PBCOM v CIR

Facts: Petitioner (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly
income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax of
P5,016,954.00. The taxes due were settled by applying PBCom's tax credit memos and accordingly, the Bureau of
Internal Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and P1,615,253.00,
respectively.

Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended
December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable
for the year.

But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted
to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986.

On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of
P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property
rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for
Review on November 18, 1988 before the Court of Tax Appeals (CTA). CTA denied the request of petitioner for a tax
refund or credit in the sum amount of P5,299,749.95, on the ground that it was filed beyond the two-year reglementary
period provided for by law. The petitioner's claim for refund in 1986 amounting to P234,077.69 was likewise denied on
the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year.

Petitioner filed a Motion for Reconsideration of the CTA's decision but the same was denied due course for lack of merit
in which the CA agreed. Hence this petition.

Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying on the applicability
of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular states that overpaid income taxes are
not covered by the two-year prescriptive period under the tax Code and that taxpayers may claim refund or tax credits
for the excess quarterly income tax with the BIR within ten (10) years under Article 1144 of the Civil Code.

Respondent Commissioner of Internal Revenue, through Solicitor General, argues that the two-year prescriptive period
for filing tax cases in court concerning income tax payments of Corporations is reckoned from the date of filing the Final
Adjusted Income Tax Return, which is generally done on April 15 following the close of the calendar year. Respondent
Commissioner also states that since the Final Adjusted Income Tax Return of the petitioner for the taxable year 1985
was supposed to be filed on April 15, 1986, the latter had only until April 15, 1988 to seek relief from the court. Further,
respondent Commissioner stresses that when the petitioner filed the case before the CTA on November 18, 1988, the
same was filed beyond the time fixed by law, and such failure is fatal to petitioner's cause of action.

Issue: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of
prescription, despite petitioner's reliance on RMC No. 7-85, changing the prescriptive period of two years to ten years?

Ruling: Petition is denied. Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to
generate funds for the State to finance the needs of the citizenry and to advance the common weal. 13 Due process of
law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it
is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as
little as possible. 14

From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because
the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered
by incidental matters.
Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) provides for the The
rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two
(2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should
be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years
to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the
provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines
contrary to the statute passed by Congress.

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more
specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal
Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to
enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be
ignored if judicially found to be erroneous. 20 Thus, courts will not countenance administrative issuances that override,
instead of remaining consistent and in harmony with the law they seek to apply and implement. 21

On the second issue, the petitioner alleges that the Court of Appeals seriously erred in affirming CTA's decision denying
its claim for refund of P234,077.69 (tax overpaid in 1986), based on mere speculation, without proof, that PBCom
availed of the automatic tax credit in 1987.

Sec. 69 of the 1977 NIRC 29 (now Sec. 76 of the 1997 NIRC) provides that any excess of the total quarterly payments
over the actual income tax computed in the adjustment or final corporate income tax return, shall either(a) be refunded
to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the
succeeding taxable year.To ease the administration of tax collection, these remedies are in the alternative, and the
choice of one precludes the other.

That the petitioner opted for an automatic tax credit in accordance with Sec. 69 of the 1977 NIRC, as specified in its
1986 Final Adjusted Income Tax Return, is a finding of fact which we must respect. Moreover, the 1987 annual
corporate tax return of the petitioner was not offered as evidence to contovert said fact. Thus, we are bound by the
findings of fact by respondent courts, there being no showing of gross error or abuse on their part to disturb our reliance
thereon. 31
Sison v Ancheta

Facts: Petitioner is assailaing the validity of Section I of Batas Pambansa Blg. 135. The assailed provision further
amends Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or
residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d)
interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and
similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted
gross income.

Petitioner 3 as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the imposition of
higher rates of tax upon his income arising from the exercise of his profession vis-a-visthose which are imposed upon
fixed income or salaried individual taxpayers.

He characterizes the above sction as arbitrary amounting to class legislation, oppressive and capricious in
character 5 For petitioner, therefore, there is a transgression of both the equal protection and due process clauses 6 of
the Constitution as well as of the rule requiring uniformity in taxation. 7

Issue: Whether the imposition of a higher tax rate on taxable net income derived from business or profession than on
compensation is constitutionally infirm.

