1. taxation. value-added tax (vat). tax on spending or consumption.

— vat is a tax on spending or

consumption. it is levied on the sale, barter, exchange or lease of goods or properties and
services. being an indirect tax on expenditure, the seller of goods or services may pass on the
amount of tax paid to the buyer, with the seller acting merely as a tax collector. 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. examples are individual and
corporate income taxes, transfer taxes, and residence taxes.
2. political law. legislative department. power of internal regulation and discipline are intrinsic
in any legislative body. — 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,
“if the power did not exist, it would be utterly impractical to transact the business of the
nation,either at all, or at least with decency, deliberation, and order.”thus, article vi,
section 16 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
bicameralconference committee.
3. separation of powers. expanded jurisdiction of the supreme court cannot apply to questions
regarding only internal operation of congress. — one of the most basic and inherent powers 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's 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 questionsregarding only
the internal operation of congress, thus, the courtis want to deny a review of the internal
proceedings of a co�equal branch of government.
4. legislative department. congress finds the practices of the bicameral conference committee to be
very useful for purposes ofprompt and efficient legislative action. —as far back as 1994 or more
than ten years ago, in the case oftolentino vs. secretary of finance, the court already made the
pronouncement that “if 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.” to date, congress has not seen it fit to make such
changes advertised 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.
5. mandated to settle the differences between the disagreeing provisions in the house bill and the
senate bill. — 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.” 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.
6. taxation. republic act no. 9337 (expanded value�added tax law). the stand-by authority of the
president is still totally within the subject of what rate of value-added tax should be imposed
on the taxpayers. — 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 ofcongress. nevertheless, such
compromise is still totally within the subject of what rate of vat should be imposed on
taxpayers.
7. political law. legislative department.bicameral conference committee. it is within its power to
include in its report an entirely new provision that is not found either in the house bill or in
the senate bill. — all the changes or modifications made by the bicameral conference committee
are 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. pradoand tolentino vs. secretary of finance, 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 germaneto the subject of the bills before the
committee. after all, its report was not final but needed the approval of both houses ofcongress
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.
8. “no-amendment rule”. cannot be taken to mean that the introduction by the bicameral committee of
amendments and modifications to disagreeing provisions in bills that have been acted upon by both
houses of congress is prohibited. — the courtreiterates 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 prescribe 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 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.
 9. 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. — sincethere is no question that the
revenue bill exclusively originates in the house of representatives, the senate was acting within
its constitutional power to introduce amendments to thehouse 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.
10. revenue bills. the senate can introduce amendments within the purposes of those bills. — notably
therefore, the main purpose of the bills emanating from the house of representatives is to bring
in sizable 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.
11. principle of separation of powers.elucidated. — 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. 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. this doctrine is based on the ethical principle that such a
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.
12. legislative department. congress is prohibited from delegating those which are strictly, or
inherently and exclusively, legislative. with respect to the legislature, section 1 of article vi
of the constitution provides that “the legislativepower 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.
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 pertaining 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.
13. exceptions. — 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 of article vi of the constitution. (2) delegation of emergency powers
to thepresident under section 23 of article vi of the constitution. (3) delegation to the people
at large. (4) delegation to local governments. and(5) delegation to administrative bodies.
14. tests of valid delegation. — 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 the policy to be executed, carried out, or implemented by the delegate. 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. 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. 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.
15. the legislature may delegate to executive officers or bodies the power to determine certain facts
or conditions on which the operation of a statute is made to depend. — 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. 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.
16. rationale. — 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. intelligentlegislation 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. the constitution as a continuously
operative charter of government does not require that congress and 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 congressitself properly to investigate.
17. statutory construction. the use of the word “shall” in a statute denotes an imperative obligation
and is inconsistent with the idea of discretion. — 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. 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 disobeyed.
18. taxation. republic act no. 9337. 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. — thus, it
is the ministerial duty of thepresident 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 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.
19. political law. executive department. secretaryof finance as the alter ego of the
president.explained. — 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 thechief 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 reprobate 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 ofattorney-general cushing, is “subject to
the direction of thepresident.”
