Guidelines on the Review of Local Revenue · PDF fileReview the Local Revenue Code (LRC) by Higher ... Professional Tax (Sec 139), ... 3.2 Codal Requirements in the Review of Local

Guide on How to Review the Local

Revenue Code (LRC) by Higher

LGUs

Draft

TABLE OF CONTENTS

1.0 INTRODUCTION ........................................................................................................... 4

1.1 Rationale .......................................................................................................................... 4

1.2 Objective of the Guideline ............................................................................................... 4

1.3 Users of the Guideline ...................................................................................................... 4

1.4 Organization of the Guideline .......................................................................................... 5

2.0 EXTENT OF THE POWERS OF LOCAL GOVERNMENT UNITS TO CREATE SOURCES OF REVENUES ............................................................................................................................. 5

3.0 AUTHORITY TO REVIEW LOCAL REVENUE MEASURES ................................................... 6

3.1 Legal Bases on the Authority to Review ........................................................................... 6

a. Sangguniang Panlalawigan ........................................................................................... 6

b. Sangguniang Panglungsod................................................................................................ 6

c. Sangguniang Bayan .......................................................................................................... 6

3.2 Codal Requirements in the Review of Local Revenue Measures ..................................... 6

a. Review by the Sangguniang Panlalawigan. ...................................................................... 7

b. Review by the Sangguniang Panlungsod or Sangguniang Bayan. .................................... 7

4.0 CONSIDERATIONS IN THE REVIEW FUNCTIONS ............................................................ 8

4.1 General Considerations .................................................................................................... 8

a. Approval of Revenue Measure/Ordinance by Local Sanggunian .................................. 8

b. Tax Rates for Cities. ......................................................................................................... 8

c. Rates of Tax of Municipalities Within the Metropolitan Manila Area ............................. 8

d. Taxes on Newly Started Business ..................................................................................... 8

e. Upward and Downward Adjustment of Tax Rates of Tax Ordinances ............................. 9

f. Adjustments of tax rate shall not be oftener than once every five (5) years. For this purpose, the date of the effectivity of the revenue measures is the start date of the five (5) year period. ............................................................................................................................. 9

g. Rates of Fees and Charges ............................................................................................... 9

h. Upward and Downward Adjustment of Rates of Fees and Charges ................................ 9

i. Extent of the Taxing Powers of Provinces. ....................................................................... 9

j. Fines and Penalties ......................................................................................................... 10

k. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges ....................................... 10

l. Interests on Unpaid Real Property Tax .......................................................................... 10

m. Limitations on the Taxing Powers of LGUs. ................................................................ 11

4.2 Detailed Review of the Local Revenue Measures .......................................................... 13

Guidelines in Reviewing the Local Revenue Measures Page 2

a. Local Business Taxes ....................................................................................................... 13

1. Tax on Transfer of Real Property Ownership (Sec. 135) ........................................... 13 2. Tax on Business of Printing and Publication (Sec. 136) .............................................. 14 3. Franchise Tax (Sec. 137) ............................................................................................. 14 4. Tax on Sand, Gravel and Other Quarry Resources (Sec 138), (Art 239) ..................... 14 5. Professional Tax (Sec 139), (Sec 151) ......................................................................... 14 6. Amusement Tax (Sec 140), (Sec 151), (RA 9640) ....................................................... 15 7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers, Wholesalers of, Dealers, or Retailers in, Certain Products (Sec 141) ............................... 15 8. Tax on Business (Sec 143) ........................................................................................... 15

b. Land-Based Taxes ........................................................................................................... 17

1. Real Property Tax (Sec 232), (Sec 233), (Sec 271) ...................................................... 17 2. Additional Levy on Real Property for the Special Educational Fund (SEF) (Sec 235), (Sec 271) ............................................................................................................................. 17 3. Additional Ad Valorem Tax on Idle Lands (Sec 236), (Sec 273) .................................. 18 4. Special Levy by Local Government Units (Sec 240, 241, 242, 243, 244, 245) ............ 18 5. Socialized Housing Tax (Sec 43, RA 7279), (LFC 1-97) ................................................ 18

c. Permit and Regulatory Fees ........................................................................................... 19

1. Mayors’ Permit Fee on Business ................................................................................ 21 2. Fees for Sealing and Licensing of Weights and Measures .......................................... 21 3. Building Permit Fee ..................................................................................................... 21 4. Permit Fee for Zoning/Locational Clearance .............................................................. 21 5. Subdivision Plan Processing Fee ................................................................................. 21 6. Permit Fees for Tricycle Operation ............................................................................. 22 7. Permit Fee for Pedaled Tricycle (Sec ) ........................................................................ 22 8. Permit Fee for Cockpits Owners/Operators/Licensees/Promoters and Cockpit Personnel (Sec ).................................................................................................................. 22 9. Special Permit Fee for Cockfighting (Sec ) .................................................................. 22 10. Permit Fee on Occupation or Calling Not Requiring Government Examination (Sec ) 22 11. Registration and Transfer Fees on Large Cattle (Sec ) ............................................ 23 12. Fees on Impounding of Stray Animals (Sec ) .......................................................... 23 13. Cart or Sledge Registration Fee (Sec ) ..................................................................... 23 14. Permit Fee on Caretela or Calesa (Sec ) .................................................................. 23 15. Permit Fee for Agricultural Machinery and Other Heavy Equipment (Sec ) .......... 23 16. Permit and Inspection Fee on Machineries and Engines (Sec ) .............................. 23 17. Permit Fee for the Storage of Flammable and Combustible Materials .................. 23 18. Permit Fee for Temporary Use of Roads, Streets, Sidewalks, Alleys, Patios, Plazas and Playgrounds................................................................................................................. 24 19. Permit Fee for Excavation ....................................................................................... 24 20. Permit Fee on Circus and Other Parades ................................................................ 24 21. Permit Fee for the Conduct of Group Activities (Sec ) ............................................ 24 22. Permit Fee on Film-Making (Sec ) ........................................................................... 24


d. Service Fee ..................................................................................................................... 24

e. Charges ........................................................................................................................... 25

1. Fishery Rentals, Fees and Charges ............................................................................. 25 2. Rentals of Personal and Real Properties Owned by the LGU (Sec ) ........................... 26 3. Charges for Parking (Sec ) ........................................................................................... 26 4. Hospital Service Fee (Sec ) .......................................................................................... 26 5. Charges for Use of Waterworks System (Sec ) ........................................................... 26 6. Cemetery Charges (Sec ) ............................................................................................. 26 7. Market Fees and Charges (Sec ) ................................................................................. 26 8. Slaughterhouse Fees (Sec ) ......................................................................................... 27 9. Toll Fees or Charges (Sec ) .......................................................................................... 27


1.0 INTRODUCTION

1.1 Rationale

In the midst of the recurring global crisis resulting in the financial strain on

government, local government units (LGUs) are face with the challenge to fully marshal

local taxing, regulatory as well as proprietary powers to generate the needed revenues and

resources to finance the delivery of basic services.

The Local Government Code of 1991 defines the legal framework by which

LGUs can generate revenues and mobilize resources. It has given LGUs some degree of

autonomy in making revenue raising decisions, such that LGUs have the option to impose

the various tax subjects enumerated in the Code and they may set the tax rates within a

certain limit through an approved local revenue ordinance. They are also allowed to

make tax rate adjustments once every five years. These statutory mandates have

provided some degree of dynamism as well as certainty in the revenue-raising powers of

LGUs.

However, such revenue generating and regulatory powers of LGUs are not open-

ended, they must be exercised based on some guiding principles and must be within the

parameters and limits provided by law.

A growing number of complaints from the business sector and ordinary taxpayers

seem to indicate a possible and unwitting abuse or misuse of such powers on the part of

the LGUs, thus negatively affecting compliance. It is also noted that some LGUs have

adopted revenue and regulatory measures beyond their taxing and regulatory powers.

