1. What is the present form of local government?

As per Art. 2, Sec. 1, 1987 Constitution, the country adopts a democratic and republican
State and the sovereignty resides in the people and all government authority emanates
from them. Philippines currently has a republic with a presidential form of government
wherein it has 3 co-equal branches – executive, legislative, and judicial bodies. The
legislative branch is the law-making body which is usually observed in the Congress
comprising of both the Senate and the House of Representatives. The executive branch
comprises the President and the VP. As for the judiciary, it is composed of the Supreme
Court and the lower courts.
2. What is the present state of the law on “initiative” and “recall”? (also see Sec. 3, LGC)
In present, the Constitution and the corresponding laws recognize the right of the people
towards the process of initiative and recall. Specifically, Art. 6, Sec. 1, 1987 Constitution
allows people to have the right to directly propose and enact laws or approve or reject any
act or law or part thereof passed by the Congress (phrase” except to the extent reserved to
the people by the provisions on initiative and referendum). Art. 17, Sec. 2 also provides
that the people could directly propose “through initiative upon a petition of at least 12 per
centum of the total number of registered voters, of which every legislative district must
be represented by at least 3 per centum of the registered voters therein”.

As for recall, the people have the right to initiate the recall of local elective officials in
the case they lose confidence in them. Under Chapter 5, RA 7160 (LGC), a recall petition
must be signed by at least 25% of the registered voters in the locality where the elected
official is serving. The petition must also contain valid and specific grounds for the recall
like commission of a crime involving moral turpitude or gross negligence of duty.

Although people reserve such rights, its process and requisites are quite complicated
which entail a lot of time and effort to the extent that they have not been used extensively
by the people. Most often than not, only a few initiative (banning of single-use plastics in
Makati city) and recall (recalled corrupt governor in Palawan) were perfected.

In any event, the framers of our 1987 Constitution realized the value of initiative and referendum
as an ultimate weapon of the people to negate government malfeasance and misfeasance and
they put in place an overarching system. Thus, thru an initiative, the people were given the
power to amend the Constitution itself. Sec. 2 of Art. XVII provides: "Amendments to this
Constitution may likewise be directly proposed by the people through initiative upon a petition of
at least twelve per centum of the total number of registered voters, of which every legislative
district must be represented by at least three per centum of the registered voters therein."
Likewise, thru an initiative, the people were also endowed with the power to enact or reject any
act or law by congress or local legislative body. Sections 1 and 32 of Article VI provide:

Sec. 1. The legislative power shall be vested in the Congress of the Philippines which shall
consist of a Senate and a House of Representatives except to the extent reserved to the people
by the provisions on initiative and referendum.
 a. Garcia v. COMELEC, 237 SCRA 279 (1994)
FACTS  The Sangguniang Bayan of Morong, Bataan acquiesced to the
inclusion of Morong as a part of the Subic Special Economic Zone
pursuant to RA No. 7227 through its Pambayang Kapasyahan Blg.
10, Serye 1993.
 March 1993 – The petitioners, headed by Gov. Enrique Garcia,
filed a petition to annul the said resolution coupled with a list of
grounds to consider to enable the inclusion of the said municipality
in the SSEZ.
 The SB did not take action, and thus, the resort of the petitioners to
their power of initiative under the Local Government Code of 1991.
They commenced to glean the required number of signatures to
repeal the said resolution.
 However, unknown to the petitioners, Vice Mayor Edilberto de
Leon had already wrote a letter to the Executive Director of
COMELEC requesting the dismissal of the petition for a local
initiative by the petitioners for the reason that the SB had already
made efforts to raise some of the considerations of the petitioners.
Thus, they are mere rehash.
 Thereafter, the COMELEC en banc resolved to deny the petition
for local initiative by reason of “it is a merely a resolution and not
an ordinance”. It also directed Atty. Casiano, Provincial Election
Supervisor, to hold action on the authentication of signatures being
gathered.
 The petitioners then filed a petition for certiorari and mandamus.
For certiorari, they averred that the COMELEC, as an
administrative agency, is bound to observe due process in the
conduct of its proceedings since they (petitioners) were deprived of
the opportunity to be heard. For mandamus, they argued that the
COMELEC has the ministerial duty to supervise the gathering of
signatures in support of the petition.
 On the other hand, the COMELEC reiterated its position that a
resolution cannot be the subject of a local initiative.
 Thus, the review before the SC.
ISSUE WON resolutions should not be the subject of a local initiative
RULING  The Court held that contrary to what the respondents claim, the
enactment of the LGC of 1991 did not change its scope of its
coverage. It also did not constrain the coverage of local initiatives
to ordinances alone.
 The provision, specifically Sec. 120, Chapter 2, Title XI, Book I of
the LGC that the respondents invoked just defined the concept of
local initiative as the process where registered voters of a LGU may
propose, enact, or amend any ordinance. This does not concern
subject or matters that can be taken up in a local initiative.
 The Court also ruled that the provision invoked by the respondents
 would collide with the Constitution and will subvert the intent of
the lawmakers in enacting the provisions of the said Code on
initiative and referendum.
 Sec. 124, LGC of 1991 which talks about the limitations on local
initiatives says that the application of such is exclusively confined
to “all subjects or matters which are within the legal powers of the
Sanggunians to enact” which undoubtedly includes resolutions.
 It is necessary that the voice of the people of Morong be heard
through an initiative since the inclusion of their municipality in the
Subic Special Economic Zone would bring about lasting changes.
Regardless of the Municipality’s decision being in a form of
resolution, the welfare of the people should be the primary
consideration.
 SC’s constitutional basis – Art. 6, Sec. 32, 1987 Constitution

HENCE, the petition is GRANTED.

