LGUs taking a step too far

Published by rudy Date posted on December 19, 2011

Last week, I expressed what I liked most about the new structure and workings of local governments in the Philippines. Today, I would like to express my concerns about current local governance after more than two decades when the Local Government Code was enacted.

Perhaps the most glaring exhibition of how too strong our local governments have become is the “abuse” in taxing prerogatives. The Code, for those who are familiar, has allowed local governments to impose taxes, though with limits, on their constituents.

But sometimes, certain initiatives step beyond acceptable bounds. A classic case is the attempt of the City of Manila quite a number of years ago to impose additional taxes on petroleum that passes through their roads. This has been withdrawn after the oil companies brought their concerns before the higher courts.

The city had put forward a reason, i.e., trucks heavy with fuel products passing through local roads were causing damages, and consequently costly repairs. They were also partly to blame for the deteriorating traffic situation in the city.

Oil companies, however, pointed out the folly of such reasoning, one that would open a Pandora’s box leading to other LGUs imposing taxes on the oil tankers passing through their roads.

The biggest argument that oil firms gave, though, was that oil and oil products taxation was already the prerogative of the national government, and that any other taxation would wind up as a double levy, which eventually would be passed on to further burden consumers.

Business friendly

The Code recognizes exclusive areas of jurisdiction when it comes to taxation. With the LGUs’ growing sense of empowerment in recent years, taxation has become a tool that has been used, sometimes with a bit of a heavy hand, to improve the local government’s cash position.

Certain local governments, for example, are now gaining a reputation for excessive taxes, especially those levied on businesses. This, of course, has led the affected entities to seek better operating conditions, i.e., moving their base of operations to cities or municipalities that offer “friendlier” terms.

There are even local governments that “overtax” businesses by imposing just about any kind of taxation, which in the process alienates not only new but also existing companies that do business in the area. There remains still a lot of misunderstanding on how much sales taxes should be imposed on branch operations and main offices.

There is a process now that is being set in place, but the task of defining this is often tedious, costly and time-consuming.

True valuation

Another local revenue source, albeit one that pays off handsomely to some LGUs, is from real estate. Makati and Quezon City are two localities that have been diligently enforcing updated valuation of property as a basis to increasing revenue collections.

Real estate taxation – unlike sales taxes which may be shared with the national government – is without questionable doubt a local tax and goes straight to the LGU’s treasury. The law mandates that LGUs update their schedules of land and real property values every three years.

Many LGUs have now been diligently doing this; but many others have not. Taxes based on updated real estate values are a big help to the local governments in terms of financing their own social development costs, including the maintenance of health clinics and social welfare units.

Such local taxes also help ease the burden on the national government, which we all know has been operating on a deficit for an eternity already.

As the various local government groupings strengthen and mature, we should look forward to more reasonable and logical basis for local taxes.

Businesses generally welcome fair valuation and taxation on real estate, and usually prepare for increases. But when natural calamities – the like of Typhoon Ondoy – happens, they also expect downward adjustments in real estate valuations.


There are other little things that have been bothering me that I presume are also a product of the Code – or the effect of having this Code. One is the noticeable erection of more booms (some wooden bars, others heavy metal with corresponding locks) that prohibit entry into public streets after a certain hour in the night.

Another has to do with tarps that local government officials post at just about any excuse: graduation, Valentines, and of course, the Yuletide. While there are pronounced prohibitions by some LGUs, transgressions are still apparent and sometimes difficult to punish.

It also is a waste of local government funds to see sidewalks and center islands of roads being given facelifts (or even being demolished for new structures) especially when they don’t need a new one. Coincidentally, this often happens there is a change in the local leadership.

Lastly, and I mention this with some uncertainty, is the growing phenomenon of having a spouse or a brother or a sister or a cousin to replace the incumbent when his or her set term expires. This practice, while having its good points, also leaves a lot of opportunity for abuse.


Moving on to its third decade, the Code continues to be under study and change. The intention is clear, and there has been indeed a lot of good progress since its passage in 2001. For one, “leagues” or those groupings of local government entities are gaining strength and hopefully wisdom.

The Code has also strengthened people participation, now noticeable with barangay buildings sprouting all over and better choices of barangay officials manning the desks and outposts. But there is still a lot of work that remains to be done. –Rey Gamboa (The Philippine Star)

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