City of Makati staff slapped a closure order on the headquarters of Philippine wireless operator Smart Communications Inc in the financial district on Monday, February 27, 2023. Image Credit: Twitter | Screengrab

Manila: The city government of Makati, Manila’s financial district, padlocked the headquarters of wireless carrier Smart Communications Inc on Monday (February 27, 2023) over a claimed 3.2 billion pesos ($57.84 million) in unpaid taxes — and four years of operating without a valid business permit issued by the city government.

"To date, Smart has failed to settle or obtain any relief from the courts over its franchise tax deficiency worth over Php3.2 billion covering the period January 2012 to December 2015," the city government said in a media statement.

Makati City Administrator Claro Certeza told Manila-based news channel ABS-CBN that all Smart offices in Makati are covered by the closure order, including in-mall branches.

Closure order

The city administration said in a closure order dated February 23 that Smart headquarters violated City Ordinance No. 2004-A-025 — which requires an annual charge for the issuing of a mayor's permit to businesses operating out of the city.

Smart also refused to disclose the needed breakdown of revenues and company taxes paid in all of its branches nationally, according to the Makati City government.

Smart, one of the Philippines’ largest phone operators, is a mobile phone pioneer in the Asian country and operates as a wireless communications, mobile commerce, and satellite communication services.

Smart is a wholly-owned wireless communications and digital services subsidiary of PLDT, Inc., the Philippines' largest telecommunications operator.

The company has 73 million mobile subscribers as of 2020, under the brands Smart, Sun, and TNT. It recorded 42.6 million active data users in 2021, up by 11% versus 2020.

Review sought

The carrier filed a review petition with the Makati Regional Trial Court (RTC) in 2018, seeking to discard the Office of City Treasurer's “Notice of Assessment”, which claimed that the company owed the city government billions of pesos in franchise tax.

In general, a franchise tax is a kind of tax imposed on businesses or corporations chartered within a certain jurisdiction. The relevant authority charges this tax for the right of the business or corporation to exist as a legal entity and to do business within a particular jurisdiction.

Smart argued that Makati has no jurisdiction to audit the company’s financial statements and operations in other branches nationwide.

On February 23, 2023, Smart issued a statement: “Smart has filed the appropriate cases to resolve outstanding legal issues; these cases remain pending. Our legal and tax teams continue to be in touch with the Makati LGU (local government unit) on the matters at hand. We assure the public that our services remain available and accessible to our subscribers.”