Bureau of Local Government Finance Opinion

June 26, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon. Alberto L. Taga Chairman Committee on Ways and Means Office of the Sangguniang Bayan G. Borja Street Pateros, Metro Manila Sir : This refers to your letter dated May 26, 2015 seeking legal opinion on the interpretation of the Draft Ordinance No. 2015-09, entitled: "AN ORDINANCE AMENDING SECTION 3B.02 AND SECTION 3C.02 (a) ON CHAPTER III, ARTICLE B AND ARTICLE C, RESPECTIVELY OF MUNICIPAL ORDINANCE NO. 2004-20, OTHERWISE KNOWN AS "THE REVENUE CODE OF THE MUNICIPALITY OF PATEROS". EcTCAD To date, the Municipality of Pateros has an existing Municipal Ordinance No. 2004-020 entitled "THE REVENUE CODE OF THE MUNICIPALITY OF PATEROS." SECTION 3B.02 and SECTION 3C.02, (both imposition of fees), all of ARTICLE B (Permit Fee for Cockpits Owners/Operators Licensees/Promoters and Cockpit Personnel), CHAPTER III (Permit and Regulatory Fees) thereof, specifically state, and to quote: " ARTICLE B. Permit Fee for Cockpit owners/Operators/Licensees/Promoter and Cockpit Personnel. Section 3B.02. Imposition of Fees. There shall be collected the following Mayor's Permit fees from cockpit operators/owners/licensees/cockpit personnel: (a) From the owner/operator/licensees of the cockpit: Annual cockpit permit fee P10, 000.00 " ARTICLE C. Special Permit Fee for Cockfighting. Section 3C.02. Imposition of Fees. There shall be collected the following fees per day for cockfighting: (a) Special Cockfights (Pintakasi) P1,000.00 " (Emphasis supplied) Representations are made that one members of the Sangguniang Bayan of Pateros authored and submitted a draft measure with an end in sight of amending the decade old tax ordinance, specifically the provisions on the imposition of fees being collected for Mayor's Permit fees and on the payment of Special Cockfights (Pintakasi) . The proposal is numbered as (draft) Ordinance No. 2015-09, and was appropriately referred to the Committee on Ways and Means for consideration and for the submission of mandatory committee report with the following primary objectives: AScHCD 1. To increase the Annual Cockpit Mayors Permit fee from TEN THOUSAND PESOS (Php10,000.00) to FIVE HUNDRED THOUSAND PESOS (Php500,000.00). 2. To increase the payment of Special Cockfights (Pintakasi) fee from ONE THOUSAND PESOS (Php1,000.00) per day to TEN THOUSAND PESOS (Php10,000.00) per day. According to the Honorable Councilor-Sponsor, the idea was borne out of the legislative enactment passed by the City of San Juan, then a Municipality the San Juan Municipal Revenue Code, Ordinance No. 47, Series of 2003. He opined that if the Municipality of San Juan can legally collect such amount from cockpit operator, what stops this small municipality to collect the same? In this connection, the issues/questions that need to be resolved are as follows: 1. Is the Sangguniang Bayan of Pateros or the Municipal Government of Pateros as a whole, will violate any statute and will be liable to any administrative and criminal offenses should we passed the draft measure? 2. Is there a prescribed limit, as mandated by existing law, in increasing the fees to be collected by the ONLY MUNICIPALITY in Metropolitan Manila area in the subject establishment? As to Issue No. 1, Section 129 of Republic Act No. 7160, otherwise known as the Local Government Code (LGC) of 1991 provides that LGU has "the power to create their own sources of revenues and to levy taxes, fees and charges" and Section 132 thereof provides "that the power to impose a tax, fee, or charge or to generate revenue . . . shall be exercised by the local sanggunian of the local government concerned", both of which are conferred upon them by Congress and may be exercise thru the enactment of a tax ordinance or revenue measure by the said local sanggunian concerned pursuant to the procedures set up under Sections 187 and 188 of the Local Government Code (LGC) of 1991, which provide the following basic requisites: 1. Pre-Publication and/or Posting 2. Written Notices to Interested or Affected Parties 3. Public Hearing AcICHD 4. Preparation of Minutes 5. Approval 6. Publication 7. Review Based on the above immediate preceding representations, that Office has the authority to enact the necessary local revenue code or tax measure that will serve as the basis in the collection of local taxes, fees and charges by the local treasurer provided, that, the mandatory public hearing prior to the enactment or approval shall have been conducted pursuant to Section 187 of the same Code. As regard Issue No. 2, the proposed provisions of Ordinance No. 2015-09 specifically increase the amount of fees to be collected from P10,000.00 to P500,000.00 from Cockpit Owners/Operators/Licensees and from P1,000.00 to P10,000.00, for Special Permit Fee for Cockfights (Pintakasi). It may be stated that regulatory fees, services charges and impositions made in the exercise of the police power of the Municipality such as the Mayor's permit fee herein referred to can be adjusted anytime it is deemed fit and proper. However, this Bureau has consistently expressed the view that fees and charges that the local government units may impose should only commensurate to the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance. This is pursuant to Article 233 of the Implementing Rules and Regulations (IRR) implementing Section 147 of the LGC, quoted as follows: TAIaHE "Article 233. Fees and Charges. The municipality may impose and collect such reasonable fees and charges on businesses and occupations and, except as reserved to the province under Article 228 of this Rule, on the practice of any profession or calling before any person may engage in such business or occupation, or practice such profession or calling provided that such fees and charges shall only be commensurate to the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance . No such fee or charge shall be based on capital investment or gross sales or receipts of the person or business liable thereof ." (Emphasis ours) As can be discern from the wordings of the abovequoted provision of the LGC, it may be deduced that the clear intent of the law is to give the local sanggunians the discretion to determine the appropriate rates of regulatory fees to be adopted in their locality. This is for the simple reason that the sanggunian , being the local law-making body, is in the best position to determine the appropriateness of such fee or charge based on the economic condition prevailing in the locality guided however by the principle that such fees and charges shall commensurate to the cost of regulation that may be incurred in the conduct of inspection, surveillance and other related activities to justify such impositions. We hope that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director