It becomes imperative then to strengthen the existing oversight and review

mechanisms related to enactment of LRCs/revenue ordinances to ensure equity and

fairness, prudence and better compliance.

1.2 Objective of the Guideline

This Guideline is prepared in order to provide the reviewing authorities the

necessary tools in ensuring the legality, rationality and uniformity of local revenue

measures enacted by their component local government units.

1.3 Users of the Guideline

This guideline is a useful tool to the following:

a. Members of the Sangguniang Panlalawigan in reviewing the local revenue

measures of its component municipalities and component cities;

b. Members of the Sangguninang Bayan and Sangguniang Panglungsod in

reviewing the local revenue measures of their respective barangays;


c. Provincial Attorney, Provincial Prosecutor, City Attorney and City Prosecutor

who may be required by the appropriate sanggunian to provide inputs and

comments on the submitted local revenue measures.

d. Local Treasurers who may be required by the appropriate sanggunian to act as

resource person during the review of the submtitted local revenue measures.

e. Department of Interior and Local Government (DILG) and Bureau of Local

Government Finance, Department of Finance (BLGF-DOF) who may be

requested by local government units (LGUs) to provide comments on their

local revenue measures.

1.4 Organization of the Guideline

The guideline provides an overview of the legal bases and responsibilities of

higher local government units in reviewing the local revenue measures of their

component LGUs. It is designed to be an easy reference in reviewing local revenue

measures enacted by component local government units.

The guideline first discusses the rationale and objective of its issuance. It further

amplifies the importance of the review function of higher level LGUs and describes their

roles and responsibilities in reviewing the local revenue measures of their component

LGUs.

Lastly it identifies the areas to be reviewed in the local revenue measures

supported with citation on specific provisions in the Local Government Code of 1991

(LGC) and other relevant laws, rules and regulations.

2.0 EXTENT OF THE POWERS OF LOCAL GOVERNMENT UNITS TO

CREATE SOURCES OF REVENUES

Section 129 of the LGC provides that “Each local government unit shall exercise its

power to create its own sources of revenue and to levy taxes, fees, and charges subject to the

provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and

charges shall accrue exclusively to the local government units.

However, such power is not absolute because Congress provided limitations in the LGC

pursuant to Section 5, Article X of the Philippine Constitution which is quoted hereunder:

“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.”

Such limitations are provided in Section 133 of the LGC. Further, Section 5b of the LGC

also provides that “In 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. Any

tax exemption, incentive or relief granted by any local government unit pursuant to the

provisions of this Code shall be construed strictly against the person claiming it.”

3.0 MANDATE TO REVIEW LOCAL REVENUE MEASURES

3.1 Legal Bases of the Review Functions

a. Sangguniang Panlalawigan

Shall review all ordinances approved by the sanggunians of component cities

and municipalities and executive orders issued by the mayors of said

component units to determine whether these are within the scope of the

prescribed powers of the sanggunian and of the mayor. [Sec. 468(1)(i)],

(Sec. 56).

b. Sangguniang Panglungsod

Shall review all ordinances approved by the sanggunian barangay and

executive orders issued by the punong barangay to determine whether these

are within the scope of the prescribed powers of the sanggunian and of the

punong barangay. [Sec. 458(1)(i)], (Sec 57).

c. Sangguniang Bayan

Shall review all ordinances approved by the sanggunian barangay and

executive orders issued by the punong barangay to determine whether these

are within the scope of the prescribed powers of the sanggunian and of the

punong barangay. [Sec. 447(1)(i)], (Sec 57).

3.2 Codal Requirements in the Review of Local Revenue Measures

The review function of higher level LGUs over the LRCs/revenue ordinances of

their component LGUs is of paramount importance in promoting equity, fairness and

legality of such LRCs/revenue ordinances.

The review would ensure that LRCs/revenue ordinances of component LGUs are

properly formulated and crafted based on fundamental principles and statutory

requirements of local taxation, and aptly anchored on a coherent philosophical

framework.

To facilitate a meaningful and comprehensive review of component LGUs’

Revenue Codes/Ordinances, it is imperative for the reviewing authority to provide the

component LGUs a checklist of the documents to be submitted to the reviewing

authority. The checklist would include the following: (a) copies of the Revenue

Code/Ordinance to be reviewed; and (b) copies of the immediately preceding Revenue

Code/Ordinance being updated or amended by the proposed Revenue Code/Ordinance.

This would provide the reviewing authority the necessary information as to the propriety

of the rates and the effectivity of the proposed measures. Additional documents such as


AIP, CLUP and Zoning Ordinance of the component LGUs are also desirable, to provide

the reviewing authority a holistic governance profile of the component LGU, wherein the

proposed Revenue Code/Ordinance is a vital integral component. This would underscore

the truism that revenue generation is an inherent challenge to local governance and

development.

a. Review by the Sangguniang Panlalawigan

Step 1. Within three (3) days after the approval of revenue measures, the

secretary of the sanguniang panlungsod or sangguniang bayan shall

forward to the sangguniang panlalawigan for review, copies of approved

ordinances. [Sec 56 (a)]

Step 2. Within thirty (30) days after receipt of copies of such ordinances and

resolutions the sangguniang panlalawigan shall examine the documents

or transmit them to the provincial attorney, or if there is none, to the

provincial prosecutor for prompt examination. [Sec 56 (b)]

The provincial attorney or provincial prosecutor shall, within a

period of ten (10) days from receipt of the documents inform the

sangguniang panlalawigan in writing of his comments or

recommendations, which may be considered by the sangguniang

panlalawigan in making its decision. [Sec 56 (b)]

Step 3. If the Sangguniang Panlalawigan finds that such an ordinance or

resolution is beyond the power conferred upon the Sangguniang

Panlungsod or Sangguniang bayan concerned, it shall declare such

ordinance or resolution invalid in whole or in part. The Sangguniang

Panlalawigan shall enter its action in the minutes and shall advise the

corresponding city or municipal authorities of the action it has taken.

[Sec 56 (c)]

Step 4. If no action has been taken by the Sangguniang Panlalawigan within

thirty (30) days after submission of such an ordinance or resolution, the

same shall be presumed consistent with law and therefore valid.

[Sec 56(d)]

b. Review by the Sangguniang Panlungsod or Sangguniang Bayan.

Step 1. Within ten (10) days after its enactment, the Sangguniang Barangay

shall furnish copies of all Barangay revenue ordinances to the

Sangguniang Panlungsod or Sangguniang bayan concerned for review as

to whether the ordinance is consistent with law and city or municipal

ordinances. [Sec 57 (a) of LGC]

Step 2. If the Sangguniang Panlungsod or Sangguniang bayan, as the case may

be, finds the Barangay ordinances inconsistent with law or city or

municipal ordinances, the Sanggunian concerned shall, within thirty (30)


days from receipt thereof, return the same with its comments and

recommendations to the Sangguniang Barangay concerned for

adjustment, amendment, or modification; in which case, the effectivity

of the Barangay ordinance is suspended until such time as the revision

called for is effected. [Sec 57 (c) of LGC]

Step 3. If the Sangguniang Panlungsod or Sangguniang bayan, as the case may

be, fails to take action on Barangay ordinances within thirty (30) days

from receipt thereof, the same shall be deemed approved.

[Sec 57(b) of LGC]

4.0 CONSIDERATIONS IN THE REVIEW OF LOCAL REVENUE

MEASURES

4.1 General Considerations

a. Approval of Revenue Measure/Ordinance by Local Sanggunian

An ordinance levying taxes, fees and charges, prescribing the rates thereof

for general and specific purposes, and granting tax exemptions, incentives or

reliefs shall be approved by majority vote of all members of the sanggunian. [Sec

458(2)(ii), Sec 447(2)(ii)]

b. Tax Rates for Cities.

The rates of taxes that the city may levy may exceed the maximum rates

allowed for the province or municipality by not more than fifty percent (50%)

except the rates of professional and amusement taxes (Sec 151). As such, the

rates of the professional and amusement taxes for provinces and cities shall be

P300.00 for professional tax, and 10% for amusement tax (as amended by R.A.

