Legality of the Collection of Mining/Quarrying Taxes/Fees Imposed by LGUs on top of Taxes Already Imposed on the Mining/Quarrying Industry

December 16, 2009 DILG LEGAL OPINION NO. 064-09 Mr. Ernesto M. Ordonez President Cement Manufacturers Association of the Philippines (CeMAP),Inc. No. 1 Corporal Cruz St.,cor. E. Rodriguez Ave. Bo. Bagong Ilog, Pasig City Ms. Nelia C. Halcon Executive Vice-President Chamber of Mines of the Philippines Room 809 Ortigas Building Ortigas Avenue, Pasig City Dear Pres. Ordonez and EVP Halcon : This has reference to your earlier separate letters asking this Department's legal opinion and/or assistance regarding the legality of the collection of mining or quarrying taxes/fees imposed by local government units (LGUs),specifically the provinces of Rizal and Cebu, on top of the taxes (national and local) already imposed on the mining or quarrying industry. As culled from your letters, the Provincial Government of Rizal has the following existing ordinances, to wit: Provincial Ordinance No. 08-008, entitled "An Ordinance Prescribing Guidelines for Environmental Regulations in the Province of Rizal" ;and Provincial Ordinance No. 010, series of 2008, entitled "An Ordinance Imposing Environmental Monitoring and Stabilization Fee and for other Purposes" According to you, the foregoing Ordinances prescribed certain taxes, fees and charges including the application requirement for permits; fees on blasting; monitoring and supervision fees for Quarrying/Mining Operations, Crushing/Processing and Transport; and contribution to the provincial 'environmental protection fund',which should not be applied to large-scale mining operations (more than 5 hectares) or holders of Mineral Production Sharing Agreements (MPSA) since these are, by law, regulated exclusively by another agency, that is, the Department of Environment and Natural Resources (DENR). ATHCac On the other hand, the Provincial Government of Cebu also levies the so-called Environmental Enhancement Fee on the extraction of non-metallic mineral. In your letters and its attachments, you failed to state the manner in which the Province of Cebu is collecting the Environmental Enhancement Fee. Nevertheless, per our verification with Mr. Vincent B. Castillo III, Operations Manager of CeMAP, said Environmental Enhancement Fee is being collected via Provincial Ordinance No. 2008, otherwise known as the "Revenue Code of Cebu of 2008". Meanwhile, this Department issued Memorandum Circular No. 2009-42 dated 27 March 2009 regarding the imposition and collection of local taxes, fees and taxes. In said Memorandum Circular, this Department enumerated the common limitations on the taxing powers of the different local government units, including provinces, as well as the authorized local taxes, fees and charges that they may impose. It is your contention that the different fees collected under the aforesaid Provincial Ordinances of the Provinces of Rizal and Cebu are beyond the scope of their taxing authority as enumerated in this Department's Memorandum Circular. It is also your concern that if these fees are allowed, it will bear heavily on the cost of producing cement; and that increased cement cost will dampen local construction projects as well as lessen the capability of the local cement industry to compete with the excess cement capacities which are now being experienced by many cement companies outside the Philippines because of the present global economic crisis. Hence, your request for legal opinion and/or assistance. In reply thereto, please be informed that since the subject Provincial Ordinances, which imposed the different taxes, fees, and charges as you represented, had already been passed and approved in accordance with the procedural requirements set by the Local Government Code of 1991 (RA 7160), and, in fact, are being implemented for almost a year now, they therefore enjoy the presumption of validity and remain to be enforceable, unless declared otherwise by our courts upon proper judicial action. Be that as it may, for academic discussion, may we further inform you that under Section 129 of the Local Government Code of 1991, local government units are given the power to create their own sources of revenue. Categorically, the law states: "Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein consistent with the basic policy of local autonomy . . .". Based on this aforequoted provision, a local government unit, including provinces, may create their own sources of revenue and levy taxes, fees, and charges subject to the limitations provided under the Local Government Code of 1991, consistent with the basic policy of local autonomy. The Local Government Code of 1991 itself enumerates the items or services that may be taxed or charged by the different levels of local government units. SDHacT Sections 135 to 141 of the Local Government Code of 1991 specifically provide for the items or services that may be taxed upon by the provinces. It does not follow however that only those items or services enumerated by law may be taxed or charged upon because Section 186 of the same Code has given local government units a certain degree of leeway to determine other possible sources of income. Hence, aside from those enumerated under Sections 135 to 141 of the Code, provinces may conceptualize other forms of revenue generating sources provided, however, that the restrictions and limitations found in Section 133 of the Code are observed and that the procedure surrounding the enactment of revenue-raising provincial ordinances are complied with. On a final note, if you are determined to question the substantive validity of the subject Provincial Ordinances, your remedy is to file an action for declaratory relief in accordance with rule 63 of the Revised Rules of Court. We hope that we have addressed your concern accordingly. Very truly yours, (SGD.) AUSTERE A. PANADERO Undersecretary Department of Interior and Local Government