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GR No L-22734,

September 15, 1957, 217 SCRA 105

On May 23, 1945, Anastasio Pineda died, survived by his wife and 15 children, the
eldest of whom is Atty. Manuel Pineda. Estate proceedings were had in the CFI of Manila
resulting to the estate being divided among and awarded to the heirs. Manuels share
amounted to about P 2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue (BIR)
investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948
and it found that the corresponding income tax returns were not filed. Thereupon, the
representative of the CIR issued the following assessments:
I. Deficiency Income Tax (1945, 1946, 1947) P 2,707.44
II. Additional Residence Tax for 1945 P 14.50
III. Real estate dealers tax for 4th qtr of 1946 and whole year 1947 P207.50
The assessment was contested by Manuel Pineda. Thereafter, he appealed to the
CTA alleging that he was appealing only that proportionate part or portion pertaining to
him as one of the heirs. Subsequently, the CTA rendered judgment reversing the decision
of the CIR on the ground of prescription of his right to assess and collect the
aforementioned tax. On appeal to the SC, the SC affirmed the ruling of the CTA with
respect to the assessment for the year 1947 (income tax) but held that for the years 1945
and 1946, the action for assessment and collection has not yet prescribed. Accordingly,
the SC remanded the case to the CTA for further appropriate proceedings.
The CTA rendered judgment holding Manuel Pineda liable for his share in the
deficiency income tax for 1945 and 1946 and the real estate dealers tax all amounting to
P760.28. The decision was then appealed by the CIR to the SC.
WON Manuel Pineda can be held liable for the payment of all the taxes found by the
CTA instead of only for his corresponding share in the same
YES. The government can require Manuel Pineda to pay the full amount of the taxes
assessed. The reason is that the government has a lien on the P2, 500.00 received by him
from the estate as his share in the inheritance, for unpaid income taxes for which said
estate is liable, pursuant to Section 315 of the Tax Code.
By virtue of such lien, the government has the right to subject the property in
Pinedas possession (the money amounting to P2, 500.00) to satisfy the income tax
assessment. After such payment, Manuel Pineda will have a right of contribution from his

The government can collect the tax in question in two ways. First, by going after all
the heirs and collecting from each one of them the amount of the tax proportionate to the
inheritance received. The second remedy, pursuant to the lien created by Section 315 of
the Tax Code upon all property and property rights belonging to the taxpayer for unpaid
income tax, is by subjecting said property of the estate which is in the hands of the heir or
transferee to the payment of the tax due, the estate. This second remedy is the option the
government took in this case to collect the tax. The BIR should be given the necessary
discretion to avail itself of the most expeditious way to collect the tax, because taxes are
the lifeblood of the government and their prompt and certain availability is an imperious


G.R. No. L-28896, February 17, 1988, 158 SCRA 9
By: Roman, single,living, Almalbis
Algue, Inc., a domestic corporation engaged in engineering, construction and other
allied activities, received a letter from petitioner that it has delinquency taxes for the
years 1958 and 1959. Algue filed a letter of protest, through its counsel Atty. Guevara, Jr..
A warrant of distraint and levy was issued by CIR, however counsel refused to receive it on
the ground of pending protest. The letter of protest being missing, BIR did not take any
action on the protest, only then that counsel received the warrant. Petition for review of
the decision of the Commissioner of Internal Revenue was brought to the Court of Tax
Appeals and it ruled in favor of Algue. Thus, CIR brought the case to the SC.
WON the Collector of Internal Revenue correctly disallowed the P75, 000.00
deduction claimed by Algue as legitimate business expenses in its income tax returns.
Petition is meritorious.
Taxation; nature of taxes; purpose of taxation; collection of taxes should be
made in accordance with law
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance On the other hand; such collection should be made in accordance
with law as any arbitrariness will negate the very reason for government itself. It is
therefore necessary to reconcile the apparently conflicting interests of the authorities and
the taxpayers so that the real purpose of taxation, which is the promotion of the common
good, may be achieved.

The SC discussed the LIFEBLOOD Theory, the rationale for taxation, to wit:
It is said that taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and operate it.
Hence, despite the natural reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his share in the running of
the government. The government for its part is expected to respond in the form of tangible
and intangible benefits intended to improve the lives of the people and enhance their
moral and material values. This symbiotic relationship is the rationale of taxation and
should dispel the erroneous notion that it is an arbitrary method of exaction by those in
the seat of power.
On the substantive main issue:
Contrary to the allegations of the CIR, that the payments were fictitious and suggest
a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary
deduction; that the claimed deduction of P75, 000 was properly disallowed because it was
not an ordinary, reasonable or necessary business expense, the Court viewed it differently.
Agreeing with Algue and the Court of Tax Appeals, it held that the said amount had been
legitimately paid by Algue for actual services rendered, in the form of promotional fees.
Nota Bene:
Tax assessment by tax examiners are presumed correct and made in good faith.
Taxpayer has the duty to prove otherwise.