20. taxation. republic act no. 9337. secretary of finance becomes the means or tool by which the
legislative policy in the value-added tax is determined and implemented. case at bar. — 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 thepresident or even her
subordinate. in such instances, 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. 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, thepresident 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.
21. congress did not declare the power to tax but the mere implementation of the law. — congress
simply granted the secretary of finance the authority to ascertain the existence of a fact,
namely, wetherby 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 or the national
government deficit as a percentage of gdp of the previous year exceeds one and one-half percent.
if either of these two instances has occurred, the secretary of finance, by legislative mandate,
must submit such information to the president. thenthe 12% vat rate must be imposed by the
president effectivejanuary 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. 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 hisauthority. in our complex economy that is frequently the
only way in which the legislative process can go forward. x x x .congress did not delegate the
power to tax but the mere implementation of the law. the intent and will to increase thevat rate
to 12% came from congress and the task of the presidentis 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.
22. political law. judicial department. supreme court does not rule on allegations which are
manifestly conjectural. — the insinuation by petitioners pimentel, et al. that the president has
ample power 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.
23. statutory construction. where the provision of the law is clear andunambiguous, the law must be
taken as itis. — under the common provisions of sections 4, 5 and 6 of r.a. no. 9337, if any of
the two conditions set forth herein 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 sorevert if, after the rate is increased to 12%, the vat
collection goes below the 2% 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. thus,in the absence of any provision providing for a return to the10% rate, which in this
case the court finds none, petitioner's 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.
24. taxation. basic principle. fiscal adequacy,explained. — the principle of fiscal adequacy as a
characteristic of a sound tax system was originally stated byadam smith in his canons of taxation
(1776), as: iv. everytax 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. it simply means that sources of revenues must be adequate to meet
government expenditures and their variations.
25. political law. judicial department. whetherthe law is indeed sufficient to answer the state's
economic dilemma is not for the court to judge. — 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 thecourt 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 thecourt.
 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. in the same vein,the court in
this case will not dawdle on the purpose of congressor the executive policy, given that it is not
for the judiciary to“pass upon questions of wisdom, justice or expediency of legislation.”
26. constitutional law. bill of rights. due process and equal protection clauses. to invoke violation
thereof, there is a need for proof of such persuasive character would lead to such a conclusion.
— the doctrine is that where due process and equal protection clauses are invoked, considering
that they are not fixed rules but rather broad standards, there is a need for proof that such
persuasive characters would lead to such a conclusion. absent such a showing, the presumption of
validity must prevail.
27. taxation. value-added tax. input tax and output tax. defined. — input tax is defined under
section110(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 avat-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.
28. republic act no. 9337. the excess input taxis retained in a business’s books of accounts and
remains creditable in the succeeding quarters. — 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 credible. more importantly, the excess input
tax, if any, is retained in a business's books of accounts and remains creditable in the
succeedingquarter/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.
29. in computing the value-added taxpayable, three possible scenarios may arise.— 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 thevat payable, three
possible scenarios may arise: first, if at the end of a taxable quarter the output taxes charged
by the seller is 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. 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.
30. a person can credit his input tax only up to the extent of 70% of the output tax. —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 terms, 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's 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.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.
31. input tax is not a property or a property right within the constitutional purview of the due
process clause. — 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 who 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.
32. taxable transactions with the government are subject to a 5% rate. — 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
inputvat), in lieu of the actual input vat directly or attributable to the taxable transaction.
the court need not explore the rationale behind the provision. it is clear that congress intended
to treat differently taxable transactions with the government. 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.
33. political law. judicial department. supreme court will not engage in a legal joust where premises
are uncertain. — 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, “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. itcannot be overstressed that a business is created
precisely for profit.
34. constitutional law. bill of rights. equal protection clause. the power of the state to make
reasonable and natural classification for the purposes of taxation has long been established. —
 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 similar circumstances.” 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.
35. does not require the universal application of the laws on all persons or things without
distinction. — 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 equality among equals as determined according to a valid
classification. by classification it means the grouping of persons or things similar to each
other in certain particulars and different from all others in these same particulars.
