Instructions on the Implementation of Presidential Decree No. 231 (Local Tax Code)

September 7, 1973 PROVINCIAL CIRCULAR NO. 2273 SUBJECT : Instructions on the Implementation of Presidential Decree No. 231, otherwise known as the Local Tax Code TO : All Provincial Boards, City Councils or Municipal Boards, Municipal Councils, Barrio Councils and Provincial, City and Municipal Treasurers I Legal Basis and Objectives of the Local Tax Code The Local Tax Code was promulgated into law by Presidential Decree No. 231 pursuant to the provisions of Section 2 of Article XI of the Constitution enjoining the enactment of a Local Government Code which shall, among others, allocate among the different local government units their powers and resources and Section 5 of the same Article of the Constitution declaring that "each local government unit shall have the power to create its own sources of revenue and to levy taxes, subject to such limitations as may be provided by law." While the Constitution under Section 5 of Article XI ensures the viability and self-sufficiency of local government units by directly granting them general taxing powers, yet the same Constitution also sees fit under Sections 2 and 5 of Article XI to have such taxing powers allocated and limited by law. This is to ensure that, while the local governments are being strengthened and made more autonomous, the taxpayers will not be over-burdened or saddled with multiple and unreasonable impositions; that each local government unit will have its fair share of available resources; that the resources of the national government will not be unduly disturbed; and that local taxation will be fair, uniform, and just. Thus, the Local Tax Code embodies the limitations called for by the Constitution with respect to the exercise of the local taxing powers and allocates the local taxes, fees and other impositions that may be levied among the different local government units. Therefore, in order to enhance the effectiveness of the Code as a tool in the attainment of the foregoing constitutional objectives, the following instructions are hereby issued for information, guidance and compliance of all concerned. II On the Allocation of, and Limitations on, the Taxing and Other Revenue-Raising Powers of Local Governments In the exercise of its general taxing powers, a local government unit through its board or council may levy a tax, fee or any other imposition, and for the purpose the board or council shall enact a tax ordinance. If the local government unit is specifically authorized by the Local Tax Code to levy or impose the tax or fee, all that it has to do in imposing the same is to see to it that the rate thereof is: (1) within the range of rates provided therefor by the Code; (2) uniform throughout the political subdivision; and (3) fair and reasonable to the taxpayers. cTDaEH If the tax or fee is not specifically authorized by the Local Tax Code, the same may not be imposed by the local government unit if: 1. It is against any of the following FUNDAMENTAL PRINCIPLES provided under Section 2 of the Code: (a) Taxation shall be uniform in each local political subdivision; (b) Taxes shall be based as much as possible on the taxpayer's ability to pay; (c) Taxes shall be levied and collected only for public purposes; (d) Taxes and other impositions must not be unjust, excessive, oppressive or confiscatory; and (e) Taxes and other impositions must not be contrary to law, public policy and national economic policy, nor in restraint of trade. 2. It is one of the following prohibited impositions under Section 5 of the Code, captioned COMMON LIMITATIONS ON THE TAXING POWERS OF LOCAL GOVERNMENTS: (a) Documentary stamp tax: (b) Taxes on forest products and forest concessions; (c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa , except as otherwise provided in this Code; 1 (d) Taxes on income of any kind whatsoever; (e) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof; (f) Customs duties, registration fees of vessels except as otherwise provided in this Code, 2 and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues, except wharfage on wharves constructed and maintained by the local government concerned at rates not exceeding those fixed by the Tariff and Customs Code; (g) Taxes of any kind on banks and insurance companies; (h) Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance companies; (i) Export taxes, fees, or other levies on Philippine finished, manufactured or processed products, and products of Philippine cottage industries, 3 (j) Taxes and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local governments in the guise of unreasonable charges for wharfage, use of bridges, or otherwise, or other taxes in any form whatever upon such goods or merchandise; (k) Taxes or fees on agricultural products when sold by the farmer or producer thereof, whether in their original form or not, 4 and (l) Percentage tax on sales, except as otherwise provided in this Code. 5 3. It is one of the taxes, fees or charges denied the local government unit under the following SPECIFIC LIMITATIONS ON POWERS of provinces, municipalities and cities provided by the Code: SEC. 17. Specific limitations on power . Except as otherwise provided in this Code, the province shall not levy the following: (a) Business tax 6 (b) Municipal fees and charges under Section 20 of this Code, 7 (c) Fishery rental and license fees; (d) Tax on articles subject to specific tax under the provisions of the National Internal Revenue Code; and (e) Taxes and other impositions enumerated in Section 5, Chapter I of this Code. SEC. 22. Specific Limitations on Power . Except as otherwise provided in this Code, the municipality shall not levy the following: (a) Taxes, fees and charges that the province or city is authorized to levy in this Code; (b) Taxes on articles subject to specific tax under the provisions of the National Internal Revenue Code; and (c) Taxes and other impositions enumerated