EN BANC
Agenda for October 18, 2005
Item No. 45
G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S.
Alcantara, et al. vs. The Hon. Executive Secretary Eduardo R. Ermita);
G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. vs. Executive
Secretary Eduardo R. 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 vs. Cesar V. Purisima, et al);
and G.R. No. 168730 (Bataan Governor Enrique T. Garcia, Jr. vs. Hon.
Eduardo R. Ermita, et al.)
RESOLUTION
For resolution are the following motions for reconsideration of the
Court’s Decision dated September 1, 2005 upholding the constitutionality of
Republic Act No. 9337 or the VAT Reform Act[1]:
1) Motion for Reconsideration filed by petitioners in G.R. No.
168463, Escudero, et al., on the following grounds:
A. THE DELETION OF THE “NO PASS ON PROVISIONS” FOR
THE SALE OF PETROLEUM PRODUCTS AND POWER
GENERATION SERVICES CONSTITUTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION ON THE PART OF THE BICAMERAL
CONFERENCE COMMITTEE.
B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE
CONSTITUTIONAL
IMPERATIVE
ON
EXCLUSIVE
ORIGINATION OF REVENUE BILLS UNDER §24, ARTICLE VI,
1987 PHILIPPINE CONSTITUTION.
C. REPUBLIC ACT NO. 9337’S STAND-BY AUTHORITY TO THE
EXECUTIVE TO INCREASE THE VAT RATE, ESPECIALLY ON
ACCOUNT OF THE EFFECTIVE RECOMMENDATORY POWER
GRANTED TO THE SECRETARY OF FINANCE, CONSTITUTES
UNDUE DELEGATION OF LEGISLATIVE AUTHORITY.
2) Motion for Reconsideration of petitioner in G.R. No. 168730,
Bataan Governor Enrique T. Garcia, Jr., with the argument that
burdening the consumers with significantly higher prices under a
VAT regime vis-à-vis a 3% gross tax renders the law
unconstitutional for being arbitrary, oppressive and inequitable.
and
3) Motion for Reconsideration by petitioners Association of
Pilipinas Shell Dealers, Inc. in G.R. No. 168461, on the grounds
that:
I. This Honorable Court erred in upholding the constitutionality of
Section 110(A)(2) and Section 110(B) of the NIRC, as amended by the
EVAT Law, imposing limitations on the amount of input VAT that may
be claimed as a credit against output VAT, as well as Section 114(C) of
the NIRC, as amended by the EVAT Law, requiring the government or
any of its instrumentalities to withhold a 5% final withholding VAT on
their gross payments on purchases of goods and services, and finding
that the questioned provisions:
A.
are not arbitrary, oppressive and consfiscatory as to amount to a
deprivation of property without due process of law in violation
of Article III, Section 1 of the 1987 Philippine Constitution;
B.
do not violate the equal protection clause prescribed under
Article III, Section 1 of the 1987 Philippine Constitution; and
C.
apply uniformly to all those belonging to the same class and do
not violate Article VI, Section 28(1) of the 1987 Philippine
Constitution.
II. This Honorable Court erred in upholding the constitutionality of
Section 110(B) of the NIRC, as amended by the EVAT Law, imposing a
limitation on the amount of input VAT that may be claimed as a credit
against output VAT notwithstanding the finding that the tax is not
progressive as exhorted by Article VI, Section 28(1) of the 1987
Philippine Constitution.
Respondents filed their Consolidated Comment. Petitioner Garcia
filed his Reply.
Petitioners Escudero, et al., insist that the bicameral conference
committee should not even have acted on the no pass-on provisions since
there is no disagreement between House Bill Nos. 3705 and 3555 on the one
hand, and Senate Bill No. 1950 on the other, with regard to the no pass-on
provision for the sale of service for power generation because both the
Senate and the House were in agreement that the VAT burden for the sale of
such service shall not be passed on to the end-consumer. As to the no passon provision for sale of petroleum products, petitioners argue that the fact
that the presence of such a no pass-on provision in the House version and
the absence thereof in the Senate Bill means there is no conflict because “a
House provision cannot be in conflict with something that does not exist.”
Such argument is flawed. Note that the rules of both houses of
Congress provide that a conference committee shall settle the “differences”
in the respective bills of each house. Verily, the fact that a no pass-on
provision is present in one version but absent in the other, and one version
intends two industries, i.e., power generation companies and petroleum
sellers, to bear the burden of the tax, while the other version intended only
the industry of power generation, transmission and distribution to be saddled
with such burden, clearly shows that there are indeed differences between
the bills coming from each house, which differences should be acted upon
by the bicameral conference committee. It is incorrect to conclude that there
is no clash between two opposing forces with regard to the no pass-on
provision for VAT on the sale of petroleum products merely because such
provision exists in the House version while it is absent in the Senate
version. It is precisely the absence of such provision in the Senate bill and
the presence thereof in the House bills that causes the conflict. The absence
of the provision in the Senate bill shows the Senate’s disagreement to the
intention of the House of Representatives make the sellers of petroleum bear
the burden of the VAT. Thus, there are indeed two opposing forces: on one
side, the House of Representatives which wants petroleum dealers to be
saddled with the burden of paying VAT and on the other, the Senate which
does not see it proper to make that particular industry bear said burden.