9640).

c. Rates of Tax of Municipalities Within the Metropolitan Manila Area

The municipalities within the Metropolitan Manila Area (MMA) may levy

the taxes on business enumerated in Article 232 of the IRR of LGC at rates which

shall not exceed by fifty percent (50%) the maximum rates prescribed for said

business (Art. 236).

d. Taxes on Newly Started Business

No taxes on newly started business shall be collected by all levels of

LGUs except on business of printing and publication (Sec 136) and business

enjoying a franchise (Sec. 137) which can only be imposed and collected by


provinces, cities the municipality of Pateros in MMA. The tax shall be based on

the capital investment of the said newly started business. However, such

businesses are required to secure and pay the necessary permit fees, licenses and

charges that the LGU may impose.

e. Upward and Downward Adjustment of Tax Rates of Tax Ordinances

Pursuant to Sec 191 of the LGC, Adjustment of tax rates of tax ordinances

is governed by the following conditions:

f. Adjustments of tax rate shall not be oftener than once every five (5)

years. For this purpose, the date of the effectivity of the revenue

measures is the start date of the five (5) year period.

1. Tax rate adjustment shall not exceed ten percent (10%) percent of the

rates prescribed in the LGC.

g. Rates of Fees and Charges

The municipality may impose and collect such reasonable fees and

charges on business and occupation and, except as reserved to the province in

Section 139 of the LGC, on the practice of any profession or calling,

commensurate with the cost of regulation, inspection and licensing before any

person may engage in such business or occupation, or practice such profession or

calling. (Sec. 147)

No such fee or charge shall be based on capital investment or gross sales

or receipts of a person or business (Art. 233). It is therefore prohibited for the

LGU to impose a fee or clearance and charges based on the amount of taxes paid

on the previous years.

h. Upward and Downward Adjustment of Rates of Fees and Charges

Rates adjustment on fees and charges is not covered by the provision of

Sec 191 of the LGC. Because of the nature of its imposition, the rates of fees and

charges may be adjusted annually.

i. Extent of the Taxing Powers of Provinces.

The sangguniang panlalawigan has no authority to impose taxes on

businesses and professionals within the territorial jurisdiction of the city. This is

in view of the provision of Sec 151 of the LGC. This is further supported by the

provision of Art. 5 of the IRR of LGC which states that “Any fair and reasonable

doubt on the powers of LGUs shall be liberally interpreted and resolved in their

favor, and in cases involving lower and higher level LGUs, in favor of the lower

level LGU.”


j. Fines and Penalties

Local sanggunian of different levels of LGUs can only impose the

following fines and penalties:

1) Sangguniang Panlalawigan.

Approve ordinances imposing a fine not exceeding Five thousand

pesos (Php5,000) or imprisonment not exceeding one (1) year, or both in

the discretion of the court, for the violation of a provincial ordinance

[Sec. 468(iii)].

2) Sangguniang Panglunsod.

Approve ordinances imposing a fine not exceeding Five thousand

pesos (Php5,000) or imprisonment not exceeding one (1) year, or both in

the discretion of the court, for the violation of a city ordinance

[Sec.458(iii)].

3) Sangguniang Bayan.

Approve ordinances imposing a fine not exceeding Two thousand

five hundred pesos (Php2,500) or imprisonment not exceeding six (6)

months, or both in the discretion of the court, for the violation of a

municipal ordinance [Sec. 447(iii)].

4) Sangguniang Barangay.

Prescribe fines in amounts not exceeding One thousand pesos

(Php1,000) for violation of barangay ordinance [Sec. 391(14)]. Unlike

other local legislative bodies, the sangguniang barangay cannot impose

imprisonment as a penalty for violating a barangay ordinance.

k. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges

The Sanggunian may impose a surcharge not exceeding twenty-five

percent (25%) of the amount of taxes, fees or charges not paid on time and an

interest at the rate not exceeding two percent (2%) per month of the unpaid taxes,

fees or charges including surcharges, until such amount is fully paid but in no

case shall the total interest on the unpaid amount or portion thereof exceed thirty-

six (36) months. (Sec. 168)

l. Interests on Unpaid Real Property Tax

In case of failure to pay the basic real property tax or any other tax levied

under this Title upon the expiration of the periods as provided in Section 250, or

when due, as the case may be, shall subject the taxpayer to the payment of interest

at the rate of two percent (2%) per month on the unpaid amount or a fraction

thereof, until the delinquent tax shall have been fully paid: Provided, however,


That in no case shall the total interest on the unpaid tax or portion thereof exceed

thirty-six (36) months. (Sec. 255)

m. Limitations on the Taxing Powers of LGUs.

In no case that local revenue measures of LGUs should extend to levy of

the following as enumerated in Sec 133 of the LGC:

1) Income tax, except when levied on banks and other financial

institutions;

Local government units may levy local taxes on banks and other

financial institutions based on gross receipts. The DOF has provided

guidelines on these impositions per Local Finance Circular No. 1-93.

(LFC No. 2-07 dated Feb 26, 2007 amending Sections 2 and 5 of LFC

1-93)

2) Documentary stamp tax;

Only the National Government may impose the excise tax upon the

privilege, opportunity or facility offered at exchanges for the

transaction of the business.

3) Taxes on estates, inheritance, gifts, legacies and other acquisitions

mortis causa, except as otherwise provided herein;

An exception is provided in Sec. 135 of the LGC, where provinces and

cities may impose tax on the sale, donation, barter, or on any other

transferring ownership or title of real property. Transfer of real

properties owned by religious and charitable institutions which are

sold or transferred to private parties are subject to transfer tax

4) Customs duties, registration fees vessels and wharfage on wharves,

tonnage dues, and all other kinds of customs fees, charges and dues

except wharfage on wharves constructed and maintained by the local

government unit concerned;

Sec. 149 (3) of the LGC authorizes LGUs to impose license fees for

the operation of fishing vessels of 3 tons or less.

5) Taxes, fee and charges and other impositions upon goods carried into

or out of, or passing through, the territorial jurisdictions of local

government units in the guise of charges for wharfage, tolls for bridges

or otherwise, or other taxes, fees or charges in any form whatsoever

upon such goods or merchandise;

Import or export taxes or fees on goods and commodities carried

through into or out of their respective territories would deter the free

flow of commerce in the country and cause considerable increase in

the prices of commodities, to the prejudice on the consuming public.


6) Taxes, fees, or charges on agricultural and aquatic products when sold

by marginal farmers or fishermen;

Sec. 131 provides a listing of covered agricultural products and the

definition of a marginal farmer or fisherman. So that agricultural

products and aquatic products become taxable when:

- It is sold by persons other than the farmer or fisherman, even

without undergoing any process.

- Sold on a commercial scale

- The products have been transformed into manufactured

products such as sugar, charcoal, balut, sardines, etc.

7) Taxes on business enterprises certified to by the Board of Investments

as pioneer or non-pioneer for a period of six (6) and (4) four years,

respectively from the date of registration;

DOF issued LFC No. 5-93 provides guidelines on this.

8) Excise taxes on articles enumerated under the National Internal

Revenue Code, as amended, and taxes, fees or charges on petroleum

products;

Excise taxes can be in the form of specific or ad valorem taxes.

Specific taxes are based on the unit or number, weight or volume

capacity or any other physical unit of measurement of the objects to

tax. While Ad valorem taxes are based on the selling price or other

specific value of the goods

9) Percentage or value added tax (VAT) on sales, barters or exchanges or

similar transactions on goods or services except as otherwise provided

herein;

10) Taxes on the gross receipts of transaction contractors and persons

engaged in the transportation of passengers or freight by hire and

common carriers by air, land or water, except as provided in the LGC;

Since transportation contractors are still subject to the business tax

imposed on contractors by LGUs as stated in DOF Opinion,

November 8, 1995, it may be implied that LGUs may impose a

business tax on bases other than gross receipts, i.e., type of vehicle,

number of vehicles, capacity, etc. (for transport companies with

terminals or booking office)

11) Taxes on premium paid by way or reinsurance or retrocession;

Reinsurance is a contract by which an insurer procures a third person

to ensure him against loss or liability by reason of original insurance.

