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Local Tax
Local Tax
Local Government Taxation in the Philippines is based on Republic Act 7160, otherwise known as Local Government Code of 1991 which was signed into law on 10 October 1991 and took effect on 1 January 1992.
Sec. 133 - Common Limitations on the Taxing Powers of Local Government Units
a. Income tax, except when levied on banks and other financial institutions; b. Documentary stamp tax; c. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein; d. Customs duties, registration fees of vessel 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;
e. Taxes, fees 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, tools for bridges or otherwise, or other taxes, fees and charges in any form whatsoever upon such goods or merchandise; f. Taxes, fees and charges on agricultural and aquatic products when sold by marginal farmers or fisherman.
g. Taxes on business enterprises certified to by the Board of Investments as pioneer or nonpioneer for a period of six (6) and four (4) years, respectively from the date of registration. h. Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum product i. Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;
j. Taxes on the gross receipts of transportation of passengers of freight by hire and common carriers by air, land or water, except as provided in this code. k. Taxes on premiums paid by way of reinsurance or retrocession l. Taxes , fees and charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles; m. Taxes, fees and other charges on Philippine products actually exported, except as otherwise provided herein;
n. Taxes, fees and charges, on Countryside and Barangay Business Enterprises and cooperative duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty eight (R.A. No. 6938) otherwise known as the cooperative code of the Philippines respectively; and o. Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and Local Government Units.
1.) GENERAL FUND USED TO ACCOUNT FOR SUCH MONIES AND RESOURCES AS MAY BE RECEIVED BY AND DISBURSED FROM THE LOCAL TREASURY. 2.) SPECIAL EDUCATION FUND SHALL CONSIST OF THE RESPECTIVE SHARES OF PROVINCES, CITIES , MUNICIPALITIES, AND BARANGAYS IN THE PROCEEDS OF THE ADDITIONAL TAX ON REAL PROPERTY. 3.) TRUST FUND SHALL CONSIST OF PRIVATE AND PUBLIC MONIES WHICH HAVE OFFICIALLY COME INTO THE POSSESSION OF THE LGU OR OF A LOCAL GOVERNMENT OFFICAIL AS TRUSTEE, AGENT OR ADMINISTRATORR, WHICH HAVE BEEN RECEIVED AS A GUARANTY FOR FULFILLMENT OF SOME OBLIAGATION.
A. Province - at rate not exceeding 1% of the assessed value of the real property. Province 35% Municipality 40% Barangay 25% B. City or Municipality within Metropolitan Manila Area - at rate not exceeding 2% of the assessed value of real property. City 70% Barangay 30%
Revenues Taxes - enforced contribution Kinds: 1. Property taxes 2. Business and other taxes Receipts Fees imposed on the exercise of regulatory powers Charges cost recovery impositions for services delivered or use of facilities
BUSINESS TAXES
PROVINCES - They may collect taxes, fees and charges on: 1) Tax on Transfer of Real Property Ownership - at rate not more than 50% of 1% of total consideration 2) Franchise Tax - at rate not exceeding 50% of 1 % of the gross receipts for the preceding calendar year 3) Tax on Sand, Gravel and Other Resources - at rate not more than 10% of fair market value 4) Tax on Business of Printing and Publication -at rate not exceeding 50% of 1% 5) Professional Tax - at rate not more than P 300.00 annually 6) Amusement Tax - at rate not more than 30% of gross receipts from admission fees 7) Annual fixed Tax for every Delivery Truck, or Van of Manufacturers or Producers, Wholesalers of, Dealers, or Retailers in, Certain Products - at rate not exceeding P 500.00 annually.
MUNICIPALITIES - They may collect taxes, fees and charges not otherwise levied by provinces. 1.) Manufacturer - at rate not exceeding 37 1/2 % of 1% of gross sales or receipts for the preceding calendar year. 2.) Wholesalers - at rate not exceeding 50% of 1 % of gross sales or receipts for the preceding calendar year. 3.) On Exporters, Manufacturers, Wholesalers or Retailers of essential commodities - at rate not exceeding 1/2 of the rate prescribed under letters A, B, and D. 4.) Retailers -at rate with gross sales or receipts for the preceding calendar year or P 400,000 or less 2% per annum More than P 400,000 1% per annum
5.) Contractors at rate not exceeding 50% of 1% on the gross sales or receipts for the preceding calendar year. 6.) Banks and other financial Institution at rate not exceeding 50% of 1% on the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending activities. 7.) Peddlers at rate not exceeding P 50.00 annually. 8.) On any business, not otherwise specified at rate not exceeding 2% of gross sales or receipts of the preceding calendar year.
