Makati Mayor Jejomar Binay has agreed in principle to settle the city's P1.2 billion tax debts with the Bureau of Internal Revenue (BIR), it was learned Friday.

Revenue officials said the amicable settlement was arrived at after Makati Revenue Regional Director Jaime Santiago and Assistant Director Manuel Mapoy went to the Makati City Hall to meet with Binay and his staff to demand the payment of the tax due the city government.

Earlier, the Court of Tax Appeals (CTA) upheld the final tax assessment imposed by the BIR on the city covering unremitted withholding tax on the salaries of city officials and employees; expanded withholding tax from payments made by the city to its suppliers of goods and services; and value-added tax for the years 1999, 2001, 2002 and 2004.

According to Santiago, Binay agreed to settle the huge liabilities if the BIR waives the collection of penalties and surcharges and pay only the principal.

Santiago said Binay's proposal will be submitted to Revenue Commissioner Joel L. Tan-Torres who has the sole authority to decide on Binay's request for tax abatement.

He said the mayor also wanted to pay the liabilities on installment basis with the first payment to be made next year.

He explained that the city's budget for 2010 was already approved and that no amount was appropriated for the payment of debts.

BIR insiders said Tan-Torres is likely to approve Binay's proposal as it has precedents.

The BIR slapped the city with less than P2 billion deficiency tax assessments but it was reduced to P1.2 billion after payment of P500 million.

Binay then thought that the P500 million was settlement for the entire liabilities, which prompted him to elevate the case to the CTA after the BIR asked the city to complete the payment.