Guide for Updating Local Revenue Code

PART I. GENERAL PRINCIPLES AND CONCEPTS OF LOCAL TAXATION

The power of local government to levy taxes, fees and charges is provided in the Constitution of
the Republic of the Philippines. Under Section 5, Article X, the Constitution provides:
Section 5. 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.
The guidelines and limitations mentioned in Section 5 are spelled out in Book 2 of Republic Act
(RA) No. 7160 (otherwise known as the Local Government Code of 1991) which provides the
legal basis and parameters for the taxing and revenue-raising powers of local governments. For
further guidance in LGUs exercise of taxing powers, relevant Opinions and Rulings by the
Bureau of Local Government Finance of the Department of Finance have been compiled in
Annex B.

Fundamental Principles
The exercise of the taxing and other revenue-raising powers of local governments is governed by
the following fundamental principles.

Taxation shall be uniform in each local government unit;

Taxes, fees, charges and other imposition shall:

Be equitable and based as far as practicable on the taxpayers ability to pay;

Be levied and collected only for public purposes;
Not be unjust, excessive, oppressive, or confiscatory;
Not be contrary to law, public policy, national economic policy, or in restraint of
trade;

The collection of local taxes, fees and charges and other impositions cannot be let to any
private person (see Annex B, Excerpt 2);

The revenue collected shall be used solely for the benefit of, and be subject to
disposition by the local government unit levying the tax, fee, charge or other imposition
unless other otherwise provided; and
Each local government shall, as far as practicable, evolve a progressive system of
taxation.

Exercise by LGU of their Taxing and Revenue-Raising Powers

LGUs exercise taxing and revenue-raising powers through the enactment of tax ordinances.
However, the Code provides common limitations to these taxing powers as provided for in
Section 133 of RA 7160, Common Limitations on the Taxing Powers of Local Government
Units.
In essence, the limitations are:

Table 1: COMMON LIMITATIONS

PROHIBITIONS

REMARKS

Income Tax

Local government units may levy local taxes

on banks and other financial institutions
based on gross receipts.
The DOF has
provided guidelines on these impositions per
Local Finance Circular No. 1-93. (LFC No. 207 dated Feb 26, 2007 amending Sections 2
and 5 of LFC 1-93)

Documentary Stamp Tax

Only the National Government may impose

the excise tax upon the privilege, opportunity
or facility offered at exchanges for the
transaction of the business.

Taxes on estates, inheritance, gifts, legacies

and other acquisitions mortis causa

An exception is provided in Sec. 135 of the

LGC, where provinces and cities may impose
tax on the sale, donation, barter, or on any
other transferring ownership or title of real
property.
Transfer of real properties owned by religious
and charitable institutions which are sold or
transferred to private parties are subject to
transfer tax.
2

Custom duties, registration fees of vessel and Except wharfage on wharves constructed and
wharfage on wharves, tonnage dues, and all maintained by the local government unit
other kind of custom duties, charges and dues. concerned.
Also, Sec. 149 of the LGC authorizes LGUs to
impose license fees for the operation of fishing
vessels of 3 tons or less.
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, tolls for bridges or otherwise, or
other taxes, fees or charges in any form
whatsoever upon such or goods or merchandise
(see Annex B, Excerpt 12).

Import or export taxes or fees on goods and

commodities carried through into or out of
their respective territories would deter the free
flow of commerce in the country and cause
considerable increase in the prices of
commodities, to the prejudice on the
consuming public.

Percentage or value-added tax (VAT) on sales, Local government units are authorized to
barters or exchanges or similar transactions on impose fixed graduated taxes on gross sales.
goods or services except as otherwise provided
in the Code.
Taxes, fees or charges on agricultural and Sec. 131 provides a listing of covered
aquatic products when sold by marginal agricultural products and the definition of a
farmers or fishermen (see Annex B, Excerpt marginal farmer or fisherman.
13).
So that agricultural products and aquatic
products become taxable when:

It is sold by persons other than the

farmer or fisherman, even without
undergoing any process.
Sold on a commercial scale
The products have been transformed
into manufactured products such as
sugar, charcoal, balut, sardines, etc.

Taxes on business enterprises certified to by DOF issued LFC No. 5-93 provides guidelines
the Board of Investments as pioneer or non- on this.
pioneer for a period of six (6) and four (4)
years, respectively from the date of registration
(see Annex B, Excerpt 14).
Excise taxes on articles enumerated under the Excise taxes can be in the form of specific or
National Internal Revenue Code, as amended, ad valorem taxes.
and taxes, fees or charges on petroleum
3

products (See Annex B, Excerpt 15).

Specific taxes are based on the unit or number,

weight or volume capacity or any other
physical unit of measurement of the objects
to tax.
Ad valorem taxes are based on the selling
price or other specific value of the goods.

Taxes on gross receipts of transportation

contractors and persons engaged in the
transportation of passengers or freight by hire
and common carriers by air, land or water,
except as provided in the Code (see Annex B,
Excerpts 15a and 16).

Since transportation contractors are still subject

to the business tax imposed on contractors by
LGUs as stated in DOF Opinion, November 8,
1995, it may be implied that LGUs may
impose a business tax on bases other than gross
receipts, i.e., type of vehicle, number of
vehicles, capacity, etc. (for transport
companies with terminals or booking office)

Taxes on premiums paid by of reinsurance or Reinsurance is a contract by which an insurer

retrocession.
procures a third person to ensure him against
loss or liability by reason of original insurance.
Retrocession is the rejection of the risk being
insured.
Taxes, fees or charges for the registration of LGUs may impose taxes, fees, or charges for
motor vehicles and for the issuance of all kinds the registration of tricycles.
of licenses or permits for the driving thereof,
except tricycles (see Annex B, Excerpt 17).
Taxes, fees or other charges on Philippine
products actually exported, except as otherwise
provided in the Code (see Annex B, Excerpt
18).

The prohibition does not apply to the

business of exporting said products which is
still covered by the business tax on exporters.
(DOF Opinion, March 10, 1994), Sec. 143(c)
of the LGC of 1991.

Taxes, fees, or charges, on Countryside and

Barangay
Business
Enterprises
and
cooperatives duly registered under R.A 6810
and R.A 6938 otherwise known as the
Cooperative Code of the Philippines
respectively (see Annex B, Excerpt 19).

However, per DOF Opinion dated November

14, 1994, the exception enjoyed by duly
registered cooperatives does not include
payment of service charges or rentals for the
use of property and equipment or public
utilities owned by a local government such as
charges for actual consumption of water,
electric power, toil fees, use of public roads
and bridges, and the like.

Taxes, fees or charges of any kind on the This should be read in connection with Section
National Government, its agencies and 193 of the Code which withdraws exceptions
instrumentalities, and local government units or incentives granted to all persons, natural
4

(See Annex B, Excerpt 20).

or juridical, including government owned- or

controlled corporations except local water
districts, non-stock and non-profit hospitals
and education institutions.

Revenue Structure of LGUs

LGUs have two (2) major sources of funds, internally generated (local) and external (shares from
national revenues and foreign/local grants).
TABLE 2: LGU REVENUE STRUCTURE
NATURE

BASIS/AUTHORITY

Local Sources
Tax Revenues
Property Taxes
Business taxes and other local taxes
Non-Tax Revenues
Receipts from economic enterprises
Fees, user charges and other receipts

RA 7160, Governmental Powers

RA 7160, Governmental Powers
RA 7160, Corporate Powers
RA 7160, Police Powers; Corporate Powers

External Sources
Statutory allotments/shares from National
Government, Grants, Aids, Loans

RA 7160
Foreign and Local Sources

Local Revenue Bases Available to Local Government Units

Local government units may impose taxes, fees and charges as follows:

Table 3: LGU REVENUE BASE

TYPES OF
IMPOSITIONS
Taxes

Regulatory Fees

DEFINITION

REMARKS

Impositions under the

taxing power of LGUs
for the purpose of
raising revenues, e.g.,
real property tax,
business tax and
other local taxes

Allocation among
LGUs of taxing
powers and
distribution of
proceeds, defined by
the law