in Section 5, Chapter I of this code. SEC. 25. Specific Limitations on Power . Except as otherwise provided in this Code, the city shall not levy the taxes and other impositions enumerated in Section 5, Chapter I of this Code. 8 If the tax or fee is not denied the local government unit under: (1) the FUNDAMENTAL PRINCIPLES; (2) the COMMON LIMITATIONS; or (3) the SPECIFIC LIMITATIONS as discussed herein-above and the same tax or fee although not specifically enumerated in the Code is on a tax base or subject similar to any of those authorized therein, the local government unit may levy or impose the same, but the rate thereof, pursuant to Section 49 of the Code, shall in no case exceed that fixed for the similar tax base or subject . If the tax or fee is not denied the local government unit either by (1) the FUNDAMENTAL PRINCIPLES; (2) the COMMON LIMITATIONS; or (3) the SPECIFIC LIMITATIONS and the same tax or fee is on a tax base or subject not similar or comparable to any tax base or subject specifically mentioned or otherwise provided in the Code, the local government unit may levy or impose the tax or fee, provided that the same shall not be unjust, excessive, oppressive or confiscatory, or contrary to declared national economic policy. The tax or fee so levied or imposed shall only be collectible, in accordance with Section 50 of the Code, without interests or other surcharges on the initial payment, after review and approval of the ordinance imposing the same by the Secretary of Finance . In accordance with Sections 36, 37 and 51 of the Code, a local government unit may impose and collect: 1. A permit fee for the issuance of a permit which shall be required of an individual or any juridical entity before the same shall engage in any business or occupation, but such permit fee shall be sufficient to cover only the cost of the issuance of the permit ; 2. A service charge , but this shall be in an amount reasonably commensurate to the service rendered ; and 3. A regulatory fee in connection with administrative or regulatory measures ordained for the conduct of a business or industry, or the practice of a profession or occupation, or to protect public interest, but such regulatory fee shall be commensurate to the service rendered in the implementation of the regulatory measures to which the same is incidental . Conformably to Section 23 of the Code, the CITY 1. May levy and collect, among others, any of the taxes, fees and other impositions that the province and the municipality may levy and collect, and may set the rates thereof in excess of the maximum authorized the province and the municipality, but the excess so set shall not be more than fifty per cent of the maximum rates authorized by the Code for the province and the municipality ; 2. May levy and collect, in lieu of the graduated fixed taxes on business based on sales, percentage tax on sales at the rates of not exceeding one per cent on the sales of essential commodities as defined in the Code and not exceeding two per cent on the sales of non-essential commodities; and 3. Shall impose and collect, at the rates prescribed therein, the occupation tax, amusement tax on admission and fees for sealing and licensing of weights and measures provided under Sections 12, 13 and 14, respectively, of the Code. Under Article 4, Chapter II of the Code, the exercise of the taxing and other revenue-raising powers of the BARRIO is limited to: 1. Stores, signs, signboards and billboards displayed or maintained in any place exposed to public view, except those displayed at the place where the profession or business advertised is conducted; 2. Gamecocks owned by residents of the barrios and on the cockfights conducted therein; 3. Service charges for services rendered in connection with the regulation of the use of barrio-owned properties or service facilities such as palay, copra or tobacco drier and the like; and 4. Soliciting of monies, materials and other contributions. A barrio may levy taxes or fees on Nos. 1 and 2 above, at rates that shall not exceed twenty-five per cent in the case of a barrio in a municipality and ten per cent in the case of barrio in the city of the tax or fee already imposed thereon by the municipality or city . The service charges that a barrio may collect under No. 3 above shall be commensurate to the services rendered. TCADEc III On the Common Revenue-Raising Powers Under Article 5, Chapter II of the Code, provinces, cities, municipalities and barrios: 1. May own, operate and maintain public markets and slaughterhouses and charge reasonable rentals or fees for the occupancy or use thereof, as well as their premises; 2. Shall have the power to collect charges for services rendered in connection with the operation of other public utilities owned, operated and maintained by them at the rates to be fixed by the local board or council , provided that the maximum annual net profit that may be derived therefrom shall not be in excess of ten per cent of the capital invested in the public utility and that, should the amount of net profit of the public utility be found by the provincial or city auditor concerned to be in excess of said percentage, the charges thereof shall be accordingly adjusted and the excess shall be spent only for the improvement of the public utility ; 3. May collect tuition fees in the schools owned, operated and maintained by them, subject to the approval of the Secretary of Education and Culture and to the mandatory requirements that no charge shall in any case be made for instruction in the elementary grades and that monies collected from tuition fees shall be spent only for educational purposes; 4. May designate , through their boards or councils, for the maintenance of any road or canal within their territories, such road or canal or part thereof, or any bridge or ferry, built or to be built, or maintained as part thereof, as a toll road, bridge, canal or ferry, and may fix tolls therefor at reasonable