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LGU pass-through fees on cargo vehicles illegal, joint memo stresses

  • Joint Memorandum Circular No. 2021-01 reiterates the collection of fees and taxes—such as pass-through fees—from vehicles transporting goods is prohibited
  • JMC 2021-01 emphasizes a Local Government Code provision limiting the taxing powers of local government units
  • All local chief executives were told to refrain from enforcing “any existing ordinance authorizing the levy of fees and taxes on inter-province transport of goods or merchandise, regulatory fees in local ports, and other additional taxes, fees or charges in any form upon the transport of goods or merchandise”

Local government units (LGUs) may not collect fees, taxes and other charges—such as pass-through fees—from cargo vehicles passing through their jurisdictions, a new directive has reiterated.

Joint Memorandum Circular (JMC) No. 2021-01 was virtually launched by the Anti-Red Tape Authority (ARTA), Department of the Interior and Local Government (DILG), and Department of Finance (DOF) on April 28. It provides omnibus guidelines on the suspension of LGUs’ imposition and collection of illegal fees and taxes relative to the transport of goods and products.

The issuance of the memo was welcomed by truckers with Inland Haulers and Truckers Association president Teodorico Gervacio telling PortCalls in a phone interview they are hoping for the order’s immediate implementation. He noted how truckers for years have been subjected to various LGU-imposed charges even when they are just passing, and despite truckers’ payment of road user’s tax to the national government.

The Alliance of Concerned Truck Owners and Organizations and Confederation of Truckers Association of the Philippines (CTAP) also lauded the new directive.

CTAP president Pepito Dino, in a message to PortCalls, said the JMC “is one way of improving the logistics sector” as it eliminates regulations “that hamper or delay the [transport] of goods.”

“This will lessen logistics costs which can greatly help in improving our services to our clients,” Dino added.

READ: Pass-through fees in Manila violate DILG rule, says ARTA

JMC reiterates DILG Memorandum Circular (MC) No. 2018-033, issued in 2018 and which directs LGUs to “refrain from enforcing any existing ordinance authorizing the levy of fees and taxes on their inter-province transport of goods and merchandise, regulatory fees in local ports, and other additional taxes, fees or charges in any form upon the transport of goods and merchandise.”

DILG has since 2006 issued eight memorandum circulars reiterating that the collection of pass-through fees is illegal, the latest being MC 2018-133.

Taxation powers clipped

JMC 2021-01 emphasizes that the Local Government Code (LGC) of 1991 puts limits on the taxing powers of LGUs, particularly their power to impose “various fees, taxes and other charges on goods carried into or out, or passing through, their respective territorial jurisdictions.”

The order provides additional directives for regulation on the part of ARTA, and provision of technical assistance to LGUs by the DOF-Bureau of Local Government Finance (BLGF).

Interior and Local Government undersecretary for operations Epimaco Densing III, during the virtual launch, said that despite the issuance of MC 2018-033, DILG continues to receive complaints that some LGUs charge fees, taxes, and other charges on transport vehicles carrying goods and products in or out of, or passing through their territorial jurisdictions. The taxes and fees are supposedly imposed under the guise of sticker fees or discharging fees.

Interior and Local Government Secretary Eduardo Año called on local authorities “to strictly observe and abide by the JMC’s provisions, particularly in ensuring that no pass through fees will be enforced.”

He added that DILG will work closely with the Philippine National Police to oversee implementation of JMC 2021-01.

Pursuant to the LGC, JMC 2021-01 enjoins all local chief executives to refrain from enforcing “any existing ordinance authorizing the levy of fees and taxes on inter-province transport of goods or merchandise, regulatory fees in local ports, and other additional taxes, fees or charges in any form upon the transport of goods or merchandise.”

These include 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, sticker fee, discharging fee, delivery fee, market fee, toll fee, entry fee, and/or mayor’s permit fee, or other taxes, fees, or charges in any form whatsoever upon such goods or merchandise.

All policies, issuances, ordinance or resolutions inconsistent with JMC 20210-01 will be repealed or amended consistent with DILG-ARTA JMC 2019-01, or the guidelines on the regulatory reform for LGUs pursuant to Republic Act (RA) 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018.

Existing local ordinances on pass-through fees and taxes for any form of transported goods and products will go through a regulatory impact assessment pursuant also to RA 11032.

LGUs are likewise directed to strictly observe DILG MC No. 2008-112 (implementation of uniform truck ban hours), particularly on the exemptions from truck ban of trucks and vans carrying perishable goods.

Monitoring system on compliance

To implement the JMC, DILG regional offices are enjoined to ensure no new ordinances are being passed that violate the JMC’s provisions.

DILG- Bureau of Local Government Development (BLGD) will develop a new system for monitoring the progress and implementation of the JMC.

DILG-Local and Legislative Liaison Service (LLLS) will also check all existing local ordinances for any provisions that violate JMC 2021-01.

ARTA will conduct its own regulatory review of ordinances by LGUs that received a show-cause order from the LLLS. In addition, it will investigate and file appropriate charges with recommendation for preventive suspension of erring government officials.

For its part, DOF-BLGF will monitor the compliance of local treasurers during the conduct of treasury evaluation and provide technical assistance to LGUs in updating or amending their local revenue code.

ARTA said a Joint Oversight Committee, composed of DILG-BLGD, DOF-BLGF, ARTA, and public and private stakeholders, was created and tasked to monitor implementation of the JMC.

LGUs that fail to comply with JMC 2021-01 will be dealt with under pertinent laws and regulations. They may also face a fact-finding investigation with results forwarded to the appropriate judicial body for action. – Roumina Pablo

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