Council to Rama: Appeal BIR ruling on lot sales

CEBU, Philippines - The Cebu City Council yesterday asked Mayor Michael Rama to appeal the decision of the Bureau of Internal Revenue (BIR) Commissioner Kim Jacinto-Henares to collect taxes from City Hall out of the P2.7-billion sale of 30.4 hectare-lots at the South Road Properties to SM Prime Holdings Inc. (SMPHI).

Councilor Edgardo Labella is worried after he learned that the SMPHI officials already informed Mayor Michael Rama that they will be constrained to withhold and remit to the BIR their installment supposedly due to the city on January 14, 2012 and their advance payment.

Although the BIR District Office No. 082 based in Natalio Bacalso Avenue assessed the capital gains tax and expanded withholding tax of the city at P197,204,935, but because the amount was not immediately paid by the city, the amount already reached over P800 million.

Assistant City Treasurer Emma Villarete said SMPHI is scheduled to pay the city within this week the amount of P105 million and another similar amount on April 14.

But because the SMPHI’s installment payment to the city for this quarter would not be enough for the P197.2 million tax obligation to the BIR, the SMPHI will pay the rest of the amount but it will be deducted from the next scheduled payment due on April 14, 2012.

According to Labella, the denial of the BIR Commissioner of the city treasurer’s request for exemption of tax payment is not the final decision on the matter because an appeal could still be filed before the secretary of the Department of Finance.

“It is the best interest of the City of Cebu that it should appeal the ruling of the BIR Commissioner to the DOF Secretary as the failure to avail itself of the said remedy will mean the loss of some P200 million that the city would have to pay to the BIR in expanded withholding taxes alone,” Labella said.

When asked of his next move, Rama merely replied, “Ah sige lang, sige lang, duna ta’y himoon ana.” (Don’t worry, we will do something about it.) He did not elaborate.

Vice Mayor Joy Augustus Young had asked Rama, through the media, to let Cebu City South District Rep. Tomas R. Osmeña talk with the BIR Commissioner or the DOF secretary about the issue.

But Osmeña said he will get himself involved with the issue if Rama admits that he could not solve it anymore.

The BIR Commissioner explained that although the City of Cebu has been accredited by the Philippine Export Zone Authority, it cannot be exempted from the payment of capital gains tax and withholding tax if it will sell the SRP lots to persons or companies that are not PEZA registered, particularly if the purpose is commercial.

Jacinto-Henares said the SMPHI was not accredited by PEZA when it purchased the 30.4-hectare SRP lot from the city. — (FREEMAN)