Ruling: Petition is without merit, considering the (1) lack of factual foundation to show the arbitrary character of the
assailed provision; 31 (2) the force of controlling doctrines on due process, equal protection, and uniformity in taxation
and (3) the reasonableness of the distinction between compensation and taxable net income of professionals and
businessman certainly not a suspect classification,

The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here. does not
suffice. There must be a factual foundation of such unconstitutional taint.. Absent such a showing, the presumption of
validity must prevail. 5. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary
that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation
of property. That would be a clear abuse of power.

Now for equal protection. Favoritism and undue preference cannot be allowed.. The Constitution does not require things
which are different in fact or opinion to be treated in law as though they were the same." 21 Hence the constant
reiteration of the view that classification if rational in character is allowable. As a matter of fact, in a leading case of Lutz
V. Araneta, 22 this Court, through Justice J.B.L. Reyes, went so far as to hold "at any rate, it is inherent in the power
to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which
result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.'" 23

7. Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution: "The rule of taxation shag
be uniform and equitable." 24 This requirement is met according to Justice Laurel in Philippine Trust Company v.
Yatco,25 decided in 1940, when the tax "operates with the same force and effect in every place where the subject may
be found. " 26 He likewise added: "The rule of uniformity does not call for perfect uniformity or perfect equality, because
this is hardly attainable." 27 There is quite a similarity then to the standard of equal protection for all that is required is
that the tax "applies equally to all persons, firms and corporations placed in similar situation."30

8. Further on this point. Apparently, what misled petitioner is his failure to take into consideration the distinction between
a tax rate and a tax base. Taxpayers may be classified into different categories. Taxpayers who are recipients of
compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers are e not
entitled to make deductions for income tax purposes because they are in the same situation more or less. On the other
hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or
expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them
zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. There is ample
justification then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income,
while continuing the system of net income taxation as regards professional and business income.
Reyes v Almanzor

Facts: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta.
Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants were
paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. Reyes were precluded in from
raising rentals and from ejecting the tenants because of enactment of Republic Act No. 6359 prohibiting an increase
of monthly rental of those not exceeding P300.00 a month but allowing an increase in rent by not more than 10%
thereafter, which also disallowed the ejectment of lessees upon the expiration of the usual legal period of lease. On
October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition

In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on
the schedule of market values duly reviewed by the Secretary of Finance. The revision, as expected, entailed an
increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement with the Board of
Tax Assessment Appeals. They averred that the reassessments made were "excessive, unwarranted, inequitable,
confiscatory and unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income
derived from their properties. They argued that the income approach should have been used in determining the land
values instead of the comparable sales approach which the City Assessor adopted (Rollo, pp. 9-10-A). The Board of
Tax Assessment Appeals, however, considered the assessments valid.

The Reyeses appealed to the Central Board of Assessment Appeals but it affirmed the decision. The motion for
reconsideration was likewise denied. Hence this petition.

Petitioners maintain that the "Income Approach" method would have been more realistic for in disregarding the effect
of the restrictions imposed by P.D. 20 on the market value of the properties affected, respondent Assessor of the City
of Manila unlawfully and unjustifiably set increased new assessed values at levels so high and successive that the
resulting annual real estate taxes would admittedly exceed the sum total of the yearly rentals paid or payable by the
dweller tenants under P.D. 20. Hence, petitioners protested against the levels of the values assigned to their properties
as revised and increased on the ground that they were arbitrarily excessive, unwarranted, inequitable, confiscatory and
unconstitutional (Rollo, p. 10-A).

On the other hand, respondents opted instead for the "Comparable Sales Approach" on the ground that the value
estimate of the properties predicated upon prices paid in actual, market transactions would be a uniform and a more
credible standards to use especially in case of mass appraisal of properties.

Issue: the honorable board erred in adopting the "comparable sales approach" method in fixing the assessed value of
appellants’ properties.

Ruling: Petition granted. The taxing power has the authority to make a reasonable and natural classification for
purposes of taxation but the government’s act must not be prompted by a spirit of hostility, or at the very least
discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons
under similar circumstances or that all persons must be treated in the same manner, the conditions not being different
both in the privileges conferred and the liabilities imposed (Ibid., p. 662).

Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first Fundamental Principle to
guide the appraisal and assessment of real property for taxation purposes is that the property must be "appraised at its
current and fair market value. By no stretch of the imagination can the market value of properties covered by P.D. No.
20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value
in new of the rental restrictions.

Ironically, in the case at bar, not even the factors determinant of the assessed value of subject properties under the
"comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a
bonafide arm’s length transaction between a willing seller and a willing buyer and (2) the property must be comparable
property (Rollo, p. 27). Nothing can justify or support their view as it is of judicial notice that for properties covered by
P.D. 20 especially during the time in question, there were hardly any willing buyers.
Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws
(then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same
government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their
properties.
Nitafan v CIR

Petitioners, the duly appointed and qualified Judges presiding over Branches 52, 19 and 53, respectively, of the
Regional Trial Court, National Capital Judicial Region, all with stations in Manila, seek to prohibit and/or perpetually
enjoin respondents, the Commissioner of Internal Revenue and the Financial Officer of the Supreme Court, from making
any deduction of withholding taxes from their salaries.

In a nutshell, they submit that "any tax withheld from their emoluments or compensation as judicial officers constitutes
a decrease or diminution of their salaries, contrary to the provision of Section 10, Article VIII of the 1987 Constitution
mandating that "(d)uring their continuance in office, their salary shall not be decreased," even as it is anathema to the
Ideal of an independent judiciary envisioned in and by said Constitution."

Issue: Whether or not the members of the Judiciary are exempted from income tax

Ruling: Petition dismissed.

RE: Question of exemption from income taxation. — The Court REAFFIRMED the Chief Justice's previous
and standing directive to the Fiscal Management and Budget Office of this Court to continue with the deduction
of the withholding taxes from the salaries of the Justices of the Supreme Court as well as from the salaries of
all other members of the judiciary.

That should have resolved the question. However, with the filing of this petition, the Court has deemed it best to settle
the legal issue raised through this judicial pronouncement. As will be shown hereinafter, the clear intent of the
Constitutional Commission was to delete the proposed express grant of exemption from payment of income tax to
members of the Judiciary, so as to "give substance to equality among the three branches of Government" in the words
of Commissioner Rigos. In the course of the deliberations, it was further expressly made clear, specially with regard to
Commissioner Joaquin F. Bernas' accepted amendment to the amendment of Commissioner Rigos, that the salaries
of members of the Judiciary would be subject to the general income tax applied to all taxpayers.

This intent was somehow and inadvertently not clearly set forth in the final text of the Constitution as approved and
ratified in February, 1987 (infra, pp. 7-8). Although the intent may have been obscured by the failure to include in the
General Provisions a proscription against exemption of any public officer or employee, including constitutional officers,
from payment of income tax, the Court since then has authorized the continuation of the deduction of the withholding
tax from the salaries of the members of the Supreme Court, as well as from the salaries of all other members of the
Judiciary. The Court hereby makes of record that it had then discarded the ruling in Perfecto vs. Meer and Endencia
vs. David, infra, that declared the salaries of members of the Judiciary exempt from payment of the income tax and
considered such payment as a diminution of their salaries during their continuance in office. The Court hereby reiterates
that the salaries of Justices and Judges are properly subject to a general income tax law applicable to all income
earners and that the payment of such income tax by Justices and Judges does not fall within the constitutional protection
against decrease of their salaries during their continuance in office.

The debates, interpellations and opinions expressed regarding the constitutional provision in question until it was finally
approved by the Commission disclosed that the true intent of the framers of the 1987 Constitution, in adopting it, was
to make the salaries of members of the Judiciary taxable. The ascertainment of that intent is but in keeping with the
fundamental principle of constitutional construction that the intent of the framers of the organic law and of the people
adopting it should be given effect.10 The primary task in constitutional construction is to ascertain and thereafter assure
the realization of the purpose of the framers and of the people in the adoption of the Constitution. 11it may also be safely
assumed that the people in ratifying the Constitution were guided mainly by the explanation offered by the
framers.12 1avvphi1

