ARTICLE VI SEC 27 CASE 1 OF 4
ABAKADA v ERMITA (J.Austria-Martinez)
VAT: tax on spending/consumption; levied on sale/barter/exchange/lease of goods/properties & services
STAND BY AUTHORITY: authority of President to raise VAT rate to 12% if certain conditions met
UNIFORMITY IN TAXATION: same class taxed at the same rate.
“where due process and equal protection clauses are invoked, considering that they are not fixed rules
but rather broad standards, there is a need for proof of such persuasive character as would lead to such a
conclusion.”
- HB 3555: substituting HB 1468; motherhood bill
- HB 3705: substituting HB 3381
- SB 1950: substituting SB 1337, 1338, and 1873, taking into consideration HB 3555/3705
- APRIL 13, 2005: disagreeing provisions in proposed bills consolidated (Conf. Committee)
o Signed into law by President = RA 9337 (amending a bunch of NIRC sections)
- JULY 1: Court issued TRO, enjoining respondents from enforcing implementing law
GR 168056
- ABAKADA GURO Party List et al: unconstitutional because abandons exclusive authority
of Congress to fix rate of taxes under ART VI SEC 28 (2)
o SEC 4: imposes 10% VAT on sale of goods and properties
o SEC 5: imposes 10% VAT on importation
o SEC 6: imposes 10% VAT on sale of services and use or lease of properties
o Proviso authorizing Pres to raise VAT rate to 12% effective Jan 1, 2006 IF:
 VAT collection as % of GDP of previous year exceeds 2 4/5 % OR
 Nat’l gov’t deficit as % of GDP of previous year exceeds 1 ½%
GR 168207
- Sen Aquilino Q. Pimentel Jr., et al: unconstitutional SECs 4/5/6
o Questions stand-by authority of Pres (violates no-amendment rule of SEC 26(2))
o Amounts to undue delegation of legislative power
o 12% increase violates due process clause (unfair and additional tax burden)
 Ambiguous: does not state if rate would be returned to 10% if
conditions no longer satisfied
 Unfair/unreasonable: unsure of applicable VAT rate from yr to yr
 Should only be based on fiscal adequacy
GR 168461
- Association of Pilipinas Shell Dealers Inc., et al
- Unconstitutional for being arbitrary, oppressive, excessive, and confiscatory
o SEC 8: requiring amortized input tax over 60-mo period + imposing 70% limit
on amount of input tax to be credited against output tax
 70% limit violative of SEC 28 (1) bc smaller businesses with higher
input to output tax ration will suffer (wipes out margins they make)
o SEC 12: authorizing gov’t to deduct 5% final withholding tax on gross payments
GR 168463
- Rep. Francis Joseph G. Escudero
o Undue delegation
o Bicam Conference Committee w/o jurisdiction in deleting no pass on provisions
o Insertion of sections from SB 1950 violates ART VI SEC 24(1) because did not
originate exclusively in House of Representatives
GR 168730
- Gov. Enrique T. Garcia
o Limitation on creditable input tax in effect allows VAT-registered establishments
to retain portion of taxes they collect
ISSUES:
- W/N BCC followed rules of Congress :. remaining w/n JURISDICTION YES
- W/N “no-amendment rule” (SEC 26(2)) was violated NO
- W/N NIRC amendments BY SENATE valid YES
- W/N there is undue delegation of legislative power NO
- W/N 12% increase imposes unfair/unnecessary additional tax burden NO
- W/N violates DUE PROCESS and EQUAL PROTECTION clause NO
- W/N violates uniformity and equitability of taxation NO
RULING:
1. Congress best judge of how to conduct its own business expeditiously/most orderly manner
a. No showing of violation of Consti right = Parliamentary rules JUST procedural
b. ART VI SEC 16 (3): “each House may determine rules of its proceeding”
c. RULE XII SEC 35 of RULES OF THE SENATE
“In event that Senate does not agree with HoR on provision of any bill or joint
resolution, the differences shall be settled by a conference committee of both
Houses which shall meet within 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.
