Congress indeed is also authorized to formulate its
own rules of procedure—but within limits not found in American
law. For instance, there is the “three readings on separate days”
rule. Another important rule is that no amendments may be
introduced by either house during third reading. These
limitations were introduced by the 1935 and 1973 Constitutions
and confirmed by the 1987 Constitution as a defense against the
inventiveness of the stealthy and surreptitious. These, however,
were disregarded by the Court in Tolentino in favor of contrary
American practice.
This is not to say that conference committees should not be
allowed. But an effort should be made to lay out the scope of what
conference committees may do according to the requirements and
the reasons of the Philippine Constitution and not according to
the practice of the American Congress. For instance, if the two
Houses are not allowed to introduce and debate amendments on
third reading,
242
The task at hand for the Court, but which the ponencia
eschews, is to circumscribe the powers of the Bicameral
Conference Committee in light of the “three-reading” and
“noamendment” rules in Article VI, Section 26(2) of the
Constitution.
Sec. 88. Conference Committee.—In the event that the House does
not agree with the Senate on the amendments to any bill or joint
resolution, the differences may be settled by the conference
committees of both chambers.
In resolving the differences with the Senate, the House panel
shall, as much as possible, adhere to and support the House Bill.
If the differences with the Senate are so substantial that they
materially impair the House Bill, the panel shall report such fact
to the House for the latter’s appropriate action.
_______________
5
Bernas SJ, J., The 1987 Constitution of the Republic of the Philippines, A
Commentary, pp. 702-703 (1996 Ed.).
243
Sec. 35. In the event that the Senate does not agree with the
House of Representatives on the provision of any bill or joint
resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten (10) days
after their composition. The President shall designate the
members of the Senate Panel in the conference committee with
the approval of the Senate.
Each Conference Committee Report shall contain a detailed
and sufficiently explicit statement of the changes in, or
amendments to the subject measure, and shall be signed by a
majority of the members of each House panel, voting separately.
_______________
6
Dissenting Opinion of Justice Romero in Tolentino, supra.
7
Vermuele, supra.
245
_______________
8
Id. citing Bentham, J., Political Tactics.
9
Senators Ralph G. Recto, Joker P. Arroyo, Manuel B. Villar, Richard
J. Gordon, Rodolfo G. Biazon, Edgardo G. Angara, M.A. Madrigal, Sergio
R. Osmena III, Juan Ponce Enrile.
10
Senators Recto, Villar, Gordon, Biazon.
11
Representatives Jesli A. Lapus, Danilo E. Suarez, Arnulfo P.
Fuentebella, Eric D. Singson, Junie E. Cua, Teodoro L. Locsin, Jr.,
Salacnib Baterina, Edcel C. Lagman, Luis R. Villafuerte, Herminio G.
Teves, Eduardo G. Gullas, Joey Sarte Salceda, Prospero C. Nograles,
Exequiel B. Javier, Rolando G. Andaya, Jr., Guillermo P. Cua, Arthur D.
Defensor, Raul V. Del Mar, Ronaldo B. Zamora, Rolex P. Suplico, Jacinto
V. Paras, Vincent P. Crisologo, Alan Peter S. Cayetano, Joseph Santiago,
Oscar G. Malapitan, Catalino Figueroa, Antonino P. Roman and Imee R.
Marcos.
12
Representatives Suarez, Fuentebella, Cua, Locsin, Jr., Teves, Gullas,
Javier, Cua, Defensor, Crisologo, Cayetano, Santiago, Malapitan and
Marcos.
13
Representatives Del Mar, Suplico and Paras.
246
_______________
14
Dissenting Opinion in Tolentino, supra.
247
The Court finds no reason to deviate from the salutary in this case
where the irregularities alleged by the petitioners mostly involved
the internal rules of Congress, whether House or Senate.
Parliamentary rules are merely procedural and with their
observance the courts have no concern. Whatever doubts there
may be as to the formal validity of Rep. Act No. 9006 must be
resolved in its favor. The Court reiterates its ruling in Arroyo v.
