Local Taxation

Question 1

What is the constitutional basis of local government taxation?

Answer 1

Section 5, Article X, 1987 Constitution

Each local government unit shall have the power to create its own sources of revenue 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 government

Question 2

What is local government?

Answer 2

It is described as a political subdivision of a national or state which is constituted by law and has substantial control of local affairs

Question 3

What are the nature and source of taxing pwoer of LGUs?

Answer 3

1. delegated legislative authority
2. revenue-raising power - all LGUs are granted general powers to levy taxes, fees and charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the LURC, as amended, or other applicable laws. The levy must not be unjust, excessive, oppressive, confiscatory or contrary to a declared national economic policy. (Sec 186, LGC)
3. police power of LGU
4. local tax ordinance (Sec 132, LGC)

Question 4

What are the requirement for passing of a local tax ordinance?

Answer 4

1. It shall be exercised by the Sanggunian through an appropriation ordinance and the usual approval process of an ordinance (Sec 53, 54 and 55 of the LGC)
2. Public hearing (Sec 187, LGC)
3. Publication in full in 3 consecutive days in a newspaper of local circulation or posted in at least 2 conspicuous and publicly accessible places (Sec 188, LGC)
4. distribution of copies to treasurers (Sec 189, LGC)

Question 5

What are the test/requisites for a valid ordinance?

Answer 5

1. must not contravene the Constitution or any statute
2. must not be unfair or oppressive
3. must not be partial or discriminatory
4. must not be prohibited, but mat regulate trade
5. must be general and consistent with public policy and
6. must not be reasonable (City of Batangas v Philippine Shell Petroleum Corporation, GR No. 195003, June 7, 2017)

Question 6

When does an ordinance take effect?

Answer 6

1. Secretary to the Sanggunian must post it not later than 5 days from approval
2. The text of the ordinance shall be disseminated and posted in Filipino or English and in the language or dialect understood by the majority of the people of the LGU, and the secretary to record such fact
3. ordinances with penal sanctions - published in a newspaper of general circulation within the province where the local legislative body belongs it shall be posted in 2 conspicuous places
4. take effect after 10 days from posting (bulletin board at the entrance of the LGU and in at least 2 other conspicuous places in the LGU concerned.

Question 7

What is the process of review of a tax ordinance?

Answer 7

1. within 3 days after its approval
2. municipal/component city - provincial sanggunian
3. barangay - municipality/City Sanggunian
4. 30 days review -
   review by province = declared invalid if ultra vires review by municipal/city - if inconsistent with the law, RETURN for adjustment, amendment or notification

no action within 30 days - deemed approved
Constitutionality - appeal to the Secretary of Justice

Question 8

What is the process of appeal to the secretary of justice?

Answer 8

1. must be filed within 30 days from effectivity of ordinance
2. justice secretary must render decision within 60 days
3. within 30 days from adverse decision or lapse of judgement, an appropriate proceeding may be filed with a court of competent jurisdiction

Note (ordinance is not suspended by the appeal to the SOJ)

Question 9

What are the limitations to the authority of he LGUs to adjust local tax rates?

Answer 9

1. Frequency - not oftener than once every five years
2. amount - the adjustment should not exceed 10% of the rates fixed under the LGC

Question 10

LGUs authority to grants and withdraw local tax exemption privileges

Answer 10

Sec 192 of the LGC
- Local Government Units may, through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem necessary

Question 11

Residual taxing power

Answer 11

Section 186 of the LGC

Question 12

What are imposable penalties under the tax ordinances?

Answer 12

1. surcharges- 25% of the TFC ‘
2. Interest- not exceeding 2% per month unpaid TFC + surcharges until fully paid but in no case shall the total exceed 36 months
3. Penalties - fine 1,000 - 5,000 or imprisonment 1 month to 6 months
   Cities, municipalities, provinces
4. Penalties - not less than 100 - 1000

Question 13

Scope of taxing powers of the provinces

Answer 13

1. Tax on Transfer of Real Property Ownership.
2. Tax on Business of Printing and Publication.
3. Franchise Tax
4. Tax on Sand, Gravel and Other Quarry Resources
5. Professional Tax
6. Amusement Tax
7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers, Wholesalers of, Dealers, or Retailers in, Certain Products.

