Taxing powers, scope and limitations of nga and lgu

JMJ Marist Brothers
Graduate School
Notre Dame of Marbel University
Koronadal City, South Cotabato
Master in Public Administration
PA 235 – Public Fiscal Administration
Professor – Roditt C. Delfino, PhD
Reporters:
Argie Ryan L. Asaria
Diana Rose B. Daguro
Marvin Lyndon Ganancial
Normina S. Magandia
Sittie Mairah A. Mangudadatu
Fatima Sarah H. Maungco

PRESENTATION OUTLINE
SET – UP, FUNCTIONS AND COORDINATION IN PFA
a. Taxing Powers, Scope & limitations of National
Government Agencies
b. Taxing Powers, Scope & limitations of Local Government
Units
c. Procedures and Sharing System of Internal Revenue
Allotments
d. Responsibilities and Accountabilities of Agencies
involved in Fiscal Administration: NGAs & LGUs
e. Government Enterprises
- GOCCs
- Local Economic Enterprises

Taxation Powers, Scope
& Limitations of
National Government
Agencies
REPORTER:
ASARIA, ARGIE RYAN L.

What is National Government?
- Under the Constitution, the government is
divided into executive, legislative and judicial
departments. The separation of powers is based on the
theory of checks and balances.
• Executive Branch (law enforcing body)
• Legislative Branch (law making body)
• Judicial Branch (law interpreting body)

- is under the headship of the president. The
president obtains the position through national voting
system; the tenure is a six year period.
• Executive Branch
• Legislative Branch
- is characterized by a bicameral congress
comprising the Senate and the House of
Representatives. Occupying the upper house is the
Senate whose 24 members are voted in a national
election with a 6-year term.

• Judicial Branch
- demonstrates its authority to the Supreme Court
of the Philippines as the highest judicial body and
presided by a Chief Justice with 14 Associate Justices; all
are appointed by the president under the advise of the
Judicial and Bar Council.
What are the major sources of funds to finance
the national government?
1. revenues from both tax and non-tax sources;
2. borrowings from both domestic and foreign
sources; and,
3. withdrawals from available cash balances

Bangko Sentral ng Pilipinas
- is a banking institution granted the exclusive
privilege to lend a government its currency. Like a
normal commercial bank, the bank charges interest
on the loans made to borrowers, primarily the
government, typically as a ‘lender of last resort’.

TAXATION
- is a power by which an Independent State,
through its law-making body, raises and accumulates
revenue from its inhabitants to pay the necessary
expenses of the government.
As a power, it refers to the inherent power of a
state, co-extensive with sovereignty to demand
contributions for public purposes to support the
government.

Tax law in the Philippines covers national
and local taxes.
National Taxes
- refer to national internal revenue taxes
imposed and collected by the national government
through the Bureau of Internal Revenue (BIR) and
local taxes refer to those imposed and collected by
the local government.

National Tax Law - 1987 Constitution
• The 1987 Philippine Constitution sets limitations
on the exercise of the power to tax.
• The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive
system of taxation.

KINDS OF NATIONAL INTERNAL REVENUE TAXES
a. INCOME TAX –is a tax on a person’s income, profits and
the like, realized in a one taxable year
b. ESTATE AND DONOR TAXES
Estate Tax is the tax on the right of the deceased person
to transmit his lawful heirs or beneficiaries
Inheritance Tax is a tax on the right of the heirs of
beneficiaries to receive the estate of the deceased person
Donor Tax – donation is an act of liberality whereby a
person disposes gratuitously of a thing or right in favour of
another who accepts it

c. VALUE ADDED TAX (VAT) – is a percentage tax imposed on
every sale, barter, exchange, or lease of goods or properties
(real or personal) or sale of services in the course of trade or
business, and on every importation of goods, whether or not
in the course of trade or business, based on the gross selling
price or value, or the gross receipts, payable by the seller,
transferor, lessor, or importer.
d. OTHER PERCENTAGE TAXES – are taxes based on a certain
percentage of the gross selling price or gross value in money
of goods sold, bartered, exchanged, or imported, or gross
receipts or earnings derived by a person engaged in the sale
of services

PERSONS OR BUSINESS SUBJECT TO AND RATES OF
OTHER PERCENTAGE TAXES
1. Small business enterprises, i.e., those whose annual
gross sales and/or receipts do not exceed Php 550,000,
- 3% of gross quarterly sales or receipts.
2. Domestic carriers by land, air or water and transport
passengers for hire, and keepers of garages-3% of gross
receipts.
3. International carriers, air or shipping, doing business
in the Philippines – 3% of their gross quarterly receipts.