Retrocession is the rejection of the risk being insured.


12) Taxes, fees or charges for the registration of motor vehicle and for the

issuance of all kinds of licenses or permits for the driving thereof,

except tricycles;

LGUs may impose taxes, fees, or charges for the registration of

tricycles.

13) Taxes, fees or charges on Philippine products actually exported, except

as otherwise provided herein;

The prohibition does not apply to the business of exporting said

products which is still covered by the business tax on exporters. (DOF

Opinion, March 10, 1994), Sec. 143(c) of the LGC of 1991.

14) Taxes, fees, or charges, on Countryside and Barangay Business

Enterprises and cooperatives duly registered under R.A. No. 6810 and

Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No.

6938) otherwise known as the "Cooperatives Code of the Philippines"

respectively; and

However, per DOF Opinion dated November 14, 1994, the exception

enjoyed by duly registered cooperatives does not include payment of

service charges or rentals for the use of property and equipment or

public utilities owned by a local government such as charges for

actual consumption of water, electric power, toil fees, use of public

roads and bridges, and the like.

15) Taxes, fees or charges, of any kind on the National Government, its

agencies and instrumentalities, and local government units.

This should be read in connection with Section 193 of the Code which

withdraws exceptions or incentives granted to all persons, natural or

juridical, including government owned- or controlled corporations

except local water districts, non-stock and non-profit hospitals and

educational institutions.

4.2 Specific Considerations in the Review of the Local Revenue Measures

a. Local Business Taxes

Local business taxes are impositions of province, city, municipality and

barangays enumerated in Title One Book II of the LGC. (Section 128-196)

1. Tax on Transfer of Real Property Ownership (Sec. 135)

Taxing Authority : Province City

Maximum Tax Rate : 50% of 1% 75% of 1%

Tax Base: : Total consideration involved in the acquisition of the

property or the fair market value as reflected in the

Assessor’s approved schedule of Market Value, whichever


is higher.

Remarks : The LGU can only use the acquisition cost or the fair market

value as provided in the Schedule of Fair Market Value

(SFMV) of the LGU. The LGU cannot use the zonal value

for this purpose.

2. Tax on Business of Printing and Publication (Sec. 136)



: 1/20 of 1% 3/40 of 1% For newly started business

Tax Base: : Gross receipts of the preceding year

Capital investment for newly started business

Remarks : Tax can be imposed on newly started business

3. Franchise Tax (Sec. 137)



: 1/20 of 1% 3/40 of 1% For newly started business

Tax Base: : Gross receipts of the preceding year

Capital investment for newly started business

Remarks : Tax can be imposed on newly started business

4. Tax on Sand, Gravel and Other Quarry Resources (Sec 138), (Art 239)

Taxing Authority : Province Highly Urbanized City

Maximum Tax Rate : 10% 15%

Sharing : Province -

30%

Component city or mun. -

30%

Barangay -

40%

City - 60%

Barangay - 40%

Tax Base: : Fair market value in the locality per cubic meter

extracted from public lands and public waters

Remarks : The permit to extract sand, gravel and other quarry

resources shall be issued exclusively by the provincial

governor or city mayor, in case of highly urbanized

city, pursuant to their respective ordinances.

5. Professional Tax (Sec 139), (Sec 151)


Maximum Tax Rate : Php300.00 Php300.00

Tax Base: : Fixed amount

Remarks : The rate of professional tax for provinces and cities shall be

uniform


6. Amusement Tax (Sec 140), (Sec 151), (RA 9640)



Sharing : Province : 50%

Municipality : 50%

Tax Base: : Gross receipts from admission

Remarks : The rate of amusement tax for provinces and cities shall be

uniform. Sec 140 of the LGC was amended by R.A. 9640

lowering the maximum amusement tax rate from 30% to

10%.

7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers in, Certain Products

(Sec 141)




Remarks : Exempt from municipal or city peddlers tax

8. Tax on Business (Sec 143)

8.1 On manufacturers, assemblers, repackers, processors, brewers,

distillers, rectifiers, and compounders of liquors, distilled spirits, and

wines or manufacturers of any article of commerce of whatever kind of

nature [Sec 143(a)]

Taxing Authority : Municipality City

Maximum Tax Rate : 37 ½% of 1% 56 ¼% of 1%

Tax Base: : Gross sales/receipts of the preceding calendar

year

Remarks : No tax for newly started business

8.2 On wholesalers, distributors, or dealers in any article of commerce of

whatever kind or nature [Sec 143(b)]




year


8.3 On exporters, and on manufacturers, millers, producers, wholesalers,

distributors, dealers or retailers of essential commodities [Sec 143(c)]



Maximum Tax Rate : ½ of the maximum tax rate of Sec. 143 (a(, (b),

and (d)


year


8.4 On retailers [Sec 143(d)], (Sec 152)

Taxing Authority : Municipality City Barangay

Maximum Tax Rate : 400,000 or less – 2% More than 400,000 – 1%

400,000 or less – 3% More than 400,000 – 1%

Maximum Tax Rate for

barangay

: Depending on the location of the barangay, the

maximum tax rate shall be that of the municipality

or city where the barangay is located.

Tax Base: : The barangays shall have the exclusive power to

levy taxes, under Sec 152 on gross sales or

receipts of the preceding year of Php50,000.00 or

less, in the case of cities, and Php30,000.00 or

less, in the case of municipalities

Remarks : No tax for newly started business. Only the

municipality or city shall issue permit to operate

this kind of business. The barangay, as in all kind

of business, shall only issue barangay clearance.

8.5 On contractors and other independent contractors [Sec 143(e)]




year


8.6 On banks and other financial Institutions [Sec 143(f)]



Tax Base: : Gross receipts derived from interest, commissions

and discounts from lending activities, income

from financial leasing, dividends, rentals, on

property and profit from exchange or sale of

property, insurance premium of the preceding

calendar year


8.7 On peddlers [Sec 143(g)]





Remarks : None

8.8 On any other business not previously enumerated[Sec 143(h)]


Maximum Tax Rate : 2.0% 3.0%


year

Remarks : - The tax rate can be a percentage tax or a

graduated tax.

- No tax for newly started business.

b. Land-Based Taxes

1. Real Property Tax (Sec 232), (Sec 233), (Sec 271)

Taxing Authority : Province City Municipality of Pateros

Maximum Tax Rate : 1% 2% 2%

Sharing : In case of Province:

Province – 35%

Municipality – 40%

Barangays – 25%

In case of City

City - 70%

Barangay - 30%

- 50% shall accrue to barangay where the

property is located

- 50% shall accrue equally to all barangays

In case of Municipality of Pateros

MMA - 35%

Pateros - 35%

Barangays - 30%

- 50% shall accrue to barangay where the

property is located

- 50% shall accrue equally to all barangays

a. Tax Base: : Assessed value of the property. Based on the appraisal and

assessment made by the local assessor

b. Remarks :

2. Additional Levy on Real Property for the Special Educational Fund

(SEF) (Sec 235), (Sec 271)



Sharing : In case of Province

Provincial School Board - 50%

Municipal School Board - 50%


In case of City

City School Board - 100%

Tax Base: : Assessed value of the property. Based on the appraisal and


Remarks : The SEF is fixed uniform rate of 1% of the assessed value

of the real property. The levy is in addition to, and collected

at the same time as, the basic real property tax

3. Additional Ad Valorem Tax on Idle Lands (Sec 236), (Sec 273)



Sharing : Province - 100%

City - 100%

Municipality of Pateros

MMA - 50%

Pateros - 50%

a. Tax Base: : Assessed value of the property. Based on the appraisal and


b. Remarks : The proceeds from the collection of idle land tax accrue to

the LGU imposing such tax. However, there is no

prohibition for the local sanggunian of the LGU imposing

such tax to enact an ordinance sharing the proceeds to its

component LGUs.