rates ; 5. Are authorized, without securing a permit from the Department of Social Welfare, to hold benefits to raise funds for some specific purpose having in view their general welfare and the general welfare of their inhabitants, provided that the proceeds thereof shall be disbursed for the specific purpose for which the benefit was held; the excess of the proceeds, if any, shall accrue to their general fund; and no such benefit shall be held within one hundred twenty days immediately preceding a national or local election; 6. May collect a permit fee sufficient to cover the cost of the issuance of a permit which shall be required of an individual or any juridical entity before the same shall engage in any business or occupation under the provisions of the Code; and 7. May collect a service charge for any service rendered by it in an amount reasonably commensurate to such service. IV On the Adjudication of Vacant Market Stalls or Booths to Applicants and Regulation Thereof 1. Vacancy of stalls/booths; adjudication to applicants . Vacant market stalls/booths shall be adjudicated to qualified applicants in the following manner: (a) Notice of vacancy of vacant or newly constructed stalls or booths shall be made for a period of not less than ten (10) days immediately preceding the date fixed for their award to qualified applicants to apprise the public of the fact that such stalls or booths are unoccupied and available for lease. Such notice shall be posted conspicuously on the unoccupied stall or booth and the bulletin board of the market. The notice of vacancy shall be written on cardboard, thick paper, or any other suitable material and shall be in the following form: NOTICE Notice is hereby given that Stall/Booth No. ________, Building or Pavilion No. ________ of the _____________ market is vacant (or will be vacated on _________________________, 19______ ). Any person, 21 years of age or more and is not legally incapacitated, desiring to lease this stall/booth, shall file an application therefor on the prescribed form (copies may be obtained from the Office of the Provincial/City/Municipal Treasurer during office hours and before 12 o'clock noon of ____________, 19_____ ). In case there are more than one applicant, the award of the lease of the vacant stall/booth shall be determined through drawing of lots to be conducted on _________________ 19_____, at 12 o'clock noon at the Office of the Provincial/City/Municipal Treasurer by the Market Committee. This stall/booth is found in the _______________ Section and is intended for the sale of __________________. ____________________________ Provincial/City/Municipal Treasurer (b) The application shall be under oath. It shall be submitted to the office of the provincial/city/municipal treasurer concerned by the applicant either in person or through his or her attorney. (c) It shall be the duty of the provincial/city/municipal treasurer to keep a register book showing the names and addresses of all applicants for vacant stalls or booths, the number and description of the booth/stall applied for by them, and the date and hour of the receipt by the treasurer of each application. It shall be also the duty of the treasurer to acknowledge receipt of the application setting forth therein the time and date of receipt thereof. The application shall be substantially in the following form: Application to Lease Market Stall ___________ _______ Address Date The Provincial/City/Municipal Treasurer, City/Municipality of _____________ Province of __________________ S i r : I hereby apply under the following contract for the lease of Stall No. _______ of the Market. I am _____ years of age, ______________ a citizen of the ___________ and residing at ____________________. Should the above mentioned stall be leased to me in accordance with the market rules and regulations, I promise to hold the same under the following conditions: (1) That while I am occupying or leasing this stall (or these stalls), I shall at all times have my picture and that of my helper (or those of my helpers) conveniently framed and hung up conspicuously in the stall. (2) I shall keep the stall (or stalls) at all times in good sanitary condition and comply strictly with all sanitary and market rules and regulations now existing or which may hereafter be promulgated. (3) I shall pay the corresponding rents for the booth (or booths) or the fee for the stall (or stalls) in the manner prescribed by existing ordinance. (4) The business to be conducted in the stall (or stalls) shall belong exclusively to me. (5) In case I engage helpers, I shall nevertheless personally conduct my business and be present at the stall (or stalls or booths). I shall promptly notify the market authorities of my absence, giving my reason or reasons therefor. (6) I shall not sell or transfer my privilege to the stall (or stalls or booths) or otherwise permit another person to conduct business therein. (7) Any violation on my part or on the part of my helpers of the foregoing conditions shall be sufficient cause for the market authorities to cancel this contract. Very respectfully, ________________ (Applicant) I ______________________, do hereby state that I am the person who signed the foregoing application; that I have read the same; and that the contents thereof are true to the best of my own knowledge. ________________ (Applicant) T.A.N. _____________ SUBSCRIBED AND SWORN to before me in the city (or municipality) of ___________________ Philippines, this ______ day of ________________, 19______ Applicant-affiant exhibiting to me his/her Res. Cert. No. A-_________ issued on ___________ at ___________ Philippines. ________________ (Official Title) (d) Applicants who are Filipino citizens shall have preference in the lease of public market stalls. If on the last day set for filing applications, there is no application from a Filipino citizen, the posting of the Notice of Vacancy prescribed above shall be repeated for