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Bicameral Conference Committee gets a close shave

(Article published in the Sep 21,2005 issue of Manila Standard Today)

            Fifteen 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 hair day.

          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 consolidation.  But, 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.