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Guide for Updating Local Revenue Code

PART I. GENERAL PRINCIPLES AND CONCEPTS OF LOCAL TAXATION

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.

Taxation shall be uniform in each local government unit;

Taxes, fees, charges and other imposition shall:

Be equitable and based as far as practicable on the taxpayer’s ability to pay; Be levied and collected only for public purposes; Not be unjust, excessive, oppressive, or confiscatory; Not be contrary to law, public policy, national economic policy, or in restraint of

trade;

The collection of local taxes, fees and charges and other impositions cannot be let to any private person (see Annex B, Excerpt 2);

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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.

Exercise by LGU of their Taxing and Revenue-Raising Powers

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 GovernmentUnits.”

In essence, the limitations are:

Table 1: COMMON LIMITATIONS

PROHIBITIONS REMARKS

Income Tax Local government units may levy local taxes on banks and other financial institutionsbased 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)

Documentary Stamp Tax Only the National Government may imposethe excise tax upon the privilege, opportunity or facility offered at exchanges for the transaction of the business.

Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa

An exception is provided in Sec. 135 of the LGC, where provinces and cities may impose tax on the sale, donation, barter, or on any other transferring ownership or title of real property.

Transfer of real properties owned by religious and charitable institutions which are sold or transferred to private parties are subject to transfer tax.

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Custom duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kind of custom duties, charges and dues.

Except wharfage on wharves constructed and maintained by the local government unitconcerned.

Also, Sec. 149 of the LGC authorizes LGUs to impose license fees for the operation of fishing vessels of 3 tons or less.

Taxes, fees and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such or goods or merchandise(see Annex B, Excerpt 12).

Import or export taxes or fees on goods and commodities carried through into or out of their respective territories would deter the free flow of commerce in the country and cause considerable increase in the prices ofcommodities, to the prejudice on the consuming public.

Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided in the Code.

Local government units are authorized to impose fixed graduated taxes on gross sales.

Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen (see Annex B, Excerpt 13).

Sec. 131 provides a listing of covered agricultural products and the definition of a marginal farmer or fisherman.

So that agricultural products and aquatic products become taxable when:

It is sold by persons other than the farmer or fisherman, even without undergoing any process.

Sold on a commercial scale The products have been transformed

into manufactured products such as sugar, charcoal, balut, sardines, etc.

Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration(see Annex B, Excerpt 14).

DOF issued LFC No. 5-93 provides guidelines on this.

Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum

Excise taxes can be in the form of specific or ad valorem taxes.

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products (See Annex B, Excerpt 15). Specific taxes are based on the unit or number, weight or volume capacity or any otherphysical 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 contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in the Code (see Annex B, Excerpts 15a and 16).

Since transportation contractors are still subject to the business tax imposed on contractors by LGUs as stated in DOF Opinion, November 8, 1995, it may be implied that LGUs may impose a business tax on bases other than grossreceipts, i.e., type of vehicle, number of vehicles, capacity, etc. (for transport companies with terminals or booking office)

Taxes on premiums paid by of reinsurance or retrocession.

Reinsurance is a contract by which an insurer procures a third person to ensure him against loss or liability by reason of original insurance.

Retrocession is the rejection of the risk being insured.

Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles (see Annex B, Excerpt 17).

LGUs may impose taxes, fees, or charges for the registration of tricycles.

Taxes, fees or other charges on Philippine products actually exported, except as otherwise provided in the Code (see Annex B, Excerpt 18).

The prohibition does not apply to the business of exporting said products which is still covered by the business tax on exporters. (DOF Opinion, March 10, 1994), Sec. 143(c) of the LGC of 1991.

Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A 6810 and R.A 6938 otherwise known as the “Cooperative Code of the Philippines” respectively (see Annex B, Excerpt 19).

However, per DOF Opinion dated November 14, 1994, the exception enjoyed by duly registered cooperatives does not includepayment of service charges or rentals for the use of property and equipment or public 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 National Government, its agencies and instrumentalities, and local government units

This should be read in connection with Section 193 of the Code which withdraws exceptions or incentives granted to all persons, natural

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(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.

Revenue Structure of LGUs

LGUs have two (2) major sources of funds, internally generated (local) and external (shares from national revenues and foreign/local grants).

TABLE 2: LGU REVENUE STRUCTURE

Local Revenue Bases Available to Local Government Units

Local government units may impose taxes, fees and charges as follows:

NATURE BASIS/AUTHORITY

Local Sources

Tax Revenues

Property Taxes Business taxes and other local taxesNon-Tax Revenues

Receipts from economic enterprises Fees, user charges and other receipts

External Sources

Statutory allotments/shares from National Government, Grants, Aids, Loans

RA 7160, Governmental PowersRA 7160, Governmental Powers

RA 7160, Corporate PowersRA 7160, Police Powers; Corporate Powers

RA 7160Foreign and Local Sources

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Table 3: LGU REVENUE BASE

TYPES OF IMPOSITIONS

DEFINITION REMARKS EXAMPLES

Taxes Impositions under the taxing power of LGUs for the purpose of raising revenues, e.g., real property tax, business tax andother local taxes

Allocation among LGUs of taxing powers and distribution of proceeds, defined by the law

Property taxes

Business taxes

Franchise, community tax, amusement, tax on printing and publication, etc

Regulatory Fees Charges made by law or ordinance for the regulation or inspection of business or activities

