G.R. No. 211772

G.R. No. 211772, April 18, 2023,
♦ Decision, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring Opinion, Zalameda, [J]
♦ Concurring Opinion, Singh, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]

PHILIPPINE COLLEGE OF PHYSICIANS, PHILIPPINE MEDICAL ASSOCIATION, INC., AND PHILIPPINE DENTAL ASSOCIATION, PETITIONERS-IN-INTERVENTION; VS. SECRETARY CESAR V. PURISIMA OF THE DEPARTMENT OF FINANCE AND COMMISSIONER KIM S. JACINTO-HENARES OF THE BUREAU OF INTERNAL REVENUE, RESPONDENTS.

ASSOCIATION OF SMALL ACCOUNTING PRACTITIONERS IN THE PHILIPPINES, INC., PETITIONER, VS. HON. SECRETARY OF FINANCE CESAR V. PURISIMA AND HON. COMMISSIONER OF INTERNAL REVENUE KIM S. JACINTO-HENARES, RESPONDENTS.

In all, I concur that the subject case presents an actual case or controversy, and that portions of Section 2(1) and Section 2(2) of the assailed Revenue Regulations No. 4-2014 (RR 4-2014),1 specifically the requirement for self-employed professionals (a) to submit an affidavit where they indicate their rates, manner of billings, as well as the factors considered in determining their service fees, and (b) to register their appointment books with the Bureau of Internal Revenue (BIR), should be struck down for being unconstitutional.

To stress, before us are the representative organizations of professionals whose members, patients, clients' fundamental rights to privacy are supposedly violated. They assail a regulation issued by agents of fiscal policy and tax collection who mandate the disclosure of their patients' and clients' names and appointment. The competing rights and the prima facie showing of grave abuse of discretion call for proper adjudication.

Thus, petitioners present an actual case or controversy, which merits this Court's exercise of judicial review.2

As I had consistently put forward in several other cases, and finally adopted by the present members of the en banc, the latest of which being the recently decided Executive Secretary v. Pilipinas Shell3 (ES v. Pilipinas Shell), and Universal Robina Corporation v. Department of Trade and Industry4 (URC v. DTI), actual facts resulting from the assailed law, as applied, are not absolutely necessary in all cases in order for the Court to exercise its power of judicial review. Once and for all, with this case and that of ES v. Pilipinas Shell and URC v. DTI, it should now be definitively settled that "mere contrariety of legal rights" constitutes a justiciable controversy.1aшphi1

To be sure, this correct understanding of justiciability is entrenched in jurisprudence. As early as Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on Ancestral Domain5 (Province of North Cotabato), the Court already ruled that "when an act of a branch of government is seriously alleged to have infringed the Constitution, it becomes not only the right[,] but in fact the duty of the judiciary to settle the dispute."6 In other words, it is sufficient that the questioned law has been enacted, or that the challenged action was approved for an actual case or controversy to exist. Stated differently, petitioners need not await the "implementing evil to befall on them",7 or for them to actually suffer the injury or harm before challenging these acts as illegal or unconstitutional.8

As may be recalled, this was also the position taken by the Court in SPARK v. Quezon City,9 where it upheld the constitutionality of the curfew ordinances in several cities in Metro Manila, even if there was no allegation that petitioners therein already violated said ordinances or that they already suffered actual harm or injury, which would then constitute the so-called "actual facts". The Court notably found the case already justiciable due to the "evident clash of the parties' legal claims."10

As well, in Inmates of New Bilibid Prison v. De Lima,11 it was ruled that a judicial controversy already exists if "there is a contrariety of legal rights that can be interpreted and enforced on the basis of existing law and jurisprudence."12 Indeed, as succinctly stated by the majority in Republic v. Maria Basa Express Jeepney Operators and Drivers Association, Inc.13 (Maria Basa), citing Inmates of New Bilibid, "the existence of an actual case or controversy does not call for concrete acts, as an actual case may exist even in the absence of 'tangible instances'."14

Thus, following the principle of stare decisis et non quieta movere—or to follow past precedents and do not disturb what has been settled—the Court should no longer recalibrate the meaning of the actual case or controversy requirement.

