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The power of local government to levy taxes, fees and charges is provided in the Constitution of
the Republic of the Philippines. Under Section 5, Article X, the Constitution provides:
“Section 5. 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.”
The guidelines and limitations mentioned in Section 5 are spelled out in Book 2 of Republic Act
(RA) No. 7160 (otherwise known as the Local Government Code of 1991) which provides the
legal basis and parameters for the taxing and revenue-raising powers of local governments. For
further guidance in LGUs’ exercise of taxing powers, relevant Opinions and Rulings by the
Bureau of Local Government Finance of the Department of Finance have been compiled in
Annex B.
Fundamental Principles
The exercise of the taxing and other revenue-raising powers of local governments is governed by
the following fundamental principles.
The collection of local taxes, fees and charges and other impositions cannot be let to any
private person (see Annex B, Excerpt 2);
1
The revenue collected shall be used solely for the benefit of, and be subject to
disposition by the local government unit levying the tax, fee, charge or other imposition
unless other otherwise provided; and
Each local government shall, as far as practicable, evolve a progressive system of
taxation.
LGUs exercise taxing and revenue-raising powers through the enactment of tax ordinances.
However, the Code provides common limitations to these taxing powers as provided for in
Section 133 of RA 7160, “Common Limitations on the Taxing Powers of Local Government
Units.”
PROHIBITIONS REMARKS
Income Tax 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)
Taxes on estates, inheritance, gifts, legacies An exception is provided in Sec. 135 of the
and other acquisitions mortis causa LGC, where provinces and cities may impose
tax on the sale, donation, barter, or on any
other transferring ownership or title of real
property.
2
Custom duties, registration fees of vessel and Except wharfage on wharves constructed and
wharfage on wharves, tonnage dues, and all maintained by the local government unit
other kind of custom duties, charges and dues. concerned.
Taxes, fees and charges and other impositions Import or export taxes or fees on goods and
upon goods carried into or out of, or passing commodities carried through into or out of
through, the territorial jurisdictions of local their respective territories would deter the free
government units in the guise of charges for flow of commerce in the country and cause
wharfage, tolls for bridges or otherwise, or considerable increase in the prices of
other taxes, fees or charges in any form commodities, to the prejudice on the
whatsoever upon such or goods or merchandise consuming public.
(see Annex B, Excerpt 12).
Percentage or value-added tax (VAT) on sales, Local government units are authorized to
barters or exchanges or similar transactions on impose fixed graduated taxes on gross sales.
goods or services except as otherwise provided
in the Code.
Taxes, fees or charges on agricultural and Sec. 131 provides a listing of covered
aquatic products when sold by marginal agricultural products and the definition of a
farmers or fishermen (see Annex B, Excerpt marginal farmer or fisherman.
13).
So that agricultural products and aquatic
products become taxable when:
Excise taxes on articles enumerated under the Excise taxes can be in the form of specific or
National Internal Revenue Code, as amended, ad valorem taxes.
and taxes, fees or charges on petroleum
3
products (See Annex B, Excerpt 15). 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.
Ad valorem taxes are based on the selling
price or other specific value of the goods.
Taxes on gross receipts of transportation Since transportation contractors are still subject
contractors and persons engaged in the to the business tax imposed on contractors by
transportation of passengers or freight by hire LGUs as stated in DOF Opinion, November 8,
and common carriers by air, land or water, 1995, it may be implied that LGUs may
except as provided in the Code (see Annex B, impose a business tax on bases other than gross
Excerpts 15a and 16). receipts, i.e., type of vehicle, number of
vehicles, capacity, etc. (for transport
companies with terminals or booking office)
Taxes, fees or other charges on Philippine The prohibition does not apply to the
products actually exported, except as otherwise business of exporting said products which is
provided in the Code (see Annex B, Excerpt still covered by the business tax on exporters.
18). (DOF Opinion, March 10, 1994), Sec. 143(c)
of the LGC of 1991.
Taxes, fees, or charges, on Countryside and However, per DOF Opinion dated November
Barangay Business Enterprises and 14, 1994, the exception enjoyed by duly
cooperatives duly registered under R.A 6810 registered cooperatives does not include
and R.A 6938 otherwise known as the payment of service charges or rentals for the
“Cooperative Code of the Philippines” use of property and equipment or public
respectively (see Annex B, Excerpt 19). 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.
