Abakada Guro v. Ermita

R.A. No. 9337, the VAT reform law, consolidated House Bill Nos. 3555 and 3705 and Senate Bill No. 1950. A Bicameral Conference Committee reconciled the bills, and both houses approved its report on May 10–11, 2005. The President signed the law on May 24, 2005, and it took effect July 1, 2005, when the Court issued a TRO against its implementation. Sections 4, 5 and 6 contained a common proviso: the President, upon the Secretary of Finance's recommendation, 'shall' raise VAT from 10% to 12% effective January 1, 2006, once either of two conditions was met. The conditions were a VAT collection above 2 4/5% of the previous year's GDP, or a national government deficit above 1 1/2% of GDP. Petitioners, including the ABAKADA GURO party-list, Senators led by Pimentel, Representatives led by Escudero, and Bataan Governor Garcia, claimed undue delegation of the taxing power. Petroleum dealers attacked the 70% input-tax cap, the 60-month amortization of input tax on capital goods, and the 5% withholding on government payments as confiscatory. Others claimed the Committee exceeded its authority and violated Sections 24 and 26(2), Article VI.

1. 1Whether the standby authority in Sections 4, 5 and 6 of R.A. 9337 is an undue delegation of the legislative power to tax.
2. 2Whether R.A. 9337 violates Article VI, Section 24 (origination of revenue bills) and Section 26(2) (no-amendment rule) because of the Bicameral Conference Committee's changes.
3. 3Whether the 70% input-tax cap, 60-month amortization and 5% withholding provisions violate due process and the rule of uniform and equitable taxation.

The petitions were dismissed. A delegation is valid only if the law (a) is complete in itself, setting out the policy to be carried out, and (b) fixes a standard that is sufficiently determinate and determinable. These completeness and sufficient-standard tests prevent a total transfer of legislative authority. The proviso was not a delegation of legislative power. It was a delegation of the ascertainment of facts on which the 12% rate was contingent. The word 'shall' made imposition a ministerial duty, leaving the President no discretion. In verifying the conditions, the Secretary of Finance acts as an agent of the legislative department, not as the President's alter ego. Congress fixed the policy and the rate, and the President merely executes it. On procedure, the Court applied the enrolled bill doctrine and Fariñas v. Executive Secretary: courts do not enforce Congress's internal rules absent a constitutional violation. The Committee's changes, including deleting the no pass-on provision, adding the 70% cap and including Senate amendments on other taxes, were germane to the provisions referred to it (Tolentino v. Secretary of Finance). The no-amendment rule of Section 26(2) applies to bills in each house, not to conference committee reports. Section 24 requires the revenue bill, not the law, to originate in the House, and the Senate may propose amendments. The input tax credit is a statutory privilege, not property; the 70% cap and 60-month amortization only delay crediting. The 5% final withholding on government payments is a valid method of collection and classification. The law is uniform and equitable under Section 28(1). Disposition: the petitions were dismissed and the TRO was lifted upon finality.