TAX-il ka notes 2016. cheret lang.
1. National tax (Sec. 21 of NIRC) – paid in the Bureau of Internal
June 28, 2016 (Tuesday)
Transcribed by: Michelle Andoy
Taxation refers to the inherent power of the state to demand
enforced contribution for public purpose or purposes. It is very
specific and that is public purpose or purposes. Now it doesn’t
mean that a tax payer must be benefited directly as long as the
purpose is for public purpose or purposes. Now in the case of CIR
vs. Algueit in inherent in nature being a principal attribute of
sovereignty, the very existence of the government itself confers
it to the power to tax. Without the revenue from taxation the
government will not survive resulting to a detriment to society.
That is why taxes are the lifeblood of the government. Mao na
iyang dugo, kung wala’y kwarta unsaon pag lihok sa atong
gobyerno. So the lifeblood theory is explained in the case of CIR
vs. Algue.
“Taxes are the lifeblood of the government, for without taxes,
the government can neither exist nor endure. A principal
attribute of sovereignty, the exercise of taxing power derives its
source from the very existence of the state whose social contract
with its citizens obliges it to promote public interest and common
good. The theory behind the exercise of the power to tax
emanates from necessity; without taxes, government cannot
fulfill its mandate of promoting the general welfare and well-
being of the people. (CIR vs. Algue)“
And the symbiotic relationship between the government and the
tax payer. So as a tax payer, kung subject ka sa taxing power ng
government unde the taxing jurisdiction and you have this two-
fold relationship, symbiotic relationship. You have the obligation
to support the government and for the government to provide
protection to the tax payer. So that is in the form of services.
Now taxation as an inherent power of the state, the power of
taxation is the essential and inherent attribute sovereignty, the
longing as a matter of right to every independent government
without being expressly granted by the people. Nandiyan talaga
ang power to tax. It doesn’t need a law na magkaraoon ang
government ng power to tax the very existence of the
government itself is the power to tax. A principal attribute of
sovereignty, the exercise of taxing power derives its source from
the very existence of the state whose social contract with its
citizens obliges it to promote public interest and common good.
Now taxation is also a legislative power because it involves the
promulgation of goods. The congress promulgates the tax laws.
In the local government the one that exercising the legislative
powers is the Sangguniang Panglungsod, Sangguniang Bayan,
Sangguniang Panlalawigan. Legislative power because it involves
promulgation of rules. Ano ang object ng taxation? How much
need to be paid? Magkano ang babayaran? Who shall pay the
tax? And to whom shall it be paid? And When the tax should be
paid. Later on we will learn that there are taxes that are:
Revenue (BIR)
2. Local tax (LGU code) – paid in Local Government Unit (LGU)
which includes provinces, cities, municipalities and barangays
And pagnational internal revenue tax, hindi pwede magimpose
ang local government. So like yung cedula/polltax/community
tax, sino man ang nagacollect niyan? Local government, pwede
barangay. Pag income tax? National tax yan. Pag transfer tax or
di kaya professional tax? City, province hindi municipality. How
about tax on quarry and resources? What about the power of
the LGU’s in giving tax, is it inherent? NO. Remember this – the
power to tax is inherent in every government, but not inherent
to LGU’s.It is just a delegated power as provided in our 1987
Constitution. (Bantay ma mali pa mo! Strong si ma’am)
Remember the principle that what has been delegated can no
longer be delegated.
An mga tax ay may mga deadlines like income tax, when do you
file it? April 15. How about poll tax? Professional tax? Iba ibang
deadline yan. Diba sa rule making you have to state the object of
taxation? An example of an object of taxation – is it imposed for
importation or exportation of goods? Is it imposed for donation?
Yung ang object.
Sa donor’s tax ano ang object? Yung property donated. In your
tax 2, you will learn that donor’s tax has lower rate. You have to
distinguished the donor and the donee because if the donee is a
relative within yung sa description of law then the rate is lower
mga 5-20%. But if it’s a stranger, the rate is 30%. Another object
of taxation is capital gain’s tax. Sale of property, that is subject to
capital gain’s tax of 6% and the return should be filed within 30
days from the date of sale. So if you compared the rates, capital
gain’s tax 6% and donor’s tax 5-20% depending on the value of
the property. In this case, they ought on executing a deed of sale
instead of executing a deed of donation. Kasi flat rate ang sa
deed of sale 6% while donation aabot ng 30% depending on the
value of the property. But usually the rates are progressive, the
higher the tax rate the higher is the tax. How about income? 0-
32%. Dako kag income, dako kag tax bayaran. Now who shall pay
the tax? Because usually sino yung may burden ng tax siya talaga
yung magbabayad. Like employees who pays for them?
Employees. Pero sino ang naga remit? Employer. Because of our
tax system. And that is the convenience of the state, mas dali
collectahon. Employers are the agent of the government in
collecting taxes. Under section 21 of the NIRC andun ang list ng
national internal revenue tax.
Sec. 21. The following taxes, fees and charges are deemed to be
national internal revenue tax:
a. income tax;
b. estate and donor’s taxes;
c. value-added tax;
d. other percentage tax;
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e. excise taxes;
f. documentary stamp taxes;
g. and such other taxes as are or hereafter may imposed
and collected by the BIR.
So andiyan, national taxes sila sec. 21. Other than that local taxes
na. And iba naman nasa customs and tariffs law. Ano naman ang
example ng local taxes? We have real property tax, mao ng
gitawag na dimuras taxes on property. Iba yan ha sa estate tax
like an exise tax. When somebody dies and he has registrable
properties the heirs will file a notice of death before the BIR
within 60 days, and within 6 months the estate tax must be
settled. So there is consolidation of all the properties owned by
the dead. And from it will be deducted, kung may medical
expenses or expenses sa pagpalubong. Ang daming walang alam
ngayon sa estate tax :c Real estate tax is paid every year, March
15. Another example of local tax is transfer tax. If you transact
properties, the register of deeds requires the transfer tax
indicating where the property was located to record the
property tax. Another is franchise tax. Then we have professional
tax, lawyer, accountants, teacher – all occupation which has
board exams. If you become a lawyer, you pay the the
professional tax. Sa resibo “PTR NO.” Sa inyong notary kauban
ang IBP number. Once you paid your professional tax, example in
tagum city, do I have to pay professional tax in Compostela
valley? Not anymore under LGU. You can practice anywhere in
the Philippines. Kaya isa lang. Every year magbayad. Next, tax on
sand, quarry, gravel and other resources – ang maghatag sa
permit is exclusively sa province pero there is sharing the income
or taxes sa mga nacollect nila. There is sharing in the province,
barangay where gina exact ang quarry resources.
Tax on business. Bisag family business magbayad giyapon ka.
Who among here has business? (monkey business ma
counted?hihi)
Again going back, the LGU has no implied power of taxation and
must look at the statutory grant for such authority.
Now what are the exceptions to the prohibition against
delegation of taxing powers:
1. Delegation of the president under Art. VI, Sec. 7,
paragraph 2 of the 1987 Philippine Constitution
2. Delegation of the Local Government under RA 7160
Now let us take up the 7 essential characteristics of taxation:
1. Enforced contribution;
2. Proportionate in character;
3. Generally payable in money;
4. Levied on persons or property;
5. Levied by the state which has jurisdiction over persons
or property;
6. Levied by the lawmaking body of the state; and
7. Levied for the public purpose or purposes.
Generally payable in money; Now in one exam
tinananong pwede ba magpass ang law na ang tax is
payable in kind? Ha? YES there is no prohibition. But,
mahirap noh? Kaya nga in our laws may levi or
restraint. Benta mo ang property, may public auction
tapos ang proceeds will be applied to the tax
indebtedness or due.
Levied by the state which has jurisdiction over persons
or property; take note we have international comity,
sovereign equality of state so we have no taxing power
over those embassy because they are considered as
extension of other country’s territory, they are not
under our taxing jurisdiction. Di naman sinabi na ang
subject ng taxing powers are Filipinos. If you are a
resident alien or non resident citizen, OFW ka, may
jurisdiction ba ang taxing authority sayo? NOT
TAXABLE.
But if you are an OFW you a non resident citizen imong
income didto not within the jurisdiction of the taxing
authority. But if you have an apartment here, gina pa-
arkelahan nimo the earning of such will be taxable.
What about seaman? NOT TAXABLE unless kung
domestic. Pero kung nagtrabaho kag SM, pero branch
nila sa China, gi hire ka nila. Ang salary nimo kay
credited diri sa BPI Tagum, are you within the reach of
the Philippine taxing authority? Puhon mabal-an lang
na ninyo. Even of that money is received in China or in
the Philippine, what is controlling is where the services
os performed. And that services was performed outside
the country, it is considered earned outside the
Philippines. So NOT TAXABLE. (yawyaw si ma’am nga
dili siya ganahan of tax.haha)
Levied for the public purpose or purposes; public
service is synonymous with governement purpose. And
the proceeds of the tax will be used for the purpose of
the government, for the recognized object of
government and to promote the welfare of the
community.
Now the exercise of the power of taxation involves 2
aspects:
1. The levying or the imposition of the tax which is a
legislative act; with the passage of law imposing
taxation;
2. The collection of the tax or tax administration; yan
ang function ng BIR or LGU
The power to tax is sometimes called the power to destroy.
Therefore, it should be exercised with caution to minimize injury
to the proprietary rights of the tax payer. Syntax law, naa man
jud tig himo og sigarilyo. Taasan ang tax nila para mawala and
madiscourage mo magsigarilyo. Naa papel dira naka seal, tax
yan, before makalabas sa planta nakabayad na nag tax. Murag
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resibong gamay murag stamp iyang itsura, and that is tax.
Pagdating ng tax II makikita niyo na before yan makalabas ng
manufacturing company may naka-assign na doon na tax agent.
So bayad na siya sa factory pa lang. So in the case of Roxas
vs.Court of Tax Appeals, 23 SCRA 276:
"The power of taxation is sometimes called also the power to
destroy. Therefore, it should be exercised with caution to
minimize injury to the proprietary rights of the taxpayer. It must
be exercised fairly, equally and uniformly, lest the tax collector
kills the 'hen that lays the golden eggs.' And in order to maintain
the general public's trust and confidence in the government, this
power must be used justly and not treacherously."
binibigyan ng preferential rates. Because under our constitution
preferential rates like mga hospital, non-profit, are they exempt
from tax? Hindi but they are given preferential rates. Instead
30% ay 10% na lang sa kanila. Let’s go now to..
Section 5. No law shall be made respecting an establishment of
religion or prohibiting the free exercise thereof. The free
exercise and enjoyment of religious profession and worship
without discrimination or preference shall forever be allowed.
No religious test shall be required for the exercise of civil or
political rights.
In the case of American Bible vs. Manila:

Because if you think ang sabi diba power to tax is exercised by
the legislative department, under your Consti law their power is
plenary diba? Pwede niya maimposed 50% tax, wala na mu
negosyo diri. That is why, the tax collector kills the 'hen that lays
the golden eggs. Manlayas ang mga investor. Mao very powerful
ang legislative. Ang delegated power to the LGU’s they have
limitations. It provides that the taxes should not be imposed
higher than 50% as imposed by provinces and municipalities. So
we have two limitations:
1. Constitutional limitations;
2. Inherent limitations not embodied in the Constitution
The constitutional guaranty of the free exercise and enjoyment
of religious profession and worship carries with it the right to
disseminate religious information.
For this reason the provisions of the city ordinance which
requires the payment of license fee for conducting the business
of general merchandise cannot be applied to American Bible
Society in doing so it will impair the free exercise and enjoyment
of religious profession and worship as well as its right in
dissemination of religious information. Dili pwede i-tax kay part
man ni sa pagsabwag sa ilang katu-uhan.

LIMITING THE EXERCISE OF THE STATE’S POWER OF TAXATION

Now certain provisions in the 1987 Constitution limits the power

of the State to tax, we have to take up Article III Bill of Rights
section 1which is the dues process of law and equal protection of
laws:

Section 1. No person shall be deprived of life liberty or property

without due process of law nor shall any person be denied the
equal protection of the laws.

The payment of tax is generally payable in money and money is

property. How will you apply due process in taxation? Giving of
notice on tax liability, giving of notice of sale in a public auction.
Give him the tax payer the right to be heard in a competent
tribunal because we have remedies for the tax payer. What
about the equal protection of laws? One of the characteristics of
tax is it is proportionate in character. So persons similarly
situated are tax alike. Pero naa pud mga privileged animals like
mga senior citizen, those who are minimum wage earners. Dili ni
sila gabayad og income tax. In the case of Eastern Theatrical
Company vs. Alfonso:

“Equality and uniformity in taxation means that all taxable

articles or kinds of property of the same class shall be taxed at
the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of
taxation.”

Like business taxes, if you are considered as a corporation 30%,

kung owned by single proprietor 32%(?) pero may iba na
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JUNE 29, 2016 denied the equal protection of the laws.

RECAP: Sec. 5. No law shall be made respecting an establishment of

religion, or prohibiting the free exercise thereof. The free
We already discussed:
exercise and enjoyment of religious profession and worship,
- The power to tax without discrimination or preference, shall forever be allowed.
- Tax as the lifeblood of the economy No religious test shall be required for the exercise of civil or
- The lifeblood theory political rights.
- The symbiotic relationship between the government
and the taxpayer
Now for this, I already assigned the case of American Bible
- Taxation as an inherent power of the state and it is an
Society vs. City of Manila:
attribute of sovereignty
- Taxation is a legislative power because it involves the
Ordinance No. 2529 of the City of Manila, as amended, is not
promulgation of rules
applicable to plaintiff-appellant and defendant-appellee is
There are basically 2 types of taxes: powerless to license or tax the business of plaintiff Society
involved herein for, as stated before, it would impair plaintiff's
o National tax- those enumerated under right to the free exercise and enjoyment of its religious
section 21 of the NIRC, so there are 7, profession and worship, as well as its rights of dissemination of
religious beliefs.
SEC. 21. Sources of Revenue - The following taxes, fees and
charges are deemed to be national internal revenue taxes:
Now we will discuss Section 10 of Art. 3 : No law impairing the
obligation of contracts shall be passed.
(a) Income tax;
(b) Estate and donor's taxes; Now in the case of Meralco vs. Province of Laguna:
(c) Value-added tax;
(d) Other percentage taxes; Contractual tax exemptions, in the real sense of the term and
(e) Excise taxes; where the non-impairment clause of the Constitution can
(f) Documentary stamp taxes; and rightly be invoked, are those agreed to by the taxing authority
(g) Such other taxes as are or hereafter may be imposed and in contracts, such as those contained in government bonds or
collected by the Bureau of Internal Revenue. debentures, lawfully entered into by them under enabling laws
in which the government, acting in its private capacity, sheds
its cloak of authority and waives its governmental immunity.
National taxes are those we pay to Truly, tax exemptions of this kind may not be revoked without
the government through the BIR impairing the obligations of contracts. These contractual tax
o Local tax- those we pay to the LGUs such as exemptions, however, are not to be confused with tax
provinces, municipalities, cities and barangays exemptions granted under franchises. A franchise partakes the
nature of a grant which is beyond the purview of the non-
Now we have also taken the Essential characteristics of tax that
impairment clause of the Constitution.
is:

1. an enforced contribution,
Ganito kasi, if you are granted a franchise then yung franchise
2. it is proportionate in character,
may exemption, pero there are cases wherein ginachallenge ng
3. generally payable in money,
mga franchise grantees why they are subjected to tax in the local
4. levied on persons and property,
level. Yung mga LGUs naga-ano ng taxes, tapos sabi nila, you
5. levied by the State which has jurisdiction over the
should not be taxed because I franchised that exempt kami from
persons or property,
tax. So in those cases, the franchise is just a grant. Kailan mo ma-
6. levied by the law making body of the State and
raise ang Sec. 10? If it is the taxing authority mismo entered into
7. levied for public purpose.
contract with the franchise grantees. Contractual tax
And we also discussed that the power of the LGU to tax is NOT exemptions are those agreed to by the taxing authority in
inherent but a delegated power. Then we’ve also discussed contracts, so nakakontrata sila mismo. The contract is the law
some provisions of the Bill of Rights affecting the power to tax between the parties so you should follow. So kung ang
which are Sec. 1 the due process of law and equal protection of gobyerno mismo entered into a contract then later on you will
laws and Sec. 5 the non-infringement of religious freedom. be taxed, then you can raised that there is impairment of
contracts.
Art. III Sec. 1. No person shall be deprived of life, liberty, or
property without due process of law, nor shall any person be In Casanovas vs. Ford:

