DOJ Opinion No. 019, s. 1995

DOJ OPINION NO. 019 , s. 1995 February 28, 1995 Mr. Guido Alfredo A. Delgado President National Power Corporation cor. Quezon Avenue and Agham Road Diliman, Quezon City Sir : This has reference to your request for a ruling concerning payment of business tax under Section 143(e) of the Local Government Code (LGC) of 1991. It is gathered from your letter-request that the National Power Corporation (NPC) has existing contracts with certain foreign contractors for the construction of its foreign-loan funded 300MW Bataan Combined Cycle Power Project at the Municipality of Limay, Bataan; that the contract price of the project does not include the taxes, fees and dues that may be imposed thereon but NPC undertakes to reimburse the same in the event that taxes, fees and dues are levied at the expense of the foreign contractors; and that the Municipality of Limay, Bataan, is imposing a business tax on the foreign contractors of NPC on the basis of Section 143(e) of the LGC which imposes a business tax on contractors based on "gross receipts for the preceding calendar year". The instant request has arisen because the Municipality of Limay, Bataan, is imposing a business tax based on the "total local work portion-on-shore (peso portion) and the imported work portion-off-shore (foreign portion)" of the contract price of the project. However, NPC contends that the tax liability of the contractors should only cover the "local work portion (peso portion) of the contract price, excluding the imported work portion (foreign portion)." Hence, this query. We note, at the outset, that the issue had been previously raised by the Municipality of Limay, Bataan to the Bureau of Local Government Finance (BLGF) which issued a ruling, the pertinent portion of which reads: ". . . the term 'gross receipts', as applied to contractors, would be the total amount of service fees, including the amount charged or materials parts of the things to be constructed supplied with the service, and advance payments or deposits actually or constructively received during the taxable year. Such part of the contract price or those payments or deposits which are not actually or constructively received by the contractor during the taxable year and materials or equipment that do not form part of the things to be constructed although they were supplied during the said year shall be excluded from the tax base." Since the BLGF, which is the government agency empowered by law to give consultative services to local government units on matters of local taxation (see Book IV, Title II, Chapter 4, Administrative Code of 1987), has already made a determination of what constitutes the term "gross receipts", we are constrained to decline rendition of opinion on the instant query. By established precedents, this Department has consistently refrained from expressing its views on matters involving the official acts or issuances of other government officials over whom the Secretary of Justice exercises no supervisory jurisdiction and over whose actions he possesses no revisory authority, unless so requested by the official concerned (Sec. of Jus. Ops. No. 14, s. 1991; No. 11, s. 1987; No. 91, s. 1982; Nos. 123 and 9, s. 1980; No. 99, s. 1978; No. 137; s. 1977, etc.). This rule arises not only from practical considerations, but also out of due respect and deference for the competence and expertise of the office having primary jurisdiction to resolve the matter and for its familiarity with the policy repercussions of the question as well as from a logical recognition of the lawful exercise of an authority conferred by law (ibid., No. 1, s. 1983). It is suggested that you directly take up the matter with the BLGF and/or elevate the matter to the Department of Finance which exercises control and supervision over the BLGF and which has the final say on tax matters at the administrative level. Very truly yours, (SGD.) DEMETRIO G. DEMETRIA Acting Secretary