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NTRC TRJ: Community Tax: An Update

The study assesses the revenue performance of the tax over the years and the issues affecting its growth to serve as basis in recommending reform measures that should be undertaken for this purpose. The community tax is one of the oldest sources of revenue of local governments. The enactment of the 1991 LGC has transformed it into a local imposition to buoy up local revenues and enhance the financial capacity of LGUs. However, decades later, the community tax remains as one of the poorly administered local taxes. The various issues confronting the administration of the tax has slowed down its growth and prevented it from becoming an important local revenue source. The LGC authorized the imposition and collection of the community tax by cities and municipalities in lieu of the residence tax, thus, transferring the taxing authority to local units. Basically, the community tax is similar to the former residence tax as to tax base and purpose, differing only to a certain extent in the tax rates but largely in the accrual of proceeds. Both individuals and corporations are subject to the tax. The tax is levied on every inhabitant of the country, 18 years of age, or over who has been regularly employed on a wage or salary basis for at least one month during any calendar year or who is engaged in any business or occupation, or who owns real property with total assessed value of at least PhP1,000.00, or who is required by law to file an income tax return. The community tax is paid in the place of residence of the individual or in the place where the principal office of the juridical entity is located. A Community Tax Certificate (CTC) is issued to every person or corporation upon payment of the tax. The tax is primarily collected by the City or Municipal Treasurer. The Barangay Treasurer may be deputized by the local treasurer to collect the community tax in his/her jurisdiction, provided, that the collection shall be limited to the tax payable by individuals only and that the former is properly bonded. The proceeds of the tax accrue to the general fund of the city or municipality concerned. However, the proceeds of the community tax collected by barangay treasurers are apportioned equally between the barangay and the city or municipality. The BIR is responsible for the printing and distribution of CTC to cities and municipalities. A portion of the collected amount from the tax is remitted by the city and municipal treasurer concerned to the national government to cover the cost and printing of the CTC. The importance of the CTC as identification document has progressively diminished through the years. Save for the purpose of authenticating certain legal documents, the CTC is no longer solely relied upon for identification purposes in transactions with both public and private sectors. This is further amplified by claims that a syndicate has been producing fake certificates and selling it nationwide. This may be attributed, among others, to the failure of most LGUs to strictly enforce sanctions against falsification, altering or counterfeiting of the CTC. Payment of the tax is mostly done on a voluntary basis. Because of this, some LGUs often resort to the setting of arbitrary levels of income for purposes of the tax. Moreover, the practice among treasurers of accepting information supplied by the taxpayers without verifying or cross-checking is quite prevalent. The present system does not provide for a way to check whether the taxpayer is paying the true amount of the tax. The non-payment of the true amount of the tax due has effectively deprived the LGUs with much needed revenues. Despite its weaknesses, the revenue importance of the community tax cannot be ignored. It is considered as one of the stable sources of tax revenue of local governments. The nationwide collection from the tax averaged PhP1.37 billion, which is almost 2% of the total tax revenues of LGUs for CYs 2008 to 2012. Presently, there is a bill pending at the Senate which seeks to scrap the use of the CTC. The proponent contends that the CTC has lost its significance and value, since other proofs of identification are already available. Hence, it has become an unnecessary burden imposed on the people who are required to present it when doing public transactions. The intent and purpose of the proposal is recognized, however, this may generate resistance on the part of LGUs unless it will be replaced by an alternative revenue source.

National Tax Research Center
Authors Keywords
NTRC; Community Tax ;
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Published in 2013 and available in the NTRC Library or can be downloaded as full text Downloaded 6 times since May 06, 2019