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It is not inherent but since time immemorial the power to tax had been delegated by Congress to the local
government units; and under the 1973 and the present Constitution, this power has been constitutionally
granted to them subject such limitations as the law may impose. (Pepsi Cola Bottling Co. vs. Municipality
of Tanauan, 69 SCRA 460)
2. What are the main provisions of the Constitution affecting the taxing power of the local government
units?
Sec. 3, Art. X of the Constitution enjoins the enactment of a Local Government Code which would, among
other things, allocate among the different local government units their respective powers, functions,
responsibilities and resources; and Sec. 5, ibid., declares that each LGU shall have the power to create
its own sources of revenue and to levy taxes, subject to such limitations as may be provided by law,
consistent with the principle of local autonomy. Said taxes, etc. shall accrue exclusively to them. (see
William Lines, Inc. vs. City of Ozamis, 56 SCRA 590; C. Basco v Pagcor GR 91649 May 14, 1991 held
LGU has no power to tax Pagcor; Prov of Batangas v Romulo, GR 152774 May 27, 2004 meaning of
local autonomy)
a. Taxes, etc.
b. shares from national government collections
c. share in the utilization of their natural resources and
d. other sources [proprietary, etc.]
3. What law was enacted to flesh out the above constitutional mandate?
RA No. 7160, otherwise known as the Local Government Code, specifically, Book II - Local Taxation and
Fiscal Matters, Title One Local Government Taxation, Title Two Real Property Taxation and Title Three
Shares of LGUs in the Proceeds of National Taxes.
4. Extant of the provisions of the LGC on Local Taxation and Fiscal Matters, what other provision therein
can be used as basis for imposing fees or licenses?
Sec. 16 of LGC . General Welfare. Every LGU shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as the powers necessary, appropriate, or incidental of its efficient
and effective governance, and those which are essential to the promotion of the general welfare.
Any provision on the power of a LGU shall be liberally interpreted in its favor, and in case of doubt, it shall
be resolved in favor of devolution of power and of the LGU. (Sec. 5(a) LGC); however, any doubt on the
application of any tax ordinance shall be construed against the LGU and liberally in favor of the taxpayer,
except tax exemption, incentive or relief granted by the LGU, which shall be interpreted against the
grantee. (Sec. 5(b), ibid.) Respondents cite our declaration in City Government of San Pablo v. Reyes[1]
[45]
that following the 1987 Constitution the rule thenceforth in interpreting statutory provisions on
municipal fiscal powers, doubts will have to be resolved in favor of municipal corporations. [2][46] Such
policy is also echoed in Section 5(a) of the Code, which states that [a]ny provision on a power of a local
government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall
be resolved in favor of devolution of powers and of the lower local government unit. But somewhat
conversely, Section 5(b) then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue
measure shall be construed strictly against the local government unit enacting it, and liberally in favor of
the taxpayer.[3][47] And this latter qualification has to be respected as a constitutionally authorized
limitation which Congress has seen fit to provide. Evidently, local fiscal autonomy should not necessarily
translate into abject deference to the power of local government units to impose taxes. [cited in the Apr
16, 2008 Petron Corp v Mayor Tobias Tetiangco case]
6. Are the provisions of LGC on Local Government Taxation sufficient for LGUs to assess and collect
local taxes, fees and licenses from their constituents? Or How shall the power of taxation be exercised by
the LGUs?
No, there is a need for a baranggay, municipal, city or provincial ordinance to levy, assess and collect
taxes, fees and licenses. The power to impose a tax, fee or charge or to generate revenue under LGC
shall be exercised by the sanggunian of the LGU concerned through an appropriate ordinance. (Sec. 133,
ibid.)
7. If a LGU failed to pass a tax ordinance pursuant to the provisions of the LGC upon the effectivity of the
Code, can it still assess and collect taxes, fees, and licenses?