Charges made by law or

ordinance for the
regulation or
inspection of business
or activities

Based on cost of
regulation of the
activity

EXAMPLES
Property taxes
Business taxes

Franchise, community
tax, amusement, tax on
printing and
publication, etc
Mayors permit fee on
business; permit fees
for sealing and
licensing of weights
and measures; building
permit fees; permit fee
on zonal/
locational clearance;
permit fee for
inspection and
verification of
subdivision; permit fee
for tricycle operations;
permit fee for pedaled
tricycle; permit fee for
cockpit owners/
operators/ licensees/
promoters and cockpit
personnel; special
permit fee for
cockfighting; permit
fee on occupation/
calling not requiring
government
examination;
registration and transfer
fees on large cattle;
fees on impounding of
stray animals; cart or
sledge registration fee;
6

permit fee on caretela

or calesa; permit fee for
agricultural machinery
and other heavy
equipment; permit and
inspection fee on
machineries and
engines; permit fee for
the storage of
flammable and
combustible materials;
permit fee for
temporary use of roads,
streets, sidewalk,
alleys, patios, plazas
and playgrounds;
permit fee for
excavation; permit fee
on circus and other
parades; permit fee for
the conduct of group
activities; permit fee on
film making;
signboards permit fees;
Permit to quarry on
sand, gravel and other
quarry resources;

Service Fees

Fees collected for

services rendered or
for conveniences
furnished by the LGU

Amount
commensurate to the
cost of services

Violation fees;
Other regulatory fees
Secretarys/certification
fees; local civil registry
fees; police clearance
fees; sanitary
inspection fees; service
fees for various health
services; garbage
collection fees; dog
vaccination fees
IT/computer processing
fees
Tipping fees

Charges

Impositions for the

operation of public
enterprises in
connection with the
governments exercise
of its proprietary
functions

Full cost recovery as

basis for amount of
charge to be imposed

Fishery rentals, fees

and charges; rentals of
personal and real
properties owned by
the municipality;
charges for parking;
municipal hospital
service fees;
waterworks system
charges; cemetery
charges; market fees
and charges;
slaughterhouse and
corral charges; toll fees
and charges; terminal
fees

Municipal Taxing Powers (Secs. 142-149 of the LGC and Secs. 153-157 of the LGC)
Municipalities may levy tax on business which varies according to business classification such
as:

Manufacturing, assembling, repacking, processing, brewing, distilling, rectifying and

compounding of liquors, distilled spirits and wines or manufacturing of any article of
commerce of whatever kind or nature.

Wholesalers, distributors, dealers, or retailers in any article of commerce of whatever

kind or nature.

Pawnshops, boarding houses, lodging houses, hotels and motels, and signs, signboards,
billboards and advertisements.

Municipalities may also impose a deficiency tax upon the retirement of business.
Municipalities may levy fees and charges on specific items which include cart and sledge
registration, parades, registration of large cattle, building permit, civil registry, issuance of
official records, police clearance, impounding and /or sale of stray animals, burial permit and
exhumation of cadaver, dog license and bicycle permit, fees for sealing and licensing of weights
and measures.
In addition, municipalities can collect fees for the use of their facilities such as markets,
slaughterhouses and public utilities.
8

Their authority extends to the exclusive right to grant fishery rights, licensing individual fishing
gears in municipal waters, including the fixing of rentals and fees.
Municipalities are also empowered to collect the community tax from individuals and juridical
persons.

Provincial Taxing Powers (Secs. 134-141 and Secs. 153-155 of the LGC)
The following taxes may be imposed by the province, although they share the proceeds:

Real property tax proceeds from the basic tax are shared between the province 35%,
municipalities 40%, and barangays 25%; while proceeds from the Special Education
Fund (SEF) are shared 50% for the province and 50% for the municipalities.

Amusement tax proceeds from the tax are shared equally by the province and the
municipality where the amusement place is located.

Tax on sand, gravel and other quarry resources are shared between the province 30%,
municipalities 30%, and barangays 40%.

In addition, the province levies the following provincial impositions which accrue to them 100%:

Tax on transfer of real property ownership

Franchise tax

Annual fixed tax for every delivery truck, van of manufacturers or producers, wholesalers
of, dealers, or retailers in certain products

Professional tax

Tax on business of printing and publication

Idle land tax However, the province can pass an ordinance providing for a sharing
scheme between the province, municipality and barangay in order to ensure effective
implementation of the idle land tax.

Cities Taxing Powers (Sec. 151 and Secs. 153-157 of the LGC)
Cities may levy taxes, fees and charges under the taxing authority of municipalities and
provinces (see above listing).

Cities may also impose rates fifty per cent (50%) higher than the maximum rates allowed for
municipalities and provinces except for the occupation tax, amusement tax on admission, and
fees for the licensing of weights and measures, which shall be uniform.
In addition, cities can collect fees for the use of their facilities such as markets, slaughterhouses,
and public utilities.
Cities also collect the community tax from individuals and juridical persons.
Basic real property taxes collected by cities are shared in the following manner: 70% for the city
and 30% for the barangays.

Barangays Taxing Powers (Sec. 152 and Secs. 153-155 of the LGC)
Taxes on stores and retailers with fixed business establishments, with gross sales or receipts for
the preceding year that do not exceed P50,000 in the case of cities and P30,000 in the case of
municipalities.
Service fees or charges for services rendered in connection with the regulation or use of
barangay-owned properties or service facilities, such as palay, copra or tobacco dryers, parking
lots, etc.
Other fees and charges on
a. Commercial breeding of fighting cocks
b. Cockfights and cockpits
c. Places of recreation charging admission fees
d. Billboards, signboards, neon signs and outdoor advertisements
e. Impounding astray animals

10

Table 4: SAMPLE/MENU OF LGU IMPOSITIONS

Impositions

Bases

Cities, MMA,
Municipalities
A.

Real property tax

Tax on transfer
of real property

Idle land tax

Special levy on
lands

Socialized
housing tax

Assessed value
Total
consideration in
acquisition or fair
market value
whichever is
higher
Assessed value
Actual cost of
projects
and improvements
including cost of
acquiring land and
other real
properties
Assessed value of
lands in urban
areas

Municipalities

Provinces

Barangays

TAXES

Land-Based Taxes

na
na

na
na

na

na

na

na

na

Business and other Community-Based Taxes

Amusement tax
(See Annex B,
Excerpt 3)
Annual fixed tax
on delivery truck
or van of
manufacturers or
producers,
dealers, or
retailers in
certain products
(See Annex B,
Excerpt 3)

Gross receipts
from admission
fees
Per delivery truck,
van or vehicle

na

na

na

na

11

Business tax
Community tax
Franchise tax
(See Annex B,
Excerpt 3)

Occupation tax
Professional tax
(See Annex B,
Excerpt 3)
Tax on business
of printing and
franchise and
publication (See
Annex B, Excerpt
3)

Tax on business
of operating
motorized and
non-motorized
tricycle
Tax on forest
concessions and
forest products
Tax on mining
operations
Tax on peddlers

Gross receipts for

the preceding
calendar year
Per person,
income
RPT values
Capital
investments for
newly started
business/
Gross receipts for
the preceding
calendar year for
existing business
Per occupation
Type of
occupation
Per profession
Type of
profession
Capital
investments for
newly started
business/
Gross annual
receipts for the
preceding
calendar year for
existing
businesses
Type of tricycle
(motorized or
non-motorized)

na

na

na

na

na

Annual gross
receipts for the
preceding year
Gross receipts for
the preceding year
May be based on

na

na

na

na

na

na

na

na

na

na

na

na
na

On stores and retailers with fixed business establishments with gross sales or receipts of the preceding calendar
year of P50,000 or less in the case of cities and P30,000 in the case of municipalities, at a rate not exceeding 1% on
such gross sales or receipts.

12

Tax on sand,
gravel and other
quarry resources

means of transport
used by peddler
Fair market value
per cubic meter
B.

Business permit
Building permit
and related fees
Zoning and
locational fee
Development
permit
Excavation fees
Signboards,
billboards and
outdoor
advertisements
Fees on
impounding of
stray animals
Fees for sealing
and licensing of
weights and
measures
Tricycle
franchise,
bicycles
Large cattle
registration and
transfer fees
Permit fee on
agricultural

na

na

na

PERMITS AND REGULATORY FEES

Cost of regulating
the activity or
privilege
In accordance
with schedule of
rates fixed by the
Sec of DPWH
Rates covered by
HLURB Circular
Cost of issuing
the permit and
surveillance
Cost of issuing
the permit and
surveillance
Cost of issuing
the permit and
surveillance

na

na

na

na

na

Cost of
impounding and
feeding
Cost of issuing
the permit,
calibration and
surveillance
Cost of issuing
the permit and
surveillance
Cost of
registration and
surveillance
Cost of issuing
the permit and

na

na

na

na

na

na

na

na

na

na
3

na

Business permit on printing and publication, , delivery truck or van of manufacturers, producers, wholesalers,
retailers & dealers of certain products
3
On provincial roads
4
Local Government Code Sec. 152 d(3)
5
If devolved to barangays by municipalities or cities in their respective ordinances.

