(Article published in the Sep 21,2005 issue of Manila Standard Today)
justices of the Supreme Court took part in the deliberations of
R.A. No. 9337, usually called the “VAT Reform Act” in order
to distinguish it from three previous statutes amending the first
VAT law, E.O. No. 273. Eight
justices were of the opinion that the Bicameral Conference Committee (BCC)
that crafted the VAT Reform Act as it is now poised to take effect somehow
acted beyond its powers. Eight
was all the votes that were needed to declare R.A. No. 9337
unconstitutional. Had the
eight justices come to an agreement on just one provision of the law, the
BCC would have gotten a humbling hair cut and the President a really bad
As it turned out, Lady Luck bestowed on the BCC, as she had been
heretofore granting the incumbent President, the blessing of a fragmented
opposition. The eight
dissenting justices were unable to agree on one single point that was
wrong with the BCC’s final version.
Thus did the BCC avoid a fatal blow on R.A. No. 9337; but then, it
did not, in my view, leave the battle unscathed.
The armor of legislative prerogative had suffered a serious dent.
The next time around, BCC may have to be more conscious of the
parameters of its authority. The
Supreme Court, it is clear, was getting a bit restless about how tax
statutes were being made.
The factual narration of the majority decision, reports that the
assault on the BCC was by legislators themselves,
by some senators, led by Aquilino Q. Pimentel, Jr. in G.R. No.
168207, and by some members of the House of Representatives, headed by Francis Joseph G. Escudero with their G.R. No. 168463,
against their own kind.
Their common complaint, among other items, was that their
colleagues at the BCC did not follow the constitutionally mandated way of
passing a tax law. Section 24
of Article VI says that all tax bills must “originate exclusively in the
House of Representatives but the Senate may propose or concur with
amendments”. The BCC, which
is a creation of the rules in both houses (Sec. 88, Rule XIV for the House
and Sec. 35 of Rule XII for the Senate) is mandated to settle differences
in the event that the House and Senate versions do not agree.
The version that came out of the BCC, among other features,
contained “amendments” from the Senate that dealt with, among other
provisions of the tax code, the Income Tax (primarily changing corporate
tax rates), and amended provisions which were not even touched by the
Senate and House versions (percentage tax on banks and excise tax on
mineral products). The
argument therefore was that the BCC acted in excess of its powers
The three most senior members of the Supreme Court were united in
holding that the portions of R.A. No. 9337 that amended the income tax law
were unconstitutional. Chief
Justice Hilario G. Davide, Jr., while recognizing the amplitude of the
power of the BCC to revise the versions before it, maintained that the
changes must be “germane” to the subject of the bill that originated
from the House. He argued
that since the BCC’s versions amended non-VAT provisions, such as the
income tax law, in the tax code, those amendments were not “germane”
to the subject of the bills that came from the House, namely, H.B. No.
3555 and H.B. No. 3705. He conceded that the purpose of the non-VAT amendments was to
mitigate impact of the reformed VAT on consumers, but, he pointed out that
said objectives “may still be realized by means of another bill that may
later be initiated by the House of Representatives”.
Associate Justices Reynato S. Puno and Artemio v. Panganiban wrote
extensive dissertions that no student of the law-making process could
afford not to read. Justice
Puno reiterated the stand he made in Tolentino
v. Secretary of Finance (235 SCRA 630) and maintained that the passage
of time since Tolentino
fortified belief that the BBC has limited powers and was not a “third
house” of Congress. Justice
Panganiban, for his part, began his analysis with the three options
available to the BCC, i.e. adopting the House version in part or in toto;
adopting the Senate version in part or in toto,and compromising by
notwithstanding their varied starting points, the two most senior
associates agreed that the provisions in the VAT law amending the income
tax were not germane to the subject of the bills that originated from the
House. Justices Consuelo Ynares-Santiago, Angelina Sandoval-Gutierrez,
Romeo J. Callejo, Sr. and Adolfo
S. Azcuna echoed the same refrain.
Associate Justice Danto O. Tinga provided the eighth vote against
the BCC. He affirmed the need
to apply the test of “germaneness” and invoked it to strike down the
restrictions imposed by the law on the use by local government units of
their incremental revenue from the VAT.
But lucky for the BCC, he joined the majority justices in the view
that the purpose of revenue generation, which permeated both the initial
bills in the House as well as the final version of R.A. No. 9337, made the
income tax amendments “germane”.
Thus while the dissenting justices had the required number, they
were not all together on the same flaw of the law.
But the shave on the BCC was very close.
And unless it proceeds, in subsequent laws, with more caution that
it exhibited when it fashioned out R.A. No. 9337, it is only a matter of
time before we see the dismantling of the third house of Congress.
This is a welcome development for estate planners. We need less a legislative that flaunts its authority; we can use more legislators who are internally restrained by the limits that the constitution puts on their prerogatives.