Yes. All existing tax ordinances or revenue measures of LGUs shall continue to be in force and effect after
effectivity of the LGC unless amended by the sanggunian concerned, or inconsistent with, or in violation
of, the provision of LGC. (Sec. 530, ibid.). A SC decision ruled that when the mun of Pasig was converted
into a city, the ordinances issued prior to conversion were not deemed reenacted as city ordinances, thus
collection of taxes by the city under mun ordinance was invalid.
8. Definitions of terms
a. Agricultural products
b. Amusement
c. Amusement places
d. Business
e. Banks and other financial intermediaries
f. Capital investment
g. Charges
h. Contractor
i. Corporation
j. Countryside and Barangay Business Enterprise
k. Dealer
l. Fee
m. Franchise
n. Gross Sales or Receipts
o. Manufacturer
p. Marginal Farmer or Fisherman
q. Motor Vehicle
r. Municipal waters
s. Operator
t. Peddler
u. Persons
v. Resident
w. Retail
x. Vessel
y. Wharfage
z. Wholesale
9. What are the [Fundamental Principles] general limitations on their taxing powers [Sec 130]
Equality and uniformity in local taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate within the territory of the LGU, not necessarily in comparison with
other LGU within the same political subdivision. In other words, it merely requires geographical uniformity.
(Punzalan v. City of Manila, 95 Phil 46) A tax is considered uniform when it operates with the same force
and effect in every place where the subject may be found.
It requires that the proceeds of taxation be used to support the existence of the LGU or the pursuit of its
governmental objectives.
Yes, per Bagatsing vs. Ramirez, 7 SCRA 306. The fees collected do go to the coffers of the private
corporation but for revenue raising of the city. The people may be taxed for public purpose, although it be
under the direction of private entiy. Per Asiatic Integrated Corp v. Alikpala, 72 SCRA 285, these fees are
not taxes but rentals or demands of proprietorship. Per Vitug, impositions include acts of proprietorship,
thus he made reservations on Alikpalas distinctions.
1. substantial distinctions
2. germane to the purpose of the law
3. applies not only to present conditions but also to future conditions substantially identical to those
of the present
4. applies equally to all those who belong to the same class [Pepsi v City of Butuan, 24 SCRA 789
(1968) only agents of outside dealers were subjected to tax , held invalid]
14. What are the common limitations? Unless expressly provided in the Code, the LGUs cannot levy the
following: [Sec 133]
26. Income tax, except on banks and financial intermediary [Sec 133 (a) in relation to Sec 143(f) of
LGC and Sec 221(a) of IRR]. - Rural banks though there is an exemption against all taxes, fees,
charges provision RA 7353, said law states that they are subject to corporate tax, local taxes,
fees, charges, thus they are subject to local taxes under Sec. 143(f) of LGC.]
27. Doc stamps tax
28. On estates, inheritance, gifts, legacies and other acquisitions, mortis causa, except transfer tax
by provinces and cities. Thus, under Sec. 135 of LGC, provinces (and cities) are empowered to
impose transfer tax on real property at the rate of 50% of 1% percent.
29. Customs duties, etc., except wharfage on wharves constructed and maintained by LGU. Thus if
wharf is owned by the national government, the LGU cannot impose tax, charge, or fees on
receipts therefrom. Under Sec 155, LGU can impose toll fees or charges for the use of public
road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed
by the LGU. But AFP, PNP, postal service, handicap 65 or over. It may also waive collection when
public safety and welfare require it. However, under PPA Admin Order No. 02-98, some national
gov ports can be transferred to LGU. Thus, a mun ordinance imposing quarantine, sanitation,
inspection and safety fees of P0.01 per kilo of copra, etc. on ships anchoring and leaving the
ports of its barangays was declared by BLFG ultra vires as it violates Sec 133(e) of LGC but it
could impose fixed or flat rates wharfage fee, regulatory fee and charges for services
30. Taxes, fees and charges and other impositions upon goods carried into or out of or passing
through, the territory of LGU in guise of charges for wharfage, tolls for bridges or otherwise, or
other fees or charges in any form whatsoever upon such goods or merchandise. The reason is
if allowed it would inhibit the free flow of goods in or out of the LGUs. (Panaligan v. City of
Tacloban GR 9312, Sept 27, 1957). Furthermore, an ordinance imposing terminal fee for
passengers and permit fee for equipment from the PPA managed port was held by BLFG ultra
vires pursuant to Sec. 155 and Sec 133(e) of LGC.
