Business tax reform is back on the agenda in the city of Los Angeles as an advisory committee last week called on officials to make the city’s business tax system less confusing and more consistent.

The Business Tax Advisory Committee, a panel with members selected by Mayor Antonio Villaraigosa and the City Council, issued a series of recommendations for further reform of L.A.’s business tax system to the council. Los Angeles has the highest tax rate and most complex business taxes of any city in the region; several companies have either left the city because of high business taxes or have threatened to do so.

“The focus of this is to make the tax administration process fair, equitable, transparent and consistent,” said Lloyd Greif, chief executive of L.A. investment bank Greif & Co., who is chairman of the tax committee.

Among the recommendations:

• Creating a formal “classification upon registration” program to reduce confusion about a business’s tax category.

• Allowing the city more flexibility in imposing penalties on tax evaders to encourage them to pay their business taxes.

• Ensuring that prior decisions of auditors and the city’s Board of Review are not arbitrarily reversed if the taxpayer’s business remains unchanged.

The last recommendation comes amid controversy over reclassification of several Internet companies from a low tax category into the most expensive category. Last month, the city created a new lower Internet business tax category for these companies; though at least one of the reclassified companies, LegalZoom, may not qualify for the full extent of the tax breaks and is looking to leave the city.

“Businesses shouldn’t have to guess – at their peril – what their tax bill is going to be,” Greif said.

New Office

California business organizations greeted the creation of the state’s Office of Economic Development with enthusiasm.

“At long last California has a single entity focused on economic development and job creation,” said John Kabateck, executive director of the California chapter of the National Federation of Independent Business, which represents small businesses.

Gov. Arnold Schwarzenegger established the office in an effort to make the state more friendly to business and to guide companies through the state’s bureaucracy. The office is designed to be a one-stop shop for companies to register their businesses, get permits and licenses, report information to state regulators, and help businesses open or expand in California.

“This office is exactly what businesses need to navigate through state requirements and take advantage of state resources,” Schwarzenegger said April 8 when he signed an executive order establishing the office. “This office will cut red tape and streamline state functions.”

Schwarzenegger tapped Joel Ayala, former Orange County Chamber of Commerce chief executive, to head the office, which is being staffed using existing state resources.

Relief Demanded

A coalition of 300 California companies and major statewide business organizations has sent a letter to state lawmakers asking them to reduce the burden of state regulations.

In the April 12 “open letter,” the business coalition writes: “We strongly recommend that you make the regulatory system in California more cost-effective and predictable through measures that ensure regulatory agencies, departments and boards understand the impacts of proposed regulations and are held accountable for effective outcomes.”

The letter asks legislators to review major new regulations, to make sure the economic impacts of these regulations are measured before they’re adopted and to weed out regulations deemed ineffective.

“Your commitment to improving the regulatory climate will help to restore California’s reputation as an attractive state for investment and jobs,” the letter states. “Dozens of bills have already been introduced on these topics and we urge your support as they move through the process.”

The letter is signed by dozens of major national corporations and several business organizations, including the California Manufacturers and Technology Association, the California Chamber of Commerce, Associated Builders and Contractors, the California Grocers Association and the California Restaurant Association.

Among the Los Angeles County-based companies signing the letter are Paramount Ready Mix Concrete, Signal Hill Petroleum Inc. and San Marino Seafood.

Staff reporter Howard Fine can be reached at hfine@labusinessjournal.com or at (323) 549-5225, ext. 227.

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