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SCOPE OF TAXATION

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-59431 July 25, 1984
ANTERO M. SISON, JR., petitioner,
vs.
RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA, Deputy Commissioner,
Bureau of Internal Revenue; TOMAS TOLEDO Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA,
Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on Audit, and CESAR E. A. VIRATA, Minister of
Finance, respondents.
Antero Sison for petitioner and for his own behalf.
The Solicitor General for respondents.
FERNANDO, C.J.:
The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the validity of
Section I of Batas Pambansa Blg.135 depends upon a showingof its constitutional infirmity.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 shareof individual partner in the net profits of taxable
partnership, (f) adjusted gross income. 2 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-vis those which are imposed upon fixed income or salaried individual taxpayers. 4 He
characterizes the above sction as arbitrary amounting to class legislation, oppressive and capricious in
character 5For 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
The Court, in a resolution of January 26, 1982, required respondents to file an answer within 10 days from notice.
Such an answer, after two extensions were granted the Office of the Solicitor General, was filed on May 28,
1982.8 The facts as alleged were admitted but not the allegations which to their mind are "mere arguments,
opinions or conclusions on the part of the petitioner, the truth [for them] being those stated [in their] Special and
Affirmative Defenses." 9 The answer then affirmed: "Batas Pambansa Big. 135 is a valid exercise of the State's
power to tax. The authorities and cases cited while correctly quoted or paraghraph do not support petitioner's
stand." 10 The prayer is for the dismissal of the petition for lack of merit.

This Court finds such a plea more than justified. The petition must be dismissed.
1. It is manifestthat the field of state activity has assumed a much wider scope, The reason was so clearly set forth
by retired Chief Justice Makalintal thus: "The areas which used to be left to private enterprise and initiative and
which the government was called upon to enter optionally,and only 'because it was better equipped to administer
for the public welfare than is any private individual or group of individuals,' continue to lose their well-defined
boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it
is to meet the increasing social challenges of the times." 11 Hence the need for more revenues. The power to tax,
an inherent prerogative, has to be availed of to assure the performance of vital state functions. It is the source of
the bulk of public funds. To praphrase a recent decision, taxes being the lifeblood of the government, their prompt
and certain availability is of the essence. 12
2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of
all the powers of of government." 13 It is, of course, to be admitted that for all its plenitude 'the power to tax is
not unconfined. There are restrictions. The Constitution sets forth such limits . Adversely affecting as it does
properly rights,both the due process and equal protection clauses inay properly be invoked, all petitioner does, to
invalidate in appropriate cases a revenue measure. if it were otherwise, there would -be truth to the 1803 dictum
of Chief Justice Marshall that "the power to tax involves the power to destroy." 14 In a separate opinion in Graves
v. New York, 15 Justice Frankfurter, after referring to it as an 1, unfortunate remark characterized it as "a flourish
of rhetoric [attributable to] the intellectual fashion of the times following] a free use of absolutes." 16 This is
merely to emphasize that it is riot and there cannot be such a constitutional manda te. Justice Frankfurter could
rightfully conclude:"The web of unreality spun from Marshall's famous dictum was brushed away by one stroke of
Mr. Justice Holmess pen: 'The power to tax is not the power to destroy while this Court sits." 17 So it is in the
Philippines.
3. This Court then is left with no choice. The Constitution as the fundamental law overrides any legislative or
executive, act that runs counter to it. In any case therefore where it can be demonstrated that the challenged
statutory provision — as petitioner here alleges — fails to abide by its command, then this Court must so declare
and adjudge it null. The injury thus is centered on the question of whether the imposition of a higher tax rate on
taxable net income derived from business or profession than on compensation is constitutionally infirm.
4, 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. Considering that petitioner here
would condemn such a provision as void or its face, he has not made out a case. This is merely to adhere to the
authoritative doctrine that were the due process and equal protection clauses are invoked, considering that they
arc not fixed rules but rather broad standards, there is a need for of such persuasive character as would lead to
such a conclusion. Absent such a showing, the presumption of validity must prevail. 18
5. It is undoubted that the due process clausemay be invoked where a taxingstatute 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. It then becomes the duty of this Court to say that such an
arbitrary act amounted to the exercise of an authority not conferred. That properly calls for the application of the
Holmes dictum. It has also been held that where the assailed tax measureis beyond the jurisdiction of the state, or
is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack
on due process grounds. 19
6. Now for equal protection. The applicablestandard to avoid the charge that there is a denial of this consti tutional
mandate whether the assailed act is in the exercise of the lice power or the power of eminent domain is to
demonstrated that the governmental act assailed, far from being inspired by the attainment of the common weal
was prompted by the 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. Favoritism and undue preference cannot be allowed. For the principle is that equal
protection and security shall be given to every person under circumtances which if not Identical are analogous. If
law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same
fashion, whatever restrictions cast on some in the group equally binding on the rest." 20 That same formulation
applies as well to taxation measures. The equal protection clause is, of course, inspired by the noble concept of
approximating the Ideal of the laws benefits being available to all and the affairs of men being governed by that
serene and impartial uniformity,which is of the very essence of the Idea of law. There is, however, wisdom, as well
as realism in these words of Justice Frankfurter: "The equality at which the 'equal protection' clause aims is not a
disembodied equality. The Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws are not
abstract propositions. They do not relate to abstract units A, B and C, but are expressions of policy arising out of
specific difficulties, address to the attainment of specific ends by the use of specific remedies. The Constitution
does not require things which are different in fact or opinion to be treated in law as though they were the
same." 21Hence 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 resultfroma singlingoutof one particular class for taxation, or exemption
infringe no constitutional limitation.'" 23A
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 The problem of classification did not present itself in that
case. It did not arise until nine years later, when the Supreme Court held: "Equality and uniformity in taxation
means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing
power has the authority to make reasonableand natural classifications for purposes of taxation, ... . 28 As clarified
by Justice Tuason, where "the differentiation" complained of "conforms to the practical dictates of justice and
equity" it "is not discriminatory within the meaning of this clause and is therefore uniform." 29 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. There is no legal objection to a broader tax base or taxable income by
eliminatingall deductibleitems and at the same time reducingthe applicabletax rate. Taxpa yers may be classified
into different categories. To repeat, it. is enough that the classification mustrest upon substantial distinctions that
make real differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the,
discerniblebasisof classification is thesusceptibility of the income to the application of generalized rules removing
all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of
them. 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 justthen to disregard the disparities by givingall 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.
9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1) lack of factual
foundation to showthe arbitrary character of the assailed provision; 31 (2) the force of controllingdoctrines 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,

WHEREFORE, the petition is dismissed. Costs against petitioner.
Makasiar, Concepcion, Jr., Guerero, Melencio-Herrera, Escolin, Relova, Gutierrez, Jr., De la Fuente and Cuevas, JJ.,
concur.
Teehankee, J., concurs in the result.
Plana, J., took no part.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. The petitioner has no cause of action for prohibition.
ABAD SANTOS, J., dissenting:
This is a frivolous suit. While the tax rates for compensation income are lower than those for net income such
circumtance does not necessarily result in lower tax payments for these receiving compensation income. In fact,
the reverse will most likely be the case; those who file returns on the basis of net income will pay less taxes
because they claim all sort of deduction justified or not I vote for dismissal.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. The petitioner has no cause of action for prohibition.
ABAD SANTOS, J., dissenting:
This is a frivolous suit. While the tax rates for compensation income are lower than those for net income such
circumtance does not necessarily result in lower tax payments for these receiving compensation income. In fact,
the reverse will most likely be the case; those who file returns on the basis of net income will pay less taxes
because they claim all sort of deduction justified or not I vote for dismissal.
Footnotes
1 Petitioner must have realized that a suit for declaratory relief must be filed with Regional Trial
Courts.
2 Batas Pambansa Blg. 135, Section 21 (1981).

