Local Government Taxation Short Cases

1. Congress, after much public hearing and consultations with various sectors of society, came to the
conclusion that it will be good for the country to have only one system of taxation by centralizing the
imposition and collection of all taxes in the national government. Accordingly, it is thinking of passing a
law that would abolish the taxing power of all local government units. In your opinion, would such a law
be valid under the present Constitution? Explain your answer. (5 points)
- No. Changing the current tax system and policy into one system of taxation by centralizing the
imposition and collection of all taxes in the national government is not an efficient move. Because the
national government needed subsidiaries or subsystems like local government to make the tax system be
organized and the process of tax imposition and collection will be easier and it will not be mix-up.
2. In order to raise revenue for the repair and maintenance of the newly constructed City Hall of Makati,
the City Mayor ordered the collection of P1.00, called “elevator tax", every time a person rides any of the
high-tech elevators in the city hall during the hours of 8:00 a.m. to 10:00 a.m. and 4:00 p.m. to 6:00 p.m.
Is the “elevator tax" a valid imposition? Explain. (5 points)
- The imposition of “Elevator Tax” is not valid. Because City Mayors has no power to imposed taxes.
Thus, tax imposition in city or municipality shall exercise by the local legislative council called
“Sanggunian” which is the one who is responsible for tax imposition.
3. Mr. Fermin, a resident of Quezon City, is a Certified Public Accountant- Lawyer engaged in the
Practice of his two professions. He has his main office in Makati City and maintains a branch office in
Pasig City. Mr. Fermin pays his professional tax as a CPA in Makati City and his professional tax as a
lawyer in Pasig City. May Makati City, where he has his main office, require him to pay his professional
tax as a lawyer? Explain. (5 points)
- No. Mr Fermin has given the option where to pay his professional tax as a lawyer. It is either where he
practice his profession or where his principal office is located. May Quezon City, where he has his
residence and where he also practices his two professions, go after him for the payment of his
professional tax as a CPA and a lawyer? Explain. (5 points)- No. The City of Quezon has no right to
mandate and has no privilege to collect for his professional tax. Because Mr Fermin’s professional taxes
shall only be paid in the city where he practices his profession or where he maintain his principal office.
Question City is not the proper situs for Mr Fermin to pay his professional taxes.
4. Ferremaro, Inc., a manufacturer of handcrafted shoes, maintains its principal office in Cubao, Quezon
City. It has branches/sales offices in Cebu and Davao. Its factory is located in Marikina City where most
of its workers live. Its principal office in Quezon City is also a sales office. Sales of finished products for
calendar year 2009 in the amount of P10 million were made at the following locations: Cebu branch 25%
Davao branch 15% Quezon City branch 60% Total 100% Where should the applicable local taxes on the
shoes be paid? Explain. (5 points)
- It is applicable to pay the local taxes and record the sale in the city or municipality where the branch or
sales office is located. Since Ferremaro, Inc. maintains one factory, the sale shall be recorded in the
principal office. The 25% of the sales shall be taxed in Cebu branch and the 15% of the sales shall be
taxed in Davao branch. The remaining 60% shall be recorded in the principal office. Whereas, the 30% of
the 60% remaining sales is taxable where the principal office is located and the 70% of the 60%
remaining sales is taxable where the factory is located