Taxes, fees or charges of any kind on the This should be read in connection with Section
National Government, its agencies and 193 of the Code which withdraws exceptions
instrumentalities, and local government units or incentives granted to all persons, natural
4
(See Annex B, Excerpt 20). or juridical, including government owned- or
controlled corporations except local water
districts, non-stock and non-profit hospitals
and education institutions.
LGUs have two (2) major sources of funds, internally generated (local) and external (shares from
national revenues and foreign/local grants).
NATURE BASIS/AUTHORITY
Local Sources
Tax Revenues
External Sources
Local government units may impose taxes, fees and charges as follows:
5
Table 3: LGU REVENUE BASE
TYPES OF
DEFINITION REMARKS EXAMPLES
IMPOSITIONS
Taxes Impositions under the Allocation among Property taxes
taxing power of LGUs LGUs of taxing
for the purpose of powers and Business taxes
raising revenues, e.g., distribution of
real property tax, proceeds, defined by
business tax and the law
other local taxes Franchise, community
tax, amusement, tax on
printing and
publication, etc
Regulatory Fees Charges made by law or Based on cost of Mayor’s permit fee on
ordinance for the regulation of the business; permit fees
regulation or activity for sealing and
inspection of business licensing of weights
or activities and measures; building
permit fees; permit fee
on zonal/
locational clearance;
permit fee for
inspection and
verification of
subdivision; permit fee
for tricycle operations;
permit fee for pedaled
tricycle; permit fee for
cockpit owners/
operators/ licensees/
promoters and cockpit
personnel; special
permit fee for
cockfighting; permit
fee on occupation/
calling not requiring
government
examination;
registration and transfer
fees on large cattle;
fees on impounding of
stray animals; cart or
sledge registration fee;
6
permit fee on caretela
or calesa; permit fee for
agricultural machinery
and other heavy
equipment; permit and
inspection fee on
machineries and
engines; permit fee for
the storage of
flammable and
combustible materials;
permit fee for
temporary use of roads,
streets, sidewalk,
alleys, patios, plazas
and playgrounds;
permit fee for
excavation; permit fee
on circus and other
parades; permit fee for
the conduct of group
activities; permit fee on
film making;
signboards permit fees;
Permit to quarry on
sand, gravel and other
quarry resources;
Violation fees;
Other regulatory fees
Service Fees Fees collected for Amount Secretary’s/certification
services rendered or commensurate to the fees; local civil registry
for conveniences cost of services fees; police clearance
furnished by the LGU fees; sanitary
inspection fees; service
fees for various health
services; garbage
collection fees; dog
vaccination fees
IT/computer processing
fees
Tipping fees
7
Charges Impositions for the Full cost recovery as Fishery rentals, fees
operation of public basis for amount of and charges; rentals of
enterprises in charge to be imposed personal and real
connection with the properties owned by
government’s exercise the municipality;
of its proprietary charges for parking;
functions municipal hospital
service fees;
waterworks system
charges; cemetery
charges; market fees
and charges;
slaughterhouse and
corral charges; toll fees
and charges; terminal
fees
Municipal Taxing Powers (Secs. 142-149 of the LGC and Secs. 153-157 of the LGC)
Municipalities may levy tax on business which varies according to business classification such
as:
Pawnshops, boarding houses, lodging houses, hotels and motels, and signs, signboards,
billboards and advertisements.
Municipalities may also impose a deficiency tax upon the retirement of business.
Municipalities may levy fees and charges on specific items which include cart and sledge
registration, parades, registration of large cattle, building permit, civil registry, issuance of
official records, police clearance, impounding and /or sale of stray animals, burial permit and
exhumation of cadaver, dog license and bicycle permit, fees for sealing and licensing of weights
and measures.
In addition, municipalities can collect fees for the use of their facilities such as markets,
slaughterhouses and public utilities.
8
Their authority extends to the exclusive right to grant fishery rights, licensing individual fishing
gears in municipal waters, including the fixing of rentals and fees.
Municipalities are also empowered to collect the community tax from individuals and juridical
persons.
Provincial Taxing Powers (Secs. 134-141 and Secs. 153-155 of the LGC)
The following taxes may be imposed by the province, although they share the proceeds:
Real property tax – proceeds from the basic tax are shared between the province 35%,
municipalities 40%, and barangays 25%; while proceeds from the Special Education
Fund (SEF) are shared 50% for the province and 50% for the municipalities.
Amusement tax – proceeds from the tax are shared equally by the province and the
municipality where the amusement place is located.
Tax on sand, gravel and other quarry resources are shared between the province 30%,
municipalities 30%, and barangays 40%.
