Cebu City dad pushes bid to increase taxes on banks

In order to increase revenues for Cebu City, a councilor is proposing to increase the taxes imposed by the city on banks and other financial institutions.

But during a public hearing on the proposed ordinance by Councilor Raymond Alvin Garcia yesterday afternoon, the Cebu Bankers Club (CBC) expressed their opposition to the proposal, saying that banks had incurred more expenses in the past couple of years.

Mario Fritz Palileo, CBC president, read a statement signed by members of the CBC’s board of directors where they explained that the increase in taxes would also mean an increase in the total expenses of banks.

“Bank expenses have increased these past few years due to capital expenditures which are aimed in increasing the safety and efficiency of the bank’s delivery of services and operations,” he said.

Garcia’s proposed amendments to Sections 46 and 48 of the Cebu City Omnibus Tax Ordinance seek to increase the taxes imposed by the city on banks by another 25 percent.

Currently, the city imposes a tax rate of 50 percent of the one percent of gross annual receipts of banks and other financial institutions.
Garcia wants it to become 75 percent of the one percent of banks’ gross annual receipts which is the highest percentage provided for under the Local Government Code.

Taxes banks pay

According to Palileo, banks that are not full service usually pay P40,000 to P50,000 per branch as taxes with the current rate.
On the other hand, full-service banks or those that offer direct loans pay as much as P100,000 to P200,000 as taxes to the city with the current rate.
These rates are expected to increase by another 25 percent if the proposal of Garcia is approved by the City Council.

Bank expenses

Palileo said among the expenses banks had recently incurred included the switch to EMV technology for ATM cards and machines due to recent incidents of ATM card fraud all over the country.

The Bangko Sentral ng Pilipinas (BSP) has mandated banks to do the switch.

Banks have also implemented the Check Image Clearing System (CICS) to shorten the clearing period of checks deposited by clients.
The upgrade includes the purchase of new machines, he added.

The emergence of Financial Technology (FinTech) companies, Palileo said, had also pushed banks to upgrade computer peripherals and other machines to cope with the competition.

“Whereas, banks have continued to pursue to be competitive and provide the Filipino citizens with financial products and services, we recommend that the implementation of the proposed amendment mentioned in the agenda be put on hold and be deferred for further study,” read CBC’s position paper.

“We believe also that the banks have been taxed enough with its gross receipts, bank signages, bank computer equipment and Automated Teller Machines,” it added.

Asked when banks could already recover from their recent expenses, Palileo said it would take about two years for them.

Only lesser profit
But Councilor Margarita Osmeña, who was once a banker, said that even if the increase in taxes would mean additional expenses for the banks, it would still not mean that they would already lose money.

She said it would just mean that the banks’ revenues and profits would be a bit lower.

“This will certainly increase income to support various programs, projects and activities of the government, said Cebu City Officer Marietta Gumia, who is in favor of the proposed amendment, in a separate position paper.

Clarification
Aside from the increase in taxes, Garcia also proposed that there would be a clarification of the definition and coverage of the term “gross annual receipts.”

His proposed amendment specifies coverage including interest from loans and discounts; interest earned and actually collected on interbank loans; and rental of property.

After yesterday’s public hearing, the recommendations would be forwarded to Councilor Garcia, sponsor of the proposed ordinance, who would then decide whether to revise or add the recommendations to his proposed amendments. It will then be submitted to the City Council for approval.