ABAKADA GURO PARTY LIST vs.

ERMITA
Promulgation: September 1, 2005
Petitioners: Abakada Guro Party List Officers Samson S. Alcantara, Ed Vincent Albano
Respondents: Executive Secretary Eduardo Ermita, Secretary of DOF Cesar Purisima,
Comissioner of Internal Revenue Gulliermo Parayno Jr.
Ponente: J. Austria-Martinez
Doctrine: There is a delegation of ascertainment of facts upon which the enforcement
and administration of the increase rate under the law is contingent. The legislature has
made the 12% rate contingent upon a specified fact or condition, which is outside of the
control of the executive. There is no discretion that is exercised by the President.

RA 9337 is a consolidation of three legislative bills: House Bill Nos. 3555 and
3705 and Senate Bill No. 1950. The Act amends Sections 106, 107 and 108 of the
National Internal Revenue Code (NIRC): imposing a 10% VAT on sale of goods and
properties (Sec.4), a 10% VAT on importation of goods (Sec.5), a 10% VAT on sale of
services and use or lease of properties (Sec.6).

The Act also contains a uniform proviso authorizing the President, upon
recommendation of the Sec. of Finance to raise the VAT rate to 12%, effective January 1,
2006 after any of the following conditions has been satisfied: (a) VAT collection as a
percentage of GDP of the previous year exceeds two and four-fifth percent or (b) National
govt deficit as a percentage of GDP of the previous year exceeds one and one-half
percent.

The VAT is a tax on spending or consumption and is levied on the sale, barter,
exchange or lease of goods, properties or services. Being an indirect tax on expenditure,
the seller may pass on the amount of tax paid to the buyer. A direct tax on the other hand,
is a tax which a taxpayer is directly liable on the transaction or business without
transferring the burden to someone else.

This value-added system has long been in existence but in a different manner. The
system was a single-stage tax computed under the cost deduction method and was only
payable by original sellers. This was then modified and a mixture of the cost deduction
method and tax credit method was used to determine the value-added tax.

The Legislative has an inherent constitutional power to promulgate its own rules of
procedure and pursuant to this, each house of Congress provided for the creation of a
Bicameral Conference Committee for purposes of prompt and efficient legislative action. It
is mandated to settle the differences between the disagreeing provisions of the House bill
and the Senate bill. It is within the power of the committee to include an entirely new
provision that is not found in either the House or Senate bill. The charge then that the
Committee acted as a third legislative chamber is without basis.

The revenue bill originated in the House of Reps. and the Senate was acting in its
constitutional power to introduce amendments to the House bill when it included
provisions in Senate Bill 1950 amending corporate income taxes, percentage, excise and
franchise taxes. Article 6, Sec 24 of the Constitution does not contain any prohibitions or
limitations on the extent of the amendments that may be introduced by the Senate to the
House bill.

The MAIN PURPOSE of the House bills is to bring in sizeable revenues for the
government to supplement our countrys serious financial problems and improve tax
administration and control of the leakages in revenues from income taxes and value-added
taxes and the Senate, approaching from the national perspective can introduce
amendments within the purpose such as providing ways that would soften the impact of
the VAT measure to the consumer (i.e. distributing the burden across all sectors)
ISSUE:

W/N RA 9337 is an unconstitutional delegation of legislative power as it constitutes an

abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI,
Sec 28(2)1 of the Philippine Constitution.
HELD:
The Petition is dismissed and the constitutionality of RA 9337 is upheld in its entirety.

The doctrine of the separation of powers is the principle of non-delegation of powers,

a doctrine based on the ethical principle that delegated power constitutes not only a right
but a duty to be performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another. potestas delegata non
delegari potes What has been delegated, cannot be delegated.

The powers which Congress is prohibited from delegating are those which are strictly,
inherently and exclusively legislative. Purely legislative power, which can never be
delegated, has been described as the authority to make a complete law complete as to
the time when it shall take effect and to whom it shall be applicable to and to determine
the expediency of its enactment. Thus, in order that a court may be justified in holding a
statute unconstitutional as a delegation of legislative power, it must appear that the power
involved is purely legislative in nature. It is the nature of the power and not the liability of
its use or manner of its exercise, which determines the validity of its delegation.

Test of Valid delegation: If the law is (a) complete in itself and (b) fixes a standard to
which the delegate must conform in the performance of his functions.

While the power to tax cannot be delegated to executive agencies, details as to the
enforcement and administration of an exercise of power shall be left to them, including the
power to determine the existence of facts on which its operation depends. The rationale
being that the preliminary ascertainment of facts as basis for the enactment of legislation
is not of itself a legislative function but is simple auxiliary to legislation. Thus, the duty of
correlating information and making recommendations is the kind of subsidiary activity that
the legislature may delegate others to perform.

The case is not a delegation of legislative power but a delegation of ascertainment

of facts upon which the enforcement and administration of the increase rate under the
law is contingent. The legislature has made the 12% rate contingent upon a specified fact
or condition, which is outside of the control of the executive. Thus, there is no discretion
that is exercised by the President.

The Sec. Of Finance in making his recommendations to the President is not acting as
the Presidents alter ego but as an agent of the legislative department in determining and
implementing legislative policy. Thus, the President cannot alter or nullify or set aside any
of his findings,

Congress merely granted the Sec of Fin the authority to ascertain the two instances
when the VAT rate can be raised to 12%. There is no undue delegation of power but only
the discretion as to the execution of a law and this is constitutionally permissible. Congress
does not unduly delegate power when it describes what job must be done, who must do it
and what is the scope of his authority.

The intent and will to increase the VAT rate to 12% came from Congress and the task
of the President is to simply execute the legislative policy.
RELEVANT TO SECTION 26
Par (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

SEC.28(2)TheCongressmay,bylaw,authorizethePresidenttofixwithinspecifiedlimits,andsubjecttosuchlimitationsand
restrictionsasitmayimpose,tariffrates,importandexportquotas,tonnageandwharfagedues,andotherdutiesorimposts
withintheframeworkofthenationaldevelopmentprogramofthegovernment.

allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and
nays entered in the Journal.
Tolentino case: Nor is there any reason for requiring that the Committees Report in these
cases must have undergone three readings in each of the two houses. If that be the case,
there would be no end to negotiation since each house may seek modification of the
compromise bill. Art. 6, section 26 (2) must be construed as referring only to bills
introduced for the first time in either house of Congress, not to the conference
committee report.
The no-amendment rule refers only to the procedure to be followed by each
house of Congress with regard to bills initiated in each of said respective
houses, before said bill is transmitted to the other house for its concurrence or
amendment. To construe said provision in a way as to proscribe any further changes to a
bill after one house has voted on it would lead to absurdity as this would mean that the
other house of Congress would be deprived of its constitutional power to amend or
introduce changes to said bill. Thus, Art. 6, Sec. 26 (2) of the Constitution cannot be taken
to mean that the introduction by the Bicameral Conference Committee of amendments
and modifications to disagreeing provisions in bills that have been acted upon by both
houses of Congress is prohibited.