67 ABAKADA Vs The Honorable Executive Secretary

EN BANC
G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and
ED VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY
OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER
OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent.
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G.R. No. 168207
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA, PANFILO

M. LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEÑA III,
Petitioners,
vs.
EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA, SECRETARY OF
FINANCE, GUILLERMO L. PARAYNO, JR., COMMISSIONER OF THE BUREAU OF INTERNAL
REVENUE, Respondent.
x-------------------------x
G.R. No. 168461
ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its President, ROSARIO

ANTONIO; PETRON DEALERS’ ASSOCIATION represented by its President, RUTH E. BARBIBI;
ASSOCIATION OF CALTEX DEALERS’ OF THE PHILIPPINES represented by its President,
MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business under the name and style of "ANB
NORTH SHELL SERVICE STATION"; LOURDES MARTINEZ doing business under the name and
style of "SHELL GATE – N. DOMINGO"; BETHZAIDA TAN doing business under the name and style
of "ADVANCE SHELL STATION"; REYNALDO P. MONTOYA doing business under the name and
style of "NEW LAMUAN SHELL SERVICE STATION"; EFREN SOTTO doing business under the
name and style of "RED FIELD SHELL SERVICE STATION"; DONICA CORPORATION
represented by its President, DESI TOMACRUZ; RUTH E. MARBIBI doing business under the name
and style of "R&R PETRON STATION"; PETER M. UNGSON doing business under the name and
style of "CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN SHEILA A. LEE doing
business under the name and style of "NTE GASOLINE & SERVICE STATION"; JULIAN CESAR P.
POSADAS doing business under the name and style of "STARCARGA ENTERPRISES";
ADORACION MAÑEBO doing business under the name and style of "CMA MOTORISTS CENTER";
SUSAN M. ENTRATA doing business under the name and style of "LEONA’S GASOLINE STATION
and SERVICE CENTER"; CARMELITA BALDONADO doing business under the name and style of
"FIRST CHOICE SERVICE CENTER"; MERCEDITAS A. GARCIA doing business under the name
and style of "LORPED SERVICE CENTER"; RHEAMAR A. RAMOS doing business under the name
and style of "RJRAM PTT GAS STATION"; MA. ISABEL VIOLAGO doing business under the name
and style of "VIOLAGO-PTT SERVICE CENTER"; MOTORISTS’ HEART CORPORATION
represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS’
HARVARD CORPORATION represented by its Vice-President for Operations, JOSELITO F.
FLORDELIZA; MOTORISTS’ HERITAGE CORPORATION represented by its Vice-President for
Operations, JOSELITO F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION
represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL
doing business under the name and style of "ROMMAN GASOLINE STATION"; ANTHONY ALBERT
CRUZ III doing business under the name and style of "TRUE SERVICE STATION", Petitioners,
vs.
CESAR V. PURISIMA, in his capacity as Secretary of the Department of Finance and
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal
Revenue, Respondent.
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G.R. No. 168463
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,
Petitioners,
vs.
CESAR V. PURISIMA, in his capacity as Secretary of Finance, GUILLERMO L. PARAYNO, JR.,
in his capacity as Commissioner of Internal Revenue, and EDUARDO R. ERMITA, in his
capacity as Executive Secretary, Respondent.
x-------------------------x
G.R. No. 168730
BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner,

vs.
HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO
TEVES, in his capacity as Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the
OIC Commissioner of the Bureau of Internal Revenue; and HON. ALEXANDER AREVALO, in his
capacity as the OIC Commissioner of the Bureau of Customs, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object the interest of all, should be borne by everyone,
and the more man enjoys the advantages of society, the more he ought to hold himself honored in
contributing to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist
Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased
emoluments for health workers, and wider coverage for full value-added tax benefits … these are the
reasons why Republic Act No. 9337 (R.A. No. 9337)1 was enacted. Reasons, the wisdom of which,
the Court even with its extensive constitutional power of review, cannot probe. The petitioners in
these cases, however, question not only the wisdom of the law, but also perceived constitutional
infirmities in its passage.
Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding,
petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not
unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705,
and Senate Bill No. 1950.
House Bill No. 35552 was introduced on first reading on January 7, 2005. The House Committee on
Ways and Means approved the bill, in substitution of House Bill No. 1468, which Representative
(Rep.) Eric D. Singson introduced on August 8, 2004. The President certified the bill on January 7,
2005 for immediate enactment. On January 27, 2005, the House of Representatives approved the
bill on second and third reading.
House Bill No. 37053 on the other hand, substituted House Bill No. 3105 introduced by Rep.
Salacnib F. Baterina, and House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its "mother bill"
is House Bill No. 3555. The House Committee on Ways and Means approved the bill on February 2,
2005. The President also certified it as urgent on February 8, 2005. The House of Representatives
approved the bill on second and third reading on February 28, 2005.
Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No. 19504 on March
7, 2005, "in substitution of Senate Bill Nos. 1337, 1838 and 1873, taking into consideration House
Bill Nos. 3555 and 3705." Senator Ralph G. Recto sponsored Senate Bill No. 1337, while Senate Bill
Nos. 1838 and 1873 were both sponsored by Sens. Franklin M. Drilon, Juan M. Flavier and Francis
N. Pangilinan. The President certified the bill on March 11, 2005, and was approved by the Senate
on second and third reading on April 13, 2005.
On the same date, April 13, 2005, the Senate agreed to the request of the House of Representatives
for a committee conference on the disagreeing provisions of the proposed bills.
Before long, the Conference Committee on the Disagreeing Provisions of House Bill No. 3555,
House Bill No. 3705, and Senate Bill No. 1950, "after having met and discussed in full free and
conference," recommended the approval of its report, which the Senate did on May 10, 2005, and
with the House of Representatives agreeing thereto the next day, May 11, 2005.
On May 23, 2005, the enrolled copy of the consolidated House and Senate version was transmitted
to the President, who signed the same into law on May 24, 2005. Thus, came R.A. No. 9337.
July 1, 2005 is the effectivity date of R.A. No. 9337.5 When said date came, the Court issued a
temporary restraining order, effective immediately and continuing until further orders, enjoining
respondents from enforcing and implementing the law.
Oral arguments were held on July 14, 2005. Significantly, during the hearing, the Court speaking
through Mr. Justice Artemio V. Panganiban, voiced the rationale for its issuance of the temporary
restraining order on July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details of your presentation, let me just tell you a little
background. You know when the law took effect on July 1, 2005, the Court issued a TRO at about 5
o’clock in the afternoon. But before that, there was a lot of complaints aired on television and on
radio. Some people in a gas station were complaining that the gas prices went up by 10%. Some
people were complaining that their electric bill will go up by 10%. Other times people riding in
domestic air carrier were complaining that the prices that they’ll have to pay would have to go up by
10%. While all that was being aired, per your presentation and per our own understanding of the law,
that’s not true. It’s not true that the e-vat law necessarily increased prices by 10% uniformly isn’t it?
ATTY. BANIQUED : No, Your Honor.
J. PANGANIBAN : It is not?
ATTY. BANIQUED : It’s not, because, Your Honor, there is an Executive Order that granted the
Petroleum companies some subsidy . . . interrupted
J. PANGANIBAN : That’s correct . . .
ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . . interrupted
J. PANGANIBAN : . . . mitigating measures . . .
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : As a matter of fact a part of the mitigating measures would be the elimination of
the Excise Tax and the import duties. That is why, it is not correct to say that the VAT as to
petroleum dealers increased prices by 10%.
J. PANGANIBAN : And therefore, there is no justification for increasing the retail price by 10% to
cover the E-Vat tax. If you consider the excise tax and the import duties, the Net Tax would probably
be in the neighborhood of 7%? We are not going into exact figures I am just trying to deliver a point
that different industries, different products, different services are hit differently. So it’s not correct to
say that all prices must go up by 10%.
ATTY. BANIQUED : You’re right, Your Honor.
J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr. Counsel, are at present
imposed a Sales Tax of 3%. When this E-Vat law took effect the Sales Tax was also removed as a
mitigating measure. So, therefore, there is no justification to increase the fares by 10% at best 7%,
correct?
ATTY. BANIQUED : I guess so, Your Honor, yes.
J. PANGANIBAN : There are other products that the people were complaining on that first day, were
being increased arbitrarily by 10%. And that’s one reason among many others this Court had to
issue TRO because of the confusion in the implementation. That’s why we added as an issue in this
case, even if it’s tangentially taken up by the pleadings of the parties, the confusion in the
implementation of the E-vat. Our people were subjected to the mercy of that confusion of an across
the board increase of 10%, which you yourself now admit and I think even the Government will admit
is incorrect. In some cases, it should be 3% only, in some cases it should be 6% depending on these
mitigating measures and the location and situation of each product, of each service, of each
company, isn’t it?
J. PANGANIBAN : Alright. So that’s one reason why we had to issue a TRO pending the clarification
of all these and we wish the government will take time to clarify all these by means of a more
detailed implementing rules, in case the law is upheld by this Court. . . .6
The Court also directed the parties to file their respective Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for
prohibition on May 27, 2005. They question the constitutionality of Sections 4, 5 and 6 of R.A. No.
9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code
(NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10%
VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or
lease of properties. These questioned provisions contain a uniform proviso authorizing the
President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective
January 1, 2006, after any of the following conditions have been satisfied, to wit:
. . . 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:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its
exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition for certiorari likewise assailing
the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to
12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also
contend that the increase in the VAT rate to 12% contingent on any of the two conditions being
satisfied violates the due process clause embodied in Article III, Section 1 of the Constitution, as it
imposes an unfair and additional tax burden on the people, in that: (1) the 12% increase is
ambiguous because it does not state if the rate would be returned to the original 10% if the
conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as the people are unsure
of the applicable VAT rate from year to year; and (3) the increase in the VAT rate, which is supposed
to be an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal adequacy.
Petitioners further claim that the inclusion of a stand-by authority granted to the President by the
Bicameral Conference Committee is a violation of the "no-amendment rule" upon last reading of a
bill laid down in Article VI, Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29, 2005, by the Association of Pilipinas Shell
Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on depreciable
goods shall be amortized over a 60-month period, if the acquisition, excluding the VAT components,
exceeds One Million Pesos (₱1, 000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of input tax
to be credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its
political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final
withholding tax on gross payments of goods and services, which are subject to 10% VAT under
Sections 106 (sale of goods and properties) and 108 (sale of services and use or lease of
properties) of the NIRC.
Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive,
excessive, and confiscatory.
Petitioners’ argument is premised on the constitutional right of non-deprivation of life, liberty or

property without due process of law under Article III, Section 1 of the Constitution. According to
petitioners, the contested sections impose limitations on the amount of input tax that may be
claimed. Petitioners also argue that the input tax partakes the nature of a property that may not be
confiscated, appropriated, or limited without due process of law. Petitioners further contend that like
any other property or property right, the input tax credit may be transferred or disposed of, and that
by limiting the same, the government gets to tax a profit or value-added even if there is no profit or
value-added.
Petitioners also believe that these provisions violate the constitutional guarantee of equal protection
of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax
if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several
transactions with the government, is not based on real and substantial differences to meet a valid
classification.
Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI,
Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output
tax ratio that will suffer the consequences thereof for it wipes out whatever meager margins the
petitioners make.
G.R. No. 168463

Several members of the House of Representatives led by Rep. Francis Joseph G. Escudero filed
this petition for certiorari on June 30, 2005. They question the constitutionality of R.A. No. 9337 on
the following grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of legislative power, in
violation of Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without jurisdiction in deleting the no pass
on provisions present in Senate Bill No. 1950 and House Bill No. 3705; and
3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117, 119, 121,
125,7 148, 151, 236, 237 and 288, which were present in Senate Bill No. 1950, violates Article VI,
Section 24(1) of the Constitution, which provides that all appropriation, revenue or tariff bills shall
originate exclusively in the House of Representatives
G.R. No. 168730
On the eleventh hour, Governor Enrique T. Garcia filed a petition for certiorari and prohibition on July
20, 2005, alleging unconstitutionality of the law on the ground that the limitation on the creditable
input tax in effect allows VAT-registered establishments to retain a portion of the taxes they collect,
thus violating the principle that tax collection and revenue should be solely allocated for public
purposes and expenditures. Petitioner Garcia further claims that allowing these establishments to
pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the
Constitution.
RESPONDENTS’ COMMENT
The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. Preliminarily,
respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners
failed to cast doubt on its validity.
Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
630 (1994), respondents argue that the procedural issues raised by petitioners, i.e., legality of the
bicameral proceedings, exclusive origination of revenue measures and the power of the Senate
concomitant thereto, have already been settled. With regard to the issue of undue delegation of
legislative power to the President, respondents contend that the law is complete and leaves no
discretion to the President but to increase the rate to 12% once any of the two conditions provided
therein arise.
Respondents also refute petitioners’ argument that the increase to 12%, as well as the 70%
limitation on the creditable input tax, the 60-month amortization on the purchase or importation of
capital goods exceeding ₱1,000,000.00, and the 5% final withholding tax by government agencies,
is arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on
progressive taxation, among others.
Finally, respondents manifest that R.A. No. 9337 is the anchor of the government’s fiscal reform
agenda. A reform in the value-added system of taxation is the core revenue measure that will tilt the
balance towards a sustainable macroeconomic environment necessary for economic growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC,
violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions
of the Constitution:
b. Article III, Section 1
RULING OF THE COURT
As a prelude, the Court deems it apt to restate the general principles and concepts of value-added
tax (VAT), as the confusion and inevitably, litigation, breeds from a fallacious notion of its nature.
The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or lease of
goods or properties and services.8 Being an indirect tax on expenditure, the seller of goods or
services may pass on the amount of tax paid to the buyer,9 with the seller acting merely as a tax
collector.10 The burden of VAT is intended to fall on the immediate buyers and ultimately, the end-
consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business it
engages in, without transferring the burden to someone else.11 Examples are individual and
corporate income taxes, transfer taxes, and residence taxes.12
In the Philippines, the value-added system of sales taxation has long been in existence, albeit in a
different mode. Prior to 1978, the system was a single-stage tax computed under the "cost deduction
method" and was payable only by the original sellers. The single-stage system was subsequently
modified, and a mixture of the "cost deduction method" and "tax credit method" was used to
determine the value-added tax payable.13 Under the "tax credit method," an entity can credit against
or subtract from the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and
imports.14
It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273, that the
VAT system was rationalized by imposing a multi-stage tax rate of 0% or 10% on all sales using the
"tax credit method."15
E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law,16 R.A. No. 8241 or the
Improved VAT Law,17 R.A. No. 8424 or the Tax Reform Act of 1997,18 and finally, the presently
beleaguered R.A. No. 9337, also referred to by respondents as the VAT Reform Act.
The Court will now discuss the issues in logical sequence.
PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
A. The Bicameral Conference Committee
Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral Conference Committee
exceeded its authority by:
1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in both the House and Senate bills;
3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against the
output tax; and
4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes
in addition to the value-added tax.
Petitioners now beseech the Court to define the powers of the Bicameral Conference Committee.
It should be borne in mind that the power of internal regulation and discipline are intrinsic in any
legislative body for, as unerringly elucidated by Justice Story, "[i]f the power did not exist, it would
be utterly impracticable to transact the business of the nation, either at all, or at least with
decency, deliberation, and order."19 Thus, Article VI, Section 16 (3) of the Constitution provides
that "each House may determine the rules of its proceedings." Pursuant to this inherent
constitutional power to promulgate and implement its own rules of procedure, the respective rules of
each house of Congress provided for the creation of a Bicameral Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as follows:
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.
Sec. 89. Conference Committee Reports. – . . . Each report shall contain a detailed, sufficiently
explicit statement of the changes in or amendments to the subject measure.
...
The Chairman of the House panel may be interpellated on the Conference Committee Report prior
to the voting thereon. The House shall vote on the Conference Committee Report in the same
manner and procedure as it votes on a bill on third and final reading.
Rule XII, Section 35 of the Rules of the Senate states:
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.
...
The creation of such conference committee was apparently in response to a problem, not addressed
by any constitutional provision, where the two houses of Congress find themselves in disagreement
over changes or amendments introduced by the other house in a legislative bill. Given that one of
the most basic powers of the legislative branch is to formulate and implement its own rules of
proceedings and to discipline its members, may the Court then delve into the details of how
Congress complies with its internal rules or how it conducts its business of passing legislation? Note
that in the present petitions, the issue is not whether provisions of the rules of both houses creating
the bicameral conference committee are unconstitutional, but whether the bicameral conference
committee has strictly complied with the rules of both houses, thereby remaining within the
jurisdiction conferred upon it by Congress.
In the recent case of Fariñas vs. The Executive Secretary,20 the Court En
Banc, unanimously reiterated and emphasized its adherence to the "enrolled bill doctrine," thus,
declining therein petitioners’ plea for the Court to go behind the enrolled copy of the bill. Assailed in
said case was Congress’s creation of two sets of bicameral conference committees, the lack of
records of said committees’ proceedings, the alleged violation of said committees of the rules of both
houses, and the disappearance or deletion of one of the provisions in the compromise bill submitted
by the bicameral conference committee. It was argued that such irregularities in the passage of the
law nullified R.A. No. 9006, or the Fair Election Act.
Striking down such argument, the Court held thus:

Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House and the Senate
President and the certification of the Secretaries of both Houses of Congress that it was passed are
conclusive of its due enactment. A review of cases reveals the Court’s consistent adherence to the
rule. The Court finds no reason to deviate from the salutary rule in this case where the
irregularities alleged by the petitioners mostly involved the internal rules of Congress, e.g.,
creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not
the proper forum for the enforcement of these 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 vs. 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 allegations that, in enacting a law, a House of Congress failed to comply
with its own rules, in the absence of showing that there was a violation of a constitutional
provision or the rights of private individuals. In Osmeña v. Pendatun, it was held: "At any rate,
courts have declared that ‘the rules adopted by deliberative bodies are subject to revocation,
modification or waiver at the pleasure of the body adopting them.’ And it has been said that
"Parliamentary rules are merely procedural, and with their observance, the courts have no
concern. They may be waived or disregarded by the legislative body." Consequently, "mere
failure to conform to parliamentary usage will not invalidate the action (taken by a
deliberative body) when the requisite number of members have agreed to a particular
measure."21 (Emphasis supplied)
The foregoing declaration is exactly in point with the present cases, where petitioners allege
irregularities committed by the conference committee in introducing changes or deleting provisions in
the House and Senate bills. Akin to the Fariñas case,22 the present petitions also raise an issue
regarding the actions taken by the conference committee on matters regarding Congress’
compliance with its own internal rules. As stated earlier, one of the most basic and inherent power of
the legislature is the power to formulate rules for its proceedings and the discipline of its members.
Congress is the best judge of how it should conduct its own business expeditiously and in the most
orderly manner. It is also the sole
concern of Congress to instill discipline among the members of its conference committee if it
believes that said members violated any of its rules of proceedings. Even the expanded jurisdiction
of this Court cannot apply to questions regarding only the internal operation of Congress, thus, the
Court is wont to deny a review of the internal proceedings of a co-equal branch of government.
Moreover, as far back as 1994 or more than ten years ago, in the case of Tolentino vs. Secretary of
Finance,23 the Court already made the pronouncement that "[i]f a change is desired in the practice
[of the Bicameral Conference Committee] it must be sought in Congress since this question
is not covered by any constitutional provision but is only an internal rule of each house." 24 To
date, Congress has not seen it fit to make such changes adverted to by the Court. It seems,
therefore, that Congress finds the practices of the bicameral conference committee to be very useful
for purposes of prompt and efficient legislative action.
Nevertheless, just to put minds at ease that no blatant irregularities tainted the proceedings of the
bicameral conference committees, the Court deems it necessary to dwell on the issue. The Court
observes that there was a necessity for a conference committee because a comparison of the
provisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other,
reveals that there were indeed disagreements. As pointed out in the petitions, said disagreements
were as follows:
House Bill No. 3555 House Bill No.3705 Senate Bill No. 1950
With regard to "Stand-By Authority" in favor of President
Provides for 12% VAT on Provides for 12% VAT in general Provides for a single rate of
every sale of goods or on sales of goods or properties 10% VAT on sale of goods or
properties (amending Sec. and reduced rates for sale of properties (amending Sec.
106 of NIRC); 12% VAT on certain locally manufactured 106 of NIRC), 10% VAT on
importation of goods goods and petroleum products sale of services including
(amending Sec. 107 of and raw materials to be used in sale of electricity by
NIRC); and 12% VAT on the manufacture thereof generation companies,
sale of services and use or (amending Sec. 106 of NIRC); transmission and distribution
lease of properties 12% VAT on importation of companies, and use or lease
(amending Sec. 108 of goods and reduced rates for of properties (amending Sec.
NIRC) certain imported products 108 of NIRC)
including petroleum products
(amending Sec. 107 of NIRC);
and 12% VAT on sale of
services and use or lease of
properties and a reduced rate for
certain services including power
generation (amending Sec. 108
of NIRC)
With regard to the "no pass-on" provision
No similar provision Provides that the VAT imposed Provides that the VAT
on power generation and on the imposed on sales of
sale of petroleum products shall electricity by generation
be absorbed by generation companies and services of
companies or sellers, transmission companies and
respectively, and shall not be distribution companies, as
passed on to consumers well as those of franchise
grantees of electric utilities
shall not apply to residential
end-users. VAT shall be

absorbed by generation,
transmission, and distribution
companies.
With regard to 70% limit on input tax credit
Provides that the input tax No similar provision Provides that the input tax
credit for capital goods on credit for capital goods on
which a VAT has been paid which a VAT has been paid
shall be equally distributed shall be equally distributed
over 5 years or the over 5 years or the
depreciable life of such depreciable life of such
capital goods; the input tax capital goods; the input tax
credit for goods and services credit for goods and services
other than capital goods other than capital goods shall
shall not exceed 5% of the not exceed 90% of the output
total amount of such goods VAT.
and services; and for
persons engaged in retail
trading of goods, the
allowable input tax credit
shall not exceed 11% of the
total amount of goods
purchased.
With regard to amendments to be made to NIRC provisions regarding income and excise
taxes
No similar provision No similar provision Provided for amendments to
several NIRC provisions
regarding corporate income,
percentage, franchise and
excise taxes
The disagreements between the provisions in the House bills and the Senate bill were with regard to
(1) what rate of VAT is to be imposed; (2) whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to consumers, as proposed in the
Senate bill, or both the VAT imposed on electricity generation, transmission and distribution
companies and the VAT imposed on sale of petroleum products should not be passed on to
consumers, as proposed in the House bill; (3) in what manner input tax credits should be limited; (4)
and whether the NIRC provisions on corporate income taxes, percentage, franchise and excise
taxes should be amended.
There being differences and/or disagreements on the foregoing provisions of the House and Senate
bills, the Bicameral Conference Committee was mandated by the rules of both houses of Congress
to act on the same by settling said differences and/or disagreements. The Bicameral Conference
Committee acted on the disagreeing provisions by making the following changes:
1. With regard to the disagreement on the rate of VAT to be imposed, it would appear from the
Conference Committee Report that the Bicameral Conference Committee tried to bridge the gap in
the difference between the 10% VAT rate proposed by the Senate, and the various rates with 12%
as the highest VAT rate proposed by the House, by striking a compromise whereby the present 10%
VAT rate would be retained until certain conditions arise, i.e., the value-added tax collection as a
percentage of gross domestic product (GDP) of the previous year exceeds 2 4/5%, or National
Government deficit as a percentage of GDP of the previous year exceeds 1½%, when the President,
upon recommendation of the Secretary of Finance shall raise the rate of VAT to 12% effective
January 1, 2006.
2. With regard to the disagreement on whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to consumers or whether both the
VAT imposed on electricity generation, transmission and distribution companies and the VAT
imposed on sale of petroleum products may be passed on to consumers, the Bicameral Conference
Committee chose to settle such disagreement by altogether deleting from its Report any no pass-
on provision.
3. With regard to the disagreement on whether input tax credits should be limited or not, the
Bicameral Conference Committee decided to adopt the position of the House by putting a limitation
on the amount of input tax that may be credited against the output tax, although it crafted its own
language as to the amount of the limitation on input tax credits and the manner of computing the
same by providing thus:
(A) Creditable Input Tax. – . . .
...
Provided, The input tax on goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this Code, shall be spread evenly
over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof, exceeds one million Pesos
(₱1,000,000.00): PROVIDED, however, that if the estimated useful life of the capital good is less
than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such
shorter period: . . .
(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the
input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output
tax, the excess shall be carried over to the succeeding quarter or quarters: PROVIDED that the input
tax inclusive of input VAT carried over from the previous quarter that may be credited in every
quarter shall not exceed seventy percent (70%) of the output VAT: PROVIDED, HOWEVER, THAT
any input tax attributable to zero-rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, . . .
4. With regard to the amendments to other provisions of the NIRC on corporate income tax,
franchise, percentage and excise taxes, the conference committee decided to include such
amendments and basically adopted the provisions found in Senate Bill No. 1950, with some changes
as to the rate of the tax to be imposed.
Under the provisions of both the Rules of the House of Representatives and Senate Rules, the
Bicameral Conference Committee is mandated to settle the differences between the disagreeing
provisions in the House bill and the Senate bill. The term "settle" is synonymous to "reconcile" and
"harmonize."25 To reconcile or harmonize disagreeing provisions, the Bicameral Conference
Committee may then (a) adopt the specific provisions of either the House bill or Senate bill, (b)
decide that neither provisions in the House bill or the provisions in the Senate bill would
be carried into the final form of the bill, and/or (c) try to arrive at a compromise between the
disagreeing provisions.
In the present case, the changes introduced by the Bicameral Conference Committee on
disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it
did not inject any idea or intent that is wholly foreign to the subject embraced by the original
provisions.
The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT wanted by
the Senate is retained until such time that certain conditions arise when the 12% VAT wanted by the
House shall be imposed, appears to be a compromise to try to bridge the difference in the rate of
VAT proposed by the two houses of Congress. Nevertheless, such compromise is still totally within
the subject of what rate of VAT should be imposed on taxpayers.
The no pass-on provision was deleted altogether. In the transcripts of the proceedings of the
Bicameral Conference Committee held on May 10, 2005, Sen. Ralph Recto, Chairman of the Senate
Panel, explained the reason for deleting the no pass-on provision in this wise:
. . . 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. And let’s keep it 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 simple, let’s keep the VAT simple.26 (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that the no pass-on provision "never really
enjoyed the support of either House."27
With regard to the amount of input tax to be credited against output tax, the Bicameral Conference
Committee came to a compromise on the percentage rate of the limitation or cap on such input tax
credit, but again, the change introduced by the Bicameral Conference Committee was totally within
the intent of both houses to put a cap on input tax that may be
credited against the output tax. From the inception of the subject revenue bill in the House of
Representatives, one of the major objectives was to "plug a glaring loophole in the tax policy and
administration by creating vital restrictions on the claiming of input VAT tax credits . . ." and "[b]y
introducing limitations on the claiming of tax credit, we are capping a major leakage that has placed
our collection efforts at an apparent disadvantage."28
As to the amendments to NIRC provisions on taxes other than the value-added tax proposed in
Senate Bill No. 1950, since said provisions were among those referred to it, the conference
committee had to act on the same and it basically adopted the version of the Senate.
Thus, all the changes or modifications made by the Bicameral Conference Committee were germane
to subjects of the provisions referred
to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion
amounting to lack or excess of jurisdiction committed by the Bicameral Conference Committee. In
the earlier cases of Philippine Judges Association vs. Prado29 and Tolentino vs. Secretary of
Finance,30 the Court recognized the long-standing legislative practice of giving said conference
committee ample latitude for compromising differences between the Senate and the House. Thus, in
the Tolentino case, it was held that:
. . . it is within the power of a conference committee to include in its report an entirely new provision
that is not found either in the House bill or in the Senate bill. If the committee can propose an
amendment consisting of one or two provisions, there is no reason why it cannot propose several
provisions, collectively considered as an "amendment in the nature of a substitute," so long as such
amendment is germane to the subject of the bills before the committee. After all, its report was not
final but needed the approval of both houses of Congress to become valid as an act of the legislative
department. The charge that in this case the Conference Committee acted as a third legislative
chamber is thus without any basis.31 (Emphasis supplied)
B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on the "No-
Amendment Rule"
Article VI, Sec. 26 (2) of the Constitution, states:
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.
Petitioners’ argument that the practice where a bicameral conference committee is allowed to add or
delete provisions in the House bill and the Senate bill after these had passed three readings is in
effect a circumvention of the "no amendment rule" (Sec. 26 (2), Art. VI of the 1987 Constitution), fails
to convince the Court to deviate from its ruling in the Tolentino case that:
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 report.32 (Emphasis
supplied)
The Court reiterates here that the "no-amendment rule" refers only to the procedure to be
followed by each house of Congress with regard to bills initiated in each of said respective
houses, before said bill is transmitted to the other house for its concurrence or amendment.
Verily, to construe said provision in a way as to proscribe any further changes to a bill after one
house has voted on it would lead to absurdity as this would mean that the other house of Congress
would be deprived of its constitutional power to amend or introduce changes to said bill. Thus, Art.
VI, Sec. 26 (2) of the Constitution cannot be taken to mean that the introduction by the Bicameral
Conference Committee of amendments and modifications to disagreeing provisions in bills that have
been acted upon by both houses of Congress is prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination
of Revenue Bills
Coming to the issue of the validity of the amendments made regarding the NIRC provisions on
corporate income taxes and percentage, excise taxes. Petitioners refer to the following provisions, to
wit:
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 of Garage
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
Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from
the House. They aver that House Bill No. 3555 proposed amendments only regarding Sections 106,
107, 108, 110 and 114 of the NIRC, while House Bill No. 3705 proposed amendments only to
Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the other sections of the NIRC which
the Senate amended but which amendments were not found in the House bills are not intended to
be amended by the House of Representatives. Hence, they argue that since the proposed
amendments did not originate from the House, such amendments are a violation of Article VI,
Section 24 of the Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives but the
Senate may propose or concur with amendments.
In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705 that
initiated the move for amending provisions of the NIRC dealing mainly with the value-added tax.
Upon transmittal of said House bills to the Senate, the Senate came out with Senate Bill No. 1950
proposing amendments not only to NIRC provisions on the value-added tax but also amendments to
NIRC provisions on other kinds of taxes. Is the introduction by the Senate of provisions not dealing
directly with the value- added tax, which is the only kind of tax being amended in the House bills, still
within the purview of the constitutional provision authorizing the Senate to propose or concur with
amendments to a revenue bill that originated from the House?
The foregoing question had been squarely answered in the Tolentino case, wherein the Court held,
thus:
. . . To begin with, it is not the law – but the revenue bill – which is required by the Constitution to
"originate exclusively" in the House of Representatives. It is important to emphasize this, because a
bill originating in the House may undergo such extensive changes in the Senate that the result may
be a rewriting of the whole. . . . At this point, what is important to note is that, as a result of the
Senate action, a distinct bill may be produced. To insist 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
coequality of legislative power of the two houses of Congress and in fact make the House superior to
the Senate.
…Given, then, the power of the Senate to propose amendments, the Senate can propose its
own version even with respect to bills which are required by the Constitution to originate in
the House.
...
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills,
bills authorizing an increase of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as they are from the districts, the
members of the House can be expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are elected at large, are expected to
approach the same problems from the national perspective. Both views are thereby made to
bear on the enactment of such laws.33 (Emphasis supplied)
Since there is no question that the revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its
constitutional power to introduce amendments to the House bill when it included provisions in
Senate Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes.
Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation on the
extent of the amendments that may be introduced by the Senate to the House revenue bill.
Furthermore, the amendments introduced by the Senate to the NIRC provisions that had not been
touched in the House bills are still in furtherance of the intent of the House in initiating the subject
revenue bills. The Explanatory Note of House Bill No. 1468, the very first House bill introduced on
the floor, which was later substituted by House Bill No. 3555, stated:
One of the challenges faced by the present administration is the urgent and daunting task of solving
the country’s serious financial problems. To do this, government expenditures must be strictly
monitored and controlled and revenues must be significantly increased. This may be easier said
than done, but our fiscal authorities are still optimistic the government will be operating on a
balanced budget by the year 2009. In fact, several measures that will result to significant expenditure
savings have been identified by the administration. It is supported with a credible package of
revenue measures that include measures to improve tax administration and control the
leakages in revenues from income taxes and the value-added tax (VAT). (Emphasis supplied)
Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555, declared that:
In the budget message of our President in the year 2005, she reiterated that we all acknowledged
that on top of our agenda must be the restoration of the health of our fiscal system.
In order to considerably lower the consolidated public sector deficit and eventually achieve a
balanced budget by the year 2009, we need to seize windows of opportunities which might
seem poignant in the beginning, but in the long run prove effective and beneficial to the
overall status of our economy. One such opportunity is a review of existing tax rates,
evaluating the relevance given our present conditions.34 (Emphasis supplied)
Notably therefore, the main purpose of the bills emanating from the House of Representatives is to
bring in sizeable revenues for the government
to supplement our country’s serious financial problems, and improve tax administration and control
of the leakages in revenues from income taxes and value-added taxes. As these house bills were
transmitted to the Senate, the latter, approaching the measures from the point of national
perspective, can introduce amendments within the purposes of those bills. It can provide for ways
that would soften the impact of the VAT measure on the consumer, i.e., by distributing the burden
across all sectors instead of putting it entirely on the shoulders of the consumers. The sponsorship
speech of Sen. Ralph Recto on why the provisions on income tax on corporation were included is
worth quoting:
All in all, the proposal of the Senate Committee on Ways and Means will raise ₱64.3 billion in
additional revenues annually even while by mitigating prices of power, services and petroleum
products.
However, not all of this will be wrung out of VAT. In fact, only ₱48.7 billion amount is from the VAT
on twelve goods and services. The rest of the tab – ₱10.5 billion- will be picked by corporations.
What we therefore prescribe is a burden sharing between corporate Philippines and the consumer.
Why should the latter bear all the pain? Why should the fiscal salvation be only on the burden of the
consumer?
The corporate world’s equity is in form of the increase in the corporate income tax from 32 to 35
percent, but up to 2008 only. This will raise ₱10.5 billion a year. After that, the rate will slide back,
not to its old rate of 32 percent, but two notches lower, to 30 percent.
Clearly, we are telling those with the capacity to pay, corporations, to bear with this emergency
provision that will be in effect for 1,200 days, while we put our fiscal house in order. This fiscal
medicine will have an expiry date.
For their assistance, a reward of tax reduction awaits them. We intend to keep the length of their
sacrifice brief. We would like to assure them that not because there is a light at the end of the tunnel,
this government will keep on making the tunnel long.
The responsibility will not rest solely on the weary shoulders of the small man. Big business will be
there to share the burden.35
As the Court has said, the Senate can propose amendments and in fact, the amendments made on
provisions in the tax on income of corporations are germane to the purpose of the house bills which
is to raise revenues for the government.
Likewise, the Court finds the sections referring to other percentage and excise taxes germane to the
reforms to the VAT system, as these sections would cushion the effects of VAT on consumers.
Considering that certain goods and services which were subject to percentage tax and excise tax
would no longer be VAT-exempt, the consumer would be burdened more as they would be paying
the VAT in addition to these taxes. Thus, there is a need to amend these sections to soften the
impact of VAT. Again, in his sponsorship speech, Sen. Recto said:
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 have to pay as a result of VAT.36
The other sections amended by the Senate pertained to matters of tax administration which are
necessary for the implementation of the changes in the VAT system.
To reiterate, the sections introduced by the Senate are germane to the subject matter and purposes
of the house bills, which is to supplement our country’s fiscal deficit, among others. Thus, the Senate
acted within its power to propose those amendments.
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC,
violate the following provisions of the Constitution:
A. No Undue Delegation of Legislative Power
Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in
common that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate from 10%
to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax.
The assailed provisions read as follows:
SEC. 4. Sec. 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 (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.
(i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 ½%).
SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods. –
(A) In General. – There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such tax to be paid by the importer prior to the release of such goods from customs
custody: Provided, That where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if
any: provided, further, 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.
one-half percent (1 ½%).
SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected, a value-added tax
equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of
services: 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.
one-half percent (1 ½%). (Emphasis supplied)
Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is
a virtual abdication by Congress of its exclusive power to tax because such delegation is not within
the purview of Section 28 (2), Article VI of the Constitution, which provides:
The Congress may, by law, authorize the President to fix within specified limits, and may impose,
tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within
the framework of the national development program of the government.
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 also effectively nullified the President’s power
of control, which includes the authority to set aside and nullify the acts of her subordinates like the
Secretary of Finance, by mandating the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has ample powers to cause, influence or create
the conditions provided by the law to bring about either or both the conditions precedent.
On the other hand, petitioners Escudero, et al. find bizarre and revolting the situation that the
imposition of the 12% rate would be subject to the whim of the Secretary of Finance, an unelected
bureaucrat, contrary to the principle of no taxation without representation. They submit that the
Secretary of Finance is not mandated to give a favorable recommendation and he may not even give
his recommendation. Moreover, they allege that no guiding standards are provided in the law on
what basis and as to how he will make his recommendation. They claim, nonetheless, that any
recommendation of the Secretary of Finance can easily be brushed aside by the President since the
former is a mere alter ego of the latter, such that, ultimately, it is the President who decides whether
to impose the increased tax rate or not.
A brief discourse on the principle of non-delegation of powers is instructive.
The principle of separation of powers ordains that each of the three great branches of government
has exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated
sphere.37 A logical
corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as

