Claim for Refund/Tax Credit of Illegally Collected Local Business for the Years 2013 to 2015 Tax from Coca-Cola FEMSA Phils., Inc.

February 19, 2016 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Buenaventura F. Lagudi City Treasurer Office of the City Treasurer Tuguegarao City SUBJECT : Claim for Refund/Tax Credit of Illegally Collected Local Business for the Years 2013 to 2015 Tax from Coca-Cola FEMSA Phils., Inc. Sir : This refers to the attached letter dated January 15, 2016 of Atty. Antonio L. Cardio and Atty. Leonardo A. Aurelio , of A.M. Sison, Jr. & Partners Law Office, formally demanding, for and in behalf of their client, Coca-Cola Femsa Phils., Inc. (CCFPI), the refund/tax credit of illegally collected local business tax paid for the years 2013 to 2015 in the total amount of P266,396.57, allegedly as a result of uniformly and illegally based the tax computation for years 2013 to 2015 on the 2011 gross sales thus, resulting to overpayment of local business tax (LBT). In connection thereof, comments and/or appropriate action from that Office is hereby requested ten (10) days upon receipt hereof, together with the copy of the Revenue Code of that City, or excerpt thereof, imposing such specific tax on CCFPI. Be guided accordingly. (SGD.) JOCELYN T. PENDON OIC-Executive Director ATTACHMENT Law Office of A.M. Sison, Jr. & Partners Suite 2002-A Security Bank Centre Tel. Nos. 891-1338 to 40 6776 Ayala Avenue, 1226 Makati City Fax (632) 891-1136 Philippines, P.O. Box 3222, MCPO E-mail [emailprotected] January 28, 2016 Bureau of Local Government Finance Department of Finance 8th Floor EDPC Building, Bangko Sentral ng Pilipinas Complex, Roxas Boulevard, Manila 1004 Claim for Refund/Tax Credit of Illegally Collected Local Business Tax Paid for the Years 2013 to 2015 in the Total Amount of P266,396.57 by Coca-Cola FEMSA Phils., Inc. For and on behalf of our client, Coca-Cola Femsa Phils., Inc. (CCFPI) , we are furnishing you with our letter regarding the above subject, dated January 15, 2016, received on January 22, 2016 by the City Treasurer of Tuguegarao City, Cagayan for your review and appropriate action. ATICcS Hoping for your preferential attention on this matter. Yours Very Truly, (SGD.) ATTY. LEONARDO A. AURELIO January 15, 2016 Buenaventura F. Lagundi City Treasurer City of Tuguegarao Province of Cagayan Dear Madam : Claim for Refund/Tax Credit of Illegally Collected Local Business Tax Paid for the Years 2013 to 2015 in the Total Amount of P266,396.57 by Coca-Cola FEMSA Phils., Inc. For and on behalf of our client, Coca-Cola Femsa Phils., Inc. (CCFPI), we are formally demanding the refund/tax credit of illegally collected local business tax it paid for the years 2013 to 2015 in the total amount of P266,396.57, computed as follows: Tabulation A Year Gross Receipts Correct Tax Overpayment Preceding Year Tax Collected 2012 P56,067,718.20 (2011) P280,338.59 280,338.59 - 2013 49,812,515.63 (2012) 249,062.58 280,338.59 P31,276.01 2014 38,433,062.76 (2013) 192,165.31 280,338.60 88,173.29 2015 26,678,265.93 (2014) 133,391.33 280,338.60 146,947.27 Overpaid Tax for the years 2013, 2014 and 2015 P266,396.57 ========== Under Section 21.02 (b) of the Revenue Code of Tuguegarao City, it is provided that: "(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in accordance with the following schedule: With gross sales or receipts for the Amount of preceding calendar year in the amount of: Tax per Annum Less than P1,000.00 18.00 P1,000.00 or more but less than P2,000.00 33.00 2,000.00 or more but less than 3,000.00 50.00 3,000.00 or more but less than 4,000.00 72.00 4,000.00 or more but less than 5,000.00 100.00 5,000.00 or more but less than 6,000.00 121.00 6,000.00 or more but less than 7,000.00 143.00 7,000.00 or more but less than 8,000.00 165.00 8,000.00 or more but less than 10,000.00 187.00 10,000.00 or more but less than 15,000.00 220.00 15,000.00 or more but less than 20,000.00 275.00 20,000.00 or more but less than 30,000.00 330.00 30,000.00 or more but less than 40,000.00 440.00 40,000.00 or more but less than 50,000.00 660.00 50,000.00 or more but less than 75,000.00 990.00 75,000.00 or more but less than 100,000.00 1,320.00 100,000.00 or more but less than 150,000.00 1,870.00 150,000.00 or more but less than 200,000.00 2,420.00 200,000.00 or more but less than 300,000.00 3,300.00 300,000.00 or more but less than 500,000.00 4,400.00 500,000.00 or more but less than 750,000.00 6,600.00 750,000.00 or more but less than 1,000,000.00 