SC: Heart Center property tax-exempt

The Supreme Court has invalidated the sale at public auction of 11 real properties of the Philippine Heart Center by the Quezon City government over its failure to settle its tax obligations amounting to P36.5 million in 2014.

In a decision written by Associate Justice Amy Lazaro-Javier, the high court’s First Division said the PHC was exempt from paying real property taxes, being a government instrumentality, as mandated by the Local Government Code of the Philippines.

The Court reversed the Court of Appeals’ ruling issued on March 15, 2016, which denied PHC’s petition on a technicality.

“Real properties owned by the Republic, whether titled in the name of the Republic itself or in the name of agencies or instrumentalities of the national government, are exempt from real property tax,” the high said.

The high court said the PHC passed the two criteria to be classified as a government instrumentality: it performs governmental functions and enjoys operational autonomy.

It said the PHC is under the supervision of the Health department and carries out government policies in pursuit of its objectives.

“Certainly, the PHC’s functions are less commercial than governmental, and more for public use and public welfare than for profit-oriented services,” the high court said.

The high court said the properties of the PHC are considered public dominion devoted to public use and welfare, thus exempt from real property taxes and levies.

In the pursuit of its mandate, the PHC reported it had served 60,000 cardiology patients, performed around 94,000 radiology procedures and provided free heart surgery for 82 mission beneficiaries, among others.

Despite reporting revenues of P3.03 billion in 2018, the high court said, the PHC still operated at a loss of P504.5 million.

Thus the government annually allocates funding to the PHC and in 2018 alone it provided P888.7 million in financial assistance to the hospital.

“The hospital fees which the PHC charges are simply too meager to cover operating expenses. To divest the PHC of other sources of income may, therefore, impede, if not paralyze, its operations altogether,” the high court said.

“And to allow the Quezon City government to confiscate the PHC’s properties would be nothing short of ironic, if not self-destructive, as it would kill the very patient the government so desperately seeks to revive.”

But the Court agreed with the position of the Quezon City government that the 11 properties of the PHC in the city are subject to real property tax since the PHC granted the beneficial use of these properties to commercial establishments such as Globe Telecom Inc., Jollibee Corporation and several others, but “this does not automatically validate the acts of assessing, levying and selling the 11 properties of the PHC.”