LGU can't tax petroleum products, business

At the outset, it must be emphasized that although the power to tax is inherent in the State, the same is not true for LGUs because although the mandate to impose taxes granted to LGUs is categorical and long established in the 1987 Philippine Constitution, the same is not all encompassing as it is subject to limitations as explicitly stated in Section 5, Article X of the 1987 Constitution, viz.:
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. (Emphasis supplied)
In the consolidated cases of City of Manila, et al. v. Hon. Colet and Malaysian Airline system; Maersk-Filipinas, Inc., et al. v. City of Manila, et al,; Eastern Shipping Lines, Inc. v. City Council of Manila, et al; William Lines, Inc., et al. v. Regional Trial Court of Manila, et al.; PNOC Shipping and Transport Corporation v. Hon. Nabong, et al.; Maersk-Filipinas, Inc., et al. v. City of Manila, et al, and with Intervenors William Lines, Inc., et al; Cosco Container Lines and HEUNG-A Shipping Co., Ltd., et al. v. City of Manila; Sulpicio Lines, Inc. v. Regional Trial Court of Manila, et al; Association of International Shipping Lines, Inc. v. City of Manila, et al; Dongnama Shipping Co., Ltd., et al. v. Court of Appeals, et al.,[1] the Supreme Court expounded that the LGUs' power to tax is subject to the limitations set forth under Section 133 of the LGC. Thus:
It is already well-settled that although the power to tax is inherent in the State, the same is not true for the LGUs to whom the power must be delegated by Congress and must be exercised within the guidelines and limitations that Congress may provide. The Court expounded in Pelizloy Realty Corporation v. The Province of Benguet that:
The power to tax "is an attribute of sovereignty," and as such, inheres in the State. Such, however, is not true for provinces, cities, municipalities and barangays as they are not the sovereign; rather, there are mere "territorial and political subdivisions of the Republic of the Philippines."
The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized in Icard v. City Council of Baguio:
It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. And the power when granted is to be construed in strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved against the municipality. Inferences, implication, deductions - all these- have no place in the interpretation of the taxing power of a municipal corporation.
Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either by the Constitution or by statute. Section 5, Article X of the 1987 Constitution is clear on this point:

x x x x

Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges." Nevertheless, such authority is "subject to such guidelines and limitations as the Congress may provide."

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise known as the local Government Code of 1991. Book II of the LGC governs local taxation and fiscal matters.

Relevant provisions of Book II of the LGC establish the parameters of the taxing powers of LGUs found below.

First, Section 130 provides for the following fundamental principles governing the taxing powers of LGUs:
  1. Taxation shall be uniform in each LGU.
  2. Taxes, fees, charges and other impositions shall:
    1. be equitable and based as far as practicable on the taxpayer's ability to pay;
    2. be levied and collected only for public purposes;
    3. not be unjust, excessive, oppressive orconfiscatory;
    4. not be contrary to law, public policy, national economic policy, or in the restraint of trade.
  3. The collection of local taxes, fees, charges and other impositions shall in no case be left to any private person.
  4. The revenue collected pursuant to the provisions of the LGC shall inure solely to the benefit of, and be subject to the disposition by, the LGU levying the tax, fee, charge or other imposition unless otherwise specifically provided by the LGC.
  5. Each LGU shall, as far as practicable, evolve a progressive system of taxation.
Second, Section 133 provides for the common limitations on the taxing powers of LGUs.

Among the common limitations on the taxing powers of LGUs under Section 133 of the LGC is paragraph (h) which states:

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

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

From the foregoing, Section 133(h) clearly specifies the two kinds of taxes which cannot be imposed by LGUs: (1) excise taxes on articles enumerated under the NIRC, as amended; and (2) taxes, fees or charges on petroleum products.

Indisputably, the power of LGUs to impose business taxes derives from Section 143[2] of the LGC. However, the same is subject to the explicit statutory impediment provided for under Section 133(h) of the same Code which prohibits LGUs from imposing "taxes, fees or charges on petroleum products." It can, therefore, be deduced that although petroleum products are subject to excise tax, the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the LGC to impose business taxes.