expressed in the Latin maxim: potestas delegata non delegari potest which means "what has been
delegated, cannot be delegated."38 This doctrine is based on the ethical principle that such as
delegated power constitutes not only a right but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening mind of another.39
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.40 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 in nature – that is, one appertaining exclusively to the legislative
department. 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.
Nonetheless, the general rule barring delegation of legislative powers is subject to the following
recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the
Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
In every case of permissible delegation, there must be a showing that the delegation itself is valid. It
is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried
out, or implemented by the delegate;41 and (b) fixes a standard — the limits of which are sufficiently
determinate and determinable — to which the delegate must conform in the performance of his
functions.42 A sufficient standard is one which defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the circumstances under which
the legislative command is to be effected.43 Both tests are intended to prevent a total transference of
legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and
exercise a power essentially legislative.44
In People vs. Vera,45 the Court, through eminent Justice Jose P. Laurel, expounded on the concept
and extent of delegation of power in this wise:
In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to
inquire whether the statute was complete in all its terms and provisions when it left the hands of the
legislature so that nothing was left to the judgment of any other appointee or delegate of the
legislature.
...
‘The true distinction’, says Judge Ranney, ‘is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be, and conferring an authority
or discretion as to its execution, to be exercised under and in pursuance of the law. The first
cannot be done; to the latter no valid objection can be made.’
...
It is contended, however, that a legislative act may be made to the effect as law after it leaves the
hands of the legislature. It is true that laws may be made effective on certain contingencies, as by
proclamation of the executive or the adoption by the people of a particular community. In Wayman
vs. Southard, the Supreme Court of the United States ruled that the legislature may delegate a
power not legislative which it may itself rightfully exercise. The power to ascertain facts is such a
power which may be delegated. There is nothing essentially legislative in ascertaining the
existence of facts or conditions as the basis of the taking into effect of a law. That is a mental
process common to all branches of the government. Notwithstanding the apparent tendency,
however, to relax the rule prohibiting delegation of legislative authority on account of the complexity
arising from social and economic forces at work in this modern industrial age, the orthodox
pronouncement of Judge Cooley in his work on Constitutional Limitations finds restatement in Prof.
Willoughby's treatise on the Constitution of the United States in the following language — speaking
of declaration of legislative power to administrative agencies: The principle which permits the
legislature to provide that the administrative agent may determine when the circumstances
are such as require the application of a law is defended upon the ground that at the time this
authority is granted, the rule of public policy, which is the essence of the legislative act, is
determined by the legislature. In other words, the legislature, as it is its duty to do,
determines that, under given circumstances, certain executive or administrative action is to
be taken, and that, under other circumstances, different or no action at all is to be taken.
What is thus left to the administrative official is not the legislative determination of what
public policy demands, but simply the ascertainment of what the facts of the case require to
be done according to the terms of the law by which he is governed. The efficiency of an Act
as a declaration of legislative will must, of course, come from Congress, but the
ascertainment of the contingency upon which the Act shall take effect may be left to such
agencies as it may designate. The legislature, then, may provide that a law shall take effect
upon the happening of future specified contingencies leaving to some other person or body
the power to determine when the specified contingency has arisen. (Emphasis supplied).46
In Edu vs. Ericta,47 the Court reiterated:
What cannot be delegated is the authority under the Constitution 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 flexibility and practicability. (Emphasis supplied).48
Clearly, the legislature may delegate to executive officers or bodies the power to determine certain
facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its
terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations
on their authority.49 While the power to tax cannot be delegated to executive agencies, details as to
the enforcement and administration of an exercise of such power may be left to them, including the
power to determine the existence of facts on which its operation depends.50
The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of
legislation is not of itself a legislative function, but is simply ancillary to legislation. Thus, the duty of
correlating information and making recommendations is the kind of subsidiary activity which the
legislature may perform through its members, or which it may delegate to others to perform.
Intelligent legislation on the complicated problems of modern society is impossible in the absence of
accurate information on the part of the legislators, and any reasonable method of securing such
information is proper.51 The Constitution as a continuously operative charter of government does not
require that Congress find for itself
every fact upon which it desires to base legislative action or that it make for itself detailed
determinations which it has declared to be prerequisite to application of legislative policy to particular
facts and circumstances impossible for Congress itself properly to investigate.52
In the present case, the challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5
and 6 which reads as follows:
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:
The case before the Court is not a delegation of legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and administration of the increase rate under the law
is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006,
contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the
12% rate upon factual matters outside of the control of the executive.
No discretion would be exercised by the President. Highlighting the absence of discretion is the fact
that the word shall is used in the common proviso. The use of the word shall connotes a mandatory
order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of
discretion.53 Where the law is clear and unambiguous, it must be taken to mean exactly what it says,
and courts have no choice but to see to it that the mandate is obeyed.54
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the
existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by
the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the
President does not come into play. It is a clear directive to impose the 12% VAT rate when the
specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the
happening of a certain specified contingency, or upon the ascertainment of certain facts or
conditions by a person or body other than the legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the
law effectively nullified the President’s power of control over the Secretary of Finance by mandating
the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. The
Court cannot also subscribe to the position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase "upon
the recommendation of the Secretary of Finance." Neither does the Court find persuasive the
submission of petitioners Escudero, et al. that any recommendation by the Secretary of Finance can
easily be brushed aside by the President since the former is a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the alter ego of the President, it simply means that
as head of the Department of Finance he is the assistant and agent of the Chief Executive. The
multifarious executive and administrative functions of the Chief Executive are performed by and
through the executive departments, and the acts of the secretaries of such departments, such as the
Department of Finance, performed and promulgated in the regular course of business, are, unless
disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief
Executive. The Secretary of Finance, as such, occupies a political position and holds office in an
advisory capacity, and, in the language of Thomas Jefferson, "should be of the President's bosom
confidence" and, in the language of Attorney-General Cushing, is "subject to the direction of the
President."55
In the present case, in making his recommendation to the President on the existence of either of the
two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her
subordinate. In such instance, he is not subject to the power of control and direction of the President.
He is acting as the agent of the legislative department, to determine and declare the event upon
which its expressed will is to take effect.56 The Secretary of Finance becomes the means or tool by
which legislative policy is determined and implemented, considering that he possesses all the
facilities to gather data and information and has a much broader perspective to properly evaluate
them. His function is to gather and collate statistical data and other pertinent information and verify if
any of the two conditions laid out by Congress is present. His personality in such instance is in
reality but a projection of that of Congress. Thus, being the agent of Congress and not of the
President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of
Finance and to substitute the judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact,
namely, whether by December 31, 2005, the value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (24/5%) or the
national government deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1½%). If either of these two instances has occurred, the Secretary of Finance, by legislative
mandate, must submit such information to the President. Then the 12% VAT rate must be imposed
by the President effective January 1, 2006. There is no undue delegation of legislative power but
only of the discretion as to the execution of a law. This is constitutionally
permissible.57 Congress does not abdicate its functions or unduly delegate power when it describes
what job must be done, who must do it, and what is the scope of his authority; in our complex
economy that is frequently the only way in which the legislative process can go forward.58
As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to the President
the legislative power to tax is contrary to the principle of republicanism, the same deserves scant
consideration. Congress did not delegate the power to tax but the mere implementation 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.59
The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause,
influence or create the conditions to bring about either or both the conditions precedent does not
deserve any merit as this argument is highly speculative. 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. When the Court acts on appearances instead of realities,
justice and law will be short-lived.
B. The 12% Increase VAT Rate Does Not Impose an Unfair and Unnecessary Additional Tax Burden
Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate imposes an unfair and
additional tax burden on the people. Petitioners also argue that the 12% increase, dependent on any
of the 2 conditions set forth in the contested provisions, is ambiguous because it does not state if the
VAT rate would be returned to the original 10% if the rates are no longer satisfied. Petitioners also
argue that such rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate
from year to year.
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions set
forth therein are satisfied, the President shall increase the VAT rate to 12%. The provisions of the
law are clear. It does not provide for a return to the 10% rate nor does it empower the President to
so revert if, after the rate is increased to 12%, the VAT collection goes below the 24/5 of the GDP of
the previous year or that the national government deficit as a percentage of GDP of the previous
year does not exceed 1½%.
Therefore, no statutory construction or interpretation is needed. Neither can conditions or limitations

be introduced where none is provided for. Rewriting the law is a forbidden ground that only
Congress may tread upon.60
Thus, in the absence of any provision providing for a return to the 10% rate, which in this case the
Court finds none, petitioners’ argument is, at best, purely speculative. There is no basis for
petitioners’ fear of a fluctuating VAT rate because the law itself does not provide that the rate should
go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is
that where the provision of the law is clear and unambiguous, so that there is no occasion for the
court's seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or
subtraction.61
Petitioners also contend that the increase in the VAT rate, which was allegedly an incentive to the
President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year, should be
based on fiscal adequacy.
Petitioners obviously overlooked that increase in VAT collection is not the only condition. There is
another condition, i.e., the national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 ½%).
Respondents explained the philosophy behind these alternative conditions:
1. VAT/GDP Ratio > 2.8%
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.
2. Nat’l Gov’t Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP is 1.5% or less means the fiscal condition of
government has reached a relatively sound position or is towards the direction of a balanced budget
position. Therefore, there is no need to increase the VAT rate since the fiscal house is in a relatively
healthy position. Otherwise stated, if the ratio is more than 1.5%, there is indeed a need to increase
the VAT rate.62
That the first condition amounts to an incentive to the President to increase the VAT collection does
not render it unconstitutional so long as there is a public purpose for which the law was passed,
which in this case, is mainly to raise revenue. In fact, fiscal adequacy dictated the need for a raise in
revenue.
The principle of fiscal adequacy as a characteristic of a sound tax system was originally stated by
Adam Smith in his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the
people as little as possible over and above what it brings into the public treasury of the state.63
It simply means that sources of revenues must be adequate to meet government expenditures and
their variations.64
The dire need for revenue cannot be ignored. Our country is in a quagmire of financial woe. During
the Bicameral Conference Committee hearing, then Finance Secretary Purisima bluntly depicted the
country’s gloomy state of economic affairs, thus:
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.
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 conditions have changed on us because the interest rates have gone up. In fact, just
within this room, we tried to access the market for a billion dollars because for this year alone, the
Philippines will have to borrow 4 billion dollars. Of that amount, we have borrowed 1.5 billion. We
issued last January a 25-year bond at 9.7 percent cost. We were trying to access last week and the
market was not as favorable and up to now we have not accessed and we might pull back because
the conditions are not very good.
So given this situation, we at the Department of Finance believe that we really need to front-end our
deficit reduction. Because it is deficit that is causing the increase of the debt and we are in what we
call a debt spiral. The more debt you have, the more deficit you have because interest and debt
service eats and eats more of your revenue. We need to get out of this debt spiral. And the only way,
I think, we can get out of this debt spiral is really have a front-end adjustment in our revenue base.65
The image portrayed is chilling. Congress passed the law hoping for rescue from an inevitable
catastrophe. Whether the law is indeed sufficient to answer the state’s economic dilemma is not for
the Court to judge. In the Fariñas case, the Court refused to consider the various arguments raised
therein that dwelt on the wisdom of Section 14 of R.A. No. 9006 (The Fair Election Act), pronouncing
that:
. . . policy matters are not the concern of the Court. Government policy is within the exclusive
dominion of the political branches of the government. It is not for this Court to look into the wisdom
or propriety of legislative determination. Indeed, whether an enactment is wise or unwise, whether it
is based on sound economic theory, whether it is the best means to achieve the desired results,
whether, in short, the legislative discretion within its prescribed limits should be exercised in a
particular manner are matters for the judgment of the legislature, and the serious conflict of opinions
does not suffice to bring them within the range of judicial cognizance.66
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.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions
of the Constitution:
b. Article III, Section 1
A. Due Process and Equal Protection Clauses

Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section 8 of R.A. No. 9337,
amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114 (C)
of the NIRC are arbitrary, oppressive, excessive and confiscatory. Their argument is premised on
the constitutional right against deprivation of life, liberty of property without due process of law, as
embodied in Article III, Section 1 of the Constitution.
Petitioners also contend that these provisions violate the constitutional guarantee of equal protection
of the law.
The doctrine is that where the 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. Absent such a showing, the presumption of validity
must prevail.68
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the
amount of input tax that may be credited against the output tax. It states, in part: "[P]rovided, that the
input tax inclusive of the input VAT carried over from the previous quarter that may be credited in
every quarter shall not exceed seventy percent (70%) of the output VAT: …"
Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax
due from or paid by a VAT-registered person on the importation of goods or local purchase of good
and services, including lease or use of property, in the course of trade or business, from a VAT-
registered person, and Output Tax is the value-added tax due on the sale or lease of taxable goods
or properties or services by any person registered or required to register under the law.
Petitioners claim that the contested sections impose limitations on the amount of input tax that may
be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited
against the output tax.
Petitioners’ argument is not absolute. It assumes that the input tax exceeds 70% of the output tax,
and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the
input tax is less than 70% of the output tax, then 100% of such input tax is still creditable.
More importantly, the excess input tax, if any, is retained in a business’s books of accounts and
remains creditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B), which
provides that "if the input tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters." In addition, Section 112(B) allows a VAT-registered person to apply
for the issuance of a tax credit certificate or refund for any unused input taxes, to 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;
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
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a person can
credit his input tax only up to the extent of 70% of the output tax. In layman’s term, the value-added
taxes that a person/taxpayer paid and passed on to him by a seller can only be credited up to 70%
of the value-added taxes that is due to him on a taxable transaction. There is no retention of any tax
collection because the person/taxpayer has already previously paid the input tax to a seller, and the
seller will subsequently remit such input tax to the BIR. The party directly liable for the payment of
the tax is the seller.71 What only needs to be done is for the person/taxpayer to apply or credit these
input taxes, as evidenced by receipts, against his output taxes.
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the input tax partakes
the nature of a property that may not be confiscated, appropriated, or limited without due process of
law.
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 distinction between statutory privileges and vested rights must be borne in mind for persons
have no vested rights in statutory privileges. The state may change or take away rights, which were
created by the law of the state, although it may not take away property, which was vested by virtue
of such rights.72
Under the previous system of single-stage taxation, taxes paid at every level of distribution are not
recoverable from the taxes payable, although it becomes part of the cost, which is deductible from
the gross revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all
sales, it was then that the crediting of the input tax paid on purchase or importation of goods and
services by VAT-registered persons against the output tax was introduced.73 This was adopted by
the Expanded VAT Law (R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A. No. 8424).75 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 in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of R.A. No.
9337, amending Section 110(A) of the NIRC, which provides:
SEC. 110. Tax Credits. –
(A) Creditable Input Tax. – …
Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this Code, shall be spread evenly
over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof, exceeds One million pesos
(₱1,000,000.00): Provided, however, That if the estimated useful life of the capital goods is less than
five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a
shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties,
the input tax shall be creditable to the purchaser, lessee or license upon payment of the
compensation, rental, royalty or fee.
The foregoing section imposes a 60-month period within which to amortize the creditable input tax
on purchase or importation of capital goods with acquisition cost of ₱1 Million pesos, exclusive of the
VAT component. Such spread out only poses a delay in the crediting of the input tax. Petitioners’
argument is without basis because the taxpayer is not permanently deprived of his privilege to credit
the input tax.
It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this
case amounts to a 4-year interest-free loan to the government.76 In the same breath, Congress also
justified its move by saying that the provision was designed to raise an annual revenue of 22.6
billion.77 The legislature also dispelled the fear that the provision will fend off foreign investments,
saying that foreign investors have other tax incentives provided by law, and citing the case of China,
where despite a 17.5% non-creditable VAT, foreign investments were not deterred.78 Again, for
whatever is the purpose of the 60-month amortization, this involves executive economic policy and
legislative wisdom in which the Court cannot intervene.
With regard to the 5% creditable withholding tax imposed on payments made by the government for
taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax. –
(C) Withholding of 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 and services which are subject
to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final
value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That the
payment for lease or use of properties or property rights to nonresident owners shall be subject to
ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor or
person in control of the payment shall be considered as the withholding agent.
The value-added tax withheld under this Section shall be remitted within ten (10) days following the
end of the month the withholding was made.
Section 114(C) merely provides a method of collection, or as stated by respondents, a more

simplified VAT withholding system. The government in this case is constituted as a withholding
agent with respect to their payments for goods and services.
Prior to its amendment, Section 114(C) provided for different rates of value-added taxes to be
withheld -- 3% on gross payments for purchases of goods; 6% on gross payments for services
supplied by contractors other than by public works contractors; 8.5% on gross payments for services
supplied by public work contractors; or 10% on payment for the lease or use of properties or
property rights to nonresident owners. Under the present Section 114(C), these different rates,
except for the 10% on lease or property rights payment to nonresidents, were deleted, and a uniform
rate of 5% is applied.
The Court observes, however, that the law the used the word final. In tax usage, final, as opposed to
creditable, means full. Thus, it is provided in Section 114(C): "final value-added tax at the rate of five
percent (5%)."
In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax Reform Act of 1997), the
concept of final withholding tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. – Under the final withholding tax system the amount of income tax
withheld by the withholding agent is constituted as full and final payment 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.79
The Court need not explore the rationale behind the provision. It is clear that Congress intended to
treat differently taxable transactions with the government.80 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 contractors, the withholding rate shall be eight and one-half percent
(8.5%): Provided, further, That the payment for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For
this purpose, the payor or person in control of the payment shall be considered as the withholding
agent.
The valued-added tax withheld under this Section shall be remitted within ten (10) days following the
end of the month the withholding was made. (Emphasis supplied)
As amended, the use of the word final and the deletion of the word creditable exhibits Congress’s
intention to treat transactions with the government differently. Since it has not been shown that the
class subject to the 5% final withholding tax has been unreasonably narrowed, there is no reason to
invalidate the provision. Petitioners, as petroleum dealers, are not the only ones subjected to the 5%
final withholding tax. It applies to all those who deal with the government.
Moreover, the actual input tax is not totally lost or uncreditable, as petitioners believe. Revenue
Regulations No. 14-2005 or the Consolidated Value-Added Tax Regulations 2005 issued by the BIR,
provides that should the actual input tax exceed 5% of gross payments, the excess may form part of
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 that a business is created
precisely for profit.
The equal protection clause under the Constitution means that "no person or class of persons shall
be deprived of the same protection of laws which is enjoyed by other persons or other classes in the
same place and in like circumstances."83
The power of the State to make reasonable and natural classifications for the purposes of taxation
has long been established. Whether it relates to the subject of taxation, the kind of property, the
rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection,
the State’s power is entitled to presumption of validity. As a rule, the judiciary will not interfere with
such power absent a clear showing of unreasonableness, discrimination, or arbitrariness.84
Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of input
tax, or invests in capital equipment, or has several transactions with the government, is not based on
real and substantial differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law does not make any classification in the
subject of taxation, the kind of property, the rates to be levied or the amounts to be raised, the
methods of assessment, valuation and collection. Petitioners’ alleged distinctions are based on
variables that bear different consequences. While the implementation of the law may yield varying
end results depending on one’s profit margin and value-added, the Court cannot go beyond what the
legislature has laid down and interfere with the affairs of business.
The equal protection clause does not require the universal application of the laws on all persons or
things without distinction. This might in fact sometimes result in unequal protection. What the clause
requires is equality among equals as determined according to a valid classification. By classification
is meant the grouping of persons or things similar to each other in certain particulars and different
from all others in these same particulars.85
Petitioners brought to the Court’s attention the introduction of Senate Bill No. 2038 by Sens. S.R.
Osmeña III and Ma. Ana Consuelo A.S. – Madrigal on June 6, 2005, and House Bill No. 4493 by
Rep. Eric D. Singson. The proposed legislation seeks to amend the 70% limitation by increasing the
same to 90%. This, according to petitioners, supports their stance that the 70% limitation is arbitrary
and confiscatory. On this score, suffice it to say that these are still proposed legislations. Until
Congress amends the law, and absent any unequivocal basis for its unconstitutionality, the 70%
limitation stays.
B. Uniformity and Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system
of taxation.
Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is
uniform on the same class everywhere with all people at all times.86
In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods
and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108,
respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties,
importation of goods, and sale of services and use or lease of properties. These same sections also
provide for a 0% rate on certain sales and transaction.
Neither does the law make any distinction as to the type of industry or trade that will bear the 70%
limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital
goods or the 5% final withholding tax by the government. It must be stressed that the rule of uniform
taxation does not deprive Congress of the power to classify subjects of taxation, and only demands
uniformity within the particular class.87
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or
10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not
exceeding ₱1,500,000.00.88 Also, basic marine and agricultural food products in their original state
are still not subject to the tax,89 thus ensuring that prices at the grassroots level will remain
accessible. As was stated in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs.
Tan:90
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons
engaged in business with an aggregate gross annual sales exceeding ₱200,000.00. Small
corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax
are sales of farm and marine products, so that the costs of basic food and other necessities, spared
as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of
the general public.
It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly
favors those with high profit margins. Congress was not oblivious to this. Thus, to equalize the
weighty burden the law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-
exempt persons under Section 109(v), i.e., transactions with gross annual sales and/or receipts not
exceeding ₱1.5 Million. This acts as a equalizer because in effect, bigger businesses that qualify for
VAT coverage and VAT-exempt taxpayers stand on equal-footing.
Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the tax
on those previously exempt. Excise taxes on petroleum products91 and natural gas92 were reduced.
Percentage tax on domestic carriers was removed.93 Power producers are now exempt from paying
franchise tax.94
Aside from these, Congress also increased the income tax rates of corporations, in order to
distribute the burden of taxation. Domestic, foreign, and non-resident corporations are now subject
to a 35% income tax rate, from a previous 32%.95 Intercorporate dividends of non-resident foreign
corporations are still subject to 15% final withholding tax but the tax credit allowed on the
corporation’s domicile was increased to 20%.96 The Philippine Amusement and Gaming Corporation
(PAGCOR) is not exempt from income taxes anymore.97 Even the sale by an artist of his works or
services performed for the production of such works was not spared.
All these were designed to ease, as well as spread out, the burden of taxation, which would
otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A. No. 9337 is
equitable.
C. Progressivity of Taxation
Lastly, petitioners contend that the limitation on the creditable input tax is anything but regressive. It
is the smaller business with higher input tax-output tax ratio that will suffer the consequences.
Progressive taxation is built on the principle of the taxpayer’s ability 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.98
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.
Nevertheless, 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. What it simply provides is that Congress shall ‘evolve a progressive system of taxation.’
The constitutional provision has been interpreted to mean simply that ‘direct taxes are . . . to be
preferred [and] as much as possible, indirect taxes should be minimized.’ (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1977)) Indeed, the mandate to Congress
is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps
are 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 amending §103 of the NIRC)99
CONCLUSION
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-doing, each may be brought to account, either by impeachment, trial or by the ballot box.100
The words of the Court in Vera vs. Avelino101 holds true then, as it still holds true now. All things
considered, there is no raison d'être for the unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056,
168207, 168461, 168463, and 168730, are hereby DISMISSED.
There being no constitutional impediment to the full enforcement and implementation of R.A. No.
9337, the temporary restraining order issued by the Court on July 1, 2005 is LIFTED upon finality of
herein decision.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
HILARIO G. DAVIDE, JR.
Chief Justice
REYNATO S. PUNO ARTEMIO V. PANGANIBAN
Associate Justice Associate Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

ANGELINA SANDOVAL-GUTIERREZ ANTONIO T. CARPIO
Associate Justice
Associate Justice
RENATO C. CORONA CONCHITA CARPIO-MORALES

ROMEO J. CALLEJO, SR. ADOLFO S. AZCUNA
Associate Justice
Associate Justice
DANTE O. TINGA MINITA V. CHICO-NAZARIO
Associate Justice
Associate Justice
CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
Chief Justice
Footnotes
1Entitled "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."
2Entitled, "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."
4Entitled, "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.
6 TSN, July 14, 2005.
7Section 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.
8 Section 105, National Internal Revenue of the Philippines, as amended.
9 Ibid.
Deoferio, Jr., V.A. and Mamalateo, V.C., The Value Added Tax in the Philippines (First
10
Edition 2000).
11 Maceda vs. Macaraig, Jr., G.R. No. 88291, May 31, 1991, 197 SCRA 771.
12 Maceda vs. Macaraig, Jr., G.R. No. 88291, June 8, 1993, 223 SCRA, 217.
Id., Deoferio, Jr., V.A. and Mamalateo, V.C., The Value Added Tax in the Philippines (First
13
Edition 2000).
14 Commissioner of Internal Revenue vs. Seagate, G.R. No. 153866, February 11, 2005.
15Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan, G.R. Nos. L-
81311, L-81820, L-81921, L-82152, June 30, 1988, 163 SCRA 371.
16Entitled, "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."
17Entitled, "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."
18Entitled, "An Act Amending the National Internal Revenue Code, as Amended, and for
other Purposes."
19 Story, Commentaries 835 (1833).
20 G.R. No. 147387, December 10, 2003, 417 SCRA 503.
21 Id., pp. 529-530.
22 Supra., Note 20.
23 G.R. No. 115455, August 25, 1994, 235 SCRA 630.
24 Id., p. 670.
25 Wester’s Third New International Dictionary, p. 1897.
26TSN, Bicameral Conference Committee on the Disagreeing Provisions of Senate Bill No.
1950 and House Bill Nos. 3705 and 3555, May 10, 2005, p. 4.
27 Id., p. 3.
Sponsorship Speech of Representative Teves, in behalf of Representative Jesli Lapus,

28
TSN, January 7, 2005, pp. 34-35.
29 G.R. No. 105371, November 11, 1993, 227 SCRA 703.
30 Supra, Note 23.
31 Id., p. 668.
32 Id., p. 671.
33 Id., pp. 661-663.
34 Transcript of Session Proceedings, January 7, 2005, pp. 19-20.
35 Journal of the Senate, Session No. 67, March 7, 2005, pp. 727-728.
36 Id., p. 726.
37 See Angara vs. Electoral Commission, No. 45081, July 15, 1936, 63 Phil. 139, 156.
38Defensor-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.
41Pelaez vs. Auditor General, No. L-23825, December 24, 1965, 122 Phil. 965, 974 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.
42Pelaez 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. 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.
44Eastern Shipping Lines, Inc. vs. POEA, No. L-76633, October 18, 1988, 166 SCRA 533,
543-544.
45 No. 45685, November 16, 1937, 65 Phil. 56.
46 Id., pp. 115-120.
47 Supra, note 43.
48 Id., pp. 496-497.
49 16 C.J.S., Constitutional Law, § 138.
50 Ibid.
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.
53Province of Batangas vs. Romulo, G.R. No. 152774, May 27, 2004; 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.
54Province 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.
55 Villena vs. Secretary of Interior, No. 46570, April 21, 1939, 67 Phil 451, 463-464.
Alunan vs. Mirasol, G.R. No. 108399, July 31, 1997, 276 SCRA 501, 513-514, citing
56
Panama Refining Co. vs. Ryan, 293 U.S. 388, 79 L.Ed. 469 (1935).
57Compañia 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.
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.
60Commission on Internal Revenue vs. American Express International, Inc. (Philippine

Branch), G.R. No. 152609, June 29, 2005.
61Acting Commissioner of Customs vs. MERALCO, No. L-23623, June 30, 1977, 77 SCRA
469, 473.
62 Respondents’ Memorandum, pp. 168-169.
63 The Wealth of Nations, Book V, Chapter II.
64 Chavez vs. Ongpin, G.R. No. 76778, June 6, 1990, 186 SCRA 331, 338.
65TSN, 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.
66 G.R. No. 147387, December 10, 2003, 417 SCRA 503, 524.
67National Housing Authority vs. Reyes, G.R. No. L-49439, June 29, 1983, 123 SCRA 245,
249.
68 Sison vs. Ancheta, G.R. No. L-59431, July 25, 1984, 130 SCRA 654, 661.
69 Section 8, R.A. No. 9337, amending Section 110(A)(B),NIRC.
70 Ibid.
71Commissioner of Internal Revenue vs. Benguet Corp., G.R. Nos. 134587 & 134588, July
8, 2005.
72United 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).
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.
79 Revenue Regulations No. 14-2005, 4.114-2(a).
80 Commissioner of Internal Revenue vs. Philam, G.R. No. 141658, March 18, 2005.
81 Revenue Regulations No. 14-2005, Sec. 4. 114-2.
82 Act V, Scene V.
83Philippine Rural Electric Cooperatives Association, Inc. vs. DILG, G.R. No. 143076, June
10, 2003, 403 SCRA 558, 565.
84 Aban, Benjamin, Law of Basic Taxation in the Philippines (First Edition 1994).
85 Philippine Judges Association case, supra., note 29.
86Commissioner 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.
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.
92 Section 18, amending Section 151, NIRC.
95 Sections 1 and 2, amending Sections 27 and 28, NIRC.
97 Section 1, amending Section 27(C), NIRC.

