Supreme Court saves HMO industry, payments from widened taxation
One of the rare good news that unfortunately got swamped in the increasingly toxic and fake news environment was a recent Supreme Court decision that saved the private health insurance industry – and kept the medical insurance payments VAT-free – from the ever-expanding tentacles of the tax brigade.
The decision involved MediCard Philippines, the health maintenance organization, having successfully thwarted the Bureau of Internal Revenue and the Court of Tax Appeals from slapping value-added tax on 100 percent of the health insurance payments.
In a decision that became final last month, the high tribunal ruled that only 20 percent of the HMO payments made by private companies on behalf of their covered employees are covered by VAT. The balance of 80 percent will remain VAT-exempt.
“The Court likewise rules that for purposes of determining the VAT liability of an HMO, the amounts earmarked and actually spent for medical utilization of its members should not be included in the computation of its gross receipts,” said Associate Justice Bienvenido Reyes.
In other words, only 20 percent of the HMO fees collected by enrolled companies for their employees are subject to the 12 percent VAT.
“It is significant to note in this regard that MediCard established that upon receipt of payment of membership fee it actually issued two official receipts, one pertaining to the VATable portion, representing compensation for its services, and the other represents the non-VATable portion pertaining to the amount earmarked for medical utilization,” Reyes said.
“By earmarking or allocating 80 percent of the amount, MediCard unequivocally recognizes that its possession of the funds is not in the concept of owner, but as a mere administrator of the same,” Reyes added.
“MediCard’s right in relation to these amounts is a mere inchoate owner which would ripen into actual ownership if, and only if, there is under-utilization of the membership fees at the end of the fiscal year,” Reyes said.
Justices Presbitero Velasco Jr., Lucas Bersamin, Alfredo Benjamin Caguioa, and Noel Tijam agreed.
The high tribunal also took down the BIR examiners for going after MediCard without the requisite Letter of Authority from the BIR commissioner or his authorized representative, an omission that itself was another ground for the dismissal of the tax case.
Had the BIR and the Court of Tax Appeals been upheld, MediCard would have been bled P223 million in deficiency VAT, not including interests, for the year 2006 alone.
Incidentally, the MediCard counsel, according to the grapevine, happens to be Divina Law, the same law firm that has now found itself in the middle of the Angry Bird storm.
But that, as they say, is another story.
Max’s Group president Robert Trota has opted for a take-out meal from his restaurant chain amid the rainy days.
The 49-year-old chief executive did not dine alone, but instead shared the nearly P80-million blessings with his two sisters.
According to a regulatory disclosure, Trota raised that much when his Trofi Ventures unloaded 4.1 million Max’s shares last Monday, when the stock market was ironically closed because of the stormy weather.
A private holding company controlled by Trota and his siblings and fellow directors Cristina T. Garcia and Carolyn T. Salud, Trofi Ventures has been left with a 10.5-percent stake in the fried chicken-led chain after the September 11 disposal to an undisclosed party.
That 10.5-percent stake is worth about P2.22 billion, no chicken feed, at current prices.
Marcventures president Isidro Alcantara Jr. obtained board approval in mid-July to acquire 22.73 million company shares at P2.20 each, or a total of P50 million.
But MARC’s share price closed at P2.12 by yesterday noon, still below Alcantara’s acquisition cost, which would mean the former banker had been optimistically forward-looking in the company’s nickel mining fortunes when he agreed to the option.
The MARC award is on top of an undisclosed bloc of shares that Alcantara also obtained, apparently by way of another option, in the operating nickel mining subsidiary, Marcventures Mining and Development Corp.
Celebrity doctor Joel Mendez has lost his final appeal to overturn his tax evasion sentence and will now have to serve a prison term anywhere from one to three years.
Mendez was convicted for his failure to file an income tax return covering his 2001 operations, when his Weigh Less Center/Mendez Medical Center was still the toast of the volatile cosmetics industry and he the apple of his then partner’s eyes, another celebrity doctor and, unfortunately for him, the very well-connected Vicki Belo.
E-mail: moneygoround.manila@yahoo.com