De Venecia, viz.:
But the cases, both here and abroad, in varying forms of expression, all
deny to the courts the power to inquire into the allegations that, in
enacting a law, a House of Congress failed to comply with its own rules, in
_______________
15
G.R. No. 147387, 10 December 2003, 417 SCRA 503.
248
_______________
16
Id., pp. 529-530. (Emphases mine.).
17
By way of explanation, the constitutional issues raised in Fariñas
were (1) whether Section 14 of R.A. No. 9006 was a rider or that it violated
Article VI, Section 26(1) of the Constitution requiring that “[e]very bill
passed by Congress shall embrace only one subject which shall be
expressed in the title thereof”; and (2) whether Section 14 of R.A. No. 9006
violated the equal protection clause of the Constitution. On both issues the
Court ruled in the negative. To reiterate, unlike in the present cases, the
acts of the conference committee with respect to R.A. No. 9006 in Fariñas
allegedly violated the internal rules of either house of Congress, but it was
not alleged therein that they amounted to a violation of any constitutional
provision on legislative procedure.
18
Article VIII, Section 1, CONSTITUTION.
249
AZCUNA, J.:
_______________
1
The Constitution states that “Congress may, by law, allow the
President to fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties as imposts within the
framework of the national development program of the Government.” (Art.
VI, Sec. 28 [2], emphasis supplied.)
Petitioners claim that the power does not extend to fixing the rates of
taxes, since taxes are not tariffs, import and export quotas, tonnage and
wharfage dues, or other duties or imposts.
2
Section 4, Republic Act No. 9337. The pertinent portion of the
provision states:
SEC. 4. Section 106 of the same Code, as amended, is hereby further amended to
read as follows:
“SEC. 106. Value-added Tax on Sale of Goods or Properties.—
“(A) Rate and Base of Tax.—There shall be levied, assessed and collected on
every sale, barter or exchange of goods or properties, a value-added tax equivalent
to ten percent
250
_______________
(10%) of the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be paid by the seller or
transferor: Provided, That the President, upon the recommendation of the
251
_______________
3
Condition has been defined by Escriche as “every future and
uncertain event upon which an obligation or provision is made to depend.”
It is a future and uncertain event upon which the acquisition or resolution
of rights is made to depend by those who execute the juridical act.
252
tions; (b) amend the tax credit against taxes due from
nonresident foreign corporations on the intercorporate
dividends; and (c) reduce the allowable deduction from
interest expense.”
Respondents should, in any case, now be able to
implement the E-VAT law without confusion and thereby
achieve its purpose.4
I vote to GRANT the petitions to the extent of declaring
unconstitutional the provisions in Republic Act. No. 9337
that are not germane to the subject matter and DENY said
petitions as to the rest of the law, which are constitutional.
TINGA, J.:
_______________
4
I voted for the issuance of the temporary restraining order to prevent
the disorderly implementation of the law that would have defeated its
very purpose and disrupted the entire VAT system, resulting in less
revenues. The rationale, therefore, of the rule against enjoining the
collection of taxes, that taxes are the lifeblood of Government, leaned in
favor of the temporary restraining order.
1
Republic Act No. 9337. Referred to intext as “E-VAT Law.”
255
destroy while this Court sits,” and we should very well live
up to this expectation not only of the revered Holmes, but
of the Filipino people who rely on this Court as the
guardian of their rights. At stake is the right to exist and
subsist despite taxes, which is encompassed in the due
process clause.
I respectfully submit these views while maintaining the
deepest respect for the prerogative of the legislature to
impose taxes, and of the national government to chart
economic policy. Such respect impels me to vote to deny the
petitions in G.R. Nos. 168056, 168207, 168463,2 and
168730, even as I acknowledge certain merit in the
challenges against the E-VAT law that are asserted in
those petitions. In the final analysis, petitioners therein are
unable to convincingly demonstrate the constitutional
infirmity of the provisions they seek to assail. The only
exception is Section 21 of the law, which I consider
unconstitutional, for reasons I shall later elaborate.
