SC rules EVAT constitutional

The Supreme Court upheld yesterday the constitutionality of the expanded value-added tax (EVAT) law, described as the cornerstone of the government’s efforts to escape a looming fiscal crisis.

The high tribunal ruled that Republic Act 9337 or the EVAT Law was legal "in its entirety" but it did not lift the two-month-old temporary restraining order (TRO) against the implementation of the controversial tax measure.

In the 81-page decision penned by Associate Justice Alicia Austria-Martinez, the 15-day freeze on the EVAT implementation will remain to allow the petitioners a chance to appeal the decision and present new arguments.

The court said the TRO would be lifted once its decision becomes final within 15 days.

"There being no constitutional impediment to the full enforcement and implementation of RA 9337, the temporary restraining order issued by the Court on July 1, 2005 is lifted upon finality of herein decision," the SC said.

SC spokesman Ismael Khan said a majority of the magistrates concluded that the EVAT Law "as a whole" is legal and constitutional.

"The TRO stays in the meantime," Khan said. "The TRO will be lifted upon the effectivity of the resolution or within 15 to 16 days."

Khan, however, failed to mention the exact turnout of the voting.

He said there were some justices who had reservations on certain provisions of the tax law but their votes did not reach the required number to constitute a dissenting opinion.

"The Court, by a majority vote, dismissed all the five petitions against the EVAT and declared the constitutionality of RA 9337," Khan said.

Earlier reports said all 15 justices had unanimously voted to uphold the legality of the EVAT law.

The EVAT law took effect July 1, but the SC issued a TRO hours later after petroleum dealers and opposition lawmakers argued that it empowered President Arroyo to increase the rate next year.

The petitioners — including opposition Sen. Aquilino Pimentel Jr., the Association of Pilipinas Shell Dealers Inc., Sorsogon Rep. Francis Escudero, Abakada Guro Party list group, and Bataan Gov. Enrique Garcia Jr. — filed separate petitions arguing against the "undue delegation of legislative powers to the President" and alleged insertions and deletions made in some provisions in the bicameral conference committee that had not been tackled by Congress.

The petitioners said the bicameral conference committee has exceeded its authority by "inserting the standby authority in favor of the President in Sections 4, 5 and 6 of RA 9337."

They pointed out the deletion of the "no pass-on" provision of the law and the insertion of some provisions not found in the original committee report approved by both houses of Congress.

The High Tribunal ruled that the changes introduced by the bicameral conference committee were meant only to reconcile and harmonize the conflicting versions of both legislative bodies.

The court said there was no malicious intent to replace the original provisions of the law.

The SC upheld the power of Congress to delegate some of its functions to executive officers or bodies to determine certain facts or conditions in the operation of a statute but only under certain standards and policies.

The high court said the standby authority provision of RA 9337, which grants the President, upon the recommendation of the secretary of finance, to power to raise the VAT rate from 10 percent to 12 percent effective Jan. 1, 2006 "is not a delegation of power" but a ministerial duty for Mrs. Arroyo to immediately impose the 12 percent rate upon the existence of any of the conditions specified by Congress.

The EVAT was touted as the government’s biggest revenue-raising measure, intended to balance the budget by 2010.

By removing most exemptions, the EVAT law increases the number of products and services subject to a 10-percent charge. The controversial tax measure has been hailed as a cure to many of the country’s economic ills, including a gaping budget deficit, but dreaded by most Filipinos already hard-hit by soaring oil prices.

It is expected to generate additional revenues of over a billion pesos by next year, part of which would go to financing the national deficit and to paying off outstanding debts.

Under the law, Mrs. Arroyo was given the provisional authority to raise VAT rates from 10 to 12 percent by next year.

The EVAT also increased corporate income tax to 35 percent from 32 percent and expanded coverage of the VAT to the oil and airline industry.

Tarlac Rep. Jesli Lapus, the principal author of the law, said the SC decision "finally clears the way toward our solving the debilitating fiscal woes. The financial markets were about to give up on the Philippines."

Critics, however, warned the imposition of the EVAT "could be a prescription for a social revolt."

Militant groups led by Partido ng Manggagawa condemned the ruling and slammed the Supreme Court, claiming it had joined the ranks of Congress and other branches of government "whose integrity is shot."

‘We Won’t Relent’

On the other hand, Malacañang said it would not relent in its plan to implement the EVAT immediately amid the seemingly uncontrollable increase in oil prices.

Officials stressed the EVAT should be implemented to address the worsening fiscal deficit problem of the government.

Press Secretary Ignacio Bunye said the government had carefully studied the EVAT before its legality was questioned before the Supreme Court.

Bunye said "the government’s stand on its implementation is unchanged."

"Although the SC has not yet lifted the TRO, its declaration that the EVAT is constitutional is a positive and welcome development," he said.

Bunye said the decision demonstrates the high court’s deep sensitivity to the socio-economic interest of the nation. "This (decision to uphold the legality of EVAT) reopens the door to greater fiscal stability, more investments and jobs.

"The additional revenue generated is for the development needs and long-term financial stability of the economy," he said.

Bunye said the President ordered the Cabinet to set up the needed safety nets in anticipation of this ruling.

"We will make sure the poorest of the poor don’t get hurt while we shore up our economy," Bunye said. — With Aurea Calica, AFP, AP