Bureau of Local Government Finance Opinion

April 10, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Mary Grace A. Checa-Hinojosa Counsel for the Protestant 2nd Flr., RDK Plaza, P. Guevarra Ave. 4009 Santa Cruz, Laguna Madam : This refers to the PROTEST/COMPLAINT dated March 16, 2012 requesting the Secretary of Finance to SUSPEND the implementation and/or REVOKE the 1) "KAUTUSAN/ORDINANSANG PAMBARANGAY Blg. 2 T. 2011 of Sanggunian Barangay of Barangay Rizal, Majayjay, Laguna; and 2) RESOLUSYON Blg. 06 T. 2012 of Sangguniang Bayan of Majayjay, Laguna, for being ultra vires tax ordinance/resolution, which was forwarded to this Bureau for appropriate action. Representations are made that Mr. Jerry A. Borines is the proprietor of Goya Malinao Resort ("Resort" for brevity) situated at Barangay Rizal, Majayjay, Laguna. Goya Malinao Resort is a place of recreation with cottages alongside Malinaw River. Its operation commenced in 2003 up to present and Mr. Borines has been religiously paying taxes, fees, permits and licenses for the operation of the Resort. On October 5, 2011, the Sanggunian Barangay of Barangay Rizal, enacted a tax ordinance entitled "KAUTUSAN/ORDINANSANG PAMBARANGAY Blg. 2 T. 2011 TUNGKOL SA PANININGIL NG ENVIRONMENTAL FEE SA PAPASOK O ANUMANG LAYUNIN SA ILOG MALINAW BARANGAY RIZAL, MAJAYJAY, LAGUNA" imposing ENVIRONMENTAL FEE to all persons who will enter or use for any reason the waters of Malinaw River within its jurisdiction. The Sangguniang Bayan reviewed said tax ordinance to determine if the same is consistent with the law and other municipal ordinances. On January 16, 2012, SB Majayjay passed Resolution Blg. 06 T. 2012 entitled "PINAGTIBAY ANG KAUTUSAN/ORDINANSANG PAMBARANGAY BLG. 02, T. 2011 NG SANGGUNIAN BARANGAY NG RIZAL NA NAUUKOL SA PANININGIL NG ENVIRONMENTAL FEE SA PAPASOK O ANUMANG LAYUNIN SA ILOG MALINAW, BARANGAY RIZAL, MAJAYJAY, LAGUNA" which confirmed and "approved" Barangay Tax Ordinance 2011. CHDaAE Upon learning about the passage of Resolution No. 2012, Mr. Borines immediately wrote a protest letter to the Hon. Vice-Mayor Ana Linda C. Rosas, Chairwoman of the Sangguniang Bayan of Majayjay, Laguna. Mr. Borines reminded the Honorable SB on the outcome of the previous tax ordinances (Barangay Tax Ordinance 2004 and Barangay Tax Ordinance 2006) which were also passed and enacted by SB Rizal and duly confirmed and/or approved by SB Majayjay, but were subsequently declared as ultra vires tax ordinances by the Provincial Chief Legal Counsel and the Provincial Treasurer of Laguna. On July 12, 2011, Atty. Sherwin Marc Arcega, Provincial Chief Legal Counsel and Ms. Evelyn A. de Guzman, Provincial Treasurer issued a Legal Opinion declaring as illegal the Barangay Tax Ordinances 2004 and 2006, a portion of the said opinion is quoted as follows: "Therefore, above-cited resolution/ordinance enacted by the Sangguniang Barangay of Rizal, Majayjay, Laguna duly confirmed and/or approved by the Sangguniang Bayan of Majayjay had been made without any basis either under any existing law(s) and/or jurisprudence, as well as, undertaken and/or exercised in excess of authority(ies) of both local sanggunian(s) concerned; considering, that language of afore-cited par. e, Sec. 1 of RA 9460 is crystal clear in that amusement tax proceeds are to be shared equally by ONLY the province and municipality [taxing authority(ies)] having jurisdiction over the situs where tax subject(s) are actually, and in fact, located. As such, the Barangay LGUs could not legitimately and/or validly share from proceeds of said amusement tax(es) levied/assessed and/or collected. Hence, it is heretofore, confidently, strongly and steadfastly declared and/or asserted that said ordinance/resolution is considered as ultra vires without any legal and/or binding force and effect." Despite the issuance of Legal Opinion No. 10, Series of 2011 issued by Atty. Arcega, the SB of Rizal still enacted Ordinance No. 2, T. 2011 allegedly as a substitution of Barangay Tax Ordinance No. 1, T. 2004 and Ordinance No. 03, T. 2006. Quoted hereunder is the difference between the two previous Ordinances that has been declared as illegal and Barangay Tax Ordinance No. 2, T. 2011: aHTDAc Barangay Tax Ordinance No. 01, T. 2004 & Barangay Tax Ordinance No. 2, T. Barangay Tax Ordinance No. 03, T. 2006 2011 Imposing a fee or "butaw"/share in the Imposing "environmental fee" admission fee of Goya Malinao The Goya Malinao's admission fee of P10.00 On top of Goya Malinao's admission shall be divided as follows: fee of P10.00, the Barangay shall a. P5.00 - Goya Malinao collect additional P5.00 as b. P3.00 - Barangay environmental fee; c. P2.00 - Municipality On February 28, 2012, Mr. Borines wrote another protest letter as a reiteration/follow-up to his letter dated January 25, 2012, addressed to SB of Majayjay, Laguna, SP of Laguna, Atty. Sherwin Marc Arcega, and Hon. Florentino C. Policena, Punong Barangay of Barangay Rizal, Majayjay, Laguna. However, on March 10, 2012, despite the pendency of the protest of Mr. Borines, the Barangay Chairman of Rizal, Majayjay, Laguna, together with all the members of SB Rizal, adamantly, willfully, unlawfully, malicious and frivolously implemented the questioned tax ordinance over and above the overwhelming objection of