However, I see the petition in G.R. No. 168461 as
meritorious and would vote to grant it. Accordingly, I
dissent and hold as unconstitutional Section 8 of Republic
Act No. 9337, insofar as it amends Section 110(A) and (B) of
the National Internal Revenue Code (NIRC) as well as
Section 12 of the same law, with respect to its amendment
of Section 114(C) of the NIRC.
The first part of my discussion pertains to the petitions
in G.R. Nos. 168056, 168207, 168463, and 168730, while
the second part is devoted to what I deem the most crucial
issue before the Court, the petition in G.R. No. 168461.
_______________
2
Except insofar as it prays that Section 21 of the E-VAT Law be
declared unconstitutional. Infra.
256
_______________
3
J. Vitug and E. Acosta, Tax Law and Jurisprudence (2nd ed., 2000), at
pp. 7-8.
4
See National Power Corporation v. Province of Albay, G.R. No. 87479,
4 June 1990, 186 SCRA 198, 203.
5
See Section 24, Article VI, Constitution.
6
The recognized exceptions, both expressly provided by the
Constitution, being the tariff clause under Section 28(2), Article VI, and
the powers of taxation of local government units under Section 5, Article
X.
7
G.R. No. 158540, 8 July 2005, 434 SCRA 65.
257
_______________
8
See People v. Vera, 65 Phil. 56, 117 (1937).
9
Decision, infra.
258
259
_______________
10
Carpio v. Executive Secretary, G.R. No. 96409 February 14, 1992, 206
SCRA 290, 298; citing In re Guarina, 24 Phil. 37.
260
_______________
11
People v. Vera, supra note 8.
12
See Section 2, National Internal Revenue Code.
261
_______________
13
There are two eminent tests for valid delegation, the “completeness
test” and the “sufficient standard test.” The law must be complete in its
essential terms and conditions when it leaves the legislature so that there
will be nothing left for the delegate to do when it reaches him except
enforce it. U.S. v. Ang Tang Ho, 43 Phil. 1, 6-7 (1922). On the other hand,
a sufficient standard is intended to map out the boundaries of the
delegate’s authority by defining legislative policy and indicating the
circumstances under which it is to be pursued and effected; intended to
prevent a total transference of legislative power from the legislature to the
delegate.
14
Decision, infra, citing Alunan v. Mirasol, G.R. No. 108399, 31 July
1997, 276 SCRA 501, 513-514.
262
_______________
15
Notwithstanding, the Court in Southern Cross did rule that Section 5
of the Safeguard Measures Act, which required a positive final
determination by the Tariff Commission before the DTI or Agriculture
Secretaries could impose general safeguard measures, operated as a valid
restriction and limitation on the exercise by the executive branch of
government of its tariff powers.
263
One of the more crucial issues now before us, one that has
seriously divided the Court, pertains to the ability of the
Bicameral Conference Committee to introduce amendments
to the final bill which were not contained in the House bill
from which the E-VAT Law originated. Most of the points
addressed by the petitioners have been settled in our ruling
in Tolentino v. Secretary of Finance,16 yet a revisit of that
precedent is urged upon this Court. On this score, I offer
my qualified concurrence with the ponencia.
Two key provisions of the Constitution come into play:
Sections 24 and 26(2), Article VI of the Constitution. They
read:
_______________
16
G.R. No. 115455, 25 August 1994, 235 SCRA 630.
264
Papers as follows:
This power over the purse, may in fact be regarded as the most
complete and effectual weapon with which any constitution can
arm the immediate representatives of the people, for obtaining a
redress of every grievance, and for carrying into effect every just
18
and salutary measure.
_______________
17
M. Evans, ‘A SOURCE OF FREQUENT AND OBSTINATE
ALTERCATIONS’: THE HISTORY AND APPLICATION OF THE
ORIGINATION CLAUSE.