13

machinery and
other heavy
equipment
Permit fee for
burial, cadaver
exhumation and
removal
Permit fee for
cockfighting
Permit fee for
cockpit owners/
operators/
licensees and
other cockpit
personnel
Permit fee on
film-making
Permit fee on
parades
Registration fees
on fishing boats
and caretela or
calesa

surveillance
Cost of issuing
the permit and
surveillance

na

na

Cost of issuing
the permit and
surveillance
Cost of issuing
the permit and
surveillance

na

na

na

Cost of issuing
the permit and
surveillance
Cost of issuing
the permit and
surveillance
Cost of issuing
the permit and
surveillance

na

na

na

na

na

na

C.
Garbage
collection fees
Tipping fees for
landfill
Local registry
fees
Medical &
physical
examination fees
Police clearance
fees
Sanitary
inspection fees
Secretarys
/Certification fees
6

SERVICE FEES

Full-cost recovery

na

Full- cost
recovery
Cost of issuing

na

Full-cost recovery

Cost of issuing

na

na

Cost of issuing
and inspection
Cost of issuing

na

na

na

na
na

na

Local Government Code Sec. 152 d(1)

14

D.
Ferry rentals
Fishery rentals
Market fees
Mineral lands rental
Occupation fee on
mining claims

CHARGES

Full-cost recovery

Per hectare of area

covered during lease
period
Full-cost recovery
Per hectare of area
covered during lease
period
Per hectare of area
covered during lease
period
Full-cost recovery
Full-cost recovery

na

na

na

na

na

na

na

na

na

na

Lease period

na

Full-cost recovery

Full-cost recovery

na

Tuition fees

Full-cost recovery

na

Medical/dental fees

Full-cost recovery

na

Recreational fees

Full-cost recovery

na

Parking charges
Public utility charges
(terminal,
waterworks,
communications,
power, transport, etc)
Public restrooms
Rental of real
property/equipments
of LGU
Rental of cemetery
lots and
niches/columbary
Slaughter & corral
fees
Toll fees

At least full cost

recovery

na

na

If barangays are operating public markets

If barangays are operating and maintaining parking spaces
9
If barangays are operating public restrooms
8

15

Table of LGU Shared Taxes

Tax
Basic RPT

Provincial Sharing
Province

35%

City

Municipality

40%

Barangay 30%

Barangay

70%

25%

Prov. Sch. Board 50%

SEF

City Sharing

City Sch. Board 100%

Mun. Sch. Board 50%

Idle Land Tax *

Province

100%

City 100%

Special Levy

This could be imposed any LGU provided there is

proper consultation and duly approved ordinance.

* To encourage active participation of the barangays and municipalities in the

implementation of the idle land tax, the same sharing scheme with that of real
property tax may be adopted by the province through a duly enacted ordinance.

Tax
Tax on Sand,
Gravel & other
Quarry
Resources

Provincial Sharing
Province

Amusement Tax

30%

Component city/

Highly urbanized

municipality 30%
Barangay

Tax

City Sharing

40%

city

Barangay 40%

Provincial Sharing
Province

50%

60%

City Sharing
City

100%

Municipality 50%

16

Amusement Tax
Tax subject: patrons of shows and entertainment activities; collected and
remitted by proprietors, lessees and operators
Tax rate:
- Not to exceed 10% of paid admission fees
- No admission fees, no tax
Exemptions: operas, concerts, dramas, recitals, painting and art exhibitions,
flower shows, musical and literary presentations except rock and similar
concerts

Situs Rule: Taxing Complex Business Establishments

Used on companies with multiple layers of operations: principal office,

branch or sales offices, factories, plantations and experimental farms

Branch: a fixed place which conducts operations as extension of the

principal office; also called sales office

Warehouse: a building used for storage of goods; if it accepts orders and

issues sales invoices, it is treated as sales office

Situs Rule: System of Allocating Gross Receipts to LGUs *

If with branch, sales is recorded at branch and tax accrues to LGU where
branch is located

If without branch, sales is recorded at principal office for taxation

purposes, but allocated as follows:

o 30% to LGU where principal office is located

o 70% to LGU where factory, project office or plantation is located
If plantation and factory exist in different LGUs, allocation is:
o 60% of 70% share allocated to LGU where factory is located
o 40% of 70% share allocated to LGU where plantation is located
If there are two or more factories or plantations, respective allocation
share is pro-rated to LGUs where these are located on the basis of
production during the period tax is due

* If volume of production cannot be determined, equal sharing among concerned LGUs

will be adopted. For newly established business, initial assessment will be based on
capitalization mobilized in each locality.

17

Criteria in the Development of a Local Tax Policy

The Local Revenue Code is a reflection of the local tax policy of the LGU. It should be in
consonance with the Constitutional mandate and founded on a solid legal basis. Further, it
should be guided by certain philosophical framework and economic principles to ensure equity,
efficiency, sustainability and acceptability.
The following are the criteria in developing a local tax policy.
Revenue Adequacy and Elasticity
Revenue adequacy refers to the amount generated by the tax.
concentrate effort on taxes which are cost effective, e.g., those that:

It is desirable to

o can raise sufficient revenues to more than cover the cost of collecting them
o contribute a substantial portion of the cost of services financed by local
governments
Taxes with relatively low yields may be imposed if these are used to correct market
distortions since low yielding taxes tend to:
o dissipate collection efforts
o increase administrative costs

Tax Elasticity is formally defined as the percentage change in tax yield over a given
period of time to the percentage change in GNP, income or tax base.
Simply put, it is the ability of the tax to keep up with the increase in tax bases.
It has two dimensions:
o growth of the potential tax base, and
o ease with which the tax exploits that growth

Equity
The second criterion is to look at taxes from the point of view of fairness. Two (2)
approaches are used to determine if a tax is fair or not.

18

o under the benefit principle, it is considered fairer to tax individuals in proportion

to the benefits they get from government.
o under the ability to pay principle, individuals are taxed in relation to their wealth
or income. The higher the income, the more taxes one pays.

Economic Efficiency
Taxes, in general, influence the decisions of individuals to work, save, consume and invest.
From the point of view of economic efficiency, we want taxes that are non-distortionary or
neutral with respect to these decisions.
Taxes should not be too high to discourage investments nor too low to encourage diseconomies.

Administrative Feasibility
There are significant costs associated with administering the tax system. The administrative
cost of running a tax system depends on a number of factors like:
o kinds of records that need to be maintained
o complexity of the tax structure in terms of number of rates, exemptions, special
provisions
Taxes vary in the amount of time and money involved in assessing and collecting them
compared to the yield. The best scenario would be to collect taxes with minimal administrative
costs.

Political Acceptability
No tax is popular. Some taxes, however, are more unpopular than others. Political will is
needed to:
o impose taxes,
o determine a rate structure,
o decide who should pay and how they are assessed,
o collect taxes physically, and
o enforce sanctions against delinquents.
19

Taxes and charges are vulnerable politically if they require rate adjustments to maintain or
increase their real value.
The only way to make taxes politically acceptable is to establish a strong connection
between the taxes collected and the services provided.

20

PART II. UPDATING THE TAX ORDINANCE/LOCAL REVENUE CODE

Updating the tax ordinance is not simply a question of providing for all possible tax bases. The
updated Local Revenue Code should be a reflection of the local tax policy of the local
government unit. It should also be based on sound revenue projections of the LGUs financial
requirements and an understanding of the existing and potential revenue base of the LGU.
The Local Sanggunians, with the assistance of the Local Finance Committees, are mandated by
law to enact revenue ordinance and/or formulate/update Local Revenue Codes (Sec. 132, Sec.
447 (a) 2 (ii) and Sec. 316 of the Local Government Code). The Local Finance Committee
recommends the appropriate tax and other revenue measures for consideration of the
Sanggunian.
Updating the tax ordinance/local revenue code gives occasion for LGUs to revisit and amend
their existing ordinances in accordance with the Local Government Code (LGC) of 1991. It also
allows the inclusion of businesses or economic activities which are not covered under previous
tax ordinances.
To ensure the sustainability and buoyancy of various local taxes, the tax rates of the LGU
Revenue Code should be updated and rationalized once every five years (Sec. 191 LGC) while
rates for regulatory/service fees and charges should be updated to make these fees and charges
commensurate to the cost of the regulation and the services provided.
There are several decisions to be made which will directly affect local taxation. Among these
are:

decision on the types of taxes, fees and charges to be imposed

rate of imposition

tax subjects

penalty provisions and fines (this can almost be double the original tax to be paid and can
serve as a deterrent for would-be tax delinquent)

grant of tax relief (discounts for prompt payment, condonation of interests, deferred
payment schemes, etc.)

tax incentives (deferment of taxes, waiver of taxes and fees, etc.)

