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TRJ 2012-8: Rationalization of Fees and Charges via Administrative Order No. 31, September - October 2012

The paper focuses on the rationalization of fees and charges imposed by government agencies and/or government-owned and/or controlled corporations (GOCCs) in the exercise of mandated regulatory and service delivery functions. Fees and charges are non-tax receipts or levies imposed on direct recipients of certain public goods and services rendered by government agencies and GOCCs, i.e., permit fee, license fee, registration/accreditation fee, filing, clearance and certification fees, etc. The basic principle behind the imposition of fees and charges is cost recovery that aims to relieve the government of its funding burden by making the individuals receiving the services share in the burden of the expenses incurred by the government. The cost of rendering government services is continuously increasing over the years brought mainly by inflation. Thus, to keep up with the rising costs and to be able to sustain, expand or improve government services, there is a need to rationalize the rates of existing fees and charges and, if found necessary, adjust upward existing fees and/or impose new fees. This authority to rationalize the fees of government agencies was recently granted to the heads of government agencies and GOCCs through Administrative Order (AO) No. 31, issued on October 1, 2012. Prior to AO 31, the last presidential issuance directing and authorizing all departments, bureaus, commissions, agencies, offices and instrumentalities including GOCCs to increase their rates was through Executive Order (EO) No. 197 issued in 2000. Thus, the last mandated adjustment of fees was made more than 11 years ago. Fees and charges are non-tax sources of revenue of the government along with the Bureau of the Treasury (BTr) income, proceeds from privatization of government assets and foreign grants. Collections from fees and charges of national government agencies (NGAs) are generally remitted to the General Fund. In some cases, however, some of the collections from fees and charges are either fully or partially retained by the collecting agency or remitted to the BTr as a Special Account in the General Fund. The funds under Special Accounts are either intended to defray the collecting agency’s operational expenses or earmarked for certain specific purpose. Non-tax revenue contributes on the average about 13% of the total government revenue and among the non-tax sources, 35% come from fees and charges. From 2002 to 2011, the collection from fees and charges ranged from PhP21 billion to PhP71 billion or an average of about PhP44 billion annually. The collection has the potential to increase if the imposition of new fees and/or increase in existing fees will be rationalized. The Administrative Code of 1987 granted authority to the heads of bureaus, offices or agencies upon approval of the concerned department head, the continuing authority to revise their rates of fees and charges to recover the cost of services rendered. Despite this authority, however, many NGAs were identified to have not adjusted their fees for years. Hence, a presidential issuance is deemed necessary to reiterate such authority. The issuance of AO 31 is an opportune time for the government agencies to rationalize or review and evaluate their fees and charges. The DOF, DBM and NEDA, as of this writing, shall soon jointly issue the implementing rules and regulations (IRR) of this AO. The IRR shall provide the parameters for determining just and reasonable rates, as well as safeguards to protect the public from unreasonable and arbitrary fees and charges.

National Tax Research Center
Authors Keywords
NTRC; Fees and Charges; Administrative Order No. 31;
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Published in 2012 and available in the NTRC Library or can be downloaded as full text Downloaded 367 times since January 02, 2014