another ten-day period. If after the expiration of that period there is still no Filipino applicant, the stall affected may be leased to any alien applicant who filed his application first. If there are several alien applicants, the adjudication of the stall shall be made through drawing of lots to be conducted by the Market Committee. In case there is only one Filipino applicant, the stall or booth applied for shall be adjudicated to him. If there are several Filipino applicants for the same stall, adjudication of the stall shall be made through drawing of lots to be conducted by the Market Committee on the date and hour specified in the Notice. The result of the drawing of lots shall be reported immediately by the Committee to the provincial/city/municipal treasurer concerned for appropriate action. DIEACH (e) The successful applicant shall furnish the provincial/city/municipal treasurer two copies of his or her picture immediately after the award of the lease. It shall be the duty of the treasurer to affix one copy of the picture to the application and the other copy to the record card kept for that purpose. 2. Vacancy of stall before expiration of the lease . Should, for any reason, a stall holder or lessee discontinue or be required to discontinue his business before his lease of the stall expires, such stall shall be considered vacant and its occupancy thereafter shall be disposed of in the manner herein prescribed. 3. Partnership with stall holder . A market stall holder who enters into business partnership with any party after he had acquired the right to lease such stall shall have no authority to transfer to his partner or partners the right to occupy the stall; Provided , however , That in case of death or any legal disability of such stall holder to continue in his business, the surviving partner may be authorized to continue occupying the stall for a period of not exceeding sixty (60) days within which to wind up the business of the partnership. If the surviving partner is otherwise qualified to occupy a market stall under the provisions hereof, and the spouse, parent, son, daughter or relative within the third degree by consanguinity or affinity of the deceased is not applying for the stall, he shall be given the preference to continue occupying the stall or booth concerned, if he applies therefor. 4. Lessee to personally administer his stall . Any person, who has been awarded the right to lease a market stall in accordance with the provisions hereof, shall occupy, administer and be present personally at his stall or stalls, booth or booths; Provided , however , That he may employ helpers who must be citizens of the Philippines, including but not limited to the spouse, parents and children of the stall holder who are actually living with him and who are not disqualified under the provisions hereof: and Provided , further , That the persons to be employed as helpers shall, under no circumstances, be persons with whom the stall holder has any commercial relation or transaction. 5. Dummies; sub-lease of stalls . In any case where the person, registered to be the holder or lessee of a stall or stalls, booth or booths, in the public market, is found to be in reality not the person who is actually occupying said stall or stalls, booth or booths, the lease of such stall or stalls, booth or booths, shall be cancelled, if upon investigation such stall holder shall be found to have subleased his or her stall or stalls, booth or booths, to another person or to have connived with such person so that the latter may for any reason be able to occupy the said stall or stalls, or booth or booths. 6. Appeals . Any applicant who is not satisfied with the adjudication made by the provincial/city/municipal treasurer or the market committee of the stall applied for by him, may file with the Secretary of Finance an appeal therefrom, through the mayor concerned, who may submit such comment and recommendation as he may desire to make on the matter. The decision of the Secretary of Finance in such cases shall be final. 7. Market Committee . There is hereby created in each province/city/municipality a Market Committee, whose duty it shall be to conduct the drawing of lots and opening of bids in connection with the adjudication of vacant or newly constructed stalls or booths in the provincial/city/municipal markets as prescribed herein, and to certify to the provincial/city/municipal treasurer, as the case may be, the results thereof. In the provinces, the committee shall be composed of the Provincial Treasurer, as Chairman, and a representative of the Governor, a representative of the Provincial Board, a representative of the Secretary of Finance, the Provincial Attorney or a representative of the Provincial Fiscal in case there is no Provincial Attorney, and a representative of the Market Vendors to be appointed by the Secretary of Finance, as members. In the chartered cities, the Committee shall be composed of the City Treasurer, as Chairman, and a representative of the Mayor, a representative of the Municipal Board or City Council, a representative of the Secretary of Finance, the City Attorney or a representative of the City Fiscal in case there is no City Attorney, and a representative of the Market Vendors to be appointed by the Secretary of Finance, as members. In the municipalities, the Municipal Treasurer shall be the Chairman, and a representative of the Mayor, a representative of the Council and a representative of the Market Vendors to be appointed by the Secretary of Finance, as members. In cases where the deliberations of the Market Committee result in a tie vote, the decision of the provincial/city/municipal treasurer shall prevail. 