BARANGAY INCOME SOURCES I. Internal Revenue Allotment (IRA) II. Real Property Tax (RPT) III. Barangay Taxing Power IV. Community Tax
The share of each province, city and municipality shall be determined on the bases of the following formula. a) Population b) Land Area c) Equal Sharing 50% 25% 25%
B. SHARES OF LGU IN THE PROCEEDS OF NATIONAL WEALTH - Local government units shall have an equitable share in the proceeds derived from the utilization and development areas at 40% of the gross collection derived by the national government from the preceding year from mining taxes, royalties, forestry and fishery charges in addition to the internal revenue allotment.
3/40 of 1%
Franchise Tax
Franchise Right or privilege, affected with public interest conferred upon private person or corporation, under government - imposed terms and conditions in interest of public welfare, security and safety Tax rate: not to exceed Tax Base Provinces Cities Gross receipts 50% of 1% 75% of 1% Capital investment For start- u ps
1/20 of 1%
3/40 of 1%
Franchise Tax proceed not shared exemption: holders of certificates of public convenience for operation of public utility vehicle
FRANCHISE TAX Meralco, Globe, Smart, Manila Water Maynilad and PLDT are subject to franchise tax on the receipts derived within the LGU
Tax on Professionals
Tax subject: persons engaged in the practice of profession requiring government exams Tax rate: Provinces- maximum of Php 300/ profession Cities- maximum of Php 300/ profession Payment: on or before January 31 in the province/city where practice is done, or principal office is located proceeds not shared exemption: practice of profession exclusively as government employee
Amusement Tax
Tax subject: patrons of shows and entertainment activities; collected and remitted by proprietors, lessees and operators Tax rate: Provinces-not to exceed 30% of paid admission fees. Cities- not to exceed 30% of paid admission fees no admission fee, no tax
Amusement Tax
proceeds shared: 50-50 between province and municipality exemptions: operas, concerts, dramas, recitals, painting and art exhibition, flower shows, musical and literary presentations except rock and similar concerts
Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or judicial, including government - o wned or controlled corporations are hereby withdrawn upon the effectivity of this Code except: 1. Local water districts 2. Cooperatives registered under R.A. No. 6938 3. Non - s t ock non - profit hospitals and educational institutions 4. Business enterprises certified by BOI as pioneer or non - p oneer i 5. Business entity, association or cooperatives registered under R.A. No. 6810 6. Printer and/or publisher of books and other reading materials prescribed by DECS
Administrative Procedures Requirements for Existing Business Mayors Permit must be renewed within January 1-20 of every year Renewal of existing business permit is not automatic
(b) If a person conducts or operates two (2) or more related businesses which are subject to the same rate of imposition, the tax shall be computed on the basis of the combined total gross sales or receipts of the said two (2) or more related businesses.
(c) If, however, the businesses operated by one person are governed by separate tax schedules or the rates of the taxes are different, the taxable gross sales or receipts of each business shall be reported independently and the tax thereon shall be computed on the basis of the appropriate schedule.
Assessment
Assessment is the inherent function of the local treasurer. Securing/applying business permit is under the Office of the City Mayor. EDP for Billing functions. Acceptance of payment is again a function of the Treasurers Office.
Community Tax
Should be paid in the place of residence of the individual or in the place where the principal office of the juridical entity is located. Branches are not required to secure community tax.
Manufacturers
Manufacturers sales office which distributes its product should also be classified as manufacturers and taxable as such and not as distributor/wholesaler/retailer.
Retailer
Car dealers should not be classified as wholesalers/dealers simply because they are commonly known as car dealers. They should be classified as retailers since they sell directly to end-user or customers.
Retirement of Business
Should be retired on or before the 20th day of January. Should pay for the entire year after January 20. Sales realized from January up to the time of retirement should likewise be paid.
Security Agency
Security agency are subject to business tax as contractor and subject to situs of tax at 70% - 30%
Canteens and bookstore operated by the school are exempted from the payment of business tax. Concessionaires operating canteen and bookstores are subject to business taxes.
