Cebu City fails to collect P230-M taxes from Veco

THE Cebu City Government lost around P230 million in revenues from real property taxes after it failed to collect the taxes on Visayas Electric Company’s (Veco) transformers and electric posts from 1992 to 2008.

Cebu City Assessor Raul Bitoon said that because of a Local Government Code provision, the City lost an opportunity to earn P230 million from Veco.

Section 222 of the law states that “real property declared for the first time shall be assessed for taxes for the period during which it would have been liable but in no case for more than 10 years prior to the date of initial assessment.”

Since the City assessed some of Veco’s real properties only recently, including those that were used since 1992, Bitoon said the City can collect only the taxes for 2009 to 2019.

According to the assessment of the City Assessor’s Office, Veco owes the City P134.27 million in real property taxes for its 35,249 posts and 7,491 transformers from 2009 to 2019. The assessment was based on the list of machinery that Veco submitted to the assessor’s office this year.

Another P73.89 million is owed by Veco from 1992 to 2019 for real properties covered by its first tax declaration submitted in 1992, which includes posts and transformers. The amount includes interest and surcharges.

As for the City’s lost income when it did not assess and collect Veco’s taxes prior to 2009, Bitoon said he based his computation on Veco’s new tax declaration.

“The P134 million has not been paid by Veco because we did not issue the assessment and the P73.89 million has not been paid because we never collected the amount,” Bitoon said.

The outgoing city assessor said they already sent the recent assessment to Veco. The power distribution firm has 60 days to contest the tax amount.

In an interview on Wednesday, June 26, mayor-elect Edgardo Labella lamented the failure of previous administrations to collect the right amount of taxes from Veco.

“This is a wake-up call and this may not only be an isolated case. There are others whose taxes were not collected. I will issue a memorandum to the City Assessor to make a rigorous approach on the assessment of all existing establishments so that appropriate RPT will be paid,” the outgoing vice mayor said.

Labella said the assessor’s office should intensify its tax mapping and profiling of real property units in the city.

He said it’s a big challenge for the incoming city assessor, especially after Bitoon said the City’s tax collection efficiency is at 40 percent only. There are some 280,000 real property units in Cebu City.

For his part, Energy Regulatory Commission (ERC) Visayas Director Joel Bontuyan said that the real property tax is not included in the performance-based regulation (PBR) of Veco. He said the private electric utility could not yet pass the tax on to its consumers.

Veco earlier said it is working with the Cebu City Government to resolve its tax obligations, and it is waiting for the ruling of the ERC on whether real property taxes could be passed on to its customers.

The PBR is a rate-making methodology for private distribution utilities (DUs) like Veco. He said the real property tax was not captured in the original PBR rules because no local government units (LGUs) imposed it on DUs as it would raise electricity rates and affect their constituents.

The LGUs in Luzon imposed the PBR on Manila Electric Company’s (Meralco) real property tax, according to Bontuyan.

“There’s a need to have a uniform set of rules for all DUs,” Bontuyan said.

A few months ago, the Philippine Rural Electric Cooperatives Inc. filed a petition to ERC, asking for authority to pass on to its consumers the real property tax that will be collected by LGUs.

“It is still pending. As far as I know, Veco is not even a part of it,” Bontuyan said.

Bontuyan said there may be two schools of thought on who shall carry the burden of Veco’s real property tax to Cebu City—it could be the Cebu City residents only, or all of the power consumers within Veco’s franchise area since the properties taxed are necessary for its function.

Veco serves the cities of Cebu, Mandaue, Talisay and Naga, and the municipalities of Liloan, Consolacion, Minglanillla and San Fernando. (With LRC, EOB)


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