Scope of a Barangay's Taxing Authority

March 10, 2010 DILG LEGAL OPINION NO. 026-10 Mr. Vicente J. Tan Gana, Jr. Sangguniang Bayan Member Bian, Laguna Dear Sir : This has reference to your request for this Department's legal opinion anent the scope of a barangay's taxing authority inasmuch as your Sanggunian is currently reviewing a barangay tax ordinance. Specifically, you inquire the following, which we quote: "1. Section 152, Article IV of the Local Government Code (RA 7160) provides for the scope of the barangay taxing power. In view of the specific and unequivocal provisions, the power of the barangay to tax is confined to those enumerated in the said article. Is it therefore valid for a barangay to tax the following: a) Fees of Registration of Dogs b) Fees on Bicycle Registration c) Docket and Filing Fees Lupon Tagapamayapa cases 2. Can the Barangay charge fees and taxes on certain subject areas, outside of Article 152, and those that are already covered by our comprehensive, valid and existing Municipal Revised Revenue Code of 2002? 3. Is it allowable for the barangays to tax certain business, or establishments that do not exist in their barangay by way of fees and charges on places or recreation, such as but not limited to cinemas, etcetera?" At the outset, we find it necessary to discuss the general revenue raising powers of a barangay since from the tenor of your queries, there is clearly a mis-appreciation of the distinction between taxes, fees and charges that a Local Government Unit (LGU), including barangays, may impose. Section 5, Article X of the 1987 Constitution and Section 129 of the Local Government Code empowered LGUs, namely: provinces, cities, municipalities and barangays, to create their own sources of revenue which includes, among others, the power to levy taxes, fees and charges, subject to the provisions of law and consistent with the basic policy on local autonomy. cDTSHE At this point, it bears to stress that a tax, a fee and a charge are three different kinds of imposition. A tax is defined as "tax is imposed under the taxing power primarily for purposes of raising revenues" (Black's Law Dictionary). Meantime, under the Local Government Code of 1991 (RA 7160), a fee is defined as "a charge fixed by law or ordinance for the regulation or inspection of a business or activity. It shall also include charges fixed by law or agency for the services of a public officer in the discharge of his official duties" (Sec. 131 [l]);and a charge refers to "pecuniary liability, as rents or fees against person or property" (Sec. 131 [g]). Along this line, it bears to stress that the Local Government Code assigned to the different levels of LGUs their scope of revenue raising powers through the levy of taxes, fees and charges. With respect to the province, Sections 134 to 141 provides for the subjects that are within the power of the province to tax. On the other hand, Sections 142-146 of the same Code provides for the subjects that are within the power of the municipality to tax. Sections 147-149 provides for the subjects that are within the power of the city to tax. With respect to cities, it is noted that the city may levy taxes, fees and charges which the municipality may impose. With respect to barangays, Section 152, particularly paragraph (a) thereof, provides for the subjects that the barangay may impose a tax. Paragraphs (b), (c) and (d) of the same section provides for the subjects upon which the barangay may impose a fee. On top of the above-mentioned impositions by the province, city, municipality or barangay, Section 153 of the Code provided for the common revenue raising power of all the LGUs. Section 153 of the Code provides that for every services rendered by a LGU, for instance by the barangay, a reasonable fee or charge can be imposed. Another incident of the revenue raising power of a barangay is Section 17 of the Local Government Code. It is noted that Section 17 provides for the devolved functions to LGUs, meaning, these functions were done previously by the national government but are now to be done by the LGU per specific devolved functions under Section 17. Along this line, Section 17 provides for the devolved functions and basic services that a barangay should deliver. Important to note is the last paragraph of Section 17 which empowers LGUs to raise revenue by imposing reasonable fee to cover the cost of the delivery of basic services or facilities enumerated in the said section. The above discussion should be related to Section 186 of the Code. It bears to stress that Section 134 with respect to province, Section 142 with respect to municipality, Section 151 with respect to city and Section 152 with respect to barangay, are the specific subjects upon which each LGU may impose the tax, fee or charge, as the case may be. Section 186 of the Code, on the other hand, speaks of the general power of a LGU, whether province, city, municipality or barangay, to impose other taxes, fees or charges. Section 186 provides that LGUs may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein (referring to the Local Government Code)or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws. Going now to your query no. 1, with respect to fees on registration of