Biz taxes hike plan still under appraisal
The city council has referred back to the executive department the latter’s proposal to raise business taxes and other fees for possible reconsideration.
The proposal, presented by City Treasurer Alex Cabarrubias during the council session on April 24, seeks to raise business taxes by 40 percent.
Cabarrubias said the increase was computed in consideration of the fact the city government did not update the Tax Ordinance for 22 years.
The Local Government Code (LGC) allows the city to increase business taxes every five years as long as it does not exceed 10 percent of the rates fixed by the LGC.
Members of the city council referred back the proposal for reconsideration to include, among other things, the possibility of adjusting the increase to 20 percent, instead of 40 percent.
Councilors Peter Fianza and Betty Lourdes Tabanda said the proposed increase, although it may have a legal basis, is oppressive.
“Imposing a 40 percent increase might not be in the interest of justice. It violates the basic law in taxation that taxes must not be oppressive,” they said.
Councilor Jose Molintas said instead of imposing a one-time increase of 40 percent to cover for the years the city government did not adjust the rates, the executive department should consider a 20 percent increase then raise it to 10 percent after five years.
The proposed increase in the proposal depends on the kind of business and their gross receipts.
For instance, for manufacturers, the proposal projects a 40 percent increase in the fixed rates plus 0.56 percent on the excess of the gross receipt bracket.
As a result, a manufacturer that has a gross receipt of below P10,000 will be charged P358 yearly compared with the P248 imposed by the Tax Code.
The baseline of the figures presented by Cabarrubias was in 2019, before the pandemic hit.
For manufacturers with a gross receipt of P762,747,000, the tax collected was P1.9 million and with the proposal, the tax will become P4.3M.
For wholesalers, the proposal is 40 percent on the fixed rates plus 0.75 on the excess of the brackets.
As a result, wholesalers with a gross of P8,000 will pay P395. The tax collected was P281 using the current Tax Code.
For those with a gross of P42.6M, the tax to be collected is P333,000 compared with the P117,000 collected under the Tax Code.
For retailers, Cabarrubias said the proposed adjustment offers an option that retailers with gross receipts of more than P50,000 but not more than P400,000 will be levied a three percent tax and those with gross receipts of more than P400,000 will be imposed one percent.
The other option is to impose a fixed tax to brackets starting from gross receipts of over P50,000 but less than P75,000 and 0.50 percent to capture the excess amount.
As a result, if the retailers’ gross receipt is P50,301, they will pay P1,509 if three percent tax is levied. But if the other option is followed, the tax to be imposed is P2,044.
In the current ordinance, the tax paid by retailers that have a gross receipt of P50,301 was P1,408.
For retailers with a gross receipt of P10,812,000, the tax will be P116,128 with the three percent tax imposition. But if the other option is applied, the tax will be P84,564.
Under the current ordinance, the tax imposed on retailers with such gross receipt was P44,126.
The proposed tax adjustment for other lines of business have varying rates.
Cabarrubias said the projected collection from the tax adjustments if implemented will be P332,225,789, assuming the city hits the 2019 levels of gross receipts from the more than 18,000 businesses operating then.
The proposal also eyes to increase other fees, such as the mayor’s fee to be raised from P200 to P1,500 to P3,000 and the processing fee from P450 to P1,500, among the other adjustments.
It also proposes to impose a non-refundable fee of P50,000 from those seeking exemption from the Zoning Ordinance.
Councilor Benny Bomogao said this proposal needs to be reconsidered as it is a form of denying a person the right to seek exemption.
Cabarrubias said the fee is a deterrent to those who keep on seeking an exemption form the Zoning Ordinance.
Tabanda said those seeking for exemption will be minimized if the Comprehensive Land Use Plan will be out so that people will know the classification of their area before they build their structure.
The council asked the executive department to refine the proposal and incorporate the inputs of the members. They also asked that the City Legal Office be involved in fine-tuning the proposal.
Mayor Benjamin Magalong earlier asked the council to give preferential consideration to the proposed adjustment to the Tax Code.
The council earlier asked the CTO to present the basis, adjustments, and the projected increase in collection before the council could act on it and subject the same to a public consultation. – Jane B. Cadalig