Bureau of Local Government Finance Opinion

April 18, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer, Caloocan City, the within letter with attachments dated April 9, 2011 of Mr. ALBERTO S. ANTONIO, Chairman, CAZANOVA TRANSPORT SERVICE COOPERATIVE (CTSC), with business address at B1 L1 Genesis St., Cielito Homes, Caloocan City relative to ORDINANCE No. 0432 s. 2007 entitled "AN ORDINANCE FIXING AT THREE HUNDRED PESOS (P300.00) COVERING ALL TAXES, REGULATORY FEES AND CHARGES THAT WOULD BE PAID ANNUALLY BY ALL LEGITIMATE AND DULY REGISTERED COOPERATIVES UPON SECURING THE NECESSARY MAYOR'S PERMIT FOR PURPOSES OF OPERATING AND/OR DOING BUSINESS WITHIN THE JURISDICTION OF CALOOCAN CITY". Perusal of the attached documents reveal that CTSC was assessed the Mayor's permit fee and other regulatory fees, inclusive of penalties, covering the period 2000-2010 as follows: O.R. No. Date Year Amount Paid 4116731 Dec. 07, 2010 2000 P4,590.10 4116730 Dec. 07, 2010 2001 2,186.70 4116729 Dec. 07, 2010 2002 2,186.70 4116728 Dec. 07, 2010 2003 2,128.50 4116727 Dec. 07, 2010 2004 2,186.70 4116726 Dec. 07, 2010 2005 8,212.13 4116725 Dec. 07, 2010 2006 8,210.96 4116724 Dec. 07, 2010 2007 8,209.96 4116723 Dec. 07, 2010 2008 9,714.38 7116722 Dec. 07, 2010 2009 14,383.25 4116721 Dec. 07, 2010 2010 12,799.15 GRAND TOTAL P74,808.53 ========= Relative to the above matter, Articles 60 and 61 of R.A. No. 9520 also known as the COOPERATIVE CODE OF 2008, amending R.A. No. 6938, provide the following: DAHCaI "ART. 60. Tax Treatment of Cooperative. Duly registered cooperatives under this Code which do not transact any business with non-members or the general public shall not be subject to any taxes and fees imposed under the internal revenue laws and other tax laws . Cooperatives not falling under this article shall be governed by the succeeding section. "ART. 61. Tax and Other Exemptions. Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including ( sic ) not limited to final taxes on members' deposits and documentary tax. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions: "(1) Cooperatives with accumulated reserves and undivided net savings of not more than Ten Million pesos (P10,000,000.00) shall be exempt from all national, city, provincial, municipal or barangay taxes of whatever name and nature. . . . . "(2) Cooperatives with accumulated reserves and divided net savings of more than Ten Million pesos (P10,000,000.00) shall pay the following taxes at the full rate: "(a) . . .; "(c) All other taxes unless otherwise provided herein; and "xxx xxx xxx." ( Boldfacing and underscoring for emphasis ) Clearly, from the abovequoted provisions of law, a cooperative, whether transacting exclusively with members or both with members and non-members, shall not be liable to the payment of any fees or charges. On the other hand, Ordinance No. 0432 provides as follows: "Section 3. Scope. All legitimate cooperatives that transact business, either with members or non-members, shall be exempted from all city and barangay taxes, fees and charges of whatever name and nature, and any impositions levied by the City Government in connection with the operation of the cooperatives . Provided, however, that an amount of Three Hundred Pesos (P300.00) shall be charged annually on the cooperative upon securing the Mayor's Permit. DCcHIS Section 4. Rule. The exemption provided in this Ordinance shall not apply to all legitimate cooperatives that transact business, either with members or non-members which have exceeded its accumulated reserves plus undivided net savings by more than Ten Million Pesos (P10,000,000.00) as provided by Article 62 of R .A. 69 38." (Underscoring supplied) As can be gleaned from the abovequoted Section 3 of Ordinance No. 0432, it is very apparent that the provision is a contradiction in itself when it declared that legitimate cooperatives, whether transacting business with members or non-members, shall be exempted from all city and barangay taxes, fees and charges of whatever name and nature and any imposition levied by the City Government in connection with the operation of the cooperatives. On the other hand, it provides that cooperatives shall pay the P300.00 regulatory fee upon securing the Mayor's permit. Definitely, the P300.00 charged to a cooperative upon securing a Mayor's permit falls squarely within the realm of the phrase "fees and charges" which by its nature is a regulatory fee, prohibited under Section 133 (n) of the Local Government Code of 1991 (LGC), which states: "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 barangays shall not extend to the levy of the following: xxx xxx xxx (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 68 10 and Republic Act Numbered Sixt y-nine hundred thirty-ei ght (R.A. No. 69 38) otherwise known as the "Coo perative Co de of the Philippines" respectively; . . . ." ( Emphasis ours ) Concordantly, Section 60 of R.A. No. 9520 succinctly states that cooperatives that "do not transact any business with non-members or the general public shall not be subject to any taxes and fees imposed under the internal revenue laws and other tax laws." It is informed that whether CTSC's "Accumulated Reserves" and "[Un]divided Net Savings" exceed the Ten Million (P10,000,000.00) threshold provided in the law, it is of no importance in the issue raised by Mr. Antonio. The real issue is the collection of regulatory fees from CTSC, which is not in accordance with the provisions of law aforequoted, except under Ordinance No. 0432, s. 2007. In this connection and in order that appropriate action can be taken on the matter, her comment specifically on the regulatory fees and charges imposed on CTSC for the period 2000-2010 and on Ordinance No. 0432, in view of the clear intent of the law (LGC and R.A. No. 9520) exempting cooperatives registered with CDA from the payment of fees and charges, is requested five (5) days upon receipt hereof. Further, may we be clarified as to the legal basis of the assessments made on CTSC for 2000-2010 as to whether the same is pursuant to Ordinance No. 0432 or any other tax ordinance of that City. That Office is advised to make representations with the Sangguniang Panlungsod so that the necessary amendatory provision could be made on Ordinance No. 0432 to conform with R.A. No. 9520 and its Implementing Rules and Regulations (IRR) and not on R.A. No. 6938. Be guided accordingly. ESTAIH (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director