G.R. No.

115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF
INTERNAL REVENUE, respondents.
G.R. No. 115525 October 30, 1995
JUAN T. DAVID, petitioner,
vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE
OCAMPO, as Secretary of Finance; LIWAYWAY VINZONS-CHATO, as
Commissioner of Internal Revenue; and their AUTHORIZED AGENTS
OR REPRESENTATIVES, respondents.
G.R. No. 115543 October 30, 1995
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES,
petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE
COMMISSIONERS OF THE BUREAU OF INTERNAL REVENUE AND
BUREAU OF CUSTOMS, respondents.
G.R. No. 115544 October 30, 1995
PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.;
KAMAHALAN PUBLISHING CORPORATION; PHILIPPINE
JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA,
petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of
Internal Revenue; HON. TEOFISTO T. GUINGONA, JR., in his capacity
as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his
capacity as Secretary of Finance, respondents.
G.R. No. 115754 October 30, 1995
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC.,
(CREBA), petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 115781 October 30, 1995
KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME
CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM
TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN,
FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V. VICTORINO,
JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF
ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM,
INC. ("MABINI"), FREEDOM FROM DEBT COALITION, INC., and
PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO TAADA,
petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE
COMMISSIONER OF INTERNAL REVENUE and THE COMMISSIONER
OF CUSTOMS, respondents.
G.R. No. 115852 October 30, 1995
PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 115873 October 30, 1995
COOPERATIVE UNION OF THE PHILIPPINES, petitioner,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of
Internal Revenue, HON. TEOFISTO T. GUINGONA, JR., in his capacity
as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his
capacity as Secretary of Finance, respondents.
G.R. No. 115931 October 30, 1995
PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and
ASSOCIATION OF PHILIPPINE BOOK SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON.
LIWAYWAY V. CHATO, as the Commissioner of Internal Revenue; and
HON. GUILLERMO PARAYNO, JR., in his capacity as the
Commissioner of Customs, respondents.
R E S O L U T I O N
MENDOZA, J .:
These are motions seeking reconsideration of our decision dismissing the
petitions filed in these cases for the declaration of unconstitutionality of R.A.
No. 7716, otherwise known as the Expanded Value-Added Tax Law. The
motions, of which there are 10 in all, have been filed by the several
petitioners in these cases, with the exception of the Philippine Educational
Publishers Association, Inc. and the Association of Philippine Booksellers,
petitioners in G.R. No. 115931.
The Solicitor General, representing the respondents, filed a consolidated
comment, to which the Philippine Airlines, Inc., petitioner in G.R. No.
115852, and the Philippine Press Institute, Inc., petitioner in G.R. No.
115544, and Juan T. David, petitioner in G.R. No. 115525, each filed a
reply. In turn the Solicitor General filed on June 1, 1995 a rejoinder to the
PPIs reply.
On June 27, 1995 the matter was submitted for resolution.
I. Power of the Senate to propose amendments to revenue bills. Some of
the petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines (PAL), Roco,
and Chamber of Real Estate and Builders Association (CREBA)) reiterate
previous claims made by them that R.A. No. 7716 did not "originate
exclusively" in the House of Representatives as required by Art. VI, 24 of
the Constitution. Although they admit that H. No. 11197 was filed in the
House of Representatives where it passed three readings and that
afterward it was sent to the Senate where after first reading it was referred
to the Senate Ways and Means Committee, they complain that the Senate
did not pass it on second and third readings. Instead what the Senate did
was to pass its own version (S. No. 1630) which it approved on May 24,
1994. Petitioner Tolentino adds that what the Senate committee should
have done was to amend H. No. 11197 by striking out the text of the bill and
substituting it with the text of S. No. 1630. That way, it is said, "the bill
remains a House bill and the Senate version just becomes the text (only the
text) of the House bill."
The contention has no merit.
The enactment of S. No. 1630 is not the only instance in which the Senate
proposed an amendment to a House revenue bill by enacting its own
version of a revenue bill. On at least two occasions during the Eighth
Congress, the Senate passed its own version of revenue bills, which, in
consolidation with House bills earlier passed, became the enrolled bills.
These were:
R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS
CODE OF 1987 BY EXTENDING FROM FIVE (5) YEARS TO TEN YEARS
THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON
CAPITAL EQUIPMENT) which was approved by the President on April 10,
1992. This Act is actually a consolidation of H. No. 34254, which was
approved by the House on January 29, 1992, and S. No. 1920, which was
approved by the Senate on February 3, 1992.
R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER
SHALL GIVE REWARD TO ANY FILIPINO ATHLETE WINNING A MEDAL
IN OLYMPIC GAMES) which was approved by the President on May 22,
1992. This Act is a consolidation of H. No. 22232, which was approved by
the House of Representatives on August 2, 1989, and S. No. 807, which
was approved by the Senate on October 21, 1991.
On the other hand, the Ninth Congress passed revenue laws which were
also the result of the consolidation of House and Senate bills. These are the
following, with indications of the dates on which the laws were approved by
the President and dates the separate bills of the two chambers of Congress
were respectively passed:
1. R.A. NO. 7642
AN ACT INCREASING THE PENALTIES FOR TAX EVASION,
AMENDING FOR THIS PURPOSE THE PERTINENT SECTIONS
OF THE NATIONAL INTERNAL REVENUE CODE (December
28, 1992).