98 Reyes vs. Almanzor, G.R. Nos. 49839-46, April 26, 1991, 196 SCRA 322, 327.
99Tolentino vs. Secretary of Finance, G.R. No. 115455, October 30, 1995, 249 SCRA 628,
659.
100 Vera vs. Avelino, G.R. No. L-543, August 31, 1946, 77 Phil. 365.
101 Ibid.
The Lawphil Project - Arellano Law Foundation
EN BANC
G.R. No. 168056 - ABAKADA GURO PARTY LIST, ET AL. V. EXECUTIVE

SECRETARY EDUARDO R. ERMITA, ET AL.
G.R. No. 168207 - AQUILINO PIMENTEL, JR., ET AL. V. EXECUTIVE SECRETARY EDUARDO
ERMITA, ET AL.
G.R. No. 168461 - ASSOCIATION OF PILIPINAS SHELL DEALERS, INC, ET AL. V. CESAR V.
PURISIMA, ET AL.
G.R. No. 168463 - FRANCIS JOSEPH G. ESCUDERO, ET AL. V. CESAR V. PURISIMA, ET AL.
X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X
SEPARATE CONCURRING
AND DISSENTING OPINION
DAVIDE, JR., C.J.:
While I still hold on to my position expressed in my dissenting opinion in the first VAT cases,1 I partly
yield to the application to the cases at bar of the rule on "germaneness" therein enunciated. Thus, I
concur with the ponencia of my highly-esteemed colleague Mme. Justice Ma. Alicia Austria-Martinez
except as regards its ruling on the issue of whether Republic Act No. 9337 violates Section 24,
Article VI of the Constitution.
R.A. No. 9337 primarily aims to restructure the value-added tax (VAT) system by broadening its
base and raising the rate so as to generate more revenues for the government that can assuage the
economic predicament that our country is now facing. This recently enacted law stemmed from three
legislative bills: House Bill (HB) No. 3555, HB No. 3705, and Senate Bill (SB) 1950. The first (HB No.
3555) called for the amendment of Sections 106, 107, 108, 109, 110, and 111 of the National
Internal Revenue Code (NIRC) as amended; while the second (HB No. 3705) proposed
amendments to Sections 106, 107, 108, 110, and 114 of the NIRC, as amended. It is significant to
note that all these Sections specifically deal with VAT. And indubitably, these bills are revenue bills
in that they are intended to levy taxes and raise funds for the government.2
On the other hand, SB No. 1950 introduced amendments to "Sections 27, 28, 34, 106, 108, 109,
110, 111, 112, 113, 114, 116, 117, 118, 119, 125, 148, 236, 237, and 288" of the NIRC, as
amended. Among the provisions sought to be amended, only Sections 106, 108, 109, 110, 111, 112,
113, 114, and 116 pertain to VAT. And while Sections 236, 237, and 288 are administrative
provisions pertaining to registration requirements and issuance of receipts commercial invoices, the
proposed amendments thereto are related to VAT. Hence, the proposed amendments to these
Sections were validly taken cognizance of and properly considered by the Bicameral Conference
Committee (BCC).
However, I am of the opinion that the inclusion into the law of the amendments proposed in SB No.
1950 to the following provisions (with modifications on the rates of taxes) is invalid.
Provision Subject matter
Section 27 Rate of income tax on domestic corporations
Section 28(A)(1) Rate of income tax on resident foreign corporation
Section 28(B)(1) Rate of income tax on non-resident foreign corporation
Section 28(B)(5-b) Rate of income tax on intra-corporate dividends received by non-resident foreign
corporation
Section 34(B)(1) Deductions from gross income
Section 117 Percentage tax on domestic carriers and keepers of garages
Section 119 Tax on franchises
Section 148 Excise tax on manufactured oils and other fuels
Obviously, these provisions do not deal with VAT. It must be noted that the House Bills initiated
amendments to provisions pertaining to VAT only. Doubtless, the Senate has the constitutional
power to concur with the amendments to the VAT provisions introduced in the House Bills or even to
propose its own version of VAT measure. But that power does not extend to initiation of other tax
measures, such as introducing amendments to provisions on corporate income taxes, percentage
taxes, franchise taxes, and excise taxes like what the Senate did in these cases. It was beyond the
ambit of the authority of the Senate to propose amendments to provisions not covered by the House
Bills or not related to the subject matter of the House Bills, which is VAT. To allow the Senate to do
so would be tantamount to vesting in it the power to initiate revenue bills -- a power that exclusively
pertains to the House of Representatives under Section 24, Article VI of the Constitution, which
provides:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives but the
Senate may propose or concur with amendments.
Moreover, Sections 121 (Percentage Tax on Banks and Non-Bank Financial Intermediaries) and 151
(Excise Tax on Mineral Products) of the NIRC, as amended, have been included by the BCC in R.A.
N0. 9337 even though they were not found in the Senate and House Bills.
In Philippine Judges Association v. Prado,3 the Court described the function of a conference
committee in this wise: "A conference committee may deal generally with the subject matter or it may
be limited to resolving the precise differences between the two houses. Even where the conference
committee is not by rule limited in its jurisdiction, legislative custom severely limits the freedom
with which new subject matter can be inserted into the conference bill."
The limitation on the power of a conference committee to insert new provisions was laid down
in Tolentino v. Secretary of Finance.4 There, the Court, while recognizing the power of a conference
committee to include in its report an entirely new provision that is not found either in the House bill or
in the Senate bill, held that the exercise of that power is subject to the condition that the said
provision is "germane to the subject of the House and Senate bills."
As pointed out by the petitioners, Tolentino differs from the present cases in the sense that in that
case the amendments introduced in the Senate bill were on the same subject matter treated in the
House bill, which was VAT, and the new provision inserted by the conference committee had relation
to that subject matter. Specifically, HB No. 11197 called for the (1) amendment of Sections
99,100,102,103,104,105,106,107, 108, 110, 112,115, 116, 236,237, and 238 of the NIRC, as
amended; and (2) repeal of Sections 113 and 114 of the NIRC, as amended. SB No. 1630, on the
other hand, proposed the (1) amendment of Sections 99,100,102,103,104,105,107, 108, 110, 112,
236, 237, and 238 of the NIRC, as amended; and (2) repeal of Sections 113, 114, and 116 of the
NIRC, as amended. In short, all the provisions sought to be changed in the Senate bill were covered
in the House bill. Although the new provisions inserted by the conference committee were not found
in either the House or Senate bills, they were germane to the general subject of the bills.
In the present cases, the provisions inserted by the BCC, namely, Sections 121 (Percentage Tax on
Banks and Non-Bank Financial Intermediaries) and 151 (Excise Tax on Mineral Products) of the
NIRC, as amended, are undoubtedly germane to SB No. 1950, which introduced amendments to the
provisions on percentage and excise taxes -- but foreign to HB Nos. 3555 and 3705, which dealt with
VAT only. Since the proposed amendments in the Senate bill relating to percentage and excise
taxes cannot themselves be sustained because they did not take their root from, or are not related to
the subject of, HB Nos. 3705 and 3555, in violation of Section 24, Article VI of the Constitution, the
new provisions inserted by the BCC on percentage and excise taxes would have no leg to stand on.
I understand very well that the amendments of the Senate and the BCC relating to corporate
income, percentage, franchise, and excise taxes were designed to "soften the impact of VAT
measure on the consumer, i.e., by distributing the burden across all sectors instead of putting it
entirely on the shoulders of the consumers" and to alleviate the country’s financial problems by
bringing more revenues for the government. However, these commendable intentions do not justify a
deviation from the Constitution, which mandates that the initiative for filing revenue bills should come
from the House of Representatives, not from the Senate. After all, these aims may still be realized by
means of another bill that may later be initiated by the House of Representatives.
Therefore, I vote to declare R.A. No. 9337 as constitutional insofar as it amends provisions
pertaining to VAT. However, I vote to declare as unconstitutional Sections 1, 2, 3, 14, 15, 16, 17,
and 18 thereof which, respectively, amend Sections 27, 28, 34, 117, 119, 121, 148, and 151 of the
NIRC, as amended because these amendments deal with subject matters which were not touched
or covered by the bills emanating from the House of Representatives, thereby violating Section 24 of
Article VI of the Constitution.
Footnotes
1Tolentino v. Secretary of Finance, G.R. No. 115455, 25 August 1994, 235 SCRA 630, and
companion cases.
2 ISAGANI A. CRUZ, POLITICAL LAW 154 (2002 ed.) citing U.S. v. Nortorn, 91 U.S. 566.
3G.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.
G.R. No. 168056 – ABAKADA GURO PARTY LIST, ET AL. VS. EXECUTIVE SECRETARY
EDUARDO ERMITA, ET AL.
G.R. No. 168207 – AQUILINO PIMENTEL, JR., ET AL. VS. EXECUTIVE SECRETARY EDUARDO
ERMITA, ET AL.
G.R. No. 168461 – ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., ET AL. VS. CESAR V.
PURISIMA, ET AL.
G.R. No. 168463 – FRANCIS JOSEPH G. ESCUDERO, ET AL. VS. CESAR V. PURISIMA, ET AL.
Promulgated: September 1, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
CONCURRING AND
DISSENTING OPINION
PUNO, J.:
The main opinion of Madam Justice Martinez exhaustively discusses the numerous constitutional
and legal issues raised by the petitioners. Be that as it may, I wish to raise the following points, viz:
First. Petitioners assail sections 4 to 6 of Republic Act No. 9337 as violative of the principle of non-
delegation of legislative power. These sections authorize the President, upon recommendation of the
Secretary of Finance, to raise the value-added tax (VAT) rate to 12% effective January 1, 2006,
upon satisfaction of the following conditions: viz:
The power of judicial review under Article VIII, section 5(2) of the 1987 Constitution is limited to the
review of "actual cases and controversies."1 As rightly stressed by retired Justice Vicente V.
Mendoza, this requirement gives the judiciary "the opportunity, denied to the legislature, of seeing
the actual operation of the statute as it is applied to actual facts and thus enables it to reach sounder
judgment" and "enhances public acceptance of its role in our system of government."2 It also
assures that the judiciary does not intrude on areas committed to the other branches of government
and is confined to its role as defined by the Constitution.3 Apposite thereto is the doctrine
of ripeness whose basic rationale is "to prevent the courts, through premature adjudication, from
entangling themselves in abstract disagreements."4 Central to the doctrine is the determination of
"whether the case involves uncertain or contingent future events that may not occur as
anticipated, or indeed may not occur at all."5 The ripeness requirement must be satisfied for each
challenged legal provision and parts of a statute so that those which are "not immediately
involved are not thereby thrown open for a judicial determination of constitutionality."6
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.
Second. With due respect, I submit that the most important constitutional issue posed by the
petitions at bar relates to the parameters of power of a Bicameral Conference Committee. Most
of the issues in the petitions at bar arose because the Bicameral Conference Committee concerned
exercised powers that went beyond reconciling the differences between Senate Bill No. 1950 and
House Bill Nos. 3705 and 3555. In Tolentino v. Secretary of Finance,7 I ventured the view that a
Bicameral Conference Committee has limited powers and cannot be allowed to act as if it were a
"third house" of Congress. I further warned 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. I wish, therefore, to reiterate my
reasons for this unbending view, viz:8
Section 209, Rule XII of the Rules of the Senate provides:
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.
changes in or amendments to the subject measure, and shall be signed by the conferees.
(Emphasis supplied)
The counterpart rule of the House of Representatives is cast in near identical language. Section 85
of the Rules of the House of Representatives pertinently provides:
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 a conference committee of both chambers.
x x x. Each report shall contain a detailed, sufficiently explicit statement of the changes in or
amendments to the subject measure. (Emphasis supplied)
The Jefferson’s Manual has been adopted as a supplement to our parliamentary rules and practice.
Section 456 of Jefferson’s Manual similarly confines the powers of a conference committee, viz:
The managers of a conference must confine themselves to the differences committed to them …
and may not include subjects not within the disagreements, even though germane to a question in
issue.
This rule of antiquity has been honed and honored in practice by the Congress of the United States.
Thus, it is chronicled by Floyd Biddick, Parliamentarian Emeritus of the United States Senate, viz:
Committees of conference are appointed for the sole purpose of compromising and adjusting the
differing and conflicting opinions of the two Houses and the committees of conference alone can
grant compromises and modify propositions of either Houses within the limits of the disagreement.
Conferees are limited to the consideration of differences between the two Houses.
Congress shall not insert in their report matters not committed to them by either House, nor shall
they strike from the bill matters agreed to by both Houses. No matter on which there is nothing in
either the Senate or House passed versions of a bill may be included in the conference report and
actions to the contrary would subject the report to a point of order. (Emphasis ours)
In fine, there is neither a sound nor a syllable in the Rules of the Senate and the House of
Representatives to support the thesis of the respondents that a bicameral conference committee is
clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can 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 subject of a free and full
discussion of both Houses of Congress. With such a vagrant power, a Bicameral Conference
Committee acting as a Third Chamber will be a constitutional monstrosity.
It needs no omniscience to perceive that our Constitution did not provide for a Congress composed
of three chambers. On the contrary, section 1, Article VI of the Constitution provides in clear and
certain language: "The legislative power shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of Representatives …" Note that in vesting legislative
power exclusively to the Senate and the House, the Constitution used the word "shall." Its command
for a Congress of two houses is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means the Senate "… composed of
twenty-four Senators xxx elected at large by the qualified voters of the Philippines …" Similarly,
when the Constitution vested the legislative power to the House, it means the House "… composed
of not more than two hundred and fifty members xxx who shall be elected from legislative districts
xxx and those who xxx shall be elected through a party-list system of registered national, regional,
and sectoral parties or organizations." The Constitution thus, did not vest on a Bicameral Conference
Committee with an ad hoc membership the power to legislate for it exclusively vested legislative
power to the Senate and the House as co-equal bodies. To be sure, the Constitution does not
mention the Bicameral Conference Committees of Congress. No constitutional status is accorded to
them. They are not even statutory creations. They owe their existence from the internal rules of the
two Houses of Congress. Yet, respondents peddle the disconcerting idea that they should be
recognized as a Third Chamber of Congress and with ex post veto power at that.
The thesis that a Bicameral Conference Committee can exercise law making power with ex
post veto power is freighted with mischief. Law making is a power that can be used for good or 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 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
shortcircuiting 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
"policy of full public disclosure of all its transactions involving public interest." The Constitution could
not have contemplated a Congress of invisible and unaccountable John and Mary Does. A law
whose rationale is a riddle and whose authorship is obscure cannot bind the people.
All these notwithstanding, respondents resort to the legal cosmetology that these additions and
deletions should govern the people as laws because the Bicameral Conference Committee Report
was anyway submitted to and approved by the Senate and the House of Representatives. The
submission may have some merit with respect to provisions agreed upon by the Committee in the
process of reconciling conflicts between S.B. No. 1630 and H.B. No. 11197. In these instances, the
conflicting provisions had been previously screened by the proper committees, deliberated upon by
both Houses and approved by them. It is, however, a different matter with respect to additions and
deletions which were entirely new and which were made not to reconcile inconsistencies between
S.B. No. 1630 and H.B. No. 11197. The members of the Bicameral Conference Committee did not
have any authority to add new provisions or delete provisions already approved by both Houses as it
was not necessary to discharge their limited task of reconciling differences in bills. At that late stage
of law making, the Conference Committee cannot add/delete provisions which can become laws
without undergoing the study and deliberation of both chambers given to bills on 1st, 2nd, and 3rd
readings. Even the Senate and the House cannot enact a law which will not undergo these
mandatory three (3) readings required by the Constitution. If the Senate and the House cannot enact
such a law, neither can the lesser Bicameral Conference Committee.
Moreover, the so-called choice given to the members of both Houses to either approve or
disapprove the said additions and deletions is more of an optical illusion. These additions and
deletions are not submitted separately for approval. They are tucked to the entire bill. The vote is on
the bill as a package, i.e., together with the insertions and deletions. And the vote is either "aye" or
"nay," without any further debate and deliberation. Quite often, legislators vote "yes" because they
approve of the bill as a whole although they may object to its amendments by the Conference
Committee. This lack of real choice is well observed by Robert Luce:
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 conference, or delay
may give opposition to the main proposal chance to develop more strength.
In a similar vein, Prof. Jack Davies commented that "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."
The respondents also contend that the additions and deletions made by the Bicameral Conference
Committee were in accord with legislative customs and usages. The argument does not persuade
for it misappreciates the value of customs and usages in the hierarchy of sources of legislative rules
of procedure. To be sure, every legislative assembly has the inherent right to promulgate its own
internal rules. In our jurisdiction, Article VI, section 16(3) of the Constitution provides that "Each
House may determine the rules of its proceedings x x x." But it is hornbook law that the sources of
Rules of Procedure are many and hierarchical in character. Mason laid them down as follows:
xxx
1. Rules of Procedure are derived from several sources. The principal sources are as follows:
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.
2. The rules from the different sources take precedence in the order listed above except that judicial
decisions, since they are interpretations of rules from one of the other sources, take the same
precedence as the source interpreted. Thus, for example, an interpretation of a constitutional
provision takes precedence over a statute.
3. Whenever there is conflict between rules from these sources the rule from the source listed earlier
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)
As discussed above, the unauthorized additions and deletions made by the Bicameral Conference
Committee violated the procedure fixed by the Constitution in the making of laws. It is reasonless for
respondents therefore to justify these insertions as sanctioned by customs and usages.
Finally, respondents seek sanctuary in the conclusiveness of an enrolled bill to bar any judicial
inquiry on whether Congress observed our constitutional procedure in the passage of R.A. No. 7716.
The enrolled bill theory is a historical relic that should not continuously rule us from the fossilized
past. It should be immediately emphasized that the enrolled bill theory originated in England where
there is no written constitution and where Parliament is supreme. In this jurisdiction, we have a
written constitution and the legislature is a body of limited powers. Likewise, it must be pointed out
that starting from the decade of the 40s, even American courts have veered away from the rigidity
and unrealism of the conclusiveness of an enrolled bill. Prof. Sutherland observed:
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.
Various jurisdictions have adopted these alternative approaches in view of strong dissent and
dissatisfaction against the philosophical underpinnings of the conclusiveness of an enrolled bill. Prof.
Sutherland further observed:
x x x. Numerous reasons have been given for this rule. Traditionally, an enrolled bill was "a record"
and as such was not subject to attack at common law. Likewise, the rule of conclusiveness was
similar to the common law rule of the inviolability of the sheriff’s return. Indeed, they had the same
origin, that is, the sheriff was an officer of the king and likewise the parliamentary act was a regal act
and no official might dispute the king’s word. Transposed to our democratic system of government,
courts held that as the legislature was an official branch of government the court must indulge every
presumption that the legislative act was valid. The doctrine of separation of powers was advanced
as a strong reason why the court should treat the acts of a co-ordinate branch of government with
the same respect as it treats the action of its own officers; indeed, it was thought that it was entitled
to even greater respect, else the court might be in the position of reviewing the work of a supposedly
equal branch of government. When these arguments failed, as they frequently did, the doctrine of
convenience was advanced, that is, that it was not only an undue burden upon the legislature to
preserve its records to meet the attack of persons not affected by the procedure of enactment, but
also that it unnecessarily complicated litigation and confused the trial of substantive issues.
Although many of these arguments are persuasive and are indeed the basis for the rule in many
states today, they are not invulnerable to attack. The rule most relied on – the sheriff’s return or
sworn official rule – did not in civil litigation deprive the injured party of an action, for always he could
sue the sheriff upon his official bond. Likewise, although collateral attack was not permitted, direct
attack permitted raising the issue of fraud, and at a later date attack in equity was also available; and
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.
The argument that the enrolled bill is a "record" and therefore unimpeachable is likewise misleading,
for the correction of records is a matter of established judicial procedure. Apparently, the justification
is either the historical one that the king’s word could not be questioned or the separation of powers
principle that one branch of the government must treat as valid the acts of another.
Persuasive as these arguments are, the tendency today is to avoid reaching results by artificial
presumptions and thus it would seem desirable to insist that the enrolled bill stand or fall on the
basis of the relevant evidence which may be submitted for or against it. (Emphasis ours)
Thus, as far back as the 1940s, Prof. Sutherland confirmed that "x x x the tendency seems to be
toward the abandonment of the conclusive presumption rule and the adoption of the third rule
leaving only a prima facie presumption of validity which may be attacked by any authoritative source
of information.
Third. I respectfully submit that it is only by strictly following the contours of powers of a Bicameral
Conference Committee, as delineated by the rules of the House and the Senate, that we can
prevent said Committee from acting as a "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:
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.
Sec. 89. Conference Committee Reports. - . . . Each report shall contain a detailed, sufficiently
explicit statement of the changes in or amendments to the subject measure.
...
The Chairman of the House panel may be interpellated on the Conference Committee Report prior
to the voting thereon. The House shall vote on the Conference Committee Report in the same
manner and procedure as it votes a bill on third and final reading.
Section 35, Rule XII of the Rules of the Senate states:
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.
changes in, or amendments to the subject measure, and shall be signed by a majority of the
members of each House panel, voting separately.
The House rule brightlines the following: (1) the power of the Conference Committee is limited . . .
it is only to settle differences with the Senate; (2) if the differences are substantial, the Committee
must report to the House for the latter’s appropriate action; and (3) the Committee report has to be
voted upon in the same manner and procedure as a bill on third and final reading. Similarly,
the Senate rule underscores in crimson that (1) the power of the Committee is limited - - - to
settle differences with the House; (2) it can make changes or amendments only in the discharge of
this limited power to settle differences with the House; and (3) the changes or amendments are
merely recommendatory for they still have to be approved by the Senate.
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.
Fourth. Prescinding from these premises, I respectfully submit that the following acts of the
Bicameral Conference Committee constitute grave abuse of discretion amounting to lack or excess
of jurisdiction and should be struck down as unconstitutional nullities, viz:
a. Its deletion of the pro poor "no pass on provision" which is common in both Senate Bill No. 1950
and House Bill No. 3705.
Sec. 1 of House Bill No. 37059 provides:
Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby further amended
to read as follows:
SEC. 106. Value-added Tax on Sale of Goods or Properties. –
xxx
Provided, further, that notwithstanding the provision of the second paragraph of Section 105 of this
Code, the Value-added Tax herein levied on the sale of petroleum products under Subparagraph (1)
hereof shall be paid and absorbed by the sellers of petroleum products who shall be prohibited
from passing on the cost of such tax payments, either directly or indirectly[,] to any
consumer in whatever form or manner, it being the express intent of this act that the Value-added
Tax shall be borne and absorbed exclusively by the sellers of petroleum products x x x.
Sec. 3 of the same House bill provides:
Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby further amended
to read as follows:
Sec. 108. Value-added Tax on Sale of Goods or Properties. –
Provided, further, that notwithstanding the provision of the second paragraph of Section 105 of this
Code, the Value-added Tax imposed under this paragraph shall be paid and absorbed by the
subject generation companies who shall be prohibited from passing on the cost of such tax
payments, either directly or indirectly[,] to any consumer in whatever form or manner, it being
the express intent of this act that the Value-added Tax shall be borne and absorbed exclusively [by]
the power-generating companies.
In contrast and comparison, Sec. 5 of Senate Bill No. 1950 provides:
Value-added Tax on sale of Services and Use or Lease of Properties. –
x x x Provided, that the VAT on sales of electricity by generation companies, and services of
transmission companies and distribution companies, as well as those of franchise grantees of
electrical utilities shall not apply to residential end-users: Provided, that the Value-added Tax herein
levied shall be absorbed and paid by the generation, transmission and distribution companies
concerned. The said companies shall not pass on such tax payments to NAPOCOR or
ultimately to the consumers, including but not limited to residential end users, either as costs or in
any other form whatsoever, directly or indirectly. x x x.
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.
In the guise of reconciling disagreeing provisions of the House and the Senate bills on the
matter, the Bicameral Conference Committee deleted the "no pass on provision" on both the
sales of electricity and petroleum products. This action by the Committee is not warranted by the
rules of either the Senate or the House. As aforediscussed, the only power of a Bicameral
Conference Committee is to reconcile disagreeing provisions in the bills or joint resolutions of the
two houses of Congress. The House and the Senate bills both prohibited the passing on to
consumers of the VAT on sales of electricity. The Bicameral Conference Committee cannot
override this unequivocal decision of the Senate and the House. Nor is it clear that there is a
conflict between the House and Senate versions on the "no pass on provisions" of the VAT on sales
of petroleum products. The House version contained a "no pass on provision" but the Senate had
none. Elementary logic will tell us that while there may be a difference in the two versions, it
does not necessarily mean that there is a disagreement or conflict between the Senate and
the House. The silence of the Senate on the issue cannot be interpreted as an outright
opposition to the House decision prohibiting the passing on of the VAT to the consumers on sales
of petroleum products. Silence can even be conformity, albeit implicit in nature. But granting for the
nonce that there is conflict between the two versions, the conflict cannot escape the characterization
as a substantial difference. The seismic consequence of the deletion of the "no pass on provision"
of the VAT on sales of petroleum products on the ability of our consumers, especially on the
roofless and the shirtless of our society, to survive the onslaught of spiraling prices ought to be
beyond quibble. The rules require that the Bicameral Conference Committee should not, on its own,
act on this substantial conflict. It has to seek guidance from the chamber that created it. It must
receive proper instructions from its principal, for it is the law of nature that no spring can rise higher
than its source. The records of both the Senate and the House do not reveal that this step was taken
by the members of the Bicameral Conference Committee. They bypassed their principal and ran riot
with the exercise of powers that the rules never 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:
1. Fifteen percent (15%) for public elementary and secondary education to finance the construction
of buildings, purchases of school furniture and in-service teacher trainings;
2. Ten percent (10%) for health insurance premiums of enrolled indigents as a counterpart
contribution of the local government to sustain the universal coverage of the national health
insurance program;
3. Fifteen percent (15%) for environmental conservation to fully implement a comprehensive national
reforestation program; and
4. Ten percent (10%) for agricultural modernization to finance the construction of farm-to-market
roads and irrigation facilities.
Such allocations shall be segregated as separate trust funds by the national treasury and shall be
over and above the annual appropriation for similar purposes.
These amendments did not harmonize conflicting provisions between the constituent bills of R.A.
No. 9337 but are entirely new and extraneous concepts which fall beyond the median thereof.
They transgress the limits of the Bicameral Conference Committee’s authority and must be struck
down.
I cannot therefore subscribe to the thesis of the majority that "the changes introduced by the
Bicameral Conference Committee on disagreeing provisions were meant only to reconcile and
harmonize the disagreeing provisions for it did not inject any idea or intent that is wholly foreign
to the subject embraced by the original provisions."
Fifth. 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;10 (2)
providing for quorum requirements;11 (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;12 (4) requiring
that bills embrace one subject expressed in the title thereof;13 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 reading thereof.14 A Bicameral Conference Committee with untrammeled
powers will destroy this lawmaking structure. At the very least, it will diminish the free and open
debate of proposed legislations and facilitate the smuggling of what purports to be laws.
On this point, Mr. Robert Luce’s disconcerting observations are apropos:
"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 matters 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 more likely if the report comes in
the rush of business toward the end of the 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
conference, or delay may give opposition to the main proposal chance to develop more strength.
xxx xxx xxx
Entangled in a network of rule and custom, the Representative who resents and would resist this
theft of his rights, finds himself helpless. Rarely can be vote, rarely can he voice his mind, in the
matter of any fraction of the bill. Usually he cannot even record himself as protesting against some
one feature while accepting the measure as whole. Worst of all, he cannot by argument or
suggested change, try to improve what the other branch has done.
This means more than the subversion of individual rights. It means to a degree the abandonment
of whatever advantage the bicameral system may have. By so much it in effect transfers the
lawmaking power to small group of members who work out in private a decision that almost
always prevails. What is worse, these men are not chosen in a way to ensure the wisest choice. It
has become the practice to name as conferees the ranking members of the committee, so that the
accident of seniority determines. Exceptions are made, but in general it is not a question of who are
most competent to serve. Chance governs, sometimes giving way to favor, rarely to merit.
xxx xxx xxx
Speaking broadly, the system of legislating by conference committee is unscientific and therefore
defective. Usually it forfeits the benefit of scrutiny and judgment by all the wisdom available.
Uncontrolled, it is inferior to that process by which every amendment is secured independent
discussion and vote. . . ."15
It cannot be overemphasized that in a republican form of government, laws can only be enacted
by all the duly elected representatives of the people. It cuts against conventional wisdom in
democracy to lodge this power in the hands of a few or in the claws of a committee. It is for
these reasons that the argument that we should overlook the excesses of the Bicameral Conference
Committee because its report is anyway approved by both houses is a futile attempt to square the
circle for an unconstitutional act is void and cannot be redeemed by any subsequent ratification.
Neither can we shut our eyes to the unconstitutional acts of the Bicameral Conference Committee by
holding that the Court cannot interpose its checking powers over mere violations of the internal rules
of Congress. In Arroyo, et al. v. de Venecia, et al.,16 we ruled that when the violations affect private
rights or impair the Constitution, the Court has all the power, nay, the duty to strike them
down.
In conclusion, I wish to stress that this is not the first time nor will it be last that arguments will be
foisted for the Court to merely wink at assaults
on the Constitution on the ground of some national interest, sometimes clear and at other times
inchoate. To be sure, it cannot be gainsaid that the country is in the vortex of a financial crisis. The
broadsheets scream the disconcerting news that our debt payments for the year 2006 will exceed
Pph1 billion daily for interest alone. Experts underscore some factors that will further drive up the
debt service expenses such as the devaluation of the peso, credit downgrades and a spike in
interest rates.17 But no doomsday scenario will ever justify the thrashing of the Constitution. The
Constitution is meant to be our rule both in good times as in bad times. It is the Court’s
uncompromising obligation to defend the Constitution at all times lest it be condemned as an
irrelevant relic.
WHEREFORE, I concur with the majority but dissent on the following points:
a) I vote to withhold judgment on the constitutionality of the "standby authority" in Sections 4 to 6 of

