Types of Local Income and Revenues Collected by Local Government Units

8/3/2019 Types of Local Income and Revenues Collected by Local Government Units

1/13

TYPES OF LOCAL INCOME AND REVENUES COLLECTED BY LOCAL GOVERNMENTUNITS

1. Definition of Income. Income refers to all revenues and receipts collected or receivedforming the gross accretions of funds of the local government unit. (Sec. 306 (i), LGC)

2. Power to Create Sources of Revenue. Each local government unit shall exercise itspower to create its own sources of revenue and to levy taxes, fees, and charges subject tothe provisions of the Local Government Code of 1991, consistent with the basic policy oflocal autonomy. Such taxes, fees, and charges shall accrue exclusively to the localgovernment units. (Sec. 129, LGC)

Local government units do not have the inherent power to tax (Basco vs. PAGCOR, 197SCRA 52), except such power as may be delegated to them by law (p. 401, Tax Law and

Jurisprudence, Second Edition, Vitug and Acosta), that is, the 1987 Constitution through R.A.No. 7160 or the Local Government Code of 1991.

Thus, the power to impose a tax, fee or charge or to generate revenue under the LocalGovernment Code of 1991 shall be exercised by the sanggunian of the local government

unit concerned through an appropriate ordinance. (Sec. 132, LGC)

3. Fundamental Principles. The following fundamental principles shall govern theexercise of the taxing and other revenue-raising powers of local government units:

a) Taxation shall be uniform in each local government unit. (Sec. 130 (a), LGC)

Equality and uniformity in local taxation means that all taxable articles or kinds ofproperty of the same class shall be taxed at the same rate within the territorial

jurisdiction of the taxing authority or local government unit and not necessarily incomparison with other units although belonging to the same political subdivision. Infine, uniformity is required only within the geographical limitation of the taxingauthority21 (p. 416, Tax Law and Jurisprudence, Second Edition, Vitug and Acosta).

Thus, if the tax is a city tax, it must be uniform throughout the city; if the tax is amunicipal tax, it must be uniform throughout the municipality (Notes on Sec. 130,LGC, p. 18, Philippine Law on Local Government Taxation, Annotated, 2000 Edition,Ursal).The uniformity required is only within the territorial jurisdiction of a province,a city, a municipality or a barangay(Art. 219 (a), IRR, implementing Sec. 130 (a),LGC).

A tax is considered uniform when it operates with the same force and effect in everyplace where the subject may be found. Where the statute or ordinance appliesequally to all persons, firms, and corporations placed in similar situations, there is noinfringement of the rule on equality. Inequalities which result from the singling out ofone particular class, in respect to other classes, for taxation and exemption infringeno constitutional limitation (p. 416, Tax Law and Jurisprudence, Second Edition, Vitug

and Acosta).

Uniformity is not equivalent to equality in taxation (p. 18, Philippine Law on LocalGovernment taxation, Annotated, 2000 Edition, Ursal).The Supreme Court has ruled,It is not true that the uniformity essential to the valid exercise of the power oftaxation does not require identity or equality under all circumstances, or negate theauthority to classify the object of taxation. The classification made in the exercise of

21Punzalan vs. City of Manila, 95 Phil. 46

1


2/13

this authority, to be valid, must, however, be reasonable and this requirement is notdeemed satisfied unless:

1) It is based upon substantial distinctions which make the real differences;2) These are germane to the purpose of the legislation or ordinance;3) The classification applies, not only to present conditions, but , also, to future

conditions substantially identical to those of the present; and4) The classification applies equally to all those who belong to the same class.

These conditions are not fully met by the ordinance in question. Indeed, if its purposewere merely to levy a burden upon the sale of soft drinks or carbonated beverages,there is no reason why sales thereof by dealers other than agents or consignees ofproducers or merchants established outside the City of Butuan should be exemptfrom then tax.22 (p. 417, Tax Law and Jurisprudence, Second Edition, Vitug and

Acosta).

b) Taxes, fees, charges and other impositions shall:

1) Be equitable and based as far as possible on the taxpayers ability to

pay Sec. 130 (b) (1), LGC). Equitability is characterized by equity. It means beingfair to all concerned and that it is without prejudice, favour or vigor entailingundue hardship. It is the word fairness that best describe equitable. If the tax isexcessive, it is not fair. When the tax discriminates, aside from violating the ruleof uniformity, it is not fair. If the tax is in restraint of trade (that is, it discouragesinvestors), it is not fair.