4. Franchise holders or grantees in respect to franchises on
radio and/or television broadcasting companies whose annual
gross receipts of the preceding year do not exceed Php 10
million – 3% of gross receipts, and on electric, gas, and water
utilities-2%
5. Senders of overseas messages-10% of the amount paid for
the service.
6.Life insurance companies – 5% of gross premium collected.
7. Proprietors, lessees or operators of amusement places –
15%, 18%, or 30% of gross receipts

8. Sale of shares of stock.-1/2 of 1% (0.05), 4%, 2%, and
1% of gross selling price or gross value of the shares.
OVERSEAS COMMUNICATION TAX
The tax is imposed upon every overseas dispatch
message or conversation transmitted from the
Philippines by telephone, telewriter exchange, wireless
and other communication services equivalent to 10%
on the amount paid for such services payable by the
person paying for the services rendered.

TAX ON RECEIPTS OF LIFE INSURANCE COMPANIES
The tax is imposed on persons, companies or corporations
engaged in insurance business in the Philippines equivalent to
2% of the total premiums collected. Certain premiums
mentioned by law are not included in the taxable receipts.
The law exempts from the tax purely cooperative companies
or associations defined as those as are conducted by the
members thereof with the money collected from among
themselves and solely for their own protection and not for
profit. Agents of non-resident foreign insurance companies
shall pay a tax equal to 10% of the total premiums received.

AMUSEMENT TAXES
1. Taxes on gross receipts.
Taxes equivalent to 18% of the gross
receipts of cockpits, cabarets, and day or night clubs;
10% in the case of boxing exhibitions; 15% in the case
of professional basketball games; and 30% in the case
of race tracks and jai-alai, irrespective of whether or
not any amount is charged or pay for admission,
collected from every proprietor, lessee, or operator of
such establishment.

2. Taxes on winnings.
Taxes imposed on every person who wins
in a horse race or jai-alai equivalent to 10% of
his winnings or “dividends”. The same tax is
collected from the owners of winning race
horses.
The amusement tax on admission to places
of amusement is now levied and collected by
the provinces and cities to the exclusion of
national government.

e. EXCISE TAXES ON CERTAIN GOODS
Excise Tax, as used in the Tax Code, are taxes imposed
on certain specified goods manufactured or produced
in the Philippines for domestic sale or consumption or
for any other disposition and on goods imported into
the Philippines.
Nature of Excise Tax
Excise Taxes subject directly the produce or
goods to tax. They are, therefore, taxes on property.

GOODS SUBJECT TO EXCISE TAXES
1. In General-Excise Taxes apply:
a. To goods manufactured or produced in the Phils.
For domestic use or consumption or for any other
disposition and
b. To goods imported from foreign countries
2. In Particular-The Tax Code enumerates the goods
subject to excise taxes, namely:
a. Alcohol products d. Miscellaneous goods
b. Tobacco products e. Mineral products
c. Petroleum products

f. DOCUMENTARY STAMP TAXES
- Is a tax on documents, and papers evidencing
the acceptance, assignment, sale or transfer of
an obligation, right or property incident
thereto.
- The purpose of the law in imposing stamp
taxes is to raise revenue, and not to invalidate
the contract

• Tax exemptions are limited to those granted by law.
However, no law granting any tax exemption shall be
passed without the concurrence of a majority of all the
members of the Congress.
(1) charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, and nonprofit cemeteries
and all lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or
educational purposes
(2) non-stock non-profit educational institutions used
actually, directly and exclusively for educational
purposes.
The Constitution expressly grants tax exemption on
certain entities/institutions such as:

NATURE OF TAXATION POWER
1. Inherent Power
2. Legislative Function
3. Public Purposes
4. Operating within Territorial Jurisdiction
5. The strongest among the inherent powers of the
government.
6. Taxation is the subject to limitation
• Inherent limitations
• Constitutional Limitations.

SCOPE OF TAXATION OF NGAs
1. Plenary or Complete
- Taxation has unlimited area of application and
only restricted by the inherent and constitutional
limitation.
2. Comprehensive
- It has a wide scope of coverage. It covers all
persons, properties, rights and transactions subject to
taxation, unless expressly exempted by laws within the
sovereign.

