COA to Lapu-Lapu city: Collect due taxes of the MCIAA

CEBU, Philippines - The Commission on Audit has maintained that the Mactan Cebu International Airport Authority (MCIAA) must pay real property taxes to the City of Lapu-Lapu despite its continuous claim for exemption.

COA, in its 2012 audit report, reiterated its recommendation, asking the city to send demand letters and requiring the MCIAA to settle its tax liabilities including penalties, interest and surcharges totaling to P1,727,348,182.45.

“Otherwise, institute appropriate legal action by citing the foregoing Supreme Court ruling to advance its case against the subject agency,” the report said.

In the case of Lahug Airport, MCIAA also used the same argument of not paying real property taxes to the City of Cebu. However, the Supreme Court ruled on September 11, 1996 in favor of the latter requiring the former to pay its real property taxes.

“This SC decision may now be used by the City to strengthen its case against the MCIAA,” the audit report said.

COA has found that the City of Lapu-Lapu failed to record in the books of accounts the real property tax receivable from the MCIAA totaling to P928,122,879.30, exclusive of penalties and interests covering years 1992 to 2012.

This resulted in the understatement of the City’s real property tax receivable (RPT) and its appropriate deferred real property tax income by the same amount.

The City Treasurer’s Office (CTO) disclosed that MCIAA was not included in its list of taxpayers which has taxable real properties since it is listed under the exempt classification.

COA said that putting the said agency under the exempt status seemed to place CTO’s income projection on a safe level so as not to prejudice its targeted collections on account of MCIAA’s declaration that their office is exempt from paying taxes to the LGU.

This is in pursuant to Republic Act 6958 or the MCIAA Charter which provides that the authority shall be exempt from realty taxes imposed by the national government or any of its political subdivisions, agencies and instrumentalities, provided, that no tax exemption herein granted shall extend to any subsidiary which may be organized by the authority.

With such pronouncement, MCIAA discontinued paying their RPT obligations including the business tax which is applicable to the business establishments operating or situated in their property which are supposed to pay subject tax to the City government.

Records show that as of December 31, 2012, MCIAA has an outstanding basic RPT dues of P928,122,879.30 with penalty amounting P582,004,782.49 from 1992 to 2012 and P217,220,520.66 of business taxes including interests and surcharges for taxable years 1998 to 2012.

COA recommended the City Treasurer to include MCIAA in its list of taxpayers until such time the agency gets a favorable ruling from the court.

It further recommended the City Treasurer to conduct extensive tax mapping activities to identify business establishments located within the property of MCIAA and determine their appropriate business tax dues and send appropriate notices directing them to pay and settle their obligations in compliance with the City’s Tax Code.  (FREEMAN)