The taxpayers ability to pay must be considered. It cannot be absolute or itcannot be based in a hard and fast rule. Ability to pay is more equated with theprogressive system of taxation, that is, the more you earn, the more tax you pay.

Taxation must be based, as far as practicable, on ability to pay. (p. 209, LocalGovernment Code Annotated, Nolledo)

The question as to when a tax is said to be equitable, is related to thedistribution of the tax burden itself. Thus, the most equitable tax system is thatwhich is most closely in conformity with the standards of equity in the distributionof real income. (p. 19, Philippine Law on Local Government Taxation, Annotated,2000 Edition, Ursal)

2) Be levied and collected only for public purposes (Sec. 130, (b) (2), LGC).Public purpose requires that the proceeds of taxation are used to support theexistence of the local government or the pursuit of its governmental objectives(p. 419, Tax Law and Jurisprudence, Second Edition, Vitug and Acosta). The taxshould be designed to support the services of the Government and therecognized public needs. The tax must affect the area as a community ratherthan as individual (LGC Annotated by Nolledo).

3) Not be unjust, excessive, oppressive, or confiscatory (Sec. 130, (b), (3), LGC).Thetax must be reasonable in order not to be unjust or oppressive (LGC Annotated byNolledo).

4) Not be contrary to law, public policy, national economic policy, or in restraint oftrade (Sec. 130 (b) (4), LGC). A tax is contrary to law if it is a tax beyond theauthority of an LGU to impose (LGC Annotated by Nolledo). Thus, a local

22Pepsi Cola Bottling Co. vs. City of Butuan, 24 SCRA 789

2


3/13

ordinance, to be valid, must not contravene the Constitution or any statute; notbe unfair or oppressive; not be partial or discriminatory; not prohibit but mayregulate trade; be general and consistent with public policy; and notunreasonable (US vs. Abendan, 24 Phil. 165). A tax must not be restraint of tradein that it must not deter the free flow of commerce in the country, and causeconsiderable increase in the price of commodities, to the prejudice of the

consuming public (Sec 133(e), Annotated, Local Government Taxation, Ursal).

c) The collection of local taxes, fees, charges and other impositions shall in no case belet to any private person (Sec. 130, (c), LGC). The Supreme Court has said thatentrusting the collection of the fees to a private person does not destroy the publicpurpose of the ordinance, stating that so long as the purpose is public, it does notmatter whether the agency through which the money is dispensed is public orprivate. (Bagatsing vs. Ramirez, L-41631, Dec. 17, 1976)

d) The revenue collected pursuant to the provisions of the Local Government Code shallinure solely to the benefit of, and be subject to disposition by the local governmentunit levying the tax, fee, charge or other imposition unless otherwise specificallyprovided in the same Code (Sec. 130 (d), LGC). In no case can the National

Government share in local taxes even if provided by law. The Constitution providesthat local taxes, fees and charges shall accrue exclusively to the local governments.(Sec. 5, Art. X, 1987 Constitution).

e) Each local government unit shall, as far as practicable, evolve a progressive systemof taxation. (Sec. 130 (e), LGC). A progressive tax is one where the tax rate increasesas the tax base increases. In the case of tax on business, manufacturers pay moretaxes per annum as their gross sales or receipts for the preceding year increases.(Sec. 130 (h), Annotated, Local Government Taxation, Ursal).

3


4/13

4. Valid Revenue Ordinance

A. For any revenue ordinance to be valid, it must conform with the provisions of Chapter5, Title 1, Book II of R.A. No. 7160 or the Local Government Code of 1991, whichdefine both substantive and procedural requirements therefor.

