JOHN HAY PEOPLE’S ALTERNATIVE COALITION V.

VICTOR LIM
G.R. No. 119775, October 24, 2003

This is a petition assailing the constitutionality of Presidential Proclamation No. 420 (Proc. 420) creating
and designating a portion of the area covered by Camp John Hay into a special economic zone (SEZ). In
particular, petitioners challenge the validity of Proc. 420 on the grounds that it infringes on Sec. 28(4), Art.
6 of the Constitution and that it diminishes the local autonomy of Baguio City.

FACTS:
 1992: Congress enacted RA 7227, or the Bases Conversion and Development Act
o The act accelerates the conversion of the military reservations into other productive uses and
creates the Bases Conversion and Development Authority (BCDA)
o RA 7227 primarily created the Subic Special Economic Zone (Subic SEZ) , delineated its metes
and bounds, and granted the Subic SEZ incentives like tax and duty-free importations, and
exemptions of businesses from local and national taxes
o The RA also gave express authority to the President to create via Executive Proclamation,
subject to the concurrence of the LGUs to be affected, other SEZs in areas covered by Clark,
Wallace Station in San Fernando, and Camp John Hay (CJH)
 1993: BCDA entered into a Memorandum of Agreement (MOA) and Escrow Agreement with Tuntex
and Asiaworld (British Virgin Islands corporations)
o Agreed on a joint venture agreement (JVA), which was executed, thus creating the Baguio
International Development Management Corporation to LEASE areas within CJH in Baguio and
Poro Point in La Union
 1993: Sangguniang Panglungsod of Baguio (Sanggunian) officially asked the BCDA to exclude 9
barangays partly and totally located in the CJH area from the coverage of any plan for development
o Also submitted a 15-point concept for the development of CJH
o They proposed that the development be protective of the environment and that priority
development opportunities, as well as free access, be granted to Baguio residents
o Also proposed guaranteed participation of the city govt. in the management and operation of the
camp and liability for local taxes of the businesses to be established in the CJH
o BCDA partly agreed and rejected other proposals; the Sanggunian then submitted their proposal
to the President
 1994: Pres. Ramos issued Proc. 420, granting BCDA authority to implement all necessary policies,
rules, and regulations, including investment incentives in the Camp John Hay Area
1995: Petitioners filed instant petition challenging the constitutionality and validity of the MOA and JVA
between BCDA, Tuntex, and Asiaworld

ISSUES: WN Proc. 420 is unconstitutional by providing for national and local tax exemption?

HELD. Yes, It was established in the language of Sec. 12, RA 7227 that the tax exemption only applies to
SUBIC SEZ; no express extension of the aforesaid benefits to other SEZs still to be created was made.
The deliberations of the Senate also affirm this fact.

It is the legislature, unless limited by the Constitution, that has full power to exempt any person,
corporation, or class from tax, as included in their broad power to tax. The Constitution may provide for
specific tax exemptions; local govts may pass ordinances of tax exemption but only for local taxes

Sec. 28(4), Art. 6, 1987 Consti: No law granting any tax exemption shall be passed without the
concurrence of a majority of all Members of Congress

Proc. 420 extends the tax exemption contemplated in RA 7227 to other economic zones. Thus, it is an
infringement of RA 7227 and Sec. 28(4), Art. 6