City to pursue franchise taxes

CEBU, Philippines - The Cebu City government will start collecting franchise taxes from telecommunication companies (telcos) this year.

In a news conference yesterday, Mayor Michael Rama announced that he will no longer allow a compromise payment as he wanted telcos to pay the exact franchise taxes to the city.

Rama ordered the City Treasurer's Office (CTO) to start assessing the franchise taxes owed by telcos since the expiry of the compromise agreement in 2011.

The mayor also seeks an investigation into reports that a foundation has been a recipient of an amount, which was supposedly part of the compromise payment.

The money was allegedly released as a donation to the foundation.

The foundation is allegedly headed by a then city official who is a close ally of south district Representative Tomas Osmeña.

"There are allegations that a certain amount has been compromised that went to this group. That's why I told the city treasurer that from now on, I want what is due to the city goes to the city," Rama said.

Two telecommunication companies and the city government have entered into a compromise agreement, in which they would give the city a certain amount instead of paying franchise taxes.

Under the compromise agreement, the telcos agreed to deposit P7 million a year, as in the particular case of Globe Telecom, for three years from 2009 to 2011 without necessary paying for the real property and franchise taxes.

Telcos also paid a certain amount as a compromise payment to the franchise tax demanded by the city from them since 2006 to 2008.

Globe Telecom paid P21 million "arrears" upon the signing of the MOA, which is on top of the P7 million compromise payment annually.

The compromise agreement expired in 2011.

City officials only recall signing an agreement with Globe Telecom, but not with the other telcos such as SMART Communications and Digitel.

City treasurer Emma Villarete said there was supposedly a plan to renew the compromise agreement last year, a move Rama opposed.

"The mayor wants these telecommunication companies to pay the exact amount. Well the truth is, we can collect more from them if they pay the correct franchise tax," Villarete said.

She said although it may not be an easy task because to determine their franchise tax dues, the CTO needs to open their books.

Villarete said the matter needs to be discussed with the legal office.

According to the Omnibus Tax Code, franchise tax is three-fourths of one percent of the company's gross receipts.

Other utilities operating in the city like the Visayan Electric Company are paying about P30 to P35 million in franchise tax annually, she said.

Villarete said she has no idea about the amount that went to the foundation through an alleged special agreement because she was not the city treasurer at the time.

Rama said these telcos must pay the franchise tax since there is a Supreme Court decision that utilities are not exempted from paying franchise tax.

He said he is contemplating filing charges if necessary.

Osmeña, the former mayor, had agreed to a compromise agreement with telcos to spare the city government from the tedious and costly court battle.

On Rama's plan to collect franchise tax, Osmeña said it is Rama's obligation.

"Rama is entitled, if not obligated to collect taxes when due. And I hope he does so long as he doesn't use it for lechon give-aways and for expressing his personal sympathies using government funds. He spends hundreds of thousands in flowers to bereaved families not in the name of the city," Osmeña said in a text message.

Osmeña refused to comment further on the alleged donation of funds to a foundation.

"What a foundation collects is between them and their donors. Don't analyze it in a vacuum; how much does the province get from these telecoms? What about the other cities' collection?" Osmeña said. -/LPM (FREEMAN)