AJLPP Update

February 10, 2009

Philippines agrees to settle NYC taxes for -M to save -M

NEW YORK– Corruption stretch from the Philippine sea to the other side of the shining seas- in the United States.

AJLPP learned through media sources that New York mayor Michael Bloomberg welcomed the Philippine government’s promise to pay million in property taxes, including interest, calling it “what every other law-abiding property owner does.”

The incident proved that corruption is rampant in high places. That includes tax evasion and other corrupt practices even in the diplomatic circles. This includes the Philippine Embassy that issued a statement announcing the end on January 28 of the long-standing dispute over non-payment of real estate taxes between the Philippines and the New York City.

The settlement, according to the statement, “saved the Philippines .9 million and which effectively prevented the potential loss of million.”

“This is a problem that resulted from certain decisions that were taken over three decades ago,” the Philippine Embassy said. “It is a problem that could not be allowed to continue to fester and to drain our resources.”

The Philippine embassy based in the capitol said that Manila had put up a “vigorous” political and legal battle, resisting settlement, but a 2007 US Supreme Court decision effectively limited the legal options that a foreign government had in terms of challenging the jurisdiction of New York courts. 

“Protracted litigation would only lead to great legal costs, increases in interests and fines, and the very real possibility of an adverse judgment amounting to over million,” the embassy said. After consulting its legal counsel and after a thorough study of the case, a decision was taken to settle the case, but at a lower amount, the embassy added.

The City of New York sued the Philippines in April 2003 in a case filed in the United States District Court for the Southern District of New York seeking unpaid real property taxes on the Philippine Center Building for the period from January 1974 through January 1995. 

The City sought real property taxes, and interest, of approximately million on portions of the Philippine Center occupied by Maharlika, a Philippine restaurant, by the Philippine National Bank (PNB), and by Philippine Airlines (PAL). 

The Court ruled against the Philippines in the amount of .9 million for the operations of PNB and PAL, as these were commercial in nature and not exempt from local taxation.

The Philippine Government filed an appeal against this judgment. The City of New York also filed an appeal to include the taxes for the Maharlika Restaurant in the amount of million.

“In settling the case for million, the Philippines saved over .9M against the judgment of .9 million and prevented the potential loss of over million.  As part of the settlement, the City of New York agreed to withdraw its claim of over million against the Philippines with prejudice,” the embassy said.

Reacting to the decision, Bloomberg issued his own statement: “It is only fair that foreign government-owned properties used for non-exempt purposes pay their fair share of property taxes, because that is what every other law-abiding property owner does.”

Citing tough times, the mayor said he has asked all city agencies to “stretch every tax dollar further.”

Last year, U.S. District Court Judge Jed Rakoff ordered three foreign governments, including the Philippines, to settle their tax liabilities including interest payments with the city. The two others are India (.2 million) and Mongolia (.3 million).

“Most countries are good neighbors to New York City. They pay what they owe, like all other New Yorkers who carry their share of the tax burden. However, this ruling sends a message to those trying to avert their obligations that New York City will be vigilant,” the New York City Law Department said in a statement following the Rakoff ruling.

The Philippine Center Building on 5th Avenue in Manhattan has an estimated market value of more than million.