B. Procedural Requirements for a Valid Revenue Ordinance. The conduct ofpublic hearings shall be governed by the following procedure:

1) Pre-publication or Posting. Within ten (10) days from the filing of theproposed tax ordinance or revenue measure, the same shall first be published forthree (3) consecutive days in a newspaper of local circulation or shall be postedsimultaneously in at least four (4) conspicuous places within the territorial

jurisdiction of the LGU concerned. (art. 276 (b) (1), IRR, implementing Sec. 188,LGC)

Conspicuous places include municipal halls, plazas, barangay halls, publicmarkets, churches and other public places where the constituents converge.

2) Written Notices to Interested or Affected Parties. In addition to theforegoing requirement on publication or posting, the sanggunian concerned shallcause the sending of written notices of the proposed ordinance, enclosing a copythereof, to the interested or affected parties operating or doing business withinthe territorial jurisdiction of the LGU concerned. (Art. 276 (b) (2), IRR,implementing Sec. 188, LGC)

Information must reach those that shall be directly affected by the imposition. Forexample, when the measure is on the business tax, the LGU may invite thebusiness community in the public hearing. To ensure compliance with therequirement, sending of written notices is necessary.

The notice or notices shall specify the date or days and venue of the public

hearing or hearings.(Art. 276 (b) (3), IRR, implementing Sec. 188, LGC)

3) Public Hearing. (a) the initial public hearing shall be held not earlier than ten(10) days from the sending out of notice or notices, or the last day of publication,or date of posting thereof, whichever is later.(Art. 276 (b) (3), IRR, implementingSec. 188, LGC)

(b) Public hearings shall be conducted prior to the enactment of the tax ordinanceor revenue measure. (Sec. 187, LGC)

(C) At the public hearing or hearings, all affected or interested parties shall beaccorded an opportunity to appear and present or express their views, comments and recommendations, and such public hearing or hearings shall

continue until all issues have been presented and fully deliberated upon and/or aconsensus is obtained, whether for or against the enactment of the proposed taxordinance or revenue measure. (Art. 276 (b) (4), IRR, implementing Sec. 188,LGC)

(d) The deliberations at the public hearing or hearings shall serve as inputs to themembers of the sanggunian. After the sanggunian members have considered theviews and comments, they may modify, pass or suspend judgment on the issue.

4


5/13

No tax ordinance or revenue measure shall be enacted or approved in theabsence of a public hearing duly conducted in the manner herein prescribed. (Art.276 , IRR, implementing Sec. 188, LGC)

4) Preparation of Minutes. The secretary of the sanggunian concerned shallprepare the minutes of such public hearing and shall attach to the minutes the

position papers, memoranda, and the like submitted by those who participated.(Art. 276, (b) (5), IRR, implementing Sec. 188, LGC)

The proceedings must be properly documented, so that, the sanggunian canreadily access information on the peoples reaction on the proposal.

5) Approval. (a) Every ordinance enacted by the sangguniang panlalawigan,sangguniang panlungsod, or sangguniang bayan, shall be presented to theprovincial governor or city or municipal mayor, as the case may be. If the localchief executive concerned approves the same, he shall affix his signature on eachand every page thereof. (Sec. 54 (a), LGC)

(b) The local chief executive may veto any ordinance of the sangguniang

panlalawigan, sangguniang panlungsod, or sangguniang bayan on the groundthat it is ultra vires or prejudicial to the public welfare, stating his reasonstherefor in writing (Sec. 55 (a), LGC), and return the same to the sanggunian(Sec. 54 (a), LGC).

The veto shall be communicated by the local chief executive concerned to thesanggunian within fifteen (15) days in the case of a province, and ten (10) days inthe case of a city or municipality; otherwise, the ordinance shall be deemedapproved as if he had signed it. (Sec. 54 (b), LGC)

The local chief executive may veto an ordinance or resolution only once. (Sec. 55(c), LGC)

(c) The sanggunian concerned may override the veto of the local chief executiveby two-thirds (2/3) vote of all its members, thereby making the ordinance orresolution effective for all legal intents and purposes. (Sec. 54 (a), LGC)

(d) Ordinances enacted by the sangguniang barangay shall, upon approval bythe majority of all its members, be signed by thepunong barangay. (Sec. 54 (c),LGC)

