Friday, October 20, 2006 Lawsuit surprises City Hall By Linette C. Ramos Sun.Star Staff Reporter
THE lawsuit filed by proprietary schools and hospitals surprised Cebu City officials yesterday. They believe the ordinance taxing the said institutions was passed with the owners’ “verbal approval.”
City Councilor Jose Daluz III, proponent of the ordinance, said he was also confused that the establishments asserted their exemption from paying real estate taxes when the City Hall does not intend to collect the tax from them.
As provided for in a recently approved ordinance, City Hall reduced the business tax rate for non-stock, non-profit schools and hospitals from 2.5 percent to three-fourths of one percent retroactive 2003.
Another ordinance approved recently also grants an exemption to the establishments for the payment of penalties and surcharges for all their unpaid business taxes.
By approving both ordinances, the City was able to ease their tax burden, Daluz said.
Public interest
“Cebu City stands to lose millions because of the two ordinances but considering that their services are imbued with public interest, we agreed to lower their taxes and exempt them from penalties,” he told Sun.Star Cebu.
“I might be wrong but I thought their representatives already agreed on this, that’s why we passed the ordinance. I hope this will be resolved in court because we are surprised that they filed a case. A lot of the councilors believe there was already a verbal agreement,” Daluz said.
Officials of eight schools and hospitals filed a civil suit and asked the court to stop the implementation of the amendments in the Cebu City Omnibus Tax Code, saying the amendments made are “illegal”.
They argued that section 193 of the Local Government Code grants tax exemptions to non-stock and non-profit hospitals and educational institutions.
The amendments classified proprietary schools and hospitals as service-oriented industries.
The tax code now specifically states that the establishments are subject to business taxes using a graduated tax rate, depending on their gross sales receipts for the preceding year.
In a separate interview, City Administrator Francisco Fernandez said he respects the school and hospital owners’ decision to file a complaint.
Consult
The petitioners include Cebu Doctors’ University (CDU), Velez College, Cebu Institute of Technology, Southwestern University and their affiliated hospitals.
“We talked to them. We consulted them and we thought it was okay. Now if they’re filing a case, then obviously it’s not okay for them. But it’s their right to file a case, I hope the court will resolve the matter,” Fernandez said.
He recalled that in a meeting with the school and hospital representatives, he got the impression that all those present agreed to the amendments, except for CDU.
The meeting was held before the mayor signed the ordinance.
“We believe it’s a very small tax amount. It’s just three-fourths of one percent. Besides, most of their students are not from Cebu City and I think they should also share in the cost of traffic management, garbage collection and road repairs by paying the tax,” he said.
Fernandez explained that for a P20,000 tuition (for each student), only P150 will go to business tax.
Contrary to the petitioners’ claim that there was no public hearing held before the ordinance was approved, city officials said the school representatives were even allowed to speak during the public hearing last January.
Even before the amendatory ordinance was approved, hospital and school owners had warned of an increase in tuition and hospital fees if the measure is approved since they will have to pass on to their clients the tax they will pay.