With the foregoing interpretation, and as stated heretofore, the ruling that "the imposition of income tax upon the salary
of judges is a dimunition thereof, and so violates the Constitution" in Perfecto vs. Meer,13 as affirmed in Endencia vs.
David 14 must be declared discarded. The framers of the fundamental law, as the alter ego of the people, have
expressed in clear and unmistakable terms the meaning and import of Section 10, Article VIII, of the 1987 Constitution
that they have adopted

Stated otherwise, we accord due respect to the intent of the people, through the discussions and deliberations of their
representatives, in the spirit that all citizens should bear their aliquot part of the cost of maintaining the government and
should share the burden of general income taxation equitably.
PAL v Sec of Finance

The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or
exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties
sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No. 7716
seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National
Internal Revenue Code.

Fifth. An additional attack on the formal validity of Republic Act No. 7716 is made by the Philippine Airlines, Inc.,
petitioner in G.R. No. 11582, namely, that it violates Art. VI, § 26(1) which provides that "Every bill passed by Congress
shall embrace only one subject which shall be expressed in the title thereof." It is contended that neither H. No. 11197
nor S. No. 1630 provided for removal of exemption of PAL transactions from the payment of the VAT and that this was
made only in the Conference Committee bill which became Republic Act No. 7716 without reflecting this fact in its title.

The title of Republic Act No. 7716 is:

AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND
ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES.

The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is concerned.

Issue: Whether or not the withdrawal of PALs exemption from VAT without being mentioned in title violated a bill
embracing one subject (The question is whether this amendment of § 103 of the NIRC is fairly embraced in the title of
Republic Act No. 7716, although no mention is made therein of P.D. No. 1590 as among those which the statute
amends)

Ruling:. We think it is, since the title states that the purpose of the statute is to expand the VAT system, and one way
of doing this is to widen its base by withdrawing some of the exemptions granted before. To insist that P.D. No. 1590
be mentioned in the title of the law, in addition to § 103 of the NIRC, in which it is specifically referred to, would be to
insist that the title of a bill should be a complete index of its content.

The constitutional requirement that every bill passed by Congress shall embrace only one subject which shall be
expressed in its title is intended to prevent surprise upon the members of Congress and to inform the people of pending
legislation so that, if they wish to, they can be heard regarding it. If, in the case at bar, petitioner did not know before
that its exemption had been withdrawn, it is not because of any defect in the title but perhaps for the same reason other
statutes, although published, pass unnoticed until some event somehow calls attention to their existence. Indeed, the
title of Republic Act No. 7716 is not any more general than the title of PAL's own franchise under P.D. No. 1590, and
yet no mention is made of its tax exemption. The title of P.D. No. 1590 is:

The trend in our cases is to construe the constitutional requirement in such a manner that courts do not unduly interfere
with the enactment of necessary legislation and to consider it sufficient if the title expresses the general subject of the
statute and all its provisions are germane to the general subject thus expressed. 24

In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. 1590) by specifically
excepting from the grant of exemptions from the VAT PAL's exemption under P.D. No. 1590. This is within the power
of Congress to do under Art. XII, § 11 of the Constitution, which provides that the grant of a franchise for the operation
of a public utility is subject to amendment, alteration or repeal by Congress when the common good so requires.

In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's power of taxation
save only where a tax exemption has been granted for a valid consideration. 47 Such is not the case of PAL in G.R. No.
115852, and we do not understand it to make this claim. Rather, its position, as discussed above, is that the removal
of its tax exemption cannot be made by a general, but only by a specific, law.

(1) That the procedural requirements of the Constitution have been complied with by Congress in the enactment of the
statute. WHEREFORE, the petitions in these cases are DISMISSED.
Tolentino v Sec of Finance

Facts: The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the
sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or
properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No.
7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National
Internal Revenue Code.

That is, the VAT will be regressive." Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption
goods of those who are in the higher-income bracket, which before were taxed at a rate higher than 10%, has been
reduced, while basic commodities, which before were taxed at rates ranging from 3% to 5%, are now taxed at a higher
rate.

