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TOLENTINO V SECRETARY OF FINANCE 235 SCRA 630, 1994

A Case Report

Submitted by: MA. BERNA JOYCE M. SILVANO 3D

Submitted to: ATTY. NICASIO C. CABANEIRO

July 9, 2012

TOLENTINO V SECRETARY OF FINANCE 235 SCRA 630, 1994

INTRODUCTION

In this case are motions seeking reconsideration of the decision dismissing the petitions filed 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 related cases are the following:

1. G.R. No. 115455 October 30, 1995, ARTURO M. TOLENTINO, petitioner,


vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

2. 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.

3. 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.

4. 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.

5. G.R. No. 115754 October 30, 1995, CHAMBER OF REAL ESTATE AND BUILDERS
ASSOCIATIONS, INC., (CREBA), petitioner, vs. INTERNAL REVENUE, respondent. THE COMMISSIONER OF

6. 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.

7. G.R. No. 115852 October 30, 1995, PHILIPPINE AIRLINES, INC., petitioner,
vs. THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.

8. 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.

9. 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.

Parties in the Case For better appreciation of this case the background of some of the parties deserves a glance: Arturo Modesto Tolentino (September 19, 1910 August 2, 2004) was a member of the senate while this case was being tried. He was a prominent political figure who briefly held the position of vice president in 1986. He is better known as the father of the Philippine archipelagic doctrine and expert on the Law of the Sea. He became part of the House of Representative and the Senate. In 1992, he successfully ran for the Senate placing on number 18 under the Nationalist People's Coalition. However, his bid for reelection in 1995 was not successful and he retired from politics.1 Teofisto Tayko Guingona, Jr. (born July 4, 1928 in San Juan, Rizal) was the Vice President of the Philippines from 2001 to 2004 during the first term of Gloria Macapagal-Arroyo. Tito was a delegate to the 1971 Constitutional Convention and when Martial Law was declared in 1972, he staunchly resisted the abuses of the regime, serving as a human rights lawyer and defender of the oppressed. He founded SANDATA and became the honorary chairman of BANDILA, two mass-based organizations dedicated to social and economic reforms. Because of his opposition to martial rule he was jailed twice, first in 1972 and then in 1978. When the dictator was ousted, the new President appointed Tito as Chairman of the Commission on Audit where he gained renown as a no-nonsense graft buster. He did not stay long in the Commission on Audit, however, for he was drafted to run for a Senate seat. He became part of the Senate but in this case he acted in his capacity as Executive Secretary.2
1 2

Arturo Tolentino. Wikipedia. http://en.wikipedia.org/wiki/Arturo_Tolentino. Teofisto Guingona, Jr. Wikipedia. http://en.wikipedia.org/wiki/Teofisto_Guingona,_Jr..

Raul Sagarbarria Roco (October 26, 1941 August 5, 2005) was a Senator of the country during this case. He was the standard-bearer of Aksyon Demokratiko, which he founded in 1997 as a vehicle for his presidential bids in 1998 and 2004. He was a former senator and the Secretary of the Department of Education under the presidency of Gloria Macapagal-Arroyo. He had a strong following among young voters in the Philippines, due to his efforts to promote honesty and good governance. After he passed the bar in 1965, Roco lobbied for the holding of a Constitutional Convention that aimed to amend the 1935 Philippine Constitution. He campaigned for a seat to represent his district inCamarines Sur. He won and thus became convention's youngest Bicolano delegate. From 1983 to 1985, he served as president of the Integrated Bar of the Philippines. While there, he was on the legal staff of the late Philippine Senator Benigno "Ninoy" Aquino, and he drafted the Study Now, Pay Later law. Alongside his work in law, he has also served as a film producer. In 1974, he was the executive producer of the late film director Lino Brocka's movie Tinimbang Ka Ngunit Kulang; this film won six FAMAS awards that year, including best film. Among all legislators of the Eighth Congress of the Philippines (which lasted from 19871992), he was adjudged by the Ford Foundation and the University of the Philippines Institute of Strategic and Development Studies as first in over-all performance. Roco was elected to the Senate in 1992 and 1995 serving until 2001, making many contributions that led many to recognize him as an "outstanding senator".3 Jovito "Jovy" Reyes Salonga (born June 22, 1920) was continuing his work in public service through Kilosbayan (People Action) when this case was being tried. Kilosbayan is a forum for raising political consciousness and citizens' participation in governance is a Filipino nationalist politician and lawyer, as well as a leading opposition leader during the Marcos regime from 1972, when Ferdinand Marcosdeclared martial law, until 1986, when Marcos was deposed as a result of a bloodless revolution (see People Power Revolution). Salonga was the 14th President of the Senate of the Philippines serving from 1987 to 1992.4 The Presiding Judge The Judge Presiding in this case is Justice Jose Catral Mendoza. A native of Lipa City, Justice Jose Catral Mendoza was born on August 13, 1947 to Col. Ibarra S. Mendoza, a retired PAF officer, and Teresa Catral Mendoza, a mother engaged in poultry-raising. He is the eldest of their eight children. Of his seven siblings, two are priests, two PAF generals, one PAL pilot, one a parish assistant, and the only girl, a PITC Vice-President. A law degree holder from the San Beda College of Law, he is married to the former Livia Rojas, with whom he has a son, Barleon Rojas Mendoza. After passing the 1971 Bar Examinations, he engaged in private practice and served as a legal officer of the Philippine Banking Corporation, the Manila Electric Co., and the Gokongwei Group of Companies. Before joining the Judiciary as Research Attorney in the Court of Appeals in 1977, he also served as Senior Consular Investigator in the United States Embassy. After three years, he re-entered the private sector and worked as an Associate of the Alampay Alvero Alampay Law Office before rejoining the Judiciary anew in the Supreme Court in 1985, first in the Office of Justice Nestor B. Alampay and later in that of Justice Abdulwahid A. Bidin.