Deciding which provision to retain, revise, delete and add is not a mechanical act on the part of
the LGU. Having a long list of fees and charges may lull local government officials into
thinking that there is a sufficient source of local revenues when in fact majority in the long list of
21

fees and charges may actually be yielding very little by way of actual revenues. A little
arithmetic may show that the cost of collecting some fees and charges may be higher than the
actual revenue yield. As noted earlier, it might be prudent for the LGU to concentrate their effort
on the collection of taxes, fees and charges with the highest yield.
The amount of fees to be charged will also need to be studied. Under certain instances, the rates
should reflect the development policy of the LGU. As a general practice, LGUs charge 100 to
1,000 times more for LCEs permit of golf courses than they would other types of businesses.
This is because golf courses carry with them an environmental cost.
Given the above, the crafting of the local revenue code should be a result of a deliberate study of
the LGUs current and projected financial position, development priorities, and administrative
capability. Efforts to pursue local revenue generating initiatives must be anchored on a clearly
defined and community-owned development vision to promote and accelerate meaningful local
economic development.
With a carefully crafted Local Revenue Code, LGUs can look forward to having a landmark
legislation that can provide the LGU with the means to attain a measure of financial autonomy.
In updating the LGUs present tax ordinance or local revenue code, legal provisions of the 1991
LGC, its Implementing Rules and Regulations and other issuances will have to be considered.
Since development and its rewards are not free, LGUs need to enhance its local revenue and
resource generation efforts by exercising their taxing, regulatory and corporate powers to be able
to underwrite the cost of development at the same time equitably distribute the tax burden. A
regular updating and rationalizing of the Local Revenue Code is one potent too for local
development.
Table 5: GUIDE FOR UPDATING THE LGU REVENUE CODE
AREA OF CONCERN
Definitions and Construction of
Provisions

REMARKS
Definitions are taken from:

Section 131 of the LGC 1991

Section 3 of PD 231 (Local Tax Code)

LAND-BASED TAXES
Basic Real Property Tax and SEF

LGC allows a basic rate not exceeding 1% of

the assessed value

An additional 1% SEF tax on the assessed

value is also provided, however, that the
proceeds accrue to the School Board and not
the province.
22

 Municipalities only have a share from the real

property tax since this is a provincial
imposition.
RA 9513, Renewable Energy Act of 2008, Sec. 15
Tax Discounts

This is optional depending on the Sanggunian.

If a tax discount is granted, the extent of
discount allowed for prompt and advanced
payment shall be specified.
Art. 342 - IRR provides that prompt
payments may be given a maximum of 10%
discount while advanced payments may be
given a maximum of 20% discount.

Imposition of Fine

The Sanggunian is authorized by the LGC to fix the

amount of penalty or fine for non-compliance.

Preparation of Schedule of Fair Market

Value

DOF Local Assessment Regulation No. 1-92

prescribes the rules and regulations for the conduct of
general revision of real property assessments.

Assessment Levels to be Applied to the

Fair Market Value of Real Property

See LGC Section 218 (Assessment Levels) for

applicable maximum assessment levels to be applied
to the fair market value of the real property.
The Sanggunian may lower the assessment levels.
Under this instance, it is advisable to make sure that
the fair market values provided approximates actual
market values or BIR zonal valuation.
RA 9513, Renewable Energy Act of 2008, Sec. 15

Depreciation Allowance for Machinery

Sec. 225 - LGC provides a rate not exceeding 5% of

the original cost or replacement cost for each year of
use and the remaining value for all kinds of
machinery shall be fixed at not less than 20% of
such original, replacement, or reproduction cost for
so long as the machinery is useful and in operation.
RA 9513, Renewable Energy Act of 2008, Sec. 15

23

Redemption of Property Sold

Sec 262 - LGC provides an interest of not more than

2% per month on the purchase price from the
date of sale to the date of redemption.
In addition, it allows an interest of not more than
2% per month for the entire amount paid by the
purchaser of the property to be redeemed.

Proceeds from the Resale of Real Estate

taken for Taxes, Fees or Charges

The Sanggunian may include a provision stating that

the proceeds of the sale shall be distributed to the
municipality and barangay in accordance with the
distribution formula in the LGC.

Penalties for Omission of Property from

Assessment or Tax Rolls by Officers
and other Acts

Sec. 517 - LGC provides for a punishment by

imprisonment of not less than 1 month but not
more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.

Penalties for Any Officer Required to

Perform Acts Related to the
Administration of Real Property and
who Willfully Fails to Discharge Such
Duties.

Sec. 517 - LGC provides for a punishment by

imprisonment of not less than 1 month but not
more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.

Penalties for Delaying Assessment of

Real Property and Assessment Appeals

Sec 518 - LGC provides for a punishment by

imprisonment of not less than 1 month but not
more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.

Penalties for Failure to Dispose of

Delinquent Real Property of Public
Auction

Sec 519 - LGC provides for a punishment by

imprisonment of not less than 1 month but not
more than 6 months, or by a fine of not less than
P1,000.00 but not more than P5,000.00 or both at
the discretion of the court.

Rate of Imposition on Tax on Idle Lands

Sec 236 - LGC provides for a maximum amount of

5% of the assessed value of real property.

Imposition of the Socialized Housing

Tax

The Urban Development and Housing Act of 1992

(RA7279) authorizes local government units to
impose the Socialized Housing Tax. As contained in
Sec. 43: all local government units are hereby
24

authorized to impose an additional one-half (0.5%)

tax on the assessed value of all lands in urban
areas in excess of Fifty Thousand Pesos
(P50,000.00).

Penalty for Violation

Duly approved ordinances need to impose the

socialize tax
Sec 45 of 7279 provides that any person who
violates any provision of this Act shall be imposed
the penalty of not more than six (6) years of
imprisonment or a fine of not less than P5,000.00
but not more than P100,000.00, or both, at the
discretion of the court.

However, many claim that the fine is excessive so the

Sanggunian may decide to apply instead the penalty
provision of Sec. 516 of the LGC which authorizes
the Sanggunian to prescribe fines or other penalties
for violation of tax ordinances but in no case shall
such fines be less than P1,000.00 nor more than
P5,000.00, nor shall imprisonment be less than 1
month nor more than 6 months.
Rate of Imposition of Tax on Transfer of Sec 135 - LGC provides for a rate not exceeding 50%
Real Property (See Annex B, Excerpt 1) of 1%.
COMMUNITY-BASED TAXES IMPOSABLE BY CITIES, PROVINCES,
MUNICIPALITIES AND BARANGAYS
Tax on Business of Printing and
Publication
Rate of Imposition

Sec 136/151 - LGC provides for a rate not to exceed

75% of 1%

For newly-started business

Sec 136/151 - LGC provides for a rate not to exceed

3/40 of 1% of the capital investment of a newlystarted business

Franchise Tax (See Annex B, Excerpt 7)

Rate of Imposition

Sec 137/151 - LGC provides for a rate not to 75% of

1%

For newly-stated business

Sec 137/151 - LGC provides that the rate shall not

exceed 3/40 of 1% of the capital investment of a
newly-started business
As defined in Sec. 131(h) - LGC
Subject to the tax rate prescribed in Sec. 143(e) LGC

On Contractors and other Independent

Contractors (See See Annex B, Excerpt
6)

25

Imposition of Tax on Sand, Gravel and

other Quarry Resources (See Annex B,
Excerpt 4a)
Professional Tax

Sec 138 - LGC and Art 227 - IRR allow a rate of not
more than 15% of market value in the locality per
cubic meter.
The Sanggunian Bayan may opt to set a rate lower
than 15 %.
Sec 139 - LGC allows for a maximum rate of
P300.00 annually.

