1. CIR vs. TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC.
This cannot apply to transactions of Toshiba because although the
G.R. No. 150154. August 9, 2005 / 466 SCRA 211
FACTS: Toshiba registered with the PEZA as an ECOZONE Export
Enterprise and it registered with the BIR as a VAT taxpayer and a
withholding agent. Toshiba filed its VAT returns for the first and second
quarters of taxable year 1996, reporting input VAT in the amount of
P13,118,542.00 and P5,128,761.94, respectively, or a total of
P18,247,303.94. It alleged that the said input VAT was from its
purchases of capital goods and services which remained unutilized since
it had not yet engaged in any business activity or transaction for which
it may be liable for any output VAT.
Toshiba filed with DOF applications for tax credit/refund of its unutilized
input VAT. To toll the running of the two-year prescriptive period for
judicially claiming a tax credit/refund Toshiba, filed with the CTA a
Petition for Review. CTA ordered CIR to refund, or in the alternative, to
issue a tax credit certificate to Toshiba in the amount of
P16,188,045.44. CA AFFIRMED.
ISSUE: Whether Toshiba is entitled to the tax credit/refund of its input
VAT on its purchases of capital goods and services.
RULING: YES. An ECOZONE enterprise is a VAT-exempt entity. Sales of
goods, properties, and services by persons from the Customs Territory
to ECOZONE enterprises shall be subject to VAT at zero percent (0%).
It would seem that CIR failed to differentiate between VAT-exempt
transactions from VAT-exempt entities.
An exempt transaction, on the one hand, involves goods or services
which, by their nature, are specifically listed in and expressly exempted
from the VAT under the Tax Code, without regard to the tax status –
VAT-exempt or not – of the party to the transaction…
An exempt party, on the other hand, is a person or entity granted VAT
exemption under the Tax Code, a special law or an international
agreement to which the Philippines is a signatory, and by virtue of which
its taxable transactions become exempt from VAT…
CIR, bases its argument on VAT-exempt transactions. Since such
transactions are not subject to VAT, the sellers cannot pass on any
output VAT to the purchasers of goods, properties, or services, and they
may not claim tax credit/refund of the input VAT they had paid thereon.
transactions covered by special laws may be exempt from VAT, those
falling under Presidential Decree No. 66 (EPZA) are not.
This Court agrees, however, that PEZA-registered enterprises, which
would necessarily be located within ECOZONES, are VAT-exempt entities
because ECOZONES are foreign territory. As a result, sales made by a
supplier in the Customs Territory to a purchaser in the ECOZONE shall
be treated as an exportation from the Customs Territory. Conversely,
sales made by a supplier from the ECOZONE to a purchaser in the
Customs Territory shall be considered as an importation into the
Customs Territory.
The Philippine VAT system adheres to the Cross Border Doctrine,
according to which, no VAT shall be imposed to form part of the cost of
goods destined for consumption outside of the territorial border of the
taxing authority. Hence, actual export of goods and services from the
Philippines to a foreign country must be free of VAT; while, those
destined for use or consumption within the Philippines shall be imposed
with ten percent (10%) VAT.
No output VAT may be passed on to an ECOZONE enterprise since it is a
VAT-exempt entity. The VAT treatment of sales to it, however, varies
depending on whether the supplier from the Customs Territory is VAT-
registered or not.
Sales of goods, properties and services by a VAT-registered supplier
from the Customs Territory to an ECOZONE enterprise shall be treated
as export sales. If such sales are made by a VAT-registered supplier,
they shall be subject to VAT at zero percent (0%). In zero-rated
transactions, the VAT-registered supplier shall not pass on any output
VAT to the ECOZONE enterprise, and at the same time, shall be entitled
to claim tax credit/refund of its input VAT attributable to such sales.
Zero-rating of export sales primarily intends to benefit the exporter
(i.e., the supplier from the Customs Territory), who is directly and
legally liable for the VAT, making it internationally competitive by
allowing it to credit/refund the input VAT attributable to its export sales.