6) Publication of Tax Ordinances and Revenue Measures. (a) Within ten (10)days after their approval, certified true copies of all provincial, city, and municipaltax ordinances or revenue measures shall be published in full for three (3)consecutive days in a newspaper of local circulation: Provided, however,That inprovinces, cities and municipalities where there are no newspapers of localcirculation, the same may be posted in at least two conspicuous and publiclyaccessible places. (Sec. 188, LGC)

(b) If the tax ordinance or revenue measure contains penal provisions, the gist ofsuch ordinance or revenue measure shall be published in a newspaper of generalcirculation within the province where the local sanggunian concerned belongs. Inthe absence of any newspaper of general circulation within the province, postingof such ordinance or measure shall be made in accessible and conspicuous publicplaces in all municipalities and cities of the province to which the sanggunian

5


6/13

enacting the ordinance or revenue measure belongs. (Art. 276, IRR, implementingSec. 188, LGC)

C. Substantive Requirements for a Valid Revenue Ordinance.23 To be valid, atax or revenue ordinance must conform to the following substantive requirements:

1) It must not contravene the Constitution or any statute;2) It must not be unfair or oppressive;3) It must not be partial or discriminatory;4) It must not prohibit but may regulate trade;5) It must be generally consistent with public policy; and

6) It must not be unreasonable. (US vs. Abendan, 24 Phil. 165)

D. Effectivity of Tax Ordinances or Revenue Measures. The tax ordinances orrevenue measures take effect upon compliance with the above procedural andsubstantive requirements.

E. Furnishing of Copies of Tax Ordinances and Revenue Measures. Copies ofall provincial, city, and municipal and barangay tax ordinances and revenue

measures shall be furnished the respective Local Treasurers for public dissemination.

F. Review of Tax Ordinances or Revenue Measures. R.A. No. 7160 or the LocalGovernment Code of 1991, provides the following cautionary steps wherein taxordinances or revenue measures of component cities and municipalities are reviewedby the sangguniang panlalawigan, and the ordinances of barangays by thesangguniang panlungsodor sangguniang bayan:

1) Review of Component City and Municipal Ordinances or Resolutions bythe Sangguniang Panlalawigan. (a) Within three (3) days after the approval,the secretary of the sangguniang panlungsod or sangguniang bayan shallforward to the sangguniang panlalawigan for review, copies of approved revenueordinances and resolutions. (Sec. 56 (a), LGC)

(b) Within thirty (30) days after receipt of copies of such revenue ordinances andresolutions, the sangguniang panlalawigan shall examine the documents ortransmit them to the provincial attorney, or if there be none, to the provincialprosecutor for prompt examination. The provincial attorney or provincialprosecutor shall within a period of ten (10) days from receipt of the documents,inform the sangguniang panlalawigan in writing of his comments orrecommendations, which may be considered by the sangguniang panlalawigan inmaking its decision. (Sec. 56 (b), LGC)

(c) If the sangguniang panlalawiagan finds that such an ordinance or resolution isbeyond the power conferred upon the sangguniang panlungsodor sangguniangbayan concerned it shall declare such ordinance or resolution invalid in whole or

in part. The sangguniang panlalawigan shall enter its action in the minutes andshall revise the corresponding city or municipal authorities of the action it hastaken. (Sec. 56 (c), LGC)

(d) The review by the sangguniang panlalawigan of the component city andmunicipal revenue ordinances is limited to determining the legality thereof or ifthe same exceed the powers conferred upon by law to the sangguniang

23 See separate handout for a more detailed discussion of the substantive requirements of avalid revenue ordinance.

6


7/13

panlungsod or sangguniang bayan. Exceeding such powers is ultra vires andamounts to usurpation of the legislative functions of the city or municipalcouncils.

(e) The review by the sangguniang panlalawigan is in the nature of legislativecheck and it is a measure by which the provincial government exercises its power

of general supervision over component units.

(f) 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 bepresumed consistent with law and therefore valid. (Sec. 56 (d), LGC)

(g) Pending review by the higher council, a revenue ordinance continues to be inforce and effect.

(h) Declaration of invalidity of the revenue ordinance is equivalent to disapprovalthereof.

(i) The signature of the governor is required in relation to the resolution adopted

by the sangguniang panlalawigan, approving or disapproving the revenueordinance or resolution enacted by the sangguniang bayan or sangguniangpanlungsod.

