Bureau of Local Government Finance Opinion

July 18, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Rolando P. Navarro VP-Legal Services Ms. Imelda I. Sebastian VP-Group Controller Chemphil Group, LMG Chemical Corporation Chemphil Building, 851 Arnaiz Avenue Legaspi Village, Makati City Sir/Madam : This has reference to your letter dated November 20, 2001 referring to this Bureau the issue of whether or not manufacturers of chemicals in this case LMG Chemical Corporation (LMG) and Chemphil Albright and Wilson Corp. (CAWC) are liable to tax based on Article IV, Section 2 (a) of Tax Ordinance No. 96-001 of San Pascual, Batangas, which reads: Section 2. Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under NIRC. On any of the following businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue Code (NIRC) as amended, a tax of two percent (2%) per annum of the gross sales or receipt of the preceding calendar year is hereby imposed: a. On persons who sell goods and services in the course of trade or business and those who import goods whether for business or otherwise as provided for in Sections 100 to 103 of the NIRC as administered and determined by the Bureau of Internal Revenue pursuant to the pertinent provision of said Code. EICDSA This issue was passed upon by BLGF previously through its letter dated February 19, 2001 where it expressed that "LMG and CAWC shall be subject to, or liable to pay, the business tax under Section 143 (a) of the LGC as implemented by a duly-enacted ordinance of the municipality of San Pascual, Batangas and not under Section 243 (h) of the said Code as implemented under [Article IV] Section 2 of Tax Ordinance No. 96-001." In a letter dated October 4, 2001, the Office for Legal Services of the Province of Batangas opined that: Despite the opinion given by the Department of Finance on the matter, this office strongly maintains the position that the validity of your municipal ordinance must stand and you should continue collecting taxes by virtue of the same. This is because of the presumption that a tax ordinance is valid unless otherwise declared by the judiciary (San Miguel Corporation vs. Hon. Celso Avelino and the City of Mandaue, 89 SCRA 69) . Notwithstanding the foregoing opinion of the Office for Legal Services of the Province of Batangas, this Bureau finds no reason to depart from its previous opinion cited above. This Bureau hastens to clarify that it expresses no opinion as to the validity or invalidity of Tax Ordinance No. 96-001 simply because such is beyond the powers of this Bureau. This Bureau's opinion expressed here and in our letter to Atty. Rolando R. Navarro of Chemphil Group dated February 19, 2001 is limited to the proper application of Tax Ordinance No. 96-01 to this particular case within the confines provided by law, particularly Section 143 of the LGC. EacHSA To reiterate what has been previously stated, it is this Bureau's opinion that where Article IV, Section 2 of Tax Ordinance No. 96-001 was enacted in pursuance of Section 143 (h) of the LGC, the said provision of Tax Ordinance No. 96-001 does not apply to both LMG and CAWC because Section 143 (h) of the LGC adverted to in the Tax Ordinance does not apply to manufacturers such as LMG and CAWC. This Bureau maintains that LMG and CAWC are liable to pay the business taxes pursuant to the rates prescribed in Section 143 (a) of the LGC as implemented by a duly-enacted tax ordinance of the Municipality of San Pascual, Batangas. Accordingly, this Bureau has written a separate indorsement of even date to the (Assistant Municipal Treasurer) In-Charge of Office, Office of the Municipal Treasurer, San Pascual, Batangas. A copy is enclosed for your reference. Very truly yours, (SGD.) JUANITA D. AMATONG Undersecretary of Finance and Officer-in-Charge Bureau of Local Government Finance <www.blgf.gov.ph/downloads/opinion/localtax/2002/a2001-1117.pdf> last visited January 14, 2014.