18
The Federalist No. 58, at p. 394 (J. Madison) (J. Cooke ed. 1961),
cited in J. M. Medina, The Origination Clause in the American
Constitution: A Comparative Survey, 23 Tulsa Law Journal 2, at p. 165.
265
_______________
19
Tolentino v. Secretary of Finance, supra note 16 at p. 661.
266
before said bills are transmitted to the other house for its
concurrence or amendment.” I agree with this statement.
Clearly, the procedure under Section 26(2), Article VI only
relates to the passage of a bill before the House and Senate,
and not the process undertaken afterwards in the
_______________
20
See Section 27(1), Article VI, CONSTITUTION.
267
_______________
21
Tolentino v. Secretary of Finance, supra note 16 at p. 668.
268
_______________
22
G.R. No. 124360, 5 November 1997, 281 SCRA 330.
269
out the general subject. We hold that section 5(b) providing for
tariff differential is germane to the subject of R.A. No. 8180 which
is the deregulation of the downstream oil industry. The section is
supposed to sway prospective investors to put up refineries in our
23
country and make them rely less on imported petroleum.
_______________
23
Id., at pp. 349-350.
270
II.
_______________
24
People v. Tudtud, G.R. No. 144037, 26 September 2003, 412 SCRA
142, 168.
273
_______________
25
See Section 1, Article III, CONSTITUTION. Private corporations and
partnerships are persons within the scope of the guaranty insofar as their
property is concerned. Smith Bell & Co. v. Natividad, 40 Phil. 136, 145
(1919).
26
16 C.J.S., at pp. 1150-1151.
27
292 U.S. 40 (1934).
28
Id., at p. 44.
29
G.R. No. L-59431, 25 July 1984, 130 SCRA 654.
274
275
_______________
30
Id., at pp. 660-662.
31
Justice Isagani Cruz offers the following examples of taxes that
contravene the due process clause: “A tax, for example, that would claim
80 percent of a person’s net income would clearly be oppressive and could
unquestionably struck down as a deprivation of his property without due
process of law. A property tax retroacting to as long as fifty years back
would by tyrannical and unrealistic, as the property might not yet have
been then in the possession of the taxpayer nor, presumably, would he
have acquired it had he known
276
cause pain and injury to the taxpayer, albeit for the greater
good of society. Perhaps whatever collective notion there
may be of what constitutes an arbitrary, confiscatory, and
unreasonable tax might draw more from the fairy
tale/legend traditions of absolute monarchs and the
oppressed peasants they tax. Indeed, it is easier to jump to
the conclusion that a tax is oppressive and unfair if it is
imposed by a tyrant or an authoritarian state.
But could an arbitrary, confiscatory or unreasonable tax
actually be enacted by a democratic state such as ours? Of
course it could, but these would exist in more palatable
guises. In a democratic society wherein statutes are
enacted by a representative legislature only after debate
and deliberation, tax statutes will most likely, on their face,
seem fair and even-handed. After all, if Congress passes a
tax law that on facial examination is obviously harsh and
_______________
277
_______________
32
“After defining religion, the Court, citing Tañada and Fernando,
made this statement, viz.:
This was the Court’s maiden unequivocal affirmation of the “clear and
present danger” rule in the religious freedom area, and in Philippine
jurisprudence, for that matter.” Estrada v. Escritor, A.M. No. P-02-1651, 4
August 2003, 408 SCRA 1.
279
_______________
33
Separate Opinion, infra.
34
Ibid.
281
_______________
35
Art. 2, European Commission First Council Directive 67/227 of 11
April 1967 on the Harmonization of Legislation of Member States
Concerning Turnover Taxes, 1971 O.J. (L 71) 1301.
36
Liam & Ebrill, THE MODERN VAT.
283
two concepts, the input tax and the output tax. Section
110(A) of the National Internal Revenue Code defines the
input tax as the VAT due from or paid by a VAT-registered
person on the importation of goods or local purchase of
goods and services in the course of trade or business, from a
VAT registered person.