Meanwhile, sales to an ECOZONE enterprise made by a non-VAT or
unregistered supplier would only be exempt from VAT and the supplier
shall not be able to claim credit/refund of its input VAT.
Even conceding, however, that respondent Toshiba, as a PEZA-
registered enterprise, is a VAT-exempt entity that could not have
engaged in a VAT-taxable business, this Court still believes, given the
particular circumstances of the present case, that it is entitled to a
credit/refund of its input VAT.

The sale of capital goods by suppliers from the Customs Territory to
Toshiba took place way before the issuance of RMC No. 74-99, and
when the old rule was accepted and implemented by no less than the
BIR itself. Since Toshiba opted to avail itself of the income tax holiday
under Exec. Order No. 226, as amended, then it was deemed subject to
the ten percent (10%) VAT. It was very likely therefore that suppliers
from the Customs Territory had passed on output VAT to Toshiba, and
the latter, thus, incurred input VAT. Accordingly, this Court gives due
respect to and adopts herein the CTA’s findings that the suppliers of
capital goods from the Customs Territory did pass on output VAT to
Toshiba and the amount of input VAT which Toshiba could claim as
credit/refund.
2. Phil Export v. Pearl City
G.R. No. 168668 December 16, 2009 / 608 SCRA 280
FACTS: PEZA is an administrative agency. Pearl City Manufacturing
Corporation (PCMC) is a PEZA-registered Ecozone Export Enterprise.
PCMC was informed of a physical inventory to be conducted by the PEZA
officers. PEZA officers discovered that PCMC had an unaccounted
importation of 8,259,645 kilograms of used clothing. PCMC was
instructed to submit its explanation regarding the unaccounted
shortage. After submitting the required explanation, PCMC was
subjected to a special audit conducted by PEZA to determine the amount
of wastage generated by the company. On the basis of the results of the
inventory and the special audit conducted, the PEZA Board passed a
resolution canceling the PEZA Registration of PCMC as an Ecozone
Export Enterprise. An administrative appeal was filed by PCMC to the
Office of the President (OP) from the resolution canceling its
registration. The OP affirmed the resolution and denied the Motion for
Reconsideration filed by PCMC afterwards. PCMC then filed a petition for
review with the Court of Appeals. The CA reversed the decision of the
OP and declared the PEZA Board Resolution cancelling the registration of
PCMC as null and void.
ISSUE: Whether or not PCMC was afforded due process
RULING: Yes. PCMC was afforded due process. In administrative
proceedings, a fair and reasonable opportunity to explain one’s side
suffices to meet the requirements of due process. The essence of
procedural due process is embodied in the basic requirement of notice
and a real opportunity to be heard. "To be heard" does not mean only
verbal arguments in court; one may be heard also thru pleadings.
Where opportunity to be heard, either through oral arguments or
pleadings, is accorded, there is no denial of procedural due process.
It is not legally objectionable for an administrative agency to resolve a
case based solely on position papers, affidavits or documentary
evidence submitted by the parties, as affidavits of witnesses may take
the place of their direct testimonies. Where the party has the
opportunity to appeal or seek reconsideration of the action or ruling
complained of, defects in procedural due process may be cured.—In any
event, the Court agrees with petitioners that any procedural defect in
the proceedings before the PEZA Board was cured when the PCMC
appealed PEZA Board Resolution No. 04-236 before the OP. Petitioners
were also able to move for the reconsideration of the adverse ruling of
the Office of the President.
The Court agrees with the petitioner’s averment that the power and
authority to conduct inquiries is lodged with the PEZA Director General
and not with the PEZA Board. Thus, Section 14(g) of Republic Act (R.A.)
No. 7916 provides: SEC. 14. Powers and Functions of the Director
General.—The director general shall be the overall coordinator of the
policies, plans and programs of the ECOZONES. As such, he shall
provide overall supervision over and general direction to the
development and operations of these ECOZONES. He shall determine
the structure and the staffing pattern and personnel complement of the
PEZA and establish regional offices, when necessary, subject to the
approval of the PEZA Board.
