Monday, May 07, 2007

I smell a rat in Makati

The current woes hounding Makati City Mayor Binay stems from the city government's failure to remit the withheld taxes of its employees. One must keep in mind this most important detail in this particularly fresh episode of political drama.

In the usual case, the city government or any company for that matter, may withhold a portion of its employees' salaries with the intent of remitting the same amount to the Bureau of Internal Revenue (BIR). The same organization, city government or private corporation, reports the amount payable to the BIR when it files its taxes and it is expected that the organization remits the payment to the BIR via a simple bank transaction. Sounds simple.

Now let's take a look at the Makati case. The BIR is trying to collect from the city government the taxes of its employees it withheld. Take note, the taxes due are that of its employees' and not the city government's. The amount is not computed by the BIR, but is determined and computed by the city government and is reported by the city government via the tax returns.

However, the city government apparently failed to remit the taxes it reported to the BIR. Under the law, an organization that fails to remit payments, despite the filing of tax returns, commits tax evasion. The city government of Makati failed to remits its employees' taxes for several years, accumulating to more than a billion pesos. And for this reason, Mayor Binay admitted that he met with Finance Secretary Gary Teves to find compromise with regard to this issue. He claims that the city will pay P200 million of the P1.1 billion taxes payable.

Well, that last part is the strangest of all and has gotten me to smelling a rat in Makati. Why should the city government negotiate something that doesn't belong to it. The BIR is merely trying to collect the taxes of Makati city government employees' taxes. Not the city government's, not Mayor Binay's, not any other official in Makati. So what gives them the right to negotiate for something that is not directly theirs? They're merely supposed to hold the money in behalf of their employees in order to expedite the collection of taxes.

If the issue is one of computation and determination of the correct amount, shouldn't that have been fixed through amendments of the tax returns with the subsequent and prompt remittance of the amount payable?

The mere fact that Binay admitted to negotiating on something for which he had no right to negotiate raises suspicion. The issue is that the tax is of the employees, and Binay failed to remit the tax which did not belong to him or the city government in the first place. Also note that it is this same city government that reported the amount in its tax returns which is now contesting the amount it reported. Strange that.

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