Telecom firm wins P17-M tax case vs Pasig City gov’t

Telecom firm wins P17-M tax case vs Pasig City gov’t

By Leila Salaverria - Inquirer

MANILA, Philippines -- Ericsson Telecommunications Inc. has won its tax suit against the Pasig City government after the Supreme Court reinstated a regional trial court’s ruling canceling the more than P17 million business tax deficiency assessed by the local government.

In ruling for the telecommunication firm, the high tribunal said the tax assessments made by the Pasig government were based on the wrong kind of data -- the gross revenue.

The high court said the business tax assessments against Ericsson should have been based on gross receipts.

Gross receipts include money or its equivalent that has actually or constructively been received in exchange for services rendered or articles sold, exchanged or leased.

On the other hand, gross income or revenue refers to money actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received.

In this case, Ericsson’s audited financial statements, on which the tax assessment was based, reflected income it was entitled to receive during the taxable period, even though it has not yet been paid the amount.

Hence, the high court said, taxing Ericsson based on gross revenue could lead to taxing the private firm twice for the same transaction.

“The imposition of the local business tax based on petitioner’s gross revenue will inevitably result in the constitutionally proscribed double taxation -- taxing of the same person twice by the same jurisdiction for the same thing -- inasmuch as petitioner’s revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid,” the court said in its Nov. 22 decision.

It also pointed out that under the Local Government Code, Pasig City may impose a business tax on contractors based on gross receipts for the preceding calendar year. The Pasig Revenue Code also provides that the tax should be computed based on gross receipts, it added.

“Thus, respondent [Pasig City] committed a palpable error when it assessed petitioner’s local business tax based on its gross revenue as reported in its audited financial statements,” it said.

The Pasig City government earlier asked Ericsson to pay business taxes based on its gross revenues for the years 1997 and 1998, and 2000 and 2001