Republic Act No. 9337 as this issue is not ripe for adjudication.;
b) I vote to declare unconstitutional the deletion by the Bicameral Conference Committee of the pro
poor "no pass on provision" on electricity to residential consumers as it contravened the unequivocal
intent of both Houses of Congress; and
c) I vote to declare Section 21 of Republic Act No. 9337 as unconstitutional as it contains extraneous
provisions not found in its constituent bills.
REYNATO S. PUNO
Associate Justice
Footnotes
1Angara 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).

3 Id. at 87.
4Abbott Laboratories v. Gardner, 387 U.S. 136 (1967); I Tribe, American Constitutional Law,
p. 334 (3rd ed.).
5Texas 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.).
6Communist 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).
7
235 SCRA 630 (1994).
8 See Opinion in 235 SCRA 630, 805-825.
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.
101 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 separate deliberations and actions in the respective bodies that check and
balance each other."
11Const., 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."
12Const., 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 and remonstrance if their pendency had been seasonably announced. The
constitutional clause under discussion is intended to correct these evils; to prevent such
corrupting aggregations of incongruous measures, by confining each act to one subject or
object; to prevent surprise and inadvertence by requiring that subject or object to be
expressed in the title."
14Const., Article VI, Section 26(2) (1987); 1 Sutherland Statutory Construction § 10:4 (6th
ed.); See also IV Laurel, Journal of the (1935) Constitutional Convention, pp. 436-437, 440-
441 where the 1934 Constitutional Convention noted the anomalous legislative practice of
railroading bills on the last day of the legislative year when members of Congress were
eager to go home. By this irregular procedure, legislators were able to successfully insert
matters into bills which would not otherwise stand scrutiny in leisurely debate; I Cooley, A
Treatise on the Constitutional Limitations, pp. 286-287(8th ed.); Smith v. Mitchell, 69 W.Va
481, 72 S.E. 755 (1911): "The purpose of this provision of the Constitution is to inform
legislators and people of legislation proposed by a bill, and to prevent hasty legislation."
15235 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."
16 268 SCRA 269, 289 (1997).
17 The Manila Standard Today, August 26, 2005, p. 1.
EN BANC
GR No. 168056 -- ABAKADA GURO PARTY LIST, etc. et al. v. HON. EXECUTIVE SECRETARY
EDUARDO R. ERMITA et al.
GR No. 168207 -- AQUILINO Q. PIMENTEL JR. et al. v. EXECUTIVE SECRETARY EDUARDO R.

ERMITA et al.
GR No. 168461 -- ASSOCIATION OF PILIPINAS SHELL DEALERS, INC., etc. et al. v. CESAR V.
PURISIMA, etc. et al.
GR No. 168463 -- FRANCIS JOSEPH G. ESCUDERO et al. v. CESAR V. PURISIMA etc., et al.
GR No. 168730 -- BATAAN GOVERNOR ENRIQUE T. GARCIA JR. v. HON. EDUARDO R.

