BAR REVIEW LECTURE LOCAL TAXATION

Prof. Carmencita C. Dabu

 Local Taxation primary law- Local Government Code of 1991 RA

Part I Local Government Taxation Book II, Title One- Secs.128 to 196 Part II Real Property Taxation Book II, Title Two Sec.197 to 283

 Part I Local government taxation:

Nature and source of taxing power of LGUs -

a) Sec. 5, Art. X, 1987 Constitution

b) Sec. 128 to 196, LGC

. Nature of taxing power of LGUs - not inherent, not mere delegation by legislature but direct constitutional grant - not absolute subject to limitations (Sec.133, LGC) - legislative exercised by Sanggunian through ordinance (Sec. 132, LGC) - territorial

Fundamental Principles Sec. 130 [CUP E-CLIP] U - Uniform E - Equitable P - Public purpose C - not unjust, excessive, oppressive or Confiscatory C - not Contrary to law, public policy L - collection not Let to private person I - Inure solely to the LGU P - Progressive system

Power to prescribe penalties(Sec. 516, LGC) Power to adjust tax rates Sec. 191 not oftener that once every 5 years

Power to grant tax exemption- Sec. 192, LGC - does no apply to regulatory fees - thru ordinance - conferred thru tax exemption certificate - tax exemption cert. not transferrable

Guidelines: tax exemptions - calamities, civil disturbance, etc. - through ordinance - all businesses similarly situated - duration 12 months - in case of shared revenues- only to LGU granting exemption

Guidelines tax incentives - new investments - ordinance prescribe terms and conditions - definite period one year - ordinance passed prior to Jan. 1

Tax exemption prior to LGC Gen. Rule withdrawn by Sec. 193 Exceptions: (Sec. 234) a) local water districts b) cooperatives registered under RA 6938. non-profit hospitals c) educational institution

Question Does the power to grant tax exemptions include the power to condone taxes that have already accrued before the passage of the ordinance?

Residual taxing power of LGUs -(Sec. 186)- LGUs can impose other taxes. Limitations: a) constitutional b) limitations under Sec. 133 c) fundamental principles under Sec. 130 d) requirement under Sec. 186 e) principle of pre-emption

Principle of Pre-emption or Exclusionary Rule (Victorias Milling Co., Inc. v. Municipality of Victorias, Neg. Occ.. L-21183. Sept. 27, 1968) -national government elects to tax a particular area, it impliedly withholds from the LGU the power to tax the same area.

Cases: Province of Bulacan vs. CA GR 126232, Nov. 27. 1998 Mun. of San Fernando, La Union vs. Sta. Romana, March 31, 1987

Tax Ordinance a. Procedure for approval - Sec. 53 quorum - Sec. 54 approval and veto b. Effectivity 1) other ordinances after 10 days copy was posted 2) tax ordinances -

Scope of Taxing Power: Common Limitations (Sec. 133) a. income tax except banks and FI; b. documentary stamp tax c. taxes on estate, gift, legacies and mortis cause acquisitions; except LGC

d. customs duties (TFC TCCP) e. TFC - importations and exportations f. TFC agricultural/aquatic products sold by marginal farmers g. business taxes- registered with BOI as pioneer (6 years) and non-pioneer (4 years) h. excise taxes imposed by NIRC; TFC on petroleum products

i. percentage tax or VAT j. taxes on gross receipts of transportation contractors, etc. k. taxes on reinsurance premiums l. TFC for registration of motor vehicles license and permits m. TFC- Phil. products exported n. TFC RA 6810 and RA 6938 n. TFC on the government and LGUs

Specific Taxing powers of LGUs

A. Province and City 1. transfer of real property-

2. printers and publishers tax exempt - books/reading materials required by DECS and text books

3. franchise tax- 50% of 1% of GAR; (Sec. 137, LGC) a) Sec. 119, NIRC -2% FT on electric gas and water utilities; b) Telephone, telegraph, radio and TV broadcasting 12%VAT (Sec. 108 [A], NIRC)

4. sand, gravel, quarry resources (public lands, sea beds, streams)-10% of FMV per cubic meter (Sec. 138, LGC) NIRC imposes tax on sand gravel quarry resources regardless of source.

5.professional tax - passed government examinations 6.amusement tax proprietors, lessees, operators exempt operas, concerts, drama, recitals, painting/art exhibitions, musical, literary, oratorical except: pop, rock or similar concets.

