Bureau of Local Government Finance Opinion

October 28, 2002 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned to the OIC-City Treasurer, City of Davao, the herein preceding indorsement relative to the letter dated May 7, 2001 of Mr. Leopoldo P. Parreo requesting opinion on certain provisions of the Davao City Tax Ordinance No. 230, s. 1991, as amended, which are allegedly not in conformity with the Local Government Code (LGC) of 1991, enumerated as follows: 1. Section 3 Article 4, Imposition of permits, fees based on the capital declared; 2. Section 2, Article 11, the tax of ten pesos (P10.00) per cubic meter on sand, gravel and other quarry resources, alleged to be different from what is allowed under the Local Government Code of 1991; 3. Section 2-A Article 30, imposition of P100.00 fine for failure on the part of taxpayer to display valid mayor's permit. Issue No. 1. Article 233 of the Implementing Rules and Regulations implementing Section 147 of the LGC provides as follows: TEAaDC "Art. 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 be only 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 on gross sales or receipts of the person or business liable thereof ." (Underlining supplied) There are two (2) conditions in the imposition of fees and charges provided under Article 233 of the IRR, as follows: 1) that it should be reasonable; and (2) that it should be only commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling. ScCEIA Obviously, the 2nd condition was not complied with as the imposition of the mayor's permit fee was based on capital investment. The fee should be in such amount as to only defray the expenses incurred in the regulation, inspection and surveillance. It was observed that in a 2nd Indorsement dated 03 September 2001 the City Treasurer supported the view that the fee based on capital investment is valid because "the general provision of law only requires that the fee be reasonable. The City Treasurer further ratiocinated that the implementing regulations cannot outweigh the clear provision of the law. In this connection, the City Treasurer is hereby directed to refrain from making such declaration as he is mandated to implement and enforce administrative rules and regulations issued by the DOF regardless of his personal conviction and belief. Administrative regulations and policies enacted by administrative bodies to interpret the law have the force of law and are entitled to great respect. However, administrative agencies are not authorized to substitute their own judgment for any applicable law or administrative regulation with the wisdom or propriety of which they do not agree, at least, not before such law or regulation is set aside by the authorized agency of government as unconstitutional or illegal and void. ( Eslao vs. Commission on Audit , 236 SCRA 161) EHcaAI Issue No 2. The LGC sets the limit on the rate of tax that can be collected on sand, gravel and other quarry resources, i.e. , not more than 10% of fair market value thereof in the locality per cubic meter. If the present minimum value per cubic meter thereof in Davao City is indeed P100.00 as stated in the 2nd Indorsement of that Office, then it can be said that the tax rate prescribed in the questioned ordinance of P10.00 per cubic meter is within the limitation. Besides, under the LGC, the city is authorized to impose not more than 50% more of the maximum rates allowed for the province and municipality. All local taxes, fees and charges are required to be paid within the first twenty (20) days of January, but the same may also be paid in quarterly installments on or before the first twenty (20) days of each subsequent quarter. The exception to this rule is when the Code itself provides otherwise, or when the sanggunian concerned fixes a different date whenever so authorized, as in the case of the tax on sand, gravel and other quarry resources, which should be payable upon extraction. (Ursal, Phil. Law of Local Government Taxation annotated, 2000 Ed., p. 197) caCTHI Issue No. 3. The penalty imposed by the questioned ordinance for the violation of the provision on display of mayor's permit is not in accordance with Section 516 of the LGC which mandates that the fine shall not be less than P1,000.00. Accordingly, that Office is hereby instructed to make representations with the Sangguniang Panlungsod thereat for the amendment of Section 3, Article 4, and Section 2, Article 30 of the Davao City Tax Ordinance No. 230, s. 1991, as amended to ensure compliance with the Code and its IRR. However, this Bureau is not in a position to declare the nullity or illegality of said ordinance. Thus, in a separate letter, Mr. Parreo was advised of the provisions of Section 187 of the LGC which holds 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." Unless there is a declaration of unconstitutionality or illegality by competent authority, the questioned provisions in the questioned tax ordinance shall be presumed valid and enforceable. It should also be emphasized that any ruling or opinion rendered by the BLGF or the DOF as regards the constitutionality or legality of tax ordinances or revenue measures is merely persuasive, not mandatory, because the Secretary of Finance under the LGC has no longer the power to review tax ordinances or revenue measures enacted by the LGU. TSDHCc (SGD.) MA. PRESENTACION R. MONTESA Executive Director