COA recommends higher tax rates for Cebu City

Taxes collected by the Cebu City government from businesses operating in the city account for the bulk of the city’s revenue. The Commission on Audit recommended a revision and upgrading of the tax rates contained in the city’s tax ordinance. CDN FILE PHOTO

The Cebu City government could have earned an additional P1.6 billion if they had amended the Revised Omnibus Tax Ordinance and imposed a 10 percent increase, at most, in local taxes.

“The Revised Omnibus Tax Ordinance of Cebu City was not updated since 1994, thus, a potential increase in revenue totaling to P1,689,513,097.15 was not collected (from 2006 to 2016), depriving the constituents from more valuable projects that could have been implemented,” state auditors said in its audit observations contained in the Annual Audit Report for 2017 for Cebu City.

The Revised Omnibus Tax Ordinance of Cebu City was enacted in 1994 to regulate business establishments as to their tax payment schedules.

Cebu City, a first-class, highly-urbanized city in Central Visayas, posted a revenue worth P2.5 billion for the first quarter of 2018, the bulk of which came from
business taxes.

The City Treasurer’s Office said the amount was around P200 million higher than last year’s first quarter revenue collection or an eight percent increase.

But even so, COA said that the city did not adjust its tax rates in 1999, 2004, 2009, and 2014, pursuant to Section 191 of the Local Government Code.

“Local government units shall have the authority to adjust the tax rates as prescribed herein not often than once every five years, but in no case shall such adjustment exceed ten percent of the rates fixed under this code,” explained COA.

According to their computation, Cebu City could have collected P2.1 billion in local taxes, which include business and real property taxes, in 2016, if they had adjusted their tax rates and imposed a 10 percent increase.

The city government recorded a P213-million collection from local taxes in 2016.

COA had a similar audit observation in 2012 and 2018 and reiterated its suggestion for the city to increase their tax rates.

“We reiterate our recommendation to increase the revenue collection of local taxes that can be used to finance more valuable projects of the city,” COA added.