31. Taxes, fees and charges on agricultural and aquatic products when sold by marginal farmers or
fishermen. In City of Cebu v. Intermediate Appellate Court 144 SCRA 710, it was held that
inspection fee on agricultural product is not allowed whether in its original form or not. But the
prohibition refers to the produce of farmer or fisherman and his immediate family, otherwise, the
sale of said products are subject to tax under Sec 143 ( c ) at of the rate imposed on other
products.
32. Taxes on business enterprises certified by BOI as pioneer and non-poineer for a period of 6 and 4
years, respectively from date of registration. Though they are exempt from business tax, they
are however subject to mayors permit, garbage fees, sanitary inspection fees, electrical
inspection fees and other charges for services rendered by the LGU.
33. Excise taxes on articles enumerated in NIRC, and taxes, fees, or charges on petroleum products,
but not on the business of importing, manufacturing or producing said products (Petron v. Pilila,
198 SCRA 82), meaning it can impose tax on this business. Issue: The City of Manila passed an
Ordinance no. 7794 imposing 3% gross sales tax on petroleum products (both non-VAT and VAT
products). This was declared unconstitutional by DOJ because of lack of public hearing and being
contrary national economic policy [Sec 130(b)(4)] and Sec 133(h). City of Manila filed a petition
for certiorari with the RTC of Manila who declared that Sec. 187 pertaining to the appellate power
of DOJ was unconstitutional because it amounted to control and an excessive exercise of
supervisory power. It did not touch on the ultra vires issues because, City Council issued
ordinance suspending indefinitely the ordinance pertaining to petroleum products. However, in
Drilon v. Lim 235 SCRA 135, SC said that the DOJ review is merely supervisory and not control.
Also, under a GR No. 42497 Aug 4, 1994 said ordinance was held to be valid by SC en banc.
Gasoline stations are not subject to tax for the sale of gasoline and other petroleum products but
their sales of TBA are subject. They are also subject to Mayors Permit and other regulatory fees.
In Petron Corp v Mayor Tobias Tiangco of Navotas, GR 158881 Apr 16, 2008, where the issue is
whether sale of petroleum products may be subject to business taxes under Navotas tax
ordinance issued pursuant to Sec 143 of LGC or is it exempt under Sec 133(h) of LGC and Art
232(h) of the IRR, the SC ruled that it is exempt. We can concede that a tax on a business is
distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an
excise tax. However, such distinction is immaterial insofar as the latter part of Section 133(h) is
concerned, for the phrase taxes, fees or charges on petroleum products does not qualify the
kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the
provision. It would have been a different matter had Congress, in crafting Section 133(h), barred
excise taxes or direct taxes, or any category of taxes only, for then it would be understood that
only such specified taxes on petroleum products could not be imposed under the prohibition. The
absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum
products, including business taxes, are prohibited by Section 133(h). Where the law does not
distinguish, we should not distinguish.
The language of Section 133(h) makes plain that the prohibition with respect to
petroleum products extends not only to excise taxes thereon, but all taxes, fees and
charges. The earlier reference in paragraph (h) to excise taxes comprehends a
wider range of subjects of taxation: all articles already covered by excise taxation
under the NIRC, such as alcohol products, tobacco products, mineral products,
automobiles, and such non-essential goods as jewelry, goods made of precious
metals, perfumes, and yachts and other vessels intended for pleasure or sports. In
contrast, the later reference to taxes, fees and charges pertains only to one class of
articles of the many subjects of excise taxes, specifically, petroleum products. While
local government units are authorized to burden all such other class of goods with
taxes, fees and charges, excepting excise taxes, a specific prohibition is imposed
barring the levying of any other type of taxes with respect to petroleum products.
