The City of Makati is wrong in assessing ABC Corp. as a contractor. First, ABC Corp. is not a contractor as defined in Section 131(h) of Republic…

The question

The City of Makati is wrong in assessing ABC Corp. as a contractor. First, ABC Corp. is not a contractor as defined in Section 131(h) of Republic Act No. 7160 or the Local Government Code (LGC). This provision defines a contractor as a person, natural or juridical, not subject to professional tax under the LGC, but whose activity consists essentially of the sale of all kinds of services for a fee, regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractor or his employees. In the given problem, ABC Corp. is merely a holding company whose earnings are limited to dividends, interests on bank deposits and foreign exchange gains from foreign currency account. Evidently, ABC Corp. is not engaged in the sale of services for a fee. Second, Section 186 of LGC provides that local government units cannot levy taxes, fees or charges on any base or subject tax under the provisions of the NIRC. In the given problem, ABC Corp.’s dividends, interest income and foreign exchange gains from foreign currency account are already subject to final income tax under the NIRC, specifically, Sections 27(D)(4), 27(D)(1), 32(A), respectively. Consequently, the City of Makati cannot levy from ABC Corp. taxes on these incomes. Which statement is correct? (2012 Bar Question)

1. A.Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as resolutions and ordinances;
2. B.Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as resolutions;
3. C.Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as ordinances;
4. D.Both ordinances and resolutions are solemn and formal acts.

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