Reporter: RAUL R.

MELEGRITO
Local government units, by
virtue of the 1987 Constitution
and the Local Government Code
of 1991, otherwise known as
Republic Act 7160 have been
given the power to raise certain
taxes.
Power to Create Sources of
Revenue (Sec. 129)

Each local government unit (LGU) has the
power to create its own sources of revenue
and to levy taxes, fees, and charges
The grant of power to create sources of
revenue is consistent with the basic policy
of local autonomy
The taxes, fees and charges shall accrue
exclusively to the LGU.
 Following political subdivisions
have the power to tax:

1.) Province - It is the largest unit in the political
structure of the Philippines. It consists in varying
numbers of municipalities and, in some cases, of
component cities.
2.) City -There are three classes of cities in the
Philippines: the highly-urbanized, the independent
component cities which are independent of the
province, and the component cities which are part of
the provinces where they are located and subject to
their administrative supervision.
 3.) Municipality- It is a political corporate body which is
endowed with the facilities of a municipal corporation,
exercised by and through the municipal government in
conformity with law. It is a subsidiary of the province which
consists of a number of barangays within its territorial
boundaries, one of which is the seat of government found at
the town proper.

4.) Barangay- The smallest political unit into which cities

and municipalities in the Philippines are divided. It is the
basic unit of the Philippine political system. It consists of less
than 1,000 inhabitants residing within the territorial limit of a
city or municipality and administered by a set of elective
officials, headed by a barangay chairman.
 CONSTITUTION AUTHORIZES CREATION
OF SOURCES OF
REVENUE AND LEVY TAXES

Section 5. Each local government unit shall have the power
to create its own sources of revenues and to levy taxes, fees
and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local governments.

SEC. 130. Fundamental Principles – the following

fundamental principles shall govern the exercise of the
taxing and other revenue-raising powers of local
government units:
a. Taxation shall be uniform in each local government unit;
b. Taxes, fees, charges and other impositions shall:
1. Be equitable and based as far as practicable on the
taxpayer’s ability to pay;
2. Be levied and collected only for public purposes;
3. Not be unjust, excessive, oppressive, or confiscatory;
4. Not be contrary to law, public policy, national economic
policy, or in restraint of trade;
c. The collection of local taxes, fees, charges and other impositions
shall in no case be let to any private person;
d. The revenue collected pursuant to the provisions of this Code
shall inure solely to the benefit of, and be subjected to
disposition by, the local government until levying the tax, fee,
charge or other imposition unless otherwise specifically
provided herein; and
e. Each local government unit shall, as far as practicable, evolve a
progressive system of taxation.
 
THE CONDUCT AND MANAGEMENT
OF FINANCIAL AFFAIRS,
TRANSACTIONS, AND OPERATIONS
OF PROVINCES, CITIES,
MUNICIPALITIES, AND BARANGAYS.
SEC. 305. Fundamental Principles. – The financial affairs,
transactions, and operations of local government units shall
be governed by the following fundamental principles:

(a) No money shall be paid out of the local treasury except in pursuance
of an appropriations ordinance or law;
(b) Local government funds and monies shall be spent solely for public
purposes;
(c) Local revenue is generated only from sources expressly authorized by
law or ordinance, and collection thereof shall at all times be
acknowledged properly;
(d) All monies officially received by a local government officer in any
capacity or on any occasion shall be accounted for as local funds, unless
otherwise provided by law;
(e) Trust funds in the local treasury shall not be paid out except in
fulfillment of the purpose for which the trust was created or the funds
received;
(f) Every officer of the local government unit whose duties permit
or require the possession or custody of local funds shall be
properly bonded, and such officer shall be accountable and
responsible for said funds and for the safekeeping thereof in
conformity with the provisions of law;
(g) Local governments shall formulate sound financial plans, and
the local budgets shall be based on functions, activities, and
projects, in terms of expected results; development plans, goals,
and strategies in order to optimize the utilization of resources and
to avoid duplication in the use of fiscal and physical resources;
(i) Local budgets shall operationalize approved local development
plans;
(j) Local government units shall ensure that their respective
budgets incorporate the requirements of their component units
and provide for equitable allocation of resources among these
component units;
(k) National planning shall be based on local planning to
ensure that the needs and aspirations of the people as
articulated by the local government units in their
respective local development plans are considered in the
formulation of budgets of national line agencies or
offices;
(l) Fiscal responsibility shall be shared by all those
exercising authority over the financial affairs,
transactions, and operations of the local government
units; and
(m) The local government unit shall endeavor to have a
balanced budget in each fiscal year of operation.
THANK YOU
