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ph


Republic of the Philippines
Department of Finance
BUREAU OF LOCAL GOVERNMENT FINANCE

March 28, 2003


Atty. Michael Angelo A. Abaya
Partner
Abaya Elias
Attorneys-At-Law
Unit 409 Prestige Tower
Emerald Avenue, Ortigas Business Center
Pasig City

S i r :

This refers to your letter dated October 25, 2002 requesting in behalf of your client
Robust Rocks Resources Corporation (Robust Rocks for brevity) confirmation of your
opinion that the Provincial Treasurer of Bataan has no authority to levy sand and gravel tax
upon the said corporation for quarry operations performed on private lands.

Representations are made that Robust Rocks has, under a subsisting quarry permit,
been engaged in the extraction of quarry resources in private lands situated in Bataan.

It is claimed that the Provincial Treasurer of Bataan, seeks to levy sand and gravel tax
upon Robust Rocks pursuant to Section 32 of the Bataan Revenue Code of 1997, quoted as
follows:

Section 32. Sand and Gravel Tax There is hereby levied and
collected a tax of 10% of fair market value per cubic meter of ordinary stones,
sand, gravel, earth and other quarry resources, such as but not limited to
marble, granite, volcanic cinders, basalt, tuff and rock phosphate, extracted
from lands or from the beds of seas, lakes, rivers, streams, creeks, and public
waters within the territorial jurisdiction of the Province of Bataan. (Emphasis
supplied)

That Office cites the case of Province of Bulacan v. Court of Appeals (293 SCRA 442
[1998]) where the Supreme Court ruled that a province may levy and collect tax on sand,
gravel, etc, only from public lands, and that the assessment of taxes on quarry resources
extracted from private land is therefore an ultra vires act traversing as it does the limitations
set by the Local Government Code.

However, the Provincial Treasurer of Bataan in a written communication dismisses
the applicability of the judicial precedent because the reason why the Supreme Court said
that the Province of Bulacan may not invoke the Regalian doctrine to extend the coverage of
their ordinance to quarry resources extracted from private lands (is) because Sec. 21 of the
Provincial Ordinance No. 3 clearly applies only to quarry resources extracted from public
lands.

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In view of the foregoing, the Provincial Treasurer not the Provincial Assessor
contends that it is within the entire power of the Province of Bulacan to moot the decision of
the Supreme Court by the sheer expedience of amending Ordinance No. 3 by deleting the
word public from Section 21, thus, x x x [t]he Bataan Revenue Code of 1997, is worded to
include private land as lands without any distinction, include (sic) public and private lands.
x x x.

On the other hand, that Office contends that the ratio decidendi of the case rests not
on any particular wording of a provincial ordinance concerned but its lack of authority to
legislate in the first instance of tax measure contrary to law.

That Office likewise cited a letter-opinion dated August 21, 1993 addressed to Mr.
Felix Q. Flores wherein this Bureau expressed the view that only quarry resources extracted
from public lands are subject to local taxes, thus quarry resources extracted from private
lands are not within the taxing power of the local government unit the land being private
property.

In this connection, this Bureau believes that the Supreme Court decision is very clear
and it finds no merit in disturbing the judicial interpretation made by competent authority. It
ruled that the tax imposed by the Province of Bulacan is an excise tax, being a tax upon the
performance, carrying on, or exercise of an activity which is prohibited pursuant to Section
133 (h) of the Local Government Code (LGC) of 1991, quoted as follows:

Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:

(a) x x x

(h) Excise tax on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or charges on petroleum products;

x x x.

In view of the above, the Supreme Court ruled further as follows:

A province may not, therefore, levy excise taxes on articles already taxed by the
National Internal Revenue Code. Unfortunately for petitioners, the National Internal Revenue
Code provides:

Section 151. Mineral Products.

(A) Rates of Tax. There shall be levied, assessed and collected on minerals,
mineral products and quarry resources, excise tax as follows:

xxx xxx xxx

(2) On all nonmetallic minerals and quarry resources, a tax of two
percent (2%) based on the actual market value of the gross output thereof at
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the time of removal, in case of those locally extracted or produced; or the
values used by the Bureau of Customs in determining tariff and customs
duties, net of excise tax and value-added tax, in the case of importation.

xxx xxx xxx

(B) [Definition of Terms]. For purposes of this Section, the term

xxx xxx xxx

(4) Quarry resources shall mean any common stone or other common
mineral substances as the Director of Mines and Geo-Sciences may declare to
be quarry resources such as, but not restricted to, marl, marble, granite,
volcanic cinders, basalt, tuff and rock phosphate; Provided, That they contain
no metal or metals or other valuable minerals in economically workable
quantities.

It is clearly apparent from the above provision that the National Internal Revenue
Code levies a tax on all quarry resources, regardless of origin, whether extracted from public
or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel,
earth and other quarry resources, as the same are already taxed under the National Internal
Revenue Code. The province can, however, impose a tax on stones, sand, gravel, earth and
other quarry resources extracted from public land because it is expressly empowered to do so
under the Local Government Code. As to stones, sand, gravel, earth and other quarry
resources extracted from private land, however, it may not do so, because of the limitation
provided by Section 133 of the Code in relation to Section 151 of the National Internal
Revenue Code.

In view of the foregoing, this Bureau concurs in your opinion that the Provincial
Treasurer of Bataan has no authority to levy sand and gravel tax upon Robust Rocks
Corporation, for quarry operations performed on private lands.

We trust that this clarifies matters.

Very truly yours,
MA. PRESENTACION R. MONTESA
Executive Director

BLM/tld
ccs#2002-1201