By: Atty. Henson M. Montalvo

            Every local government unit (LGU) is authorized and empowered by the Constitution and Republic Act No. 7160, otherwise known as the ”1991 Local Government Code (LGC)”, as amended, to levy taxes, fees, and other charges. Nonetheless, this power is not limitless or boundless but rather subject to the limitations as provided under the LGC and to such guidelines and limitations as Congress may provide.

            Section 252 of the LGC categorically provides that no protest shall be entertained unless the taxpayer first pays the tax. This “payment under protest” provision is applicable in protesting a real property tax (RPT) assessment.  A circumspect reading of the LGC clearly sets forth that such administrative remedy is available to a taxpayer or a real property owner who is not satisfied with the assessment or reasonableness of the RPT sought to be collected.

However, nowhere in the LGC can we find such requirement insofar as the local business tax assessment is concerned. Section 195 of the LGC provides for the remedies of protest and appeals in case of local business tax assessments.  This brings us now to this point of inquiry which baffles taxpayers: “Can an LGU validly extend, through its local revenue code, the requirement of payment under protest in local business tax assessment?”

            In a recent case (Rock Steel Resources, Inc. v. City of Davao, CTA Case AC No. 139, August 11, 2016) wherein Section 423 of the Revised Revenue Code of the City of Davao required payment under protest with respect to local business tax assessments, the tax court ruled that the LGU involved should not supply additional requirements onerous to the taxpayer concerned by requiring prior payment on protest against the latter’s local business tax assessment which is not mandated under Section 195 of the LGC. Further, the court emphatically reiterated that it is only in real property taxation that the LGC requires payment under protest.

            In essence, a tax ordinance cannot extend or expand the coverage of a law (LGC), as the power to amend or repeal a statute is vested in the legislature. To impose a requirement hinged on a provision of an ordinance in contravention of the provisions of the LGC would be to countenance an arbitrary interpretation or application of a law and to inflict injustice on unassuming taxpayers.