Bureau of Local Government Finance Opinion

June 14, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned to the City Treasurer, Makati City the herein preceding indorsement relative to the letter dated April 5, 2000 of Mr. C. P. Noel, Tax Division, SGV & Co., requesting in behalf of their client, Tupperware Philippines, Inc. (TPI) waiver of the penalty surcharge and interest on the municipal license fee assessed against TPI. Representations are made that TPI was incorporated on September 16, 1998, thus filed an application for a first Mayor's permit with the City of Makati on October 5, 1998, and paid the total amount of P6,430.00. On January 13, 1999, TPI filed an application for the renewal of the Company's Mayor's permit with a corresponding declaration of the Company's Gross Sales in the amount of P117,623,078.00. However, the concerned personnel from License Division of that City allegedly did not accept TPI's application. TPI was advised to revise the said application since it is just a new corporation and does not have a Financial Statement yet. Thus, TPI was provided with a new computation and on the basis of which a revised application was filed without a declared gross sales or receipts. TPI was made to pay the amount of P4,240.00. And for the year 2000, TPI filed an application for the renewal of its Mayor's permit. Originally TPI was assessed deficiency business tax for the preceding year of 1999 in the amount of P558,115.39 and surcharge/interest in the amount of P299,938.85 or a total amount of P888,054.24. However, since TPI believes that it should not be made liable for the surcharge and interest, the same expressed its willingness to pay the basic tax due but not the said penalties. In fact, TPI expressed its willingness to pay the basic tax due under the correct business classification (under a higher tax rate), since, as pointed by TPI, that office made a mistake when it used the wrong business classification. Hence, under the corrected classification, TPI is being asked to pay the amount of P806,673.09 as basic tax due and the amount of P411,403.28 as surcharge and interest or a total amount of P1,218,076.37. DACcIH In this connection, it may be stated that where the complaining taxpayers honestly paid their taxes within the time required by the Local Government Code of 1991 (LGC) to pay, but that, due to wrong interpretation and erroneous assessments subsequently made this resulted in the undercollection or short collection of the tax due, these taxpayers who paid their taxes on time and in the honest belief that the tax assessed and collected from them are correct, should not be required to pay the surcharge and interests in the guise of late payment. It bears emphasis however that the above views shall be in effect up to that extent when the undercomputation of the tax due is not yet discovered. However, as of the date of the discovery of the underpayment and the taxpayer is notified thereof, surcharges and interests should be assessed on the unpaid tax. On the basis of the representations laid-out above, TPI should not suffer the imposition of penalties for late payment of its 1999 accounts for there was no deliberate attempt to avoid paying the same, as reflected in the application for Mayor's Permit (Annex B) filed by TPI on January 13, 1999. Accordingly that Office is hereby instructed to recompute the assessed tax delinquency in accordance with the foregoing discussion. The TPI counsel is being furnished a copy of this indorsement for his information and guidance. Advice of action taken hereon is requested. ATICcS (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a2000-0602.pdf> last visited on October 2, 2013.