Court strikes down biz tax on hospital-A A +A
Monday, October 21, 2013
REGIONAL Trial Court Judge Simeon Dumdum Jr. struck down the Cebu City Government’s attempt to collect about P62 million in business taxes from a private hospital.
Dumdum, in his decision dated Oct. 14, prevented the City, the City Treasurer’s Office, and their agents from collecting business taxes from Perpetual Succour Hospital Inc. (PSH).
The presiding judge of the RTC Branch 7 ruled the City cannot impose its Tax Ordinance 113, which amended the Omnibus Tax Ordinance of Cebu City, imposing business tax on proprietary schools and hospitals.
The case stemmed from the petition for injunction the PSH filed in court to prevent the City and the City Treasurer’s Office from imposing business taxes on the hospital.
PSH’s counsel, Cornelio Mercado, questioned the validity of the City’s Omnibus Tax Ordinance, which imposes business taxes “on any business…a percentage of two and one half of the gross receipts or sales” of private schools and hospitals.
The City Treasurer’s Office issued a certificate of delinquency to the hospital management last April 13 for unpaid business taxes from 2000 to 2009, amounting to P62 million.
City Hall questioned the status of the PSH as a non-stock, non-profit corporation, saying that the hospital does not operate as one because it runs a pharmacy, general merchandise store and real estate leases, among others.
The City, in its motion to dismiss, also said PSH failed to present proof it is a non-stock, non-profit corporation.
Dumdum said that even if PSH does not function as a non-stock, non-profit organization, “its (status) does not change its nature and standing under the law (as a non-stock, non-profit corporation).”
Dumdum had also affirmed his order, dated Aug. 4, 2010, preventing the City Government from enforcing its tax ordinance on PSH.
Dumdum, in his four-page decision, said the Securities and Exchange Commission recognizes PSH as a non-stock, non-profit entity.
“The court, unless petitioner’s status is directly contested in proper proceedings, must give due recognition to this,” said Dumdum.
If City Hall intends to tax the hospital for its pharmacy and general merchandise stores, among others, then, Dumdum said, notices of unpaid business taxes should be stated and “not put a blanket over the whole hospital and bring, within their scope, even purely hospital operations.”
The court said that if City Hall insists on collecting business tax from a non-stock, non-profit corporation, it would have to move for a review of the Local Government Code.
In his latest ruling, Dumdum also pointed out the City already assessed the alleged tax liability of the hospital even before it could verify whether it is a non-stock and non-profit institution.
“It seems that the act of the defendants (City Government) was premature,” said Dumdum in his decision.
The judge also said even the Court of Tax Appeals declared PSH a non-stock, non-profit institution that “operated exclusively for religious and charitable purpose.”
Likewise, the Department of Justice had declared City’s Omnibus Tax Ordinance as null.
The judge also ordered the City Government to reimburse the hospital P41, 290 as docket fees and P76, 440 as bond premium.
Published in the Sun.Star Cebu newspaper on October 21, 2013.