3 The respondents are Ruben B. Ancheta, Acting Commissioner, Bureau of Internal Revenue;
Romulo Villa, Deputy Commissioner, Bureau of Internal Revenue; Tomas Toledo, Deputy
Commissioner,Bureau of Internal Revenue; Manuel Alba, Minister of Budget; Francisco Tantuico,
Chairman, Commissioner on Audit; and Cesar E. A. Virata, Minister of Finance.
4 Petition, Parties, par. 1. The challenge is thus aimed at paragraphs (a) and (b) of Section 1
further Amending Section 21 of the National Internal Revenue Code of 1977. Par. (a) reads:
"(a) On taxable compensation income. — A tax is hereby imposed upon the taxable
compensation income as determined in Section 28 (a) received during each taxable year from all
sources by every individual, whether a citizen of the Philippines, determined in accordance with
the following schedule:
Not over P2,500 0%
Over P 2,500 but not over P 5,000 1%
Over P 5,000 but not over 10,000 P 25 + 3% of excess over P 5,000
Over P 10,000 but not over P 20,000 P 175 + 7 % of excess over P 10,000
Over P 20,000 but not over P 40,000 P 875 + 11%, of excess over P 20,000
Over P 40.000 but not over P 60,000 P 3,075 + I 15% of excess over P 40,000
Over P 60,000 but not over
P100,000
P 6,075 + 19% of excess over P 60,000
Over P100,000 but not over
P250,000
P 13,675 + 24% excess over P100,000
Over P250,000 but not over
P500,000
P 49,675 + 29% of excess over P250,000
Over P500,000 P 122,175 + 35% of excess over P500,000
Par. (b) reads: "(b) On taxable net income. — A tax is hereby imposed upon the taxable net
income as determined in Section 29 (a) received during each taxable year from all sources by
every individual, whether a citizen of the Philippines, or an alien residing in the Philippines
determined in accordance with the following schedule:
Not over P10,000 5%
Over P 10,000 but not over P 30,000 P 500 + 15% of excess over P 10,000
Over P 30,000 but not over P150,000 P 3,500 + 30% of excess over P 30,000
Over P150,000 but not over
P500,000
P 39,500 + 45% of excess over P150,000
Over P500,000 P197,000 + 601% of excess over P500,000
5 Ibid Statement, par. 4.

6 Article IV, Section 1 of the Constitution reads: "No person shall be deprived of life, liberty or
property without due process of law, nor shall any person be denied the equal protection of the
laws."
7 Article VII, Section 7. par. (1) of the Constitution reads: "The rule of taxation shall be uniform
and equitable. The Batasang Pambansa shall evolve a progressive system of taxation."
8 It was filed by Solicitor General Estelito P. Mendoza. He was assisted by Assistant Solicitor
General Eduardo D. Montenegro and Solicitor Erlinda B, Masakayan.
9 Answer, pars. 1-6.
10 Ibid, par. 6.
11 Agricultural Credit and Cooperative Financing Administration v. Consideration of Unions in
Government Corporation and Offices, L-21484, November 29, 1969, 30 SCRA 649, 662.
12 Cf, Vera v. Fernandez, L-31364, March 30, 1979, 89 SCRA 199, per Castro, J.
13 Sarasola v. Trinidad, 40 Phil. 252, 262 (1919).
14 McColloch v. Maryland 4 Wheaton 316,
15 306 US 466 ( 938).
16 Ibid, 489
17 Ibid. 490.
18 Cf. Ermita-Malate Hotel and Motel Operator S Association v. Hon. City Mayor, 127 Phil. 306,
315 ( 1967); U.S. v. Salaveria, 39 Phil. 102,111 (1918) and Ebona v. Daet, 85 Phil, 369 (1950).
Likewise referred to is O'Gorman and Young v. Hartford Fire Insurance Co 282 US 251, 328
(1931).
19 Cf. Manila Gas Co. v. Collector of Internal Revenue, 62 Phil. 895 (1936); Wells Fargo Bank and
Union Trust Co. v. Collector, 70 Phil. 325 (1940); Republic v. Oasan Vda. de Fernandez, 99 Phil.
934 (1956).
20 The excerpt is from the opinion in J.M. Tuason and Co. v. The Land Tenure Administration, L-
21064, February 18, 1970, 31 SCRA 413, 435 and reiterated in Bautista v. Juinio, G.R. No. 50908,
January 31, 1984, 127 SCRA 329, 339. The former deals with an eminent domain proceeding and
the latter with a suit contesting the validity of a police power measure.
21 Tigner v. Texas, 310 US 141, 147 (1940).
22 98 Phil. 148 (1955).
23 Ibid, 153.
24 Article VIII, Section 17, par. 1, first sentence of the Constitution

25 69 Phil. 420 (1940).
26 Ibid, 426.
27 Ibid, 424.
28 Eastern Theatrical Co. v. Alfonso, 83 Phil. 852, 862 (1949).
29 Manila Race Horse Trainers Asso. v. De la Fuente, 88 Phil. 60,65 (1951).
30 Uy Matias v. City of Cebu, 93 Phil. 300 (1953).
31 While petitioner cited figures to sustain in his assertion, public respondents refuted with
other figures that argue against his submission. One reason for requiring declaratory relief
proceedings to start in regional trial courts is precisely to enable petitioner to prove his
allegation, absent an admission in the answer.
G.R. No. L-75697 June 18, 1987
VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR and CITY
TREASURER OF MANILA, respondents.
Nelson Y. Ng for petitioner.

