CITY COUNCIL DEMAND AGGRESSIVE COLLECTION OF PERMIT FEES AND UNPAID DUES TO CAMP JOHN HAY

August 17, 2024 Metro BLISTT

BAGUIO CITY

The Baguio City Council urged the executive department to take more aggressive action in requiring businesses within the John Hay Special Economic Zone (JHSEZ) to obtain business permits from the city government and in collecting their corresponding regulatory fees. The city council also reiterated the need for a more aggressive stance in collecting the unpaid dues from the Bases Conversion and Development Authority (BCDA) and Camp John Hay Management Corporation (CJHMC). During the city council’s regular session on August 12, 2024, the local legislators urged the City Legal Office to urgently initiate appropriate legal or administrative procedures to facilitate the collection of what is owed to the city.

Collection Regulatory Fees

With the Supreme Court’s final ruling in favor of the city government in its case against the BCDA, the city government now has the legal right to require businesses within the JHSEZ to obtain business permits and pay the applicable regulatory fees. The High Court emphasized that the payment for business permits is regulatory and not a form of taxation, thus, businesses within JHSEZ cannot claim exemptions based on tax-exempt status.

The legal dispute arose when the city government issued an administrative order requiring businesses in the JHEZ to secure business permits and pay the mayor’s permit fees as imposed by the city’s tax ordinance (Tax Ordinance No. 2000-01). The BCDA argued that such fees are contrary to Republic Act No. 7916 which exempts businesses in special economic zones from local taxes and that the mayor’s permit fee should not apply.

However, on February 2, 2023, the SC ruled that the mayor’s permit fee, as part of the local business permit process, is not considered a local tax but rather a regulatory fee. The BCDA filed a motion for reconsideration, but on April 14, 2024, the SC denied it with finality, stating that no further pleadings or motions would be entertained in this case.
During the August 12 regular session, Lawyer Althea Alberto informed the city council about an ongoing negotiation with the board of Camp John Hay Management Corporation (CJHMC).

The negotiation focuses on CJHMC’s proposal to draft a memorandum of agreement with the city government for the conduct of an inventory of businesses in JHEZ and the processing of necessary business permits, given that CJHMC has its own zoning and building officials. To date, the City Legal Office has not yet received the draft MOA from CJHMC despite their commitment to submit it two weeks after their meeting on July 10, 2024. aside due to the BCDA’s motion for reconsideration. With the recent SC decision, they resumed discussions on July 10, 2024.

Councilor Jose Molintas asserted that, in compliance with the SC decision, all businesses in JHEZ should now get business permits from the city government. He expressed hope that full compliance will be achieved next year. Molintas suggested that the city government should not focus on the proposed MOA until it is received but should instead proceed with implementing aggressive mechanisms to collect the dues from BCDA/JHMC. Vice- Mayor Faustino Olowan suggested that the city government should take the matter to court with a proposal for a compromise agreement.

He emphasized that coordination should now be between the City Legal Office and the court, following proper legal procedures, rather than through direct negotiations between the city government and the BCDA outside the court’s purview. Councilor Betty Lourdes Tabanda likewise questioned the need to await the crafting and execution of a MOA between the city government and BCDA/JHMC when this might be unnecessary given the SC decision. Alberto explained that the pursuit of a MOA was based on the instructions from Mayor Benjamin Magalong after his engagements with BCDA President Joshua Bingcang.

The intent of the MOA, as Alberto understood it, was to mitigate any “combative energy” between the city government and BCDA/JHMC and to aim for a more amicable approach. Alberto added thay they will draft the MOA
for their review. But Olowan and Tabanda pointed out that the city council might not be the proper body to review such a document. They emphasized that the court should be involved in this process. Tabanda advised setting a deadline for the drafting and execution of the MOA with an alternative action to proceed with court action if the MOA is not feasible within that time frame.

SC Ruling Limits Tax Exemptions to PEZA-Registered Business

Allan Abayao, the head of the Permits and Licensing Division, as of July 2024, approximately 59 establishments within Camp John Hay have been issued business permits by the city government. He confirmed that some establishments registered with PEZA are paying their taxes to PEZA, which then remits the due amount to the city government. He also noted the presence of establishments that are neither registered with PEZA nor have obtained permits from the city government. These establishments were given a “permit to operate” by CJHMC through their one-stop shop.

Other Unpaid Dues Aside from the imposed business permit fees, the BCDA also has unpaid financial obligations to
the city government, totaling P225 million as of 2021. In addition to this revenue sharing, Section 10 (Condition No. 10) specifies that BCDA must allocate 25% of its lease rentals or 30% of its net income from its operations within JHSEZ, whichever is higher. The amount to be paid by BCDA under Condition No. 9 is P56, 843,842.08. No payment has been done under this condition.

An outstanding balance of P168,608,109.60 has yet to be collected under Condition No. 10. This indebtedness was computed based on the lease payments of CJH Development Corporation (CJHDevCo) to BCDA, a far cry from the P930 million outstanding balance calculated by the City Treasurer’s Office up to 2020 based on the terms of the lease agreement between BCDA and CJHDevCo.