Several business groups in Cebu City expressed reservations over the city government’s plans to increase the business tax rate by 1.5 percent.
In a statement sent to Cebu Daily News, Robert Go, president of the Philippine Retailers Association–Cebu Chapter, asked the city government to reconsider its decision of amending the Revised Omnibus Tax Ordinance of Cebu City to pave the way for the 1.5 percent over-the-board increase in business taxes.
“(It) is a double whammy to the retail industry. It is six times the present rate or a 600 percent increase. Many of the food, like rice or oil, milk or infant milk, liquor and cigarettes and other staple food has margins of 0.5 to 0.75 percent,” said Go.
He also said that if the proposed ordinance will push through, retailers may have no choice but to also increase the prices of their products to cover up for the new tax rates.
“The increase is too drastic, a tremendous jump of 600 percent that many medium-sized retailers cannot sustain. Food retailing will be on the red zone on profitability,” explained Go.
“We beg to review the proposal. Retailers for food should be taken into consideration. Retailers still have VAT (value added tax), income tax, corporate tax. This is also way, way more than in other cities,” he added.
Big challenge
Carlo Suarez, president of the Hotels Resort and Restaurant Association of Cebu (HRRAC), said increasing the current tax rates would be a big challenge for the business sector.
He instead requested the city government to disclose what benefits the increase will give to the business sector once the proposed ordinance will be approved.
“Increasing business tax by 1.5 percent will be a high cost to pay with all the increase in OPEX (operating expense), considering that labor cost this year increased three times,” Suarez told CDN in a separate statement.
The proposed ordinance, authored by Councilors Margarita Osmeña and Alvin Arcilla, seeks to amend Section 59 of the city’s tax ordinance by imposing an annual flat-rate of 1.5 percent.
Update business tax rates
It will cover all types of businesses such as manufacturers, assemblers, repackers, processors, brewers of distilled spirits, wholesalers, distributors, dealers, exporters, restaurants, bars, and contractors with gross sales or receipts ranging from less than P1,000 to more than P20 million.
Osmeña and Arcilla’s proposal was also in response to the letter from the City Treasurer’s Office (CTO) asking the legislative to update the city’s business tax rates.
Acting City Treasurer, Veronica Morelos, said that they received an audit observation from the Commission on Audit (COA) recommending an update on the city’s tax rates.
“COA, for the calendar year 2017, disclosed that the Revised Omnibus Tax Ordinance of Cebu City was not updated since 1994, thus, a potential increase in revenue totaling P1,689, 513,097.15 was not collected, depriving the constituents from more valuable projects that could have been implemented,” Morelos stated.