THIRD DIVISION

[G.R. No. 149179. July 15, 2005.]

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. ,
petitioner, vs. CITY OF BACOLOD, FLORENTINO T. GUANCO, in
his capacity as the City Treasurer of Bacolod City, and
ANTONIO G. LACZI, in his capacity as the City Legal Ocer of
Bacolod City, respondents.

Estelito P. Mendoza for petitioner.

Bacolod City Legal Office for respondents.
SYLLABUS
1 .
POLITICAL LAW; LOCAL GOVERNMENT; TAXATION; FRANCHISE TAX;
REPUBLIC ACT NO. 7925, SECTION 23 THEREOF; "MOST-FAVORED-TREATMENT"
CLAUSE, CONSTRUED. As we see it, the only question which commends itself for
our resolution is, whether or not Section 23 of Rep. Act No. 7925, also called the
"most-favored-treatment" clause, operates to exempt petitioner PLDT from the
payment of franchise tax imposed by the respondent City of Bacolod. Contrary to
petitioner's claim, the issue thus posed is not one of "rst impression" insofar as this
Court is concerned. In PLDT vs. City of Davao, this Court interpreted Section 23 of
Rep. Act No. 7925 as not operating to exempt PLDT from the payment of franchise
tax imposed upon it by the City of Davao: 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
rst 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.
2.
ID.; ID.; ID.; ID.; ID.; GRANT OF TAX EXEMPTION TO SMART AND GLOBE
DOES NOT IPSO FACTO APPLY TO PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, INC. As in City of Davao, supra, petitioner presently argues that
because Smart Communications, Inc. (SMART) and Globe Telecom (GLOBE) under
whose respective franchises granted after the eectivity of the Local Government
Code, are exempt from franchise tax, it follows that petitioner is likewise exempt
from the franchise tax sought to be collected by the City of Bacolod, on the
reasoning that the grant of tax exemption to SMART and GLOBE ipso facto applies
to PLDT, consistent with the "most-favored-treatment" clause found in Section 23 of

the Public Telecommunications Policy Act of the Philippines (Rep. Act No. 7925).
Again, there is nothing novel in petitioner's contention. In rejecting PLDT's
contention, this Court ruled in City of Davao as follows: 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 (1/2% [sic] ) 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 eld, 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 eld" so to speak. This could not have been
the intent of Congress in enacting Section 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
dierent if Congress enacts a law specically granting uniform advantages, favor,
privilege, exemption or immunity to all telecommunications entities.
3.
ID.; ID.; ID.; ID.; ID.; DOES NOT REFER TO TAX EXEMPTION BUT ONLY TO
EXEMPTION FROM CERTAIN REGULATIONS AND REQUIREMENTS IMPOSED BY THE
NATIONAL TELECOMMUNICATIONS COMMISSION. On PLDT's motion for
reconsideration in City of Davao, the Court added in its en banc Resolution of March
25, 2003, that even as it is a state policy to promote a level playing eld in the
communications industry, Section 23 of Rep. Act No. 7925 does not refer to tax
exemption but only to exemption from certain regulations and requirements
imposed by the National Telecommunications Commission: . . . . The records of
Congress are bereft of any discussion or even mention of tax exemption. To the
contrary, what the Chairman of the Committee on Transportation, Rep. Jerome V.
Paras, mentioned in his sponsorship of H.B. No. 14028, which became R.A. No.
7925, were 'equal access clauses' in interconnection agreements, not tax
exemptions. He said: There is also a need to promote a level playing eld in the
telecommunications industry. New entities must be granted protection against
dominant carriers through the encouragement of equitable access charges and
equal access clauses in interconnection agreements and the strict policing of
predatory pricing by dominant carriers. Equal access should be granted to all
operators connecting into the interexchange network. There should be no
discrimination against any carrier in terms of priorities and/or quality of services.
Nor does the term 'exemption' in 23 of R.A. No. 7925 mean tax exemption. The
term refers to exemption from certain regulations and requirements imposed by the
National Telecommunications Commission (NTC). For instance, R.A. No. 7925,
17 provides: 'The Commission shall exempt any specic telecommunications
service from its rate or tari regulations if the service has sucient competition to
ensure fair and reasonable rates or tariffs.' Another exemption granted by the law in
line with its policy of deregulation is the exemption from the requirement of
securing permits from the NTC every time a telecommunications company imports
equipment.