SCOPE OF TAXATION OF NGAs
3. Supreme
- it has the highest degree of application and it
considered as the strongest among the inherent power
of the state.
Taxation reaches every trade or
occupation, every object of industry, and every
species of possession. It imposes a burden
which, in case of failure to discharge, may be
followed by seizure or confistication of property.

LIMITATIONS OF TAXATION OF NGAs
• Levy for public purpose;
• Non-delegation of legislative power to tax.
• Exemption of government entities.
• Tax power is limited to territorial jurisdiction
of the State;
• Taxation is subject to international comity;
1. Inherent Limitations

• Due process of law (Art. III, Section I);
• Equal protection of law (Art. III, Section I);
• Rule of uniformity and equity (Art. VI, Sec. 28. par.1);
• President’s power to veto separate items in
revenue or tariff bills (Art. VI, Sec. 27 (2));
• Exemption from property taxation of religious,
charitable or educational entities, nonprofit
cemeteries, churches and convents appurtenant
thereto (Art. VI, Sec. 28, par. 3);
2. Constitutional Limitations

• Exemption from property taxation of
religious, charitable or educational entities,
nonprofit cemeteries, churches and
convents appurtenant thereto (Art. VI, Sec.
28, par. 3);
• No public money shall be appropriated for
religious purposes (Art. VI, Sec. 29);
• Majority of all the members of the Congress
granting tax exemption (Art. VI, Sec. 28, par.
4);
• No public money shall be appropriated for
religious purposes (Art. VI, Sec. 29);
• Majority of all the members of the Congress
granting tax exemption (Art. VI, Sec. 28, par. 4);
• No imprisonment for nonpayment of poll tax (Art.
III, Sec. 20); and
• Tax collection shall generally be treated as general
funds of the government (Art. VI, Sec. 29, par. 3).
2. Constitutional Limitations

Taxation Powers,
Scope & Limitations
of Local Government
Units
REPORTERS:
MAGANDIA, NORMINA S.
MANGUDADATU, SITTIE MAIRAH A.

TAXING POWER OF LGUs
Section 18. Power to Generate and Apply Resources
RA No. 7160 – The Local Government Code of 1991
- Local government units shall have
the power and authority to establish an
organization that shall be responsible for the
efficient and effective implementation of their
development plans, program, objectives and
priority.;

Section 18. Power to Generate and Apply Resources
Section 128. Scope
- The provision herein shall govern the
exercise by provinces, cities, municipalities and
barangays of their taxing and other revenue-
raising powers.
- to create their own sources of
revenues and to levy taxes, fees, and charges
which shall accrue exclusively for their use and
disposition and which shall be retained by
them; to have a just share in national taxes.

Section 129. Power to create Sources of Revenue
- Each LGU has the power to create its own
sources of revenue and to levy taxes, fees, and charges.
Section 132. Local Taxing Authority.
- The power to impose a tax, fee, or
charge or to generate revenue under this Code
shall be exercised by the sanggunian of the
local government unit concerned through an
appropriate ordinance.

Common Revenue – Raising Powers of LGUs
TAXING POWER OF LGUs
1. Fees and charges for services rendered
2. Charges for operation of public utilities
owned, operated and maintained by them
within their jurisdiction
3. Toll fees and charges for use of public road,
pier, wharf, waterways, bridge, ferry or
telecommunications system funded and
constructed by them.

Distribution of the Power to Impose Tax by
Provincial, City, Municipal and Barangay
Government:
Distribution of the Power to Impose Tax by Provincial,
City, Municipal and Barangay Government:
Provincial
Taxes
Municipal
Taxes
City
Taxes
Barangay
Taxes
1. Transfer of Real
Property
Ownership
2. Printing and
Publication
3. Franchise Tax
4. Sand and Gravel
5. Professional Tax
6. Amusement Tax
7. Annual Fixed tax
for Delivery
Van/truck
8. Real Property Tax
9. Additional 1%
SEF Tax
10. Tax on Idle Land
11. Special Levy on
Land
12. Public Utility
Charges
1. Business Tax on
manufacturers,
assemblers,
repackers,
processors, brewers,
distillers, rectifiers,
compounders of
liquors and others,
or manufacturers of
any article of
commerce
2. Bus. Tax
onwholesalers,
distributors, dealers
3. Bus. Tax on retailers
4. Bus. Tax on
Exporters,
manufacturers,
wholesalers &
retailers of essential
commodities
1. Taxes, Fees and
charges imposed
by provinces and
municipalities at
rates not to
exceed the
maximum rates
allowed to
provinces and
municipalities by
not more than
50% excepts in
cases of
Professional and
Amusement Tax
2. Community Tax
1. Taxes on stores or
retailers with
fixed business
Establishment
2. Service Fees of
charges on
regulation or use
of brgy. Owned
properties
3. Brgy. Clearance
fee
4. Other fees and
charges on
a.) commercial
breeding of
fighting cocks
b.) cockfights and
cockpits
c.) places of recreation
charging
admission;

