Tuesday, September 11, 2007 Taxes turn off SM firm from Oro By Lizanilla J. Amarga
MULTIBILLION peso corporation SM Prime Holdings, Inc. has now backed-off from putting another huge mall here that could have translated to more jobs and other business opportunities in the city, a city councilor disclosed Monday.
The move was blamed on the "confiscatory" nature of the new capital gains tax rates under new zonal valuation tax system of the regional office of the Bureau of Internal Revenues (BIR).
Other local traders reported that Cagayan de Oro City's economy is "losing not by the millions of pesos but by the billions in terms of lost business and job opportunities" because of the new tax system even from the start of its effectivity on June 4, 2007.
These local traders are convinced that the City of Cagayan de Oro has a higher capital gains tax than those of Cebu and Davao.
The City Council is inviting the BIR Regional Director Mustapha Gandarosa, members of the Oro Chamber of Commerce and Industry, local realtors, subdivision developers and other stakeholders among others for a "possible reconsideration" on this matter.
Earlier, there were also concerns of how some unscrupulous employees at the BIR-Northern Mindanao are extorting some businessmen operating locally.
Vice Mayor Vicente Emano said local traders paid higher amount of taxes but only a small amount was reflected in the receipts reported among other anomalies committed by this national revenue agency.
Disadvantageous
Gandarosa has denied knowledge of such “extortion activities.” Instead the agency came out with a report that it was awarded as one of the highest tax collection body in the entire country.
During the City Council Session Monday, Councilor Alfonso Goking issued a special report regarding BIR’s new zonal valuation tax system as driving away investors.
"The current BIR zonal tax system is confiscatory in nature and disadvantageous to our city," he said.
He added that higher taxes would translate to higher income for the City Government "but in reality it is detrimental to our city's growth and development."
The National Internal Revenue Code (NIRC) defines Capital Gains Tax as "tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the country, including pacto de retro sales and other forms of conditional sale."
Capital asset means property held by the taxpayer -- whether or not connected with his trade or business.
Jacked up
It does not however include "stock in trade of the taxpayer or other property of a kind, which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year."
The taxpayer’s properties primarily for sale to customers in the ordinary course of his business and those in the business of a character is excluded and is subject to the allowance for depreciation provided in subsection (F) of Section 34 of the NIRC.
The Code also excludes real property used in trade or business of the taxpayer considered as capital assets.
Goking said this new BIR tax system valuation has "jacked-up almost more than 100 percent" the current tax rates.
He cited how the capital gains tax for the properties along Captain Vicente Roa to Yacapin Street have gone up from P13,000 per square meter to P25,000 per square meter.
Also, those properties along JR Borja street to Corrales street and those located at Recto Avenue have been hiked up from P18,500 per square meter to P27,000 per square meter.
"SM almost bought five hectares of property along Recto Avenue but did not push through with it because of the zonal valuation tax," he said.
Basis
According to Goking, SM Prime Holdings, Inc. owned by Henry Sy, Sr. did not push to put up a five-hectare SM City Mall across Gaisano City at Recto Avenue this city as this property with P435 million selling price will have to be paid by P1.2 billion because of BIR’s zonal valuation tax system.
"It is no longer attractive to investors," this local Chinese-Filipino businessman-legislator said.
City Councilor President Elipe said he shares Goking's sentiments considering that the computation of the capital gains tax is based on either the contract price between the parties, market value as assessed by the local assessor's office or the zonal valuation of the BIR whichever is higher.
"So no matter how low our city assessor would peg the value, still, it will be the BIR's zonal valuation that will be followed as the basis for the computation of the capital gains tax as it is the higher rate," he said.
Elipe believes this tax system is "alarming" and is "deterrent to the development" of the city.
"The prices of our properties are higher than those Cebu City and Davao City," he said.