In addition, the province levies the following provincial impositions which accrue to them 100%:
Franchise tax
Annual fixed tax for every delivery truck, van of manufacturers or producers, wholesalers
of, dealers, or retailers in certain products
Professional tax
Idle land tax – However, the province can pass an ordinance providing for a sharing
scheme between the province, municipality and barangay in order to ensure effective
implementation of the idle land tax.
Cities’ Taxing Powers (Sec. 151 and Secs. 153-157 of the LGC)
Cities may levy taxes, fees and charges under the taxing authority of municipalities and
provinces (see above listing).
9
Cities may also impose rates fifty per cent (50%) higher than the maximum rates allowed for
municipalities and provinces except for the occupation tax, amusement tax on admission, and
fees for the licensing of weights and measures, which shall be uniform.
In addition, cities can collect fees for the use of their facilities such as markets, slaughterhouses,
and public utilities.
Cities also collect the community tax from individuals and juridical persons.
Basic real property taxes collected by cities are shared in the following manner: 70% for the city
and 30% for the barangays.
Barangays’ Taxing Powers (Sec. 152 and Secs. 153-155 of the LGC)
Taxes on stores and retailers with fixed business establishments, with gross sales or receipts for
the preceding year that do not exceed P50,000 in the case of cities and P30,000 in the case of
municipalities.
Service fees or charges for services rendered in connection with the regulation or use of
barangay-owned properties or service facilities, such as palay, copra or tobacco dryers, parking
lots, etc.
10
Table 4: SAMPLE/MENU OF LGU IMPOSITIONS
11
1
Business tax Gross receipts for na
the preceding
calendar year
Community tax Per person, na na
income
RPT values
Franchise tax Capital na na
(See Annex B, investments for
Excerpt 3) newly started
business/
Gross receipts for
the preceding
calendar year for
existing business
Occupation tax Per occupation na na
Type of
occupation
Professional tax Per profession na na
(See Annex B, Type of
Excerpt 3) profession
Tax on business Capital na na
of printing and investments for
franchise and newly started
publication (See business/
Annex B, Excerpt Gross annual
3) receipts for the
preceding
calendar year for
existing
businesses
Tax on business Type of tricycle na na
of operating (motorized or
motorized and non-motorized)
non-motorized
tricycle
Tax on forest Annual gross na na
concessions and receipts for the
forest products preceding year
Tax on mining Gross receipts for na
operations the preceding year
Tax on peddlers May be based on na na
1
On stores and retailers with fixed business establishments with gross sales or receipts of the preceding calendar
year of P50,000 or less in the case of cities and P30,000 in the case of municipalities, at a rate not exceeding 1% on
such gross sales or receipts.
12
means of transport
used by peddler
Tax on sand, Fair market value na na
gravel and other per cubic meter
quarry resources
B. PERMITS AND REGULATORY FEES
2
Business permit Cost of regulating na
the activity or
privilege
Building permit In accordance na na
and related fees with schedule of
rates fixed by the
Sec of DPWH
Zoning and Rates covered by na na
locational fee HLURB Circular
Development Cost of issuing na
permit the permit and
surveillance
3
Excavation fees Cost of issuing na
the permit and
surveillance
4
Signboards, Cost of issuing na
billboards and the permit and
outdoor surveillance
advertisements
5
Fees on Cost of na
impounding of impounding and
stray animals feeding
Fees for sealing Cost of issuing na na
and licensing of the permit,
weights and calibration and
measures surveillance
Tricycle Cost of issuing na na
franchise, the permit and
bicycles surveillance
Large cattle Cost of na na
registration and registration and
transfer fees surveillance
Permit fee on Cost of issuing na na
agricultural the permit and
2
Business permit on printing and publication, , delivery truck or van of manufacturers, producers, wholesalers,
retailers & dealers of certain products
3
On provincial roads
4
Local Government Code Sec. 152 d(3)
5
If devolved to barangays by municipalities or cities in their respective ordinances.
