Film academy case: A pyrrhic victory?
SHOOTING STRAIGHT - Bobit S. Avila (The Freeman) - August 12, 2015 - 10:00am

Last Tuesday, SunStar Daily came up with the headline, "City Hall Wins, but owes P77M." If you won your case, why then do you need to pay the petitioners? To get a better understanding of this case, let me give you the gist of this story. In the year 2002, the Film Development Council of the Philippines was created in a special law to help the local or Tagalog movie industry. It was a body that graded or classified films where a film that was graded A would have a full 100 percent free from amusement taxes.

One day, actress Laurice Guillen who represented the FDCP, came to Cebu to meet with the theater owners and inform them that they owed FDCP P159.37 in supposedly back taxes. Of course this was a shocker to the theater owners because no one from Congress invited the theater owners or operators to the public hearings for the creation of this law. The next thing they knew, Ms. Guillen came to collect their share of the taxes.

But since all theater operators remit the 30 percent in gross sales as amusement taxes to the City of Cebu, paying the FDCP would have amounted to unjust taxation. I should not be writing on this case simply because the Colon Heritage Realty Corp. is owned by the Avila Family and represented by my cousin Mr. Isidoro Cañizares. However since we are talking about taxes being remitted to Cebu City, I should write about this case in order to enlighten our readers as to why this has happened.

In the Year 2009, FDCP demanded from the eight theater operators to pay the P159.37 million. But if the theater operators paid any sum higher than the 30 percent they already paid to the City of Cebu, it would tantamount to unjust taxation. So we refused and FDCP went to the City of Cebu to demand payment. It was then that the City of Cebu realized that the special law creating the FDCP had infringed on its right to collect taxes.

Since the FDCP was already considered an operative law, we had no choice but to file a case for declaratory relief. Former Cebu City Mayor Tomas Osmeña then asked me that we should have a joint case filed in order to strengthen our cases. This was handled by the law firm of my son-in-law Atty. Jennoh Tequillo and represented by his partner Atty. Ed Suson.

What I cannot understand in this Supreme Court En Banc ruling promulgated only last June 16, 2015 is that the City of Cebu still has to pay or remit to the FDCP P76,836,807?

If we are supposed to have won the case where a special law is declared as unconstitutional, then the City of Cebu should not be made to pay. The SC's reason is that the FDCP collected the taxes or fees in good faith, saying,  "The SC invoked the doctrine of operative fact. The doctrine nullifies the void law or executive act but sustains its effect."

So is the SC telling us that the City of Cebu collected the amusement taxes in bad faith?

Hence I fully agree that the City of Cebu should appeal this case. Mind you, this SC decision has a huge impact on the Philippine movie industry. If the City of Cebu owes P76,836,807, it just makes you wonder how much does the cities of Manila, Makati, Quezon City, Parañaque, Valenzuela, Davao, Cagayan de Oro and so many more owe to the FDCP? We are talking here of figures reaching in the hundreds of millions of pesos, and who are in the same predicament with Cebu City.

Above all, there is a lesson for Congress to learn from the creation of the FDCP special law; that it should not infringe on the taxing powers of the Local Government Units. If at all, Manila theater operators, especially the giants like SM Cinema and Ayala Cinemas owe this legal victory to the case filed by the Colon Heritage Corp. and the City of Cebu. For so long, Congressmen just file laws that are really unconstitutional, but for as long as no one files a case before the Supreme Court, it will always be the law of the land.

Mind you, this is not to marginalize the need for some financial assistance to the local movie industry. I am sure that they need some kind of financial help from the national government. However it should never be at the expense of the LGUs, which have very limited revenues. It is up to the national government to come up with some kind of scheme to encourage local movies, which unfortunately has started to dwindle because of the high cost of production.

If at all, the best thing that Congress has done for the theater industry was to reduce the amusement taxes from a high of 30 percent of gross down to 10 percent just a couple of years ago. But it was too late for many theater owners, especially here in Cebu City where once, just in the downtown district, there were 16 first run movie houses. Today, we can count only less than five that are still operating. Thanks to modern technology, like the iPad or even your cellphone or cable television, where you can watch your movies. Of course, the City of Cebu never stopped the bootleg DVD that killed the industry.

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