- Ching Agcaoili

8/2/2019 - Ching Agcaoili

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BasicTaxationPrinciplesandLegal Basesof RevenueRaisingPowers ofLGUs

(Module 2)


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Module 2 OutlineLegal Bases

LG Fiscal Organization

Provisions of R. A. No. 7160

Issues and Initiatives

Future Challenges


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Legal Baseson the Taxing& Revenue RaisingPowers of LGUs


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Sources of Power of LocalGovernments 1987 Constitution, its provisions on local

government

R. A. 7160, or the Local Government Code

of 1991

all existing laws, acts, decrees, executive

orders, proclamations and administrative

regulations not inconsistent with the 1987Constitution and the Local Government

Code of 1991


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Sec. of Finance vs. Ilarde and CabalunaMay 9, 2005For real property taxes due from 1986 to 1991, including

penalties and interests, the computation should be based from theprovisions of Sec. 66 of P.D. 464, i. e., 2% on the amount of thedelinquent tax for each month of delinquency or fraction thereof,but in no case shall the total penalty exceed 24% of the delinquent

tax. Thus, penalties imposed are valid only up to 24% of thedelinquent tax.

However, from 1992 onwards, the basis for thecomputation of the real property tax payable, including penalties or

interests, if applicable, must be R.A. 7160 (Local GovernmentCode) as it has expressly repealed P.D. 464. Thus, the penalty is2% for each month of delinquency, but not to exceed 36 months orpenalties imposed are valid up to 72% of the delinquent tax.


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Fiscal Organizationof LGUs Underthe DecentralizedRegime


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NG Level DILG

NEDA

DBM

DOF COA


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LCE

Sanggunian

Local Treasurer

Budget Officer

Assessor

Accountant

Local Planning andDevelopment Officer

Local Finance Committee

LG Level


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Provisions of theLocal Government Codeof 1991, Governingthe Exercise of RevenueRaising Powers of LGUs


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Power to Create Own-Source Revenues Sec. 129 authority to create own-source revenues and to

levy taxes, fees, and charges

consistent with the basic policy oflocalautonomy

subject to limitations under the 1991 LGC

proceeds accrue exclusively to the LGU


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Fundamental Principles

Sec. 130 - uniformity of taxation in each LGU

taxes, fees, charges and other impositions :

equitability

taxpayers ability to pay

public purpose not unjust, excessive, oppressive, or confiscatory

not contrary to law, public policy, national economic policy, or in

restraint of trade

collection shall not be let to private persons

proceeds shall inure solely to the LGU imposing the tax, fee or charge progressive system of taxation


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LGU Taxing and Revenue Raising Powers Section 132revenue ordinance by the sanggunian

Section 186 - impose tax, fee, or charge on any base or subject Section 187 - mandatory public hearing; issue on constitutionality/legality

appealable to DOJ- will not suspend the effectivity of the ordinance- DOJdecision appealable to the regular court

Section 188publication

in full of the approved revenue ordinance for 3consecutive days in a newspaper of local circulation/posting in at least 2conspicuous and publicly accessible places

Section 189dissemination of revenue ordinance by the local treasurer Section 190 attempt to enforce void revenue ordinance is sufficient

ground for administrative action against local officials and employeesresponsible therefor

Section 191 - authority to adjust tax rates once every 5 years, but not toexceed 10% of the rates under the 1991 LGC

Section 192grant oftax exemptions, incentives or reliefs


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Limitations on LGU Power to Tax Section 133 -

income tax except on banks and other financial institutions

documentary stamp tax

tax on estates, inheritance, gifts, legacies and other acquisitions

mortis causa, except tax on transfer of real property ownership

customs duties, registration fees of vessel and wharfage onwharves, tonnage dues and all other kinds of customs fees,

charges and dues except wharfage on wharves constructed andmaintained by the LGU

impositions upon goods carried into or out of, or passing through,

the territorial jurisdictions of LGUs in the guise of charges for

wharfage, toll for bridges or otherwise, or other taxes, fees or

charges in any form upon such goods or merchandise

impositions on agricultural and aquatic productswhen sold bymarginal farmers or fishermen


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Sourcesof LGU Income


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External Sources Shares from National Taxes

