Makati City Hall closed its Ayala Ave.  Smart because of the P3.2-B franchise tax line

The Makati city government on Monday closed the headquarters of Smart Communications Inc. located on Ayala Avenue, citing the telecommunications giant's failure to pay off more than P 3.2 billion covering the period January 2012 to December 2015 and to operate without a business license since then. 2019.

In a halt/closure order dated February 23, 2023, City said Smart's headquarters were located at 6799 Ayala Ave. in Brgy. San Lorenzo, violates Section 4A.01 of the Revised Makati Income Code or City Ordinance No. 2004-A-025.

“You are hereby ordered to cease and desist from further carrying on your business until such time as such ordinances are made,” read the order executed on Monday (Feb 27).

To date, Smart has failed to resolve or obtain relief from the courts for its franchise tax shortfall of more than P3.2 billion, City Hall said.

“When businesses in Makati choose to operate without a valid business license, 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 large or small company,” said Claro Certeza, Makati City Administrator.

The case stems from an investigation launched by the City Treasury's Office in 2016, which concluded that Smart Communications Inc. owed the city government more than P3.2 billion in franchise taxes over a four-year period.

Certeza said the city had asked Smart to submit details of income and business taxes paid at all branches nationwide, but the telecommunications giant refused to produce those documents.

Meanwhile, Mayor Abigail Binay reaffirmed her commitment to upholding the highest quality and safety standards for businesses operating in the city.

“I am committed to ensuring all businesses operate legally. It is important for businesses to know that we take these matters seriously and will take action when necessary,” said Binay.

In 2018, Smart filed a review application with the Makati Branch 133 District Court to request the cancellation of the City Treasurer's Office of Assessment Letter, which stated that telecommunications companies do not pay franchise taxes.

During the trial, the Makati city government submitted a motion for document drafting and inspection, which was granted by the court. However, on 31 May 2019, Smart filed a comment/opposition against Makati's motion and challenged the court's decision before the Court of Tax Appeals (CTA).

In 2022, CTA rejected Smart's petition and confirmed RTC's Makati Branch 155 decision.

Smart argued that the city had no jurisdiction to audit the financial statements and operations of companies in other branches nationwide, adding that it had submitted all records regarding its operations within the city and paid the necessary taxes.

CTA, however, said Makati has the authority to investigate Smart's entire operation under the Local Government Code. Smart has yet to take the case to the Supreme Court.

Last year, the Makati City Business Permits and Licensing Office closed 191 companies due to a lack of business licenses.

Binay reminded all businesses in Makati to comply with the law and obtain the necessary permits before operating in the city.