ERMITA, etc. et al.
Promulgated: September 1, 2005

x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
SEPARATE OPINION
PANGANIBAN, J.:
The ponencia written by the esteemed Madame Justice Ma. Alicia Austria-Martinez declares that the
enrolled bill doctrine has been historically and uniformly upheld in our country. Cited as recent
reiterations of this doctrine are the two Tolentino v. Secretary of Finance judgments1 and Fariñas v.
Executive Secretary.2
Precedence of Mandatory
Constitutional Provisions
Over the Enrolled Bill Doctrine
I believe, however, that the enrolled bill doctrine3 is not absolute. It may be all-encompassing in
some countries like Great Britain,4 but as applied to our jurisdiction, it must yield to mandatory
provisions of our 1987 Constitution. The Court can take judicial notice of the form of government5 in
Great Britain.6 It is unlike that in our country and, therefore, the doctrine from which it
originated7 could be modified accordingly by our Constitution.
In fine, the enrolled bill doctrine applies mainly to the internal rules and processes followed by
Congress in its principal duty of lawmaking. However, when the Constitution imposes certain
conditions, restrictions or limitations on the exercise of congressional prerogatives, the judiciary has
both the power and the duty to strike down congressional actions that are done in plain
contravention of such conditions, restrictions or limitations.8 Insofar as the present case is
concerned, the three most important restrictions or limitations to the enrolled bill doctrine are the
"origination," "no-amendment" and "three-reading" rules which I will discuss later.
Verily, these restrictions or limitations to the enrolled bill doctrine are safeguarded by the
expanded9 constitutional mandate of the judiciary "to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government."10 Even the ponente of Tolentino,11 the learned Mr. Justice
Vicente V. Mendoza, concedes in another decision that 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."12
The Bicameral Conference Committee (BCC) created by Congress to iron out differences between
the Senate and the House of Representatives versions of the E-VAT bills13 is one such "branch or
instrumentality of the government," over which this Court may exercise certiorari review to determine
whether or not grave abuse of discretion has been committed; and, specifically, to find out whether
the constitutional conditions, restrictions and limitations on law-making have been violated.
In general, the BCC has at least five options in performing its functions: (1) adopt the House version
in part or in toto, (2) adopt the Senate version in part or in toto, (3) consolidate the two versions, (4)
reject non-conflicting provisions, and (5) adopt completely new provisions not found in either version.
This, therefore, is the simple question: In the performance of its function of reconciling conflicting
provisions, has the Committee blatantly violated the Constitution?
My short answer is: No, except those relating to income taxes referred to in Sections 1, 2 and 3 of
Republic Act (RA) No. 9337. Let me explain.
Adopting the House
Version in Part or in Toto
First, the BCC had the option of adopting the House bills either in part or in toto, endorsing them
without changes. Since these bills had passed the three-reading requirement14 under the
Constitution,15 it readily becomes apparent that no procedural impediment would arise. There would
also be no question as to their origination,16 because the bills originated exclusively from the House
of Representatives itself.
In the present case, the BCC did not ignore the Senate and adopt any of the House bills in part or in
toto. Therefore, this option was not taken by the BCC.
Adopting the Senate
Version in Part or in Toto
Second, the BCC may choose to adopt the Senate version either
in part or in toto, endorsing it also without changes. In so doing, the question of origination arises.
Under the 1987 Constitution, all "revenue x x x bills x x x shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments."17
If the revenue bill originates exclusively from the Senate, then obviously the origination provision18 of
the Constitution would be violated. If, however, it originates exclusively from the House and
presumably passes the three-reading requirement there, then the question to contend with is
whether the Senate amendments complied with the "germane" principle.
While in the Senate, the House version may, per Tolentino, undergo extensive changes, such that
the Senate may rewrite not only portions of it but even all of it.19 I believe that such rewriting is limited
by the "germane" principle: although "relevant"20 or "related"21 to the general subject of taxation, the
Senate version is not necessarily "germane" all the time. The "germane" principle requires a legal --
not necessarily an economic22 or political -- interpretation. There must be an "inherent logical
connection."23 What may be germane in an economic or political sense is not necessarily germane in
the legal sense. Otherwise, any provision in the Senate version that is entirely new and extraneous,
or that is remotely or even slightly connected, to the vast and perplexing subject of taxation, would
always be germane. Under this interpretation, the origination principle would surely be rendered
inutile.
To repeat, in Tolentino, the Court said that the Senate may even write its own version, which in
effect would be an amendment by substitution.24 The Court went further by saying that "the
Constitution does not prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of
the bill from the House, so long as action by the Senate as a body is withheld pending receipt of the
House bill."25 After all, the initiative for filing a revenue bill must come from the House26 on the theory
that, elected as its members are from their respective districts, the House is more sensitive to local
needs and problems. By contrast, the Senate whose members are elected at large approaches the
matter from a national perspective,27 with a broader and more circumspect outlook.28
Even if I have some reservations on the foregoing sweeping pronouncements in Tolentino, I shall not
comment any further, because the BCC, in reconciling conflicting provisions, also did not take the
second option of ignoring the House bills completely and of adopting only the Senate version in part
or in toto. Instead, the BCC used or applied the third option as will be discussed below.
Compromising
by Consolidating
As a third option, the BCC may reach a compromise by

consolidating both the Senate and the House versions. It can adopt some parts and reject other
parts of both bills, and craft new provisions or even a substitute bill. I believe this option is viable,
provided that there is no violation of the origination and germane principles, as well as the three-
reading rule. After all, the report generated by the BCC will not become a final valid act of the
Legislative Department until the BCC obtains the approval of both houses of Congress.29
Standby Authority. I believe that the BCC did not exceed its authority when it crafted the so-called
"standby authority" of the President. The originating bills from the House imposed a 12 percent VAT
rate,30 while the bill from the Senate retained the
original 10 percent.31 The BCC opted to initially use the 10 percent Senate provision and to increase
this rate to the 12 percent House provision, effective January 1, 2006, upon the occurrence of a
predetermined factual scenario as follows:
"(i) [VAT] collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds
two and four-fifth percent (2 4/5%) or
(ii) National Government Deficit as a percentage of GDP of the previous year exceeds one and one-
half percent (1 1/2%)."32
In the computation of the percentage requirements in the alternative conditions under the law, the
amounts of the VAT collection, National Deficit,33 and GDP34 -- as well as the interrelationship among
them -- can easily be derived by the finance secretary from the proper government bodies charged
with their determination. The law is complete and standards have been fixed.35 Only the fact-finding
mathematical computation for its implementation on January 1, 2006, is necessary.
Once either of the factual and mathematical events provided in the law takes place, the President
has no choice but to implement the increase of the VAT rate to 12 percent.36 This eventuality has
been predetermined by Congress.37
The taxing power has not been delegated by Congress to either or both the President and the
finance secretary. What was delegated
was only the power to ascertain the facts in order to bring the law into operation. In fact, there was
really no "delegation’ to speak of;
__________________
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. Do we charge the end consumers 10 [percent] or 12 [percent]? The regulations
should be able to spell that out [i]n the same manner that even now the various consumers of
various products and services must be able to get from your
there was merely a declaration of an administrative, not a legislative, function.38
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 Congress."
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.39 Indeed, as I have mentioned
earlier, the fact-finding condition is a mere administrative, not legislative, function.
The ponencia states that Congress merely delegates the implementation of the law to the secretary
of finance. How then can the latter be its agent? Making a law is different from implementing it. While
the first (the making of laws) may be delegated under certain conditions and only in specific
instances provided under the Constitution, the second (the implementation of laws) may not be done
by Congress. After all, the legislature does not have the power to implement laws. Therefore,
congressional agency arises only in the first, not in the second. The first is a legislative function;
the second, an executive one.
Petitioners’ argument is that because the GDP does not account for the economic effects of so-
called underground businesses, it is an inaccurate indicator of either economic growth or slowdown
in transitional economies.40 Clearly, this matter is within the confines of lawmaking. This Court is
neither a substitute for the wisdom, or lack of it, in Congress,41 nor an arbiter of flaws within the
latter’s internal rules.42 Policy matters lie within the domain of the political branches of
government,43 outside the range of judicial cognizance.44 "[T]he right to select the measure and
objects of taxation devolves upon the Congress, and not upon the courts, and such selections are
valid unless constitutional limitations are overstepped."45 Moreover, each house of Congress has the
power and authority to determine the rules of its proceedings.46 The contention that this case is not
ripe for determination because there is no violation yet of the Constitution regarding the exercise of
the President’s standby authority has no basis. The question raised is whether the BCC, in passing
the law, committed grave abuse of discretion, not whether the provision in question had been
violated. Hence, this case is not premature and is, in fact, subject to judicial determination.
Amendments on Income Taxes. I respectfully submit that the amendments made by the BCC (that
were culled from the Senate version) regarding income taxes47 are not legally germane to the subject
matter of the House bills. Revising the income tax rates on domestic, resident foreign and
nonresident foreign corporations; increasing the tax credit against taxes due from nonresident
foreign corporations on intercorporate dividends; and reducing the allowable deduction for interest
expense are legally unrelated and not germane to the subject matter contained in the House bills;
they violate the origination principle.48 The reasons are as follows:
One, an income tax is a direct tax imposed on actual or presumed income -- gross or net -- realized
by a taxpayer during a given taxable year,49 while a VAT is an indirect tax not in the context of who is
directly and legally liable for its payment, but in terms of its nature as "a tax on
consumption."50 The former cannot be passed on to the consumer, but the latter can.51 It is too wide
a stretch of the imagination to even relate one concept with the other. In like manner, it is
inconceivable how the provisions that increase corporate income taxes can be considered
as mitigating measures for increasing the VAT and, as I will explain later, for effectively imposing a
maximum of 3 percent tax on gross sales or revenues because of the 70 percent cap. Even the
argument that the corporate income tax rates will be reduced to 30 percent does not hold water. This
reduction will take effect only in 2009, not 2006 when the 12 percent VAT rate will have been
implemented.
Two, taxes on intercorporate dividends are final, but the input VAT is generally creditable. Under
a final withholding tax system, the amount of income tax that is withheld by a withholding agent is
constituted as a full and final payment of the income tax due from the payee on said income.52 The
liability for the tax primarily rests upon the payor as a withholding agent.53 Under
a creditable withholding tax system, taxes withheld on certain payments are meant to approximate
the tax that is due of the payee on said payments.54 The liability for the tax rests upon the payee who
is mandated by law to still file a tax return, report the tax base, and pay the difference between the
tax withheld and the tax due.55
From this observation alone, it can already be seen that not only are dividends alien to the tax base
upon which the VAT is imposed, but their respective methods of withholding are totally different.
VAT-registered persons may not always be nonresident foreign corporations that declare and pay
dividends, while intercorporate dividends are certainly not goods or properties for sale, barter,
exchange, lease or importation. Certainly, input VAT credits are different from tax credits on
dividends received by nonresident foreign corporations.
Three, itemized deductions from gross income partake of the nature of a tax exemption.56 Interest --
which is among such deductions -- refers to the amount paid by a debtor to a creditor for the use or
forbearance of money.57 It is an expense item that is paid or incurred within a given taxable year on
indebtedness in connection with a taxpayer’s trade, business or exercise of profession.58 In order to
reduce revenue losses, Congress enacted RA 842459 which reduces the amount of interest expense
deductible by a taxpayer from gross income, equal to the applicable percentage of interest income
subject to final tax.60 To assert that reducing the allowable deduction in interest expense is a matter
that is legally related to the proposed VAT amendments is too far-fetched. Interest expenses are not
allowed as credits against output VAT. Neither are VAT-registered persons always liable for interest.
Having argued on the unconstitutionality (non-germaneness) of the BCC insertions on income taxes,
let me now proceed to the other provisions that were attacked by petitioners.
No Pass-on Provisions. I agree with the ponencia that the BCC did not exceed its authority when it
deleted the no pass-on provisions found in the congressional bills. Its authority to make amendments
not only implies the power to make insertions, but also deletions, in order to
resolve conflicting provisions.
The no pass-on provision in House Bill (HB) No. 3705 referred to the petroleum products subject to
excise tax (and the raw materials used in the manufacture of such products), the sellers of petroleum
products, and the generation companies.61 The analogous provision in Senate Bill (SB) No. 1950
dealt with electricity, businesses other than generation companies, and services of franchise
grantees of electric utilities.62 In contrast, there was a marked absence of the no pass-on provision in
HB 3555. Faced with such variances, the BCC had the option of retaining or modifying the no pass-
on provisions and determining their extent, or of deleting them altogether. In opting for deletion to
resolve the variances, it was merely acting within its discretion. No grave abuse may be imputed to
the BCC.
The 70 Percent Cap on Input Tax and the 5 Percent Final Withholding VAT. Deciding on the 70
percent cap and the 5 percent final withholding VAT in the consolidated bill is also within the power
of the BCC. While HB 3555 included limits of 5 percent and 11 percent on input tax,63 SB 1950
proposed an even spread over 60 months.64 The decision to put a cap and fix its rate, so as to
harmonize or to find a compromise in settling the apparent differences in these versions,65 was within
the sound discretion of the BCC.
In like manner, HB 3555 contained provisions on the withholding of creditable VAT at the rates of 5
percent, 8 percent, 10.5 percent, and 12 percent.66 HB 3705 had no such equivalent amendment,
and SB 1950 pegged the rates at only 5 percent and 10 percent.67 I believe that the decision to
impose a final (not creditable) VAT and to fix the rates at 5 percent and 10 percent, so as to
harmonize the apparent differences in all three versions, was also within the sound discretion of the
BCC.
Indeed, the tax credit method under our VAT system is not only practical, but also principally used in
almost all taxing jurisdictions. This does not mean, however, that in the eyes of Congress through
the BCC, our country can neither deviate from this method nor modify its application to suit our fiscal
requirements. The VAT is usually collected through the tax credit method (and in the past, even
through the cost deduction method or a mixture of these two methods),68 but there is no hard and
fast rule that 100 percent of the input taxes will always be allowed as a tax credit.
In fact, it was Maurice Lauré, a French engineer,69 who invented the VAT. In 1954, he had the idea
of imposing an indirect tax on consumption, called taxe sur la valeur ajoutée,70 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, rather than retailers or
tax authorities, were forced to administer and account for the tax themselves.71
Since the unutilized input VAT can be carried over to succeeding quarters, there is no undue
deprivation of property. Alternatively, it can be passed on to the consumers;72 there is no law
prohibiting that. Merely speculative and unproven, therefore, is the contention that the law is arbitrary
and oppressive.73 Laws that impose taxes are necessarily burdensome, compulsory, and involuntary.
The deferred input tax account -- which accumulates the unutilized input VAT -- remains an asset in
the accounting records of a business. It is not at all confiscated by the government. By deleting
Section 112(B) of the Tax Code,74 Congress no longer made available tax credit certificates for such
asset account until retirement from or cessation of business, or changes in or cessation of VAT-
registered status.75 This is a matter of policy, not legality. The Court cannot step beyond the confines
of its constitutional power, if there is absolutely no clear showing of grave abuse of discretion in the
enactment of the law.
That the unutilized input VAT would be rendered useless is merely speculative.76 Although it is
recorded as a deferred asset in the books of a company, it remains to be a mere privilege. It may be
written off or expensed outright; it may also be denied as a tax credit.
There is no vested right in a deferred input tax account; it is a mere statutory privilege.77 The State
may modify or withdraw such privilege, which is merely an asset granted by operation of
law.78 Moreover, there is no vested right in generally accepted accounting principles.79 These refer to
accounting concepts, measurement techniques, and standards of presentation in a company’s
financial statements, and are not rooted in laws of nature, as are the laws of physical science, for
these are merely developed and continually modified by local and international regulatory accounting
bodies.80 To state otherwise and recognize such asset account as a vested right is to limit the taxing
power of the State. Unlimited, plenary, comprehensive and supreme, this power cannot be unduly
restricted by mere creations of the State.
That the unutilized input VAT would also have an unequal effect on businesses -- some with low,
others with high, input-output ratio -- is not a legal ground for invalidating the law. Profit margins are
a variable of sound business judgment, not of legal doctrine. The law applies equally to all
businesses; it is up to each of them to determine the best formula for selling their goods or services
in the face of stiffer competition. There is, thus, no violation of the equal protection clause. If the
implementation of the 70 percent cap would cause an ad infinitum deferment of input taxes or an
unequal effect upon different types of businesses with varying profit margins and capital
requirements, then the remedy would be an amendment of the law -- not an unwarranted and
outright declaration of unconstitutionality.
The matter of business establishments shouldering 30 percent of output tax and remitting the
amount, as computed, to the government is in effect imposing a tax that is equivalent to a maximum
of 3 percent of gross sales or revenues.81 This imposition is arguably another tax on gross -- not net -
- income and thus a deviation from the concept of VAT as a tax on consumption; it also assumes
that sales or revenues are on cash basis or, if on credit, given credit terms shorter than a quarter of
a year. However, such additional imposition and assumption are also arguably within the power of
Congress to make. The State may in fact choose to impose an additional 3 percent tax on gross
income, in lieu of the 70 percent cap, and thus subject the income of businesses to two types of
taxes -- one on gross, the other on net. These impositions may constitute double taxation,82 which is
not constitutionally proscribed.83
Besides, prior to the amendments introduced by the BCC, already extant in the Tax Code was a 3
percent percentage tax on the gross quarterly sales or receipts of persons who were not VAT-
registered, and whose sales or receipts were exempt from VAT.84 This is another type of tax
imposed by the Tax Code, in addition to the tax on their respective incomes. No question as to its
validity was raised before; none is being brought now. More important, there is a presumption in
favor of constitutionality,85 "rooted in the doctrine of separation of powers which enjoins upon the
three coordinate departments of the Government a becoming courtesy for each other’s acts."86
As to the argument that Section 8 of RA 9337 contravenes Section 1 of Article III and Section 20 of
Article II of the 1987 Constitution, I respectfully disagree.
One, 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."87
RA 9337 was enacted precisely to achieve the objective of raising revenues to defray the necessary
expenses of government.88 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;89 neither public notice nor public hearings
were denied.
Two, private enterprises are not discouraged. Tax burdens are never delightful, but with the
imposition of the 70 percent cap, there will be an assurance of a steady cash flow to the
government, which can be translated to the production of improved goods, rendition of better
services, and construction of better facilities for the people, including all private enterprises.
Perhaps, Congress deems it best to make our economy depend more on businesses that are easier
to monitor, so there will be a more efficient collection of taxes. Whatever is expected of the outcome
of the law, or its wisdom, should be the sole responsibility of the representatives chosen by the
electorate.
The profit margin rates of various industries generally do not change. However, the profit
margin figures do, because these are obviously monetary variables that affect business, along with
the level of competition, the quality of goods and services offered, and the cost of their production.
And there will inevitably be a conscious desire on the part of those who engage in business and
those who consume their output to adapt or adjust accordingly to any congressional modification of
the VAT system.
In addition, 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.
Not expensed, but amortized over its useful life, is capital equipment, which is purchased or treated
as capital leases by private enterprises. Aimed at achieving the twin objectives of profitability and
solvency, such purchase or lease is a matter of prudence in business decision-making.
Hence, business judgments, sales volume, and their effect on competition are for businesses to
determine and for Congress to regulate -- not for this Court to interfere with, absent a clear showing
that constitutional provisions have been violated. Tax collection and administrative feasibility are for
the executive branch to focus on, again not for this Court to dwell upon.
The Transcript of the Oral Arguments on July 14, 2005 clearly point out in a long line of relevant
questioning that, absent a violation of constitutional provisions, the Court cannot interfere with the 70
percent cap, the 5 percent final withholding tax, and the 60-month amortization, there being other
extra-judicial remedies available to petitioners, thus:
"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.
"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 petroleum, 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 100 [percent] of it, Your Honor.
"Justice Panganiban: That might be true, but we are talking about whether that particular provision
would be unconstitutional. You say it’s oppressive, but you have a remedy, you just pass it on to
the customer. I am not sayin[g] it’s good[.] [N]either am I saying it’s wise[.] [A]ll I’m talking about is,
whether it’s constitutional or not.
"Atty. Baniqued: Yes, in fact we acknowledge, Your Honor, that that is a remedy available to the
petroleum dealers, but considering the impact of that limitation[,] and were just talking of the 70
[percent cap] on [input VAT] in the level of the petroleum dealers. Were not even talking yet of the
limitation on the [input VAT] available to the manufacturers, so, what if they pass that on as well?
"Justice Panganiban: Yes.
"Atty. Baniqued: Then, it would complicate… interrupted
"Justice Panganiban: What I am saying is, there is a remedy, which is business in character. The
mere fact that the government is imposing that [seventy percent] cap does not make the law
unconstitutional, isn’t it?
"Atty. Baniqued: It does, Your Honor, if it can be shown. And as we have shown, it is oppressive and
unreasonable, it is excessive, Your Honor… interrupted
"Justice Panganiban: If you have no way of recouping it. If you have no way of recouping that
amount, then it will be oppressive, but you have a business way of recouping it[.] I am saying that,
not advising that it’s good. All I am saying is, is it constitutional or not[?] We’re not here to determine
the wisdom of the law, that’s up for Congress. As pointed out earlier, if the law is not wise, the law
makers will be changed by the people[.] [T]hat is their solution t[o] the lack of wisdom of a law. If the
law is unconstitutional[,] then the Supreme Court will declare it unconstitutional and void it, but[,] in
this case[,] there seems to be a business remedy in the same manner that Congress may just
impose that tax straight without saying it’s [VAT]. If Congress will just say all petroleum will pay 3
[percent] of their Gross Sales, but you don’t bear that, you pass that on, isn’t it?
"Atty. Baniqued: We acknowledge your concern, Your Honor, but we should not forget that when the
petroleum dealers pass these financial burden or this tax differential to the consumers, they
themselves are consumers in their own right. As a matter of fact, they filed this case both as
petroleum dealer[s] and as taxpayers. If they pass if on, they themselves would ultimately bear the
burden[, especially] in increase[d] cost of electricity, land transport, food, everything, Your Honor.
"Justice Panganiban: Yes, but the issue here in this Court, is whether that act of Congress is
unconstitutional.
"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 seen on TV
going around just to check that prices don’t go up. And as a matter of fact, he had pronouncements
that, the increase in petroleum price should only be limited to the effect of 10 [percent] E-VAT.
"Justice Panganiban: It’s becaus[e] the implementing rules were not clear and were not extensive
enough to cover how much really should be the increase for various oil products, refined oil
products. It’s up for the dealers to guess, and the dealers were guessing to their advantage by
saying plus 10 [percent] anyway, right?
"Atty. Baniqued: In fact, the petroleum dealers, Your Honors, are not only faced with constitutional
issues before this Court. They are also faced with a possibility of the Department of Energy not
allowing them to pass it on[,] because this would be an unreasonable price increase. And so, they
are being hit from both sides…interrupted
"Justice Panganiban: That’s why I say, that there is need to refine the implementing rules so that
everyone will know, the customers will know how much to pay for gasoline, not only gasoline,
gasoline, and so on, diesel and all kinds of products, so there’ll be no confusion and there’ll be no
undue taking advantage. There will be a smooth implementation[,] if the law were to be upheld by
the Court. In your case, as I said, it may be unwise to pass that on to the customers, but definitely,
the dealers will not bear that [--] to suffer the loss that you mentioned in your consolidated balance
sheets. Certainly, the dealers will not bear that [cost], isn’t it?
"Atty. Baniqued: It will be a very hard decision to make, Your Honor.
"Justice Panganiban: Why, you will not pass it on?
"Atty. Baniqued: I cannot speak for the dealers…. interrupted.
"Justice Panganiban: As a consumer, I will thank you if you don’t pass it on[;] but you or your clients
as businessm[e]n, I know, will pass it on.
"Atty. Baniqued: As I have said, Your Honor, there are many constraints on their ability to do that[,]
and that is why the first step that we are seeking is to seek redress from this Honorable Court[,]
because we feel that the imposition is excessive and oppressive….. interrupted
"Justice Panganiban: You can find redress here, only if you can show that the law is unconstitutional.
"Atty. Baniqued: We realized that, Your Honor.
"Justice Panganiban: Alright. Let’s talk about the 5 [percent] [d]epreciation rate, but that applies
only to the capital equipment worth over a million?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: And that doesn’t apply at all times, isn’t it?
"Atty. Baniqued: Well……
"Justice Panganiban: That doesn’t at all times?
"Atty. Baniqued: For capital goods costing less than 1 million, Your Honor, then….
"Justice Panganiban: That will not apply?
"Atty. Baniqued: That will not apply, but you will have the 70 [percent] cap on input [VAT], Your
Honor.
"Justice Panganiban: Yes, but we talked already about the 70 [percent].
"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].
"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 the gas station[.] [A]ll
I am saying is it should be presented to us in perspective. Neither am I siding with the government.
All I am saying is, when I saw your complicated balance sheet and mathematics, I saw that you were
to put in all the time the depreciation that should be spread over [five] years. But we have agreed
that that applies only to capital equipment [-- ]not to any kind of goods [--] but to capital equipment
costing over 1 million pesos.
"Atty. Baniqued: Yes, Your Honor, we apologize if it has caused a little confusion….
"Justice Panganiban: Again the solution could b[e] to pass that on, because that’s an added
cost, isn’t it?
"Atty. Baniqued: Well, yes, you can pass it on….
"Justice Panganiban: I am not teaching you, I am just saying that you have a remedy… I am not
saying either that the remedy is wise or should be done, because[,] as a consumer[,] I wouldn’t want
that to be done to me.
"Atty. Baniqued: We realiz[e] that, Your Honor, but the fact remain[s] that whether it is in the hands
of the petroleum dealers or in the hands of the consumers[,] if this imposition is unreasonable and
oppressive, it will remain so, even after it is passed on, Your Honor.
"Justice Panganiban: Alright. Let’s go to the third. The 5 [percent] withholding tax, [f]inal [w]ithholding
[t]ax, but this applies to sales to government?

