Facts:

The case consolidates several petitions challenging Republic Act No. 9337 (RA 9337), known as the E-VAT Law, which amended sections of the National Internal Revenue Code (NIRC) to restructure the value-added tax system in the Philippines. The petitions were filed by various groups including Abakada Guro Party List, listed officers, senators, petroleum dealers associations, and others who questioned the constitutionality of several provisions of RA 9337. The key areas of contention include the imposition of a 10% VAT with a standby authority for the President to raise it to 12% based on certain fiscal conditions, limitations on input tax credits, requirements for amortization of input tax on capital goods, and a 5% withholding VAT on transactions with the government. The bicameral conference committee had merged three legislative bills (House Bill Nos. 3555 and 3705, and Senate Bill No. 1950) into one law, RA 9337. The petitions alleged violations of constitutional provisions suc

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Facts:

Legislative and Procedural Background

• Congress enacted Republic Act No. 9337—commonly known as the E‑VAT Law—to restructure the nation’s value‑added tax system in order to raise additional revenue in the face of widening fiscal deficits.
• The law consolidated provisions from three legislative measures: House Bills Nos. 3555 and 3705 (which focused primarily on amending VAT‑related sections of the National Internal Revenue Code of 1997) and Senate Bill No. 1950 (which, in addition to VAT, proposed amendments affecting non‑VAT taxes such as income, percentage, franchise, and excise taxes).
• A Bicameral Conference Committee was formed under the respective internal rules of the House of Representatives and the Senate to reconcile differences between the two sets of bills. In doing so, the Committee both inserted new provisions (and sometimes deleted those “no pass‑on” provisions present in one version) that were later embodied in the final law.
• The enacted law contains several controversial provisions, including:
• Sections 4, 5, and 6, which provide that the VAT rate shall automatically increase from 10% to 12% effective January 1, 2006, if either of two specified conditions is met:

• (i) the VAT collection as a percentage of the previous year’s GDP exceeds 2 4⁄5%, or • (ii) the national government deficit as a percentage of GDP exceeds 1½%.

Contentions and Parties’ Positions

• Petitioners (including certain party lists, legislators, and business groups) challenged portions of RA 9337 on several grounds. They argued that:
• By delegating the authority to increase the VAT rate to the President—“upon the recommendation of the Secretary of Finance”—Congress improperly ceded its exclusive power to tax, thereby violating the non‑delegation principle and the constitutional requirement that revenue bills originate exclusively in the House (Article VI, Section 24).
• The mechanism used (the “stand‑by authority” where the increase is triggered “shall” be applied if certain conditions occur) is ambiguous and gives rise to uncertainty, thereby violating due process and equal protection guarantees.
• The Bicameral Conference Committee exceeded its limited function by amending the bills beyond merely reconciling discrepancies—by inserting amendments not present in either the original House or Senate version (for example, provisions affecting corporate income taxes) or by deleting provisions (such as the “no pass‑on” rules). They argued that such actions run afoul of the three‑reading and no‑amendment rules under Article VI, Section 26(2) of the Constitution.
• Several Justices expressed divergent views in separate concurring and dissenting opinions. Some opined that the delegation was acceptable if the language was mandatory (“shall”) and that the internal procedures of Congress (including the role of the Bicameral Conference Committee) should be accorded deference, while others contended that certain provisions—especially those that affect non‑VAT taxes or the “no pass‑on” measures—were not germane to the revenue purpose of the original bills.

Issue:

Delegation Issue

• Does providing that the President, “upon the recommendation of the Secretary of Finance,” shall increase the VAT rate from 10% to 12% violate the constitutional principle that the power to tax is an exclusively legislative function?
• Is such a mandatory “stand‑by” mechanism simply an administrative ascertaining of facts or an impermissible delegation of legislative power?

Constitutional Procedure and Legislative Origination

• Did the Bicameral Conference Committee exceed its authority by inserting new provisions and deleting the “no pass‑on” provisions not in conflict between the House and Senate bills, thereby violating the three‑reading and no‑amendment rules and the exclusive origination requirement for revenue bills?
• Are amendments affecting non‑VAT matters (such as corporate income taxes) extraneous to the original revenue purpose and thus unconstitutional?

Due Process, Equal Protection, and Impact on Business

• Do the provisions imposing a 70% cap on input VAT credits (along with a 60‑month amortization requirement) and a 5% final withholding tax on government transactions violate due process and equal protection by effectively depriving small to medium enterprises of their ability to recover pre‑paid taxes and maintain minimal profit margins?

Overall Validity

• Taken as a whole, do the contested provisions of RA 9337 conform to constitutional requirements regarding separation of powers, non‑delegation, and procedural safeguards in lawmaking?

Ruling:

• (Subscriber-Only)

Ratio:

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Doctrine:

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