Bureau of Local Government Finance Opinion

August 19, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the Municipal Treasurer, Tagig, Metro Manila, for comment and/or appropriate action. This refers to the letter dated July 7, 1997 of Mr. Oscar B. Galuna, Corporate Secretary, Uniden Philippines, Inc. (UPI), requesting this Bureau to reverse the decision of that Office regarding the assessment made in the amount of P458,448,56 representing the penalty and surcharges on the business tax paid by said company for the second quarter of 1997. Representations are made that in January 1997, UPI applied for the renewal of its business permit. Said company was assessed in the amount of P5,940,874.35 as business tax for the year 1997, computed on a quarterly basis as follows: PERIOD AMOUNT 1st Quarter P1,504,275.36 2nd Quarter 1,478,866.33 3rd Quarter 1,478,866.33 4th Quarter 1,478,866.33 The first quarter tax was duly paid on January 20, 1997. However, the second quarter tax was paid on June 30, 1997, with an additional assessment of P458,448.56 as penalty and surcharges. UPI paid under protest the said amount of P458,448.56 on the ground that the company was not operating due to the strike staged by its employees between the period of February and May, 1997 making it impossible to pay the second quarter business tax liability. ICESTA Section 168 of the Local Government Code of 1991 (LGC) provides as follows: "Sec. 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges . The sanggunian may impose a surcharge not exceeding twenty-five percent (25%) of the amount of taxes, fees, or charges not paid on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the total interest on the unpaid amount or a portion thereof." It is clear from the aforequoted provision of law that upon failure to pay the tax, fee or charge, a "surcharge" is automatically imposed on the amount due and unpaid at the rate of not exceeding 25% thereof. In addition, it may be mentioned that under Sections 165, 166 and 167 of the same Code, the tax period for all local taxes, fees and charges shall be the calendar year which become due and collectible on the first (1st) day of January of each year and are required to be paid within first twenty (20) days of January, but which may also be paid by quarterly installments on or before the first twenty (20) days of each subsequent quarter. However, the pertinent portion of Section 167 aforementioned states that "The sanggunian concerned may, for a justifiable reason or cause, extend the time for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding six (6) months." Accordingly, it appearing that there was no deliberate attempt on the part of UPI to avoid paying its business tax, it is suggested that, that Office conduct a verification to determine if, indeed, the company was not in operation on the duration of the strike. Thereafter, that Office may recommend to the sanggunian for the extension of the time of payment of UPI taxes for 2nd quarter of 1997, without surcharges and penalties. Report of action taken thereon within fifteen (15) days from receipt hereof is requested. (SGD.) ANGELINA M. MAGSINO (Deputy Executive Director) Officer-In-Charge