Bureau of Local Government Finance Opinion

December 11, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Manny Duka Chief Accountant Philippine Belt Manufacturing Corp. 280 Dasmarias St. Binondo, Manila Sir : This refers to your letter dated July 9, 2002, requesting opinion on the following: "(i) In the Rules and Regulations Implementing the Local Government Code of 1991, are sales on business already subjected to Article 232(a) can still be subjected to Art. 232(h)? "(ii) Is the local treasurer of Manila correct to subject our sales to Section 21 aside from Section 14 of their City Ordinance No. 7988? "(iii) Can a City Ordinance amend guidelines and provision of the law, particularly the Local Government Code?" Representations are made that Philippine Belt Manufacturing Corp. (PBMC) is a manufacturer of industrial and automotive fan belts and conveyor belts. Its manufacturing plant or factory is located in Novaliches, Quezon City and maintains several sales offices or branches, and one of this is the Binondo Sales Office. Each branch maintains separate sales book or record, and consolidates it with the principal office. AHCETa PBMC claims that the City Treasurer's Office in Manila subjects its Binondo Sales Office to the following: (i) Section 14 tax on Manufacturers, Assemblers, and other Processors; and (ii) Section 21 tax on Business subject to the Excise, Value-Added or Percentage tax under the NIRC. PBMC claims further that Article 232 (h) of the Implementing Rules and Regulations (IRR) quoted hereunder, of the Local Government Code (LGC) of 1991 was used as basis of said Section 21 of City Ordinance No. 7988: "Article 232. Tax on Business . The municipality may impose taxes on the following businesses: "(a) . . . "(h) On any business, not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax provided that on any business subject to the excise, value added or percentage tax under the NIRC, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year, and provided further that in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline and other petroleum products shall not be subject to any local tax imposed under this provision. HTSaEC "xxx xxx xxx." In view of the above, PBMC opines that the words "on any business, not otherwise specified in the preceding paragraphs" signifies that there shall be no double taxation on any cases. That if the particular sales had already been subjected to city tax in the particular Section, example in this case, it is not right to tax the same sale in the succeeding Section of the said Ordinance, in this case, Section 21. Query No. 1 & 2: This Bureau has consistently expressed the view that what is right to be taxed under Section 143 (h) of the LGC are businesses not specifically provided in the preceding paragraphs. Meaning, if a business is already taxed under sub-section (a) to (g) of Section 143 of the LGC such business should no longer be taxed under sub-section (h). Hence, the imposition of business taxes under Section 21 of the Revenue Code of Manila on businesses already subject to the business taxes under Sections 14 to 20 of the said Revenue Code will constitute double taxation as the same kind of tax is being imposed twice on the same business. Moreover, the phrase ". . . on any business subject to the excise, value-added or percentage tax . . . ." qualifies the business that will be imposed a rate that should not exceed 2% of gross sales or receipts of the preceding calendar year. It does not authorize the imposition of a value-added tax, percentage tax or excise tax. cCEAHT The foregoing views are expressed in line with the provisions of Art. 287 of the IRR and not a declaration of nullity or illegality of the subject portion of the Ordinance. In this connection, enclosed is a copy of the Decision promulgated by Judge Zenaida R. Daguna, of the Regional Trial Court, Branch 19, Manila, upholding the legality of Section 21 of Ordinance No. 7794 as amended by Ordinance No. 7807 likewise amended by Ordinance No. 7988. Query No. 3: Section 458 (2) (ii) of the LGC provides as follows: "Section 458. Powers, Duties, Functions and Compensation . (a) . . . "(1) . . . "(2) . . . (i) . . . (ii) subject to the provisions of Book II of this Code and applicable laws and upon the majority vote of all the members of the sangguniang panlungsod , enact ordinances levying taxes, fees and charges, prescribing the rates thereof for general and specific purposes, and granting tax exemptions, incentives or reliefs; SEHDIC "xxx xxx xxx." It is clear from the aforequoted Section 458 (2) (ii) that local tax ordinance should be enacted pursuant to the provisions of the LGC. Any provision thereof may not be amended unless a corresponding amendatory provision of law is enacted thru the legislative process. Thus, the provisions of the LGC cannot be amended by a mere ordinance. It is hoped that this will help clarify matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director