G.R. No. L-7988, January 19, 1916298, SCRA 83
The city of Manila, contending that the property of Young Men's Christian Association
(YMCA) is taxable, assessed it and levied a tax thereon. It was paid under protest and this
action begun to recover it on the ground that the property was exempt from taxation
under the charter of the city of Manila. The decision was for the city and the association
Whether or not the building and grounds of the Young Men's Christian Association of
Manila are subject to taxation (property tax), under section 48 of the charter of the city of

YMCA as an educational department is not denied. It is undisputed that the aim of this
department is to furnish, at much less than cost, instruction in subjects that will greatly
increase the mental efficiency and wage-earning capacity of young men, prepare them in
special lines of business and offer them special lines of study. It offers various courses to
its students.
YMCA is preeminently religious; and the fundamental basis and groundwork is the
Christian religion. All of the officials of the association are devoted Christians, members of
a church, and have dedicated their lives to the spread of the Christian principles and
building of Christian character.
The institution also has charitable features. It makes no profit on any of its activities. The
professors and instructors in all departments serve without pay and freely give of their
time and ability to further the purposes of the institution. The chief secretary and his
assistant receive no salary from the institution. Whatever they are paid comes from the
United States.
The contention that the institution is run as a business in that it keeps a lodging and
boarding house is without merit. It may be admitted that there are 64 persons occupying
rooms in the main building as lodgers or roomers and that they take their meals at the
restaurant below. But the purpose is not for profit but instead to keep the membership
continually within the sphere of influence of the institution.
The Young Men's Christian Association of Manila cannot be said to be an institution used
exclusively for religious purposes, or an institution used exclusively for charitable
purposes, or an institution devoted exclusively to educational purposes; but the Court
believes that it is an institution used exclusively for all three purposes, and that, as such, it
is entitled to be exempted from taxation.

Private Respondent YMCA is a non-stock, non-profit institution, which conducts various
programs and activities that are beneficial to the public, especially the young people,
pursuant to its religious, educational and charitable objectives.
Private respondent earned, among others, an income from leasing out a portion of its
premises to small shop owners, like restaurants and canteen operators, and from parking
fees collected from non-members. The commissioner of internal revenue (CIR) issued an
assessment to private respondent, including surcharge and interest, for deficiency income

tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency
withholding tax on wages. Private respondent formally protested the assessment and, as
a supplement to its basic protest.
The CTA issued this ruling in favor of the YMCA. CA initially ruled in favor of CIR but
affirmed CTAs decision on reconsideration.
W/N YMCA is exempt from the payment of taxes
No. Section 27 (now Section 26) of the NIRC states that:
SEC. 27.Exemptions from tax on corporations. -- The following organizations shall
not be taxed under this Title in respect to income received by them as such -(g) Civic league or organization not organized for profit but operated
exclusively for the promotion of social welfare;
(h) Club organized and operated exclusively for pleasure, recreation, and
other non-profitable purposes, no part of the net income of which inures to
the benefit of any private stockholder or member;
Notwithstanding the provision in the preceding paragraphs, the income of whatever kind
and character of the foregoing organization from any of their properties, real or personal,
or from any of their activities conducted for profit, regardless of the disposition made of
such income, shall be subject to the tax imposed under this Code. (as amended by Pres.
Decree No. 1457)
Respondent Court of Appeals committed reversible error when it allowed, on
reconsideration, the tax exemption claimed by YMCA on income it derived from renting out
its real property, on the solitary but unconvincing ground that the said income is not
collected for profit but is merely incidental to its operation. The law does not make a
distinction. The rental income is taxable regardless of whence such income is derived and
how it used or disposed of.
Private respondent submits that Article VI, Section 28 of par. 3 of the 1987 Constitution,
exempts charitable institutions from the payment not only of property taxes but also of
income tax from any source. However, what is exempted is not the institution itself; the
exemption pertains only to property taxes.Thus, YMCA is exempt from the paymentof
property tax, but not income tax on the rentals from its property.
Private respondent also invokes Article XIV, Section 4, par. 3 of the Charter, claiming that
the YMCA is a non-stock, non-profit educational institution whose revenues and assets are
used actually, directly and exclusively for educational purposes so it is exempt from taxes
on its properties and income. However, the Court founds nothing in them that even hints
that it is a school or an educational institution

Petition is GRANTED.


