Press Release
September 11, 2015


Sen. Francis "Chiz" Escudero is urging the administration to support the proposed amendment to the situs rule on local business tax in a bid to raise revenues for local government units (LGUs) and boost their financial capability to execute programs in their respective areas.

Speaking before local executives during a convention organized by the League of Municipalities of the Philippines (LMP) Visayas Cluster in Iloilo recently, Escudero underscored the need to amend Section 150 of Republic Act No. 7160, or the Local Government Code, a provision which he said has deprived LGUs of much deserved revenues for a long time.

"We have a pending bill which seeks to amend the situs of taxation provision in the Local Government Code. Essentially, we want businesses to pay their local taxes in municipalities where the businesses operate, instead of where their main offices are located. LGUs in effect should have a bigger share in the revenue from these firms," explained Escudero, former chairman of the Senate Committee on Finance.

Escudero has been pushing for the amendment since 2012, when he filed Senate Bill No. 105 which seeks to give a 100-percent tax share to LGUs so long as such sales or transactions occur in the LGU concerned. In 2013 under the 16th Congress, the senator refiled the proposal, or SBN 120.

"Ang situs of taxation ay dapat baguhin dahil yung mga pinagkakitaan ng mga negosyong iyan, galing sa bulsa at pera ng mga naninirahan sa inyong mga munisipyo at sa inyong lokalidad. Sa mahabang panahon, tinututulan po ito ng DBM, sa mahabang panahon tinututulan din ito ng BIR.

"Sana sa hindi malayong hinaharap masuportahan ito ng administrasyon upang maging realidad na at upang maisakatuparan alang-alang sa mas nakatataas na interes ng mga lokal na pamahalaan," the senator explained.

Besides, most business owners, according to Escudero, prefer to pay their taxes where their businesses are located to "foster a relationship with the LGU where they operate."

Escudero's bill expunges the present 30-percent share of the LGU where the principal place of business is located.

"We have to make our LGUs autonomous and self-sustaining government bodies as mandated by the Constitution. More income for our LGUs will also help the administration's drive for inclusive growth as it will spur economic development in the countryside," he said.

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."

The rule has become a contentious issue because of the multiple jurisdictions spanned by most business operations with their branches, sales outlets, factories, project offices and plantations or plants.

Escudero's proposed bill also seeks to apply the following sales allocation for manufacturers, assemblers, contractors, producers and exporters with factories, project offices, plants and plantations in the pursuit of their business:

  •  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.

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