FACTS
Donald Smith, an American working at Subic Special Economic Zone (SSEZ), was seeking for a refund of the income taxes he had paid for the year 1998 amounting to P1.5M.
His legal basis was Sec. 12(c) of the Bases Conversion and Development Act of 1992 (RA 7227), which states that “no taxes, local and national, shall be imposed within the Subic Special Economic Zone.” The CTA denied his claim for refund, ruling that said provision pertained to businesses and not individuals.
RULING
The Court ruled in favor of the BIR.
A close reading of Section 12 (c) would reveal that the exemption from taxes, local or national, is actually intended to benefit only those registered businesses and establishments operating within the territory and not to individual taxpayers working within its parameters. If the law intended to exempt individuals employed within the SSEZ from taxes, it could have expressly stated it in clear and unequivocal language.
Granted, individual aliens employed within the SSEZ are not exempt from the awesome power of Philippine taxation. The secured area of SSEZ, which is virtually delineated in metes and bounds by proclamation No. 532, issued by the then President Fidel Ramos on February 1, 1995, is in reality part of the territorial jurisdiction of the Philippines.
All subjects over which the Philippines can exercise dominion are necessarily objects of taxation. As such, all subjects of taxation within its jurisdiction are required to pay tax in exchange of the protection that the State gives.