G.R. No. L-22074, April 30, 1965, 13 SCRA 775
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts with foreign insurance companies not doing business in the Philippines, thereby
ceding to the foreign reinsurers a portion of the premiums on insurances it has originally
underwritten in the Philippines. Philippine Guaranty Co., Inc. ceded to the foreign
reinsurers the premiums for 1953 and 1954. Said premiums were excluded by Philippine
Guaranty Co., Inc. from its gross income when it filed its income tax returns for 1953 and
1951. Furthermore, it did not withhold or pay tax on them. Consequently, the
Commissioner of Internal Revenue assessed Philippine Guaranty Co., Inc. against
withholding tax on the ceded reinsurance premiums. Philippine Guaranty Co., Inc.
protested the assessment on the ground that the premiums are not subject to tax for the
premiums did not constitute income from sources within the Philippines because the
foreign reinsurers did not engage in business in the Philippines, and CIR's previous rulings
did not require insurance companies to withhold income tax due from foreign companies.
WON insurance companies required to withhold tax on reinsurance premiums ceded to
foreign insurance companies
Yes. The reinsurance contracts however show that the transactions or activities that
constituted the undertaking to reinsure Philippine Guaranty Co., Inc. against losses arising
from the original insurances in the Philippines were performed in the Philippines. The
reinsurance premiums were income created from the undertaking of the foreign
reinsurance companies to reinsure Philippine Guaranty Co., Inc. against liability for loss
under original insurances. Such undertaking, as explained above, took place in the
Philippines. These insurance premiums therefore came from sources within the Philippines
and, hence, are subject to corporate income tax.

The power to lax is an attribute of sovereignty. It is a power emanating from necessity. It is

a necessary burden to preserve the State's sovereignty and a means to give the citizenry
an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil
servants to serve, public improvements designed for the enjoyment of the citizenry and
those which come within the State's territory, and facilities and protection which a

government is supposed to provide. Considering that the reinsurance premiums in

question were afforded protection by the government and the recipient foreign reinsurers
exercised rights and privileges guaranteed by our laws, such reinsurance premiums and
reinsurers should share the burden of maintaining the state.

U.S 4 Wheat, 316
Maryland (P) enacted a statute imposing a tax on all banks operating in Maryland not
chartered by the state. The statute provided that all such banks were prohibited from
issuing bank notes except upon stamped paper issued by the state. The statute set forth
the fees to be paid for the paper and established penalties for violations. The Second Bank
of the United States was established pursuant to an 1816 act of Congress. McCulloch (D),
the cashier of the Baltimore branch of the Bank of the United States, issued bank notes
without complying with the Maryland law. Maryland sued McCulloch for failing to pay the
taxes due under the Maryland statute and McCulloch contested the constitutionality of
that act. The state court found for Maryland and McCulloch appealed.
Issues :
(1)Does Congress have the power under the Constitution to incorporate a bank, even
though that power is not specifically enumerated within the Constitution?
(2)Does the State of Maryland have the power to tax an institution created by
Congress pursuant to its powers under the Constitution?
Holding and Rule (Marshall):
(1) Yes. Congress has power under the Constitution to incorporate a bank pursuant to
the Necessary and Proper clause (Article I, section 8).
(2)No. The State of Maryland does not have the power to tax an institution created by
Congress pursuant to its powers under the Constitution. The Government of the
Union, though limited in its powers, is supreme within its sphere of action, and its
laws, when made in pursuance of the Constitution, form the supreme law of the
land. There is nothing in the Constitution which excludes incidental or implied
powers. If the end be legitimate, and within the scope of the Constitution, all the
means which are appropriate and plainly adapted to that end, and which are not
prohibited, may be employed to carry it into effect pursuant to the Necessary and
Proper clause.
The power of establishing a corporation is not
Government, but only the means of carrying
sovereign. It may be exercised whenever it
exercising any of the powers granted to the

a distinct sovereign power or end of

into effect other powers which are
becomes an appropriate means of
federal government under the U.S.

