Local Business Tax: Payment Under Protest Does Not

Apply
Posted on: 2019 September, 06
Description:

ShareFacebookTwitterEmail

 By: Atty. Henson M. Montalvo

            Every local government unit (LGU) is authorized and empowered by the
Constitution and Republic Act No. 7160, otherwise known as the ”1991 Local
Government Code (LGC)”, as amended, to levy taxes, fees, and other charges.
Nonetheless, this power is not limitless or boundless but rather subject to the
limitations as provided under the LGC and to such guidelines and limitations as
Congress may provide.

            Section 252 of the LGC categorically provides that no protest shall be
entertained unless the taxpayer first pays the tax. This “payment under protest”
provision is applicable in protesting a real property tax (RPT) assessment.  A
circumspect reading of the LGC clearly sets forth that such administrative remedy is
available to a taxpayer or a real property owner who is not satisfied with the
assessment or reasonableness of the RPT sought to be collected.

 
However, nowhere in the LGC can we find such requirement insofar as the local
business tax assessment is concerned. Section 195 of the LGC provides for the
remedies of protest and appeals in case of local business tax assessments.  This brings
us now to this point of inquiry which baffles taxpayers: “Can an LGU validly extend,
through its local revenue code, the requirement of payment under protest in local
business tax assessment?”

            In a recent case (Rock Steel Resources, Inc. v. City of Davao, CTA Case AC No.
139, August 11, 2016) wherein Section 423 of the Revised Revenue Code of the City
of Davao required payment under protest with respect to local business tax
assessments, the tax court ruled that the LGU involved should not supply additional
requirements onerous to the taxpayer concerned by requiring prior payment on
protest against the latter’s local business tax assessment which is not mandated under
Section 195 of the LGC. Further, the court emphatically reiterated that it is only in
real property taxation that the LGC requires payment under protest.

            In essence, a tax ordinance cannot extend or expand the coverage of a law
(LGC), as the power to amend or repeal a statute is vested in the legislature. To
impose a requirement hinged on a provision of an ordinance in contravention of the
provisions of the LGC would be to countenance an arbitrary interpretation or
application of a law and to inflict injustice on unassuming taxpayers.