In addition, he shall have the following specific powers and
responsibilities: x x x x g) To acquire jurisdiction, as he may deem
proper, over the protests, complaints and claims of the residents and
enterprises in the ECOZONE concerning administrative matters; In
consonance with the above-quoted authority, the PEZA Director General
is also empowered, under Section 14(h) of the same law, to recommend
to the PEZA Board the grant, approval, refusal, amendment or
termination of the ECOZONE franchises, licenses, permits, contracts and
agreements in accordance with the polices of the said Board. The
primary authority to conduct inquiries and fact-finding investigations is
bestowed upon the office of the Philippine Economic Zone Authority
(PEZA) Director General simply because no complaint, protest or claim
can be properly addressed, and neither can any reasonable
recommendation to the PEZA Board be made by the PEZA Director
General without conducting any such inquiry or fact-finding.
3. PHILIPPINE ECONOMIC ZONE AUTHORITY, represented herein
by DIRECTOR GENERAL LILIA B. DE LIMA, Petitioner, vs.
JOSEPH JUDE CARANTES, ROSE CARANTES, and all the other
HEIRS OF MAXIMINO CARANTES, Respondents.
G.R. No. 181274               June 23, 2010
FACTS: Respondents Joseph Jude Carantes, Rose Carantes and the
heirs of Maximino Carantes are in possession of a 0,368-square meter
parcel of land located in Loakan Road, Baguio City. On June 20, 1997,
they obtained Certificate of Ancestral Land Claim over the land from the
DENR. On the strength of said CALC, respondents secured a building
permit and a fencing permit from the Building Official of Baguio City,
Teodoro G. Barrozo. Before long, they fenced the premises and began
constructing a residential building thereon. Soon, respondents
received a letter from Digna D. Torres, the Zone Administrator of the
Philippine Economic Zone Authority (PEZA), informing them that the
house they built had overlapped PEZA’s territorial boundary. Torres
advised respondents to demolish the same within sixty (60) days from
notice. Otherwise, PEZA would undertake its demolition at respondents’
expense. Without answering PEZA’s letter, respondents filed a petition
for injunction, with prayer for the issuance of a temporary restraining
order (TRO) and writ of preliminary injunction before the RTC of Baguio
City. The RTC of Baguio City issued a TRO, which enjoined PEZA to
cease and desist from threatening respondents with the demolition of
their house before respondents’ prayer for a writ of preliminary
injunction can be heard. Later on, RTC granted respondents’ petition
and ordered the issuance of a writ of injunction against PEZA.
RTC: Respondents are entitled to possess, occupy and cultivate the
subject lots on the basis of their CALC. The court a quo explained that
by the very definition of an ancestral land under Republic Act (R.A.) No.
8371 or the Indigenous Peoples Rights Act of 1997, said lots have been
segregated from lands of the public domain. As such, the rights of
respondents to the land are already vested in them and cannot be
disturbed by Proclamation No. 1825. On appeal, the CA affirmed the
RTC ruling. The Office of the Solicitor General, as counsel for petitioner
PEZA, filed a petition, challenging the CA decision on two (2) issues:
1. Whether it is the petitioner or the city engineer of Baguio City who
has the legal authority to sissue building and fencing permits for
constructions within the PEZA-BCEZ. Petitioner claims exclusive
authority to issue building and fencing permits within ecozones under
Section 616 of Presidential Decree (P.D.) No. 1716, amending P.D. No.
66. Alongside, petitioner asserts concurrent authority to require owners
of structures without said permits to remove or demolish such
structures under Section 14 (i)  of R.A. No. 7916
2. Whether respondent's CALC is sufficient to disregard the provisions of
the National Building Code of the Philippines.
ISSUE: Whether petitioner can require respondents to demolish the
structures they had built within the territory of PEZA-BCEZ (Baguio City
Economic Zone).
