ABAKADA vs Ermita

FACTS: On May 24, 2005, the President signed into law Republic Act 9337. Petitioners are
challenging the constitutionality of the law. 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 can’t be included
within the purview of tariffs under the exemption delegation 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?

RULING: No. 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 a delegation 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.

As for the recommendatory power granted to the Secretary of Finance, it is simply an authority
to ascertain the existence of a fact. 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. In
doing so, he is not acting as the alter ego of the President, instead, he is acting as the agent of
the legislative department. Congress did not delegate the power to tax but the mere
implementation of the law.