The Sanggunian has the discretion to fix a rate lower

than P300.00.
Amusement Tax (See Annex B, Excerpt Sec 140 - LGC provides for a rate not to exceed 10%
4)
of the gross receipts from admission fees.

Annual Fixed Tax for Every Delivery

Truck or Van

The Sanggunian has the option to set a rate lower

than 10%.
Sec 141 of the Code allows a rate not to exceed
P500.00.
This is the maximum; the rates can actually be lower.

COMMUNITY-BASED TAXES IMPOSABLE BY CITIES AND MUNICIPALITIES

Business Tax

The LGC classifies all types of business into 7

categories and specifies the amount of tax due per
taxable bracket. For details on maximum rates, see
Sec. 143 of the LGC.

Dealers (See Annex B, Excerpt 8)

Manufacturers (See Annex B, Excerpt 9)
Retail and Wholesale Transactions (See The rates of taxes provided are maximum rates that
Annex B, Excerpt 11)
cities or municipalities are authorized to impose. The
Sanggunian may adopt a lower schedule of graduated
rates. If the rates are lowered, the entire rate schedule
should be adjusted accordingly and not just the rates
for 1 or 2 brackets.

On Banks and other Financial

Institutions (See Annex B, Excerpt 5)

Pursuant to Section 143 (h) and Section 186 of the

LGC, subject to the limitations provided, other tax
bases found in the city or municipality may be taxed.
Various schedules for different types of financial
institutions such as banks, pawnshops, money shops,
finance companies, etc may be adopted by the
Sanggunian subject to the maximum rate of 50% of
1% of gross receipts derived from the taxable
sources. All other incomes or receipts of banks and
other financial institutions not allowed as taxable
sources may not be taxable by the city or
municipality.

26

Tax on Peddlers (See Annex B, Excerpt Section 143 of the LGC provides for the maximum
10)
rate of P75.00 for cities and P50.00 for
municipalities. However, LGUs may opt to use a
schedule based on means of transport as classified
under the LTC, as follows:
Peddlers of any article or merchandise carried in
trucks of any other motor vehicle.
Peddlers of any article or merchandise carried in a
motorized bicycle, tricycle, or other similar
motorized vehicle other than those specified in (a)
above.
Peddlers of any article or merchandise carried in a
cart, caretela or other vehicle drawn by animals.
Peddlers of any article or merchandise carried on
bicycle, pedicab, or other similar vehicle.

Rate of Imposition on Tax on Mining

Operations

Peddlers of any article or merchandise carried by

person.
Per Sec. 143 LGC, for cities, the tax should not
exceed 3% of the gross receipts during the preceding
calendar year.
For municipalities, the tax should not exceed 2% of
the gross receipts during the preceding calendar year.
LGUs should also take into consideration the
following national taxes imposed on mineral
products:
10% VAT on mineral products based on gross
receipts
Excise tax of P50.00 on coal and code per metric
ton
Excise tax of 3% based on actual market value of
the gross output on all non-metallic minerals and
quarry resources
Excise tax of 5% on actual market value of the
gross output on all metallic minerals.
27

Tax on Forest Concessions and Forest

Products

Excise tax of 15% based on the fair international

market price
This is a new taxable base for LGUs.
The LGC lifted the limitations previously provided
under PD 231.
This revenue source is of special relevance to LGUs
with forests lands.
Sec. 143 LGC allows a rate not exceeding 3% of
the annual gross receipts for cities.

For municipalities, the rate should not exceed 2% of

the annual gross receipts.
Tax on Business of Operating Motorized This is another new tax base for LGUs.
and Non-Motorized Tricycles
The suggested rates for cities are:
Motorized tricycle
P720.00
Non-motorized tricycle
P360.00
For municipalities:
Motorized tricycle
Non-motorized tricycle

P480.00
P240.00

The above rates are based on 3% for cities and 2% for

municipalities of the average daily income of P80.00
and P40.00 for motorized and non-motorized tricycle
respectively, operating 300 days a year.
PERMIT AND REGULATORY FEES 10
Types of permit and regulatory fees
imposable by cities and municipalities

Except for fees for sealing and licensing of weights

and measures, the Code does not specifically
enumerate the kinds of permit and regulatory fees
LGUS may impose. The fees included in the model
ordinance are simply sample of commonly imposed
fees that may be levied under Sections 147, 151 and
186.
In addition, as part of the devolved regulatory
functions to LGUs, the following fees may be
collected:

10

Reclassification of agricultural lands

See Annex C: Guide in the Calculation of Regulatory Fees

28

 Enforcement of environmental laws

Inspection of food products
Quarantine and enforcement of the sanitation
code
Processing and approval of subdivision plans
Establishment and operation of tourism
facilities
Small-scale mining permit

Mayors Permit

Rate of Imposition

For each fee imposed by other LGUs, refer to Table 7

on Fees and Charges
Sec. 147 LGC explicitly provides that:

Form of Imposition

Fees on Sealing and Licensing of

Weights and Measures

The fee imposed must be sufficient only to

cover the cost of regulation and surveillance
of a business or occupation.
It cannot be based on capital investment and
on gross sales or receipts of the person or
business.
The LGU may adopt any, or a combination of
the following forms of Mayors permit fee:

o Fixed rates for each kind of business

activity
o A schedule of graduated fixed rates for
each kind of business activity
o Similar businesses or activities are grouped
and assigned a fixed rate of permit fee
o A variation is to provide a schedule of
permit fees for each type of business based
on number of employees, floor space, etc.
Art. 65 of the Consumer Act of the Philippines
provides for the following penalties:
For violations of subsections (a) to (f) of the
Section in the model ordinance, upon
conviction a fine of not less than P200.00 but
not more than P1,000.00, or by imprisonment
of not more than 1 year, or both.
For violations of subsection (g) for the first
time, a fine of not less than P500.00, or by
imprisonment of not less than 1 month but not
more than 5 years, or both.
For violations of subsections (h) to (k), a fine
of not less than P300.00, or by imprisonment
of not exceeding 1 year, or both.
29

SERVICE FEES/USER CHARGES 11

Garbage Fee

Fishery Rentals or Fees (Duration of

Lease)
Rental Fee on Mineral Lands

LGUs have the option to provide their own rate

structure, some of these options are:
Classify businesses into different categories
(similar to that of the business tax) and impose
fixed rates for each category
Classify business activities into 3 major
categories on the basis of expected volume of
garbage generated.
Classify businesses into similar categories
(services of commercial and distributive
magnitude like hotels, schools, etc; personal
services like beauty parlors, barber shops, etc;
processing-production establishments such as
bakeries, extractive industries such as
factories, etc).
these are then further
subdivided based on certain criteria such as
floor space, number of personnel, capacity,
etc.
Sec. 29 of PD 704 (Fishering and Fisheries Law)
authorized LGUs to lease out corals, oyster culture
beds, or gathering of bangus fry or other species for a
period not exceeding 5 years.
E.O. 273 of the Value-Added Tax Law transferred the
collection of rentals on mineral lands from the BIR to
the city/municipality where the mining claim is
located. Sec. 216 of the NIRC provides the following
rates:
On coal-bearing public lands:
P5.00 per hectare or fraction thereof for each
and every year for the first 10 years, and
P10.00 per hectare or fraction thereof for
each and every year thereafter during the life
of the lease.
On public lands bearing quarry resources:
P50.00 per hectare or fraction thereof for
each and every year for the first 10 years.
On all other mineral lands containing metallic and
non-metallic minerals under existing mining laws or
decrees:
P10.00 per hectare or fraction thereof for each

11

See Annex D: Guide in the Calculation of Service Fees/User Charges

30

Occupation Fee for Mining Claims

and every year thereafter during the life of the

lease.
This is part of local charges imposable by LGUs
since E. O. 273 (the VAT Law) transferred the
collection of this fee form the BIR to the
city/municipality where the mining claim is situated.
Proceeds from the collection shall accrue solely to the
city. For municipalities, the province has a 30%
share from the municipal imposition. In effect the
municipality retains only 70% of the fee.

