The Supreme Court (SC) has ordered the Makati City government to settle its tax liabilities for taxable years 1999-2001 and 2002-2004 which may amount to billions of pesos due to deficiency and delinquency interests. In a resolution made public on Tuesday, July 18, the SC denied Makati City’s petition as it modified the decision handed down by the Court of Tax Appeals (CTA) on Sept. 16, 2011 as a full court and the resolution dated Jan. 19, 2012. The CTA’s full court decision affirmed the ruling handed down on Dec. 16, 2009 by the tax court’s second division in favor of the Bureau of Internal Revenue (BIR). Its second division dismissed the petition filed by Makati City to nullify the Final Decision on Disputed Assessment (FDDA) dated Oct. 16, 2003 which the BIR issued for alleged deficiency taxes for taxable years 1999 to 2001. The second division ordered Makati City to pay the BIR P1.04 billion in deficiency taxes for taxable years 1999 to 2001 an P217.8 million in deficiency taxes for taxable years 2002 to 2004. Makati City was also ordered to pay a delinquency interest of 20 percent yearly on the P1.04 billion from Nov. 19, 2003 until fully paid and on the P217.8 million from Nov. 2, 2007 until fully paid under Section 249(C)(3) of the National Internal Revenue Code (NIRC) of 1997 as amended. On Makati City’s appeal to the CTA as a full court, its petition was dismissed for lack of merit. It ruled that the FFDA has factual and legal bases and, therefore valid. The case was elevated to the SC. On July 3, 2013, Makati City manifested that it had paid P400 million for the settlement of the case on top of the P200 million it paid in 2005 to 2006. It then asked the SC to hold in abeyance the resolution of the petition to give chance to its extra-judicial settlement.  In 2015, both the BIR and Makati City were required to inform the SC on the development on their extra-judicial settlement. On May 8, 2018, the SC was asked by Makati City to dismiss the petition as it manifested that it had paid an additional amount of P301,979,220.58 on April 25, 2017 to the BIR, for the final resolution of the case. However, the BIR told the SC that Makati City failed to establish that the payment of P301,979,220.58 was the full payment of the city’s obligation to settle the case. Later, the BIR manifested it has no objection on the motion to dismiss filed by Makati City.  The SC did not act on the motion to dismiss since both the BIR and Makati City failed to provide a copy of the compromise agreement. “Compromise may be the favored method to settle disputes, but when it involves taxes, it may be subject to closer scrutiny by the courts. A compromise agreement involving taxes would affect not just the taxpayer and the BIR, but also the whole nation, the ultimate beneficiary of the tax revenues collected,” the SC explained. The SC said: “Here, there is no compromise agreement to be scrutinized. “If truth be told, too much leeway had already been extended to the City of Makati. Numerous opportunities had been given. Continuing with this leniency will cause injustice not only to the constituents of the City of Makati, but also to the whole Republic of the Philippines. “Plainly, the Court cannot find any reason to grant the prayer of the City of Makati to suspend the collection of its deficiency taxes for 1999-2001 and 2002-2004. “Wherefore, the Motion to Dismiss with Prejudice and the Petition for Review on Certiorari, both filed by the petitioner City of Makati, are denied. The Decision dated Sept. 16, 2011 and Resolution dated Jan. 19, 2012 of the Court of Tax Appeals En Banc in CTA EB Case No. 641 {CTA Case No. 7809) are affirmed with modification. “The City of Makati is hereby ordered to pay the Bureau of Internal Revenue deficiency taxes for taxable years 1999-2001 and 2002-2004 in the amounts of Pl,046,883,846.08 and P217,807,339.66, respectively. “In addition, the City of Makati is likewise ordered to pay deficiency interest and delinquency interest computed by the Bureau of Internal Revenue. “Deduct from the foregoing the following payments already made by the City of Makati: (a) P400,000,000; and (b) P301,979,220.58. “Impose a deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency taxes of the City of Makati for taxable years 1999- 2001 and 2002-2004, computed from the respective date prescribed for their payments until Dec. 31, 2017. “Impose a delinquency interest at the rate of twenty percent (20%) per annum on the total amount of deficiency taxes of the City of Makati for taxable years 1999-2001, and on the 20% deficiency interest which have accrued as stated in paragraph (2), computed from Nov. 19, 2003 until Dec. 31, 2017 pursuant to Section 249(C) of the National Internal Revenue Code of 1997. “Impose a delinquency interest at the rate of twenty percent (20%) per annum on the total amount of deficiency taxes of the City of Makati for taxable years 2002- 2004, and on the 20% deficiency interest which have accrued as stated in paragraph (2), computed from Nov.20, 2007 until Dec. 31, 2017 pursuant to Section 249(C) of the National Internal Revenue Code of 1997. “Impose a delinquency interest at the rate of twelve percent (12%) per annum on the unpaid amount for taxable years 1999-2001 and 2002-2004 (i.e., basic tax plus surcharge and interests computed in the foregoing paragraphs) computed from Jan. 1, 2018 until full payment thereof, pursuant to Section 249(C)(3) of the 1997 Tax Code, as amended by Republic Act No. 10963. So ordered.”