Closing an I-Café To Apply for a New Permit

In order to evade paying what seems to be an ever increasing local tax being levied by a local government unit (LGU), more and more owners are thinking of “closing” their i-cafés and secure new permits instead of renewing their old ones. The reason for the big difference in the taxes imposed on new registrations as against renewal of existing business permits has been explained in my previous blog but is it advisable to close a i-café and apply for a new business permit?

First of all, let me describe what happens when a business owner decides to “close” his i-café. More often than not, he makes this kind of decision at permit renewal time so a whole year operation already transpired before he files the application for closure of the business due to losses.  As such and as provided for in Section 145 of the Local Government Code on Retirement of Business, he shall submit a sworn statement of its gross sales or receipts for the past year. If the tax paid during the past year be less than the tax due on said gross sales or receipts, the difference shall be paid before the business is considered officially retired.

Secondly, he will need to appoint a “new” owner of the i-cafe who logically must not be a first degree relative because how can he sell a losing business to his wife or children. The “new” owner will have to go through the process of getting a new business name from DTI before a new permit can be secured from the LGU where the i-café is located. This procedure will result to the “new” owner paying less than what will be assessed if the “previous” owner renewed the business permit. Is it really the case? I suggest you make a calculation before you make the conclusion.

What is wrong with paying more if the truth is that you added some units to your i-cafe in the past year? Is it worth your while to give up a business name that you have nurtured for a year or two? Is evading the payment of a few thousand pesos reasonable if you equate the amount you will pay for the free public school education, efficient garbage collection and the reliable health services that you are getting from your local government?