Makati orders closure of Smart HQ over lack of permit, unpaid taxes

MANILA, Philippines (Updated, 2:43 p.m.) — The local government of Makati City slapped Smart Communications Inc. — the mobile unit of telco giant PLDT Inc. — with a closure order, saying the company has been operating without a business permit since 2019 and owes the city taxes.

In an order dated February, the city government directed the closure of Smart’s headquarters located at Ayala Avenue in Makati for violating Section 4A.01 of the Revised Makati Revenue Code.

The case stemmed from an examination launched by the Office of the City Treasurer in 2016, which found that Smart owed Makati City over P3.2 billion in franchise tax covering the period of January 2012 to December 2015.

Makati officials said Smart "has failed to settle or obtain any relief from the courts" over its franchise tax deficiency to date.

"I am committed to making sure all businesses are operating legally. It is important for businesses to know that we take these matters seriously and will take action when necessary," Makati Mayor Abby Binay was quoted as saying in a statement.

In a statement, Smart said its legal and tax teams "continue to be in touch with the Makati LGU on the matters at hand".

"Smart remains committed to complying with Makati City’s local tax ordinances, and with applicable national laws, in respect of local taxation," the company said. 

Jurisdiction to audit

In 2018, Smart filed a petition for review before the Makati Regional Trial Court Branch 133 that sought the nullification of the Makati City Treasurer’s notice of assessment.

The city government said it had asked Smart to submit a breakdown of revenues and business taxes paid in all branches nationwide, but the company refused to present the documents.

During the trial, Makati filed a motion for production and inspection of documents, which the court granted. Smart challenged the Makati court’s decision before the Court of Tax Appeals (CTA).

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

In 2022, CTA denied Smart’s petition and affirmed the decision of the Makati court. The CTA also ruled that Makati “has the authority to investigate Smart’s entire operations under the Local Government Code”.

Makati said Smart has yet to bring the case to the Supreme Court.

Makati said it has been cracking down on businesses that have been operating in the city without a permit. Last year, Makati's Business Permits and Licensing Office shut down 191 establishments due to lack of business permits.

Editor's Note: A unit under PLDT's media conglomerate has a majority stake in Philstar Global Corp., which runs Philstar.com. This article was independently produced following editorial guidelines.