IRA, Tobacco Excise Tax,

ECOZONES, & VAT

Shares from the Utilization of National

Wealth -

royalties, mining taxes, forestryand fishery charges, and other

fees and charges

Grants -

foreign or local

Loans/Borrowingsbanks and other financial

institutions, LGUs


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Internal Sources Taxes

Real Property Taxes

Business Taxes

Other Taxes

Non-Tax Revenues

Fees : regulatory fees; permit fees;toll fees

Service/User Charges

Receipts from Economic Enterprise

Operations

Other Receipts


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Internal/Own SourceIncome of LGUs


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Revenue Province City Municipality Barangay

Tax Revenues:

Tax on Transfer of Real Property

Ownership

50% of 1% of price or

FMV, whichever ishigher (max.)

rates may exceed the

maximum rates allowedfor the province or

municipality by not

more than 50%

x x

Franchise Tax 50% of 1% of gross

receipts (max.)

- do - x x

Tax on Business of Printing and

Publication

50% of 1% of gross

receipts (max.)

-do- x x

Annual Fixed Tax for Every Delivery

Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or

Retailers in, Certain Products

Php 500.00 - do- x x

Tax on Sand, Gravel & Other Quarry

Resources

10% of FMV per cubic

meter (max.)

- do - x x

Professional Tax Php 300.00 (max.) Php 300.00 (max.) x x

Amusement Tax 10% of gross receipts

from admission fees

(max.)

10% of gross receipts

from admission fees

(max.)

x x

Community TaxIndividualCorporate

X x

LGU Own Source Income


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LGU Own Source IncomeRevenue Province City/Municipality

within M. Manila

Municipality Barangay

Real Property Tax (Basic) 1% of AV (max.) 2% of AV (max.) x x

Special Education Fund (SEF) 1% of AV 1% of AV x x

Tax on Idle Lands 5% of AV (max.) 5% of AV (max.) x x

Special Levy on Lands benefited by

Public Works, Projects or

Improvements funded by LGU

60% of project cost

(max.)

60% of project cost

(max.)

x x

Tax on Business x graduated schedulebased on gross sales or

receipts

graduatedschedule based on

gross sales or

receipts

gross sales orreceipts of

Php50,000 or less

within a city; gross

sales or receipts of

Php30,000 or less

within a

municipality1%of gross sales or

receipts

Non-Tax Revenues:

Service Fees and Charges

Public Utility Charges x

Toll Fees or Charges x x


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Current Issues


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LGUs continue to be financially dependent from the central government

LGU AVERAGE REVENUE SOURCES (2001 2008)


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LGU AVERAGE REVENUE SOURCES (2001 - 2008)In Php Million

NON-TAX

REVENUE26%

TAX

REVENUE

74%


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LGU AVERAGE REVENUE SOURCES (2001 - 2008)In Php Million

Real Property Tax36.7 %

Business Taxes32.6 %

Other Taxes4.4 %

Regulatory Fee6.0 %

Service/UserCharges

3.9%

Receipts from Eco.Enterprise

11.0%

Toll Fees0.1 %

Other Receipts5.3 %

LOCAL AVERAGE TAX SOURCES (2001 2008)


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LOCAL AVERAGE TAX SOURCES (2001 2008)In Php Million

REAL PROPERTY TAX

49.8%

BUSINESS TAXES44.3%

OTHER TAXES6.0%

LOCAL AVERAGE NON TAX SOURCES (2001 2008)


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LOCAL AVERAGE NON-TAX SOURCES (2001 - 2008)in Php Million

Regulatory Fees22.8%

Other Receipts20.3%

Service/UserCharge14.9%

Receipts from Eco.Enterprise

41.8%

Toll Fees

0.3%


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1. Misconception or misunderstanding of the true meaning of local

autonomy aggravated by the inability of NGAs to transform the mindsetof LGU officials who remain in the traditional realm of politics, into a

culture of progressivity.

Current Issues on Tax Administration and PublicFinance


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Current Issue/s on Tax Administration and PublicFinance2. Lack of synchronization and harmonization of policies among the various

national government agencies and bureaus involved in fiscal devolution.