13
machinery and surveillance
other heavy
equipment
Permit fee for Cost of issuing na na
burial, cadaver the permit and
exhumation and surveillance
removal
6
Permit fee for Cost of issuing na
cockfighting the permit and
surveillance
Permit fee for Cost of issuing na na
cockpit owners/ the permit and
operators/ surveillance
licensees and
other cockpit
personnel
Permit fee on Cost of issuing na na
film-making the permit and
surveillance
Permit fee on Cost of issuing na na
parades the permit and
surveillance
Registration fees Cost of issuing na na
on fishing boats the permit and
and caretela or surveillance
calesa
C. SERVICE FEES
Garbage Full-cost recovery na
collection fees
Tipping fees for Full- cost na
landfill recovery
Local registry Cost of issuing na na
fees
Medical & Full-cost recovery na
physical
examination fees
Police clearance Cost of issuing na na
fees
Sanitary Cost of issuing na na
inspection fees and inspection
Secretary’s Cost of issuing na
/Certification fees
6
Local Government Code Sec. 152 d(1)
14
D. CHARGES
Ferry rentals Full-cost recovery na
Fishery rentals Per hectare of area na na
covered during lease
period
7
Market fees Full-cost recovery na
Mineral lands rental Per hectare of area na na
covered during lease
period
Occupation fee on Per hectare of area na na
mining claims covered during lease
period
8
Parking charges Full-cost recovery
Public utility charges Full-cost recovery na
(terminal,
waterworks,
communications,
power, transport, etc)
9
Public restrooms
Rental of real At least full cost na
property/equipments recovery
of LGU
Rental of cemetery Lease period na
lots and
niches/columbary
Slaughter & corral Full-cost recovery na na
fees
Toll fees Full-cost recovery na
Tuition fees Full-cost recovery na
Medical/dental fees Full-cost recovery na
Recreational fees Full-cost recovery na
7
If barangays are operating public markets
8
If barangays are operating and maintaining parking spaces
9
If barangays are operating public restrooms
15
Table of LGU Shared Taxes
Municipality 50%
16
Amusement Tax
Tax subject: patrons of shows and entertainment activities; collected and
remitted by proprietors, lessees and operators
Tax rate:
- Not to exceed 10% of paid admission fees
- No admission fees, no tax
Exemptions: operas, concerts, dramas, recitals, painting and art exhibitions,
flower shows, musical and literary presentations except rock and similar
concerts
If with branch, sales is recorded at branch and tax accrues to LGU where
branch is located
If without branch, sales is recorded at principal office for taxation
purposes, but allocated as follows:
o 30% to LGU where principal office is located
o 70% to LGU where factory, project office or plantation is located
If plantation and factory exist in different LGUs, allocation is:
o 60% of 70% share allocated to LGU where factory is located
o 40% of 70% share allocated to LGU where plantation is located
If there are two or more factories or plantations, respective allocation
share is pro-rated to LGUs where these are located on the basis of
production during the period tax is due
* If volume of production cannot be determined, equal sharing among concerned LGUs
will be adopted. For newly established business, initial assessment will be based on
capitalization mobilized in each locality.
17
Criteria in the Development of a Local Tax Policy
The Local Revenue Code is a reflection of the local tax policy of the LGU. It should be in
consonance with the Constitutional mandate and founded on a solid legal basis. Further, it
should be guided by certain philosophical framework and economic principles to ensure equity,
efficiency, sustainability and acceptability.
o can raise sufficient revenues to more than cover the cost of collecting them
Taxes with relatively low yields may be imposed if these are used to correct market
distortions since low yielding taxes tend to:
Tax Elasticity is formally defined as the percentage change in tax yield over a given
period of time to the percentage change in GNP, income or tax base.
Simply put, it is the ability of the tax to keep up with the increase in tax bases.
Equity
The second criterion is to look at taxes from the point of view of fairness. Two (2)
approaches are used to determine if a tax is fair or not.
18
o under the benefit principle, it is considered fairer to tax individuals in proportion
to the benefits they get from government.
o under the ability to pay principle, individuals are taxed in relation to their wealth
or income. The higher the income, the more taxes one pays.
Economic Efficiency
Taxes, in general, influence the decisions of individuals to work, save, consume and invest.
From the point of view of economic efficiency, we want taxes that are non-distortionary or
neutral with respect to these decisions.
Taxes should not be too high to discourage investments nor too low to encourage diseconomies.
Administrative Feasibility
There are significant costs associated with administering the tax system. The administrative
cost of running a tax system depends on a number of factors like:
Taxes vary in the amount of time and money involved in assessing and collecting them
compared to the yield. The best scenario would be to collect taxes with minimal administrative
costs.
Political Acceptability
No tax is popular. Some taxes, however, are more unpopular than others. Political will is
needed to:
o impose taxes,
19
Taxes and charges are vulnerable politically if they require rate adjustments to maintain or
increase their real value.
The only way to make taxes politically acceptable is to establish a strong connection
between the taxes collected and the services provided.
