Philippine Supreme Court Jurisprudence > Year 2005 > September 2005 Decisions > CONCURRING AND DISSENTING OPINION : SANDOVAL - GUTIERREZ, J.: G.R. No. 168056, G.R. NO. 168207, G.R. NO. 168461, G.R. NO. 168463 and G.R. NO. 168730 - ABAKADA Guro Party List Officers Samson S. Alcantara, et al. v. The Honorable Executive Secretary Eduard:

SANDOVAL - GUTIERREZ, J.:

Adam Smith, the great 18^th - century political economist, enunciated the dictum that "the subjects of every state ought to contribute to the support of 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.”¹ At no other time this dictum becomes more urgent and obligatory as in the present time, when the Philippines is in its most precarious fiscal position.

At this juncture, may I state that I join Mr. Senior Justice Reynato S. Puno in his Opinion, specifically on the following points:

1. It is "high time to re-examine the test of germaneness proffered in Tolentino;”
   
   
2. The Bicameral Conference Committee "cannot exercise its unbridled discretion," "it cannot create a new law," and its deletion of the "no pass on provision" common in both Senate Bill No. 1950 and House Bill No. 3705 is "unconstitutional."

In addition to the above points raised by Mr. Senior Justice Puno, may I expound on the issues specified hereunder:

There is no reason to rush and stamp the imprimatur of validity to a tax law, R.A. 9337, that contains patently unconstitutional provisions. I refer to Sections 4 to 6 which violate the principle of non-delegation of legislative power. These Sections authorize the President, upon recommendation of the Secretary of Finance, to raise the VAT rate from 10% to 12% effective January 1, 2006, if the conditions specified therein are met, thus:

. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following conditions has been satisfied:

	(i)	Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
	(ii)	National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 �%).

This proviso on the authority of the President is uniformly appended to Sections 4, 5 and 6 of R.A. No. 9337, provisions amending Sections 106, 107 and 108 of the NIRC, respectively. Section 4 imposes a 10% VAT on sales 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.

Petitioners in G.R. NOS. 168056,² 168207³ and 168463⁴ assail the constitutionality of the above provisions on the ground that such stand-by authority granted to the President constitutes: (1) undue delegation of legislative power; (2) violation of due process; and (3) violation of the principle of "exclusive origination." They cited as their basis Article VI, Section 28 (2); Article III, Section 1; and Article VI, Section 24 of the Constitution.


Taxation is an inherent attribute of sovereignty.⁵ It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of government without infringing upon the theory of separation of powers.⁶ The rationale of this doctrine may be traced from the democratic principle of "no taxation without representation." The power of taxation being so pervasive, it is in the best interest of the people that such power be lodged only in the Legislature. Composed of the people's representatives, it is "closer to the pulse of the people and… are therefore in a better position to determine both the extent of the legal burden the people are capable of bearing and the benefits they need.”⁷ Also, this set-up provides security against the abuse of power. As Chief Justice Marshall said: "In imposing a tax, the legislature acts upon its constituents. The power may be abused; but the interest, wisdom, and justice of the representative body, and its relations with its constituents, furnish a sufficient security.”

Consequently, Section 24, Article VI of our Constitution enshrined the principle of "no taxation without representation" by providing that "all… revenue bills… shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments." This provision generally confines the power of taxation to the Legislature.

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.⁸ As Judge Cooley enunciated:

"One of the settled maxims in constitutional law is, that the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority. Where the sovereign power of the state has located the authority, there it must remain; and by the constitutional agency alone the laws must be made until the Constitution itself is changed. The power to whose judgment, wisdom, and patriotism this high prerogative has been entrusted cannot relieve itself of the responsibility by choosing other agencies upon which the power shall be devolved, nor can it substitute the judgment, wisdom, and patriotism of any other body for those to which alone the people have seen fit to confide this sovereign trust."⁹

Of course, the rule which forbids the delegation of the power of taxation is not absolute and inflexible. It admits of exceptions. Retired Justice Jose C. Vitug enumerated such exceptions, to wit: (1) delegations to local governments (to be exercised by the local legislative bodies thereof) or political subdivisions; (2) delegations allowed by the Constitution; and (3) delegations relating merely to administrative implementation that may call for some degree of discretionary powers under a set of sufficient standards expressed by law.¹⁰

Patently, the act of the Legislature in delegating its power to tax does not fall under any of the exceptions.