GENERAL ADMINISTRATIVE AND PENAL PROVISIONS

Surcharges and penalties on unpaid
taxes, fees or charges

Interests on other unpaid revenues

Sec. 618 LGC provides a surcharge not exceeding

25% of the amount of taxes, fees or charges not paid
on time and interest of the rate not exceeding 2% pr
month of the unpaid taxes, fees, or charges including
surcharge until such amount is fully paid but in no
case should the total interest on the unpaid or portion
thereof exceed 36 months.
Sec. 169 LGC provides an interest on other unpaid
revenues at the rate not exceeding 2% per month
from the date it is due until it is paid but in no case
shall the total interest on the unpaid amount or a
portion thereof exceed 36 months.

31

PART III. GUIDELINES FOR TAX ORDINANCE PREPARATION

AND CODIFICATION

Since the revenue-raising powers of LGUs authorized under the Code are not self-executory, the
Local Sanggunians as the local taxing authority must enact the needed enabling ordinances.

TAX CODIFICATION
Tax Codification is the process of compiling all tax and revenue ordinances of a local
government units and arranging them systematically into chapters, articles, sections and
subsections.
The output of a tax codification project is a Local Revenue Code. The Code governs the
imposition, assessment and collection of all taxes, fees and charges within its territorial
jurisdiction.
Tax Codification is important because:

The enactment of the LGC has substantially altered the revenue-raising powers of the
LGU. However, to be able to levy and collect the authorized impositions under the Code,
the LGU must pass a tax ordinance containing the rates and base of imposition, time and
manner of collection and other administrative provisions to effectively implement the
ordinance.

A codified revenue ordinance serves as a guide and a handy reference for local officials
and taxpayers. The ordinance also provides the legal basis for the collection of taxes,
fees, and charges imposed by the local government.

A revenue ordinance legitimizes and facilitates the orderly collection of various

impositions. This redounds to increased revenues which the LGU can program for basic
public services and local development projects.

STEPS IN TAX CODIFICATION

Step 1.

Gather and compile all revenue ordinances, including their respective

implementing rules and regulations, if any.
32

Step 2.

Step 3.

List all revenue ordinances chronologically, that is, from the earliest to latest
enactments in a tally sheet. The listing should show in separate columns the
following information:

Ordinance number

Date enacted

Source, i.e., bound volumes of the minutes of Sanggunian sessions, LCEs

file, Secretary to the Sanggunians file, etc

Subject summary

Changes in the form of notations where an ordinance specifically amends

or repeals an earlier ordinance

Disposition or notation as to what happened to each ordinance listed.

Indicate whether an ordinance was discarded or retained

Update the ordinances. Discard the ordinances that:

Have been totally repealed under the LGC

Duplicate another

Are not within the taxing powers of the LGU

Are discriminatory in nature or affect the free flow of commerce

Integrate only ordinances that are amendatory to the retained ordinances.

Step 4.

Classify the ordinances according to the type or nature of impositions authorized

for the LGU.

Step 5.

After updating the ordinances, prepare a list of business establishments and/or

activities in the LGU. Classify this based on the type of imposition which the
LGU is authorized to levy under the LGC. The purpose of his step is to identify
activities which have never been taxed or could have been under-taxed.

Step 6.

Re-examine existing ordinances to identify which tax measure or measures need

improvement and in what area or areas. Revision entails restating ordinances in a
corrected and improved form which either mean repealing them, or adding or
supplementing the deficiencies of existing ordinances.

33

In terms of the language of the ordinance, the author12 states that this should be
simple, brief, clear and precise. He provides the following writing tips:

Exclude unnecessary words.

Avoid lengthening the sentence by the use of Provided that or

Provided, however, that Provided further that Provided finally that.
Their use tends to cause confusion and difficulty in the enforcement of the
Revenue Code.

Use the present tense and indicative mood. The present tense is more
understandable and requires fewer words. For example, dont say, if any
person shall violate this ordinance he shall be fines. Say, Any person
who violates this ordinance shall be fined. Write, If it appears instead
of If it shall appear and If it is necessary instead of if it shall be
necessary.

One verb should be used to direct a legal action. It is not a good practice
to use two verbs in place of one, like is authorized and empowered to do
a particular act.
The dual verbs would create confusion since it can be construed as
mandatory or directory.

Use definite references. If one refers to a particular section say Sec.

5A.01 instead of saying preceding section. Write the section.
Reference by number of sections has advantage of clarity.
In drafting the Revenue Code, three (3) numbering systems are available.
Before the actual drafting, decide which numbering system is to be
adopted.
First Form of Numbering:

All chapters are to be numbered in roman numerals.

Sections that pertain to one subject matter are grouped together under
one article.
A section number carries a decimal point. To the left of the decimal
point is the chapter number and the article letter. To the right of the
decimal point is the section number. Under each article, sections are
numbered consecutively starting with the number 01.
To illustrate: Sec 1A.01

12

Taken from book: Juan F. Rivera, How to Codify Ordinances Do it Yourself, 1979

34

In the future, should there be a need to add new sections at the end of
an article, what needs to be done is merely to continue with the next
arabic number. For example: If the last section is 1A.05, then the new
section is numbered, 1A.06.

To add a new article with new sections under a chapter, designate the
new article with the next alphabet immediately following the last letter
and start section number with .01

To insert sections between existing ones, e.g., between 1A,05 and

1A,06, another decimal point may be added and the new section may
be numbered with arabic numerals starting with 01. Thus, 1A.05.01,
and so forth.

Second Form of Numbering:

Chapters and articles are numbered in roman numerals and capital

letters, respectively, and

Sections under a chapter are numbered continuously from 1, 2, 3, etc.

Third Form of Numbering

Sections from chapters 1 up to the last chapter are numbered

consecutively starting with the number 1.

Step 7.

Consolidate various outputs to produce the draft Local Revenue Code (refer to
your copy of the MTP Sample Model Revenue Code).

Step 8.

Review and finalize for presentation to the Sanggunian.

Following the outline of the model local revenue code provided, below are the basic guidelines
in preparing the chapters, articles, and sections:

35

Table 6: REVENUE CODE OUTLINE

REVENUE CODE
OUTLINE
Chapter

REMARKS
Each chapter must bear its own title descriptive of the subject
covered by it.
It is subdivided into sections. Whenever sections pertain to one
subject they can be grouped together under one article and given the
appropriate caption.

Article

An article consists of several sections that pertain to a subject

matter.
It is generally divided into the following sections:

Definitions (in an Article)

Definitions
Imposition of a tax or free
Exemption
Time of payment
Surcharge for late payment
Administrative provisions
Interest on unpaid tax, fee or charge

The words defined in this section refer to those that are used and
have meanings applicable only in a particular chapter or article.
A word must be defined if it used in a sense other than its dictionary
meaning or if it is used in the sense of several dictionary meanings.
Definitions are placed at the beginning of a chapter or article.
Words defined under Chapter 1, Article B are those that used and
carry the same meaning throughout the Code.

Imposition of Tax or Fee

This Section contains:

Rate(s) of the imposition on the tax base

In general, the LGC provides for the maximum rate of
tax that may be imposed by the LGU, majority of which is
based on gross receipts or sales.
However, there are instances when the Sanggunian has the
option to provide an alternative rate structure subject to the
maximum rate provided in the LGC.

36

Imposition of Tax or Fee

Coverage of the tax

The tax base should be specific, definite and measurable.

This involves identifying the category into which a particular
business fails. In this connection, the Sanggunian should be familiar
with the nature of a specific business or activity in the LGU.
It would be best for the Sanggunian to identify the tax bases not
specifically enumerated in the LGC which may be included in the
Local Revenue Code.
Exemption

This Section is included if the LGC provides exemption(s) from

the tax. Thus, if the LGC does not provide exemption(s) from a
particular tax, this Section is omitted from the Article.
The Sanggunian may grant tax exemption or relief through the
enactment of a separate ordinance in cases of natural calamities,
civil disturbances, general failure of crops, or adverse economic
conditions such as substantial decrease in the prices of agricultural
or agri-based products pursuant to Section 192 of the LGC.
Such exemption or relief takes effect only during the next calendar
year for a period not exceeding twelve (12) months as may be
provided in the ordinance.
Any exemption or relief granted to a type or kind of business applies
to all businesses similarly situated.
In the case of shared revenues such as the amusement tax, the
exemption or relief extends only to the LGU granting such
exemption or relief.
The authority of the Sanggunian to grant exemptions does not apply
to regulatory fees imposed by the LGU.
The tax exemption certificates issued by the LGU are nontransferable.
The Sanggunian may likewise grant tax incentives in the form of
reduced rates, etc., to a new investment in the locality through the
passing of an ordinance prescribing the terms and conditions thereof
prior to the first day of January of any year.