Constitution. If a certain means to carry into effect of any of the powers expressly given
by the Constitution to the Government of the Union be an appropriate measure, not
prohibited by the Constitution, the degree of its necessity is a question of legislative
discretion, not of judicial cognizance.
The Bank of the United States has a right to establish its branches within any state. The
States have no power, by taxation or otherwise, to impede or in any manner control
any of the constitutional means employed by the U.S. government to execute its
powers under the Constitution. This principle does not extend to property taxes on the
property of the Bank of the United States, nor to taxes on the proprietary interest which
the citizens of that State may hold in this institution, in common with other property of
the same description throughout the State.


G.R. No. L-81311, June 30, 1988, 163 SCRA 371
These four (4) petitions seek to nullify Executive Order No. 273 issued by the President of
the Philippines, and which amended certain sections of the National Internal
Revenue Code and adopted the value-added tax, for being unconstitutional in that its
enactment is not allegedly within the powers of the President; that the VAT is oppressive,
discriminatory, regressive, and violates the due process and equal protection clauses and
other provisions of the 1987 Constitution.
The VAT is a tax levied on a wide range of goods and services. It is a tax on the value,
added by every seller, with aggregate gross annual sales of articles and/or services,
exceeding P200,00.00, to his purchase of goods and services, unless exempt. VAT is
computed at the rate of 0% or 10% of the gross selling price of goods or gross receipts
realized from the sale of services.
The VAT is said to have eliminated privilege taxes, multiple rated sales tax on
manufacturers and producers, advance sales tax, and compensating tax on importations.
The framers of EO 273 that it is principally aimed to rationalize the system of taxing goods
and services; simplify tax administration; and make the tax system more equitable, to
enable the country to attain economic recovery.
The VAT is not entirely new. It was already in force, in a modified form, before EO 273 was
issued. As pointed out by the Solicitor General, the Philippine sales tax system, prior to the
issuance of EO 273, was essentially a single stage value added tax system computed
under the "cost subtraction method" or "cost deduction method" and was imposed only on
original sale, barter or exchange of articles by manufacturers, producers, or importers.
Subsequent sales of such articles were not subject to sales tax. However, with the
issuance of PD 1991 on 31 October 1985, a 3% tax was imposed on a second sale, which
was reduced to 1.5% upon the issuance of PD 2006 on 31 December 1985, to take effect 1

January 1986. Reduced sales taxes were imposed not only on the second sale, but on
every subsequent sale, as well. EO 273 merely increased the VAT on every sale to 10%,
unless zero-rated or exempt.
WON EO 273 is unconstitutional
No. Petitioners have failed to show that EO 273 was issued capriciously and whimsically or
in an arbitrary or despotic manner by reason of passion or personal hostility. It appears
that a comprehensive study of the VAT had been extensively discussed by these framers
and other government agencies involved in its implementation, even under the past
administration. As the Solicitor General correctly stated: "The signing of E.O. 273 was
merely the last stage in the exercise of her legislative powers. The legislative process
started long before the signing when the data were gathered, proposals were weighed and
the final wordings of the measure were drafted, revised and finalized. Certainly, it cannot
be said that the President made a jump, so to speak, on the Congress, two days before it
Next, the petitioners claim that EO 273 is oppressive, discriminatory, unjust and
The petitioners" assertions in this regard are not supported by facts and circumstances to
warrant their conclusions. They have failed to adequately show that the VAT is oppressive,
discriminatory or unjust. Petitioners merely rely upon newspaper articles which are
actually hearsay and have evidentiary value. To justify the nullification of a law, there must
be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. A tax
is considered uniform when it operates with the same force and effect in every place
where the subject may be found." 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 engage 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, spared as they are from the
incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.
The Court likewise finds no merit in the contention of the petitioner Integrated Customs
Brokers Association of the Philippines that EO 273, more particularly the new Sec. 103 (r)
of the National Internal Revenue Code, unduly discriminates against customs brokers.
At any rate, the distinction of the customs brokers from the other professionals who are

subject to occupation tax under the Local Tax Code is based upon material differences, in
that the activities of customs brokers (like those of stock, real estate and immigration
brokers) partake more of a business, rather than a profession and were thus subjected to
the percentage tax under Sec. 174 of the National Internal Revenue Code prior to its
amendment by EO 273. EO 273 abolished the percentage tax and replaced it with the VAT.


