LOCAL TAXATION - QUIZ
1. What are the fundamental principles governing
local taxation?
1.Taxation shall be uniform in each local
government unit;
2. It shall be equitable and based as far as
practicable on the taxpayer's ability to pay;
3. Levied and collected only for public
purposes;
4. Not be adjust, excessive, oppressive, or
confiscatory;
5. Not be contrary to law, public policy,
national economic policy, or in restraint of
trade;
6. The collection of local taxes, fees, charges
and other impositions shall in no case be let
to any private person
7.The revenue collected pursuant to the
provisions of this Code shall inure solely to
the benefit of, and be subject to disposition
by, the local government unit levying the
tax, fee, charge or other imposition unless
otherwise specifically provided herein;
8. Each local government unit shall, as far as
2. May the government grant tax exemption to
taxpayers whose previous exemption has been
withdrawn?
Yes. In PLDT v. City of Davao, the Supreme Court
held that withdrawal of a tax exemption does not
prohibit future grants of tax exemption.
3. Can the ordinance with has been declared void
as failure to publish for 3 weeks be remedied by
passing another ordinance with purports to
amend the ordinance that has been declared null
and void?
NO. In Coca-Cola Bottlers v. City of Manila [June 27,
2006], the Supreme Court held that the new
ordinance is still void since the passage of it did not
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have the effect of curing the defects of the first
ordinance that has been declared null and void
which, anyway, does not legally exist. Instead of
amending the ordinance, the LGU should have
enacted another tax measure which strictly
complies with the requirements of law, both
procedural and substantive.
4. What is the Principle of Pre-Emption or
Exclusionary Rule?
It states that where the National Government
elects to tax a particular area, it impliedly
withholds from the local government the delegated
power to tax the same field.
5. Discuss the process on how to appeal involving
questions of constitutionality or legality of tax
ordinances.
Procedure:
a. Appeal within 30 days from
effectivity of the ordinance to the
Secretary of Justice.
b. Secretary must render a
decision within 60 days from receipt of
appeal.
c. Taxpayer must file an
appropriate action with a court of
competent jurisdiction within 30 days
from:
c-1. Receipt of decision of Secretary of
Justice or
c-2. The lapse of 60 days without any
action from the Secretary of Justice
(Sec. 187 of LGC)
6. State the procedure in protest of local tax
assessment.
a. Taxpayer to file a written protest with the local
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treasurer within 60 days from the receipt of the
notice of assessment
b. The treasurer has to decide within 60 days from
the time of filing. If treasurer finds the protest
meritorious, he will cancel the assessment; if not,
he will deny the protest.
c. Taxpayer has 30 days from receipt of denial, or
30 days from the lapse of the 60 day period within
which to appeal to the proper court of competent
jurisdiction; otherwise assessment shall become
final and executory.
d. After, go to CTA within 30 days via:
o Petition for review to CTA Division under Rule 42
(if from RTC acting original), or
o Petition for review to CTA En Banc under Rule
43 (if from the RTC acting in its appellate
jurisdiction)
ANSWERS TO THE GUIDE QUESTIONS
1. What is the source of the local taxing power of
the government?
It is granted by the Constitution under Section 5,
Article X of the 1987 Constitution. It is not inherent
in the Local Government.
2. What is the legal basis of the grant of local
taxing power under the LGC?
Section 129 of the LGC states that 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.
3. Who has the authority to prescribe penalties for
local tax violations?
The Sanggunian of a LGU is authorised to prescribe
fines or other penalties for violation of tax
ordinances. (Sec. 516, LGC)
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4. Who may grant local tax exemptions?
The LGU may, through ordinance duly approved,
grant tax exemptions, incentives or reliefs under
such terms and conditions, as they may deem
necessary. (Sec. 192, LGC)
5. What are the guidelines for the grant of tax
exemptions, tax incentives, and reliefs?
Sanggunians have the power to grant tax
exemptions, tax incentives, and tax reliefs. These,
however, do not cover regulatory fees imposed by
the LGU.
For Tax Exemptions
 The tax exemptions should be conferred via
a tax credit certificate;
 The grant of exemption and reliefs must be
through an ordinance;
 They may be granted in cases of natural
calamities, civil disturbances, general failure
of crops, or adverse economic conditions;
 Any exemption or relief granted to a type or
kind of business shall apply to all business
similarly situated; and
 The exemption or reliefs are only to last for
a period not exceeding 12 months.
For Tax Incentives
 The tax incentive shall be granted only to
new investments in the locality and the
ordinance shall prescribe the terms and
conditions therefore;
 The grant of the tax incentive shall be for a
definite period not exceeding 1 calendar
year;
 The grant of tax incentives shall be by
ordinance passed prior to the 1st day of
January of any year; and
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  Any tax incentive granted to a type or kind and (d) Barangays?
of business shall apply to all business
similarly situated. (Article 282, I.R.R. of R.A. (A) Province
7160)
 Local Transfer Tax
6. What entities are still exempt from local taxes?  Business Tax on Printing and Publication
a. Local Water Districts  Local Franchise Tax
b. Cooperatives duly registered under RA 6938  Tax on Sand, Gravel and other Quarry
c. Non-stock and non-profit hospitals Resources
d. Educational institutions  Professional Tax
 Amusement Tax
7. Who has the authority to adjust local tax rates?
 Tax on Route Delivery Truck or Vans
The LGU have the authority to adjust local tax
rates. However, it should not be more than once (B) Municipalities
every 5 years and in no case shall such adjustment A municipality may levy on those taxes, fees and
exceed 10% of the rates fixed under the Code. (Sec. charges not otherwise levied by provinces (see Section
191, LGC) 142, LGC)