36. taxation. the rule of uniformity does not deprive congress of the power to classify subjects 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. 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 and6 of r.a. no. 9337, amending sections 106, 107 and 108,
respectively, of the nirc, provide for a rate of 105 (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. itmust be stressed that the rule of uniform taxation
does not deprivecongress of the power to classify subjects of taxation, and only demands
uniformity within the particular class.
37. republic act no. 9337 is equitable. equipped with a threshold margin. — r.a. no. 9337 is also
equitable. the law is equipped with a threshold margin. the vatrate of 0% or 10% (or 12%) does
not apply to sales of goods or services with gross annual sales or receipts not
exceedingp1,500,000.00. also, basic marine and agricultural food products in their original state
are still not subject to the tax, thus ensuring that prices at the grassroots level will remain
accessible. xxxit 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 undersection 109(v), i.e., transactions with gross annual
sales and/or receipts not exceeding p1.5 million. this acts as an 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 products and natural gas were
reduced.percentage tax on domestic carriers was removed. power producers are now exempt from
paying franchise tax.
38. basic principle. progressivity. elucidated.— progressive taxation is built on the principle of
the taxpayer's ability to pay. this principle was also lifted from adam smith’scanons 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.
39. republic act no. 9337. value-added tax is an antithesis of progressive taxation. — thevat 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 vatpaid 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
conversion, 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 are always hardest hit.
40. the constitution does not really prohibit the imposition of indirect taxes, like the vat. —
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 philippines221 (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. resorting 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 thisimposition by providing for zero rating of
certain transactions (r.a. no. 7716, §3, amending §102 (b) of the nlrc), while granting
exemptions to other transactions. (r.a. no. 7716, §4 amending §103 of the nirc)
**PANGANIBAN, C.J., separate opinion:
1. POLITICAL LAW. JUDICIAL DEPARTMENT. JUDICIARY HAS BOTH THE POWER AND THE DUTY TO STRIKE DOWN
CONGRESSIONAL ACTIONS THAT ARE DONE IN PLAIN CONTRAVENTION OF THE CONSTITUTIONAL CONDITIONS,
RESTRICTIONS OR LIMITATIONS. — 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. 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 expanded 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.” Even the
ponente of Tolentino, 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.”
2. LEGISLATIVE DEPARTMENT. BICAMERAL CONFERENCE COMMITTEE (BCB). SUPREME COURT MAY EXERCISE
CERTIORARI REVIEW TO FIND OUT WHETHER THE CONSTITUTIONAL CONDITIONS, RESTRICTIONS AND LIMITATIONS
ON LAW-MAKING HAVE BEEN VIOLATED. — 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
bills 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.
3. FIVE OPTIONS IN PERFORMING ITS FUNCTIONS. — 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.
4. IN ADOPTING THE HOUSE VERSION OF THE REVENUE BILL IN PART OR IN TOTO, THERE IS NO
PROCEDURAL IMPEDIMENT SINCE IT HAD PASSED THE THREE-READING REQUIREMENT. — 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 requirement under the Constitution, it readily becomes
apparent that no procedural impediment would arise. There would also be no question as to their
origination, because the bills originated exclusively from the House of Representatives itself.
5. REVENUE BILL. IN THE SENATE, THE REWRITING IS LIMITED BY 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. I believe that such rewriting is limited
by the “germane” principle: although “relevant” or “related” 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 economic or political — interpretation. There must be an “inherent
logical connection.” 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.
6. SENATE IS NOT PROHIBITED TO FILE A SUBSTITUTE BILL IN ANTICIPATION OF ITS RECEIPT OF THE
BILL FROM THE HOUSE. — 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. 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.” After all, the initiative for filing a revenue
bill must come from the House 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, with
a broader and more circumspect outlook.
7. BICAMERAL CONFERENCE COMMITTEE. ITS REPORT WILL NOT BECOME A FINAL VALID ACT OF THE
LEGISLATIVE DEPARTMENT UNTIL IT OBTAINS THE APPROVAL OF BOTH HOUSES OF CONGRESS. — 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.
