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Local Taxation

1987 Consti
LGC – enabling law
RA7160

Not inherent unlike sovereign state.


May exercise the power only if delegated.

Subject to limitations
-Each local gov unit shall have the power to create its own sources of revenue and to levy
taxes. Fees, and charges, subject ot such limitations and guidelines as Congress may provide.

Authority to grant tax exemptions


LGUs may, through ordinances, grant tax exemptions, incentives, reliefs (sec. 192 LGC)
Ex. Cagayan De Oro, Tanay Rizal
Except real prop. Tax (?)
*Limited to local taxes

Withdrawal of tax exemption privileges


Tax exemptions/incentives granted to, or presently enjoyed by all persons, have been
withdrawn by effectivity of the code. (sec. 193 LGC)

Authority to adjust tax rates


LGUs shall have authority to adjust tax rates not oftener than once every 5 years, but in no
case shall adjustment exceed 10% of rates fixed under LGC. (sec. 191 LGC)

Local Taxing Authority


Sangguniang Panlalawigan – province
Panlungsod – city
Bayan – Municipalities
Barangay – Barangays

Procedure for Approval and Effectivty of Tax Ordinances

Tax Ordinances and Revenue Measures


1. Procedure for approval – shall be in accordance with LGC. Public hearings shall be
conducted for the purpose prior to the enactment thereof.
2. Appeal to the Sec. of DOJ – any question on the constitutionality of tax ordinances or
revenue measures may be raised on appeal within 30 days from effectivity to Sec.
who shall render decision within 60 days.
-Such appeal will not suspend effectivity of ordinance and collection of tax
-Within 30 days after receipt of decision or lapse of the 60-day period to decide in
case of inaction. TP can file appropriate proceedings with relevant court.

3. Publication – within 10 days from approval, certified true copies of tax


ordinance/revenue measure shall be
Fundamental Principles

-Taxation shall be uniform in each local subunit


-Taxes, fees, charges, and other impositions shall be EQUITABLE, and based as much as
possible on the TP’s ability to pay.
-Taxes shall be levied and collected only for PUBLIC purpose.

Common Limitations of Power to Tax


Shall not extend to the imposition of the ff:
1. Income tax, except when levied on banks and other financial institutions
2. DST
3. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis cause,
except as otherwise provided in the Code.
4. Custom duties, registration fees of 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 LGU concerned.

Only exception: LGUs cannot tax holding companies

Common Limitations of Power to Tax

8. Excise taxes on articles enumerated under the NIRC, as amended, and taex, fees, and
charges on

12. taxes, fees, 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. ^^on the Phil. Products actually exported, except as otherwise provided in the LGC.
14. ^ôn Countryside and and Barangay Business Enterprises, and duly registered
cooperatives under the Cooperative Code of the Phil.

15. ^^on the National Gov. its agencies and instrumentalities and LGUs.

Taxing powers of Provinces

1. Tax on the transfer of real property ownership


a. Transfer covered – sale, donation, barter, or any other mode of transferring
ownership of real property.
b. Rate of tax – not exceed 50% of 1% of total consideration or of the FMV in case
the monetary consideration is not substantial, whichever is higher.
(most LGUs tax base is higher of zonal and FMV)
c. Duties of Officials relative to payment of transfer tax.
d. Real property covered – lands, bldgs., and machineries
e. Time of payment – seller/donor to pay tax within 60 days from date of execution
of the deed, or 60 days from the date of decedent’s death
f. Exemption from tax – sale/transfer of real property pursuant to CARP law is
exempt from tax.
g. Duties of officials relative to payment of transfer tax
2. Tax on the business of printing and publication
a. Coverage – Persons engaged in printing and or publication
b. Rate of Tax – 50% of 1% of gross annual receipts for the preceding calendar year.

Situs of business tax


Recording of Sales/Payment of tax – for collection of tax on business
a. If maintaining a branch/sales outlet (elsewhere) – sales recorded in the branch/sales
outlet making the sale or transaction.
Business taxpaid to municipality where branch/sales outlet is located.

b. If no branch/sales outlet – sales recorded in the principal office and business tax paid
in the municipality where principal office is located.

*Catch all provision (principal place)