Facts:

• The case involves the Philippine Long Distance Telephone Company, Inc. (PLDT) and the City of Davao, with Adelaida B. Barcelona as the City Treasurer.
• In January 1999, PLDT applied for a Mayor's Permit to operate its Davao Metro Exchange.
• The City of Davao withheld action on the application pending PLDT's payment of local franchise taxes amounting to P3,681,985.72 for the first to the fourth quarter of 1999.
• PLDT protested the assessment and requested a refund for franchise taxes paid in 1997 and the first to the third quarters of 1998, citing an opinion from the Bureau of Local Government Finance (BLGF) that it was exempt from such taxes under Section 23 of Republic Act (RA) No. 7925.
• The City Treasurer denied the protest and refund request, referencing a local ordinance that imposed a tax on businesses enjoying a franchise.
• PLDT filed a petition in the Regional Trial Court (RTC) of Davao, which affirmed the City Treasurer's decision, ruling that the Local Government Code (LGC) withdrew all tax exemptions and authorized local government units to impose taxes on businesses with franchises.
• The RTC also found that PLDT failed to prove that other telecommunications companies like Globe and Smart were enjoying similar tax exemptions.
• PLDT subsequently filed a petition for review on certiorari with the Supreme Court.

Issue:

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Ruling:

1. The Supreme Court ruled that the lower court did not err in applying Section 137 and Section 193 of the Local Government Code.
2. The Supreme Court held that PLDT is not exempt from local franchise and business taxes under its franchise as implicitly amended by Section 23 of RA No. 7925.
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Ratio:

• The Supreme Court explained that tax exemptions are highly disfavored and must be clearly stated in the statute.
• Section 137 of the LGC allows local government units to impose taxes on businesses enjoying a franchise, and Section 193 withdraws al...continue reading