House Bill No. 2165, October 5, 1992
Senate Bill No. 32, December 7, 1992
2. R.A. NO. 7643
AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL
REVENUE TO REQUIRE THE PAYMENT OF THE VALUE-
ADDED TAX EVERY MONTH AND TO ALLOW LOCAL
GOVERNMENT UNITS TO SHARE IN VAT REVENUE,
AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF
THE NATIONAL INTERNAL REVENUE CODE (December 28,
1992)
House Bill No. 1503, September 3, 1992
Senate Bill No. 968, December 7, 1992
3. R.A. NO. 7646
AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL
REVENUE TO PRESCRIBE THE PLACE FOR PAYMENT OF
INTERNAL REVENUE TAXES BY LARGE TAXPAYERS,
AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED
(February 24, 1993)
House Bill No. 1470, October 20, 1992
Senate Bill No. 35, November 19, 1992
4. R.A. NO. 7649
AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS
POLITICAL SUBDIVISIONS, INSTRUMENTALITIES OR
AGENCIES INCLUDING GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS (GOCCS) TO DEDUCT AND
WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE OF
THREE PERCENT (3%) ON GROSS PAYMENT FOR THE
PURCHASE OF GOODS AND SIX PERCENT (6%) ON GROSS
RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS
(April 6, 1993)
House Bill No. 5260, January 26, 1993
Senate Bill No. 1141, March 30, 1993
5. R.A. NO. 7656
AN ACT REQUIRING GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS TO DECLARE DIVIDENDS
UNDER CERTAIN CONDITIONS TO THE NATIONAL
GOVERNMENT, AND FOR OTHER PURPOSES (November 9,
1993)
House Bill No. 11024, November 3, 1993
Senate Bill No. 1168, November 3, 1993
6. R.A. NO. 7660
AN ACT RATIONALIZING FURTHER THE STRUCTURE AND
ADMINISTRATION OF THE DOCUMENTARY STAMP TAX,
AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
ALLOCATING FUNDS FOR SPECIFIC PROGRAMS, AND FOR
OTHER PURPOSES (December 23, 1993)
House Bill No. 7789, May 31, 1993
Senate Bill No. 1330, November 18, 1993
7. R.A. NO. 7717
AN ACT IMPOSING A TAX ON THE SALE, BARTER OR
EXCHANGE OF SHARES OF STOCK LISTED AND TRADED
THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH
INITIAL PUBLIC OFFERING, AMENDING FOR THE PURPOSE
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
BY INSERTING A NEW SECTION AND REPEALING CERTAIN
SUBSECTIONS THEREOF (May 5, 1994)
House Bill No. 9187, November 3, 1993
Senate Bill No. 1127, March 23, 1994
Thus, the enactment of S. No. 1630 is not the only instance in which the
Senate, in the exercise of its power to propose amendments to bills required
to originate in the House, passed its own version of a House revenue
measure. It is noteworthy that, in the particular case of S. No. 1630,
petitioners Tolentino and Roco, as members of the Senate, voted to
approve it on second and third readings.
On the other hand, amendment by substitution, in the manner urged by
petitioner Tolentino, concerns a mere matter of form. Petitioner has not
shown what substantial difference it would make if, as the Senate actually
did in this case, a separate bill like S. No. 1630 is instead enacted as a
substitute measure, "taking into Consideration . . . H.B. 11197."
Indeed, so far as pertinent, the Rules of the Senate only provide:
RULE XXIX
AMENDMENTS
xxx xxx xxx
68. Not more than one amendment to the original amendment
shall be considered.
No amendment by substitution shall be entertained unless the text
thereof is submitted in writing.
Any of said amendments may be withdrawn before a vote is taken
thereon.
69. No amendment which seeks the inclusion of a legislative
provision foreign to the subject matter of a bill (rider) shall be
entertained.
xxx xxx xxx
70-A. A bill or resolution shall not be amended by substituting it
with another which covers a subject distinct from that proposed in
the original bill or resolution. (emphasis added).
Nor is there merit in petitioners contention that, with regard to revenue bills,
the Philippine Senate possesses less power than the U.S. Senate because
of textual differences between constitutional provisions giving them the
power to propose or concur with amendments.
Art. I, 7, cl. 1 of the U.S. Constitution reads:
All Bills for raising Revenue shall originate in the House of
Representatives; but the Senate may propose or concur with
amendments as on other Bills.
Art. VI, 24 of our Constitution reads:
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.
The addition of the word "exclusively" in the Philippine Constitution and the
decision to drop the phrase "as on other Bills" in the American version,
according to petitioners, shows the intention of the framers of our
Constitution to restrict the Senates power to propose amendments to
revenue bills. Petitioner Tolentino contends that the word "exclusively" was
inserted to modify "originate" and "the words as in any other bills (sic) were
eliminated so as to show that these bills were not to be like other bills but
must be treated as a special kind."
The history of this provision does not support this contention. The supposed
indicia of constitutional intent are nothing but the relics of an unsuccessful
attempt to limit the power of the Senate. It will be recalled that the 1935
Constitution originally provided for a unicameral National Assembly. When it
was decided in 1939 to change to a bicameral legislature, it became
necessary to provide for the procedure for lawmaking by the Senate and the
House of Representatives. The work of proposing amendments to the
Constitution was done by the National Assembly, acting as a constituent
assembly, some of whose members, jealous of preserving the Assemblys
lawmaking powers, sought to curtail the powers of the proposed Senate.
Accordingly they proposed the following provision:
All bills appropriating public funds, revenue or tariff bills, bills of
local application, and private bills shall originate exclusively in the
Assembly, but the Senate may propose or concur with
amendments. In case of disapproval by the Senate of any such
bills, the Assembly may repass the same by a two-thirds vote of
all its members, and thereupon, the bill so repassed shall be
deemed enacted and may be submitted to the President for
corresponding action. In the event that the Senate should fail to
finally act on any such bills, the Assembly may, after thirty days
from the opening of the next regular session of the same
legislative term, reapprove the same with a vote of two-thirds of
all the members of the Assembly. And upon such reapproval, the
bill shall be deemed enacted and may be submitted to the
President for corresponding action.
The special committee on the revision of laws of the Second National
Assembly vetoed the proposal. It deleted everything after the first sentence.
As rewritten, the proposal was approved by the National Assembly and
embodied in Resolution No. 38, as amended by Resolution No. 73. (J.
ARUEGO, KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed
amendment was submitted to the people and ratified by them in the
elections held on June 18, 1940.
This is the history of Art. VI, 18 (2) of the 1935 Constitution, from which Art.
VI, 24 of the present Constitution was derived. It explains why the word
"exclusively" was added to the American text from which the framers of the
Philippine Constitution borrowed and why the phrase "as on other Bills" was
not copied. Considering the defeat of the proposal, the power of the Senate
to propose amendments must be understood to be full, plenary and
complete "as on other Bills." Thus, because revenue bills are required to
originate exclusively in the House of Representatives, the Senate cannot
enact revenue measures of its own without such bills. After a revenue bill is
passed and sent over to it by the House, however, the Senate certainly can
pass its own version on the same subject matter. This follows from the
coequality of the two chambers of Congress.
That this is also the understanding of book authors of the scope of the
Senates power to concur is clear from the following commentaries:
The power of the Senate to propose or concur with amendments
is apparently without restriction. It would seem that by virtue of
this power, the Senate can practically re-write a bill required to
come from the House and leave only a trace of the original bill.