In the instant case, the present petition stemmed from consolidated petitions for prohibition and mandamus filed by petitioners before the Court to raise a question of law, i.e., the constitutionality of RR 4-2014. Here, the ponencia correctly finds petitioners' questions justiciable. Notably, this is notwithstanding the fact that the case is bereft of any contention whatsoever that petitioners already committed overt acts in violation of the assailed regulations or that they already suffered actual harm after its passage. In fact, shortly after RR 4-2014 took effect on April 5, 2014, the Court issued a Temporary Restraining Order against its implementation.15 Verily, what existed when petitioners filed their petition was a mere contrariety of legal rights between petitioners and their patients and clients on the one hand, and the Department of Finance (DOF) and the BIR on the other. In other words, there were no "actual facts".

Again, I stress anew that justiciability and absence of overt acts constituting breach of a law or regulation are not mutually exclusive, especially in an action for prohibition which also prays for a preliminary injunction, such as the case herein. A petition for prohibition is a preventive remedy to restrain the doing of some act which is about to be done.16 It cannot restrain acts that are already accomplished.17 Similarly, an action for injunction, which has for its purpose the enjoinment of a defendant from the commission or continuance of a specific act, would be dismissed if the act sought to be restrained has been accomplished or fully executed.18 Under these circumstances, the breach or the injury is merely imminent, and it would be incongruous for the Court to require further overt acts before ruling on the petition as by that time, the act sought to be enjoined would already be fait accompli.

Self-employed professionals shall register and pay the annual registration fee (ARF) with the RDO/LTDO having jurisdiction over them. In addition to the requirements for annual registration, all self-employed professionals shall submit an affidavit indicating the rates, manner of billings and the factors they consider in determining their service fees upon registration and every year thereafter on or before January 31. (Emphasis supplied)

According to the ponencia, while the requirement for self-employed professionals to register with the BIR and pay an annual registration fee are valid,19 the BIR's power to require submission of the aforementioned affidavits lacks reasonable or statutory basis,20 and is therefore, unconstitutional.21 In line with this, the ponencia enunciates that:

The affidavit that the issuances required may be akin to receipts, which are written evidence of the value of services. However, but it is indicative only, and the supposed fee is determined before the service is performed. It does not bind professionals to the disclosures in their affidavits, and it appears to allow them to ultimately charge higher or lower. It is vague how the affidavit aids the tax collector in the performance of her duties in ascertaining the payable tax.

Thus, there appears no compelling need for sworn statements of the rates and manner of billing among professionals. It is irrelevant, baseless, and serves no legitimate purpose. This is not the proper exercise of delegated power of subordinate legislation in an administrative agency. This is unconstitutional.

Respondents herein harp that the assailed submission of an affidavit may find support from Sections 5 and 244 of the Tax Code, which read as follows:

On this matter, I join the ponencia, as well as the opinions of Associate Justices Rodil V. Zalameda (Justice Zalameda), Jose Midas P. Marquez (Justice Marquez) and Maria Filomena D. Singh (Justice Singh).

Preliminarily, I point out that while Section 244 of the Tax Code authorizes the Secretary of Finance to promulgate rules and regulations for the effective implementation and enforcement of the Tax Code, this power is necessarily limited to what is provided for in the legislative enactment. As elucidated in Department of Finance v1aшphi1. Asia United Bank:22

Here, the BIR clearly expanded Section 5 of the Tax Code, which allows the CIR to obtain information relative to the tax liability of taxpayers, by requiring self-employed professionals to submit the aforementioned affidavit. Without doubt, Section 2(1) of RR 4-2014 does not only modify, but also contravenes the law.

For one, I agree with the opinions of Justice Zalameda, Justice Marquez, and Justice Singh that Section 5 of the Tax Code pertains to powers of the CIR to properly assess and collect taxes after a taxable transaction has already been made, or in case of service providers, once service has already been rendered. To be sure, the authorities granted to the CIR pursuant to Section 5 of the Tax Code are limited to achieving the following purposes: (a) ascertaining the correctness of any return; (b) making a return when none has been made; (c) determining the liability of any person for any internal revenue tax; (d) collecting any such liability; or (e) in evaluating tax compliance. Clearly, these objectives become relevant only after a taxable transaction is made or service is rendered. Thus, any information prior to rendering the service, or even preceding the engagement of the professional, should be considered as outside the scope of Section 5.

As correctly pointed out by my esteemed colleagues, the affidavit required under Section 2(1) of RR 4-2014 is an example of a "pre-sale" information that is not covered by Section 5 of the Tax Code. As aptly observed by the ponencia as well, "[t]he affidavit that the issuance requires may be akin to receipts, which are written evidence of the value of services. However, it is indicative only, and the supposed fee is determined before the service is performed."24 While it may be indicative of the value of services offered by self-employed professionals, the same is still irrelevant in achieving the purposes enumerated in Section 5 of the Tax Code since taxes will still be assessed and collected on the basis of the rates actually charged by the professionals after the rendition of services.

