Whether a Municipal Government Can Legally Impose Tax on Persons Engaged in Exportation

March 8, 1994 DILG LEGAL OPINION NO. 041-94 LEGAL SERVICE Mr. Floripes M. Villagonzalo 912 Ouano St., Opao Mandaue City Dear Mr. Villagonzalo : This has reference to your request for opinion on whether or not a municipal government can legally impose tax on persons engaged in exportation. llcd You state that the Municipal Government of Tabuelan, Cebu, had increased the tax on exporters which you were paying as exporter of basket and other handicrafts. You contend that the said municipality is bereft of any authority to assess and impose said tax on the ground that under Section 133(m) of the Local Government Code of 1991 (RA 7160 ". . . the exercise of taxing powers of . . . municipalities shall not extend . . . to the levy of the following: xxx xxx xxx (m) Taxes, fees, or other charges on Philippine products actually exported except as otherwise provided herein. (Emphasis ours) xxx xxx xxx" The municipal mayor, on the other hand, argued that what is being levied is not tax on exporter but a business permit fee considering that the place or site of your business is the Municipality of Tabuelan. Hence, this present recourse. The pertinent provisions of the Code on this score are the following, to wit: "SEC. 142. Except as otherwise provided in this Code, municipalities may levy taxes, fees and charges not otherwise levied by provinces. "SEC. 143. 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 subsections (a), (b), and (d) of this Section; 1. Rice and Corn; 2. Wheat or cassava flour, meat, dairy products locally manufactured, processed or preserved foods, 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, detergent and medicine; 5. Agricultural implements, equipment and post harvest facilities, fertilizers, pesticide, insecticides, herbicides and other farm inputs; 6. Poultry feeds, and other animal feeds; 7. School supplies; and 8. Cement. xxx xxx xxx" It is easily discernible from the foregoing that a municipality is empowered to impose taxes and charges over goods, services and businesses which are located within its territorial jurisdiction. This power is so broad that it almost encompasses all businesses being conducted in the municipality. As exceptions, it cannot however impose taxes or charges which are within the taxing powers of the province, or when the Code expressly provides otherwise. More specifically, on the question as to the propriety and legality of the tax on exporters being levied against you by the municipality, we opine that the same conforms with the mandatory provisions of the Code. The power to tax on exporters is explicitly given to it by virtue of the aforequoted provisions. Your contention that under Section 133(m) of the Code a municipality is prohibited from imposing taxes on the items enumerated therein is clearly unmeritorious. The Code merely prohibits the imposition of taxes over the products being exported from the Philippines and not to the person engaged in it. Stated differently, what is being levied in the former situation is the tax on exporters, and the latter situation is the tax on the products themselves. Since this two impositions are distinct from each other, it could be inferred that the imposition of the said municipality of the tax on exporter appears to be proper and in order. Furthermore, we would like to invite your attention to Section 187 of the 1991 Local Government Code (RA 7160) which in part, provides that: "SEC. 187. . . . Provided, further, that any question on the constitutionality or legality of tax ordinance or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: . . ." Premises considered, since, as represented therein, the Municipality of Tabuelan, Cebu, is imposing tax on exporters under the aforequoted provision and not exported products, we are of the considered view that the same bears the mandate of the Code. Please be guided accordingly. Very truly yours, DIR. JACOB F. MONTESA Department Legal Counsel Department of Interior and Local Government copy furnished: The Municipal Mayor Tabuelan, Cebu