4. Special Levy by Local Government Units (Sec 240, 241, 242, 243, 244,

245)

Taxing Authority : Province City Municipalities

Maximum Tax Rate : Pro-rated Pro-rated Pro-rated

Tax Base: : Only a maximum 60% of the project cost shall be imposed

and collected from all lands that benefitted from the public

works projects or improvements funded by the LGU. The

project cost includes improvement and acquisition of land if

any.

Collection Period : Between five (5) to ten (10) years only

Sharing/Remarks : An ordinance imposing this tax can only be enacted upon

determination of the cost of the project, location, number of

annual installments, etc.

5. Socialized Housing Tax (Sec 43, RA 7279), (LFC 1-97)

Taxing Authority : City Municipality

Maximum Tax Rate : 0.05% 0.05%


Tax Base: : Assessed value of land in urban areas in excess of fifty

thousand pesos (Php50,000.00)

Remarks : This tax can be imposed by all cities regardless of their

population density and by municipalities with a population

density of at least five hundred (500) persons per square

kilometer.

c. Other Taxes on Business

i. Tax on Mobile Traders



Tax Base: : Gross sales/receipts

Remarks : The tax rate can be a percentage tax or a graduated tax.

A mobile trader is a person who travels from place to place

and sells goods and offers to deliver said goods using a

vehicle such as rolling stores, portable stores, among others.

ii. Tax on Operators of Public Utility Vehicles



Tax Base: : Number of vehicles

Remarks : Transportation contractors can still be subject to the

business tax if imposed on bases other than gross receipts,

i.e. type of vehicle, number of vehicles, capacity, etc.

This imposition is deemed valid on transport companies

maintaining terminals or booking offices in the LGU

concerned.

iii. Tax on Ambulant and Itinerant Amusement Operations


Maximum Tax Rate :

Tax Base: :

Remarks :

iv. Tax on Mining Operations


Maximum Tax Rate : 3% 1

Sec 143(a) rates 2

2% 1

Sec 143 (a) rates 2

Tax Base: : Gross receipts for the preceding year

Remarks : 1 If mining companies exclusively operate for the extraction


of metallic or non-metallic resources, the maximum rate

is 2% of gross receipts pursuant to Sec 143 of the LGC.

2 If mining companies’ operations include the processing

of extracted minerals to finished products, the tax shall be

based on gross receipts pursuant to Sec 143(a) of the

LGC as imposed under the LGU Revenue Ordinance.

Further, Mayor’s Permit and other regulatory fees shall

be collected before the start of the mining operation of a

mining company pursuant to Secs 147 and 151 of the

LGC and as implemented under a duly enacted revenue

code/ordinance of the LGU concerned.

v. Tax on Forest Concessions and Forest Products



Tax Base: : Gross receipts for the preceding year

Remarks : Forest products mean timber, pulp wood/chip wood,

firewood, fuel wood and minor forest products such as

bark, tree tops, resins, gum, wood, oil, honey, beeswax,

nipa, rattan or other forest growths like grass shrub and

flowering plants. If the above-mentioned forest products

are sold by marginal farmers, then they are exempt from

business tax.

d. Permit and Regulatory Fees

Permit and regulatory fees are reasonable charges made by law or

ordinance for the regulation or inspection of business or activities. The following

are the essential characteristics of permit and regulatory fees:

- Fees and charges should be commensurate with the cost of regulation,

inspection and licensing. (Sec 147)

- Fees and charges shall be commensurate to the cost of issuing the license

or permit fee and the expenses incurred in the conduct of the necessary

inspection or surveillance (Art 233 of IRR)

- No such fee or charge shall be based on capital investment or gross sales

or receipts of the person or business. (Art 233 of IRR)

- Barangay clearances and certifications shall not exceed the amount of

regulatory fees imposed by the municipality/city concerned


1. Mayors’ Permit Fee on Business

Legal bases : Sec 147, Sec 458(3)(ii), Sec 447(3)(ii), Sec 458(4)(v), Sec

447(4)(v)

Remarks : The use of the Philippine business classification set by DTI,

for establishing the size and extent of business operations

for purposes of fixing and rationalizing the fees for Mayor’s

Permit is an acceptable practice. This scheme would abide

by the limitation that no regulatory fee shall be based on

capital investment or gross sales or receipts as provided in

Article 233 of the IRR. This will also provide a convenient

measure for determining the commensurate cost of issuing

the license and the expenses incurred in the conduct of the

necessary inspection or surveillance in the performance of

LGUs’ regulatory function

A higher permit fee maybe imposed for businesses trading

liquor, wine, distilled spirits, tobacco and other “sin goods”

A barangay has no authority to regulate business activity.

The role of the barangay is to issue a barangay clearance for

the application and renewal of business license.

2. Fees for Sealing and Licensing of Weights and Measures

Legal bases : Sec 148, Sec 458(2)(xv), Sec 447(2)(xv), R.A. 7394

Remarks : R.A. 7394 provides for a stiffer penalty of five (5) years

imprisonment for violators.

3. Building Permit Fee

Legal bases : Sec 458(2)(ix), Sec 447(2)(ix)

Remarks : Revenue measures imposing building permit fees should

adopt the revised rates of building permit fees prescribed by

the Department of Public Works and Highways pursuant to

the National Building code.

4. Permit Fee for Zoning/Locational Clearance


Remarks : Adopt the updated rates prescribed by HLURB for

uniformity among LGUs

5. Subdivision Plan Processing Fee

Legal bases : Sec 458(2)( x), Sec 447(2)(x)

Remarks : Adopt the updated rates prescribed by HLURB for


uniformity among LGUs

6. Permit Fees for Tricycle Operation

Legal bases : Sec 458(3)(vi), Sec 447(3)(vi), Sec 457(5)(vi), Sec

447(5)(vi)

Remarks : Establish a minimum standard size, head room and seating

capacity of the sidecars for the convenience and safety of

the riding and paying public

7. Permit Fee for Pedaled Tricycle (Sec )

Legal bases : Sec 458(5)(vi), Sec 447(5)(vi)

Remarks : While this is to be regulated by cities and municipalities, it

is better to assigned this responsibility to the barangays.

8. Permit Fee for Cockpits Owners/Operators/Licensees/Promoters and

Cockpit Personnel (Sec )

Legal bases : Sec 458(3)(v), Sec 447(3)(v), PD 449, PD 1802

Remarks : Even if the regulation of this activity has already been

devolved to the LGUs, provisions of PD 449 (Cockfighting

Law of 1974 and PD 1802 (Creating the Philippine

Gamefowl Commission) and other laws shall apply to all

matters regarding the operation of cockpits and holding of

cockfights.

9. Special Permit Fee for Cockfighting (Sec )

Legal bases : Sec 458(3)(v), Sec 447(3)(v), PD 449, PD 1802

Remarks : Even if the regulation of this activity has already been

devolved to the LGUs, provisions of PD 449 (Cockfighting

Law of 1974 and PD 1802 (Creating the Philippine

Gamefowl Commission) and other laws shall apply to all

matters regarding the operation of cockpits and holding of

cockfights.

10. Permit Fee on Occupation or Calling Not Requiring Government

Examination (Sec )

Legal bases : Sec 458(3)(ii), Sec 447(3)(ii)

Remarks : Professionals who are subject to the Professional Tax

pursuant to Sec 139 of the LGC and government employees

are exempted from payment of this fee.

Workers or employees whether working on temporary or

permanent, resident or non-resident are required to secure

this permit


11. Registration and Transfer Fees on Large Cattle (Sec )

Legal bases : Sec 458(4)(viii), Sec 447(4)(viii)

Remarks : The fee is exclusive of the face value of the certificate of

registration

12. Fees on Impounding of Stray Animals (Sec )


Remarks : In imposing this fee, the LGU should have the facilities to

house impounded animals as well as the caretaker who will

tend to the needs of the animals

Sometimes this regulation and imposition of fee is better

delegated to the barangays.

