Legality of a Municipal Ordinance Imposing an Environmental Hazard Fee on All Commercial Vessels Loading Mineral Ores within Municipal Waters

November 21, 2013 DILG LEGAL OPINION NO. 037-13 Hon. Vicente T. Pimentel Mayor Municipality of Carrascal Province of Surigao del Sur Dear Mayor Pimentel : This refers to your 20 March 2013 letter which seeks this Department's legal opinion in relation to the attached copy of Carrascal Municipal Ordinance No. 02, s. 2012 (the "Ordinance") that imposes environmental hazard fee on all commercial vessels loading mineral ores within the municipal waters of Carrascal. The queries are as follows: "1. Whether or not DILG Memorandum Circular No. 2006-70 and MC No. 2011-151 affect enacted Municipal Ordinance No. 02, s. 2012 of the Municipality of Carrascal and cause the municipality to refrain from imposing significant provisions of said ordinance especially the collection of environmental hazard fee. 2. Are there any legal liabilities if the LGU continues to impose said ordinance and impose penalties to owners of vessel who failed to pay the required fee?" Based on the copy of the Ordinance, the same was enacted by the Sangguniang Bayan (SB) of Carrascal, Surigao del Sur on 28 February 2012 to generate revenues for the protection and rehabilitation of the Municipal Waters of Carrascal specifically from ore loading and transporting vessels and barges. The Ordinance provides that the environmental hazard fee collected from these commercial vessels and barges are to be deposited in a trust fund to be used for the protection and maintenance of the environment and to provide livelihood and social services for affected fishermen/farmers. DEIHSa The pertinent provisions of the Ordinance are quoted as follows: "Section 1. An environmental Hazard Fee shall be collected on all commercial vessels loading ores within the Municipal Waters of Carrascal including barges transporting ores from the causeway to the vessel . For this purpose, a representative of the Municipal Treasurer's Office together with the MENRO shall cause the collection (sic) the applicable fees by the foreign vessels and barges. xxx xxx xxx Section 3. Collection of Environmental Hazard Fee. The following shall be the amount to be collected: 1. Commercial Vessels per calling $1,000.00/per calling 2. Barges Per Year Php40,000.00/year 3. Collection of garbage fee $100.00 Dollars/weeks (sic)/vessel For commercial vessels, the amount shall be per shipment basis. For barges, the fee shall be for per year during operations. The amount collected shall be deposited in a trust fund to be used for the following purposes: a. Fifty (50%) percent shall be for the protection and maintenance of the environment. b. Remaining Fifty (50%) percent for Farmers/Fishermen shall be for the livelihood and social services of affected fishermen/farmers in concern (sic) barangays. Section 4. Manner of Collection. The environmental hazard fee shall be collected from commercial vessels and barges in the following manners: a. Five (5) days before entering the municipal waters of Carrascal, the shipping company or its representative shall make the payment with the Municipal Treasurer's Office. cSTDIC b. If there is no payment, is shall not be allowed to enter. Section 5. Statement of Purpose. The collection of Environmental Hazard Fee from commercial vessels and barges shall have the following purposes or interest: 1. to serve as revenue of the municipality and source of funds for social services specifically in providing livelihood to fishermen/farmers. 2. for the installation of markers for the sake (sic) maneuver of boat before anchoring to prevent damage to corals. 3. in case of major oil spill, to control the spill and the clean-up of the affected area. 4. for the filling (sic) of charges in the court against the crew of the vessel which has caused the spill. 5. to keep the municipal waters of Carrascal clean." (Underscoring supplied) The following discussions are instructive on the issues raised: This Department's Position on Illegal Impositions Local ordinances imposing/collecting pass through fees, in addition to the taxes, fees or charges on the types of subjects enumerated under Section 133 of the Code, are considered illegal impositions as the same are beyond the taxing authority of LGUs. An illegal imposition is defined under DILG Memorandum Circular No. 2009-42 dated 27 March 2009, as follows: "Illegal imposition pertains to the levy of taxes, fees and charges duly imposed by a local government unit on a certain subject through an appropriate ordinance but is, however, outside the scope of its taxing and revenue-raising powers vis--vis the statutory scope of taxing powers of provinces, cities, municipalities and barangays as are conferred to them by the Local Government Code. It may include situations, such as, but not limited to: a. When the taxes, fees or charges are unjust, excessive, oppressive, confiscatory or contrary to declared national policy; (Section 186, LGC) HcSDIE b. When the imposition of taxes, fees or charges would amount to a restraint of trade; (Section 130, LGC) c. When a local government adjust the rates of tax in violation of the provision of law; (Section 191, LGC) d. When a local government