The City Legal Officer for respondents City Mayor and City Treasurer.
MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other
videogram operators adversely affected. It assailstheconstitutionality of Presidential Decree No. 1987 entitled "An
Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram
industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, 1985 and took
effect on April 10, 1986, fifteen (15) days after completion of its publication i n the Official Gazette.
On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No.
1994 amended the National Internal Revenue Code providing, inter alia:
SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette, ready
for playback, regardless of length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to sales tax.
On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and
Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter
collectively referred to as the Intervenors, were permitted by the Court to intervene in the ca se, over petitioner's
opposition, upon the allegations that intervention was necessary for the complete protection of their rights and
that their "survival and very existence is threatened by the unregulated proliferation of film piracy." The
Intervenors were thereafter allowed to file their Comment in Intervention.
The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of videograms including, among
others, videotapes, discs, cassettes or any technical improvement or variation thereof, have
greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp decline
in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection
of sales,contractor's specific,amusement and other taxes, thereby resultingin substantial losses
estimated at P450 Million annually in government revenues;
2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and such earnings have not been subjected to tax,
thereby depriving the Government of approximately P180 Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram establishments have also affected the
viability of the movie industry, particularly the more than 1,200 movie houses and theaters
throughout the country, and occasioned industry-wide displacement and unemployment due to
the shutdown of numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the
Government to create an environment conducive to growth and development of all business
industries, including the movie industry which has an accumulated investment of about P3
Billion;
5. WHEREAS, proper taxation of the activities of videogramestablishments will not only alleviate
the dire financial condition of the movie industry upon which more than 75,000 families and

500,000 workers depend for their livelihood,butalso providean additional source of revenue for
the Government, and at the same time rationalize the heretofore uncontrolled distribution of
videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a
clear and present danger to the moral and spiritual well-being of the youth, and impairs the
mandate of the Constitution for the State to support the rearing of the youth for civic efficiency
and the development of moral character and promote their physical,intellectual,and social well-
being;
7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these
blatant malpractices which have flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people
and betraying the national economic recovery program, bold emergency measures must be
adopted with dispatch; ... (Numbering of paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:
1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local
government is a RIDER and the same is not germane to the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in
violation of the due process clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the President of the vast powers
conferred upon him by Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a nuisance, which it is not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the
title thereof" 1 is sufficiently complied with if the title be comprehensive enough to include the general purpose
which a statute seeks to achieve. It is not necessary that the title express each and every end that the statute
wishes to accomplish.Therequirement is satisfied if all the parts of the statute are related, and are germane to the
subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject
and title. 2 An act having a single general subject, indicated in the title, may contain any number of provisions, no
matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and
may be considered in furtherance of such subject by providing for the method and means of carrying out the
general object." 3 The rule also is that the constitutional requirement as to the title of a bill should not be so
narrowly construed as to cripple or impede the power of legislation. 4 It should be given practical rather than
technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without
merit. That section reads, inter alia:

Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision of
law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price
or rental rate, as the casemay be, for every sale,leaseor disposition of a videogram containing a
reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds
of the tax collected shall accrue to the province, and the other fifty percent (50%) shall acrrue to
the municipality where the tax is collected;PROVIDED, That in Metropolitan Manila,the tax shall
be shared equally by the City/Municipality and the Metropolitan Manila Commission.
xxx xxx xxx
The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the
general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory
Board as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and
title. As a tool for regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout the
DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and
rationalizethe heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those
preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which is the
creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes expressed in its
Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or
that the latter be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in
restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it
regulates, discourages, or even definitely deters the activities taxed. 8 The power to impose taxes is one so
unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion of the authority which exercises it. 9 In imposing a tax,
the legislatureacts upon its constituents.This is,in general,a sufficient security against erroneous and oppressive
taxation. 10
The tax imposed by the DECREE is not only a regulatory but also a revenue meas ure prompted by the realization
that earnings of videogram establishments of around P600 million per annum have not been subjected to tax,
thereby depriving the Government of an additional source of revenue. It is an end-user tax, imposed on retailers
for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or
borne by the movie industry which the theater-owners pay to the government, but which is passed on to the
entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that
is imposed uniformly on all videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the
video industry,particularly becauseof the rampantfilmpiracy,the flagrantviolation of intellectual property rights,
and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the
movie industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist even if the motive which impelled the legislature to
impose the tax was to favor one industry over another. 11
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 "inequities which result from a singling out of one particular class for
taxation or exemption infringe no constitutional limitation". 12 Taxation has been made the
implement of the state's police power. 13
At bottom, the rate of tax is a matter better addressed to the taxing legislature.

3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former
President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the judgment of the
President ... , there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasang
Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that
in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees,
orders, or letters of instructions, which shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently
summarizes the justification in that grave emergencies corroding the moral values of the people and betraying the
national economic recovery program necessitated bold emergency measures to be adopted with dispatch.
Whatever the reasons "in the judgment" of the then President, considering that the issue of the validity of the
exercise of legislative power under the said Amendment still pends resolution in several other cases, we reserve
resolution of the question raised at the proper time.
4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. The
grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and
units of the government and deputize, for a fixed and limited period, the heads or personnel of such agencies and
units to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution, enforcement, and implementation. "The true distinction
is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be,
and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. The
first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language of the decree,
the authority of the BOARD to solicitsuch assistanceis for a "fixed and limited period" with the deputized agencies
concerned being "subject to the direction and control of the BOARD." That the grant of such authority might be
the source of graft and corruption would not stigmatize the DECREE as unconstitutional. Should the eventuality
occur, the aggrieved parties will not be without adequate remedy in law.
5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one
which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law
required at the time of the commission of the offense." It is petitioner's position that Section 15 of the DECREE in
providing that:
All videogram establishments in the Philippines are hereby given a period of forty-five (45) days
after the effectivity of this Decree within which to register with and secure a permit from the
BOARD to engage in the videogram business and to register with the BOARD all their inventories
of videograms, including videotapes, discs, cassettes or other technical improvements or
variations thereof, before they could be sold, leased, or otherwise disposed of. Thereafter any
videogram found in the possession of any person engaged in the videogram business without the
required proof of registration by the BOARD, shall be prima facie evidence of violation of the
Decree, whether the possession of such videogram be for private showing and/or public
exhibition.
raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of
any videogram cannot be presented and thus partakes of the nature of an ex post facto law.
The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15
... it is now well settled that "there is no constitutional objection to the passage of a law
providing that the presumption of innocence may be overcome by a contrary presumption
founded upon the experience of human conduct, and enacting what evidence sha ll be sufficient
to overcome such presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at 858-59,
citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the

"legislature may enact that when certain facts have been proved that they shall be prima facie
evidence of the existence of the guilt of the accused and shift the burden of proof provided there
be a rational connection between the facts proved and the ultimate facts presumed so that the
inference of the one from proof of the others is not unreasonable and arbitrary because of lack
of connection between the two in common experience". 16
Applied to the challenged provision, there is no question that there is a rational connection between the fact
proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the
fact that the prima facie presumption of violation of the DECREE attaches only after a forty-five-day period
counted from its effectivity and is, therefore, neither retrospective in character.
6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of
existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While
the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public
welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy; the
erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed
video tapes containing pornographic films and films with brutally violent sequences; and losses in government
revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video
establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are
required to engage in business. 17
The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video industry. On
the contrary, video establishments are seen to have proliferated in many places notwithstanding the 30% tax
imposed.
In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of the DECREE.
These considerations, however, are primarily and exclusively a matter of legislative concern.
Only congressional power or competence, not the wisdom of the action taken, may be the basis
for declaringa statute invalid.This is as it ought to be. The principle of separation of powers has
in the main wisely allocated the respective authority of each department and confined its
jurisdiction to such a sphere. There would then be intrusion notallowable under the Constitution
if on a matter left to the discretion of a coordinatebranch,the judiciary would substituteits own.
If there be adherence to the rule of law, as there ought to be, the last offender should be courts
of justice,to which rightly litigants submittheir controversy precisely to maintai n unimpaired the
supremacy of legal norms and prescriptions. The attack on the validity of the challenged
provision likewise insofar as there may be objections, even if valid and cogent on its wisdom
cannot be sustained. 18
In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute. We find no
clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as
unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
SO ORDERED.
Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento
and Cortes, JJ., concur.

