BUSINESS TAX ISSUE: City okays compromise deal with hospital, two schools

CEBU, Philippines - The Cebu City Council yesterday finally approved the proposed compromise agreement between the two private universities and a private hospital and the City of Cebu regarding the mode of payment of their business taxes to the city.

Councilor Edgardo Labella presented to the city council yesterday the separate compromise agreements between the city and Cebu Institute of Technology, University of Cebu and St. Vincent Hospital. 

The committee on laws of the city council, through its vice chairman councilor Gerardo Carillo, gave its legal opinion that there is no legal impediment for the approval of the proposed compromise agreement.

Carillo said aside from the financial benefits that can be derived from the memorandum of agreements, the residents of Cebu City would directly benefit through the scholarship grants and charitable hospital services.

Cebu City has an existing ordinance imposing a 75 centavo business tax for every P100 gross income of schools and hospitals that are operating within its territorial jurisdiction, but the officials of these institutions filed a case in court questioning the validity of the ordinance.

The schools and hospitals claimed that they are exempt because their institutions are not for profit.

CIT was among the schools and hospitals that had filed a civil case which is still pending before the Regional Trial Court, but CIT president Gregorio Escario withdrew as one of the plaintiffs of the case and offered the city a compromise agreement.

Although UC and St. Vincent are not parties of the case that is still pending before the court, its owners have expressed willingness to enter into a compromise agreement with the city out of goodwill and without admitting that they are obliged to pay such taxes.

It was stipulated in the agreement that the term “gross receipt” only covers tuition and registration fees for schools, while for the hospital the payment of professional fees for the doctors and other medical specialists shall not be subject to business taxes.

Councilor Rodrigo Abellanosa objected and decided to abstain from supporting for the approval of the said agreement as he described it as disadvantageous to the other schools and hospitals.

The agreement was that the amount to be given to the city shall be the aggregate amount for the years 2007, 2008 and 2009 which is equivalent to 75 centavos for every P100 of gross receipts of the said schools and hospitals, without imposing penalties and surcharges.

Half of the amount covering the three years period shall be given in cash but in two equal installments, the first payment shall be paid upon the approval of the agreement and the second payment will be made within the next three months.

The other half is to be paid by the concerned schools and hospital in the form of college scholarship program for deserving high school graduates of Cebu City and hospital services. (FREEMAN NEWS)