LOCAL TAXATION

1. The City of Manila enacted Ordinance No. 55-66 which imposes a The storage fee imposed under the question Ordinance is actually a
municipal occupation tax on persons practicing various professions in the municipal license tax or fee on persons, firms and corporations, like
city. Among those subjected to the occupation tax were lawyers. Atty. plaintiff, exercising the privilege of storing copra in a bodega within
Mariano Batas, who has a law office in Manila, pays the ordinance- the Municipality's territorial jurisdiction. For the term "license tax"
imposed occupation tax under protest. He goes to court to assail the has not acquired a fixed meaning. It is often used indiseriminately to
validity of the ordinance for being discriminatory. Decide with reasons. designate impositions exacted for the exercise of various privileges.
In many instances, it refers to revenue-raising exactions on privileges
or activities.
ANSWER: Punsalan vs Municipal Board of Manila
Moreover, the business of buying and selling and storing copra is
The Legislature may, in its discretion, select what occupations shall
property the subject of regulation within the police power granted
be taxed, and in its discretion may tax all, or select classes of
to municipalities under section 2238 of the Revised Administrative
occupation for taxation, and leave others untaxed. It is not for the
Code or the "general welfare clause". It has been held that a
courts to judge which cities or municipalities should be empowered
warehouse used for keeping or storing copra is an establishment
to impose occupation taxes aside from that imposed by the National
likely to endanger the public safety or likely to give rise to
Government. That matter is within the domain of political
conflagration because the oil content of the copra when ignited is
departments. The argument against double taxation may not be
difficult to put under control by water and the use of chemicals is
invoked if one tax is imposed by the state and the other is imposed
necessary to put out the fire.7 And as the Ordinance itself states, all
by the city. It is widely recognized that there is nothing inherently
exportable copra deposited within the municipality is "part of the
terrible in the requirement that taxes be exacted with respect to the
surveillance and lookout of municipal authorities.
same occupation by both the state and the political subdivisions
thereof.

3. The Local Government Code took effect on January 1, 1992. PLDT’s

legislative franchise was granted sometime before 1992. Its franchise
2. The Sangguniang Bayan of the Municipality of Sampaloc, Quezon,
provides that PLDT will only pay 3% franchise tax in lieu of all taxes. The
passed an ordinance imposing a storage fee of ten centavos (PO. 10) for
legislative franchises of Smart and Globe Telecoms were granted in 1998.
every 100 kilos of copra deposited in any bodega within the
Their legislative franchises state that they will pay only 5% franchise tax in
Municipality’s jurisdiction. The Metropolitan Manufacturing Corporation
lieu of all taxes. The Province of Zamboanga del Norte passed an
(MMC), with principal office in Makati, is engaged in the manufacture of
ordinance in 1997 that imposes a local franchise tax on all
soap, edible oil, margarine, and other coconut oil based products. It has a
telecommunication
warehouse in Sampaloc, Quezon, used as storage space for the copra
companies operating within the province. The tax is 50% of 1% of the
purchased in Sampaloc and nearby towns before the same is shipped to
gross annual receipts of the preceding calendar year based on the
Makati. MMC goes to court to challenge the validity of the ordinance,
incoming receipts, or receipts realized, within its territorial jurisdiction.
demanding the refund of the storage fees it paid under protest.

Is the ordinance valid? Are PLDT, Smart and Globe liable to pay franchise
ANSWER: Procter & Gamble vs Municipality of Jagna
taxes? Reason briefly.

