Republic of the Espace
HOUSE OF REPRESENTATIVES
Quezon City

NINETEENTH CONGRESS
First Regular Session

HOUSE BILL No. 4774

Introduced by Representative Rex Gatchalian

AN ACT
REALLOCATING THE SHARING OF TAXES BETWEEN LOCAL GOVERNMENT
UNITS HOSTING PRINCIPAL OFFICES, FACTORIES, PROJECT OFFICES,
PLANTS, AND PLANTATIONS AMENDING FOR THIS PURPOSE SECTIONS 131
AND 150 OF REPUBLIC ACT NO. 7160, OTHERWISE KNOWN AS THE “LOCAL
GOVERNMENT CODE OF 1991”

EXPLANATORY NOTE

Under the Local Government Code of 1991 (LGC) the sales allocation between
cities and municipalities hosting principal offices and those hosting factories, project
offices, plants and plantations is 30% and 70% of all sales recorded in the principal
office, respectively. However, since the LGC was passed more than thirty years ago,
we have seen a disproportionate improvement and increase in the income of cities
and municipalities hosting principal offices while LGUs hosting factories, project
offices, plants, and plantations have fallen far behind.

It is becoming increasingly clear that the ratio under the LGC by which local
business taxes are shared is not equitable. Manufacturing cities, or cities and
municipalities where factories, project offices, plants, and plantations are located
often bear the brunt of the social ills associated with running a business.

To put things into perspective, these cities and municipalities host most of the
human resource required to run a factory for manufacturing or a plantation to
function. In this connection, these workers will require socialized housing, health
services, food subsidies, and education for their children, just to name a few. So
instead of focusing on capital investment and increasing personal services for basic
government operations, these LGUs are burdened with the responsibility of taking


care of their constituents - a concern much less experienced by LGUs hosting just
the principal offices.

Further, the infrastructure of LGUs hosting factories and plantations also take
a rather heavier toll. Studies have shown that trailer trucks weighing 40 tons can
cause as much as 2,500 more damage when compared to the damage caused by
sedans on roads. It is therefore not a surprise to see roads beside factories so beat
up, while the roads in central business districts remain well maintained despite

having the same amount of capital investment poured in them.

Despite supposedly having a larger share of the local business tax, a sizable
portion of these proceeds are spent providing for the aforementioned additional social
services for a larger number of constituents and the cost for repair and rehabilitation
of road infrastructure. This is one of the reasons why manufacturing cities have
fallen behind some of the more progressive LGUs that only host principal offices in
their jurisdiction.

It is for these reasons that this bill proposes to reallocate the sharing of local
taxes between cities and municipalities hosting principal offices and those hosting
factories, project offices, plants and plantations from the current ratio of 30% and
70% of all sales recorded in the principal office, respectively, to a new ratio of 10%
and 90%, respectively.

In view of the foregoing, approval of this bill is earnestly sought.

i REX GATCHALIAN

Representative
1# District, Valenzuela City


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Republic of the Philippines
HOUSE OF REPRESENTATIVES

NINETEENTH CONGRESS
First Regular Session
HOUSE BILL NO. 4774

i

Introduced by Representative Rex Gatchalian
i
AN ACT
REALLOCATING THE SHARING OF TAXES BETWEEN LOCAL GOVERNMENT
‘UNITS HOSTING PRINCIPAL OFFICES, FACTORIES, PROJECT OFFICES,
PLANTS, AND PLANTATIONS AMENDING FOR THIS PURPOSE SECTIONS 131

AND 150 OF REPUBLIC ACT NO. 7160, OTHERWISE KNOWN AS THE “LOCAL
GOVERNMENT CODE OF 1991”

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Section 131 of Republic Act No. 7160, otherwise known as the
‘Local Government Code of 1991’, is hereby amended and renumbered to read as

follows:
“Section 131. Definition of Terms. - When used in this Title, the term:
(a) “Agricultural Product” xxx
(b) xx

{L) “DISAGGREGATED FINANCIAL REPORT” REFERS TO THE
FINANCIAL REPORT CONTAINING THE SALES ALLOCATION OF
COVERED BUSINESSES THAT HAS BEEN BROKEN DOWN IN
COMPONENT PARTS, SPECIFYING THE MONETARY VALUE OF THE
RESPECTIVE VOLUMES OF PRODUCTION OR SALES THAT MAY BE
ATTRIBUTABLE TO THE PRINCIPAL OFFICE, EVERY BRANCH OR
SALES OUTLET, FACTORY, PROJECT OFFICE, PLANT, OR
PLANTATION, AS THE CASE MAY BE.

(MR) “Fee” 20x


(AA[z}) “Wholesale” xxx.”