Footnotes
1 Section 19[1], Article VIII, 1973 Constitution; Section 26[l] Article VI, 1987 Constitution.
2 Sumulong vs. COMELEC, No. 48609, October 10, 1941, 73 Phil. 288; Cordero vs. Hon. Jose
Cabatuando, et al., L-14542, Oct. 31, 1962,6 SCRA 418.
3 Public Service Co., Recktenwald, 290 III. 314, 8 ALR 466, 470.
4 Government vs. Hongkong & Shanghai Banking Corporation, No. 44257, November 22, 1938,
66 Phil. 483; Cordero vs. Cabatuando, et al., supra.
5 Sumulong vs. Commission on Elections, supra.
6 United States vs.Sanchez, 340 U.S. 42, 44,1950, cited in Bernas,Philippines Constitutional Law,
p. 594.
7 People vs. Carlos, L-239, June 30, 1947, 78 Phil. 535.
8 U.S. vs. Sanchez, supra.
9 II Cooley, A Treatise on the Constitutional Limitations, p. 986.
10 ibid., p. 987.
11 Magnano Co. vs. Hamilton, 292, U.S. 40.
12 Lutz vs. Araneta, L-7859, December 22, 1955, 98 Phil.148,citingCarmichael vs. Southern Coal
and Coke Co., 301 U.S. 495, 81 L. Ed. 1245.
13 ibid., citing Great Atl. and Pacific Tea Co. vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. vs.
Butler, 297 U.S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4 Wheat, 316,4 L. Ed. 579.
14 Cincinnati, W & Z.R. Co. vs. Clinton County Comrs (1852) 1 Ohio St. 88.
15 G. R. No. L-40195, May 29, 1987.
16 ibid., citing People vs. Mingoa, supra, See also U.S. vs. Luling No. 11162, August 12, 1916,34
Phil. 725.
17 Solicitor General's Comments, p. 102, Rollo.
18 Morfe vs. Mutuc, L-20387, January 31, 1968, 22 SCRA 424, 450-451.

G.R. No. 115455 October 30, 1995
ARTURO M. TOLENTINO, petitioner,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 115525 October 30, 1995
JUAN T. DAVID, petitioner,
vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance; LIWAYWAY
VINZONS-CHATO, as Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR
REPRESENTATIVES, respondents.
G.R. No. 115543 October 30, 1995
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF INTERNAL REVENUE
AND BUREAU OF CUSTOMS, respondents.
G.R. No. 115544 October 30, 1995
PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING CORPORATION;
PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T. GUINGONA,
JR., in his capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of
Finance, respondents.
G.R. No. 115754 October 30, 1995
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 October 30, 1995
KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO,
EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G.
FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT COALITION, INC., and
PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO TAÑADA,petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE and THE
COMMISSIONER OF CUSTOMS, respondents.
G.R. No. 115852 October 30, 1995
PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 115873 October 30, 1995
COOPERATIVE UNION OF THE PHILIPPINES, petitioner,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON. TEOFISTO T.
GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his capacity as
Secretary of Finance, respondents.
G.R. No. 115931 October 30, 1995
PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF PHILIPPINE BOOK
SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the Commissioner of
Internal Revenue; and HON. GUILLERMO PARAYNO, JR., in his capacity as the Commissioner of
Customs, respondents.
R E S O L U T I O N
MENDOZA, J.:
These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the
declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The
motions, of which there are 10 in all, have been filed by the several petitioners in these cases, with the exception
of the PhilippineEducational PublishersAssociation,Inc.and the Association of Philippine Booksellers, petitioners
in G.R. No. 115931.
The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine
Airlines, Inc., petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc., petitioner in G.R. No. 115544,
and Juan T. David, petitioner in G.R. No. 115525, each filed a reply. In turn the Solicitor General filed on June 1,
1995 a rejoinder to the PPI's reply.

On June 27, 1995 the matter was submitted for resolution.
I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan,
Inc., Philippine Airlines (PAL), Roco, and Chamber of Real Estate and Builders Association (CREBA)) reiterate
previous claims madeby them that R.A. No. 7716 did not "originateexclusively"in the House of Representatives as
required by Art. VI, §24 of the Constitution. Although they admit that H. No. 11197 was filed in the House of
Representatives where it passed three readings and that afterward it was sent to the Senate where after first
reading it was referred to the Senate Ways and Means Committee, they complain that the Senate did not pass it
on second and third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it
approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have done was to
amend H. No. 11197 by striking out the text of the bill and substituting it with the text of S. No. 1630. That way, it
is said,"the bill remains a House bill and the Senate version just becomes the text (only the text) of the House bill."
The contention has no merit.
The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a House
revenue bill by enactingits own version of a revenue bill.On at least two occasions during the Eighth Congress, the
Senate passed its own version of revenue bills,which,in consolidation with House bills earlier passed, became the
enrolled bills. These were:
R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM FIVE (5)
YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT)
which was approved by the President on April 10,1992. This Act is actually a consolidation of H. No. 34254, which
was approved by the House on January 29, 1992, and S. No. 1920, which was approved by the Senate on February
3, 1992.
R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY FILIPINO ATHLETE
WINNING A MEDAL IN OLYMPIC GAMES) which was approved by the President on May 22, 1992. This Act is a
consolidation of H. No. 22232, which was approved by the House of Representatives on August 2, 1989, and S. No.
807, which was approved by the Senate on October 21, 1991.
On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of
House and Senate bills. These are the following, with indications of the dates on which the laws were approved by
the President and dates the separate bills of the two chambers of Congress were respectively passed:
1. R.A. NO. 7642
AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE
PERTINENT SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992).
House Bill No. 2165, October 5, 1992
Senate Bill No. 32, December 7, 1992
2. R.A. NO. 7643
AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE PAYMENT
OF THE VALUE-ADDED TAX EVERY MONTH AND TO ALLOW LOCAL GOVERNMENT UNITS TO
SHARE IN VAT REVENUE, AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF THE NATIONAL
INTERNAL REVENUE CODE (December 28, 1992)