8. TAXATION. REPUBLIC ACT NO. 9337. “STANDBY AUTHORITY” OF THE PRESIDENT, THERE WAS REALLY NO
“DELEGATION” TO SPEAK OF SINCE THERE WAS MERELY A DECLARATION OF AN ADMINISTRATIVE, NOT A
LEGISLATIVE FUNCTION. —- In the computation of the percentage requirements in the alternative
conditions under the law, the amounts of the VAT collection, National Deficit, and GDP — 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. 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.
This eventuality has been predetermined by Congress. 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. there was merely a declaration of an administrative, not a
legislative, function. 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.
9. THE SECRETARY OF FINANCE IS NOT AN ALTER EGO OF CONGRESS BUT OF THE PRESIDENT. — The
secretary of fainance 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. Indeed, as I have
mentioned earlier, the fact finding condition is a mere administrative, not legislative,
function.
10. POLITICAL LAW. LEGISLATIVE DEPARTMENT. THE LEGISLATURE DOES NOT HAVE THE POWER TO IMPLEMENT LAWS.
— 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.
11. THE RIGHT TO SELECT THE MEASURE AND OBJECTS OF TAXATION DEVOLVES UPON THE CONGRESS. —
Petitioners’ argument is that because the GDPdoes 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. Clearly, this matter is within the confines of lawmaking.
This Court is neither a substitute for the wisdom, or lack of it, in Congress, nor an arbiter of
flaws within the latter’s internal rules. Policy matters lie within the domain of the political
branches of government, outside the range of judicial cognizance. “The 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.” Moreover, each house of
Congress has the power and authority to determine the rules of its proceedings.
12. TAXATION. REPUBLIC ACT NO. 9337. THE AMENDMENTS MADE BY THE BICAMERAL CONFERENCE COMMITTTEE
REGARDING INCOME TAXES ARE NOT LEGALLY GERMANE TO THE SUBJECT MATTER OF THE HOUSE BILLS. —
Amendments on Income Taxes. I respectfully submit that the amendments made by the BCC (that were
culled from the Senate version) regarding income taxes 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.
13. IT IS INCONCIEVABLE HOW THE PROVISIONS THAT INCREASE CORPORATE INCOME TAXES CAN BE
CONSIDERED AS MITIGATING MEASURES FOR INCREASING THE VALUE-ADDED TAX. — 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, 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.” The former
cannot be passed on to the consumer, but the latter can. 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.
14. TAXES ON INTERCORPORATE DIVIDENDS ARE FINAL BUT THE INPUT VALUE-ADDED TAX IS GENERALLY
CREDITABLE. — 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. The liability for the tax primarily rests upon the payor as a withholding agent.
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. 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.
15. INPUT VALUE-ADDED TAX CREDITS ARE DIFFERENT FROM TAX CREDITS ON DIVIDENDS RECEIVED BY
NONRESIDENT FOREIGN CORPORATIONS. — 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.
16. ITEMIZED DEDUCTIONS FROM GROSS INCOME PARTAKE OF THE NATURE OF A TAX EXEMPTION. — Itemized
deductions from gross income partake of the nature of a tax exemption. Interest — which is among
such deductions — refers to the amount paid by a debtor to a creditor for the use or forbearance
of money. 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. In order
to reduce revenue losses, Congress enacted RA 8424 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. 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.
17. THE BICAMERAL CONFERENCE COMMITTEE HAD THE OPTION OF RETAINING OR MODIFYING THE NO PASS-ON
PROVISIONS AND DETERMINING THEIR EXTENT OR OF DELETING THEM ALTOGETHER. — 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. 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. 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.
18. NATIONAL INTERNAL REVENUE CODE. VALUE ADDED TAX . THERE IS NO HARD AND FAST RULE THAT 100
PERCENT OF THE INPUT TAXES WILL ALWAYS BE ALLOWED AS A TAX CREDIT. — 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), but there is no hard and
fast rule that 100 percent of the input taxes will always be allowed as a tax credit.