Provincial
Taxes
Municipal
Taxes
City
Taxes
Barangay
Taxes
13. Toll fees/charges
14. Service
Fees/Charges
5. Bus. Tax on
contractors
6. Bus. Tax on Banks &
Financial Institutions
7. Bus. Tax on Peddlers
8. Bus. Tax on other
Businesses
9. Income tax on Banks
10. Fees & Charges on
Business &
Occupation
11. Fees for sealing and
licensing of weights
and measures
12. Fishery rentals fees
and charges
13. Community Tax
14. Special Levy on Land
4. Additional 1%
Tax on Idle
Land
5. Tax on Idle
Land
6. Special Levy
on Land
7. Public Utility
Charges
8. Toll
Fees/Charges
9. Service
Fees/charges
d.) Billboards, sign
boards, neon signs,
outdoor
advertisements
e.) advertisements
by means of
vehicles, baloons,
kites, etc.
Distribution of the Power to Impose Tax by Provincial,
City, Municipal and Barangay Government:

Revenue Sources Provinces Cities Municipalities Barangays
Real Property Tax √ √ ✓ 40% of
provincial
✓25% of
collections prov’l or
30% of city
collections
Transfer of Real Property
Ownership
√ √
Tax on sand, gravel, and
other quarry resources
√ √ ✓ 30% of
provincial
✓ 40% of prov’l
collections
Amusement Tax √ √ ✓ 50% of prov’l
collections
Business Tax √ √ √
Franchise Tax √ √
Community Tax √ √ ✓ 50% of collections
Tax Assignment by LG in the Philippines

Provincial
Taxes
Provincial
Share
Component
City Share
Brgy. Share
Tax on Sand,
Gravel &
Quarry
Resources
30 % 30% 40%
Amusement
Tax
50% 50% None
Real Property
Tax
35% 40% 25%
Summary of Provincial Taxes with Shared
Proceeds

Summary of City Taxes with Shared
Proceeds
City Taxes City Share Brgy. Share
Sand and
Gravel Tax
60 % Where quarry
is located
40%
Real Property
Tax
70% 30%

1.Constitutional Limitations
2.Inherent Limitations
3. Statutory Limitations
- LGUs’ taxing and revenue raising
powers are limited. They can only impose
taxes, fees and charges as the law may
allow.
LIMITATIONS IN THE TAXING POWERS
OF LOCAL GOVERNMENT UNITS

RA 7160, SECTION 133
Common Limitations on the Taxing Powers of
LGUs
a. Income tax, except when levied on banks and other
financial institutions;
b. Documentary stamp tax;
c. Taxes on estates, inheritance, gifts, legacies and other
acquisitions mortis causa, except as otherwise
provided herein;
Computation of income
tax

d. Customs duties, registration fees of vessel and
wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained by
the local government unit concerned;
e. Taxes, fees and charges and other impositions
upon goods carried into or out of, or passing
through, the territorial jurisdictions of local
government units in the guise of charges for
wharfage, tolls for bridges or otherwise, or other
taxes, fees or charges in any form whatsoever
upon such goods or merchandise;

f. Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or fishermen;
g. Taxes on business enterprises certified to by the
Board of Investments as pioneer or non-pioneer
for a period of six (6) and four (4) years,
respectively from the date of registration;
h. Excise taxes on articles enumerated under the
National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;

i. Percentage or value-added tax (VAT) on sales, barters
or exchanges or similar transactions on goods or
services except as otherwise provided herein;
j. Taxes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight by hire and
common carriers by air, land or water, except as
provided in this Code;
k. Taxes on premiums paid by way of reinsurance or
retrocession;

l. Taxes, fees or charges for the registration of motor
vehicles and for the issuance of all kinds of licenses or
permits for the driving thereof, except tricycles;
o. Taxes, fees or charges of any kind on the National
Government , its agencies and instrumentalities,
and local government units.
m. Taxes, fees, or other charges on Philippine products
actually exported, except as otherwise provided
herein;

Procedures and
Sharing System of
Internal Revenue
Allotment
REPORTER:
DAGURO, DIANA ROSE B.