13. Cart or Sledge Registration Fee (Sec )


Remarks : The regulation of this activity and imposition of fee is better

left to the barangay

14. Permit Fee on Caretela or Calesa (Sec )


Remarks : The regulation of this activity and imposition of fee is better

left to the barangay

15. Permit Fee for Agricultural Machinery and Other Heavy Equipment

(Sec )

Legal bases : Sec 458(5)(v), Sec 447 (5)(v)

Remarks : This fee is imposed for each agricultural and heavy

equipment rented out in the LGU

16. Permit and Inspection Fee on Machineries and Engines (Sec )

Legal bases : Sec 458(4)(i)(ii), Sec 447(4)(i)(ii)

Remarks : This fee is imposed to prevent or abate any nuisance and

maintain sanitary condition.

17. Permit Fee for the Storage of Flammable and Combustible Materials


Remarks : For public welfare and safety, no person shall keep at his

place of business any flammable, combustible or explosive

substances without first securing a permit.


Are gasoline station and depot exempted from this

imposition?

18. Permit Fee for Temporary Use of Roads, Streets, Sidewalks, Alleys,

Patios, Plazas and Playgrounds

Legal bases : Sec 457(5)(v), Sec 447(5)(v)

Remarks : Roads, streets, sidewalks, alleys, patios, public plazas and

playgrounds are for public use. Therefore, any person that

willl temporarily use and/or occupy such public facilities for

whatever purpose shall first secure a mayor’s permit and

pay the corresponding fee.

19. Permit Fee for Excavation


Remarks : It is appropriate to include a provision that will require a

cash deposit of more than the cost of the restoration from

the contractor who will undertake the excavation. Such

provision will ensure that the portion affected by the

excavation will be restored to its original state.

20. Permit Fee on Circus and Other Parades


Remarks : To ensure public order and welfare

21. Permit Fee for the Conduct of Group Activities (Sec )


Remarks : To ensure public order and welfare

22. Permit Fee on Film-Making (Sec )

Legal bases :

Remarks :

e. Service Fee

Service fees are collected for services rendered or for conveniences

furnished by the LGU. Such fee amount is commensurate to the cost of providing

the service. The following are the common service fees imposed by LGUs:

1. Secretary’s Fee.

Fees collected for requesting copies of official records and documents

from the office of the LGU.


2. Local Civil Registry Fees.

Fees collected for services rendered by the civil registrar office of the

LGU.

3. Police Clearance Fee.

Fees paid for each police clearance certificate obtained from the

station commander of the Philippine National Police located in the

LGU.

4. Sanitary Inspection Fee.

Fee collected from each business establishment or house for rent in

the LGU for the purpose of enforcing sanitary rules and regulations

5. Service Fees for Health Examination.

Fee collected from any person who is given an examination by the

LGU health officer or his authorized representative.

6. Service Fee for Garbage Collection.

Annual fee collected for hauling of garbage from the following:

a. Owner, manager or operators of establishment located in the LGU.

Usually paid during application or renewal of business licenses.

b. Owner of residential properties. Fees are collected during payment

of real property tax.

7. Dog Vaccination Fee.

Fees collected from every dog owner whose dog is vaccinated within

the territorial jurisdiction of the LGU

f. Charges

Impositions for the operation of public enterprises in connection with

the government’s exercise of its proprietary functions

1. Fishery Rentals, Fees and Charges

Legal bases : Sec 458(2)(xi), Sec 447(2)(xi)


Remarks : No rental fee, charge or any imposition whatsoever shall be

collected from marginal fishermen.

Marginal fisherman refers to an individual engaged in

subsistence fishing which shall be limited to the sale, barter

or exchange or marine products produced by himself and his

immediate family, and whose annual net income from

fishing does not exceed Php50,000.00 or the poverty line

established by NEDA for the particular region or locality.

2. Rentals of Personal and Real Properties Owned by the LGU (Sec )

Legal bases : Sec 458(2)(v), Sec 447(2)(v), Sec 458(3)(iii), Sec 447(3)(iii)

Remarks : Rental rates of the properties shall be based on full cost

pricing in order to generate revenues and have enough funds

for the maintenance of such properties.

3. Charges for Parking (Sec )

Legal bases : Sec 458(5)(v), Sec 447(5)(v), Sec 458(5)(vi), Sec 447(5)(vi)

Remarks : To regulate traffic and the use of streets

4. Hospital Service Fee (Sec )

Legal bases : Sec 153

Remarks : LGUs may impose reasonable service fees and charges for

services rendered

5. Charges for Use of Waterworks System (Sec )

Legal bases : Sec 154, Sec 458(5)(vii), Sec 447(5)(vii)

Remarks : LGUs may fix rates and impose charges for the operation of

public utilities owned, operated and maintained by them

within their jurisdiction

6. Cemetery Charges (Sec )


Remarks : To regulate the operation and maintenance of the burial or

cremation of the dead

7. Market Fees and Charges (Sec )

Legal bases : Sec 458(5)(ii), Sec 447(5)(ii), Sec 458(5)(iv), Sec


447(5)(iv)

Remarks : LGUs may fix rates and impose charges and fees for

the use of public markets constructed and operated by

the LGUs in their exercise of proprietary powers

8. Slaughterhouse Fees (Sec )


Remarks : LGUs may impose fees for the use of slaughterhouses or

animal corrals constructed and operated by LGUs

9. Toll Fees or Charges (Sec )

Legal bases : Sec 155

Remarks : The LGU can only collect toll fees or charges on the for the

use of any public road, pier or wharf, waterway, bridge,

ferry or telecommunication system if such facilities are

funded and constructed by the LGU

Action taken by the reviewing authority

This Guide is intended for local officials tasked to review local revenue codes. The Guide uses

the Model City Revenue Code which includes provincial and municipal impositions as working

reference.

AREAS FOR REVIEW OF THE LOCAL REVENUE CODE

In general, a higher level Sanggunian shall review the following with respect to the

Revenue Ordinance submitted to it:

consistency with constitution and national laws

Scope of Taxing and regulatory power (indicate relevant Sections of the Code)

Rate/frequency of increase

Compliance with mandatory procedures

Consistency with constitution and national laws

xxxxxxxxxxxxxxxxxxxxxx

Scope of Taxing and regulatory power including rate/frequency of increase (indicate

relevant Sections of the Code)

CHAPTER I. GENERAL PROVISIONS

Article A. Short Title and Scope

Article B. Construction of Provisions

Article C. Definition of Terms

FOCUS: Chapter I, General Provisions. Articles A, B and C are provisions common to revenue

codes/ordinances. They are generally accepted in the form and style presented.

CHAPTER II. City Taxes


ARTICLE A. Real Property Taxes

ARTICLE B. Tax on Idle Lands

ARTICLE C. Special Levy on Lands

ARTICLE D. Socialized Housing Tax

FOCUS: Land-based taxes are easily explained. Except for special levy, the taxes are based on

assessed values of real properties.

The rates of levy are:

Basic Tax (under Article A. RPT)

o Provinces – not exceeding one percent (1%) of the assessed value of the

real property

o Cities and municipalities in the Metropolitan Manila Area – not exceeding

two percent (2%) of the assessed value of the real property

Additional Levy for the Special Education Fund – For provinces, cities and

municipalities within the Metropolitan Manila Area, a fixed uniform rate of one

percent (1%) of the assessed value of the real property. The levy is in addition

to, and collected at the same time as, the basic real property tax.

Idle Land Tax – A province, city or municipality within the Metropolitan Manila

Area: not exceeding five percent (5%) of the assessed value of the real property

which shall be in addition to the basic real property tax.