House Bill No. 1503, September 3, 1992
Senate Bill No. 968, December 7, 1992
3. R.A. NO. 7646
AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE PLACE
FOR PAYMENT OF INTERNAL REVENUE TAXES BY LARGE TAXPAYERS, AMENDING FOR THIS
PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED
(February 24, 1993)
House Bill No. 1470, October 20, 1992
Senate Bill No. 35, November 19, 1992
4. R.A. NO. 7649
AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS,
INSTRUMENTALITIES OR AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS (GOCCS) TO DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE
OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF GOODS AND SIX PERCENT
(6%) ON GROSS RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS (April 6, 1993)
House Bill No. 5260, January 26, 1993
Senate Bill No. 1141, March 30, 1993
5. R.A. NO. 7656
AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO DECLARE
DIVIDENDS UNDER CERTAIN CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR OTHER
PURPOSES (November 9, 1993)
House Bill No. 11024, November 3, 1993
Senate Bill No. 1168, November 3, 1993
6. R.A. NO. 7660
AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE
DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR SPECIFIC
PROGRAMS, AND FOR OTHER PURPOSES (December 23, 1993)
House Bill No. 7789, May 31, 1993
Senate Bill No. 1330, November 18, 1993
7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK LISTED AND
TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC OFFERING,
AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, BY
INSERTING A NEW SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF (May 5, 1994)
House Bill No. 9187, November 3, 1993
Senate Bill No. 1127, March 23, 1994
Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to
propose amendments to bills required to originate in the House, passed its own version of a House revenue
measure. Itis noteworthy that, in the particular caseof S. No. 1630, petitioners Tolentino and Roco, as members of
the Senate, voted to approve it on second and third readings.
On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere
matter of form. Petitioner has not shown what substantial differenceitwould make if, as the Senate actually did in
this case, a separate bill like S. No. 1630 is instead enacted as a substitute measure, "taking into Consideration . .
. H.B. 11197."
Indeed, so far as pertinent, the Rules of the Senate only provide:
RULE XXIX
AMENDMENTS
xxx xxx xxx
§68. Not more than one amendment to the original amendment shall be considered.
No amendment by substitution shall be entertained unless the text thereof is submitted in
writing.
Any of said amendments may be withdrawn before a vote is taken thereon.
§69. No amendment which seeks the inclusion of a legislative provision foreign to the subject
matter of a bill (rider) shall be entertained.
xxx xxx xxx
§70-A. A bill or resolution shall not be amended by substituting it with another which covers a
subject distinct from that proposed in the original bill or resolution. (emphasis added).
Nor is there merit in petitioners' contention that, with regard to revenue bills,the PhilippineSenate possesses less
power than the U.S. Senate because of textual differences between constitutional provisions giving them the
power to propose or concur with amendments.
Art. I, §7, cl. 1 of the U.S. Constitution reads:
All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may
propose or concur with amendments as on other Bills.

Art. VI, §24 of our Constitution reads:
All appropriation,revenue or tariff bills,billsauthorizingincreaseof the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on
other Bills" in the American version, according to petitioners, shows the intention of the framers of our
Constitution to restrict the Senate's power to propose amendments to revenue bills. Petitioner Tolentino contends
that the word "exclusively" was inserted to modify "originate" and "the words 'as in any other bills' (sic) were
eliminated so as to show that these bills were not to be like other bills but must be treated as a special kind."
The history of this provision does not support this contention. The supposed indicia of constitutional intent are
nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935
Constitution originally provided for a unicameral National Assembly. When it was decided in 1939 to change to a
bicameral legislature, it became necessary to provide for the procedure for lawmaking by the Senate and the
House of Representatives. The work of proposing amendments to the Constitution was done by the National
Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assembly's
lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the following
provision:
All bills appropriating public funds, revenue or tariff bills, bills of local application, and private
bills shall originate exclusively in the Assembly, but the Senate may propose or concur with
amendments. In caseof disapproval by the Senate of any such bills,the Assembly may repass the
same by a two-thirds vote of all its members, and thereupon, the bill so repassed shall be
deemed enacted and may be submitted to the President for corresponding action. In the event
that the Senate should fail to finally act on any such bills, the Assembly may, after thirty days
from the opening of the next regular session of the same legislative term, reapprove the same
with a vote of two-thirds of all the members of the Assembly. And upon such reapproval, the bill
shall be deemed enacted and may be submitted to the President for corresponding action.
The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted
everything after the first sentence. As rewritten, the proposal was approved by the National Assembly and
embodied in Resolution No. 38, as amended by Resolution No. 73. (J. ARUEGO, KNOW YOUR CONSTITUTION 65 -66
(1950)). The proposed amendment was submitted to the people and ratified by them in the elections held on June
18, 1940.
This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present Constitution
was derived. It explains why the word "exclusively" was added to the American text from which the framers of the
PhilippineConstitution borrowed and why the phrase "as on other Bills" was not copied. Considering the defeat of
the proposal, the power of the Senate to propose amendments must be understood to be full, plenary and
complete "as on other Bills." Thus, because revenue bills are required to originate exclusively in the House of
Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue bill is
passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same
subject matter. This follows from the coequality of the two chambers of Congress.
That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from the
following commentaries:
The power of the Senate to propose or concur with amendments is apparently without
restriction. It would seem that by virtue of this power, the Senate can practically re-write a bill

required to come from the House and leave only a trace of the original bill. For exampl e, a
general revenue bill passed by the lower house of the United States Congress contained
provisions for the imposition of an inheritance tax . This was changed by the Senate into a
corporation tax. The amending authority of the Senate was declared by the United States
Supreme Court to be sufficiently broad to enable it to make the alteration. [Flint v. Stone Tracy
Company, 220 U.S. 107, 55 L. ed. 389].
(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))
The above-mentioned bills are supposed to be initiated by the House of Representatives because
it is more numerous in membership and therefore also more representative of the people.
Moreover, its members are presumed to be more familiar with the needs of the country in
regard to the enactment of the legislation involved.
The Senate is, however, allowed much leeway in the exercise of its power to propose or concur
with amendments to the bills initiated by the House of Representatives. Thus, in one case, a bill
introduced in the U.S. House of Representatives was changed by the Senate to make a proposed
inheritance tax a corporation tax. It is also accepted practice for the Senate to introduce what is
known as an amendment by substitution, which may entirely replace the bill initiated in the
House of Representatives.
(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).
In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application,and privatebills must "originate exclusively in the House of Representatives,"
it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the Senate
may propose an entirely new bill as a substitute measure. As petitioner Tolentino states in a high school text, a
committee to which a bill is referred may do any of the following:
(1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding
sections or altering its language; (3) to make and endorse an entirely new bill as a substitute, in
which case it will be known as a committee bill; or (4) to make no report at all.
(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))
To except from this procedure the amendment of bills which are required to originate in the House by prescribing
that the number of the House bill and its other parts up to the enacting clause must be preserved although the
text of the Senate amendment may be incorporated in place of the original body of the bill is to insist on a mere
technicality. At any rate there is no rule prescribing this form. S. No. 1630, as a substitute measure, is therefore as
much an amendment of H. No. 11197 as any which the Senate could have made.
II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No. 1630 is
an independent and distinct bill. Hence their repeated references to its certification that it was passed by the
Senate "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197," implying
that there is something substantially different between the reference to S. No. 1129 and the reference to H. No.
11197. From this premise, they conclude that R.A. No. 7716 originated both in the House and in the Senate and
that it is the product of two "half-baked bills because neither H. No. 11197 nor S. No. 1630 was passed by both
houses of Congress."
In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of the
corresponding provisions of H. No. 11197. The very tabular comparison of the provisions of H. No. 11197 and S.