3 4

Raul Roco. Wikipedia. http://en.wikipedia.org/wiki/Raul_Roco. Jovito Salonga. Wikipedia. http://en.wikipedia.org/wiki/Jovito_Salonga.

In 1989, Justice Mendoza became a member of the Bench when he was appointed Presiding Judge of Branch 26, RTC, Sta. Cruz, Laguna. In 1992, he was named Executive Judge of that station. After almost five years in the province, in 1994, he was transferred as the Presiding Judge of Branch 219, RTC, Quezon City, which was designated as a special court for heinous crimes. For his fair handling of the sensational cases assigned to him, he was nominated by the IBP, Quezon City, for the Judicial Excellence Award. The Volunteers Against Crime and Corruption (VACC) and the Crusade Against Violence (CAV) recognized and commended him on how he was dispensing justice. In 2002, the VACC bestowed on him the Outstanding Judge award. In 2003, he was appointed as the stations Executive Judge. On July 4, 2003, he was appointed Associate Justice of the Court of Appeals. He is most remembered for penning the decision on the reinstatement of the criminal charges against Dante Tan, and for writing the decision granting the petition for a writ of amparo filed by the families of University of the Philippines students Sherlyn Cadapan and Karen Empeo, who were abducted allegedly by members of the military way back in 2006.1 History Update on EVAT Laws The Extended Value Added Tax (EVAT) Law or Republic Act. 9337 was enacted to 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. It was begun and held in Metro Manila, on Monday July 26, 2004. This Act which is a consolidation of House Bill No. 3555, House Bill No. 3705 and Senate Bill No. 1950 was finally passed by the House of Representatives and the Senate on May 11, 2005 and May 10, 2005, respectively. But it was imposed a temporary suspension by the Supreme Court a few hours after it went into effect on July 1 because of a petition from opposition lawmakers questioning its legality. As a response to this allegation, Bunye emphasized that the measure "underwent rigorous and tight scrutiny in the House (of Representatives) and in the Senate" before it was finally enacted and signed by President Gloria Macapagal-Arroyo into law as Republic Act No. 9337 last May 24. The suspension, however, was considered as a victim of the rift between the administration and the political opposition over the corruption and election fraud charges against President Arroyo. This delay in the EVAT Law, according to a Business World Research article, worsened the budget deficit; foregone revenues are estimated to be around P5 billion. Aside from the lost revenues, it also resulted in a credit rating downgrade from agencies such as Moodys, S&P, and Fitch. Following almost four-hour deliberations, the highest tribunal released the decision around 2 p.m. of October 18, 2005 after months of suspension, allowing President Gloria Macapagal-Arroyo to raise the sales tax rate from 10 percent to 12 percent.venue-increase measure. The law was enforced on November 1, 2005.

