A DRAFT bill from the Department of Interior and Local Government (DILG), prepared with the assistance of the Asian Development Bank (ADB), hopes to raise the share of tax revenue for local government units (LGUs) hosting facilities of businesses regardless of their headquarters.
The bill calls for 10% of a company’s tax due on sales be paid to the LGU hosting its head office, with 90% going to the LGU city or municipality where its factory, plant or plantation is located.
The former split was 30% for the LGU hosting the head office and 70% for the LGUs hosting the business operations.
ADB consultant to the DILG Raymund C. Fabre said the draft bill will enhance the revenue-raising capacity of LGUs and allow “more judicious allocation of revenue” to LGUs where businesses are located and resources are being used.
“There is an undue emphasis on the head office of corporations as a taxable unit. LGUs which host plantations, mines, plants, factories and sales offices are not able to receive their just share in local business tax because the mother firm only pays this tax to the LGU where the head office is located,” he said during Tuesday’s Senate hearing on legislative proposals to revisit the 27-year-old Republic Act No. 7160 or the Local Government Code.
The draft bill also allows local government units, through approved ordinances, to grant local tax exemptions, incentives or relief in order to promote or encourage investment in their jurisdictions, provided that the duration of incentives is less than six years.
It also seeks to raise the annual fixed tax for delivery trucks from P500 to P1,500 and allow the Sangguniang Panlalawigan to increase the rate once every three years based on the consumer price index.
LGUs said the split is secondary to the proper implementation of the system allocating the revenue to the site of the business operations.
“Beyond the 70% making it to 90%, I think it’s more of the implementation of how you’re really going to allow the LGUs where the plant, the mine or the factory is located to get that 90%. It’s really the system,” said League of Provinces of the Philippine (LPP) Director for Policy Angelica J. Sanchez.
“Maybe the BIR (Bureau of Internal Revenue) can create a system wherein you can delineate which were collections made from the factory, the site, the mine, and which were from the headquarters,” she added.
Bureau of Local Government Finance — Department of Finance (BLGF-DoF) director for local fiscal policy service Pamela P. Quizon said the agency’s recommendations centered on proper procedures on the filing of financial statements.
“We recognized that it’s really the taxpayer that should be reporting instead of the consolidated financial statement. That’s where the problem lies,” she said.
Ms. Quizon added that business taxpayers should be compelled to disclose payments to an LGU to check if it complied with the Local Government Code.
“Even without changing the 70/30, the 90/10 or if we want to have 80/20, I think the proper recording should be addressed first and that the easiest mode is to amend the IRR (implementing rules and regulations of the code) because we can do that,” she added. — Camille A. Aguinaldo
