Philippines settles tax dispute with New York

Courtesy of ABS CBN NEWS

WASHINGTON D.C. - The Philippines will pay $9 million to settle an almost six-year-old legal battle with New York City, the Philippine Embassy announced here Thursday (Friday in Manila).

In a statement, it said the settlement avoided "great legal costs, increases in interests and fines and the very real possibility of an adverse judgment amounting to over $27 million."

The case arose by the alleged failure of the Philippine Center Building, which is owned by the Philippine government, to pay $37 million in real property taxes covering the period January 1974 to January 1995.

The New York City government alleged that three occupants of the building - Philippine Airlines, the Philippine National Bank and the restaurant "Maharlika" - were commercial in nature and not exempt from local taxes.

The city government sued the Philippines at the US District Court in New York in April 2003, attempting to collect $37 million in back taxes plus interest.

The Southern District of New York court ruled against the Philippines and demanded it pay $10.9 million for PAL and PNB.

Both the Philippine government and New York City appealed the decision - New York City lawyers wanted to include the $27 million in back taxes they alleged was owed for the operation of Maharlika restaurant.

"The Philippines had put up a vigorous political and legal struggle over the years," the statement read, "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."

"After consulting its legal counsel and after a thorough study of the case a decision was taken to settle the case, but at an amount lower than the existing judgment against the Philippines," the statement read.

"This is a problem that resulted from certain decisions that were taken over three decades ago that could not be allowed to continue to fester and drain our resources," it continued.

Embassy officials pointed to the $1.9 million savings they were able to generate settling the case and finally ending a longstanding feud with the New York City government.