Business tax changes pushed

Senator Francis Escudero has asked the administration to support the proposed amendment to the situs rule on local business tax to raise revenues for local government units.

Escudero, speaking before local executives during a convention organized by the League of Municipalities of the Philippines Visayas Cluster in Iloilo recently, cited the need to amend Section 150 of Republic Act No. 7160, or the Local Government Code, a provision which he said deprived LGUs of much deserved revenues for a long time.

“We have a pending bill which seeks to amend the situs of taxation provision in the Local Government Code. Essentially, we want businesses to pay their local taxes in municipalities where the businesses operate, instead of where their main offices are located. LGUs in effect should have a bigger share in the revenue from these firms,” said Escudero, former chairman of the Senate committee on finance.

Escudero has been pushing for the amendment since 2012, when he filed Senate Bill No. 105 which seeks to give a 100-percent tax share to LGUs so long as such sales or transactions occur in the LGU concerned.

He said the situs rule of taxation should be amended to that the towns and cities where businesses were located would benefit more from the tax contribution of those companies.

Escudero said the Budget Department and the Bureau of Internal Revenue had long opposed his proposal.

Most business owners, according to Escudero, preferred to pay their taxes where their businesses were located to “foster a relationship with the LGU where they operate.”

Escudero’s bill expunges the present 30-percent share of the LGU where the principal place of business is located.

“We have to make our LGUs autonomous and self-sustaining government bodies as mandated by the Constitution. More income for our LGUs will also help the administration’s drive for inclusive growth as it will spur economic development in the countryside,” he said.

Section 150 of the Local Government Code of 1991 on situs rule or the taxing jurisdiction rule on local business tax provides that “all sales made in a locality where there is a branch or sales office or warehouse should be recorded in said branch or sales office or warehouse and the local business tax due should be paid to the city or municipality where the same is located.”

The rule has become a contentious issue because of the multiple jurisdictions spanned by most business operations with their branches, sales outlets, factories, project offices and plantations or plants.

Escudero’s proposed bill also seeks to apply the following sales allocation for manufacturers, assemblers, contractors, producers and exporters with factories, project offices, plants and plantations in the pursuit of their business:

30 percent of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located; and

70 percent of all sales shall be taxable by the city or municipality where the factory, project office, plant or plantation is located.

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