RESOURCE GENERATION AND MOBILIZATION

Major Sources of Income of LGUs

Article X of the Constitution, Section 5 states:
“Each local government unit shall have the power to create its own sources of revenues and
levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of the local governments.”
Article X of the Constitution, Section 6 states:
“Local government units shall have a just share as determined by law, in the national taxes
which shall automatically release to them.”
Article X of the Constitution, Section 7 states:
“An equitable share in the proceeds of the utilization and development of the national wealth
within their respective areas, in the manner provided by the law, including sharing the same with
the inhabitants by way of direct benefits.”

Two Categories:
1. Locally generated
2. Externally sourced
Locally generated
Income generated from business tax and other local taxes, real property taxes, income
from economic enterprises, fees and charges.
Externally sourced
Income of LGUs consists of a share in BIR gross collection or IRA, a share in the
proceeds from the utilization and development of national wealth, loans, credits and bonds, and
grants or subsidies.

LOCAL TAXATION
LGU have limited fiscal autonomy
PD 231 (Local Tax Code)-LGUs have restricted tax base.
-impose limitations on the scope of taxing powers of LGUs
-prohibited from taxing forest products, forest concessionaires, mineral products, and
mining operations
-tax rates are in terms of fixed amounts
LIMITATIONS OF LOCAL TAXATION
*The base or subject to taxes is not included in the National Internal Revenue Code (NIRC) as
amended;
*Taxes, fees or charges imposed by the LGU shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared national policy;
*Any ordinance levying such taxes, fees, or charges shall not be enacted without any prior
public hearing conducted for the purpose.
*Taxes on business enterprises certified by the Board of Investments as pioneer or non-pioneer
-LGU Exempts entities as pioneer or non-pioneer from payment of local taxes
*Excise taxes on articles enumerated under the NIRC as amended
-Prohibits LGU from imposing excise taxes
*Taxes, fees or charges on countryside or Barangay Business enterprises of Kalakalan 20 and
cooperatives duly registered under RA 6938
-exempt from all taxes, national or local, license or building permit fees and other
business taxes except real property tax and capital gains tax, import duties and other taxes on
imported articles.

LOCAL TAXING AUTHORITY

Like PD 231, the code vests the power to impose taxes and to generate revenues in the
sanggunian. The taxing and revenue-generating powers shall be exercised through appropriate
ordinances.

Taxing Powers of the LGU

PROVINCES
-Tax on Transfer of Real Property Ownership
-Tax on Business of Printing and Publication
-Franchise Tax
-Tax on Sand, Gravel and Other Quarry Resources
-Professional Tax
-Amusement Tax
-Annual Fixed Tax For Delivery Tricks
The Province is required to share with the component units the proceeds from certain taxes
and fees that they impose.
The municipalities shall no longer share in the proceeds in the franchise and occupation taxes
to which they are entitled in the present. However, they shall be given share in the proceeds in
the amusement tax.
The Barangays shall have direct share in the taxes imposed by provinces.

Municipalities (Taxing and Revenue-Raising powers)

Taxing and Revenue-raising powers:
-Tax on Business most productive local revenue source
-Fees and charges
-Fees for Sealing and Licensing of Weights and Measures
-Fishery Rentals, Fees and Charges

Situs of Tax
In LGU, Plants and sales offices of manufacturers or producers are located receive allocations
in the proceeds from the business tax.
It also includes the branches of sales offices of banks and other financial institutions are
situated.
70% Share on tax proceeds
70% (60% Factory, 40% Plantation)

Cities share the taxing powers of provinces and municipalities. They are authorized to levy
rates of taxes that exceed the maximum rates allowed for provinces or municipalities by at most
50%.
Not authorized to exceed the rates of taxes on professional and amusement taxes levied by a
province or municipality.

Barangay retain taxing powers granted to them under PD 231 with some slight modifications.
Authorized to impose taxes on stores or retailers with fixed business establishments with gross
sales or receipts in the preceeding calendar year of
P50,000.00 or less –Barangays in Cities
P30,000.00 or less-Barangays in Municipalities
Authorized to collect fees or charges on the following:
1. Services rendered in connection with the regulation on the use of barangay-owned
properties or service facilities such as palay, copra, or tobacco dryers
2. Commercial breeding of fighting cocks, cockfights, and cockpits
3. Billboards, signboards, neon signs, and outdoor advertisements
4. Places of recreation which charge admission fees

Community Tax
Fees and Charges-LGU are authorized to impose reasonable fees and charges commensurate
to the cost of inspection and regulation incurred by the unit in the course of performing its
functions.
They may also fix the rate for the operation of public utilities owned, operated and
maintained by them.
Prescribe the terms and conditions and the rates of toll fees or charges for the use of
any public road, bridge, wharf or any facility funded and constructed by them.

LGUs are authorized to adjust the tax rates prescribed in the Code not often than once every
five years provided such adjustment does not exceed 10% of the rates fixed in the Code.

Authority to Grant Tax Exemption Privileges

LGUs are allowed to grant tax exemption privileges, incentives or relief to community growth-
including domestic enterprises under such terms and conditions as they may deem necessary.
This will enable them to attract investments to their localities and to encourage the development
of key to local industries.
Ordinances granting tax exemption privileges require at least a 2/3 vote of all the members of
the Sanggunian.

BARANGAY ORDINANCES
Under PD231, the provincial and city treasures are authorized to review the tax ordinances of
the Sangguniang Barangay in their respective jurisdictions. They are also authorized to suspend
the effectivity of any such tax ordinances. The Code vest in the Sangguniang Panlungsod or
Sangguniang Bayan to authority to review as well as suspend the effectivity of any tax
ordinance of the Sangguniang Barangay .
COLLECTION OF TAXES
Tax Period and Manner of Payment
-All local taxes may be paid in quarterly installment
-Fees and charges for services rendered are due upon completion of service
Time of Payment
-Deadlines are set
-Allows extension of 30 days to six months without penalties or surcharges
Surcharges and Penalties
LGU are authorized to impose a surcharge on unpaid taxes, fees or charges but not to
exceed 25% of the amount of taxes, fees or charges when not paid on time.