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that the legislature of a State may, in the absence of special
restrictions in its constitution, make a valid contract with a
corporation in respect to taxation, and that such contract can be
enforced against the State at the instance of the corporation.
So in this 2 cases, dito maillustrate yung applicability ng section
10.
Section 20. No person shall be imprisoned for debt or non-
payment of poll tax.
So ano ba yang poll tax? Cedula? OK. Under the LGU code,
Community Tax that is sec. 156 to sec. 164 of the LGC. Under sec.
156, cities or municipalities may levy a community tax in
accordance with the provisions of this article.
Individuals liable to community tax. So when I read this
provisions I went over my cedula kung tama pa ba, kasi sabi ditto
basic community tax is 5 pesos. So my 2016 community tax,
tama nga, basic is 5 pesos. Now every inhabitant of the
Philippines, 18 yrs of age or over, has been regularly employed
on a wage or salary basis for at least 30 consecutive working
days, kailangan magkuha kana ng cedula, 5 pesos basic. What is
the computation? If you’re earning, if your only earning is your
salary and you earn 200K a year, you pay 1 peso for every 1000
pesos you earn. So you pay 200 pesos plus the basic tax of 5
pesos.
Now question, natural persons lang ba ang kailangan magkuha
ng cedula? Ok if you read the LGC, it is not only the natural
persons, even juridical persons kailangan kumuha ng community
tax. Kung as individual the basic is 5 pesos, pag sa juridical
persons 500 pesos. Ok? So ang basic nila is 500 pesos. Now for
individuals, diba ang basic is 5 pesos? Then for every 1000 pesos
you earn you pay 1 peso and sa corporation naman the
maximum you pay is 10,000 pesos. Shall not exceed 10,000
pesos. Kung hindi ka magbayad ng cedual? Anong sabi ng consti
provision? You cannot be imprisoned for non-payment of poll
tax. But for non-payment of tax? Pwede! Under your NIRC may
penal provisions, you can be imprisoned, fined or both.
Now sa poll tax or community tax, there are also persons who
are exempted from poll tax, because sa consti law yung
sovereign equality of states. Although they are working in the
Philippines, nandoon sila sa embassy so din a sila kailangan
kumuha ng poll tax. Because diplomatic and consular
representatives are outside Philippine jurisdiction so dili jud sila
within reach of our taxing authorities.
Now itong mga poll tax, place of payment? Usually where you
reside, doon ka kukuha ng certificate. But there is this provision
under the LGC that is no longer applicable anymore, sec. 163,
because before, ang poll tax, itong community tax accepted xa as
proof of identity, even in notarial or public documents. In fact in
sec. 163 presentation of community tax certificate on certain
occasions when an individual subject to the community tax
acknowledges any document before a notary public, but that is
not applicable anymore because sa ating Notarial Law, ang
community tax is not a valid proof of identity.
Although a community tax is one of a source of revenue of local
government the printing of this community tax certificates is
with the BIR. And under sec. 164: printing of community tax
certificates and distribution of proceeds, now the proceeds of
the tax shall accrue to the general fund of the national
government to cover the actual cost of printing. So if you are
asked, ang community tax, is that a national tax? No, because it
is not included in sec. 21 of the NIRC, it is a local source of
revenue, however ang nagamanage ng printing is ang BIR, tapos
gina-distribute. So ang proceeds of community tax, part of it is
remitted to the BIR to cover the cost of printing.
Even sa community tax there is an allocation of the proceeds,
the proceeds of the community tax actually and directly
collected by the city or municipal treasurer shall accrue entirely
to the general fund of the city or municipality concerned.
However, proceeds of the community tax collected through the
Barangay treasurers shall be apportioned as follows:
50% shall accrue to the general fund of the city or municipality
concerned
50% shall accrue to the barangay where the tax is collected.
Mao na ang mga uban naa pud naga kolekta sa barangay,
because kung sila magkolekta eh d naa pud share.
Now let’s go to article 6, the legislative department,
Sec. 24: All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application,
and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with
amendments.
So you have to pass a law, in that law you have to specify, what
is the subject of taxation, how much is the tax to be paid, who
shall pay the tax, to whom shall be paid and what is the purpose,
minsan kasi may special purpose.
Now what do you mean by tariff? Because it speaks of tariff bills,
revenue or tariff bills. So revenue, that is? How do we raise
revenue? By the imposition of tax, collection of tax, collection of
fees, collection of licenses. Now tariff? What do you mean by
tariff? Now tariff are duties imposed by the government on
imported or exported goods. So it deals with import and export.
Sec. 25 par. 4: A special appropriations bill shall specify the
purpose for which it is intended, and shall be supported by
funds actually available as certified by the National Treasurer,
or to be raised by a corresponding revenue proposed therein.
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Special appropriations, minsan the government will propose a
bill for revenue raising then may special purpose. Now what if
this purpose, tapos na..terminated na..tapos na ang purpose for
which it is intended..at may natira pa na pera, then that is ibalik
sa general fund. Now, alam nyo naman yan in consti law that
government spending, always pursuant to an appropriation.
Dapat may appropriation before you can spend. So every
projects of the government may appropriation para dito then
may breakdown pa. pag may savings sa isang appropriation, you
cannot spend it on other things, you have to give it back to the
general funds and you have to request for a supplementary
budget. So that is under section 25.
Sec. 26 (1) Every bill passed by the Congress shall embrace only
one subject which shall be expressed in the title thereof.
So this is against log rolling legislation, diba na take-up nyo na
yan? So same with tax laws, dapat clear, kung unsa man gani ang
subject dapat specified didto sa title. So pati tax laws, walang
exemption, pati tax laws ganyan dapat pagkagawa.
Sec. 27 (2) The President shall have the power to veto any
particular item or items in an appropriation, revenue, or tariff
bill, but the veto shall not affect the item or items to which he
does not object.
Now Sec. 27, true, power to tax is essentially legislative, this is an
exception to the non-delegation of the power to tax. Ok? So
under Sec. 27 par. 2 The President shall have the power to veto
any particular item or items in an appropriation, revenue, or
tariff bill, but the veto shall not affect the item or items to
which he does not object. So this is with respect to the passage
of budget. Now only budget, revenue or tariff bill, so he has the
power to veto.
Section 28, very important provision!
Sec. 28 (1) The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of taxation.
So what do you mean by progressive system of taxation? The tax
increases as the tax base also increases. Now, progressive
system of taxation as oppose to regressive tax, because in
progressive system of taxation like income tax rates, so nagataas
imong income nagataas pud ang rate so we have a rate from 0-
32%.
Now the rule on taxation should be uniform and equitable, now
this is consistent with theoretical justice, not oppressive.
Progressive System of Taxation, the higher your earnings the
higher tax you pay.
You compare that to regressive, a regressive tax is a tax imposed
in such a manner that the tax rate decreases as the amount
subject to taxation increases. So sa Philippine taxation wala
tayong regressive. Flat rate or progressive, yan lang tayo.
Now let us take up the Principles of Sound Tax System:
1. Fiscal Adequacy- meaning that the sources of revenue should
be sufficient to meet the demands of public expenditures.
Basta kung mag budget ka, expenditure nato 1 billion, the
question is, is your revenue enough to support your 1 billion
budget? And usual nyan na nangyayari pag nag-deficit is mag
external borrowing, mao na sa Pilipinas, dako na kaayo tag utang
kay nag deficit man ta sa atoang budget. So we have to resort to
external borrowing.
2. Administrative Feasibility- which means that the tax laws
should be capable of convenient, just, and effective
administration.
Okay, gaya ng BIR, even if you read the NIRC may incentive doon,
if BIR will meet their target, may incentive sila. So administrative
feasibility, realizable ba? Valuable ba? Sensible ba? Because
when you make estimates, it must be realistic. So usahay mag
hokus-pokus nalang ang BIR para ma-meet ang target.
3. Theoretical Justice- means that the tax imposed should be
based on the taxpayer’s ability to pay. (Ability to pay principle).
So theoretical justice, di pa pasok tong regressive tax, because
regressive tax is a tax that a larger percentage from low income
people. So they have this vertical equity vs. horizontal equity in
taxation.
Vertical Equity- connotes a difference in the tax treatment
between those financially well-off and those who have relatively
less. To tax those who have more in life than those who have
relatively less.
So may difference daw in treatment depende aw kung pila
imong income.
Horizontal Equity- implies that those who are similarly situated
in life should be taxed similarly.
In the Philippines we follow the vertical equity, ano yung vertical
equity? Again it connotes the difference in the tax treatment
between those financially well-off and those who have relatively
less. To tax those who have more in life than those who have
relatively less.
Now another exception to non-delegation of the power to tax is
Sec.28 par. 2:
Sec. 28 (2) The Congress may, by law, authorize the President
to fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development
program of the Government.
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So again, the power to tax is essentially legislative, but this is an
exception to the non-delegation of the power to tax. When they
delegate to the President the fixing of tariff rates, import and
export quotas, tonnage and wharfage dues.
Sec. 28 (3) Charitable institutions, churches and personages or
convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements,
actually, directly and exclusively used for religious, charitable
or educational purposes shall be exempt from taxation.
Another very important provision. My professor wants us to
memorize this particular provision. Now what kind of tax is this
section referring to? Ha? Real Property Tax. And what is the test
for the exemption? actually, directly and exclusively used. The
use, NOT ownership. Meaning if I am the owner of the building
tapos girentahan, gihimong eskwelahan, exempt sya from
property tax, but the rent is subject to income tax.
Now the test, it is the use of the property and not the ownership
and the word exclusively, halimbawa kani si Sumiog, nay syay
Kampo ni Sumiog, nay syay hall dako kaayo, where they do their
weekly worship, but during weekdays ginapaarkilahan nya,
bunyag, kasal or seminar, then should that property be subject
to tax? Still NO. (property tax but the earnings is subject to
income tax)
Now the word exclusively is used in the constitution means
primarily rather than solely. So that the exemption is not fully or
partially lost because on certain occasions the property is used
for social purposes or lend out to others for entertainment.
So ang iba naman they will argue that the rental is used for the
runs of their costs, sa Kampo ni Sumiog, para mudaghan pa ang
mga kampon nya. Even if the proceeds, the rent is used for the
maintenance of the Kampo ni Sumiog, still that is subject to tax.
But there are certain incomes that are given preferential rates.
Now exemption extends to facilities that are incidental to or
reasonably necessary for the accomplishment of their purpose.
Halimbawa hospital, naa syay dormitory para puy-an sa mga
interns, that is incidental, so covered sya ng exemption. Facility
built as a school for the training of nurses or housing facilities for
interns, so that is incidental. Halimbawa school, may dormitory,
puy-an sa mga estudyante kay ang imong eskwelahan tua sa
tumoy sa buntod, tunga sa lasang.
May public property be leased to a religious group? Halimbawa
like the City Government of Tagum, naa syay mga stalls, sa
TOTIT, sa tagum overland transport terminal, here comes a
religious sect gusto magrent, is that allowed? YES. Pwede!
Provided that the lease is under the same condition as to private
persons, because ilahi pud nimo ang rate sa ilang rental, pabor2x
na and under non-infringement of religious freedom, no law
shall be made respecting an establishment of religion or
prohibiting the free exercise thereof without discrimination or
preference. So you are giving preference to once sect if you will
give a lower rent. So dili na sya pwede.
So taxability of tax exempt organizations, rental income derived
by a tax exempt organization from the lease of its properties,
real or personal, it is not exempt from income taxation, even if
such income is exclusively used for the accomplishment of its
objectives.
Taken from the case of CIR vs. CTA-YMCA
that rented income derived by a tax-exempt organization from
the lease of its properties, real or personal, [is] not, therefore,
exempt from income taxation, even if such income [is]
exclusively used for the accomplishment of its objectives.cl
Mao to ang giingon nako, girentahan nya ang Hall, karon
kwentahan sya og income tax, even if the income is, pareho
anang mga schools exempt sila sa property tax. How about tong
sa mga operation nila? Nya exempted gihapon miski sa income?
Dili na, but we are given preferential rates, and we will take that
up sa NIRC provisions.
Now another assignment, diba naibigay ko na CIR vs. CTA-YMCA:
So in that case, that rented income derived by a tax-exempt
organization from the lease of its properties, real or personal, [is]
not, therefore, exempt from income taxation, even if such
income [is] exclusively used for the accomplishment of its
objectives. Now the exemption covers only property tax and not
other taxes this refers to article 6 section 28 par. 3 of the consti.
Art. VI, Sec. 28 (4) No law granting any tax exemption shall be
passed without the concurrence of a majority of all the
Members of the Congress.
So what is the vote required for tax exemption? Absolute
majority. The total members of congress divided by 2 plus 1,that
the vote required for the passage of law granting tax exemption.
And the intention is to prevent indiscriminate grant of tax
exemption.
Sec. 29 (2) No public money or property shall be appropriated,
applied, paid or employed, directly or indirectly, for the use,
benefit or support of any sect, church, denomination, sectarian
institution, or system of religion, or of any priest, preacher,
minister or other religious teacher, or dignitary as such, except
when such priest, preacher, minister or dignitary is assigned to
the armed forces or to any penal institution or government
orphanage or leprosarium.
Now sa mga public school naa man nay mga katekista, may
bayad ban a sila? Wala. Kay bawal, klaro kaayo ang section 29,
bawal magbayad sa mga katekista. Kung gusto sila mutudlo, pero
no cash out from the government, walay sweldo, kay volunteer
man na sila. So it is very specific here, gamay lang ang pwede
when such priest, preacher, minister or dignitary is assigned to
the armed forces or to any penal institution or government
orphanage or leprosarium. I don’t know what is the
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arrangement sa DRH kasi may Chaplain doon, dili man siguro na
sila sweldado noh? Kay DRH is a government hospital, so bawal,
klaro kaayo ang section 29, very specific.

Now take note that taxes are levied by the legislature for public
purposes that is one of the essential requisites now:

Sec. 29 (3) All money collected on any tax levied for a special
purpose shall be treated as a special fund and paid out for such
purpose only. If the purpose for which a special fund was
created has been fulfilled or abandoned, the balance, if any,
shall be transferred to the general funds of the Government.

Ito yung sinabi ko kanina, pag tapos na, nameet the special
purpose for which the fund is allocated, kung fulfilled na or
abandoned, the balance if any, shall be transferred to the
general funds of the Government. And when it is transferred
back to the general funds of the government, it is now open for,
or available for appropriation.

So next week we will take up Article VII, the Executive

Department. Again, Government spends pursuant to an
appropriation and cannot be allowed to divert, pass, hence there
will be technical malversation. So sabi dito sa section 29 any
unspent fund must be transferred to the general fund and
becomes available again for appropriation. Next meeting be
ready for recitation.

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4TH of JULY, 2016. 
So we are done with Article VI now we’ll take up Article VII.
Article VII, Section 21.
No treaty or international agreement shall be valid and
effective unless concurred in by at least two-thirds of all
members of the Senate.
Article VII, Section 22.
The President shall submit to the Congress within 30 days from
the opening of every regular session, as the basis of the general
appropriations bill, a budget of expenditures and sources of
financing, including receipts from existing and proposed
revenue measures.
So what is it for demand is that not only government’s grants,
how much is the budget for a particular year, but also where to
source funds to cover up or to provide for the government
spending. Now, the powers of the President to tax, although
with power to create itong President kasi he has the power to
create special economic zones . I think we already have one in
Del Norte, an Anflocor property. Nag-apply na sila for special
economic zone. The President does not have the power to
provide for tax and financial incentives because kasali yan sa
inherent limitations that the power to tax is coherently
legislative. It is the legislative branch which has the inherent
power not only to select the just subjects of taxation but to
grant exceptions. So dapat pursuant to a law ang pag grant ng
exceptions.
Paragraph 4, Section 28, Article VI of the Constitution.
No law granting any tax exemption shall be passed without the
concurrence of the majority of all the members of the
Congress.
So that is absolute majority. That is reiterated in the case of...
Article 8, sec 4 (2)
All cases involving the constitutionality of a treaty,
international or executive agreement, or law which shall be
heard by the Supreme court or en banc, and all other cases
which under the Rules of Court are required to be heard en
banc, including those involving the constitutionality,
application, or operation of presidential decrees,
proclamations, orders, instructions, ordinances and other
regulations shall be decided with the concurrence of a majority
of the members who actually took part in the deliberations on
the issues in the case and voted thereon.
Bakit kasali ang ordinance sa tax? Sa ating local taxation, you
can’t impose local tax dapat magpasa ng ordinansa ang
legislative department, ang sanggunian panlalawigan, panlunsod,
pangbayan. That is the legislative department of the Local
government.
So under paragraph 2, Section 5
The Supreme Court shall have the following powers:
Xxxxx
2. Review, revise, reverse modify, or affirm on appeal or
certiorari, as the law or the Rules of Court may provide, final
judgments and orders of lower courts in:
Ma’am: Just read A and B.
(a) All cases in which the Constitutionality or validity of
any treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.
(b) All cases involving the legality of any tax, impost,
assessment, or toll, or any penalty imposed in relation
thereto.
Under these provisions, the Congress cannot take away from the
Supreme Court the power given to it by the Constitution as the
final arbiter of tax cases. Pag hindi na solve sa Court of tax
appeals, san niya i-appeal? Sa Supreme Court.
Article VIII, Section 10.
The Salary of the Chief Justice and of the Associate Justices of
the Supreme Court and of lower courts shall be fixed by law.
During their continuance in office, their salary shall not be
decreased.
Applicable din ito sa mga Constitutional Commisions. That is also
involving penalty.
Now let’s take up Article X, general provisions. Let’s go to
section 5.
Each LGU shall have the power to create its own sources of
revenues and to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes
and fees and charges shall accrue exclusively to the local
governments.
So this is a delegated power. LGUs enacts ordinances affecting
local taxes. The ordinances are subject to the guidelines and
limitations as provided by the Congress. So, if you are asked if
the power to tax can be __, that is inherent but when it comes to
LGU, that is delegated. Very basic yan. (yawyaw, text2)
Okay, under Section 6.
LGUs shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.
Now, anong tawag dito? IRA. Internal Revenue allocation. Ano ba
ang nature ng IRA? This is the share of the local government in
the national revenue. Diba under Section 21 of the NIRC,
national revenues. Sinong nagcocollect ng national revenues?
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BIR. The IRA is a crucial component of local authority as
envisioned in the 1987 Constitution and we have LG code. When
we say autonomy, how can you be independent kung wala kay
kwarta? Mao na aside from the power of the LGU to raise its
own revenue through legislation or ordinances, meron pa silang
share in the national Government. Yun ang tinatawag na IRA.
Without the IRA, LGU would be unable to function. Most. Now,
Davao City, dako pud nag income but what about other
municipalities? Murag ghost town. Mao na maningkamot ang
uban na maging City para magdako ilang IRA. Bisan walay mall,
city.  Mangita silag paagi na mudako ilang IRA. Kay hoping na
mahimo silag City, mudako ilang IRA.
The IRA or the share of the LGUs in the national revenues
collected is a form of inter-government from income transfer or
inter-government from fiscal transfer. Resources and funds
emanate from a higher level government to a local level. That is
general allotment to which the LGUs are entitled. What is the
constitutional basis of IRA? The 1987 Constitution contains an
entire article on Local Government, that is Article X which
provides as expansion of the local autonomy under the 1973
Constitution.
Now section 2, Article X grants LGUS the right of local autonomy
providing that:
The territorial and political subdivisions shall enjoy local
autonomy.
Section 3 is the basis for the centralized local government
structure, as follows:
The Congress shall enact a local government code which shall
provide for a more responsive and accountable local
government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative,
and referendum, allocate among the different local
government units their powers, responsibilities, and resources
and provide for the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of
local officials and all other matters relating to the organization
and operation of the local units.
So if you go back to your Consti, parang mas speedy ang delivery
of services. Kaning mga LGUs pwede mag impose ug revenues as
long as dili pud naimposed sa national. The mission of the
government is the speedy delivery of services from national to
local. Fiscal autonomy as a component of local autonomy is
recognized under Section 5 which provides:
Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees and charges
subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy.
Such taxes, fees and charges shall accrue exclusively to the local
governments.
Unsa man ang departments na nay fiscal autonomy? ConComs,
Judiciary, Ombudsman, etc. LGUs also have fiscal autonomies.
The legal basis of the IRA, the principles of centralization,
distribution were adopted in the LGC which was enacted
pursuant to section 3, Article X of the 1987 Constitution.
What about the share of IRA in National Internal revenue?
Section 2 before the local government code defines the IRA
defines the IRA as the share of LGUS in National Revenue. What
about the allotment? The share of LGUs in the national taxes
collected stands currently at 40 %. Now the basis of the
computation of the IRA is based on the tax collections of the 3rd
fiscal year preceding the current years. Of previous years na
collection. Thus, increased collections for the current year will
not transmit to increase IRA in the immediate year. So it doesn’t
mean na if mag increase ang collection, automatic mag increase
ang IRA so halimbawa doesn’t mean na kung nung 2015 malaki
ang collection, sa 2016 mag increase na. Dapat naa silay basis
jud. Halimbawa, for the current year, yung 2 years ago na
collection. The IRA plays an important role in local autonomy.
Local governments have the right to receive IRA as a means to
help defray the funds for their new responsibilities under the
local government code. This is to support operative principles of
decentralization. Also take note of the automatic release of IRA.
Under section 286 of the Local Government Code,
The share of each government unit shall be released without
the need of any further action directly to the provincial, city,
municipal or barangay treasurer as the case may be or
quarterly basis within 5 day after the end of each quarter which
shall not be subject to any lien or holdback that may be
imposed by the National government for whatever purpose.
so wala ng mga requirements yan unlike sa iba. Independent
talaga. The basis is Section 6, Article X.
Local government units shall have a just share, as determined
by law, in the national taxes which shall be automatically
released to them.
When we say automatic, it means without need for further
action. The share will be released directly to the provincial, city,
municipal or barangay treasurer within 5 days after the end of
each quarter. The share shall not be subject of any lien that may
be impost by the National government. Walang ganyan,
automatic release agd. The only limitation is that under 287
which provides:
Section 287. Local Development Projects.
Each local government unit shall appropriate in its annual
budget no less than 20 % of its annual budget no less than 20%
of its annual internal revenue allotment for development
projects. Copies of the development plans of the LGUs shall be
furnished the DILG.
This section requires LGUs to appropriate in their local budgets
at least 20 % of IRA for local development projects. This is a
limitation. Dapat ifurnish ang DILG kung ano ang mga projects
nila.
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Disposition of national internal revenue. National internal
revenue collected shall not go to the national treasurer and shall
be available for the general purposes of the government. Diba
sabi natin there are 2 kinds of taxes. The national taxes and local
taxes. National tax, yun yung kinocollect ng BIR then yung local
tax, collected by the LGU. Yung collection ng LGU is exclusive
para sa LGU but aside from that may share pa siya sa national
tax. Yun yung IRA. What about the 60 %? Yan ang pupunta sa
national treasury and that is for the spending of the national
government. That is available for appropriation because anong
sabi ko? Ang government spending should be pursuant to an
appropriation. Halimbawa, pag di naspend, ibalik mo sa general
fund. Now, under section 20. Autonomous regions. I’ll leave it for
you to read. Now Section 7 of Article X provides:

Local governments shall be entitled to an equitable share in the

proceeds of the utilization and development of the national
wealth within their respective areas, in the manner provided by
law, including sharing the same with the inhabitants by way of
direct benefits.

Example. Mining. (chika2)

Aside from that under Title 11, allotment of revenue taxes as

amended by RAs 9334, 9327 and 10026 (i’m not so sure of the
RAs), an act imposing excise taxes. Itong national, like collection
ng national government, ang COA is not an LGU, san ito kukuha
ng funds? Under the provisions of the NIRC, ½ of 1 % of national
revenue goes to COA. Malaki yan.

Don’t you know that 5 % of actual tax collections shall accrue to

the special fund of the BIR and for what purpose? Utilize as
incentive, bonus, purchase of equipment and for the
improvement of the tax administration.

So nakita na ninyo? ½ of 1 % sa COA, 40 % sa IRA. how about

taxes collected from insurance premiums? Part of that goes to
the insurance commission para mabuhi ilang opisina. What
about excise taxes of alcoholic drinks? Tobacco? Part of that
goes to the place which produces. 25 % of the premium tax
collected shall accrue to the insurance fund. 75% sa national
government.

Under Section 288 of the NIRC, part of it says that a certain

percentage of revenue derived from the excise tax from alcohol
and tobacco product shall be remitted directly to the Philippine
Head of the insurance company.

So Article XII na ta.

