Bureau of Local Government Finance Opinion

August 17, 1994 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Chika G. Go Councilor, 3rd District Manila S i r : This refers to your letter dated July 19, 1994 inquiring on the legality of the imposition of excise tax by the City Treasurer of Manila. Section 21 of the Revenue Code of the said city provides as follows: "SEC. 21. Tax on Businesses Subject to the Excise. Value-Added or Percentage Taxes Under the NIRC . On any of the following businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue Code hereinafter referred to as NIRC, as amended, a tax of three percent (3%) per annum on the gross sales or receipts of the preceding calendar year is hereby imposed: "D) Excisable goods subject to vat 1) Distilled spirits 2) Wines 3) Tobacco products (Other that cigarettes, cigars and chewing tobacco) 4) Tobacco specially prepared for chewing 5) Lubricating oils and grease 6) Processed Gas 7) Waxes and petroleum 8) Denatured alcohol to be used for motive power 9) Fireworks 10) Cinematographic films 11) Saccharine 12) Coal and Coke 13) Fermented liquor, brewers wholesale price, excluding the ad valorem tax 14) Automobiles, manufacturers or importer selling price 15) Non-essential goods based on wholesale price, net of excise tax and vat "a) Jewelry, whether real and imitation, pearls, precious and semi-precious stones and imitations thereof; goods made of, or ornamented, mounted or fitted with precious metals or imitations thereof or ivory (not including surgical and dental instruments, silver-plated wares, frames or mounting for spectacles or eyeglasses, and dental gold or gold alloys and other precious metals used in filling, mounting or fitting of the teeth.) b) Perfumes and toilet waters c) Yachts and other vessels intended for pleasure or sports." (16) Mineral products, based on actual market value of the annual gross output at the time of removal xxx xxx xxx In this connection, it may be stated that under the provisions of Section 151 of the Local Government Code (LGC) of 1991, city governments, like Manila, may impose a tax on businesses referred to under Sec. 143 (h) of the Code, quoted here under in relation to Sec 151 thereof: "SEC. 143. Tax on Business . The municipality may impose taxes on the following businesses: xxx xxx xxx (h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper to tax: Provided, That on any business subject to the excise, value-added or percentage tax under the National Internal Revenue Code, as amended, the rate of the tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year. xxx xxx xxx It appears, however, that the aforequoted Section 21 (D) of the Revenue Code of the city imposes a tax of 3% on articles of commerce listed therein. The tax, therefore, is levied not on businesses but on goods or articles of commerce. Apparently, as written, Section 21 (D) is violative of Sec. 133 (h) of the LGC, quoted as follows: "SEC. 133. Common Limitations on the Taxing: Powers of Local Government Units . Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangay shall not extend to the levy of the following: xxx xxx xxx "(h) Excise tax on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; xxx xxx xxx It bears emphasis however, that the foregoing view are expressed in line with the provisions of Art. 287 of the Implementing Rules and Regulations (IRR)implementing the LGC and not a declaration of the nullity or illegality of the subject portion of the ordinance. We hope that this will clarify matters. Very truly yours, LORINDA M. CARLOS Executive Director