No. 1630 attached as Supplement A to the basic petition of petitioner Tolentino, while showing differences
between the two bills, at the same time indicates that the provisions of the Senate bill were precisely intended to
be amendments to the House bill.
Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere
amendment of the House bill, H. No. 11197 in its original form did not have to pass the Senate on second and
three readings. It was enough that after it was passed on first reading it was referred to the Senate Committee on
Ways and Means. Neither was it required that S. No. 1630 be passed by the House of Representatives before the
two bills could be referred to the Conference Committee.
There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House bill
and Senate bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were referred to a
conference committee, the question was raised whether the two bills could be the subject of such conference,
considering that the bill from one house had not been passed by the other and vice versa. As Congressman Duran
put the question:
MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by
the House but not passed by the Senate, and a Senate bill of a similar nature is passed in the
Senate but never passed in the House, can the two bills be the subject of a conference, and can a
law be enacted from these two bills? I understand that the Senate bill in this particular instance
does not refer to investments in government securities, whereas the bill in the House, which was
introduced by the Speaker, covers two subject matters: not only investigation of deposits in
banks but also investigation of investments in government securities. Now, since the two bills
differ in their subject matter, I believe that no law can be enacted.
Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:
THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like this
where a conference should be had. If the House bill had been approved by the Senate, there
would have been no need of a conference; but precisely because the Senate passed another bill
on the same subject matter, the conference committee had to be created, and we are now
considering the report of that committee.
(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))
III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and unrelated
measures also accounts for the petitioners' (Kilosbayan's and PAL's) contention that because the President
separately certified to the need for the immediate enactment of these measures, his certification was ineffectual
and void. The certification had to be made of the version of the same revenue bill which at the momentwas being
considered.Otherwise, to followpetitioners' theory, it would be necessary for the Presidentto certify as many bills
as are presented in a house of Congress even though the bills are merely versions of the bill he has already
certified. Itis enough that he certifies the bill which, at the time he makes the certification,is under consideration.
Sinceon March 22, 1994 the Senate was consideringS. No. 1630, it was that bill which had to be certified. For that
matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate enactment because it was the
one which at that time was being considered by the House. This bill was later substituted, together with other bills,
by H. No. 11197.
As to what Presidential certification can accomplish, we have already explained in the main decision that the
phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, §26 (2)
qualifies not only the requirement that "printed copies [of a bill] in its final form [must be] distributed to the
members three days before its passage" but also the requirement that before a bill can become a law it must have

passed "three readings on separate days." There is not only textual support for such construction but historical
basis as well.
Art. VI, §21 (2) of the 1935 Constitution originally provided:
(2) No bill shall bepassed by either House unless it shall have been printed and copies thereof in
its final form furnished its Members at least three calendar days prior to its passage, except
when the President shall have certified to the necessity of its immediate enactment. Upon the
last reading of a bill, no amendment thereof shall be allowed and the question upon its pas sage
shall be taken immediately thereafter, and the yeas and nays entered on the Journal.
When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):
(2) No bill shall become a law unless it has passed three readings on separate days, and printed
copies thereof in its final form have been distributed to the Members three days before its
passage, except when the Prime Minister certifies to the necessity of its immediate enactment to
meet a public calamity or emergency. Upon the lastreadingof a bill,no amendment thereto shall
be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the present
Constitution, thus:
(2) No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members
three days before its passage, except when the President certifies to the necessity of its
immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote thereon shall be taken immediately
thereafter, and the yeasand nays entered in the Journal.
The exception is based on the prudential consideration that if in all cases three readings on separate days are
required and a bill has to be printed in final form before it can be passed, the need for a law may be rendered
academic by the occurrence of the very emergency or public calamity which it is meant to address.
Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the
Philippines where budget deficitis a chronic condition. Even if this were the case, an enormous budget deficit does
not make the need for R.A. No. 7716 any less urgent or the situation calling for its enactment any less an
emergency.
Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there was
an urgent need for consideration of S. No. 1630, because they responded to the call of the President by voting on
the bill on second and third readings on the same day. While the judicial department is not bound by the Senate's
acceptance of the President's certification, the respect due coequal departments of the government in matters
committed to them by the Constitution and the absence of a clear showing of grave abuse of discretion caution a
stay of the judicial hand.
At any rate, we are satisfied thatS. No. 1630 received thorough consideration in theSenate where it was discussed
for six days. Only its distribution in advance in its final printed form was actually dispensed with by holding the
voting on second and third readings on the same day (March 24, 1994). Otherwise, sufficient time between the
submission of the bill on February 8, 1994 on second readingand its approval on March 24, 1994 elapsed before it
was finally voted on by the Senate on third reading.

The purpose for which three readings on separate days is required is said to be two-fold: (1) to inform the
members of Congress of what they must vote on and (2) to give them notice that a measure is progressing through
the enacting process, thus enabling them and others interested in the measure to prepare their positions with
reference to it. (1 J. G. SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION §10.04, p. 282 (1972)). These
purposes were substantially achieved in the case of R.A. No. 7716.
IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of Attorneys
for Brotherhood, Integrity and Nationalism,Inc.(MABINI)) that in violation of the constitutional policy of full public
disclosure and the people's right to know (Art. II, §28 and Art. III, §7) the Conference Committee met for two days
in executive session with only the conferees present.
As pointed out in our main decision,even in the United States it was customary to hold such sessi ons with only the
conferees and their staffs in attendance and it was only in 1975 when a new rule was adopted requiring open
sessions. Unlike its American counterpart, the Philippine Congress has not adopted a rule prescribing open
hearings for conference committees.
It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff members
were present. These were staff members of the Senators and Congressmen, however, who may be presumed to be
their confidential men, not stenographers as in this case who on the last two days of the conference were
excluded. There is no showing that the conferees themselves did not take notes of their proceedings so as to give
petitioner Kilosbayan basis for claiming that even in secret diplomatic negotiations involving state interests,
conferees keep notes of their meetings. Above all, the public's right to know was fully served because the
Conference Committee in this case submitted a report showing the changes made on the differing versions of the
House and the Senate.
Petitioners cite the rules of both houses which provide that conference committee reports must contain "a
detailed, sufficiently explicit statement of the changes in or other amendments." These changes are shown in the
bill attached to the Conference Committee Report. The members of both houses could thus ascertain what
changes had been made in the original bills without the need of a statement detailing the changes.
The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of
1955) was reported by the Conference Committee. Congressman Bengzon raised a point of order. He said:
MR. BENGZON. My point of order is that it is out of order to consider the report of the
conference committee regarding House Bill No. 2557 by reason of the provision of Section 11,
Article XII, of the Rules of this House which provides specifically that the conference report must
be accompanied by a detailed statement of the effects of the amendment on the bill of the
House. This conference committee report is not accompanied by that detailed statement, Mr.
Speaker. Therefore it is out of order to consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:
MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point
of order raised by the gentleman from Pangasinan.
There is no question about the provision of the Rule cited by the gentleman from Pangasinan,
but this provision applies to those cases where only portions of the bill have been amended. In
this case before us an entire bill is presented; therefore, it can be easily seen from the reading of
the bill what the provisions are. Besides, this procedure has been an established practice.
After some interruption, he continued:

MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the provisions
of the Rules, and the reason for the requirement in the provision cited by the gentleman from
Pangasinan is when there are only certain words or phrases inserted in or deleted from the
provisions of the bill included in the conference report, and we cannot understand what those
words and phrases mean and their relation to the bill. In that case, it is necessary to make a
detailed statement on how those words and phrases will affect the bill as a whole; but when the
entire bill itself is copied verbatim in the conference report, that is not necessary. So when the
reason for the Rule does not exist, the Rule does not exist.
(2 CONG. REC. NO. 2, p. 4056. (emphasis added))
Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was
upheld by viva voce and when a division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)
Nor is there any doubt about the power of a conference committee to insert new provisions as long as these are
germane to the subject of the conference. As this Court held in Philippine Judges Association v. Prado, 227 SCRA
703 (1993), in an opinion written by then Justice Cruz, the jurisdiction of the conference committee is not limited
to resolving differences between the Senate and the House. It may propose an entirely new provision. What is
important is that its report is subsequently approved by the respective houses of Congress. This Court ruled that it
would not entertain allegations that, because new provisions had been added by the conference committee, there
was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no amendment thereto
shall be allowed."
Applying these principles, we shall decline to look into the petitioners' charges that an
amendment was made upon the last reading of the bill that eventually became R.A. No. 7354 and
that copiesthereof in its final form were not distributed among the members of each House. Both
the enrolled bill and the legislative journals certify that the measure was duly enacted i.e., in
accordance with Article VI, Sec. 26 (2) of the Constitution. We are bound by such official
assurances from a coordinate department of the government, to which we owe, at the very least,
a becoming courtesy.
(Id. at 710. (emphasis added))
It is interesting to note the following description of conference committees in the Philippines in a 1979 study:
Conference committees may be of two types: free or instructed. These committees may be given
instructions by their parent bodies or they may be left without instructions. Normally the
conference committees are without instructions,and this is why they are often critically referred
to as "the little legislatures." Once bills have been sent to them, the conferees have almost
unlimited authority to change the clauses of the bills and in fact sometimes introduce new
measures that were not in the original legislation. No minutes are kept, and members' activities
on conference committees are difficult to determine. One congressman known for his idealism
put itthis way: "I killed a bill on export incentives for my interest group [copra] in the conference
committee but I could not have done so anywhere else." The conference committee submits a
report to both houses, and usually it is accepted. If the report is not accepted, then the
committee is discharged and new members are appointed.
(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A
COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).

In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that
conference committees here are no different from their counterparts in the United States whose vast powers we
noted in Philippine Judges Association v. Prado, supra. At all events, under Art. VI, §16(3) each house has the
power "to determine the rules of its proceedings," including those of its committees. Any meaningful change in the
method and procedures of Congress or its committees must therefore be sought in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26 (1) of the
Constitution which provides that "Every bill passed by Congress shall embrace only one subject which shall be
expressed in the title thereof." PAL contends that the amendment of its franchise by the withdrawal of its
exemption from the VAT is not expressed in the title of the law.
Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all other taxes,
duties, royalties, registration, license and other fees and charges of any kind, nature, or des cription, imposed,
levied, established, assessed or collected by any municipal, city, provincial or national authority or government
agency, now or in the future."
PAL was exempted from the payment of the VAT along with other entities by §103 of the National Internal
Revenue Code, which provides as follows:
§103. Exempt transactions. — The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws or international agreements to which the
Philippines is a signatory.
R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending §103, as follows:
§103. Exempt transactions. — The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under Presidential
Decree Nos. 66, 529, 972, 1491, 1590. . . .
The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:
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.
By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY] 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,"
Congress thereby clearly expresses its intention to amend any provision of the NIRC which stands in the way of
accomplishing the purpose of the law.
PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to
P.D. No. 1590.It is unnecessary to do this in order to comply with the constitutional requirement, sinceitis already
stated in the title that the law seeks to amend the pertinent provisions of the NIRC, among which is §103(q), in

order to widen the baseof the VAT. Actually,it is the bill which becomes a lawthat is required to express in its title
the subjectof legislation.Thetitles of H. No. 11197 and S. No. 1630 in fact specifically referred to §103 of the NIRC
as among the provisions sought to be amended. We are satisfied that sufficient notice had been given of the
pendency of these bills in Congress before they were enacted into what is now R.A.
No. 7716.
In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected. R.A. No.
7354 is entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS POWERS, FUNCTIONS
AND RESPONSIBILITIES, PROVIDING FOR REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED
THEREWITH. It contained a provision repealing all franking privileges. It was contended that the withdrawal of
franking privileges was not expressed in the title of the law. In holding that there was sufficient description of the
subject of the law in its title, including the repeal of franking privileges, this Court held:
To require every end and means necessary for the accomplishment of the general objectives of
the statute to be expressed in its title would not only be unreasonable but would actually render
legislation impossible. [Cooley, Constitutional Limitations, 8th Ed., p. 297] As has been correctly
explained:
The details of a legislative act need not be specifically stated in its title, but
matter germane to the subject as expressed in the title, and adopted to the
accomplishment of the object in view, may properly be included in the act.
Thus, it is proper to create in the same act the machinery by which the act is to
be enforced, to prescribe the penalties for its infraction, and to remove
obstacles in the way of its execution. If such matters are properly connected
with the subjectas expressed in the title, it is unnecessary thatthey should also
have special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed. 725)
(227 SCRA at 707-708)
VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not
exempt from the taxing power of the State and that what the constitutional guarantee of free press prohibits are
laws which single out the press or target a group belonging to the press for special treatment or which in any way
discriminate against the press on the basis of the content of the publication, and R.A. No. 7716 is none of these.
Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining those
granted to others, the law discriminates against the press. At any rate, it is averred, "even nondiscriminatory
taxation of constitutionally guaranteed freedom is unconstitutional."
With respect to the firstcontention, itwould suffice to say that since the law granted the press a privilege, the law
could take back the privilege anytime without offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its sovereign prerogative.
Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other
businesses have long ago been subject. It is thus different from the tax involved in the cases invoked by the PPI.
The license tax in Grosjean v. American Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be discriminatory
because itwas laid on the gross advertisingreceipts only of newspapers whose weekly circulation was over 20,000,
with the resultthat the tax applied only to 13 out of 124 publishers i n Louisiana.Theselargepapers were critical of
Senator Huey Long who controlled the state legislaturewhich enacted the licensetax.The censorial motivation for
the law was thus evident.

