Bureau of Local Government Finance Opinion

March 20, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned, thru the Provincial Treasurer, Tarlac, Tarlac, to Sangguniang Panlalawigan Board Member Genaro M. Mendoza, same province. This refers to his basic letter dated August 2, 1996 posing the following queries: 1) Will it still be possible for the Provincial Government of Tarlac to impose its taxing and other revenue raising powers over the city of Tarlac; 2) If query No. 1 is in the affirmative, what specific tax provisions then could the province impose in (sic) the city; and 3) How much share will be taken from the Internal Revenue Allotment (IRA) of the province. The above queries have been raised in view of the proposed conversion of the municipality of Tarlac into a component city which is now allegedly on second reading at the House of Representatives under House Bill No. 6863. On queries Nos. 1 and 2, attention is invited to Section 151 of R.A. 7160, otherwise known as the Local Government Code of (LGC) 1991, quoted hereunder: "SEC. 151. Scope of Taxing Powers . Except as otherwise provided in this Code, the city may levy the taxes, fees, and charges which the province or municipality may impose: Provided , however . That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. HAECID "That rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes." From the abovequoted provision of the Code, it is clear that all cities, whether component, independent component or highly urbanized, are empowered under the Code to levy the taxes, fees and charges that provinces and municipalities are authorized to impose. It may be added that pursuant to Section 129 of the same Code, "(e)ach local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to the provisions of the Code, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the local governments." Accordingly, a province cannot impose its taxing and other revenue raising powers within the territorial jurisdiction of a city. As regards query No. 3, the IRA shares of provinces, cities and municipalities are determined pursuant to the provisions of Section 285 of the Code quoted, in part, as follows: "SEC. 285. Allocation to Local Government Units . The share of local government units in the internal revenue allotment shall be allocated in the following manner: "(a) Provinces Twenty-three percent (23%); "(b) Cities Twenty-three percent (23%); "(c) Municipalities Thirty-four percent (34%); and "(d) Barangays Twenty percent (20%%)." Provided, however, That the share of each province, city, and municipality shall be determined on the basis of the following formula: "(a) Population Fifty percent (50%); "(b) Land Area Twenty-five percent (25%); and" "(c) Equal Sharing Twenty-five percent (25%) "xxx xxx xxx." Accordingly, if and when the municipality of Tarlac is converted into a city, the IRA allocation of the province will be affected since the factors in determining the share of the province will be reduced, specifically population and land area of the municipality of Tarlac, both of which will be removed from the province. It is hoped that this clarifies matters. (SGD.) LORINDA M. CARLOS Executive Director