Computation of LGUs' Internal Revenue Allotment to Include Tariff and Customs Duties

DOJ OPINION NO. 055 , s. 2010 November 22, 2010 Undersecretary Mario L. Relampagos Department of Budget and Management Malacaang, Manila Dear Undersecretary Relampagos : This pertains to your request for legal opinion on whether the tariff and customs duties being administered and collected by the Bureau of Customs shall be considered and included for purposes of computing the 40% Internal Revenue Allotment (IRA) share of the Local Government Units (LGUs). aSDHCT The request, it appears, stemmed from the resolution (LPP General Assembly (G.A.) Resolution No. 2009-0011) adopted by the League of Provinces of the Philippines (LPP) requesting former President Gloria Macapagal-Arroyo to include the revenues of the Bureau of Customs (tariff and customs duties) in the computation of the IRA for the LGUs beginning FY 2010 and thereafter; and that said resolution was adopted after the Development Budget Coordination Committee issued on September 4, 2003, a resolution (DBCC Resolution No. 2003-02 ["Defining the Revenue Base of the Internal Revenue Allotment (IRA)]"), which pertinently provides that in the determination of the revenue base of the IRA, collection of internal revenue taxes shall refer to cash collections based on Bureau of Internal Revenue (BIR) data as reconciled with the Bureau of Treasury. It also appears that the LPP is of the view that the tariff and customs duties collected by the Bureau of Customs are also national revenue collections, without distinction on whether it is collected by the Bureau of Internal Revenue or by the Bureau of Customs, and should, therefore, be a part of the basis for their IRA. With regret, this Department cannot issue the opinion requested. It bears stress, at the outset, that the resolution of the issue herein raised would inevitably be an interpretation and/or examination of the certain provisions of the Local Government Code of 1991, 1 specifically Section 284 thereof. Such function, however, properly pertains to the Oversight Committee, which is mandated by law to promulgate rules and regulations necessary for the implementation of the said Code, 2 and the Department of the Interior and Local Government (DILG), the lead agency designated by the President in the implementation of the Code. 3 Pursuant to settled policy and precedents, the Secretary of Justice does not rule on issues which fall within the primary jurisdiction of another Office in this case, the Oversight Committee and the DILG over which the rulings or actuations of this Department exercises no revisory authority, unless the request comes from the said office or agency. 4 Moreover, even if we want to, we cannot do so because the determination of the issue raised would inevitably require us to pass upon the action taken by the Development Budget Coordination Committee (DBCC) which, unfortunately, is beyond the revisory authority of this Department. The Secretary of Justice time and again desisted from passing upon issues that have already been the subject of official action by other officials/officers over whose actuations he possesses no revisory authority. 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 for its familiarity with the policy repercussions of the question as well as from logical recognition of the lawful exercise of an authority conferred by law. 5 HCITAS Also, the resolution of the issue raised indubitably affects the substantive rights of the officers and members of the League of the Provinces of the Philippines. Opinions of the Secretary of Justice are merely advisory in nature. As such, they have no binding effect upon the party/parties whose substantive rights may be affected by the opinion and who may, in all probability, contest the same before the courts, if said opinion turns out to be opposed to their interest. As a matter of policy and in consonance with long established precedents, the Secretary of Justice does not render opinion or give legal advise on matters that are justiciable in nature or may be the subject of court litigation. 6 This, notwithstanding, considering the importance of the issue you had raised, we would like to state some relevant observations for your information and enlightenment. The grant of a just share in the national taxes for the LGUs is clear and explicit from a reading of Section 6, Article X of the 1987 Philippine Constitution, thus: Section 6. Local government units shall have a just share, as determined by law , in the national taxes which shall be automatically released to them. (Emphasis ours) In line with this, Section 284, Chapter I, Title III of the Local Government Code of 1991 provides that: Section 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as follows: (a) On the first year of the effectivity of this Code, thirty percent (30%); (b) On the second year, thirty-five percent (35%); and (c) On the third year and thereafter, forty percent (40%). . . . (Emphasis ours) The national internal revenue taxes are clearly enumerated in Section 21 of the National Internal Revenue Code of the Philippines, otherwise known as the Tax Reform Act of 1997 (Republic Act No. 8424), to wit: Sec. 21. Sources of Revenue. The following taxes, fees and charges are deemed to be national internal revenue taxes: (a) Income tax; (b) Estate and donor's tax; (c) Value-added tax; (d) Other percentage taxes; (e) Excise taxes; (f) Documentary stamp taxes; and (g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue . (Emphasis ours) A review of the Senate Deliberation of Senate Bill No. 155 (R.A. 7160) is also clear that the basis for the computation of the LGUs IRA is only on the BIR taxes enumerated above, thus: HDTSIE "SENATOR GUINGONA: In which case, there is really an urgent need to increase and rectify the sharing, because 11 percent, much less 7%, is really inequitable. Many provinces and cities cannot plan adequately; do not have the resources to do so. Now, may I know what is the base for the sharing of 20 percent or 11 percent or 7 percent? Is it the collection of the entire Nation? In other words, is the base the collection per province or is it the collection per region or per national revenues? SENATOR PIMENTEL: The criterion, Mr. President, is rather nebulous on that score because I understand that, even as the National Government says that one has to distribute the taxes on the basis of population and size, et cetera, the National Government also has some leeway to grant an increase or impose a decrease on the revenue-tax allotments. So, Mr. President, maybe, we can work out a formula in our Code wherein we can be more specific regarding this item. SENATOR GUINGONA: Because, Mr. President, one of the most important factors is really the base. If the base of the distribution is the total collection from the entire Nation of BIR taxes , then the poor provinces would get 20% if it is 20, and the rich provinces would get 20 percent. . . ." (Emphasis ours) Basic is the rule in statutory interpretation that when the law is clear, plain and free from ambiguity, it must be given its literal meaning without attempted interpretation ( Ramos vs. Court of Appeals , 108 SCRA 728, 733). Known as the plain meaning rule, or verba legis , this rule, which was derived from the maxim index animi sermo est (speech is the index of intention), rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude a different construction (see also, PNB vs. Garcia , 388 SCRA 485, 491). The rationale is because the legislature is presumed to know the meaning of the words, to have used the words advisedly, and to have expressed its intent by the use of such words as are found in the statute. (Sec. of Justice Op. No. 39, current series, citing Op. Nos. 64, 58 & 56, s. 2009) National taxes refer to national internal revenue taxes imposed and collected by the national government through the Bureau of Internal Revenue (BIR). Hence, national internal revenue taxes does not include tariff and customs duties being administered and collected by the Bureau of Customs. Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. Republic Act No. 7160. 2. Section 533, supra. 3. Administrative Order No. 269, dated February 21, 1992, and DOJ Op. No. 65, s. 2007. 4. DOJ Op. 61, s. 2009 and DOJ Op. No. 65, s. 2007, citing opinions. 5. Ibid. , No. 35, s. 2009. 6. Id. , No. 63, s. 2007, citing opinions.