Legality of the Draft Ordinance Increasing the Rates of Regulatory Fees on Cockpit and Cockfights

January 20, 2016 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Noel Mariano Tuazon Owner/Operator, New Pateros Coliseum 18 M. Almeda St., Pateros Metro Manila SUBJECT : Legality of the Draft Ordinance Increasing the Rates of Regulatory Fees on Cockpit and Cockfights Sir : This refers to your letter dated 13 January 2016 requesting opinion regarding the legality of Draft Ordinance No. 2015-09 (hereinafter referred to as "Draft Ordinance"), which amends two Sections of Municipal Ordinance No. 2004-20, otherwise known as the Revenue Code of the Municipality of Pateros (hereinafter referred to as "Revenue Code"). To summarize, the current amounts of fees in the existing Revenue Code are compared with the amounts in the proposed amendments to show the percentage increase, thus: Proposed Amendments Existing Draft Ordinance Percentage Ordinance Increase Section 3B.02 P10,000.00/yr. P500,000.00/yr. 5,000% Imposition of Fees. (a) Annual cockpit permit fee Section 3C.02 P1,000.00/day P10,000.00/day 1,000% (a) Special Cockfights [ Pintakasi ] Based on the above presentation, it is viewed that the Draft Ordinance exceeds the limitations on increases in tax rates provided under Section 7D.04, Chapter VII, Article D of the Revenue Code (Municipal Ordinance No. 2004-020), quoted as follows: " Section 7D.04. Authority to Adjust Rate. The Sangguniang Bayan shall have the sole authority to adjust tax rates as prescribed herein not oftener than once every five (5) years, but in no case shall such adjustment exceed ( sic ) ten percent (10%) of the rates fixed under this Revenue Code." (Emphasis ours) Moreover, the proposed amounts of regulatory fees in the Draft Ordinance are also viewed as excessive, oppressive, confiscatory , considering the costs of regulation, inspection, and licensing provided under Section 147 of the Local Government Code (LGC) of 1991, quoted as follows: "SEC. 147. Fees and Charges . The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling." And Section 186, same Code, provides: "SEC. 186. Power to Levy Other Taxes, Fees or Charges . Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy : Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose." For your information, the Chairman, Committee on Ways and Means of the Office of the Sangguniang Bayan of Pateros, made a similar query seeking comments on the said Draft Ordinance , particularly on the proposed amount of fees to be collected from P10,000.00 to P500,000.00 from Cockpit Owners/Operators/Licensees and from P1,000.00 to P10,000 for Special Permit Fee for Cockfights (Pintakasi) . In this connection, attached for guidance and information is a copy of our letter dated June 26, 2015 addressed to HON. ALBERTO L. TAGA, Chairman, Committee on Ways and Means of the Office of the Sangguniang Bayan of said Municipality, the pertinent portions of which are quoted as follows: TIADCc "It may be stated that regulatory fees, services charges and impositions made in the exercise of the police power of the Municipality such as the Mayor's permit fee herein referred to can be adjusted anytime it is deemed fit and proper. However, this Bureau has consistently expressed the view that fees and charges that the local government units may impose should only commensurate to the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance . This is pursuant to Article 233 of the Implementing Rules and Regulations (IRR) implementing Section 147 of the LGC, quoted as follows: (Emphasis supplied) 'Article 233. Fees and Charges . The municipality may impose and collect such reasonable fees and charges on businesses and occupations and, except as reserved to the province under Article 228 of this Rule, on the practice of any profession or calling before any person may engage in such business or occupation, or practice such profession or calling provided that such fees and charges shall only be commensurate to the cost of issuing the license or permit and the expenses incurred in the conduct of the necessary inspection or surveillance . No such fee or charge shall be based on capital investment _or gross sales or receipts of the person or business liable thereof .' (Emphasis ours) . "As can be discern ( sic ) from the wordings of the abovequoted provision of the LGC, it may be deduced that the clear intent of the law is to give the local sanggunians the discretion to determine the appropriate rates of regulatory fees to be adopted in their locality. This is for the simple reason that the sanggunian , being the local law-making body, is in the best position to determine the appropriateness of such fee or charge based on the economic condition prevailing in the locality guided however by the principle that such fees and charges shall commensurate to the cost of regulation that may be incurred in the conduct of inspection, surveillance and other related activities to justify such impositions." As to the main issue concerning the LEGALITY of the Draft Ordinance, your attention is invited to Section 187, which provides: " SEC. 187. Procedure for Approval and Effectivity of Tax, Ordinances and Revenue Measures; Mandatory Public Hearings. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal : Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction ." (Underscoring supplied) Considering therefore that the issue submitted will have to deal on matter of question of law, particularly on the legality of the Draft Ordinance, you may avail of the options provided in the law aforequoted. We hope that this will help clarify matters. Very truly yours, (SGD.) JOCELYN T. PENDON OIC-Executive Director