Senator Chiz Escudero is pressing for a more equitable distribution of tax under a proposal that will give a 100- percent tax share to local government units (LGUs) from all revenues derived from sales or transactions where the principal place of business is located.
“We seek to modify the present situs rule on taxation, which is already recognized and imposed by the Local Government Code. We want a fair tax sharing for our local governments,” Escudero explained.
Section 150 of the Local Government Code of 1991 on situs rule or the taxing jurisdiction rule on local business tax provides that “all sales made in a locality where there is a branch or sales office or warehouse should be recorded in said branch or sales office or warehouse and the local business tax due should be paid to the city or municipality where the same is located.”
This basic rule of taxation has been a dispute among local government units especially since most principal places of business are located in highly urbanized cities in the country like those in Metro Manila.
“Majority of the big businesses build their factories or project offices in provincial areas but maintain head offices in the cities. This bill wants to equally distribute the revenues among towns and municipalities so that they can get their right share of the pie,” the senator said.
Escudero’s Senate Bill No. 105, or to be known as Rationalizing Local Taxation Act, expunges the present 30-percent share of the LGU where the principal place of business is located.
The senator’s proposal also seeks to apply the following sales allocation: 30 percent of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located and; 70 percent of all sales shall be taxable by the city or municipality where the factory, project office, plant or plantation is located.
“There is a constitutional mandate of making our LGUs autonomous and self-sustaining government bodies. SBN 105 is in consonance with this,” Escudero said.