Bureau of Local Government Finance Opinion

May 19, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Fidel V. Giron President/Manager Masuerte Rural Bank of Bacoor (Cavite), Inc. 2118 Paraiso Street Dasmarias Village Makati City S i r : This refers to your letter dated March 7, 1997 requesting clarification or opinion as to whether or not Masuerte Rural Bank of Bacoor, Cavite (MRBBC) should pay or is under obligation to pay the local taxes to the municipality of Bacoor, based on a tax ordinance which was not enacted in accordance with Local Finance Circular No. 1-93 dated June 16, 1993. It was gathered that the municipal Council of Bacoor, Cavite enacted Tax Ordinance No. 93-6, s. 1993, otherwise known as the "Revenue Code of Bacoor, Cavite" which took effect on January 1, 1994. The imposition of taxes under Section 2B.02 of said Ordinance covers all business establishments including banks and other financial institutions. Hence, upon implementation thereof, the treasurer demanded the payment of business taxes, as well as the Mayor's permit and other regulatory fees from MRBBC. However, MRBBC claimed that the subject ordinance shall not apply to said bank and other banks for lack of any notice and public hearing in accordance with the aforecited Local Finance Circular (LFC). Upon perusal of subject Ordinance, this Bureau finds that the imposition of business tax on banks and other financial institutions is allowable inasmuch as the rate of said tax has not exceeded 50% of 1% of the gross receipts prescribed under Section 143(f) of the Local Government Code (LGC) of 1991. Moreover, under a certification dated November 24, 1993 issued by Mr. Edwin E. Malvar, the then chairman, Committee on Ordinances and Legal Matters of the Sangguniang Bayan, it appears that a public hearing was conducted and the enactment of the subject ordinance is in accordance with the provisions of RA No. 7160, including the mandatory public hearing requirement under Section 187 of the Code. It may be stated further that circulars, like LFC No. 1-93, issued by the Department of Finance are guidelines on the levy and administration of local taxes, fees and charges pursuant to Article 287 of the Implementing Rules and Regulations (IRR) implementing the Code. Such guidelines are directory and only intended to, among others, guide local treasury offices in collecting taxes and other local impositions, as well as in determining or computing tax discounts or penalties and surcharges, and the taxpaying public as to the proper interpretation and application of the law and rules governing local taxation. On the basis of the foregoing, and considering that the imposition of tax on banks under the subject ordinance is in accordance with Section 143(f) of the Code, this Bureau expresses the view that MRBBC is subject to the payment of local business taxes as well as the Mayor's permit and other regulatory fees. ESTAIH We trust that this will clarify matters. Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director