REPUBLIC OF THE PHILIPPINES DEPARTMENT OF THE INTERIOR AND LOCAL Francisco Gold Condominium II EDSA Cor. Mapagmahal St., Diliman Quezon City LEGAL SERVICE DILG Legal Opinion No. 55 s. 2012 VICE MAYOR INOCENCIO P. CUNIO AUG 29 2012 Roseller T. Lim, Zamboanga Sibugay Dear Vice Mayor Cunio: This pertains to your letter requesting for a comprehensive explanation of Section 152 in relation to Section 130 of Republic Act No. 7160 as amended pertaining to the exercise of the taxing & other revenue-raising powers of local government units. Before giving you a comprehensive explanation of the above-cited provisions of RA 7160, please allow us to state the basic principles governing local government taxation. Local government taxation emanates from the constitutional grant of the power to tax and to create its own sources of revenues and to levy taxes, fees, and charges, which shall accrue to the local governments (Article X, Section 5). It is well settled that Local Government Units have the power to create their own sources of revenues through local tax ordinances. Local tax ordinances should be enacted within the limitations and boundaries provided in the Local Government Code. Section 152 of the Local Government Code provides for the scope of the taxing powers while Section 130 enumerates the fundamental principles governing the exercise of the taxing and other revenue-raising powers of local government units. Section 152 of the Local Government Code as amended provides that: SEC. 152. Scope of Taxing Powers. - The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively accrue to them (a) Taxes - On stores or retailers with fixed business establishments with gross sales or receipts of the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the case of cities and Thirty thousand pesos (30,000.00) or less, in the case of municipalities, at a rate not exceeding one percent (1%) on such gross sales or receipts. (b) Service Fees or Charges ~ barangays may collect reasonable fees or charges for services rendered in connection with the regulation or the use of barangay-owned properties or service facilities such as palay, copra, or tobacco dryers. (c) Barangay Clearance - No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such business or activity is located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee. The application for clearance shall be acted upon within seven (7) working days from the filing thereof. In the event that the clearance is notissued within the said period, the city or municipality may issue the said license or permit. (d) Other Fees and Charges - The barangay may levy reasonable fees and charges (4) 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. (Emphasis Ours) Based on the above -quoted provision law, there are three different kinds of imposition, to wit: taxes, charges and fees. “Tax” refers to a charge levied by a local government on a product, income, or activity, the purpose of which is to generate public revenues to finance public goods and services.! Under the Local Government Code as amended, a fee is defined “as a charge fixed by law or ordinance for the regulation or inspection of a business or activity, I¢ shall also include charges fixed by law or agency for the services of a public officer in the discharge of his official duties” (Section 134 [I]; and a charge refers to “pecuniary liability, as rents or fees against person or property” (Section [g]). Itis clear that barangay may only impose, levy, assess and impose tax on stores or retailers with fixed business establishments with gross sales or receipts of the preceding calendar year of P50, 000.00 or P30, 000.00, depending on whether the barangay is located in a city or in a municipality. Likewise, it is evident that barangay may impose fees and charges provided that it is reasonable. The reasonableness of a fee would depend largely on the regulatory service to be rendered by the barangay in relation to the issuance of a barangay clearance. Fees and charges should be proportionate or equal to the cost of issuing the license or permit and the expenses incurred. The exercise of taxing and other revenue-raising powers of local government is governed by fundamental principles provided in Section 130 of the Local Government Code as amended. The following are the fundamental principles: * Taxation shall be uniform in each local government unit; * Taxes, fees, charges and other impositions shall: (1) be equitable and based as far as practicable on the taxpayer's ability to pay; (2) be levied and collected only for public purposes; (3) not be unjust, excessive, oppressive, or confiscatory; (4) not be contrary to law, public policy, national economic policy, or in restraint of trade; * The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person; © The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and, * Each local government unit shall, as far as practicable, evolve a progressive system of taxation.LGU is independent and autonomous in its taxing power and this is clearly reflected on the above-quoted provision of law. The LGC requires uniformity in taxation. It is likewise required that taxes, fees, charges and other impositions to be equitable, not to be unjust, excessive, oppressive, or confiscatory. Uniformity in taxation implies that all property may be taxed alike and equally? A tax is unjust if it is deficient in justice and fairness. Unjust is defined by Black's Law Dictionary as contrary to right and justice, or to the enjoyment of his rights by another, or to the standards of conduct furnished by the laws. Excessive as defined by Black's Law Dictionary is tending to or marked by excess, which is the quality or state of exceeding the proper or reasonable limit. or measure. We hope we have enlightened you on the matter. Very truly yours, ESUS B.HOQUE IV Director M1