19. REPUBLIC ACT NO. 9337. SINCE THE UNUTILIZED INPUT VALUE-ADDED TAX CAN BE CARRIED TO SUCCEEDING
QUARTERS. — 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. there is
no law prohibiting that. Merely speculative and unproven, therefore, is the contention that the
law is arbitrary and oppressive. 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, 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. 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.
20. THERE IS NO VESTED RIGHT IN A DEFERRED INPUT TAX ACCOUNT. — That the unutilized input VAT
would be rendered useless is merely speculative. 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. The State may modify or withdraw such privilege, which
is merely an asset granted by operation of law. 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.
21. THERE IS NO VIOLATION OF THE EQUAL PROTECTION CLAUSE SINCE THE LAW APPLIES EQUALLY TO ALL
BUSINESSES. — 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.
22. INCOME TAX. ADDITIONAL IMPOSITION AND ASSUMPTION ARE WITHIN THE POWER OF CONGRESS TO MAKE. —
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. 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, which is not constitutionally proscribed.
23. REPUBLIC ACT NO. 9337. REDUCTION OF TAX CREDITS IS A QUESTION OF ECONOMIC POLICY, NOT OF LEGAL
PERLUSTRATION. — RA 9337 was enacted precisely to achieve the objective of raising revenues to
defray the necessary expenses of government. 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. neither public
notice nor public hearings were denied.
24. PRIVATE ENTERPRISES ARE NOT DISCOURAGED. — 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.
25. THE PROFIT MARGIN RATES OF VARIOUS INDUSTRIES GENERALLY DO NOT CHANGE. — 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.
26. NATIONAL INTERNAL REVENUE CODE. VALUE ADDED TAX. THE VAT SYSTEM CAN ALWAYS BE MODIFIED TO SUIT
MODERN FISCAL DEMANDS.— 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.
27. REPUBLIC ACT NO. 9337. NO-AMENDMENT RULE WAS NOT VIOLATED SINCE THERE WAS NO NEW PROVISION
INSERTED IN THE APPROVED BILL. — The no-amendment rule 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.
28. POLITICAL LAW. SEPARATION OF POWERS. THE COURT IS DEFERENTIAL TO THE ACTIONS TAKEN BY THE OTHER
BRANCHES OF GOVERNMENT. — “The 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.” Thus, in upholding the Philippine ratification of the treaty establishing the World
Trade Organization , 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.” As pointed out in Cawaling Jr. v. Comelec, the grounds for nullity of the law “must be
beyond reasonable doubt, for to doubt is to sustain.” Indeed, “there must be clear and
unequivocal showing that what the Constitutions prohibits, the statute permits.”**
CHICO-NAZARIO, J., concurring opinion:
1. POLITICAL LAW. LEGISLATIVE DEPARTMENT. ENROLLED BILL DOCTRINE. EXPLAINED. — Under the said
doctrine, the enrolled bill, as signed by the Speaker of the House of Representatives and the
Senate President, and certified by the Secretaries of both Houses of Congress, shall be
conclusive proof of its due enactment.
2. JUDICIAL DEPARTMENT. IT IS MORE PRUDENT FOR THE SUPREME COURT TO REMAIN CONSERVATIVE AND TO
CONTINUE ITS ADHERENCE TO THE ENROLLED BILL DOCTRINE. — I believe that it is more prudent for
this Court to remain conservative and to continue its adherence to the enrolled bill doctrine,
for to abandon the said doctrine would be to open a Pandora’s Box, giving rise to a situation
more fraught with evil and mischief. Statutes enacted by Congress may not attain finality or
conclusiveness unless declared so by this Court. This would undermine the authority of our
statutes because despite having been signed and certified by the designated officers of Congress,
their validity would still be in doubt and their implementation would be greatly hampered by
allegations of irregularities in their passage by the Legislature. Such an uncertainty in the
statutes would indubitably result in confusion and disorder. In all probability, it is the
contemplation of such a scenario that led an American judge to proclaim, thus – . . . Better, far
better, that a provision should occasionally find its way into the statute through mistake, or
even fraud, than, that every Act, state and national, should at any and all times be liable to
put in issue and impeached by the journals, loose papers of the Legislature, and parol evidence.
Such a state of uncertainty in the statute laws of the land would lead to mischiefs absolutely
intolerable. . . .
