This is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure of the resolution, 1 dated June 23, 2000, of the Regional Trial Court, Branch 13, Davao City, affirming the tax assessment of petitioner and the denial of its claim for tax refund by the City Treasurer of Davao.chanrob1es virtua1 1aw library
The facts are as follows:chanrob1es virtual 1aw library
On January 1999, petitioner Philippine Long Distance Telephone Co., Inc. (PLDT) applied for a Mayor’s Permit to operate its Davao Metro Exchange. Respondent City of Davao withheld action on the application pending payment by petitioner of the local franchise tax in the amount of P3,681,985.72 for the first to the fourth quarter of 1999. 2 In a letter dated May 31, 1999, 3 petitioner protested the assessment of the local franchise tax and requested a refund of the franchise tax paid by it for the year 1997 and the first to the third quarters of 1998. Petitioner contended that it was exempt from the payment of franchise tax based on an opinion of the Bureau of Local Government Finance (BLGF), dated June 2, 1998, which reads as follows:chanrob1es virtual 1aw library
PLDT:chanrob1es virtual 1aw library
Section 12 of RA 7082 provides as follows:jgc:chanrobles.com.ph
"SECTION 12. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings, and personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof . . ."cralaw virtua1aw library
It appears that RA 7082 further amending Act No. 3436 which granted to PLDT a franchise to install, operate and maintain a telephone system throughout the Philippine Islands was approved on August 3, 1991. Section 12 of said franchise, likewise, contains the "in lieu of all taxes" proviso.
In this connection, Section 23 of RA 7925, quoted hereunder, which was approved on March 1, 1995, provides for the equality of treatment in the telecommunications industry:jgc:chanrobles.com.ph
"SECTION 23. Equality of Treatment in the Telecommunications Industry. — Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchise and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise." (Emphasis supplied
On the basis of the aforequoted Section 23 of RA 7925, PLDT as a telecommunications franchise holder becomes automatically covered by the tax exemption provisions of RA 7925, which took effect on March 16, 1995.chanrob1es virtua1 1aw 1ibrary
Accordingly, PLDT shall be exempt from the payment of franchise and business taxes imposable by LGUs under Sections 137 and 143 (sic), respectively, of the LGC, upon the effectivity of RA 7925 on March 16, 1995. However, PLDT shall be liable to pay the franchise and business taxes on its gross receipts realized from January 1, 1992 up to March 15, 1995, during which period PLDT was not enjoying the "most favored clause" proviso of RA 7025 (sic). 4
In a letter dated September 27, 1999, respondent Adelaida B. Barcelona, City Treasurer of Davao, denied the protest and claim for tax refund of petitioner, 5 citing the legal opinion of the City Legal Officer of Davao and Art. 10, §1 of Ordinance No. 230, Series of 1991, as amended by Ordinance No. 519, Series of 1992, which provides:chanrob1es virtual 1aw library
Notwithstanding any exemption granted by any law or other special law, there is hereby imposed a tax on businesses enjoying a franchise, at a rate of Seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the income or receipts realized within the territorial jurisdiction of Davao City. 6
Petitioner received respondent City Treasurer’s order of denial on October 1, 1999. On November 3, 1999, it filed a petition in the Regional Trial Court of Davao seeking a reversal of respondent City Treasurer’s denial of petitioner’s protest and the refund of the franchise tax paid by it for the year 1998 in the amount of P2,580,829.23. The petition was filed pursuant to §§195 and 196 of the Local Government Code (R.A. No. 7160). No claim for refund of franchise taxes paid in 1997 was made as the same had already prescribed under §196 of the LGC, which provides that claims for the refund of taxes paid under it must be made within two (2) years from the date of payment of such taxes. 7
The trial court denied petitioner’s appeal and affirmed the City Treasurer’s decision. It ruled that the LGC withdrew all tax exemptions previously enjoyed by all persons and authorized local government units to impose a tax on businesses enjoying a franchise notwithstanding the grant of tax exemption to them. The trial court likewise denied petitioner’s claim for exemption under R.A. No. 7925 for the following reasons: (1) it is clear from the wording of §193 of the Local Government Code that Congress did not intend to exempt any franchise holder from the payment of local franchise and business taxes; (2) the opinion of the Executive Director of the Bureau of Local Government Finance to the contrary is not binding on respondents; and (3) petitioner failed to present any proof that Globe and Smart were enjoying local franchise and business tax exemptions.
Hence, this petition for review based on the following grounds:chanrob1es virtual 1aw library
I. THE LOWER COURT ERRED IN APPLYING SECTION 137 OF THE LOCAL GOVERNMENT CODE, WHICH ALLOWS A CITY TO IMPOSE A FRANCHISE TAX, AND SECTION 193 THEREOF, WHICH PROVIDES FOR WITHDRAWAL OF TAX EXEMPTION PRIVILEGES.
