G.R. No. L-81311, L-81820, L-81921, L-82152 June 30, 1988
KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., ET AL., petitioners, vs. HON. BIENVENIDO TAN, ET AL., respondents.

FACTS

These consolidated petitions sought to nullify Executive Order No. 273, issued by President Corazon Aquino on July 25, 1987, which amended the National Internal Revenue Code to adopt a value-added tax (VAT) system effective January 1, 1988. The petitioners, comprising various organizations and individuals including a government employees’ association, a labor center, a customs brokers’ association, and a citizen, challenged the constitutionality of EO 273 on several grounds. They alleged that the President lacked legislative authority to issue the order; that the VAT is oppressive, discriminatory, and regressive, violating due process and equal protection; and that it contravenes other constitutional provisions.
The Solicitor General moved for dismissal, primarily questioning the petitioners’ legal standing and arguing the absence of a justiciable controversy, rendering the petitions mere requests for an advisory opinion. He contended that only the procedural requisite of raising the constitutional question at the earliest opportunity was satisfied. Despite these procedural objections, the Supreme Court, emphasizing the paramount public importance of the issues and its constitutional duty to review the actions of co-equal branches, brushed aside technicalities and assumed jurisdiction over the cases.

ISSUE

The principal issues were: (1) Whether the President possessed the legislative authority to enact EO 273 on July 25, 1987; (2) Whether the VAT, as provided under EO 273, is unconstitutional for being oppressive, discriminatory, regressive, and in violation of the due process and equal protection clauses.

RULING

The Supreme Court dismissed the petitions, upholding the constitutionality of EO 273. On the first issue, the Court ruled that the President validly exercised legislative power when she issued EO 273. Under Article XVIII, Section 6 of the 1987 Constitution, the incumbent President continued to exercise legislative powers until the first Congress was convened. The first Congress under the new Constitution convened on July 27, 1987. Since EO 273 was promulgated on July 25, 1987, two days prior, its enactment fell squarely within the President’s constitutional legislative authority. The Court rejected the argument that Congress “convened” when its members assumed office on June 30, 1987, clarifying that “convene” means to call together as a legislative body, which occurred on July 27.
On the substantive challenges to the VAT, the Court found no constitutional infirmity. The power of taxation is legislative, and the Court’s role is limited to determining whether the tax measure passes constitutional muster, not to assess its wisdom or efficacy. The VAT, being a broad-based tax on consumption, is not inherently regressive, oppressive, or confiscatory. Its design to rationalize the tax system, simplify administration, and promote equity is a legitimate exercise of the state’s taxing power. The classification of taxpayers and exemptions under the law (e.g., the treatment of customs brokers differently from other professionals) was held to be based on material and substantive distinctions, thus not violating the equal protection clause. The fears of economic hardship were deemed speculative, especially since the VAT had been in effect for months without the predicted dire consequences. Recourse for policy grievances lies with the political branches, not the judiciary, under the doctrine of separation of powers.