3. What is the power of supervision?

According to jurisprudence, supervision is “the power of a superior officer to see to it that lower
officers perform their functions in accordance with law”. A supervisor or superintendent does not
lay down such rules, nor does he have the discretion to modify or replace them. If the rules are
not observed, he may order the work done or re-done but only to conform to the rules being
prescribed.
This is vested in the President and other executive officials or alter egos to ascertain that
subordinate officials and LGUs are compliant with the tasks given to them and with the law.
Otherwise stated, it is a mere power to guide and oversee.
4. What is the supervisory structure in the local government system?
To ensure consistency with the policy on local autonomy, Art. 1, Sec. 25, RA 7160 states that the
President should have the power of general supervision over local government units to ensure
that the latter are acting within the scope of their prescribed powers and functions. The law is
clear that the supervisory authority of the President does not tantamount to power of control
because he clearly guides the LGUs to act within the ambit of their delegated powers. Also, the
President practices its supervision through the DILG, which is an administrative agency or the
alter ego of the former. It is responsible for overseeing the operations of LGUs vis a vis local
affairs.
- Second sentence, Art. 10, Sec. 4; President – independent component cities
5. When Sec. 187 of the LGC authorizes the Secretary of Justice to pass judgement on the
constitutionality or legality of a tax ordinances or revenue measures, does he not exercise
the power of control?
 No. He is not permitted to substitute his own judgement for the judgement of the local
government that enacted the measure. It is an act not of control, but of mere supervision. A
supervisor does not have the authority to lay down the rules in accomplishing a particular act
and who does not exercise discretion over such. What he mainly does is to ensure that the
rules are being followed.
a. Drilon v. Lim SCRA 135, 141 (1994)
FACTS  Hon. Franklin Drilon, Secretary of Justice, declared Ordinance No.
7794, Manila Revenue Code, to be null and void for no conforming
with the procedural rule on the enactment of tax ordinances and for
containing provisions contrary to law and public policy.
 Thereafter, the City of Manila filed a petition for certiorari before
the RTC of Manila.
 Ruling of RTC Manila – It opposed the Secretary’s resolution and
sustained the ordinance holding that the procedural requirements
were observed. Also, it declared Sec. 187, LGC to be
unconstitutional because it gives the said Secretary a power of
control over local governments which encroaches upon the
President’s Constitutional mandate in exercising the power of
supervision over the local governments.
 In response, the Secretary averred that the annulled Sec. 187 is
constitutional and that the prescribed procedure for the enactment
of tax ordinances under the Local Government Code had not been
observed.
 Judge Rodolfo Palattao declared Sec. 187, LGC to be
unconstitutional, for it empowers the Sec. of Justice to review tax
ordinances and to annul them. In general, this also violates the
policy of local autonomy.
ISSUE/S WON Sec. 187, LGC is unconstitutional for it allows the Secretary of
Justice to exercise power of control
RULING  The Court held that the lower court was hasty in invalidating the
provision. Sec. 187 of the Code authorizes the Secretary of Justice
to review only the constitutionality or legality of the tax ordinance
and, if warranted, to revoke it on either or both of these grounds.
 His power of supervision does not grant him the authority to
substitute his own judgement over that judgement of the concerned
local government when he alters or modifies or sets aside a tax
ordinance.
 In the Case at Bar, what Secretary Drilon only did was to set aside
the Manila Revenue Code when he found it was illegal, but he did
not even recommended another version as replacement for such,
not even stated it was unreasonable as a basis for its annulment.
 The Court emphasized that Sec. Drilon exercised such rightful
authority of supervision vested on him and not that of control.
Further, supervision is that power which oversees whether or not a
 particular work is compliant with the prescribed rules. However, his