While Section 133(h) does not generally bar the imposition of business taxes on
articles burdened by excise taxes under the NIRC, it specifically prohibits local
government units from extending the levy of any kind of taxes, fees or charges on
petroleum products. Accordingly, the subject tax assessment is ultra vires and void.
34. Percentage tax or VAT on sales, barters, or exchanges of goods or services, but not fixed
graduated fixed tax on gross sales or on volume of production. This should be read together
with Sec 143(h) of LGC which provides that mun may levy taxes on any business not otherwise
specified in Sec 143(a)(b)(c)(d)(e) and (f)) but for business subject to excise tax,, VAT or
percentage tax, the rate shall not exceed 2% of gross sales or receipts (for cities 3%). As
mentioned above, the power of city of manila to further collect taxes on businesses already
subject Sec 143 is being challenged in court. This was ultimately resolved in 2006 by the SC.
Look for this case.
35. Taxes on gross receipts of transportation contractors, or common carriers, except as provided in
this code Pipeline concessionaires transporting petroleum products through the pipelines are
considered common carriers therefore LGU can no longer tax on their gross receipts. Since they
are already subject to 3% carriers tax, subjecting them further tax is double taxation ?(First Phil
Industrial Corp vs. CA, Hon Paterno Tac an, Batangas Ctiy and Adoracion Angeles, GR 125948,
Dec 29, 1998). Under RA 7716, the Expanded VAT Law, Sec 117 of NIRC, the gross receipts of
common carriers derived from their incoming and outgoing freight shall not be subject to local
taxes imposed under LGC.
36. Taxes on premiums on reinsurance or retrocession
37. Taxes fees or charges for the registration of motor vehicles or for issuance of licenses or permits
for driving, except tricycle. Under a BFLG ruling, traction engine used in agriculture may be
subject to registration fees because it is not considered a motor vehicle as defined in Sec.131(q),
nor is it an agricultural product under Sec 133(f). It is even necessary to be regulated due to
safety and wear and tear of the road.
38. Taxes, fees or charges on Phil products actually exported, except as provided in this code. But
may tax the business of exporting said products under Sec 143 at the rate of 143(a)(b) and
(d).. But EPZA operators are not subject to local taxes, except service fees.
39. Taxes, fees, or charges on Countryside and Barangay Business Enterprises and cooperative duly
registered under RA No. 6810 and RA No. 6938 (Cooperative Code of the Philippines). Similar
exemption is granted for income tax and withholding tax. CBBE has already expired.
40. Taxes, fees or charges of any kinds on the National Government its agencies and
instrumentalities and local government units. (Thus in Basco v. Pagcor, 197 SCRA 52 (1991), it
was held that Pagcor being a gov agency is exempt from local taxes pursuant to the law creating
it and under Sec. 133(o) of LGC.); NDC v. Cebu City, 215 SCRA 382. Duty Free Philippines being
an agency of the Philippine Tourism is exempt from local taxes. While Sec 193 of LGC has
withdrawn exemptions it also provides Unless otherwise provided for in this Code means Sec
133(o) per DOJ opinion no 63 , May 13, 1993. Refer to Cebu Mactan International Airport
Authority v. Marcos and Manila International Airport Authority v. City of Paranaque.
a. 5% tax on GR based on rentals on privately owned public markets is a valid license tax or
fee for regulations of the business rather than an income tax (Progressive Development
Corp. v. Quezon City, GR 36081, Apr 24, 1989)
b. imposing tax based on capital investment or purchases during preceding period is not a
sales tax (Tatel v. Viras 48 SCRA 79)
c. a tax of P30/hec is a tax on privilege, not a property, percentage, or forest concession
tax (P v. Nazario, GR 44143 Aug 31, 1988)
d. a tax of P0.01/gal on all soft drinks produced or manufactured does not partake the
nature of a percentage tax on sales . The volume capacity is used only as basis. Pepsi v.
