LOCAL GOVERNMENT CODE OF 1991, as amended

Local taxes are taxes that are imposed and collected by the local government units in order to raise revenues to
enable them to perform the functions for which they have been organized.

Aspects of local taxation:

1. Local Government Taxation (Sections 128-196, LGC)
2. Real Property Taxation (Sections 197-283, LGC)

LOCAL GOVERNMENT TAXATION REAL PROPERTY TAXATION

Imposition of license, taxes, fees and other System of levy on real property imposed on a country-
impositions, including community tax wide basis but authorizing, to a limited extent and within
certain parameters, local governments to vary the rates
of taxation

LOCAL GOVERNMENT TAXATION

Fundamental Principles [UE-LIP]
1. Taxation shall be Uniform in each local government unit;
2. Taxes, fees, charges and other impositions shall: [EPU]
a. be equitable and based as much as possible on the taxpayer's ability to pay;
b. be levied and collected only for public purposes;
c. shall not be unjust, excessive, oppressive, or confiscatory;
3. The collection of local taxes, fees, charges and other impositions shall in no case be Let to any private person;
4. The revenues collected pursuant to the provisions of the LGC shall Inure solely to the benefit of, and be subject
to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise
specifically provided herein; and
5. Each local government unit shall, as far as practicable, evolve a Progressive system of taxation (Sec. 130, LGC).

Nature and source of taxing power

a) Grant of local taxing power under the LGC

Legal foundations of local government unit’s powers

1. Art. X, Sec 5 of the 1987 Constitution - “Each local government unit shall have the power to create their 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.”

2. Sec. 129 of the Local Government Code (LGC) - “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.”

3. Charter of Cities – additional taxing authority exclusively granted to cities include the power to impose
percentage tax and taxes on articles subject to specific tax.

Characteristics of the taxing power of LGUs [DON2G]

1. Not inherent –May only be exercised if delegated to them by national legislature or conferred by the
Constitution itself.
2. Direct grant from the Constitution – While a direct grant, the same is subject to limitations as may be set by
Congress.
3. Not absolute –Subject to limitations and guidelines as may be provided by law such as progressivity etc.
4. Exercised by the sanggunian of the LGU concerned through an appropriate Ordinance.
5. Its application is bounded by the Geographical limits of the LGU that imposes the tax.
Authority to adjust local tax rates
LGUs have the power to adjust local tax rates provided that the adjustment of the tax rates as prescribed herein
should not be oftener than once every five (5) years, and in no case shall such adjustment exceed ten percent
(10%) of the rates fixed under the LGC (Sec. 191, LGC).

LGUs cannot tax the National Government:

GR: LGUs cannot impose taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities.
XPN: When specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the
aforementioned entities (City Government of San Pablo, Laguna v. Reyes, G.R. No. 127708, March 25, 1999).

Authority to issue local tax ordinances

Kinds of Local Tax Ordinances
1. Those imposing a fee or tax specifically authorized by the Local Government Code for the local government
units to impose.

2. Those imposing a fee or tax not specifically enumerated under the LGC or taxed under the provisions of the
NIRC or other applicable laws (Sec. 186, LGC).

Local taxing authority

Power to create revenues exercised through LGUs
Each local government unit has the power to: (Sec. 129, LGC)
1. Create its own sources of revenue; and
2. Levy taxes, fees, and charges subject to the provisions herein, consistent with the basic policy of local
autonomy.

The power to impose a tax, fee, or charge or to generate revenue under the LGC shall be exercised by the
sanggunian of the local government unit concerned through an appropriate ordinance (Sec. 132, LCG).

Procedure for approval and effectivity of tax ordinances

1. The procedure applicable to local government ordinances in general should be observed (Sec. 187, LGC).

The following procedural details must be complied with:

a. Necessity of a quorum
b. Submission for approval by the local chief executive
c. The matter of veto and overriding the same
d. Publication and effectivity (Secs. 54, 55, and 59, LGC).

2. Public hearings are required before any local tax ordinance is enacted (Sec. 187, LGC).

3. Within 10 days after their approval, publication in full for 3 consecutive days in a newspaper of general
circulation. In the absence of such newspaper in the province, city or municipality, then the ordinance may be
posted in at least two conspicuous and publicly accessible places (Sec. 188 & 189, LGC).

When an ordinance takes effect

In case the effectivity of any tax ordinance or revenue measure falls on any date other than the beginning of the
quarter, the same shall be considered as falling at the beginning of the next ensuing quarter, and the taxes, fees, or
charges due shall begin to accrue therefrom.

Test in determining the validity of an ordinance

1. It must not contravene the Constitution or a statute
2. It must not prohibit but may regulate trade
3. It must not be discriminatory, unfair, unjust, confiscatory, unreasonable, and oppresive
4. It must be general and consistent with the national or public policy of the government
Scope of the taxing power of LGUs
1. Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes,
fees, and charges, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall
exclusively accrue to it (Sec. 129, LGC).

2. All local government units are granted general powers to levy taxes, fees or charges on any base or subject not
otherwise specifically enumerated herein or taxed under the provisions of the NIRC, as amended, or other
applicable laws. The levy must not be unjust, excessive, oppressive, confiscatory or contrary to a declared
national economic policy (Sec. 186, LGC).

3. No such taxes, fees or charges shall be imposed without a public hearing having been held prior to the
enactment of the ordinance (Sec. 187, LGC).

4. Copies of the provincial, city, and municipal tax ordinances or revenue measures shall be published in full for three
consecutive days in a newspaper of local circulation or posted in at least two conspicuous and publicly accessible
places (Sec. 188, LGC).

Specific taxing power of Local Government Units

a. Taxing powers of provinces

Taxes, fees and charges which a province or a city may levy

1. Tax on transfer of real property ownership (Sec. 135, LGC)
2. Tax on business of printing and publication (Sec. 136, LGC)
3. Franchise Tax (Sec. 137, LGC)
4. Tax on sand, gravel and other quarry resources (Sec. 138, LGC)
5. Professional tax (Sec. 139, LGC)
6. Amusement tax (Sec. 140, LGC)
7. Annual fixed tax for every delivery truck or van of manufacturers or producers, wholesalers of, dealers, or
retailer in certain products (Sec. 141, LGC)
8. Annual ad valorem tax on real property such as land, building, machinery, and other improvement not
specifically exempted at the rate not exceeding 1% of the assessed value of the real property (Sec. 232, LGC)
9. Special levies on real property
10. Toll fees or charges for the use of any public road, pier, or wharf, waterway, bridge, ferry, or
telecommunication system funded and constructed by the provincial government (Sec. 155, LGC)
11. Reasonable fees and charges for services rendered (Sec. 153, LGC)
12. Charges for the operation of public utilities owned, operated, and maintained by the provincial government
(Sec. 154, LGC)
13. Slaughter fees, corral fees, market fees, charges for holding benefits
14. Tuition fees from the operation of the provincial high school, except in the public elementary grades
15. Those that are allowed under the common taxing powers of the local government in addition to the above
enumeration