MANILA, Philippines – Telecommunications giant Smart Communications was slapped with a closure order by the local government of Makati City on Monday, February 27, for allegedly not paying up to P3.2 billion in taxes and operating without a business permit over the last four years.

The order was a result of the findings of the Office of the City Treasurer in 2016, which concluded that Smart owed the city government over P3.2 billion in franchise tax from January 2012 to December 2015.

“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,” Makati City Administrator Claro Certeza said. 

“You are hereby commanded to cease and desist from further operating your business establishment until such time compliance with the said ordinance is made,” read a portion of the order dated Thursday, February 23.

Certeza said the city had requested Smart to submit a breakdown of revenues and business taxes paid in all branches nationwide, but the telecommunications giant allegedly refused to present the documents.

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

In 2018, Smart filed a petition for review before the Makati City Regional Trial Court (RTC) seeking to nullify the assessment.

During the trial, the Makati City government filed a motion for production and inspection of documents, which the court granted. However, in 2019, Smart filed an opposition to Makati’s motion and challenged the court’s decision before the Court of Tax Appeals (CTA).

In 2022, the CTA denied Smart’s petition and affirmed the decision of the Makati City RTC.

Legal battle

In a statement, Smart said it will comply with taxation laws, whether national or Makati City’s local tax ordinances.

In the same release, Smart said it has lodged cases to “resolve” the matter.

Shares of PLDT fell by as much as 7.5% on Monday, February 27.

PLDT, Smart’s parent, is among the most valuable companies in the Philippines. PLDT’s core income rose 8% to P30.2 billion in 2021. In the first nine months of 2022, its telco core income was up 10% to P25.4 billion and was on track to reach full-year guidance of P33 billion.

Makati City’s move against Smart comes after its parent PLDT’s reputation was stained over a P48-billion budget overrun that was disclosed in December 2022 following an internal probe. The budget problem led to a class suit from some United States shareholders. – Rappler.com