10. Tolentino v.

Sec of Finance

Facts:

The complete title of RA 7716 (E-VAT Law) is “An Act Restructuring the VAT System, Widening
its Tax Base and Enhancing its Administration, and for these purposes amending and repealing
the Relevant Provisions of the NIRC, as amended, and for other purposes”.

It evolved from HB 11197 which was duly passed by the House of Reps and transmitted to the
Senate. In the Senate, SB 1630 was submitted “in substitution of SB 1129, taking into
consideration xxx HB 11197.” Because the President had certified SB 1630 as urgent for the
reason of a “growing budget deficit,” it was approved on the 2nd and 3rd reading on the same
day. SB 1630 was then referred, together with HB 11197, to a conference committee which
recommended that “HB 11197, in consolidation with SB 1630, be approved xxx as reconciled
and approved by the conferees.” The enrolled bill was then approved as RA 7716.

Among those amended by RA 7716 is sec 103 of the NIRC. Such amendment effected the
removal of the tax exemption granted to Philippine Airlines (PAL) as far as the VAT is
concerned. The petitioners now challenge the constitutionality of RA 7716 for the following
reasons (among others):

1. RA 7716 did not “originate exclusively” in the House of Reps as required by Art VI, Sec 24 of
the Constitution, because it is in fact the result of the consolidation of 2 distinct bills: HB 11197
and SB 1630. They aver that to be considered as having originated in the House of Reps, RA
7716 must retain the essence of HB 11197. They further argue that SB 1630 was passed not in
substitution of HB 11197 but of another senate bill (SB 1129) and what the Senate merely did
was to “take HB 11197 into consideration” in enacting SB 1630.

2. SB 1630 did not pass 3 readings on separate days as required by Art VI, Sec 26(2) of the
Constitution because the 2nd and 3rd readings were done on the same day. The further argue
that the presidential certification of urgency is invalid because a “growing budget deficit” is not
an unusual condition in this country.

3. The amendment of sec 103 of the NIRC is not fairly embraced in the title of RA 7716 in
violation of Art VI, Sec 26(1) of the Constitution.

Issues:

1. Does RA 7716 violate Art VI, Sec 24 of the Constitution?

2. Does the removal of the exemption of the press from the VAT while maintaining those
granted to others, the law discriminates against the press. At any rate, it is averred, "even
nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional."?
3. Does it violate Art VI, Sec 26(1) of the Constitution?
Held:

1. No. To insist that a revenue statute must substantially be the same as the HB would be to
deny the Senate’s power not only to “concur with amendments” but also to “propose
amendments.” What the Constitution simply means is that the initiative for filing revenue xxx
bills xxx come from the House of Reps. Moreover, 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 xxx is withheld pending receipt of the HB. The Court cannot, therefore,
understand the alarm expressed over the fact that 8 months before the House passed HB
11197, SB 1129 had been filed in the Senate. After all it does not appear that the Senate ever
considered it. It was only after the Senate had received HB 11197 that the process of legislation
in respect of it began.

2. No, the removal of tax exemption does not discriminate the right of PPI to freedom of press.
We have held that, as a general proposition, the press is not exempt from the taxing power of
the State and that what the constitutional guarantee of free press prohibits are laws which single
out the press or target a group belonging to the press for special treatment or which in any way
discriminate against the press on the basis of the content of the publication, and R.A. No. 7716
is none of these.

Now it is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press.
At any rate, it is averred, "even nondiscriminatory taxation of constitutionally guaranteed
freedom is unconstitutional." With respect to the first contention, it would suffice to say that since
the law granted the press a privilege, the law could take back the privilege anytime without
offense to the Constitution. The reason is simple: by granting exemptions, the State does not
forever waive the exercise of its sovereign prerogative. Indeed, in withdrawing the exemption,
the law merely subjects the press to the same tax burden to which other businesses have long
ago been subject. It is thus different from the tax involved in the cases invoked by the PPI.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a
privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of
goods or properties or the sale or exchange of services and the lease of properties purely for
revenue purposes. To subject the press to its payment is not to burden the exercise of its right
any more than to make the press pay income tax or subject it to general regulation is not to
violate its freedom under the Constitution.

3. No. Since the title states that the purpose of the statue is to expand the VAT system, one way
of doing this is to widen its base by withdrawing some of the exemptions granted before. To
insist that PD 1590 be mentioned in the title of the law, in addition to Sec 103 of the NIRC, in
which it is specifically referred to, would be to insist that the title of a bill should be a complete
index of its content.