To increase awarness on the law tax campaigns and other events were organized in different parts of the country. Bacolod EVAT awareness roardshow was kicked off in January 13, 2006. Finance Secretary Margarito Teves led top government officials from various government agencies in explaining features of EVAT and its impact on the prices of basic commodities The Expanded value-added tax (E-VAT) law was instituted as a measure to bridle the rising foreign debt of the Philippines and to improve government services such as education, health care, social security, and and transportation. It forms part of the package of measures Malacaang had endorsed to help shore up the governments fiscal position and reverse the credit rating downgrade certain rating agencies had given the Philippines. This law was made on account that the more taxed a government can collect, the more services and programs of the government can be implemented as infrastructure projects. The EVAT law granted President Arroyo the stand-by authority to raise the tax from the current 10 percent to 12 percent under certain conditions. This would help in increasing government funds and helps alleviate government deficit so that a inflation rate and unemployment can be overcome. The president stated that the P120 billion expected to be generated a year by the measure represents an unprecedented revenue increase in the countrys fiscal history. President Gloria Macapagal Arroyo stressed that this law may entail sacrifices in the short term due to the tax increase imposed on sectors of society but its long-term benefits for the country and the Filipino people will be immeasurable and far-reaching in the form of more jobs and livelihood opportunities, better social services, more infrastructures, less debt, and more and better financing for rural programs. This is part of the steps undertaken by the Arroyo government to pave the way to for the plan to build a strong Republic "that will make the Philippines a first world country in 20 years with a permanent environment conducive to sustain wealth creation." The International Monetary Fund (IMF) stressed the importance of the EVAT law to reduce fiscal deficit of the Philippines. Yet they were at the same time concerned of the delay that was caused by the appeal made to the Supreme Court regarding its implementation. The IMF suggested that other alternative revenue raising measures be held on standby in case there emerges problems with its implementation. On the other hand, despite the nod of the Supreme Court, some lawmakers after still continued to study a proposal to delay the enforcement of the EVAT on power and oil, which is expected to make life tougher for Filipinos. The new tax measure was expected to bring the government an extra 2 billion-3 billion pesos (36 million to 54 million US dollars) in monthly revenues in 2004, which can ease the deteriorating budget deficit and national debts dragged by rising oil price and consistent political turbulence. The government expects at least 80 billion pesos to be resulted from the law the succeeding year, helping reduce the country's budget deficit to 125 billion pesos, or 2.1 percent of the gross domestic product.5

EVAT: A Brief History and Rationale. http://evat-atenista.blogspot.com/2007/09/brief-history-andrationale.html. September 30, 2007.

IMPORTANCE

STATEMENT OF THE FACTS

CLAIMS OF THE PARTIES

STATEMENT OF THE ISSUES

1. Whether or not R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI Sec. 24 of the Constitution. 2. Whether or not R.A. No. 7716 is violative of press freedom and religious freedom under Art. III Secs. 4 and 5 of the Constitution. 3. Whether or not there is violation of the rule on taxation under Art. VI Sec. 28 (1) of the Constitution. 4. Whether or not there is an impairment of obligation of contracts under Art. III Sec. 10 of the Constitution. 5. Whether or not there is violation of the due process clause under Art. III Sec. 1 of the Constitution.

THE RULING 1. While Art. VI Sec. 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. 2. Since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The VAT 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. 3. 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." 4. 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. 5. On the alleged violation of due process, hardship to taxpayers alone is not 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, Sec. 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. DISCUSSION AND CONCLUSION LIST OF CITED CASES BIBLIOGRAPHY

Arturo Tolentino. Wikipedia. http://en.wikipedia.org/wiki/Arturo_Tolentino. Teofisto Guingona, Jr. Wikipedia. http://en.wikipedia.org/wiki/Teofisto_Guingona,_Jr.. Raul Roco. Wikipedia. http://en.wikipedia.org/wiki/Raul_Roco. Jovito Salonga. Wikipedia. http://en.wikipedia.org/wiki/Jovito_Salonga.
APPENDIX A. Full Text of the Case

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.

RESOLUTION

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 PPI's 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 Senate's 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 Assembly's 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 Senate's 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' (Kilosbayan's and PAL's) 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 momentwas 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 yeasand 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 Senate's acceptance of the President's 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 people's 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 public's 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 copiesthereof 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 Jehovah's Witnesses, in connection with the latter's 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 petitioner's 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 CREBA's 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 petitioner's members have not even been assessed the VAT. Petitioner's 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 court's "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. Petitioner's 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 petitioner's assertion that the government's 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, petitioner's 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). CUP's 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.