Special Levy on Lands – LGUs may impose a special levy on lands especially

benefitted by public works or improvements funded by the LGU. The special

levy shall not exceed sixty percent (60%) of the cost of such projects and

improvements, including the cost of acquiring land and such other real property in

connection therewith.

o Sec. 240 of LGC provides that: “A province, city or municipality may

impose a special levy on the lands comprised within its territorial

jurisdiction especially benefited by public works projects or improvements

funded by the LGU concerned: provided, however, that the special levy

shall not exceed sixty (60) percent of the actual cost of such projects and

improvements, including the costs of acquiring land and such other real

property in connection therewith: provided, further, that the special levy

shall not apply to lands exempt from basic real property tax and the

remainder of the land portions of which have been donated to the LGU

concerned for the construction of such projects or improvements.”

o Sec. 241 of LGC stipulates that: “A tax ordinance imposing a special levy

shall describe with reasonable accuracy the nature, extent, and location of

the public works projects or improvements to be undertaken, state the

estimated cost thereof, specify the metes and bounds by monuments and

lines and the number of annual installment for the payment of the special

levy which in no case shall be less than five (5) nor more than ten (10)

years. The sanggunian concerned shall not be obliged, in the

apportionment and computation of the special levy, to establish a uniform

percentage of all lands subject to the payment of the tax for the entire

district, but it may fix different rates for different parts or sections thereof,

depending on whether such land is more or less benefited by the proposed

work.”


o Sec. 242 of the LGC states that: “Before the enactment of an ordinance

imposing a special levy, the sanggunian concerned shall conduct a public

hearing thereon; notify in writing the owners of the real property to be

affected or the persons having legal interest therein as to the date and

place thereof and afford the latter the opportunity to express their positions

or objections relative to the proposed ordinance.”

o Sec. 243 of the LGC provides that: “The special levy authorized herein

shall be apportioned, computed and assessed according to the assessed

valuation of the lands affected as shown by the books of the assessor

concerned, or its current assessed value as fixed by said assessor of the

property does not appear of record in his books. Upon the effectivity of

the ordinance imposing special levy, the assessor concerned shall

forthwith proceed to determine the annual amount of special levy assessed

against each parcel of land comprised within the area especially benefited

and shall send to each landowner a written notice thereof by mail, personal

service or publication in appropriate cases.”

o Sec. 244 of the LGC stipulates that: “Any owner of real property affected

by a special levy or any person having a legal interest therein may, upon

receipt of the written notice of assessment of the special levy, avail of the

remedies provided for in Chapter 3, Title Two, Book II of the LGC.”

o Sec. 245 of the LGC states that: “The special levy shall accrue on the first

day of the quarter next following the effectivity of the ordinance imposing

such levy.”

The Socialized Housing Tax – LGUs are authorized to impose an additional one-half percent

(0.5%) tax on assessed value of all lands in urban areas in excess of fifty thousand pesos

(Php50,000.00). (Republic Act 7279)

“Urban areas” refers to all cities regardless of their population density and to municipalities

with a population of at least five hundred per square kilometer.

ARTICLE E. Tax on Transfer of Real Property Ownership (section 135)*

ARTICLE F. Tax on Printing and Publication (section 136)**

ARTICLE G. Franchise Tax (section 137)**

ARTICLE H. Professional Tax***

ARTICLE I. Amusement Tax on Admission (RA 9640)***

ARTICLE J. Annual Fixed Tax on Delivery Vans (dealer, manufacturer, wholesaler

*the fair market value under Section 135 refers to the current approved schedule of market

values used by the assessor.

** provision on newly started business applies only to tax on printing and publication, and

franchise

***uniform rate for provinces and cities

FOCUS: Taxes under Articles E, F, G, H, I and J impositions allocated to provinces which cities

may also impose at rates not exceeding fifty percent (50%) of the amounts allowed for the

province, except the rates for professional and amusement taxes.

The tax on sand, gravel and other quarry resources is not included in the Model as it is the

province that has the exclusive authority to impose such tax. It is only in the case of highly


urbanized city, where the City Mayor issues the permit to extract sand, gravel and other quarry

resources.

ARTICLE L. Graduated Tax on Business

FOCUS: Business taxes under Sections 143 of the Local Government Code (LGC), viz:

a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and

compounders of liquors, distilled spirits and wines

b) On wholesalers, distributors or dealers in any article of commerce of whatever kind or

nature

c) On exporters and on manufacturers, millers, producers, wholesalers, distributors, or

dealers of essential commodities

d) On retailers

e) On contractors and other independent contractors*

f) On banks and other financial institutions

g) On peddlers engaged in the sale of any merchandise or article of commerce

h) On any business, not otherwise specified in the foregoing enumeration

Items a), b) c) and e) are provided with graduated schedule of fixed taxes; while items d), f), g)

and h) are percentage taxes. These impositions are enumerated in Section 143. “(T)he

Sanggunian concerned may prescribe a schedule of graduated tax rates for item h) but in no case

to exceed the rates prescribed (t)herein.”

A distinguishing characteristic of this set of taxes is that the tax base (except for peddlers) is

gross sales or receipts for the preceding calendar year.

Tax rates can be increased by not more than 10% once every 5 years is provided by the Code

(Section 191).

* Definition of Contractor- expand the enumeration of contractors to include other businesses

providing services for a fee

ARTICLE M. Other Taxes on Business pursuant to Sections 186 and 143(h)

a) Tax on Mobile Traders – An annual tax of one percent (1%) on the gross receipts of any

person, who either for himself or commission, travels from place to place and sells goods

or offers to deliver the same, using a vehicle.

[Provinces were authorized under Presidential Decree 231 to impose taxes on peddlers engaged

in the sale of any merchandise or article of commerce within the province using trucks,

motorized bicycles, tricycles or other motorized vehicles. The tax on mobile traders is

impossable on peddlers using vehicles who sell or deliver goods within the city or municipality.]

b) Tax on Ambulant and Itinerant Amusement Operators – A fixed tax per day prescribed by

the Sanggunian.

c) Tax on Mining Operations (Department of Finance’s Local Finance Circular No. 2-09)

c.1 Mining companies which exclusively operate for the extraction of minerals, metallic

or non-metallic, the tax rate shall not exceed two percent (2%) of their gross receipts

pursuant to Section 143(h) of the LGC Imposed under the ordinance of the local

government unit (LGU) concerned.

c.2 Mining companies whose operations include the processing of extracted minerals to

finished products shall be taxed on their gross receipts pursuant to Section 143(a) of the

LGC imposed under the ordinance of the LGUs concerned.


c.3 Liability Pay to Real Property Tax – Any person, grantee or concessionaire who shall

undertake and execute mining operations (exploration, development and commercial utilization)

of certain mineral deposits existing within the mining area shall be subject/liable to real property

tax.

c.4 Payment of Mayor’s Permits and Other Regulatory Fees – Mayor’s permits and other

regulatory fees shall be collected before the start of the mining operation of a mining company

pursuant to Sections 147 and 151 of the LGC and as implemented under a duly-enacted revenue

code of the LGU concerned.]

d) Tax on Forest Concessions – An annual tax not exceeding two percent (2%) of the gross

receipts for the preceding year.

e) Tax on Newly-Started Business – A tax of one-twentieth (1/20) of one percent (1%) of the

capital investment. apply only to printing and publication, and franchise

FOCUS: Taxes under Article M are basically impositions under Section 186 of the LGC.

In discussing taxes based on gross sales/receipts, it might be helpful to mention in passing tools

for checking/validating taxpayers’ declarations, e.g., examination of the books of accounts and

pertinent records, obtaining/sharing information from other government agencies, obtaining

financial statements supporting income tax returns, use of the Presumptive Income Level, in

determining gross receipts of business. The assumption use must be understood by tax payer

A Sanggunian may grant tax exemption. A Municipal Mayor cannot, however, waive the

collection of inspection fees, since it is levied under the police power. (DILG Opinion No. 148-

1964)

The Rule of the Situs of the Tax also needs emphasis. It is observed that many are not aware

that:

1. “… businesses, maintain or operating branch or sales outlet … shall record the

sale in the branch or sales outlet making the sale or transaction, and the tax hereon

shall accrue and shall be paid to the municipality where such branch or sales

outlet is located.”

