CH officials hope for compromise on P255 million taxes on schools, hospitals
WHILE seizing the assets of seven proprietary schools and hospitals with unpaid taxes is an option, other Cebu City officials opt to refrain from doing anything “drastic.”
The officials hoped that a compromise can be reached for the payment of some P255 million in taxes.
Mayor Tomas Osmeña, however, said he will do what the City Treasurer’s Office (CTO) and the City Attorney’s Office recommend regarding the matter.
Three schools and four hospitals have refused to pay P155 million in business taxes and questioned in court the validity of the City Government’s amendatory tax ordinance.
Business taxes
But as early as March 2001, the Bureau of Local Government Finance (BLGF) of the Department of Finance already made a stand that privately-owned schools and hospitals are subject to local business taxes.
The owners said that under the law, they are not subject to tax because of the nature of their business, which is service-oriented. Aside from those that sued the City, another school has an unpaid tax of some P90 million.
In his news conference yesterday, Osmeña said the City will collect payments for the unpaid taxes in whatever way the concerned City Hall departments recommend.
“I run the City professionally and in spite of the nonpayment of these accounts, we’re the most professional in fiscal management in the entire region. It’s the line staff, the city treasurer and the legal department, that determines these things so whatever they say has to be done will be done,” the mayor said.
Like the sidewalk and market vendors, he said that proprietary school and hospital owners will have to pay business taxes to the City.
‘Above the rest’
“We can’t make these people feel that they are above the rest. Even the sidewalk vendors pay taxes... How in the world did we get into the situation where ordinary sidewalk vendors pay and the schools don’t?” Osmeña said.
Sun.Star Cebu called lawyer Cornelio Mercado, the legal counsel for Cebu Doctors’ University and Cebu Doctors’ Hospital, but he declined to be interviewed as the case is still pending in court.
Because the schools and hospitals failed to secure an injunction against the City’s implementation of the tax ordinance, the CTO has continued to collect business taxes from the institutions.
However, they refused to pay and have also stopped submitting their financial documents since 2005, keeping the CTO from assessing their taxes due from 2005 to the present.
City Councilor Jose Daluz III and City Treasurer Tessie Camarillo earlier said that one option the City could take is exercise its authority to “distraint personal properties” or “levy properties” of the owners of the schools and hospitals. This includes, but not limited to or not necessarily, the properties that have unpaid taxes.
But a City Hall source, who requested anonymity, said it might be better not to take any action at this time as there might still be a chance for the City and the institutions to reach a settlement during the pre-trial conference next month.
The source privy to the case said, however, that there is no legal impediment on the part of the City in taking any of the administrative and legal remedies provided for in the Local Government Code.
“Perhaps we can withhold any drastic action related to this case because there is still a possibility that we can reach a compromise on the payment.
But they will really have to pay because as early as 2001, there have been opinions given that they are liable to tax,” said the source.
According to the opinion published in the “Local Business Taxation: the BLGF-DOF Perspective,” privately owned schools and hospitals that are organized as stock corporations are engaged in business and are therefore subject to local business tax and other regulatory fees.
Opinion
The BLGF drafted the opinion in March 2001 in response to the inquiry of lawyer Rolando Nonato, one of the legal counsels of CDU and CDH.
In exercising the local government unit’s power to distrain personal property, the source cited Section 175 of the Local Government Code, which states: “Upon failure of the person owing any local tax, fee or charge to pay at the time required, the local treasurer or his deputy may, upon written notice, seize or confiscate any personal property belonging to that person or any personal property subject to the lien in sufficient quantity to satisfy the tax...”
To distrain means to “appropriate somebody’s property as a pledge or guarantee that a certain obligation will be fulfilled.”
“The property will then be considered as guarantee for payment. The LGU has the power to seize any personal property belonging to that person or persons who have unpaid taxes,” the source added.
Last year, the City Council amended the Omnibus Tax Code and reduced the tax collected from proprietary schools and hospitals.
From 2.5 percent of the annual gross sales, the City is now collecting P15,000 for the first P1 million in gross sales, and three-fourths of one percent for sales in excess of P1 million.
Cebu Doctors’ University (CDU), Cebu Institute of Technology (CIT), Southwestern University (SWU), Sacred Heart Hospital, Cebu Doctors’ Hospital (CDH), Cebu North General Hospital and Velez General Hospital filed a civil case against the City in June 2007 and asked the court to declare the City’s amended tax ordinance null and void. (LCR)
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Sun.Star Cebu - CH officials hope for compromise on P255 million taxes on schools, hospitals
Known schools and hospitals in Cebu did not pay 'taxes'
Originally Posted by jdimpas
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