No tax exemption for PLDT-Bacolod

– SCThe Supreme Court (SC) upheld the decision of a Bacolod City court rejecting the claim of the Philippine Long Distance Telephone Company, Inc. (PLDT) that it is exempted from paying franchise and business taxes imposed by the local government.

Reiterating its ruling in "PLDT vs. City of Davao", the High Court in a decision penned by Associate Justice Cancio C. Garcia ruled that "Section 23 of RA 7925 (Public Telecommunications Policy Act) does not operate to exempt PLDT from the payment of franchise tax imposed upon it" by the government unit where it operates.

Part of the conditions of PLDT’s franchise provide that PLDT shall pay a franchise tax equivalent to three per cent of all its gross receipts "in lieu of all taxes."

However in January 1992 after the Local Government Code took effect, local government units were given the power to impose local franchise tax on businesses enjoying a franchise.
This provision in the LG Code effectively dissolved all tax exemption privileges including those taxes enjoyed by PLDT under the "in-lieu-of-all-taxes" clause in its charter.

When PLDT applied for a mayor’s permit, Bacolod City withheld issuance pending payment of PLDT’s franchise tax liability that amounted to P1,782,836.40 as of 1999 excluding surcharges.
PLDT filed a protest based on Section 23 of RA 7925 before the lower court. The petition was later dismissed.

In its ruling, the High Bench noted that there is nothing in the language of Sec 23 nor in the proceedings of both Houses of Congress when they enacted RA 7925 that it contemplated to grant tax exemptions to all telecommunications entities, including those whose exemptions had been withdrawn by the local government unit.

The exemption provided by Section 23 "does not refer to tax exemption but only to exemption from certain regulations and requirements imposed by the National Telecommunications Commission," the High Court explained. (Amor A. Lopez)