Let us put this in operational terms. A VAT registered
person, engaged in an enterprise, necessarily purchases
goods such as raw materials and machinery in order to
produce consumer goods. The purchase of such raw
materials and machineries is subject to VAT, hence the
enterprise pays an additional 10% of the purchase price to
the supplier as VAT. This extra amount paid by the
enterprise constitutes its input
284
_______________
37
“The most basic law in finance!” Understand the Time Value of
Money. http://www.free-financial-advice.net/time-value-of-money. html.
Last visited, 30 August 2005.
290
_______________
38
Time Value of Money. http://www.jetobjects.com/components/finance
/TVM/concepts.html. Last visited, 30 August 2005.
291
_______________
39
There is also the option for the business to go underground and avoid
VAT registration, and consequently avoid remitting VAT payments to the
government. It would be facetious though for a Justice of the Supreme
292
293
DEALER “A”
_______________
40
In Joseph Heller’s Catch-22, Yossarian, a World War II pilot
reasoned that if he feigned insanity, he would be necessarily exempt from
assignment to dangerous bombing runs in enemy territory. However, his
superiors reasoned that if he were truly insane, he then would be heedless
enough to be sent on those dangerous bomb ing runs he had sought to
avoid in the first place.
294
Slide 1
Item Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR Due BIR with 70% cap
without cap
Output VAT 100,000.00 Output VAT 100,000.00
Actual Input 80,000.00 Allowable Input 70,000.00
VAT VAT
Net VAT 20,000.00 Net VAT Payable 30,000.00
Payable
Excess Input 10,000.00
VAT
Carry-over to
next quarter
Slide 2
Item Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 600,000.00 60,000.00
Due BIR without cap Due BIR with 70% cap
Output VAT 100,000.00 Output VAT 100,000.00
Actual Input VAT (60% of output Allowable 60,000.00
Input VAT
_______________
41
Pangloss was a famed character ridiculed in Voltaire’s Candide,
renowned for his absolute blind faith in optimism, no matter how dire the
circumstances.
296
VAT) 60,000.00
Net VAT 40,000.00 Net VAT Payable 40,000.00
Payable
Excess Input VAT ___0_____
Carry-over to next
quarter
Slide 1
Quarter 1
Item No. Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Allowable Input VAT 70,000.00
Net VAT Payable 30,000.00
Excess Input Vat 10,000.00
Carry-over to next quarter
_______________
42
Id., at pp. 29-30.
297
Quarter 2
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 7-% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 1st Qtr. 10,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 90,000.00
Allowable Input VAT (100,000 x 70,000.00 70,000.00
70%)
Net VAT Payable 30,000.00
Total Available Input VAT 90,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to 20,000.00
next Quarter
Quarter 3
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 2nd Qtr. 20,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 100,000.00
Allowable Input VAT (100,000 x 70,000.00 70,000.00
70%)
Net VAT Payable 30,000.00
298
Quarter 4
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 3rd Qtr. 30,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 110,000.00
Allowable Input VAT (100,000 x 70,000.00 70,000.00
70%)
Net VAT Payable 30,000.00
Allowable Input VAT 110,000.00
Total Available Input VAT 70,000.00
Excess Input VAT to be 40,000.00
carried over to next quarter
_______________
43
Decision, infra.
301
xxx
“(B) Capital Goods.—A VAT-registered person may apply for
_______________
44
This is confirmed by the BIR in its draft Revenue Memorandum
Circular dated 12 July 2005, submitted by respondents in its Compliance
dated 16 August 2005:
“[Q]: Is there a way by which such unapplied excess input tax credits can be claimed
for refund or issuance of TCC?