For another, I likewise agree with the observation of Justice Marquez that Section 5(B) of the Tax Code is carefully crafted to exclude taxpayers from the power of the CIR to demand "any information" for the purpose of properly assessing and collecting taxes. As such, Section 5 expressly provides that "any information" may only be obtained from any persons "other than the person whose internal revenue tax liability is subject to audit or investigation," i.e., the taxpayer. As aptly noted by Associate Justice Amy C. Lazaro-Javier, the deliberations of the Bicameral Conference Committee on Ways support the interpretation that the coercive power to obtain "any information" is directed only to third persons and not the taxpayers.25 Therefore, to require submission of information not from third persons, but from taxpayers, unduly expands and modifies Section 5(B) of the Tax Code.

All told, I concur with the ponencia that that portion of Section 2(1) which requires self-employed professionals to submit their affidavits of rates, manner of billing, and factors considered in determining their service fees is unconstitutional.

Self-employed professionals are obligated to register the books of accounts and official appointment books of their practice of profession/occupation/calling before using the same. The official appointment books shall contain only the names of the client and the date/time of the meeting. They are likewise obligated to register their sales invoices and official receipts (VAT or non-VAT) before using them in any transactions. (Emphasis supplied)

I agree with the ruling of the ponencia that requiring self-employed professionals to register their appointment books, which contain their clients' name and appointment schedules, encroaches upon privacy rights. Aside from the grounds already exhaustively enumerated and comprehensively discussed by the ponencia, I would like to add that this requirement violates the general principle of proportionality that is espoused in Republic Act No. 10173 or the Data Privacy Act of 2012,26 viz:

To my mind, requiring self-employed professionals to disclose their clients' names and their appointment schedules is already excessive vis-à-vis the declared purpose of RR 4-2014, which is to monitor the fees charged by these professionals, aid the BIR personnel in conducting tax audit, and boost revenue collections. To be sure, these objectives can be fulfilled even if the client names are anonymized and their appointment schedules not specified.

In light of the foregoing, I express my concurrence with finding portions of Section 2(2) of RR 4-2014 unconstitutional. While requiring self-employed professionals to register their books of accounts is valid because it finds statutory basis in the Tax Code, the same cannot be said for the requirement to register the appointment books of self-employed professionals.

The main purpose of RR 4-2014 is to minimize tax evasion among self-employed professionals. By requiring taxpayers to submit a schedule of their rates and their appointment books, the BIR can more or less estimate or have an accurate baseline of a person's tax liability. This can be done by simply multiplying the number of paid appointments or consultations by the rates of services.

To my mind, however, with the requirement to register the appointment books being struck down for violating privacy rights, the objective of RR 4-2014 to aid the BIR in conducting tax audit can no longer be met. Standing alone, the requirement to submit an affidavit of schedule of fees, is irrelevant for purposes of tax assessment and collection. Verily, without the number of client appointments or patient consultations, the BIR is left with just a table of fees that a self-employed professional may charge his or her clients or patients. Evidently, the BIR cannot, with just this information, minimize tax evasion in the industry. Thus, for no longer being germane to the purpose of the Tax Code and RR 4-2014, the requirement to submit an affidavit of schedule of fees should definitely be invalidated as well.

To this end, I would like to also point out that nothing in the Tax Code or in RR 4-2014 binds the professionals to the disclosure in their affidavits. If the affidavits are not binding to the professionals, then why require them in the first place? To be sure, RR 4-2014 is also silent as regards the possibility of charging a different rate once the affidavit is already submitted to the BIR. While neither the Tax Code nor RR 4-2014 penalizes professionals if they stray from their declared schedule of fees, I emphasize that Article 183 of the Revised Penal Code still penalizes perjury or the making of false testimony under oath. Stated simply, all that the submission of affidavit of fees does is to compel a taxpayer to furnish evidence that can be used against him or her—this is not only unreasonable, but completely unwarranted.

Thus, for the reasons above, I fully concur with the ponencia. Accordingly, I VOTE to declare as VOID portions of both Sections 2(1) and 2(2) of the Revenue Regulation No. 4-2014, insofar as they require self-employed professionals (a) to submit an affidavit where they indicate their rates, manner of billings, as well as the factors considered in determining their service fees, and (b) to register their appointment books with the BIR.