Bureau of Local Government Finance Opinion

January 26, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully referred to Ms. Milagros S. Contreras, City Treasurer, Vigan City, Ilocos Sur, the within letter, together with its attachments, dated December 11, 2010 of Mr. ELPIDIO QUE, 98 Gen. Luna Street, that City, addressed to His Excellency BENIGNO C. AQUINO III, President of the Republic of the Philippines, copy furnished the Hon. CESAR V. PURISIMA, Secretary, Department of Finance, and forwarded to this Bureau under a 1st Indorsement dated 18 January 2011 for appropriate action. The letter zeroes in intensely on, among others, the non-implementation of (Tobacco Tax) Ordinance No. 2, Series of 1993 which resulted in what appears to be an accumulation of unpaid business tax on tobacco leaves being processed at NTRCI facility thereat. The letter purported that Resolution No. 10-15 entitled "A RESOLUTION AUTHORIZING THE LOCAL CHIEF EXECUTIVE, MAYOR EVA MARIE S. MEDINA, TO ENTER INTO A COMPROMISE AGREEMENT WITH THE NORTHERN TOBACCO REDRYING CORPORATION INC., (NTRCI) FOR THE SETTLEMENT OF ITS TAX LIABILITY UNDER ORDINANCE NO. 2, SERIES OF 1973 COVERING THE YEARS 1973 TO 2006", was alleged to have been approved on December 15, 2010, without going through the proper procedures pursuant to Section 187, 188 and 189 of R.A. No. 7160, otherwise known as the Local Government Code of 1991 (LGC). CHEDAc Mr. Elpidio Que revealed that (Tobacco Tax) Ordinance No. 2, Series of 1973 had been in effect since 1973. However the very purpose for which it was enacted seems abandoned thus, the tobacco tax liability of Northern Tobacco Redrying Corporation, Inc. (NTRCI) which, as appearing, remains uncollected up to this moment. Further, Ordinance No. 2 appears to have been superseded or repealed by the new Revenue Code of that City supposedly to have been approved either in 2006 or 2007. In this regard, the Department of Finance (DOF) and this Bureau would like to inquire from that Office matters pertaining to treasury operations relative to the issue of uncollected taxes of NTRCI. Thus, information is requested on the following: 1) Circumstances and/or facts that hindered or prevented that Office from establishing the actual tax liability of NTRCI considering the length of time Ordinance No. 2 was in effect; 2) Action taken by that Office since 1973 or after the approval and implementation of Ordinance No. 2 in 1993 pursuant to Sections 170, 171 and 470 (d), subpars. (4) and (5) of the LGC; 3) Facts and information surrounding the non-collection of business tax on tobacco leaves processed by NTRCI since 1973 to 2006; 4) Information as to the implementation of the revised Revenue Code of that City in relation to business tax levied on tobacco leaves/products of NTRCI; and 5) Copy of Resolution No. 10-15, which was alleged to have been approved on December 15, 2010. TaHDAS In this connection, that Office is requested to submit to this Bureau its comments together with all the necessary and pertinent papers/documents relative to the tax liability of NTRCI, "A.S.A.P.". Be guided accordingly. (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director