Educational Institutions
Contractors doing business in an LGU are subject to business tax at 70%. Main or Principal office are subject to 30%. Sub-contractors are not subject to contractors tax. Only main contractors are liable to pay the tax. Tantamount to double taxation if collected from sub-contractors. Income derived from abroad are not taxable.
Contractors
Liquefied Petroleum Products LPG is not subject to local tax. However, said LPG business shall still be liable to pay the Mayors permit and other regulatory fees or service charges.
RE-EXPORTATION
Re-exportation of finished product should not be classified as exporter or local/domestic sale but should be classified as rendering service contractor
Upon the effectivity of the EPIRA Law (2002) Gross receipts less: NPC Charges TransCo charges Reinvestment fund Universal Charges
QUEZON CITY
Former Capital of the Philippines Largest City in Metro Manila in terms of population and land area with 2.17 Million residents occupying over 16,000 hectares of land area Was known as the most financially distressed Local Government Unit in Metro Manila and probably nationwide in 2001
1.
1. For residential 5 years 2. For commercial and industrial 3 years 3. For machineries 3 years This is an internal rule promulgated by the auction committee
2.) Reassignment of permanent employees to avoid familiarization with Taxpayer. 3.) Prepared at least 20 delinquency letters per day per employee assigned in the Real Estate Division. 4.) Computerization of systems and processes.
5.) Issued new Official Receipts with security features to identify and curb the proliferation of fake receipts. 6.) Constructed the taxpayers assessment and payment lounges (free Coffee & Ice Tea). 7.) Recognized the 10 outstanding Taxpayers for Business and Real Property.
8.) Increased the discount given to Real Property Taxpayers paying annually from 10% to 20%, and from 5% to 10% for those paying promptly quarterly. 9.) Conducted Auction Sale of Government Owned and Controlled Corp. such as Heart Center, Lung Center, Kidney Center and MWSS. 10.) Hired an independent and private encoding company to encode all RPT payment records and Tax Declarations. 11.) Automatically Generated and issued Computerized Delinquency Letters amounting to P10.7 Billion Pesos.
12.) Filed anti-graft cases with the office of the Ombudsman against employees issuing fake RPT Receipts, that resulted to the dismissal of 6 employees. 13.) Declared Tax Amnesty on Machinery and Equipment from Oct. to Dec. 2002. 14.) Created a special Task Force on Machinery composed of representatives from the Treasury, Assessors and Engineering Departments to conduct physical inventories of all machinery and equipment which failed to avail of the Tax Amnesty.
15.) Posted 300 Billboards in major thoroughfares informing the date of the Auction Sale and the increased discount from 10% to 20%, if RP Tax is paid annually. 16.) Allowed staggered payment of Delinquent Real Property Taxes upon payment of a minimum of 30% down and the balance payable within 6 months.
17.) Verified the total value of machinery as appearing in the Tax Declaration issued by the Assessors Office and counter checked this ,with that appearing in the financial statements. 18.) Instruct the Building Official to forward to the City Assessor the building / occupancy permit, stating the total value of the construction cost, for issuance of a new tax declaration.
19.) Instruct the City Engineer to forward to the City Assessor all application for mechanical permit for issuance of a new tax declaration on machineries. 20.) Implemented the Geographic Information System (GIS) for future tax mapping of Real Property.
1.) Required taxpayers with gross receipts of over P500,000.00 to submit BIR stamped 2005 financial statements and records of monthly payments of VAT and NON-VAT for the year 2006; for comparison against declared gross receipts for 2006 before renewing their Mayors Permit for 2007.
2.) Utilized the presumptive income level approach (implementing a schedule of minimum gross) to make gross tax declarations more realistic and current.
3.) Alignment of Business Taxes with Metro Manila Rates 4.) Consultation and Dialogue with the Business Sector particularly QCCCI
5.) SEC / BIR gross-sales data versus declared gross sales with LGUs. 6.) Census and listing of tax payers. 7.) Adequate and competent staffing. 8.) Examinations of books of account and pertinent records by the Treasurer or his authorize representative. 9.) Revenue target setting
10.) Required contractors to pay business tax prior to the release of the building, excavation and occupancy permits.
11.) Required dealers, sellers, and developers of real estate, such as land, building, condominium units and the like, especially corporations and other juridical entities, to present their Mayors Permit and proof of payment of Business Taxes before processing the Transfer Tax.
