FACTS
Several petitions were filed challenging the constitutionality of Republic Act No. 9337 (Expanded Value-Added Tax or E-VAT Law), which amended various provisions of the National Internal Revenue Code (NIRC) of 1997 to increase government revenues and address the country's growing fiscal deficit. The law expanded the coverage of the Value-Added Tax (VAT), removed certain exemptions, and authorized the President, upon the recommendation of the Secretary of Finance, to increase the VAT rate from 10% to 12% once either of two conditions was met: (1) VAT collection as a percentage of GDP exceeded 2⅘%, or (2) the national government deficit exceeded 1½% of GDP. Petitioners, composed of legislators, taxpayers, business groups, and public officials, questioned the law as unconstitutional.
Petitioners argued that the law violated Article VI, Section 24 of the 1987 Constitution, which requires that all revenue bills originate exclusively from the House of Representatives, because the Bicameral Conference Committee allegedly introduced substantial amendments not found in the House bill. They likewise contended that the law constituted an undue delegation of the legislative power of taxation by allowing the President to increase the VAT rate. They also challenged the removal of the "no pass-on" provisions for petroleum products and electricity, the imposition of a 70% cap on input tax credits, and the 5% final withholding VAT, claiming that these violated the constitutional guarantees of due process, equal protection, and non-impairment of contracts.
ISSUE
Whether Republic Act No. 9337 violates Article VI, Section 24 of the Constitution by allegedly failing to originate exclusively from the House of Representatives after substantial amendments by the Bicameral Conference Committee.
Whether the law unconstitutionally delegates the legislative power to tax by authorizing the President to increase the VAT rate under specified conditions, and whether its provisions on VAT expansion, input tax credits, withholding VAT, and removal of the "no pass-on" provisions violate the constitutional guarantees of due process, equal protection, and non-impairment of contracts.
HELD
The Supreme Court dismissed the petitions and upheld the constitutionality of Republic Act No. 9337. It ruled that the law complied with Article VI, Section 24 of the Constitution because the constitutional requirement is satisfied so long as the revenue measure originates in the House of Representatives. The Senate may validly propose amendments, and the Bicameral Conference Committee may reconcile conflicting provisions of the House and Senate versions, even if the final version contains amendments not found in either bill, provided they are germane to the subject of the legislation. The Court also held that the authority granted to the President to increase the VAT rate was not an undue delegation of legislative power, since Congress itself fixed the policy, prescribed the conditions under which the increase could be made, and provided sufficient standards. The President merely determined the existence of the facts upon which the law would operate, which is a valid delegation of fact-finding or administrative authority.
The Court further ruled that the challenged VAT provisions did not violate due process, equal protection, or the non-impairment clause. Taxation is an inherent power of the State, and classifications made by the law were reasonable and applied uniformly to those similarly situated. The removal of the "no pass-on" provisions did not make the law unconstitutional because VAT is an indirect tax that may legally be shifted to consumers. Likewise, the 70% cap on input tax credits and the 5% final withholding VAT were held to be valid legislative measures designed to improve tax administration and revenue collection. Accordingly, the Court sustained the E-VAT Law as a legitimate exercise of Congress' taxing power consistent with the Constitution
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