Review of Barangay Ordinances by the Sangguniang Panlungsod orSangguniang Bayan. - (a) Within ten (10) days after its enactment, thesangguniang barangay shall furnish copies of all barangay ordinances to thesangguniang panlungsodor sangguniang bayan concerned for review as to whetherthe ordinance is consistent with law and city or municipal ordinances. (Sec. 57 (a),LGC)

(b) If the sangguniang panlungsodor sangguniang bayan, as the case may be, failsto take action on barangay ordinances within thirty (30) days from receipt thereof,the same shall be deemed approved. (Sec. 57 (b), LGC)

(c) If the sangguniang panlungsodor sangguniang bayan, as the case may be, findsthe barangay ordinances inconsistent with law or city or municipal ordinances, thesanggunian concerned shall, within thirty (30) days from receipt thereof, return thesame with its comments and recommendations to the sangguniang barangayconcerned for adjustment, amendment, or modification; in which case, the effectivityof the barangayordinance is suspended until such time as the revision called for iseffected. (Sec. 57 (c), LGC)

G. Appeal on the Legality or Constitutionality of an Ordinance. Appeal on theconstitutionality or legality of an ordinance may be made to the Secretary of Justiceor to the regular courts, as follows:

a) Appeal to the Secretary of Justice:

1) Any question on the constitutionality or legality of tax ordinances or revenuemeasures may be raised on appeal within thirty (30) days from the effectivitythereof to the Secretary of Justice who shall render a decision within sixty (60)days from the date of receipt of the appeal: Provided, however, That suchappeal shall not have the effect of suspending the effectivity of the ordinanceand the accrual and payment of the tax, fee, or charge levied therein. (Sec.187, LGC)

7


8/13

2) The appeal to the Secretary of Justice extends only to the determination if theordinance is constitutional or legal. The Secretary of Justice shall neithersubstitute his own judgment nor replace the same with another version. Thisappeal to the Secretary of Justice is one of supervision and not of control.

3) The decision of the Secretary of Justice can be further appealed to the President, pursuant to the principle of exhaustion of

administrative remedies, in order for the courts to take cognizance of the appeal on the decision of the executive branch of the

government.

b) Appeal through the Courts. Provided, finally, That within thirty (30) daysafter receipt of the decision or the lapse of the sixty-day period without theSecretary of Justice acting upon the appeal, the aggrieved party may fileappropriate proceedings with a court of competent jurisdiction.

H. Penalties for Violation of Tax Ordinances. The local government unit isauthorized to prescribe imprisonment or fines or penalties for violation of taxordinances but in no case shall such fines be less than One Thousand Pesos (P1,000.00) nor more than Five Thousand Pesos (P5,000.00), nor shall imprisonment beless than one (1) month nor more than six (6) months. Such fine or other penalty, or

both, shall be imposed at the discretion of the court. The sangguniang barangaymayprescribe a fine of not less than One Hundred Pesos (P100.00) nor more than OneThousand Pesos (P1,000.00). (Sec. 516, LGC)

I. Attempt to Enforce Void or Suspended Tax Ordinances and revenuemeasures. The enforcement of any tax ordinance or revenue measure after duenotice of the disapproval or suspension thereof shall be sufficient ground foradministrative disciplinary action against the local officials and employeesresponsible therefor. (Sec. 190, LGC)

5. Power to Create Sources of Revenue and Local Taxing Authority. (a) Each localgovernment unit shall exercise its power to create its own sources of revenue and to levytaxes, fees, and charges subject to the provisions of R.A. No. 7160 or the Local Government

Code of 1991, consistent with the basic policy of local autonomy. Such taxes, fees, andcharges shall accrue exclusively to the local government units. (Sec. 129, LGC)Local government units do not have the inherent power to tax. The power to tax inherentlybelongs to the State. However, the State may delegate this power through legislation which,in this case, through the R.A. No. 7160 or the Local Government Code of 1991.

(b) As in all revenue measures, it is up to the particular local government to enact thenecessarytax ordinance that would enable it to avail of its power to impose a given tax.

