High Court rules on telcos firm

The Supreme Court (SC) has declared final its ruling that Smart Communications, Inc. is not exempt form the payment of franchise tax to local governments.

In a resolution written by Justice Antonio Eduardo B. Nachura, the SC denied Smart’s motion to reconsider last year’s decision that dismissed its petition challenging the franchise tax of 75 percent of one per cent gross annual receipts imposed by the local government of Davao City.

Last year, the SC ruled that Smart unlike Globe Telecom, Inc., is not exempt from franchise tax that may be imposed by municipal, city, or provincial governments.

The decision affirmed the July 19, 2002 order of the Davao City regional trial court (RTC) which dismissed the petition filed by Smart with a ruling that “the ambiguity of the ‘in lieu of all taxes’ provision in RA No. 7295 (Smart’s legislative franchise) on whether it covers both national and local taxes must be resolved against the taxpayer.”

From an unfavorable RTC ruling, Smart elevated the issue before the SC.

Section 9 of RA 7295 provides that “…the grantee, its successors or assigns shall pay a franchise tax equivalent to three per cent of all gross receipts of the business… and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof.”

Smart claimed that the “in lieu of all taxes” clause in Section 9 of its franchise exempts it from all taxes, both local and national, except the national franchise tax (now value added tax), income tax, and real property tax.

By. Rey G. Panaligan – Manila Bulletin