BAGUIO CITY – Mayor Reinaldo Bautista Jr. Thursday said he is willing “to meet halfway” with the beleaguered business locators within the Camp John Hay Special Economic Zone who now have no option but to secure business licenses from the city government after the Regional Trial Court ruled our their exemption from the city’s permit and local tax payment requirement.
In the Ugnayang Panlungsod press briefing held Thursday, the mayor said he created a special committee to study possible options on the assessment and payment of business taxes of said business firms to help these businessmen comply with the permit and local tax requirements.
The committee composed of the mayor, city legal officer Melchor Carlos Rabanes, city treasurer Thelma Manaois and others will meet on Monday for said purpose to come up with the best formula that the mayor assured will be equitable to the businessmen without sacrificing the interest of the city government.
“We are looking for a middle ground because we understand the plight of these businessmen and we do not intend to drive them away from our city and at the same time, we also have to think of the welfare of the city government and the need to follow our rules on tax collection,” the mayor said.
In coming up with the formula, the team might consider not only the existing revenue code but also the newly approved investment code of the city.
“We will fix a formula that will enable us to implement the law and at the same time give these businessmen the incentive and special treatment that they also deserve as investors contributing to the city’s economy,” the mayor said.
Regional Trial Court Branch 6 under Presiding Judge Cleto Villacorta III dismissed the civil case for prohibition with prayer for issuance of a writ of preliminary injunction filed by the Bases Conversion and Development Authority and the John Hay Management Corp. against the city government to prevent the city from closing down the business establishments for failure to secure business permits and pay the corresponding fees.
The court said the case “lacks merit” as taxes and duties for which businesses within the special economic zones are granted incentives do no cover business permits and fees.
The court also said the petitioners “cannot claim that the subject business permit and fees are a form of taxation to implement (the city’s) police power…” as “the annual fee… is so minimal – in graduated amounts…”
The court also said that BCDA and JHMC have no police power and thus are subject to “powers possessed by the local government units… to require business permits and exact regulatory fees…”
“This Court cannot bestow exemptions where there are none… The remedy lies with Congress, the relief depends on the enactment of appropriate legislative measures,” the court said.
The case stemmed from the city government’s decision to require business establishments operating within the Zone to secure business permit based on the opinion issued by city legal officer Rabanes that since John Hay falls within the territorial jurisdiction of the city, the businesses operating there must be subject to local laws including the requirement for business licenses.
The concessionaires had been paying business taxes to the city when they started operating in 1997 but most of them stopped in 2007 with the issuance of Republic Act No. 9400 which granted tax incentives to zone operations.
Except for 15 concessionaires who continued to secure business permits, the businessmen argued that they are exempted from local taxes since they are located within the Special Economic Zone and enjoy tax incentives.
The city maintained that the fiscal incentives enjoyed by the said establishments are “only for exemption from local and national tax and do not include exemption from local business or license fees and charges” citing past court decisions.
He said the amount collected in the issuance of business permit “is not a tax but a non-tax revenue the amount of which invariably is limited to cover the expenses of its issuance and the cost of the necessary surveillance, inspection or supervision by the government.” – Aileen Refuerzo
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