authority does not extend to prescribing his own manner for the
doing of the act. He has no judgement on this matter except to see
to it that the rules are being followed.
 Sec. Drilon set aside the Manila Revenue Code only on 2 grounds:
i. The inclusion therein of certain ultra vires provisions
ii. Non-compliance with the prescribed procedure in the
enactment of the Manila Revenue Code
 When the Court examined the exhibits of public hearings
concerning the Manila Revenue Code, it had been confirmed that
notices of public hearings were sent to the parties but those did not
apply to the approval of local development plans and public
investment programs of the LGU and not on tax ordinances.

HENCE, the RTC’s decision concerning the declaration of Sec. 187, LGC
as unconstitutional is REVERSED.

6. Petitioner challenges the right of the President, through the Secretary of Interior, to
suspend him on the ground that the removal of the phrase “as may be provided by law”
from the constitutional provision has stripped the President and legislature of the power
over local governments. Corollarily, he argues that the new Constitution has effectively
repealed existing laws on the subject. Decide.
According to jurisprudence, such Constitutional change does not depict that the President
or his alter ego no longer has the authority to suspend local officials. The removal of the phrase
“as may be provided by law” is by reason of emphasizing the break of Congress’ control over the
local government affairs. At the end of the day, local autonomy is not absolute to the point that it
excludes all other measures designed to realize autonomy at the local level. The Secretary of
Interior, as an executive alter ego, is allowed to suspend a local official as a valid exercise of
general supervision over local governments.
a. Ganzon v. CA, GR 93252, Aug. 5, 1991
FACTS  The petitioners herein include Rodolfo Ganzon, Mayor of Iloilo
City and a member of the Sangguniang Panlungsod thereof,
respectively.
 Mayor Ganzon’s petitions are derived from a series of 10
administrative complaints filed against him by various city
officials on several charges such as but not limited to: abuse of
authority, oppression, grave misconduct, intimidation, and others.
 Thereafter, the Mayor answered and the cases began to set for the
hearing.
 During the case’s pendency, 2 successive suspensions, with each
constituting a period of 60 days, were ordered against the
petitioner. Mayor Ganzon then sought an action for prohibition
 against the respondent Secretary of Local Government in the RTC,
Iloilo City where the former was able to obtain a writ of
preliminary injunction. He then moved for an action for
prohibition before the respondent CA.
 May 3, 1990 – the Secretary issued another suspension order for a
period of 60 days. Ganzon also filed a petition for prohibition
before the CA which was later on dismissed by the appellate court.
 Petitioner then argued that under the 1987 Constitution, the
President no longer has the authority, as opposed to 1935 and 1973
Constitutions, to exercise the power of suspension and/or removal
over local officials.
ISSUE/S WON the Secretary of Local Government, as the President’s alter ego, can
suspend and/or remove local officials
RULING  The Court ruled that the constitutional change in the language of
the 1987 Constitution did not intend to divest the President of his
prerogative to provide administrative sanctions against local
officials.
 The removal of “as may be provided by law” solely explicates the
local governments’ autonomy from congress and to break
Congress’ control over the local government affairs. This does not
enable the local autonomy to deprive the legislature of all the
authority over municipal corporations especially discipline.
 Further, it is not within the agenda of autonomy to make mini-
states out of local government units. The local autonomy that the
local governments enjoy should be noted to be subjected to laws,
charters, and other measures designed to realize autonomy at the
local level.
 The Court also emphasized that it is a Constitutional stipulation
that the local governments are under the general supervision of the
Executive.
 The Charter also allows the Congress to include in the LGC
provisions for removal of local officials, which suggest that
Congress may exercise removal powers and as the existing LGC
has done, delegate its exercise to the President.