Clearly, such conflicts and differences between the no pass-on provisions in
the Senate and House bills had to be acted upon by the bicameral conference
committee as mandated by the rules of both houses of Congress.
Moreover, the deletion of the no pass-on provision made the present
VAT law more in consonance with the very nature of VAT which, as stated
in the Decision promulgated on September 1, 2005, is a tax on spending or
consumption, thus, the burden thereof is ultimately borne by the endconsumer.
Escudero, et al., then claim that there had been changes introduced in
the Rules of the House of Representatives regarding the conduct of the
House panel in a bicameral conference committee, since the time of
Tolentino vs. Secretary of Finance[2] to act as safeguards against possible
abuse of authority by the House members of the bicameral conference
committee. Even assuming that the rule requiring the House panel to report
back to the House if there are substantial differences in the House and
Senate bills had indeed been introduced after Tolentino, the Court stands by
its ruling that the issue of whether or not the House panel in the bicameral
conference committee complied with said internal rule cannot be inquired
into by the Court. To reiterate, “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.”[3]
Escudero, et. al., also contend that Republic Act No. 9337 grossly
violates the constitutional imperative on exclusive origination of revenue
bills under Section 24 of Article VI of the Constitution when the Senate
introduced amendments not connected with VAT.
The Court is not persuaded.
Article VI, Section 24 of the Constitution 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.
Section 24 speaks of origination of certain bills from the House of
Representatives which has been interpreted in the Tolentino case as follows:
… 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.[4]
Clearly, after the House bills as approved on third reading are duly
transmitted to the Senate, the Constitution states that the latter can propose
or concur with amendments. The Court finds that the subject provisions
found in the Senate bill are within the purview of such constitutional
provision as declared in the Tolentino case.
The intent of the House of Representatives in initiating House Bill
Nos. 3555 and 3705 was to solve the country’s serious financial problems. It
was stated in the respective explanatory notes that there is a need for the
government to make significant expenditure savings and a credible package
of revenue measures. These measures include improvement of tax
administration and control and leakages in revenues from income taxes and
value added tax. It is also stated that one opportunity that could be
beneficial to the overall status of our economy is to review existing tax rates,
evaluating the relevance given our present conditions. Thus, with these
purposes in mind and to accomplish these purposes for which the house bills
were filed, i.e., to raise revenues for the government, the Senate introduced
amendments on income taxes, which as admitted by Senator Ralph Recto,
would yield about P10.5 billion a year.
Moreover, since the objective of these house bills is to raise revenues,
the increase in corporate income taxes would be a great help and would also
soften the impact of VAT measure on the consumers by distributing the
burden across all sectors instead of putting it entirely on the shoulders of the
consumers.
As to the other National Internal Revenue Code (NIRC) provisions
found in Senate Bill No. 1950, i.e., percentage taxes, franchise taxes,
amusement and excise taxes, these provisions are needed so as to cushion
the effects of VAT on consumers. As we said in our decision, certain goods
and services which were subject to percentage tax and excise tax would no
longer be VAT exempt, thus, 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. The Court finds no
reason to reverse the earlier ruling that the Senate introduced amendments
that are germane to the subject matter and purposes of the house bills.
Petitioners Escudero, et al., also reiterate that R.A. No. 9337’s standby authority to the Executive to increase the VAT rate, especially on account
of the recommendatory power granted to the Secretary of Finance,
constitutes undue delegation of legislative power. They submit that the
recommendatory power given to the Secretary of Finance in regard to the
occurrence of either of two events using the Gross Domestic Product (GDP)
as a benchmark necessarily and inherently required extended analysis and
evaluation, as well as policy making.
There is no merit in this contention. The Court reiterates that 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. 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. 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. Congress 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 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. 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. There is no undue delegation of legislative power
but only of the discretion as to the execution of a law. This is
constitutionally permissible. 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 use the GDP
as a benchmark to determine economic growth is not within the province of
the Court to inquire into, its task being to interpret the law.
With regard to petitioner Garcia’s arguments, the Court also finds the
same to be without merit. As stated in the assailed Decision, the Court
recognizes the burden that the consumers will be bearing with the passage of
R.A. No. 9337. But as was also stated by the Court, it cannot strike down
the law as unconstitutional simply because of its yokes. The legislature has
spoken and the only role that the Court plays in the picture is to determine
whether the law was passed with due regard to the mandates of the
Constitution. Inasmuch as the Court finds that there are no constitutional
infirmities with its passage, the validity of the law must therefore be upheld.