3. Problems in real property valuation.

1993 (1st GR) 1996 (2nd GR) 1999 (3rd GR) 2002 (4th GR) 2005 (5th GR) 2008 (6th GR)

Provinces 75% 61% 57% 41% 27% 28%

Cities 92% 66% 52% 33% 34% 22%

Total 83% 63% 54% 36% 31% 25%

75% 61% 57% 41% 27% 28%92% 66% 52% 33% 34% 22%

83%

63%54%

36%

31%25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percento

fLGUCompliance

Compliance of LGUs in the Conduct of General Revision of SMV1993-2006

Source: Bureau of Local Government Finance (BLGF)


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Initiatives


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Response/Initiatives of theGovernment to the Issue/sJMC No. 2010-01

enjoining all provinces, cities, and themunicipality of Pateros, MM to revise

SMV and conduct general revision ofproperty values for RPT

JMC No. 2010-02 implementation of the idle land tax


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Response/Initiatives of theGovernment to the Issue/sJMC No. 001, series of 2007

an attempt to synchronize andharmonize local

planning, investmentprogramming, revenueadministration, budgeting andexpenditure management inthe LGU


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Response/Initiatives of theGovernment to the Issue/sLAMP2-ValuationComponent

Valuation Reform Act Bill

address the issues on real propertyundervaluation and the adverse impact on

revenue generation and administration

implemented by the DOF through theBLGF and the NTRC

legislative reforms are being pursued bythe DOF to address certain dysfunctionsin the LGC that are not conducive torevenue generation both in the nationaland local government which adverselyaffect fiscal autonomy


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Response/Initiatives of theGovernment to the Issue/sR. A. No. 9646, or the RealEstate Service Act (RESA)

took effect, August 1, 2009

subjects real estate servicepractitioners, real estate brokers, realestate appraisers/valuers both in privateand government sectors, localgovernment assessors, and real estateconsultants, to a licensure examination

significant feature of this law is theinclusion of government appraisers andlocal assessors in theprofessionalization, and which nowrequires licensure for their appointment.


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Response/Initiatives of theGovernment to the Issue/sCredit Financing throughMDFO

special revolving fund that aims to

establish an effective mechanismthat would enable LGUs to availfunds local and internationalassistance for the implementationof various social and economic

development projects atconcessional financing terms


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Future Challenges!!!


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There is no doubt that the Philippines is onthe right track towards more effectivegovernance, and that is through the empowermentof LGUs. However, what has been accomplished

in the past 15 years since the adoption of the LocalGovernment Code, is the legislative structuralshowcase for decentralization. The frameworkremains to be operationalized to achieve itsintended objective of making local governmentstruly autonomous or capable of generating by

itself adequate resources to fund its developmentalprograms and improve the scope and quality ofservices to its constituencies.

There should be greater and genuine effort tosubstantiate the Local Government Code byaddressing the problems identified earlier in thispresentation. The most important of this isfinancial autonomy. The solution lies in the areasof legislative, as well as administrative remedies. Inthe former case, there is an urgent need to plug theloopholes of the Local Government Code which

had been identified through the years.

Th bl h b id ifi d d


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These problems have been identified andcomplied in several proposed legislations amendingthe Local Government Code, which have beenpending for years. These initiatives have beensubjected to various consultations and research

studies by the University of the Philippines LocalGovernment Center, the Department of LocalGovernment, and a number of projects funded byinternational institutions. The Congress of thePhilippines should take-up these proposed reformsfor legislation.

From the point of view of administration, the need for clarifying andcoordinating the programs and projects of thegovernment relating to local governments shouldlikewise be an agenda for the immediate future.

This will lead to better management of resourcesfor local governments and also reduce or removeuseless duplication of efforts.

A complementary program should focus onfurther capacitating local government

officials, both elective and appointive for theirroles in effective governance.


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References:1987 Philippine Constitution1987. Constitution of the

Philippines.

Republic Act No. 7160 or the Local Government Code

of the Philippines.

Studies Conducted by the Land Administration and

Management Project (LAMP) funded by AusAID

and World Bank.

Local Government Bureaucracy and Local Fiscal

Administration, 2006, Local Government

Foundation (LOGODEF) and Kondrad Adenauer

Stiftung.

Harmonization of Local Planning, InvestmentProgramming, Revenue Administration, Budgeting

and Expenditure Management with Joint

Memorandum Circular No. 001, series of2007, German Agency for Technical Cooperation

Decentralization Program.

MDFO-LOGOFIND Project Completion Report 2008.


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Thank Youand

Mabuhay!!!Ching Q. AgcaoiliBureau of Local Government FinanceDepartment of Finance

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