LGU TAX QUESTIONED

Daluz wants to seek SC view on LGU’s being taxed when exercising proprietary function

Cebu City Councilor Jose Daluz III wants the City Legal Office to file a petition for declaratory relief before the Supreme Court to determine if local government units (LGU) are taxable when exercising their proprietary function.

Daluz’s manifestation came after the City Council approved the report of the committee on budget and finance on the proposed P299.8 million third supplemental budget (SB 3) of the City Government this year.

The bulk of the amount of the SB 3 will be used to pay the compromise basic tax deficiency with the Bureau of Internal Revenue (BIR) amounting to some P188.4 million.

The City Government is set to apply for a compromise settlement with the BIR to settle its tax liability as provided under Section 204, item A of the National Internal Revenue Code.

The BIR earlier issued in 2014 a preliminary assessment notice to the City Government, assessing that it has a deficiency in its taxes of around P1.2 billion for its 2010 transactions.

The P188.4 million allocation for the tax due to the BIR is equivalent to 40 percent of the City’s basic assessed tax.

Daluz, who is also a lawyer, said that if the High Court will settle the case, it will also benefit other LGUs.

“It’s basically a proprietary or governmental function of the LGU and its proprietary function is just incidental. So we want to know whether LGUs are taxable,” he said.

Daluz said the City can go directly to the Supreme Court because the matter is a question of law.

The petition for declaratory relief is a special civil action provided under Rule 63 of the Rules of Court.

By seeking a declaratory judgment, the party making the request is seeking an official declaration of the status of a matter in controversy.

Aside from the payment for the tax dues to the BIR, other items in the proposed SB 3 also include the P55-million additional fund for the City Hospitalization Assistance and Medicine Program, P40 million for paving and retreading of various city streets and P8 million for aid to Barangay Banilad, among others.

The executive department has realigned some continuing appropriations amounting to some P291.8 million and P8 million from aid that Barangay Banilad returned as sources of fund for the SB 3.