Review of Existing Ordinances Enacted by the Sangguniang Barangay Which Impose Taxes, Fees, and Charges Beyond its Taxing Power, Which Include, But Not Limited to Micro-Financing Institutions Operating Thereat

March 25, 2011 DILG MEMORANDUM CIRCULAR NO. 045-11 TO : All Concerned Punong Barangays, Sangguniang Barangays, All City and Municipal Mayors, Sangguniang Panlungsod/Bayan, Liga ng mga Barangay National Executive Board, and DILG Regional Directors and Field Officers SUBJECT : Review of Existing Ordinances Enacted by the Sangguniang Barangay Which Impose Taxes, Fees, and Charges Beyond its Taxing Power, Which Include, But Not Limited to Micro-Financing Institutions Operating Thereat While the Department duly recognize the fiscal autonomy enjoyed by the local government units (LGUs) pursuant to their power to create their own sources of revenue (Section 129 of RA 7160 or the Local Government Code of 1991, herein referred to the "Code"), such power is not absolute as the Code itself provides for certain limitations, enumerating items or services that may be taxed or charged by the different levels of LGUs. Section 152 of RA 7160 provides for the taxing powers of a Barangay, and we quote: "Section 152. Scope of Taxing Powers. The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively accrue to them: (a) Taxes On stores or retailers with fixed business establishments with gross sales of receipts of the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the case of cities and Thirty thousand pesos (P30,000.00) or less, in the case of municipalities, at a rate not exceeding one percent (1%) on such gross sales or receipts. (b) Service Fees or Charges. Barangays may collect reasonable fees or charges for services rendered in connection with the regulations or the use of barangay-owned properties or service facilities such as palay, copra, or tobacco dryers. ACTIHa (c) Barangay Clearance. No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such business or activity is located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee . The application for clearance shall be acted upon within seven (7) working days from the filing thereof. In the event that the clearance is not issued within the said period, the city or municipality may issue the said license or permit. (d) Other fees and Charges. The barangay may levy reasonable fees and charges: (1) On commercial breeding of fighting cocks, cockfights and cockpits; (2) On places of recreation which charge admission fees; and (3) On billboards, signboards, neon signs, and outdoor advertisements. Those items that may be taxed by the barangays are those provided under paragraph (a) above while those where they may levy a fee are those enumerated under paragraphs (b) to (d). 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 Section 152 of the Code, barangays, without distinction, may conceptualize other forms of revenue generating sources provided, however, that the restrictions and limitations found in Section 133 of RA 7160 are observed and that the procedure surrounding the enactment of revenue-raising barangay ordinances are complied with. Given such powers to generate their own resources, and amid complaints received by the Department on the alleged excessive fees and charges, burdensome or extraneous documentary requirements imposed by some barangays especially on the issuance of barangay clearance, all City/Municipal Mayors, Sangguniang Bayan/Panlungsod are enjoined to initiate the conduct of thorough review of all existing barangay ordinances on regulatory service fees and charges imposed by the barangay government to ensure that the fees and charges imposed by the barangays in their respective jurisdictions are not unjust, excessive, oppressive, confiscatory or contrary to declared national policy, and that the same have undergone public hearing prior to its enactment (Section 186 of the Code). TIcEDC In the review of existing and subsequent revenue ordinances, all concerned shall also be guided by Section 130 of the Code, which provides for the fundamental principles governing the exercise of the taxing and other revenue-raising powers of the LGUs: (a) Taxation shall be uniform in each local government unit; (b) Taxes, fees, charges and other impositions shall: (1) be equitable and based as far as practicable on the taxpayer's ability to pay; (2) be levied and collected only for public purposes; (3) not be unjust, excessive, oppressive, or confiscatory; (4) not be contrary to law, public policy, national economic policy, or in the restraint of trade; (c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person; (d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and, (e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation. Therefore, all barangay governments that have enacted ordinances and those who are intending to enact ordinances of similar import are advised to be guided by the principles stated above, with emphasis on Section 130 (b) (1), (2), (3) and (4), as mentioned. Public officials are hereby reminded of their sworn duty to strictly uphold the law and shall at all times be accountable to the people. They must discharge their duties with utmost responsibility, integrity, competence and loyalty, act with patriotism and justice, lead modest lives, and uphold public interest over personal interest. ICAcHE All Regional Directors and Field Officers are directed to immediately disseminate this Memorandum Circular in their respective jurisdictions. For your immediate compliance. (SGD.) JESSE M. ROBREDO Secretary