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CJH developer slapped with P71.98M import duties, taxes

BAGUIO CITY (May 27) — The developer of the 246-hectare Camp John Hay (CJH) complex has been slapped with import duties and taxes reaching at least P71.98 million from 1998 to 2004.

Camp John Hay Development Corporation (CJHDevCo), was ordered to pay the Bureau of Customs (BOC) its import duties and taxes, contrary to the public statements of the Bases Conversion Development Authority (BCDA) that the Supreme Court (SC) ruling nullifying the John Hay Special Economic Zone (CJSEZ) incentives has no impact yet.

The Pandora’s box has been opened to an ugly turn, CJHDevCo said on Thursday after receiving the BOC order.

The customs assessment comes in the heels of the Bureau of Internal Revenue’s (BIR) denial of the developer’s request for authority to print non-VAT receipts and invoices, opining that CJHDevCo has become an ordinary corporation subject to the regular corporate income tax and value added tax imposed under the Tax Code of 1997 last Monday.

Both the BOC and the BIR cited the March 29, 2005 Resolution and October 24, 2003 SC decision nullifying the JHSEZ tax and duty exemptions as the basis for their action.

“This only proves that we are not hiding behind the SC ruling. The impact of the SC Decision is immediate and real. This clearly evidences a material breach of BCDA’s warranty on the 5% of gross income earned incentive embodied in Article XVI, Section 18 of the Lease Agreement,” the developer’s spokesperson Atty. Gina Alvarez said.

“With this mounting tax problem, BCDA can rest assured that CJHDevCo will seek indemnification. We will pursue all legal steps to protect our rights as spelled out in our lease agreement,” Alvarez said.

The same SC decision spurred the City Treasurer’s Office of the City of Baguio last January to assess CJHDevCo with some P101.93 million in unpaid real estate taxes since the developer took over the 246-hectare Camp John Hay property in 1996.

Alvarez lamented that the JHSEZ tax and duty exemptions was a guaranteed enticement by the BCDA when it invited the private developer to bid for the development of Camp John Hay and was in fact written into the lease agreement inked by the parties. As if we were offered gold but when we bought it at the prize of the vendor, it turned out to be bronze, she said in analogy.

Customs District Collector Edward O. Baltazar, in a letter dated May 26 said “all importations of CJHDevCo has thus lost their duty and tax exemption privileges earlier accorded by Proclamation No. 420.”

“In view thereof, demand is hereby being made for CJHDevCo to settle your liability with this Port amounting to P71,983,753.00 representing duties and taxes due on all your importations from 1998 to 2004,” his letter said.

Baltazar requested CJHDevCo to settle the amount within 15 days.

Gov’t not honoring its word?

“BCDA has accused us of employing `scare tactics’. Isn’t it more frightening when the business sector, including the public in general, could not count on the government to honor its word? And isn’t it the mother of all scares when, after failing to honor its word, government threatens an illegal takeover?” Alvarez alleged.

BCDA last week announced it is seriously considering a takeover of Camp John Hay. But , Baguio rep. Mauricio Domogan said instead that the takeover plan was ill-advised, saying, “Takeover is easier said than done. I still believe Camp John Hay is better managed by the private sector.”

Domogan emphasized the need for BCDA and the developer to sit down and come up with a win-win solution for the problems besetting Camp John Hay. But this, he said could only start when both parties honor the terms of the lease agreement they signed in 1996.

On Monday, the Baguio City Council conducted an inquiry in aid of legislation to find common grounds for settlement of the Camp John Hay row.

After hearing the side of both BCDA and CJHDevCo, city councilors urged the government through BCDA-JHMC to sit down with CJHDevCo to settle their differences amicably for the sake of the people of Baguio who stand to be most affected.

CJHDevCo, said Alvarez, has been willing to sit down with BCDA to discuss a solution to the problem created by the cancellation of the SEZ tax and duty privileges by the SC.

BCDA Spokesperson Atty. Lyssa Pagano-Calde, however said that CJHDevCo merely wants to skirt away from its liabilities to government. She said the private developer must pay first its outstanding P1.2 billion arrears in rentals and debt.

BCDA’s conditions on CJHDevCo, the private developer, Alvarez said, even before talks on an amicable solution can be started is not acceptable to CJHdevCo. “Unless BCDA agrees to make good its John Hay SEZ tax guarantees, or define, quantify and acknowledge the financial impact of the tax ruling on CJHDevco and its sub-locators” she said.

Domogan however warned that amid the tussle between BCDA and CJHDevCo, “It is not only the future of the people of Baguio which is at stake here but the larger picture which is the privatization program of the government. Who will believe in government now if it can just unilaterally disregard contracts?”

Domogan was the mayor of Baguio when the lease agreement between CJH DevCo and BCDA was forged.

Meanwhile, Baguio City Mayor Braulio D. Yaranon stood firm that the city government may resort to appropriate judicial proceedings for the collection the 25% share of the city in rental payments. Yaranon, in a statement said the private developers of Camp John Hay have only paid rentals up to 1997.

“There is no valid reason for the private developers to refuse to pay rentals to BCDA,” Yaranon said, adding that the SC decision nullifying tax exemptions to businesses within the camp is not an excuse for non-payment of rentals on the leased property. # Artemio A. Dumlao for NORDIS

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