Extent of the Taxing Powers Conferred upon Barangays under R.A. No. 7160

December 7, 1993 DILG LEGAL OPINION NO. 294-93 LEGAL SERVICE Ms. Virginia M. Clemente, et al. Libis ng Nayon, Bgy. Lalakay Los Baos, Laguna Ladies and Gentlemen : This has reference to the November 11, 1993 1st Indorsement of Director Jesus I. Ingeniero of the DILG Regional Office No. IV in Quezon City, referring to us you request for legal opinion on the extent of the taxing powers conferred upon barangays under Rep. Act No. 7160, otherwise known as the Local Government Code of 1991. It appears that the Sangguniang Barangay of Bgy. Lalakay is contemplating on imposing a barangay tax ("Resort Taxation") on those engaged in the operation of swimming pools, rooms and picnic facilities in that barangay. Being part of the tourism industry, you are opposing such proposed tax measure for being exorbitant, oppressive and detrimental to the business climate of the industry you are in. Hence, this request for clarification. While it may be true that local government units have been constitutionally and statutorily empowered "to create their own sources of revenue and to levy taxes, fees, and charges which shall accrue exclusively for their use and disposition", equally conceded is the fact that the same shall always have to be in conformity with the fundamental principles and common limitations therefor. Insofar as the barangay is concerned, the exercise of its taxing and other revenue-raising powers is limited to those taxes, fees, charges and contributions mentioned under Section 152 of the Local Government Code of 1991 (RA 7160). Although no rates have been specified in the Code itself, the barangay may nevertheless levy "reasonable fees and charges" on, among others, "places of recreation which charge admission fees" (Sec. 152 [d]). Such places of recreation invariably include "theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances" (see Sec. 131 [c], RA 7160). Relevantly, the amusement tax which provinces are authorized to impose on places of amusement at the rate of not more than thirty percent of the gross receipts from admission fees (Sec. 140) should be distinguished from the fees which barangays are empowered to levy. Since the latter is in the nature of "fees, the same may not be similarly based on the gross receipts on the places of recreation, but on the cost of inspecting the premises so as to determine their compliance with safety, sanitation, and other government regulations. It bears emphasis to state that unlike taxes, fees are generally imposed to recover the cost of regulating or inspecting a business or activity (Sec. 131 [1], RA 7160; Local Government Taxation, S. B. Ursal, 1992 ed., psue 178). The procedure for the approval, review, publication, and effectivity of barangay tax ordinances and revenue measures are provided for under Sections 54, 55, 57, 58 and 59 of the Local Government Code of 1991. Summing up, a tax ordinance enacted by the sangguniang barangay shall, upon approval by the majority of all its members, be signed by the punong barangay. Within ten (10) days after its enactment, the sangguniang barangay shall furnish copies of all barangay ordinances to the sangguniang bayan concerned for review as to whether the ordinance is consistent with law and municipal ordinances. If the sangguniang bayan fails to take action thereon within thirty days from receipt thereof, the same shall be deemed approved. Should the sangguniang bayan find the barangay ordinance inconsistent with law or municipal ordinances, the sanggunian concerned shall, within thirty days from receipt thereof, return the same with its comments and recommendations in the sangguniang barangay concerned for adjustment, amendment or modification; in which case the effectivity on the barangay ordinance is suspended until such time as the revision called for is effected. In connection therewith, we would like to further invite your attention to Section 187 of the Code which provides, in part, that: "The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances 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: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein. . . ." Hoping that you will be guided accordingly. Very truly yours, DIR. JACOB F. MONTESA Department Legal Counsel Department of Interior and Local Government cc: Director Jesus I. Ingeniero DILG Regional Office No. IV EDSA, Diliman, Quezon City