Bureau of Local Government Finance Opinion

April 24, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Mario C. Duerme, CPA Municipal Treasurer Jones, Isabela Sir : This refers to the letter dated March 19, 2012 of Atty. Luvimindo E. Balinang, Legal Consultant, Municipality of Jones, Isabela, relative to your letter dated August 19, 2011 seeking guidance and direction on the issue of Ordinance No. 2009-003 enacted by the Sangguniang Bayan of Jones, Isabela, on March 11, 2009 entitled "ORDINANCE REGULATING THE CONDUCT AND OPERATION OF TOWERS AND IMPOSING AN ANNUAL TOWER FEE FOR THE OPERATION OF THE CELL SITES FOR COMMERCIAL PURPOSES WITHIN THE MUNICIPALITY OF JONES, ISABELA". In the said request, representations are made that under Section 4 thereof, an annual tower fee of P200,000.00 is imposed upon all towers operated by telecommunication companies for cell sites within the municipality. A public hearing preceded the enactment of the ordinance, and all telecommunications companies were duly notified. It was duly approved by the Municipal Mayor, and eventually by the Sangguniang Panlalawigan of Isabela. It is claimed that in the middle part of 2009, the municipality exerted efforts to collect the tower fee prescribed in the ordinance. However, Smart Communications, Inc. (Smart for brevity) refused to pay instead of paying under protest as required in Section 195 of the Local Government Code (LGC) of 1991, which provides: DcAaSI "Section 195. Protest on Assessment. When the local treasurer of his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interest and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. "The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice canceling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the period or from the lapse of the sixty-day period prescribe herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable." That Office likewise provided the following information: 1. Smart filed a Civil Case against the LGU for Certiorari and Prohibition under Rule 65 of the 1997 Rules of Civil Procedure (with application for temporary restraining order and/or writ of preliminary injunction) at the Regional Trial Court, Echague, Isabela. 2. Atty. William Pamintuan of Digitel Mobile, Phils. likewise opposed the imposition of tower fees by seeking refuge in two (2) opinions of the Department of Justice in a letter dated July 30, 2009, thus: DEcSaI "xxx xxx xxx "We would like to respectfully inform your Honorable Office that the legality of the imposition of annual tower fee had already settled in two (2) separate occasions by the Department of Justice (DOJ) in their Resolution dated February 28, 2008 docketed as MTO-OSJ Case No. 11-2006, entitled Smart Communications, Inc. vs. Municipality of Rosario, Batangas, with dispositive portion read in the following tenor" WHEREFORE, premises considered, the instant appeal is hereby GRANTED and judgment is hereby rendered, declaring the Municipal Ordinance No. 172, series of 2006 of the Municipality of Rosario, Province of Batangas unconstitutional and illegal. "Likewise, in the consolidated appeal of the telcos, DOJ rules in favor of the telecommunication companies in their Resolution dated March 5, 2008 docketed as MTO-DOJ Case No. 02-2008, MTO-DOJ Case No. 03-2008 entitled Digitel Mobile Philippines, Inc. (DPMI) vs. City of Taguig , and Smart Communications, Inc. vs. City of Taguig with dispositive portion read in the following tenor 'WHEREFORE, premises considered, Ordinance No. 37, series of 2007, of the City of Taguig entitled: An Ordinance Providing for the Regulation of the Construction and Operation of Base Stations, Cell Site Towers for Mobile Phone Services and other Similar Wireless Communication Facilities in the City of Taguig and amending Ordinance No. 50, series of 2005, is hereby declared void ab initio for being contravention of law, and therefore, of no legal force and effect.'" 3. On April 14, 2009, Atty. Rodolfo Arvin Agbayani, Senior Tax Manager of Globe Telecommunications, Inc. wrote Ms. Lourdes Hernandez, Secretary to the Sangguniang Bayan of Jones, assailing the ordinance. Thus: "xxx xxx xxx "The DOJ noted that despite the purported regulatory purpose stated in the 'where clause' of the assailed ordinances, 'Antenna Tower Fees' were nothing more than thinly real property tax rather than regulatory enactment since the fees imposed on the antenna bear no relation to the cost of inspection and regulation. There was no showing, the DOJ observed, what expenses the local government will incur, or what resources or technical competence it has to conduct for the necessary inspection of the cell site towers. prcd "Moreover, the DOJ found that both ordinances failed to comply with the requirement of Section 54, Chapter 12 Book No. IV of the Revised Administrative Code of 1987 limiting fees to be fixed at cost or at such reasonable rate in excess of cost by the boards of council concerned . . ." 4. On August 20, 2009, the Hon. Florante A. Raspado, Municipal Mayor of Jones, Isabela, countered with a letter which, in part, reads: "xxx xxx xxx "The fact that the said imposition is based on the Ordinance passed by the Bayan and declared VALID by the Sangguniang Panlalawigan of the Province of Isabela which is the proper reviewing body under the law, said annual tower fee in the amount of Two Hundred Thousand (P200,000.00) Pesos has legal basis, contrary to your allegation. What you have cited in your letter about certain DOJ Resolutions speaks of different cases and issues particularly the reasons for their being declared unconstitutional and illegal, i.e. , the "big amount of maximum annual tax set forth in the Ordinances which convinced the Department of Justice that the tax is in fact a Revenue Tax and not a Regulatory Fee" and the absence of any indication that the tax imposed is merely for police inspection, supervision or regulation. "In the case of the Municipality of Jones, the imposition of such tower fee is anchored on the necessity to provide security, surveillance and intelligence fund to safeguard the said cellular towers from lawless elements from other places who usually use this area as exit point, and who might cause irreparable damage to communication facilities. Undoubtedly, said imposition of annual tower fee is an exercise of the Police Power of the LGU. DEacIT "In the absence therefore of any ruling declaring the Municipal Ordinance to be contrary law, we firmly believe that you are governed by the said local law by virtue of your having been permitted to conduct business in this Municipality. As such, you are duty-bound to adhere to existing laws, rules and regulations being implemented by the LGU, such as paying the annual tower fee in question, without prejudice to your right to bring the matter to higher authorities for any question of law or clarification. . . . ." In the said letter dated March 19, 2012, the Municipality of Jones submitted to this Bureau copies of the Petition of Smart and Answer of said Municipality to the Petition. It appears that Smart filed a case, SCA CASE NO. 24-2011-05, on August 1, 2011 for the issuance of a TRO/preliminary injunction prohibiting the Municipality of Jones from further imposing the assailed tower fees and declaring as null and void Ordinance No. 2009-003. On the other hand the Municipality of Jones submitted its Answer to the Court on August 17, 2011 to deny the application of TRO/preliminary injunction and to direct Petitioner to pay the amount of P400,000.00. Considering therefore that a SP Civil Case had been filed at the Regional Trial Court of Echague, Isabela, this Bureau regrets that it is not in a position to make any comment thereon, the same being " sub-judice ". EDIHSC In this connection and for purposes of information only, 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 and shall not be based on capital investment or gross receipts of the person or business liable for said permit and/or license fees. This is pursuant to Article 233 of the Implementing Rules and Regulations (IRR) implementing Section 147 of the Local Government Code (LGC) of 1991, quoted as follows: "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 . (Emphasis ours) No such fee or charge shall be based on capital investment or gross sales or receipts of the person or business liable thereof." Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director