II. THE LOWER COURT ERRED IN NOT HOLDING THAT UNDER PETITIONER’S FRANCHISE, AS IMPLICITLY AMENDED AND EXPANDED BY SECTION 23 OF REPUBLIC ACT NO. 7925 (PUBLIC TELECOMMUNICATIONS POLICY ACT), TAKING INTO ACCOUNT THE FRANCHISES OF GLOBE TELECOM, INC. AND SMART COMMUNICATIONS, INC., WHICH WERE ENACTED SUBSEQUENT TO THE LOCAL GOVERNMENT CODE, NO FRANCHISE AND BUSINESS TAXES MAY BE IMPOSED ON PETITIONER BY RESPONDENT CITY.
III. THE LOWER COURT ERRED IN NOT GIVING WEIGHT TO THE RULING OF THE BUREAU OF LOCAL GOVERNMENT FINANCE THAT PETITIONER IS EXEMPT FROM THE PAYMENT OF FRANCHISE AND BUSINESS TAXES, AMONG OTHERS, IMPOSABLE BY LOCAL GOVERNMENT UNITS UNDER THE LOCAL GOVERNMENT CODE.
First. The LGC, which took effect on January 1, 1992, provides:chanrob1es virtual 1aw library
SECTION 137. Franchise Tax. — Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction.
In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. 8
SECTION 193. Withdrawal of Tax Exemption Privileges. — Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.
The trial court held that, under these provisions, all exemptions granted to all persons, whether natural and juridical, including those which in the future might be granted, are withdrawn unless the law granting the exemption expressly states that the exemption also applies to local taxes. We disagree. Sec. 137 does not state that it covers future exemptions. In Philippine Airlines, Inc. v. Edu, 9 where a provision of the Tax Code enacted on June 27, 1968 (R.A. 5431) withdrew the exemption enjoyed by PAL, it was held that a subsequent amendment of PAL’s franchise, exempting it from all other taxes except that imposed by its franchise, again entitled PAL to exemption from the date of the enactment of such amendment. The Tax Code provision withdrawing the tax exemption was not construed as prohibiting future grants of exemptions from all taxes.
Indeed, the grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations. 10
The question, therefore, is whether, after the withdrawal of its exemption by virtue of §137 of the LGC, petitioner has again become entitled to exemption from local franchise tax. Petitioner answers in the affirmative and points to §23 of R.A. No. 7925, in relation to the franchises of Globe Telecom (Globe) and Smart Communications, Inc. (Smart), which allegedly grant the latter exemption from local franchise taxes.chanrob1es virtua1 1aw 1ibrary
To begin with, tax exemptions are highly disfavored. The reason for this was explained by this Court in Asiatic Petroleum Co. v. Llanes, 11 in which it was held:chanrob1es virtual 1aw library
. . . Exemptions from taxation are highly disfavored, so much so that they may almost be said to be odious to the law. He who claims an exemption must be able to point to some positive provision of law creating the right. . . As was said by the Supreme Court of Tennessee in Memphis v. U. & P. Bank (91 Tenn., 546, 550), "The right of taxation is inherent in the State. It is a prerogative essential to the perpetuity of the government; and he who claims an exemption from the common burden must justify his claim by the clearest grant of organic or statute law." Other utterances equally or more emphatic come readily to hand from the highest authority. In Ohio Life Ins. and Trust Co. v. Debolt (16 Howard, 416), it was said by Chief Justice Taney, that the right of taxation will not be held to have been surrendered, "unless the intention to surrender is manifested by words too plain to be mistaken." In the case of the Delaware Railroad Tax (18 Wallace, 206, 226), the Supreme Court of the United States said that the surrender, when claimed, must be shown by clear, unambiguous language, which will admit of no reasonable construction consistent with the reservation of the power. If a doubt arises as to the intent of the legislature, that doubt must be solved in favor of the State. In Erie Railway Company v. Commonwealth of Pennsylvania (21 Wallace, 492, 499), Mr. Justice Hunt, speaking of exemptions, observed that a State cannot strip itself of the most essential power of taxation by doubtful words. "It cannot, by ambiguous language, be deprived of this highest attribute of sovereignty." In Tennessee v. Whitworth (117 U.S., 129, 136), it was said: "In all cases of this kind the question is as to the intent of the legislature, the presumption always being against any surrender of the taxing power." In Farrington v. Tennessee and County of Shelby (95 U.S., 679, 686), Mr. Justice Swayne said: ". . . When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported."cralaw virtua1aw library
The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. 12
In the present case, petitioner justifies its claim of tax exemption by strained inferences. First, it cites R.A. No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, §23 of which reads:chanrob1es virtual 1aw library
SECTION 23. Equality of Treatment in the Telecommunications Industry. — Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise.