37

Time of Payment

This Section specifies the period within which the imposition is

payable.
It may also contain:

The person to whom it is to be paid, e.g., Local Treasurer

and/or other duly authorized deputies, and

The manner by which the imposition is to be paid.

Unless otherwise specifically provided in the LGC, all local taxes,

fees and charges shall be paid within the first twenty (20) days of
January or of each subsequent quarter.
However, the LGC empowers the Local Sanggunian for a justifiable
reason or cause, to extend the time for payment of such taxes, fees
and charges without surcharges or penalties, but only for a period
not exceeding six (6) months.
Moreover, unless otherwise provided in the LGC, the tax period of
all local taxes, fees and charges is the calendar year.
Surcharge for Late
Payment

The Sanggunian may impose a surcharge

Not exceeding 25% of the amount of taxes, fees or charges

not paid on time, and
An interest at the rate not exceeding 2% per month of the
unpaid taxes, fees or charges including surcharges, until such
amount is fully paid.

But in no case shall the total interest on the unpaid amount or

portion thereof exceed 36 months.

Administrative Provisions

Interest on Unpaid Tax,

Fee or Charge

The amount of surcharge may vary according to the type of tax, fee
or charge.
This Section contains provisions which are relevant to the
administration or implementation of a tax, fee or charge.
This Section may include steps involved in, and requirements for,
the payment of a tax or fee, as well as procedures in monitoring the
payment of the impositions, mechanisms to enforce collection of the
tax, etc.
A general provision on the imposition of interest is provided in the
LGC at a rate not exceeding two percent (2%) per month of the
unpaid tax, fee or charge, including surcharges, until such
amount is fully paid but not to exceed thirty six (36) months.
38

This rate applies if the Revenue Code does not provide the rate of
interest for any specific impositions.
This Section is included in the Article only if the LGU deems it
necessary to charge an interest on unpaid taxes, fees and charges.
The amount of interest may be uniform or may vary according to the
type of tax, fee or charge subject to the above-mentioned limitations.

Since the LGC allows the LGUs to identify the services and functions for which corresponding
fees and charges may be levied, below is a list of some such fees and charges being imposed by
other local government units.
Table 7: FEES AND CHARGES LGUs MAY IMPOSE
Regulatory Fees (Construction)
Building Permit
Electrical Inspection
Fire Certification
Mechanical Inspection
Occupancy Permit
Sanitary Permit

Demolition Permit
Electrical Permit
Inspection Fees
Mechanical Permit
Plumbing Permit
Regulatory Fees (Business)

Agricultural Machinery
Other Heavy Equipment
Cart/Sledge Registration
Cockfights
Film-Making
Gaffers, Referees, etc.
Mayors Permit
Mining Claims
Parades
Sanitary Inspection
Tricycle/Pedicab Operation
Tricycle Franchising
Weights and Measures

Bicycle Permit
Boats Permit
Caretela & Calesa Registration
Cockpits
Fishing
Hawkers
Mineral Lands
Occupation Fees
Professional Fees
Storage of Flammable & Combustible
Material
Video Tape Rental

39

Regulatory Fees (Non-Business)

Burial
Court Fees
Holding of Benefits
Fiscals Clearance
Large Cattle Registration
Marriage Permit & Solemnization
Tax Clearance Fees

Civil Registry Fees

Exhumation/Removal of Cadaver
Firearms Permit
Impounding/Sales of Stray Animals
Police Clearance
Sheriffs Fees
Service Fees

Garbage Collection
Hospital Fees
Parking Fees
Secretarys Certification
Terminal Fee
Towing Charges

Health Services
Overnight Parking
Physical Examination & Medical
Certificates
Toll Fees or Charges
Traffic Violations
Tuition Fees

Receipts from Economic Enterprises

Cemeteries
Markets
Waterworks System

Electrical Light and Power

Slaughterhouses and Corrals

40

PART IV. ENACTMENT OF THE LOCAL REVENUE CODE

As required by the Local Government Code, the draft Revenue Code needs to be legally enacted
through a legislative act of the Sanggunian and approved by the Local Chief Executive.
Below are the processes involved in said enactment for cities and municipalities.

FOR CITIES
Step 1
Filing and
Numbering

a. A short note explaining the need for the ordinance is prepared

and signed by the proponents and attached to the ordinance.
b. Two (2) or three (3) copies of the draft ordinance are filed
with the Secretary to the Sanggunian at least three (3) days
before a regular or special session.
c. The Secretary to the Sanggunian records the proposed City
Revenue Code in the logbook and assigns a number to it.

Step 2
First Reading

a. The secretary to the Sanggunian reports the ordinance to the

Sanggunian at its next meeting.
b. During the session, the draft Revenue Code is referred to the
Committee on Ways and Means or Finance Committee, as the
case may be, for study, conduct of public hearings, and
debates.
.
a. Within ten (10) days from filing of the tax ordinance, it shall
be published for three (3) consecutive days in a newspaper of
general circulation, or shall be posted simultaneously in at
least four (4) conspicuous places within the territorial
jurisdiction of the city.
b. In addition to the publication or posting, the committee must
send a written notice on the proposed Revenue Code together
with a copy to interested or affected parties or those doing
business within the territorial jurisdiction of the city.
c. The notice must indicate the dates and venue of the public
hearing. The public hearing must be held at least ten (10)
days from the sending out of notices, or the last day of
publication whichever, comes later.

Step 3
Publication,
Posting and
Notification

Step 4
Public
Hearings

a. During the public hearing, all affected or interested parties

shall be given opportunity to appear and present or express
their views, comments and recommendations, and such public
41

hearings shall continue until all issues have been presented

and fully deliberated upon and/or a consensus shall have been
obtained, whether for or against the enactment of the
proposed Revenue Code.
b. The Secretary to the Sanggunian Panlungsod must prepare
the minutes of such public hearings and shall attach to it the
position papers, memoranda, and the like submitted by those
who participated.
Step 5
Second Reading

a. The proposed Revenue Code shall then be considered on

second reading in any regular meeting after it has been
reported out by the proper committee to which it was referred
to or certified as urgent by the City Mayor.
b. During the second reading, the Sanggunian shall deliberate on
the proposed Revenue Code. The members shall be given the
opportunity to express their views, comments and
recommendations for or against the proposed ordinance.
Various amendments to the provisions of said ordinance shall
then be made.
c. The Secretary shall prepare copies of the proposed ordinance
in the form it was passed on second reading and provide each
member of the Sanggunian with a copy of the proposed
ordinance at least three days before the scheduled third and
final reading.
If the ordinance is certified as urgent by the City Mayor, it may be
submitted for final voting during the second reading.

Step 6
Third and Final
Reading

Step 7
Approval

a. The draft ordinance shall be submitted to the Sanggunian for

third reading.
b. There being a quorum, the affirmative votes of the majority
of all the members present shall be necessary for the passing
of the ordinance.
a. The enacted revenue ordinance shall be presented to the City
Mayor for approval.
b. If the latter approves the ordinance, he shall affix his
signature on each and every page of the document.
c. If he does not approve the ordinance, he shall veto it and
return it with his objections to the Sanggunian, which may
proceed to reconsider the same.
d. The veto shall be communicated by the City Mayor to the
Sanggunian within ten (10) days, otherwise the ordinance
shall be deemed approved as if the Local Chief Executive
had signed it. The Local Chief Executive may veto an
ordinance only once.
42

e. The Sanggunian may override the veto of the Local Chief

Executive by two-thirds (2/3) vote of all its members
thereby making the ordinance effective for all legal
intents and purposes.
All approved ordinances shall be numbered consecutively
throughout the calendar year and continuously from year to year,
using the last two (2) digits of the calendar year in which it is
enacted, followed by the denominated number.
Step 8
Publication or
Posting of
Approved
Ordinance

a. Within ten (10) days after the approval of the Revenue Code,
a certified true copy shall be published in full for three (3)
consecutive days in a newspaper of local circulation.
b. In cases where there are no newspapers of local circulation,
the same may be posted in at least two (2) conspicuous and
publicly accessible places.

Step 9
Effectivity

a. Unless otherwise stated in the Revenue Code, the ordinance

shall take effect ten (10) days from the date a copy is posted
in a bulletin board at the entrance of the city hall.
b. In case the effectivity of the Revenue Codes falls on any date
other than the beginning of the quarter, it shall be considered
as falling at the beginning of the next ensuing quarter and the
taxes, fees, or charges due shall begin to accrue at that date.

