Case Summary (G.R. No. 168056)
Petitioners and Respondents
• G.R. No. 168056, 168207, 168463, 168730: Political figures and party-list representatives, governors, etc., contest Sections 4–6, 8, 12, and procedural passage.
• G.R. No. 168461: Association of Pilipinas Shell Dealers and other petroleum dealers challenge Sections 8 and 12 on due process and equal protection grounds.
Key Dates
• House Bills 3555 & 3705 passed January–February 2005
• Senate Bill 1950 passed April 13, 2005
• Bicameral Conference Report approved May 10–11, 2005
• Enrolled bill transmitted May 23, 2005; signed into law May 24, 2005
• Effectivity date: July 1, 2005
• TRO issued July 1, 2005; oral arguments July 14, 2005
Applicable Law
• National Internal Revenue Code (NIRC) of 1997, as amended by R.A. 9337
• Procedural rules of the House and Senate re: conference committees
Constitutional Provisions
• Art. II, Sec. 20: Encourage private enterprise and incentives for investment
• Art. III, Sec. 1: No deprivation of life, liberty, or property without due process
• Art. VI, Sec. 24: Revenue bills originate exclusively in the House; Senate may amend
• Art. VI, Sec. 26(2): Three readings on separate days; no amendment on last reading
• Art. VI, Sec. 28(2): Delegation to President of tariff and impost rates, within limits
Issues
- Procedural – Did the Bicameral Conference Committee exceed its authority? Violate origination and no-amendment rules? Must courts apply the enrolled-bill doctrine?
- Substantive – Do Sections 4–6 (stand-by VAT increase), Section 8 (70% input-tax cap and 60-month amortization), and Section 12 (5% final withholding VAT by government) violate:
• the delegation ban (Art. VI, Sec. 28)
• due process (Art. III, Sec. 1)
• equal protection or uniformity in taxation (Art. VI, Sec. 28(1))?
Procedural History
• Petitioners filed for prohibition and certiorari before R.A. 9337 took effect; TRO granted July 1, 2005.
• Respondents invoked the presumption of constitutionality and enrolled-bill doctrine.
• Court defined the constitutional and procedural questions to be resolved.
Rulings on Procedural Issues
• Enrolled-Bill Doctrine: Reaffirmed – the signed, certified enrolled bill conclusively proves due enactment in absence of constitutional violation.
• No-Amendment Rule (Art. VI, Sec. 26(2)): Applies only to readings in each House before conference stage; does not bar the conference committee from reconciling conflicting provisions.
• Origination Clause (Art. VI, Sec. 24): A revenue measure must originate in the House; Senate may propose or concur with amendments. Amendments germane to a revenue bill from the House – including VAT-related and associated tax measures – are constitutionally proper.
Undue Delegation to the Executive (Sections 4–6)
• Stand-by Increase: Congress retained initial 10% VAT rate and mandated (by “shall”) the President to raise it to 12% effective January 1, 2006 upon the satisfaction of either of two specified economic benchmarks.
• Rule: While plenary power to tax may not be delegated, Congress may delegate fact-finding – a nonlegislative, administrative function – to ascertain preconditions for statutory triggers.
• Holding: No undue delegation. The law is complete; standards are clear. The President has mandatory, not discretionary, duty to increase the rate when real-world data confirm one of the conditions.
Seventy-Percent Cap on Input Tax (Section 8)
• Amendment: Limits quarterly creditable input VAT to 70% of output VAT; requires any excess to be carried forward. Introduces 60-month spread of input VAT on capital goods over P1 million.
• Core VAT Principle: VAT is an indirect tax on consumption; sellers collect VAT from buyers; businesses carry input tax on purchases and recover the same by crediting against output tax.
• Effect of the 70% Cap: Ensures government receives at least 30% of output VAT each quarter from all registrants. Excess input taxes are deferred indefinitely or until cessation of business.
• Due Process / Confiscation?: Input-tax credits are statutory privileges, not vested property rights; they may be modified, limited or withdrawn by law. Excess input credits may be carried over, and ultimately converted to tax-credit certificates or refund after business closure.
• Uniformity & Progressive Taxation: The rule of uniformity demands consistent rates within a class; R.A. 9337 applies the cap to all VAT-registered sellers equally. A parallel 3% gross-receipts tax on non-VAT small sellers levels the playing field.
• Holding: Cap on credits, 60-month amortization, and carry-over provisions do not violate due process, equal protection, or uniformity. Congress may rationally limit credits to secure minimum revenues.
Sixty-Month Amortization of Input Tax on Capital Goods
• Amendment: Input VAT on capital goods with acquisition cost over P1 million must be spread evenly over 60 months (or shorter life if depreciation schedule is under five years).
• Effect: Introduces a time-value-of-money delay in crediting capital-goods VAT; amortizes input tax over the asset’s useful life.
• Holding: Amortization reflects policy choices in tax administration and revenue certainty. It is neither arbitrary nor materially confiscatory, and does not violate due process.
Five-Percent Final Withholding VAT by Government (Section 12)
• Amendment: State entities must withhold 5%
Case Syllabus (G.R. No. 168056)
Relevant Facts
- Republic Act No. 9337 amends numerous sections of the 1997 National Internal Revenue Code (NIRC) to raise additional revenue.
- Among its provisions are (a) a 10% VAT with a “stand-by” increase to 12% after certain economic thresholds are met; (b) a 70% cap on the VAT input credit; (c) a 60-month amortization of input credit on capital goods above ₱1,000,000; and (d) a 5% final VAT withholding by government payors.
- The law took effect July 1, 2005; on that date the Supreme Court issued a temporary restraining order (TRO) halting enforcement.
- Oral arguments were held July 14, 2005. The TRO was maintained pending final resolution.
Legislative History
- Three bills were consolidated into RA 9337:
• House Bill No. 3555 – Amended Sections 106–108, 110, 114 of the NIRC (VAT restructuring).
• House Bill No. 3705 – Amended Sections 106–111 of the NIRC (VAT rates, certain exemptions).
• Senate Bill No. 1950 – Amended Sections 27, 28, 34, 106–108, 109, 110, 112–114, 116, 117, 119, 121, 125, 148, 151, 236, 237, 288 of the NIRC (corporate tax, excise tax, VAT). - Bicameral Conference Committee reconciled differences (May 10–11, 2005).
- Both Houses approved the Conference Report; enrolled version transmitted May 23 and signed into law May 24, 2005.
Temporary Restraining Order
- Effective July 1, 2005, pending further order, the Court enjoined enforcement of RA 9337.
- TRO rationale included confusion over implementing rules and fears of an across-the-board 10% price increase.
- The Court directed parties to submit implementing regulations and economic data.
Petitioners
- G.R. No. 168056 – ABAKADA Guro Party List et al.: challenged the “stand-by” authority to raise VAT from 10% to 12%.
- G.R. No. 168207 – Senator Pimentel et al.: also challenged “stand-by” authority and its vagueness.
- G.R. No. 168461 – Association of Pilipinas Shell Dealers et al.: challenged (a) the 70% input-tax-credit cap, (b) the 60-month amortization of capital-goods input tax, and (c) the 5% final withholding by government.
- G.R. No. 168463 – House Members led by Rep. Escudero: challenged additional tax provisions, the deletion of “no-pass-on” clauses, and bicameral procedure.
- G.R. No. 168730 – Governor Garcia: challenged the input-tax-credit cap an