Petitioner then claims that Smart and Globe enjoy exemption from the payment of the franchise tax by virtue of their legislative franchises per opinion of the Bureau of Local Government Finance of the Department of Finance. Finally, it argues that because Smart and Globe are exempt from the franchise tax, it follows that it must likewise be exempt from the tax being collected by the City of Davao because the grant of tax exemption to Smart and Globe ipso facto extended the same exemption to it.
The acceptance of petitioner’s theory would result in absurd consequences. To illustrate: In its franchise, Globe is required to pay a franchise tax of only one and one-half percentum (1½%) of all gross receipts from its transactions while Smart is required to pay a tax of three percent (3%) on all gross receipts from business transacted. Petitioner’s theory would require that, to level the playing field, any "advantage, favor, privilege, exemption, or immunity" granted to Globe must be extended to all telecommunications companies, including Smart. If, later, Congress again grants a franchise to another telecommunications company imposing, say, one percent (1%) franchise tax, then all other telecommunications franchises will have to be adjusted to "level the playing field" so to speak. This could not have been the intent of Congress in enacting §23 of Rep. Act 7925. Petitioner’s theory will leave the Government with the burden of having to keep track of all granted telecommunications franchises, lest some companies be treated unequally. It is different if Congress enacts a law specifically granting uniform advantages, favor, privilege, exemption, or immunity to all telecommunications entities.
The fact is that the term "exemption" in §23 is too general. A cardinal rule in statutory construction is that legislative intent must be ascertained from a consideration of the statute as a whole and not merely of a particular provision. For, taken in the abstract, a word or phrase might easily convey a meaning which is different from the one actually intended. A general provision may actually have a limited application if read together with other provisions. 13 Hence, a consideration of the law itself in its entirety and the proceedings of both Houses of Congress is in order. 14
Art. I of Rep. Act No. 7925 contains the general provisions, stating that the Act shall be known as the Public Telecommunications Policy Act of the Philippines, and a definition of terms. 15 Art. II provides for its policies and objectives, which is to foster the improvement and expansion of telecommunications services in the country through: (1) the construction of telecommunications infrastructure and interconnection facilities, having in mind the efficient use of the radio frequency spectrum and extension of basic services to areas not yet served; (2) fair, just, and reasonable rates and tariff charges; (3) stable, transparent, and fair administrative processes; (4) reliance on private enterprise for direct provision of telecommunications services; (5) dispersal of ownership of telecommunications entities in compliance with the constitutional mandate to democratize the ownership of public utilities; (6) encouragement of the establishment of interconnection with other countries to provide access to international communications highways and development of a competitive export-oriented domestic telecommunications manufacturing industry; and (7) development of human resources skills and capabilities to sustain the growth and development of telecommunications. 16
Art. III provides for its administration. The operational and administrative functions are delegated to the National Telecommunications Commission (NTC), while policy-making, research, and negotiations in international telecommunications matters are left with the Department of Transportation and Communications. 17
Art. IV classifies the categories of telecommunications entities as: Local Exchange Operator, Inter-Exchange Carrier, International Carrier, Value-Added Service Provider, Mobile Radio Services, and Radio Paging Services. 18 Art. V provides for the use of other services and facilities, such as customer premises equipment, which may be used within the premises of telecommunications subscribers subject only to the requirement that it is type-approved by the NTC, and radio frequency spectrum, the assignment of which shall be subject to periodic review. 19
Art. VI, entitled Franchise, Rates and Revenue Determination, provides for the requirement to obtain a franchise from Congress and a Certificate of Public Convenience and Necessity from the NTC before a telecommunications entity can begin its operations. It also provides for the NTC’s residual power to regulate the rates or tariffs when ruinous competition results or when a monopoly or a cartel or combination in restraint of free competition exists and the rates or tariffs are distorted or unable to function freely and the public is adversely affected. There is also a provision relating to revenue sharing arrangements between inter-connecting carriers. 20
Art. VII provides for the rights of telecommunications users. 21
Art. VIII, entitled Telecommunications Development, where §23 is found, provides for public ownership of telecommunications entities, privatization of existing facilities, and the equality of treatment provision. 22
Art. IX contains the Final Provisions. 23
R.A. No. 7925 is thus a legislative enactment designed to set the national policy on telecommunications and provide the structures to implement it to keep up with the technological advances in the industry and the needs of the public. The thrust of the law is to promote gradually the deregulation of the entry, pricing, and operations of all public telecommunications entities and thus promote a level playing field in the telecommunications industry. 24 There is nothing in the language of §23 nor in the proceedings of both the House of Representatives and the Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the LGC.chanrob1es virtua1 1aw 1ibrary
What this Court said in Asiatic Petroleum Co. v. Llanes 25 applies mutatis mutandis to this case: "When exemption is claimed, it must be shown indubitably to exist. At the outset, every presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported." In this case, the word "exemption" in §23 of R.A. No. 7925 could contemplate exemption from certain regulatory or reporting requirements, bearing in mind the policy of the law. It is noteworthy that, in holding Smart and Globe exempt from local taxes, the BLGF did not base its opinion on §23 but on the fact that the franchises granted to them after the effectivity of the LGC exempted them from the payment of local franchise and business taxes.