For example, a general revenue bill passed by the lower house of
the United States Congress contained provisions for the
imposition of an inheritance tax . This was changed by the Senate
into a corporation tax. The amending authority of the Senate was
declared by the United States Supreme Court to be sufficiently
broad to enable it to make the alteration. [Flint v. Stone Tracy
Company, 220 U.S. 107, 55 L. ed. 389].
(L. TAADA AND F. CARREON, POLITICAL LAW OF THE
PHILIPPINES 247 (1961))
The above-mentioned bills are supposed to be initiated by the
House of Representatives because it is more numerous in
membership and therefore also more representative of the
people. Moreover, its members are presumed to be more familiar
with the needs of the country in regard to the enactment of the
legislation involved.
The Senate is, however, allowed much leeway in the exercise of
its power to propose or concur with amendments to the bills
initiated by the House of Representatives. Thus, in one case, a
bill introduced in the U.S. House of Representatives was changed
by the Senate to make a proposed inheritance tax a corporation
tax. It is also accepted practice for the Senate to introduce what is
known as an amendment by substitution, which may entirely
replace the bill initiated in the House of Representatives.
(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).
In sum, while Art. VI, 24 provides that all appropriation, revenue or tariff
bills, bills authorizing increase of the public debt, bills of local application,
and private bills must "originate exclusively in the House of
Representatives," it also adds, "but the Senate may propose or concur with
amendments." In the exercise of this power, the Senate may propose an
entirely new bill as a substitute measure. As petitioner Tolentino states in a
high school text, a committee to which a bill is referred may do any of the
following:
(1) to endorse the bill without changes; (2) to make changes in
the bill omitting or adding sections or altering its language; (3) to
make and endorse an entirely new bill as a substitute, in which
case it will be known as a committee bill; or (4) to make no report
at all.
(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES
258 (1950))
To except from this procedure the amendment of bills which are required to
originate in the House by prescribing that the number of the House bill and
its other parts up to the enacting clause must be preserved although the text
of the Senate amendment may be incorporated in place of the original body
of the bill is to insist on a mere technicality. At any rate there is no rule
prescribing this form. S. No. 1630, as a substitute measure, is therefore as
much an amendment of H. No. 11197 as any which the Senate could have
made.
II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners basic error
is that they assume that S. No. 1630 is an independent and distinct bill.
Hence their repeated references to its certification that it was passed by the
Senate "in substitution of S.B. No. 1129, taking into consideration P.S. Res.
No. 734 and H.B. No. 11197," implying that there is something substantially
different between the reference to S. No. 1129 and the reference to H. No.
11197. From this premise, they conclude that R.A. No. 7716 originated both
in the House and in the Senate and that it is the product of two "half-baked
bills because neither H. No. 11197 nor S. No. 1630 was passed by both
houses of Congress."
In point of fact, in several instances the provisions of S. No. 1630, clearly
appear to be mere amendments of the corresponding provisions of H. No.
11197. The very tabular comparison of the provisions of H. No. 11197 and
S. No. 1630 attached as Supplement A to the basic petition of petitioner
Tolentino, while showing differences between the two bills, at the same time
indicates that the provisions of the Senate bill were precisely intended to be
amendments to the House bill.
Without H. No. 11197, the Senate could not have enacted S. No. 1630.
Because the Senate bill was a mere amendment of the House bill, H. No.
11197 in its original form did not have to pass the Senate on second and
three readings. It was enough that after it was passed on first reading it was
referred to the Senate Committee on Ways and Means. Neither was it
required that S. No. 1630 be passed by the House of Representatives
before the two bills could be referred to the Conference Committee.
There is legislative precedent for what was done in the case of H. No.
11197 and S. No. 1630. When the House bill and Senate bill, which became
R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were
referred to a conference committee, the question was raised whether the
two bills could be the subject of such conference, considering that the bill
from one house had not been passed by the other and vice versa. As
Congressman Duran put the question:
MR. DURAN. Therefore, I raise this question of order as to
procedure: If a House bill is passed by the House but not passed
by the Senate, and a Senate bill of a similar nature is passed in
the Senate but never passed in the House, can the two bills be
the subject of a conference, and can a law be enacted from these
two bills? I understand that the Senate bill in this particular
instance does not refer to investments in government securities,
whereas the bill in the House, which was introduced by the
Speaker, covers two subject matters: not only investigation of
deposits in banks but also investigation of investments in
government securities. Now, since the two bills differ in their
subject matter, I believe that no law can be enacted.
Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.)
said:
THE SPEAKER. The report of the conference committee is in
order. It is precisely in cases like this where a conference should
be had. If the House bill had been approved by the Senate, there
would have been no need of a conference; but precisely because
the Senate passed another bill on the same subject matter, the
conference committee had to be created, and we are now
considering the report of that committee.
(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis
added))
III. The President's certification. The fallacy in thinking that H. No. 11197
and S. No. 1630 are distinct and unrelated measures also accounts for the
petitioners (Kilosbayans and PALs) contention that because the President
separately certified to the need for the immediate enactment of these
measures, his certification was ineffectual and void. The certification had to
be made of the version of the same revenue bill which at the moment was
being considered. Otherwise, to follow petitioners theory, it would be
necessary for the President to certify as many bills as are presented in a
house of Congress even though the bills are merely versions of the bill he
has already certified. It is enough that he certifies the bill which, at the time
he makes the certification, is under consideration. Since on March 22, 1994
the Senate was considering S. No. 1630, it was that bill which had to be
certified. For that matter on June 1, 1993 the President had earlier certified
H. No. 9210 for immediate enactment because it was the one which at that
time was being considered by the House. This bill was later substituted,
together with other bills, by H. No. 11197.
As to what Presidential certification can accomplish, we have already
explained in the main decision that the phrase "except when the President
certifies to the necessity of its immediate enactment, etc." in Art. VI, 26 (2)
qualifies not only the requirement that "printed copies [of a bill] in its final
form [must be] distributed to the members three days before its passage"
but also the requirement that before a bill can become a law it must have
passed "three readings on separate days." There is not only textual support
for such construction but historical basis as well.
Art. VI, 21 (2) of the 1935 Constitution originally provided:
(2) No bill shall be passed by either House unless it shall have
been printed and copies thereof in its final form furnished its
Members at least three calendar days prior to its passage, except
when the President shall have certified to the necessity of its
immediate enactment. Upon the last reading of a bill, no
amendment thereof shall be allowed and the question upon its
passage shall be taken immediately thereafter, and the yeas and
nays entered on the Journal.