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July 5, 2016 (Tuesday)
Transcribed by: Joni Puray
Let us continue with the Constitutional Provision.
Just read. Sec. 11. Art. XII. No franchise, certificate, or any other
form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens; nor
shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any
such franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal by
the Congress when the common good so requires. The State
shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to
their proportionate share in its capital, and all the executive and
managing officers of such corporation or association must be
citizens of the Philippines.
Sec. 2 (2,3). Art. XIV. The State shall:
2. Establish and maintain, a system of free public
education in the elementary and high school levels.
Without limiting the natural rights of parents to rear
their children, elementary education is compulsory for
all children of school age;
3. Establish and maintain a system of scholarship grants,
student loan programs, subsidies, and other incentives
which shall be available to deserving students in both
public and private schools, especially to the under-
privileged;
Why are we taking this up? In local taxation, the real property
tax is a part thereof. If you look at the receipt of the real
property tax, you can see there “Basic Tax and SEF.” SEF stands
for Special Education Fund. What is the purpose of SEF? Kasi
itong local governments, nagahatag sila scholarship funds. That
is mandate of the Constitution. So if you pay your real property
tax, part of that is for the special education fund.
Section 3 (3, 4). Art. XIV
3. They shall inculcate patriotism and nationalism, foster
love of humanity, respect for human rights,
appreciation of the role of national heroes in the
historical development of the country, teach the rights
and duties of citizenship, strengthen ethical and
spiritual values, develop moral character and personal
discipline, encourage critical and creative thinking,
broaden scientific and technological knowledge, and
promote vocational efficiency.
4. At the option expressed in writing by the parents or
guardians, religion shall be allowed to be taught to
their children or wards in public elementary and high
schools within the regular class hours by instructors
designated or approved by the religious authorities of
the religion to which the children or wards belong,
without additional cost to the Government.
So walang appropriation for salaries of teachers teaching religion
for elementary and high school.
Section 4 (3). Art. XIV.
3. All revenues and assets of non-stock, non-profit
educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt
from taxes and duties.
Now compare this with Sec. 28 (3) of Art. VI:
Charitable institutions, churches and personages or
convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements,
actually, directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt
from taxation.
So yung Art. VI is referring to the property itself. Remember.
What is the test for the exemption under Art. VI? It is the use
and not the ownership.
Dito naman sa Art. XIV, the exception covers income tax.
However, anong sinabi dito? That all revenues are used actually,
directly, and exclusively for educational purposes. So non-stock,
non-profit educational institutions.
If you read the NIRC, they are given preferential rates. The rate
for corporate income tax is 13 %. However, if you are a hospital,
or non-stock non-profit educational institution, the preferential
rate is only 10%.
Proprietary educational institutions, including those
cooperatively owned, may likewise be entitled to such
exemptions, subject to the limitations provided by law,
including restrictions on dividends and provisions for
reinvestment.
You just read the rest.
Diba ang sabi kapag ang property is exclusively used for
educational or religious purposes, exempt siya. Tapos ang
income, halimbawa ang property ginagamit mo for other
purpose nagpaparenta ka, then the rent is subject to tax.
However, sabi dito kapag ang revenue is used actually, directly,
and exclusively, it could be exempt from tax. But, how will they
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know that the revenue is used directly for the furtherance of the 5. Prohibition against imprisonment for non-payment of
cause of a non-stock non-profit institution? The burden of proof poll tax (or cedula)
is on the taxpayer. 6. Uniformity, equality of taxation and progressive system
of taxation
Section 11. Art. XIV. The Congress may provide for incentives, *Take note of the difference between progressive
including tax deductions, to encourage private participation in system of taxation and regressive system of taxation.
programs of basic and applied scientific research. Scholarships, 7. Delegated authority of the President to impose tariff
grants-in-aid, or other forms of incentives shall be provided to rates (Art. VI, Sec. 28)
deserving science students, researchers, scientists, inventors, 8. Prohibition against taxation of real property of
technologists, and specially gifted citizens. charitable institutions, churches, parsonages, convents,
mosque, and non-profit cemeteries. (Art VI, Sec 28 par.
3)
Summary:
9. Prohibition against taxation of non-stock, non-profit
educational institutions
What are the limitations on the Power to Tax?
10. Majority vote of Congress for grant of tax exemption
11. Prohibition of the use of tax leviedfor special purpose.
Inherent Limitations (5)
12. Tax bill shall originate exclusively in the HREP
13. President’s veto power of appropriation, revenue, and
1. It should be for Public Purpose
tariff bills
14. Judicial power to review legality of tax under Art. 8,
2. Inherently Legislative in nature
Sec. 5
15. Grant of power to the LGU to create its own source of
Exception: delegation of tax power to President in
revenue
fixing the tariff rates
CASES
3. Government entities, agencies, and instrumentalities
are generally exempt from taxation
CIR vs. Algue.
4. International comity
In this case, there is a claim for deduction.
This is because we have to respect treaties entered into
Q: What is the contention of the CIR for the disallowance of such
by the government. But if we grant exemption, that has
claim?
to be concurred by the Congress.
A: Contention of CIR: What were incurred were not ordinary
expenses.
5. Territorial
Q: What can be claimed as a deduction?
You cannot just impose tax; it should be within our
A: Ordinary and Necessary expenses.
jurisdiction.
What if you claimed deduction, but said deduction is not related
Exception: residents of the Philippines. Ano ba ang
to the business? Ang imong gi-deduct kay tuition sa imong anak.
taxable sa kanya? All income from within and without
Dili related. That would be disallowed.
the Philippines. Later on we will learn, kapag OFW,
considered as parang non-resident citizen. So ang
In this case, there is a claim for deduction (75,000) and this was
income niya abroad is not subject to Philippine tax.
disallowed by CIR.
Seaman? Not subject to Philippine tax, kasi parang
considered siya as OFW, unless of course if he is a
Q: What is the issue in this case?
domestic seaman. But, if the person has income from
A: Whether or not the CIR correctly disallowed the 75,000
the Philippines or if he has some kind of business in the
deduction claimed by respondent Algue as legitimate business
country, then his income is subject to tax.
expenses in its income tax returns.
Constitutional Limitations (15)
Q: What is the principle of symbiotic relationship?
A:Despite the natural reluctance to surrender part of one's hard
1. Due Process (Art. III, Sec. 1)
earned income to the taxing authorities, every person who is able
2. Equal Protection of Laws
to must contribute his share in the running of the government.
3. Religious Freedom
The government for its part, is expected to respond in the form of
4. Non-impairment of contracts
tangible and intangible benefits intended to improve the lives of
*Take note of those contracts freely entered into by
the people and enhance their moral and material values. This
the government.
symbiotic relationship is the rationale of taxation and should
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dispel the erroneous notion that it is an arbitrary method of
exaction by those in the seat of power. (A two-way relationship.)
Q: What about the life blood theory?
A: Taxes are the lifeblood theory of the government and so
should be collected without unnecessary hindrance. It is said that
taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to
activate and operate it.
In this case, although na-explain nga ang life blood theory – oo
nga kailangan natin ng taxes. We need taxes kasi kapag walang
taxes, mamatay ang gobyerno. But even if that is the lifeblood of
the government, tagaan pud nato ug due process. Actually this
discussion is for the due process limitation under Art. 3 of the
Constitution.
Ok, nagclaim ka ng 75k deduction. It was disallowed by CIR. Now
you have remedies to substantiate your claim of deduction. In
this case, saan nag favor ang SC?
A: The deduction is reasonable. It doesn’t mean that, just
because taxes are the lifeblood of the government, the bureau is
always right. So remedies are available to taxpayers.
Procedural Aspect
Facts: The proven fact is that four days after the private
respondent received the petitioner's notice of assessment, it
filed its letter of protest. This was apparently not taken into
account before the warrant of distraint and levy was issued;
indeed, such protest could not be located in the office of the
petitioner. It was only after Atty. Guevara gave the BIR a copy of
the protest that it was, if at all, considered by the tax authorities.
During the intervening period, the warrant was premature and
could therefore not be served.
Ma’am Boja: Ganito ang nangyari. First nabigyan siya ng
assessment. Then nagfile siya ng request for reconsideration.
After that request, ano ginawa ng CIR? They just received it. In
the end, ang ginawa is may warrant ng restraint and levy. So
parang may procedural lapses in this case. Actually in this case
the taxpayer timely filed his request for reconsideration.
Kasi ganito ‘yan. kapag nag file ka, there is a period for the
bureau to act on the motion for the request. Kapag na-receive
mo na ang ruling nila on your motion/request, then that’s the
time when you will do another move (kung ano nanaman ang
remedy mo after that. Another thing, if you will not act within
180 days, your motion is considered as denied.There are two
ways of knowing. If your appeal is denied, it’s either you receive
a notice or decision or they will not act on your case after the
lapse of time. Ang nahitabo diri diba, the second time kay gi-
accept na nila yung letter pero wala gihapon na-receive ang
company. So considered as denied.
Just remember the following principles here:
1. Lifeblood theory
2. Symbiotic relationship
3. Due process requirement
Pepsi-Cola vs. Mun. of Tanauan, Leyte
Q: When was the case decided?
A: 1976. So even before the 1987 Constitution, there was already
a delegation to the LGU.
Q: What is double taxation?
A: It means taxing twice for the same tax period the same thing
or activity, when it should be taxed once, for the same purpose
and with the same kind of character of tax.
Strict Sense (Direct Duplicate Taxation)
1. the same property must be taxed twice when it should be
taxed once;
2. both taxes must be imposed on the same property or subject
matter;
3. for the same purpose;
4. by the same State, Government, or taxing authority;
5. within the same territory, jurisdiction or taxing district;
6. during the same taxing period; and
7. of the same kind or character of tax.
Broad Sense
There is double taxation in the broad sense or there is indirect
duplicate taxation if any of the elements for direct duplicate
taxation is absent.
It extends to all cases in which there is a burden of two or more
pecuniary impositions. For example, a tax upon the same
property imposed by the state, and the LGU.
Q: Is double taxation prohibited?
Double taxation in its narrow sense is undoubtedly
unconstitutional but that in the broader sense is not necessarily
so. Where double taxation (in its strict sense) occurs, the
taxpayer may seek relief under the uniformity rule or the equal
protection guarantee.
In this case, we have a double taxation in a broad sense. Double
taxation, in general, is not forbidden by our fundamental law,
since the Court has not adopted as part thereof the injunction
against double taxation found in the Constitution of the United
States and some states of the Union. Double taxation becomes
obnoxious only where the taxpayer is taxed twice for the benefit
of the same governmental entity or by the same jurisdiction for
the same purpose (strict sense), but not in a case where one tax
is imposed by the State and the other by the city or municipality
(broad sense).
Q: Is it correct to say that there is double taxation on the ground
that ordinance no. 23 and 27 cover the same subject matter and
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impose the same tax rate. Were said ordinances intended to be
imposed altogether?

No. The difference between the two ordinances clearly lies in the
tax rate of the soft drinks produced: in Ordinance No. 23, it was
1/16 of a centavo for every bottle corked; in Ordinance No. 27, it
is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity. The intention of the Municipal Council of
Tanauan in enacting Ordinance No. 27 is thus clear: it was
intended as a plain substitute for the prior Ordinance No. 23,
and operates as a repeal of the latter, even without words to
that effect.

Q: What was the standing of the Supreme Court in this case?

A: The SC upheld the Constitutionality of the delegation of the
taxing power to the municipality or LGU. Under the New
Constitution, local governments are granted the autonomous
authority to create their own sources of revenue and to levy
taxes. Section 5, Article XI provides: "Each local government unit
shall have the power to create its sources of revenue and to levy
taxes, subject to such limitations as may be provided by law.

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July 6, 2016 promoting the general welfare and well-being of
the people.
Transcribed by: Maedelyn G. Amella

One of our constitutional rights is that no person shall be

COMMISSIONER OF INTERNAL REVENUE vs BPI
FACTS:
Petitioner CIR assessed respondent BPI for
deficiency percentage and documentary stamp
taxes for the year 1986 in the total amount of
P129,488,656.63 by sending two notices.
BPI, through its counsel replied arguing that the
assessments made are no assessments at all. The
taxpayer is not informed even in the vaguest
terms, why it is being assessed a deficiency. The
very purpose of such is to inform taxpayer why he
has incurred a deficiency so that he can make an
intelligent decision on whether to pay or to
protest the assessment.
deprived of his property without due process of law. So dapat
ma inform ang taxpayer sa tax due nya. This is done through tax
assessments. If nabigyan na ng tax assessments, the taxpayer
can question that by filing a protest within the required period..
In this case, the court disregarded whether or not BPI filed a
protest within the reglementary period considering that the case
has been pending for almost 20 years emphasizing that taxes are
the lifeblood of the government, Without them, the government
can neither exist nor endure.
QUESTION: TAXES ARE PAYABLE IN MONEY OR
PROPERTY?
ANSWER: FALSE

The letter sent by BPI failed to qualify as protest
under Revenue Regulations and therefore not
deserving of any rejoinder by the office as no
valid issue was raise against the validity of our
assessment. Hence, the decision on that matter
was final.
ISSUE:WON THE BPI SHOULD BE ABSOLVE OF ITS
LIABILITY? ( issue na related sa topic natin)
RULING: AFFIRMATIVE
Taxes are pecuniary in nature.
NOTA BENE: There is no particular law saying that
taxes are generally payable in money. It is only based
on jurisprudence.
So if the taxpayer or a corporation is already
insolvent or have no more money, the BIR can
provide remedies. It may levy or restraint certain
properties and sell them to public auction tapos
yung proceeds will be applied to the tax due. 

Whether or not a protest was made, the court

cannot absolve BPI of its liability under the
subject tax assessments. “Life battles don’t always go with the stronger or faster man.
Sooner or later, the man who wins is the man who thinks he
These assessments have been pending for can.”
almost 20 years, which involve a considerable
amount of money. Be that as it may, we cannot LABAN LANG!!!! 
legally presume the existence of something
which was never there. The state will be
deprived of the taxes validly due it and the
public will suffer if taxpayers will not be liable
for the proper taxes assessed against them.

Taxes are the lifeblood of the government, for

without taxes, the government can neither exist
nor endure. A principal attribute of sovereignty,
the exercise of taxing power derives its source
from the very existence of the state whose social
contract with its citizens obliges it to promote
public interest and common good. The theory
behind the exercise of the power to tax
emanates from necessity; without taxes,
government cannot fulfil its mandate of