B. Municipality- not levied by the province (Sec. 142) 1. Business taxa) manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers and compounders of liquors, distilled spirits and wines (Sec. 143) graduated annual fixed tax -37.5% of 1% - gross sale of P6.5M or more

b. wholesalers, distributors, or dealers of any article of commerce- graduated annual fixed tax; gross sale-P2M percentage tax at 50% of 1%

c. exporters and manufacturers, millers, producers, wholesalers, distributors or retailers of essential commodities

d. Retailers annual percentage tax on gross sale (preceding CY) -not more than P400k - 2% - more than P400k - 1% barangays exclusive power if gross sales not exceed P50,000 (city) and P30,000 (municipality)

e. Contractors and independent contractors graduated annual fixed tax * gross receipt P2M percentage tax -50% of 1%

f. Banks and financial institutions50% of 1%

g. Peddlers merchandise/article of commerce not exceed P50.00 per peddler annually;

h. any business subject to excise, VAT or percentage tax rate not exceed 2% of gross receipts
Municipalities within Metro Manila - rate not exceed by 50% of maximum under LGC

C. Barangays 1) retailer rate 1% 2) service fees/charges 3) barangay clearance 4) other fees-

Situs of local taxes (Sec. 150) 1. place of business 2. principal and branch office sale at branch

3. with factory, plantation, project office -100% recorded-principal office; tax shall accrue and taxablea. 30% principal 70% factory/plantation/p.o.

b. plantation and factory- located in different city/municipalities 100% recorded at principal officetax accrues and payable at: 1) 30% principal office; 70% allocated: 60% -factory 40%-plantation or p.o

2) 2 or more factories located at different municipalities 70% pro rated

Common revenue raising powers of LGUs 1. fees and charges 2. operation of public utilities owned by LGU

3. Toll fees
* except: enlisted men of AFP and PNP on mission, post office personnel delivering,

physically handicapped/disabled citizens 65 years of age. * suspend collection public safety and welfare requires

4. Community tax Kinds : a) basic (CTC A) P5 b) additional (CTC B) c) CTC C juridical persons
Who are liable basic tax a) individuals 18 years old employed for 30 consecutive working days or engaged in business or owns real property or required by law to file ITR

Who are exempt

1) diplomatic and consular rep. 2) transient visitors stay not exceed 3 months Place of payment individuals -residence juridical persons- principal place of business

Time of payment accrues -1st day of January payable last day of Feb Penalty for late payment 24% per annum

Collection of business tax

a) Tax period - Calendar Year manner of payment quarterly installment b) Accrual of tax 1st day of January of each Year **new taxes -1st of quarter following the effectivity of ordinance

c) Time of payment within 1st 20 days of January of each year; or next quarter ** extended 6 months only
d) Penalties interest 2% per month maximum -36 months surcharge 25% e) Treasurer collect and inspect books

Taxpayers remedies
a) Period of assessment 5 years tax become due Fraud/intent to evade taxes 10 years from discovery Period of collection 5 years from date of assessment

Suspension prescriptive period: 1. Treasurer -legally prohibited to collect 2. TP request for reinvestigation or waives period 3. TP out of the country

b) Protest of assessment 1) written protest 60 days 2) Treasurer 60 days to decide 3) if denied 30 days to appeal to regular courts inaction 30 days from lapse of 60 days = appeal to regular courts 4) Regular courts denied protestappeal to CTA 30 days

c) Claim for refund or tax credit ** erroneously/illegally collected TFC ** written claim filed with Treasurer ** 2 years from payment

Civil remedies for collection of revenues

a) Local governments lien b) Civil remedies (i) Administrative action a) distraint of personal property b) levy on real property

personal property exempt from distraint or levy (Sec. 185) Penalty - local treasurer for failure to issue and execute warrant of distraint or levy - dismissal
(2) Judicial action

REAL PROPERTY TAXATION

1. Fundamental principles 2. Nature of real property tax 3. Imposition of real property tax a) Power to levy real property tax b) Exemption from real property tax

4. Appraisal and assessment of real property tax

a) Rule on appraisal of real property at fair market value
b) Declaration of real property

c) Listing of real property in assessment rolls

Appraisal and assessment of real property tax

d) Preparation of schedules of fair market value (i) Authority of assessor to take evidence (ii) Amendment of schedule of fair market value e) Classes of real property f) Actual use of property as basis of assessment

Appraisal and assessment of real property tax

g) Assessment of real property (i) Assessment levels (ii) General revisions of assessments and property classification (iii) Date of effectivity of assessment or reassessment (iv) Assessment of property subject to back taxes (v) Notification of new or revised assessment h) Appraisal and assessment of machinery

5. Collection of real property tax

a) Date of accrual of real property tax b) Collection of tax (i) Collecting authority (ii) Duty of assessor to furnish local treasurer with assessment rolls (iii) Notice of time for collection of tax

Collection of real property tax

c) Periods within which to collect real property tax d) Special rules on payment (i) Payment of real property tax in installments (ii) Interests on unpaid real property tax (iii) Condonation of real property tax

Collection of real property tax

e) Remedies of LGUs for collection of real property tax (i) Issuance of notice of delinquency for real property tax payment (ii) Local governments lien (iii) Remedies in general (iv) Resale of real estate taken for taxes, fees or charges (v) Further levy until full payment of amount due

6. Refund or credit of real property tax

a) Payment under protest

b) Repayment of excessive collections

7. Taxpayers remedies
a) Contesting an assessment of value of real property (i) Appeal to the Local Board of Assessment Appeals (ii) Appeal to the Central Board of Assessment Appeals (iii) Effect of payment of tax

Taxpayers remedies b. Payment of real property under protest (i) File protest with local treasurer (ii) Appeal to the Local Board of Assessment Appeals (iii) Appeal to the Central Board of Assessment Appeals (iv) Appeal to the CTA (v) Appeal to the Supreme Court