POWER TO CREATE SOURCES OF REVENUES

Article 10 Sec. 5 of the Philippine Constitution

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.

Local Government Code

Sec 18, LGC Power to generate and apply resources. LGU shall have the power and authority to establish an
organization that shall be responsible for the efficient and effective implementation of their development
plans, program objectives and priorities; to create their own sources of revenues and to levy taxes, fees, and
charges which shall accrue exclusively for their use and disposition and which shall be accrue exclusively for
their use and disposition and which shall be retained by them; to have a just share in national taxes which
shall be automatically and directly released to them without need of any further action; to have an equitable
share in the proceeds from the utilization and development of national wealth and resources within their
respective territorial jurisdictions including sharing with the inhabitants by way of direct benefits; to acquire,
develop, lease, encumber, alienate or otherwise dispose of real or personal property held by them in their
proprietary capacity and to apply their resources and assets for productive, developmental, or welfare
purposes, in the exercise or furtherance of their governmental or proprietary powers and functions and thereby
ensure their development into self-reliant communities and active participants in the attainment of national
goal.

Local Revenue Ordinance

HIGHLIGHTS OF THE DECENTRALIZED REVENUE
GENERATION SYSTEM
• Operative word is “may”
• Rates are given as range (maximum or minimum)
• Expansion available under section 186
• Adjustment of tax rates possible once every five
years at rate not exceeding 10% (section 191)
• Ability to grant tax exemptions, reliefs, and
incentives,
• Not subject to review by any national government
agency
 LOCAL RESOURCE STRUCTURE
National Government
• Internal Revenue Allotment
• Share from National Wealth
• Direct Share from National Taxes
• Other Grants
Local Sources
• Taxes
• Fees
• Charges
• Operations of Economic Enterprises
Other External Sources
• Loans
• Bonds
• Private Sector Participation
• Others (Donors, NGAs and the private sector)
 REVENUE CODES
Compiled tax and revenue ordinances
arranged systematically (A handy
reference for LGU Officials and
Taxpayers)
A necessary element for imposing and
collecting revenues
Approved Revenue Codes mandate local treasurers
to collect the LGUs
 THE ADVANTAGE OF REVENUE ORDINANCE
IN CODIFIED FORM
 MORE ORGANIZED REVENUE
G E N E R AT I O N S Y S T E M
 PROVIDES A HOLISTIC VIEW OF
INTERNAL SOURCES WHICH CAN BE
CONVENIENT BASIS FOR RESOURCE
E S T I M AT I O N . I T C A N A L S O B A L A N C E
TA X PAY E R S A B I L I T Y T O PAY
 D E TA I L P R O C E D U R E S F O R TA X
A D M I N I S T R AT I O N F O R TA X PAY E R S
CONVENIENCE
 C A N B E T H E M AT I C T O S U P P O R T T H E
DEVELOPMENT OBJECTIVES OF THE
LGU
PURPOSE OF UPDATING REVENUE CODE

1. Anchor provisions on legal basis

2. Expand Coverage
3. Elimination of unproductive bases of
revenues/bases which the LGU has no
intentions of enforcing
4. Adjust/Update Rates
5. Simplify Provisions
6. Increase transparency
7. Input Economic Sensitivity
8. Stimulate Economic Development
COMMON COMPOSITION OF TAX CODIFICATION PROJECT

Chairman - Vice Mayor

Vice-Chairman - Treasurer
Secretary - Sanggunian Secretary
Members - Budget Officer
Planning Officer
Representatives, Office of the Mayor
Representatives, Comm. on Ways &
Means
Private Sector

The LGU can add to the list

PROCESS OF UPDATING REVENUE CODES

1. Planning
2. Drafting
3. Enactment of Ordinances
4. Implementation
5. Redistribution
OUTLINE OF REVENUE CODE

General Provisions
Taxes
Permit & Regulatory Fee
Service Fees
Charges
General Administrative and
Penal Provisions
Final Provisions
 IMPORTANT PROVISIONS IN UPDATING
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.
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.
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.
Section 147. Fees and Charges. - The municipality may impose and collect such
reasonable fees and charges on business and occupation and, except as reserved to
the province in Section 139 of this Code, on the practice of any profession or calling,
commensurate with the cost of regulation, inspection and licensing before any
person may engage in such business or occupation, or practice such profession or
calling.
 THE TAX FORMULA

Tax Due= Tax Base x Tax Rate + penalty/discount

Tax Subject – Object of the Tax

Tax Base – Characteristic of the subject from where the tax is estimated
Tax rate – fixed amount or percentage
DECISIONS TO BE MADE
Taxes, fees and charges to be imposed
Rate of imposition
Coverage and Exemptions
Time and Manner of Payment
Penalty provisions and fines
Grant of tax incentives and tax relief
(discounts for prompt payment, condonation
of interests, deferred payment schemes,
etc)
General Administrative Requirements
LOCAL TAXES
Provinces
Real Property Amusement Places Transfer of Real Property
Professionals Sand, Gravel & Quarry Delivery Vans & Trucks
Franchise Printing & Publication Idle Lands

Municipalities
Business Taxes Community Tax
Cities
All taxes which can be imposed by the Provinces and Municipalities
combined and the rates can be 50% higher

Note: 1) Tax Rates can be increased once every five (5) years at the rates not exceeding 10%.
2) Section 186 of the LGU allow LGUs to impose other taxes, fees and charges under certain
limitations
 FEES AND CHARGES
Building Agricultural Mayors Burial Permit Fishing Market
Permit Machinery Permit Permit
Electrical Other Heavy Mining Reg. of Large Hawkers Hospital fees
permit Equipment Claims Cattle
Mechanical Carts and Parades Parking Mineral Health
Permit Sledge Lands Services
Plumbing Cockpits Pedicab Tax Video Tape Terminal
Permit Operations Clearance Rental Fees

