Bureau of Local Government Finance Opinion

August 12, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned, thru the City Treasurer, General Santos City, to the Sangguniang Panlungsod, same city. This refers to the request for comment and recommendation on the proposed Ordinance entitled "AN ORDINANCE AMENDING ORDINANCE NO. 09, SERIES OF 1995, OTHERWISE KNOWN AS THE GENERAL SANTOS CITY INVESTMENT CODE OF 1995." In this connection, hereunder are the comments/recommendations of this Bureau on subject amendatory ordinance. 1. On Section 1, paragraph 1.12 A. Fiscal Incentives: "1. Full exemption from payment of business taxes for the (sic) first three (3) years of operation." Comment : The proposed grant of tax incentives for a period of three (3) years is not in conformity with Article 282 of the Implementing Rules and Regulations (IRR) implementing Section 192 of the Local Government Code (LGC) of 1991, quoted hereunder, and therefore not enforceable: "ART. 282. . . . "(2) On the grant of tax incentives: "xxx xxx xxx (ii) The grant of tax incentive shall be for a definite period not exceeding one (1) calendar year; Thus, the Sangguniang Panlungsod should amend said ordinance by reducing the period of exemption to not more than one (1) year from the actual date the business started operations. With respect to exemption from taxes, the Sangguniang Panglungsod should clearly and explicitly specify the fees that the businesses referred to shall be exempt from. It may be mentioned at this point that the exemption should not extend to fees and charges imposed for services rendered by the LGU, such as garbage fees, inspection fees and the like and such fees or rentals levied for the use of government-owned facilities and properties. DSTCIa 2. On Section 1, subparagraph 1.12 A: "b.6. In addition to the existing discount on prompt payment, Fifteen (15) percent Tax discount on basic Real Property Tax (RPT) and Special Education Fund (SEF) on land shall be granted provided the whole amount is paid before the end of the first quarter of every calendar year." Comment : We suggest that the additional discount on the Real Property Tax on land be deleted in view of the provisions of Sec. 251 of the LGC limiting discounts to a maximum of 20%. However, if there are machineries involved, an accelerated depreciation may be applied. 3. On Section 1, subparagraphs (1.3) and (1.8) of the subject Ordinance which provide as follows: "1.3 The Phrase 'that are disruptive to' in Section 2 thereof, reflecting the Policy Statement shall be deleted and changed to 'will maintain and enhance' so that said Policy Statement shall now be read as follows:" "Section 2. Policy Statement . In furtherance of the City and National growth and development towards Philippines 2000, General Santos city encourages new investments, expansions and/or diversification in industries that will maintain and enhance the ecological balance congruent to the agri-industrial development framework of the City and its surrounding areas. "1.8 In Sections 13 and 14 Chapter 8, containing the Qualification of the Enterprise shall be merged and now read as follows:" "Section 13. Qualification of New and/or Existing Enterprise . The following qualifications must be met by new and/or existing enterprise in order to avail of the local incentives provided in this Code: "xxx xxx xxx." Comment : Pursuant to Article 282 of the IRR, "The tax incentive shall be granted only to new investments in the locality . . ." Thus, the term, "new" shall be defined, i.e., only enterprises (industrial) engaging in new products or activity. And in consonance with paragraph 2-IV, of said article which states that "Any tax incentive granted to a type or kind of business shall apply to all businesses similarly situated", all other businesses will become automatically exempt also. It bears emphasis, however, that the foregoing views are expressed in line with the provisions of Article 287 of the IRR implementing the LGC and not a declaration of the illegality of the ordinance for reason that such function falls exclusively within the jurisdiction of the Department of Justice. (SGD.) ANGELINA M. MAGSINO (Deputy Executive Director) Officer-in-Charge