Changes in tax laws advance

Posted: October 25, 2011

IT'S BEEN A long time coming, but a City Council committee yesterday approved two measures that would drastically alter the city's business-tax structure, and Mayor Nutter is on board.

Council's Committee on Finance approved a bill introduced by Council members Bill Green and Maria Quinones-Sanchez that would exempt the first $100,000 in business receipts from both gross-receipts and the net-income portions of the tax for all businesses, protecting smaller city-based businesses and startups. The measure would be phased in over a three-year period beginning in fiscal year 2015.

Under the legislation, the gross-receipt rate freezes and the scheduled reductions would be delayed until fiscal year 2014. City-based businesses would only pay taxes on goods sold within the city.

"The statement made by City Council and the administration is that Philadelphia is open for business," Green said. "This is the biggest impact in tax reforms done in the history of the city of Philadelphia in one single day."

The bill stems from a more-drastic 2010 measure that attempted to shift the business-tax burden from the net-income tax, which taxes profits, to the gross-receipts tax, which taxes sales. Last year's bill was tabled after it was met with opposition from the administration, which claimed it would hurt the construction industry, insurance and hotels.

But for now, everyone supports the latest plan, put together by a joint working group of Council members and administration officials, intended to create a level playing field for in-city businesses and their competitors.

"We're still in tough economic times but we need to do something to jump-start our own situation and circumstances," Nutter said. "We need to incentivize folks to come start a business here in Philadelphia."

Council and the business sector say the current business-tax structure puts city businesses at a competitive disadvantage because they pay a gross-receipts tax even if they lose money. Council and the mayor have been gradually reducing the gross-receipts tax since 1995.

"With unemployment hovering at almost 12 percent, the primary tool that will spur the economy out of one of the worst economic downturns since the Great Depression is new businesses coming to the city and providing jobs for local residents," said Joseph Mahoney Jr., executive vice president of the Greater Philadelphia Chamber of Commerce.

A second measure introduced by Councilman Jim Kenney that received committee-level approval would eliminate the business-privilege-license fee for all businesses starting in fiscal year 2014. A lifetime license costs $300 and and annual license is $50.

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