First, it does not involve a delegation of taxing power to the local government. It is a delegation to the President.

Second, it is not allowed by the Constitution. Section 28 (2), Article VI of the Constitution enumerates the charges or duties, the rates of which may be fixed by the President pursuant to a law passed by Congress, thus:

The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.

Noteworthy is the absence of tax rates or VAT rates in the enumeration. If the intention of the Framers of the Constitution is to permit the delegation of the power to fix tax rates or VAT rates to the President, such could have been easily achieved by the mere inclusion of the term "tax rates" or "VAT rates" in the enumeration. It is a dictum in statutory construction that what is expressed puts an end to what is implied. Expressium facit cessare tacitum.¹¹ This is a derivative of the more familiar maxim express mention is implied exclusion or expressio unius est exclusio alterius. Considering that Section 28 (2), Article VI expressly speaks only of "tariff rates,¹² import¹³ and export quotas,¹⁴ tonnage¹⁵ and wharfage dues¹⁶ and other duties and imposts,¹⁷" by no stretch of imagination can this enumeration be extended to include the VAT.

And third, it does not relate merely to the administrative implementation of R.A. No. 9337.

In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to inquire whether the statute was complete in all its terms and provisions when it left the hands of the Legislature so that nothing was left to the judgment of any other appointee or delegate of the legislature.¹⁸

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.

The two conditions set forth by law would have been sufficient had it not been for the fact that the President, being at the helm of the entire officialdom, has more than enough power of control to bring about the existence of such conditions. Obviously, R.A. No. 9337 allows the President to determine for herself whether the VAT rate shall be increased or not at all. The fulfillment of the conditions is entirely placed in her hands. If she wishes to increase the VAT rate, all she has to do is to strictly enforce the VAT collection so as to exceed the 2 4/5% ceiling. The same holds true with the national government deficit. She will just limit government expenses so as not to exceed the 1 �% ceiling. On the other hand, if she does not wish to increase the VAT rate, she may discourage the Secretary of Finance from making the recommendation.

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.¹⁹


The constitutional safeguard of due process is briefly worded in Section 1, Article III of the Constitution which states that, "no person shall be deprived of life, liberty or property without due process of law.”²⁰

Substantive due process requires the intrinsic validity of the law in interfering with the rights of the person to his property. The inquiry in this regard is not whether or not the law is being enforced in accordance with the prescribed manner but whether or not, to begin with, it is a proper exercise of legislative power.

To be so, the law must have a valid governmental objective, i.e., the interest of the public as distinguished from those of a particular class, requires the intervention of the State. This objective must be pursued in a lawful manner, or in other words, the means employed must be reasonably related to the accomplishment of the purpose and not unduly oppressive.

There is no doubt that R.A. No. 9337 was enacted pursuant to a valid governmental objective, i.e. to raise revenues for the government. However, with respect to the means employed to accomplish such objective, I am convinced that R.A. No. 9337, particularly Sections 4, 5 and 6 thereof, are arbitrary and unduly oppressive.

A reading of the Senate deliberation reveals that the first condition constitutes a reward to the President for her effective collection of VAT. Thus, the President may increase the VAT rate from 10% to 12% if her VAT collection during the previous year exceeds 2 4/5% of the Gross Domestic Product. I quote the deliberation:

Senator Lacson.	Thank you, Mr. President. Now, I will go back to my original question, my first question. Who are we threatening to punish on the imposed condition No. 1 - the public or the President?
Senator Recto	That is not a punishment, that is supposed to be a reward system.
Senator Lacson.	Yes, an incentive. So we are offering an incentive to the Chief Executive.
Senator Recto.	That is right.
Senator Lacson	– in order for her to be able to raise the VAT to 12 %.
Senator Recto.	That is right. That is the intention, yes.
	x x x x x x
Senator Osmena.	All right. Therefore, with the lifting of exemptions it stands to reason that Value-added tax collections as a percentage of GDP will be much higher than… Now, if it is higher than 2.5%, in other words, because they collected more, we will allow them to even tax more. Is that the meaning of this particular phrase?
Senator Recto.	Yes, Mr. President, that is why it is as low as 2.8%. It is like if a person has a son and his son asks him for an allowance, I do not think that he would immediately give his son an increase in allowance unless he tells his son, You better improve your grades and I will give you an allowance. That is the analogy of this.
	x x x x x x
Senator Osmena.	So the gentleman is telling the President, If you collect more than 138 billion, I will give you additional powers to tax the people.
Senator Recto.	x x x We are saying, kung mataas and grade mo, dadagdagan ko an allowance mo. Katulad ng sinabi natin ditto. What we are saying here is you prove to me that you can collect it, then we will increase your rate, you can raise your rate. It is an incentive.21

