Does a local government executive have the power to enter into compromises with respect to unpaid real property tax obligations?
This was the question raised before the Office of the Ombudsman after Batangas City Mayor Vilma Dimacuha was charged recently for entering into a compromise agreement with an independent power producer that reduced the latter’s tax liability from P9.9 billion to only P900 million
Dimacuha was charged of corrupt practices of public officials, malversation of public funds, fraud and illegal exaction, and fraud against the public treasury by a taxpayer.
Rodan Spiritu who was included as a respondent to the case, along with Dimacuha’s son and nine members of the city council who all allegedly conspired with the mayor to engage in the alleged multi-million tax scam.
Data showed that Kepco Ilijan Power Corp. (Keilco) failed to pay real property taxes amounting to P9.9 billion (P6.9 billion in unpaid taxes and P3 billion in penalty) from 2002 to 2012.
Because of this, the local government filed a case against Keilco to force the power company to pay its tax obligations. The city won the case filed with the Local Board of Assessment and Central Board of Assessment. The dispute is now with the Court of Tax Appeals.
While the case was still being heard, Dimacuha reportedly entered into the questionable compromise agreement with Keilco, allowing the power firm to pay only P900 million and putting the local government at a disadvantage.
According to the complainant, he filed the case not only because the compromise was made without the knowledge and permission of the CTA, but also because only the President can reduce and defer real property tax payments.
Need for effective tax administration
With the sin tax measure soon to be signed into law, the question that needs to be answered is this: does the government have the capability to collect accurately?
Any tax measure, no matter how laudable the intention behind it, has to be feasible and simple to implement in order for it to be successful.
According to the proponents, this particular tax measure would generate an extra P200 billion over the next five years, almost P34 billion of which will be raised in 2013 alone.
The Aquino government is under extreme pressure to plug loopholes in its tax administration partly to comply with international commitments on putting a halt to smuggling and tax fraud.
For instance, the Philippines and other signatories to the Framework Convention on Tobacco Control (FCTC) of the World Health Organization (WHO) signed last month a landmark accord committing them to adopt track-and-trace systems or technologies so they could better monitor the supply and sale of these products in their respective countries.
It has been said that “the elimination of all forms of illicit trade in tobacco products, including smuggling and illegal manufacturing, is an essential component of tobacco control.”
The Philippines would really find itself in a “win-win situation” via the adoption of the WHO FCTC-endorsed strip stamp or hi-tech track and trace system to combat tobacco smuggling and tax fraud.
According to proponents, “the adoption of a track and trace technology would simplify and enhance tax collections on tobacco products and save the bureaucracy precious man-hours and resources in monitoring the correct amount of taxes that the tobacco industry should pay, by effectively checking the actual number of cigarette and cigar packs being produced and distributed in the country.”
One solution that the WHO has proposed is for countries to adopt new technologies to help plug loopholes in the collection of taxes on tobacco products, such as the use of electronic strip stamps in Brazil and Turkey and the state of California in the US.
BIR commissioner Kim Henares has said that the Aquino government is committed to the cigarette security stamp system, saying that the printing of the stamps would be assigned to the state-run Apo Production Unit, which, in turn, would oversee the public bidding for the needed technology for this system.
Bringing out the best in people
The MVP Group of Companies was able to raise over P100 million for the victims of typhoon Pablo that ravaged Compostela Valley,
The group, chaired by Manuel V. Pangilinan, was able to raise P66 million of the over P100 million pledged during the six-hour “Tulong Kapatid MVP Telethon” aired on TV5.
Philex Mining, through its president and COO, Eulalio Austin Jr., pledged P10 million while its parent company First Pacific, the latter’s chairman Antonio Salim, and Pangilinan, together chipped in P35 million.
Pangilinan said that “being a businessman is not just about working for economic growth, but also about becoming a man for others, as our Christian tenet has molded us.
The Philippine Long Distance Telephone (PLDT) Co. donated P5 million; Smart Foundation, P5 million; First Pacific Leadership Academy, P2 million; NorthLuzon Expressway, P1 million; One Meralco Foundation, P5 million; MVP Sports Foundation, P1 million; Maynilad, P1 million; and Metro Pacific Hospitals Group, P1 million.
According to Philex Mining SVP for corporate affairs and group spokesperson Mike Toledo, top corporations from China, Myanmar, Singapore, Indonesia and Hongkong, through Pangilinan, are also sending donations.
Toledo said that aside from the relief goods to be donated by the MVP companies for the typhoon victims through the money it has raised, the group would also focus on providing shelter, building of infrastructure destroyed by the typhoon, and creating livelihood.
Philex’ Austin earlier announced that Philex Mining has also sent an elite team of 12 miners to Compostela Valley to help in the search, rescue, and recovery of typhoon victims. These miners, he said, are well trained in the search, rescue, and recovery of people trapped underground or buried under rubble during a disaster.
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