ARTA flags LGUs corruption-prone tax assessment

Published February 2, 2021, 7:00 AM

by Bernie Cahiles-Magkilat

The Anti Red Tape Authority (ARTA) has flagged local government units (LGUs) in their high assessment of business taxes and the imposition of Public Liability Insurance or its equivalent stressing such unnecessary requirements open opportunities for corruption.

ARTA Director-General Jeremiah Belgica made this call following ARTA’s ongoing surprise inspections of LGUs concerning their Business One-Stop Shops (BOSS).

Anti-Red Tape Authority (ARTA) Director-General Jeremiah Belgica (PIA NCR / MANILA BULLETIN)

“Unnecessary and burdensome requirements open an opportunity for corruption where it becomes a money-making business for government officers with connivance to some private players,” Belgica said.

Belgica has called on all LGUs to strictly observe the Department of Finance’s Bureau of Local Government Finance (BLGF) MC 01-2020, or the Updated Reminders in the Assessment of the Local Business Tax(LBT), Registration and Renewal of Business Permits and Licenses, and the imposition of Local Taxes, Fees and Charges, which provide for clear guidelines on the assessment of local business taxes in order to avoid whimsical, disproportionate, and unnecessary imposition of fees or taxes upon taxpayers.

Belgica emphasized that pursuant to Section B. 1. of BLGF MC No. 001-2020, LGUs are to base their assessments on the Audited Financial Statement of the applicant, or in its absence, on the Sworn Declaration of gross sales or receipts, or the applicant’s Income Tax Returns.

He explained that in case of suspected underdeclaration of gross sales/receipts, such application shall be tagged by the LGU and will be subjected to the examination of books of accounts by the local treasurer to be done after the business renewal period.

Still, he said, the renewal of the subject business permit may still proceed and the corresponding permit may be issued, which shall be subject to revocation or suspension in the event of a finding of under or misdeclaration after the conduct of such examination.

He likewise emphasized to LGUs the proper use of the Presumptive Income Level Assessment Approach (PILAA) pursuant to Section B. 3. BLGF MC No. 001-2020.

According to Belgica, this may be resorted to by LGUs in computing for the local business taxes but only if the taxpayer is unable to provide proof of its gross sales or receipts. It is important to note that the use of PILAA must be in the LGU’s local ordinance and has undergone public hearings and publications.

“Absent such ordinance, the assessment using PILAA is illegal and the taxpayer may properly claim the refund of the excess business taxes collected,” Belgica pointed out.

Aside from these observations during the surprise inspections that ARTA has conducted in the various BOSS in the National Capital Region, Belgica said that a number of complaints and reports came to his agency’s attention on the seemingly high assessment of business taxes or sometimes the none compliance with the procedure for proving gross sales or receipts as laid down by the BLGF MC. 01-2020.

“Unfortunately, this high assessment becomes an opening for corruption to fester,” he pointed out.

ARTA has urged LGUs that still require a Public Liability Insurance (or General Liability Policy Insurance) for the issuance of a business permit or renewal thereof to consider the immediate repeal of the ordinances requiring the same. This is because, he stressed that securing such insurance is optional to businesses and mandatorily requiring it serves as an undue additional requirement, especially for micro-small-medium enterprises.                                                                                      

He said such insurance policy is unnecessary and burdensome requirement as said that it only opens corruption in government in cahoots with some private players.

ARTA will work with DILG-BLGD and with DOF-BLGF to ensure full compliance of LGUs with BLGF MC. 01-2020. ARTA will also be inviting the LGUs for a meeting to formally discuss these matters.

“Any supposed violations of the RA 11032 or any legal orders without justifiable cause may be subjected to administrative investigation,” he concluded.