Bureau of Local Government Finance Opinion

October 16, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned, thru the Regional Director for Local Government Finance, Department of Finance, Region III, 4th Floor, Freluz Building, Gapan-Olongapo Road, San Fernando, Pampanga, to the Provincial Treasurer, Balanga, Bataan, the herein request for clarification/amplification on the provision of Section 270 of the Local Government Code of 1991 (RA 7160). The query is allegedly prompted by a taxpayer lawyer who invoked that his unpaid realty taxes beginning calendar year 1988 which are five (5) years and older under said section had already prescribed. Hence, he offers to pay taxes only from 1993 onwards. In this connection, it is informed that the Local Government Code of 1991 took effect on January 1, 1992, and therefore, taxes accruing or becoming due and payable beginning CY 1992 shall be covered by the said Code, tax laws being of prospective application unless the contrary is clearly provided. It follows further that taxes due prior to CY 1992 shall be subject to the law then in force and effect which is PD 464, as amended. The said decree did not provide any prescriptive period in the collection of the realty taxes. For the proper implementation of PD 464, the Department of Finance (then a Ministry) issued Joint Assessment Regulation No. 1-85 and Local Treasury Regulation No. 2-85, dated August 1, 1985, whereby under Section 4(c) of which provides as follows: SEC. 4. Computation of Penalties on Delinquent Real Property Taxes. (c) The penalty of two (2%) per month of delinquency, or twenty four percent (24%) per annum, as the case may be, shall continue to be imposed on the unpaid tax from the time the delinquency was incurred up to the time that it is paid in full ".(Emphasis supplied) Under the abovequoted provision, it is clear that taxes accruing beginning CY 1986 until 1991, if not paid shall be subject to the payment of the interest of 24% per year "from the time the delinquency was incurred up to the time that it is paid for in full." On the other hand, Section 270 of the Code, provides: "Sec. 270. Periods Within Which to Collect Real Property Taxes . The basic real property tax and any other tax levied under this Title shall be collected within five (5) years from the date they become due. No action for the collection of the tax, whether administrative or judicial, shall be instituted after the expiration of such period. In case of fraud or intent to evade payment of the tax, such action may be instituted for the collection of the same within ten (10) years from discovery of such fraud or intent to evade payment. "The period of prescription within which to collect shall be suspended for the time during which: 1. The local treasurer is legally prevented from collecting the tax; 2. The owner of the property or the person having legal interest therein requests for reinvestigation and executes a waiver in writing before the expiration of the period within which to collect; and 3. The owner of the property or the person having legal interest therein is out of the country or otherwise cannot be located." On the basis of the aforequoted provisions of law, it may be gleaned that if the local treasurer (under No. 1) sends notice of delinquency and/or demand letter for the payment of the delinquent taxes in observance of due process preparatory to the application of the administrative remedies in the collection of delinquent taxes provided in the law, the prescriptive period of five (5) years for the collection of taxes shall not start to run. It is only when the treasurer concerned neglected to perform his mandated duties that he shall be faulted giving rise to said prescriptive period under the law. Otherwise, taxpayers may circumvent the law by not paying their taxes until the collection of the same prescribes. In view of the foregoing, the realty taxes of the subject taxpayer from CY 1988 to CY 1991, if not paid, shall be subject to the payment of the interest for being delinquent at the rate of 24% per year until paid in full. On the other hand, taxes accruing from CY 1992, if not paid, shall be subject to the penalty rate of 2% per month but not exceeding 36 months pursuant Section 255 of RA 7160 quoted as follows: "SEC. 255. Interests on Unpaid Real Property Tax . In case of failure to pay the basic real property tax or any other tax levied under this Title upon the expiration of the periods as provided in Section 250, or when due, as the case may be, shall subject the taxpayer to the payment of interest at the rate of two (2%) per month on the unpaid amount or a fraction thereof, until the delinquent tax shall have been fully paid: Provided, however ,That in no case shall the total interest on the unpaid tax or portion thereof exceed thirty six (36) months." Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director