Findings No.5 COA Annual Audit Report 2005

July 28, 2008

5. To increase local revenue, the City collected P514,816.76 taxes from business establishments with annual gross sales of not more than P50,000 in violation of sections 143 and 152(a) of RA 7160, thus depriving the barangays of the income due to them.

Section 143 of RA 7160 provides that the barangays shall have the exclusive power to levy taxes in accordance with Section 152 (a) of the same Code which further provides that the taxes on stores or retailers with fixed establishments having gross sales or receipts of the preceding calendar year of P50,000 or less in the case of cities shall be at a rate not exceeding one percent on such gross sales or receipts.

But the City enacted Tax Ordinance No. 97-06-119 dated June 6, 1997 requiring all business establishments within the city to pay business taxes. During the year, P514,816.78 (Annex 6) were collected from 295 business establishments of the 20 barangays with annual gross sales of not more than P50,000. These were treated as income of the City.

This deficiency was brought to the attention of the Chief Executive in one of the conferences we had in October, 2005.

The City Mayor justified that it was one way of increasing their local revenue and since it was within their power to issue Mayor`s permit, the business tax on annual gross sales was attached to it. This information was also relayed to the concerned barangay officials to avoid double taxation to which said barangay officials concurred.

This practice however deprived the barangays of the income due to them which could have redound to the benefits of the residents in the form of basic services.

Recommendation

Amend the tax ordinance of the City by imposing business taxes on establishments with annual gross sales of more than P 50,000 only and let the barangays exercise their power to levy taxes in accordance with Section 152 of RA 7160.

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Written by admin · Filed Under Commission on Audit, Tangub City