Second. In the case of petitioner, the BLGF opined that §23 of R.A. No. 7925 amended the franchise of petitioner and in effect restored its exemptions from local taxes. Petitioner contends that courts should not set aside conclusions reached by the BLGF because its function is precisely the study of local tax problems and it has necessarily developed an expertise on the subject.
To be sure, the BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the courts. The authorities cited by petitioner pertain to the Court of Tax Appeals, 26 a highly specialized court which performs judicial functions as it was created for the review of tax cases. 27 In contrast, the BLGF was created merely to provide consultative services and technical assistance to local governments and the general public on local taxation, real property assessment, and other related matters, among others. 28 The question raised by petitioner is a legal question, to wit, the interpretation of §23 of R.A. No. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields.chanrob1es virtua1 1aw 1ibrary
Petitioner likewise argues that the BLGF enjoys the presumption of regularity in the performance of its duty. It does enjoy this presumption, but this has nothing to do with the question in this case. This case does not concern the regularity of performance of the BLGF in the exercise of its duties, but the correctness of its interpretation of a provision of law.
In sum, it does not appear that, in approving §23 of R.A. No. 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, we hold that §23 of R.A. No. 7925 cannot be considered as having amended petitioner’s franchise so as to entitle it to exemption from the imposition of local franchise taxes. Consequently, we hold that petitioner is liable to pay local franchise taxes in the amount of P3,681,985.72 for the period covering the first to the fourth quarter of 1999 and that it is not entitled to a refund of taxes paid by it for the period covering the first to the third quarter of 1998.
WHEREFORE, the petition for review on certiorari
is DENIED and the decision of the Regional Trial Court, Branch 13, Davao City is AFFIRMED.
SO ORDERED.chanrob1es virtua1 1aw 1ibrary
Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ.
1. Per Judge Isaac G. Robillo, Jr.
2. Respondent’s Comment, Annex A; Rollo, pp. 102, 116.
3. Id., Annex B; id., pp. 118-119.
4. Rollo, pp. 57-58, 118; 2nd Indorsement, pp. 1-2.
5. Respondents’ Comment, Annex C; Rollo, p. 120.
7. Rollo, p. 73; Petition, p. 3.
8. This applies to cities by virtue of the following provision:chanrob1es virtual 1aw library
SEC. 151. Scope of Taxing Powers. — Except as otherwise provided in this Code, the city may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees, and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes.
9. 164 SCRA 320 (1988).
10. Manila Electric Company v. Province of Laguna, 306 SCRA 750 (1999); City Government of San Pablo, Laguna v. Reyes, 305 SCRA 353 (1999).
11. 49 Phil. 466, 471-472 (1926).
12. Commissioner of Internal Revenue v. Court of Appeals, 298 SCRA 83 (1998); Commissioner of Customs v. Philippine Acetylene Company, 39 SCRA 70 (1971); Commissioner of Internal Revenue v. Guerrero, 21 SCRA 180 (1967).
13. People v. Purisima, 86 SCRA 542 (1978).
14. National Police Commission v. De Guzman, Jr., 229 SCRA 801 (1994).
15. REP. ACT NO. 7925, §§1-3.
16. Id., §4.
17. Id., §§5-6.
18. Id., §§7-13.
19. Id., §§14-15.
20. Id., §§16-19
21. Id., §20.
22. Id., §§21-23
23. Id., §§24-27.
24. RECORD OF THE SENATE, NO. 73, April 20, 1994, p. 871; 3 RECORD OF THE HOUSE OF REPRESENTATIVES, December 5, 1994, p. 552.
25. 49 Phil. 466, 472 (1926).
26. Commissioner of Internal Revenue v. Court of Appeals, 271 SCRA 605 (19973 citing Commissioner of Internal Revenue v. Wander Philippines, Inc., 160 SCRA 573 (1988).
27. Philippine Refining Company v. Court of Appeals, 256 SCRA 667 (1996); See REP. ACT NO. 1125.
28. ADMINISTRATIVE CODE, Title 2, Chapter 4, § 33(4).