When the 1973 Constitution was adopted, it was provided in Art. VIII, 19
(2):
(2) No bill shall become a law unless it has passed three readings
on separate days, and printed copies thereof in its final form have
been distributed to the Members three days before its passage,
except when the Prime Minister certifies to the necessity of its
immediate enactment to meet a public calamity or emergency.
Upon the last reading of a bill, no amendment thereto shall be
allowed, and the vote thereon shall be taken immediately
thereafter, and the yeas and nays entered in the Journal.
This provision of the 1973 document, with slight modification, was adopted
in Art. VI, 26 (2) of the present Constitution, thus:
(2) No bill passed by either House shall become a law unless it
has passed three readings on separate days, and printed copies
thereof in its final form have been distributed to its Members three
days before its passage, except when the President certifies to
the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote thereon shall
be taken immediately thereafter, and the yeas and nays entered
in the Journal.
The exception is based on the prudential consideration that if in all cases
three readings on separate days are required and a bill has to be printed in
final form before it can be passed, the need for a law may be rendered
academic by the occurrence of the very emergency or public calamity which
it is meant to address.
Petitioners further contend that a "growing budget deficit" is not an
emergency, especially in a country like the Philippines where budget deficit
is a chronic condition. Even if this were the case, an enormous budget
deficit does not make the need for R.A. No. 7716 any less urgent or the
situation calling for its enactment any less an emergency.
Apparently, the members of the Senate (including some of the petitioners in
these cases) believed that there was an urgent need for consideration of S.
No. 1630, because they responded to the call of the President by voting on
the bill on second and third readings on the same day. While the judicial
department is not bound by the Senates acceptance of the Presidents
certification, the respect due coequal departments of the government in
matters committed to them by the Constitution and the absence of a clear
showing of grave abuse of discretion caution a stay of the judicial hand.
At any rate, we are satisfied that S. No. 1630 received thorough
consideration in the Senate where it was discussed for six days. Only its
distribution in advance in its final printed form was actually dispensed with
by holding the voting on second and third readings on the same day (March
24, 1994). Otherwise, sufficient time between the submission of the bill on
February 8, 1994 on second reading and its approval on March 24, 1994
elapsed before it was finally voted on by the Senate on third reading.
The purpose for which three readings on separate days is required is said to
be two-fold: (1) to inform the members of Congress of what they must vote
on and (2) to give them notice that a measure is progressing through the
enacting process, thus enabling them and others interested in the measure
to prepare their positions with reference to it. (1 J. G. SUTHERLAND,
STATUTES AND STATUTORY CONSTRUCTION 10.04, p. 282 (1972)).
These purposes were substantially achieved in the case of R.A. No. 7716.
IV. Power of Conference Committee. It is contended (principally by
Kilosbayan, Inc. and the Movement of Attorneys for Brotherhood, Integrity
and Nationalism, Inc. (MABINI)) that in violation of the constitutional policy
of full public disclosure and the peoples right to know (Art. II, 28 and Art.
III, 7) the Conference Committee met for two days in executive session
with only the conferees present.
As pointed out in our main decision, even in the United States it was
customary to hold such sessions with only the conferees and their staffs in
attendance and it was only in 1975 when a new rule was adopted requiring
open sessions. Unlike its American counterpart, the Philippine Congress
has not adopted a rule prescribing open hearings for conference
committees.
It is nevertheless claimed that in the United States, before the adoption of
the rule in 1975, at least staff members were present. These were staff
members of the Senators and Congressmen, however, who may be
presumed to be their confidential men, not stenographers as in this case
who on the last two days of the conference were excluded. There is no
showing that the conferees themselves did not take notes of their
proceedings so as to give petitioner Kilosbayan basis for claiming that even
in secret diplomatic negotiations involving state interests, conferees keep
notes of their meetings. Above all, the publics right to know was fully served
because the Conference Committee in this case submitted a report showing
the changes made on the differing versions of the House and the Senate.
Petitioners cite the rules of both houses which provide that conference
committee reports must contain "a detailed, sufficiently explicit statement of
the changes in or other amendments." These changes are shown in the bill
attached to the Conference Committee Report. The members of both
houses could thus ascertain what changes had been made in the original
bills without the need of a statement detailing the changes.
The same question now presented was raised when the bill which became
R.A. No. 1400 (Land Reform Act of 1955) was reported by the Conference
Committee. Congressman Bengzon raised a point of order. He said:
MR. BENGZON. My point of order is that it is out of order to
consider the report of the conference committee regarding House
Bill No. 2557 by reason of the provision of Section 11, Article XII,
of the Rules of this House which provides specifically that the
conference report must be accompanied by a detailed statement
of the effects of the amendment on the bill of the House. This
conference committee report is not accompanied by that detailed
statement, Mr. Speaker. Therefore it is out of order to consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:
MR. TOLENTINO. Mr. Speaker, I should just like to say a few
words in connection with the point of order raised by the
gentleman from Pangasinan.
There is no question about the provision of the Rule cited by the
gentleman from Pangasinan, but this provision applies to those
cases where only portions of the bill have been amended. In this
case before us an entire bill is presented; therefore, it can be
easily seen from the reading of the bill what the provisions are.
Besides, this procedure has been an established practice.
After some interruption, he continued:
MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look
into the reason for the provisions of the Rules, and the reason for
the requirement in the provision cited by the gentleman from
Pangasinan is when there are only certain words or phrases
inserted in or deleted from the provisions of the bill included in the
conference report, and we cannot understand what those words
and phrases mean and their relation to the bill. In that case, it is
necessary to make a detailed statement on how those words and
phrases will affect the bill as a whole; but when the entire bill itself
is copied verbatim in the conference report, that is not necessary.
So when the reason for the Rule does not exist, the Rule does not
exist.
(2 CONG. REC. NO. 2, p. 4056. (emphasis added))
Congressman Tolentino was sustained by the chair. The record shows that
when the ruling was appealed, it was upheld by viva voce and when a
division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)
Nor is there any doubt about the power of a conference committee to insert
new provisions as long as these are germane to the subject of the
conference. As this Court held in Philippine Judges Association v. Prado,
227 SCRA 703 (1993), in an opinion written by then Justice Cruz, the
jurisdiction of the conference committee is not limited to resolving
differences between the Senate and the House. It may propose an entirely
new provision. What is important is that its report is subsequently approved
by the respective houses of Congress. This Court ruled that it would not
entertain allegations that, because new provisions had been added by the
conference committee, there was thereby a violation of the constitutional
injunction that "upon the last reading of a bill, no amendment thereto shall
be allowed."
