While the LGUs are granted with a wide latitude to determine the classification, tax base, tax rate and its corresponding increase, apart from the aforestated restrictions, the taxing powers of the LGU must be exercised in accordance with fundamental principles set forth under Section 130[64] of the LGC, and is subjected to the common limitations found under Section 133[65] and specific restrictions under Section 186[66] of the same code. With these, the respondent is strictly reminded of, in making subsequent adjustments of its tax ordinances or in enacting new revenue measures.

Section 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;

(c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

^[65] Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

(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;
(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;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.

^[66] Section 186. Power To Levy Other Taxes, Fees or Charges. - Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose.

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Clearly therefore, Ordinance No. 8331 is invalid insofar as it imposes more than the allowed adjustment for gross receipts or sales amounting to Php 50,000.00 up to Php 400,000.00.

The Court is mindful that the interval of time between the two ordinances is 20 years, Ordinance No. 7807 having been enacted in 1993, and Ordinance No. 8331 in 2013. However, this does not justify the accumulation of allowable increases and then their subsequent one-time imposition. The option to increase the tax rates under the LGC arises every five (5) years reckoned from the enactment of the ordinance sought to be adjusted. The decision of whether or not to exercise such option falls upon the LGU, through their respective sanggunian taking into consideration the status of each industry balanced with the needs of their respective territory.

In the event that the LGU fails to make such adjustment within the five (5)-year period, the option to increase the prevailing ordinance remains open until such right is exercised, at which point, the five (5)-year period of limitation starts to run again.

On the other hand, were the LGU decides to make such adjustment, the basis for the increase would be the prevailing tax rate. Foreseeing that the compounding of interest would invite fear that its eventual accumulation would become unduly burdensome, the taxpayers should be reassured of the built-in measures under the LGC to restrict the power of the LGUs in this regard.

While the LGUs are granted with a wide latitude to determine the classification, tax base, tax rate and its corresponding increase, apart from the aforestated restrictions, the taxing powers of the LGU must be exercised in accordance with fundamental principles set forth under Section 130^[64] of the LGC, and is subjected to the common limitations found under Section 133^[65] and specific restrictions under Section 186^[66] of the same code. With these, the respondent is strictly reminded of, in making subsequent adjustments of its tax ordinances or in enacting new revenue measures.

SECOND DIVISION

[ G.R. No. 222886, October 17, 2018 ]

HONORABLE LEILA M. DE LIMA, IN HER CAPACITY AS SECRETARY OF JUSTICE, PETITIONER, V. CITY OF MANILA, REPRESENTED BY MAYOR JOSEPH EJERCITO ESTRADA, RESPONDENT.