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July 12, 2016
Transcribed by: Fritzie Lynne Sumando
Maceda vs. Macaraig GR 88291, 31 May 1991
Facts:
Commonwealth Act 120 created NAPOCOR as a public
corporation to undertake the development of hydraulic power
and the production of power from other sources. RA 358 (1949)
granted NAPOCOR tax and duty exemption privileges. RA 6395
(1971) revised the charter of the NAPOCOR, tasking it to carry
out the policy of the national electrification, and provided in
detail NAPOCOR’s tax exceptions. PD 380 (1974 )specified that
NAPOCOR’s exemption includes all taxes, etc. imposed “directly
or indirectly.” PD 938 integrated the exemptions in favor of
GOCCs including their subsidiaries; however, empowering the
Presidentor the Minister of Finance, upon recommendation of
the Fiscal Incentives Review Board (FIRB) to restore,partially or
completely, the exemptions withdrawn or revised.
The FIRB issued Resolution 10-85 (7 February1985) restoring the
duty and tax exemptions privileges of NAPOCOR for period 11
June 1984- 30 June 1985.Resolution 1-86 (1January 1986)
restored such exemption indefinitely effective 1 July 1985. EO 93
(1987)again withdrew the exemption. FIRB issued Resolution 17-
87 (24 June 1987) restoring NAPOCOR’sexemption, which was
approved by the President on 5 October 1987.].
Since 1976, oil firms never paid excise or specific and ad valorem
taxes for petroleum products sold anddelivered to NAPOCOR.Oil
companies started to pay specific and ad valorem taxes on their
sales of oilproducts to NAPOCOR only in 1984. NAPOCOR
claimed for a refund (P468.58 million). Only portionthereof,
corresponding to Caltex, was approved and released by way of a
tax credit memo. The claim forrefund of taxes paid by PetroPhil,
Shell and Caltex amounting to P410.58 million was denied.
NAPOCORmoved for reconsideration, starting that all deliveries
of petroleum products to NAPOCOR are tax exempt,regardless of
the period of delivery.
Issue: WON NAPOCOR ceased to enjoy exemption from indirect
tax when PD 938 stated the exemption in general terms.
Held:
NAPOCOR is a non-profit public corporation created for the
general good and welfare, and wholly owned by the government
of the Republic of the Philippines. From the very beginning of the
corporation’s existence, NAPOCOR enjoyed preferential tax
treatment “to enable the corporation to pay the indebtedness
and obligation” and effective implementation of the policy
enunciated in Section 1 of RA 6395. From the preamble of PD
938, it is evident that the provisions of PD 938 were not intended
to be strictly construed against NAPOCOR. On the contrary, the
law mandates that it should be interpreted liberally so as to
enhance the tax exempt status of NAPOCOR. It is recognized
principle that the rule on strict interpretation does not apply in
the case of exemptions in favor of government political
subdivision or instrumentality. In the case of property owned by
the state or a city or other public corporations, the express
exception should not be construed with the same degree of
strictness that applies to exemptions contrary to the policy of
the state, since as to such property “exception is the rule and
taxation the exception.”
~~~
Q:Who is the petitioner? What is his contention?
A: Maceda’s contention: the NPC should not be exempted from
indirect.
Q: Is there loss of income in tax exemption? Why?
A: No. There is no tax due.
Tax Exemption is the opposite of tax amnesty. There is no loss of
revenue in the former. It is legislative. On the other hand, in Tax
Amnesty, there is tax due, then pinatawad ng government.
There is loss of revenue. It is legislative. There must be a law.
NPC is a public corporation which was enacted to develop
hydraulic power from all water resources in the Philippines. It
was granted tax exemption. Several laws passed also lifted the
exemption.
NPC had tax exemption because when the president granted
back the tax exemption, there was an exercise of both the
executive and legislative powers. It did not violate “what has
been delegated cannot be further delegated”
.
Q: What is the nature of the services of the NPC?
A: It is a government corporation. It is a service provider.
As a general rule, the government is exempt from taxation.
However, agencies of the government performing proprietary
functions are subject to tax. There is no prohibition for the
government to tax itself. Since NPC is a service provider charging
people for their services, it can be subject to tax.
The purpose of the petitioner is to improve the revenue of the
government. The amount of revenue received or expected to be
received by the tax exemption is however not going to any of the
oil companies. There would be no loss to the government. The
said amount shall accrue to the benefit of NPC, a government
corporation, to enable it to sustain its tremendous task of
providing electricity to the country at the least cost to the
consumers. Denying its tax exemption would be hampering, if
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not paralyzing, the operations of the NPC. The greater interest of
the people must be paramount.
Marcos, at that time, exercised both executive and legislative
power. That is why we have Presidential Decrees. Examples are
Anti-fencing law, Anti car napping, etc..
From UP Bar Reviewer 2013
If the taxing authority is the National Government:
General Rule:Agencies and instrumentalities of the government
are exempt from tax.
Note: Unless otherwise provided by law, the exemption applies
only to government entities through which the government
immediately and directly exercises its sovereign powers. With
respect to government-owned or controlled corporations
performing proprietary (not governmental) functions, they are
generally subject to tax in the absence of tax exemption
provisions in their charters or the law creating them.
Reasons for the exemption:
(1) To levy a tax upon public property would render necessary
new taxes on
other public property for the payment of the tax so laid and thus,
the government would be taxing itself
to raise money to pay over for itself.
(2) This immunity also rests upon fundamental principles of
government, being necessary in order that the functions of
government shall not be unduly impeded. (1 Cooley 263).
(3) The practical effect of an exemption running to the benefit of
the government is merely to reduce the amount of money that
has to be handled by the government in the course of its
operations: It is for these reasons that provisions granting
exemptions to government agencies may be construed liberally
in favor of non-tax liability of such agencies. (Maceda v.
Macaraig, Jr., 197 SCRA 771
[1991]).
Eastern Theatrical Co. vs. AlfonsoGR L-1104, 31 May 1944
Facts:
The municipal board of Manila enacted Ordinance 2958 (series
of 1946) imposing a fee on the price of every admission ticket
sold by cinematograph theaters, vaudeville companies, theatrical
shows and boxing exhibitions, in addition to fees imposed under
Sections 633 and 778 of Ordinance 1600. Eastern Theatrical Co.,
among others, question the validity of ordinance, on the ground
that it is unconstitutional for being contrary to the provisions on
uniformity and equality of taxation and the equal protection of
the laws in as much as the ordinance does not tax other kinds of
amusement, such as race tracks, cockpits, cabarets, concert
halls, circuses, and other places of amusement.
Issue: WON the ordinance violates the rule on uniformity and
equality of taxation.
Held: NO
Equality and uniformity in taxation means that all taxable articles
or kinds of property of the same classshall be taxed at the same
rate. The taxing power has the authority to make reasonable and
naturalclassifications for purposes of taxation; and the theater
companies cannot point out what places of amusementtaxed by
the ordinance do not constitute a class by themselves and which
can be confused with those notincluded in the ordinance. The
fact that somew places of amusement are not taxed while
others, like the onesherein, are taxed is no argument at all
against the equality and uniformity of the tax imposition.
Q: What are the requirements for a valid ordinance? Go back to
your consti.
UP Bar Reviewer 2013
Taxation does not require identity or equality under all
circumstances, or negate the authority to classify the objects of
taxation. –
Classification to be valid, must, be reasonable and this
requirement is not deemed satisfied unless:
(1) it is based upon substantial distinctions which make real
differences;
(2) these are germane to the purpose of the legislation or
ordinance;
(3) the classification applies, not only to present conditions, but,
also, to future conditions
substantially identical to those of the present; and
(4) the classification applies equally to all those who belong to
the same class.
(Pepsi-Cola v. Butuan City, 24 SCRA 789)
The classification is reasonable in the case at bar. The taxing
power has the authority to reasonably classify businesses.
Q:What is the decision of the court in this case? Is the ordinance
valid?
A: Yes. The conflict which is pointed out by these businesses
were imaginary. The fact that some places of amusement were
not taxed while others such as the cinematographs, are taxed is
no argument at all as to the equality and uniformity of the tax
imposition. Equality and Uniformity of tax means that all taxable
articles or kinds of property of the same class shall be taxed at
the same rate.
American Bible Society vs. ManilaGR L-9637, 30 April 1957
Facts:
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In the course of its ministry, the Philippine agency of the
American Bible Society has been distributing and selling bibles
and/or gospel portions thereof throughout the Philippines and
translating the same into several Philippine dialects. The acting
City Treasurer of Manila required the society to secure the
corresponding Mayor’s permit and municipal license fees,
together with compromise covering the period from the 4th
quarter of 1945 to the 2nd quarter of 1953. The society paid
such under protest, and filed suit questioning the legality of the
ordinances under which the fees are being collected.
Issue: WON the municipal ordinances violate the freedom of
religious profession and worship.
Held:
A tax on the income of one who engages in religious activities is
different from a tax on property used or employed in connection
with those activities. It is one thing to impose a tax on the
income or property of a preacher, and another to exact a tax for
him for the privilege of delivering a sermon. The power to tax
the exercise of a privilege is the power to control or suppress its
enjoyment. Even if religious groups and the press are not
altogether free from the burdens of the government, the act of
distributing and selling bibles is purely religious and does not fall
under Section 27 (e) of the Tax Code (CA 466). The fact that the
price of bibles, etc. are a little higher than actual cost of the
same does not necessarily mean it is already engaged in business
for profit. Ordinance 2529 and 3000 are not applicable to the
Society.
Casanovas vs. HordGR L-3473, 22 March 1907
Facts:
In 1897, the Spanish Government, in accordance with the
provisions of the royal decree of 14 may1867, granted J.
Casanovas certain mines in the province of Ambos Camarines, of
which mines the latter isnow the owner. That these were validly
perfected mining concessions granted to prior to 11 April 1899
isconceded. They were so considered by the Collector of Internal
Revenue and were by him said to fall withinthe provisions of
Section 134 of Act 1189 (Internal Revenue Act). The
Commissioner, JNO S. Hord, imposedupon these properties the
tax mentioned in Section 134, which Casanovas paid under
protest.
Issue: WON Section 134 of Act 1189 is valid.
Held:
The deed constituted a contract between the Spanish
Government and Casanovas. The obligation in thecontract was
impaired by the enactment of Section 134 ofthe Internal
Revenue La, thereby infringing theprovisions of Section 5 of the
Act of Congress of 1 July 1902. Furthermore, the section conflicts
with Section60 of the Act of Congress of 1 July 1902, which
indicate that concessions can be cancelled only by reason
ofillegality in the procedure by which they wer obtained, or for
failure to comply with the conditions prescribedas requisites for
their retention in the laws under which they wer granted. The
grounds were not shown orclaimed in the case. As to the
allegation that the section violates uniformity of taxation, the
Court found itunnecessary to consider the claim in view of the
result at which the Court has arrived.
Ad Valorem Tax– a tax of a fixed proportion of the value of the
property with respect to which the tax is assessed. It requires the
intervention of assessors or appraisers to estimate the value of
such property before the amount due from each taxpayer can be
determined. The phrase “ad valorem” means literally, “according
to value.” (e.g. real estate tax, excise tax on automobiles, non-
essential goods such as jewelry and perfumes, customs duties
(except on inematographic films)).
Specific Tax – a tax of a fixed amount imposed by the head or
number or by some other standard of weight or measurement. It
requires no assessment (valuation) other than the listing or
classification of the objects to be taxed. (e.g., taxes on distilled
spirits, wines, and fermented liquors; cigars and cigarettes)
Chamber of Real Estate and Builders’ Associations, Inc., v. The
Hon. ExecutiveSecretary Alberto Romulo, et al
Facts:
Petitioner Chamber of Real Estate and Builders’ Associations, Inc.
(CREBA), an association of real estate developers and builders in
the Philippines, questioned the validity of Section 27(E) of the
Tax Code which imposes the minimum corporate income tax
(MCIT) on corporations. Under the Tax Code, a corporation can
become subject to the MCIT at the rate of 2% of gross income,
beginning on the 4thtaxable year immediately following the year
in which it commenced its business operations, when such MCIT
is greater than the normal corporate income tax. If the regular
income tax is higher than the MCIT, the corporation does not pay
the MCIT. CREBA argued, among others, that the use of gross
income as MCIT base amounts to a confiscation of capital
because gross income, unlike net income, is not realized gain.
CREBA also sought to invalidate the provisions of RR No. 2-98, as
amended, otherwise known as the Consolidated Withholding Tax
Regulations, which prescribe the rules and procedures for the
collection of CWT on sales of real properties classified as
ordinary assets, on the grounds that these regulations:
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Use gross selling price (GSP) or fair market value(FMV) as basis
for determining the income tax on the sale of real estate
classified as ordinary assets, instead of the entity’s net taxable
income as provided for under the Tax Code;
Mandate the collection of income tax on a per transaction basis,
contrary to the Tax Code provision which imposes income tax on
net income at the end of the taxable period;
Go against the due process clause because the government
collects income tax even when the net income has not yet been
determined; gain is never assured by mere receipt of the selling
price; and
Contravene the equal protection clause because the CWT is
being charged upon real estate enterprises, but not on other
business enterprises, more particularly, those in the
manufacturing sector, which do business similar to that of a real
estate enterprise.
Issues:
(1) Is the imposition of MCIT constitutional?
(2) Is the imposition of CWT on income from sales of real
properties classified as ordinary assets constitutional?
Held:
1) Yes. The imposition of the MCIT is constitutional. An income
tax is arbitrary and confiscatory if it taxes capital, because it is
income, and not capital, which is subject to income tax.
However, MCIT is imposed on gross income which is computed
by deducting from gross sales the capital spent by a corporation
in the sale of its goods, i.e., the cost of goods and other direct
expenses from gross sales. Clearly, the capital is not being taxed.
Various safeguards were incorporated into the law imposing
MCIT.
Firstly, recognizing the birth pangs of businesses and the reality
of the need to recoup initial major capital expenditures ,the
MCIT is imposed only on the 4th taxable year immediately
following the year in which the corporation commenced its
operations. Secondly, the law allows the carry-forward of any
excess of the MCIT paid over the normal income tax which shall
be credited against the normal income tax for the three
immediately succeeding years. Thirdly, since certain businesses
may be incurring genuine repeated losses, the law authorizes the
Secretary of Finance to suspend the imposition of MCIT if a
corporation suffers losses due to prolonged labor dispute, force
majeure and legitimate business reverses.
2) Yes. Despite the imposition of CWT on GSP or FMV, the
income tax base for sales of real property classified as ordinary
assets remains as the entity’s net taxable income as provided in
the Tax Code, i.e., gross income less allowable costs and
deductions. The seller shall file its income tax return and credit
the taxes withheld by the withholding agent-buyer against its tax
due. If the tax due is greater than the tax withheld, then the
taxpayer shall pay the difference. If, on the other hand, the tax
due is less than the tax withheld, the taxpayer will be entitled to
a refund or tax credit. The use of the GSP or FMV as basis to
determine the CWT is for purposes of practicality and
convenience. The knowledge of the withholding agent-buyer is
limited to the particular transaction in which he is a party.
Hence, his basis can only be the GSP or FMV which figures are
reasonably known to him.
Also, the collection of income tax via the CWT on a per
transaction basis, i.e., upon consummation of the sale, is not
contrary to the Tax Code which calls for the payment of the net
income at the end of the taxable period. The taxes withheld are
in the nature of advance tax payments by a taxpayer in order to
cancel its possible future tax obligation. They are installments on
the annual tax which may be due at the end of the taxable year.
The withholding agent-buyer’s act of collecting the tax at the
time of the transaction, by withholding the tax due from the
income payable, is the very essence of the withholding tax
method of tax collection.
On the alleged violation of the equal protection clause, the
taxing power has the authority to make reasonable
classifications for purposes of taxation. Inequalities which result
from singling out a particular class for taxation, or exemption,
infringe no constitutional limitation. The real estate industry is,
by itself, a class and can be validly treated differently from other
business enterprises. What distinguishes the real estate business
from other manufacturing enterprises, for purposes of the
imposition of the CWT, is not their production processes but the
prices of their goods sold and the number of transactions
involved. The income from the sale of a real property is bigger
and its frequency of transaction limited, making it less
cumbersome for the parties to comply with the withholding tax
scheme. On the other hand, each manufacturing enterprise may
have tens of thousands of transactions with several thousand
customers every month involving both minimal and substantial
amounts.
MCIT is computed directly from the gross sales of the
corporation. It is 2% of the gross income.
Gross Income is sales deducted by cost of sales (cost incurred
that are directly attributable to the sale)
Net Income is gross income less cost of sales less operating
expenses
How much is the present corporate tax rate? 30% of net income
How about MCIT? 2% of gross income.
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Halimbawa. 1 M. The net income is 500T. The normal tax due is
500T x 30%, so that is 150T. How much is MCIT? 1 M x 2% is 20T.
In that case, alin doon ang babayran? It is the normal tax due.
What is higher sa dalawa.

Minsan kasi ang mga corporatiom always negative ang income

kahit ilang years na in existence. If MCIT is higher than the
normal tax due, you pay the MCIT.

Halimbawa, ang imong ginabligya pantalon. Naa kay 10 ka

pantaloon, imong baligya kay tig 1T, gikumpra nimo tag 500, so
your sales is 10T. Your cost of sales is your capital, so 5T. 10T less
5T is 5T, that is your gross income. Less operational expenses,
pamiliti, tao nag bantay, suga, tubig, you come up with your net
income.

Manila Electric vs. Province of Laguna

Facts:

Manila Electric Company (MERALCO) was granted franchise by

certain municipalities of the Province of Laguna and the National
Electrification Administration for the supply of electric light, heat
and power within their concerned areas.

Upon enactment of the Local Government Code, the province

enacted an ordinance imposing a tax on businesses enjoying a
franchise. MERALCO paid under protest and later claimed for
refund as it contravened Sec 1 of PD 551 imposing a franchise
tax of 2% of gross receipts notwithstanding any provision of law
or local ordinance to the contrary.

ISSUE: Whether or not the imposition of a franchise tax by the

Province of Laguna to MERLACO is violative of the non-
impairment clause of the Constitution considering that under PD
551 notwithstanding any provision of law or local ordinance to
the contrary, the franchise tax payable shall be 2% of gross
receipts.

RULING:

No, it is contractual tax exemptions where non-impairment

clause of the Constitution can rightly be invoked, not franchise.
Contractual tax exemptions are those agreed to by the taxing
authority in contracts, such as those contained in government
bonds or debentures, lawfully entered into by them under
enabling laws in which the government, acting in its private
capacity, sheds its cloak of authority and waives its
governmental immunity.

It is even explicit in Article XII, Section 11, of the 1987

Constitution that “…Neither shall any such franchise or right be
granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the
common good so requires. ” Hence, the Local Government Code
repealed or modified the inconsistent part or parts of PD 551.

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Tax TSN for July 17 2016
By: Mark Malinao
Local Taxation
Local Government Code
Starting with section 128 now under ...
SECTION 128. Scope - The provision herein shall govern the
exercise by provinces, cities, municipalities, and Barangays of
their taxing and other revenue-raising powers.
and under section 129, na reitirate dito yung power granted by
the Constitution for LGU's to create sources of revenue.
SECTION 129. Power to Create Source of Revenue - Each local
government unit shall exercise its power to create its own
sources of revenue and to levy taxes, fees, and charges subject
to the provisions herein, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively
to the local government units.
Now if you look at section 186, it gives the general view of the
limitation of the LGU in the exercise of their taxing power.
SECTION 186. Power To Levy Other Taxes, Fees or Charges. -
Local government units may exercise the power to levy taxes,
fees or charges on any base or subject not otherwise specifically
enumerated herein or taxed under the provisions of the National
Internal Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be unjust,
excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying
such taxes, fees or charges shall not be enacted without any
prior public hearing conducted for the purpose.
Ok... so may tatlo jan huh
General Limitations of the Power to Tax by LGU's
1. Cannot tox those specifically enumerated herein or taxed
under the provisions of the National Internal Revenue Code.
- So you have to remeber the enumeration under the
list under the NIRC. Yung ang hindi pwede e-tax ng LGU.
2. The taxes, fees, or charges shall not be unjust, excessive,
oppressive, confiscatory or contrary to declared national policy.
3. It must be through an ordinance, and there must be prior
public hearing.
So yan ang general view of the limitations on the power to tax, of
LGU's
Now under 132 ...
SECTION 132. Local Taxing Authority - The power to impose a
tax, fee, or charge or to generate revenue under this Code shall
be exercised by the Sanggunian of the local government unit
concerned through an appropriate ordinance.
So the law making body ng LGU is the Sanggunian. It has to pass
an ordinance to levy tax. And that tax cannot be imposed
without prior public hearing.
Now the common limitations of the taxing power of the LGU's is
enumerated under section 133
SECTION 133. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and Barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other
financial institutions;
- Income tax, ano yan, kasama yan sa NIRC,
but the LG Code provides for an exception and that is banks and
financial institution. so take note of the two exceptions. So as a
general rule, income tax, hindi pwede.
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and
other acquisitions mortis causa, except as otherwise provided
herein;
- B and C are under NIRC. So National Revenue
yan sila.
(d) Customs duties, registration fees vessels 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 unit
concerned;
- Syempre doon yan sa BoC and collector
nyan.
(e) Taxes, fee and charges and other impositions upon
goods carried into or out of, or passing through, the territorial
jurisdictions of local government units in the guise of charges for
wharfage, tolls for bridges or otherwise, or other taxes, fees or
charges in any form whatsoever upon such goods or
merchandise;
- Halimbawa naay city, naay ni agi na truck
nag bit-bit ug goods diha, e-tax pana nimu? So that is discussed
in the case of Palma Development Company vs Mun of
Malangas. So you will read that case so that you will know why.
(f) Taxes, fees, or charges on agricultural and aquatic
products when sold by marginal farmers or fishermen;
- So this is part of income tax. However under
the NIRC, it provides for some exceptions. Etong mga marginal
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farmers and fisherfolks meron yan sila exemptions given to them - Republic Act No. 6810 (December
under the provissions of the NIRC. 14, 1989)

(g) Taxes on business enterprises certified to by the AN ACT ESTABLISHING THE MAGNA
Board of Investments as pioneer or non-pioneer for a period of CARTA FOR COUNTRYSIDE AND
six (6) and (4) four years, respectively from the date of BARANGAY BUSINESS ENTERPRISES, GRANTING
registration; EXEMPTIONS FROM ANY AND
ALL GOVERNMENT RULES AND REGULATIONS AND OTHER
- Now this is the case of Batangas Power INCENTIVES AND BENEFITS
Corporation vs Batangas City. THEREFOR, AND FOR OTHER PURPOSES

(h) Excise taxes on articles enumerated under the - So let us read this law. Under
National Internal Revenue Code, as amended, and taxes, fees or section 1
charges on petroleum products;
Section 1. It is hereby declared to be
(i) Percentage or value added tax (VAT) on sales, the policy of the State that growth
barters or exchanges or similar transactions on goods or services of countryside business enterprises shall be achieved
except as otherwise provided herein; through absence of bureaucratic
restrictions and granting of incentives and other
- H and I are under the NIRC. benefits.
(j) Taxes on the gross receipts of transaction - So as a part of incentive, marami
contractors and persons engaged in the transportation of silang exemptions. Including business
passengers or freight by hire and common carriers by air, land or license. Now section 2 ...
water, except as provided in this Code;
Section 2. This Act shall be known
- So example, Airplane. It is subject to and cited as the "Magna Carta for
percentage tax. So this is income tax that is subject to NIRC. So Countryside and Barangay Business Enterprises
Section 133 (j) is about common carriers. So the case is First (Kalakalan 20)."
Philippine vs CA. So a common carrier makes no distinction, as
long as it is by air or by land or by sea. Kasi tong First Philippine, As used in this Act, the term