ANSWER: 2007 Bar Question
The ordinance is valid as it was passed pursuant to the powers of
provinces and cities to impose taxes on businesses with franchises
under the LGC. The LGC which took effect on Januart 1, 1992,
withdrew tax exemptions or incentives previously enjoyed by all
persons, except certain entities (Section 193, LGC)
PLDT is liable to pay local franchise taxes because its legislative
franchise was granted by Congress prior to the passage of the LGC.
Section 193 of the LGC applies to PLDT.
Smart and Globe are exempt from the local franchise taxes imposed
by the province since their respective legislative franchises were
granted in 1998. It was superseded by the legislative franchise but
note that in Smart vs Davao “in lieu of all taxes” refers to national
taxes only and not local taxes.
5. Mayor Raul Bendana of the Muncipality of Lemery decides to hire a
private firm (which has a computer) to take care of the imposition and
collection of all fees, licenses and taxes imposed by the municipality. The
Mayor believes that in this manner the tax collection will be fair and
efficient because the private firm will be paid a percentage of the taxes it
collects. May the Mayor legally enter into such an arrangement?
ANSWER:
No, he may not. One of the fundamental principles of local taxation
as provided under Section 130 states that the collection of local
taxes shall not be let to any private person. Thus, the Mayor cannot
enter legally into such arrangement as it violates the fundamental
principles of local taxation.
6. An ordinance was passed by the Municipality of Malvar in Batangas
imposing a tax on the boarding stables of race horses only without
including the stables for other kind of horses. Is the ordinance valid?
Explain.
ANSWER: MANILA RACE HORSES VS DE LA FUENTE
The ordinance is valid. IN taxing only boarding stables for race
horses, we do not believe that the ordinance, makes arbitrary
classification. In the case of Eastern Theatrical Co. Inc., vs. Alfonso,
46 Off. Gaz. Supp. to No. 11, p. 303,* it was said there is equality and
uniformity in taxation if all articles or kinds of property of the same
class are taxed at the same rate. Applying this criterion to the
present case, there would be discrimination if some boarding stables
of the same class used for the same number of horses were not taxed
or were made to pay less or more than others.
The owners of boarding stables for race horses and, for that matter, the
race horse owners themselves, who in the scheme of shifting may carry
the taxation burden, are a class by themselves and appropriately taxed
where owners of other kinds of horses are taxed less or not at all,
considering that equity in taxation is generally conceived in terms of
ability to pay in relation to the benefits received by the taxpayer and by
the public from the business or property taxed. Race horses are devoted
to gambling if legalized, their owners derive fat income and the public
hardly any profit from horse racing, and this business demands relatively
heavy police supervision.
7. The Manila Race Horces Trainers Association Inc., a non-stock
corporation maintaining boarding stables for horses, challenges the
validity of Ordinance No. 3065 of the City of Manila. Plaintiff maintains
that the ordinance under consideration is a tax on race horses as distinct
from boarding stables for horses dedicated to other purposes. Is the
ordinance valid? Explain fully.
SAME AS ABOVE
8. What taxes may be levied by the province under the LGC of 1991?
  Tax on transfer of real property ownership
 Tax on business of printing and publication
 Tax on sand, gravel and other quarry resources extracted from
public land and public water within its jurisdiction
 Professional Tax
 Franchise Tax
 Amusement Tax
 Annual Fixed Tax for every Delivery Truck, Van of Manufacturer
etc.
9. Can a province or city impose a franchise tax on business enjoying a
franchise within its territorial jurisdiction notwithstanding the said
businesses are liable for VAT
ANSWER: YES.
Notwithstanding any exemption granted by any law or other special
law, the province may impose a tax on businesses enjoying a
franchise.
10. What is the Doctrine of Pre-emption under the Local Government
Code?
ANSWER: Where the NG elects to tax a particular area, it impliedly
withholds from the local government the delegated power to tax the
same field.This doctrine principally rests on the intention of the
Congress. Conversely, should the Congress allow municipal
corporations to cover fields of taxation it already occupies then the
doctrine of pre-emption will not apply (Victoria Millings case, GR No.
L-21183, Sept. 27, 1968).
11. The City of Manila passed a new Revenue Code. Vicky, a taxpayer
questioned the legality of the ordinance on the ground of non-
compliance with the procedural requirements provided by law. The
Secretary of Justice ruled against the validity of the ordinance for non-
compliance. On appeal, the RTC ruled that the appellate power of the
Secretary to rule on the validity of tax ordinances is unconstitutional
because it grants the Secretary the power to control local government
units, in violation of the constitutional policy of local autonomy and the
specific provision that the President shall exercise only the power of
supervision over local government units.
a. What are the procedural requirements provided by law for the
adoption of the ordinance?
b. Is the appellate power of the Secretary unconstitutional?
QUIZ
12. Megshine Marble Co., a domestic corporation engaged in the
business of manufacturing marble tiles, maintains its principal office at
Quezon City while its factory and warehouse are located in Nueva Ecija.
All sales are conducted and recorded in Quezon City. In 2007, Megshine
Marble Co. made a total sales of Ph300,000. For purposes of paying its
local business tax as a manufacturer, you were asked as counsel in which
place or places should it file its return and how much must be declared?
Explain your answer.
QUIZ
13. Three years ago, a diversion road was constructed by the government
to cut travel time to the northern provinces in Luzon by the construction
of the Subic-Clark-Tarlac Expressway (SCTEX). The diversion road passed
through various agricultural lands along the route and this improvement
increased the
market value of the parcels of land in various area in Pampanga and
Tarlac. While before the lands were solely agricultural in nature, now