8. Transfer of personnel, property, funds, etc., to the Treasurer . In any case where the public market owned and operated by the local government and the personnel thereof, including those whose duties concern the maintenance and upkeep of the market and premises, are not under the direct and immediate supervision, administration and control of the Treasurer, the Local Chief Executive concerned shall, within thirty (30) days from the date of issuance of this Circular, take the necessary steps to transfer to the Treasurer such supervision, administration and control over the public market and all personnel, properties, appropriations, etc., pertaining thereto. V On Transferred Taxes and Fees A. National Taxes and Fees Transferred to the Provinces and Cities . The power to levy and collect the following taxes and fees has been transferred from the National Government to the provinces under Sections 12, 13 and 14 and to the cities under Section 23 of the Code: 1. Occupation tax on all persons engaged in the exercise or practice of their profession or calling; 2. Amusement tax on admission to be collected from the proprietors, lessees, or operators of theaters, cinematographs, concert halls, circuses and other places of amusements; and 3. Fees for sealing and licensing of weights and measures . Any person liable to pay the occupation tax , who has already paid the same to the national government, shall hereafter pay the tax to the local government concerned effective January 1, 1974. However, delinquencies due and payable before July 1, 1973, the date of effectivity of Presidential Decree No. 231 shall still be paid to the national government. Any person who became liable for the payment of the tax on or after July 1, 1973 shall pay the same to the local government concerned unless he can show proof that he has already paid the amount due to the national government. All amusement places liable for the payment of the amusement tax on admission shall pay the same to the corresponding local government effective October 1, 1973. The tax shall be determined as follows: 1. If the amount of the tax (including municipal tax, if imposed) is indicated on the face of the admission ticket, the basis of the tax is the price or amount paid for admission exclusive of the tax. Thus, if the price paid for admission is P1.05 (including municipal tax of P0.05), the taxable amount paid for admission is P1.00 and the tax at the rate of 20% is P0.20. aSACED 2. If the amount of tax (municipal) is not indicated on the face of the admission ticket, the price or amount paid for admission shall not be deemed to include the amount of such tax and, therefore, such price or amount paid for the ticket shall be the basis for purposes of applying the corresponding rate of 20% or 30%, as the case may be. Thus, if the amount paid for admission is P1.20 and on the face of the admission ticket the amount of the amusement tax is not indicated, the same amount of P1.20 shall be subject to tax at the rate of 30% and the amount of the tax payable would be P0.36. B. Municipal Taxes Transferred to Provinces and Cities . The power to levy and collect the tax and fee mentioned hereunder has been transferred from the municipalities to the provinces under Sections 15 and 16 and to the cities under Section 23 of the Code: 1. Tax on peddlers engaged in the sale of any merchandise or article of commerce within the province or city; and 2. Rental fee for the use of municipal waters, rivers, lakes and the like within the territorial jurisdiction of the province or city as log pond. While it is mandatory upon the provinces and cities to impose the taxes and fees transferred from the national government and at the rates provided therefor by the Code, here the imposition of the tax on peddlers and rental fee for the use of municipal waters as log pond is permissive and the provinces and cities may fix any rates therefor, provided that the same shall be within the ranges prescribed in the Code. VI On the Residence Tax The levy, collection and administration of the residence tax by the national government through the Bureau of Internal Revenue as well as the rates and accrual of the proceeds thereof shall now be governed by the provisions of Article VI of the Code. The Bureau of Internal Revenue shall collect the residence taxes through the city and municipal treasurers in accordance with prescribed regulations. There is no need for the enactment of any local tax ordinance in order that the residence taxes may be collected . Beginning January 1, 1974 the residence tax shall be collected at the rates fixed therefor in the Code and the proceeds of the tax shall accrue to the general funds of provinces, cities and municipalities except five per cent thereof which shall accrue to the general fund of the National government to cover the costs of printing and distribution of the forms and other incidental expenses . The provincial or city treasurer concerned shall remit to the National Treasurer the five per cent share of the National Government in the proceeds of the tax within ten days after the end of each quarter . The remaining ninety-five per cent collected by municipalities shall be divided equally between the province and the municipality where the tax is collected . The Municipal Treasurer shall retain the share of the municipality and remit to the Provincial Treasurer the share of the province, as well as the five per cent share of the National Government, within five (5) days after the end of each month . Provincial and City treasurers shall requisition the necessary forms from the Bureau of Internal Revenue and it shall be the duty of every provincial treasurer to provide his respective municipal treasurers with sufficient quantities thereof. VII On the Effectivity of Local Tax Ordinances A tax ordinance passed by the local board or council shall be approved and signed by the local chief executive concerned, but if he considers such ordinance as prejudicial to the public welfare, he may veto it by signifying his disapproval thereof in writing. The local board or council may, however, override the veto by a two-thirds (2/3) vote of all its members, in which case it shall be deemed approved without the local chief