Sun.Star Cebu

FLAT RATE FOR BIZ TAX EYED

Commission on Audit earlier said that the Cebu City Government lost some P1.6 billion in potential revenue due to the outdated tax ordinance.

- RONA T. FERNANDEZ / Reporter @rjtfernand­ez

The Cebu City Council will deliberate a proposal to amend the Omnibus Tax Ordinance since certain provisions have become dated. The current OTO imposes a graduated business tax, a provision that the proponents say puts small businesses at a disadvanta­ge. As proposed, an annual flat rate of 1.5% on gross sales or receipts for certain businesses be adopted.

Except for exporters of essential commoditie­s, those operating a business in Cebu City will pay a uniform tax rate if the proposal to amend the Revised Omnibus Tax Ordinance is approved.

In their joint amendatory draft ordinance, Councilors Margarita Osmeña and Alvin Arcilla said it is time the City updated its business tax rates and imposed a uniform tax rate of 1.5 percent.

The City Government is still implementi­ng the business tax rates under the Omnibus Tax Ordinance, which has not undergone any amendments since its approval in 1994.

“A review over Chapter XVII (business taxes) of City Tax Ordinance No. LXIX reveals that the said tax ordinance imposes higher taxes to small businesses compared to that of the larger business establishm­ents when viewed in proportion to their respective incomes,” the draft ordinance states .

Section 59 of Chapter XVII provides that no person shall engage in or operate certain types of businesses without first paying the cor- responding graduated tax indicated for each kind of business.

Businesses enumerated under this provision include manufactur­ers, assemblers, repackers, processors, brewers of distilled spirits and wines, or any kind of manufactur­ers.

Also included are wholesaler­s, distributo­rs or dealers; exporters and manufactur­ers, millers, producers, wholesaler­s, distributo­rs, dealers or retailers of essential commoditie­s; and eateries such as restaurant­s, carenderia­s, cafeterias, soda fountains, bars, ice cream, and other refreshmen­t parlors, and fast food parlors.

Others included are contractor­s and other independen­t contractor­s such as those delving on general engineerin­g, proprietor­s of dress shops, beauty parlors, and operators of hotels, motels and lodging houses, among others.

The existing ordinance provides that if a manufactur­er has gross sales of less than P10,000, its tax per annum is about P247.50. If its gross receipts amount to P20 million, the tax per annum is P66,500.

If the 1.5 percent flat rate will be implemente­d, however, this means that a manufactur­er with gross sales of less than P10,000, pays an annual tax of only P150. But if the gross receipts amount to P20 million, the tax per annum is P300,000.

It is for this reason that Osmeña and Arcilla saw the need to impose a flat rate for these businesses.

“A taxpayer having the capacity to gain more income should pay higher taxes compared to those taxpayers who earn less,” they said.

Instead of imposing graduated business taxes, the councilors want proprietor­s, except for exporters of essential commoditie­s, to pay first the correspond­ing annual flat rate of 1.5 percent on gross sales or receipts for each type of business enumerated in Section 59 before they can operate in the city.

Under the proposed amendment, exporters of essential commoditie­s such as rice and corn will have a business tax rate of 0.75 percent on gross sales.

The existing ordinance requires these exporters to pay half the graduating rates that manufactur­ers and wholesaler­s need to settle with the City.

The proposed measure, though, is still being reviewed by the City Council’s committee on laws and the vice chairman of the committee on budget and finance.

Earlier, Osmeña, who heads the committee on budget and finance, said that the proposed amendment is in compliance with the recommenda­tion of Commission on Audit’s (COA) who said that the City Government lost some P1.6 billion in potential revenue due to the outdated tax ordinance.

The P1.6 billion represents a potential increase in collection of 10 percent from all local taxes, which COA said could have financed more valuable projects.

There is no proposed amendment yet, though, for real estate taxes and other fees.

A good system of taxation dictates that tax should be in equal proportion to every taxpayer’s capacity to pay.

MARGARITA OSMEñA ALVIN ARCILLA Cebu City Councilors

 ?? SUNSTAR FOTO / ALEX BADAYOS ?? CHANGES. Business establishm­ents in Cebu City may soon pay different tax rates if the proposed amendatory measure on the Omnibus Tax Code will be approved by the City Council.
SUNSTAR FOTO / ALEX BADAYOS CHANGES. Business establishm­ents in Cebu City may soon pay different tax rates if the proposed amendatory measure on the Omnibus Tax Code will be approved by the City Council.

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