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The Department does not interpose on the passage of the proposed measure as it

would surely enhance the revenue-making powers of the concerned local government units
(LGUs) which the said LGUs may use in funding their several programs and projects,
including the improvement of their facilities and services.

It must be emphasized that as a general rule, LGUs are prohibited from imposing local
tax on the national government, its agencies and instrumentalities. The reason for such rule
is the power of taxation enjoyed by said LGUs were only delegated by the national
government1. Such rule has been inscribed in Section 133 (o) of Republic Act (RA) No. 7160,
otherwise known as the “Local Government Code of 1991” (LGC), which provides:

“Section 133. Common Limitations on the Taxing Powers of Local Government Units.
- Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following:
xxx xxx xxx

(o) Taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities, and local government units.”

Nevertheless, an exception to the said rule is if the legislature clearly allows the
concerned LGU to exercise its power to impose local taxes on services performed by the
national government. The case of Manila International Airport Authority vs Court of
Appeals2 provides the following:

“There is, moreover, no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of public
funds from one government pocket to another.

There is also no reason for local governments to tax national government


instrumentalities for rendering essential public services to inhabitants of local
governments. The only exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential public services for
sound and compelling policy considerations. There must be express language in
the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against
local governments.”

1 Republic of the Philippines vs. Parañaque, G.R. No. 191109, 18 July 18, 677 SCRA 246.
2 GR No. 155650, 20 July 2006, 495 SCRA 591.
Under Section 18 of the LGC, it provides that LGUs have the right to have an
“equitable share in the proceeds from the utilization and development of the national wealth
and resources within their respective territorial jurisdictions”. Thus, it is only proper that the
concerned LGUs would have a share on the collection dues received by either the Bureau of
Customs (BoC) or the Philippine Ports Authority (PPA) operating in the ports located within
the territorial jurisdiction of the said LGU.

Nonetheless, may we recommend that the concerned House Committee would also
solicit the comments and recommendations of the Department of Finance (DoF), BoC, and
the PPA, as the subject matter herein falls within their mandate and jurisdiction.

Moreover, since the subject matter herein concerns the revenue-making power of
LGUs, may we also recommend that the positions of the Liga ng mga Barangay sa Pilipinas
(LnB), the League of Municipalities of the Philippines (LMP), the League of Cities of the
Philippines (LCP), and the League of Provinces of the Philippines (LPP) be solicited as well.

Thank you.

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