B. R.A. No. 7716 REPUBLIC ACT NO. 7716

AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASED 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. SECTION 1. Section 99 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary "Sec. 99. Persons Liable. Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be liable to the value-added tax (VAT) imposed in Sections 100 to 102 of this Code. chan robles virtual law library "The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rules likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of this Act. chan robles virtual law library "The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic activity, including transactions incident thereto, by any person regardless of whether or not the person engaged therein is a non-stock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.chanrobles virtual law library "The rules of regularity, to the contrary, notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business." Sec. 2. Section 100 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 100. Value-added-tax on sale of goods or properties. (a) Rate and base of tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods, or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.chanrobles virtual law library chan robles virtual law library "(1) The term 'goods or properties' shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: "(A) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; chan robles virtual law library

"(B) The right or privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; chan robles virtual law library "(C) The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment; "(D) The right or the privilege to use motion picture films, films, tapes and discs; and "(E) Radio, television, satellite transmission and cable television time. "The term 'gross selling price' means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, one such goods or properties shall form part of the gross selling price. "(2) The following sales by VAT-registered persons shall be subject to 0%:chanroblesvirtualawlibrary

"(A) Export sales. The term `export sales' means: chan robles virtual law library "(i) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); chan robles virtual law library "(ii) Sale of raw materials or packing materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral Pilipinas (BSP);chan robles virtual law library "(iii) Sale of raw materials of packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; "(iv) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and "(v) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws. "(B) Foreign currency denominated sale. The phrase `foreign currency denominated sale' means sale to a nonresident of goods, except those mentioned in Sections 149 and 150, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). "(C) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero-rate. "(b) Transactions deemed sale. The following transactions shall be deemed sale:

"(l) Transfer, use, or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business.chanrobles virtual law library chan robles virtual law library "(2) Distribution or transfer to: "(A) Shareholders or investors as share in the profits of the VAT-registered persons; or chan robles virtual law library "(B) Creditors in payment of debt "(3) Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. chan robles virtual law library "(4) Retirement from or cessation of business, with respect to investment of taxable goods existing as of such retirement or cessation.chanrobles virtual law library "(c) Changes in cessation of status of a VAT-registered person. The tax imposed in paragraph (a) of this section shall also apply to goods disposed of or existing as of a certain date if under circumstances to be prescribed in regulations to be promulgated by the Secretary of Finance, the status of a person as a VAT-registered person changes or is terminated.chanrobles virtual law library chan robles virtual law library "(d) Determination of the tax. (1) The tax shall be computed by multiplying the total amount indicated in the invoice by 1/11. chan robles virtual law library "(2) Sales returns, allowances and sales discounts. The value of goods or properties sold and subsequently returned or for which allowances were granted by a VATregistered person may be deducted from the gross sales or receipts for the quarter in which a refund is made or a credit memorandum or refund is issued. Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event may be excluded from the gross sales within the same quarter it was given.chanrobles virtual law library "(3) Authority of the Commissioner to determine the appropriate tax base. The Commissioner shall, by regulations, determine the appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods or properties under paragraph (b) hereof, or where the gross selling price is unreasonably lower than the actual market value. Sec. 3. Section 102 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 102. Value-added tax on sale of services and use or lease of properties. (a) Rate and base of tax. There shall be levied, assessed and collected, a value-added tax equivalent to 10% of gross receipts derived from the sale or exchange of services, including the use or lease of properties. chan robles virtual law library

chan robles virtual law library "The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, models, rest houses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; landing investors; operators of taxicabs; utility cars for rent or hire driven by the lessees (rent-a-car companies), tourist buses; and other common carriers by land, air, and sea relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 117 of this Code; services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances) including surety, fidelity and indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase `sale or exchange of services' shall likewise include:chanroblesvirtualawlibrary "(1) The lease or the use of or the right privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; chan robles virtual law library "(2) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; chan robles virtual law library "(3) The supply of scientific, technical, industrial or commercial knowledge or information; "(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3); or "(5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery, or other apparatus purchased from such nonresident person; "(6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; "(7) The lease of motion picture films, films, tapes and discs; and "(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television time.

"Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines. chan robles virtual law library "The term 'gross receipts' means the total amount of money or its equivalent representing the contract price compensation, service fee, rentals or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax. "(b) Transactions subject to zero-rate. The following services performed in the Philippines by VAT-registered persons shall be subject to 0%: "(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). chan robles virtual law library chan robles virtual law library "(2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).chanrobles virtual law library chan robles virtual law library "(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero rate.chanrobles virtual law library "(4) Services rendered to vessels engaged exclusively in international shipping; and "(5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production. "(c) Determination of the tax. The tax shall be computed by multiplying the total amount indicated in the official receipt by 1/11." Sec. 4. Section 103 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 103. Exempt transactions. The following shall be exempt from the value-added tax:

"(a) Sale of nonfood agricultural products; marine and forest products in their original state by the primary producer or the owner of the land where the same are produced; chan robles virtual law library "(b) Sale of cotton and cotton seeds in their original state; and copra; chan robles virtual law library

"(c) Sale or importation of agricultural and marine food products in their original state, except importation of meat, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor.chan robles virtual law library "Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping. Polished and/or husked rice, corn grits, locally produced raw cane sugar and ordinary salt shall be considered in their original state: "(d) State or importation of fertilizers, seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty foods for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets); "(e) Sale or importation of petroleum products (except lubricating oil, processed gas, grease wax, and petrolatum) subject to excise tax imposed under Title VI; "(f) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products subject to excise tax, except lubricating oil, processed gas, grease, wax, and petrolatum. "(g) Importation of passenger and/or cargo vessels of more than five thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator thereof; "(h) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines; "(i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessels, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide; "(j) Services subject to percentage tax under Title V; "(k) Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar; "(l) Medical, dental, hospital and veterinary services except those rendered by professionals; "(m) Educational services rendered by private educational institutions, duly accredited by the Department of Education Culture and Sports, and those rendered by government educational institutions;

"(n) Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services performed for the production of such works; "(o) Services rendered by individual pursuant to an employer-employee relationship; "(p) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; chan robles virtual law library "(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, and 1950, and non-electric cooperatives under Republic Act No. 6938, or international agreements to which the Philippines is a signatory; "(r) Export sales by persons who are not VAT-registered; "(s) Sale of real properties are primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws; "(t) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount prescribed in regulation to be promulgated by the President upon the recommendation by the Secretary of Finance which shall not be less than Four hundred eighty thousand pesos (P480,000.00) or more than Seven hundred twenty thousand pesos (P720,000.00) subject to tax under Section 112 of this Code. "The foregoing exemptions to the contrary notwithstanding any person whose sale of goods or properties or services which are otherwise not subject to VAT, but who issues a VAT invoice or receipt thereof shall, in addition to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Section 100 or 102 without the benefit of input tax credit, and such tax shall not, also be recognized as input tax credit to the purchaser under Section 104, all of this Code." Sec. 5. Section 104 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 104. Tax Credits. (a) Creditable input tax. Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 108 hereof on the following transactions shall be creditable against the output tax:chanroblesvirtualawlibrary "(1) Purchase or importation of goods: "(A) For sale; or chan robles virtual law library chan robles virtual law library "(B) For conversion into or intended to form part of a finished product for sale including packing materials; or chan robles virtual law library "(C) For use as supplies in the course of business; or "(D) For use as materials supplied in the sale of service; or

"(E) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts. "(2) Purchase of services on which a value-added tax has been actually paid.chanrobles virtual law library "The input tax on domestic purchase of goods or properties shall be creditable: "(AA) To the purchaser upon consummation of sale and on importation of goods or properties; chan robles virtual law library "(BB) To the importer upon payment of the value-added tax prior to the release of the good from the custody of the Bureau of Customs. chan robles virtual law library chan robles virtual law library "However, in the case of purchase of services, lease or use of properties the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. "A VAT-registered person who is also engaged in transactions not subject to the valueadded tax shall be allowed input tax credit as follows: "(A) Total input tax which can be directly attributed to transactions subject to valueadded tax; and chan robles virtual law library "(B) A ratable portion of any input tax which cannot be directly attributed to either activity. chan robles virtual law library "The term 'input tax' means the value-added tax due from or paid by a VAT-registered persons in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 135 of this Code. "The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 107 of this Code. "(b) Excess output or input tax. If at the end of the any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenues taxes, subject to the provisions of Section 106. chan robles virtual law library "(c) Determination of creditable input tax. The sum of the excess input tax carried over from the preceding month or quarter and the input tax creditable to a VAT-registered person during the taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for value-added tax and other adjustments, such as purchase returns or allowances and input tax attributable to exempt sale. chan robles virtual law library