meron sila pipe line consetion. So it was held that the "countryside and barangay business
corporation is a common carrier and is thus exempt from enterprises," hereinafter referred to as the CBBE
business tax imposed by the LGU. (Kalakalan 20), shall mean
any business entity, association or cooperative registered under
(k) Taxes on premium paid by way or reinsurance or the provisions of this Act whose:
retrocession;
(a) Number of
(l) Taxes, fees or charges for the registration of motor employees does not exceed twenty (20) at
vehicle and for the issuance of all kinds of licenses or permits for any time for the purpose of undertaking a productive
the driving thereof, except tricycles; business enterprise
recommended by the Department of Trade and Industry
- Because sa LTO ito. Pero, resgistration sa
(DTI) provincial office that will help
"Pedicab" LGU yan siya.
develop the economy in its area.
(m) Taxes, fees or charges on Philippine products
For this purpose, the term
actually exported, except as otherwise provided herein;
"productive business enterprise"
shall not apply to business enterprises engaged
- Under the NIRC yan siya.
principally in any of the following
(n) Taxes, fees, or charges, on Countryside and activities, namely: professional services, retailing, wholesaling
Barangay Business Enterprises and cooperatives duly registered or trading of commodities, products or
under R.A. No. 6810 and Republic Act Numbered Sixty-nine merchandise;
hundred thirty-eight (R.A. No. 6938) otherwise known as the
(b) Assets, at the time
"Cooperatives Code of the Philippines" respectively; and
of registration as CBBE, do not
- Ok, may exemption yan pag cooperatives. exceed Five hundred thousand pesos (P500,000.00)
Eto naman "Countryside and Barangay Business Enterprises" before financing; and
under RA 6810 ...

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(c) Principal office Now let us take up Provinces. So the specific provision on the
and location of business operations are taxing and revenue rasing powers of local government.
located in the countryside as defined in the
implementing rules and Take note we have Province, City, Municipalities and Barangays.
regulations issued by the Secretary of Trade and You should know, ano ang mga taxing powers of each local
Industry. governments. Because, example, the province cannot impose
business taxes. So kung hindi sya maka impose ng business taxes,
- So meron sya mga what can it impose? So specific sa provinces, we have sections
qualification. Remember production 135 to 141.
industry lang. Di pwede ang professional services,
retailing, wholesaling or So under 135 ...
trading of commodities, products or merchandise.
SECTION 135. Tax on Transfer of Real Property Ownership. -
- Ang trabahante not more
than 20. Assets at the time of (a) The province may impose a tax on the sale,
registration not more than 500k. donation, barter, or on any other mode of transferring
ownership or title of real property at the rate of not more than
- So this CBBE upon fifty percent (50%) of one percent (1%) of the total consideration
registration pay P250.00 to the city or involved in the acquisition of the property or of the fair market
municipality where its principal place of business is value in case the monetary consideration involved in the transfer
located cover the cost of the is not substantial, whichever is higher. The sale, transfer or other
issuance of the license to operate, known as the CBBE disposition of real property pursuant to R.A. No. 6657 shall be
authority. exempt from this tax.

- So the excemption naman (b) For this purpose, the Register of Deeds of the
is not forever. sa start lang yan. province concernedshall, before registering any deed, require
the presentation of the evidence of payment of this tax. The
- So All CBBEs shall be provincial assessor shall likewise make the same requirement
exempted from all taxes, national or before canceling an old tax declaration and issuing a new one in
local, license and building permit fees and other place thereof. Notaries public shall furnish the provincial
business taxes, except real treasures with a copy of any deed transferring ownership or title
property and capital gains taxes, import duties and other taxes to any real property within thirty (30) days from the date of
on imported articles. In notarization.
addition, any and all income, receipts and proceeds
derived from the business operations of the CBBE shall It shall be the duty of the seller, donor, transferor,
be excluded from the executor or administrator to pay the tax herein imposed within
computation of gross income for purposes of computing the sixty (60) days from the date of the execution of the deed or
individual income tax of the from the date of the decedent's death.
owners/members thereof.
- So transfer of ownership, mu ingon mo, "ma'am diba
- So marami syang sa Estate Tax" yan siya? No it's different. Yung sa Estate Tax,
exemptions, pero mag bayad parin sya ng unsa man ang gi tax didto? The priviledege noh. The transfer of
real property tax, capital gains, import duties and the property from the dead to the living. Eto naman "Tax on
income taxes from its Transfer Property Tax", required siya sa bagong sistema, kasi
operation. So you just read the rest of this RA 6810. required ka mag bayad ng "transfer fee" sa City or sa Province.
That transfer fee is one of the requirements before the registry
of deeds will transfer the property to the name of the owner as
in a deed of sale.
(o) Taxes, fees or charges, of any kind on the National
Government, its agencies and instrumentalities, and local - Now after the transfer, you do not stop with the RoD.
government units. You still have to go to the Assessor's office to transfer the Tax
Declaration to the new registered owner. So you still need to
- Basta yun general rule, government is show proof that you paid the Transfer Fee.
exmepted from taxes. "But there is no
law prohibiting the government from taxing it self." - - So the rate is 50% of 1% of the total consideration or
(sure?) Specially yung mga government entities na the fair market value which ever is higher. So in case of
performing proprietary functions. sucsession, wala naman consideration, so fair market value lang.
In case naman sa Deed of Sale, so the value. Pero kung barato ra
pud kaayu, fair market value. So which ever is higher.
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Then Tax on Business of Printing and Publication
SECTION 136. Tax on Business of Printing and Publication. - The
Province may impose a tax on the business of persons engaged
in the printing and/or publication of books, cards, posters,
leaflets, handbills, certificates, receipts, pamphlets, and other of
similar nature, at a rate not exceeding fifty percent (50%) of one
percent (1%) of the gross annual receipts for the preceding
calendar year.
In the case of a newly started business, the tax shall not
exceed onetwentieth (1/20) of one percent (1%) of the capital
investment. In the succeeding calendar year, regardless of when
the business started to operate, the tax shall be based on the
gross receipts for the preceding calendar year, or any fraction
thereof, as provided herein.
The receipts from the printing and/or publishing of
books or other reading materials prescribed by the Department
of Education, Culture and Sports as school texts or reference
shall be exempt from the tax herein imposed.
- So meron exemptions, hindi ma impose on news
papers, news magasinzes, and reading materials prescribed by
the Department of Education.
- Then next we have Franchise.
SECTION 137. Franchise Tax - Notwithstanding any exemption
granted by any law or other special laws, the province may
impose a tax on business enjoying a franchise, at a rate
exceeding fifty percent (50%) of one percent (1%) of the gross
annual receipts for the preceding calendar year based on the
incoming receipt, or realized, within its territorial jurisdiction.
In the case of a newly started business, the tax shall not
exceed onetwentieth (1/20) of one percent (1%) of the capital
investment. In the succeeding calendar year, regardless of when
the business started to operate, the tax shall be based on the
gross receipts for the preceding calendar year, or any fraction
thereof, as provided herein.
- Now remember, that as you read along, ang
municipalities,the difference sa tatlo huh (Province, City and
Municipalities), kasi ang naka lagay dito the province may levy
only the taxses fees and charges as provided in this article. Pero
yung municipalities na hindi naman pwede na mag charge ng
franchise tax. So municipalities may levy taxes fees and charges
not levied by the province. You take note, kaya marami gusto
maging city because cities may levy taxes fees and charges which
the provinces and municipalities may impose.
- So if ang provinces limited lang sa naka lista doon. Ang
municipalities naman maka impose lang yung hindi na impose ng
province. Pag dating sa city, pwede sya. Plus maka impose pa sya
ng not more than 50% higher at the rate the provinces and
municipalities may impose.
- By the way, municipalities at Metro Manila area, kahit
municipality lang sila, they are like cities. Ang taxing powers nila
are just like cities. It is provided here in your LG Code.
- So franchise tax. Take note "notwitstanding" ang sabi.
SO yung franchise grantee, na bigyan ng exemption, nong na
ipasa ang LG Code, marami nag file ng kaso. They claim
exemption under their franchise. So are they exempt from the
franchise tax imposed by LGU? The answer is no. So if grantee ka
before the passage of the LG Code, subject ka sa franchise tax ng
LGU. But if the grant is after the LG Code, meron specific
exemption talaga doon, exempted ka.
Ok under section 138 ..
SECTION 138. Tax on Sand, Gravel and Other Quarry Resources -
The province may levy and collect not more than ten percent
(10%) of fair market value in the locality per cubic meter of
ordinary stones, sand, gravel, earth, and other quarry resources,
as defined under the National Internal Revenue Code, as
amended, extracted from public lands or from the beds of seas,
lakes, rivers, streams, creeks, and other public waters within its
territorial jurisdiction.
The permit to extract sand, gravel and other quarry
resources shall be issued exclusively by the provincial governor,
pursuant to the ordinance of the Sangguniang Panlalawigan.
The proceeds of the tax on sand, gravel and other
quarry resources shall be distributed as follows:
(1) Province - Thirty percent (30%);
(2) Component City or Municipality where the sand,
gravel, and other quarry resources are extracted -
Thirty percent (30%); and
(3) Barangay where the sand, gravel, and other quarry
resources are extracted - Forty percent (40%).
- So permitis issued exclusively by the
Governor pursuant to the Sanggunian. So also take note of
the distribution.
Then we have professional tax ...
SECTION 139. Professional Tax - (a) The province may levy an
annual professional tax on each person engaged in the exercise
or practice of his profession requiring government examination
as such amount and reasonable classification as the Sangguniang
Panlalawigan may determine but shall in no case exceed Three
hundred pesos (P300.00)
(b) Every person legally authorized to practice his
profession shall pay the professional tax to the province where
he practices his profession or where he maintains his principal
office in case he practices his profession in several places:
Provided, however, That such person who has paid the
corresponding professional tax shall be entitled to practice his
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profession in any part of the Philippines without being subjected
to any other national or local tax, license, or free for the practice
of such profession.
(1) Any individual or corporation employing a person
subject to professional tax shall require payment by that
person of thetax on his profession before employment and
annually thereafter.
(2) The professional tax shall be payable annually on or
before the thirty first (31st) day of January must, however,
pay the full tax before engaging therein. A line of profession
does not become exempt even if conducted with some
other profession for which the tax has been paid.
Professionals exclusively employed in the government shall be
exempt from the payment of this tax.
(3) Any person subject to the professional tax shall
write in deeds, receipts, prescriptions, reports, books of
account, plans and designs, surveys and maps, as the case may
be, the number of the official receipt issued to him.
- So teachers, accountant engineers, basta
yung meron board exam. No case exeed
P300.00
- So 139 (b) exemption yan pero kailangan
exclusively.
- So 139 (no. 3) mao na ang mga PTR.
SECTION 140. Amusement Tax - (a) The province may levy an
amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing
stadia, and other places of amusement at a rate of not more
than thirty percent (30%) of the gross receipts from admission
fees.
(1) In the case of theaters of cinemas, the tax shall first
be deducted and withheld by their proprietors, lessees,
or operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors,
lessees, or operators and the distributors of the
cinematographic films.
(2) The holding of operas, concerts, dramas, recitals,
painting and art exhibitions, flower shows, musical programs,
literary and oratorical presentations, except pop, rock, or
similar concerts shall be exempt from the payment of
the tax herein imposed.
(3) The Sangguniang Panlalawigan may prescribe the
time, manner, terms and conditions for the payment of tax. In
case of fraud or failure to pay the tax, the Sangguniang
Panlalawigan may impose such surcharges, interests and
penalties.
(4) The proceeds from the amusement tax shall be
shared equally by the province and the municipality where
such amusement places are located.
SECTION 141. Annual Fixed Tax For Every Delivery Truck or Van
of Manufacturers or Producers, Wholesalers of, Dealers, or
Retailers in, Certain Products. - (a) The province may levy an
annual fixed tax for every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or retailers in
the delivery or distribution of distilled spirits, fermented liquors,
soft drinks, cigars and cigarettes, and other products as may be
determined by the Sangguniang Panlalawigan, to sales outlets,
consumers, whether directly or indirectly, within the province in
an amount not exceeding Five hundred pesos (P500.00).
(b) The manufacturers, producers, wholesalers, dealers,
and retailers referred to in the immediately foregoing paragraph
shall be exempt from the tax on peddlers prescribed elsewhere
in this Code.
- 140 and 141 kay wala na mention ni ma'am pero apil siya sa
taxing powers sa province.
Ok specific taxing power of municipalities.
So again under section 142 ...
SECTION 142. Scope of Taxing Powers. _ Except as otherwise
provided in this Code, municipalities may levy taxes, fees, and
charges not otherwise levied by provinces.
So eto ng section 144, the rates of tax in Metropolitan Manila
area ...
SECTION 144. Rates of Tax within the Metropolitan Manila Area.
- The municipalities within the Metropolitan Manila Area may
levy taxes at rates which shall not exceed by fifty percent (50%)
the maximum rates prescribed in the preceding Section.
- So municipalities pala, not more than 50% of the rates
imposed by other municipalities. So even retirement of business,
me bayad yan. Nag retire ka kay na lugi, unya pa bayaron
gihapon ka ana. That's under section 145 ...
SECTIOIN 145. Retirement of Business. - A business subject to tax
pursuant to the preceding sections shall, upon termination
thereof, submit a sworn statement of its gross sales or receipts
for the current year. If the tax paid during the year, the
difference shall be paid before the business is concerned
officially retired.
- You secure a business permit for 2016, in the middle
of the year, you are retiring your business, so you still have to
pay the gross receipts from January up to the date of retirement.
You have to pay the corresponding tax.
Ok, for section 150 ...
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SECTION 150. Situs of the Tax. - (a) For purposes of collection of
the taxes under Section 143 of this Code, manufacturers,
assemblers, repackers, brewers, distillers, rectifiers and
compounders of liquor, distilled spirits and wines, millers,
producers, exporters, wholesalers, distributors, dealers,
contractors, banks and other financial institutions, and other
businesses, maintaining or operating branch or sales outlet
elsewhere shall record the sale in the branch or sales outlet
making the sale or transaction, and the tax thereon shall accrue
and shall be paid to the municipality where such branch or sales
outlet is located. In cases where there is no such branch or sales
outlet in the city or municipality where the sale or transaction is
made, the sale shall be duly recorded in the principal office and
the taxes due shall accrue and shall be paid to such city or
municipality.
(b) The following sales allocation shall apply to
manufacturers, assemblers, contractors, producers, and
exporters with factories, project offices, plants, and plantations
in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded
in the principal office shall be taxable
by the city or municipality where the principal office is located;
and
(2) Seventy percent (70%) of all sales recorded
in the principal office shall be taxable
by the city or municipality where the factory, project office,
plant, or plantation is located.
(c) In case of a plantation located at a place other than
the place where the factory is located, said seventy percent
(70%) mentioned in subparagraph (b) of subsection (2)
above shall be divided as follows:
(1) Sixty percent (60%) to the city or
municipality where the factory is
located; and
(2) Forty percent (40%) to the city or
municipality where the plantation
is located.
(d) In case where a manufacturer, assembler, producer,
exporter or contractor has two (2) or more factories, project
offices, plants, or plantations located in different localities, the
seventy percent (70%) mentioned in subparagraph (b) of
subsection (2) above shall be prorated among the localities
where the factories, project offices, plants, and plantations are
located in proportion to their respective volume or production
during the period for which the tax is due.
(e) The foregoing sales allocation shall be applied
irrespective of whether or not sales are made in the locality
where the factory, project office, plant or plan is located.
- For puropes of collection of business tax. Ok saan ka
dapat mag bayad ng local tax? If you are a manufucturer without
sales outlet, then you pay your business tax in your principal
office. Pag manufucturer ka, at meron kang sales outlet, then
you pay business tax in your sales outlet. Howabout, may
principal office and factory? So 30% sa principal office, 70% sa
factory. Pag may principal office, may factory and plantation, in
that case, 30% sa principal office. Ang 70% kay ma hati ug 60:40.
So 60% of 70% to the factory and 40% of 70% to the plantation.
That is pag mag iba-iba ang location.
Now let's go to Cities. Scope of taxing powers ...
SECTION 151. Scope of Taxing Powers. - Except as otherwise
provided in this Code, the city, may levy the taxes, fees, and
charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and
collected by highly urbanized and independent component cities
shall accrue to them and distributed in accordance with the
provisions of this code.
The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by not
more than fifty percent (50%) except the rates of professional
and amusement taxes.
- So the cities can impose a higher rate excpet on
professional and amusement taxes.
- So ilan lang ba ang highly urbanized cities? Like Davao
City and Cebu City.
So Barangays ...
SECTION 152. Scope of Taxing Powers. - The Barangays may levy
taxes, fees, and charges, as provided in this Article, which shall
exclusively accrue to them:
(a) Taxes - On stores or retailers with fixed business
establishments with gross sales or receipts of the preceding
calendar year of Fifty Thousand pesos (P50,000.00) or less, in the
case of cities and Thirty thousand pesos (P30,000.00) or less, in
the case of municipalities, at a rate not exceeding one percent
(1%) on such gross sales or receipts.
- Ok, daghan naga avail ani. Barangay Permit
na lang ilaha. Tuo kaha ka 13k lang iyahang
gross receipts for 1year? Tikasan kaayu.
(b) Service Fees or Charges - Barangays may collect
reasonable fees or charges for services rendered in connectioin
with the regulation or the use of Barangay-owned properties or
service facilities such as palay, copra, or tobacco dryers.
- Actually this is also a common revenue
rasing power under 153, 154, and 155.
(c) Barangay Clearance - No city or municipality may
issue any license or permit for any business or activity unless a
clearance is first obtained from the Barangay where such
business or activity is located or conducted. For such clearance,
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the Sangguniang Barangay may impose a reasonable fee. The
application for clearance shall be acted upon within seven (7)
working days from the filing thereof. In the event that the
clearance is not issued within the said period, the city or
municipality may issue the said license or permit.

(d) Other Fees and Charges - The Barangay may levy

reasonable fees and charges:

(1) On commercial breeding of fighting cocks,

cockfighting and cockpits;

(2) On places of recreation which charge

admission fees; and

(3) On billboards, signboards, neon signs, and

outdoor advertisements.

- So ano lang pwede sa barangay? Barangay clearance

para maka kuha ka business license. Next we have Community
Tax, so this is partly explained when we took up Constitutional
Provissions. So hindi lang individual ang liable, pati juridical
persons.

- Now exemptions under 159 ... (Community Tax)

SECTION 159. Exemption. - The following are exempt from the

community tax:

(1) Diplomatic and consular representatives; and

(2) Transient visitors when their stay in the Philippines

does not exceed three (3) months.

- So poll tax is community tax. So where do you get

Community tax?

SECTION 160. Place of Payment. - The community tax shall be

paid in the place of residence of the individual, or in the place
where the principal office of the juridical entity is located.

So pag di ka subject ng Community tax, pero gusto mo mag

bayad, pwede dire, oh piso.

SECTION 162. Community Tax Certificate. - A community tax

certificate shall be issued to every person or corporation upon
payment of the community tax. A community tax certificate may
also be issued to any person or corporation not subject to the
community tax upon payment of One peso (P1.00).

Now Section 163 is not anymore applicable. "SECTION 163.

Presentation of Community Tax Certificate On Certain
Occasions" - it is not anymore acceptable under our Notarial
Law.

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July 19, 2016
Transcribed by: Maedelyn G. Amella
Continuation of CHAPTER III. COLLECTION OF TAXES.
PLEASE READ TOGETHER WITH YOUR COPY OF THE LGU CODE.
 Section 173. Local Government's Lien. - Local taxes,
The LGU used the calendar year for the collection of taxes. Such
taxes, fees and charges may be paid in quarterly instalments.
Section 169. Interests on Other Unpaid Revenues. - Where the
amount of any other revenue due a local government unit,
except voluntary contributions or donations, is not paid on the
date fixed in the ordinance, or in the contract, expressed or
implied, or upon the occurrence of the event which has given
rise to its collection, there shall be collected as part of that
amount an interest thereon at the rate not exceeding two
percent (2%) per month from the date it is due until it is paid,
but in no case shall the total interest on the unpaid amount or
a portion thereof exceed thirty-six (36) months.
Section 170 provides that all local taxes, fess and charges shall
be collected by the provincial, city, municipal, or barangay
treasurer or their duly authorized deputies.
Section 171 provides for the power of the provincial, city,
municipal or barangay treasurer, by himself through any of his
deputies duly authorized in writing, to examine the books,
accounts and other pertinent records of any person,
partnership, corporation or association.
For example. Sa licensing sa business, the taxpayer is supposed
to state their gross receipts. So i disclose nya magkano ang gross
receipts of the preceeding year and that will be the basis for the
computation of the business license for the incoming year. Ang
presumption is that the sales last year is pareho lang sa sales this
year.
So parang sort of fishing expedition ba. Mag ask man nah sila,
“How many workers do you have?” What about the place of
business? Is it owned or rented? if it is rented, how much is the
rent? Ipakita mo pa ang ang iyong lease contract before ka
makakuha og business license. So in that way, they can assess if
you are disclosing your real gross receipts. Kasi if you are saying
na 10k per month then your annual rental expense is 120k tapos
ang gideclare mo na gross receipts is only 200k within 5years,
anong sasabihin ng government or LGU? Enough lang ang imong
gross receipts for your rent? So that means namakak ka.
Take note that failure to secure business license renders the
business operation illegal but non-payment of taxes before the
BIR does not render the business operation illegal.
Now, what if you cannot pay the taxes,fees and charges due to
the Local Government?
So the Local Government have remedies for the collection of any
delinquent local tax, fees and charges.
Under Section 173
The Local Government has a lien.
fees, charges and other revenues constitute a lien,
superior to all liens, charges or encumbrances in
favor of any person, enforceable by appropriate
administrative or judicial action, not only upon any
property or rights therein which may be subject to
the lien but also upon property used in business,
occupation, practice of profession or calling, or
exercise of privilege with respect to which the lien is
imposed. The lien may only be extinguished upon
full payment of the delinquent local taxes fees and
charges including related surcharges and interest.
Section 174 provides for the Civil Remedies available to the
LGU.
We have Administrative Action or Judicial Action against those
guilty or ayaw magbayad ng taxes, fees or charges.
For administrative action, pwedeng DISTRAINT or LEVY. So alam
nyo na kapag distraint that is for personal property. So ang i-
seize ng LGU is the personal property of the taxpayer then
pwede din ang Levy.
So in the absence of any personal property or yung personal
property is exempt from execution, they can go after the real
properties of the taxpayer.
Now, under Distraint. What is the procedure?
A. SEIZURE
Upon written notice, the local government seize or confiscate
any personal property subject to the lien. There must first be
failure to pay then the taxpayer will be declared delinquent.
There is the fact of delinquency in the payment of charges. Now
in that written notice, it must contain the fact of delinquency,
the amount of tax, fees and charges including the penalties and
this serves as a warrant for the distraint and this property will be
subject for public auction because taxes and charges are
pecuniary liabilities so it must be paid in money. “dili pwede in
kind”. Kung walang ibang property the gov’t resorts to distraint.
B. ACCOUNTING
There must be an Accounting of distrained goods. If one personal
property is not sufficient to cover the tax dues including
penalties, then the gov’t may take other personal property
sufficient to settle the liability of the taxpayer.
C. PUBLICATION
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In case of distraint publication is required. It must be published
in not less than 3 public and conspicuous places in the territory
of the local gov’t unit where the distraint is made. The
publication must specify the time and place of the same and the
articles distrained. Among the 3 places, included na doon ang
office of the chief executive of the local gov’t unit in which the