2. “Seventy percent (70%) of all sales recorded in the principal office shall be

taxable by the city or municipality where the factory, project office, plant or

plantation is located.”

Another mechanism that LGUs could avail of is the Presumptive Income Level Technique. The

methodology is simple but needs explanation and illustration.

CHAPTER III. PERMIT AND REGULATORY FEES

FOCUS: General Considerations

Regulatory fees are impositions in the exercise of the police power, the power to regulate

business and activities.

Fees shall be commensurate to the cost of regulation, inspection and licensing (Section

147, LGC)

Fees and charges shall be commensurate to the cost of issuing the license or permit fee

and the expenses incurred in the conduct of the necessary inspection or surveillance

(Article 233, Implementing Rules and Regulations)

No such fee or charge shall be based on capital investment or gross sales or receipts of

the person or business (Article 233, Implementing Rules and Regulations)


Barangay, clearances and certifications shall not exceed regulatory fees imposed by the

municipality/city concerned (Section 152 of the Code and Article 420 (c, d, e,..) of IRR

ARTICLE A. Mayor’s Permit Fee of Business

The Model suggests the use of the Philippine business classification set by DTI, for establishing

the size and extent of business operations for purposes of fixing and rationalizing the fees for

Mayor’s Permit. This scheme would abide by the prescription that no regulatory fee shall be

based on capital investment or gross sales or receipts as provided in Article 233 of the IRR. This

will also provide a convenient measure for determining the commensurate cost of issuing the

license and the expenses incurred in the conduct of the necessary inspection or surveillance in

the performance of LGUs’ regulatory function.


Enterprise Scale Asset Limit Work Force

Micro-Industries Php150,000 & below No specific

Cottage Industries Above Php150,000 to Php1.5 M Less than 10

Small Scale Industries Php1.5M to Php15M 10-99

Medium-Scale Industries Php15M to Php60M 100-199

Large-Scale Industries Above Php60M 200 or more

ARTICLE B. Fees for Sealing and Licensing of Weights and Measures

The provisions in the Local Revenue Codes should conform with the Consumer Act of 1992,

Republic Act 7394.

ARTICLE C. Building Permit Fees

The Local Revenue Codes should adopt the Revised Rates of Building Permit Fees prescribed by

the Department of Public Works and Highways pursuant to the National Building Code.

ARTICLE D. Permit Fee for Zonal/Locational Clearance (adopt updated HLURB Rates)

ARTICLE E. Permit Fee for Inspection and Verification of Subdivision (adopt updated HLURB

Rates)

Articles D and E are in pursuance of Sections 457 (2) (ix) and 457 (2) (x) for cities and Sections

447 (2) (ix) and 447 (2) (x) in the case of municipalities.

The following permit fees are imposed under the police power for regulation purposes:

ARTICLE F. Permit Fee for Tricycle Operation

Establish minimum standard size and seating capacity of Side Cars to ensure convenience and

safety of the riding public

ARTICLE G. Permit Fee for Pedaled Tricycle (barangay)

ARTICLE H. Permit Fee for Owners/Operators/Licensees/Promoters and Cockpit Personnel

ARTICLE I. Special Permit for Cockfights

ARTICLE J. Permit Fee for Occupation/Calling not Requiring Government Examination

ARTICLE K. Fees for Registration and Transfer of Large Cattle

ARTICLE L. Fees for Impounding Astray Animals (barangay)

ARTICLE M. Cart of Sledge Registration Fee (barangay)

ARTICLE N. Permit Fee on Caretela or Calesa (barangay)

ARTICLE O. Permit Fee for Agricultural Machinery and Other Heavy Equipment

ARTICLE P. Permit Fee for Inspection of Machineries and Engines

ARTICLE Q. Permit Fee for Storage of Flammable and Combustible Materials

ARTICLE R. Permit Fee for Temporary Use of Streets, Sidewalks, Alleys, Parks and

Playgrounds

ARTICLE S. Permit Fee for Excavations

ARTICLE T. Permit Fee for Circus and Other Parades

ARTICLE U. Permit Fee for Conduct of Group Activities

ARTICLE V. Permit Fee for Film Making


FOCUS:

1. Rationalizing rates

2. Preventing issuance of permits for illegal activities

3. Guarding against impositions in restraint of trade, e.g., “taxes, fees and charges and other

impositions upon goods carried into or out of, or passing through the territorial

jurisdiction of local government units in the guise of wharfage, tolls for bridges or

otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or

merchandise.” (Common Limitations) (Section 133 (e), LGC)

An LGU may impose a market entrance fee, but not a market outgoing fee. (DOF Opinion, April

15, 1993).

CHAPTER IV. SERVICE FEES

In general, fees are collected for the services of a public officer and/or for services provided by

the LGU.

ARTICLE A. Secretary’s/Certification’s Fees

ARTICLE B. Local Civil Registry Fees

ARTICLE C. Police Clearance Fees

ARTICLE D. Sanitary Inspection Fees

ARTICLE E. Service Fees for Health Examination

ARTICLE F. Garbage Collection Fees

ARTICLE G. Dog Vaccination Fees.

FOCUS:

1. Cost recovery

2. Pricing

CHAPTER V. CITY CHARGES

City charges are imposed in the exercise of the proprietary nature (as legal persons) of LGUs.

ARTICLE A. Fishery Rentals, Fees and Charges (Fishery Code)

ARTICLE B. Rentals of Personal and Real Properties Owned by the City

ARTICLE C. Charges for Parking

ARTICLE D. Hospital Charges

ARTICLE E. Waterworks System Charges

ARTICLE F. Cemetery Charges

ARTICLE G. Market Fees and Charges

ARTICLE H. Slaughterhouse and Corral Fees

ARTICLE I. Toll Fees or Charges

FOCUS:

1. Cost recovery

2. Pricing

CHAPTER VI. COMMUNITY TAX


CHAPTER VII. GENERAL ADMINISTRATIVE PROVISIONS

ARTICLE A. Collection and Accounting of City Taxes and Other Impositions

ARTICLE B. Civil Remedies for Collection of Revenues

ARTICLE C. Taxpayer’s Remedies

ARTICLE D. Miscellaneous Provisions

CHAPTER VIII. GENERAL PENAL PROVISIONS

CHAPTER IX. FINAL PROVISIONS

Rate and frequency of increase. Section 191 of the LGCode

Compliance with mandatory procedures (enhanced steps)

xxxxxxxxxxxxxxxxxxxxxxxxxxx

March 27, 2012

INPUT:

RA 7279 Socialized Housing Tax

Section 132 of LGC. LGU is the local taxing authority.

Include in the general opening statements the authority of city to impose franchise tax,

amusement tax. Rules of interpretation in in the IRR.

Get the issuance by DILG on tax codification process for possible inclusion

Agreement of the city/municipality on imposing charges. In case of garbage collections

by the city/municipality and barangays

Provide an explicit statement defining the use of the barangay clearance. Not for

operating a business but as a requirement for the city or municipality to start the

processing of renewal/registration of business.

Check on the e-commerce act on publication of revenue ordinances. No need for

publication if published on the web?

Steps in enacting a revenue ordinance. Publication for approved ordinances vs. Posting

for public hearing?

Issue on the 30days prescriptive period on the review. “No action taken”? To be issued

by DILG for clarification

Where can the sangguniang bayan refer the revenue measures they are reviewing?

Define legal action on the review of revenue measures.

See Sec 146 of LGC

Franchise

Cooperatives

Preparatory steps in review process

Documents

Guidelines on the Review of Local Revenue · PDF fileReview the Local Revenue Code (LRC) by Higher ... Professional Tax (Sec 139), ... 3.2 Codal Requirements in the Review of Local