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SC tax ruling hurts bizmen at Camp John Hay

BAGUIO CITY (May 13) — Businesses inside Club John Hay (CJH) may eventually feel the brunt of a Supreme Court (SC) decision nullifying tax and duty exemptions earlier granted.

Establishments operating inside CJH, declared as a Special Economic Zone (SEZ) by then President Fidel V. Ramos, are the innocent casualties, said private developer-lessee Camp John Hay Development Corporation Vice President and spokesperson Atty. Gina Alvarez.

This week, several sub-locators, concessionaires and residents of Camp John Hay joined CJHDevCo’s appeal to the government-run Bases Conversion Development Authority (BCDA) and its local subsidiary John Hay Management Corporation (JHMC) for indemnification or a written guarantee over their cancelled tax and duty exemptions at the John Hay Special Economic Zone (JHSEZ).

The establishments, which include the CJH Manor, Golf Club and the Mile Hi Center that houses 18 enterprises, reiterated that they set up shops in CJH “on the assumption that (they) would enjoy for fifty (50) years the SEZ tax and duty exemptions spelled out in the JHSEZ Implementing Rules and Regulations, particularly Chapter IV, Sections 10 and 17; R.A. 7227; and, Section 3 of Presidential Proclamation No. 420.”

Jose Ma. N. Esteban III, President of Inbound Pacific, Inc. which operates Mile Hi Center claimed, “Now that these tax and duty exemptions have been withdrawn, we are reduced to the status of a regular taxpayer and would have to contend with a 32-35% net income tax regime, the value added tax, documentary stamp taxes, real property taxes, local business taxes, import duties and other similar fees and impositions, none of which we expected when we entered into business in Camp John Hay.”

“What’s so special about the John Hay Special Economic Zone if not for the tax and duty free incentives? Ayaw sana naming isipin na naisahan kami, pero ‘yun ang lumalabas,” added Eric Santos, store manager of the CJH Commissary.

Meanwhile, the locators complain that JHMC’s evasive response to their letters was that JHMC cannot do anything about the issue since they have not yet received a copy of the SC decision.

“How could BCDA and JHMC not know about the issue? In fact, it’s all over the papers that the SC decision is final. They really have to do something about this,” said Jess Gonzales, manager of Wines & Spirits at the Mile Hi Center.

“We trust that BCDA, JHMC and CJHDevCo will protect innocent parties, such as our company. We would appreciate a written assurance from CJH DevCo, JHMC and BCDA that we would be held free and harmless from any adverse consequences of the Supreme Court resolution as well as a written continuing guarantee on our enjoyment of the tax and duty exemptions within the JHSEZ,” said Manor General Manager Heinrich Maulbecker.

“We are still reeling from the effects of the meningococcemia scare. It was bad for business. And now this?” complains another establishment owner. “BCDA should have told us there is a possibility that our exemptions will be taken away. We would not have invested so much, and find ourselves unfairly embroiled in this mess,” Maulbecker added.

Alvarez however assured the John Hay locators that CJHDevCo is doing everything within its power to protect each and everyone’s stake, rights and interest in the John Hay SEZ. “All legal remedies are being explored and undertaken for our common good and benefit. After all, we are all victims of circumstance and the unrepentant breach of guarantee on the part of the BCDA.”

Last month, it was reported that the ambitious Subic-Clark-Tarlac Expressway Project (SCTEP) being undertaken by BCDA badly needed around P300 million for its completion.

BCDA, in its desire to collect lease rentals from the Camp John Hay project, is trying to pit the host community against the developer, even using some dubious non-government organizations as a pressure group, Alvarez claimed.

P1 B alleged arrears on rentals, a betrayal

Alvarez, also the senior vice president for legal and corporate services of CJHDevCo insisted that the P1 billion alleged arrears in CJHDevCo lease rental is BCDA’s doing. It is BCDA’s failure to honor its guaranty on John Hay SEZ tax exemption and duty free privileges that is the main culprit for CJHDevCo’s rental issues.

She explained, “we have repeatedly asked BCDA to honor its warranty and contractual covenant under the original lease agreement. BCDA assured the winning bidder in 1996 that it will enjoy John Hay Special Economic Zone tax incentives. That BCDA reneged on that promise is betrayal of first water.”

BCDA prior to the Supreme Court Decision, she further claimed, rendered the John Hay SEZ tax incentives null and void on October 24, 2003.

CJHDevCo was in good standing as to its rental obligations under the 18 July 2003 MOA.

Alvarez added that CJHDevCo had given more than P900 million since 1996, including the P425 million lease rental it paid in 1997, despite the fact that BCDA failed to deliver 32 hectares of the leased area. “The tax exposure that BCDA has created for CJHDevCo is the height of injustice. It is the responsibility of BCDA to rectify this situation.

For so long, we have tried to enjoin BCDA in constructive effort to solve this issue. It would not have come to this if BCDA kept its end of the bargain from the very start,” Alvarez continued. # Artemio A. Dumlao for NORDIS

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