The Philippine Supreme Court has ruled that municipal, city and provincial governments have no power to impose and collect business taxes on persons and companies engaged in the manufacture and distribution of petroleum products.
The highest court in the land said that under Section 133(h) of the Philippine Local Government Code (LGC), local government units (LGUs) cannot impose taxes, fees or charges on petroleum products.
Although petroleum products are subject to excise tax, it said, “the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the LGC to impose business taxes.”
“Additionally, Section 133(h) of the LGC makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all ‘taxes, fees or charges,’” the SC said in a decision written by Justice Diosdado M. Peralta.
With the ruling, the SC dismissed the petition filed by the Batangas City government to reverse a Court of Tax Appeals (CTA) decision that dismissed a trial court ruling which allowed the city government to collect PHP 405 million (USD 8.7 million) in business taxes from Pilipinas Shell Petroleum Corporation which operates an oil refinery and a depot in the city’s Tabangao district.
Case records showed that Pilipinas Shell was only paying PHP 98,964.71 (USD 2,136) for fees and other charges, which included the amount of PHP 1,180.34 (USD 25) as Mayor’s Permit. But in 2001, the Batangas City government sent Pilipinas Shell a notice of assessment for PHP 92,373,720.50 (USD 2.0 million) and PHP 312,656,253.04 (USD 6.7 million) as business taxes for manufacturing and distribution of petroleum products.