Bureau of Local Government Finance Opinion

October 4, 2013 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Ryan D. Maminta SB Member & Chairman, Committee on Rules and Laws Office of the Sangguniang Bayan Narra, Palawan Sir : This refers to Ordinance No. 2012-08 of Barangay Poblacion, entitled, "An Ordinance amending certain provisions of Barangay Ordinance No. 2009-05, entitled, 'An Ordinance enacting the revised Barangay Tax Ordinance of 2009 particularly on Article IV (Service Fees and Charges) by inserting additional Sub-Sections and provisions which shall be known as 'Sections 6.1.e, 6.1.f, 6.1.g, 6.1.h, 6.1.i, 6.1.j, 6.1.k, 6.1.l, 6.1.m and 6.10, 6.11, 6.12, 6.13 and 6.14.'" which was referred to the Committee on Rules & Laws of the Office of the Sangguniang Bayan of that Municipality. ADEacC It is claimed that as discussed and agreed by the Committee during its Committee Hearing dated August 5, 2013, said Ordinance be referred to the Department of Finance for legal opinion which was forwarded to this Bureau for appropriate action. The pertinent Sections of said Ordinance are quoted as follows: "Section I. Certain provision of the Barangay Tax Ordinance No. 2009-05 is hereby amended and modified accordingly by providing and inserting additional provision and sub-sections under Article IV, Section 6 on which shall be Sections 6.1.e, 6.1.f, 6.1.g, 6.1.h, 6.1.i, 6.1.j, 6.1.k, 6.1.l, 6.1.m and 6.10, 6.11, 6.12, 6.13 and 6.14. "Section II. The additional provisions and sub-sections 6.1.e, 6.1.f, 6.1.g, 6.1.h, 6.1.i, 6.1.j, 6.1.k, 6.1.l, 6.1.m and 6.10, 6.11, 6.12, 6.13 and 6.14 in which is hereby inserted shall be: 6.1.e Gross sales 100,001 to 150,000 150.00 6.1.f Gross sales 150,001 to 200,000 250.00 6.1.g Gross sales 200,001 to 300,000 300.00 6.1.h Gross sales 300,001 to 400,000 350.00 6.1.i Gross sales 400,001 to 500,000 400.00 6.1.j Gross sales 500,001 to 750,000 450.00 6.1.j Gross sales 750,001 to 1,500,000 500.00 6.1.j Gross sales 1,500,001 to 2,500,000 750.00 6.1.j Gross sales 2,500,001 and above 1,000.00 6.10 Request for Barangay Resolution/Certification 200.00 6.11 Certification or Clearance of newly cut Lumber and 200.00 forest product for transport 6.12 Clearance used for securing a Police Clearance, NBI or 150.00 Court Clearance 6.13 Certification to cut trees (P30.00/tree but not less than 100.00) 6.14 Certification for Light/Water Application 6.14.1 Residential 100.00 6.14.2 Commercial, Industrial and Institutional 200.00 In this connection, Section 152 of the Local Government Code (LGC) of 1991, is quoted as follows: acSECT "Section 152. Scope of Taxing Powers . The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively accrue to them: "(a) Taxes On stores or retailers with fixed business establishments with gross sales or receipts of the preceding calendar year of Fifty Thousand Pesos (P50,000.00) or less, in the case of cities and Thirty Thousand Pesos (P30,000.00) or less, in the case of municipalities, at rates not exceeding one percent (1%) on such gross sales or receipts. "(b) Service Fees or Charges Barangays may collect reasonable fees or charges for services rendered in connection with the regulation or the use of barangay -owned properties or service facilities such as palay , copra or tobacco dryers. "(c) Barangay Clearance No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such business or activity is located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee. The application for clearance shall be acted upon within seven (7) working days from the filling thereof. In the event that the clearance is not issued within the said period, the city or municipality may issue the said license or permit. "(d) Other Fees and Charges The barangay may levy reasonable fees and charges: "(1) On commercial breeding of fighting cocks, cockfights and cockpits; "(2) On places of recreation which charge admission fees; and "(3) On billboards, signboards, neon signs, and outdoor advertisements." In view of the foregoing, this Bureau expressed the following comments: 1. The revenue-raising power of the barangay is limited to taxes, fees or charges under Section 152, supra , of the LGC. Pursuant to said Section, barangays may only issue barangay clearance on business or activity located or conducted therein. The imposition of a regulatory fee is within the power of the municipality pursuant to Section 147 of the LGC, quoted hereunder. The imposition of such permit fee proceeds from the power of municipality to regulate any business, activity or undertaking conducted or to be conducted within its territorial jurisdictions. This power to regulate emanates from police power which expressly provided under Section 16 (General Welfare Clause) of the LGC: DaHISE " SEC. 147 . Fees and Charges . The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code , on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling." (Emphasis supplied) 2. Section 5. Newly-started Business. The LGC does not provide for the imposition of local business tax (LBT) for newly-started business except in the case of Section 136 Tax on Business of Printing and Publication and Section 137 Franchise Tax , both of which are provincial impositions, providing a tax rate of not exceeding 50% of 1% of the gross annual receipts of the preceding calendar year. Nevertheless, the tax rate in the Ordinance providing for a 5% of 1% on Capital Investment does not find support in the LGC as what is provided therein is gross annual receipts for the preceding calendar year . 3. Section 8. Regulatory Fees and Other Fees. As already discussed above, the regulation of certain types of vehicles is beyond the regulatory powers of barangays . 4. Section 9. Clearance or Certification Fee. The issuance of Barangay Clearance for any business or activity for purposes of securing a Mayor's permit is based on the Gross sales of the business which is in direct contravention of Article 233 of the Implementing Rules and Regulations (IRR), implementing Section 147 of the LGC, which provides: "No such fee or charge shall be based on capital investment or gross sales or receipts of the person or business liable therefor ." 5. Sub-sections 6.11 and 6.13 are beyond the authority to impose for reason that such authority falls under the jurisdiction of the Department of Environment and Natural Resources (DENR). 6. Sub-section 6.10 should be specific as to what kind of Barangay Resolution/Certification is being requested by the taxpayer concerned. In view of the foregoing, it is advised that in the imposition of regulatory fees and charges, local government units should be guided by the principle " commensurate with the cost of regulation, inspection and licensing ." It bears emphasis however, that the above comments are expressed in relation to Article 287 of the Implementing Rules and Regulations (IRR) of the LGC and should not be construed as a declaration of the legality or illegality of Ordinance No. 2012-08 of Barangay Poblacion, Narra, Palawan, for reason that such function falls exclusively within the jurisdiction of the Department of Justice or Court of competent authority. DAcaIE Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director