Tolentino vs. Secretary of Finance G.R. No.

115455, August 25, 1994

Facts: These consolidated cases are motions for reconsideration of a 1994 case concerning the
constitutionality of RA 7716 proposing the implementation of value added tax.

The valued-added tax (VAT) is levied on the sale, barter or exchange of goodsand properties as well as
on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in
money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or
exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and
enhance its administration by amending the National Internal Revenue Code.

Issue 1: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the Constitution? (Did not
exclusively originate in the HoR, since it is the consolidation of 2 distinct bills from both HoR and Senate)

Held: NO.

 What the Constitution simply means is that the initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that they are more attuned to local concerns
of their districts.

Issue 2: Whether or not S. No. 1630 is unconstitutional for not passing 3 readings on separate days as
required by the Constitution?

Held: NO.

 The second and third readings were done on the same day, but this was because the President
had certified S. No. 1630 as urgent. The presidential certification dispensed with the
requirement not only of printing but also that of reading the bill on 3 separate days.

ISSUE 3: Whether R.A. No. 7716 is unconstitutional on ground that it violates the contractclause under
Art. III, sec 10 of the Bill of Rights. (PAL raises this issue and questions the constitutionality of this tax
measure because they previously enjoyed real estate tax exemption and they were being taxed in RA
7716.)

HELD: NO.

 The Supreme Court held that the imposition of the VAT on the sales and leases of real estate by
virtue of contracts entered into prior to the effectivity of the law would not violate the
constitutional provision of non-impairment of contracts.
 The parties to a contract cannot fetter the exercise of the taxing power of the State. The policy
of protecting contracts against impairment presupposes the maintenance of a government
which retains adequate authority to secure the peace and good order of society. The Contract
 Clause has never been thought as a limitation on the exercise of the State's power of taxation.
It is inherent in the power to tax that the State be free to select subjects of taxation.

ISSUE 4: Whether or not sales tax on bible sales violative of religious and press freedom?

HELD: NO.

 The Court was speaking in American Bible Society v. City of Manila 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 to religious and press freedom.
 The VAT is, however, 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.

ISSUE 5: Whether or not it violates the rule that taxes should be uniform and equitable and that
Congress shall evolve a progressive system of taxation?

HELD: NO

 Equality and uniformity means that all taxable articles or kinds of property of the same class
be taxed at the same rate. The taxing power has the authority to make reasonable and natural
classifications for purposes of taxation. To satisfy the requirement, it is enough that the statute
applies equally to all persons, forms and corporations placed in a similar situation.
 Re: "evolve a progressive system of taxation" - It is not the mandate of congress to prescribe but
to evolve a progressive tax system. Resort to indirect taxez should be minimized but not avoided
entirely. VAT minimizes the regressive effects of this imposition by providing exemptions to
other transactions (agricultural, petroleum, educational services, medical/veterinary services,
etc.)