Question 14

What are the score of taxing power of the municipalities?

Answer 14

1. Tax and Business
2. Fees and Charges
   - Fees for Sealing and Licensing of Weights and Measures
3. Fishery Rentals, Fees and Charges.

Question 15

What are the common limitations on the taxing powers of Local Government units?

Answer 15

1. Income tax, except when levied on banks and other financial institutions;
2. Documentary stamp tax;
3. Taxes on estates, inheritance, gifts, legacies and other acquisitions
   mortis causa, except as otherwise provided herein;
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;
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;
6. Taxes, fees, or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;
   (38) 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;
   (39) Excise taxes on articles enumerated under the National Internal
   Revenue Code, as amended, and taxes, fees or charges on petroleum products;
   (40) Percentage or value added tax (VAT) on sales, barters or
   exchanges or similar transactions on goods or services except as otherwise provided herein;
   (41) 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 this Code;
   (42) Taxes on premium paid by way or reinsurance or retrocession; (43) 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;

(44) Taxes, fees or charges on Philippine products actually exported,
except as otherwise provided herein;
(45) 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
(46) Taxes, fees or charges, of any kind on the National Government, its
agencies and instrumentalities, and local government units.

Question 16

What is an estate tax?

Answer 16

Tax levied on the transmission of properties from a decedent to his heirs.it is the privilege to transmit property at death and on certain transfers which are made the equivalent of testamentary dispositions by the statute.

Question 17

What is the justification for payment of estate tax?

Answer 17

① benefits received theory
② privilege theory or State partnership theory
③ ability to pay theory

Question 18

Excise tax is a duty or impost levied upon:

Answer 18

① goods manufactured or produced in the Philippines for domestic sale or consumption or for any disposition;
② to things imported; and
③ services performed in the Philippines

Question 19

In 2018, city x amended its revenue code to include a new provision imposing a tax on every sale of merchandise by a wholesaler based on the total selling price of goods, inclusive of vat. The ABC Corp, a wholesaler operating within the city, challenged the new provision based on the ff contentions: 1 since the tax being imposed is akin to vat, it is beyond the power of city x to levy the same.

Answer 19

ABC cap is incorrect. Under the lac, L6Us are empowered to enact ordinances that will aid in their revenue generation, which is in umsname with the principle of the fiscal autonomy of LGU although the tax t be imposed is akin to vat, the Len may never theless impose such local business tax.

Question 20

What is the destination principles cross-border doctrine?

Answer 20

The power of state to tax does not extend to territories beyond the borders of the state

Question 21

What is a percentage tax?

Answer 21

A national tax measured bya certain percentage of gross selling price or gross value in money of goods sold, bartered, or imported or of the gross receipts or earnings derived by any person engaged in the sale of services

Question 22

What is vat?

Answer 22

Vat is levied on the sale, barter, exchange, or lease
Of goods or properties

Question 23

What taxes may be imposed by the provinces?

Answer 23

Section 135 of the LGC. Tax on Transfer of Real Property Ownership. - (a) The province may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real property at the rate of not more than fifty percent (50%) of one percent (1%)

SECTION 136. Tax on Business of Printing and Publication.

SECTION 137. Franchise Tax

SECTION 138. Tax on Sand, Gravel and Other Quarry Resources

SECTION 139. Professional Tax

SECTION 140. Amusement Tax -

SECTION 141. Annual Fixed Tax For Every Delivery Truck or Van of
Manufacturers or Producers, Wholesalers of, Dealers, or Retailers in,
Certain Products. -

Question 24

What taxes may be imposed by the Municipalities?

Answer 24

SECTION 143. Tax and Business -
SECTION 148. Fees for Sealing and Licensing of Weights and Measures.
SECTION 149. Fishery Rentals, Fees and Charges.

Question 25

What taxes may be imposed by the cities?

Question 26

What is the tax period for collection of local taxes?

Answer 26

SECTION 165. Tax Period and Manner of Payment. - Unless otherwise
provided in this Code, the tax period of all local taxes, fees and charges
shall be the calendar year. Such taxes, fees and charges may be paid in
quarterly installments.