Applying these principles, we shall decline to look into the
petitioners charges that an amendment was made upon the last
reading of the bill that eventually became R.A. No. 7354 and that
copies thereof in its final form were not distributed among the
members of each House. Both the enrolled bill and the legislative
journals certify that the measure was duly enacted i.e., in
accordance with Article VI, Sec. 26 (2) of the Constitution. We are
bound by such official assurances from a coordinate department
of the government, to which we owe, at the very least, a
becoming courtesy.
(Id. at 710. (emphasis added))
It is interesting to note the following description of conference committees in
the Philippines in a 1979 study:
Conference committees may be of two types: free or instructed.
These committees may be given instructions by their parent
bodies or they may be left without instructions. Normally the
conference committees are without instructions, and this is why
they are often critically referred to as "the little legislatures." Once
bills have been sent to them, the conferees have almost unlimited
authority to change the clauses of the bills and in fact sometimes
introduce new measures that were not in the original legislation.
No minutes are kept, and members activities on conference
committees are difficult to determine. One congressman known
for his idealism put it this way: "I killed a bill on export incentives
for my interest group [copra] in the conference committee but I
could not have done so anywhere else." The conference
committee submits a report to both houses, and usually it is
accepted. If the report is not accepted, then the committee is
discharged and new members are appointed.
(R. Jackson, Committees in the Philippine Congress, in
COMMITTEES AND LEGISLATURES: A COMPARATIVE
ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).
In citing this study, we pass no judgment on the methods of conference
committees. We cite it only to say that conference committees here are no
different from their counterparts in the United States whose vast powers we
noted in Philippine Judges Association v. Prado, supra. At all events, under
Art. VI, 16(3) each house has the power "to determine the rules of its
proceedings," including those of its committees. Any meaningful change in
the method and procedures of Congress or its committees must therefore
be sought in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No.
7716 violates Art. VI, 26 (1) of the Constitution which provides that "Every
bill passed by Congress shall embrace only one subject which shall be
expressed in the title thereof." PAL contends that the amendment of its
franchise by the withdrawal of its exemption from the VAT is not expressed
in the title of the law.
Pursuant to 13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its
gross revenue "in lieu of all other taxes, duties, royalties, registration,
license and other fees and charges of any kind, nature, or description,
imposed, levied, established, assessed or collected by any municipal, city,
provincial or national authority or government agency, now or in the future."
PAL was exempted from the payment of the VAT along with other entities
by 103 of the National Internal Revenue Code, which provides as follows:
103. Exempt transactions. The following shall be exempt from
the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws or
international agreements to which the Philippines is a signatory.
R.A. No. 7716 seeks to withdraw certain exemptions, including that granted
to PAL, by amending 103, as follows:
103. Exempt transactions. The following shall be exempt from
the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except
those granted under Presidential Decree Nos. 66, 529, 972, 1491,
1590. . . .
The amendment of 103 is expressed in the title of R.A. No. 7716 which
reads:
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT)
SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS
ADMINISTRATION, AND FOR THESE PURPOSES AMENDING
AND REPEALING THE RELEVANT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND
FOR OTHER PURPOSES.
By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-
ADDED TAX (VAT) SYSTEM [BY] WIDENING ITS TAX BASE AND
ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES
AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR
OTHER PURPOSES," Congress thereby clearly expresses its intention to
amend any provision of the NIRC which stands in the way of accomplishing
the purpose of the law.
PAL asserts that the amendment of its franchise must be reflected in the
title of the law by specific reference to P.D. No. 1590. It is unnecessary to
do this in order to comply with the constitutional requirement, since it is
already stated in the title that the law seeks to amend the pertinent
provisions of the NIRC, among which is 103(q), in order to widen the base
of the VAT. Actually, it is the bill which becomes a law that is required to
express in its title the subject of legislation. The titles of H. No. 11197 and S.
No. 1630 in fact specifically referred to 103 of the NIRC as among the
provisions sought to be amended. We are satisfied that sufficient notice had
been given of the pendency of these bills in Congress before they were
enacted into what is now R.A.
No. 7716.
In Philippine Judges Association v. Prado, supra, a similar argument as that
now made by PAL was rejected. R.A. No. 7354 is entitled AN ACT
CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS
POWERS, FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR
REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES
CONNECTED THEREWITH. It contained a provision repealing all franking
privileges. It was contended that the withdrawal of franking privileges was
not expressed in the title of the law. In holding that there was sufficient
description of the subject of the law in its title, including the repeal of
franking privileges, this Court held:
To require every end and means necessary for the
accomplishment of the general objectives of the statute to be
expressed in its title would not only be unreasonable but would
actually render legislation impossible. [Cooley, Constitutional
Limitations, 8th Ed., p. 297] As has been correctly explained:
The details of a legislative act need not be specifically
stated in its title, but matter germane to the subject as
expressed in the title, and adopted to the
accomplishment of the object in view, may properly be
included in the act. Thus, it is proper to create in the
same act the machinery by which the act is to be
enforced, to prescribe the penalties for its infraction,
and to remove obstacles in the way of its execution. If
such matters are properly connected with the subject as
expressed in the title, it is unnecessary that they should
also have special mention in the title. (Southern Pac.
Co. v. Bartine, 170 Fed. 725)
(227 SCRA at 707-708)
VI. Claims of press freedom and religious liberty. We have held that, as a
general proposition, the press is not exempt from the taxing power of the
State and that what the constitutional guarantee of free press prohibits are
laws which single out the press or target a group belonging to the press for
special treatment or which in any way discriminate against the press on the
basis of the content of the publication, and R.A. No. 7716 is none of these.
Now it is contended by the PPI that by removing the exemption of the press
from the VAT while maintaining those granted to others, the law
discriminates against the press. At any rate, it is averred, "even
nondiscriminatory taxation of constitutionally guaranteed freedom is
unconstitutional."
With respect to the first contention, it would suffice to say that since the law
granted the press a privilege, the law could take back the privilege anytime
without offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its sovereign
prerogative.
Indeed, in withdrawing the exemption, the law merely subjects the press to
the same tax burden to which other businesses have long ago been subject.
It is thus different from the tax involved in the cases invoked by the PPI. The
license tax in Grosjean v. American Press Co., 297 U.S. 233, 80 L. Ed. 660
(1936) was found to be discriminatory because it was laid on the gross
advertising receipts only of newspapers whose weekly circulation was over
20,000, with the result that the tax applied only to 13 out of 124 publishers in
Louisiana. These large papers were critical of Senator Huey Long who
controlled the state legislature which enacted the license tax. The censorial
motivation for the law was thus evident.