3. SEPARATION OF POWERS. SUPREME COURT MUST ATTRIBUTE GOOD FAITH AND ACCORD UTMOST RESPECT TO THE
ACTS OF A CO-EQUAL BRANCH OF GOVERNMENT. — This Court must attribute good faith and accord utmost
respect to the acts of a co-equal branch of government. While it is true that its jurisdiction
has been expanded by the Constitution, the exercise thereof should not violate the basic
principle of separation of powers. The expanded jurisdiction does not contemplate judicial
supremacy over the other branches of government. Thus, in resolving the procedural issues raised
by the petitioners, this Court should limit itself to a determination of compliance with, or
conversely, the violation of a specified procedure in the Constitution for the passage of laws by
Congress, and not of a mere internal rule of proceedings of its Houses.
4. LEGISLATIVE DEPARTMENT. BICAMERAL CONFERENCE COMMITTEE. CREATION THEREOF IS AUTHORIZED BY THE
RULES OF BOTH HOUSES OF CONGRESS. — It bears emphasis that most of the irregularities in the
enactment of Rep. Act No. 9337 concern the amendments introduced by the Bicameral Conference
Committee. The Constitution is silent on such a committee, it neither prescribes the creation
thereof nor does it prohibit it. The creation of the Bicameral Conference Committee is authorized
by the Rules of both Houses of Congress. That the Rules of both Houses of Congress provide for
the creation of a Bicameral Conference Committee is within the prerogative of each House under
the Constitution to determine its own rules of proceedings.
5. A CREATION OF NECESSITY AND PRACTICALITY CONSIDERING THAT OUR CONGRESS IS COMPOSED OF TWO
HOUSES. — The Bicameral Conference Committee is a creation of necessity and practicality
considering that our Congress is composed of two Houses, and it is highly improbable that their
respective bills on the same subject matter shall always be in accord and consistent with each
other. Instead of all their members, only the appointed representatives of both Houses shall meet
to reconcile or settle the differences in their bills. The resulting bill from their meetings,
embodied in the Bicameral Conference Report, shall be subject to approval and ratification by
both Houses, voting separately.
6. BOTH HOUSES HAD THE POWER TO AMEND THEIR RESPECTIVE RULES TO CLARIFY OR LIMIT EVEN FURTHER THE
SCOPE OF THE AUTHORITY WHICH THEY GRANTED THERETO. — It does perplex me that members of both
Houses would again ask the Court to define and limit the powers of the Bicameral Conference
Committee when such committee is of their own creation. In a number of cases, this Court already
 made a determination of the extent of the powers of the Bicameral Conference Committee after
taking into account the existing Rules of both Houses of Congress. In gist, the power of the
Bicameral Conference Committee to reconcile or settle the differences in the two Houses’
respective bills is not limited to the conflicting provisions of the bills. but may include
matters not found in the original bills but germane to the purpose thereof. If both Houses viewed
the pronouncement made by this Court in such cases as extreme or beyond what they intended, they
had the power to amend their respective Rules to clarify or limit even further the scope of the
authority which they grant to the Bicameral Conference Committee. Petitioners’ grievance that,
unfortunately, they cannot bring about such an amendment of the Rules on the Bicameral Conference
Committee because they are members of the minority, deserves scant consideration. That the
majority of the members of both Houses refuses to amend the Rules on the Bicameral Conference
Committee is an indication that it is still satisfied therewith. At any rate, this is how
democracy works – the will of the majority shall be controlling.
