Reporter: RAUL R.

MELEGRITO

 Local government units, by

virtue
of
the
1987
Constitution and the Local
Government Code of 1991,
otherwise known as Republic
Act 7160 have been given the
power to raise certain taxes.

Power to Create
Sources of Revenue
(Sec.
129)

Each local government unit (LGU) has the

power to create its own sources of
revenue and to levy taxes, fees, and
charges
The grant of power to create sources of
revenue is consistent with the basic policy
of local autonomy
The taxes, fees and charges shall accrue
exclusively to the LGU.

Following political
subdivisions have the power
totax:
1.) Province - It is the largest unit in the political
structure of the Philippines. It consists in varying
numbers of municipalities and, in some cases, of
component cities.
2.) City -There are three classes of cities in the
Philippines: the highly-urbanized, the independent
component cities which are independent of the
province, and the component cities which are part
of the provinces where they are located and
subject to their administrative supervision.

3.) Municipality- It is a political corporate body

which is endowed with the facilities of a municipal
corporation, exercised by and through the municipal
government in conformity with law. It is a subsidiary of
the province which consists of a number of barangays
within its territorial boundaries, one of which is the
seat of government found at the town proper.
4.) Barangay- The smallest political unit into which
cities and municipalities in the Philippines are divided.
It is the basic unit of the Philippine political system. It
consists of less than 1,000 inhabitants residing within
the territorial limit of a city or municipality and
administered by a set of elective officials, headed by a
barangay chairman.

CONSTITUTION AUTHORIZES
CREATION OF SOURCES OF
REVENUE AND LEVY TAXES

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.
SEC. 130. Fundamental Principles the following
fundamental principles shall govern the exercise of
the taxing and other revenue-raising powers of local
government units:

a. Taxation shall be uniform in each local government unit;

b. Taxes, fees, charges and other impositions shall:
1. Be equitable and based as far as practicable on the
taxpayers ability to pay;
2. Be levied and collected only for public purposes;
3. Not
be
unjust,
excessive,
oppressive,
or
confiscatory;
4. Not be contrary to law, public policy, national
economic policy, or in restraint of trade;
c. The collection of local taxes, fees, charges and other
impositions shall in no case be let to any private person;
d. The revenue collected pursuant to the provisions of this
Code shall inure solely to the benefit of, and be
subjected to disposition by, the local government until
levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and
e. Each local government unit shall, as far as practicable,
evolve a progressive system of taxation.


THE CONDUCT AND MANAGEMENT
OF FINANCIAL AFFAIRS,
TRANSACTIONS, AND OPERATIONS
OF PROVINCES, CITIES,
MUNICIPALITIES, AND BARANGAYS.

SEC. 305. Fundamental Principles. The financial

affairs, transactions, and operations of local
government units shall be governed by the following
fundamental principles:
(a) No money shall be paid out of the local treasury except in
pursuance of an appropriations ordinance or law;
(b) Local government funds and monies shall be spent solely for
public purposes;
(c) Local revenue is generated only from sources expressly
authorized by law or ordinance, and collection thereof shall at
all times be acknowledged properly;
(d) All monies officially received by a local government officer
in any capacity or on any occasion shall be accounted for as
local funds, unless otherwise provided by law;
(e) Trust funds in the local treasury shall not be paid out except
in fulfillment of the purpose for which the trust was created or
the funds received;

(f) Every officer of the local government unit whose duties

permit or require the possession or custody of local funds
shall be properly bonded, and such officer shall be
accountable and responsible for said funds and for the
safekeeping thereof in conformity with the provisions of
law;
(g) Local governments shall formulate sound financial
plans, and the local budgets shall be based on functions,
activities, and projects, in terms of expected results;
development plans, goals, and strategies in order to
optimize the utilization of resources and to avoid
duplication in the use of fiscal and physical resources;
(i) Local budgets shall operationalize approved local
development plans;
(j) Local government units shall ensure that their
respective budgets incorporate the requirements of their
component units and provide for equitable allocation of
resources among these component units;

(k) National planning shall be based on local

planning to ensure that the needs and aspirations
of the people as articulated by the local
government units in their respective local
development plans are considered in the
formulation of budgets of national line agencies or
offices;
(l) Fiscal responsibility shall be shared by all those
exercising authority over the financial affairs,
transactions, and operations of the local
government units; and
(m) The local government unit shall endeavor to
have a balanced budget in each fiscal year of
operation.

THANK YOU