On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r
of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295 (1983), the tax was found to be
discriminatory because although it could have been made liable for the
sales tax or, in lieu thereof, for the use tax on the privilege of using, storing
or consuming tangible goods, the press was not. Instead, the press was
exempted from both taxes. It was, however, later made to pay a special use
tax on the cost of paper and ink which made these items "the only items
subject to the use tax that were component of goods to be sold at retail."
The U.S. Supreme Court held that the differential treatment of the press
"suggests that the goal of regulation is not related to suppression of
expression, and such goal is presumptively unconstitutional." It would
therefore appear that even a law that favors the press is constitutionally
suspect. (See the dissent of Rehnquist, J. in that case)
Nor is it true that only two exemptions previously granted by E.O. No. 273
are withdrawn "absolutely and unqualifiedly" by R.A. No. 7716. Other
exemptions from the VAT, such as those previously granted to PAL,
petroleum concessionaires, enterprises registered with the Export
Processing Zone Authority, and many more are likewise totally withdrawn, in
addition to exemptions which are partially withdrawn, in an effort to broaden
the base of the tax.
The PPI says that the discriminatory treatment of the press is highlighted by
the fact that transactions, which are profit oriented, continue to enjoy
exemption under R.A. No. 7716. An enumeration of some of these
transactions will suffice to show that by and large this is not so and that the
exemptions are granted for a purpose. As the Solicitor General says, such
exemptions are granted, in some cases, to encourage agricultural
production and, in other cases, for the personal benefit of the end-user
rather than for profit. The exempt transactions are:
(a) Goods for consumption or use which are in their original state
(agricultural, marine and forest products, cotton seeds in their
original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance
agriculture (milling of palay, corn, sugar cane and raw sugar,
livestock, poultry feeds, fertilizer, ingredients used for the
manufacture of feeds).
(b) Goods used for personal consumption or use (household and
personal effects of citizens returning to the Philippines) or for
professional use, like professional instruments and implements,
by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to
be used for manufacture of petroleum products subject to excise
tax and services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary
services, and services rendered under employer-employee
relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international
agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not
exceeding P500,000.00.
(Respondents Consolidated Comment on the Motions for
Reconsideration, pp. 58-60)
The PPI asserts that it does not really matter that the law does not
discriminate against the press because "even nondiscriminatory taxation on
constitutionally guaranteed freedom is unconstitutional." PPI cites in support
of this assertion the following statement in Murdock v. Pennsylvania, 319
U.S. 105, 87 L. Ed. 1292 (1943):
The fact that the ordinance is "nondiscriminatory" is immaterial.
The protection afforded by the First Amendment is not so
restricted. A license tax certainly does not acquire constitutional
validity because it classifies the privileges protected by the First
Amendment along with the wares and merchandise of hucksters
and peddlers and treats them all alike. Such equality in treatment
does not save the ordinance. Freedom of press, freedom of
speech, freedom of religion are in preferred position.
The Court was speaking in that case of a license tax, which, unlike an
ordinary tax, is mainly for regulation. Its imposition on the press is
unconstitutional because it lays a prior restraint on the exercise of its right.
Hence, although its application to others, such those selling goods, is valid,
its application to the press or to religious groups, such as the Jehovahs
Witnesses, in connection with the latters sale of religious books and
pamphlets, is unconstitutional. As the U.S. Supreme Court put it, "it is one
thing to impose a tax on income or property of a preacher. It is quite another
thing to exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society v. City of
Manila, 101 Phil. 386 (1957) which invalidated a city ordinance requiring a
business license fee on those engaged in the sale of general merchandise.
It was held that the tax could not be imposed on the sale of bibles by the
American Bible Society without restraining the free exercise of its right to
propagate.
The VAT is, however, different. It is not a license tax. It is not a tax on the
exercise of a privilege, much less a constitutional right. It is imposed on the
sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue
purposes. To subject the press to its payment is not to burden the exercise
of its right any more than to make the press pay income tax or subject it to
general regulation is not to violate its freedom under the Constitution.
Additionally, the Philippine Bible Society, Inc. claims that although it sells
bibles, the proceeds derived from the sales are used to subsidize the cost of
printing copies which are given free to those who cannot afford to pay so
that to tax the sales would be to increase the price, while reducing the
volume of sale. Granting that to be the case, the resulting burden on the
exercise of religious freedom is so incidental as to make it difficult to
differentiate it from any other economic imposition that might make the right
to disseminate religious doctrines costly. Otherwise, to follow the petitioners
argument, to increase the tax on the sale of vestments would be to lay an
impermissible burden on the right of the preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by 107 of the
NIRC, as amended by 7 of R.A. No. 7716, although fixed in amount, is
really just to pay for the expenses of registration and enforcement of
provisions such as those relating to accounting in 108 of the NIRC. That
the PBS distributes free bibles and therefore is not liable to pay the VAT
does not excuse it from the payment of this fee because it also sells some
copies. At any rate whether the PBS is liable for the VAT must be decided in
concrete cases, in the event it is assessed this tax by the Commissioner of
Internal Revenue.
VII. Alleged violations of the due process, equal protection and contract
clauses and the rule on taxation. CREBA asserts that R.A. No. 7716 (1)
impairs the obligations of contracts, (2) classifies transactions as covered or
exempt without reasonable basis and (3) violates the rule that taxes should
be uniform and equitable and that Congress shall "evolve a progressive
system of taxation."
With respect to the first contention, it is claimed that the application of the
tax to existing contracts of the sale of real property by installment or on
deferred payment basis would result in substantial increases in the monthly
amortizations to be paid because of the 10% VAT. The additional amount, it
is pointed out, is something that the buyer did not anticipate at the time he
entered into the contract.