12.) Instructed the City Accountant to deduct from the voucher the amount owing to the payment of Business Tax for contractors and suppliers doing business with the City.
13.) Instructed the BPLO to conduct a door to door, street by street, inspection and verification of all unlicensed establishments. 14.) Identified establishments having decreased current declared gross receipts compared to previous years and examined their Books of Accounts for verification of actual sales.
15.) Used (ink) color coding in signing the tax bills and stamp pad with my picture on it, and other official documents during renewal period.
16.) Employed the raffle system in the assignment of Letters of Authority to revenue examiners.
17.) Grounded a number of revenue examiners with low collection outputs every month. 18.) Rewarded top collector revenue examiner with a free trip to Hong Kong and other incentives.
19.) Created a special team to compare Treasury records of Transfer Tax payments with those found in the Land Registration Authority. (Transfer Tax Records in 2001 revealed that 58% of those recorded in the LRA were fake receipts and only 42% were valid and legitimate.)
20.) Maintained a photo gallery of all permanent and casual employees with corresponding assignments, for easier identification.
21.) Required advertising agency to pay contractors tax prior to the release of the billboard permit.
22.) Update local business tax ordinances by 10% once every 5 years. 23.) Adjust existing fees and charges. 24.) Require payment of community tax on all transaction with LGUs.
QUEZON CITY IS THE RICHEST CITY NOT ONLY IN METRO MANILA BUT IN THE ENTIRE COUNTRY AS WELL, AS AUTHENTICATED BY THE COMMISSION ON AUDIT, BEATING MAKATI AND MANILA IN TERMS OF REVENUE COLLECTION FOR THE YEAR 2002,2003,2004 AND 2005
%
17.38 103.91 93.51 86.04 -10.19 66.07 -0.75 29.52 121.35 42.85 10.07 15.25 65.59 37.15
ACTUAL
7,097,446,201
SURPLUS
847,446,201
Top 10 in terms of highest total income generated for CY 2004 as compared to 2001 (NCR) CLASS RANK RANK 2004 2001
CITY QUEZON CITY MAKATI MANILA PASIG KALOOKAN MANDALUYONG PARANAQUE MUNTINLUPA PASAY VALENZUELA MUNICIPALITY SAN JUAN NAVOTAS PATEROS
S 1 S 1 1 1 1 1 1 1 1 1 3
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH 1ST 2ND 3RD
6,496,282,210 6,247,252,757 6,029,451,082 2,969,849,218 1,681,228,300 1,601,355,056 1,590,065,300 1,250,547,925 1,246,598,000 1,1,73,179,686 519,580,000 276,671,818 72,952,324
3RD 1ST 2ND 4TH 6TH 7TH 5TH 8TH 9TH 10TH 2ND 3RD 4TH
4,276,721,410 5,122,321,279 4,422,171,694 2,220,682,718 1,493,125,921 1,165,955,784 1,533,439,002 1,087,802,228 1,075,895,000 872,868,370 430,370,000 292,835,782 62,188,114
GEN. FUND
S.E.F.
TRUST FUND
TOTALS
83,216,459
107,266,365
154,191,123
345,001,948
Time Deposits
1,423,966,330
431,777,055
431,925,255
2,287,668,641
1,512,560,010
539,043,420
586,444,378
2,638,047,810
FINANCIAL PERFORMANCE OF LOCAL GOVERNMENT UNITS COA REPORT / National Capital Region CY 2002
Cities/Municipalities 1. Quezon City 2. Makati 3. Manila City 4. Pasig City 5. Caloocan City 6. Mandaluyong City 7.) Paranaque City 8. Pasay City 9. La Pinas City 10. Muntinlupa City 11. Valenzuela City 12. Marikina City 13. Taguig 14. Malabon City 15. San Juan 16. Navotas 17. Pateros Internal Sources 3,946,465.3 External Sources 1,339,568.0 Grand Total 5,286,033.3
