SM hits Manila’s tax rate hike

MANILA, Philippines–The Manila City government’s move to raise revenue collections has been met with resistance by the SM Group of Companies which recently went to court to question the five-fold hike in local business tax rates.

A civil case asking the Manila Regional Trial Court to declare the city’s new revenue code null and void was filed last week by Mandurriao Star Inc., Metro Manila Shopping Mecca Corp., SM Mart Inc., Supervalue Inc. and Super Shopping Market Inc. with Mayor Joseph Estrada, Vice Mayor Francisco “Isko Moreno” Domagoso and the city council as respondents.

“Petitioners making gross sales/receipts in excess of P5 million used to be covered by the 20 percent of one percent local business tax rate under the old ordinance. Under the new ordinance, petitioners are now required to pay the local business tax at the rate of one percent, or five times the previous rate,” the retail giant said.

Just months after he took over as mayor, Estrada signed in December the ordinance on Manila’s new revenue code, saying the city government was facing a cash deficit as the city coffers were practically empty. Before that, the city had been operating under a 20-year-old revenue code after a move to hike business tax rates was nullified by the Supreme Court in 2000 on a technicality.

Although the petitioners conceded that the power to tax was the most effective way to raise needed revenues to finance the delivery of basic services, they argued that the Local Government Code allows only a maximum increase of 10 percent every five years “such that the new adjusted rate imposable should not be more than 22 percent of one percent.”

Estrada expressed surprise when sought for comment about the case filed by SM. “I didn’t know about that,” he told the Inquirer.

“Since 1993, we haven’t increased our taxes. It’s still lower compared to Quezon City or Makati,” he said. “I inherited a bankrupt city government. How can you implement projects without funds?”

Estrada said he would consult the city treasurer and his legal team on the matter.