Case Summary (G.R. No. 149102)
Facts
• In January 1999, PLDT applied for its Mayor’s Permit to operate the Davao Metro Exchange.
• The City of Davao conditioned issuance on payment of local franchise tax of ₱3,681,985.72 covering Q1–Q4 1999.
• On May 31, 1999, PLDT protested the assessment and sought refund of franchise taxes paid for 1997 and Q1–Q3 1998, invoking a Bureau of Local Government Finance (BLGF) opinion that RA 7082 and RA 7925 granted it exemption from local franchise and business taxes.
Procedural History
• September 27, 1999: City Treasurer denied PLDT’s protest and refund claim, relying on City Ordinance No. 230 (as amended by Ordinance No. 519) imposing a 0.75% tax on gross receipts of businesses enjoying a franchise “notwithstanding any exemption.”
• November 3, 1999: PLDT filed in the Regional Trial Court (RTC), Branch 13, Davao City, seeking reversal of the Treasurer’s denial and refund of ₱2,580,829.23 paid for Q1–Q3 1998.
• RTC Decision: Denied PLDT’s appeal, holding (a) the Local Government Code (LGC) withdrew all local tax exemptions; (b) RA 7925 did not restore exemption; (c) BLGF opinion was not binding; (d) PLDT failed to prove similar exemptions enjoyed by Globe or Smart.
• PLDT petitioned the Supreme Court via Rule 45 for certiorari review of the RTC resolution.
Applicable Law
• 1987 Constitution—granting taxing power to local governments, subject to national policy.
• Local Government Code (R.A. 7160), Sec. 137 (franchise tax authority) and Sec. 193 (withdrawal of exemptions).
• Republic Act No. 7925 (Public Telecommunications Policy Act), Sec. 23 (equality of treatment in telecommunications).
Issue
Whether RA 7925, Sec. 23, ipso facto reinstated PLDT’s local franchise tax exemption after its prior withdrawal under LGC Sec. 193.
RTC’s Interpretation of the Local Government Code
• Sec. 137 authorizes provinces and cities to impose franchise taxes up to specified rates “notwithstanding any exemption.”
• Sec. 193 withdraws “unless otherwise provided” all tax exemptions enjoyed by entities upon the LGC’s effectivity.
• RTC concluded that Congress intended to strip prior exemptions and permit local governments to tax all franchises.
Supreme Court’s Analysis on Tax Exemptions
• Tax exemptions are highly disfavored and must rest on clear statutory grants. Any ambiguity resolves against the taxpayer.
• Sec. 137 does not preclude future exemptions by Congress but clarifies local taxing power.
• After Sec. 193’s withdrawal, PLDT bore the burden to show clear legislative intent restoring its exemption.
Scope and Purpose of RA 7925
• RA 7925 establishes national policy to deregulate telecommunications, encourage competition, and ensure fair rates, infrastructure, and interconnection.
• Section 23 ensures any “advantage, favor, privilege, exemption, or immunity” granted to any franchisee becomes part of existing franchises, except as to territorial scope, franchise life span, or service type.
• The provision aims to level regulatory burdens, not negate local taxing powers or restore exemptions withdrawn by the LGC.
Interpretation of RA 7925, Sec. 23
• A literal and contextual reading shows no intent to grant a blanket exemption from local franchise or business taxes previously withdrawn by the LGC.
• Extending PLDT’s exemption based on hypothetical
Case Syllabus (G.R. No. 149102)
Facts of the Case
- 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 payment of local franchise tax amounting to ₱3,681,985.72 for the first to fourth quarters of 1999.
- By letter dated May 31, 1999, PLDT protested the assessment and sought refund of franchise taxes paid for 1997 and the first to third quarters of 1998.
- PLDT relied on a June 2, 1998 opinion of the Bureau of Local Government Finance (BLGF) interpreting R.A. 7082 Section 12 (“in lieu of all taxes” proviso) and R.A. 7925 Section 23 (equality-of-treatment clause) to claim exemption from local franchise and business taxes effective March 16, 1995.
Procedural History
- September 27, 1999: City Treasurer Adelaida B. Barcelona denied PLDT’s protest and refund claim, invoking City Ordinance No. 230, Series 1991 (as amended) which imposes a 0.75% franchise tax on gross receipts notwithstanding any exemption.
- October 1, 1999: PLDT received the order of denial.
- November 3, 1999: PLDT filed a petition in the Regional Trial Court (RTC), Branch 13, Davao City under Sections 195 and 196 of the Local Government Code (LGC) for reversal of the Treasurer’s denial and refund of ₱2,580,829.23 paid for 1998.
- The RTC denied PLDT’s petition, affirming that the LGC withdrew prior tax exemptions (Section 193) and that R.A. 7925 did not restore them.
- PLDT elevated the case to the Supreme Court via petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure.
Issues
- Whether the Local Government Code (LGC) authorizes the City of Davao to impose a local franchise tax on PLDT despite prior exemptions.
- Whether R.A. 7925 Section 23 ipso facto amended PLDT’s franchise and reinstated its local tax exemptions.
- Whether the BLGF opinion is binding on local government units and courts in interpreting local tax exemptions.
Petitioner’s Contentions
- PLDT was exempt from local franchise and business taxes by virtue of R.A. 7082 Section 12 (“in lieu of all taxes”) as further amended by R.A. 7925 Section 23’s equality-of-treatment provision.
- The BLGF’s June 2, 1998 opinion is a binding, authoritative interpretation of local tax law.
- Other telecommunications en