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Bataan asks Supreme Court to compel ecozone authority to pay real estate tax

Monday, June 15, 2009 | MANILA, PHILIPPINES [ BusinessWorld Online ]

THE PROVINCIAL government of Bataan has asked the Supreme Court to rule that the Philippine Economic Zone Authority (PEZA) is liable to pay real estate tax.

In a 42-page petition filed last week, the local government, represented by Governor Enrique T. Garcia, argued that the High Court should overturn a ruling by the Court of Appeals, which it said acted with grave abuse of discretion in setting aside the P110.5-million deficiency tax assessment and subsequent collection proceedings it had implemented in 2007.

The issue stemmed from the demand letter sent by the provincial treasurer to the agency in May 2003, assessing it of tax deficiencies worth P110.5 million for the lots located at the Bataan Economic Zone in Mariveles.

PEZA asked for the suspension of the billing, pending the resolution of a separate petition for declaratory relief with the Pasay City Regional Trial Court that sought clarification on its supposed exemption from real property tax liabilities.

The trial court, however, favored the local government, prompting the latter to issue a warrant of levy, and a corresponding "notice of sale of real property."

The auction proceeded as scheduled on October 17, 2007, before it could be stopped by the stay order from the appellate court.

But PEZA won the case in August last year, with the appellate court nullifying the sale.

In haling the issue to the High Court, the local government said "the taxability of PEZA is not anchored solely on a determination of whether or not it is a government-owned or -controlled corporation but on a clear intent of Congress to lift the tax exemption privileges of PEZA."

The agency’s predecessor, the Export Processing Zone Authority (EPZA), was indeed exempted from paying national and local taxes by virtue of Presidential Decree 66.

"Unfortunately, however, PD 66 is no longer in force," the local government said.

What is in place now is Republic Act 7916, or the Philippine Special Economic Zone Act of 1995, which did not explicitly provide such exemption. "Against the...obvious intent of Congress to remove the tax exemptions of PEZA, as formerly granted to its predecessor EPZA, this Honorable Court may not rule otherwise and negate the said intent of Congress. [The appellate court], in doing so in its questioned decision, committed judicial legislation," the local government noted.

The appellate court also abused its discretion when it assumed jurisdiction over the case. The main issue is PEZA’s exemption from real property taxes. Thus, the legal remedy is an appeal of the trial court’s order before the Court of Tax Appeals, the Bataan government said, as provided by Republic Act 9282.

PEZA officials were not immediately available for comment. — IPP


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