Cebu City Gov’t appeals ruling

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Saturday, January 11, 2014


THE Cebu City Government will ask the Court of Appeals (CA) to reevaluate the ruling of the trial court, which stopped the City’s bid to collect about P62 million in business taxes from a private hospital. 

City Hall lawyers filed a notice of appeal informing Regional Trial Court (RTC) Branch 7 Judge Simeon Dumdum Jr. that they were unsatisfied with his order that prevented the City Treasurer’s Office from collecting business taxes from Perpetual Succour Hospital Inc. (PSH). 

Dumdum denied last year the City Government’s motion for reconsideration. 

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On Oct. 14, Dumdum ruled that the City cannot impose Tax Ordinance 113, which amended the Omnibus Tax Ordinance of Cebu City, which imposes 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 treasurer’s office from imposing business taxes on the hospital. 

Validity questioned

Cornelio Mercado, the hospital lawyer, 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 treasurer’s office issued a certificate of delinquency to the hospital 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 the hospital does not operate as one because it runs a pharmacy, general merchandise store and real estate leases, among others. 

The City 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 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,” he said.

Void ordinance

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. 

The judge also said even the Court of Tax Appeals (CTA) 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 to reimburse the hospital P41,290 as docket fees and P76,440 as bond premium.

In its motion for reconsideration, city lawyers argued that the court erred in declaring the hospital a non-stock and non-profit entity.

The City also said the court was wrong in barring the city treasurer from collecting business taxes from the hospital.

The court also erred in directing the City to reimburse the hospital P41,290 as docket fees and P76,440 as bond premium.

“The court seems to fault the defendants for doing their job,” the City said.

In his two-page order, Dumdum pointed out the rulings of the CTA may have merely “persuasive effects on the lower court.”

“But if these decisions receive confirmation by the Supreme Court, the lower court is bound to follow them,” said Dumdum in his order.

Section 193 of the Local Government Code exempts non-stock and non-profit hospitals from local government taxation, the judge pointed out.

“Hence, the City of Cebu cannot impose percentage or business taxes on Perpetual Succuor Hospital, Inc., a non-stock, non-profit hospital,” Dumdum said.

The judge also said the City has to reimburse the hospital for the docket fees and bond premium since “justice requires that it be reimbursed for these amounts.”

Published in the Sun.Star Cebu newspaper on January 11, 2014.

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