THE Bureau of Internal Revenue (BIR) is demanding more than P50 million worth of income, value-
added and withholding taxes from the Oslob Municipal Government for their whale watching ventures,
which the town reportedly failed to pay in 2012 and 2013.
In an interview, Oslob Mayor Jose Tumulak confirmed that the BIR issued warrants of garnishment to
two banks where the town keeps its funds.
Under the National Internal Revenue Code, the BIR may garnish the property and bank accounts of
delinquent taxpayers.
Grace Castañeda, BIR 7 seizure agent, told reporters that the bureau served the warrants of garnishment
last Wednesday, Aug. 15.
Both Tumulak and Vice Mayor Ronald Guaren were furnished with copies of the warrants of
garnishment, Castañeda added.
JUSTIN K. VESTIL
August 18, 2018
THE Bureau of Internal Revenue (BIR) is demanding more than P50 million worth of income, value-
added and withholding taxes from the Oslob Municipal Government for their whale watching ventures,
which the town reportedly failed to pay in 2012 and 2013.
In an interview, Oslob Mayor Jose Tumulak confirmed that the BIR issued warrants of garnishment to
two banks where the town keeps its funds.
Under the National Internal Revenue Code, the BIR may garnish the property and bank accounts of
delinquent taxpayers.
Grace Castañeda, BIR 7 seizure agent, told reporters that the bureau served the warrants of garnishment
last Wednesday, Aug. 15.
Both Tumulak and Vice Mayor Ronald Guaren were furnished with copies of the warrants of
garnishment, Castañeda added
Tumulak told reporters that after the warrants of garnishment came out, he immediately sought the
assistance of the Provincial Legal Office (PLO).
Tumulak said that during the town’s initial meetings with BIR officials, he contended that fees
collected by the municipality from its whale shark watching ventures in Barangay Tan-awan cannot be
taxed by BIR.
Tumulak said that based on a municipal ordinance, the 30 percent share they get from whale shark
watching ventures in Tan-awan are regulatory fees only.
BIR disagreed.
JUSTIN K. VESTIL
August 18, 2018
THE Bureau of Internal Revenue (BIR) is demanding more than P50 million worth of income, value-
added and withholding taxes from the Oslob Municipal Government for their whale watching ventures,
which the town reportedly failed to pay in 2012 and 2013.
In an interview, Oslob Mayor Jose Tumulak confirmed that the BIR issued warrants of garnishment to
two banks where the town keeps its funds.
Under the National Internal Revenue Code, the BIR may garnish the property and bank accounts of
delinquent taxpayers.
Grace Castañeda, BIR 7 seizure agent, told reporters that the bureau served the warrants of garnishment
last Wednesday, Aug. 15.
Both Tumulak and Vice Mayor Ronald Guaren were furnished with copies of the warrants of
garnishment, Castañeda added.
Tumulak told reporters that after the warrants of garnishment came out, he immediately sought the
assistance of the Provincial Legal Office (PLO).
Tumulak said that during the town’s initial meetings with BIR officials, he contended that fees
collected by the municipality from its whale shark watching ventures in Barangay Tan-awan cannot be
taxed by BIR.
Tumulak said that based on a municipal ordinance, the 30 percent share they get from whale shark
watching ventures in Tan-awan are regulatory fees only.
BIR disagreed.
In BIR Ruling 369-11 issued last March 13, Commissioner of Internal Revenue Caesar Dulay said that
the municipal government of Oslob is liable for income tax, value-added tax (VAT), expanded
withholding tax, deficiency withholding tax on VAT and other percentage taxes, withholding tax on
compensation and registration fees for its whale shark watching ventures back in 2012.
Dulay said the whale shark watching ventures in Oslob are an exercise of its propriety function because
it does not involve administration and governance of the territory and inhabitants within the town.
Six months after the BIR ruling was released, warrants of garnishment were sent to the Development
Bank of the Philippines and Land Bank of the Philippines, where the town has bank accounts.
Based on the 2017 audit report of the Commission on Audit, the Oslob Municipal Government has
P440.7 million deposited in banks.
Tumulak said that town officials are in talks with the BIR to have the warrants of garnishment lifted.
He worries that if an immediate solution is not found, basic services in the town could be hampered.
BIR Ruling No. 471-2018 dated 13 March 2018 Facts:
The BIR issued a Letter of Authority against the Municipality of Oslob for all internal revenue tax
liabilities for taxable year 2012. Actual investigation revealed that Oslob generates income from the
Butanding Watching Activity fees collected from tourists.
Issues:
1. Is the income tax assessment proper?
2. 2. Is Oslob liable to pay income tax, VAT and EWT?
1. Yes. Section 27 (C) of the Tax Code provides that all corporations, agencies, or
instrumentalities owned by the government, except the Government Service Insurance System,
the Social Security System, the Philippine Health Insurance Corporation, the local water
districts and the Philippine Charity Sweepstakes Office, shall pay such rate of tax upon their
taxable income as are imposed upon corporations or associations engaged in a similar business,
industry or activity. Thus, the assessment of income tax liability is proper because Oslob is not
among the government agencies or instrumentalities expressly exempted from income tax; and
that the income derived by Oslob from its Butanding Watching Activity was not in the exercise
of its essential governmental function but pursuant to its proprietary function.
2. Yes. When Oslob provided the tourists with guides to assist them during Butanding Watching
and charged a fee, the municipality performed a corporate or private function which is
proprietary in nature, and thus, income derived therefrom is subject to income tax and VAT.
Oslob is also liable to withhold 1% on income payments given to local suppliers of goods and
2% on income payments given to resident suppliers of services pursuant to Section 2.57.2 (N)
of RR No. 2-98, as amended. Section 5.116 of RR No. 2-98, as amended, also requires Oslob to
withhold VAT due at the rate of 5% of the gross payment thereof before making payment on
account of each purchase of goods and services, which are subject to VAT imposed in Sections
106 and 108 of the Tax Code; or percentage tax due at the rate of 3% on gross money payments,
as the case may be.