20
PART II. UPDATING THE TAX ORDINANCE/LOCAL REVENUE CODE
Updating the tax ordinance is not simply a question of providing for all possible tax bases. The
updated Local Revenue Code should be a reflection of the local tax policy of the local
government unit. It should also be based on sound revenue projections of the LGUs’ financial
requirements and an understanding of the existing and potential revenue base of the LGU.
The Local Sanggunians, with the assistance of the Local Finance Committees, are mandated by
law to enact revenue ordinance and/or formulate/update Local Revenue Codes (Sec. 132, Sec.
447 (a) 2 (ii) and Sec. 316 of the Local Government Code). The Local Finance Committee
recommends the appropriate tax and other revenue measures for consideration of the
Sanggunian.
Updating the tax ordinance/local revenue code gives occasion for LGUs to revisit and amend
their existing ordinances in accordance with the Local Government Code (LGC) of 1991. It also
allows the inclusion of businesses or economic activities which are not covered under previous
tax ordinances.
To ensure the sustainability and buoyancy of various local taxes, the tax rates of the LGU
Revenue Code should be updated and rationalized once every five years (Sec. 191 – LGC) while
rates for regulatory/service fees and charges should be updated to make these fees and charges
commensurate to the cost of the regulation and the services provided.
There are several decisions to be made which will directly affect local taxation. Among these
are:
rate of imposition
tax subjects
penalty provisions and fines (this can almost be double the original tax to be paid and can
serve as a deterrent for would-be tax delinquent)
grant of tax relief (discounts for prompt payment, condonation of interests, deferred
payment schemes, etc.)
21
fees and charges may actually be yielding very little by way of actual revenues. A little
arithmetic may show that the cost of collecting some fees and charges may be higher than the
actual revenue yield. As noted earlier, it might be prudent for the LGU to concentrate their effort
on the collection of taxes, fees and charges with the highest yield.
The amount of fees to be charged will also need to be studied. Under certain instances, the rates
should reflect the development policy of the LGU. As a general practice, LGUs charge 100 to
1,000 times more for LCE’s permit of golf courses than they would other types of businesses.
This is because golf courses carry with them an environmental cost.
Given the above, the crafting of the local revenue code should be a result of a deliberate study of
the LGUs current and projected financial position, development priorities, and administrative
capability. Efforts to pursue local revenue generating initiatives must be anchored on a clearly
defined and community-owned development vision to promote and accelerate meaningful local
economic development.
With a carefully crafted Local Revenue Code, LGUs can look forward to having a landmark
legislation that can provide the LGU with the means to attain a measure of financial autonomy.
In updating the LGUs’ present tax ordinance or local revenue code, legal provisions of the 1991
LGC, its Implementing Rules and Regulations and other issuances will have to be considered.
Since development and its rewards are not free, LGUs need to enhance its local revenue and
resource generation efforts by exercising their taxing, regulatory and corporate powers to be able
to underwrite the cost of development at the same time equitably distribute the tax burden. A
regular updating and rationalizing of the Local Revenue Code is one potent too for local
development.
LAND-BASED TAXES
Basic Real Property Tax and SEF LGC allows a basic rate not exceeding 1% of
the assessed value
22
Municipalities only have a share from the real
property tax since this is a provincial
imposition.
Preparation of Schedule of Fair Market DOF Local Assessment Regulation No. 1-92
Value prescribes the rules and regulations for the conduct of
general revision of real property assessments.
Assessment Levels to be Applied to the See LGC Section 218 (Assessment Levels) for
Fair Market Value of Real Property applicable maximum assessment levels to be applied
to the fair market value of the real property.
Depreciation Allowance for Machinery Sec. 225 - LGC provides a rate not exceeding 5% of
the original cost or replacement cost for each year of
use and the remaining value for all kinds of
machinery shall be fixed at not less than 20% of
such original, replacement, or reproduction cost for
so long as the machinery is useful and in operation.
23
Redemption of Property Sold Sec 262 - LGC provides an interest of not more than
2% per month on the purchase price from the
date of sale to the date of redemption.
Proceeds from the Resale of Real Estate The Sanggunian may include a provision stating that
taken for Taxes, Fees or Charges the proceeds of the sale shall be distributed to the
municipality and barangay in accordance with the
distribution formula in the LGC.
Penalties for Omission of Property from Sec. 517 - LGC provides for a punishment by
Assessment or Tax Rolls by Officers imprisonment of not less than 1 month but not
and other Acts more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.
