Abakada Guro Party List vs. Ermita (G.R. No. 168056, September 1, 2005)

ABAKADA Guro Party List vs.
Ermita GR No 168056
By PactaSuntServanda - July 08, 2014
ABAKADA Guro Party List vs. Ermita
G.R. No. 168056 September 1, 2005
Facts:
ABAKADA GURO Party List, et al., filed a petition for prohibition o questioning the
constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and
108, respectively, of the National Internal Revenue Code (NIRC).
Section 4 imposes a 10% VAT on sale of goods and properties;
Section 5 imposes a 10% VAT on importation of goods; and
Section 6 imposes a 10% VAT on sale of services and use or lease of properties;
These provisions contain a provision which authorizing the President, upon

recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January
1, 2006, after specified conditions have been satisfied.
Issues:
Whether or not there is a violation of Article VI, Section 24 of the Constitution.
Whether or not there is undue delegation of legislative power in violation of Article VI Sec
28(2) of the Constitution.
Whether or not there is a violation of the due process and equal protection of the
Constitution.
Ruling:
No, the revenue bill exclusively originated in the House of Representatives, the Senate was
acting within its constitutional power to introduce amendments to the House bill when it
included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage,
and excise and franchise taxes.
No, there is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who must do
it, and what is the scope of his authority; in our complex economy that is frequently the only
way in which the legislative process can go forward. In this case, it is not a delegation of
legislative power but a delegation of ascertainment of facts upon which enforcement and
administration of the increased rate under the law is contingent.
No, the power of the State to make reasonable and natural classifications for the purposes
of taxation has long been established. Whether it relates to the subject of taxation, the kind
of property, the rates to be levied, or the amounts to be raised, the methods of assessment,
valuation and collection, the State’s power is entitled to presumption of validity. As a rule,
the judiciary will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness
ABKD GURO PARTYLIST ET. AL V. ERMITA - CASE
DIGEST - CONSTITUTIONAL LAW
ABKD GURO PARTYLIST ET. AL V. ERMITA G.R. No. 168056 September 1, 2005
FACTS:
RA 9337, an act amending certain sections of the National Internal Revenue Code of 1997, is questioned by
petitioners for being unconstitutional. Procedural issues raised by petitioners are the legality of the bicameral
proceedings, exclusive origination of revenue measures and the power of the Senate concomitant thereto.
Also, Substantive issue was raised with regard to the undue delegation of legislative power to the President to
increase the rate of value-added tax to 12%.
Petitioners also argue that the increase to 12%, as well as the 70% limitation on the creditable input tax, the 60-
month amortization on the purchase or importation of capital goods exceeding P1,000,000.00, and the 5% final
withholding tax by government agencies, is arbitrary, oppressive, and confiscatory, and that it violates the
constitutional principle on progressive taxation, among others.
ISSUE:
WON Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving
the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition is met,
constitutes undue delegation of the legislative power to tax.
HELD:
NO. The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of
facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature
has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It
leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the
executive.
No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that the
word shall is used in the common proviso. The use of the word shall connotes a mandatory order. Its use in a
statute denotes an imperative obligation and is inconsistent with the idea of discretion.Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the
mandate is obeyed
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of
the conditions specified by Congress. This is a duty which cannot be evaded by the President. Inasmuch as the law
specifically uses the word shall, the exercise of discretion by the President does not come into play. It is a clear
directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of
the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of
certain facts or conditions by a person or body other than the legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the law effectively
nullified the Presidents power of control over the Secretary of Finance by mandating the fixing of the tax rate by
the President upon the recommendation of the Secretary of Finance. The Court cannot also subscribe to the
position of petitioners Pimentel, et al. that the word shall should be interpreted to mean may in view of the
phrase upon the recommendation of the Secretary of Finance.
Furthermore, Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact,
namely, whether by December 31, 2005, the value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or the national government deficit as a
percentage of GDP of the previous year exceeds one and one-half percent (1%). If either of these two instances has
occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then
the 12% VAT rate must be imposed by the President effective January 1, 2006. There is no undue delegation of
legislative power but only of the discretion as to the execution of a law. This is constitutionally
permissible.Congress does not abdicate its functions or unduly delegate power when it describes what job must be
done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only
way in which the legislative process can go forward.
As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to the President the legislative
power to tax is contrary to the principle of republicanism, the same deserves scant consideration. Congress did not
delegate the power to tax but the mere implementation of the law. 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. That Congress
chose to do so in such a manner is not within the province of the Court to inquire into, its task being to interpret
the law.

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These provisions contain a provision which authorizing the President, upon

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