property is distrained. So dapat ang isang notice nakapost sa
labas ng office ng city mayor.
D. RELEASE OF DISTRAINED PROPERTY UPON PAYMENT PRIOR
TO SALE
At any time prior to schedule date of sale magbayad ang
delinquent taxpayer then the property will be restored or release
to the owner. Kung ayaw niya ibenta ang gamit niya he must pay
before the scheduled sale.
E. PROCEDURE OF SALE (JUST READ)
F. DISPOSITION OF PROCEEDS (JUST READ  and work)
So those properties sold at public auction shall be given to the
highest bidder for cash. Within 5 days after the sale, the local
treasurer shall make a report of the proceedings.
By the way sino ang magsend ng letter ng notice of distraint sa
taxpayer? It is the treasurer.
The treasuser shall make a report of the proceedings in writing
to the local Chief executive concern, so magreport siya sa mayor
or sa governer.
Should the property distrained be not disposed of within 120
days from the date of distraint, the same shall be considered as
sold to the local gov’t unit concerned for the amount of
assessment made thereon by the committee on appraisal and to
the extent of same amount the tax delinquencies shall be
cancelled. So kung wala jud mu-bid or walay buyer it will be sold
to the local gov’t unit.
The Committee on Appraisal is composed of the Treasurer,
Commission on Audit and the Municipal Assessor. The City or
Municipal Treasurer is the chairman while the later are the
members. After the payment, the property will be release.
After the required publication, deed of sale na dayun. It is now
considered as sold. After that i-assess na kung magkano talaga
ang value ng property. This is done by the Comittee of Appraisal
then iapply na sa tax liability. This properties maybe later on
sold.
(f) Disposition of proceeds - The proceeds of the
sale shall be applied to satisfy the tax, including
the surcharges, interest, and other penalties
incident to delinquency, and the expenses of the
distraint and sale. The balance over and above
what is required to pay the entire claim shall be
returned to the owner of the property sold. The
expenses chargeable upon the seizure and sale
shall embrace only the actual expenses of seizure
and preservation of the property pending the
sale, and no charge shall be imposed for the
services of the local officer or his deputy. Where
the proceeds of the sale are insufficient to satisfy
the claim, other property may, in like manner, be
distrained until the full amount due, including all
expenses, is collected.
Whatever excess to the sale shall be turnover to the delinquent
taxpayer.
SECTION 176
How about the levy on Real Property?
So after the expiration of the time required, the taxpayers is
declared delinquent.
Ang distraint ba may be done only once?? HINDI POWSSSS! It
may be done over again to cover the tax liability.So pwedeng
again. So halimbawa kunti lang anfg personal property , so
simultaneously pwede rin ang levy of real property.
What about the levy on real property? So ganun pa rin. Meron
pa rin notice. There is difference however on the written notice
because in this case, it is not only the taxpayer who will be given
a notice. A notice is also given to the office of the City Assessor
for annotation of the declaration na itong property na ito is na
levy na and also a notice on the ROD for the nullification of the
Certificate of Title. Ang titilo sa ROD naa nay lama lama because
of the tax dues in favour of the LGU.
Still on SECTION 176 “..... At the same time,
written notice of the levy shall be mailed to or
served upon the assessor and the Register of
Deeds of the province or city where the property
is located who shall annotate the levy on the tax
declaration and certificate of title of the property,
respectively, and the delinquent taxpayer or, if he
be absent from the Philippines, to his agent or the
manager of the business in respect to which the
liability arose, or if there be none, to the occupant
of the property in question.
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So one to the Assessor, one to the ROD and one to the
taxpayer.Pag wala gani, sa agent nya or manager or if there is
none, to the occupant of the said property. Sa kanya iserve ang
notice.
(stooooorya dayon si Maammm)
In case the levy on real property is not issued
before or simultaneously with the warrant of
distraint on personal property, and the personal
property of the taxpayer is not sufficient to satisfy
his delinquency, the provincial, city or municipal
treasurer, as the case may be, shall within thirty
(30) days after execution of the distraint, proceed
with the levy on the taxpayer's real property.
A report on any levy shall, within ten (10) days after
receipt of the warrant, be submitted by the levying
officer to the sanggunian concerned.
Diba duon sa distraint may publication in 3 conspicuous places.
Pag levy na may publication pa rin doon sa 3 conspicuous places
pati sa newspaper of General Circulation in the place kung saan
naka locate yung LGU concerned.
SECTION 177 - PENALTY FOR FAILURE TO ISSUE AND
EXECUTE WARRANT - Without prejudice to criminal
prosecution under the Revised Penal Code and other
applicable laws, any local treasurer who fails to issue
or execute the warrant of distraint or levy after the
expiration of the time prescribed, or who is found
guilty of abusing the exercise thereof by competent
authority shall be automatically dismissed from the
service after due notice and hearing.
So alam mo na delinquent walang bayad bayad pero kasi
kumpare mo mn yan dili ka magexecute ug warrant to distraint
or levy the property, automatically dismiss ka after due notice
and hearing.
How about ADVERTISEMENT?
Section 178. Advertisement and Sale. - Within
thirty (30) days after the levy, the local treasurer
shall proceed to publicly advertise for sale or
auction the property or a usable portion thereof
as may be necessary to satisfy the claim and cost
of sale; and such advertisement shall cover a
period of at least thirty (30) days. It shall be
effected by posting a notice at the main entrance
of the municipal building or city hall, and in a
public and conspicuous place in the barangay
where the real property is located, and by
publication once a week for three (3) weeks in a
newspaper of general circulation in the
province, city or municipality where the
property is located. The advertisement shall
contain the amount of taxes, fees or charges,
and penalties due thereon, and the time and
place of sale, the name of the taxpayer against
whom the taxes, fees, or charges are levied, and
a short description of the property to be sold. At
any time before the date fixed for the sale, the
taxpayer may stay they proceedings by paying the
taxes, fees, charges, penalties and interests. If he
fails to do so, the sale shall proceed and shall be
held either at the main entrance of the provincial,
city or municipal building, or on the property to
be sold, or at any other place as determined by
the local treasurer conducting the sale and
specified in the notice of sale.
Within thirty (30) days after the sale, the local
treasurer or his deputy shall make a report of the
sale to the sanggunian concerned, and which
shall form part of his records. After consultation
with the sanggunian, the local treasurer shall
make and deliver to the purchaser a certificate of
sale, showing the proceeding of the sale,
describing the property sold, stating the name of
the purchaser and setting out the exact amount
of all taxes, fees, charges, and related surcharges,
interests, or penalties: Provided, however, That
any excess in the proceeds of the sale over the
claim and cost of sales shall be turned over to the
owner of the property.

Section 178 sa levy lang sya applicable.

This is very important. Itong, publication requirement bacause if

there is no compliance, then baka yang auction sale nyo is not
legal.

Now, if the delinquent taxpayer did pay before the date of sale,
pwedeng maibalik yung property. How about if it is sold? Then
the delinquent taxpayer has one year to redeem the property. If
after one year, the delinquent taxpayer failed to redeem the
property then the sheriff will execute the Absolute deed of Sale.
So final Deed na of the purchaser under Section 180.

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Because under Section 179 is the Right of Redemption of the
delinquent taxpayer.
Section 179. Redemption of Property Sold. - Within
one (1) year from the date of sale, the delinquent
taxpayer or his representative shall have the right to
redeem the property upon payment to the local
treasurer of the total amount of taxes, fees, or
charges, and related surcharges, interests or
penalties from the date of delinquency to the date of
sale, plus interest of not more than two percent (2%)
per month on the purchase price from the date of
purchase to the date of redemption.
Then.. after ato...
Section 180. Final Deed to Purchaser. - In case
the taxpayer fails to redeem the property as
provided herein, the local treasurer shall
execute a deed conveying to the purchaser
(YUNG HIGHEST BIDDER) so much of the
property as has been sold, free from liens of any
taxes, fees, charges, related surcharges,
interests, and penalties. The deed shall
succinctly recite all the proceedings upon which
the validity of the sale depends.
Kapag walang bidder, of course the property goes to the Local
Government. That is under Section 181.
Section 181. Purchase of Property By the Local
Government Units for Want of Bidder. - In case
there is no bidder for the real property
advertised for sale as provided herein, or if the
highest bid is for an amount insufficient to pay
the taxes, fees, or charges, related surcharges,
interests, penalties and costs, the local
treasurer conducting the sale shall purchase
the property in behalf of the local government
unit concerned to satisfy the claim and within
two (2) days thereafter shall make a report of
his proceedings which shall be reflected upon
the records of his office the necessity of an
order from a competent court.
So even if the property goes to the LGU concerned, andoon pa
rin yung one year Right of Redemption in favor of the taxpayer.
So parating andyan yang Right of Redemption because the law
favors the preservation of the property to its original owner and
his family.
So gaya ng mga hindi nabenta sa public auction na personal
properties ang mga real properties na gina benta sa public
auction, na gi purchase ng government, subject to resale na sya
.” If sa tingin ng gobyerno wala tay gamitan ani, ibaligya nila
nah.” That is under Section 182. Resale of Real Estate taken for
Taxes, Fees or Charges.
What we have discussed are the Administrative Remedies –
Levy and Distraint.
The other remedy is JUDICIAL REMEDY under Section 183.
Section 183. Collection of Delinquent Taxes, Fees,
Charges or other Revenues through Judicial Action.
- The local government unit concerned may enforce
the collection of delinquent taxes, fees, charges or
other revenues by civil action in any court of
competent jurisdiction. The civil action shall be filed
by the local treasurer within the period prescribed
in Section 194 of this Code.
Section 194. Periods of Assessment and Collection. -
(a) Local taxes, fees, or charges shall be assessed within five (5)
years from the date they became due. No action for the
collection of such taxes, fees, or charges, whether administrative
or judicial, shall be instituted after the expiration of such period
(PRAY NA LANG DAW NA DILI MASAKPAN WITHIN THAT
PERIOD PARA AFTER 5YEARS DILI NA MAKA FILE OG KASO)
Provided, That taxes, fees or charges which have accrued before
the effectivity of this Code may be assessed within a period of
three (3) years from the date they became due.
(b) In case of fraud or intent to evade the payment of taxes, fees,
or charges, the same may be assessed within ten (10) years from
discovery of the fraud or intent to evade payment. (TAKE
NOTE!)
(c) Local taxes, fees, or charges may be collected within five (5)
years from the date of assessment by administrative or judicial
action. No such action shall be instituted after the expiration of
said period: Provided, however, That, taxes, fees or charges
assessed before the effectivity of this Code may be collected
within a period of three (3) years from the date of assessment.
(d) The running of the periods of prescription provided in the
preceding paragraphs shall be suspended for the time during
which:
(1) The treasurer is legally prevented from making the
assessment of collection;
(2) The taxpayer requests for a reinvestigation and executes a
waiver in writing before expiration of the period within which to
assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be
located.
SECTION 185. Naa man ni sa inyong Civil Code.
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Section 185. Personal Property Exempt from
Distraint or Levy. - The following property shall be
exempt from distraint and the levy, attachment or
execution thereof for delinquency in the payment of
any local tax, fee or charge, including the related
surcharge and interest:
(a) Tools and implements necessarily used by the
delinquent taxpayer in his trade or employment;
(Example, ang Bangka sa mangingisda, ang libro sa
lawyer? doctor, engineer..)
(b) One (1) horse, cow, carabao, or other beast of
burden, such as the delinquent taxpayer may select,
and necessarily used by him in his ordinary
occupation;
(c) His necessary clothing, and that of all his family;
(d) Household furniture and utensils necessary for
housekeeping and used for that purpose by the
delinquent taxpayer, such as he may select, of a
value not exceeding Ten thousand pesos
(P10,000.00);
(e) Provisions, including crops, actually provided for
individual or family use sufficient for four (4)
months;
(f) The professional libraries of doctors, engineers,
lawyers and judges;
(g) One fishing boat and net, not exceeding the total
value of Ten thousand pesos (P10,000.00), by the
lawful use of which a fisherman earns his livelihood;
and
(h) Any material or article forming part of a house or
improvement of any real property.
Section 186, we already discussed this yesterday. They are the
general limitations of the power to tax of the LGUs.
Section 187. THIS IS VERY IMPORTANT!!!
Section 187. Procedure for Approval and
Effectivity of Tax, Ordinances and Revenue
Measures; Mandatory Public Hearings. - The
procedure for approval of local tax ordinances
and revenue measures shall be in accordance
with the provisions of this Code: Provided, That
public hearings shall be conducted for the
purpose prior to the enactment thereof:
Provided, further, That any question on the
constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal
within thirty (30) days from the effectivity
thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from the
date of receipt of the appeal: Provided, however,
That such appeal shall not have the effect of
suspending the effectivity of the ordinance and
the accrual and payment of the tax, fee, or
charge levied therein: Provided, finally, That
within thirty (30) days after receipt of the
decision or the lapse of the sixty-day period
without the Secretary of Justice acting upon the
appeal, the aggrieved party may file appropriate
proceedings with a court of competent
jurisdiction.
“Life battles don’t always go with the stronger or faster man.
Sooner or later, the man who wins is the man who thinks he
can.”
LABAN LANG!!!! 
TAX CASES
July 20, 2016
Transcribed by: Michelle Andoy
1. THE PROVINCE OF BULACAN, ROBERTO M.
PAGDANGANAN, FLORENCE CHAVEZ, and MANUEL DJ
SIAYNGCO in their capacity as PROVINCIAL
GOVERNOR, PROVINCIAL TREASURER, PROVINCIAL
LEGAL ADVISE, respectively, petitioners, vs. THE
HONORABLE COURT OF APPEALS (FORMER SPECIAL
12TH DIVISION), PUBLIC CEMENT
CORPORATION, respondents.
Facts: In 1992, the Sangguniang Panlalawigan of Bulacan passed
Provincial Ordinance No. 3, Sec 21 of which provides:
Sec 21. There is hereby levied & collected a tax of 10% of the
FMV in the locality per cubic meter of ordinary stones, sand,
gravel, earth & other quarry resources, such, but not limited to
marble, granite, volcanic cinders, basalt, tuff and rock phosphate,
extracted from public lands or from beds of seas, lakes, rivers,
streams, creeks and other public waters within its territorial
jurisdiction.
In a letter dated Nov. 11, 1993, the Provincial Treasurer assessed
Republic Cement Corp (RCC) P2,524,692 for extracting
limestone, shale and silica from several parcels of private land in
the province during in 1992 & 1993.
On Dec. 23, 1993, RCC formally contested the assessment, which
was, denied by the Provincial Treasurer on Jan. 17, 1994. Thus,
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on Feb. 14, 1994, RCC filed a petition for declaratory relief with
the RTC of Bulacan.
The RTC, upon motion of the province, dismissed RCC’s petition
on the ground that the declaratory relief was improper, allegedly
because a breach of the ordinance had been committed by RCC.
On July 11, 1994, RCC filed a petition for certiorari with the SC
which, in a resolution, referred the same to the CA.
In the interim, the Province issued a warrant of levy against RCC
for its unpaid tax liabilities. In an agreement and modus
vivendi between the parties, RCC agreed to pay under protest
50% of the tax assessed, in exchange for the lifting of the
warrant of levy. Also, the parties agreed, with the approval of
the CA, to limit the issue for to the question as to WON the
provincial government could impose and/or assess taxes on
quarry resources extracted by RCC from private lands. The CA
ruled in favor of RCC, hence this petition for certiorari.
Issue: WON the province of Bulacan, on the basis of the
ordinance, has authority to impose taxes on quarry resources
extracted from private lands.
Ruling: NO. Although Sec 186 of the LGC allows a province to
levy taxes other than those specifically enumerated in the LGC,
the same is subject to certain conditions. One of these
limitations is Sec 133(h) of the LGC which provides that a
province may not levy excise taxes on articles already taxed by
the NIRC. Under Sec 151 of the NIRC, an excise tax is levied
on all quarry resources, regardless of origin, whether extracted
from public or private land.
In this case, since the tax imposed by the Province is an excise
tax (being a tax upon the performance, carrying on, or exercise
of an activity), it may not ordinarily impose taxes on stones,
sand, gravel, earth and other quarry resources, as the same are
already taxed under the NIRC.
However, as to sand, gravel, earth and other quarry resources
extracted from public lands, a province may do so because Sec
138 of the LGC expressly empowers a province to impose taxes
thereon.
Moreover, even if the limitation set by Section 133 of the LGC is
disregarded, petitioners may not impose taxes on quarry
resources extracted from private lands on the basis of Sec 21 of
Provincial Ordinance No. 3 as the latter clearly applies only to
quarry resources extracted from public lands.
Atty. Boja: It is only for sand, gravel, earth and other quarry
resources extracted from public lands but in the case of the
respondents.
DOCTRINE:A province has no authority to impose the taxes on
gravel, sand, stones, earth and other quarry resources extracted
from private lands.A province may not levy excise taxes on
articles already taxed by the NIRC.
Also, in this case it also touched on the interpretation of tax
laws. How should tax laws be interpreted?
Such policy is also echoed in Section 5(a) of the Code, which
states that [a]ny provision on a power of a local government unit
shall be liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor of devolution of
powers and of the lower local government unit. But somewhat
conversely, Section 5(b) then proceeds to assert that [i]n case of
doubt, any tax ordinance or revenue measure shall be
construed strictly against the local government unit enacting it,
and liberally in favor of the taxpayer. And this latter
qualification has to be respected as a constitutionally authorized
limitation which Congress has seen fit to provide. Evidently, local
fiscal autonomy should not necessarily translate into abject
deference to the power of local government units to impose
taxes.
2. PHILIPPINE BASKETBALL ASSOCIATION, petitioner,
vs. COURT OF APPEALS, COURT OF TAX APPEALS, AND
COMMISSIONER OF INTERNAL REVENUE,respondents.
Facts:Petitioner Philippine Basketball Association (PBA) received
a tax assessment from the Commission on Internal Revenue for
deficiency on amusement taxes amounting P5,864,260.84. PBA
contested the said deficiency on amusement taxes with the CTA
however was denied. The same was raised to the CA and was
also denied as well as a subsequent MR. PBA now raises the case
to the SC.
Petitioner contends PD 231, otherwise known as the Local Tax
Code of 1973, transferred the power and authority to levy and
collect amusement taxes from the sale of admission tickets to
places of amusement from the national government to the local
governments. Petitioner cited BIR Memorandum Circular No. 49-
73 providing that the power to levy and collect amusement tax
on admission tickets was transferred to the local governments by
virtue of the Local Tax Code; and BIR Ruling No. 231-86 which
held that "the jurisdiction to levy amusement tax on gross
receipts from admission tickets to places of amusement was
transferred to local governments under P.D. No. 231, as
amended.
Issue/s:
1. Does the National government have jurisdiction to tax
PBA or is it the local government as provided in SEC. 13
of the Local Tax code? NO
2. Is the Petitioner liable for the said amusement taxes?
YES
Ruling:SECTION 13. Amusement Tax on Admission. — The
province shall impose a tax on admission to be collected from the
proprietors, lessees, or operators of theaters, cinematographs,
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concert halls, circuses and other places of amusement at the
following rates:
(a) When the amount paid for admission is one peso or less,
twenty per cent; and
(b) When the amount paid for admission exceeds one peso, thirty
per cent.
In the case of theaters or cinematographs, the taxes herein
prescribed shall first be deducted and withheld by the
proprietors, lessees, or operators of the theaters or
cinematographs and paid to the provincial treasurer concerned
thru the municipal treasurer before the gross receipts are divided
between the proprietors, lessees, or operators of the theaters or
cinematographs and the distributors of the cinematographic
films.
The holding of operas, concerts, dramas, recitals, painting and
art exhibitions, flower shows, musical programs, literary and
oratorical presentations, except film exhibitions and radio or
phonographic records thereof, shall be exempt from the payment
of the taxes herein imposed.
The taxes hereinabove imposed shall be due and payable within
the first twenty days of the month following each quarter, by the
proprietor, lessee, or operator concerned, and such taxes to be
determined on the basis of a true and complete return of the
amount of gross receipts derived during the preceding quarter. If
the tax is not paid within the time fixed hereinabove, the
taxpayer shall be subject to such surcharges, interests and
penalties prescribed by this Code. In case of willful neglect to file
the return and pay the tax within the time required or in case
fraudulent return is filed or a false return is willfully made, the
taxpayer shall be subject to a surcharge of fifty per cent of the
correct amount of the tax due in addition to the interest and
penalties provided by this Code.
The foregoing provision of law in point indicates that the
province can only impose a tax on admission from the
proprietors, lessees, or operators of theatres, cinematographs,
concert halls, circuses and other places of amusement. The
authority to tax professional basketball games is not therein
included.
With the reference to PD 871 by PD 1456 and PD 1959, there is a
recognition under the laws of this country that the amusement
tax on professional basketball games is a national, and not a
local, tax. Even up to the present, the category of amusement
taxes on professional basketball games as a national tax remains
the same. This is so provided under Section 125 of the 1997
National Internal Revenue Code. Section 140 of the Local
Government Code of 1992 (Republic Act 7160), meanwhile,
retained the areas (theatres, cinematographs, concert halls,
circuses and other places of amusement) where the province
may levy an amusement tax without including therein
professional basketball games.
Last issue for resolution concerns the liability of petitioner for
the payment of surcharge and interest on the deficiency amount
due. Petitioner contends that it is not liable, as it acted in good
faith, having relied upon the issuances of the respondent
Commissioner. This issue must necessarily fail as the same has
never been posed as an issue before the respondent court.
Issues not raised in the court aquo cannot be raised for the first
time on appeal.
All things studiedly considered, the Court rules that the
petitioner is liable to pay amusement tax to the national
government, and not to the local government, in accordance
with the rates prescribed by PD 1959.
Republic Act No. 9640
AN ACT AMENDING SECTION 140 (A) OF REPUBLIC ACT
NO. 7160, OTHERWISE KNOWN AS "THE LOCAL
GOVERNMENT CODE OF 1991"
Be it enacted by the Senate and House of
Representatives of the Philippines in Congress
assembled::
Section 1. Section 140 of Republic Act No. 7160,
otherwise known as "The Local Government Code of
1991", is hereby amended to read as follows:
"SEC. 140. Amusement Tax. - (a) The province
may levy an amusement tax to be collected
from the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement
at a rate of not more than ten percent (10%)
of the gross receipts from the admissions fees
"(b) In the case of theaters or cinemas, the tax
shall first be deducted and withheld by their
proprietors, lessees, or operators and paid to
the provincial treasurer before the gross
receipts are devided between said
proprietors, lessees, or operators and the
distributors of the cinematographic films.
"(c) The holding of operas, concerts, dramas,
recitals, paintings, and art exhibitions, flower
shows, musical programs, literary and
oratorical presentations, except pop, rock, or
similar concerts shall be exempt from the
payment of the tax herein imposed.
"(d) The sangguniang panlalawigan may
prescribe the time, manner, terms and
conditions for the payment of tax. In case of
fraud or failure to pay the tax, the
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sangguniang panlalawigan may impose such
surcharges, interest and penalties as it may
deem appropriate.
"(e) The proceeds from the amusement tax
shall be shared equally by the province and
the municipality where such amusement
places are located."
3. PALMA DEVELOPMENT CORPORATION, petitioner,
vs. MUNICIPALITY OF MALANGAS, ZAMBOANGA DEL
SUR, respondent.
Facts: The facts are undisputed. Petitioner Palma Development
Corporation is engaged in milling and selling rice and corn to
wholesalers in Zamboanga City. It uses the
municipal port ofMalangas, Zamboanga del Sur as transshipment
point for its goods. The port, as well as the surrounding roads
leading to it, belong to and are maintained by
the Municipality of Malangas,Zamboanga del Sur. On January 16,
1994, the municipality passed Municipal Revenue Code No. 09,
Series of 1993, which was subsequently approved by
the Sangguniang Panlalawigan of Zamboanga delSur in
Resolution No. 1330 dated August 4, 1994. Section 5G.01 of the
ordinance reads:
Section 5G.01. Imposition of fees. There shall be collected
service fee for its use of the municipal road[s] or streets leading
to the wharf and to any point along the shorelines within the
jurisdiction of the municipality and for police surveillance on all
goods and all equipment harbored or sheltered in the premises
of the wharf and other within the jurisdiction of this municipality
in the following schedule:
a) Vehicles and Equipment: rate of fee
1. Automatic per unit P10.00
2. Ford Fiera P10.00
3. Trucks P10.00
xxxxxxxxx
b) Other Goods, Construction Material products:
1. Bamboo craft P20.00
2. Bangus/Kilo 0.30
xxxxxxxxx
41. Rice and corn grits/sack 0.50[5]
