Defer tax increase, MBC tells Makati City

Unless Makati City wants Taguig or Pasig City to be the country’s next business capital, it should scrap plans to increase business tax rates at least for the next two years, the Makati Business Club (MBC) said yesterday.

Pushing for a tax hike will only force big businesses to transfer operations to other locations which can offer lower tax rates, it added.

The group is now calling on city government officials to reconsider its proposed increases in local taxes and defer any such moves to beyond 2006.

The MBC, which has a membership of about 400 corporations mostly based in Makati City, foresees problems if Mayor Jejomar Binay and the Sangguniang Panlungsod decides otherwise.

"While we commend 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 enhance emergency response systems, we feel that such expenditures can be covered under the current budget structure without having to resort to new taxes," the group, in a statement sent to The Star, explained.

The MBC notes that as far as city finances are concerned, Makati’s financial position is healthy since the city government has posted budget surpluses of P1.64 billion in 2002, P1.96 billion in 2003, and P2.58 billion in 2004.

"We feel that the city government can tap into these surpluses to fund new projects. As the country’s leading financial and business center, Makati is already blessed with windfall tax collections arising from the sheer volume of business being booked here by all industry sectors," MBC executive director Guillermo Luz said.

"On top of that, soaring commercial and residential property values also contribute to the city’s revenues. We note that business taxes and real property taxes contributed about 40 percent each to the city income in the last quarter of 2004," he added.

The MBC said the city government should not discount the additional burden that higher city taxes will have on businesses operating in the locality.

He added that the anticipated implementation of the Expanded Value Added Tax (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 rate of 32 percent.

Creditable VAT input taxes will also be limited to only 70 percent of VAT paid to suppliers, creating yet another burden on all businesses.

Makati City cried foul over how its neighboring city is trying to take advantage of the situation which it said is unfair because the city government is only planning to set things right by raising the locality’s tax rate to city level from its current municipal level rate.

"It’s not just about taxes. A city must be able to provide quality public services. The infrastructure must be advanced, especially in information technology. These are among the many advantages of locating in Makati," said City Secretary Rogelio Marasigan.

He boasted that Makati City has the highest number of accredited Information Technology zones and many establishments were already Wi-Fi capable.

Marasigan noted that even with the proposed adjustments, Makati’s business taxes will remain as one of the lowest in Metro Manila.

"It’s not just about taxes. Investors consider several factors in selecting locations, including the capabilities of the local government and the quality of life in the city," he stressed.

The City Council is currently conducting public hearings on revising the Makati Revenue Code to adjust business tax rates from municipal level to city level based on the argument that the locality has not increased taxes since 1992 and the adjustment is long overdue. — Michael Punongbayan