Bureau of Local Government Finance Opinion

July 10, 1996 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Rogelio G. Chan Sr. Manager National Steel Corporation 377 Sen. Gil J. Puyat Ave. Makati City S i r : This refers to your letter dated May 30, 1995 requesting confirmation of the ruling of the Department of Finance (DOF) on "essential products", dated April 15, 1987. prcd At the onset, we take this opportunity to extend our apologies for the delay in making this reply, which however was not in any way deliberate but occasioned only by our heavy workload and the efforts exerted to locate precedents on similar cases. We regret to inform, moreover, that we were not able to find any opinion or ruling made by competent authority after the effectivity of the Local Government Code (LGC) on January 1, 1992 that would support the herein request of NSC. It appears that the aforementioned ruling of the DOF in 1987 was rendered in view of the request of NSC for confirmation of its continued exemption privilege and a classification of its products such as roofing materials, steel bars, nails, billets, tinplates, etc. as "essential commodities" pursuant to Executive Order No. 36, s. of 1986, of the Office of the President. In the said ruling, it was held that NSC's products should be assessed at "one-half of the rates that may be prescribed by the local board or councils" on the basis of the following incontrovertible facts: 1. the products of NSC are listed down in the Price Control Law as "essential commodities;" 2. prices of these products are controlled by the Iron and Steel Authority (ISA); and 3. the tax exemptions enjoyed by NSC were not withdrawn because NSC falls within the exceptions enumerated by P.D. 1955 and E.O. 93, s. of 1986. The herein request is for NSC to retain the classification of its products as "essential commodities" in order that it may be subject only to 50% of the rate imposed on other products (businesses) under the Iligan City Revenue Code (Ordinance No. 2193, s. 1993). In this connection, please be informed that said city ordinance appears to be based on the provisions of the LGC. Section 143(c) of the Code provides as follows: "SEC. 143. Tax on Business . The municipality may impose taxes on the following businesses:" "xxx xxx xxx "(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers, or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under sub-sections (a), (b) and (d) of this Article: (1) Rice and corn (2) Wheat, cassava flour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and other agricultural, marine, and fresh water products whether in their original state or not; (3) Cooking oil and cooking gas; (4) Laundry soap, detergents, and medicine; (5) Agricultural implements, equipment and post-harvest facilities, fertilizers, pesticides, insecticides, herbicides, and other farm inputs; (6) Poultry feeds and other animal feeds; (7) School supplies; and (8) Cement." Clearly, steel and the other NSC products are not among those specifically mentioned as "essential commodities". It may also be noted that the Code no longer includes "other commodities covered by the Price Control Law" as among those falling under the classification of "essential commodities", thus, amending the pertinent provisions of PD 231, the former Local Tax Code, which incidentally has been expressly repealed under Section 534 (c) of the LGC. Moreover, it may be stated that upon the effectivity of the LGC, all local tax exemption privileges or incentives granted to and enjoyed by any person, whether natural or juridical, including GOCCs were withdrawn under Section 193 of the Code, quoted as follows: "SEC. 193. Withdrawal of Tax Exemption Privileges . Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under RA No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code." Accordingly, this Bureau regrets that it finds no legal basis for recommending to proper authority favorable consideration of the herein request of NSC. Again, our sincere apologies. cdll Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director