Bureau of Local Government Finance Opinion

June 22, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred, thru the City Assessor, to the City Treasurer, Manila. This refers to the attached letter dated April 8, 1998 of Mr. Francisco B. Rapacon, Accounting and Tax Manager, PHIMCO Industries, Inc. (PHIMCO for brevity), which, in effect, serves to follow-up his letter dated March 21, 1998 and "further support our company's (PHIMCO's) position against the shortfall or alleged deficiency in real property taxes (RPT) for 1996 (plus interest charges)." It may be recalled that the said March 21, 1998 letter of Mr. Rapacon was forwarded to the City Treasurer of Manila under a 1st Indorsement dated April 1, 1998, copy attached, of this Bureau for his full comment. Unfortunately, the requested comment has not as yet been received. The abovementioned follow-up letter of Mr. Rapacon apparently intends to provide this Bureau with the following basic information/facts concerning the subject matter: 1. The City Council of Manila enacted Ordinance No. 7794 on June 22, 1993 upon which the general revision of real property assessments was conducted by the City Assessor of Manila; EaCDAT 2. In March, 1996, PHIMCO received notices of assessments, as a result of the general revision of assessments under the said Ordinance No. 7794, covering the company's land, buildings and machineries, all effective 1996; 3. A preliminary injunction, restraining the implementation of Ordinance No. 7794 was issued by the RTC of Manila in view of the petition filed by Rep. Jaime Lopez in April, 1996, "for the annulment of the said Ordinance No. 7794;" 4. On April 10, 1996, the City Council of Manila "passed another Ordinance, City Ordinance No. 7905," which reduced by 50% the assessment levels contained in. Ordinance No. 7794, the effectivity of which was made retroactively to January 1, 1996; 5. Eventually, the RTC of Manila, in its October 24, 1996 Decision, dismissed the abovementioned petition filed by Rep. Lopez "on ground that with the passage of Ordinance No. 7905, which amended Ordinance No. 7794, the case has become moot and academic;" 6. That during the pendency of the said petition for the annulment of Ordinance No. 7794, PHIMCO allegedly offered to pay and actually tendered payments for the 1996 real property taxes (RPT) based on 1995 levels. The City Treasurer of Manila, however, "refused to accept the payments based on 1995 assessments, however, the payments were eventually received by the City Treasurer when caused through registered mails;" 7. Thereupon, PHIMCO claims to have tendered payments for the 1997 real property taxes also based on the 1995 assessments which were allegedly duly receipted by the City Treasurer; 8. On January 16, 1998, however, the company received a letter from the City Treasurer of Manila acknowledging the previous payments made by PHIMCO, but "at the same time demanding payment of the deficiency RPT for 1996, inclusive of (30%) interest charges , as well as RPT deficiency for 1997, and for the RPT for the whole year of 1998," based on the revised assessment levels as imposed under Ordinance No. 7905; and HcSETI 9. PHIMCO submits that, after the passage of City Ordinance No. 7905, the company did not receive any revised or new notice of assessment. It also appears in the aforecited follow-up letter of Mr. Rapacon that PHIMCO is supporting the following contentions: 1. That the effectivity of the purported revised assessments applying the reduced assessment levels under the said Ordinance No. 7905, upon which the City Treasurer computed the questioned "deficiency tax and penalties" against the company's real properties should be in accordance with Section 221 of the Local Government Code of 1991 (R.A. No. 7160) and Section 5 of Local Assessment Regulations (LAR) No. 1-92, dated October 6, 1992; 2. That, in order that the abovementioned real property assessments could properly take effect in accordance with the abovecited Section 221 of R.A. No. 7160 and Section 5 of LAR 1-92, the corresponding notices of assessments therefor accompanied by the owner's copies of the tax declarations, as required under Section 9 of LAR No. 1-92 "must be served upon the owner of the property." Section 221 of R.A. No. 7160 and Sections 5 and 9 are quoted hereunder: Sec. 221, R.A. No. 7160 : "Sec. 221. Date of effectivity of Assessment or Reassessment . All assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the succeeding year: Provided, however, That the reassessment of real property due to its partial or total destruction, or to a major change in its actual use, or to any great sudden inflation or deflation of real property values, or to the gross illegality of the assessment when made or any other abnormal cause, shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take effect at the beginning of the quarter next following the reassessment. aSTHDc " Sections 5 and 9 of LAR No. 1-92 : "Sec. 5. Date of effectivity of Assessment or Re-assessment . All assessments made after the first day of January of any year shall take effect on the first day of the succeeding year. . . . "xxx xxx xxx. "Section 9. Notification of New or Revised Assessments . When real property is assessed for the first time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor shall, within thirty days, give written notice of such new or revised assessment to the person in whose name the property is declared. The notice may be delivered personally to such person or to the occupant in possession, if any, or by mail to the last known address of the person to be served, or thru the assistance of the punong barangay. (Sec. 223, id .) "xxx xxx xxx. "(a). Purpose of service of notice of assessment "Although the real property tax is levied against the real property, it is the owner who pays the tax. After that tax is fixed, he is entitled to a hearing on the assessment of his property; notice and hearing constitute part of due process (not strictly judicial) in taxation . If he is not satisfied with the action of the assessor in the assessment of his property, he may, within sixty (60) days from the date of receipt by him of the written notice of the assessment of his property, appeal to the Board of Assessment Appeals of the province or city where the property is located. If he does not appeal within the said period, he will be deprived of his right to be heard in the Board. (Emphasis supplied) "xxx xxx xxx." Anent PHIMCO's first contention, this Bureau finds the same to be consistent with the ruling embodied under the letter dated April 28, 1994 of the Department of Finance, which maintained that: "Accordingly, the general revision period is specifically provided for under the . . . provisions of the Code. However, if the general revision work thereat was not completed by December, 1993, that Office may continue the work up to July, 1994. However, be reminded that the effectivity of the revised assessments shall commence only on January 1, 1995, in line with the provisions of Section 221 of the said Code, . . ." As regards the second contention, the same is deemed to be in accordance with the basic intention of the provision of Section 223 of R.A. No. 7160, that is, to afford the assessed property owner the due process requirement in order that the assessment imposed against him could be considered valid as in the Decision of the Supreme Court in Pedro P. Roxas vs. James J. Rafferty (G.R. No. L-12182), which, among others, stated that: ". . . Sometimes statutes requiring the assessor to notify the taxpayer have been held merely directory. But in the majority of jurisdictions this requirement is held to be mandatory, so that the assessor cannot make a valid assessment unless he has given proper notice. . . ." TaSEHC The said Section 223 of the Local Government Code of 1991 is quoted hereunder: "Section 223. Notification of New or Revised Assessments . When real property is assessed for the first time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor shall within thirty (30) days give written notice of such new or revised assessment to the person in whose name the property is declared. The notice may be delivered personally or by registered mail or through the assistance of the punong barangay to the last known address of the person to be served." Apparently, the failure to furnish PHIMCO with the mandatory "notices of assessment" and the owner's copies of the tax declarations constitutes non completion of the purported revised assessments in pursuance of the aforecited Ordinance No. 7905. In view of the foregoing, this Bureau finds the questioned "deficiency tax, including penalties thereon," being demanded by the City Treasurer of Manila against PHIMCO, without legal basis considering that the City Assessor thereat should first issue the duly revised assessments covering the subject real properties of the company applying the reduced assessment levels under Ordinance No. 7905, and the abovecited provisions of Section 221 of R.A. No. 7160, and Sections 5 and 9 of LAR No. 1-92, as regards their effectivity; and, thereafter, PHIMCO should be furnished with the revised notices of assessments and the corresponding owner's copies of the tax declarations therefor. Thereupon, the correct amount of real property tax, without penalty of course, could then be computed/determined by the said City Treasurer. The said City Assessor and City Treasurer are, therefore, hereby instructed to take the necessary actions/steps in accordance herewith, in order that the real property tax assessments and collection records of the subject real properties of PHIMCO could be rectified or put in order. Reports of actions taken hereon by the abovementioned Assessor and Treasurer of the City of Manila are requested within ten (10) days from receipt hereof. EaISTD Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director