7. IF WE HAVE ONE CODE FOR ALL OUR NATIONAL INTERNAL REVENUE TAXES, THEN THERE IS NO REASON WHY
WE CANNOT HAVE A SINGLE STATUTE AMENDING PROVISIONS THERETO. — Although House Bills No. 3555 and
3705 were limited to the amendments of the provisions on VAT of the National Internal Revenue
Code of 1997, Senate Bill No. 1950 had a much wider scope and included amendments of other
provisions of the said Code, such as those on income, percentage, and excise taxes. It should be
borne in mind that the very purpose of these three Bills and, subsequently, of Rep. Act No. 9337,
was to raise additional revenues for the government to address the dire economic situation of the
country. The National Internal Revenue Code of 1997, as its title suggests, is the single Code
that governs all our national internal revenue taxes. While it does cover different taxes, all of
them are imposed and collected by the national government to raise revenues. If we have one Code
for all our national internal revenue taxes, then there is no reason why we cannot have a single
statute amending provisions thereof even if they involve different taxes under separate titles. I
hereby submit that the amendments introduced by the Bicameral Conference Committee to non-VAT
provisions of the National Internal Revenue Code of 1997 are not unconstitutional for they are
germane to the purpose of House Bills No. 3555 and 3705 and Senate Bill No. 1950, which is to
raise national revenues.
8. TAXATION. NATIONAL INTERNAL REVENUE CODE OF 1997. VALUE-ADDED TAX (VAT). INPUT VAT NOT A PROPERTY
TO WHCH THE TAXPAYER HAS VESTED RIGHTS. — I adhere to the view that the input VAT is not a
property to which the taxpayer has vested rights. Input VAT consists of the VAT a VAT-registered
person had paid on his purchases or importation of goods, properties, and services from a VAT-
registered supplier. more simply, it is VAT paid. It is not, as averred by petitioner petroleum
dealers, a property that the taxpayer acquired for valuable consideration. A VAT�registered
person incurs input VAT because he complied with the National Internal Revenue Code of 1997,
which imposed the VAT and made the payment thereof mandatory. and not because he paid for it or
purchased it for a price.
9. VAT-REGISTERED PERSON IS ALLOWED TO CREDIT HIS INPUT VAT AGAINST HIS OUTPUT VAT. — Generally,
when one pays taxes to the government, he cannot expect any direct and concrete benefit to
himself for such payment. The benefit of payment of taxes shall redound to the society as a
whole. However, by virtue of Section 110(A) of the National Internal Revenue Code of 1997, prior
to its amendment by Rep. Act No. 9337, a VAT-registered person is allowed, subject to certain
substantiation requirements, to credit his input VAT against his output VAT. x x x The crediting
of the input VAT against the output VAT is a statutory privilege, granted by Section 110 of the
National Internal Revenue Code of 1997. It gives the VAT-registered person the opportunity to
recover the input VAT he had paid, so that, in effect, the input VAT does not constitute an
additional cost for him. While it is true that input VAT credits are reported as assets in a VAT-
registered person’s financial statements and books of account, this accounting treatment is still
based on the statutory provision recognizing the input VAT as a credit. Without Section 110 of
the National Internal Revenue Code of 1997, then the accounting treatment of any input VAT will
also change and may no longer be booked outright as an asset. Since the privilege of an input VAT
credit is granted by law, then an amendment of such law may limit the exercise of or may totally
withdraw the privilege.
10. OUTPUT VAT. ELUCIDATED. — Output VAT is the VAT imposed by the VAT-registered person on his
own sales of goods, properties, and services or the VAT he passes on to his buyers. Hence, the
VAT-registered person selling the goods, properties, and services does not pay for the output
VAT. said output VAT is paid for by his consumers and he only collects and remits the same to the
government.
11. REPUBLIC ACT NO. 9337. IMPOSITION OF THE 70% CAP ON INPUT VAT CREDITS, IS A LEGITIMATE EXERCISE
BY CONGRESS OF ITS LAW-MAKING POWER. — The amendment of Section 110 of the National Internal
Revenue Code of 1997 by Rep. Act No. 9337, which imposed the 70% cap on input VAT credits, is a
legitimate exercise by Congress of its law-making power. To say that Congress may not trifle with
Section 110 of the National Internal Revenue Code of 1997 would be to violate a basic precept of
constitutional law – that no law is irrepealable. There can be no vested right to the continued
existence of a statute, which precludes its change or repeal. It bears to emphasize that Rep. Act
No. 9337 does not totally remove the privilege of crediting the input VAT against the output VAT.