The short answer to this is the one given by this Court in an early case:
"Authorities from numerous sources are cited by the plaintiffs, but none of
them show that a lawful tax on a new subject, or an increased tax on an old
one, interferes with a contract or impairs its obligation, within the meaning of
the Constitution. Even though such taxation may affect particular contracts,
as it may increase the debt of one person and lessen the security of
another, or may impose additional burdens upon one class and release the
burdens of another, still the tax must be paid unless prohibited by the
Constitution, nor can it be said that it impairs the obligation of any existing
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and
Nubla Co-Siong, 39 Phil. 567, 574 (1919)). Indeed not only existing laws but
also "the reservation of the essential attributes of sovereignty, is . . . read
into contracts as a postulate of the legal order." (Philippine-American Life
Ins. Co. v. Auditor General, 22 SCRA 135, 147 (1968)) Contracts must be
understood as having been made in reference to the possible exercise of
the rightful authority of the government and no obligation of contract can
extend to the defeat of that authority. (Norman v. Baltimore and Ohio R.R.,
79 L. Ed. 885 (1935)).
It is next pointed out that while 4 of R.A. No. 7716 exempts such
transactions as the sale of agricultural products, food items, petroleum, and
medical and veterinary services, it grants no exemption on the sale of real
property which is equally essential. The sale of real property for socialized
and low-cost housing is exempted from the tax, but CREBA claims that real
estate transactions of "the less poor," i.e., the middle class, who are equally
homeless, should likewise be exempted.
The sale of food items, petroleum, medical and veterinary services, etc.,
which are essential goods and services was already exempt under 103,
pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716.
Petitioner is in error in claiming that R.A. No. 7716 granted exemption to
these transactions, while subjecting those of petitioner to the payment of the
VAT. Moreover, there is a difference between the "homeless poor" and the
"homeless less poor" in the example given by petitioner, because the
second group or middle class can afford to rent houses in the meantime that
they cannot yet buy their own homes. The two social classes are thus
differently situated in life. "It is inherent in the power to tax that the State be
free to select the subjects of taxation, and it has been repeatedly held that
inequalities which result from a singling out of one particular class for
taxation, or exemption infringe no constitutional limitation." (Lutz v. Araneta,
98 Phil. 148, 153 (1955). Accord, City of Baguio v. De Leon, 134 Phil. 912
(1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371
(1988)).
Finally, it is contended, for the reasons already noted, that R.A. No. 7716
also violates Art. VI, 28(1) which provides that "The rule of taxation shall
be uniform and equitable. The Congress shall evolve a progressive system
of taxation."
Equality and uniformity of taxation means that all taxable articles or kinds of
property of the same class be taxed at the same rate. The taxing power has
the authority to make reasonable and natural classifications for purposes of
taxation. To satisfy this requirement it is enough that the statute or
ordinance applies equally to all persons, forms and corporations placed in
similar situation. (City of Baguio v. De Leon, supra; Sison, Jr. v. Ancheta,
supra)
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No.
7716 was enacted. R.A. No. 7716 merely expands the base of the tax. The
validity of the original VAT Law was questioned in Kapatiran ng Naglilingkod
sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds
similar to those made in these cases, namely, that the law was "oppressive,
discriminatory, unjust and regressive in violation of Art. VI, 28(1) of the
Constitution." (At 382) Rejecting the challenge to the law, this Court held:
As the Court sees it, EO 273 satisfies all the requirements of a
valid tax. It is uniform. . . .
The sales tax adopted in EO 273 is applied similarly on all goods
and services sold to the public, which are not exempt, at the
constant rate of 0% or 10%.
The disputed sales tax is also equitable. It is imposed only on
sales of goods or services by persons engaged in business with
an aggregate gross annual sales exceeding P200,000.00. Small
corner sari-sari stores are consequently exempt from its
application. Likewise exempt from the tax are sales of farm and
marine products, so that the costs of basic food and other
necessities, spared as they are from the incidence of the VAT, are
expected to be relatively lower and within the reach of the general
public.
(At 382-383)
The CREBA claims that the VAT is regressive. A similar claim is made by
the Cooperative Union of the Philippines, Inc. (CUP), while petitioner Juan
T. David argues that the law contravenes the mandate of Congress to
provide for a progressive system of taxation because the law imposes a flat
rate of 10% and thus places the tax burden on all taxpayers without regard
to their ability to pay.
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 PHILIPPINES 221
(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.
Resort 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 this imposition by providing for zero
rating of certain transactions (R.A. No. 7716, 3, amending 102 (b) of the
NIRC), while granting exemptions to other transactions. (R.A. No. 7716, 4,
amending 103 of the NIRC).
Thus, the following transactions involving basic and essential goods and
services are exempted from the VAT:
(a) Goods for consumption or use which are in their original state
(agricultural, marine and forest products, cotton seeds in their
original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance
agriculture (milling of palay, corn sugar cane and raw sugar,
livestock, poultry feeds, fertilizer, ingredients used for the
manufacture of feeds).
(b) Goods used for personal consumption or use (household and
personal effects of citizens returning to the Philippines) and or
professional use, like professional instruments and implements,
by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to
be used for manufacture of petroleum products subject to excise
tax and services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary
services, and services rendered under employer-employee
relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international
agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not
exceeding P500,000.00.
(Respondents Consolidated Comment on the Motions for
Reconsideration, pp. 58-60)
On the other hand, the transactions which are subject to the VAT are those
which involve goods and services which are used or availed of mainly by
higher income groups. These include real properties held primarily for sale
to customers or for lease in the ordinary course of trade or business, the
right or privilege to use patent, copyright, and other similar property or right,
the right or privilege to use industrial, commercial or scientific equipment,
motion picture films, tapes and discs, radio, television, satellite transmission
and cable television time, hotels, restaurants and similar places, securities,
lending investments, taxicabs, utility cars for rent, tourist buses, and other
common carriers, services of franchise grantees of telephone and telegraph.
The problem with CREBAs petition is that it presents broad claims of
constitutional violations by tendering issues not at retail but at wholesale
and in the abstract. There is no fully developed record which can impart to
adjudication the impact of actuality. There is no factual foundation to show
in the concrete the application of the law to actual contracts and exemplify
its effect on property rights. For the fact is that petitioners members have
not even been assessed the VAT. Petitioners case is not made concrete by
a series of hypothetical questions asked which are no different from those
dealt with in advisory opinions.
The difficulty confronting petitioner is thus apparent. He alleges
arbitrariness. A mere allegation, as here, does not suffice. There
must be a factual foundation of such unconstitutional taint.
Considering that petitioner here would condemn such a provision
as void on its face, he has not made out a case. This is merely to
adhere to the authoritative doctrine that where the 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 of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity
must prevail.
(Sison, Jr. v. Ancheta, 130 SCRA at 661)
Adjudication of these broad claims must await the development of a
concrete case. It may be that postponement of adjudication would result in a
multiplicity of suits. This need not be the case, however. Enforcement of the
law may give rise to such a case. A test case, provided it is an actual case
and not an abstract or hypothetical one, may thus be presented.