Accordingly, the service fees imposed by Section 5G.01 of the
ordinance was paid by petitioner under protest. It contended
that under Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, municipal governments did not have
the authority to tax goods and vehicles that passed through their
jurisdictions. Thereafter, before the Regional Trial Court (RTC)
of Pagadian City, petitioner filed against
the Municipality of Malangas on November 20, 1995, an action
for declaratory relief assailing the validity of Section 5G.01 of the
municipal ordinance.
On the premise that the case involved the validity of a municipal
ordinance, the RTC directed respondent to secure the opinion of
the Office of the Solicitor General. The trial court likewise
ordered that the opinions of the Departments of Finance and of
Justice be sought. As these opinions were still unavailable as
of October 17, 1996, petitioners counsel filed, without objection
from respondent, a Manifestation seeking the submission of the
case for the RTCs decision on a pure question of law.
In due time, the trial court rendered its November 13,
1996 Decision declaring the entire Municipal Revenue Code No.
09 as ultra vires and, hence, null and void.
Issue: WON the imposed fees are valid.
Ruling: NO.
Petitioner argues that while respondent has the power to tax or
impose fees on vehicles using its roads, it cannot tax
the goods that are transported by the vehicles. The provision of
the ordinance imposing a service fee for police surveillance on
goods is allegedly contrary to Section 133(e) of RA No. 7160,
which reads:
Section 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangaysshall not extend to the levy of the following:
xxxxxxxxx
e) Taxes, fees and charges and other impositions upon goods
carried into and out of, or passing through, the territorial
jurisdictions of local government units in the guise of charges
for wharfage, tolls for bridges or otherwise, or other taxes, fees
or charges in any form whatsoever upon such goods or
merchandise;
On the other hand, respondent maintains that the subject fees
are intended for services rendered, the use of municipal roads
and police surveillance. The fees are supposedly not covered by
the prohibited impositions under Section 133(e) of RA No.
7160.[8] It further contends that it was empowered by the
express mandate of Sections 153 and 155 of RA No. 7160 to
enact Section 5G.01 of the ordinance. The pertinent provisions
of this statute read as follows:
Section 153. Service Fees and Charges. -- Local government units
may impose and collect such reasonable fees and charges for
services rendered.
xxxxxxxxx
Section 155. Toll Fees or Charges. -- The sanggunian concerned
may prescribe the terms and conditions and fix the rates for the
imposition of toll fees or charges for the use of any public road,
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pier or wharf, waterway, bridge, ferry or telecommunication
system funded and constructed by the local government unit
concerned: Provided, That no such toll fees or charges shall be
collected from officers and enlisted men of the Armed Forces of
the Philippines and members of the Philippine National Police on
mission, post office personnel delivering mail, physically-
handicapped, and disabled citizens who are sixty-five (65) years
or older.
When public safety and welfare so requires,
the sanggunian concerned may discontinue the collection of the
tolls, and thereafter the said facility shall be free and open for
public use.
Respondent claims that there is no proof that the P0.50 fee for
every sack of rice or corn is a fraudulent legislation enacted to
subvert the limitation imposed by Section 133(e) of RA No.
7160. Moreover, it argues that allowing petitioner to use its
roads without paying the P0.50 fee for every sack of rice or corn
would contravene the principle of unjust enrichment.
By express language of Sections 153 and 155 of RA No. 7160,
local government units, through their Sanggunian, may prescribe
the terms and conditions for the imposition of toll fees or
charges for the use of any public road, pier or wharf funded and
constructed by them. A service fee imposed on vehicles using
municipal roads leading to the wharf is thus valid.However,
Section 133(e) of RA No. 7160 prohibits the imposition, in the
guise of wharfage, of fees -- as well as all other taxes or charges
in any form whatsoever -- on goods or merchandise. It is
therefore irrelevant if the fees imposed are actually for police
surveillance on the goods, because any other form of imposition
on goods passing through the territorial jurisdiction of the
municipality is clearly prohibited by Section 133(e).
Under Section 131(y) of RA No. 7160, wharfage is defined as a
fee assessed against the cargo of a vessel engaged in foreign or
domestic trade based on quantity, weight, or measure received
and/or discharged by vessel. It is apparent that a wharfage does
not lose its basic character by being labeled as a service fee for
police surveillance on all goods.
Unpersuasive is the contention of respondent that petitioner
would unjustly be enriched at the formers expense. Though the
rules thereon apply equally well to the government, for unjust
enrichment to be deemed present, two conditions must
generally concur: (a) a person is unjustly benefited, and (b) such
benefit is derived at anothers expense or damage.
In the instant case, the benefits from the use of the municipal
roads and the wharf were not unjustly derived by
petitioner. Those benefits resulted from the infrastructure that
the municipality was mandated by law to provide. There is no
unjust enrichment where the one receiving the benefit has a
legal right or entitlement thereto, or when there is no causal
relation between ones enrichment and the others
impoverishment.
4. NATIONAL POWER CORPORATION, petitioner,
vs. HON. RICARDO R. ROSARIO, in his capacity as
Presiding Judge, RTC, Br. 66, Makati City; BATANGAS
CITY GOVERNMENT; ATTY. TEODULFO DEGUITO, in his
capacity as Chief Legal Officer, Batangas City; and
BENJAMIN PARGAS, in his capacity as City Treasurer,
Batangas City, respondents.
Facts: In the early 1990s, the country suffered from a crippling
power crisis. Power outages lasted 8-12 hours daily and power
generation was badly needed. Addressing the problem, the
government, through the National Power Corporation (NPC),
sought to attract investors in power plant operations by
providing them with incentives, one of which was through the
NPCs assumption of payment of their taxes in the Build Operate
and Transfer (BOT) Agreement. Enron Power Development
Corporation (Enron) and petitioner NPC entered into a Fast Track
BOT Project. Enron agreed to supply a power station to NPC and
transfer its plant to the latter after ten (10) years of
operation. Section 11.02 of the BOT Agreement provided that
NPC shall be responsible for the payment of all taxes that may be
imposed on the power station, except income taxes and permit
fees. Subsequently, Enron assigned its obligation under the BOT
Agreement to petitioner Batangas Power Corporation (BPC).
BPC registered itself with the Board of Investments (BOI) as a
pioneer enterprise. On September 23, 1992, the BOI issued a
certificate of registration[1] to BPC as a pioneer enterprise
entitled to a tax holiday for a period of six (6) years. The
construction of the power station in respondent Batangas City
was then completed. BPC operated the station.
Batangas City (the city, for brevity), thru its legal officer Teodulfo
A. Deguito, sent a letter to BPC demanding payment of business
taxes and penalties, commencing from the year 1994 as provided
under Ordinance XI or the 1992 Batangas City Tax Code.[2] BPC
refused to pay, citing its tax-exempt status as a pioneer
enterprise for six (6) years under Section 133 (g) of the Local
Government Code (LGC).
Then, city treasurer Benjamin S. Pargas modified the citys tax
claimand demanded payment of business taxes from BPC only
for the years 1998-1999. He acknowledged that BPC enjoyed a 6-
year tax holiday as a pioneer industry but its tax exemption
period expired on September 22, 1998, six (6) years after its
registration with the BOI on September 23, 1992. The city
treasurer held that thereafter BPC became liable to pay its
business taxes.
BPC still refused to pay the tax. It insisted that its 6-year tax
holiday commenced from the date of its commercial operation
on July 16, 1993, not from the date of its BOI registration in
September 1992. It furnished the city with a BOI letter wherein
BOI designated July 16, 1993 as the start of BPCs income tax
holiday as BPC was not able to immediately operate due to force
majeure. BPC claimed that the local tax holiday is concurrent
with the income tax holiday. In the alternative, BPC asserted that
the city should collect the tax from the NPC as the latter
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assumed responsibility for its payment under their BOT
Agreement.
The matter was not put to rest. The city legal officer insistedthat
BPCs tax holiday has already expired, while the city argued that it
directed its tax claim to BPC as it is the entity doing business in
the city and hence liable to pay the taxes. The city alleged that it
was not privy to NPCs assumption of BPCs tax payment under
their BOT Agreement as the only parties thereto were NPC and
BPC. BPC adamantly refused to pay the tax claims and reiterated
its position. The city was likewise unyielding on its stand.] On
August 26, 1999, the NPC intervened. While admitting
assumption of BPCs tax obligations under their BOT Agreement,
NPC refused to pay BPCs business tax as it allegedly constituted
an indirect tax on NPC which is a tax-exempt corporation under
its Charter.
ISSUE/S:
1. whether BPCs 6-year tax holiday commenced on the
date of its BOI registration as a pioneer enterprise or on
the date of its actual commercial operation as certified by
the BOI; NO.
2. whether NPCs tax exemption privileges under its Charter
were withdrawn by Section 193 of the Local Government
Code (LGC). No.
1. On the first issue, petitioners BPC and NPC contend
that contrary to the impugned decision, BPCs 6-year tax
holiday should commence on the date of its actual
commercial operations as certified to by the BOI, not
on the date of its BOI registration.
We disagree. Sec. 133 (g) of the LGC, which proscribes local
government units (LGUs) from levying taxes on BOI-certified
pioneer enterprises for a period of six years from the date of
registration, applies specifically to taxes imposed by the local
government, like the business tax imposed by Batangas City on
BPC in the case at bar. Reliance of BPC on the provision
of Executive Order No. 226,[18] specifically Section 1, Article 39,
Title III, is clearly misplaced as the six-year tax holiday provided
therein which commences from the date of commercial
operation refers to income taxes imposed by the national
government on BOI-registered pioneer firms. Clearly, it is the
provision of the Local Government Code that should apply to the
tax claim of Batangas City against the BPC. The 6-year tax
exemption of BPC should thus commence from the date of BPCs
registration with the BOI on July 16, 1993 and end on July 15,
1999.
2. Finally, on thesecond issue, petitioners insist that NPCs
exemption from all taxes under its Charter had not
been repealed by the LGC. They argue that NPCs
Charter is a special law which cannot be impliedly
repealed by a general and later legislation like the
LGC. They likewise anchor their claim of tax-exemption
on Section 133 (o) of the LGC which exempts
government instrumentalities, such as the NPC, from
taxes imposed by local government units (LGUs), citing
in support thereof the case of Basco v. PAGCOR.
We find no merit in these contentions. The effect of the LGC on
the tax exemption privileges of the NPC has already been
extensively discussed and settled in the recent case of National
Power Corporation v. City of Cabanatuan. In said case, this
Court recognized the removal of the blanket exclusion of
government instrumentalities from local taxation as one of the
most significant provisions of the 1991 LGC. Specifically, we
stressed that Section 193 of the LGC, an express and general
repeal of all statutes granting exemptions from local
taxes, withdrew the sweeping tax privileges previously enjoyed
by the NPC under its Charter. We explained the rationale for this
provision, thus:
In recent years, the increasing social challenges of the times
expanded the scope of state activity, and taxation has become a
tool to realize social justice and the equitable distribution of
wealth, economic progress and the protection of local industries
as well as public welfare and similar objectives. Taxation
assumes even greater significance with the ratification of the
1987 Constitution. Thenceforth, the power to tax is no longer
vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges
pursuant to Article X, section 5 of the 1987 Constitution, viz:
Section 5.- Each Local Government unit shall have the power to
create its own sources of revenue, to levy taxes, fees and charges
subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy. Such
taxes, fees and charges shall accrue exclusively to the Local
Governments.
This paradigm shift results from the realization that genuine
development can be achieved only by strengthening local
autonomy and promoting decentralization of governance. For a
long time, the countrys highly centralized government structure
has bred a culture of dependence among local government
leaders upon the national leadership. It has also dampened the
spirit of initiative, innovation and imaginative resilience in
matters of local development on the part of local government
leaders. The only way to shatter this culture of dependence is to
give the LGUs a wider role in the delivery of basic services, and
confer them sufficient powers to generate their own sources for
the purpose. To achieve this goal, x x x the 1987 Constitution
mandates Congress to enact a local government code that will,
consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers x x x.
To recall, prior to the enactment of the x x x Local Government
Code x x x, various measures have been enacted to promote
local autonomy. x x x Despite these initiatives, however, the
shackles of dependence on the national government
remained. Local government units were faced with the same
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problems that hamper their capabilities to participate effectively
in the national development efforts, among which
are: (a) inadequate tax base, (b) lack of fiscal control over
external sources of income, (c) limited authority to prioritize and
approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control
over personnel of national line agencies.
Considered as the most revolutionary piece of legislation on local
autonomy, the LGC effectively deals with the fiscal constraints
faced by LGUs. It widens the tax base of LGUs to include taxes
which were prohibited by previous laws x x x. Consequently,
when NPC assumed the tax liabilities of the BPC under their 1992
BOT Agreement, the LGC which removed NPCs tax exemption
privileges had already been in effect for six (6) months. Thus,
while BPC remains to be the entity doing business in said city, it
is the NPC that is ultimately liable to pay said taxes under the
provisions of both the 1992 BOT Agreement and the 1991 Local
Government Code.
5. Petron Corporation vs. Quisumbing
Facts: Petron maintains a depot or bulk plant at the Navotas
Fishport Complex in Navotas. Through that depot, it has engaged
in the selling of diesel fuels to vessels used in commercial fishing
in and around Manila Bay. On 1 March 2002, Petron received a
letter from the office of Navotas Mayor, respondent Toby
Tiangco, wherein the corporation was assessed taxes relative to
the figures covering sale of diesel declared by your Navotas
Terminal from 1997 to 2001. The stated total amount due
was P6,259,087.62, a figure derived from the gross sales of the
depot during the years in question. The computation sheets that
were attached to the letter made reference to Ordinance 92-03,
or the New Navotas Revenue Code (Navotas Revenue Code),
though such enactment was not cited in the letter itself.
Petron duly filed with Navotas a letter-protest to the notice of
assessment pursuant to Section 195 of the Code. It argued that it
was exempt from local business taxes in view of Art. 232(h) of
the Implementing Rules (IRR) of the Code, as well as a ruling of
the Bureau of Local Government Finance of the Department of
Finance dated 31 July 1995, the latter stating that sales of
petroleum fuels are not subject to local taxation. The letter-
protest was denied by the Navotas Municipal Treasurer,
respondent Manuel T. Enriquez, in a letter dated 8 May 2002.
This was followed by a letter from the Mayor dated 15 May
2002, captioned Final Demand to Pay, requiring that Petron pay
the assessed amount within five (5) days from receipt thereof,
with a threat of closure of Petrons operations within Navotas
should there be no payment. Petron, through counsel, replied to
the Mayor by another letter posing objections to the threat of
closure. The Mayor did not respond to this last letter.
Issue: WON a local government unit is empowered under the
Local Government Code (the LGC) to impose business taxes on
persons or entities engaged in the sale of petroleum products.
No.
Ruling: As earlier stated, Petron has opted to assail the RTC
Decision directly before this Court since the matter at hand
involves pure questions of law, a characterization conceded by
the RTC Decision itself. Particularly, the controversy hinges on
the correct interpretation of Section 133(h) of the LGC, and the
applicability of Article 232 (h) of the IRR.
Section 133(h) of the LGC reads as follows:
Sec. 133. Common Limitations on
the Taxing Powers of Local Government
Units. - Unless otherwise provided herein, the
exercise of the taxing powers of provinces,
cities, municipalities, and Barangays shall not
extend to the levy of the following:
xxx
(h) Excise taxes on articles
enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or
charges on petroleum products;
Evidently, Section 133 prescribes the limitations on the
capacity of local government units to exercise their taxing
powers otherwise granted to them under the LGC. Apparently,
paragraph (h) of the Section mentions two kinds of taxes which
cannot be imposed by local government units, namely: excise
taxes on articles enumerated under the National Internal
Revenue Code [(NIRC)], as amended; and taxes, fees or charges
on petroleum products.
The power of a municipality to impose business taxes is
provided for in Section 143 of the LGC. Under the provision, a
municipality is authorized to impose business taxes on a whole
host of business activities. Suffice it to say, unless there is
another provision of law which states otherwise, Section 143,
broad in scope as it is, would undoubtedly cover the business of
selling diesel fuels, or any other petroleum product for that
matter.
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KARLO NOV QUIJANO – JULY 25, 2016
Section 186. Power To Levy Other Taxes, Fees or Charges
-Ordinaces levying fees and charges shall not be
enacted without any prior public hearing. After the
required public hearing dapat may publication…
Section 187. Procedure for Approval and Effectivity of Tax,
Ordinances and Revenue Measures; Mandatory Public Hearings. -
The procedure for approval of local tax ordinances and revenue
measures shall be in accordance with the provisions of this Code:
Provided, That public hearings shall be conducted for the
purpose prior to the enactment thereof: Provided, further, That
any question on the constitutionality or legality of tax ordinances
or revenue measures may be raised on appeal within thirty (30)
days from the effectivity thereof to the Secretary of Justice who
shall render a decision within sixty (60) days from the date of
receipt of the appeal: Provided, however, That such appeal shall
not have the effect of suspending the effectivity of the ordinance
and the accrual and payment of the tax, fee, or charge levied
therein: Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day period
without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of
competent jurisdiction.
-This is mandatory. The RTC is referred here as the
court of competent jurisdiction. The case before the
RTC is appealable to Court of Tax Appeal by division
then you can appeal to Court of Tax Appeal En Banc. So
this is the way how to question a newly enacted
ordinance. Remember the process.
Section 188. Publication of Tax Ordinances and Revenue
Measures. - Within ten (10) days after their approval, certified
true copies of all provincial, city, and municipal tax ordinances or
revenue measures shall be published in full for three (3)
consecutive days in a newspaper of local circulation: Provided,
however, That in provinces, cities and municipalities where there
are no newspapers of local circulation, the same may be posted
in at least two (2) conspicuous and publicly accessible places.
Section 189. Furnishing of Copies of Tax Ordinances and Revenue
Measures. - Copies of all provincial, city, and municipal and
barangay tax ordinances and revenue measures shall be
furnished the respective local treasurers for public
dissemination.
Section 190. Attempt to Enforce Void or Suspended Tax
Ordinances and revenue measures. - The enforcement of any tax
ordinance or revenue measure after due notice of the
disapproval or suspension thereof shall be sufficient ground for
administrative disciplinary action against the local officials and
employees responsible therefor.
- Take note of this provision.
Section 191. Authority of Local Government Units to Adjust Rates
of Tax Ordinances. - Local government units shall have the
authority to adjust the tax rates as prescribed herein not oftener
than once every five (5) years, but in no case shall such
adjustment exceed ten percent (10%) of the rates fixed under
this Code.
- Same lang ito sa provision sa Consti yung sa
amendments.
Section 192. Authority to Grant Tax Exemption Privileges. - Local
government units may, through ordinances duly approved, grant
tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.
-The imposition of tax is depicted through ordinances.
What about the grant of exemption? Pareho lang
gihapon thru ordinance.
Section 193. Withdrawal of Tax Exemption Privileges. - Unless
otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural
or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.
- Take note of this provision. Upon the effectivity of RA
9160 marami doong priviliges. GOCCs are subject to
tax. So ano yung hindi taxable? Government Corporate
Entities example nyan are PCGA (?), Phil Ports
Authority, Phil Rice Research Institute.
Let’s take up the Taxpayer’s remedies now….
Section 194. Periods of Assessment and Collection. -
(a) Local taxes, fees, or charges shall be assessed within
five (5) years from the date they became due. No action
for the collection of such taxes, fees, or charges,
whether administrative or judicial, shall be instituted
after the expiration of such period: Provided, That.
taxes, fees or charges which have accrued before the
effectivity of this Code may be assessed within a period
of three (3) years from the date they became due.
- For assessment we have 5 yrs but in case of
fraud or intent to evade payment of taxes the period of
assessment is for 10 yrs and take note mag start ang 10
yrs from the discovery of the fraud or intent to evade
payment of taxes.
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(d) The running of the periods of prescription provided
in the preceding paragraphs shall be suspended for the
time during which:
(1) The treasurer is legally prevented from
making the assessment of collection;
(2) The taxpayer requests for a reinvestigation
and executes a waiver in writing before
expiration of the period within which to assess
or collect; and
(3) The taxpayer is out of the country or
otherwise cannot be located.
-Provides for the suspension of the running of
the period of prescription. So the code
provides 3 instances wherein the running of
the period of prescription is suspended. So
the period to asses is 5 yrs. While the period
to collect is also 5 yrs. But 5 yrs from the date
of assessment by administrative or judicial
action. So take note of the reckoning period.
-Remember that under paragraph (d) is for
both, assessment and collection.
Section 195. Protest of Assessment.
- First there must be notice of assessment given or
issued by the local treasurer and the taxpayer pag ayaw
nya dahil nagkaproblema siya sa assessment the latter
may file a written protest within 60 days. Now the
question is kailangan ba ng payment before the filing of
the protest? No need na to pay.
- You have 60 days to file your protest and the local
treasurer has also 60 days to decide the protest.
- What if the treasurer did not act on the protest upon
the lapse of 60 days? The taypayer may appeal within
30 days from receipt of denial of the protest with the
court of competent jurisdiction. So RTC to CTA by
division then CTA en banc then to SC.
Section 196. Claim for Refund of Tax Credit. - No case or
proceeding shall be maintained in any court for the recovery of
any tax, fee, or charge erroneously or illegally collected until a
written claim for refund or credit has been filed with the local
treasurer. No case or proceeding shall be entertained in any
court after the expiration of two (2) years from the date of the
payment of such tax, fee, or charge, or from the date the
taxpayer is entitled to a refund or credit.
-So pareha lang ito sa NIRC under the latter the file of
claim for refund for national taxes paid it also made
within 2 yrs from the date of payment of tax.
-In case of local tax you file it with local treasurer.
-So we have 3 remedies of taxpayer: 1st is to question
the newly enacted ordinance before the Secretary of
Justice, 2nd protest against an assessment which is filed
with the local treasurer, 3rd claim for refund or tax
credit. So dli ka pwede mo diritsu sa court so
administrative ka muna before going to court of
competent jurisdiction.
Now let us go to real property taxation…
Section 198. Fundamental Principles. - The appraisal,
assessment, levy and collection of real property tax shall be
guided by the following fundamental principles:
(a) Real property shall be appraised at its current and
fair market value;
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a
uniform classification within each local government
unit;
(d) The appraisal, assessment, levy and collection of
real property tax shall not be let to any private person;
and
(e) The appraisal and assessment of real property shall
be equitable.
-So what are considered as real properties? Land and
improvements.
- Under paragraph(b) example ang property is agri
tapos pag check doon may malaking building or bahay
so the property cannot be classified as agri kasi actual
use man so residential jud siya. That is why may ocular
inspection. The basis of classification is actual use.
-Real property tax is ad valorem tax. Kasi ang rate is
based mo sa value ng property
Section 199. Definitions.
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(c) "Ad Valorem Tax" is a levy on real property
determined on the basis of a fixed proportion of the
value of the property.
(o) "Machinery" embraces machines, equipment,
mechanical contrivances, instruments, appliances or
apparatus which may or may not be attached,
permanently or temporarily, to the real property. It
includes the physical facilities for production, the
installations and appurtenant service facilities, those
which are mobile, self-powered or self-propelled, and
those not permanently attached to the real property
which are actually, directly, and exclusively used to
meet the needs of the particular industry, business or
activity and which by their very nature and purpose are
designed for, or necessary to its manufacturing, mining,
logging, commercial, industrial or agricultural purposes
-They can also be classified as real properties.
Now who provides for the valuation/guidelines/assessment of
the property? Anong Department? It is the Department of
