Validity of Proposed Joint Tax Resolution between Municipalities of Itogon and Tuba, Benguet on Business Tax Collection

DOJ OPINION NO. 060, s. 2015 September 24, 2015 Atty. Enrique C. Rodriguez, Jr. Vice President Legal Philex Mining Corporation Philex Building, 27 Brixton St. Pasig City 1600 Dear Atty. Rodriguez : This refers to your request seeking this Department's legal opinion on the validity of the proposed Joint Tax Resolution by and between the Municipalities of Itogon and Tuba, Province of Benguet, relating to the collection of business taxes within their respective areas of jurisdiction. As stated in your letter-request, it appears, that there is a long-standing boundary dispute between the municipalities of Itogon and Tuba, Province of Benguet; that directly within and/or affected/involved in the said boundary dispute is Philex Mining Corporation's ("Philex") MPSA 276 wherein it extracts ores, which is the source of its revenue, sales, gross receipts and/or business; that as a result of the said boundary dispute, both municipalities have not been able to collect business taxes; that in Philex's view, the best way to settle the business tax issue is to finally resolve the boundary dispute between the said municipalities since local taxation or the taxing authority of any local government authority is statutory in nature and under Republic Act No. 7160, otherwise known as the "Local Government Code of 1990", n as amended, territorial jurisdiction or situs is material in local taxation; that as an alternative, the municipalities of Itogon and Tuba, pending resolution of the boundary dispute would like to agree to apportion the said business tax as follows: (a) 50%-50% sharing of whatever amount Philex would pay as and for business tax for year 2013 and earlier; and (b) 50%-50% sharing of the 70% of the Annual Gross Receipts which is the tax base for the computation/assessment of business tax as stated in Section 150 (b) (1) and (2) of the Local Government Code for years 2014 onwards; and that Philex has no objection to such arrangement/agreement by the two municipalities and it is willing to enter into any such arrangement/agreement with the said municipalities provided that it is not contrary to law, morals, public order or public policy. Specifically, Philex is seeking this Department's opinion on the legality/validity of the said proposed arrangement/agreement between the two municipalities, and if insufficient to sustain validity, what other legal instruments should be executed in order to carry out the main objective of delivering business tax to both of them pending boundary dispute resolution. With regret, this Department is constrained to decline to render the opinion requested. It must be stressed, at the outset, that the issue being raised by Philex is purely hypothetical and speculative in view of the absence of an actual agreement by and between the municipalities of Itogon and Tuba concerning the collection of business taxes within their respective areas of jurisdiction. It would likewise appear that Philex is not aware if the proposed arrangement/agreement between the two municipalities would be in the form of an ordinance or a resolution. Pursuant to settled policy, the Secretary of Justice does not rule on speculative, anticipatory or hypothetical questions. 1 Also, the instant query does not present the complete factual situation from which this Department may be able to draw its premises and conclusions. 2 Your letter-request indicated that there is a pending boundary dispute between the municipalities of Itogon and Tuba, however, it failed to mention whether the said dispute is pending before the Sangguniang Panlalawigan pursuant to Section 118 of the Local Government Code or before the courts. Moreover, the issue raised herein involve the substantive rights of private parties, in this case, Philex. Since the opinion of the Secretary of Justice is merely advisory in nature, such opinion would not be binding upon the private parties who may be adversely affected thereby and who may, in all probability, take issue therewith and contest the same before the courts. 3 This notwithstanding, we would like to invite your attention to the following cases decided by the Supreme Court, for your information and guidance only. ASEcHI In the case of Mariano vs. COMELEC, G.R. No. 118577, 7 March 1995 the Supreme Court held that a local government unit may only act within its own territorial jurisdiction, otherwise, it would be acting beyond the scope of the powers granted to it by law. To quote: "The importance of drawing with precise strokes the territorial boundaries of a local unit of government cannot be overemphasized. The boundaries must be clear for they define the limits of the territorial jurisdiction of a local government unit . . . Needless to state, any uncertainty in the boundaries of local government units will sow costly conflicts in the exercise of governmental powers which ultimately will prejudice the people's welfare. " (Emphasis supplied) While in the case of Sta. Lucia Realty Development, Inc. vs. Pasig, G.R. No. 166838, 15 June 2011, the Supreme Court had an opportunity to decide a similar issue relating to the collection of taxes involving local government units with a pending boundary dispute. The following are the facts of the Sta. Lucia Realty Development, Inc. case to show its parallel aspects with that of the instant query: Sta. Lucia Realty Development, Inc. ("Sta. Lucia") is the registered owner of several parcels of land with Transfer Certificates of Title (TCT) Nos. 39112, 39110 and 38457 all of which were indicated to be located in Barrio Tatlong Kawayan, Pasig; that the parcel of land covered by TCT No. 39112 was consolidated with that covered by TCT No. 518403, which is situated in Barrio Tatlong Kawayan, Cainta; that the combined lots were thereafter partitioned into three resulting in the issuance of TCT Nos. 532250, 598424 and 599131, all now bearing the Cainta address; that upon petition filed by respondent Pasig, the Land Registration Court ordered the correction of the location stated in the three TCT insofar as it relates to TCT No. 39112 to be read as Barrio Tatlong Kawayan, Pasig; that intervenor Cainta, thus, filed in January 1994 a petition for settlement of boundary dispute with respondent Pasig before the Regional Trial Court (RTC) of Antipolo City; that even as the said case is still pending, respondent filed a Complaint against petitioner Sta. Lucia for collection of real estate taxes, including penalties and interests on the lots covered by TCT Nos. 532250, 598424, 599131, 928669, 92870 and 38457, before the RTC of Pasig City, but the latter, in its Answer, claimed that it had been religiously paying its real estate taxes to Cainta as its predecessors-in-interest did; and that Cainta, which was allowed to intervene, admitted that it had been collecting real property taxes on the said properties even before they were acquired by herein petitioner Sta. Lucia. In its ruling, the Supreme Court directed the City of Pasig and the Municipality of Cainta to await the judgment in their boundary dispute case, which was pending before the RTC, to determine which local government unit is entitled to exercise its powers, including the collection of real property taxes, on the properties subject of the dispute. In the meantime, Sta. Lucia Realty and Development, Inc. was directed to deposit the real property taxes due on the lots and improvements, which were the subject of the boundary dispute, in an escrow account with the Land Bank of the Philippines. Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. Id., Op. No. 47, s. 2012; No. 25, s. 2008; and No. 16, s. 2005. 2. Secretary of Justice Opinion No. 93, s. 2012; citing Op. No. 65, s. 2009; No. 64, s. 2008; No. 16, s. 2003 and No. 56, s. 1996. 3. Id., Op. Nos. 15, 9, 7, 5, 4 & 3, s. 2012. n Note from the Publisher: Copied verbatim from the official document. The "Local Government Code of 1990" should read as "Local Government Code of 1991".