RULING: Yes. We grant the petition.
Remedial Law: It is settled that an appeal must be perfected within the
reglementary period provided by law; otherwise, the decision becomes
final and executory. Before the Supreme Court, a petition for review on
certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, must be filed within fifteen (15) days from notice of the
judgment or final order or resolution appealed from, or of the denial of
the petitioner’s motion for new trial or reconsideration filed in due time
after notice of the judgment. Even then, review is not a matter of right,
but of sound judicial discretion, and may be granted only when there
are special and important reasons therefor. In the case at bar, the
Docket Division of the OSG received a copy of the CA decision on
November 7, 2007. It was not until February 1, 2008 or almost three
(3) months however, that the OSG, for petitioner, filed a petition for
review on certiorari with this Court. The OSG pleads for understanding
considering the scarcity of its lawyers and the inadvertence of the
temporarily-designated OIC of Division XV in overlooking that the CA
decision was adverse to PEZA. While the Court realizes the OSG’s
difficulty in having only three (3) lawyers working full time on its cases,
the OSG could have easily asked for an extension of time within which
to file the petition. However, upon careful consideration of the merits of
this case, the Court is inclined to overlook this procedural lapse in the
interest of substantial justice.
As a main action, injunction seeks to permanently enjoin the defendant
through a final injunction issued by the court and contained in the
judgment. Two (2) requisites must concur for injunction to issue: (1)
there must be a right to be protected and (2) the acts against which the
injunction is to be directed are violative of said right.Particularly, in
actions involving realty, preliminary injunction will lie only after the
plaintiff has fully established his title or right thereto by a proper action
for the purpose. To authorize a temporary injunction, the complainant
must make out at least a prima facie showing of a right to the final
relief. Preliminary injunction will not issue to protect a right
not in esse.These principles are equally relevant to actions seeking
permanent injunction. At the onset, we must stress that petitioner does
not pose an adverse claim over the subject land. Neither does petitioner
dispute that respondents hold building and fencing permits over the lots.
Land Titles: For petitioner, the question that must be answered
is whether respondents may build structures within the Baguio City
Economic Zone on the basis of their CALC and the building and fencing
permits issued by the City Building Official. We rule in the negative. As
holders of a CALC, respondents possess no greater rights than those
enumerated in Par. 1, Section 2, Article VII of DENR Department
Administrative Order (DAO) No. 02, Series of 1993.
Respondents being holders of a mere CALC, their right to possess the
subject land is limited to occupation in relation to cultivation. Unlike No.
1,Par. 1, Section 1, Article VII of the same DENR DAO, which expressly
allows ancestral domain claimants to reside peacefully within the
domain, nothing in Section 2 grants ancestral land claimants a similar
right, much less the right to build permanent structures on ancestral
lands – an act of ownership that pertains to one (1) who has a
recognized right by virtue of a Certificate of Ancestral Land Title. Yet,
even if respondents had established ownership of the land, they cannot
simply put up fences or build structures thereon without complying with
applicable laws, rules and regulations. In particular, Section 301 of P.D.
No. 1096, otherwise known as the National Building Code of the
Philippines mandates: SECTION 301. Building Permits- No person, firm
or corporation, including any agency or instrumentality of the
government shall erect, construct, alter, repair, move, convert or
demolish any building or structure or cause the same to be done
without first obtaining a building permit therefor from the Building
Official assigned in the place where the subject building is located or the
building work is to be done.
Supplementary to a building permit, a fencing permit must also be
secured from the Building Official concerned before fences may be
installed in the premises.
In the present case, petitioner refuses to honor the building and fencing
permits issued by the City Building Official to respondents. Petitioner
PEZA maintains that the function of administering and enforcing the
provisions of P.D. No. 1096 within the areas owned and administered by
it, pertains to PEZA. Hence, it is PEZA, and not the local Building Official
of Baguio City, which may properly issue building and fencing permits
within PEZA.
