The Department of Finance (DOF) and Department of the Interior and Local Government (DILG) recently signed a joint memorandum circular (JMC) calling on local government units (LGUs) to adopt reasonable regulatory fees and charges for their services to promote a business-friendly environment.
Setting reasonable fees and charges for LGU services should be in accordance with the provisions of Republic Act 7160, or the Local Government Code (LGC) of 1991 and RA 11032, or the Ease of Doing Business law.
In a news statement, Interior Secretary Eduardo M. Año said “LGUs should be properly guided by the joint circular on how to adjust and revise their fees and charges at just and reasonable rates sufficient to cover the cost of services rendered.”
“High rates discourage investors, while low rates could compromise the revenue generation of the LGUs. With this JMC, we are able to set the standard for the appropriate rates for the fees and charges to be imposed by the LGUs,” the DILG chief explained.
“We encourage all LGUs to rationalize their imposed fees and charges in accordance with this guideline, considering that the identified fees and charges must be reasonable to all concerned parties. Defiant LGUs who will impose additional fees and charges not reflected in their Citizen’s Charters will be sanctioned,” he added.
Under the JMC, an oversight committee on the revision of the fees and charges shall be created at the LGU level 90 calendar days after the promulgation of the JMC composed mainly of the local chief executives (LCE), local treasurer, budget officer, planning and development coordinator, local accountant, among others.
The committee will ensure that the guiding principles of the LGC and the JMC are followed; review the rationale of the imposed fees and user charges, and the methodology for the determination of the fee schedule or rates; compute appropriate rates to recover the cost based on gathered data, and submit the recommended proposed local revenue ordinance to the LCE and the local Sanggunian.
The rates of fees and charges levied by LGUs should also be adjusted at reasonable rates sufficient to recover the direct fixed cost and variable costs of rendering services, Año said.
Variable costs include personnel salaries and wages, costs of supplies and materials, and transportation and travel expenses, among others. On the other hand, fixed cost are those which consist of a proportionate share in the overhead expenses comprising depreciation rates of equipment and utilities used, including the cost of water, electricity, telecommunication and other regular services rendered to the applicants.
Section 130 of the LGC states that the exercise of the taxing and other revenue-raising powers of LGUs shall be “…uniform in each local government unit; equitable and based as far as practicable on the taxpayer’s ability to pay; levied and collected only for public purposes, not be unjust, excessive, oppressive, or confiscatory, and not be contrary to law, public policy, national economic policy, or in the restraint of trade.”
Among the common and allowable fees and charges collected by LGUs are the following: business permit/mayor’s permit fee; barangay clearance; permit to extract sand, gravel, and other quarries resources; fees for sealing and licensing of weights and measures; fishery rentals, fees, and charges; fees on commercial breeding of fighting cocks, cockfighting and cockpit; fees of places of recreation which charge admission fees; fees on billboards, signboards, neon signs and outdoor advertisements; toll fees and charges; public utility charges; other fees and charges strictly in accordance with Section 186 of the Local Government Code.