Resolution Passed by the Sangguniang Panlalawigan Authorizing the Governor to Enter into Compromise Agreements with Tax Delinquents

July 1, 2008 DILG LEGAL OPINION NO. 049-08 Hon. Ma. Chona M. Dimayuga Sangguniang Panlalawigan Member Provincial Capitol Building Capitol Site, Batangas City Dear SP Member Dimayuga : This has reference to your letter requesting for this Department's legal opinion regarding the Resolution passed by the Sangguniang Panlalawigan of that province. You stated that in a special session held on 05 February 2008, the Sangguniang Panlalawigan passed "A Resolution Authorizing Governor Vilma Santos Recto to Enter into Compromise Agreements with Tax Delinquents, Subject to the Ratification of the Sangguniang Panlalawigan". You allegedly opposed the passage of the said Resolution on the ground that any compromise agreements will result to a reduction or condonation of provincial taxes and will contravene an existing provincial ordinance. Such being the case, a mere Resolution will not suffice; reduction or condonation of real property taxes are only allowed under Sections 276 and 277 of the Local Government Code; under Sections 132 and 192 of the same Code, taxation and/or tax reliefs are legislative functions and as such, cannot be delegated to the Governor; and assuming that it can be delegated, the delegation should be complete in all its essential terms and conditions so that there will be nothing left for the delegate to do but to enforce it in accordance with the established standards set therein. DEHaAS It is now your contention that said Resolution passed by that Sanggunian is ultra vires because: (a) it is a mere Resolution; (b) the intention to enter into compromise agreements with delinquent taxpayers is a dangerous practice of tax collection as taxes should be uniform and not on a case to case basis, negotiated tax compromise will open the floodgates to graft and corruption; (c) the Resolution, even if it can be considered a valid delegation, did not set any standards on how the compromise can be implemented. The clause "subject to the ratification of the Sangguniang Panlalawigan" is not the completeness and boundaries required of a valid delegation. In reply, please be informed that we concur with your observations. The subject Resolution indeed appears to be ultra vires in all respects. In the case of Municipality of Paraaque vs. V.M. Realty Corporation (G.R. No. 127820, 20 July 1988), the Supreme Court had the occasion to distinguish an ordinance from a resolution, in this manner: "an ordinance is a law but a resolution is merely a declaration of the sentiment or opinion of a law making body on a specific matter; an ordinance possesses a general and permanent character but a resolution is temporary in nature; an ordinance provides a permanent rule of conduct or action but a resolution provides a mere opinion or view and temporary in character". Additionally, "the two are enacted differently third reading is necessary for an ordinance but not for a resolution, unless decided otherwise by a majority of all the Sanggunian members". In this regard, once a provincial ordinance is approved, nothing is left to the Governor except his/her duty, relative to the governance of the province, to enforce and execute the approved ordinance in accordance with the terms and conditions thereof (Sec. 465 (b) (2), Local Government Code). We fully concur with your first observation that conferment to the Governor of the power to enter into compromise agreements with tax delinquents cannot be done through a mere resolution. It is worth noting that with regard to Provincial Tax Ordinance No. 5, s. 2004, nothing is left anymore to be done by the Governor except to implement and execute the same pursuant to Section 465 (b) (2) of the Local Government Code. It bears to emphasize however, that the said ordinance did not confer unto the Governor the power to enter into compromise agreements with tax delinquents. Accordingly, in furtherance to the enforcement of the said tax ordinance, a subsequent Resolution authorizing the Governor to enter into compromise agreements with tax delinquents is not only defective as having been done by way of a mere Resolution and not in an ordinance, but it is also an undue delegation of the Sanggunian's legislative functions to the Governor considering that, assuming that a Resolution would suffice, the same failed to provide a complete delegation of a legislative function for its failure to provide a set of standards and criteria to ensure that said power to enter into a compromise shall be reasonably exercised and that the provincial government is not unduly deprived of the much needed revenues. THIAaD Hence, if at all the Governor should be empowered to enter into compromise agreement with delinquent taxpayers, said power must have been provided in the tax ordinance itself or if belatedly thought of, must be provided in a subsequent ordinance amplifying and supplementing the previous tax ordinance. Moreover, to avoid an undue delegation of legislative power and to ensure that the delegate will reasonably exercise the power, the subsequent ordinance should already set the parameters under which the power can be exercised. With respect to your second observation, it bears to stress that the Local Government Code, particularly Chapter IV, Section 174, provides for the civil remedies that can be availed of by the local government units in the collection of local tax, fees, charges and/or surcharges and interests resulting from the tax payment delinquency, to wit: (a) by administrative action thru distraint of goods and other personal property of whatever character and by levy upon real properties; and (b) by judicial action, meaning, filing of a collection case in court against the delinquent taxpayer. With respect to the collection of real property tax, Section 256 of the Local Government Code provides that for the collection of real property tax and any other tax levied under Title II (Real Property Taxation) of the Local Government Code, the local government unit concerned may avail of the remedies by administrative action thru levy on real property or by judicial action. At this point, it bears to stress that the Local Government Code, as a means of collecting taxes, fees or charges, did not confer any authority upon any Local Chief Executive for that matter the power to enter into compromise agreement with tax delinquents. But equally important is the fact that there is also no prohibition. Hence, we believe that if entering into compromise agreements is to be resorted to in order to avoid court litigations, said power may be properly provided for in the local tax ordinance itself or in any amendments made thereto. In your case, the authority to enter into compromise agreement with delinquent taxpayers is contained only in a mere Resolution and was not treated as part of the original tax ordinance or even as an amendment thereto. There is, however, a variation with respect to compromise agreements vis--vis the remedy of judicial action to collect local taxes, fees and charges. In availing the remedy of judicial action, the Governor may enter into a compromise agreement once the collection suit has already been filed in court. But before the Governor can enter into the same, a Resolution from the Sanggunian authorizing the Governor to enter into a compromise agreement in the judicial action is required as it involves entering into a contract which, under the Local Government Code, would require prior authority from the Sanggunian. The compromise agreement shall then be submitted to the court for approval which, under the Rules of Court, shall then become the court's judgment. In this case, there is no need to pass any ordinance vesting unto the Governor the power to enter into compromise agreements as the procedure is part of the remedy of judicial action availed of by the local government unit. caIEAD As to your third observation, the "ratification from the Sangguniang Panlalawigan" on any compromise entered into by the Governor based on the Resolution passed by the Sangguniang Panlalawigan cannot cure the procedural and substantive defect that such authority should be incorporated in the ordinance or in the amendments thereto. We hope we have enlightened you on the matter. Very truly yours, (SGD.) AUSTERE A. PANADERO Undersecretary Department of Interior and Local Government