The Bureau of Internal Revenue (BIR) has ordered Makati Mayor Jejomar Binay to settle the city government’s P1.1 billion unpaid withholding taxes from 1999 to 2002, or it will be forced to go after Binay’s properties.
In a demand letter dated March 9 to Binay, the city treasurer and the city accountant, BIR chief for Withholding Tax Division, Marivic Galban asked the city government to pay a total of P1,150,331,321.81 representing the unremitted withholding taxes from 1999 to 2002.
Galban said this amount could go higher if the city government also fails to pay the withholding taxes of employees from 2003 to 2007. She has given Binay until March 31, 2007 as deadline to settle the city government’s tax obligation and avail of a special "one-time administrative abatement program" but Binay still failed to settle it.
Binay, according to Galban, failed to pay even the basic tax due to the BIR despite several communications by the BIR to Binay.
"The collection will be enforced against your properties to effect the collection of the said liabilities without further notice," Galban said.
Withholding taxes are mandatory salary deductions withheld by the city government from the monthly salaries of their employees and which is remitted to the BIR representing payment of income taxes withheld.
Under BIR regulations, the remittance of withholding taxes are the duty of the city mayor and city treasurer and both are made equally liable under the criminal penalties provided for in the National Internal Revenue Code.
Under regular practice these taxes were due since 1999 and should have been paid every quarter after the city government withheld it from the salaries of their employees.
This new tax claim by the BIR could bolster allegations that Binay is allegedly employing "ghost employees" in the city hall.
It can be recalled that in October last year, former Makati Councilor Oscar Ibay accused Binay of having "ghost employees" when he revealed documents showing that 80 percent of the city government’s employees have been working for the past eight years without a taxpayer identification number (TIN).
Ibay said that there were 9,792 government employees in Makati who are without a TIN in 2001; 7,597 in 2003 and 8,068 last year.
He said the figures were attested to by Elizabeth Sacramento, head of the document processing section and Atty. Roberto Baquiran, revenue district officer of the BIR district office.
The tax identification number is assigned by the BIR to taxpayers for easy identification during tax payment as required by law.
Ibay gave three possible explanations for the alleged irregularity and these include: "withholding taxes deducted by city hall are not remitted to the BIR; second, taxes are remitted to the BIR but are not properly claimed by employees in their annual income tax payments; or the names on the payroll are fictitious.
If the roughly 8,000 "fictitious employees" each received an average monthly salary of P10,000, the residents of Makati could be losing more than P960 million a year in public funds over the last five years.