Tax court allows Makati gov’t to check Smart’s books over P3.2-B tax case

MANILA, Philippines – The Court of Tax Appeals (CTA) has allowed Makati City to check the financial records of  Smart Communications Incorporated, in line with the local government’s bid to collect P3.2 billion in alleged unpaid taxes and fees from the firm.

In its 13-page decision dated February 5, the CTA’s Second Division affirmed the 2019 resolutions of Regional Trial Court of Makati City Branch 133 on the tax case.

“Given the tenor of the case brought before the RTC, this Court finds petitioner’s records (in relation to their gross sales/receipts during the taxable years subject of the NOA (notice of assessment) material to the issue of the assessment veracity,” the CTA said.

The CTA also set aside the claim of Smart that the implementation of the trial court’s order would imperil due process.

The dispute stemmed from the petition for review filed by Smart before the trial court on July 27, 2008, seeking to nullify Makati’s notice of assessment that said the company owed the local government P3.246 billion in franchise taxes and fees for 2012 to 2015. 

Responding to Smart’s petition, Makati invoked Rule 27 of the Rules of Court and sought to direct the company to produce documents related to the assessment. 

The trial court granted Makati’s motion, prompting Smart to bring the case before the CTA.

Smart questioned the “relevancy” of some of the documents sought  by the city government, particularly those on its nationwide revenues, including revenues from other localities which the telco said “contain information referring to matters outside respondent Makati City’s territorial jurisdiction and pertain to taxable period that it can no longer be assessed for.”

Smart argued that opening its records would be “improper” since this would allow Makati City “to take inconsistent stances since the latter already upheld the validity and correctness of its NOA yet it could take another look at it to validate the assessment’s accuracy.”

Makati responded that the documents were not confidential in nature and were needed as Smart had failed to provide the city government with a breakdown of the gross sales of its branches.

On this issue, the CTA said, “Incidentally, although it is true that petitioner’s records may contain information relating to tax matters outside Makati City’s jurisdiction, the said document sought by private respondents remain as parts thereof.” 

Associate Justice Jean Marie A. Bacorro-Villena penned the ruling, with concurrences fom Associate Justices Juanito C. Castaneda Jr and Cielito N. Mindaro-Grulla. – Rappler.com