8800.00 1,000,000.00 or more but less than 2,000,000.00 10,000.00 2,000,000.00 or more At a rate not exceeding fifty percent (50%) of one percent (1%)" It is clear from the aforequoted provision of the Revenue Code of Tuguegarao City, which is basically a reproduction of Section 143 (b) of the Local Government Code, that the basis of the local business tax for dealers, wholesalers or distributors is the Gross Sales or Receipts for the preceding calendar year , i.e. , if the taxpayer is paying his tax in 2015, the basis of the tax is his gross sales or receipts in 2014. TIADCc It bears stressing that where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application (Cebu Portland Cement Co. vs. Municipality of Naga, 24 SCRA 708 [1968]). However, in the case of our client, you uniformly and illegally based its tax for 2013 , 2014 and 2015 on its gross sales in 2011 resulting in the overpayment of our client's local business tax for 2013, 2014 and 2015 in the total amount of P266,396.57, as shown in the above Tabulation A. It is very apparent in the said tabulation that there is something wrong in the tax collected because the amounts collected for each of the years 2013, 2014 and 2015 are the same (P280,338.60) when the gross receipts during the applicable preceding years are different. Obviously, the tax collected for the years 2013, 2014 and 2015 were not based on the gross sales or receipts of their respective preceding years but on another year, i.e. , 2011. This can easily be verified by multiplying the gross receipts by 0.5%. This matter was brought to your attention by our client repeatedly in their letter-protests, the latest of which was dated March 10, 2015. However, same was perversely ignored and evaded for the past three (3) years. That is: What is the basis of the local business tax? You even falsely claimed that our client did not provide you with the necessary documents needed to determine the correct amount of its tax for 2015 (see your letter dated November 20, 2015) when in fact our client submitted to your office its 2014 Audited Financial Statements, 2014 VAT Quarterly Returns and 2014 Gross Sales Receipts per Branch through its letter dated July 9, 2015 (copy attached) which was received by your office on July 10, 2015. You even refused to release the Mayor's Permits and stickers unless the assessments under question are paid. Undoubtedly, with all due respect, the records show that your action evinces deliberate, willful, dishonest and blatant violation of the Revenue Code of Tuguegarao City, the Local Government Code, Anti-Graft and Corrupt Practices Act and the Code of Conduct and Ethical Standards for Public Officials and Employees. In view of the foregoing a demand is hereby made on you to immediately refund or issue tax credit to our client CCFPI the total amount of P266,396.57 representing illegally collected local business tax for the years 2013, 2014 and 2015. Your failure to heed this demand will compel us to file civil, administrative and/or criminal cases against you in the proper fora. Please give this matter your preferential attention. Yours Very Truly, A.M. SISON, JR. & PARTNERS LAW OFFICE By: (SGD.) ANTONIO L. CARDIO Roll of Attorney No. 25458 (SGD.) LEONARDO A. AURELIO Roll of Attorney No. 25411 Coca-Cola FEMSA Philippines, Inc. 23F Net Lima Building, 5th Avenue corner 26th Street Bonifacio Global City, Taguig City, 1634 Philippines Telephone Number: (+632) 866-2000 July 9, 2015 The City Government of Tuguegarao Office of the City Treasurer Tuguegarao City, Cagayan Attention: Mr. Buenaventura F. Lagundi City Treasurer Sir : We refer to the Letter of Authority No. 2015-03 issued to Coca-Cola FEMSA Philippines, Inc. (CCFPI) on 8 May 2015 covering the audit/examination of its books of accounts and other accounting records for year ended December 31, 2014, for its Sales Office located at Highway Caggay, Tuguegarao City, Cagayan. AIDSTE We are submitting herewith copies of the required documents and records, as follows: 1. Audited Financial Statements 2014 2. VAT Quarterly Returns 2014 3. Gross Sales/Receipts per Branch 2014 Other accounting documents and records, e.g. , Sales Invoice, Official Receipts, Purchase Invoices and other pertinent business documents are available for audit/verification during business hours at above cited office. Please acknowledge receipt of the foregoing documents hereof. COCA-COLA FEMSA PHILIPPINES, INC. By: (SGD.) GILBERT ARISTEO B. AGUIMBAG Finance & Administration Executive