Based on cost of regulation of the activity

Mayor’s permit fee on business; permit fees for sealing and licensing of weights 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;

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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 services rendered or for conveniences furnished by the LGU

Amount commensurate to the cost of services

Secretary’s/certification fees; local civil registry fees; police clearance fees; sanitary inspection fees; service fees for various health services; garbage collection fees; dog vaccination fees

IT/computer processing fees

Tipping fees

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Charges Impositions for the operation of public enterprises in connection with the government’s exercise of its proprietary functions

Full cost recovery as basis for amount of charge to be imposed

Fishery rentals, fees and charges; rentals of personal and real properties owned by the municipality; charges for parking; 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:

Manufacturing, assembling, repacking, processing, brewing, distilling, rectifying and compounding of liquors, distilled spirits and wines or manufacturing of any article of commerce of whatever kind or nature.

Wholesalers, distributors, dealers, or retailers in any article of commerce of whatever kind or nature.

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.

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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%:

Tax on transfer of real property ownership

Franchise tax

Annual fixed tax for every delivery truck, van of manufacturers or producers, wholesalers of, dealers, or retailers in certain products

Professional tax

Tax on business of printing and publication

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).

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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.

Other fees and charges on

a. Commercial breeding of fighting cocks

b. Cockfights and cockpits

c. Places of recreation charging admission fees

d. Billboards, signboards, neon signs and outdoor advertisements

e. Impounding astray animals

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Table 4: SAMPLE/MENU OF LGU IMPOSITIONS

Impositions BasesCities, MMA, Municipalities

Munici-palities

Provinces Barangays

A. TAXES

Land-Based TaxesReal property tax Assessed value na naTax on transfer of real property

Total consideration in

acquisition or fair market value whichever is

higher

na na

Idle land tax Assessed value na na

Special levy on lands

Actual cost of projects

and improvements including cost of

acquiring land and other real properties

na

Socialized housing tax

Assessed value of lands in urban

areas

na na

Business and other Community-Based Taxes

Amusement tax(See Annex B, Excerpt 3)

Gross receipts from admission

fees

na na

Annual fixed tax on delivery truck or van of manufacturers or producers, dealers, or retailers in certain products(See Annex B, Excerpt 3)

Per delivery truck,van or vehicle

na na

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Business tax Gross receipts for the preceding calendar year

na 1

Community tax Per person, income

RPT values

na na

Franchise tax(See Annex B, Excerpt 3)

Capital investments for newly started

business/Gross receipts for

the preceding calendar year for existing business

na na

Occupation tax Per occupationType of

occupation

na na

Professional tax(See Annex B, Excerpt 3)

Per professionType of

profession

na na

Tax on business of printing and franchise and publication (See Annex B, Excerpt3)

Capital investments for newly started

business/Gross annual

receipts for the preceding

calendar year for existing

businesses

na na

Tax on business of operating motorized and non-motorized tricycle

Type of tricycle (motorized or

non-motorized)

na na

Tax on forest concessions and forest products

Annual gross receipts for the preceding year

na na

Tax on mining operations

Gross receipts for the preceding year

na

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.

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means of transport used by peddler

Tax on sand, gravel and other quarry resources

Fair market value per cubic meter

na na

B. PERMITS AND REGULATORY FEES

Business permit Cost of regulating the activity or

privilege

2 na

Building permit and related fees

In accordance with schedule of rates fixed by the

Sec of DPWH

na na

Zoning and locational fee

Rates covered by HLURB Circular

na na

Development permit

Cost of issuing the permit and surveillance

na

Excavation fees Cost of issuing the permit and surveillance

3 na

Signboards,billboards and outdoor advertisements

Cost of issuing the permit and surveillance

na 4

Fees on impounding of stray animals

Cost of impounding and

feeding

na 5

Fees for sealing and licensing of weights and measures

Cost of issuing the permit,

calibration and surveillance

na na

Tricycle franchise, bicycles

Cost of issuing the permit and surveillance

na na

Large cattle registration and transfer fees

Cost of registration and

surveillance

na na

Permit fee on agricultural

Cost of issuing the permit and

na na

2 Business permit on printing and publication, , delivery truck or van of manufacturers, producers, wholesalers, retailers & dealers of certain products3 On provincial roads4 Local Government Code Sec. 152 d(3)5 If devolved to barangays by municipalities or cities in their respective ordinances.

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machinery and other heavyequipment

surveillance

Permit fee for burial, cadaver exhumation and removal

Cost of issuing the permit and surveillance

na na

Permit fee for cockfighting

Cost of issuing the permit and surveillance

na 6

Permit fee for cockpit owners/ operators/ licensees and other cockpit personnel

Cost of issuing the permit and surveillance

na na

Permit fee on film-making

Cost of issuing the permit and surveillance

na na

Permit fee on parades

Cost of issuing the permit and surveillance

na na

Registration fees on fishing boats and caretela or calesa

Cost of issuing the permit and surveillance

na na

C. SERVICE FEES

Garbage collection fees

Full-cost recovery na

Tipping fees for landfill

Full- cost recovery

na

Local registry fees

Cost of issuing na na

Medical & physical examination fees

Full-cost recovery na

Police clearance fees

Cost of issuing na na

Sanitary inspection fees

Cost of issuing and inspection

na na

Secretary’s /Certification fees

Cost of issuing na

6 Local Government Code Sec. 152 d(1)

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D. CHARGES

Ferry rentals Full-cost recovery na

Fishery rentals Per hectare of area covered during lease

period

na na

Market fees Full-cost recovery na 7

Mineral lands rental Per hectare of area covered during lease

period

na na

Occupation fee on mining claims

Per hectare of area covered during lease

period

na na

Parking charges Full-cost recovery 8

Public utility charges (terminal, waterworks, communications, power, transport, etc)