Penalties for Any Officer Required to Sec. 517 - LGC provides for a punishment by
Perform Acts Related to the imprisonment of not less than 1 month but not
Administration of Real Property and more than 6 months, or by a fine of not less than
who Willfully Fails to Discharge Such P1,000.00 but not more than P5,000.00 or both at
Duties. the discretion of the court.
Penalties for Delaying Assessment of Sec 518 - LGC provides for a punishment by
Real Property and Assessment Appeals imprisonment of not less than 1 month but not
more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.
Penalties for Failure to Dispose of Sec 519 - LGC provides for a punishment by
Delinquent Real Property of Public imprisonment of not less than 1 month but not
Auction more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.
Rate of Imposition on Tax on Idle Lands Sec 236 - LGC provides for a maximum amount of
5% of the assessed value of real property.
Imposition of the Socialized Housing The Urban Development and Housing Act of 1992
Tax (RA7279) authorizes local government units to
impose the Socialized Housing Tax. As contained in
Sec. 43: ”all local government units are hereby
24
authorized to impose an additional one-half (0.5%)
tax on the assessed value of all lands in urban
areas in excess of Fifty Thousand Pesos
(P50,000.00).
Rate of Imposition Sec 136/151 - LGC provides for a rate not to exceed
75% of 1%
For newly-started business Sec 136/151 - LGC provides for a rate not to exceed
3/40 of 1% of the capital investment of a newly-
started business
Franchise Tax (See Annex B, Excerpt 7)
Rate of Imposition Sec 137/151 - LGC provides for a rate not to 75% of
1%
For newly-stated business Sec 137/151 - LGC provides that the rate shall not
exceed 3/40 of 1% of the capital investment of a
newly-started business
On Contractors and other Independent As defined in Sec. 131(h) - LGC
Contractors (See See Annex B, Excerpt Subject to the tax rate prescribed in Sec. 143(e) -
6) LGC
25
Imposition of Tax on Sand, Gravel and Sec 138 - LGC and Art 227 - IRR allow a rate of not
other Quarry Resources (See Annex B, more than 15% of market value in the locality per
Excerpt 4a) cubic meter.
The Sanggunian Bayan may opt to set a rate lower
than 15 %.
Professional Tax Sec 139 - LGC allows for a maximum rate of
P300.00 annually.
26
Tax on Peddlers (See Annex B, Excerpt Section 143 of the LGC provides for the maximum
10) rate of P75.00 for cities and P50.00 for
municipalities. However, LGUs may opt to use a
schedule based on means of transport as classified
under the LTC, as follows:
27
Excise tax of 15% based on the fair international
market price
Tax on Forest Concessions and Forest This is a new taxable base for LGUs.
Products
The LGC lifted the limitations previously provided
under PD 231.
For municipalities:
Motorized tricycle P480.00
Non-motorized tricycle P240.00
10
See Annex C: Guide in the Calculation of Regulatory Fees
28
Enforcement of environmental laws
Inspection of food products
Quarantine and enforcement of the sanitation
code
Processing and approval of subdivision plans
Establishment and operation of tourism
facilities
Small-scale mining permit
11
See Annex D: Guide in the Calculation of Service Fees/User Charges
30
and every year thereafter during the life of the
lease.
Occupation Fee for Mining Claims This is part of local charges imposable by LGUs
since E. O. 273 (the VAT Law) transferred the
collection of this fee form the BIR to the
city/municipality where the mining claim is situated.
31
PART III. GUIDELINES FOR TAX ORDINANCE PREPARATION
AND CODIFICATION
Since the revenue-raising powers of LGUs authorized under the Code are not self-executory, the
Local Sanggunians as the local taxing authority must enact the needed enabling ordinances.
TAX CODIFICATION
Tax Codification is the process of compiling all tax and revenue ordinances of a local
government units and arranging them systematically into chapters, articles, sections and
subsections.
The output of a tax codification project is a Local Revenue Code. The Code governs the
imposition, assessment and collection of all taxes, fees and charges within its territorial
jurisdiction.
The enactment of the LGC has substantially altered the revenue-raising powers of the
LGU. However, to be able to levy and collect the authorized impositions under the Code,
the LGU must pass a tax ordinance containing the rates and base of imposition, time and
manner of collection and other administrative provisions to effectively implement the
ordinance.
A codified revenue ordinance serves as a guide and a handy reference for local officials
and taxpayers. The ordinance also provides the legal basis for the collection of taxes,
fees, and charges imposed by the local government.
Step 1. Gather and compile all revenue ordinances, including their respective
implementing rules and regulations, if any.