imposes fees and charges beyond its taxing powers. (Section 133, LGC)" As discussed in this Department's previously rendered legal opinions, local government units (LGUs) are prohibited from imposing pass through fees, which is defined under Section 133 (e) of the Local Government Code of 1991 (the "Code") as taxes, fees, charges and other impositions upon goods carried into or out of, or passing through the territorial jurisdiction of the LGUs in the guise of a toll, charges for wharfage or others taxes, fees, or charges in any form upon goods or merchandise. In Palma Development Corporation vs. Municipality of Malangas, Zamboanga del Sur (G.R. No. 152492. October 16, 2003), the Supreme Court 1st Division had the occasion to rule on the illegality of imposing fees or charges on goods or merchandise passing through the territorial jurisdiction of a local government unit, viz. : "By express language of Sections 153 and 155 of RA No. 7160, local government units, through their Sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any public road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads leading to the wharf is thus valid. However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of fees as well as all other taxes or charges in any form whatsoever on goods or merchandise. It is therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because any other form of imposition on goods passing through the territorial jurisdiction of the municipality is clearly prohibited by Section 133(e) ." (Underscoring supplied) ETISAc Hence, this Department's issuance of DILG MC Nos. 2006-70 and 2011-151 in response to said LGU illegal impositions. Carrascal Municipal Ordinance No. 02, s. 2012 vis a vis Section 133 (e) of the Code (DILG MC Nos. 2006-70 and 2011- 151) The Ordinance specifically imposes an environmental hazard fee on an activity, i.e. , loading ores or transporting ores, from commercial vessels or barges, respectively. By comparison, what is prohibited by Section 133 (e) of the Code is the imposition of taxes, fees and charges on goods carried into or out of, or passing through the territorial jurisdictions of local government units. Considering that what is being taxed by the Ordinance is the commercial vessels' loading of ores within the Municipal Waters of Carrascal and/or the barges' transportation of ores from the causeway to the vessel, we opine that the fee imposed by the LGU for aforesaid activity does not appear to come within the purview of Section 133 (e). Hence, may not be classified as a pass through fee. Carrascal Municipal Ordinance No. 02, s. 2012 vis a vis Section 133 (d) of the Local Government Code The taxing powers of LGUs cannot extend to the levy of taxes, fees and charges already imposed by the national government, and this include, inter alia , the levy of customs duties, registrations fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned pursuant to Section 133 (d) of the Code, viz. : "Section 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: AECacT xxx xxx xxx d) Customs duties, registration fees of vessels and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned;" Upon perusal of the taxes, fees and charges imposed under Republic Act No. 1937, otherwise known as the "Tariff and Customs Code of the Philippines," it appears that no similar fee is imposed under Title VII of Book II thereof vis-a-vis the Ordinance. Authority of LGUs to Levy Other Taxes, Fees or Charges Consistent with the basic policy of local autonomy as enshrined in the Constitution, LGUs are granted the power to create and broaden their own sources and revenue concomitant with the vesting of additional responsibilities devolved to it by the national government. As such, the taxing powers of LGUs are not limited to those specifically enumerated under Sections 134-156 of the Code, but may also include taxes, fees or charges on any base or subject not otherwise enumerated under the Code or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws pursuant to Section 186 of the Code, viz. : " Section 186 . Power to Levy Other Taxes, Fees or Charges. Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose ." (Emphasis and underscoring ours) cCESTA Hence, subject to the afore-quoted substantive requirements and the formal requirement of a mandatory public hearing, LGUs may enact local tax ordinances and revenue measures in accordance with the procedures laid down under Sections 54, 55, 59, 187-190 of the Code and Articles 274-281 of its Implementing Rules and Regulations. It should be emphasize however, that failure to conduct a public hearing prior to the enactment of a local tax ordinance and revenue measure renders the same void as the conduct of public hearing is mandatory pursuant to Section 187 of the Code. In view of the foregoing, it is this Department's opinion that the environmental hazard fee imposed by the Municipality of Carrascal, Surigao del Sur under Municipal Ordinance No. 02, s. 2012 does not appear to be a pass through fee. Hence, does not appear to violate Section 133 (e) of the Code. Neither does it appear to violate Section 133 (d) of the Code. We hope the foregoing sufficiently addressed your concern. Very truly yours, (SGD.) AUSTERE A. PANADERO Undersecretary