What is Internal Revenue Allotment?
• Internal revenue allotment is the annual share of
local governments out of the proceeds from
national revenue taxes.
• It is estimated at forty percent (40%) of the
actual collections of national internal revenue
taxes during the third fiscal year preceding the
current year ( Section 284 of RA No. 7160)

What constitute the national Internal revenue
taxes being used as bases for the computation
of IRA?
1. Income Tax
2. Estate Tax and Donor’s Tax
3. Value Added Tax
4. Other Percentages Taxes
5. Taxes imposes by special laws, such as travel tax

Sec. 285. Allocation to LGU
LGUs % Allocation
Provinces 23%
Cities 23%
Municipalities 34%
Barangays 20%
Total 100%

The distribution of shares of individual provinces,
cities and municipality shall be determined on the
basis of the following formula:
Factor Percentage Source Document
Population 50% NSO Proclamation
Order
Land Area 25% LMB Official
masterlist of
Land Area
Equal
Sharing
25%
Total 100%

• Php80,000.00 for each barangay with a
population of not less than 100 inhabitants.
• the balance is allocated as follows:
The share of each barangay is computed as
follows:
Population 60%
Equal Sharing 40%
Total 100%

Illustrative example of how the IRA is computed
(for CY 2000)
1997 National Internal Revenue
Tax Collection as certified by the BIR ------- P 304.440B
x 40%
IRA for CY 2000 ----------- P 121.778B
Less: Actual Cost of Devolved
Functions & City-funded hospitals 6.539B
Unprogrammed amount 10.000B
Local Government Service 5.000B
Sub-total ___21.539B
Net IRA P 100.239B
STEP 1: Compute the Net IRA

STEP 2: Allocate Net IRA (P100.239B) per Sec.
285 of RA No. 7160
Share per LGU:
Provinces (23%) P 23.055B
Cities (23%) 23.055B
Municipalities(34%) 34.081B
Barangays (20%) 20.048B
P 100.239B

Equal Sharing = ( P20.048B x 40%) divided
by total no. of barangays
Population = ( P20.048B x 60%) x the ratio of a
barangay population to total Phil.
population
STEP 3: Allocate the aggregate barangay
share of P20.048B to all barangays based on
population (60%) and equal sharing (40%)

Process Flow : Release of IRA
DBM-ROCS
1. Prepares the SARO, NCA and
Schedule of Releases
2. Prepares funding checks
DBM Regional Office
Prepares Notice of Funding
Checks Issued (NFCIs) for
transmission to barangays
• Gov’t Servicing Bank
• Receives Funding Checks
for credit to the account
of the barangays
Punong Barangay/Brgy.
Treasurer
Withdraws cash from
bank

Sec. 286 Automatic Release of Shares
• The share of each LGU shall be released,
without need of any further action, directly to
the provincial, city, municipal or barangay
treasurer, as the case may be, on a quarterly
basis within five days after the end of each
quarter, and which shall not be subject to any
lien or holdback that may be imposed by the
National Government for whatever purpose.

Sec. 287 Local Development Projects
• Each local government unit shall appropriate in
its annual budget no less than twenty percent
(20%) of its annual internal revenue allotment
for development funds. Copies of the
development plans of local government units
shall be furnished by the DILG.

Responsibilities and
Accountabilities of
Agencies involved in
Fiscal Administration:
LGUs
REPORTER:
GANANCIAL, MARVIN LYNDON

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.
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.

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 taxpayer’s 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;

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
c. The collection of local taxes, fees, charges and other
impositions shall in no case be let to any private person;
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.

Government
Enterprises:
GOCCs & Local
Economic Enterprises
REPORTER:
MAUNGCO, FATIMA SARAH H.

GOCC – Government-Owned and
Controlled Corporation
• A stock or a non-stock corporation whether
performing governmental or proprietary
functions, which is directly chartered by a
special law or, if organized under the general
corporation law, is owned or controlled by the
government directly or indirectly through a
parent corporation or a subsidiary corporation.
Presidential Decree No. 2029

• Presently 158 GOCC
• 84 Chartered
• 74 registered under the SEC
Owned and controlled by the state supposed to
address market failures and correct imperfections.
A corporation created by special law or
incorporated and organized under the Corporation
Code and in which government, directly or
indirectly, has ownership of the majority of the
capital stock.
Executive Order No. 64 of 1993

Why GOCC are created? And Why?
Grounded on the idea that market failures
do exist and government needs to intervene to
protect public interest.
The use of corporate vehicle recognized
as efficient means to mobilized government
assets.