Mr. Borines and collected additional fee of five pesos (P5.00) for every incoming customers of the Resort. It is further protested that the enactment and approval of Barangay Tax Ordinance 2011, imposing P5.00 environmental fee to all the clients of the Resort is another ultra vires act of SB Rizal and SB Majayjay for the following reasons: A. It is not among those that the barangay may impose in accordance with Local Tax Code. It is beyond the power of Sanggunian Barangay to impose environmental tax. Section 152 of the Local Government Code of 1991 (LGC) enumerated the list of taxes, fees and charges which the barangay may levy, impose and collect to its constituents and environmental tax is not among them. Pursuant to the well-established rule in statutory construction expressio unius est expressio alterius, what is not included in those enumerated is deemed excluded. Since, environmental tax is not among those enumerated by Section 152 of the LGC, the same is therefore excluded by law. Hence, SB Rizal is not empowered to impose environmental tax. CcAITa B. It is unjust, excessive, oppressive and confiscatory. Article 83 of Presidential Decree No. 1067 entitled "A DECREE INSTITUTING A WATER CODE, THEREBY REVISING AND CONSOLIDATING THE LAWS GOVERNING THE OWNERSHIP, APPROPRIATION, UTILIZATION, EXPLOITATION, DEVELOPMENT, CONSERVATION AND PROTECTION OF WATER RESOURCES", is clear. The National Water Resources Board is the only institution given by law an exclusive authority to impose and collect reasonable fees, charges for water resources development from water appropriators. The barangay has no power to impose water/environmental fee for the use of the waters in any river. Hence the subject ordinance is unjust, excessive, oppressive and confiscatory. C. It is discriminatory in nature in the conduct of business and in restraint of trade. It is discriminatory in nature on the conduct of business of Mr. Borines and in restraint of trade. There are other resorts near the Resort that uses Malinaw River as an attraction to its customers. The other resorts are also charging ten pesos (P10.00) each customer. The subject tax ordinance is discriminating to the Resort because the latter is the only resort along Malinaw River that is being charged of alleged environmental tax. It is also considered as in restraint of trade because between a resort that is charging P10.00 only and a resort that charges P10.00 entrance fee and P5.00 alleged environment tax, budget conscious customers would definitely prefer the cheaper one. At the outset, it is informed that the Local Government Code (LGC) of 1991 specifically Section 187 thereof, quoted hereunder, provides the requisites in the approval of tax ordinances and revenue measures: "SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal : Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That 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 appropriate proceedings with a court of competent jurisdiction . (Boldfacing and underscoring for emphasis) Clearly, from the abovequoted provision of law, neither the Department of Finance (DOF) nor the Bureau of Local Government Finance (BLGF) has jurisdiction on the herein case. The remaining option to the herein Protestant is to file an appropriate legal action before a proper court of justice. By way of comment, however, Section 152 of the Local Government Code of 1991 (LGC) is quoted as follows: "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 resolution 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 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 filing 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. DISaEA "(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." (Underlining supplied) Explicitly, based on the abovequoted provision of the LGC, barangays are authorized to impose reasonable fee on places of recreation which charge admission fees. However, it may be reminded that such imposition shall be in accordance with Articles 233 and 244, respectively, of the Implementing Rules and Regulations (IRR) implementing the particular provisions of the LGC. Further, it is worth mentioning that in the exercise of their taxing powers, local government units (LGUs, including barangays ) should be guided by Section 130 of the LGC, which provides: "SEC. 130. Fundamental Principles. The following fundamental principles shall govern the exercise of the taxing and other revenue-raising powers of local government units: (a) Taxation shall be uniform in each local government unit ; (b) Taxes, fees, charges and other impositions shall: (1) be equitable and based as far as practicable on the taxpayer's ability to pay; (2) be levied and collected only for public purposes; (3) not be unjust, excessive, oppressive, or confiscatory ; (4) not be contrary to law, public policy, national economic policy, or in the restraint of trade; xxx xxx xxx." In view of the foregoing, we therefore regret that we are not in a position to issue any order or directive to SUSPEND the implementation and/or REVOKE the effectivity of the aforementioned local legislations as the same is beyond the jurisdiction and authority of this Office. We hope that this will help clarify matters. IacHAE Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director