Pressure on to secure SRP lot tax exemptions

Cebu City Hall needs to secure tax exemption for companies that acquired lots in the South Road Properties (SRP) lest they remit their quarterly payments to the Bureau of Internal Revenue.

Councilor Jose Daluz III issued this warning in response to reports that SM Prime Holdings will remit their payments to the BIR starting next month unless they secure tax exemption.

“Tax payment will lessen the city’s income by a few millions. And if SM starts to pay to BIR, it would already be hard to get back the money.  How are we gonna do it? Through tax refund?” said Daluz, former council finance committee chairman.

Mayor Michael Rama left for Manila last night to persuade BIR officials to grant tax exemptions on sales of SRP lots. He was with lawyer Jerome Castillo of the city legal office and Ofelia Oliva, the mayor’s financial adviser.

Daluz said he was invited to join the mayor’s team due to his knowledge on the issue but he was not issued a travel order yet.

He said Rama could elevate the issue to Finance Secretary Cesar Purisima and President Benigno Aquino III.

“I am with the opinion that since we are all government entities, why should we tax government?  It’s just like transferring money from one government to another,” Daluz said.

Daluz said government funds should be spent on services and projects and not for tax payment to another government entity. Granting that SRP lot sales are taxable, Daluz said taxes should be collected only after full payment of the property is made.

He said whatever revenues received by the city from the SRP payments is insufficient to pay off the loan contracted from the Japan Bank of International Cooperation for the reclamation project.

The BIR’s Cebu City South office sent a preliminary collection notice to the Cebu City government asking the city to pay over P800 million in deficiency value added tax, expanded withholding tax and documentary stamp tax.

The taxable amount was due to the transactions the city made with Filinvest and SM Prime Holdings Inc.

As developer and operator of the SRP,  BIR said Cebu City is liable to pay taxes that represents 5 percent of every installment made.

SM informed the city that it would be forced to already surrender their installment payment to BIR starting next month.

Mayor Rama said he only needs to talk to the President on the issue.

Daluz said the Internal Revenue Code requires collection of capital gains, the 12 percent VAT and the expanded withholding tax.

Since the SRP is already a registered economic zone, the city is only required to pay the 5 percent tax.

Daluz said the tax is shared by the national government, which pays 3 percent while the local government unit pays 2 percent.

“We have to fight only for the 5 percent tax computation with the SRP being registered as an economic zone,” he said. Doris C. Bongcac, Chief of Reporters