Why authorize the President to increase the VAT rate on the premise alone that she deserves an "incentive" or "reward”? Indeed, why should she be rewarded for performing a duty reposed upon her by law?

The rationale stated by Senator Recto is flawed. One of the principles of sound taxation is fiscal adequacy. The proceeds of tax revenue should coincide with, and approximate the needs of, government expenditures. Neither an excess nor a deficiency of revenue vis-à-vis the needs of government would be in keeping with the principle.²²

Equating the grant of authority to the President to increase the VAT rate with the grant of additional allowance to a studious son is highly inappropriate. Our Senators must have forgotten that for every increase of taxes, the burden always redounds to the people. Unlike the additional allowance given to a studious son that comes from the pocket of the granting parent alone, the increase in the VAT rate would be shouldered by the masses. Indeed, mandating them to pay the increased rate as an award to the President is arbitrary and unduly oppressive. Taxation is not a power to be exercised at one's whim.


Section 24, Article VI of the Constitution provides:

SEC. 24. All appropriations, 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.

In Tolentino vs. Secretary of Finance,²³ this Court expounded on the foregoing provision by holding that:

"x x x To begin with, it is not the law - but the revenue bill - which is required by the Constitution to ‘originate exclusively in the House of Representatives. It is important to emphasize this, because a bill originating the in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole x x x. At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute -- and not only the bill which initiated the legislative process culminating in the enactment of the law - must substantially be the same as the House Bill would be to deny the Senate's power not only to ‘concur with amendments: but also to ‘propose amendments.' It would be to violate the co-equality of the legislative power of the two houses of Congress and in fact, make the House superior to the Senate."

The case at bar gives us an opportunity to take a second hard look at the efficacy of the foregoing jurisprudence.

Section 25, Article VI is a verbatim re-enactment of Section 18, Article VI of the 1935 Constitution. The latter provision was modeled from Section 7 (1), Article I of the United States Constitution, which states:

"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."

The American people, in entrusting what James Madison termed "the power of the purse" to their elected representatives, drew inspiration from the British practice and experience with the House of Commons. As one commentator puts it:

"They knew the inestimable value of the House of Commons, as a component branch of the British parliament; and they believed that it had at all times furnished the best security against the oppression of the crown and the aristocracy. While the power of taxation, of revenue, and of supplies remained in the hands of a popular branch, it was difficult for usurpation to exist for any length of time without check, and prerogative must yield of that necessity which controlled at once the sword and the purse."

But while the fundamental principle underlying the vesting of the power to propose revenue bills solely in the House of Representatives is present in both the Philippines and US Constitutions, stress must be laid on the differences between the two quoted provisions. For one, the word "exclusively" appearing in Section 24, Article VI of our Constitution is nowhere to be found in Section 7 (1), Article I of the US Constitution. For another, the phrase "as on other bills," present in the same provision of the US Constitution, is not written in our Constitution.

The adverb "exclusively" means "in an exclusive manner.”²⁴ The term "exclusive" is defined as "excluding or having power to exclude; limiting to or limited to; single, sole, undivided, whole.”²⁵ In one case, this Court define the term "exclusive" as "possessed to the exclusion of others; appertaining to the subject alone, not including, admitting, or pertaining to another or others.”²⁶

As for the term "originate," its meaning are "to cause the beginning of; to give rise to; to initiate; to start on a course or journey; to take or have origin; to be deprived; arise; begin or start.”²⁷

With the foregoing definitions in mind, it can be reasonably concluded that when Section 24, Article VI provides that revenue bills shall originate exclusively from the House of Representatives, what the Constitution mandates is that any revenue statute must begin or start solely and only in the House. Not the Senate. Not both Chambers of Congress. But there is more to it than that. It also means that "an act for taxation must pass the House first.” It is no consequence what amendments the Senate adds.²⁸

A perusal of the legislative history of R.A. No. 9337 shows that it did not "exclusively originate" from the House of Representatives.