Finally, petitioners Association of Pilipinas Shell Dealers, Inc.
reiterated their arguments in the petition, citing this time, the dissertation of
Associate Justice Dante O. Tinga in his Dissenting Opinion.
The glitch in petitioners’ arguments is that it presents figures based on
an event that is yet to happen. Their illustration of the possible effects of the
70% limitation, while seemingly concrete, still remains theoretical. Theories
have no place in this case as the Court must only deal with an existing
case or controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.[5] The
Court will not intervene absent an actual and substantial controversy
admitting of specific relief through a decree conclusive in nature, as
distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.[6]
The impact of the 70% limitation on the creditable input tax will
ultimately depend on how one manages and operates its business. Market
forces, strategy and acumen will dictate their moves. With or without these
VAT provisions, an entrepreneur who does not have the ken to adapt to
economic variables will surely perish in the competition. The arguments
posed are within the realm of business, and the solution lies also in
business.
Petitioners also reiterate their argument that the input tax is a property
or a property right. In the same breath, the Court reiterates its finding that it
is not a property or a property right, and a VAT-registered person’s
entitlement to the creditable input tax is a mere statutory privilege.
Petitioners also contend that even if the right to credit the input VAT
is merely a statutory privilege, it has already evolved into a vested right that
the State cannot remove.
As the Court stated in its Decision, the right to credit the input tax is a
mere creation of law. Prior to the enactment of multi-stage sales taxation,
the sales taxes paid at every level of distribution are not recoverable from the
taxes payable. With the advent of Executive Order No. 273 imposing a 10%
multi-stage tax on all sales, it was only then that the crediting of the input
tax paid on purchase or importation of goods and services by VATregistered persons against the output tax was established. This continued
with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of
1997 (R.A. No. 8424). 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 limit.
It should be stressed that a person has no vested right in statutory
privileges.[7]
The concept of “vested right” is a consequence of the constitutional
guaranty of due process that expresses a present fixed interest which in right
reason and natural justice is protected against arbitrary state action; it
includes not only legal or equitable title to the enforcement of a demand but
also exemptions from new obligations created after the right has become
vested. Rights are considered vested when the right to enjoyment is a
present interest, absolute, unconditional, and perfect or fixed and
irrefutable.[8] As adeptly stated by Associate Justice Minita V. ChicoNazario in her Concurring Opinion, which the Court adopts, petitioners’
right to the input VAT credits has not yet vested, thus –
It should be remembered that prior to Rep. Act No. 9337, the
petroleum dealers’ input VAT credits were inexistent – they were
unrecognized and disallowed by law. The petroleum dealers had no such
property called input VAT credits. It is only rational, therefore, that they
cannot acquire vested rights to the use of such input VAT credits when
they were never entitled to such credits in the first place, at least, not until
Rep. Act No. 9337.
My view, at this point, when Rep. Act No. 9337 has not yet even
been implemented, is that petroleum dealers’ right to use their input VAT
as credit against their output VAT unlimitedly has not vested, being a
mere expectancy of a future benefit and being contingent on the
continuance of Section 110 of the National Internal Revenue Code of
1997, prior to its amendment by Rep. Act No. 9337.
The elucidation of Associate Justice Artemio V. Panganiban is
likewise worthy of note, to wit:
Moreover, there is no vested right in generally accepted accounting
principles. 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. 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.
More importantly, the assailed provisions of R.A. No. 9337 already
involve legislative policy and wisdom. So long as there is a public end for
which R.A. No. 9337 was passed, the means through which such end shall
be accomplished is for the legislature to choose so long as it is within
constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke
Co.:
If the question were ours to decide, we could not say that the
legislature, in adopting the present scheme rather than another, had no
basis for its choice, or was arbitrary or unreasonable in its action. But, as
the state is free to distribute the burden of a tax without regard to the
particular purpose for which it is to be used, there is no warrant in the
Constitution for setting the tax aside because a court thinks that it could
have distributed the burden more wisely. Those are functions reserved for
the legislature.[9]
WHEREFORE, the Motions for Reconsideration are hereby DENIED
WITH FINALITY. The temporary restraining order issued by the Court is
LIFTED.
SO ORDERED.
(The Justices who filed their respective concurring and dissenting
opinions maintain their respective positions. Justice Dante O. Tinga filed a
dissenting opinion to the present Resolution; while Justice Consuelo YnaresSantiago joins him in his dissenting opinion.)
[1]
[2]
[3]
Also referred to as the EVAT Law.
G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873 and 115931,
August 25, 1994, 235 SCRA 630.
Fariñas vs. The Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA 503,
530.
[4]
[5]
[6]
[7]
[8]
[9]
Supra, note no. 2, pp. 661-663.
Velarde vs. Social Justice Society, G.R. No. 159357, April 28, 2004, 428 SCRA 283.
Information Technology Foundation of the Phils. vs. COMELEC, G.R. No. 159139, June 15,
2005.
Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003, 406 SCRA 135.
Ibid.
301 U.S. 495.