Sotto bill seeks boost to LGUs’ income

September 08, 2019

SENATE President Vicente Sotto III has proposed to amend the “Situs of the Tax” provision in RA 7160 or the Local Government Code of 1991 in a bid to increase the local government units’ revenue collection.

Situs, in tax parlance, refers to the place of taxation.

Prior to the passage of RA 7160, the practice of allowing businesses to pay their taxes in Metro Manila, where they keep their principal offices even if most of their earnings come from their operations in the provinces, has been the subject of numerous complaints of local government units (LGUs), Sotto said.

“The Local Government Code of 1991 provided solution for such grievances. However, from the time of its effectivity on Jan. 1, 1992, most LGUs outside Metro Manila were left behind by those within the metropolis in terms of providing basic services, development and economic growth,” he said.

Senate Bill No. 494, Sotto said, seeks to address the LGUs’ situation by proposing an amendment to RA 7160, specifically the provision on the “Situs of the Tax” under Section 150.

The measure provides for the allocation of the value-added tax (VAT) paid by manufacturers, assemblers, contractors, producers and exporters with factories, project offices, plants and plantations to the municipality or city where they are operating. It further provides that the allocation of VAT on payments of sale to the principal office be reduced and that of the municipality or city where the factory, project office, plant or plantation is located be increased.

In proposing the amendment, Sotto sought to increase to 90 percent the current 70 percent of all sales recorded in the principal office which shall be taxable by the city or municipality where the factory, project office, plant or plantation is located.

From the present 30 percent, only 10 percent of all sales or transaction made in the principal office shall be taxable by the city or municipality where such principal office is located, the senator said.