4.
ID.; ID.; ID.; ID.; ID.; RULE THAT TAX EXEMPTION SHOULD BE APPLIED IN
STRICTISSIMI JURIS AGAINST THE TAXPAYER AND LIBERALLY IN FAVOR OF THE
GOVERNMENT APPLIES EQUALLY TO TAX EXCLUSIONS; TAX EXEMPTION
DISTINGUISHED FROM TAX EXCLUSION. In the same en banc Resolution, the
Court even rejected PLDT's contention that the "in-lieu-of-all-taxes" clause does not
refer to "tax exemption" but to "tax exclusion" and hence, the strictissimi juris rule
does not apply, explaining that these two terms actually mean the same thing, such
that the rule that tax exemption should be applied in strictissimi juris against the
taxpayer and liberally in favor of the government applies equally to tax exclusions.
Thus: Indeed, both in their nature and in their eect there is no dierence between
tax exemption and tax exclusion. Exemption is an immunity or privilege; it is
freedom from a charge or burden to which others are subjected. Exclusion, on the
other hand, is the removal of otherwise taxable items from the reach of taxation,
e.g., exclusions from gross income and allowable deductions. Exclusion is thus also
an immunity or privilege which frees a taxpayer from a charge to which others are
subjected. Consequently, the rule that tax exemption should be applied in
strictissimi juris against the taxpayer and liberally in favor of the government
applies equally to tax exclusions. To construe otherwise the 'in lieu of all taxes'
provision invoked is to be inconsistent with the theory that R.A. No. 7925, 23
grants tax exemption because of a similar grant to Globe and Smart.
5.
ID.; ID.; ID.; ID.; ID.; THE BUREAU OF LOCAL GOVERNMENT FINANCE IS NOT
AN ADMINISTRATIVE AGENCY WHOSE FINDINGS OF FACT ARE GIVEN WEIGHT AND
DEFERENCE IN COURTS. PLDT likewise argued in said case that the RTC at Davao
City erred in not giving weight to the ruling of the BLGF which, according to
petitioner, is an administrative agency with technical expertise and mastery over
the specialized matters assigned to it. But then again, we held in Davao: To be sure,
the BLGF is not an administrative agency whose ndings on questions of fact are
given weight and deference in the courts. The authorities cited by petitioner pertain
to the Court of Tax Appeals, a highly specialized court which performs judicial
functions as it was created for the review of tax cases. 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. 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.
DECISION
GARCIA, J :
p

In this appeal by way of a petition for review on certiorari under Rule 45 of the
Rules of Court, petitioner Philippine Long Distance Telephone Company (PLDT),
seeks the reversal and setting aside of the July 23, 2001 decision 1 of the
Regional Trial Court at Bacolod City, Branch 42, dismissing its petition in Civil Case

No. 99-10786, an action to declare petitioner as exempt from the payment of

franchise and business taxes sought to be imposed and collected by the respondent
City of Bacolod.
The material facts are not at all disputed:
PLDT is a holder of a legislative franchise under Act No. 3436, as amended, to render
local and international telecommunications services. On August 24, 1991, the terms
and conditions of its franchise were consolidated under Republic Act No. 7082, 2
Section 12 of which embodies the so-called "in-lieu-of-all-taxes" clause, whereunder
PLDT shall pay a franchise tax equivalent to three percent (3%) of all its gross
receipts, which franchise tax shall be "in lieu of all taxes". More specically, the
provision pertinently reads:
SEC. 12.
. . . 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. . . . (Italics ours).