3,816,458.7 3,116,507.8 1,677,114.8 640,142.2 778,135.5 708,046.2 639,536.0 467,153.0 533.984.0 434,465.2 382,179.0 337,956.7 139,776.2 314,598.4 91,122.0 23,734.1
403,992.6 1,047,027.1 388,438.6 740,218.3 280,363.8 345,447.7 306,163.3 373,755.2 304,334.4 375,762.2 318,950.7 226,678.0 289,257.2 66,611.7 116,296.9 37877.1
4,220,451.3 4,163,534.9 2,065,553.3 1,380,360.5 1,058,499.3 1,053,493.8 945,699.3 840,908.2 838,318.3 810,227.3 701,129.7 564,634.7 429,033.4 381,210.9 207,418.9 61,611.2
5,794,829,900
5,541,541,667
4,489,159,795
TOTAL
37,352,537,051.15
29,852,591,500.78
7,499,945,550.37
PARTICULARS
QUEZON CITY
MANILA
MAKATI
INCOME LOCAL SOURCES TAX REVENUE Real Property Business Taxes Other Taxes NON-TAXES REVENUE Regulatory Fees Service/User Chrages Receipts from Eco. Ent. Toll Fees Other Receipts SHARES FROM NATIONAL TAX COLLECTIONS EXTRAORDINARY RECEIPTS/GRANTS/AIDS LOANS AND BORROWINGS INTER-LOCAL TRANSFER
7,376,391,780.00 5,828,214,960.00 5,240,530,690.00 2,299,519,760.00 2,635,229,130.00 305,781,800.00 587,684,270.00 304,124,060.00 122,166,900.00 30,658,620.00 0.00 130,734,690.00 1,548,176,820.00 0.00 0.00 0.00
7,119,823,858.00 5,103,606,479.00 4,438,344,332.00 1,889,166,686.00 2,351,070,156.00 198,107,490.00 665,262,147.00 269,796,183.00 166,311,490.00 185,458,341.00 9,913.00 43,686,220.00 1,156,140,434.00 500,000.00 0.00 859,576,945.00
6,320,342,864.75 5,810,054,849.16 5,264,943,985.16 2,462,986,843.28 2,513,988,823.49 287,968,318.39 545,110,864.00 187,575,606.84 66,601,993.32 105,744,778.21 0.00 185,188,485.63 431,979,800.00 26,608,118.85 51,700,096.74 0.00
5,175,000,000.00
3,870,000,000.00
4,072,000,000.00
4,000,000,000 3,286,396,701
3,788,687,846
4,700,000,000.00
3,000,000,000
2,000,000,000
1,000,000,000
Estimate
3,641,861,948
5,200,000,000.00
5,304,608,683
5,000,000,000
5,286,033,298
Actual
1999
2000
2001
2002
2003
2004
2005
274,682,517 1,201,456,187 61,844,723 31,631,495 22,340,412 45,190,061 42,060,602 8,572,061 1,687,778,062 88,485,716 18,407,000 1,794,670,778 230,823,737 116,380,658 2,141,875,175 16,319,502 2 158 194 678
284,534,710 1,279,649,917 152,218,191 39,779,550 13,099,296 53,389,517 102,179,426 23,980,793 1,948,931,403 133,847,738 21,923,000 2,104,702,141 239,292,657 121,933,264 2,465,928,063 31,341,864 2 497 269 928
9,852,192 78,193,729 90,473,467 8,148,054 (9,241,116) 8,199,456 60,118,823 15,480,732 261,153,341 45,362,022 3,516,000 310,031,363 8,468,920 5,552,605 324,052,888 15,022,361 339 075 250
3.59 6.51 146.29 25.76 (41.37) 18.14 142.93 179.76 15.47 51.26 19.10 17.28 3.67 4.77 15.13 92.05 15 71
GEN. FUND
S.E.F.
TRUST FUND
TOTALS
432,716,682
174,710,097
446,251,976
1,053,678,955
Time Deposits
5,086,775,946
230,654,885
184,794,997
5,502,225,829
5,539,826,738
405,364,982
631,046,973
6,576,238,694
OTHER TREASURY FUNCTIONS: 1.GASOLINE CALIBRATION 2.INSPECTION OF WEIGHTS AND MEASURES 3.BILLBOARDS
GASOLINE CALIBRATION
Increase penalty of defective gasoline pumps: 1. 1st Offense - from P200 to P4,000 2. 2nd Offense - from P500 to P5,000 3. 3rd Offense - cancellation/revocation of mayor permit to operate a business * Calibration of gas pump from annually to quarterly. Note: The court may impose 3 months to 1 year imprisonment or both fine and imprisonment at the discretion of court
CALIBRATING BUCKET
TEST WEIGHTS
VICTOR B. ENDRIGA, Ph.D. Cel. NO. 0920-9555444 Tel. No. (02) 928-8336