On October 30, 1995, Executive Order No. 282 was enacted. Under
Section 1 thereof, all the powers, functions and responsibilities of EPZA
under P.D. No. 66, as amended, insofar as they are not inconsistent
with the powers, functions and responsibilities of the PEZA, under R.A.
No. 7916, shall be assumed and exercised by PEZA.
Among such powers is the administration and enforcement of
the National Building Code of the Philippines in all zones and areas
owned or administered by EPZA.  By specific provision of law, it is PEZA,
through its building officials, which has authority to issue building
permits for the construction of structures within the areas owned or
administered by it, whether on public or private lands. Corollary to this,
PEZA, through its director general may require owners of structures
built without said permit to remove such structures within sixty (60)
days. Otherwise, PEZA may summarily remove them at the expense of
the owner of the houses, buildings or structures.
As regards the issuance of fencing permits on ancestral lands,
particularly within Baguio City and the rest of the Cordilleras, DENR-
Circular No. 03-90 prescribes in Section 12 the general rule that as soon
as ancestral land claim is found to be valid and in meritorious cases, the
Special Task Force may recommend to the City/Municipal Mayor’s Office
the issuance of a fencing permit to the applicant over areas actually
occupied at the time of filing. This is the general rule. Considering,
however, that in this case, a fencing permit is issued complementary to
a building permit and that within the premises of PEZA, it is the
Authority that may properly issue a building permit, it is only fitting that
fencing permits be issued by the Authority.
Conclusion:  From the foregoing disquisition, it clearly appears that
respondents likewise failed to satisfy the second requisite in order that
an injunction may issue: that the acts against which the injunction is to
be directed, are violative of said right. PEZA acted well within its
functions when it demanded the demolition of the structures which
respondents had put up without first securing building and fencing
permits from the Authority.
4. COCONUT OIL REFINERS ASSOCIATION, INC. et al vs. RUBEN
TORRES, as Executive Secretary, et al
G.R. No. 132527. July 29, 2005/ 465 SCRA 47
FACTS: On March 13, 1992, RA No. 7227 was enacted, providing for,
among other things, the sound and balanced conversion of the Clark
and Subic military reservations and their extensions into alternative
productive uses in the form of special economic zones in order to
promote the economic and social development of Central Luzon in
particular and the country in general. The law contains provisions on tax
exemptions for importations of raw materials, capital and equipment.
After which the President issued several Executive Orders as mandated
by the law for the implementation of RA 7227. Herein petitioners
contend the validity of the tax exemption provided for in the law.
ISSUE: Whether or not the Executive Orders issued by President for the
implementation of the tax exemptions constitutes executive legislation.
RULING: To limit the tax-free importation privilege of enterprises
located inside the special economic zone only to raw materials, capital
and equipment clearly runs counter to the intention of the Legislature to
create a free port where the “free flow of goods or capital within, into,
and out of the zones” is insured.
The phrase “tax and duty-free importations of raw materials, capital and
equipment” was merely cited as an example of incentives that may be
given to entities operating within the zone. Public respondent SBMA
correctly argued that the maxim expressio unius est exclusio alterius, on
which petitioners impliedly rely to support their restrictive
interpretation, does not apply when words are mentioned by way of
example. It is obvious from the wording of RA No. 7227, particularly the
use of the phrase “such as,” that the enumeration only meant to
illustrate incentives that the SSEZ is authorized to grant, in line with its
being a free port zone.
The Court finds that the setting up of such commercial establishments
which are the only ones duly authorized to sell consumer items tax and
duty-free is still well within the policy enunciated in Section 12 of RA No.
7227 that “. . .the Subic Special Economic Zone shall be developed into
a self-sustaining, industrial, commercial, financial and investment center
to generate employment opportunities in and around the zone and to
attract and promote productive foreign investments.”
