Bureau of Local Government Finance Opinion

March 30, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the OIC-Regional Director for Local Government Finance, Department of Finance, Region XI, Davao City, her within indorsement dated February 21, 2011, relative to the request of the Assistant City Treasurer of Digos City, Davao del Sur for an opinion whether the City (Digos) can collect an amusement tax from the Province of Davao del Sur which sponsored a Philippine Basketball Association (PBA) game in December 4, 2010. Perusal of the attached communications provides the following information: 1) In a letter dated December 8, 2010, the Asst. City Treasurer of Digos City demanded from the Office of the Provincial Treasurer the remittance of the 10% of the gross receipts of admission fees derived by the provincial government from a PBA game held on December 4, 2010 sponsored by the said provincial government; 2) In a letter-reply dated December 15, 2010 addressed to the Asst. City Treasurer of Digos, the Provincial Treasurer, Davao del Sur contended, among others, that amusement tax on professional basketball games is a national tax and not a local tax, citing the Decision rendered by the Supreme Court (SC) in the case PBA vs. Court of Appeals, et al., G.R. No. 119122 dated August 8, 2000, which provides: THaDAE "From the foregoing it is clear that the "proprietor, lessee or operator of . . . professional basketball games" is required to pay an amusement tax equivalent to fifteen per centum (15%) of their gross receipts to the Bureau of Internal Revenue, which payment is a national tax. The said payment of amusement tax is in lieu of all other percentage taxes of whatever nature and description. xxx xxx xxx Even up to the present, the category of amusement taxes on professional basketball games as a national tax remains the same. This is so provided under Section 125 of the 1997 National Inter nal Revenue Code. Section 140 of the Local Govern ment Code of 1992 (Republic Act 71 60), meanwhile, retained the areas (theaters, cinematographs, concert halls, circuses and other places of amusement) where the province may levy an amusement tax without including therein professional basketball games." 3) In reply to the letter dated December 23, 2010 of the Asst. City Treasurer of Digos, seeking opinion whether or not the City (Digos) can collect amusement tax from the Province of Davao del Sur based on the Tax Ordinance of that City relative to said PBA game, that Office concurred and held the view of the Provincial Treasurer that professional basketball games are beyond the taxing authority of local governments based on the said SC Decision. As can be appreciated from the above information, the Asst. City Treasurer of Digos and the Provincial Treasurer of Davao del Sur seemed headed toward a different course. The Provincial Treasurer, on the one hand, was inclined to believe that a professional basketball game, like the PBA game held in the City of Digos and sponsored by the Provincial Government of Davao del Sur, was beyond the taxing authority of the City Government in view of the aforequoted SC Decision. aTcESI On the other hand, the Asst. City Treasurer was of the position that the provincial government, in sponsoring the said PBA, should pay the corresponding amusement tax on the admission fees collected during the PBA game, pursuant to Section 2J.02 of the New Digos Ta x Cod e of 2005. As can be gleaned from the above information, the contention of the Provincial Treasurer of Davao de Sur was hinged on the SC Decision, in the case PBA vs. CA, et al., which specifically declared that professional basketball games like the PBA game are subject to national tax through the Bureau of Internal Revenue (BIR) but not to local taxation by a local government unit like Digos City. Further, the Provincial Treasurer in his letter dated December 15, 2010 ratiocinated by stating, thus ". . ., since the national government elected to impose amusement tax on the conduct of professional basketball games, it in effect withholds from the local government the imposition of another tax by clearly providing in Section 125 of the NIRC that the tax shall be in lieu of all other percentage taxes of whatever nature and description ." Clearly, from the above discussions the Provincial Treasurer and the Assistant City Treasurer of Digos City had taken different positions on the issue. Section 140, of R.A. 9640, the law amending Section 140 of the LGC, and in relation to Section 151 of the LGC, provides that "[T]he province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than ten percent (10%) of the gross receipts from the admission fees. . . ." Further, Section 151 of the LGC, provides as follows: CTSAaH "SEC. 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. (Emphasis ours) The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes." It must be pointed out however, that the immediate preceding provision of law is qualified by the phrase "Except as otherwise provided in this Code". The qualifying phrase should be interpreted as referring to Section 133 of the Code which explicitly provides that the exercise of taxing powers of local government units, in this case, the City of Digos, shall not extend to the levy of taxes of any kind on local government units, thus: "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 (o) Taxes , fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units ." ( Boldfacing and underscoring for emphasis ) Clearly, the abovequoted provision of law needs no further interpretation and applying the plain language of the law on the issue at hand, it is very clear that the City of Digos is prohibited from imposing any kind of tax on a local government unit like Davao del Sur. Be guided accordingly. aCcEHS (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director