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Marcopper liable for realty taxes on unused ‘antipollution’ facilities

Vol. XXII, No. 201 [ BusinessWorld Online ]

Friday, May 15, 2009 | MANILA, PHILIPPINES

MARCOPPER MINING Corp.’s siltation dam and other structures are not exempt from local government taxes, the Supreme Court has ruled.

In a 16-page decision penned by Associate Justice Alicia Austria-Martinez, the high court said the facilities were not used to control pollution, and therefore not entitled to privileges under the law.

The miner figured in the country’s worst mining disaster in 1996, when its open-pit operations leaked and destroyed Marinduque’s Boac River.

"The records yield no allegation or evidence by respondent that the subject property was actually, directly and exclusively used for pollution control and environmental protection during the period covered by the assessment notice under protest," the decision read.

In March 1994, the province of Marinduque served the mining firm a notice that it should pay real property taxes for its P36.3-million siltation dam and decant system at Barangay Lamese in Sta. Cruz, Marinduque.

The firm paid the taxes but under protest, claiming before the Local Board of Assessment Appeals that the properties are exempt from real property taxes as provided under Section 234 of the Local Government Code or Republic Act No. 7160.

The section provides that machinery and equipment used for pollution control and environmental protection are exempt from local taxes. The firm showed several certificates, including an affirmation from the Department of Environment and Natural Resources that the siltation dam would be used for environmental purposes, such as to prevent mineral runoffs and tailings.

The appeals agency however dismissed the complaint, saying the properties were not even categorized as machinery.

In December 1998, the Central Board of Assessment Appeals upheld the decision, noting that "the subject property does not produce anything nor operate as auxiliary to a production process; thus, it is neither a physical facility for production nor a service facility."

Moreover, the structures had been out of operation, damaged by a typhoon in 1993.

On May 30, 2005 however, the Court of Appeals reversed the decision. As a pollution control device, the tax exemption of the structures should be "contemplated" under Republic Act No. 7942 or the Philippine Mining Act of 1995, the court noted.

The high court however rejected the appellate court’s decision, arguing that the mining law was not even in effect when the province issued the tax assessment notice. "It is settled that tax laws are prospective in application, unless expressly provided to apply retroactively." — I.P. Pedrasa


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