executive's signature. If he neither approves nor vetoes a tax ordinance within ten (10) days after its passage, it shall likewise be deemed approved. As a rule, a tax ordinance shall take effect on the date indicated therein. But if the tax ordinance does not provide any date for its effectivity, it shall go into effect on the fifteenth day after its approval. In case the effectivity of any tax ordinance falls on any date other than the beginning of the quarter, the same shall be considered as falling at the beginning of the next ensuing quarter and the tax due shall begin to accrue therefrom . All taxes, fees and charges authorized by the Code to be imposed by local governments, may only be collected by the treasurer concerned if an ordinance embodying the same has been duly enacted by the local board or council and approved in accordance with the provisions of the Code. Section 43 of the Code provides that within ten (10) days after their approval, certified true copies of all provincial, city, municipal and barrio ordinance levying or imposing taxes, fees or other charges shall be published for three (3) consecutive days in a newspaper or publication widely circulated within the jurisdiction of the local government, or posted in the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of the local government. In either case, copies of all provincial, city, municipal and barrio revenue ordinances shall be furnished the treasurers of the respective component and mother units of a local government for dissemination. While non-compliance with the foregoing provisions of the Code will not render the tax or revenue ordinances null and void, still there must be publication and dissemination as provided in the Code to obviate abuses in the exercise of the taxing powers and preclude protests from the people adversely affected. Such publication and dissemination of tax ordinances will not only be in consonance with the objective of the Code to secure fair, just and uniform local impositions but will also enhance the efficient collection of valid taxes, fees and other charges VIII On the Review and Suspension of Tax Ordinances Within fifteen (15) days after its approval, a certified true copy of a tax ordinance shall be furnished : the Secretary of Finance by the provincial board or city council; the provincial treasurer , by the municipal or barrio council; and the city treasurer by the barrio council in the city's jurisdiction. The Secretary of Finance, the provincial treasurer, or the city treasurer, as the case may be, shall review and have the authority to suspend the effectivity of any tax ordinance within one hundred and twenty (120) days after receipt of a copy thereof, if, in his opinion, the tax or fee therein levied or imposed is: (1) unjust, excessive, oppressive or confiscatory; or (2) not among those that the particular local government may impose in the exercise of its power in accordance with the Code; or (3) when the tax ordinance is, in whole or in part, contrary to declared national economic policy; or (4) when the ordinance is discriminatory in nature on the conduct of business or calling or in restraint of trade. If, within the said one hundred and twenty (120) days, the Secretary of Finance, the provincial treasurer or the city treasurer, as the case may be takes no action as provided by Section 44 of the Code herein-above discussed, the tax ordinance, shall remain in force. AHECcT In case of suspension of the tax ordinance, either in part or as a whole, the local legislative body, within thirty (30) days after receipt of the notice of suspension, may either (1) modify the tax ordinance to meet the objections thereto or (2) file an appeal with the proper court; otherwise , the tax ordinance or the part or parts thereof declared suspended shall be considered as revoked . An appeal does not stay the order of suspension nor does it authorize the local legislative body to reimpose the same tax or fee levied under a suspended ordinance until such time as the grounds for the suspension thereof shall have ceased to exist or the appeal has been resolved in favor of the local government. Any tax or fee paid pursuant to the protested ordinance or part or parts thereof shall be considered as having been paid under protest . In case the appeal is resolved in favor of the local government, the tax or fee that would have been collected if there were no order of suspension shall immediately be collected without interest and surcharge . In case the order of suspension is upheld, the court shall forthwith order the refund of the tax or fee paid under protest to the taxpayer. IX On Formal Protests Against Tax Ordinances Formal protests against tax ordinances may be made by any aggrieved taxpayers on the ground that: (1) the tax or fee therein levied or imposed is unjust, excessive, oppressive or confiscatory; or (2) the tax or fee therein levied is not among those that the particular local government may impose in the exercise of its power in accordance with the Code; or (3) the tax ordinance is, in whole or in part, contrary to declared national economic policy; or (4) the ordinance is discriminatory in nature on the conduct of business or calling or in restraint of trade. Such formal protests may be filed for resolution by the Secretary of Finance as follows: (a) In the case of tax ordinances enacted by the provincial boards, municipal councils, and barrio councils in the municipalities, with the respective provincial treasurers; and (b) In the case of tax ordinances enacted by the city councils or municipal boards and barrio councils in cities, with the respective city treasurers. In all cases, a formal protest may be filed within one hundred and twenty (120) days after the approval of the tax ordinance of any local government, or after the date of the initial implementation thereof, and the Secretary of Finance shall have sixty (60) days, after receipt of the protest, to decide the same. A formal