The Metropolitan Manila Development Authority (MMDA) and the Bureau of Internal Revenue (BIR) have reached an out-of-court settlement days after the BIR lifted a seizure order against the bank deposits and other assets of the MMDA in connection with its P116 million withholding tax liabilities.

After a brief meeting with BIR officials Friday afternoon, Chairman Oscar Inocentes said BIR Commissioner Joel Tan-Torres approved the compromise settlement after a thorough reinvestigation of the assessed tax liability.

“We were able to reduce it from P116,451,132.98 to P45 million based on our initial talks, and then finally, we were able to reduce it further to P25 million after a review of our tax obligation,” Inocentes said.

The P25 million will be paid in three tranches, the chairman added.

The first payment, in the amount of P10 million, was paid immediately after the meeting at the BIR central office in Quezon City.

The remaining balance will be paid in two installments by postdated checks within two months.

A day prior to the forging of the compromise agreement, the BIR had agreed to lift its garnishment of MMDA’s bank accounts upon the request of Inocentes for a “reinvestigation of the assessed tax or a possible abatement of tax liability.”

The BIR served Warrants of Garnishment on several bank accounts of the MMDA last March 24 for the MMDA's failure to settle its withholding tax liabilities for the years 1997, 2000, and 2001 amounting to P116,451,132.98.

Tan-Torres said, “We decided to forgive MMDA and to lift the freeze order on their bank accounts since their management has shown good faith and interest in settling their long outstanding tax debt.”

The MMDA’s case is a welcome development, different from the case of the Makati City government where Makati Mayor Jejomar C. Binay warned the BIR that he will hold the agency liable for damages and injuries that may be suffered by Makati residents as a result of their reported plan to seize city government vehicles next week.

Binay said the BIR should be equally prepared to face the consequences of their plan to seize government vehicles.

“Government vehicles are used for public purposes. Should they pull out these vehicles and as a result a senior citizen did not receive proper medical attention, or that medical supplies do not reach the beneficiaries, then the agency will have to face the legal consequences,” he said.

“Should the interest and welfare of a Makati resident be put at risk or in any form of danger as a result of the BIR action, the agency will definitely be held liable,” he added.

The Makati mayor said it is a clearly established principle in tax law that government property is not subject to distraint or levy.

“Despite this, the BIR went ahead and issued a levy on City Hall and is now bent on taking control of our vehicles, in complete disregard of the law,” he said.

Binay also disputed the claim of Tan-Torres that the city government has not shown interest in settling the issue of its alleged tax liabilities totalling P1.2 billion.

“The BIR chief should be reminded that both the city and BIR representatives were close to arriving at a settlement when the agency suddenly took a hard-line position and insisted on immediate payment,” he said.