Full-cost recovery na

Public restrooms 9

Rental of real property/equipments of LGU

At least full cost recovery

na

Rental of cemetery lots and niches/columbary

Lease period na

Slaughter & corral fees

Full-cost recovery na na

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 markets8 If barangays are operating and maintaining parking spaces9 If barangays are operating public restrooms

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Table of LGU Shared Taxes

Tax Provincial Sharing City Sharing

Basic RPT Province 35%

Municipality 40%

Barangay 25%

City 70%

Barangay 30%

SEF Prov. Sch. Board 50%

Mun. Sch. Board 50%

City Sch. Board 100%

Idle Land Tax * Province 100% City 100%

Special Levy This could be imposed any LGU provided there is proper consultation and duly approved ordinance.

* To encourage active participation of the barangays and municipalities in the implementation of the idle land tax, the same sharing scheme with that of real property tax may be adopted by the province through a duly enacted ordinance.

Tax Provincial Sharing City Sharing

Tax on Sand, Gravel & other Quarry Resources

Province 30%

Component city/

municipality 30%

Highly urbanized

city 60%

Barangay 40% Barangay 40%

Tax Provincial Sharing City Sharing

Amusement Tax Province 50% City 100%

Municipality 50%

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Amusement Tax

Tax subject: patrons of shows and entertainment activities; collected and remitted by proprietors, lessees and operatorsTax 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

Situs Rule: Taxing Complex Business Establishments

Used on companies with multiple layers of operations: principal office, branch or sales offices, factories, plantations and experimental farms

Branch: a fixed place which conducts operations as extension of the principal office; also called sales office

Warehouse: a building used for storage of goods; if it accepts orders and issues sales invoices, it is treated as sales office

Situs Rule: System of Allocating Gross Receipts to LGUs *

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 locatedo 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 locatedo 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.

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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.

The following are the criteria in developing a local tax policy.

Revenue Adequacy and Elasticity

Revenue adequacy refers to the amount generated by the tax. It is desirable to concentrate effort on taxes which are cost effective, e.g., those that:

o can raise sufficient revenues to more than cover the cost of collecting them

o contribute a substantial portion of the cost of services financed by local governments

Taxes with relatively low yields may be imposed if these are used to correct market distortions since low yielding taxes tend to:

o dissipate collection efforts

o increase administrative costs

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.

It has two dimensions:

o growth of the potential tax base, and

o ease with which the tax exploits that growth

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.

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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 orneutral 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:

o kinds of records that need to be maintainedo complexity of the tax structure in terms of number of rates, exemptions, special

provisions

Taxes vary in the amount of time and money involved in assessing and collecting themcompared 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,

o determine a rate structure,

o decide who should pay and how they are assessed,

o collect taxes physically, and

o enforce sanctions against delinquents.

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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.

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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 amendtheir 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:

decision on the types of taxes, fees and charges to be imposed

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.)

tax incentives (deferment of taxes, waiver of taxes and fees, etc.)

Deciding which provision to retain, revise, delete and add is not a mechanical act on the part of the LGU. Having a long list of fees and charges may lull local government officials into thinking that there is a sufficient source of local revenues when in fact majority in the long list of

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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 1991LGC, 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.

Table 5: GUIDE FOR UPDATING THE LGU REVENUE CODE

LAND-BASED TAXES

Basic Real Property Tax and SEF LGC allows a basic rate not exceeding 1% of the assessed value

An additional 1% SEF tax on the assessed value is also provided, however, that the proceeds accrue to the School Board and not the province.

AREA OF CONCERN REMARKS

Definitions and Construction of Provisions

Definitions are taken from:

Section 131 of the LGC 1991 Section 3 of PD 231 (Local Tax Code)

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Municipalities only have a share from the real property tax since this is a provincial imposition.

RA 9513, Renewable Energy Act of 2008, Sec. 15

Tax Discounts This is optional depending on the Sanggunian. If a tax discount is granted, the extent of discount allowed for prompt and advanced payment shall be specified.

Art. 342 - IRR provides that prompt payments may be given a maximum of 10% discount while advanced payments may be given a maximum of 20% discount.

Imposition of Fine The Sanggunian is authorized by the LGC to fix the amount of penalty or fine for non-compliance.

Preparation of Schedule of Fair Market Value

DOF Local Assessment Regulation No. 1-92 prescribes the rules and regulations for the conduct of general revision of real property assessments.

Assessment Levels to be Applied to the Fair Market Value of Real Property

See LGC Section 218 (Assessment Levels) for applicable maximum assessment levels to be applied to the fair market value of the real property.

The Sanggunian may lower the assessment levels. Under this instance, it is advisable to make sure that the fair market values provided approximates actual market values or BIR zonal valuation.

