MBC asks Makati to defer tax hike

The Makati Business Club (MBC) has called on the deferment of Makati City’s proposed tax hikes in anticipation of the implementation of the expanded value-added tax (EVAT) law.

In a position paper, the MBC said "the anticipated implementation of the EVAT law will already increase VAT coverage for all businesses as well as subject them to a new corporate income tax rate of 35 percent, up from the current 32 percent."

"Credible VAT input taxes will also be limited to only 70 percent of VAT paid to suppliers, creating yet another burden on all businesses. Coupled with increased costs of doing business, companies will be faced with more difficult times ahead," the group said.

The group said they also anticipate that business may have to face salary and benefits adjustments for their employees as prices escalate.

"As it is, a recent World Bank study showed that business enterprises in the Philippines are already burdened with the highest combined tax rates in Asia. For these reasons, we feel that the tax hike should be deferred and carefully studied," it said.

The Makati City local government should also reconsider the implementation of the proposed increases in local taxed and defer any moves to beyond 2006 since the city is already blessed with windfall tax collections.

The MBC further proposed that any move for tax hike should be presented concurrently with major projects to improve city services in Makati, particularly for the city’s lower-income neighborhoods.

"While we recommend the city government for planning the construction of new school buildings in Barangays Guadalupe Viejo, Comembo and Bangkal, as well as additional barangay halls, street and bridge lighting, and enhanced emergency response systems, we fell that such expenditures can be covered under the current budget structure without having to resort to new taxes," the group said.

As far as finances are concerned, the MBC said Makati City’s financial position is healthy.

For the past three years, the city government has been posting budget surpluses of P1.64 billion in 2002, P1.96 billion in 2003, and P2.58 billion in 2004.

At present, Makati ranks second in the National Capital Region in terms of gross income and first in terms of budget surpluses.

"We feel that the city government can tap into these surpluses to fund new projects," the businessmen’s group said.

The MBC also noted that business taxes and real property taxes contributed about 40 percent each to city income in the lat quarter of 2004.