HENCE, the petitions are DISMISSED.

7. May the Secretary of LG annul the election of officers of a federation of barangay

officials? Decide.
According to jurisprudence, the Secretary of LG, as an alter ego of the President,
exercises as well the Presidential power of general supervision over local governments. There
has been no expressed or implied Constitutional provision conferring upon the Secretary the
power to have jurisdiction or to decide over matters, like an election of officers, concerning the
federation of barangay officials. This is in accordance with an administrative principle that
administrative agencies are bereft of quasi-judicial powers unless statutes repose them such
power. Otherwise, it would allow him to interfere with the local affairs of the barangays which
explicitly opposes the rationale of the Constitutional provision vis a vis recognizing barangays as
basic components of local governments and realizing the fullest potential of autonomy.
a. Taule v. Secretary Santos GR No. 90336, Aug. 12, 1991
FACTS  June 18, 1989 – The Federation of Associations of Barangay
Councils (FABC) of Catanduanes, comprising the President of the
Association of Barangay Councils in their respective
municipalities, decided to conduct election of its officers.
 One of the attendees is Ruperto Taule, herein petitioner. Together
with the Provincial Government Operation Officer (PGOO), the
election proceeded. Thereafter, the members of the Board of
Directors were chosen, specifically, the petitioner as the President
of the FABC.
 June 19, 1989 – Catanduanes Governor Leandro Verceles,
respondent, wrote a letter towards respondent Luis Santos,
Secretary of Local Government. The letter is about an election
protest against the elected officers of FABC and seeking its
nullification for the irregularities conducted therein.
 Taule filed his Comment on the letter-protest which denied the
alleged irregularities and the improper meddling of the Governor
in a purely non-partisan affair.
 Aug. 4, 1989 Resolution – This was issued by the Secretary which
nullified the election of the officers of the FABC in Catanduanes.
He also ordered in the same resolution that another election be
held.
 Petitioner then filed a MR for the Aug. 5, 1989 Resolution but was
denied by the Secretary in its September 5, 1989 Resolution.
 Thus, the petition for certiorari before the SC seeking to reverse
the resolutions issued by the Secretary.
ISSUE/S WON the Secretary has jurisdiction over the election contests involving
the FABC elections
RULING  The Court agreed upon the contention of the OSG that the
COMELEC only exercises its jurisdiction over popular elections
which include the determination by the electorate’s will. The
Constitution speaks of election as the “conduct of polls, listing of
voters, holding of the electoral campaign, and the casting and
counting of the votes”. Such does not include the conduct of the
election of officers in the Katipunan ng mga Barangay.
 Further, “election contests” may be settled before or after the
proclamation of the winner. In the case of elections of barangay
officials, no pre-proclamation controversies are allowed.
 The COMELEC is limited to realize its appellate jurisdiction over
election contests that were decided by the Metropolitan or
 Municipal Trial Courts. Otherwise stated, the COMELEC only has
an authority of supervision over the election of the representatives
comprising the Katipunan ng mga Barangay.
 The Court also recognizes the principle of administrative law that
administrative agencies are bereft of quasi-judicial powers unless
they are expressly empowered by the provisions of the statutes
reposing power in them. Herein, the Court sees no constitutional
provision, either expressed or implied, that confers upon the
Secretary of Local Government the power to have jurisdiction
over election protest concerning officers of the Katipunan ng mga
Barangay.
 The Court then reiterated that the Presidential power over local
governments is limited to general supervision. To supervise is to
have an oversight over an inferior body. The rationale behind such
supervisory role is to ascertain that the subordinates, like the local
officials, get to perform their duties as provided by statutory
enactments. (Chap. 3, Art. 1, Sec. 25, LGC of 1991)
 As an alter ego of the President, the respondent Secretary is
expected to possess no authority in passing upon the validity or
regularity of the election of the officers of the Katipunan. If he is
allowed to do so, he would go beyond the borders of the
Constitutional mandate vested upon him. It will allow him to
interfere in the local activities aimed at strengthening the barangay
as the basic component of the local governments to realize the
fullest autonomy.
 Book 4, Title 12, Chap. 1, Sec. 3(2), Administrative Code of 1987
emphasized “monitor compliance”. The Court explicated that to
monitor is to “watch, observe, or check”. Since the Secretary only
has supervisory power, it is doubtful for him to enforce
compliance with the DLG Circular. Any doubt regarding his power
to interfere with the local affairs should be resolved in favor of the
greater autonomy of the local government.
 Therefore, the Secretary acted in excess of his jurisdiction when
he declared the election of the officers of the FABC as null and
void.

