Supreme Court throws out Parañaque’s bid to collect realty taxes from PRA

The Supreme Court has ruled that the Parañaque City government may not collect real property taxes worth nearly P700 million for land reclaimed from the Manila Bay by the Philippine Reclamation Authority (PRA).

In a decision dated July 18, the high court’s 3rd Division junked the Parañaque government’s argument that the PRA was a government-owned or -controlled corporation (GOCC) and was a taxable entity, in accordance with the Local Government Code of 1991.

The five justices in the division—Diosdado Peralta, Mariano del Castillo, Roberto Abad, Estela Perlas-Bernabe and Jose Mendoza—unanimously voted to void the real estate tax assessments, notices of real estate tax assessments, the 2003 auction sale conducted by the city government and the certificates of sale issued by the city treasurer’s office.

In the decision penned by Mendoza, the justices said the PRA was not a GOCC but an “incorporated government instrumentality,” performing an essential public service.

They said the reclaimed lands in Parañaque, whose titles the PRA was holding, remained part of the public domain, owned by the State and therefore exempt from the payment of real estate taxes.

“[R]eal property owned by the Republic of the Philippines is exempt from real property tax unless beneficial use thereof has been granted to a taxable person,” the high court said.

It said there was no proof that the PRA had granted beneficial use of the reclaimed lands to a private taxable entity.

The city government began demanding the payment of real property taxes from the PRA’s predecessor, the Public Estates Authority (PEA), way back in 2001. The assessment covered 13 parcels of reclaimed land in the southern portion of the Central Business Park and the coastal barangay of San Dionisio.

The PEA went to court, suing City Hall before the Parañaque regional trial court in 2003. PEA was renamed PRA the following year.

By 2008, the PRA real estate tax arrears had reached P297.7 million. The two parties initiated negotiations for a compromise agreement but these failed in 2009.

In 2010, the RTC issued a decision in favor of City Hall. The PRA then elevated the case to the Supreme Court.

In reversing the RTC decision the high court said: “[The] PRA was not organized either as a stock or nonstock corporation. Neither was it created by Congress to operate commercially and compete in the private market. Being an incorporated government instrumentality, it is exempt from payment of real property tax.”

The high court ruling on the PRA case echoed one that it had made in 2006 which stopped the Pasay City government from collecting real property taxes from the Manila International Airport Authority, the state operator of the Ninoy Aquino International Airport.