Meanwhile, or on January 1, 1992, Republic Act No. 7160, otherwise known as the
Local Government Code, took eect. Section 137 of the Code, in relation to Section
151 thereof, grants cities and other local government units the power to impose
local franchise tax on businesses enjoying a franchise, thus:
SEC. 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 fty 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.
xxx xxx xxx
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 fty percent (50%)
except the rates of professional and amusement taxes.

By Section 193 of the same Code, all tax exemption privileges then enjoyed by all
persons, whether natural or juridical, save those expressly mentioned therein, were
withdrawn, necessarily including those taxes from which PLDT is exempted under
the "in-lieu-of-all-taxes" clause in its charter. We quote Section 193:

SEC. 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 governmentowned or controlled corporations, except local water districts, cooperatives
duly registered under R.A. 6938, non-stock and non-prot hospitals and
educational institutions, are hereby withdrawn upon the eectivity of this
Code.

Aiming to level the playing eld among telecommunication companies, Congress

enacted Republic Act No. 7925, otherwise known as the Public Telecommunications
Policy Act of the Philippines, which took eect on March 16, 1995. To achieve the
legislative intent, Section 23 thereof, also known as the "most-favored-treatment"
clause, provides for an equality of treatment in the telecommunications industry,
thus:
SEC. 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
aect provisions of telecommunications franchises concerning territory
covered by the franchise, the life span of the franchise, or the type of the
service authorized by the franchise.

In August 1995, the City of Bacolod, invoking its authority under Section 137, in
relation to Section 151 and Section 193, supra, of the Local Government Code,
made an assessment on PLDT for the payment of franchise tax due the City.
Complying therewith, PLDT began paying the City franchise tax from the year 1994
until the third quarter of 1998, at which time the total franchise tax it had paid the
City already amounted to P2,770, 696.37.
aTcSID

On June 2, 1998, the Department of Finance through its Bureau of Local

Government Finance (BLGF), issued a ruling to the eect that as of March 16, 1995,
the eectivity date of the Public Telecommunications Policy Act of the Philippines
(Rep. Act. No. 7925), PLDT, among other telecommunication companies, became
exempt from local franchise tax. Pertinently, the BLGF ruling reads:
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:
xxx xxx xxx

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.
Accordingly, PLDT shall be exempt from the payment of franchise and
business taxes imposable by LGUs under Sections 137 and 143,
respectively, of the LGC [Local Government Code], upon the eectivity 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]. 3

Invoking the aforequoted ruling, PLDT then stopped paying local franchise and
business taxes to Bacolod City starting the fourth quarter of 1998.
The controversy came to a head-on when, sometime in 1999, PLDT applied for the
issuance of a Mayor's Permit but the City of Bacolod withheld issuance thereof
pending PLDT's payment of its franchise tax liability in the following amounts: (1)
P358,258.30 for the fourth quarter of 1998; and (b) P1,424,578.10 for the year
1999, all in the aggregate amount of P1,782,836.40, excluding surcharges and
interest, about which PLDT was duly informed by the City Treasurer via a 5th
Indorsement dated March 16, 1999 for PLDT's "appropriate action". 4
In time, PLDT led a protest 5 with the Oce of the City Legal Ocer, questioning
the assessment and at the same time asking for a refund of the local franchise taxes
it paid in 1997 until the third quarter of 1998.
In a reply-letter dated March 26, 1999, 6 City Legal Ocer Antonio G. Laczi denied
the protest and ordered PLDT to pay the questioned assessment.
Hence, on May 14, 1999, in the Regional Trial Court at Bacolod City, PLDT led its
petition 7 in Civil Case No. 99-10786, therein praying for a judgment declaring it as
exempt from the payment of local franchise and business taxes; ordering the
respondent City to henceforth cease and desist from assessing and collecting said
taxes; directing the City to issue the Mayor's Permit for the year 1999; and
requiring it to refund the amount of P2,770,606.37, allegedly representing overpaid
franchise taxes for the years 1997 and 1998 with interest until fully paid.
In time, the respondent City led its Answer/Comment to the petition, 8 basically
maintaining that Section 137 of the Local Government Code remains as the
operative law despite the enactment of the Public Telecommunications Policy Act of
the Philippines (Rep. Act No. 7925), and accordingly prayed for the dismissal of the
petition.
In the ensuing pre-trial conference, the parties manifested that they would not
present any testimonial evidence, and merely requested for time to le their
respective memoranda, to which the trial court acceded.
Eventually, in the herein assailed decision dated July 23, 2001,
dismissed PLDT's petition, thus:

