Bureau of Local Government Finance Opinion

April 23, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Medelyn B. Pacatang, LLB. City Treasurer Dapitan City Madam : This refers to your letter dated February 16, 2015 requesting opinion if your strategy of requiring real property tax clearance on business permits applications would transgress laws regarding the regulations/imposition of taxes and issuance of permits to businesses. It is forwarded that one of your strategies in the collection of real property taxes is to require business permit applicants a Real Property Tax Clearance showing proof of payment of real property tax. In view of the said policy, a few businesses reacted to it for the reason that they are just renting such place and accordingly, it is the duty of the property owners to pay the real property tax and that their business should not be made to suffer for not paying the said tax. In other cases, other few businesses are only authorized to use such place out of goodwill of the owner and therefore it is claimed that it's not their obligation to pay the real property tax. However, it is insisted that the properties that are being used by businesses should comply with the property tax clearance requirement considering that they are benefiting for using such properties hence, these businesses should advise the property owners to pay their obligations to the City Government of Dapitan. Currently, that Office is not issuing real property tax clearance to businesses that are operating or located in delinquent real properties even if the business owners are just renting the place or using it for free out of goodwill. In this connection, this Bureau expresses the views that applications for business permits/licenses, whether new applicants or for renewal, should be held back by the City Government of Dapitan on the account that they are located or operating in delinquent properties. In the first place these businesses should not be made to suffer of not being issued a permit or license for the "fault" of other people, specifically delinquent property owners. Incidentally, such policy is in direct contrast to the policy of the National Government implemented under the Business Permit & Licensing System (BPLS) Reform program of the government through the joint efforts of DILG and DTI and is compliance with the provisions of R.A. No. 9485 or the Anti-Red Tape Act (ARTA) of 2007. The program is aimed to simplify the requirements in establishing business in the country and enjoined government instrumentalities and LGUs to deliver services efficiently by reducing red tape. More importantly, the program is also aimed to have a business-friendly environment in the Philippines in order to be competitive with other countries. In this regard, while we acknowledge the intent of your City's policy on the issue, it is our view that it should conform with laws, rules and regulations. After all R.A. No. 7160, also known as the Local Government Code (LGC) of 1991 provides the necessary provisions in dealing with delinquent taxpayers, both for business and real property owners. cSEDTC In the case of delinquent real properties, that Office may avail of the remedies provided under Section 256 of the LGC in the collection of delinquent real property taxes (RPT). The law gives authority to LGUs to avail of the administrative remedy through the levy on delinquent real property and by judicial remedy through the proper court of justice, both of which may be instituted simultaneously. In view of the foregoing, the Real Property Tax Clearance requirement in the renewal of business permit may not be the proper strategy in the collection of delinquent RPT. In particular, businessmen applying for business permits/licenses but whose businesses are operating or located in delinquent properties they do not own should not be required to secure the Real Property Tax Clearance before renewing their business permits. The effort to collect should be directly addressed to the delinquent property owners and not to businessmen who are law-abiding citizens. To be sure, it would be more beneficial to both the business community and City Government if such policy is brought to an end as it will create a more business-friendly environment that will encourage robust business activities. For the guidance of that Office, if in case that such policy is embodied in the Revenue Code or Tax Ordinance of that City as one of the conditions set forth as requisite in securing business permit/license, that Office is advised to make a representation with the Sangguniang Panlungsod for the introduction of necessary amendment and/or modification to effect reform in the issuance of business permits/licenses in conformity with the above-stated policy under the BPLS Reform program of the government. We hope this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director