"Justice Panganiban: So, you can pass on this 5 [percent] to the [g]overnment. After all, that 5
[percent] will still go back to the government.
"Atty. Baniqued: Then it will come back to haunt us, Your Honor…..
"Justice Panganiban: Why?
"Atty. Baniqued: By way of, for example sales to NAPOCOR or NTC…. interrupted
"Justice Panganiban: Sales of petroleum products….
"Atty. Baniqued: ………… in the case of NTC, Your Honor, it would come back to us by way of
increase[d] cost, Your Honor.
"Justice Panganiban: Okay, let’s see. You sell, let’s say[,] your petroleum products to the Supreme
Court, as a gas station that sells gasoline to us here. Under this law, the 5 [percent] withholding tax
will have to be charged, right?
"Justice Panganiban: You will charge that[.] [T]herefore[,] the sales to the Supreme Court by that gas
station will effectively be higher?
"Justice Panganiban: So, the Supreme Court will pay more, you will not [be] going to [absorb] that 5
[percent], will you?
"Atty. Baniqued; If it is passed on, Your Honor, that’s of course we agree…. Interrupted.
"Justice Panganiban: Not if, you can pass it on….
"Atty. Baniqued: Yes, we can…. interrupted
"Justice Panganiban: There is no prohibition to passing it on[.] [P]robably the gas station will simply
pass it on to the Supreme Court and say[,] well[,] there is this 5 [percent] 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: Yes, Your Honor… interrupted
"Justice Panganiban: And perhaps will not elect their representatives anymore[.]
"Atty. Baniqued: Yes, Your Honor…..
"Justice Panganiban: For agreeing to it, because the wisdom of a law is not for the Supreme Court to
pass upon.
"Atty. Baniqued: It just so happens, Your Honor, that what is [involved] here is a commodity that
when it goes up, it affects everybody….
"Justice Panganiban: Yes, inflationary and inflammatory….
"Atty. Baniqued: …just like what Justice Puno says it shakes the entire economic foundation, Your
Honor.
"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).
Amendments on Other Taxes and Administrative Matters. Finally, the BCC’s amendments
regarding other taxes90 are both germane in a legal sense and reasonably necessary in an economic
sense. This fact is evident, considering that the proposed changes in the VAT law will have
inevitable implications and repercussions on such taxes, as well as on the procedural requirements
and the disposition of incremental revenues, in the Tax Code. Either mitigating measures91 have to
be put in place or increased rates imposed, in order to achieve the purpose of the law, cushion the
impact of increased taxation, and still maintain the equitability desired of any other revenue
law.92 Directly related to the proposed VAT changes, these amendments are expected also to have a
salutary effect on the national economy.
The no-amendment rule93 in the Constitution was not violated by the BCC, because no completely
new provision was inserted in the approved bill. The amendments may be unpopular or even work
hardship upon everyone (this writer included). If so, the remedy cannot be prescribed by this Court,
but by Congress.
Rejecting Non-Conflicting
Provisions
Fourth, the BCC may choose neither to adopt nor to consolidate the versions presented to it by both
houses of Congress, but instead to reject non-conflicting provisions in those versions. In other
words, despite the lack of conflict in them, such provisions are still eliminated entirely from the
consolidated bill. There may be a constitutional problem here.
The no pass-on provisions in the congressional bills are the only item raised by petitioners
concerning deletion.94 As I have already mentioned earlier, these provisions were in conflict. Thus,
the BCC exercised its prerogative to remove them. In fact, congressional rules give the BCC the
power to reconcile disagreeing provisions, and in the process of reconciliation, to delete them. No
other non-conflicting provision was deleted.
At this point, and after the extensive discussion above, it can readily be seen no non-
conflicting provisions of the E-VAT bills were rejected indiscriminately by the BCC.
Approving and Inserting
Completely New Provisions
Fifth, the BCC had the option of inserting completely new provisions not found in any of the
provisions of the bills of either house of Congress, or make and endorse an entirely new bill as a
substitute. Taking this option may be a blatant violation of the Constitution, for not only will the
surreptitious insertion or unwarranted creation contravene the "origination" principle; it may likewise
desecrate the three-reading requirement and the no-amendment rule.95
Fortunately, however, the BCC did not approve or insert completely new provisions. Thus, no
violation of the Constitution was committed in this regard.
Summary
The enrolled bill doctrine is said to be conclusive not only as to the provisions of a law, but also to its
due enactment. It is not absolute, however, and must yield to mandatory provisions of the 1987
Constitution. Specifically, this Court has the duty of striking down provisions of a law that in their
enactment violate conditions, restrictions or limitations imposed by the Constitution.96 The Bicameral
Conference Committee (BCC) is a mere creation of Congress. Hence, the BCC may resolve
differences only in conflicting provisions of congressional bills that are referred to it; and it may do so
only on the condition that such resolution does not violate the origination, the three-reading, and the
no-amendment rules of the Constitution.
In crafting RA 9337, the BCC opted to reconcile the conflicting provisions of the Senate and House
bills, particularly those on the 70 percent cap on input tax; the 5 percent final withholding tax;
percentage taxes on domestic carriers, keepers of garages and international carriers; franchise
taxes; amusement taxes; excise taxes on manufactured oils and other fuels; registration
requirements; issuance of receipts or sales or commercial invoices; and disposition of incremental
revenues. To my mind, these changes do not violate the origination or the germaneness principles.
Neither is there undue delegation of legislative power in the standby authority given by Congress to
the President. The law is complete, and the standards are fixed. While I concur with
the ponencia’s view that the President was given merely the power to ascertain the facts to bring the
law into operation -- clearly an administrative, not a legislative, function -- I stress that the finance
secretary remains the Chief Executive’s alter ego, not an agent of Congress.
The BCC exercised its prerogative to delete the no pass-on provisions, because these were in
conflict. I believe, however, that it blatantly violated the origination and the germaneness principles
when it inserted provisions not found in the House versions of the E-VAT Law: (1) increasing the tax
rates on domestic, resident foreign and nonresident foreign corporations; (2) increasing the tax credit
against taxes due from nonresident foreign corporations on intercorporate dividends; and (3)
reducing the allowable deduction for interest expense. Hence, I find these insertions
unconstitutional.
Some have criticized the E-VAT Law as oppressive to our already suffering people. On the other
hand, respondents have justified it by comparing it to bitter medicine that patients must endure to be
healed eventually of their maladies. The advantages and disadvantages of the E-VAT Law, as well
as its long-term effects on the economy, are beyond the reach of judicial review. The economic
repercussions of the statute are policy in nature and are beyond the power of the courts to pass
upon.
I have combed through the specific points raised in the Petitions. Other than the three items on
income taxes that I respectfully submit are unconstitutional, I cannot otherwise attribute grave abuse
of discretion to the BCC, or Congress for that matter, for passing the law.
"[T]he Court -- as a rule -- is deferential to the actions taken by the other branches of government
that have primary responsibility for the economic development of our country."97 Thus, in upholding
the Philippine ratification of the treaty establishing the World Trade Organization (WTO), Tañada v.
Angara held that "this Court never forgets that the Senate, whose act is under review, is one of two
sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a
constitutional body, independent and coordinate, and thus its actions are presumed regular and
done in good faith. Unless convincing proof and persuasive arguments are presented to overthrow
such presumption, this Court will resolve every doubt in its favor."98 As pointed our in Cawaling Jr. v.
Comelec, the grounds for nullity of the law "must be beyond reasonable doubt, for to doubt is to
sustain."99 Indeed, "there must be clear and unequivocal showing that what the Constitutions
prohibits, the statute permits."100
WHEREFORE, I vote to GRANT the Petitions in part and to declare Sections 1, 2, and 3 of Republic
Act No. 9337 unconstitutional, insofar as these sections (a) amend the rates of income tax on
domestic, resident foreign, and nonresident foreign corporations; (b) amend the tax credit against
taxes due from nonresident foreign corporations on intercorporate dividends; and (c) reduce the
allowable deduction for interest expense. The other provisions are constitutional, and as to these I
vote to DISMISS the Petitions.

67 ABAKADA Vs The Honorable Executive Secretary

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67 ABAKADA Vs The Honorable Executive Secretary

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EN BANC

G.R. No. 168056 September 1, 2005

G.R. No. 168207

AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA, PANFILO

G.R. No. 168461

ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its President, ROSARIO

G.R. No. 168463

FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL JOEL J. VILLANUEVA,

G.R. No. 168730

BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner,

-Anne Robert Jacques Turgot (1727-1781)

French statesman and economist

ATTY. BANIQUED : No, Your Honor.

J. PANGANIBAN : That’s correct . . .

J. PANGANIBAN : . . . mitigating measures . . .

ATTY. BANIQUED : Yes, Your Honor.

ATTY. BANIQUED : Yes, Your Honor.

ATTY. BANIQUED : You’re right, Your Honor.

ATTY. BANIQUED : I guess so, Your Honor, yes.

ATTY. BANIQUED : Yes, Your Honor.

G.R. No. 168056

G.R. No. 168207

G.R. No. 168461

Petitioners’ argument is premised on the constitutional right of non-deprivation of life, liberty or

G.R. No. 168463

G.R. No. 168730

Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA

a. Article VI, Section 24, and

b. Article VI, Section 26(2)

a. Article VI, Section 28(1), and

b. Article VI, Section 28(2)

a. Article VI, Section 28(1), and

b. Article III, Section 1

RULING OF THE COURT

The Court will now discuss the issues in logical sequence.

a. Article VI, Section 24, and

b. Article VI, Section 26(2)

A. The Bicameral Conference Committee

Rule XII, Section 35 of the Rules of the Senate states:

Striking down such argument, the Court held thus:

end-users. VAT shall be

(A) Creditable Input Tax. – . . .

Article VI, Sec. 26 (2) of the Constitution, states:

Section 27 Rates of Income Tax on Domestic Corporation

Article VI, Section 24 of the Constitution reads:

a. Article VI, Section 28(1), and

b. Article VI, Section 28(2)

A. No Undue Delegation of Legislative Power

The assailed provisions read as follows:

SEC. 106. Value-Added Tax on Sale of Goods or Properties. –

SEC. 107. Value-Added Tax on Importation of Goods. –

A brief discourse on the principle of non-delegation of powers is instructive.

corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as

(3) Delegation to the people at large;

(4) Delegation to local governments; and

(5) Delegation to administrative bodies.

In Edu vs. Ericta,47 the Court reiterated:

Therefore, no statutory construction or interpretation is needed. Neither can conditions or limitations

1. VAT/GDP Ratio > 2.8%

2. Nat’l Gov’t Deficit/GDP >1.5%

What do I mean by that?

a. Article VI, Section 28(1), and

b. Article III, Section 1