protest supported by a certified copy of the ordinance being questioned shall be forwarded by the provincial or city treasurer, as the case may be, to the Secretary of Finance within fifteen (15) days from the date of his receipt thereof, together with the action he or the provincial or city fiscal may have taken thereon, if any; his full comments and recommendations and, if possible and necessary, a comparative statement showing the existing and the proposed rates of taxes, fees and/or charges in question. A protest submitted directly to this Department shall be referred to the provincial or city treasurer concerned for his comments and recommendation. In making his comments and recommendation, the provincial or city treasurer shall be guided, among others, by the following considerations: 1. Equitableness of the rates of tax . The equitableness of the rates of tax fixed under the protested ordinance may be determined by a review of the tax ordinance in question and a comparative analysis of the rates of tax levied on similar subjects taxed under other ordinances. 2. Economic conditions obtaining in the locality . The provincial or city treasurer shall take into consideration the economic conditions obtaining in the locality in determining the reasonableness or unreasonableness of the rates of tax imposed. 3. Ability to pay . Ability to pay may be determined by the provincial or city treasurer by requiring the protesting party to furnish him with financial statements showing the financial condition of the business during the last three annual accounting periods. Based on these data, the reasonableness or unreasonableness of the rates of tax imposed may be determined. 4. Relationship to national economic policy . Local tax ordinances shall not run counter to established national economic policy such as the diffusion or dispersal of commerce and industry in order to hasten the economic development of the country particularly in the rural areas. 5. Multiple imposition of taxes on different, but essential, features of a business already taxed should be avoided. It would be unreasonable and unjust for the municipality to tax an act which is inseparable from and forms an integral part of a business which it has already taxed. Where a municipality is given the power to impose a license tax upon a business, it cannot divide such business into its constituent elements, parts, or incidents, and levy a separate tax on each or any element, part or incident thereof. 6. License fee as regulatory measure . In order that a license fee may be considered merely as a regulatory measure, it must be only of a sufficient amount to include the expenses of issuing the license and the cost of the necessary inspection or police surveillance, taking into account not only the expenses of direct regulation but also incidental consequences. SEIcHa 7. Charges for service rendered . Charges for the issuance of clearances, certified copies of public records, poundage of lost or astray animals and similar charges shall not exceed nominal rates reasonably commensurate with the services rendered. 8. Distinction between a tax and a fee . Taxes are for revenue purposes, whereas fees are for purposes of regulation. Taxes are levied in the exercise of the taxing power, whereas fees are a consequence of the exercise of the police power. In view of these distinctions, a reasonable rate of fee must necessarily be lower than what may be deemed as a reasonable rate of tax. X On the Questions of Legality of Tax Ordinances Issues raised against the legality of any tax ordinance or part or parts thereof, on grounds other than those mentioned in Section 44 of the Code, shall be referred for opinion to the Provincial or City Fiscal, as the case may be, of the local government concerned, who shall render a ruling thereon within thirty (30) days after his receipt of the query or protest. The opinion rendered by the Provincial or City Fiscal shall be appealable to the Secretary of Justice who shall decide the question appealed to him within sixty (60) days after receipt thereof. The decision of the Secretary of Justice shall be final and executory unless the aggrieved party contests the same in the proper court within thirty (30) days after receipt thereof. XI On the Collection of Provincial Impositions In the proper cases, municipal treasurers, in their capacity as deputy provincial treasurers, are charged with the duty of actually effecting in their respective municipalities the collection of all provincial impositions that may be imposed by the provinces under Article I of the Code. For this purpose, provincial treasurers shall furnish them, the soonest possible, with copies of duly enacted provincial tax ordinances. Collections made by municipal treasurers of provincial impositions shall be chronologically recorded by them in appropriate records of collections or abstracts separate from those of the municipalities. The duplicates of such records of collections or abstracts, together with appropriate statements of collections, shall form the papers supporting the corresponding entries in the Summary of Collections (Prov. Form No. 60-A). Liquidations and/or transfers of collections accruing to the province shall as usual be made through the Summary of Collections or Provincial Form No. 60-A at the end of every month. Under no circumstance shall collections of provincial impositions made in any month be allowed to remain unremitted beyond the succeeding month. From the duplicates of the records of collections or abstracts, provincial treasurers shall card, by municipality, the names of provincial taxpayers, the kinds of their businesses and the payments they made as well as the numbers and dates of issues of the official receipts and the periods covered by these. At the end of every quarter, provincial treasurers shall prepare lists of provincial tax delinquencies and furnish the municipal treasurers concerned with copies thereof for collection