"The claim for tax credit referred to in the foregoing paragraph shall include not those filed with the Bureau of Internal Revenue (BIR) but also those filed with the other government agencies, such as the Board of Investments (BOI) and the Bureau of Customs (BOC)." chan robles virtual law library chan robles virtual law library Sec. 6. Section 106 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary "Sec. 106. Refunds or tax credits of creditable input tax. (a) Any VAT-registered person, whose sales are zero-rated or effectively zero-rated, may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 100(a)(2)(A)(i), (ii) and (b) and Section 102(b)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP). Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. "(b) Capital goods. A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods importer or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years, after the close of the taxable quarter when the importation or purchase was made.chanrobles virtual law library chan robles virtual law library "(c) Cancellation of VAT-registration. A person whose registration has been cancelled due to retirement from a cessation of business, or due to changes in or cessation of status under Section 100(c) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which may be used in pursuant of his other internal revenues taxes. "(d) Period within which refund or tax credit of input taxes shall be made. In proper cases, the Commissioner shall grant a refund or issue the tax credit for creditable input taxes within sixty (60) days from the date of submission of complete documents in support of the application filed in accordance with sub-paragraphs (a) and (b) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the sixty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals.

"(c) Manner of giving refund. Refund shall be made upon warrants drawn by the Commissioner or by his duly authorized representative without the necessity of being countersigned by the Chairman Commission on Audit, the provisions of the revised Administrative Code, to the contrary notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the Commission on Audit." Sec. 7. Section 107 of the National Internal Revenue Code, as amended is hereby further amended to read as follows: "Sec. 107. Registration of value-added taxpayers. (a) In General. Any person subject to a value-added tax under Sections 100 and 102 of this Code shall register with the appropriate Revenue District Officer and pay an annual registration fee in the amount of One thousand pesos (P1,000.00) for every separate or distinct establishment or place of business and every year thereafter on or before the last day of January. Any person just commencing a business subject to the value-added tax must pay the fee before engaging therein.chan robles virtual law library chan robles virtual law library "A person who maintains a head or main office and branches in different places shall register with the Revenue District Office which has jurisdiction over the place wherein the main or head office is located. However, the fee shall be paid to the Revenue District Officer, collection agent, authorized treasurer of the municipality where each place of business or branch is situated. chan robles virtual law library "(b) Persons commencing business. Any person who expects to realize gross sales or receipts subject to value-added tax in excess of the amount prescribed under Section 103(t) of this Code for the next 12-month period from the commencement of the business shall, within thirty (30) days before the start of the said business, register with the Revenue District Officer who has jurisdiction over his principal place of business and shall pay the annual registration fee prescribed in the preceding paragraph. "(c) Persons becoming liable to the value-added tax. Any person whose gross sales or receipts in any 12-month period exceeds the amount prescribed under Section 103(t) of this Code for exemption from the value-added tax shall register and pay the annual registration fee prescribed in paragraph (a) of this section within thirty (30) days after the end of the last month of that period, and shall be liable to the value-added tax commencing from the first day of the month following his registration. "(d) Optional registration of exempt person. Any person whose transactions are exempt from value-added tax under Section 103(t) of this Code, or any person whose transactions are exempt from value-added tax under Section 103(a), (b), (c) and (d) of this Code with respect to his export sales only, may apply for registration as a VAT-registered person not later than ten (10) days before the beginning of the taxable quarter and shall pay the annual registration fee prescribed in sub-paragraph (a) of this section. "In any case, the Commissioner may, for administrative reason, deny any application for registration.

"For purposes of this Title, any person registered in accordance with the provision of this section shall be referred to as `VAT-registered person.' Each VAT-registered person shall be assigned only one taxpayer's identification number. "(c) Cancellation of Registration. The registration of any person who ceases to be liable to the value-added tax shall be cancelled by the Commissioner upon filing of an application for cancellation of registration. Any person who opted to be registered under paragraph (d) of this section may, under regulation of the Secretary of Finance, apply for cancellation of such registration." Sec. 8. Section 108 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 108. Invoicing and accounting requirements for VAT-registered persons. (a) Invoicing requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 238, the following information shall be indicated in the invoice or receipt: "(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); andchan robles virtual law library chan robles virtual law library "(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax.chanrobles virtual law library "(b) Accounting requirements. Notwithstanding the provisions of Section 223, all persons subject to the value-added tax under Sections 100 and 102 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance." Sec. 9. Section 110(c) of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary "(c) Withholding of Creditable Value-Added Tax. The government or any of its political subdivision, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of its purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 100 and 102 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installments payment which shall be creditable against the value-added tax liability of the sellers on contractor: Provided, however, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent

(10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent." Sec. 10. Section 112 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 112. Tax on persons exempt from value-added tax (VAT). Any person whose sales or receipts are exempt under Section 103(t) of this Code from the payment of valueadded tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) upon the effectivity of this Act and four percent (4%) two (2) years thereafter, of his gross quarterly sales or receipts." Sec. 11. Section 115 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary

"Sec. 115. Percentage tax on carriers and keepers of garages. Keepers of garages, and common carriers by land, air or water for the transport of passengers, except owners of bancas, and owners of animal-drawn two-wheeled vehicles, shall pay a tax equivalent to three per centum (3%) of their quarterly gross receipts. "The gross receipts of common carriers derived from their incoming and outgoing freight shall not be subjected to the local taxes imposed under Republic Act No. 7160, otherwise known as the Local Government Code of 1991.chanrobles virtual law library "In computing the percentage tax provided in this Section, the following shall be considered the minimum quarterly gross receipts in each particular case:chanroblesvirtualawlibrary "Jeepney for hire 1. Manila and other cities P2,400.00 chan robles virtual law library 2. Provincial 1,200.00 "Public utility bus Not exceeding 30 passengers P3,600.00 chan robles virtual law library Exceeding 30 but not exceeding 50 passengers 6,000.00 Exceeding 50 passengers 7,200.00 "Taxis 1. Manila and other cities P3,600.00 2. Provincial 2,400.00 Car for hire (w/ chauffeur) 3,000.00 Car for hire (w/one chauffeur) 1,800.00"

Sec. 12. Section 117 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 117. Tax on franchises. Any provision of general or special law to the contrary notwithstanding there shall be levied, assessed and collected in respect to all franchises on electric, gas and water utilities a tax of two (2%) on the gross receipts derived from the business covered by the law granting the franchise. chan robles virtual law library "The grantee shall file the return with, and pay the tax due thereon to, the Commissioner of Internal Revenue or his duly authorized representative in accordance with the provisions of Section 125 of this Code and the return shall be subject to audit by the Bureau of Internal Revenue, any provision of any existing law to the contrary notwithstanding." chan robles virtual law library Sec. 13. The first paragraph of Section 121 of this Code is hereby further amended to read as follows: "Sec. 121. Tax on Life Insurance Premium. There shall be collected from every person, company, or corporation (except purely cooperative companies or associations) doing life insurance business of any sort in the Philippines a tax of five per centum (5%) of the total premium collected, whether such premiums are paid in money, notes, credits or any substitute for money, but premiums refunded within six months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a nonresident, if any tax on such premium is imposed by the foreign country where the branch is established; nor upon premiums collected or received on account of any reinsurance, if the insured of personal insurance resides against covered property located outside the Philippines, if any tax on such provisions is imposed by the foreign country where the original insurance has been issued or perfected; nor upon that portion of the premiums collected or received by the insurance companies on variable contracts (as defined in Sec. 232(2) of Presidential Decree No. 612), in excess of the amounts necessary to insure the lives of the variable contract workers." Sec. 14. Section 236 of the National Internal Revenue Code as amended, is hereby further amended to read s follows: "Sec. 236. Indication of taxpayer identification number (TIN). For tax identification purposes, any person required under the authority of this Code, to make, render, or file a return, statement, or a document, shall be supplied with or assigned a taxpayer

identification number (TIN) which shall be indicated on such return, statement or document.chanrobles virtual law library chan robles virtual law library "Any person who shall secure more than one TIN or who fails to indicate his correct TIN as required in the foregoing paragraph, shall be criminally liable under the provisions of Section 274 of this Code." Sec. 15. Section 237 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 237. Registration of name or style with the revenue district officer of collection agent. Every person, other than persons required to the registration under the provisions of Section 107 engaged in any business shall, on or before the commencement of his business, or whenever he transfers to another revenue district, register with the Revenue District Officer concerned within 10 days from the commencement of business or transfer and shall pay the annual registration fee in the amount of one thousand pesos (P1,000.00) for every separate or distinct establishment or place of business and every year thereafter on or before the last day of January. The fee shall be paid to the Revenue District Officer, collection agent, authorized treasurer of the municipality where each place of business or branch is situated. In cities or municipalities where no revenue district officer is stationed, such person shall register and pay the fee prescribed herein with the collection agent. The registration shall contain his name or style, place of residence, business, the place where such business is carried on and such other information as may be required by the Commissioner in the form prescribed therefor. In the case of a firm, the names and residences of the various persons consisting the same shall also be registered. The Commissioner, after taking into consideration the volume of sales, financial condition and other relevant factors, may require the registrant to guarantee the payment of his taxes by way of advance payment, or the posting or filing of a security, guarantee or collateral acceptable to the Commissioner." Sec. 16. Section 238 of the National Internal Revenue Code, as amended is hereby further amended to read as follows: "Sec. 238. Issuance of receipts or sales or commercial invoices. All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at P25.00 or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however,That in the cases of sales, receipts or transfers in the amount of P100.00 or more, or, regardless of amount, where the sales or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or, where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices

shall be issued which shall show the name, business style, if any, and address of the purchaser, customer, or client: Provided, further, That where the purchaser is a VATregistered person, in addition to the information herein required, the invoice or receipt shall further show the taxpayer's identification number of the purchaser. chan robles virtual law library "The original of each receipt of invoices shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period. chan robles virtual law library "The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this section." Sec. 17. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services. The value-added tax shall be levied assessed and collected on the following, two (2) years after the effectivity of this Act: (a) Services performed in the exercise of profession or calling subject to the professional tax under the Local Government Code or Republic Act No. 7160, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors; and professional athletes; chan robles virtual law library (b) Services rendered by banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions; (c) Freight services rendered by international cargo vessels; and (d) The lease or use of sports facilities and equipment by amateur players, as provided under Republic Act No. 6847, except sports facilities and equipment which are exclusively or mainly for the private use of shareholders or members of the club or organization which owns or operates such sports facilities and equipment. Prior to their inclusion in the coverage of the value-added tax, the above services shall continue to pay the applicable tax prescribed under the present provisions of the National Internal Revenue Code, as amended. chan robles virtual law library However, when public interest so requires, the President, taking into account the impact on the prices of goods and services, may, upon the recommendation of the Secretary of Finance, exclude any of the above services from the coverage of the value-added tax: Provided, however,That in the event of the exclusion of any of the above services the existing applicable tax under the provisions of the National Internal Revenue Code, as

amended, shall continue to be paid on the services so excluded.chanrobles virtual law library Sec. 18. Tax Administration Development Fund. For the effective implementation of this Act, there is hereby created a Tax Administrative Development Fund to be sourced from five percent (5%) of the increase in value-added tax collectors for 1995 over that of the immediately proceeding year and annually thereafter for a period of four (4) years five percent (5%) of the increase over the collection of the preceding year. Such amount which shall be retained by the Bureau of Internal Revenue shall be considered receipts automatically appropriated for the first year. Disbursements from this fund shall be subject to such rules and guidelines as may be promulgated by the Department of Finance upon recommendation of the Commissioner of Internal Revenue. These funds shall not be used for the purchase of vehicles, the payment of salaries and incentives, creation of regular positions, and construction of buildings and offices. Sec. 19. Rules and Regulations. For the effective implementation of this Act, the Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations within ninety (90) days from effectivity hereof.cralaw Sec. 20. Repealing Clauses. The provisions of any special law relative to the rate of franchise taxes are hereby expressly repealed. Sections 113, 114 and 116 of the National Internal Revenue Code are hereby repealed. chan robles virtual law library Paragraphs (c), (d), and (e) of Article 39 of Executive Order No. 226, otherwise as the Omnibus Investment Code of 1987, are hereby repealed: Provided, however, That the benefits and incentives under said paragraphs shall continue to be enjoyed by enterprises registered with the Board of Investments before the effectivity of this Act.cralaw Unless otherwise excluded by the President pursuant to Section 17 hereof, Sections 19 and 20 of the National Internal Revenue Code shall be repealed upon the expiration of two (2) years from the effectivity of this Act. During the period that the freight services rendered by international cargo vessels are not covered by the value-added tax imposed under this Act, said services shall pay a tax at a rate of three per centum (3%) of their quarterly gross receipts derived from outgoing cargoes. All other laws, orders, issuances, rules and regulations of parts thereof inconsistent with this Act are hereby repealed, amended or modified accordingly.cralaw Sec. 21. This Act shall take effect fifteen (15) days, after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation whichever comes earlier.
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Justices of the Supreme Court. Supreme Court of the Philippines. http://sc.judiciary.gov.ph/justices/j.mendoza.php.