The power to impose a tax, fee, or charge or to generate revenue under this Code shall beexercised by the sanggunian of the local government unit concerned through an appropriateordinance. (Sec. 132, LGC)

6. Taxing Power of Provinces.

24

Except as otherwise provided in R.A. No. 7160 or theLocal Government Code of 1991, the province may levy only taxes, fees and chargesspecifically reserved to provinces, as follows: (Sec. 134, LGC)

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

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

3) Franchise Tax (Sec. 137, LGC);

4) Tax on Sand, Gravel and Other Quarry Resources (Sec. 138, LGC);

24Refer to the Local Revenue Tool Kit for Philippine LGUs in a separate handout.

8


9/13

5) Professional Tax (With required government examination) (Sec. 139, LGC);

6) Amusement Tax (Sec. 140, LGC);

7) Annual Fixed Tax for Every delivery Truck or Van of Manufacturers or Producers,Wholesalers of, Dealers, or Retailers in, Certain Products (Sec. 141, LGC);

8) Real Property Tax (Sec. 232, LGC);

9) Additional Levy on Real Property for the Special Education Fund (SEF) (Sec. 235,LGC);

10)Additional Ad Valorem Tax on Idle Lands (Sec. 236, LGC);

11)Special Levy on Lands Benefited by Public Works, Projects or Improvements Fundedby LGU concerned (Sec. 240, LGC);

12)Service Fees and Charges (Sec. 153, LGC);

13)Public Utility Charges (Sec. 154, LGC); and

14)Toll Fees or Charges (Sec. 155, LGC).

7. Taxing Powers of Municipalities. (a) Except as otherwise provided in the LocalGovernment Code of 1991, municipalities may levy taxes, fees and charges not otherwiselevied by provinces (Sec. 142, LGC), as follows:

1) Tax on Business (Sec. 143, LGC);

2) Community Tax (Sec. 156, LGC);

3) Real Property Tax (municipalities within Metropolitan Manila Area) (Sec. 232, LGC);

4) Additional Levy on Real Property for the Special Education Fund (Sec. 235, LGC);

5) Additional Ad Valorem Tax on Idle Lands (Sec. 236, LGC);

6) Special Levy on Lands Specially Benefited by Public Works, Projects or Improvements(Sec. 240, LGC);

7) Fees and Charges on Business and Occupation (Sec. 147, LGC);

8) Fees for Sealing and Licensing of Weights and Measures (Sec. 148, LGC);

9) Fishery Rentals, Fees and Charges (Sec. 149, LGC);


11)Public Utility Charges (Sec. 154, LGC); and12)Toll Fees and Charges (Sec. 155, LGC).

(b) Rates of Tax within the Metropolitan Manila Area. - The municipalities within theMetropolitan Manila Area may levy taxes at rates which shall not exceed by fifty percent(50%) the maximum rates prescribed in the preceding Section. (Sec. 144, LGC)

In the case of a city or a municipality within the Metropolitan Manila Area, at the rate notexceeding two percent (2%) of the assessed value of real property. (Sec. 233 (b), LGC)

8. Taxing Powers of Cities. Except as otherwise provided in the Local Government Codeof 1991, the City may levy taxes, fees and charges which the province or municipality mayimpose: Provided, however,That the taxes, fees and charges levied and collected by highly

urbanized and independent component cities shall accrue them and distributed inaccordance with the provisions of the same Local Government Code

The rates of taxes that the city may levy may exceed the maximum rates allowed for theprovince or municipality by not more than fifty percent (50%) except the rates ofprofessional and amusement taxes. (Sec. 151, LGC)

The taxes, fees and charges that may therefore be levied by the cities are the following:

9


10/13

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

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

3) Franchise Tax (Sec. 137, LGC);

4) Tax on Sand, Gravel and Other Quarry Resources (Sec. 138, LGC);

5) Professional Tax (Sec. 139, LGC);

6) Amusement Tax (Sec. 140, LGC);7) Annual Fixed Tax for Every delivery Truck or Van of Manufacturers or Producers,Wholesalers of, Dealers, or Retailers in, Certain Products (Sec. 141, LGC);

8) Tax on Business (Sec. 143, LGC);

9) Community Tax (Sec. 156, LGC);

10)Real Property Tax (Sec. 232, LGC);

