FACTS
Pursuant to the authority given to it by the Local Government Code, the Province of Laguna enacted an ordinance imposing a tax on businesses enjoying a franchise at a rate of fifty percent (50%) of one percent (1%) of the gross annual receipts.
MERALCO paid its corresponding tax under protest. It later sent a claim for refund, claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax imposed by the ordinance. The claim was denied.
RULING
The Supreme Court ruled in favor of the Province of Laguna.
RATIO: Local governments do not have the inherent power to tax except to the extent that such power might be delegated to them either by the basic law or by statute.
Presently, under Article X of the 1987 Constitution, a general delegation of that power has been given in favor of local government units. Where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines.
The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers.