HENCE, the petition is GRANTED.

- Katipunan ng mga Barangay is the organization of all Sangguniang barangays in:

a. Municipalities – katipunang bayan
b. Cities – katipunang panlungsod
c. Provinces – katipunang panlalawigan
d. Region – katipunang pampook
e. National – Katipunan ng mga barangay
- LGC provides for the organization of Katipunan ng mga Barangay (Sec. 110):
  Each level shall elect a board of directors and officers. The president of each level
shall represent the Katipunan concerned in the next higher level of organization.
1. Katipunan ng mga barangay – composed of katipunang pampook
2. Katipunang pampook – presidents of the katipunang panlalawigan and
katipunang panlungsod
3. Katipunang panlalawigan – presidents of katipunang bayan in each province
4. Katipunang Panlungsod – punong barangays of cities
5. Katipunang Bayan – punong barangays of municipalities
8. Digest the following cases (Sec. 5)
i. BASCO v. PAGCOR, 197 SCRA 52, 65 (1991)
FACTS  Attorneys Humberto Basco, Edilberto Balce, Socrates Maranan and
Lorenzo Sanchez, herein petitioners, filed a petition seeking to
annul the PAGCOR Charter (PD 1869) because it opposes morals,
public policy and order, constitutes a waiver of a right prejudicial to
a 3rd person with a right recognized by law, impugned on the local
government’s right to impose taxes and license fees that
contravenes Constitution’s principle of local autonomy, etc.
 The PAGCOR was created to “establish, operate and maintain
gambling casinos on land or water within the territorial jurisdiction
of the Philippines”.
 Under PD 1869, the PAGCOR enabled the Government to regulate
and centralize all games of chance authorized by existing franchise
or permitted by law. It has been observed that it is the 3rd largest
source of government revenue, next to BIR and BuCor, beneficial
to the national government’s fundings among its projects.
 Regarding the procedural issue concerning the legal personality of
the petitioners, the Court has decided to dispose such to give
cognizance to the petition wherein it is important to the public in
the case at bar.
 Thus, the discussion on various substantive issues raised in the
instant petition before the SC.
ISSUE/S WON PD No. 1869 violates the principle of local autonomy
RULING  The Court clarified that herein petitioners are all pointing to Sec.
13, par. 2, PD 1869 which exempts PAGCOR from paying “tax of
any kind or form, income or otherwise, as well as fees, charges or
levies of whatever nature, whether national or local.”
 The Court ruled that the petitioners’ contention is not meritorious
by reasons of:
1. City of Manila being a mere municipal corporation which does
not have the inherent right to impose taxes as held in
jurisprudence cited. A legislative act coming from the State,
which has the inherent right to impose tax, should confer such
power to a municipality. Otherwise, the municipality cannot
assume such.
 2. The Charter of the City of Manila is subject to control by
Congress. Otherwise stated, the Congress has the power of
control over local governments.
3. The power of the local governments to regulate gambling by
granting “franchise, licenses or permits” was already withdrawn
by PD 771 and was vested only on the National Government.
Only the National Government could issue licenses or permits
among gambling operations.
4. PAGCOR is a government-owned corporation with an original
charter, PD 1869, for it regularizes gambling operations in the
country. Being a government instrumentality, it should be
exempted from the local taxes. Otherwise, its operations would
be burdened, impeded, or subjected to control by a mere local
government.
5. Art. 10, Sec. 5, 1987 Constitution provides that the power to tax
among local government units are subject to “such guidelines
and limitations as the congress may provide”. Since PD 1869
remains an “operative” law until “amended, repealed or
revoked”, its “exemption clause” would remain to be as an
exception in the exercise by the local governments of the power
to impose taxes. Thus, PD 1869 is rather consistent with the
Local Autonomy Clause of the Constitution.
 Additionally, the State has the sole prerogative on State concerns.
In the case at bench, the matter of regulating, taxing or otherwise
dealing with gambling is a form of a State concern.
 The principle of local autonomy in the Constitution simply means
“decentralization” which does not make local governments
sovereign within the state or an “imperium in imperio”.

HENCE, the petition is DISMISSED for lack of merit.

a. It is contended that the exemption of PAGCOR from tax violates the right of local
governments to create its own source of revenue. What’s your comment on this
contention?
PAGCOR, as government-owned and controlled agency, should be exempted from the
imposition of tax by local governments. Since it is subject to the regularization of gambling
operations by the national government and serves as one of the sources for revenues intended
certain public projects, such should not be disrupted or impeded by a mere control of local
government. Considering as well that PAGCOR’s operations are State matters, the State shall
have the sole prerogative regarding such and should not be subjected to interference by local
affairs.
ii. Yamane v. BA Lepanto Condominium, GR No. 154993, Oct. 25, 2005
FACTS 
 ISSUE/S
RULING

