CAMP JOHN HAY VS LIM

G.R. No. 119775

MARCH 29, 2005

FACTS: Petitioners filed their Petition for prohibition, mandamus and declaratory relief
assailing (1) the constitutionality of Proclamation No. 420 and (2) the legality of the
Memorandum of Agreement and Joint Venture Agreement previously entered into between
public respondent BCDA and private respondents. Section 3 of Proclamation No. 420 was
declared NULL AND VOID and is accordingly declared of no legal force and effect.
Intervener CJHDC filed a Motion for Leave to Intervene alleging that it, together with its
consortium partners, entered into a Lease Agreement dated October 19, 1996 with
respondent BCDA for the development of the John Hay SEZ; and that it "stands to be most
affected" by this Court's Decision "invalidating the grant of tax exemption and other
financial incentives" in the John Hay SEZ since "[i]ts financial obligations and development
and investment commitments under the Lease Agreement were entered into upon the
premise that these incentives are valid and subsisting."
CJHDC, proffering grounds parallel to those of public respondents, prays that: (1) it be
granted leave to intervene in this case; (2) its attached Motion for Reconsideration in
Intervention be admitted; and (3) this Court's Decision of October 24, 2003 be reconsidered
and petitioners' petition dismissed.
CJHDC's Motion for leave to Intervene was granted and noted its Motion for Reconsideration
in Intervention.
ISSUE: Whether the tax exemptions and other financial incentives granted to the Subic SEZ
under Section 12 of R.A. No. 7227 (Bases Conversion and Development Act of 1992), are
applicable to the John Hay SEZ.
RULING: CJHDC's argument that the President's "power to create Special Economic Zones
carries with it the power to provide for tax and financial incentives," does not lie. It is the
legislative branch which has the inherent power not only to select the subjects of taxation
but to grant exemptions. Paragraph 4, Section 28 of Article VI of the Constitution is crystal
clear: "[n]o law granting any tax exemption shall be passed without the concurrence of a
majority of all the Members of the Congress."
Hence, it is only the legislature, as limited by the provisions of the Constitution, which has
full power to exempt any person or corporation or class of property from taxation. The
Constitution itself may provide for specific tax exemptions or local governments may pass
ordinances providing for exemption from local taxes, but, otherwise, it is only the legislative
branch which has the power to grant tax exemptions, its power to exempt being as broad as
its power to tax.
There is absolutely nothing in R.A. No. 7227 which can be considered a grant of tax
exemption in favor of public respondent BCDA. Rather, the beneficiaries of the tax
exemptions and other incentives in Section 12 (the only provision in R.A. No. 7227 which
expressly grants tax exemptions) are clearly the business enterprises located within the
Subic SEZ.

Contrary to public respondents' interpretation, the Decision of October 24, 2003 does not
"tie the hands" of executive or administrative agencies from implementing any present or
future legislation which affords tax or other financial incentives to qualified persons doing
business in the John Hay SEZ or elsewhere. The second sentence of Section 3 of
Proclamation No. 420 was declared null and void only insofar as it purported to grant tax
exemptions and other financial incentives to business enterprises located in John Hay SEZ.
However, where there is statutory basis for exemptions or incentives, there is nothing to
prevent qualified persons from applying for and availing thereof.
=)*george*