On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L. Ed. 2d
295 (1983), the tax was found to be discriminatory because although it could have been made liable for the sales
tax or, in lieu thereof, for the use tax on the privilege of using, storing or consuming tangible goods, the press was
not. Instead, the press was exempted from both taxes. It was, however, later made to pay a special use tax on the
cost of paper and ink which made these items "the only items subject to the use tax that were component of
goods to be sold at retail." The U.S. Supreme Court held that the differential treatment of the press "suggests that
the goal of regulation is notrelated to suppression of expression,and such goal is presumptively unconstitutional."
It would therefore appear that even a law that favors the press is constitutionally suspect. (See the dissent of
Rehnquist, J. in that case)
Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and
unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously granted to PAL,
petroleum concessionaires, enterprises registered with the Export Processing Zone Authority, and many more are
likewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden the
base of the tax.
The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are
profit oriented, continue to enjoy exemption under R.A. No. 7716. An enumeration of some of these transactions
will suffice to show that by and large this is not so and that the exemptions are granted for a purpose. As the
Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural production and, in
other cases, for the personal benefit of the end-user rather than for profit. The exempt transactions are:
(a) Goods for consumption or use which are in their original state(agricultural,marine and forest
products,cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn,
sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the
manufacture of feeds).
(b) Goods used for personal consumption or use (household and personal effects of citizens
returning to the Philippines) or for professional use, like professional instruments and
implements, by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of
petroleum products subject to excise tax and services subject to percentage tax.
(d) Educational services,medical,dental,hospital and veterinary services, and services rendered
under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)
The PPI asserts that it does not really matter that the law does not discriminate against the press because "even
nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional."PPI cites in support of this
assertion the following statement in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the
First Amendment is not so restricted. A license tax certainly does not acquire constitutional
validity because it classifies the privileges protected by the First Amendment along with the
wares and merchandise of hucksters and peddlers and treats them all alike. Such equality in
treatment does not save the ordinance. Freedom of press, freedom of speech, freedom of
religion are in preferred position.
The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence,
although its application to others, such those selling goods, is vali d, its application to the press or to religious
groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets, is
unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of a
preacher. It is quite another thing to exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which
invalidated a city ordinancerequiringa businesslicensefee on those engaged in the saleof general merchandise.It
was held that the tax could not be imposed on the sale of bibles by the American Bible Society without restraining
the free exercise of its right to propagate.
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment
is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.
Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the
sales are used to subsidize the cost of printing copies which are given free to those who cannot afford to pay so
that to tax the sales would be to increase the price, while reducing the volume of sale. Granting that to be the
case, the resulting burden on the exercise of religious freedom is so incidental as to make it difficult to
differentiate it from any other economic imposition that might make the right to disseminate religious doctrines
costly. Otherwise, to follow the petitioner's argument, to increase the tax on the sale of vestments would be to lay
an impermissible burden on the right of the preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No.
7716,although fixed in amount, is really justto pay for the expenses of registration and enforcement of provisions
such as those relating to accounting in §108 of the NIRC. That the PBS distributes free bibles and therefore is not
liable to pay the VAT does not excuse it from the payment of this fee because it also sells some copies. At any rate
whether the PBS is liable for the VAT must be decided in concrete cases, i n the event it is assessed this tax by the
Commissioner of Internal Revenue.
VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation. CREBA
asserts thatR.A. No. 7716 (1) impairs theobligations of contracts, (2) classifies transactions as covered or exempt
without reasonable basis and (3) violates the rule that taxes should be uniform and equitable and that Congress
shall "evolve a progressive system of taxation."
With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of
real property by installment or on deferred payment basis would result in substantial increases in the monthly
amortizations to be paid because of the 10% VAT. The additional amount, it is pointed out, is something that the
buyer did not anticipate at the time he entered into the contract.

The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources are
cited by the plaintiffs,but none of them show that a lawful tax on a new subject,or an increased tax on an old one,
interferes with a contract or impairs its obligation, within the meaning of the Constitution. Even though such
taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of
another, or may impose additional burdens upon one class and release the burdens of another, still the tax must
be paid unless prohibited by the Constitution, nor can it be said that it impairs the obl igation of any existing
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)).
Indeed not only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into
contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147
(1968)) Contracts must be understood as having been made in reference to the possible exercise of the rightful
authority of the government and no obligation of contract can extend to the defeat of that authority. (Norman v.
Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).
It is next pointed out that while§4 of R.A. No. 7716 exempts such transactions asthesale of agricultural products,
food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real property
which is equally essential. The sale of real property for socialized and low-cost housing is exempted from the tax,
but CREBA claims that real estate transactions of "the less poor," i.e., the middle class, who are equally homeless,
should likewise be exempted.
The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services
was already exempt under §103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in
error in claiming that R.A. No. 7716 granted exemption to these transactions, while subjecting those of petitioner
to the payment of the VAT. Moreover, there is a difference between the "homeless poor" and the "homeless less
poor" in the example given by petitioner, because the second group or middle class can afford to rent houses in
the meantime that they cannot yet buy their own homes. The two social classesarethus differently situated in life.
"It is inherent in the power to tax that the State be free to select the subjects of taxation, and it has been
repeatedly held that 'inequalities which resultfroma singlingoutof one particular class for taxation, or exemption
infringe no constitutional limitation.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio v. De Leon,
134 Phil.912 (1968); Sison,Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ngmga Naglilingkod sa Pamahalaan
ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).
Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1) which
provides that "The ruleof taxation shall be uniform and equitable. The Congress shall evolve a progressive system
of taxation."
Equality and uniformity of taxation means that all taxablearticlesor kinds of property of the same class betaxed at
the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of
taxation.To satisfy this requirementit is enough that the statute or ordinanceapplies equally to all persons, forms
and corporations placed in similar situation. (City of Baguio v. De Leon, supra; Sison, Jr. v. Ancheta, supra)
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716 merely
expands the base of the tax. The validity of the original VAT Law was questioned in Kapatiran ng Naglilingkod sa
Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made in these cases,
namely, that the law was "oppressive, discriminatory, unjust and regressive in violation of Art. VI, §28(1) of the
Constitution." (At 382) Rejecting the challenge to the law, this Court held:
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .
The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,
which are not exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or services by
persons engaged in business with an aggregate gross annual sales exceeding P200,000.00. Small
corner sari-sari stores are consequently exempt from its application. Likewise exempt from the
tax are sales of farm and marine products, so that the costs of basic food and other necessities,
spared as they are from the incidence of the VAT, are expected to be relatively lower and within
the reach of the general public.
(At 382-383)
The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the Philippines,
Inc.(CUP), while petitioner Juan T. David argues that the lawcontravenes the mandate of Congress to providefor a
progressive system of taxation because the law imposes a flat rate of 10% and thus places the tax burden on all
taxpayers without regard to their ability to pay.
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What
it simply provides is thatCongress shall "evolvea progressivesystem of taxation." The constitutional provision has
been interpreted to mean simply that"direct taxes are. . . to be preferred [and] as much as possible,indirecttaxes
should be minimized." (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed,
the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which
perhaps are the oldestform of indirecttaxes,would have been prohibited with the proclamation of Art. VIII,§17(1)
of the 1973 Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No.
7716, §3, amending §102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4,
amending §103 of the NIRC).
Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:
(a) Goods for consumption or use which are in their original state(agricultural,marine and forest
products,cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn
sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the
manufacture of feeds).
(b) Goods used for personal consumption or use (household and personal effects of citizens
returning to the Philippines) and or professional use, like professional instruments and
implements, by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of
petroleum products subject to excise tax and services subject to percentage tax.
(d) Educational services,medical,dental,hospital and veterinary services, and services rendered
under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.