11)Additional Levy on Real Property for the Special Education Fund (Sec. 235, LGC);

12)Additional Ad Valorem Tax on Idle Lands (Sec. 236, LGC);

13)Special Levy on Lands Specially Benefited by Public Works, Projects or Improvements(Sec. 240, LGC);

14) Fees and Charges on Business and Occupation (Sec. 147, LGC);

15) Fees for Sealing and Licensing of Weights and Measures (Sec. 148, LGC);

16) Fishery Rentals, Fees and Charges (Sec. 149, LGC);


18)Public Utility Charges (Sec. 154, LGC); and

19) Toll Fees and Charges (Sec. 155, LGC).

9. Power to Levy Other Taxes, Fees and Charges. Local government units mayexercise the power to levy taxes, fees or charges on any base or subject not otherwisespecifically enumerated herein or taxed under the provisions of the National InternalRevenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, orcharges shall not be unjust, excessive, oppressive, confiscatory or contrary to declarednational policy: Provided, further, That the ordinance levying such taxes, fees or chargesshall not be enacted without any prior public hearing conducted for the purpose. (Sec. 186,

LGC)

10. Taxing Powers ofBarangays. (a) The barangays may levy taxes, fees, and charges,as provided in Article 4, Chapter 2, Title 1, Book II of R.A. No. 7160 or the Local GovernmentCode of 1991, which shall exclusively accrue to them.

(b) Taxes. On stores or retailers with fixed business establishments with gross sales ofreceipts of the preceding calendar year of Fifty Thousand Pesos (P50,000.00) or less, in thecase of cities and Thirty Thousand Pesos (P30,000.00) or less, in the case of municipalities,at a rate not exceeding one percent (1%) on such gross sales or receipts;

(c) Service Fees or Charges. Barangays may collect reasonable fees or charges forservices rendered in connection with the regulations or the use of barangay-owned

properties or service facilities such aspalay, copra, or tobacco dryers;

(d)BarangayClearance. No city or municipality may issue any license or permit for anybusiness or activity unless a clearance is first obtained from the barangay where suchbusiness or activity is located or conducted. For such clearance, the sangguniang barangaymay impose a reasonable fee. The application for clearance shall be acted upon withinseven (7) working days from the filing thereof. In the event that the clearance is not issuedwithin the said period, the city or municipality may issue the said license or permit;

10


11/13

(e) Other fees and Charges. The barangaymay levy reasonable fees and charges:

(1) On commercial breeding of fighting cocks, cockfights and cockpits;(2) On places of recreation which charge admission fees; and(3) On billboards, signboards, neon signs, and outdoor advertisements. (Sec. 152,

LGC)

11. Common Limitations on the Taxing Powers of Local Government Units. Unlessotherwise provided in the Local Government Code of 1991, the exercise of the taxing powersof provinces, cities, municipalities, and barangays shall not extend to the levy of thefollowing:

(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 in the Local Government Code of 1991;(4) Customs duties, registration fees of vessel and wharfage on wharves, tonnage

dues, and all other kinds of customs fees, charges and dues except wharfage onwharves constructed and maintained by the local government unit concerned;

(5) Taxes, fees, and charges and other impositions upon goods carried into or out of,or passing through, the territorial jurisdictions of local government units in theguise 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 bymarginal farmers or fishermen;

(7) Taxes on business enterprises certified to by the Board of Investments as pioneeror non-pioneer for a period of six (6) and four (4) years, respectively from the dateof registration;

(8) Excise taxes on articles enumerated under the national Internal Revenue Code, asamended, and taxes, fees or charges on petroleum products;

(9) Percentage or value-added tax (VAT) on sales, barters or exchanges or similartransactions on goods or services except as otherwise provided in the LocalGovernment Code of 1991;

(10) Taxes on the gross receipts of transportation contractors and persons engagedin the transportation of passengers or freight by hire and common carriers by air,land or water, except as provided in the Local Government Code of 1991;