It merely limits the amount of input VAT one may credit against his output VAT per quarter to an
amount equivalent to 70% of the output VAT. What is more, any input VAT in excess of the 70% cap
may be carried-over to the next quarter. It is certainly a departure from the VAT crediting
system under Section 110 of the National Internal Revenue Code of 1997, but it is an innovation
that Congress may very well introduce, because – VAT will continue to evolve from its pioneering
original structure. Dynamically, it will be subjected to reforms that will make it conform to
many factors, among which are: the changing requirements of government revenue. the social,
economic and political vicissitudes of the times. and the conflicting interests in our society.
In the course of its evolution, it will be injected with some oddities and inevitably transformed
into a structure which its revisionists believe will be an improvement overtime.
12. PETROLEUM DEALER’S RIGHT TO THE INPUT VAT CREDIT IS NOT VESTED. — Assuming for the sake of
argument, that the input VAT credit is indeed a property, the petroleum dealers’ right thereto
has not vested. A right is deemed vested and subject to constitutional protection when – “. . .
The right to enjoyment, present or prospective, has become the property of some particular person
or persons as a present interest. The right must be absolute, complete, and unconditional,
 independent of a contingency, and a mere expectancy of future benefit, or a contingent interest
in property founded on anticipated continuance of existing laws, does not constitute a vested
right. So, inchoate rights which have not been acted on are not vested.” x x x 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.
13. ALLOWS THE TAXPAYER TO CARRY-OVER TO THE SUCCEEDING QUARTERS ANY EXCESS INPUT VAT. — Rep. Act
No. 9337, while imposing the 70% cap on input VAT credits, allows the taxpayer to carry-over to
the succeeding quarters any excess input VAT. The petroleum dealers presented a situation wherein
their input VAT would always exceed 70% of their output VAT, and thus, their excess input VAT
will be perennially carried-over and would remain unutilized. Even though they consistently
questioned the 70% cap on their input VAT credits, the petroleum dealers failed to establish what
is the average ratio of their input VAT vis-à-vis their output VAT per quarter. Without such
fact, I consider their objection to the 70% cap arbitrary because there is no basis therefor.
14. 70% CAP ON INPUT VAT CREDITS WAS NOT IMPOSED BY CONGRESS ARBITRARILY. — I find that the 70% cap
on input VAT credits was not imposed by Congress arbitrarily. Members of the Bicameral Conference
Committee settled on the said percentage so as to ensure that the government can collect a
minimum of 30% output VAT per taxpayer. This is to put a VAT-taxpayer, at least, on equal footing
with a VAT�exempt taxpayer under Section 109(V) of the National Internal Revenue Code, as amended
by Rep. Act No. 9337. The latter taxpayer is exempt from VAT on the basis that his sale or lease
of goods or properties or services do not exceed P1,500,000. instead, he is subject to pay a
three percent (3%) tax on his gross receipts in lieu of the VAT. If a taxpayer with presumably a
smaller business is required to pay three percent (3%) gross receipts tax, a type of tax which
does not even allow for any crediting, a VAT-taxpayer with a bigger business should be obligated,
likewise, to pay a minimum of 30% output VAT (which should be equivalent to 3% of the gross
selling price per good or property or service sold). The cap assures the government a collection
of at least 30% output VAT, contributing to an improved cash flow for the government. Attention
is further called to the fact that the output VAT is the VAT imposed on the sales by a VAT-
taxpayer. it is paid by the purchasers of the goods, properties, and services, and merely
collected through the VAT-registered seller. The latter, therefore, serves as a collecting agent
for the government. The VAT-registered seller is merely being required to remit to the government
a minimum of 30% of his output VAT collection.
15. COURT’S DISCRETION CANNOT SUBSTITUTE THAT OF THE CONGRESS. — We cannot substitute our
discretion for Congress, and even though there are provisions in Rep. Act No. 9337 which we may
believe as unwise or iniquitous, but not unconstitutional, we cannot strike them off by invoking
our power of judicial review. In such a situation, the recourse of the people is not judicial,
but rather political. If they severely doubt the wisdom of the present Congress for passing a
statute such as Rep. Act No. 9337, then they have the power to hold the members of said Congress
accountable by using their voting power in the next elections.