8. Who has the authority to issue local tax
ordinance? The power to impose a tax, fee, or
charge or to generate revenue shall be exercised by
the Sanggunian of the LGU concerned through an
appropriate ordinance. (Sec. 132, LGC)
9. What is the significance of a local tax
ordinance?
What determines tax liability is the tax ordinance.
The LGC is simply the enabling law for the local
legislative body.
10. Is publication/posting of an ordinance fixing
the assessment levels for different classes of real
property in a LGU necessary?
Yes. In Figuerres v. CA [March 25, 1999], the
Supreme Court held that the publication/posting
requirement under Section 188 of the LGC must be
complied with in case of an ordinance imposing
real property taxes, as well as an ordinance fixing
the assessment levels for different classes of real
property.
11. What is the taxing power of the following
LGUs: (a) Province; (b) Municipalities; (c) Cities;
Expressly provided in the Code:
 Local Business Tax (Section 143, LGC)
 Fees on business and occupation (Section 146,
LGC)
 Fees on sealing and licensing of weights and
measures (Section 148, LGC)
 Fishery Rentals, Fees and charges (Section 149,
LGC)
(C) Cities
May levy taxes which the province and municipality
may impose. The tax rates, fees, and charges which
the city may levy may exceed the maximum rates
allowed for the province or municipality by not
more than 50% except the rates of professional
and amusement taxes.
(D) Barangays
 Taxes on stores with fixed business
establishment
 Service fees for use of barangay-owned
properties and services rendered