a. May Makati impose business taxes on condominium corporations? Justify your

answer.
As held in the case of Yamane v. BA Lepanto Condominium, the Court held that the city
cannot collect business taxes from the said Corporation because its existence is not intended for
the generation of profits. The condominium corporations is not a “business” to begin with. As
per Condominium Act, a condominium corporation, although enjoys ownership powers, is
prohibited by law from transacting its properties for the purpose of gaining profit. Hence, there
would be no legal basis or citation for imposition of business taxes.
iii. PH Petroleum Corporation v. Mun. of Pililla, 198 SCRA 82, 89 (1991)
FACTS  Philippine Petroleum Corporation (PPC), petitioner, is a business
that manufactures petroleum products which conducts its
operations at Malaya, Pililla, Rizal.
 PD 231 (Local Tax Code) was issued by former Pres. Ferdinand
Marcos that governed the exercise of taxing and other revenue-
raising powers by the provinces, cities, municipalities and barrios.
Sec. 19 and 19 (a) thereof provide that “municipality may impose
taxes on business, except on those for which fixed taxes are
provided on manufacturers, importers or producers of any article
of commerce of whatever kind or nature…”
 Subsequently, PC No. 26-73 and 26 A-73 issued by the Secretary
of Finance enjoined provincial, city and municipal treasurers from
collecting and imposing taxes on businesses that are subject to
specific tax under the National Internal Revenue Code (NIRC).
 Municipality of Pililla, respondent, issued Municipal Tax
Ordinance No. 1 (The Pililla Tax Code of 1974) which imposed
business tax except those which have fixed rates under the LTC.
 Mar. 30, 1974 – PD 426 was issued which amended certain
provisions of PD 231 but retained Sec. 19 and 19(a) thereof.
 April 30, 1974 – PD 436 was enacted which increased specific
taxes on oils.
 The assailed Ordinance was approved by the Provincial Treasurer
of Rizal but was not enforced because it was suspended by PC
Nos. 26-73 and 26 A-73.
 April 4, 1986 – The municipality filed a complaint against PPC for
the collection of business tax from 1979 to 1986 and other fees.
 A pre-trial conference was held wherein the respective
comments/claims of both the parties are to be submitted to the
RTC.
 March 17, 1987 – RTC ruled against the petitioner. PPC moved for
MR but was denied in a resolution by the same court.
  Thus, the petition for certiorari before the SC.
ISSUE/S WON the PPC, whose oil products are subject to specific tax under NIRC,
is liable to pay business taxes and such under Municipal Ordinance No. 1
RULING  The Court agreed with the finding of the RTC that Sec. 9 (A) of
Pililla’s Municipal Tax Ordinance No. 1 that imposed taxes, fees,
and charges is valid by reason that “it is a literal reproduction of
Sec. 19 (a) of the Local Tax Code as amended by PD No. 426”.
 Such amendment made PD No. 426 also constitutes repealing of
the Provincial Circular Nos. 26-73 and 26 A-73 issued by the
Secretary of Finance. Specifically, the amendment has removed
the exemptions given to manufacturers, wholesalers, retailers, or
dealers in petroleum products.
 The Court also upheld the principle that administrative regulations
must be in harmony with the provisions of the law. In case of
discrepancy between the basic law and an implementing rule or
regulation, the former prevails.
 Sec. 2, PD 436 prohibited the imposition of local taxes on
petroleum products, but it did not amend Sec. 19 and 19 (a) of PD
231 as amended by PD 426 which granted the municipality the
right to levy taxes on business of manufacturers, importers, or
producers of any article of commerce. Otherwise stated, a tax on
business is distinct from a tax on the article itself. If it is really
forbidden to impose tax on business of manufacturers, etc. in
petroleum products, it should have been expressly stipulated in PD
436.
 Even the Constitution recognizes the right and power of the local
government units to create its own sources of revenues and to levy
taxes, subject to the limitations set forth by the Congress and
which shall be consistent with the basic policy of local autonomy.
 If the prohibition set forth in the circulars issued by the Secretary
of Finance would be upheld, then such Constitutionally granted
power to tax among local governments would be restricted by
mere administrative issuances.
 Under Art. 10, Sec. 5, 1987 Constitution, only guidelines and
limitations that may be established by Congress can define and
limit such power of local governments.

HENCE, the petition was DENIED. The RTC Decision is AFFIRMED.

Answer the ff. questions:

b. May the power of local governments to raise revenues be limited by administrative
order? Why or why not?
In jurisprudence, the power of local governments are exclusively confined to the
guidelines and limitations set forth by the Congress as provided under Art. 10, Sec. 5,
1987 Constitution. The Constitutional mandate vested upon the Congress cannot be
limited by mere administrative orders. The Court also upheld the principle that
administrative regulations must be in harmony with the provisions of the law. In case of
discrepancy between the basic law and an implementing rule or regulation, the former
prevails. Hence, the power on taxation imposed by local government units cannot be
constrained by administrative issuances.