January 20, 1999
Panganiban, J.
FACTS
In 1993, then president Fidel Ramos issued E.O. No. 97, which defined the area of the Subic Special Economic Zone subject to tax exemptions granted by RA 7227. This was followed by E.O. No. 97-A, which limited the tax- and duty-free privilege only within the Secured Area of the economic zone.
Herein petitioners challenged the constitutionality of E.O. No. 97-A for being violative of the equal protection clause. According to them, the entire City of Olongapo, the Municipality of Subic, as wellas the area formerly occupied by the base should be included and not just the fenced area in the former Subic Naval base.
RULING
In ruling in this case, the Court reiterated that the fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification.
In order to be valid, a classification must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class.
In the present case, there was valid classification and distinction between the Secured Area and the Residential Zone outside the Secured Area. The Court also held that the classification was germane to the purpose of the law, which is to convert military reservations into other productive uses.
The tax exemption was granted to attract investors into the area, and so there is no reason why the tax exemption should also apply to the area outside the Subic Special Economic Zone.
