Business and Other Taxes

8/9/2019 Business and Other Taxes

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On-Line Bar Reviewer on Taxation

Reynaldo G. GeronimoPartner

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Local Taxation

Part I Taxation of

business

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What constitutional provision grantstaxing power of local governments?

Art. X, Sec. 5: Each local government unitshall have the power to create its ownsources of revenues and to levy taxes,

fees and charges subject to suchguidelines and limitations as the Congressmay provide, consistent with the basicpolicy of local autonomy. Such taxes,fees, and charges shall accrue exclusivelyto the local governments.

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Compare local taxing power underthe current constitution with thatunder the 1935 Const.?

Under the 1935 Constitution, local governmentshad taxing power only on account of legislativedelegation. Hence, it was ruled that Congresscould revoke all the taxing powers of localgovernments.

Under the current Constitution, taxing power isdirectly vested on local governments. Thus,Congress can only put limits, but not take awaylocal taxing power entirely. 4

What are the fundamentalprinciples of local taxation?

Taxation shall be uniform in each localgovernment unit.

Taxes, fees, charges and otherimpositions shall: Be equitable and based as far as practicable

on the taxpayers ability to pay.

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Be levied and collected only for publicpurposes;

Not unjust, excessive, oppressive, orconfiscatory;

Not be contrary to law, public policy, nationaleconomic policy or in restraint of trade;

The collection of taxes, fees, charges andother impositions shall not be let to anyprivate person;

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The revenue collected pursuant to theprovisions of the LGC shall insure to the

benefit of, and be subject to the dispositionby, the local government unit levying thetax, fee, charge or other imposition unlessotherwise specifically provided herein; and

Each local government shall, as far aspracticable, evolve a progressive systemof taxation

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What are the common limitationson local taxing power?

Local taxing power, as a generally rule,cannot extend to:

1. Income tax, except on banks and otherfinancial institutions;2. Documentary stamp tax;3. Taxes on estate, inheritance, gifts, andlegacies and other acquisitions mortiscausa;

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4. Customs duties, registration fees ofvessel and wharfage on wharves, tonnagedues and all other kinds of customs fees,charges, and dues except wharfage onwharves constructed and maintained bythe local government;

5. Taxes, fees and charges and otherimpositions upon goods carried into or outof or passing through the territorial

jurisdictions of local government units

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.in the guise of charges for wharfage,tolls for bridges or otherwise, or othertaxes, fees or charges in any formwhatsoever upon goods or merchandise;

f. Taxes, fees or charges on agriculturaland aquatic products when sold bymarginal farmers or fishermen;

g. Taxes on business enterprises certifiedby the BOI as pioneer or non-pioneer for aperiod of six (6) and four (4) yearsrespectively from date of registration 10

h. Excise taxes on articles enumerated underthe NIRC, as amended, and taxes, fees, orcharges on petroleum products;

I. Percentage or VAT on sales, barters orexchanges or similar transactions on goods orservices;

j. Taxes on gross receipts of transportationcontractors and persons engaged in thetransportation of passengers or freight by hireand common carriers by law, land, or water;

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k. Taxes on premiums paid by way ofreinsurance or retrocession;

l. Taxes, fees or charges for theregistration of motor vehicles and for the

issuance of all kinds of licenses or permitsfor the driving thereof, except tricycles;

m. Taxes, fees or other charges onPhilippine products actually exported;

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n. Taxes fees or charges on Countrysideand Barangay Business Enterprises andcooperatives duly registered under R.A,No. 6810 and R.A. No. 6938, otherwiseknown as the Cooperatives Code of thePhilippines;

o. Taxes, fees, or charges of any kind onthe National Government, its agencies andinstrumentalities, and local governmentunits.

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What taxes may a province impose?

A province may impose ONLY:(a) Tax on transfer of real property

ownership;(b) Tax on business of printing and publication;(c) Franchise Tax;(d) Tax on sand, gravel and other quarry

resources;(e) Professional Tax;(f) Amusement Tax;(g) Annual Fixed Tax for delivery trucks or van 14

What taxes, fees and chargesmay municipalities impose?

Municipalities may levy taxes, fees, and

charges not otherwise levied byprovinces, such as:(a)Tax on business(b)Tax for sealing and licensing of weights(c)Fishery rentals, fees and charges

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What is the scope of taxingpower of cities? The city may levy the taxes, fees andcharges which the province or municipality

may impose. In highly urbanized and independent

component cities shall accrue to them anddistributed according to the LGC.

The rates of city taxes may exceed themaximum rates allowed for provinces ormunicipalities by not more than 50%,except the rates of professional andamusement taxes. 16

What taxes, fees and chargesmay be imposed by barangays?

Barangays may impose: Taxes on stores and retailers with fixed

business establishments with low gross sales Service fees or charges Barangay clearance fees Other fees and charges

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What are the common revenueraising powers of local govts?

All local governments may impose:1. Service fees and charges for services

rendered;2. Public utility charges;3. Toll fees or charges.

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What are the rules relating to the

collection of local taxes? 1. The tax period, unless otherwise fixed,

is the calendar. 2. The obligation accrues on the first (1 st )

day of January of each year; 3. But the tax may be paid in quarterly

installments, within the first 20 days ofJanuary or subsequent quarters

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What are the penalties that maybe imposed for non-payment oflocal taxes?

Surcharge of not more than 25% Interest of not more than 2% per

month (but not more than 36 mos.)

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What periods govern thecollection of local taxes? Period of collection: within 5 years from

the date the taxes become due In case of fraud or intent to avoid payment,

taxes may be collected within 10 yearsfrom DISCOVERY;

Period of prescription suspended: The treasurer is legal prevented Taxpayer requests in writing for a

reinvestigation Taxpayer abroad or cannot be located. 21

Thank You

Good Luck

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Business and Other Taxes