Mun of Tanauan, 69 SCRA 460)
a. Ordinance that charged a tax for selling and distributing refined and manufactured oils
based on the monthly allocation actually delivered, distributed and intended for sale
clearly exacts a tax based on sale thus void (Arabay, Inc. v. Cfi, 66 SCRA 617)
b. (i)n Province of Bulacan v. Court of Appeals [4][35] is ultimately of little consequence, and
so is Petrons reliance on such ruling. The Court therein had correctly nullified, on the
basis of Section 133(h) of the Code, a province-imposed tax of 10% of the fair market
value in the locality per cubic meter of ordinary stones, sand, gravel, earth and other
quarry resources xxx extracted from public lands, because it noted that under Section
151 of the NIRC, all nonmetallic minerals and quarry resources were assessed with
excise taxes of two percent (2%) based on the actual market value of the gross output
thereof at the time of removal, in case of those locally extracted or produced. [5][36]
Additionally, the Court also observed that the case had emanated from an attempt to
impose the said tax on quarry resources from private lands, despite the clear language of
the tax ordinance limiting the tax to such resources extracted from public lands. [6][37] On
that score alone, the case could have been correctly decided. [cited in Petron Corp v.
Mayor Tobias Tatiangco, supra.]
a. Tax on business
Should not exceed by 50% of the rates of taxes other municipalities may impose.
File a sworn statement of gross sales or receipts for current calendar year. If the tax paid during the year
is less than the tax due on said sales or receipts, the difference shall be paid before the business
considered officially retired. [Mobil Phils v City Treasurer 463 SCRA 379, (2005) rule on retirement
explained]
21. What are the rules if the business has separate or distinct establishment or place of business or more
than one line of business?
a. tax shall be paid for every separate or distinct establishment or place where bus is
conducted
b. one line of business does not become exempt by being conducted with other businesses
for which tax has been paid
c. if a person conducts 2 or more businesses falling under the same rate of tax, the tax shall
be computed based on combined sales or receipts
d. if these 2 or more business are subject to different rates, taxes shall be computed
separately
a. Fees and charges on occupation or calling not falling under the power of the provinces or
municipalities.
b. Fees for sealing and licensing of weights and measures
c. Fishery rentals, fees and charges on mIunicipal waters
a. If there is a branch, sales from it shall be reported in the mun where it is located
b. If there is no branch in the place where sales is made, sales shall be reported in the mun where
principal office is located, along with the sales made where the principal office is located.
c. If factory, project office, plant or plantation is in diff mun from principaloffice
a. 30% of all sales recorded in the principal office shall accrue to where it is located
b. 70% of all sales recorded in the principal office shall accrue to the mun where the factory,
etc is located
d. If factory is in mun separate from where plantation is located, 70% is allocated at 60% and 40%,
respectively.
e. If there are two or more factories, etc. located in different mun, the 70% allocation shall be
prorated among the factories, etc. in proportion to the volume of production
f. The allocation in par c above is irrespective of whether sales are made in the locality where the
factory, plant, etc is located. However, in case sales are made in factory, etc. the rules in par a
and b above shall apply. Ex. Factories in Gen San and in QC All sales were reported in QC and
Gen San were prorated at 70:30 between factories and headoffice. 70% is prorated bet QC and
Gen San based on volume of production. Gen San complained that all sales its factory should be
reported therein. Dept Finance said no, unless its factory is itself converted in sales office.
g. In case a contract manufacturer is engaged by a manufacturer, the former shall be considered a
factory for purposes of allocation of revenues.
a. amusement and professional taxes which shall be uniform with the provinces
b. percentage taxes not exceeding 3% of the revenues of the preceding year
a. taxes on stores or retailers with fixed business establishment P50K and P30K
26. What are the common revenue raising powers of the LGUs?
Ist day of a calendar year. However if its effectivity falls on any date other than the beginning of a qtr, it
shall be effective the 1st day of following qtr.
Within 10 days after its approval, it shall be published for 3 consecutive days in a widely circulated
newspaper in the locality, or in its absence, posting in two conspicuous places. Copies furnished to local
treasurers for dissemination.
