SEVENTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
Second Regular Session )
SENATE RECS 7,
s.B.No. 1771

Introduced by Senator SONNY ANGARA

AN ACT
TO ENHANCE THE TAXING POWERS OF LOCAL GOVERNMENT UNITS BY
AMENDING CERTAIN PROVISIONS IN BOOK II OF REPUBLIC ACT 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991

EXPLANATORY NOTE

A key objective of the Local Government Code (R.A. 7160) was to provide LGUs
greater means to create their own sources of revenue in order to carry out their
expanded responsibilities. Through the years however, the effectiveness of certain
provisions in the Code have been overtaken by changes in the economy.

These changes include annual increases in the national inflation rate which has
reduced the value of tax collections, the undue emphasis on the head office of
corporations as a taxable unit, and leakages from local tax revenues resulting from
local tax exemptions enjoyed by government corporations and business entities
covered by investment promotion laws.

The foregoing legislation proposes several reforms to address these very issues,
born out of several reviews of the Code. In particular, the proposed amendments
thereto reflected in this bill are the following

‘+ Increasing the annual fixed tax for delivery truck or vans of manufacturers or
producers from 500 pesos to 1,500 pesos while ensuring the future of
continued increase in income from this source by indexing this to the inflation
rate;



* Reducing the taxable base of the head office from thirty percent (30%) to ten
percent (10%) of gross sales or revenues and increasing the share of
factories, plantations, branches, sales outlets and the like from seventy
percent (70%) to ninety percent (90%);

* Removing the authority of the national government to provide exemptions on
local taxes, fees and charges; and

Imposing a limitation on the extent local government units can provide local
exemptions from taxes, fees, and charges.

With these proposed amendments to Book II of the Local Government Code,
local governments would be strengthened and furthered empowered towards the
attainment of national development goals.

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

SONNY ANGARA



SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
Second Regular Session ) oD ES

SENATE RECEN OE
s.B.NoL771 ‘

Introduced by Senator SONNY ANGARA

AN ACT
TO ENHANCE THE TAXING POWERS OF LOCAL GOVERNMENT UNITS BY
AMENDING CERTAIN PROVISIONS IN BOOK II OF REPUBLIC ACT 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991

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

SECTION 1. Section 141 of Republic Act No. 7160, otherwise known as the
Local Government Code of 1991, hereinafter referred to as the “Code”, is hereby

amended to read as follows:

“SEC. 141. Annual Fixed Tax for Every Delivery Truck or Van of
Manufacturers or Producers, Wholesalers of, Dealers, or Retailers in,
Certain Products. - (a) The province may levy an annual fixed tax for every
truck, van or any vehicle used by manufacturers, producers, wholesalers,
dealers or retailers in the delivery or distribution of distilled spirits, fermented
liquors, soft drinks, cigars and cigarettes, and other products as may be
determined by the Sangguniang Panlalawigan, to sales outlets, or consumers,
whether directly or indirectly, within the province in an amount not exceeding
{five-hundred-pesos{P500)} ONE THOUSAND FIVE HUNDRED PESOS
(P1,500). THE SANGGUNIANG PANLALAWIGAN MAY INCREASE THE
ANNUAL FIXED TAX FOR EVERY TRUCK, VAN OR ANY VEHICLE USED
BY MANUFACTURERS, PRODUCERS, WHOLESALERS, DEALERS OR
RETAILERS IN THE DELIVERY OR DISTRIBUTION OF DISTLLED



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18

SPIRITS, FERMENTED LIQUORS, SOFT DRINKS, CIGARS AND
CIGARETTES, AND OTHER PRODUCTS TO SALES OUTLETS, OR
CONSUMERS, WHETHER DIRECTLY OR INDIRECTLY, ONCE EVERY
THREE (3) YEARS BASED ON GUIDELINES ISSUED BY THE BUREAU
OF LOCAL GOVERNMENT FINANCE OF THE DEPARTMENT OF
FINANCE UTLIZING THE CONSUMER PRICE INDEX AS THE BASIS FOR
THE INCREASE IN THE CEILING OF THE AFOREMENTIONED ANNUAL
FIXED TAX.”

SEC. 2. Section 150 of the Code is hereby amended to read as follows:

“SEC. 150. Situs of the Tax. -(a) For purposes of collection of the taxes
under SEC. 143 of this Code, [ fack - blers, repack

tractors, banks and other fi ial_institutions,and—other] ALL

businesses[,] maintaining or operating 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.

The following sales allocation shall apply to [manufacturersassemblers,
contractors,_producers,—and_exporters] ALL BUSINESSES with factories,

project offices, plants, and plantations in the pursuit of their business:

(1) [Fhitty- percent {30%)] 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



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(2) [Seventy-percent{79%)] 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-percent-{70%)] NINETY PERCENT (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 [manufacturer —assembler—producer—exporter_or
contractor] BUSINESS has two (2) or more factories, project offices, plants, or
plantations located in different localities, the [seventy-percent470%)] 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.”

SEC. 3. Section 192 of the Code is hereby amended to read as follows:

“SEC. 192. Authority to Grant Local Tax Exemption Privileges. - EXCEPT
AS PROVIDED HEREIN, NO LAW PROVIDING TAX EXEMPTION FROM
LOCAL GOVERNMENT TAXES, FEES AND CHARGES SHALL BE
ENACTED. UNLESS OTHERWISE PROVIDED IN THIS CODE, THE local
government units [may], through [ordinances] duly approved ORDINANCES,
MAY grant tax exemptions, incentives or reliefs FOR THE PURPOSE OF
PROMOTING OR ENCOURAGING INVESTMENTS IN THEIR
JURISDICTIONS, under such terms and conditions as they may deem
necessary: PROVIDED, THAT THE DURATION OF SUCH INCENTIVES



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SHALL NOT EXCEED A TOTAL OF SIX (6) CONSECUTIVE YEARS FROM
THE EFFECTIVE DATE GRANTING THE INCENTIVE.”

SEC. 4. Repealing Clause. - All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this Act are hereby
repealed or modified accordingly.

SEC. 5. Separability Clause. - If, for any reason or reasons, any part of
provision of this Act shall be held unconstitutional or invalid, other parts or provisions

hereof which not affected thereby shall continue to be in full force and effect.

SEC. 6. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,