G.R. No. 127410 January 20, 1999
CONRADO L. TIU, JUAN T. MONTELIBANO JR. and ISAGANI M. JUNGCO, petitioners, vs. COURT OF APPEALS, HON. TEOFISTO T. GUINGONA JR., BASES CONVERSION AND DEVELOPMENT AUTHORITY, SUBIC BAY METROPOLITAN AUTHORITY, BUREAU OF INTERNAL REVENUE, CITY TREASURER OF OLONGAPO and MUNICIPAL TREASURER OF SUBIC, ZAMBALES, respondents.

FACTS

Congress passed Republic Act No. 7227 (RA 7227) on March 13, 1992, creating the Subic Special Economic Zone (SSEZ). Section 12 of RA 7227 granted special privileges to the zone, including that no national or local taxes shall be imposed within it, and in lieu thereof, businesses would remit three percent (3%) of their gross income. On June 10, 1993, President Fidel V. Ramos issued Executive Order No. 97 (EO 97) clarifying that tax and duty-free importations applied only to raw materials, capital goods, and equipment brought in by business enterprises. On June 19, 1993, the President issued Executive Order No. 97-A (EO 97-A), which specified that the “Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area” within the SSEZ. Petitioners challenged the constitutionality of EO 97-A before the Supreme Court, alleging it violated their right to equal protection of the laws. The Supreme Court referred the matter to the Court of Appeals, which upheld the constitutionality and validity of EO 97-A. Petitioners then filed this petition for review.

ISSUE

Whether Executive Order No. 97-A violates the constitutional right to equal protection of the laws by limiting the grant of tax and duty incentives only to businesses and residents within the fenced-in “Secured Area” of the Subic Special Economic Zone, and denying them to those who live within the Zone but outside such territory.

RULING

The petition is denied. The constitutional right to equal protection of the law is not violated by EO 97-A. The Constitution does not require absolute equality among residents. It is enough that all persons under like circumstances or conditions are given the same privileges and required to follow the same obligations. A classification based on valid and reasonable standards does not violate the equal protection clause. The classification established by EO 97-A, limiting the tax and duty-free privileges to the secured, fenced-in area, is based on substantial distinctions germane to the purpose of the law (RA 7227), which is to develop the area into a self-sustaining industrial, commercial, financial and investment center. The classification applies equally to all residents and businesses within the secured area. It is not arbitrary and is rationally related to the legitimate state interest of ensuring the free flow of goods within a controlled and secured environment to attract investments and generate employment.