[A]: The only time application for refund/issuance of TCC is allowed for
input taxes incurred on the purchase of domestic goods/services is when
the same are directly attributable to zero-rated or effectively zero-rated
sales (of goods/services). x x x
For those engaged purely in domestic transactions, the only time that
unapplied input taxes may be applied for the issuance of TCC is when the
VAT registration of the taxpayer is cancelled due to retirement or
cessation of business or change in the status of the taxpayer as a VAT
registered taxpayer. As provided for in Section 112(B0, in case of cancellation of
VAT registration due to cessation of business or change in status of taxpayer, the
only recourse given to such taxpayer is to apply for the issuance of TCC on his
excess input tax credits which may be used in payment of
302
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his other internal revenue taxes, application for refund thereof is not an
option.”
See Annexes “18-N” and “18-O,” Compliance dated 12 July 2005.
45
See SRC Rule 68(1)(b)(c), IMPLEMENTING RULES AND
REGULATIONS TO THE SECURITIES AND REGULATIONS CODE.
46
Section 34, INTERNATIONAL ACCOUNTING STANDARDS 12.
47
Section 36, Id.
303
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48
In his Separate Opinion, Justice Panganiban asserts that the
deferred input tax credit is not really confiscated by the government, as it
remains an asset in the accounting records of a business. See Separate
Opinion, infra. By the same logic, a law requiring all businesses to
surrender to the government 100% of its gross sales subject to
reimbursement only after a five year period, would pass muster, since the
amount is “not really confiscated by the government as it remains an asset
in the accounting records of a business.”
49
Justice Panganiban cites United Paracale Mining Co. v. De la Rosa
(cited as 221 SCRA 108, 115, April 7, 1993) to bolster his stated position
that “[t]here is no vested right in a deferred input tax account; it is a mere
statutory privilege.” Separate Opinion, infra. United Paracale does not
pertain to any deferred input taxes, but instead to “mining claims which
according to [petitioners] is private property would constitute impairment
of vested rights since by shifting the forum of the petitioner’s case from
the courts to the Bureau of Mines…[the] substantive rights to full
protection of its property rights shall be greatly impaired.” United
Paracale Mining Co. v. Hon. Dela Rosa, G.R. Nos. 63786-87, 7 April 1993,
221 SCRA 108, `115. Clearly, United Paracale is not even a tax case,
involving as it does, questions of the jurisdiction of the Bureau of Mines.
304
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50
See Part III, Paragraph 3, Revenue Memorandum Ruling No. 1-2002.
51
Section 32, International Accounting Standards 12.
52
Supra note 47.
53
Supra note 9.
54
Section 3, Article XIII, CONSTITUTION.
305
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55
Kapatiran ng Mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc., et
al. v. Tan, G.R. No. L-81311, 30 June 1988, 163 SCRA 371.
308
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56
J. Vitug and E. Acosta, supra note 3 at p. 41.
57
Pepsi-Cola Bottling Co. of the Philippines, Inc. v. Municipality of
Tanauan, G.R. No. L-31156, 27 February 1976, 69 SCRA 460, 466-67;
citing Court of Industrial Relations v. Lednicky, L-18169, July 31, 1964, 11
SCRA 609 and Ssn Miguel Brewery, Inc. v. City of Cebu, L-20312,
February 26, 1972, 43 SCRA 280.
58
A.M. No. 90-6-015-SC, 18 October 1990, 190 SCRA 851.
311
Conclusions
_______________
59
Id., at p. 856.
312
CONCURRING OPINION
CHICO-NAZARIO, J.:
_______________
1
Presidential Decree No. 1158, as amended up to Rep. Act No. 8424.
314
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2
Commissioner of Internal Revenue v. Algue, Inc., G.R. No. L-28896, 17
February 1988, 158 SCRA 9.
3
Paragraph 3.3 of the Verification and Affidavit of Merit, executed by
the then Secretary of the Department of Finance, Cesar V. Purisima,
dated 04 July 2005, attached as Annex “A” of the Very Urgent Motion to
Lift Temporary Restraining Order, filed by the Office of the Solicitor
General on 04 July 2005.