Demolition Special Tricycle Civil Registry Secretary’s Traffic

Permit Cockfighting Franchising Fees Certification Violations
Sanitary Gaffers and Weights and Exhumation Tuition Fees Towing
Permit Cockpit Pers. Measures of Cadaver Charges
Fire Filmmaking Court Fees Firearms Garbage Water and
Certification Permit Colections Power
Annual Bicycle Sheriff’s Fees Police Overnight P. Slaughterhou
Inspection Permit Clearance Fees se & Corrals
Caretela and Boats Permit Fiscal’s Holding of Toll Fees & Bus
Calesa Clearance Benefits Charges Terminals
Storage of Marriage Impounding Fee on Physical Rental of
Flammable Permit & of Stray Occupation Exam Facilities
Materials Solemnizatio Animals or Calling &Medical
n Certification
OPTIONS FOR TAXES
• 10 % upward adjustments (if the tax
rates were adopted 5 years earlier
(Section 191)
• Identify additional taxes not allocated
(Section 186 or special laws)
• Rationalization/Reclassification of
business lines
• Identification of new clusters
GUIDELINES FOR REGULATORY FEES

• Fees are not primarily meant to generate

revenues. It should be linked to a service
being performed by the LGU to promote
general welfare and maintain public order
• Fees is a form of recovery of cost by the LGU in
order to perform a particular service
• Fees shall be reasonable equated to the cost
commensurate to the cost of regulation,
inspection and licensing
• The fee should not be based on gross receipt
nor capitalization
ADJUSTING RATES OF FEES AND CHARGES

• Computing for cost of administration to

determine cost of regulations, inspection
of licensing (Section 147)
• Indexing to inflation
• Benchmarking another LGU
• Adopting a fixed rate for adjustment
ADJUSTING CHARGES

• Passing on full cost (production cost +

maintenance cost + expansion cost)
• Setting two sets of rates (regular and
socialized rates)
 COST OF ADMINISTRATION
Fixed Cost (share for delivering the service)
1. Office Space
2. Utilities
3. Equipment
4. Supplies and Other fixed Costs
Variable Cost
1. Salaries of those directly involved in delivering the
service
2. Inspection Cost (cost of inspectors and transportation)
3. Other variable cost contingent with applications

Fee Rate =Total Cost/Total applications to be processed

PHILIPPINE INFLATION RATE/CPI

Year Inflation Rate Consumer Price Index

2002 2.97% 103.0
2003 3.45% 106.5
2004 5.98% 112.9
2005 7.63% 121.5
2006 6.24% 129.1
2007 2.81% 132.7
2008 9.30% 145.0
2009 3.25% 149.8
2010 3.83% 155.5
2011 4.65% 162.7
2012 3.20% 167.9
2013 3.30% 173.4
2014 (est.) 4.50% 181.2
INJECTING ECONOMIC SENSITIVITY
BASIS
AUTHORITY TO GRANT TAX RELIEF &
EXEMPTIONS WHEN THERE IS CALAMITY,
CIVIL DISTURBANCE, FAILURE OF CROPS OR
ADVERSE ECONOMIC CONDITIONS
AUTHORITY TO GRANT DISCOUNTS AND
IMPOSE SURCHARGE & PENALTIES
AUTHORITY TO IMPOSE THE IDLE LAND TAX
AUTHORITY TO PROVIDE INCENTIVES
MAY IMPOSE RATES WITHIN ALLOWABLE
RANGE
ANOTHER WAY TO DEAL WITH ECONOMIC
SENSITIVITY

MARKET SEGMENTATION
CLASSIFY THE MARKET ACCORDING TO
AFFORDABILITY
DIFFERENTIATED IN THE FEE RATES
PROVIDING INCENTIVES
OTHER SCHEMES
 LGU OPTIONS FOR RELIEF/
INCENTIVES
DISCOUNTS
SURCHARGE AND/OR PENALTIES
DEFERRED/STAGGERED PAYMENT
TEMPORARY SUSPENSION OF PAYMENT
CONDONATION OF PENALTIES /INTERESTS
EXTENSION OF PAYMENT PERIOD WITHOUT
PENALTY
AMNESTY
COMPROMISE AGREEMENT
OPPORTUNITIES

INCLUSION OF THE FOLLOWING;

SOCIALIZED HOUSING TAX
BUSINESS TAX ON TRANSPORT OPERATORS,
COCKPIT OWNERS, AMBULANT AMUSEMENT
OPERATORS
HANDLING BT OF TRANSIENT CONTRACTORS
NEW SCHEDULE OF BUSINESS TAX &
ENUMERATION OF OTHER BUSINESSES NOT
ENUMERATED IN THE CODE
 OPPORTUNITIES – PERMIT FEES

ON PERMIT FEES
MAYORS PERMIT BASED ON BUSINESS SIZE
CLASSIFICATION
SIMPLIFYING REQUIREMENTS FOR BUSINESS
PERMIT APPLICATIONS
CLUSTERING OF BUSINESSES FOR MAYORS
PERMIT
REQUIRING RESTORATION DEPOSIT BEFORE
ISSUING EXCAVATION PERMIT
ADDITIONAL FEES ON SALE OF SIN PRODUCTS
AUTOMATIC ADJUSTMENT OF THE FEE RATES
CLUSTERING OF FEES ON OCCUPATION OR
CALLING
OPPORTUNITIES – SERVICE FEES

ADVOCATED GARBAGE FEE FOR

RESIDENTIAL PROPERTIES
ADVOCATED FEES FOR USE OF LGU
FACILITIES
ADJUSTMENT OF FEES ON CIVIL
REGISTRY & SECRETARY’S FEE
Thank you
ngmalvar
09054049665