RA 9513, Renewable Energy Act of 2008, Sec. 15

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.

RA 9513, Renewable Energy Act of 2008, Sec. 15

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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.

In addition, it allows an interest of not more than 2% per month for the entire amount paid by the purchaser of the property to be redeemed.

Proceeds from the Resale of Real Estate taken for Taxes, Fees or Charges

The Sanggunian may include a provision stating that 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 Assessment or Tax Rolls by Officers and other Acts

Sec. 517 - LGC provides for a punishment by 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 Any Officer Required to Perform Acts Related to the Administration of Real Property and who Willfully Fails to Discharge Such Duties.

Sec. 517 - LGC provides for a punishment by 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 Delaying Assessment of Real Property and Assessment Appeals

Sec 518 - LGC provides for a punishment by 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 Delinquent Real Property of Public Auction

Sec 519 - LGC provides for a punishment by 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.

Rate of Imposition on Tax on Idle Lands Sec 236 - LGC provides for a maximum amount of5% of the assessed value of real property.

Imposition of the Socialized Housing Tax

The Urban Development and Housing Act of 1992 (RA7279) authorizes local government units to impose the Socialized Housing Tax. As contained in Sec. 43: ”all local government units are hereby

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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).

Duly approved ordinances need to impose the socialize tax

Penalty for Violation Sec 45 of 7279 provides that “any person who violates any provision of this Act shall be imposed the penalty of not more than six (6) years ofimprisonment or a fine of not less than P5,000.00but not more than P100,000.00, or both, at the discretion of the court.

However, many claim that the fine is excessive so the Sanggunian may decide to apply instead the penalty provision of Sec. 516 of the LGC which authorizes the Sanggunian to prescribe fines or other penalties for violation of tax ordinances but in no case shall such fines be less than P1,000.00 nor more than P5,000.00, nor shall imprisonment be less than 1 month nor more than 6 months.

Rate of Imposition of Tax on Transfer of Real Property (See Annex B, Excerpt 1)

Sec 135 - LGC provides for a rate not exceeding 50% of 1%.

COMMUNITY-BASED TAXES IMPOSABLE BY CITIES, PROVINCES, MUNICIPALITIES AND BARANGAYS

Tax on Business of Printing and Publication

Rate of Imposition

For newly-started business

Sec 136/151 - LGC provides for a rate not to exceed 75% of 1%

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

For newly-stated business

Sec 137/151 - LGC provides for a rate not to 75% of 1%

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 Contractors (See See Annex B, Excerpt6)

As defined in Sec. 131(h) - LGCSubject to the tax rate prescribed in Sec. 143(e) -LGC

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Imposition of Tax on Sand, Gravel and other Quarry Resources (See Annex B, Excerpt 4a)

Sec 138 - LGC and Art 227 - IRR allow a rate of not more than 15% of market value in the locality per 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.

The Sanggunian has the discretion to fix a rate lower than P300.00.

Amusement Tax (See Annex B, Excerpt4)

Sec 140 - LGC provides for a rate not to exceed 10% of the gross receipts from admission fees.

The Sanggunian has the option to set a rate lower than 10%.

Annual Fixed Tax for Every Delivery Truck or Van

Sec 141 of the Code allows a rate not to exceed P500.00.

This is the maximum; the rates can actually be lower.

COMMUNITY-BASED TAXES IMPOSABLE BY CITIES AND MUNICIPALITIES

Business Tax

Dealers (See Annex B, Excerpt 8)Manufacturers (See Annex B, Excerpt 9)Retail and Wholesale Transactions (See Annex B, Excerpt 11)

The LGC classifies all types of business into 7 categories and specifies the amount of tax due per taxable bracket. For details on maximum rates, see Sec. 143 of the LGC.

The rates of taxes provided are maximum rates that cities or municipalities are authorized to impose. The Sanggunian may adopt a lower schedule of graduated rates. If the rates are lowered, the entire rate schedule should be adjusted accordingly and not just the rates for 1 or 2 brackets.

Pursuant to Section 143 (h) and Section 186 of the LGC, subject to the limitations provided, other tax bases found in the city or municipality may be taxed.

On Banks and other Financial Institutions (See Annex B, Excerpt 5)

Various schedules for different types of financial institutions such as banks, pawnshops, money shops, finance companies, etc may be adopted by the Sanggunian subject to the maximum rate of 50% of 1% of gross receipts derived from the taxable sources. All other incomes or receipts of banks and other financial institutions not allowed as taxable sources may not be taxable by the city or municipality.

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Tax on Peddlers (See Annex B, Excerpt10)

Section 143 of the LGC provides for the maximum 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:

Peddlers of any article or merchandise carried in trucks of any other motor vehicle.

Peddlers of any article or merchandise carried in a motorized bicycle, tricycle, or other similar motorized vehicle other than those specified in (a) above.

Peddlers of any article or merchandise carried in acart, caretela or other vehicle drawn by animals.

Peddlers of any article or merchandise carried on bicycle, pedicab, or other similar vehicle.

Peddlers of any article or merchandise carried by person.

Rate of Imposition on Tax on Mining Operations

Per Sec. 143 – LGC, for cities, the tax should not exceed 3% of the gross receipts during the preceding calendar year.

For municipalities, the tax should not exceed 2% of the gross receipts during the preceding calendar year.

