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Makati shuts down Smart HQ over alleged permit, tax violations

The Makati City government on Monday said it has issued a closure order against Smart Communications Inc.'s main office for allegedly operating without a business permit since 2019 and for also allegedly failing to settle its P3.2-billion franchise tax deficiency.

Citing an order of desistance/closure dated February 23, 2023, the Makati government said Smart’s headquarters in Barangay San Lorenzo on Ayala Avenue violated Section 4A.01 of the Revised Makati Revenue Code or City Ordinance No. 2004-A-025.

“You are hereby commanded to cease and desist from further operating your business establishment until such time compliance with the said ordinance is made,” the Order read.

The Makati government said Smart was also not able to obtain any relief from the courts over its P3.2-billion franchise tax deficiency from January 2012 to December 2015, based on the examination initiated by the Office of the City Treasurer in 2016.

Makati City Administrator Claro Certeza said they had requested Smart to submit a breakdown of revenues and business taxes paid in all branches nationwide, but the firm refused to present the documents.

“When businesses in Makati choose to operate without a valid business permit, they are essentially operating outside the law. This is unacceptable, and I want to make it clear that we will not tolerate this kind of behavior, whether you are a big or small company,” he said.

In a statement, Smart said it "remains committed to complying with Makati City’s local tax ordinances, and with applicable national laws, in respect of local taxation."

"Smart has filed the appropriate cases to resolve outstanding legal issues; these cases remain pending. Our legal and tax teams continue to be in touch with the Makati LGU on the matters at hand," it added.

"We assure the public that our services will remain available and accessible to our subscribers," the company said.

Petition for review

According to the Makati government, Smart filed a petition for review before the Makati Regional Trial Court Branch 133 in 2018 to seek the nullification of the Office of City Treasurer’s Notice of Assessment, which states that the company did not pay franchise tax.

During the trial, the city filed a motion for production and inspection of documents, which the court granted. However, on May 31, 2019, Smart filed a comment/opposition against the citys motion and challenged the court’s decision before the Court of Tax Appeals (CTA).

The CTA denied Smart’s petition in 2022 and affirmed the decision of the Makati RTC Branch 155.

Smart then said that the Makati City government has no jurisdiction to audit the company’s financial statements and operations in other branches nationwide, adding that it had submitted all records related to its operations within the city and paid the necessary taxes.

The CTA, however, said Makati City has the authority to investigate Smart’s entire operations under the Local Government Code.

Smart has yet to elevate the case to the Supreme Court.

Explain to Congress

In an interview, Senate public services committee chairperson Grace Poe said Smart, whose franchise goes through Congress, must explain why it failed to pay their taxes.

The lawmaker said the local government should also explain how the company was able to operate for a long time without paying the proper taxes.

"Unang-una, 'yung pumapasok sa isip ko, paano sila nakalusot nang ganon katagal nang di nagbabayad ng tax? Obviously, meron din dapat ipaliwanag yung nangongolekta ng taxes bakit nila pinabayaan na di makabayad nang ganun," Poe told reporters.

"Walang maniniwala na wala silang pera. So may kapabayaan doon o kung 'di kapabayaan merong kalokohan," she added.—Giselle Ombay/Jon Viktor Cabuenas/Hana Bordey/KBK/KG, GMA Integrated News