THE Cabanatuan City government has agreed to a periodic validation of tax records against actual payments of taxes by various businesses after a random check by government auditors last year revealed that some traders are paying much lower than what they should.
The 2023 audit report on the local government revealed that the traders were under-declaring their gross receipts in their application for business permits, and the City Treasurer’s Office simply accepted the figure without cross-checking against submitted documents in its possession.
“Review of the assessment of business tax for CY 2023 revealed that the declared gross receipts of two sampled taxpayers in the application for business permit was significantly lower than the computed gross receipts from their transactions,” the audit team said.
Responding to the audit observation, the city government said it will conduct a regular review and update of the City Revenue Code at the recommended interval of five years to optimize revenue generation.
It likewise vowed to “verify, assess, and validate other businesses” aside from the two taxpayers found by COA auditors, starting with available records of the City Treasurer’s Office as well as those in the safekeeping of the Office of the City Accountant.
The audit report identified the businesses as Jassian Enterprises and Dem Hel Computer Trading.
The first retailer declared gross sales of only P1 million in its application for business permit in 2023 but a review of its transactions with the city government alone showed total sales amounting to P6.89 million in 2022.
Its contracts with the city government include delivery of office supplies, rain gear, furniture, eco bags and plastic bags, and janitorial supplies.
The second trader declared taxable sales of only P365,685 but documents at the City Treasurer’s Office showed total transactions with the local government unit (LGU) was already at P2.605 million. Its transactions include supply and delivery of IT equipment, laptops, two-way radio, and office equipment.
Auditors clarified that the two companies do not do business with Cabanatuan City alone because they have other clients.
The Commission on Audit warned that the city government could be losing millions because of the failure of the city treasurer to detect under-declaration of gross sales.
It pointed out that the City Revenue Code empowers the City Treasurer or his authorized representative to “verify or assess the gross sales or receipts of the taxpayer under the best available evidence.”
“In order to determine the correct amount of sales/receipts of the business as a basis for assessment of the correct amount of business tax, the CT may examine the books of accounts and pertinent records of the concerned business pursuant to the City Revenue Code and Section 171 of the Local Government Code,” the COA said.
Year-on-year business tax collections of Cabanatuan City showed an increase from P228.79 million in 2022 to P254.78 million in 2023. However, the collections could have grown higher if proper taxes were determined, government auditors said.
“Although the total income of the city from business taxes during CY 2023 had increased as compared to the immediately preceding year, the LGU’s collection from business taxes could still have significantly increased had the gross sales/receipts declared by all the business establishments been properly verified,” the audit team said.
