Assessment and Collection of Local Taxes, Fees and Charges and the Application of the 10-year Assessment of Back Taxes, Fees and Charges

December 29, 2016 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Maximiniano M. Alaba President 35 Parinas St., Sta. Rita Village Project 8, Quezon SUBJECT : Assessment and Collection of Local Taxes, Fees and Charges and the Application of the 10-year Assessment of Back Taxes, Fees and Charges Dear Mr. Alaba : This has reference to your letter dated 05 February 2016, which was referred to the Municipal Treasurer of Norzagaray, Bulacan for comments and/or appropriate action under an Indorsement dated 26 February 2016, copy enclosed, requesting for clarification on the following issues, to wit: cDHAES 1. Whether the Business Permit and Licensing Office (BPLO) of Norzagaray, Bulacan, or the alleged consultant, a certain Ms. PORTIA GERMAN , (Local Assessment Operations Officer V), is the proper person or in authority to assess or demand documents/records, negotiate or talk with the taxpayer regarding the assessment and payment of business permit fee and taxes? 2. Whether MJK Realty and Development, Inc. ("MJK", for brevity) is liable to pay the previous years' (10-year back taxes, more or less) operations for business permit? In relation to the above request, MJK made the following representations, to wit: 1. In October 2002, MJK entered into a joint venture contract to develop and market a parcel of land to a memorial park located in Poblacion, Norzagaray, Bulacan; 2. MJK was able to secure the necessary permits/licenses from the national government agencies concerned for the operation of a memorial park except the Mayor's/business permit which was not granted due to the pending petition from the neighboring subdivision stopping the development; 3. MJK continued its operation despite the absence of business permit as the application for Mayor's/business permit, as alleged, is denied because of the pending petition on the project; 4. During the change of administration in 2013, MJK again applied for Mayor's permit and paid the amount of P6,970.00 on September 3, 2014, as evidenced by O.R. No. 2460837 dated 03 September 2014, but was issued a Mayor's permit; 5. On 15 June 2015, MJK again applied for renewal of Mayor's/business permit and paid the amount of P28,020.47 under O.R. No. 4051119 dated 19 June 2015 but the issuance of a Mayor's/business permit was held in abeyance pending the review of previous years operations of MJK; and 6. On 19 January 2016, MJK again applied for Mayor's/business permit but was advised that the Municipality of Norzagaray will no longer receive payment unless MJK pays the previous years' operations (10 years, more or less). TCAScE Issue No. 1 Assessment of Local Taxes, Fees and Charges This Bureau has consistently expressed the view that assessment of local taxes, fees and charges is the sole responsibility of local treasurer. Such view is explicitly cited in the 1st Indorsement dated 14 June 1996, addressed to the City Treasurer of Caloocan City bearing on similar issues, wherein the pertinent issue of which is quoted hereunder: "x x x, the City Treasurer is the one responsible for the administration, assessment, collection and enforcement of all local taxes, fees and charges thereat, which include the amusement tax. Therefore, the transfer of the administration, assessment, collection and enforcement of the amusement tax from that office to the Business Permits and Licensing Office under the Office of the Mayor is not founded on, nor supported by, any provision of the Code.'' Further, in a similar case of San Carlos City (Pangasinan), this Bureau maintained its previous position on the matter that assessments and collections of Local taxes, fees and charges are the responsibility of local treasurers, thus: "x x x, numerous opinions had already been rendered, where it is the firm stand of this Bureau that the assessment function which is preparatory in the computation and collection of business taxes is an inherent function of local treasurers. Moreover, under the Local Treasury Operations Manual (LTOM) which is the operating and guiding manual in the discharge of function of local treasurers, it is the treasurer that certified the correctness of the taxes, fees and charges collected and reported by his office pursuant to the pertinent provision of the LGC. Another important thing to point out is that in case of protest on assessment, Section 195 of the LGC explicitly provides that the treasurer shall decide the protest within the prescriptive period provided in the law (LGC). Now, in case that the assessment is made by another office or officer and relegate the treasurer in the collection function, the treasurer may not be able to make a justifiable decision on the protest as he is not the one who issued the assessment much more compute for the correct taxes. Accordingly, the previous stand of this Bureau on the matter still holds until such time that the same is modified or rescinded accordingly." ASEcHI Issue No. 2. Period of Assessment and Collection To address the second issue, it should be noted that local business taxes change annually, since it is based on the gross sales or receipts of the preceding calendar year. Thus, on this particular issue, the governing provision of law is Section 194 1 of the LGC, which clearly illustrates that the Municipal Government of Norzagaray can only assess MJK for its tax liability on previous years' operations within five (5) years from the date such liability became due. However, the 10-year assessment period shall apply only if the taxing authority could establish fraud or intent to evade payment on the part of the taxpayer, otherwise the 5-year period of assessment shall apply. We hope that we have clarified matters. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director Footnotes 1. SEC. 194. Periods of Assessment and Collection . (a) Local Taxes Fees, or charges shall be assessed within (5) years from the date they became due. No action for the collection of such taxes, fees, or n charges, whether administrative or judicial, shall be instituted after the expiration of such period: Provided, That taxes, fees or charges which have accrued before the effectivity of this Code may be assessed within a period of three (3) years from the date they became due. (b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years from discovery of the fraud or intent to evade payment. (c) Local Taxes, fees, or charges may be collected within five (5) years from the date of assessment by an administrative or judicial action. No such action shall be instituted after the expiration of said period: Provided, however, that, taxes, fees, or charges assessed before the effectivity of this Code may be collected within a period of three (3) years from the date of assessment. (d) The running of the periods of prescription provide in the preceding paragraph shall be suspended for the time during which: (1) The treasurer is legally prevented from making the assessment of collection; (2) The taxpayer requests for reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect; and (3) The taxpayer is out of the country or otherwise cannot be located. n Note from the Publisher: Written as "of" in the original document.