G.R. No. 76778, June 6, 1990, 186 SCRA 33

Section 21 of Presidential Decree No. 464 provides that every five years starting calendar
year 1978, there shall be a provincial or city general revision of real property assessments.
The revised assessment shall be the basis for the computation of real property taxes for
the five succeeding years. On the strength of the aforementioned law, the general revision
of assessments was completed in 1984. However, Executive Order No. 1019 was issued,
which deferred the collection of real property taxes based on the 1984 values to January 1,
1988 instead of January 1, 1985.On November 25, 1986, President Corazon Aquino issued
Executive order No.73. It states that beginning January 1, 1987, the 1984 assessments
shall be the basis of the real property collection. Thus, it effectively repealed Executive
Order No. 1019.Francisco Chavez, a taxpayer and a land-owner, questioned the
constitutionality of Executive Order No. 73. He alleges that it will bring unreasonable
increase in real property taxes. In fact, according to him, the application of the assailed
order will cause an excessive increase in real property taxes by 100% to 400% on
improvements and up to 100% on land.
Whether or not Executive Order no. 73 imposes unreasonable increase in real property
taxes, thus, should be declared unconstitutional.
The attack on Executive Order No. 73 has no legal basis as the general revision of
assessments is a continuing process mandated by Section 21 of Presidential Decree No.
464. If at all, it is Presidential Decree No. 464 which should be challenged as
constitutionally infirm. However, Chavez failed to raise any objection against said decree.
Without Executive Order No. 73, the basis for collection of real property taxes will still be
the 1978 revision of property values. Certainly, to continue collecting real property taxes
based on valuations arrived at several years ago, in disregard of the increases in the value
of real properties that have occurred since then, is not in consonance with a sound tax
system. Fiscal adequacy, which is one of the characteristics of a sound tax system,
requires that sources of revenues must be adequate to meet government expenditures
and their variations.


G.R. No. L-17725, February 28, 1962, 4 SCRA 622
Mambulao Lumber Co. has an aggregate forest charges liability of PhP 4, 802.37 in favor of
the Republic of the Philippines . It appears, however, that from 1947 to 1956, said
company paid the Republic the amount of PhP 9,127.00 as reforestation charges in
pursuance of Section 1 of RA 155 which provides that there shall be collected in addition
to the regular forest, the amount of Php.50 on each cubic meter of timber cut from any
public forest for commercial purposes. The amount collected shall be expanded for
reforestation and afforestation.
It is the contention of the Company that since the Republic has not made use of the
reforestation charges collected from it for reforesting the denuded area of the land
covered by its license, the Republic should refund the said amount or if it cannot be
refunded, at least, it should be compensated with what Mambulao Lumber Comapany has
owed the Republic of the Philippines for Reforestation charges.
The CFI of Manila ordered the Company to pay the sum of PhP 4,802.37 with 6% interest.
Hence, this appeal.
Whether or not the sum of PhP9,127.50 paid by the Company to the Republic as
reforestation charges may be set off or applied to the payment of the PhP4,802.37 as
forest charges due and owing from the company to the Republic.
NO. Internal revenue taxes such as forest charges cannot be subject of set off or
compensation. It is because taxes are not in the nature of contracts between the parties
but grow out of duty to, and are positive acts of the government to the making and
enforcing of which the personal consent of individual taxpayer is not required. The amount
paid by a licensee as reforestation charges is in the nature of a tax which form part of the
Reforestation fund, payable by him irrespective of whether the area covered by the license
is reforested or not. Moreover, the company and the government are not mutually
creditors and debtors of each other, hence, the law on compensation is inapplicable.


G.R. No. 125704, August 28, 1998, 294 SCRA 687

On August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities from
the 2nd quarter of 1991 to the 2nd quarter of 1992 in the total amount
of P123,821,982.52 plus 20% annual interest from August 6, 1994 until fully paid pursuant
to Sections 248 and 249 of the Tax Code of 1977.
Philex refused to pay alleging that it has pending claims from 1989 to 1991 for VAT input
credit/refund for the taxes it paid for the years 1989 to1991 in the amount of P119, 977,
037.02 plus interest. Therefore, these claims for tax credit/refund should be applied
against or used to offset the tax liabilities.
The BIR denied the offsetting of Philexs claim since said claims are still unliquidated and
since its amount is undetermined, it cannot be subject to legal compensation. Philex
raised the issue in the Court of Tax appeals but was denied for the same reason that for
legal compensation to take place, both obligations must be liquidated and demandable.
"Liquidated" debts are those where the exact amount has already been determined. The
claims of Philex for VAT refund are still pending litigation and still have to be determined.
WON compensation or offsetting can be applied
No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are
the lifeblood of the government and so should be collected without unnecessary
hindrance. Evidently, to countenance Philex's whimsical reason would render ineffective
our tax collection system. Too simplistic, it finds no support in law or in jurisprudence.
Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it
has a pending tax claim for refund or credit against the government which has not yet
been granted. Taxes cannot be subject to compensation for the simple reason
that the government and the taxpayer are not creditors and debtors of each
other. There is a material distinction between a tax and debt. Debts are due to the
Government in its corporate capacity, while taxes are due to the Government in its
sovereign capacity. xxx There can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to pay a tax on the
ground that the government owes him an amount equal to or greater than the tax being
collected. The collection of a tax cannot await the results of a lawsuit against the
Petition is DISMISSED.


