Tommy has a point

The court has already spoken through a preliminary injunction that it issued against Mayor Tommy Osmeña. But don’t expect the controversy on the mayor’s threat to close the branches of Banco de Oro (BDO) in Cebu City to die down soon.

The popular belief is that BDO’s predicament is a spillover of the mayor’s feud with SM over the latter’s adamant refusal to cancel its purchase of a huge portion of the SRP during the term of Mayor Mike Rama. Both the bank and the giant retail company are owned by the family of Henry Sy.

That belief is not totally unjustified. Osmeña has repeatedly declared his intention to recover all the SRP lots that Rama sold through public bidding instead of through unsolicited proposal, which is the mode that Osmeña favors. One of the buyers, Filinvest, has already announced that it will back out of the sale and Ayala is rumored to have also agreed with the mayor on a mutual rescission. Only SM has dared defy the mayor’s wish.

But whatever his motive is in questioning the admittedly meager income that BDO declared in the city should not cloud the fact that Osmeña raised a very valid legal question: for purposes of local taxation, what should a bank report as its gross receipts?

Many universal banks, not only BDO, file a consolidated income tax return in Makati or in Manila where their head offices are located. This is only logical because while it has many branches all over the country, there is only one bank.

But we’re of talking of income tax which is a national tax so that is not a problem insofar as the local government units are concerned. It is in the local impositions that the conflict arises.

For example, when you apply for a business permit, you’re taxed by the LGU based on your gross receipts. How do you define “gross receipts”? In the case of a bank, should it include all interest payments collected on loans incurred in Cebu City, for example? Or should they follow the practice in income taxation and treat the interest paid in Cebu City for a loan obtained from a Cebu City branch as income earned in the head office in Makati or Manila?

Tommy’s position has not been fully reported by the media but I’d like to believe that he wants all income from transactions entered into by a Cebu City branch as part of the gross receipts that that branch should report to and be subjected to tax by the city.

I fully support Tommy’s view. The employees of these banks’ branches in the city travel through roads maintained by the city government. The bank’s garbage is collected by the city’s employees and transported in the city’s trucks. Their water consumption is a drain on the city’s supplies. If the bank is robbed, it is the Cebu City, not Makati, policemen who respond. So why should they not share with the other citizens the burden of making the city government’s machinery work?

If you want to do business in our city, you should follow our rules.