ABAKADA GURO PARTY LIST versus

THE HONORABLE EXECUTIVE SECRETARY

EDUARDO ERMITA
G.R. No. 168056 01 September 2005


FACTS:
ABAKADA Guro Party List assail the constitutionality of R.A.
No. 9337, a VAT reform Act enacted on May 24, 2005 which
is a consolidation of three legislative bills namely, House Bill
Nos. 3555 and 3705, and Senate Bill No. 1950. They question
the constitutionality of Sections 4, 5 and 6 of said Act,
amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). Section 4 imposes a
10% VAT on sale of goods and properties, Section 5 imposes a
10% VAT on importation of goods, and Section 6 imposes a
10% VAT on sale of services and use or lease of properties. In
collective, granted the Secretary of Finance the authority to
ascertain: a. whether by 12/31/05, the VAT collection as a
percentage of the 2004 GDP exceeds 2.8% or b. the national
government deficit as a percentage of the 2004 GDP exceeds
1.5%. If either condition is met, the Secretary of Finance must
inform the President who, in turn, must impose the 12% VAT
rate (from 10%) effective J anuary 1, 2006.

Petitioners maintained that Congress abandoned its exclusive
authority to fix taxes and that RA 9337 contained a uniform
proviso authorizing the President upon recommendation by the
DOF Secretary to raise VAT to 12%.
Senator Pimentel maintained that RA 9337 constituted undue
delegation of legislative powers and a violation of due process
since the law was ambiguous and arbitrary. Same with
Represenative Escudero.
Thereafter, a petition for prohibition was filed on J une 29,
2005, by the Association of Pilipinas Shell Dealers, Inc., et al.,
assailing the constitutionality of R.A. No. 9337, contending
that some provisions of said VAT reform was arbitrary,
oppressive and confiscatory. According to them, the contested
sections impose limitations on the amount of input tax that may
be claimed. They also argue that the input tax partakes the
nature of a property that may not be confiscated, appropriated,
or limited without due process of law. Petitioners further
contend that like any other property or property right, the input
tax credit may be transferred or disposed of, and that by
limiting the same, the government gets to tax a profit or value-
added even if there is no profit or value-added.

Respondents countered that the law was complete, that it left
no discretion to the President, and that it merely charged the
President with carrying out the rate increase once any of the 2
conditions arise.
Respondents manifest that R.A. No. 9337 is the anchor of the
governments fiscal reform agenda. A reform in the value-
added system of taxation is the core revenue measure that will
tilt the balance towards a sustainable macroeconomic
environment necessary for economic growth.


ISSUE:
Is R.A. No. 9337 unconstitutional as there was undue
delegation?





RULING:

It has been said that taxes are the lifeblood of the government.
In this case, it is just an enema, a first-aid measure to
resuscitate an economy in distress. The Court is neither blind
nor is it turning a deaf ear on the plight of the masses. But it
does not have the panacea for the malady that the law seeks to
remedy. As in other cases, the Court cannot strike down a law
as unconstitutional simply because of its yokes.

Constitution allows as under exempted delegation the
delegation of tariffs, customs duties, and other tolls, levies on
goods imported and exported. VAT is tax levied on sales of
goods and services which could not fall under this exemption.
Hence, its delegation if unqualified is unconstitutional.

Legislative power is authority to make a complete law. Thus, to
be valid, a law must be complete in itself, setting forth therein
the policy and it must fix a standard, limits of which are
sufficiently determinate and determinable. No undue
delegation when congress describes what job must be done
who must do it and the scope of the authority given. (Edu v
Ericta) The Secretary of Finance was merely tasked to
ascertain the existence of facts. All else was laid out. It was
mainly ministerial for the secretary to ascertain the facts and
for the president to carry out the implementation for the VAT.
They were agents of the legislative department.
Therefore, there was no delegation but mere implementation of
the law.



Justice Angelina Sandoval Gutierrez in her concurring and
dissenting opinion:

R.A. No. 9337, in granting to the President the stand-by authority to
increase the VAT rate from 10% to 12%, the Legislature abdicated
its power by delegating it to the President. This is constitutionally
impermissible. The Legislature may not escape its duties and
responsibilities by delegating its power to any other body or
authority. Any attempt to abdicate the power is unconstitutional and
void, on the principle that potestas delegata non delegare potest.
In the present case, the President is the delegate of the Legislature,
endowed with the power to raise the VAT rate from 10 % to 12% if
any of the following conditions, to reiterate, has been satisfied: (i)
value-added tax collection as a percentage of gross domestic product
(GDP) of the previous year exceeds two and four-fifths percent (2
4/5%) or (ii) National Government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1 '%).
At first glance, the two conditions may appear to be definite
standards sufficient to guide the President. However, to my mind,
they are ineffectual and malleable as they give the President ample
opportunity to exercise her authority in arbitrary and discretionary
fashion.
That the President's exercise of an authority is practically within her
control is tantamount to giving no conditions at all. I believe this
amounts to a virtual surrender of legislative power to her. It must be
stressed that the validity of a law is not tested by what has been done
but by what may be done under its provisions.