Nor is hardship to taxpayers alone an adequate justification for adjudicating
abstract issues. Otherwise, adjudication would be no different from the
giving of advisory opinion that does not really settle legal issues.
We are told that it is our duty under Art. VIII, 1, 2 to decide whenever a
claim is made that "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." This duty can only arise if an actual case or controversy is
before us. Under Art . VIII, 5 our jurisdiction is defined in terms of "cases"
and all that Art. VIII, 1, 2 can plausibly mean is that in the exercise of that
jurisdiction we have the judicial power to determine questions of grave
abuse of discretion by any branch or instrumentality of the government.
Put in another way, what is granted in Art. VIII, 1, 2 is "judicial power,"
which is "the power of a court to hear and decide cases pending between
parties who have the right to sue and be sued in the courts of law and
equity" (Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from
legislative and executive power. This power cannot be directly appropriated
until it is apportioned among several courts either by the Constitution, as in
the case of Art. VIII, 5, or by statute, as in the case of the Judiciary Act of
1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980 (B.P. Blg.
129). The power thus apportioned constitutes the courts "jurisdiction,"
defined as "the power conferred by law upon a court or judge to take
cognizance of a case, to the exclusion of all others." (United States v.
Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its
jurisdiction, this Court cannot inquire into any allegation of grave abuse of
discretion by the other departments of the government.
VIII. Alleged violation of policy towards cooperatives. On the other hand, the
Cooperative Union of the Philippines (CUP), after briefly surveying the
course of legislation, argues that it was to adopt a definite policy of granting
tax exemption to cooperatives that the present Constitution embodies
provisions on cooperatives. To subject cooperatives to the VAT would
therefore be to infringe a constitutional policy. Petitioner claims that in 1973,
P.D. No. 175 was promulgated exempting cooperatives from the payment of
income taxes and sales taxes but in 1984, because of the crisis which
menaced the national economy, this exemption was withdrawn by P.D. No.
1955; that in 1986, P.D. No. 2008 again granted cooperatives exemption
from income and sales taxes until December 31, 1991, but, in the same
year, E.O. No. 93 revoked the exemption; and that finally in 1987 the
framers of the Constitution "repudiated the previous actions of the
government adverse to the interests of the cooperatives, that is, the
repeated revocation of the tax exemption to cooperatives and instead
upheld the policy of strengthening the cooperatives by way of the grant of
tax exemptions," by providing the following in Art. XII:
1. The goals of the national economy are a more equitable
distribution of opportunities, income, and wealth; a sustained
increase in the amount of goods and services produced by the
nation for the benefit of the people; and an expanding productivity
as the key to raising the quality of life for all, especially the
underprivileged.
The State shall promote industrialization and full employment
based on sound agricultural development and agrarian reform,
through industries that make full and efficient use of human and
natural resources, and which are competitive in both domestic
and foreign markets. However, the State shall protect Filipino
enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all
regions of the country shall be given optimum opportunity to
develop. Private enterprises, including corporations, cooperatives,
and similar collective organizations, shall be encouraged to
broaden the base of their ownership.
15. The Congress shall create an agency to promote the viability
and growth of cooperatives as instruments for social justice and
economic development.
Petitioners contention has no merit. In the first place, it is not true that P.D.
No. 1955 singled out cooperatives by withdrawing their exemption from
income and sales taxes under P.D. No. 175, 5. What P.D. No. 1955, 1 did
was to withdraw the exemptions and preferential treatments theretofore
granted to private business enterprises in general, in view of the economic
crisis which then beset the nation. It is true that after P.D. No. 2008, 2 had
restored the tax exemptions of cooperatives in 1986, the exemption was
again repealed by E.O. No. 93, 1, but then again cooperatives were not the
only ones whose exemptions were withdrawn. The withdrawal of tax
incentives applied to all, including government and private entities. In the
second place, the Constitution does not really require that cooperatives be
granted tax exemptions in order to promote their growth and viability.
Hence, there is no basis for petitioners assertion that the governments
policy toward cooperatives had been one of vacillation, as far as the grant of
tax privileges was concerned, and that it was to put an end to this indecision
that the constitutional provisions cited were adopted. Perhaps as a matter of
policy cooperatives should be granted tax exemptions, but that is left to the
discretion of Congress. If Congress does not grant exemption and there is
no discrimination to cooperatives, no violation of any constitutional policy
can be charged.
Indeed, petitioners theory amounts to saying that under the Constitution
cooperatives are exempt from taxation. Such theory is contrary to the
Constitution under which only the following are exempt from taxation:
charitable institutions, churches and parsonages, by reason of Art. VI, 28
(3), and non-stock, non-profit educational institutions by reason of Art. XIV,
4 (3).
CUPs further ground for seeking the invalidation of R.A. No. 7716 is that it
denies cooperatives the equal protection of the law because electric
cooperatives are exempted from the VAT. The classification between
electric and other cooperatives (farmers cooperatives, producers
cooperatives, marketing cooperatives, etc.) apparently rests on a
congressional determination that there is greater need to provide cheaper
electric power to as many people as possible, especially those living in the
rural areas, than there is to provide them with other necessities in life. We
cannot say that such classification is unreasonable.
We have carefully read the various arguments raised against the
constitutional validity of R.A. No. 7716. We have in fact taken the
extraordinary step of enjoining its enforcement pending resolution of these
cases. We have now come to the conclusion that the law suffers from none
of the infirmities attributed to it by petitioners and that its enactment by the
other branches of the government does not constitute a grave abuse of
discretion. Any question as to its necessity, desirability or expediency must
be addressed to Congress as the body which is electorally responsible,
remembering that, as Justice Holmes has said, "legislators are the ultimate
guardians of the liberties and welfare of the people in quite as great a
degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v. May, 194
U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R.
No. 115543 does in arguing that we should enforce the public accountability
of legislators, that those who took part in passing the law in question by
voting for it in Congress should later thrust to the courts the burden of
reviewing measures in the flush of enactment. This Court does not sit as a
third branch of the legislature, much less exercise a veto power over
legislation.
WHEREFORE, the motions for reconsideration are denied with finality and
the temporary restraining order previously issued is hereby lifted.
SO ORDERED.
Narvasa, C.J., Feliciano, Melo, Kapunan, Francisco and Hermosisima, Jr.,
JJ., concur.
Padilla and Vitug, JJ., maintained their separate opinion.
Regalado, Davide, Jr., Romero, Bellosillo and Puno, JJ, maintained their
dissenting opinion.
Panganiban, J., took no part.