Finance.
It is here in Section 201.
Section 201. Appraisal of Real Property. - All real property,
whether taxable or exempt, shall be appraised at the current and
fair market value prevailing in the locality where the property is
situated. The Department of Finance shall promulgate the
necessary rules and regulations for the classification, appraisal,
and assessment of real property pursuant to the provisions of
this Code.
Section 203. Duty of Person Acquiring Real Property or Making
Improvement Thereon. - It shall also be the duty of any person,
or his authorized representative, acquiring at any time real
property in any municipality or city or making any improvement
on real property, to prepare, or cause to be prepared, and file
with the provincial, city or municipal assessor, a sworn
statement declaring the true value of subject property, within
sixty (60) days after the acquisition of such property or upon
completion or occupancy of the improvement, whichever comes
earlier.
- Kung magkuha kayo ng bulding permit then pagkatapos
ng construction certificate of completion. Ang building
permit may estimate nayan kung magkano ang cost of
construction then pag natapos nyan yung certificate of
completion after that diyan na mag commence ang
taxation. So that will be based on the value of the
improvement produced doon sa construction. Kaya
may inspection. Remember taxes are the lifeblood of
the government.
Section 206. Proof of Exemption of Real Property from
Taxation. - Every person by or for whom real property is
declared, who shall claim tax exemption for such property under
this Title shall file with the provincial, city or municipal assessor
within thirty (30) days from the date of the declaration of real
property sufficient documentary evidence in support of such
claim including corporate charters, title of ownership, articles of
incorporation, by-laws, contracts, affidavits, certifications and
mortgage deeds, and similar documents.
-So hindi automatic ang exemption. You have to ask for
it.
-Bakit kasama ang contracts? What do you think?
Because the exemption is actual use so pde na taxable
person ang may ari kaya lang ang nag renta sa kanya is
charitable institution or religious. Nahimong simbahan.
Naa koy building 3 storey ang 3rd floor gi arkilahan ug gi
himong simbahan ang 2nd ug 1st kay commercial so the
exemption is doon lang sa 3rd floor. So the exemption is
proportionate doon lang sa 3rd floor.
-Lisod kayo mag apply ug exemption busa ayaw nlng.
-Offering or tithes sa church are also exempt sa tax kasi
it will be used for the furtherance of such purpose.
Section 215. Classes of Real Property for Assessment Purposes. -
For purposes of assessment, real property shall be classified as
residential, agricultural, commercial, industrial, mineral,
timberland or special.
The city or municipality within the Metropolitan Manila Area,
through their respective sanggunian, shall have the power to
classify lands as residential, agricultural, commercial, industrial,
mineral, timberland, or special in accordance with their zoning
ordinances.
Section 216. Special Classes of Real Property. - All lands,
buildings, and other improvements thereon actually, directly and
exclusively used for hospitals, cultural, or scientific purposes, and
those owned and used by local water districts, and government-
owned or controlled corporations rendering essential public
services in the supply and distribution of water and/or
generation and transmission of electric power shall be classified
as special.
-If classified siya as special usually they are exempt.
Section 217. Actual Use of Real Property as Basis for
Assessment. - Real property shall be classified, valued and
assessed on the basis of its actual use regardless of where
located, whoever owns it, and whoever uses it.
-Kasi ang assessment level iba-iba ang percentage
depende sa classification and value of the property. So
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malaki ang assessment pag commercial or industrial
mura naman pag residential.
Section 219. General Revision of Assessment and Property
Classification. - The provincial, city or municipal assessor shall
undertake a general revision of real property assessments within
two (2) years after the effectivity of this Code and every three (3)
years thereafter.
-Usually, it is published.
JULY 26, 2016
ADA MAE D. ABELLERA
Reclassification of real property by the Local Assessor.
The assessment of real property shall not be oftener than once
every 3 years except in case of new improvements substantially
increasing the value of said property or of any change in its
actual size.
So hindi pwede na every year may increase. So may limit. In this
case, not oftener (may word na oftener? hehe) than once in
every 3 years. If you make some improvements or introduce
improvements on a property, then you have it re-assessed within
90 days from the introduction of such improvement and the
reassessment shall take effect at the beginning of the next
quarter following its assessment.
What about if we have an improvement, a building, pero wala
kang assessment kasi wala kang building permit tapos ngayon
gusto mong magpa-assess. Now under Section 222.
So you have this structure. It has been existing since 1970. So
ngayon, you first declare it for assessment purposes for taxation.
Section 222. Assessment of property subject to back taxes.-Real
property declared for the first time shall be assessed for taxes for
the period during which it would have been liable but in no case
for more than 10 years prior to the date of initial assessment:
Provided, however, That such taxes shall be computed on the
basis of the applicable schedule of values in force during the
corresponding period. ( Just read paragraph 2 in your codal. She
didn’t mention.)
If such taxes are paid on or before the end of the quarter
following the date the notice of assessment was received by the
owner or his representative, no interest for delinquency shall be
imposed thereon; otherwise, such taxes shall be subject to an
interest at the rate of two percent (2%) per month or a fraction
thereof from the date of the receipt of the assessment until such
taxes are fully paid.
If you’re paying for back taxes for 1980s or 1990s, then ang
valuation applicable for that time shall be the basis for the
computation of the back taxes. Now, may 90s na client, may
estate tax. Hindi sila nagbayad. Yung iba patay na. Ang sabi kasi
the basis of the valuation of the property of the decedent shall
be at the time of his death. It should be the valuation of the
place at the time of the death. (yawyaw)
Section 223. Notification of new or revised assessment.-When
real property is assessed for the first time or when an existing
assessment is increased or decreased, the provincial, city or
municipal assessor shall within 20 days give written notice of
such new or revised assessment to the person in whose name the
property is declared.
(again, she didn’t mention the next sentence. Skip skip si
ma’am.)
The notice may be delivered personally or by registered mail or
through the assistance of the punong barangay to the last known
address of the person to be served.
So kung sino ang pangalan nakalagay dun sa assessment, siya
ang bibigyan ng notice for such increase.
We also have here,
Section 224. Appraisal and Assessment of Machinery. –
(a) The fair market value of a brand-new machinery shall be the
acquisition cost. In all other cases, the fair market value shall be
determined by dividing the remaining economic life of the
machinery by its estimated economic life and multiplied by the
replacement or reproduction cost.
(b) If the machinery is imported, the acquisition cost includes
freight, insurance, bank and other charges, brokerage, arrastre
and handling, duties and taxes, plus charges at the present site.
The cost in foreign currency of imported machinery shall be
converted to peso cost on the basis of foreign currency exchange
rates as fixed by the Central Bank.
I leave it to you to read this sections so let’s go to assessment
appeals. So if you have problem or not satisfied with the actions
of the assessor then you may appeal the same within 60 days
from the date of the receipt of the written notice of the
assessment. O binigyan ka nang assessment but you’re not
satisfied with it, so Section 226.
Section 226. Local Board of Assessment Appeals.- any owner or
person having legal interest in the property who is not satisfied
with the action of the provincial, city or municipal assessor in the
assessment of his property may, within 60 days from the date of
receipt of the written notice of assessment, appeal to the Board
of Assessment Appeals of the province or city by filing a petition
under oath in the form prescribed for the prescribed for the
purpose, together with copies of the tax declarations and such
affidavits or documents submitted in support of the appeal
Section 227. Organization, Powers, Duties, and Functions of the
Local Board of Assessment Appeals. -
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(a) The Board of Assessment Appeals of the province or city shall
be composed of the Registrar of Deeds, as Chairman, the
provincial or city prosecutor and the provincial, or city engineer
as members, who shall serve as such in an ex officio capacity
without additional compensation.
(b) The chairman of the Board shall have the power to designate
any employee of the province or city to serve as secretary to the
Board also without additional compensation.
(c) The chairman and members of the Board of Assessment
Appeals of the province or city shall assume their respective
positions without need of further appointment or special
designations immediately upon effectivity of this Code. They shall
take oath or affirmation of office in the prescribed form.
(d) In provinces and cities without a provincial or city engineer,
the district engineer shall serve as member of the Board. In the
absence of the Registrar of Deeds, or the provincial or city
prosecutor, or the provincial or city engineer, or the district
engineer, the persons performing their duties, whether in an
acting capacity or as a duly designated officer-in-charge, shall
automatically become the chairman or member, respectively, of
the said Board, as the case may be.
Ano ba ang composition na Board of Assessment Appeals? We
have the registrar of deeds as chairman, the provincial or city
prosecutor or the provincial or city engineer as members of the
Board.
Now, decision. Upon receipt of the notice of assessment, you
have 60 days from the date of receipt to appear before the
board. The decision of the board is appealable before the Central
board of assessment appeals. Now the local board of assessment
appeals has 120 days from the date of receipt of such appeal to
decide on it. So may notice of assessment, if you’re not satisfied,
then appeal it before the local board. The taxpayer has 60 days.
Going back to Section 228(b),
Section 228(b) All assessment of the Board (local board) shall be
charged against the general fund of the province or city, as the
case may be. The sanggunian concerned shall appropriate the
necessary funds to enable the Board in their respective localities
to operate effectively.
Dapat may appropriation for this purpose.
After that if the decision is adverse to you, then appeal it before
the central board. This 2nd board of assessment appeals if you
read Section 230.
Section 230. Central Board of Assessment Appeals (read daw)
Section 230. Central Board of Assessment Appeals. - The Central
Board of Assessment Appeals shall be composed of a chairman,
and two (2) members to be appointed by the President, who shall
serve for a term of seven (7) years, without reappointment. Of
those first appointed, the chairman shall hold office for seven (7)
years, one member for five (5) years, and the other member for
three (3) years. Appointment to any vacancy shall be only for the
unexpired portion of the term of the predecessor. In no case shall
any member be appointed or designated in a temporary or acting
capacity. The chairman and the members of the Board shall be
Filipino citizens, at least forty (40) years old at the time of their
appointment, and members of the Bar or Certified Public
Accountants for at least ten (10) years immediately preceding
their appointment. The chairman of the Board of Assessment
Appeals shall have the salary grade equivalent to the rank of
Director III under the Salary Standardization Law exclusive of
allowances and other emoluments. The members of the Board
shall have the salary grade equivalent to the rank of Director II
under the Salary Standardization Law exclusive of allowances
and other emoluments. The Board shall have appellate
jurisdiction over all assessment cases decided by the Local Board
of Assessment Appeals.
There shall be Hearing Officers to be appointed by the Central
Board of Assessment Appeals pursuant to civil service laws, rules
and regulations, one each for Luzon, Visayas and Mindanao, who
shall hold office in Manila, Cebu City and Cagayan de Oro City,
respectively, and who shall serve for a term of six (6) years,
without reappointment until their successors have been
appointed and qualified. The Hearing Officers shall have the
same qualifications as that of the Judges of the Municipal Trial
Courts.
The Central Board Assessment Appeals, in the performance of its
powers and duties, may establish and organize staffs, offices,
units, prescribe the titles, functions and duties of their members
and adopt its own rules and regulations.
Unless otherwise provided by law, the annual appropriations for
the Central Board of Assessment Appeals shall be included in the
budget of the Department of Finance in the corresponding
General Appropriations Act.
Mataas ang qualification ng chairman at members ng CBAA.
Members of the bar or CPA for atleast 10 years...
And since we only have one CBAA, there shall be hearing
officers. This CBAA is under the Department of Finance.
Section 231 (important)- Effect of Appeal on the Payment of
Real Property tax.- Appeal on assessments of real property made
under the provisions of this Code shall in no case, suspend the
collection of the corresponding realty taxes on the property
involved as assessed by the provincial or city assessor, without
prejudice to subsequent adjustment depending upon the final
outcome of the appeal.
So your appeal suspends the collection of the corresponding tax.
So lifeblood doctrine.
We are now in Chapter IV, Imposition of Real Rroperty Tax.
So when we talk about real property, not only land. That includes
building, machinery and any improvements thereof. Now the
rates of levy.
Section 233. Rates of Levy (Read)
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Section 233. Rates of Levy. - A province or city or a municipality
within the Metropolitan Manila Area shall fix a uniform rate of
basic real property tax applicable to their respective localities as
follows:
(a) In the case of a province, at the rate not exceeding one
percent (1%) of the assessed value of real property; and
(b) In the case of a city or a municipality within the Metropolitan
Manila Area, at the rate not exceeding two percent (2%) of the
assessed value of real property.
In the case of province- rate not exceeding 1 %
City/Municipality- 2 %
And now section 234. Another important provision. You have to
to know what are exempt from real property tax. Kung pwede i
memorize ninyo ito.
Section 234. Exemptions from Real Property Tax. - The following
are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any
of its political subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable
person;
(b) Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, non-profit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government owned
or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as
provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and
environmental protection.
Except as provided herein, any exemption from payment of real
property tax previously granted to, or presently enjoyed by, all
persons, whether natural or juridical, including all government-
owned or controlled corporations are hereby withdrawn upon the
effectivity of this Code.
A) –meaning if owned by the republic but leased by
taxable person, then that is subject to real property tax
B) –this is also a Constitutional provision
So bumalik na naman tong last paragraph. Makita natin to sa
Section 193.
So we are now in Chapter V, Special Levies on Real Property.
Section 235. Additional Levy on Real Property for the Special
Education Fund. - A province or city, or a municipality within the
Metropolitan Manila Area, may levy and collect an annual tax of
one percent (1%) on the assessed value of real property which
shall be in addition to the basic real property tax. The proceeds
thereof shall exclusively accrue to the Special Education Fund
(SEF).
Kung makakita kayo ng basic property tax at meron ding for SEF.
Now this Section 236, mahirap ito esp. If you are in metro manila
may commercial property ka and it is idle because we can
impose additional ad valorem tax.
Section 236. Additional Ad Valorem Tax on Idle Lands. - A
province or city, or a municipality within the Metropolitan Manila
Area, may levy an annual tax on idle lands at the rate not
exceeding five percent (5%) of the assessed value of the property
which shall be in addition to the basic real property tax.
So malaki pa ang tax ng idle lands. Sakit kayo sa bulsa noh? So
this is to encourage you to develop the property kesa
nakatiwangwang lang jan. Now, when is a property considered
idle? That is in section 227.
Section 237. Idle lands, Coverage. (read)
Section 237. Idle Lands, Coverage. - For purposes of real property
taxation, idle lands shall include the following:
(a) Agricultural lands, more than one (1) hectare in area, suitable
for cultivation, dairying, inland fishery, and other agricultural
uses, one-half (1/2) of which remain uncultivated or unimproved
by the owner of the property or person having legal interest
therein. Agricultural lands planted to permanent or perennial
crops with at least fifty (50) trees to a hectare shall not be
considered idle lands. Lands actually used for grazing purposes
shall likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city or
municipality, more than one thousand (1,000) square meters in
area one-half (1/2) of which remain unutilized or unimproved by
the owner of the property or person having legal interest therein.
Regardless of land area, this Section shall likewise apply to
residential lots in subdivisions duly approved by proper
authorities, the ownership of which has been transferred to
individual owners, who shall be liable for the additional tax:
Provided, however, That individual lots of such subdivisions, the
ownership of which has not been transferred to the buyer shall
be considered as part of the subdivision, and shall be subject to
the additional tax payable by subdivision owner or operator.
How about special levy? How do you understand special levy?
Andoy?
Andoy: can I read the provision ma’am? (hehe)
Section 240. Special Levy by Local Government Units. - A
province, city or municipality may impose a special levy on the
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lands comprised within its territorial jurisdiction specially
benefited by public works projects or improvements funded by
the local government unit concerned: Provided, however, That
the special levy shall not exceed sixty percent (60%) of the actual
cost of such projects and improvements, including the costs of
acquiring land and such other real property in connection
therewith: Provided, further, That the special levy shall not apply
to lands exempt from basic real property tax and the remainder
of the land portions of which have been donated to the local
government unit concerned for the construction of such projects
or improvements.
So if there is improvement, that will benefit the LGU.
Section 241. Ordinance Imposing a Special Levy. - A tax
ordinance imposing a special levy shall describe with reasonable
accuracy the nature, extent, and location of the public works
projects or improvements to be undertaken, state the estimated
cost thereof, specify the metes and bounds by monuments and
lines and the number of annual installments for the payment of
the special levy which in no case shall be less than five (5) nor
more than ten (10) years. The sanggunian concerned shall not be
obliged, in the apportionment and computation of the special
levy, to establish a uniform percentage of all lands subject to the
payment of the tax for the entire district, but it may fix different
rates for different parts or sections thereof, depending on
whether such land is more or less benefited by proposed work.
So, taxpayers remedies against special levies. An ka mag-appeal?
That is in Chapter 3, Title 2. Sa Local Board of Assessment
appeals. (LBAA)
And under section 250, payment of real property taxes in
instalments.
Section 250. Payment of Real Property Taxes in Installments. -
The owner of the real property or the person having legal interest
therein may pay the basic real property tax and the additional
tax for Special Education Fund (SEF) due thereon without interest
in four (4) equal installments; the first installment to be due and
payable on or before March Thirty-first (31st); the second
installment, on or before June Thirty (30); the third installment,
on or before September Thirty (30); and the last installment on or
before December Thirty-first (31st), except the special levy the
payment of which shall be governed by ordinance of the
sanggunian concerned.
The date for the payment of any other tax imposed under this
Title without interest shall be prescribed by the sanggunian
concerned.
Payments of real property taxes shall first be applied to prior
years delinquencies, interests, and penalties, if any, and only
after said delinquencies are settled may tax payments be
credited for the current period.
So pwede siya na quarterly ang bayad and without interest yan
pag bayaran mo quarterly but the LGU may also pass an
ordinance drafting discounts in case of advance contract
payment. So before magbayad ng land tax for 2016 pero
bayaraan niya December of 2013. You have 20 % discount. Then
later gichange nila kasi mas beneficial on the part of the LGU
kung earlier ang kanilang collection. So that is under 251.
Section 251. Tax Discount for Advanced Prompt Payment. - If
the basic real property tax and the additional tax accruing to the
Special Education Fund (SEF) are paid in advance in accordance
with the prescribed schedule of payment as provided under
Section 250, the sanggunian concerned may grant a discount not
exceeding twenty percent (20%) of the annual tax due.
Section 254. Notice of Delinquency in the Payment of the Real
Property Tax. -
(a) When the real property tax or any other tax imposed under
this Title becomes delinquent, the provincial, city or municipal
treasurer shall immediately cause a notice of the delinquency to
be posted at the main hall and in a publicly accessible and
conspicuous place in each barangay of the local government unit
concerned. The notice of delinquency shall also be published once
a week for two (2) consecutive weeks, in a newspaper of general
circulation in the province, city, or municipality.
(b) Such notice shall specify the date upon which the tax became
delinquent and shall state that personal property may be
distrained to effect payment. It shall likewise state that any time
before the distraint of personal property, payment of the tax with
surcharges, interests and penalties may be made in accordance
with the next following Section, and unless the tax, surcharges
and penalties are paid before the expiration of the year for which
the tax is due except when the notice of assessment or special
levy is contested administratively or judicially pursuant to the
provisions of Chapter 3, Title II, Book II of this Code, the
delinquent real property will be sold at public auction, and the
title to the property will be vested in the purchaser, subject,
however, to the right of the delinquent owner of the property or
any person having legal interest therein to redeem the property
within one (1) year from the date of sale.
These are the procedures.
So if di ka nakabayad, the government has the usually remedies,
levy and distraint and of course before public sale, there must be
the mandatory publication (the usual procedure). The delinquent
taxpayer has the right to redemption within one year from the
date of sale. And if not redeemed, a final deed of sale shall be
executed in favor of the highest bidder.
Section 259. Penalty for Failure to Issue and Execute Warrant. -
Without prejudice to criminal prosecution under the Revised
Penal Code and other applicable laws, any local treasurer or his
deputy who fails to issue or execute the warrant of levy within
one (1) year from the time the tax becomes delinquent or within
thirty (30) days from the date of the issuance thereof, or who is
found guilty of abusing the exercise thereof in an administrative
or judicial proceeding shall be dismissed from the service.
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We will not take up 261, 262, pareparehas to sila.
Section 264. Resale of Real Estate Taken for Taxes, Fees, or
Charges. - The sanggunian concerned may, by ordinance duly
approved, and upon notice of not less than twenty (20) days, sell
and dispose of the real property acquired under the preceding
section at public auction. The proceeds of the sale shall accrue to
the general fund of the local government unit concerned.
Section 265. Further Distraint or Levy. - Levy may be repeated if
necessary until the full amount due, including all expenses, is
collected.
Itong period to collect pa ding period for assessment and
collection. Kasi we have period of 5 years and 10 years.
Disposition of proceeds i’ll leave that for you to read.
Section 277. Condonation or Reduction of Tax by the President
of the Philippines. - The President of the Philippines may, when
public interest so requires, condone or reduce the real property
tax and interest for any year in any province or city or a
municipality within the Metropolitan Manila Area.
So I need not discuss to you the sharing. Done. 

What about 267? Action assailing validity of tax sale. (read)

Section 267. Action Assailing Validity of Tax Sale. - No court

shall entertain any action assailing the validity or any sale at
public auction of real property or rights therein under this Title
until the taxpayer shall have deposited with the court the
amount for which the real property was sold, together with
interest of two percent (2%) per month from the date of sale to
the time of the institution of the action. The amount so deposited
shall be paid to the purchaser at the auction sale if the deed is
declared invalid but it shall be returned to the depositor if the
action fails.

Neither shall any court declare a sale at public auction invalid by

reason or irregularities or informalities in the proceedings unless
the substantive rights of the delinquent owner of the real
property or the person having legal interest therein have been
impaired.

This is an important provision.

Section 270. Periods Within Which To Collect Real Property

Taxes.
- The basic real property tax and any other tax levied under this
Title shall be collected within five (5) years from the date they
become due. No action for the collection of the tax, whether
administrative or judicial, shall be instituted after the expiration
of such period. In case of fraud or intent to evade payment of the
tax, such action may be instituted for the collection of the same
within ten (10) years from the discovery of such fraud or intent to
evade payment.

The period of prescription within which to collect shall be

suspended for the time during which:

(1) The local treasurer is legally prevented from collecting the

tax;
(2) The owner of the property or the person having legal interest
therein requests for reinvestigation and executes a waiver in
writing before the expiration of the period within which to
collect; and
(3) The owner of the property or the person having legal interest
therein is out of the country or otherwise cannot be located.

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