The House of Representatives approved House Bill Nos. 3555²⁹ and 3705³⁰. These Bills intended to amend Sections 106, 107, 108, 109, 110, 111 and 114 of the NIRC. For its part, the Senate approved Senate Bill No. 1950,³¹ taking into consideration House Bill Nos. 3555 and 3705. It intended to amend Sections 27, 28, 34, 106, 108, 109, 110, 112, 113, 114, 116, 117, 119, 121, 125, 148, 151, 236, 237 and 288 of the NIRC.

Thereafter, on April 13, 2005, a Committee Conference was created to thresh out the disagreeing provisions of the three proposed bills.

In less than a month, the Conference Committee "after having met and discussed in full free and conference," came up with a report and recommended the approval of the consolidated version of the bills. The Senate and the House of Representatives approved it.

On May 23, 2005, the enrolled copy of the consolidated version of the bills was transmitted to President Arroyo, who signed it into law. Thus, the enactment of R.A. No. 9337, entitled "An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, As Amended and For Other Purposes.”

Clearly, Senate Bill No. 1950 is not based on any bill passed by the House of Representatives. It has a legislative identity and existence separate and apart from House Bills No. 3555 and 3705. Instead of concurring or proposing amendments, Senate Bill No. 1950 merely "takes into consideration” the two House Bills. To take into consideration means "to take into account." Consideration, in this sense, means "deliberation, attention, observation or contemplation.³² Simply put, the Senate in passing Senate Bill No. 1950, a tax measure, merely took into account House Bills No. 3555 and 3705, but did not concur with or amend either or both bills. As a matter of fact, it did not even take these two House Bills as a frame of reference.

In Tolentino, the majority subscribed to the view that Senate may amend the House revenue bill by substitution or by presenting its own version of the bill. In either case, the result is "two bills on the same subject.”³³ This is the source of the "germaneness" rule which states that the Senate bill must be germane to the bill originally passed by the House of Representatives. In Tolentino, this was not really an issue as both the House and Senate Bills in question had one subject - the VAT.

The facts obtaining here is very much different from Tolentino. It is very apparent that House Bills No. 3555 and 3705 merely intended to amend Sections 106, 107, 108, 109, 110, 111 and 114 of the NIRC of 1997, pertaining to the VAT provisions. On the other hand, Senate Bill No. 1950 intended to amend Sections 27, 28, 34, 106, 108, 109, 110, 112, 113, 114, 116, 117, 119, 121, 125, 148, 151, 236, 237 and 288 of the NIRC, pertaining to matters outside of VAT, such as income tax, percentage tax, franchise tax, taxes on banks and other financial intermediaries, excise taxes, etc.

Thus, I am of the position that the Senate could not, without violating the germaneness rule and the principle of "exclusive origination," propose tax matters not included in the House Bills.

WHEREFORE, I vote to CONCUR with the majority opinion except with respect to the points above-mentioned.

Endnotes:

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¹ Book V of The Wealth of Nations.

² ABAKADA GURO Party List (Formerly AASJAS), Officers Samson S. Alcantara and Ed Vincent S. Albano.

³ Aquilino Q. Pimentel, Jr., Luisa P. Ejercito-Estrada, Jinggoy E. Estrada, Panfilo M. Lacson, Alfredo S. Lim, Jamby A.S. Madrigal and Sergio R. Osmena III.

⁴ Francis Joseph G. Escudero, Vincent Crisologo, Emmanuel Joel J. Villanueva, Rodolfo G. Plaza, Darlene Antonino-Custodio, Oscar G. Malapitan, Benjamin C. Agarao, Jr., Juan Edgardo M. Angara, Justin Marc SB. Chipeco, Florencio G. Noel, Mujiv S. Hataman, Renato B. Magtubo, Joseph A. Santiago, Teofisto DL. Guingona III, Ruy Elias C. Lopez, Rodolfo Q. Agbayani and Teodoro A. Casino.