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Step 2. List all revenue ordinances chronologically, that is, from the earliest to latest
enactments in a tally sheet. The listing should show in separate columns the
following information:
Ordinance number
Date enacted
Subject summary
Duplicate another
Step 4. Classify the ordinances according to the type or nature of impositions authorized
for the LGU.
Step 5. After updating the ordinances, prepare a list of business establishments and/or
activities in the LGU. Classify this based on the type of imposition which the
LGU is authorized to levy under the LGC. The purpose of his step is to identify
activities which have never been taxed or could have been under-taxed.
Step 6. Re-examine existing ordinances to identify which tax measure or measures need
improvement and in what area or areas. Revision entails restating ordinances in a
corrected and improved form which either mean repealing them, or adding or
supplementing the deficiencies of existing ordinances.
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In terms of the language of the ordinance, the author12 states that this should be
simple, brief, clear and precise. He provides the following writing tips:
Use the present tense and indicative mood. The present tense is more
understandable and requires fewer words. For example, don’t say, “if any
person shall violate this ordinance he shall be fines.” Say, “Any person
who violates this ordinance shall be fined.” Write, “If it appears” instead
of “If it shall appear”’ and “If it is necessary” instead of “if it shall be
necessary”.
One verb should be used to direct a legal action. It is not a good practice
to use two verbs in place of one, like “is authorized and empowered” to do
a particular act.
12
Taken from book: Juan F. Rivera, How to Codify Ordinances – Do it Yourself, 1979
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In the future, should there be a need to add new sections at the end of
an article, what needs to be done is merely to continue with the next
arabic number. For example: If the last section is 1A.05, then the new
section is numbered, 1A.06.
To add a new article with new sections under a chapter, designate the
new article with the next alphabet immediately following the last letter
and start section number with .01
Step 7. Consolidate various outputs to produce the draft Local Revenue Code (refer to
your copy of the MTP Sample Model Revenue Code).
Following the outline of the model local revenue code provided, below are the basic guidelines
in preparing the chapters, articles, and sections:
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Table 6: REVENUE CODE OUTLINE
Definitions
Imposition of a tax or free
Exemption
Time of payment
Surcharge for late payment
Administrative provisions
Interest on unpaid tax, fee or charge
Definitions (in an Article) The words defined in this section refer to those that are used and
have meanings applicable only in a particular chapter or article.
Words defined under Chapter 1, Article B are those that used and
carry the same meaning throughout the Code.
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Imposition of Tax or Fee Coverage of the tax
It would be best for the Sanggunian to identify the tax bases not
specifically enumerated in the LGC which may be included in the
Local Revenue Code.
Such exemption or relief takes effect only during the next calendar
year for a period not exceeding twelve (12) months as may be
provided in the ordinance.
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Time of Payment This Section specifies the period within which the imposition is
payable.
The amount of surcharge may vary according to the type of tax, fee
or charge.
Administrative Provisions This Section contains provisions which are relevant to the
administration or implementation of a tax, fee or charge.
This Section may include steps involved in, and requirements for,
the payment of a tax or fee, as well as procedures in monitoring the
payment of the impositions, mechanisms to enforce collection of the
tax, etc.
Interest on Unpaid Tax, A general provision on the imposition of interest is provided in the
Fee or Charge LGC at a rate not exceeding two percent (2%) per month of the
unpaid tax, fee or charge, including surcharges, until such
amount is fully paid but not to exceed thirty six (36) months.
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This rate applies if the Revenue Code does not provide the rate of
interest for any specific impositions.
Since the LGC allows the LGUs to identify the services and functions for which corresponding
fees and charges may be levied, below is a list of some such fees and charges being imposed by
other local government units.
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Regulatory Fees (Non-Business)
Burial Civil Registry Fees
Court Fees Exhumation/Removal of Cadaver
Holding of Benefits Firearm’s Permit
Fiscal’s Clearance Impounding/Sales of Stray Animals
Large Cattle Registration Police Clearance
Marriage Permit & Solemnization Sheriff’s Fees
Tax Clearance Fees
Service Fees
Garbage Collection Health Services
Hospital Fees Overnight Parking
Parking Fees Physical Examination & Medical
Secretary’s Certification Certificates
Terminal Fee Toll Fees or Charges
Towing Charges Traffic Violations
Tuition Fees
Receipts from Economic Enterprises
Cemeteries Electrical Light and Power
Markets Slaughterhouses and Corrals
Waterworks System
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PART IV. ENACTMENT OF THE LOCAL REVENUE CODE
As required by the Local Government Code, the draft Revenue Code needs to be legally enacted
through a legislative act of the Sanggunian and approved by the Local Chief Executive.