LGUs should also take into consideration the following national taxes imposed on mineral products:

10% VAT on mineral products based on gross receipts

Excise tax of P50.00 on coal and code per metric ton

Excise tax of 3% based on actual market value of the gross output on all non-metallic minerals and quarry resources

Excise tax of 5% on actual market value of the gross output on all metallic minerals.

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Excise tax of 15% based on the fair international market price

Tax on Forest Concessions and Forest Products

This is a new taxable base for LGUs.

The LGC lifted the limitations previously provided under PD 231.

This revenue source is of special relevance to LGUs with forests lands.

Sec. 143 – LGC allows a rate not exceeding 3% of the annual gross receipts for cities.

For municipalities, the rate should not exceed 2% of the annual gross receipts.

Tax on Business of Operating Motorized and Non-Motorized Tricycles

This is another new tax base for LGUs.

The suggested rates for cities are:Motorized tricycle P720.00Non-motorized tricycle P360.00

For municipalities:Motorized tricycle P480.00Non-motorized tricycle P240.00

The above rates are based on 3% for cities and 2% for municipalities of the average daily income of P80.00 and P40.00 for motorized and non-motorized tricycle respectively, operating 300 days a year.

PERMIT AND REGULATORY FEES 10

Types of permit and regulatory fees imposable by cities and municipalities

Except for fees for sealing and licensing of weights and measures, the Code does not specifically enumerate the kinds of permit and regulatory fees LGUS may impose. The fees included in the model ordinance are simply sample of commonly imposed fees that may be levied under Sections 147, 151 and 186.

In addition, as part of the devolved regulatory functions to LGUs, the following fees may be collected:

Reclassification of agricultural lands

10 See Annex C: Guide in the Calculation of Regulatory Fees

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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

For each fee imposed by other LGUs, refer to Table 7 on Fees and Charges

Mayor’s Permit

Rate of Imposition

Form of Imposition

Sec. 147 – LGC explicitly provides that:

The fee imposed must be sufficient only to cover the cost of regulation and surveillance of a business or occupation.

It cannot be based on capital investment and on gross sales or receipts of the person or business.

The LGU may adopt any, or a combination of the following forms of Mayor’s permit fee:

o Fixed rates for each kind of business activity

o A schedule of graduated fixed rates for each kind of business activity

o Similar businesses or activities are grouped and assigned a fixed rate of permit fee

o A variation is to provide a schedule of permit fees for each type of business based on number of employees, floor space, etc.

Fees on Sealing and Licensing of Weights and Measures

Art. 65 of the Consumer Act of the Philippines provides for the following penalties:

For violations of subsections (a) to (f) of the Section in the model ordinance, upon conviction a fine of not less than P200.00 but not more than P1,000.00, or by imprisonment of not more than 1 year, or both.

For violations of subsection (g) for the first time, a fine of not less than P500.00, or by imprisonment of not less than 1 month but not more than 5 years, or both.

For violations of subsections (h) to (k), a fine of not less than P300.00, or by imprisonment of not exceeding 1 year, or both.

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SERVICE FEES/USER CHARGES 11

Garbage Fee LGUs have the option to provide their own rate structure, some of these options are:

Classify businesses into different categories (similar to that of the business tax) and impose fixed rates for each category

Classify business activities into 3 major categories on the basis of expected volume of garbage generated.

Classify businesses into similar categories (services of commercial and distributive magnitude like hotels, schools, etc; personal services like beauty parlors, barber shops, etc; processing-production establishments such as bakeries, extractive industries such as factories, etc). these are then further subdivided based on certain criteria such as floor space, number of personnel, capacity, etc.

Fishery Rentals or Fees (Duration of Lease)

Sec. 29 of PD 704 (Fishering and Fisheries Law) authorized LGUs to lease out corals, oyster culture beds, or gathering of bangus fry or other species for a period not exceeding 5 years.

Rental Fee on Mineral Lands E.O. 273 of the Value-Added Tax Law transferred the collection of rentals on mineral lands from the BIR to the city/municipality where the mining claim is located. Sec. 216 of the NIRC provides the following rates:On coal-bearing public lands:

P5.00 per hectare or fraction thereof for each and every year for the first 10 years, and

P10.00 per hectare or fraction thereof for each and every year thereafter during the life of the lease.

On public lands bearing quarry resources: P50.00 per hectare or fraction thereof for

each and every year for the first 10 years.

On all other mineral lands containing metallic and non-metallic minerals under existing mining laws or decrees:

P10.00 per hectare or fraction thereof for each

11 See Annex D: Guide in the Calculation of Service Fees/User Charges

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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.

Proceeds from the collection shall accrue solely to the city. For municipalities, the province has a 30% share from the municipal imposition. In effect the municipality retains only 70% of the fee.

GENERAL ADMINISTRATIVE AND PENAL PROVISIONS

Surcharges and penalties on unpaid taxes, fees or charges

Sec. 618 – LGC provides a surcharge not exceeding 25% of the amount of taxes, fees or charges not paid on time and interest of the rate not exceeding 2% pr month of the unpaid taxes, fees, or charges including surcharge until such amount is fully paid but in no case should the total interest on the unpaid or portion thereof exceed 36 months.

