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Tollways liable for local tax, court says

by Orland L. Mauricio
[ ] July 18, 2011

Toll plazas along the North Luzon Expressway from Balintawak to Sta. Ines (in Pampanga are considered branches or sales outlets of the Manila North Tollways Corporation and are therefore subject to payment of local business taxes and other fees under the National Building Code.

In a July 7, 2011-decision, Malolos City Judge Wilfredo T. Nieves of the Regional Trial Court – Branch 84, ruled that the tollways operator has no tax exemption privilege under its Supplemental Toll Operation Agreement with the government and ordered the company to pay taxes and other fees to the municipality of Guiguinto.

The STOA is a 1988-agreement executed by and between MNTC and the Phillippine National Construction Corp., whose legislative franchise to operate NLEX expired May 1, 2007. The agreement also included the Toll Regulatory Board, apparently to represent the government and the latter’s imprimatur to the contract.

The court ruling was a result of two civil complaints filed last February 2 and 9, 2009 by MNTC seeking to prevent Guiguinto from collecting permit fees under the National Building Code amounting to P2,283,474.20; unpaid mayor’s permit and other regulatory fees in the amount of P33,498.30 from January 2004 to January 2008; and business taxes and deficiencies for the year 2005 to 2007 in the amount of P67,443,765.93.

The tax assessments were contained in two notices sent by Guiguinto to MNTC on September 12 and October 14, 2008. In answer, MNTC wrote two protest letters contesting the assessments of back taxes but these were denied by Guiguinto which threatened to collect the unpaid taxes or close the MNTC offices in the town.

Guiguinto Mayor Isagani Pascual hailed the RTC ruling as a long, overdue verdict to assert the autonomy and right of municipalities hosting NLEX offices and toll gates to collect local business taxes and other fees under the Local Government Code.

Nieves dismissed MNTC’s claim that the NLEX service centers in Sta. Rita and Tabang, Guiguinto that sell transponders or Easy Tags, accept payments for loads, and cash payments from millions of motorists passing thru the two toll plazas and issue toll receipts are not “its branches or sales outlets conducting business within Guiguinto” but mere support facilities.

“MNTC wants the Court to believe that the big volume of its sales due to the millions of motorists passing thru its Sta. Rita and Tabang toll plaza are recorded only in its principal office in Caloocan City(Balintawak) where they are supposed to pay their business tax,” Nieves said.

The RTC ruling came on the heels of the reopening last July 11 of the third NLEX toll plaza in Barangay Tabe, also in Guiguinto. The Tabe Toll plaza had been closed for several years since Metro Pacific Tollways Corporation acquired the MNTC from the Lopez Group.

The court also declared that MNTC is not exempt from paying local business taxes by virtue of the STOA. “A cursory perusal of the STOA fails to show any provision exempting plaintiff from the payment of taxes, much less local business taxes. Neither was plaintiff able to present proof that it was granted the legislative grace of tax exemption.”

The Court decision also set aside the opinion offered by the Bureau of Local Government Finance, an office under the Department of Finance that oversees the fiscal and financial affairs of local government units.

“We are reviewing decision and there are ongoing discussions between Tollways Association of the Philippines, DOF, LGUs regarding proper allocation of local business tax,” said Marlene Ochoa, vice president for corporate communication of MNTC. MNTC has 15days from July 7 to contest the ruling.

Guiguinto legal counsel Edwin Cerezo said the Nieves ruling is a welcome development for other towns and cities along the north expressway route to assert their power to tax the NLEX toll plazas they are hosting.

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