Authorizing the Release of the Additional Cost of Living Allowance

July 11, 1996 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Edmer Y. Lim President Edron Construction Corporation Suite 803 Manufacturers Bldg. Plaza Sta. Cruz, Manila S i r : This refers to your letter dated May 15, 1996 requesting clarification as to the implementation of Local Finance Circular (LFC) No. 3-95, dated May 25, 1995, with respect to the local tax on contractors. prcd It is represented that Edron Construction Corporation (ECC) entered into a contract with the municipality of Tandag, Surigao del Sur, in November, 1994. ECC's final billing dated March 29, 1996 was held in abeyance pending settlement of the business tax imposed on ECC as contractor. ECC claims that the implementation of the LFC was on May 22, 1995 while its contract was dated November, 1994, hence, it was not able to incorporate said tax in the bid proposal considering that the contract was earlier than the implementation of said Circular. Hence, ECC posed a query as to whether the contract could be exempted from said tax or treated as a variation to the contract. In this connection, please be informed that before any tax, fee, or charge may be collected from a taxpayer, like ECC, the same must first be levied under a duly-enacted tax ordinance of the local government concerned. Hence, the LFC should not be made the basis for collecting said taxes, fees or charges. Such Circular is only intended to prescribe guidelines to supplement Article 232(e) of the Implementing Rules and Regulations of the Local Government Code relative to business taxes imposable by municipalities on contractors. Accordingly, for so long as an ordinance has been enacted for the purpose by the municipality prior to the execution of said contract, ECC shall be liable to the payment of the business tax on contractors to the municipality of Tandag, regardless of the fact that the Circular was issued thereafter. dctai We trust that this will clarify matters. Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director