Interests on other unpaid revenues Sec. 169 – LGC provides an interest on other unpaid revenues at the rate not exceeding 2% per month from the date it is due until it is paid but in no case shall the total interest on the unpaid amount or a portion thereof exceed 36 months.

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PART III. GUIDELINES FOR TAX ORDINANCE PREPARATIONAND 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.

Tax Codification is important because:

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.

A revenue ordinance legitimizes and facilitates the orderly collection of variousimpositions. This redounds to increased revenues which the LGU can program for basic public services and local development projects.

STEPS IN TAX CODIFICATION

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

Source, i.e., bound volumes of the minutes of Sanggunian sessions, LCE’s file, Secretary to the Sanggunian’s file, etc

Subject summary

Changes in the form of notations where an ordinance specifically amends or repeals an earlier ordinance

Disposition or notation as to what happened to each ordinance listed. Indicate whether an ordinance was discarded or retained

Step 3. Update the ordinances. Discard the ordinances that:

Have been totally repealed under the LGC

Duplicate another

Are not within the taxing powers of the LGU

Are discriminatory in nature or affect the free flow of commerce

Integrate only ordinances that are amendatory to the retained ordinances.

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:

Exclude unnecessary words.

Avoid lengthening the sentence by the use of “Provided that” or “Provided, however, that” “Provided further that”’ “Provided finally that”. Their use tends to cause confusion and difficulty in the enforcement of the Revenue Code.

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.

The dual verbs would create confusion since it can be construed as mandatory or directory.

Use definite references. If one refers to a particular section say “Sec. 5A.01” instead of saying “preceding section”. Write the section. Reference by number of sections has advantage of clarity.

In drafting the Revenue Code, three (3) numbering systems are available. Before the actual drafting, decide which numbering system is to be adopted.

First Form of Numbering:

All chapters are to be numbered in roman numerals.

Sections that pertain to one subject matter are grouped together under one article.

A section number carries a decimal point. To the left of the decimal point is the chapter number and the article letter. To the right of the decimal point is the section number. Under each article, sections are numbered consecutively starting with the number 01.

To illustrate: Sec 1A.01

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

To insert sections between existing ones, e.g., between 1A,05 and 1A,06, another decimal point may be added and the new section may be numbered with arabic numerals starting with 01. Thus, 1A.05.01, and so forth.

Second Form of Numbering:

Chapters and articles are numbered in roman numerals and capital letters, respectively, and

Sections under a chapter are numbered continuously from 1, 2, 3, etc.

Third Form of Numbering

Sections from chapters 1 up to the last chapter are numbered consecutively starting with the number 1.

Step 7. Consolidate various outputs to produce the draft Local Revenue Code (refer to your copy of the MTP Sample Model Revenue Code).

Step 8. Review and finalize for presentation to the Sanggunian.

Following the outline of the model local revenue code provided, below are the basic guidelinesin preparing the chapters, articles, and sections:

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Table 6: REVENUE CODE OUTLINE

REVENUE CODE OUTLINE

REMARKS

Chapter Each chapter must bear its own title descriptive of the subject covered by it.

It is subdivided into sections. Whenever sections pertain to one subject they can be grouped together under one article and given the appropriate caption.

Article An article consists of several sections that pertain to a subject matter.It is generally divided into the following sections:

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.

A word must be defined if it used in a sense other than its dictionary meaning or if it is used in the sense of several dictionary meanings.

Definitions are placed at the beginning of a chapter or article.

Words defined under Chapter 1, Article B are those that used and carry the same meaning throughout the Code.

Imposition of Tax or Fee This Section contains:

Rate(s) of the imposition on the tax baseIn general, the LGC provides for the maximum rate of tax that may be imposed by the LGU, majority of which is based on gross receipts or sales.

However, there are instances when the Sanggunian has the option to provide an alternative rate structure subject to the maximum rate provided in the LGC.

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Imposition of Tax or Fee Coverage of the tax

The tax base should be specific, definite and measurable.

This involves identifying the category into which a particular business fails. In this connection, the Sanggunian should be familiar with the nature of a specific business or activity in the LGU.

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.

Exemption This Section is included if the LGC provides exemption(s) from the tax. Thus, if the LGC does not provide exemption(s) from a particular tax, this Section is omitted from the Article.

The Sanggunian may grant tax exemption or relief through the enactment of a separate ordinance in cases of natural calamities, civil disturbances, general failure of crops, or adverse economicconditions such as substantial decrease in the prices of agricultural or agri-based products pursuant to Section 192 of the LGC.

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.

Any exemption or relief granted to a type or kind of business applies to all businesses similarly situated.

In the case of shared revenues such as the amusement tax, the exemption or relief extends only to the LGU granting such exemption or relief.

The authority of the Sanggunian to grant exemptions does not apply to regulatory fees imposed by the LGU.

The tax exemption certificates issued by the LGU are non-transferable.

The Sanggunian may likewise grant tax incentives in the form of reduced rates, etc., to a new investment in the locality through the passing of an ordinance prescribing the terms and conditions thereof prior to the first day of January of any year.

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Time of Payment This Section specifies the period within which the imposition is payable.

It may also contain:

The person to whom it is to be paid, e.g., Local Treasurer and/or other duly authorized deputies, and

The manner by which the imposition is to be paid.

Unless otherwise specifically provided in the LGC, all local taxes, fees and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter.