some of these lands became commercial. A vice mayor of one of the
towns where the SCTEX passed consulted you on what kind of tax can his
town collect with the introduction of said improvement. What will be your
advice to the vice mayor? Discuss your reasons to support your advice.
ANSWER: He may levy special assessements for public works because
that is the only type of tax that can be levied upon by municipalities.
Real property taxes may be imposed only by provinces, cities, and
municipalities within Metro Manila.
14. After a public hearing, the Sangguniang Pangbayan of Teresa, Rizal,
enacted an ordinance imposing a tax of P0.10 per liter of soft drinks
manufactured and sold within the municipality. Is the ordinance valid?
Why?
ANSWER: YES. PEPSI COLA VS TANAUAN
The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity on all softdrinks, produced or manufactured, or an
equivalent of 1-½ centavos per case, 23 cannot be considered unjust
and unfair. An increase in the tax alone would not support the claim
that the tax is oppressive, unjust and confiscatory. Municipal
corporations are allowed much discretion in determining the rates of
imposable taxes. This is in line with the constitutional policy of
according the widest possible autonomy to local governments in
matters of local taxation, an aspect that is given expression in the
Local Tax Code (PD No. 231, July 1, 1973). Unless the amount is so
excessive as to be prohibitive, courts will go slow in writing off an
ordinance as unreasonable. 27 Reluctance should not deter
compliance with an ordinance such as Ordinance No. 27 if the
purpose of the law to further strengthen local autonomy were to be
realized
15. What are the fundamental principles of Local Taxation?
16. Discuss the residual power of local government under the Local
Government Code.
17. The province of Batangas passed an ordinance imposing an
amusement tax of 30% on the gross receipts from admission earned by
proprietors, lessees and operators of amusement places within its
boundaries. On the other hand, the municipality of Sta. Teresita within the
said province likewise passed an ordinance similar to that imposed by the
province. Edilberto Mirano is a proprietor of a movie house and he
objected to these impositions contending that the same are oppressive,
unfair and unjust. How is the instant problem addressed by the Local
Government Code? Explain briefly.
ANSWER: It cannot be imposed by the municipality. The LGC provides
that a municipality can only levy taxes which are not otherwise
imposed by the Province. In this case, the LGC provides that only
provinces and cities can impose amusement taxes. Thus, a
municipality , not having authority to impose the same, should be
prohibited from promulgating the ordinance.
18. The municipality of Tuy passed an ordinance imposing a tax of Two
Pesos (2.00) per pack of cigarettes produced in the locality. Is the
ordinance valid? Explain briefly
19. An ordinance was passed by the Sangguniang Panglungsod of
Batangas City prohibiting aliens from being employed or to engage or
participate in any position, occupation or business enumerated therein,
whether permanent, temporary or casual, without first securing an
employment permit from the City Mayor’s Office and paying the permit
fee. Antonio Chua challenged the validity of said ordinance. Is Antonio
Chua correct? Explain fully.
ANSWER: Villegas vs Hu Tsai Pao
Ordinance No. 6537 does not lay down any criterion or standard to guide
the Mayor in the exercise of his discretion. It has been held that where an
ordinance of a municipality fails to state any policy or to set up any
standard to guide or limit the mayor's action, expresses no purpose to be
attained by requiring a permit, enumerates no conditions for its grant or
refusal, and entirely lacks standard, thus conferring upon the Mayor
arbitrary and unrestricted power to grant or deny the issuance of building
permits, such ordinance is invalid, being an undefined and unlimited
delegation of power to allow or prevent an activity per se lawfu
20. The Sangguniang Panglungsod of Tagaytay City passed an ordinance under protest?
imposing a ‚road-user’s tax‛ on motor and other vehicles registered and
operating within the City of Tagaytay. The Association of Real Estate 7. What are the fundamental principles of Real Property Taxation?
Brokers of Tagaytay assailed the validity of the ordinance. Is the
Association’s position correct? Explain fully. 8. Discuss the remedies of a landowner whose valuation of properties
submitted to the Assessor is questioned by the latter.
21. Twelve corporations, engaged in the motion picture business, contest
the validity of Ordinance No. 2958 of the City of Manila which reads as 9. What is a ‚special levy‛ under the Real Property Tax Code.
follows: ‚An ordinance imposing a fee on the price of every admission
ticket sold by Cinematographers, etc.‛ Appellants point out to the fact 10. The local City Assessor of Iligan City subjected to real property tax the
that the ordinance in question does not tax ‚many more kinds of following items of a gasoline station that leased a parcel of land wherein
amusements‛ than those therein specified, such as ‚race tracks, cockpits, the station is maintained: underground tanks, elevated tanks, water tanks,
cabarets, concert halls, circuses, and other places of amusement.‛ Is the gasoline pumps, computing pumps, water pumps, car washer, car and
argument of the Appellants valid? Explain fully. truck hoists, air compressors and similar articles. Are the above items
REAL PROPERTY TAXATION subject to real property tax? Explain briefly
1. Under the Real Property Taxation Law, only real property should be
subjected to the real property tax. ‚Real Property‛ has not been succinctly
defined by the Real Property Tax Code. Explain fully the criteria to
determine what real property means for realty tax purposes given the
traditional view that real property only refers to immovable property.
2. In case of real property declared for the first time, how is the liability
for back taxes computed? Discuss fully.

3. Define the following terms:

a. Idle Land Tax
b. Assessment Level
c. Manifest
d. Automatic Review in Customs Proceedings
e. Improvement

4. Underground tanks, real property? Read Caltex.

5. Remedies of landowner whose valuation was questioned by assessor.

6. Under the Real Property Tax Code, what is the effect of the payment