SEC.2. Section 150 of Republic Act No. 7160, otherwise known as the

“Local Government Code of 1991,” is hereby amended to read as follows:

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“Section 150. Situs of the Tax. - (a) For purposes of collection of the
taxes under Section 143 of this Code, [manufacturers,assemblers;
repackers,_brewers,—distillers,-reetifiers-and_compounders-of liquor;

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distributors, dealers; : kes
institutions,and-other] ALL businesses maintaining or operating A
branch or sales outlet elsewhere shall record the sale in the branch or
sales outlet making the sale or transaction, and the tax thereon shall
accrue and shall be paid to the CITY OR municipality where such
branch or sales outlet is located. In cases where there is no such branch
or sales outlet in the city or municipality where the sale or transaction
is made the sale shall be duly recorded in the principal office and the
taxes due shall accrue and shall be paid to such city or municipality.

(b) The following sales allocation shall apply to [manufacturers;
] ALL BUSINESSES
with factories, project offices, plants, and plantations in the pursuit of

their business:

(1) [Phisty-percent-{20%|] TEN PERCENT (10%) of all sales
recorded in the principal office shall be taxable by the city or

municipality where the principal office is located; and

(2) [Seventy-percent {70%}] NINETY PERCENT (90%) of all sales
recorded in the principal office shall be taxable by the city or

municipality where the factory, project office, plant, or plantation
is located.

(c) In case of a plantation located at a place other than the place where
the factory is located, said [seventy-pereent {70%}] NINETY PERCENT



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(90%) mentioned in subparagraph (b) of subsection (2) above shall be
divided as follows:

(1) Sixty percent (60%) to the city or municipality where the

factory is located; and

(2) Forty percent (40%) to the city or municipality where the

plantation is located.

(d) In cases where a BUSINESS [manufacturer,assembler producer;
exporter-or-contractor] has two (2) or more factories, project offices,
plants, or plantations located in different localities, the [seventy- percent
{70%}] NINETY PERCENT (90%) sales allocation mentioned in
subparagraph (b) of subsection (2) above shall be prorated among the
localities where the factories, project offices, plants, and plantations are
located in proportion to their respective volumes of production during
the period for which the tax is due.

(c) The foregoing sales allocation shall be applied irrespective of whether
or not sales are made in the locality where the factory, project office,
plant, or plantation is located.

(G) FOR THE PROPER ENFORCEMENT OF THIS PROVISION, THE
TAXPAYERS MENTIONED HEREIN SHALL BE REQUIRED TO
SUBMIT A SWORN DISAGGREGATED SCHEDULE OF THEIR TOTAL
SALES OR TOTAL REVENUES AND UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PRECEDING CALENDAR YEAR
WITHIN THE FIRST TWENTY (20) DAYS OF JANUARY TO THE
LOCAL GOVERNMENT UNITS WHERE THEIR PRINCIPAL OFFICE,
BRANCH, SALES OFFICE, FACTORY, WAREHOUSE, OR
PLANTATION IS LOCATED, AS THE CASE MAY BE. THE
DISAGGREGATED SCHEDULE SHALL SPECIFY THE TOTAL
AMOUNT OF SALES TAXABLE BY EACH CITY OR MUNICIPALITY.

THE PERCENTAGE OF THE TAX PAYABLE IN A PARTICULAR
LOCALITY SHALL BE BASED ON THE TOTAL SALES OR TOTAL


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REVENUES RECORDED IN ACCORDANCE WITH THE RULES
SPECIFIED IN THIS SECTION.

HE TAXPAYERS MENTIONED HEREIN SHALL HAVE THE
OBLIGATION TO PRESENT A SWORN DISAGGREGATED SCHEDULE
OF THEIR TOTAL SALES OR TOTAL REVENUES AND THEIR
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS A
CONDITION PRECEDENT TO THE ISSUANCE OR RENEWAL OF
BUSINESS PERMITS THAT ARE NECESSARY FOR THEIR INITIAL
OR CONTINUING OPERATIONS. IN THE CASE OF INITIAL
OPERATIONS, THE TAXPAYERS SHALL PRESENT THEIR
FORECASTED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
COMING FISCAL YEAR.”

SEC. 3. Implementing Rules and Regulations. - Within ninety (90) days
from the effectivity of this Act, the Department of Interior and Local Government, in
coordination with the Bureau of Local Government Finance, shall issue the rules and
regulations implementing its provisions. The Implementing Rules and Regulations
(IRR) issued pursuant to this section shall take effect thirty (30) days after its
publication in a newspaper of general circulation.

SEC.4. Separability Clause. - If any provision of this Act is held invalid
or unconstitutional, the other provisions not so declared shall remain in full force
and effect.

SEC. 5. Repealing Clause. - All other laws, executive orders, presidential
decrees, administrative orders, rules and regulations, issuances, or parts thereof
contrary to or inconsistent with the provisions of this Act are hereby repealed or
amended accordingly.

SEC. 6. Effectivity Clause. - Notwithstanding the non-issuance of the IRR,
this Act shall take effect fifteen (15) days after its publication in the Official Gazette
or in a newspaper of general circulation

Approved,