Step10
Appeal on Legality

a. Any question on the constitutionality or legality of the

Revenue Code may be raised on appeal within thirty (30)
days from the date of its effectivity to the Secretary of
Justice.
The appeal shall not have the effect of suspending the
effectivity of the ordinance and accrual and payment of the
tax, fee, or charge levied by the ordinance.
b. The Secretary of Justice shall render a decision within sixty
(60) days from the receipt of the appeal.
c. Within thirty (30) days after receipt of the decision or the
lapse of the sixty-day period without the Secretary of Justice
acting upon the appeal, the aggrieved party may file the
appropriate proceedings with a court of competent
jurisdiction.

43

FOR MUNICIPALITIES AND COMPONENT CITIES

Step 1
Filing and
Numbering

a. A short note explaining the need for the ordinance is prepared

and signed by the proponents and attached to the draft
ordinance.
b. Two (2) or three (3) copies of the draft ordinance are filed
with the Secretary to the Sanggunian at least three (3) days
before a regular or special session.
c. The Secretary to the Sanggunian records the proposed
Local Revenue Code in the logbook and assigns a number to
it.

Step 2
First Reading

a.

Step 3
Publication,
Posting and
Notification

The Secretary to the Sanggunian reports the ordinance to the

Sanggunian at its next meeting.
b. During the meeting, the draft Revenue Code is referred to the
Committee on Ways and Means or Finance Committee, as the
case may be, for study, conduct of public hearings, and
debates.
.
a. Within ten (10) days from filing of the tax ordinance, it shall
be published for three (3) consecutive days in a newspaper of
general circulation, or shall be posted simultaneously in at
least four (4) conspicuous places within the territorial
jurisdiction of the LGU.
These may include plazas,
municipal halls, markets, churches, etc.
b. In addition to the publication or posting, the committee must
send a written notice on the proposed Revenue Code together
with a copy to interested or affected parties or those doing
business within the territorial jurisdiction of the city.
The notice must indicate the dates and venue of the public
hearing. The public hearing must be held at least ten (10) days
from the sending of notices or the last day of publication
whichever comes first.

Step 4
Public
Hearings

a. During the public hearing, all affected or interested parties

shall be given opportunity to appear, present or express their
views, comments and recommendations, and such public
hearings shall continue until all issues have been presented
and fully deliberated upon and/or a consensus shall have been
obtained, whether for or against the enactment of the
proposed Local Revenue Code.
b. The Secretary to the Sanggunian must prepare the minutes of
such public hearings and shall attach to it the position papers,
44

memoranda, and the like submitted by those who

participated.
Step 5
Second Reading

a. The proposed Revenue Code shall then be considered on

second reading in any regular meeting after it has been
reported out by the proper committee to which it was referred
to or certified as urgent by the Local Chief Executive.
b. During the second reading, the Sanggunian shall deliberate on
the proposed Revenue Code. The members shall be given the
opportunity to express their views, comments and
recommendations for or against the proposed ordinance.
Various amendments to the provisions of said ordinance shall
then be made.
c. The Secretary shall prepare copies of the proposed ordinance
in the form it was passed on second reading and provide each
member of the Sanggunian with a copy of the proposed
ordinance at least three days before the scheduled third and
final reading.
If the ordinance is certified as urgent by the Local Chief
Executive, it may be submitted for final voting during the second
reading.

Step 6
Third and Final
Reading

a. The draft ordinance shall be submitted to the Sanggunian for

third reading.
b. There being a quorum, the affirmative votes of the majority
of all the members present shall be necessary for the passing
of the ordinance.

Step 7
Approval

a. The enacted revenue ordinance shall be presented to the

Local Chief Executive for approval.
b. If the Local Chief Executive approves the ordinance, he shall
affix his signature on each and every page of the ordinance.
c. If he does not approve the ordinance, he shall veto it and
return it with his objections to the Sanggunian, which may
proceed to reconsider the ordinance.
d. The veto shall be communicated by the Local Chief
Executive to the Sanggunian within ten (10) days, otherwise
the ordinance shall be deemed approved as if the local
Chief Executive signed it. The Local Chief Executive may
veto an ordinance only once.
e. The Sanggunian may override the veto of the Local Chief
Executive by two-thirds (2/3) vote of all its members
thereby making the ordinance effective for all legal
intents and purposes.
45

All approved ordinances shall be numbered consecutively

throughout the calendar year and continuously from year to year,
using the last two (2) digits of the calendar year in which it is
enacted, followed by the denominated number.
Step 8
Review by the
Sangguniang
Panlalawigan

a. The Secretary to the Sanggunian shall within three (3) days

after approval of the Revenue Code, transmit a copy of the
code to the Sangguniang Panlalawigan for review.
b. Within thirty (30) days after receipt of the code, the
Sangguniang Panlalawigan shall examine the documents or
transmit them to the Provincial Attorney, or if there is none,
to the Provincial Prosecutor for immediate examination.
c. The Provincial Attorney or Provincial Prosecutor shall,
within a period of ten (10) days from receipt of the
documents, inform the Sangguniang Panlalawigan in writing
of his comments or recommendations which may be
considered by the Sangguniang Panlalawigan in making its
decision.
d. If the Sangguniang Panlalawigan finds that such an ordinance
is beyond the taxing powers conferred to a
municipality/component city, it shall declare such ordinance
invalid in whole or in part.
e. The Sangguniang Panlalawigan shall enter its action in the
minutes
and
shall
advise
the
corresponding
municipality/component city of the action it has taken.
f. If no action is taken by the Sangguniang Panlalawigan within
thirty (30) days after the submission of such ordinance, the
same shall be presumed consistent with the law and therefore
valid.

Step 9
Publication or
Posting of
Approved
Ordinance

a. Within ten (10) days after the approval of the Revenue Code,
a certified true copy of the ordinance shall be published in
full for three (3) consecutive days in a newspaper of local
circulation.
c. In cases where there are no newspapers of local circulation,
the same may be posted in at least two (2) conspicuous and
publicly accessible places within the territorial jurisdiction of
the LGU.

Step10
Appeal on Legality

a. Any question on the constitutionality or legality of the

Revenue Code may be raised on appeal within thirty (30)
days from the date of its effectivity to the Secretary of
Justice.
The appeal shall not have the effect of suspending the
effectivity of the ordinance and accrual and payment of the
46

tax, fee, or charge levied by the ordinance.

b. The Secretary of Justice shall render a decision within sixty
(60) days from the receipt of the appeal.
c. Within thirty (30) days after receipt of the decision or the
lapse of the sixty-day period without the Secretary of Justice
acting upon the appeal, the aggrieved party may file the
appropriate proceedings with a court of competent
jurisdiction.

47

SOURCES OF INFORMATION:
1.

Handbook of Local Government Administration: Center for Local and Regional

Governance

2.

Institute of Local Government Studies, Local Legislators Toolbox

3.

Local Government Code of 1991 and Its Implementing Rules and Regulations

4.

Municipal Training Program Coursebook on Municipal Finance and Revenue

Administration

5.

National Tax Research Center/Bureau of Local Government Supervision/Local

Government Academy, Model Local Revenue Code

6.

Republic Act 7942, The Mining Act of 1995

7.

Republic Act 9513, Renewable Energy Act of 2008

8.

Urban Development and Housing Authority Act of 1992

9.

Dr. Rosario Manasans lecture on developing a local tax policy

48

ANNEX A. LIST OF PROFESSIONS REQUIRING GOVERNMENT EXAMINATION

Accountancy
Agriculture
Chemical Engineering
Civil Engineering
Customs Broker
Electrical Engineering
Engineering
Landscape Architecture
Marine Deck Officer
Mechanical Engineering
Medical Technology
Midwifery
Naval Architecture
Nursing
Optometrist
Physician
Occupational Therapy
Social Work
Veterinary Medicine
Sugar Technology

Aeronautical Engineering
Architecture
Chemistry
Criminology
Dentistry
Dietician
Electronics & Communications
Forestry
Geology
Interior Design
Librarian
Marine Engine Officer
Master Plumbing
Metallurgical Engineering
Mining Engineering
Marine Engineering
Nutritionist
Pharmacist
Physical Therapy
Sanitary Engineering

49