PLDT [TEL 1281.00 4.5%] [link] shares fell by over 7% during yesterday’s trading on news that the local government of Makati City had placed a closure notice on the doors of TEL’s mobile subsidiary, SMART Communications, for allegations of operating without a business permit since 2016 and for P3.2 billion in unpaid “franchise tax” to Makati City for a four-year period between 2012 and 2015.
Makati City said that SMART “failed to settle or obtain any relief from the courts” to cover the deficiency.
Makati City Mayor Abby Binay said that she is “committed to making sure all businesses are operating legally.”
SMART’s statement said that it would “continue to be in touch with the Makati LGU on the matters at hand”, and that it remains “committed to complying with Makati City’s local tax ordinances.”
At the core of the dispute is a disagreement on whether or not Makati City is entitled to review a breakdown of SMART’s revenues and business taxes paid on a nationwide basis as part of its assessment.
SMART asserted that Makati City had no jurisdiction to audit the company’s financial statements and operations on a nationwide basis, but the Court of Tax Appeals denied SMART’s petition to challenge the Makati Regional Trial Court’s finding that Makati City could “investigate Smart’s entire operations under the Local Government Code.”
SMART has not indicated whether it would challenge the denial of its petition to the Supreme Court.
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Shares in TEL tanked, but eventually recovered a bit to be “only” down 4.5% on the day.
Closing the front door of the SMART tower on Ayala Avenue doesn’t stop SMART from operating, and it’s not clear what long-term consequences (if any) will be faced by SMART or TEL now that Makati City has executed this splashy media hit.
Now that Ms. Binay has her POGO-style “gotem” pics of that cliche closed notice on the glass door, what’s next?
While SMART doesn’t really have clean hands here in terms of its failure to obtain business permits for 2019-2022, that issue is just a nothingburger.
Like the Megaworld [MEG 2.04 1.0%] closure that happened last year, it feels like slapping a huge CLOSED sign on the front door of a business is the kind of outcome that all parties should be looking to avoid at all costs. This whole thing feels dumb.
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