dogs and fees on bicycle registration, it is noted that these are not within the specific area, subject or base upon which a barangay under Section 152 of the Code is empowered to impose. Accordingly, for as long as there is no national imposition yet by the national government or no imposition yet by higher level of LGUs, the barangay may impose the fee for as long as the barangay is rendering services relevant to regulation. IEHScT In reply to your query number 1, paragraph c, please note that Section 410 (a) of the Local Government Code is rather clear, thus: "SEC. 410. Procedure for Amicable Settlement. (a) Who may initiate proceedings Upon payment of the appropriate filing fee, any individual who has a cause of action against another individual involving any matter within the authority of the lupon may complain, orally or in writing, to the lupon chairman of the barangay'' (underscored for emphasis). n Corollary thereto, Rule VI, Section 4 of the Katarungang Pambarangay Rules issued by the Department of justice provides: "SEC. 4. Commencement. Proceedings for settlement shall be commenced by verbal or written complaint to the Punong Barangay or any matter not excepted under Section 2 of the Rule, in accordance with the Rules on Venue provided in the preceding section and upon payment of the filing fee in the amount of not less than five (5) pesos nor more than twenty (20) pesos ...." In reply to your query number 2, as earlier stated, if the barangay delivers basic services already devolved to it under Section 17, then it can impose reasonable fees for the delivery thereof. On the other hand, if services are being rendered by a barangay, then it can impose reasonable fees pursuant to Section 153 of the Code. Further, barangays may also impose fees pursuant to Section 186 of the Code provided that in the latter case, there is no fee yet being charged by the national government or higher LGUs. Lastly, if the subject areas are already covered by the Municipal Revised Revenue Code of 2001, then the barangay can no longer impose any kind of tax, fee or charge thereon. In reply to our query number 3, it bears to emphasize that under Section 153 of the Code, the only subject or base upon which a barangay can impose a tax on businesses is with respect to Section 152 (a). This is the specific grant of power to tax unto barangay governments. If, however, there are businesses not yet the subject of any tax by the national, provincial, municipal or city government, then per Section 186 of the Code, the barangay can impose a tax on the same. It is, however, understood that the business is conducted within the territorial jurisdiction of the barangay. In relation to cinemas and other recreation businesses, it is unfortunate to note that a barangay is not given the power to tax but nonetheless, it is given the power to impose fees and charges per Section 152 (d) (2) of the Local Government Code. We hope to have enlightened you on the matter. Very truly yours, By Authority of the Secretary: (SGD.) ATTY. JESUS B. DOQUE IV Director III, Legal Service ATTACHMENT Republic of the Philippines Province of Laguna MUNICIPALITY OF BIAN OFFICE OF THE SANGGUNIANG BAYAN January 9, 2009 Atty. Edward Justine R. Orden Chief Law Division Legal Services Department of Interior and Local Government Dear Atty. Orden: As Chairman of the Committee on Ways and Means of the Sangguniang Bayan of the Municipality of Bian, Laguna, I respectfully seek your legal opinion on the legality of certain provisions of barangay tax ordinance/s that are presently under review by our committee. I have attached copies of the proposed barangay tax ordinances for your kind perusal and guidance. SEIcAD As part of the committee's ongoing review in accordance with Section 57 of the Code, and in order for us to come up with a valid and substantial recommendation to our barangay leaders for the benefit of all our constituents, I find it imperative to clarify and confirm certain queries from your good office, being our legal authority on the matter. Below are the specific queries that we came up with for your kind legal advise/opinion: 1. Section 152, Article IV of the Local Government Code (RA No. 7160) provides for the scope of the barangay taxing power. In view of the specific and unequivocal provisions, the power of the barangay to tax is confined to those enumerated in the said article. Is it therefore valid for a barangay to tax the following: Fees on Registration of Dogs Fees on Bicycle Registration Docket and Filing Fees on Lupon Tagapamayapa Cases 2. Can the barangays charge fees and taxes on certain subject areas, outside of Article 152, and those that are already covered by our comprehensive, valid and existing Municipal Revised Revenue Code of 2001? 3. Is it allowable for the barangays to tax certain businesses, or establishments that do not exist in their barangays by way of Fees and Charges on Places of Recreation, such as but not limited to cinemas, etcetera? Your utmost preferential attention on this letter request is highly appreciated in advance. Thank you and more power. Very truly yours, (SGD.) HON. VICENTE J. TAN GANA, JR., MBA Chairman Committee on Ways and Means Sangguniang Bayan Municipality of Bian Province of Laguna