History of GOCC in the Philippines
• Mid 50’s and early 60’s GOCC disastrous
financial performance.
• 37 GOCC in 1965
• During president Marcos first 10 years, GOCC
reach up to 120 in 1975
• 303 GOCC in 1984
• And in 2010 there is 604 GOCC’s in which
446 are operational water districts.

There is no central agency tasked to monitor and
supervise the activities of the government corporate
sector or the GOCC’s
Creation of GCMC
( Government Corporate Monitoring Committee.)
“Executive Order No. 936“
Authorized the privatization of GOCC’s
(that resulted to only 158 GOCC’s today.)
Presidential Proclamation No. 50

Conditions in where GOCC operate
• In cases where private sector is unwilling or unable to
provide goods and services vital to the society such
construction of large infrastructure i.e. roads & ports;
• When there is a need to create bias in favor of
disadvantage sector of the society in a free market
such as distribution of staples and sugar;
• To spur the development of strategic activities with
wide ranging economic impact; and
• When there exist natural monopolies which
government want to control to protect the consuming
public.

Groups of GOCC
 Cluster A – Financial Institutions
 Cluster B - Public Utilities, Industrial,
area development, agricultural,
trading, promotional
 Cluster C – Social, Cultural and Scientific

How do GOCC’s performance impact
the government
• Section 3 of R.A. 7656 require all GOCC to remit 50%
of annual net earning in cash, stock or property
dividends to national government.
(35.7 billion collected from GOCC in 2009 or 25.3% of total
non-tax revenue )
• GOCC’s constitutes expenditures, they deemed to be
entitled to financial support in form of subsidies,
equity infusion & lending. .
(23.8 billion of financial aid or 1.7% in government budget in
2009.)

GOCC Governance Act of 2011
(Republic Act No. 10149)
• Consolidation of Senate Bill no. 2640 & House
Bill No. 4067
• Central advisory, monitoring and oversight
body with authority to formulate, implement
and coordinate policies concerning GOCC’s and
related corporation.

Disclosure & audit requirements
“R.A. 10149 require full disclosure of all GOCC
through a website and grant unrestricted public
access”
• Latest annual audited financial report within 30
days from receipt
• Audited financial statements in immediate 5
years
• Quarterly, annual report & trial balance
• Current corporate operating budget

Complete compensation package of all
board members & officers
• Travel
• Representation
• Transportation and any form of allowances
or expenses.
Local & foreign borrowings.
Performance scorecards & strategy maps
 Government subsidiary & net lending
All borrowing guaranteed by the government
All information GCG requires

Exempted of the coverage of
R.A. 10149
• Bangko Sentral ng Pilipinas
• State Universities & Colleges Cooperatives
• Local water districts
• Economic zone authorities
• Research institution

Compensation and Position classification system for
GOCC officers & employees
Subject to Phil president approval
Additional incentives
No incentives shall be granted unless GOCC
has fully paid taxes for which its liable
Position Titles and Salary Grade
Directors/Trustees/Employees

PUBLIC ECONOMIC ENTERPRISES-a
• A business like entity,wholly or partially owned by
local government that sells a product or service
to meet a perceived specific public demand.
COMMON PUBLIC ECONOMIC ENTERPRISES:
1. Public markets
2. Slaughterhouses
3. Bus terminals
4. Waterworks
5. cementeries

PURPOSEFUL PEE
• is the one that contributes to the sustainable
development and quality service delivery
goals of the local government unit (LGU) and
the nation

How do Purposeful PEEs contribute to
poverty reduction?
1. Require less subsidy from government and
generate profit.
2. Equitable delivery of products and services
will increase the access of marginalized groups
to local services.
3. Quality services such as utilities, markets and
transportation will attract potential investors to
the LGUs.

LOCAL GOVERNMENT CODE
• Republic Act 7160, otherwise known as the
Local Government Code under Section 17
states that... (IX) public markets,
slaughterhouses and other municipal
enterprises; (X) public cemetery Under section
17, the phrase “ and others” is added, which
connotes that any other utilities or services
can be considered as economic enterprises,
provided they generate income or revenues.

Taxing powers, scope and limitations of nga and lgu

In this document

More Related Content

What's hot

Viewers also liked

Similar to Taxing powers, scope and limitations of nga and lgu

Recently uploaded

Taxing powers, scope and limitations of nga and lgu