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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.”
d. BCC mandated by rules of both houses to settle differences and/or disagreements
i. RATE: 10% (Senate) vs. various rates w/ 12% highest (House)
1. BCC Sol’n: present 10% VAT would be retained until certain
conditions arise and then shall raise to 12% start Jan 1, 2006
ii. Electricity VAT to consumers OR electricity + petroleum to consumers
1. BCC: altogether deleting any “no pass-on” provision
iii. INPUT TAX CREDITS limited or not
1. House: limit on amount of IT to be credited against OT
iv. OTHER PROVISIONS: adopted Senate Bill 1950 provisions
 e. Did not inject any idea/intent wholly foreign to subject embraced by provision 1. If IT result from zero-rated transactions: any excess over OT
i. Standby authority within subject of what VAT rate should be imposed shall instead be refunded to taxpayer or credited against other
ii. No pass-on provision: VAT already is pass-on tax (keep plain/simple) internal revenue taxes, at taxpayer’s option
iii. Input tax: change within intent of both houses to put cap on input tax 7. Uniform in standard rate of 0% or 10% (or 12%) on all goods and services
iv. Amendments to NIRC provisions: germane to subject of provision a. UNIFORMITY IN TAXATION: all taxable articles or kinds of property of the
2. SEC 26(2) referring only to bills introduced for FIRST TIME in EITHER house of Cong. same class shall be taxed at the same rate.
a. 3 readings in each of two houses would lead to never-ending negotiations i. Rule of uniformity does not deprive Congress of power to classify
b. “No-amendment rule” refers only to procedure to be followed by each house of ii. Equitable bc of threshold margin: rate does not apply to sales of
Congress with regard to bills initiated in each of said respective houses, before goods/services with gross annual sales/receipts not exceeding P1.5M or
said bill is transmitted to the other house for its concurrence or amendment. basic marine/agricultural food products in their original state
3. SEC 24: BILLS =/= statute or law; Senate acting within power to introduce amendments 1. Ensures that prices at grass-roots level remain accessible
a. Even amendments introduced by Senate not touched in HB still in furtherance of 2. Equalizer: 3% tax on VAT-exempt persons (P1.5M people)
intent of the House in initiating the subject revenue bill 3. VAT coverage and VAT-exempt taxpayers on equal footing
b. Purpose: to bring sizeable revenues for gov’t to supplement country’s fin probs iii. Mitigating measure to cushion impact of imposition
4. Not a delegation of power but a delegation of ASCERTAINMENT OF FACTS 1. Excise tax on petroleum products and natural gases reduced
a. Tax power non-delegatory but enforcement/administration under law contingent 2. % tax on domestic carriers removed
i. Increase contingent to specific fact/condition outside control of exec 3. Power producers exempt from franchise tax
ii. STATCON: “shall” used in proviso = mandatory order (no discretion) 4. Etc.
b. Sec of Finance NOT acting as alter ego or even subordinate of President
i. As head of DoF = assistant/agent of Chief Exec (advisory capacity)
ii. In present case, he is acting as the agent of the legislative department to
determine/declare the even upon which its express will is to take effect
1. MEANS/TOOL by which policy determined/implemented
iii. President cannot alter/modify/nullify/set aside findings of Sec of Fin
5. Constitutional so long as there is public purpose for which law was passed (raise revenue)
a. Country in a quagmire of financial woe; Fin Sec Purisima @ BCC
i. In position where 90% if revenue used for debt service (not sustainable)
ii. Debt to GDP level is way out of line
iii. Env’t not as benign as in the past 5 yrs (interest rates have gone up)
6. No retention of any tax collection bc person has already previously paid IT to seller
a. Party directly liable for payment of tax is seller (creditable IT statutory privilege)
i. Right to credit IT against OT privilege law can remove or limit
b. SEC 8 OF RA: VAT paid & passed to person by seller (IT) can only be credited
up to 70% if VAT due him on taxable transaction (OT)
c. DOCTRINE: “where due process and equal protection clauses are invoked,
considering that they are not fixed rules but rather broad standards, there is a need
for proof of such persuasive character as would lead to such a conclusion.”
d. INPUT TAX: VAT due from or paid by a VAT-registered person on importation
of goods/local purchase of good or services
e. OUTPUT TAX: VAT due on the sale/lease of taxable goods/properties/services
f. In computing VAT payable, 3 scenarios may arise:
i. OT = IT: no payment required
ii. OT > IT: person liable for excess to BIR
iii. OT < IT: excess carried over to succeeding quarter/s;