Bureau of Local Government Finance Opinion

January 12, 1993 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the Regional Director, Bureau of Local Government Finance, Region VII, MSK Building, Juan Luna Street corner Lapu-Lapu Street, Cebu City. This refers to the letter-query of Mr. Nemesio B. Desor, Municipal Vice-Mayor of Sibulan, Negros Oriental regarding the collection of franchise tax pursuant to RA 7160 otherwise known as the Local Government Code of 1991. It is the contention of the Vice-Mayor that both the province and municipality are authorized to collect franchise tax pursuant to Sections 137 and 447 quoted as follows: "Sec. 137. Franchise Tax . Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction. "xxx xxx xxx" "Sec. 447. Powers, Duties, Functions and Compensation . (a) The sangguniang bayan, as the legislative body of the municipality, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the municipality and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the municipality as provided for under Section 22 of this Code, and shall: "xxx xxx xxx (3) Subject to the provisions of Book II of this Code, grant franchises, enact ordinances authorizing the issuance of permits or licenses, or enact ordinances levying taxes, fees and charges upon such conditions and for such purposes intended to promote the general welfare of the inhabitants of the municipality, and pursuant to this legislative authority shall: cd "xxx xxx xxx" Under the aforequoted provisions, it is clear that the municipality has the authority to grant franchises. However, the authority to collect franchise tax is under the taxing power of the province and not the municipality, pursuant to the provision of Section 142 of the Code which provides that "Except as otherwise provided in this Code, municipalities may levy taxes, fees, and charges not otherwise levied by provinces." There is no provision in the Code which authorizes municipalities to levy the franchise tax. Accordingly, municipalities may only levy taxes, fees and charges not otherwise levied by provinces and these are taxes on business, fees and charges that covers the cost of regulation, inspection and licensing fees for sealing and licensing of weights and measures and fishing rentals fees and charges. It is hoped that this clarifies matters. By Authority of the Secretary: JUANITA D. AMATONG Undersecretary