More restaurants in Davao City are folding up due to very low sales and high rental fees.
After the widely popular Saging Repablik, several restaurants including Bon Appetit French restaurant, Keepsakes Sta. Ana branch, and Hanoi Vietnamese Restaurant Abreeza Branch and Cena Modern Bistro inside the Home Crest Hotel in Ecoland went on to close down and cease operations permanently.
According to the owner of Bon Appetit, in addition to low sales, the other reason why they are closing is that the restaurant’s trademark ambiance cannot survive due to the strict guidelines of the new normal.
“Tungod gyud kay dili pa confident mugawas ang general public to dine out. Hadlok sila. Because of this ubos ang sales. Kung dili nga ubos ang sales, wala man problema sa rent. But the number one expense item sa resto-outside salaries and food cost, is rent. Ma-adjust sa store owner ang ordering sa ingredients kung hinay ang resto. Gamay lang paliton. Palong ang aircon para ubos ang kuryente,” said Benjamin Lizada, president of Restaurant Owners Association of Davao City (ROADC).
Lizada added that restaurant owners can adjust salaries through ‘flexi time’ and special arrangements with workers such as limited hours or days of work.
“Or even to the point of retrenching some workers. Kana tanan naa sa among control,” he said stressing that they cannot control the rental fees and taxes. “Mao na kanang duha i-agi sa hangyo. Right now for example ako is operating slightly below breakeven, lugi gamay. Pero okay lang kay at least naa mi mahatag pang pagkaon among mga tao. Unya gamay akong lugi kay gipaubsan man ang among rent sa lessors. Pasalamat mi pero kung taasan nila among rent dako na ang lugi. Mapugos gyud mi ug sirado.”
Bring down real property tax rates back to 2017 for lessors
The ROADC, together with the Tourism Council of Davao City (TCDC) reiterate their appeal to the local officials of the city government of Davao to bring back the Real Property Tax (RPT) rates back to 2017 levels beginning third quarter of 2020 until the 4th quarter of 2021 through a resolution.
The ROADC resolution requests the city council to bring down the current level of RPT to 2017 level or grant a rebate targeted at lowering the current RPT to a level approximate to that of 2017 rates, to commence third quarter of 2020 until end of 2021, as a form of assistance to lessors and business owners during this time of pandemic.
It also emphasized that since the city government of Davao implemented the community quarantine (CQ), a number of restaurants have either ceased operations, permanently closed, and/or either operating at a breakeven/slightly below breakeven levels, with only take-out or 50 percent dine-in operations, despite the retrenchments or significantly lowered rental rates extended by the lessors.
Lizada said lowered RPT will ensure the maintenance of a tax base that would in turn ensure government revenues from other tax revenues, not just RPT. A tax base is a total amount of assets or income that can be taxed by a taxing authority, usually by the government.
This will enable the lessors to extend the lowering of rents, which keeps the current tax base intact.
“Daghan man forms of tax revenues from these businesses such as city health permit, Mayor’s permit, garbage fee, weighing scale fees, sign board fees, sales tax, VAT, corporate income tax. Kung dili matabangan ang mga lessors sa RPT dili sab nila mapa-ubsan ang rent. Not for long. Kay ang lessors mainly ang maigo sa taas na RPT kay sila may daghang yuta ug buildings for rent,” he said adding that keeping the tax base intact is important so that when things are normalized again the city can recover faster. “Kung daghan mag-sirado nga negosyo tungod sa high rent, mogamay ang source of revenues sa gobyerno. Mas gamay ang iyang masingilan ug tax. Due to the closure of restaurants the tax base is thinning. Gaka-gamay na ang tax base base kay daghan ng magsirado.” In an earlier interview, Councilor Danilo Dayanghirang said as assistance to the restaurant owners, the city council has able talk to some lessors who already extended or reduced the rental brought about the city’s tax relief and this include the extension of the third quarter payment to fourth quarter payment or RPT.
However, according to Lizada, it only extended the deadline of payment and still does not help. He believes that these closures are just the beginning.
“Pero with the lowering of the RPT, we have a good chance of arresting if not reversing it. Kulang ang extension. If we lose the tax base mas daghan pag mawala, not only RPT-business tax, city health permits, garbage fee, weighing scale fee, etc. Unta they will sit down and compute-at the very least, do a cost-benefit analysis of closures,” he said.
The city government, according to Lizada, should do a cost-benefit analysis and compare potential losses of the lowered RPT against loss of other tax revenues due to closures.
“If they see that mas daghan mawala kung ipaubos ang RPT then maintain. Pero kung mas dako ang mawala kay daghan nag-sarado plus the fact that mas lisud mag-recover kung gamay tax base, then lower the RPT. Wala’y labot diha ang pagpakaon sa mga unemployed and their dependents due to closures,” he said.
Lizada did not only talk about the lessors but even the owners of the small hotels in Davao City.
“Dako ilang bayronon sa RPT kay dako biya assessment sa building and type of materials. This time halos silang tanan zero occupancy,” he said.
The resolution is currently being circulated for signature.