purposes. The examination of the books of accounts of provincial taxpayers for purposes of determining the correct amounts of taxes due from them shall be strictly in accordance with the provisions of Section 59 of the Code. The books of accounts kept by business establishments pursuant to the provisions of the National Internal Revenue Code shall be sufficient for determining the correct amount of local taxes and the local government shall not require the keeping of other or separate books of accounts for the purpose. XII In view of the provisions of Section 64 of the Local Tax Code, existing tax ordinances of cities, municipalities and barrios imposing taxes, fees, or other charges: 1. The rates of which are over and above the maximum rates prescribed in the Code shall be adjusted through the enactment of an amendatory ordinance to conform to the maximum rates provided for in the Code. Copy of the existing ordinance should however be submitted immediately to this Department together with information as to whether or not the local board or council is in the process of adopting the amendatory ordinance aforementioned. In the event that the necessary amendment or adjustment of the rates has been made by the board or council a copy of the amendatory ordinance should also be submitted to this Department for review and disposition not later than December 31, 1973. CDISAc 2. Which, pursuant to the Code, are no longer within the taxing powers of the local government to levy and collect, the local board or council shall immediately revoke or rescind the same and a copy of the new ordinance adopted by the board or council should be submitted to this Department not later than December 31, 1973. In this connection, it is informed that in case of failure of the local board or council to revoke or rescind such existing tax ordinances, the same shall be deemed rescinded as of January 1, 1974 by operation of law and therefore the local treasurer shall no longer collect such taxes, fees, or other charges. 3. Which are not specifically mentioned in the Code, shall be immediately submitted to this Department for review and disposition in accordance with Section 44 of the Code not later than December 31, 1973. Copies of local ordinances providing for an administrative or regulatory measure governing the conduct of business or calling or in any manner pertaining to the imposition of a local tax, fee or charge shall likewise be submitted to this Department for review and disposition not later than December 31, 1973. Submittal of copies of the ordinances referred to above shall be the responsibility of the respective board or council secretaries who shall course the same through the provincial or city treasurers concerned. Any or all such taxes, fees, charges, or administrative or regulatory measures levied or embodied in ordinances not submitted to this Department as herein required shall be deemed ipso facto nullified as of January 1, 1974. Accordingly, the local treasurer shall no longer collect such taxes, fees, or charges nor enforce such administrative or regulatory measures. Inasmuch as the Local Tax Code has taken effect, the local boards or councils may now enact tax ordinances in accordance with the provisions thereof and the instructions embodied in this circular. Official copies of the Code, bearing the dry seal of the Department of Finance on all pages, are presently being mailed to the provincial and city treasurers for immediate implementation. All Provincial Treasurers are hereby directed to transmit the contents hereof to all the Municipal Treasurers under their jurisdiction who shall, in turn, inform the municipal officials accordingly. (SGD.) CESAR VIRATA Secretary Footnotes 1. The exception is the tax that may be levied on the transfer of real property ownership by provinces under Section 7 and by cities under Section 23 of the Local Tax Code. 2. The exception is the fee that may be imposed for the issuance of licenses for the operation of fishing vessels of three tons gross or less by municipalities under Section 21 (b) and by cities under Section 23 of the Code. 3. The prohibition applies to any local export tax, fee, or levy on Philippine finished, manufactured or processed products, and products of Philippine cottage industries but not to any local tax, fee, or levy that may be imposed on the business of exporting said products owned or administered by persons other than the operator of a duly-registered cottage industry. 4. As stated in Section 3 of the Local Tax Code "agricultural product" is confined to the yield of the soil such as corn, rice, wheat, rye, hay, etc., and includes ordinary salt as well as all kinds of fish and their by-products, poultry, livestock and animal products, whether in their original form or not. The phrase "whether in their original form or not" means that the character of being an agricultural product is not taken away merely because the produce undergoes processing at the hand of the producer or owner for the purpose of working his product into a more convenient and valuable form suited to meet the demand of an expanded market, or for the purpose of increasing or prolonging the marketability of the product. This includes the transformation of said products by the application of simple processes to preserve or otherwise to prepare said products for the market such as freezing, drying, salting, smoking or stripping. 5. The exception refers to the percentage tax on sales that may be imposed by cities under Section 23 of the Code. 6. The exceptions are the tax on the business of printing and publication; franchise tax; and tax on peddlers. 7. The exceptions are secretary's fees which may also be imposed by the province. 8. The exceptions are the tax that may be levied by cities on the transfer of real property ownership, wharfage on wharves constructed and maintained by the city, and a percentage tax on sales in lieu of the graduated fixed tax prescribed in the Code.