(11) Taxes on premiums paid by way or reinsurance or retrocession;(12) Taxes, fees or charges for the registration of motor vehicles and for the issuance

of all kinds of licenses or permits for the driving thereof, except tricycles;(13) Taxes, fees, or other charges on Philippine products actually exported, except as

otherwise provided in the Local Government Code of 1991;(14) Taxes, fees, or charges, on Countryside and BarangayBusiness Enterprises and

cooperatives duly registered under R.A. No. 681025 and R.A. No. 693826; and(15) Taxes, fees or charges of any kind on the National Government, its agencies and

instrumentalities, and local government units. (Sec. 133, LGC)

12. Non-Tax Revenues. Aside from revenues that they may be generated through theirpower of taxation, local government units have access to non-tax revenues27 from thefollowing sources:

25KALAKALAN Bilang 2026Cooperative Code of the Philippines27See summary of the non-tax revenues that may be levied by provinces, cities, andmunicipalities in separate handout.

11


12/13

1) Proceeds from fees and charges that local government units may impose in theexercise of their regulatory and proprietary powers;

2) Shares of local government units from revenues of the national government,including their share in the utilization and development of the national wealth orresources within their territorial jurisdiction and other sources defined by law; and

3) Other receipts from the disposal of assets and from donations and contributions.

13. Services Fees and Charges. Local government units may impose and collect feesand service or user charges for nay service rendered by it in an amount reasonablycommensurate to such service: Provided, however,That no service charge shall be based oncapital investments or gross sales or receipts of the person or business liable therefor. (Art.244, IRR, implementing Sec. 153, LGC)

In the same manner as local taxes, it is the sanggunian that is empowered to impose localfees and charges through appropriate ordinance or revenue measure.

A. Fees

1) Basis of Fees. Fees are collected by a local government unit in the exercise of

its police power. They are imposed in relation to the services rendered inregulating business and other activities within its jurisdiction, such as theprivilege to operate an establishment or the practice of a profession. Theimposition of a fee must be accompanied by the performance of correspondingregulatory function, if not, the fee is unjustified.

2) Amounts That May be Imposed. Fees should be imposed at rates that areconsidered reasonable. The reasonableness of a fee is commonly understood tomean that which should be more or less equated to the cost of issuing the permitor license and the cost of surveillance and services rendered in relation to thebusiness or activity regulated. It is therefore important for local government unitsto prepare cost-computation schedules to support the rates of fees established.Business gross receipts and capitalization are not allowed as basis for

determining the amount of fees, since they are unrelated to the cost ofregulation.

3) Beneficiaries of Regulatory Services. There are two general categories ofregulatory services delivered by local government units:

a) Those whose beneficiaries are in mass, whose pricing therefor cannot beallocated to individuals (such as traffic enforcement); and

b) Those whose beneficiaries can be readily identified. The rates under thiscategory can be more easily determined and, thus, set at reasonable levels.Local government units must be judicious, however, in selecting andidentifying the proper subjects for service fees.

B. Charges. Local government units can also impose charges for the use of theirfacilities. Many local government units own ferries, markets, slaughterhouses,hospitals, utilities, toll roads and bridges. While many such facilities and serviceshave been assumed by the private sector, some local government units prefer tocontinue to operate them directly for two reasons:

1) It is strategically beneficial to the community as a whole, and/or2) The private sector has not taken interest and prefers that these responsibilities

continue to be performed by the local government units.

12


13/13

14. Shares in the Proceeds of National Taxes. By provision of law, local governmentunits share from the income generated by the national government from all taxes andrevenue sources, as follows:

1) Internal Revenue Allotment (IRA) (Sec. 284, LGC)

2) Tobacco Excise Tax (R.A. No. 717128

)3) Proceeds from the utilization of national wealth within their territorial jurisdiction

(Sec. 289, LGC) and

4) Special shares from other national taxes, particularly on ECOZONES (R.A. 722729)and on specified portions of the Value Added Tax. (Sec. 2, R.A. No. 764330)

28An Act to Promote the Development of the Farmers in the Virginia Tobacco ProducingProvinces29Bases Conversion and Development Act of 199230An Act to Empower the Commissioner of Internal Revenue to Require the Payment of theValue-Added Tax Every Month and to Allow Local Government Units to Share in VATRevenue.

13

Types of Local Income and Revenues Collected by Local Government Units

Documents

Transcript of Types of Local Income and Revenues Collected by Local Government Units