However, the Court reiterates that the second sentences of paragraphs
1.2 and 1.3 of Executive Order No. 97-A, allowing tax and duty-free
removal of goods to certain individuals, even in a limited amount, from
the Secured Area of the SSEZ, are null and void for being contrary to
Section 12 of RA No. 7227. Said Section clearly provides that
“exportation or removal of goods from the territory of the Subic Special
Economic Zone to the other parts of the Philippine territory shall be
subject to customs duties and taxes under the Customs and Tariff Code
and other relevant tax laws of the Philippines.”
In the absence of any express grant of tax and duty-free privileges to
the Clark Special Economic Zone (CSEZ) in R.A. No. 7227, there would
be no legal basis to uphold Section 5 of Executive Order (EO) No. 80
and Section 4 of Bases Conversion Development Authority (BCDA),
Board Resolution No. 93-05-034—tax and duty-free incentives being in
the nature of tax exemptions, the basis thereof should be categorically
and unmistakably expressed from the language of the statute.
The shopping privileges currently being enjoyed by Overseas Filipino
Workers, Balikbayans, and tourists traveling to and from foreign
destinations, draw authority not from the issuances being assailed
herein, but from E.O. No. 46 and R.A. No. 6768, both enacted prior to
the promulgation of R.A. No. 7227. Coconut Oil Refiners Association,
Inc. vs. Torres, 465 SCRA 47, G.R. No. 132527 July 29, 2005
Special Economic Zones (R.A. No. 7227); Taxation; Statutory
Construction; In construing statutes, the proper course is to start out
and follow the true intent of the Legislature and to adopt that sense
which harmonizes best with the context and promotes in the fullest
manner the policy and objects of the Legislature; To limit the tax-free
importation privilege of enterprises located inside the special economic
zone only to raw materials, capital and equipment clearly runs counter
to the intention of the Legislature to create a free port where the “free
flow of goods or capital within, into, and out of the zones” is insured.
Duty-Free Shops; The setting up of dutyfree shops which are the only
ones authorized to sell consumer items tax and duty-free is well within
the policy enunciated in Section 12 of R.A. No. 7227 that “. . . the Subic
Special Economic Zone shall be developed into a self-sustaining,
industrial, commercial, financial and investment center to generate
employment opportunities in and around the zone and to attract and
promote productive foreign investments.
5. JOHN HAY PEOPLES ALTERNATIVE COALITION vs. LIM
G. R. No. 119775, October 24, 200/ 414 SCRA 356
FACTS: R.A. No. 7227 otherwise known as the "Bases Conversion and
Development Act of 1992," which was enacted setting out the policy of
the government to accelerate the sound and balanced conversion into
alternative productive uses of the former military bases under the 1947
Philippines-United States of America Military Bases Agreement, namely,
the Clark and Subic military reservations as well as their extensions
including the Camp John Hay Station in the City of Baguio. It created
public respondent Bases Conversion and Development Authority2
(BCDA), and the Subic Special Economic [and Free Port] Zone (Subic
SEZ). Also the said law granted the Subic SEZ incentives ranging from
tax and duty-free importations, exemption of businesses therein from
local and national taxes.
On August 16, 1993, BCDA entered into a Memorandum of Agreement
and Escrow Agreement with private respondents Tuntex (B.V.I.) Co., Ltd
(TUNTEX) and Asiaworld Internationale Group, Inc. (ASIAWORLD),
preparatory to the formation of a joint venture for the development of
Poro Point in La Union and Camp John Hay as premier tourist
destinations and recreation centers.
Four months later, BCDA, TUNTEX and ASIAWORD executed a Joint
Venture Agreement whereby they bound themselves to put up a joint
venture company known as the Baguio International Development and
Management Corporation. Meanwhile, the Baguio City government
passed a number of resolutions in response to the actions taken by
BCDA in their MOA and as owner and administrator of Camp John Hay.
One of which is Resolution No. 255, seeking and supporting the issuance
by then President Ramos of a presidential proclamation declaring an
area of 288.1 hectares of the camp as a SEZ in accordance with the
provisions of R.A. No. 7227.