⁵Luzon Stevedoring Co. vs. Court of Tax Appeals, L-302332, July 29, 1998, 163 SCRA 647 cited in Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at 7.

⁶Pepsi Cola Bottling Company of the Philippines vs. Municipality of Tanauan, Leyte, G.R. No. L-31156, February 27, 1976, 69 SCRA 460. See also National Power Corporation vs. Albay, G.R. No. 87479, June 4, 1990, 186 SCRA 198.

⁷ Bernas, SJ, The 1987 Constitution of the Republic of the Philippines, A Commentary, 1996 Edition, at 687.

⁸People vs. Vera, 65 Phil. 56 (1937).

⁹ Cooley on Constitutional Limitations, 8th ed., Vol. I, p. 224.

¹⁰ Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at 8-9.

¹¹Espiritu vs. Cipriano, G.R. No. 32743, February 15, 1974, 55 SCRA 533, 538, citing Sutherlands Statutory Construction, Vol. 2, Section 4945, p. 412.

¹² A tariff is a list or schedule of articles on which a duty is imposed upon their importation, with the rates at which they are severally taxed, it is also the custom or duty payable on such articles. (Black's Law Dictionary [6^th Edition], 1990, at 1456).

¹³ An import quota is a quantitative restriction on the importation of an article into a country, and is a remedy available to the executive department upon its determination that an imported article threatens serious injury to a domestic industry. (Id. at 755).

¹⁴ An export quota is an amount of specific goods which may be exported and are set by the government for purposes of national defense, economic stability and price support. (Id. at 579).

¹⁵ Tonnage dues are duties laid upon vessels according to their tonnage or cubical capacity. (Id. at 1488).

¹⁶ Wharfage dues are generally understood to be the fees paid for landing goods upon or loading them from a wharf. It is a charge for the use of the wharf and may be treated either as rent or compensation. (Marine Lighterage Corp. vs. Luckenbach S.S. Co., 119 Misc. 612, 248 NYS 71).

¹⁷ A duty is generally understood to be a tax on the importation or exportation of goods, merchandise and other commodities, while imposts are duties or impositions levied for various reasons. (Crew Levick Co. vs. Commonwealth of Pennsylvania, 245 US 292, 62 L. Ed. 295, 38 S. Ct. 126).

¹⁸People vs. Vera, supra.

¹⁹Walter E. Olsen & Co. vs. Aldanese and Trinidad (1922), 43 Phil., 259; 12 C. J., p. 786.

²⁰ Cruz, Constitutional Law, 1987 Edition, at 101.

²¹ TSN, May 10, 2005, Annex ‘E" of the Petition in G.R. No. 168056.

²² Vitug, Acosta, Tax Law and Jurisprudence, Second Edition, at 3.

²³ G.R. No. 115455, August 25, 1994, 235 SCRA 630.

²⁴ Merriam-Webster's Third New International Dictionary (1993 Ed.), at 793.

²⁵Id.

²⁶City Mayor vs. The Chief of Philippine Constabulary, G.R. No. 20346, October 31, 1967, 21 SCRA 665, 673.

²⁷ Merriam-Webster's Third New International Dictionary (1993 Ed.), at 1592.

²⁸ Davies, Legislative Law and Process, (2d. Ed. 1986), at 89.

²⁹ Entitled "An Act Restructuring the Value-Added Tax, Amending for the Purpose Sections 106, 107, 108, 110 and 114 of the National Internal Revenue Code of 1997, As amended, and For Other Purposes." Approved on January 27, 2005.

³⁰ Entitled "An Act Amending Sections 106, 107, 108, 109, 110 and 111 of the National Internal Revenue Code of 1997, As Amended, and For Other Purposes." Approved on February 28, 2005.

³¹ Entitled "An Act Amending Sections 27, 28, 34, 106,108, 109,110, 112, 113, 114, 116, 117, 119, 121, 125, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, As Amended, and For Other Purposes." Approved on April1 3, 2005.

³² Merriam-Webster's Third New International Dictionary (1993 Ed.), at 484.

³³Supra.