Within 30 days in the case or city and mun, and within 10 days in case of barangay, copies of the
approved ordinance shall be sent to the Sangu of prov or of citiy or mun for review. Within 30 days from
receipt from receipt of city or mun ord, the prov sangu by it self, or send the ord to prov atty or if there is
none to prov prosec, who shall act within 10 days from his receipt. The prov. Sangu may disapprove if it
finds it ultra vires, or invalid and shall enter the same in the minutes and send to Sangu concerned. If it
fails to act within 30 days, it shall be deemed approved.
In the case of Barangay, if Sangu city or mun fails to act with in 30 days deemed approved or
disapproved, if it does send it back to barangay for adjustment or amendment. (Sec. 56 & 57)
37. When may an ordinance be declared invalid or suspended?
Re-enact the ordinance or appeal within 30 days from effectivity to DOJ if the issue is the constitutionality
or legality of the ordinance (this appears to be the remedy available to the taxpayers). In Meralco
Securities vs. Central Board of Tax Appeals, 114 SCRA 260 (1982) special civil action of certiorari would
be the proper remedy. (Caltex v. CBAA, 114 SCRA 294 (1982).
From the decision of the DOJ, aggrieved party may appeal to proper court.
SECTION 187. Procedure for Approval and Effectivity of Tax, Ordinances and Revenue
Measures; Mandatory Public Hearings. The procedure for approval of local tax ordinances and
revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings
shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on
the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within
thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within
sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have
the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or
charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the
lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party
may file appropriate proceedings with a court of competent jurisdiction.
a. Administrative
a. Levy
b. Distraint
b. Judicial ordinary civil action. It precludes criminal action to collect delinquent taxes (Republic v.
Patenao, 20 SCRA 712); People v. Arnault, 92 Phil. 252)
a. 5 years for assessment from due date but 3 years if tax ord was issued under LTC
b. 10 years from discovery
c. 5 years to collect from date of assessment or 3 years as above
42. What are the instances where the running of prescriptive period is interrupted?
a. water districts
b. cooperative
c. non-profit hospital and educational institution
d. EPZA under the IRR
a. Prior to assessment
b. After assessment
1. protest within 60 days from receipt of assessment filed with the Treasurer, who has 60 days to
decide.
3. Appeal to the DOJ to decide within 60 days, if denied within 30 days from denial or 60 days
4. Appeal to appropriate court within 30 days from denial or from the lapse of 60 days within
which DOJ should make a decision.
46. What is the procedure in appealing from the decision of the local treasurer denying the tax protest of
a taxpayer?
File an appeal with the RTC within 30 days from receipt of denial of protest or from the lapse of 60 days
within which treasurer should have rendered a decision. From the decision of the RTC, an appeal is made
by filing a petition for review with CTA under Rule 42 of 1997 Rules of Court. Republic Act No. 9282
definitively proves in its Section 7(a)(3) that the CTA exercises exclusive appellate jurisdiction to review
on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases original decided
or resolved by them in the exercise of their original or appellate jurisdiction. Moreover, the provision also
states that the review is triggered "by filing a petition for review under a procedure analogous to that
provided for under Rule 42 of the 1997 Rules of Civil Procedure." [Luz Yamane v BA Lepanto Condo,
GR154993 Oct 25, 2005].
47. When the basis of tax liability is that a condo corporation may acquire full appreciative living values,
may a local government unit impose and collect taxes based on that standard?
Besides, we shudder at the thought of upholding tax liability on the basis of the standard of "full
appreciative living values", a phrase that defies statutory explication, commonsensical meaning, the
English language, or even definition from Google. The exercise of the power of taxation constitutes a
deprivation of property under the due process clause, 56 and the taxpayer's right to due process is
violated when arbitrary or oppressive methods are used in assessing and collecting taxes. 57 The fact
that the Corporation did not fall within the enumerated classes of taxable businesses under either the
Local Government Code or the Makati Revenue Code already forewarns that a clear demonstration is
essential on the part of the City Treasurer on why the Corporation should be taxed anyway. "Full
appreciative living values" is nothing but blather in search of meaning, and to impose a tax hinged on that
standard is both arbitrary and oppressive. [ibid.].
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