Bureau of Local Government Finance Opinion

September 16, 2013 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Rafael Haulo, Jr. Director Business Compliance and Property Management Services, Inc. 2nd Floor, Caratland Building 1941-A Taft Ave., Pasay City Sir : This refers to your letter dated September 03, 2013 submitting among others, the imposition of business tax on newly-started business by the City Treasurer's Office of Pasay. IcHTCS For information, your other concern relating to the alleged probable violation of laws by the City Treasurer of Pasay was referred to our Legal Division for proper evaluation. To be specific, the question raised is the "proper assessment" of business on newly-started business; whether it should be the "paid-up capital" or "authorized capital" of the business. Considering therefore that the main issue is the imposition of initial local business tax (LBT) on newly-started business and not the basis, comment is made on whether the same (initial LBT) being imposed by the City Treasurer's Office of Pasay on your client, CARATLAND VENTURE CORPORATION (CVC), a newly-started business, which per information is engaged in the real estate development and leasing and started to operate during the current year, is proper and in conformity with the Local Government Code (LGC) of 1991. The Local Government Code (LGC) of 1991 has no provision which subjects newly-started business from LBT, except in the case of the "Tax on the Business of Printing and Publication" and "Franchise Tax", Sections 136 and 137, respectively of the same Code, but from which CVC does not fall as it is engaged in real estate development and leasing. However, in a letter dated August 13, 2013 of the City Treasurer of Pasay to Ms. JOSEPHINE ARRADAZA, Corporate Secretary of CVC, Mr. Manuel E. Leycano, Jr. categorically stated that the imposition of LBT on newly-started business is provided in the Pasay Revenue Code. In view thereof, the issue therefore, to our opinion, boils down to the legality or constitutionality of the specific provision of the Pasay Revenue Code imposing initial LBT on newly-started business, which is within the jurisdiction of the proper court and therefore beyond the authority of this Bureau. In addition, and for the proper guidance of all concerned, Section 187 of the LGC provides that " 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 who shall render a decision within sixty (60) days from the date of receipt of the appeal: . . . ." Considering therefore that the prescriptive period within which to appeal the issue before the Secretary of Justice had lapsed, your other recourse is file appropriated proceedings with a court of competent jurisdiction. It is worth mentioning that the herein views as expressed in relation to Article 287 of the Implementing Rules and Regulations (IRR) of the LGC and should not be construed as a declaration of nullity or illegality of the Pasay Revenue Code. We hope that this will help clarify matters. ACSaHc Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director