ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY G.R. No.

168056 September 1, 2005

Facts:

Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337 particularly
Sections 4, 5 and 6, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue
Code (NIRC). 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. They further argue that VAT is a tax levied on the sale
or exchange of goods and services and cannot be included within the purview of tariffs under the
exemption delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on imported/exported goods. They also said that the President has
powers to cause, influence or create the conditions provided by law to bring about the conditions
precedent. Moreover, they allege that no guiding standards are made by law as to how the Secretary of
Finance will make the 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.

Issues:

(A)Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and Article VI,
Section 26 (2) of the Constitution. (B)Whether or not there was an undue delegation of legislative power
in violation of Article VI Sec 28 Par 1 and 2 of the Constitution. (C)Whether or not there was a violation of
the due process and equal protection under Article III Sec. 1 of the Constitution.

Rulings:

R.A. No. 9337 has not violated the provisions. 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.

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 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.
Supreme Court held no decision on this matter. 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.