G.R. No. 168056, September 1, 2005, 469 SCRA 1

On May 24, 2005, the President signed into law Republic Act 9337 or the VAT Reform
Act. Before the law took effect on July 1, 2005, the Court issued a TRO enjoining
government from implementing the law in response to a slew of petitions for certiorari and
prohibition questioning the constitutionality of the new law.
The challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6:
That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to 12%, after any of the following
conditions have been satisfied:

Value-added tax collection as a percentage of Gross Domestic Product (GDP) of

the previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1%)

Petitioners allege that the grant of stand-by authority to the President to increase the VAT
rate is an abdication by Congress of its exclusive power to tax because such delegation is
not covered bySection 28 (2), Article VI Constitution. They argue that VAT is a tax levied on
the sale or exchange of goods and services which cant be included within the purview of
tariffs under the exemption delegation since this refers to customs duties, tolls or tribute
payable upon merchandise to the government and usually imposed on imported/exported
goods. They also said that the President has powers to cause, influence or create
the conditions provided by law to bring about the conditions precedent. Moreover, they
allege that no guiding standards are made by law as to how the Secretary of Finance will
make the recommendation.
WON the RA 9337's stand-by authority to the Executive to increase the VAT rate, especially
on account of the recommendatory power granted to the Secretary of Finance, constitutes
undue delegation of legislative power
No. The powers which Congress is prohibited from delegating are those which are strictly,
or inherently and exclusively, legislative. Purely legislative power which can never be
delegated is the authority to make a complete law- complete as to the time when it shall
take effect and as to whom it shall be applicable, and to determine the expediency of its
enactment. It is the nature of the power and not the liability of its use or the manner of its
exercise which determines the validity of its delegation.
(a) delegation of tariff powers to President under Constitution

(b) delegation of emergency powers to President under Constitution

(c) delegation to the people at large
(d) delegation to local governments
(e) delegation to administrative bodies
For the delegation to be valid, it must be complete and it must fix a standard. A sufficient
standard is one which defines legislative policy, marks its limits, maps out its boundaries
and specifies the public agency to apply it.
In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of
facts upon which enforcement and administration of the increased rate under the law is
contingent. The legislature has made the operation of the 12% rate effective January 1,
2006, contingent upon a specified fact or condition. It leaves the entire operation or nonoperation of the 12% rate upon factual matters outside of the control of the executive. No
discretion would be exercised by the President. Highlighting the absence of discretion is
the fact that the word SHALL is used in the common proviso. The use of the word SHALL
connotes a mandatory order. Its use in a statute denotes an imperative obligation and is
inconsistent with the idea of discretion.
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon
the existence of any of the conditions specified by Congress. This is a duty, which cannot
be evaded by the President. It is a clear directive to impose the 12% VAT rate when the
specified conditions are present.
Congress just granted the Secretary of Finance the authority to ascertain the existence of
a fact--- whether by December 31, 2005, the VAT collection as a percentage of GDP of the
previous year exceeds 2 4/5 % or the national government deficit as a percentage of GDP
of the previous year exceeds one and 1%. If either of these two instances has occurred,
the Secretary of Finance, by legislative mandate, must submit such information to the
In making his recommendation to the President on the existence of either of the
two conditions, the Secretary of Finance is not acting as the alter ego of the President or
even her subordinate. He is acting as the agent of the legislative department, to
determine and declare the event upon which its expressed will is to take effect. The
Secretary of Finance becomes the means or tool by which legislative policy is determined
and implemented, considering that he possesses all the facilities to gather data and
information and has a much broader perspective to properly evaluate them. His function is
to gather and collate statistical data and other pertinent information and verify if any of
the two conditions laid out by Congress is present.
Congress does not abdicate its functions or unduly delegate power when it describes what
job must be done, who must do it, and what is the scope of his authority; in our complex
economy that is frequently the only way in which the legislative process can go forward.

There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress did not delegate the
power to tax but the mere implementation of the law.