ABAKADA GURO VS SEC ERMITA

Facts: On May 24, 2005, the President signed into law Republic Act 9337 or the VAT
Reform Act. Before the law took effect on July 1, 2005, the Court issued a TRO enjoining
government from implementing the law in response to a slew of petitions for certiorari and
prohibition questioning the constitutionality of the new law. The challenged section of R.A.
No. 9337 is the common proviso in Sections 4, 5 and 6: That the President, upon the
recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the
rate of value-added tax to 12%, after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%);
or (ii) National government deficit as a percentage of GDP of the previous year exceeds
one and one-half percent (1%)

Petitioners allege that the grant of stand-by authority to the President to increase the
VAT rate is an abdication by Congress of its exclusive power to tax because
such delegation is not covered by Section 28 (2), Article VI Consti. They argue that VAT
is a tax levied on the sale or exchange of goods and services which cant be included
within the purview of tariffs under the exemptiondelegation since this refers to customs
duties, tolls or tribute payable upon merchandise to the government and usually imposed
on imported/exported goods. They also said that the President has powers to cause,
influence or create the conditions provided by law to bring about the conditions precedent.
Moreover, they allege that no guiding standards are made by law as to how the Secretary
of Finance will make the recommendation.

Issue: Whether or not the RA 9337's stand-by authority to the Executive to increase the
VAT rate, especially on account of the recommendatory power granted to the Secretary
of Finance, constitutes undue delegation of legislative power? NO

Held: The powers which Congress is prohibited from delegating are those which are
strictly, or inherently and exclusively, legislative. Purely legislative power which can never
be delegated is the authority to make a complete law- complete as to the time when it
shall take effect and as to whom it shall be applicable, and to determine the expediency
of its enactment. It is the nature of the power and not the liability of its use or the manner
of its exercise which determines the validity of its delegation.

The exceptions are:

(a) delegation of tariff powers to President under Constitution

(b) delegation of emergency powers to President under Constitution

(c) delegation to the people at large

(d) delegation to local governments

(e) delegation to administrative bodies

For the delegation to be valid, it must be complete and it must fix a standard. A sufficient
standard is one which defines legislative policy, marks its limits, maps out its boundaries
and specifies the public agency to apply it. In this case, it is not a delegation of legislative
power BUT adelegation of ascertainment of facts upon which enforcement and
administration of the increased rate under the law is contingent. The legislature has made
the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact
or condition. It leaves the entire operation or non-operation of the 12% rate upon factual
matters outside of the control of the executive. No discretion would be exercised by the
President. Highlighting the absence of discretion is the fact that the word SHALL is used
in the common proviso. The use of the word SHALL connotes a mandatory order. Its use
in a statute denotes an imperative obligation and is inconsistent with the idea of
discretion. Thus, it is the ministerial duty of the President to immediately impose the 12%
rate upon the existence of any of the conditions specified by Congress. This is a duty,
which cannot be evaded by the President. It is a clear directive to impose the 12% VAT
rate when the specified conditions are present.

Congress just granted the Secretary of Finance the authority to ascertain the existence
of a fact--- whether by December 31, 2005, the VAT collection as a percentage of GDP
of the previous year exceeds 2 4/5 % or the national government deficit as a percentage
of GDP of the previous year exceeds one and 1%. If either of these two instances has
occurred, the Secretary of Finance, by legislative mandate, must submit such information
to the President.

In making his recommendation to the President on the existence of either of the two
conditions, the Secretary of Finance is not acting as the alter ego of the President or even
her subordinate. He is acting as the agent of the legislative department, to determine and
declare the event upon which its expressed will is to take effect. The Secretary of Finance
becomes the means or tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and information and has a
much broader perspective to properly evaluate them. His function is to gather and collate
statistical data and other pertinent information and verify if any of the two conditions laid
out by Congress is present. There is no undue delegation of legislative power but only
of the discretion as to the execution of a law. This is constitutionally permissible. Congress
did not delegate the power to tax but the mere implementation of the law.