Move to replace business tax with regulatory fee on

CEBU, Philippines - A Cebu City Councilor is pushing for an ordinance that would impose regulatory fees instead of business taxes on non-profit hospitals and schools in the city.

Councilor Noel Eleuterio Wenceslao wants a regulatory fee of P10 per bed for 365 days for hospitals and P15 per classroom for 288 days for schools. Classrooms for secondary or high school, intermediate school, middle school, elementary and Kinder 1 are exempted from assessment of the regulatory tax.

At present, these proprietary hospitals and schools pay business taxes to the city government. Those proprietary schools and hospitals with gross sales or receipts of less than P500,000 in a year pay P4,000 per annum while those who have P500,000 or more but less than P1 million pay P7,500 plus one percent in excess of P500,000. Those with a gross sale of P1 million or more pay P15,000 plus 3/4 percent in excess of P1 million.

Wenceslao said the City Treasurer’s Office continues to receive strong opposition from owners, proprietors, administrators of for-profit schools and hospitals in the city when collecting business tax through City Ordinance No. LXIX as amended by City Tax Ordinance No. CXIII.

He said the city encourages a positive educational atmosphere and it appreciates the presence of privately-run hospitals in the city.

“Filipino owners/proprietors/administrators of proprietary or for-profit schools and hospitals in the City of Cebu have expressed their agreement to the idea of being taxed based on number of beds occupied by a patient, insofar as proprietary hospitals are concerned or based on number of classes, insofar as proprietary schools are concerned,” he said.

Under the proposed ordinance, all regulatory fees imposed shall be accrued on the first day of January each year and shall be paid on or before January 20 of the year.

There will be no permits or license issued by the City mayor unless applicant presents the official receipt issued by the City Treasurer’s Office.

Section 8 of the proposed measure states that “failure to pay the regulatory fee as provided for in this ordinance and within the time fixed in section 4 herein shall subject the owner of the proprietary or for-profit school or hospital to a surcharge of 25 percent plus interest at the rate not exceeding 2percent per month of the unpaid regulatory fee until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed thirty-six months.”

Those proprietary schools and hospitals that have paid under protest business taxes shall be assessed the regulatory fee which they have paid under protest beginning ten years prior to the effectivity of the ordinance.

Those proprietary schools and hospitals that have not paid business taxes and opted to file a case against city government shall be assessed the regulatory fee plus the penalty stated under Section 8 beginning ten years prior to the effectivity of the ordinance.

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During the public hearing last October 28, representatives of schools and hospitals supported the regulatory fees but opposed the proposed penalties of violators, especially those who sued the city for imposing business taxes on non-profit institutions.

Atty. Rester John Nonato of Velez College Inc. and Cebu (Velez) General Hospital Inc. said both institutions agreed to have regulatory fee instead of regular business tax.

However, Nonato said both institutions have pending cases before the court against the imposition of the city government on business taxes. He said the proposed measure would resolve the pending cases.

“Accordingly, we believe it is improper for the Honorable Council to impose a tax ordinance imposing a penalty of 25 percent surcharge plus 2 percent interest per month for those who filed tax cases against Cebu City,” he said, adding, that imposing penalties is not fair and reasonable for those who exercise their rights in suing.

Atty. Cornelio Mercado, meanwhile, said the proponent should revisit and restudy the portion on penalties imposed to institutions that filed complaint against the city, saying that some of his clients also exercised their rights.

Mercado represents Cebu Doctor’s Hospital/University, Perpetual Succour Hospital Incorporation, South Western University, and North General Hospital.

Dean Arsenio Pacaña of Cebu Institute Technology-University said several schools will be facing financial woes next year especially that no new students will enroll in college owing to the full implementation of K-12 basic education program.

Pacaña said the institution is in favor of the proposed measure, but he is concerned of the institutions that have already paid millions to the city in the last 10 years because of the business tax.

Cebu City Private Schools Administrator’s Association, Inc. President Pastor Arturo Tangal said the association appreciates and welcomes the proposed measure, citing that it would increase the city’s revenues.

However, Tangal said the proponent of the proposed measure should define “proprietary hospitals or proprietary schools” to avoid abuse in its implementation.

Dean Baldomero Estenzo of the University of Cebu - College of Law said he will submit a position paper once his questions will be answered by the proponent.

Estenzo raised concerns on the coverage of the P10 per classroom regulatory fee, unused classrooms, effect of the proposed measure on the school’s memorandum of agreement with the city, among others.

In response, Wenceslao said all concerns of the stakeholders will be considered in the final deliberation of his proposal.  (FREEMAN)