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Saturday, February 04, 2006
Gov’t agency sides with IPI: No tax for City
By Gingging A. Campañabr>Sun.Star Staff Reporter
A Department of the Bureau of Local Government Finance (BLGF) is standing by its opinion that the Cebu City Government should not have its share of the taxes a pharmaceutical company has paid to local government units (LGUs) where its branches operate.
“We have done our part and issued our opinion on the matter. It is now up to both parties what to do next,” a BLGF official, who asked not to be named, said.
Sun.Star Cebu sought an interview with the BLGF official tasked to review in January 2004 the request from International Pharmaceuticals Inc. (IPI), for an opinion on the situs taxation provisions of the Local Government Code.
According to IPI’s representation to BLGF, the company, which manufactures pharmaceutical products, said both its factory and head office are located in Cebu City and that it operates branches or sales offices in various localities in the country.
On July 8, 2002, IPI, represented by Pio B. Castillo Jr., executive vice president, wrote to BLGF and said that it has branches in the cities of Las Piñas, Davao, Bacolod, Zamboanga, Cagyan de Oro, Naga and Dagupan (now transferred to Billasis, Pangasinan) and the municipality of Manapla, Negros Occidental.
Tug-of-war
Sales by the head office are recorded in Cebu City where the corresponding local business taxes are paid, while “sales from the branches/sales office are recorded in the respective localities where such branches or sales offices are located and the corresponding local business taxes are paid to the LGUs where the same are located.”
According to BLGF, however, the Cebu City Treasurer’s Office wants to impose taxes on 70 percent of the sales made by the branches.
But local treasurers concerned “are not agreeable since it would affect their respective revenue collections.”
To clarify this confusion, BLGF Executive Director Presentacion Montesa, in her opinion dated Jan. 4, 2004, cited Section 150 of the Local Government Code, as implemented under Article 243 (b) (1) of the implementing rules and regulations.
The code states: “All sales made in a locality where there is a branch or sales office or warehouse shall be recorded in said branch or sales office or warehouse, and the tax shall be payable to the city or municipality where the same is located.”
“It is clear that all sales or receipts made in the branch or sales office shall be recorded therein and taxable by the LGUs where such branch or sales office is located,” the opinion read.
No share
“Clearly the LGU where the head office and factory are situated (which in this case is Cebu City) will not have a share in the sales or receipts made by the branches or sales office,” it read.
BLGF said Cebu City or the LGU where the head office or the factory is located “may legally share in the sales or receipts only” under conditions of the Code’s Article 243 (b) (3) of the rules under Section 150.
The provision stated that in cases where “there is a factory, project office, plant or plantation, 30 percent of all sales recorded in the principal office shall be taxable by the city (Cebu City) where the principal office is located and 70 percent of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office and plant is located.”
This means that Cebu City can collect taxes only on 70 percent of the sales if these are recorded in the principal office, said BLGF.
IPI said that all sales in their branches are not recorded in their principal office.
Permits
But the Cebu City Treasurer’s Office insisted that they should impose taxes on IPI’s 70 percent sales because “all sales are allegedly recorded at the principal office in Cebu City.”
The CTO asserted that the IPI’s “consolidated financial reports show that all sales made by various branches/sales offices are recorded in Cebu City.”
On the other hand, IPI, in its follow-up letter dated Nov. 23, 2005 to BLGF, attached photocopies of mayor’s permits issued by different LGUs where IPI has branch or sales office.
This was to prove that IPI’s branches indeed are paying their local business taxes to the respective LGUs where such branch or sales office are located.
“The bureau expresses the view that the City Government of Cebu may not have a share in the said local business taxes pursuant to Section 150 of the LGC as implemented under Article 243 of the implementing rules of the same Code,” the BLGF opinion read. (GAC)
For Bisaya stories from Cebu. Click here. (February 4, 2006 issue)
Write letter to the editor.Click here.
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