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  Barangay clearance
 Other fees and charges for
(a) commercial breeding of fighting cocks,
cockpits and cockfighting;
(b) on places of recreation with admission
fees; (c) billboards, signboards and outdoor
advertisements
12. What are not covered by the local transfer tax
of real property?
The sale, transfer or other disposition of real
property pursuant to the Agrarian reform Program
shall be exempt from local transfer tax. (Sec. 135,
LGC)
13. What is not covered by the business tax on
printing and publication?
The receipts from the printing and/or publishing of
books or other reading materials prescribed by the
DepEd as schools texts or references shall exempt
from business tax. (Sec. 136, LGC)
14. May the tax be imposed on extractions from
private lands?
No. In Province of Bulacan v. CA [November 27,
1998], the tax be imposed only to those extracted
from public lands or public waters within its
territorial jurisdiction. Private lands are excluded.
(Sec. 138, LGC)
15. What is the situs of professional tax?
Professional tax is payable in the province where the
taxpayer practices his profession or where the principal
office is located in case he practices his profession in
several places. (Sec. 139, LGC)
16. Is the amusement tax on admission tickets to PBA
games a national or local tax?
It is a national tax. In PBA v. CA [August 8, 2000], the
Supreme Court held that it was the National
Government which could collect amusement taxes from
the PBA. While Section 13 of the Local tax Code
mentions “other places of amusement,” professional
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basketball games are definitely not within its scope
under the principle of ejusdem generis.
17. How are the sales of route trucks and vans taxed?
 If the sale is made in a place with a branch
office: the sale is reported in the LGU where the
branch office is located.
 If the sale is made in a place without a branch
office: the sale is reported in the LGU where the
sales are withdrawn.
18. The City of Cebu imposed a gross sales tax on sales
of matches stored by Philippine Match Co. in Cebu City
but delivered to customers outside the city. Is the
imposition valid?
Yes. As held in Philippine Match Co. v. City of Cebu
[January 18, 1978], the city can validly tax the sales of
matches to customers outside of the city as long as the
orders were booked and paid for in the company’s
branch office in the city. Those matches can be
regarded as sold in the city because the matches were
delivered to the carrier in Cebu City. Generally, delivery
to the carrier is delivery to the buyer.
19. ABC Bottlers Inc. maintained a bottling plant in
Pavia, Iloilo but sold softdrinks in Iloilo City by means
of a fleet of delivery trucks called rolling stores which
went directly to customers. Iloilo City passed an
ordinance imposing a municipal license tax on
distributors/sellers in the area. Is ABC liable under the
tax ordinance?
Yes. In Iloilo Bottlers Inc. v. City of Iloilo [August 19,
1988], the Supreme Court found that the bottling
company was engaged in the business of
selling/distributing softdrinks in Iloilo City through its
rolling stores where sales transactions with customers
were entered into and sales were perfected and
consummated by route salesmen. Hence, the company
was subject to municipal license tax.
20. Who are covered by the local business tax?
(1) Manufacturers, assemblers and producers
(2) Wholesalers, dealers and distributors
(3) Exporters, manufacturers of essential commodities
(4) Retailers
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(5) Contractors
(6) Banks and other financial institutions
(7) Peddlers
(8) Other business not specified
21. What is the ceiling on business tax imposed on
municipalities within Metro Manila?
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 Section
143 of the LGC. (Section 144,LGC)
22. May a municipality impose a professional tax?
No. The municipality may impose and collect such
reasonable fees and charges on business and
occupation and on the practice of any profession or
calling except professional tax which is reserved to the
province. (see Section 147, LGC)
23. What are the limitations on the taxing power of
LGUs?
As provided in Sec. 133 of the LGC, LGUs cannot impose
the following:
(1) income tax
(2) documentary stamp tax
(3) estate and donor’s tax
(4) customs duties
(5) taxes on goods passing through the LGU
(6) taxes on agricultural and aquatic products sold by
marginal farmers and fisherman
(7) taxes on board of investments registered enterprises
(8) excise taxes and taxes on petroleum products
(9) percentage tax and VAT
(10) taxes on gross receipts of transportation
contractors
(11) taxes on premium paid by way of reinsurance
(12) taxes on registration of motor vehicles
(13) taxes on Philippine products actually exported
(14) taxes on Countryside and Barangay business
enterprises and cooperatives
(15) taxes and fees on the National Government
24. Is municipal ordinance imposing fees on goods
(corn) that pass through a municipality’s territory
valid?
No. As held in Palma Development Corp V. Zamboanga
Del Sur [October 16, 2003], LGUs, through their
Sanggunian, may impose taxes for the use of any public
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road such as a service fee imposed on vehicles using
municipal roads to a wharf. However, Section 133(e)
prohibits the imposition in the guise of wharfage, of
fees as well as other taxes or charges in any form
whatsoever on goods or merchandise. In this case, the
LGU cannot tax the goods even in the guise of police
surveillance fees.
25. Petron maintains a depot or bulk plant at the
Navotas Fishport Complex where it engages in the
selling of diesel fuels to vessels used in commercial
fishing. Navotas City levied business taxes on its sale
of petroleum products. Can the LGU levy the business
tax on the sale of petroleum?
No, the LGU cannot impose any local tax on petroleum
products. As held in Petron Corp. V. Tiangco [April 16,
2008], the prohibition with respect to petroleum
products extends not only to excise taxes but all taxes,
fees, and charges. Section 133(h) provides for two
possible bases for exemption:
(1) excise tax on articles enumerated under the Tax
Code; and
(2) taxes, fees, and charges on petroleum products.
In the latter, the exemption refers not only to direct or
excise taxes to be levied by the LGUs on petroleum
products but on all types of taxes on petroleum
products including business taxes.
26. What penalties are imposable on failure to pay
local taxes?
The Sanggunian may impose a surcharge not exceeding
25% of the amount of taxes, fees or charges not paid on
time and an interest at the rate not exceeding 2% per
month of the unpaid taxes, fees or charges including
surcharges, until such amount is fully paid but in no case
shall the total interest on the unpaid amount or portion
thereof exceed 36 months. ( Section 168, LGC)
27. What are the remedies available to the taxpayer
prior to assessment?
(1) To question the constitutionality or legality of tax
ordinances or revenue measures on appeal
(Administrative Remedy)
(2) Petition for declaratory relief as and when applicable
(Judicial Remedy)
28. When may an action for declaratory relief be filed?
When there is such an obscurity, declaratory relief would
be applicable. This remedy is open to determine any
question of construction or validity of a tax law and/or the
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declaration of taxpayer’s liabilities thereunder. (Valley Trading
vs CFi, 1989)

29. What are the rules on assessments?

General Rule: An assessment must be made within 5
years from the date they become due.
Exception: If there is fraud or intent to evade payment
of the tax, the assessment may be made within 10 years
from discovery of fraud or intent to evade.

30. What are the remedies available to the taxpayer

after assessment?
a. Protest of assessment (Section 195, LGC)
b. Claim for refund (Section 196, LGC)

31. What is the rule on refunds?

The taxpayer must file a written claim within 2 years
from the date of payment of tax or from the date when
the taxpayer is entitled to refund.

32. What are the civil remedies available to the LGU

for collection of revenues?
a. Administrative action
i. Distraint of personal property
ii. Levy upon real property
iii. Compromise
b. Judicial action

33. How is the remedy of judicial action exercised?

The LGU concerned may institute an ordinary civil
action with the regular courts for the collection of
delinquent taxes within 5 years from the date the taxes,
fees or charges become due. (Sec. 194, LGC)

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