Issue: Whether or not VAT violates the progressivity, uniformity and equality rule of taxation given that VAT is regressive

Ruling: Indeed, the absence of threat of immediate harm makes the need for judicial intervention less evident and
underscores the essential nature of petitioners' attack on the law on the grounds of regressivity, denial of due process
and equal protection and impairment of contracts as a mere academic discussion of the merits of the law. For the fact
is that there have even been no notices of assessments issued to petitioners and no determinations at the
administrative levels of their claims so as to illuminate the actual operation of the law and enable us to reach sound
judgment regarding so fundamental questions as those raised in these suits.

Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by respondents that in fact
it distributes the tax burden to as many goods and services as possible particularly to those which are within the reach
of higher-income groups, even as the law exempts basic goods and services. It is thus equitable. The goods and
properties subject to the VAT are those used or consumed by higher-income groups. These include real properties held
primarily for sale to customers or held for lease in the ordinary course of business, the right or privilege to use industrial,
commercial or scientific equipment, hotels, restaurants and similar places, tourist buses, and the like. On the other
hand, small business establishments, with annual gross sales of less than P500,000, are exempted. This, according to
respondents, removes from the coverage of the law some 30,000 business establishments. On the other hand, an
occasional paper 43 of the Center for Research and Communication cities a NEDA study that the VAT has minimal
impact on inflation and income distribution and that while additional expenditure for the lowest income class is only
P301 or 1.49% a year, that for a family earning P500,000 a year or more is P8,340 or 2.2%.

Lacking empirical data on which to base any conclusion regarding these arguments, any discussion whether the VAT
is regressive in the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich," as
the Cooperative Union of the Philippines (CUP) claims in G.R. No. 115873, is largely an academic exercise.

Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the Constitution to
do is to "evolve a progressive system of taxation." This is a directive to Congress, just like the directive to it to give
priority to the enactment of laws for the enhancement of human dignity and the reduction of social, economic and
political inequalities (Art. XIII, § 1), or for the promotion of the right to "quality education" (Art. XIV, § 1). These provisions
are put in the Constitution as moral incentives to legislation, not as judicially enforceable rights.

(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive, oppressive and
confiscatory and that it violates vested rights protected under the Contract Clause are prematurely raised and do not
justify the grant of prospective relief by writ of prohibition.

WHEREFORE, the petitions in these cases are DISMISSED.

Facts: R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, and Senate
Bill No. 1950. Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for
prohibition on May 27, 2005. They question 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 questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to
12%, effective January 1, 2006, after any of the following conditions have been satisfied, to wit:

. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise
the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied:

(i) 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

(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 ½%).

Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in common that
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.

The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. Preliminarily, respondents contend
that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners failed to cast doubt on its validity.

ISSUES: Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution.

RULING: Petition dismissed. Ra 9337 is constitutional. There was No Undue Delegation of Legislative Power

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. 53 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.54

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 President’s 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

When one speaks of the Secretary of Finance as the alter ego of the President, it simply means that as head of the
Department of Finance he is the assistant and agent of the Chief Executive. The multifarious executive and
administrative functions of the Chief Executive are performed by and through the executive departments, and the acts
of the secretaries of such departments, such as the Department of Finance, performed and promulgated in the regular
course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief
Executive. The Secretary of Finance, as such, occupies a political position and holds office in an advisory capacity,
and, in the language of Thomas Jefferson, "should be of the President's bosom confidence" and, in the language of
Attorney-General Cushing, is "subject to the direction of the President." 55

In the present case, in making his recommendation to the President on the existence of either of the two conditions,
the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is
not subject to the power of control and direction of the President. He is acting as the agent of the legislative department,
to determine and declare the event upon which its expressed will is to take effect. 56 The Secretary of Finance becomes
the means or tool by which legislative policy is determined and implemented, considering that he possesses all the
facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is
to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by
Congress is present. His personality in such instance is in reality but a projection of that of Congress. Thus, being the
agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of
the Secretary of Finance and to substitute the judgment of the former for that of the latter.

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 (24/5%) or the national government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1½%). 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.57 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. 58

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. 59

The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause, influence or create the
conditions to bring about either or both the conditions precedent does not deserve any merit as this argument is highly
speculative. The Court does not rule on allegations which are manifestly conjectural, as these may not exist at all. The
Court deals with facts, not fancies; on realities, not appearances. When the Court acts on appearances instead of
realities, justice and law will be short-lived.