However, the LGC empowers the Local Sanggunian for a justifiable reason or cause, to extend the time for payment of such taxes, fees and charges without surcharges or penalties, but only for a period not exceeding six (6) months.

Moreover, unless otherwise provided in the LGC, the tax period of all local taxes, fees and charges is the calendar year.

Surcharge for Late Payment

The Sanggunian may impose a surcharge

Not exceeding 25% of the amount of taxes, fees or charges not paid on time, and

An interest at the rate not exceeding 2% per month of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid.

But in no case shall the total interest on the unpaid amount or portion thereof exceed 36 months.

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, Fee or Charge

A general provision on the imposition of interest is provided in the 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.

This Section is included in the Article only if the LGU deems it necessary to charge an interest on unpaid taxes, fees and charges.

The amount of interest may be uniform or may vary according to the type of tax, fee or charge subject to the above-mentioned limitations.

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.

Table 7: FEES AND CHARGES LGUs MAY IMPOSE

Regulatory Fees (Construction)

Building Permit Demolition PermitElectrical Inspection Electrical PermitFire Certification Inspection FeesMechanical Inspection Mechanical PermitOccupancy Permit Plumbing PermitSanitary Permit

Regulatory Fees (Business)

Agricultural Machinery Bicycle PermitOther Heavy Equipment Boats PermitCart/Sledge Registration Caretela & Calesa RegistrationCockfights CockpitsFilm-Making FishingGaffers, Referees, etc. HawkersMayor’s Permit Mineral LandsMining Claims Occupation FeesParades Professional FeesSanitary InspectionTricycle/Pedicab Operation

Storage of Flammable & Combustible Material

Tricycle Franchising Video Tape RentalWeights and Measures

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Regulatory Fees (Non-Business)

Burial Civil Registry FeesCourt Fees Exhumation/Removal of CadaverHolding of Benefits Firearm’s PermitFiscal’s Clearance Impounding/Sales of Stray AnimalsLarge Cattle Registration Police ClearanceMarriage Permit & Solemnization Sheriff’s FeesTax Clearance Fees

Service Fees

Garbage Collection Health ServicesHospital Fees Overnight ParkingParking FeesSecretary’s Certification

Physical Examination & Medical Certificates

Terminal Fee Toll Fees or ChargesTowing Charges Traffic Violations

Tuition Fees

Receipts from Economic Enterprises

Cemeteries Electrical Light and PowerMarkets Slaughterhouses and CorralsWaterworks 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 1Filing and Numbering

a. A short note explaining the need for the ordinance is prepared and signed by the proponents and attached to the 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 City Revenue Code in the logbook and assigns a number to it.

Step 2First Reading

a. The secretary to the Sanggunian reports the ordinance to the Sanggunian at its next meeting.

b. During the session, the draft Revenue Code is referred to the Committee on Ways and Means or Finance Committee, as the case may be, for study, conduct of public hearings, and debates..

Step 3Publication,Posting and Notification

a. Within ten (10) days from filing of the tax ordinance, it shall be published for three (3) consecutive days in a newspaper of general circulation, or shall be posted simultaneously in at least four (4) conspicuous places within the territorialjurisdiction of the city.

b. In addition to the publication or posting, the committee must send a written notice on the proposed Revenue Code together with a copy to interested or affected parties or those doing business within the territorial jurisdiction of the city.

c. 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 out of notices, or the last day of publication whichever, comes later.

Step 4Public Hearings

a. During the public hearing, all affected or interested parties shall be given opportunity to appear and present or expresstheir views, comments and recommendations, and such public

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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 5Second Reading

a. The proposed Revenue Code shall then be considered on second reading in any regular meeting after it has been reported out by the proper committee to which it was referred to or certified as urgent by the City Mayor.

b. During the second reading, the Sanggunian shall deliberate on the proposed Revenue Code. The members shall be given the opportunity to express their views, comments and recommendations for or against the proposed ordinance. Various amendments to the provisions of said ordinance shall then be made.

c. The Secretary shall prepare copies of the proposed ordinance in the form it was passed on second reading and provide each member of the Sanggunian with a copy of the proposed ordinance at least three days before the scheduled third and final reading.

If the ordinance is certified as urgent by the City Mayor, it may be submitted for final voting during the second reading.

Step 6Third and FinalReading

a. The draft ordinance shall be submitted to the Sanggunian forthird reading.

b. There being a quorum, the affirmative votes of the majority of all the members present shall be necessary for the passing of the ordinance.

Step 7Approval 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.

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 8Publication orPosting of Approved Ordinance

a. Within ten (10) days after the approval of the Revenue Code, a certified true copy shall be published in full for three (3) consecutive days in a newspaper of local circulation.

b. 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.

Step 9Effectivity

a. Unless otherwise stated in the Revenue Code, the ordinance shall take effect ten (10) days from the date a copy is posted in a bulletin board at the entrance of the city hall.

b. In case the effectivity of the Revenue Codes falls on any date other than the beginning of the quarter, it shall be considered as falling at the beginning of the next ensuing quarter and the taxes, fees, or charges due shall begin to accrue at that date.

Step10Appeal on Legality

a. Any question on the constitutionality or legality of theRevenue Code may be raised on appeal within thirty (30) days from the date of its effectivity to the Secretary of Justice.

