CCCI bucks Cebu City’s proposed new business tax scheme

Imposing a flat rate of 1.5 percent on business taxes in Cebu City may hinder investments coming into the city.

The Cebu Chamber of Commerce and Industry (CCCI) believed that while there is a need to adjust the city’s outdated tax scheme, it should not be “excessive.”

“It is high time Cebu City makes adjustments in taxes. It’s been more than 20 years that there were no adjustments. They were even criticized by the COA (Commission on Audit) for that,” said CCCI President Antonio Chiu.

“But moving it to a flat rate of 1.5 percent will discourage big businesses from locating to Cebu City,” he added.

According to Chiu, the current business tax scheme in Cebu City is graduated, whereby businesses with higher gross sales paying their obligations at a lower tax rate.

The CCCI has formally submitted their position paper last Tuesday to the Cebu City Council on the latter’s proposed amendatory ordinance to impose a flat rate or 1.5 percent as local business tax in the city.

The proposed ordinance by Councilors Margarita Osmeña and Alvin Arcilla sought to amend the city’s Revised Omnibus Tax Ordinance.

But according to Chiu, the city government could still increase its tax collection without being “excessive.”

The CCCI also believed that this proposed rate will be disadvantageous for micro, small, and medium enterprises (MSMEs), which comprise majority of the businesses operating in the city.

“The Chamber firmly anticipates the negative impact in imposing a flat LBT (local business tax) rate of 1.5 percent, which would make Cebu City not competitive and conducive for business and investors specially to the MSMEs including the Barangay Micro Based Enterprises (BMBEs),” the CCCI said in its position paper.

The chamber proposed that the City should have a graduated scheme based on gross sales in accordance with that the provision of the Local Government Code.

This way, big businesses will be encouraged to remain in the city, it added.

The CCCI also pointed out that other neighboring cities have maintained low tax rates.

In Mandaue City, the 1999 revenue code of the city imposes a graduated tax rate between 30 to 50 percent of one percent on the gross receipts of some specific industries.

In 2006, all tax classifications under the city’s ordinance were raised by 10 percent.

In Talisay City, its 2011 Revenue Code levied graduated tax rates of 0.5 percent for those with gross sales of P6.5 million or more.

Lastly, the CCCI pointed out that the 2007 Revenue Code of Lapu-Lapu City also prescribed for graduated tax rates for manufacturers with gross sales of P20 million or more at only P66,500 plus 0.5 percent in excess of P20 million

“We also encourage the City to impose a special and low LBT rates to MSMEs including the BMBEs to accelerate the growth of our small and new entrepreneurs and strengthen their respective businesses,” the CCCI added.

The CCCI also lamented that businesses also have to contend with other problems, including increasing costs of electricity, increasing costs of labor law compliance, and problems on ease of doing business, among others.