Additionally, Section 133(h) of the LGC makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all "taxes, fees or charges." The earlier reference in paragraph 143(h) to excise taxes comprehends a wider range of subject of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to "taxes, fees and charges" pertains only to one class of articles of the many subjects of excise taxes, specifically, "petroleum products." While LGUs are authorized to burden all such other class of goods with "taxes, fees and charges," excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products.[3]

It is likewise irrefutable that the specific exemption provided under Section 133 of the LGC prevails over Section 143 of the same Code.

First, Section 133 of the LGC is a specific provision that explicitly withhold from LGUs the power to impose taxes, fees and charges on petroleum products.

Strictly speaking, as long as the subject matter of the taxing powers of the LGUs is the petroleum products per se or even the activity or privilege related to the petroleum products, such as manufacturing and distribution of said products, it is covered by the said limitation and thus, no levy can be imposed.[4]

On the contrary, Section 143 of the LGC defines the general power of LGUs to tax businesses within its jurisdiction. Thus, the omnibus grant of power to LGUs under Section 143(h) of the LGC cannot overcome the specific exception or exemption in Section 133(h) of the same Code. This is in accord with the rule on statutory construction that specific provisions must prevail over general ones. A special and specific provision prevails over a general provision irrespective of their relative positions in the statute. Generalia specialibus non derogant. Where there is in the same statute a particular enactment and also a general one which in its most comprehensive sense would include what is embraced in the former, the particular enactment must be operative, and the general enactment must be taken to affect only such cases within its general language as are not within the provisions of the particular enactment.[5]

Second, Article 232(h) of the Implementing Rules and Regulations (IRR) of the LGC of 1991 states:

ARTICLE 232. Tax on Business. - The Municipality may impose taxes on the following businesses:

x x x x

(h)
On any business not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax provided that that on any business subject to the excise tax. VAT or percentage tax under the NIRC, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year and provided further, that in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products shall not be subject to any local tax imposed in this Article.

Article 232 defines with more particularity the capacity of a municipality to impose taxes on businesses. However, it admits of certain exceptions, specifically, that businesses engaged in the production, manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products, shall not be subject to any local tax imposed by Article 232.

[1] G.R. Nos. 120051, 121613. 121675, 121704, 121720-28, 121847-55, 122333, 122335, 122349, and 124855, December 10, 2014.

[2] Sec. 143. TAX ON BUSINESS. - The municipality may impose taxes on the following businesses:

(a) On manufactures, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, 
x x x.
(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature 
xxx. 
(c)   On exporters, and on manufactures, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding 'A of the rates prescribed under subsections (a), (b) and (d) of this Section: x x x x
(d) On retailers, with gross sales or receipts rate of tax for the preceding calendar year of x x x.
x x x x
(e) On contractors and other independent contractors xxx.
x x x x
(f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property, insurance premium.
x x x x
(g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding Fifty pesos (P50.00) per peddler annually.
(h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper to tax: provided that on any business subject to excise, value-added or percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year.

[3] Petron Corporation v. Mayor Tiangco, et al, 574 Phil. 620, 636 (2008).

[4] Batangas City v. Shell, G.R. NO. 187631, JULY 08, 2015.

[5] City of Manila, et al. v. Hon. Colet and Malaysian Airline system; Maersk-Filipinas, Inc., et al. v. City of Manila, et al,; Eastern Shipping Lines, Inc. v. City Council of Manila, et al.; William Lines, Inc., et al. v. Regional Trial Court of Manila, et al; PNOC Shipping and Transport Corporation v. Hon. Nabong, et al.; Maersk-Filipinas, Inc., et al. v. City of Manila, et al, and with Intervenors William Lines, Inc., et al.; Cosco Container Lines and HEUNG-A Shipping Co., Ltd., et al. v. City of Manila; Sulpicio Lines, Inc. v. Regional Trial Court of Manila, el al.; Association of International Shipping Lines, Inc. v. City of Manila, et al.; Dongnama Shipping Co., Ltd., el al. v. Court of Appeals, et al, G.R. Nos. 120051, 121613, 121675, 121704, 121720-28, 121847-55, 122333, 122335, 122349, and 124855, December 10, 2014.

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