On July 5, 1994 then President Ramos issued Proclamation No. 420
which established a SEZ on a portion of Camp John Hay, and in effect,
granted tax exemptions pursuant to R.A. No. 7227 to Subic SEZ extends
to other SEZs. The petitioners now allege that nowhere in R. A. No.
7227 is there a grant of tax exemption to SEZs yet to be established in
base areas, unlike the grant under Section 12 thereof of tax exemption
and investment incentives to the therein established Subic SEZ. The
grant of tax exemption to the John Hay SEZ, petitioners conclude, thus
contravenes Article VI, Section 28 (4) of the Constitution which provides
that "No law granting any tax exemption shall be passed without the
concurrence of a majority of all the members of Congress."
On the other hand, respondents contend that by extending to the John
Hay SEZ economic incentives similar to those enjoyed by the Subic SEZ
which was established under R.A. No. 7227, the proclamation is merely
implementing the legislative intent of said law to turn the US military
bases into hubs of business activity or investment. They underscore the
point that the government's policy of bases conversion cannot be
achieved without extending the same tax exemptions granted by R.A.
No. 7227 to Subic SEZ to other SEZs.
ISSUE: Whether or not Proclamation No. 420 (particularly Sec. 3) is
unconstitutional since it provides for national and local tax exemption
and grants other economic incentives to the John Hay SEZ.
RULING: Yes. The SC ruled in favor of the Petitioners. It is clear that
under Section 12 of R.A. No. 7227 it is only the Subic SEZ which was
granted by Congress with tax exemption, investment incentives and the
like. There is no express extension of the aforesaid benefits to other
SEZs still to be created at the time via presidential proclamation. While
the grant of economic incentives may be essential to the creation and
success of SEZs, free trade zones and the like, the grant thereof to the
John Hay SEZ cannot be sustained. The incentives under R.A. No. 7227
are exclusive only to the Subic SEZ, hence, the extension of the same to
the John Hay SEZ finds no support therein.
Neither does the same grant of privileges to the John Hay SEZ find
support in the other laws specified under Section 3 of Proclamation No.
420, which laws were already extant before the issuance of the
proclamation or the enactment of R.A. No. 7227. More importantly, the
nature of most of the assailed privileges is one of tax exemption. It is
the legislature, unless limited by a provision of the state constitution,
that has full power to exempt any person or corporation or class of
property from taxation, its power to exempt being as broad as its power
to tax. Other than Congress, the Constitution may itself provide for
specific tax exemptions, or local governments may pass ordinances on
exemption only from local taxes.
The challenged grant of tax exemption would circumvent the
Constitution's imposition that a law granting any tax exemption must
have the concurrence of a majority of all the members of Congress. In
the same vein, the other kinds of privileges extended to the John Hay
SEZ are by tradition and usage for Congress to legislate upon. If it were
the intent of the legislature to grant to the John Hay SEZ the same tax
exemption and incentives given to the Subic SEZ, it would have so
expressly provided in the R.A. No. 7227. Thus, the second sentence of
Section 3 of Proclamation No. 420 is hereby declared NULL AND VOID
and is accordingly declared of no legal force and effect.
The transformation of a portion of the area covered by Camp John Hay
into a Special Economic Zone (SEZ) is not simply a re-classification of
an area, a mere ascription of a status to a place—it involves turning the
former US military reservation into a focal point for investments by both
local and foreign entities. It cannot be gainsaid that the matter of
conversion of the US bases into SEZs, in this case Camp John Hay,
assumes importance of a national magnitude.
Bases Conversion and Development Authority; Tax Exemptions; The
incentives under R.A. No. 7227 are exclusive only to the Subic SEZ,
hence, the extension of the same to the John Hay SEZ finds no support
therein, and neither does the same grant of priveleges to the John Hay
SEZ find support in the other laws specified under Section 3 of
Proclamation No. 420.
Local Autonomy; With the broad rights of ownership and administration
vested over Camp John Hay, BCDA virtually has control over it, subject
to certain limitations provided for by law.