The appeal shall not have the effect of suspending the effectivity of the ordinance and accrual and payment of the tax, fee, or charge levied by the ordinance.

b. The Secretary of Justice shall render a decision within sixty (60) days from the receipt of the appeal.

c. Within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file the appropriate proceedings with a court of competent jurisdiction.

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FOR MUNICIPALITIES AND COMPONENT CITIES

Step 1Filing and Numbering

a. A short note explaining the need for the ordinance is prepared and signed by the proponents and attached to the draft 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.

Step 2First Reading

a. The Secretary to the Sanggunian reports the ordinance to the Sanggunian at its next meeting.

b. During the meeting, the draft Revenue Code is referred to the Committee on Ways and Means or Finance Committee, as the case may be, for study, conduct of public hearings, and debates..

Step 3Publication,Posting and Notification

a. Within ten (10) days from filing of the tax ordinance, it shall be published for three (3) consecutive days in a newspaper of general circulation, or shall be posted simultaneously in at least four (4) conspicuous places within the territorial jurisdiction of the LGU. These may include plazas, municipal halls, markets, churches, etc.

b. In addition to the publication or posting, the committee must send a written notice on the proposed Revenue Code together with a copy to interested or affected parties or those doing business within the territorial jurisdiction of the city.

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.

Step 4Public Hearings

a. During the public hearing, all affected or interested parties shall be given opportunity to appear, present or express their views, comments and recommendations, and such public 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 Local Revenue Code.

b. The Secretary to the Sanggunian must prepare the minutes of such public hearings and shall attach to it the position papers,

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memoranda, and the like submitted by those who participated.

Step 5Second Reading

a. The proposed Revenue Code shall then be considered on second reading in any regular meeting after it has been reported out by the proper committee to which it was referred to or certified as urgent by the Local Chief Executive.

b. During the second reading, the Sanggunian shall deliberate on the proposed Revenue Code. The members shall be given the opportunity to express their views, comments and recommendations for or against the proposed ordinance. Various amendments to the provisions of said ordinance shall then be made.

c. The Secretary shall prepare copies of the proposed ordinance in the form it was passed on second reading and provide each member of the Sanggunian with a copy of the proposed ordinance at least three days before the scheduled third and final reading.

If the ordinance is certified as urgent by the Local Chief Executive, it may be submitted for final voting during the second reading.

Step 6Third and FinalReading

a. The draft ordinance shall be submitted to the Sanggunian for third reading.

b. There being a quorum, the affirmative votes of the majority of all the members present shall be necessary for the passing of the ordinance.

Step 7Approval

a. The enacted revenue ordinance shall be presented to the Local Chief Executive for approval.

b. If the Local Chief Executive approves the ordinance, he shall affix his signature on each and every page of the ordinance.

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 ordinance.

d. The veto shall be communicated by the Local Chief Executive to the Sanggunian within ten (10) days, otherwise the ordinance shall be deemed approved as if the local Chief Executive signed it. The Local Chief Executive may veto an ordinance only once.

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.

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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 8Review by the Sangguniang Panlalawigan

a. The Secretary to the Sanggunian shall within three (3) days after approval of the Revenue Code, transmit a copy of the code to the Sangguniang Panlalawigan for review.

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 9Publication or Posting of Approved Ordinance

a. Within ten (10) days after the approval of the Revenue Code, a certified true copy of the ordinance shall be published in full for three (3) consecutive days in a newspaper of local circulation.

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.

Step10Appeal on Legality

a. Any question on the constitutionality or legality of the Revenue Code may be raised on appeal within thirty (30) days from the date of its effectivity to the Secretary of Justice.

The appeal shall not have the effect of suspending the effectivity of the ordinance and accrual and payment of the

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tax, fee, or charge levied by the ordinance.

b. The Secretary of Justice shall render a decision within sixty (60) days from the receipt of the appeal.

c. Within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file the appropriate proceedings with a court of competent jurisdiction.

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SOURCES OF INFORMATION:

1. Handbook of Local Government Administration: Center for Local and Regional Governance

2. Institute of Local Government Studies, Local Legislators Toolbox

3. Local Government Code of 1991 and Its Implementing Rules and Regulations

4. Municipal Training Program Coursebook on Municipal Finance and Revenue Administration

5. National Tax Research Center/Bureau of Local Government Supervision/Local Government Academy, Model Local Revenue Code

6. Republic Act 7942, The Mining Act of 1995

7. Republic Act 9513, Renewable Energy Act of 2008

8. Urban Development and Housing Authority Act of 1992

9. Dr. Rosario Manasan’s lecture on developing a local tax policy

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ANNEX A. LIST OF PROFESSIONS REQUIRING GOVERNMENT EXAMINATION

Accountancy Aeronautical EngineeringAgriculture ArchitectureChemical Engineering ChemistryCivil Engineering CriminologyCustoms Broker DentistryElectrical Engineering DieticianEngineering Electronics & CommunicationsLandscape Architecture ForestryMarine Deck Officer GeologyMechanical Engineering Interior DesignMedical Technology LibrarianMidwifery Marine Engine OfficerNaval Architecture Master PlumbingNursing Metallurgical EngineeringOptometrist Mining EngineeringPhysician Marine EngineeringOccupational Therapy NutritionistSocial Work PharmacistVeterinary Medicine Physical TherapySugar Technology Sanitary Engineering