315
this Court to look into the enactment of Rep. Act No. 9337
by Congress and, consequently, to review the applicability
of the enrolled bill doctrine in this jurisdiction. Under the
said doctrine, the enrolled bill, as signed by the Speaker of
the House of Representatives and the Senate President,
and certified by the Secretaries of both Houses of Congress,
shall be conclusive proof of its due enactment.4
Petitioners’ arguments failed to convince me of the
wisdom of abandoning the enrolled bill doctrine. I believe
that it is more prudent for this Court to remain
conservative and to continue its adherence to the enrolled
bill doctrine, for to abandon the said doctrine would be to
open a Pandora’s Box, giving rise to a situation more
fraught with evil and mischief. Statutes enacted by
Congress may not attain finality or conclusiveness unless
declared so by this Court. This would undermine the
authority of our statutes because despite having been
signed and certified by the designated officers of Congress,
their validity would still be in doubt and their
implementation would be greatly hampered by allegations
of irregularities in their passage by the Legislature. Such
an uncertainty in the statutes would indubitably result in
confusion and disorder. In all probability, it is the
contemplation of such a scenario that led an American
judge to proclaim, thus –
5
intolerable. . . .
_______________
4
Fariñas v. Executive Secretary, G.R. No. 147387, 10 December 2003,
417 SCRA 503, 529.
5
Justice Sawyer, in Sherman v. Story, 30 Cal. 253, 256, as quoted in
Marshall Field & Co. v. Clark, 143 U.S. 294, 304.
316
_______________
6
Tolentino v. Secretary of Finance, G.R. No. 115544, 25 August 1994, 235 SCRA
630; Philippine Judges Association v. Prado, G.R. No. 105371, 11 November 1993,
227 SCRA 703.
7
G.R. No. 127255, 14 August 1997, 277 SCRA 268, 299.
318
revenues.
_______________
8
Supra, note 6.
319
_______________
9
Supra, note 3.
10
Petition for Prohibition (Under Rule 65 with Prayer for the Issuance
of a Temporary Restraining Order and/or Writ of Preliminary Injunction)
in G.R. No. 168461 entitled, Association of Pilipinas Shell Dealers, Inc., et
al. v. Purisima, et al., p. 17, paragraph 52.
320
_______________
11
Asociacion de Agricultores de Talisay-Silay, Inc. v. Talisay-Silay
Milling Co., Inc., G.R. No. L-19937, 19 February 1979, 88 SCRA 294;
Duarte v. Dade, 32 Phil. 36 (1915).
12
Traux v. Corrigan, 257 U.S. 312, 66 L. Ed. 254, as quoted in
Asociacion de Agricultores de Talisay-Silay, Inc. v. Talisay-Silay Milling
Co., Inc., Id., p. 452.
13
Section 110(B) of the National Internal Revenue Code of 1997, as
amended by Section 8 of Rep. Act No. 9337.
14
VICTORIO A. DEOFERIO, JR. AND VICTORINO C. MAMALATEO,
322
_______________
15
Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711, 722 (1956).
16
Section 109(e) of the National Internal Revenue Code of 1997.
323
_______________
17
TSN, 18 April 2005, IV-2, p. 5.
18
Section 116 of the National Internal Revenue Code, as amended by
Rep. Act No. 9337.
325
“It will thus be seen that the contention that the rates charged for
advertising cannot be raised is purely hypothetical, based entirely
upon the opinion of the plaintiffs, unsupported by actual test, and
that the plaintiffs themselves admit that a number of other
persons have voluntarily and without protest paid the tax herein
complained of. Under these circumstances, can it be held as a
matter of fact that the tax is confiscatory or that, as a matter of
law, the tax is unconstitutional? Is the exercise of the taxing
power of the Legislature dependent upon and restricted by the
opinion of two interested witnesses? There can be but one answer
to these questions, especially in view of the fact that others are
paying the tax and presumably making reasonable profit from
their business.”
_______________
19
34 Phil. 969, 973 (1916).
326
Edu, to wit—
20
_______________
20
G.R. No. L-49112, 02 February 1979, 88 SCRA 195.
21
Id., pp. 210-211.
327
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328