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Questions and Answers
What revenue sources are available for local governments according to the Local Government Code of 1991?
What taxes imposed by the national government are local governments entitled to share in?
How much of the National Government's Gross collection are LGUs entitled to?
Which financing strategies can local governments utilize for local development programs?
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What form of indebtedness can LGUs contract from government or private banks?
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How do LGUs receive resources from the national government to finance devolved responsibilities?
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Which of the following is NOT an example of a tax that LGUs are entitled to share in?
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What type of investments enable LGUs to finance local development programs and projects?
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What is the proportion of National Government's Gross collection that LGUs are entitled to?
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Which types of loans can LGUs contract from banks and lending institutions?
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Study Notes
Local Government Unit (LGU) Taxation
- LGUs have the power to levy taxes, fees, or charges on any base or subject not specifically enumerated or taxed under the National Internal Revenue Code.
- LGUs must ensure that taxes, fees, or charges are not unjust, excessive, oppressive, confiscatory, or contrary to declared national policy.
- Prior public hearing is required for the enactment of ordinances levying taxes, fees, or charges.
Policy and Action Framework for Enhancing LGU Tax Revenues
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Local taxes include real property taxes and business taxes.
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Real Property Taxes:
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Conduct public consultations on revenue measures
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Update Local Tax Code
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Computerize Tax Administration and Financial Management System
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Improve taxpayer services
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Establish customer-friendly offices or one-stop shops for securing business permits and applications
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Provide incentives to tax collectors
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Conduct tax mapping operations for real property
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Regularly conduct General Revision of Property Assessment and Classification
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Adopt realistic Schedule of Fair Market Value
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Computerize records of the Assessor’s and Treasurer’s Offices
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Link up with the Registrar of Deeds, Building Official, Geodetic Engineers, and other relevant government agencies
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Strengthen tax collection enforcement
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Engage participation of other stakeholders to help in tax information and education campaign
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Display approved Schedule of Fair Market Value in conspicuous places
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Display transaction flow charts
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Business Taxes:
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Conduct business tax mapping and inventory of business establishments
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Tie up with the records and tax maps of the Assessor’s Office
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Use presumptive income levels in determining gross receipts of business
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Conduct examination of books of accounts of business establishments to counteract massive under declaration
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Use information database of other government agencies through institutionalized inter-agency tax information-sharing scheme
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Establish one-stop shops for tax payments and business permit applications
Type of Funds Maintained by LGU
- General Fund: available for any purpose to which the legislative body may decide to apply it
- Internal Source: Taxes, Fees, and Charges
- Income Derived from Investments, Privatized, and Development Enterprises
- Inter-Local Government Funds
Distribution of Real Property Tax on LGUs
- Provinces: 35% (provincial share), 40% (municipal share), 25% (barangay share)
- Cities: 70% (city share), 30% (barangay share)
Scope of Taxing Powers of LGUs under LGC 1991
- LGUs have the power to tax, impose fees and charges on any base or subject not specifically enumerated or taxed under the National Internal Revenue Code.
Computation and Distribution of National Tax Allocation among LGUs
- 40% of the BIR collection (with a 3-year lag) is distributed to local governments following a predetermined formula.
LGU Revenue Sources
- Local taxes, fees, and charges
- National tax allocation
- Grants and donations
- Domestic loans and credit financing schemes
- Consonance with Sec. 6, Art VI of the Philippine Constitution
- Share of the local government in the collection of taxes imposed by the national government
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Description
Test your knowledge on the power of local government units to levy taxes, fees, and charges. Explore the limitations and requirements for enacting ordinances related to taxation.