Below are the processes involved in said enactment for cities and municipalities.
FOR CITIES
Step 1 a. A short note explaining the need for the ordinance is prepared
Filing and and signed by the proponents and attached to the ordinance.
Numbering b. Two (2) or three (3) copies of the draft ordinance are filed
with the Secretary to the Sanggunian at least three (3) days
before a regular or special session.
c. The Secretary to the Sanggunian records the proposed City
Revenue Code in the logbook and assigns a number to it.
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hearings shall continue until all issues have been presented
and fully deliberated upon and/or a consensus shall have been
obtained, whether for or against the enactment of the
proposed Revenue Code.
b. The Secretary to the Sanggunian Panlungsod must prepare
the minutes of such public hearings and shall attach to it the
position papers, memoranda, and the like submitted by those
who participated.
Step 7
Approval a. The enacted revenue ordinance shall be presented to the City
Mayor for approval.
b. If the latter approves the ordinance, he shall affix his
signature on each and every page of the document.
c. If he does not approve the ordinance, he shall veto it and
return it with his objections to the Sanggunian, which may
proceed to reconsider the same.
d. The veto shall be communicated by the City Mayor to the
Sanggunian within ten (10) days, otherwise the ordinance
shall be deemed approved as if the Local Chief Executive
had signed it. The Local Chief Executive may veto an
ordinance only once.
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e. The Sanggunian may override the veto of the Local Chief
Executive by two-thirds (2/3) vote of all its members
thereby making the ordinance effective for all legal
intents and purposes.
Step 8 a. Within ten (10) days after the approval of the Revenue Code,
Publication or a certified true copy shall be published in full for three (3)
Posting of consecutive days in a newspaper of local circulation.
Approved b. In cases where there are no newspapers of local circulation,
Ordinance the same may be posted in at least two (2) conspicuous and
publicly accessible places.
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FOR MUNICIPALITIES AND COMPONENT CITIES
Step 1 a. A short note explaining the need for the ordinance is prepared
Filing and and signed by the proponents and attached to the draft
Numbering ordinance.
b. Two (2) or three (3) copies of the draft ordinance are filed
with the Secretary to the Sanggunian at least three (3) days
before a regular or special session.
c. The Secretary to the Sanggunian records the proposed
Local Revenue Code in the logbook and assigns a number to
it.
The notice must indicate the dates and venue of the public
hearing. The public hearing must be held at least ten (10) days
from the sending of notices or the last day of publication
whichever comes first.
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memoranda, and the like submitted by those who
participated.
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All approved ordinances shall be numbered consecutively
throughout the calendar year and continuously from year to year,
using the last two (2) digits of the calendar year in which it is
enacted, followed by the denominated number.
Step 8 a. The Secretary to the Sanggunian shall within three (3) days
Review by the after approval of the Revenue Code, transmit a copy of the
Sangguniang code to the Sangguniang Panlalawigan for review.
Panlalawigan b. Within thirty (30) days after receipt of the code, the
Sangguniang Panlalawigan shall examine the documents or
transmit them to the Provincial Attorney, or if there is none,
to the Provincial Prosecutor for immediate examination.
c. 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.
d. If the Sangguniang Panlalawigan finds that such an ordinance
is beyond the taxing powers conferred to a
municipality/component city, it shall declare such ordinance
invalid in whole or in part.
e. The Sangguniang Panlalawigan shall enter its action in the
minutes and shall advise the corresponding
municipality/component city of the action it has taken.
f. If no action is taken by the Sangguniang Panlalawigan within
thirty (30) days after the submission of such ordinance, the
same shall be presumed consistent with the law and therefore
valid.
Step 9 a. Within ten (10) days after the approval of the Revenue Code,
Publication or a certified true copy of the ordinance shall be published in
Posting of full for three (3) consecutive days in a newspaper of local
Approved circulation.
Ordinance c. In cases where there are no newspapers of local circulation,
the same may be posted in at least two (2) conspicuous and
publicly accessible places within the territorial jurisdiction of
the LGU.
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tax, fee, or charge levied by the ordinance.
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SOURCES OF INFORMATION:
3. Local Government Code of 1991 and Its Implementing Rules and Regulations
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ANNEX A. LIST OF PROFESSIONS REQUIRING GOVERNMENT EXAMINATION
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