the trial court

WHEREFORE, premises considered, the petition should be, as it is hereby

DISMISSED. No costs.
SO ORDERED.

Therefrom, PLDT came to this Court via the present recourse, imputing the
following errors on the part of the trial court:
5.01.a.
THE LOWER COURT ERRED IN SUSTAINING RESPONDENTS'
POSITION THAT SECTION 137 OF THE LOCAL GOVERNMENT CODE, WHICH,
IN RELATION TO SECTION 151 THEREOF, ALLOWS RESPONDENT CITY TO
IMPOSE THE FRANCHISE TAX, IS APPLICABLE IN THIS CASE.
5.01.b.
THE LOWER COURT ERRED IN NOT HOLDING THAT UNDER
PETITIONER'S FRANCHISE (REPUBLIC ACT NO. 7082), AS AMENDED AND
EXPANDED BY SECTION 23 OF REPUBLIC ACT NO. 7925 (PUBLIC
TELECOMMUNICATIONS POLICY ACT), TAKING INTO ACCOUNT THE
FRANCHISES OF GLOBE TELECOM, INC., (GLOBE) (REPUBLIC ACT NO.
7229) AND SMART COMMUNICATIONS, INC. (SMART) (REPUBLIC ACT NO.
7294), WHICH WERE ENACTED SUBSEQUENT TO THE LOCAL
GOVERNMENT CODE, NO FRANCHISE TAXES MAY BE IMPOSED ON
PETITIONER BY RESPONDENT CITY.

5.01.c.
THE LOWER COURT ERRED IN NOT GIVING WEIGHT TO THE
RULING OF THE DEPARTMENT OF FINANCE, THROUGH ITS BUREAU OF
LOCAL GOVERNMENT FINANCE, THAT PETITIONER IS EXEMPT FROM THE
PAYMENT OF FRANCHISE AND BUSINESS TAXES IMPOSABLE BY LOCAL
GOVERNMENT UNITS UNDER THE LOCAL GOVERNMENT CODE.
5.01.d.
BELOW.

THE LOWER COURT ERRED IN DISMISSING THE PETITION

As we see it, the only question which commends itself for our resolution is, whether
or not Section 23 of Rep. Act No. 7925, also called the "most-favored-treatment"
clause, operates to exempt petitioner PLDT from the payment of franchise tax
imposed by the respondent City of Bacolod.
Contrary to petitioner's claim, the issue thus posed is not one of "rst impression"
insofar as this Court is concerned. For sure, this is not the rst time for petitioner
PLDT to invoke the jurisdiction of this Court on the same question, albeit involving
another city.
In PLDT vs. City of Davao, 10 this Court has had the occasion to interpret Section 23
of Rep. Act No. 7925. There, we ruled that Section 23 does not operate to exempt
PLDT from the payment of franchise tax imposed upon it by the City of Davao:
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 rst 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. 11

Explains this Court in the same case:

To begin with, tax exemptions are highly disfavored. The reason for this was
explained by this Court in Asiatic Petroleum Co. v. Llanes , in which it was
held:
. . . 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 vs. 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. vs. 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 vs. 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 vs.
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 vs. Tennessee and
County of Shelby (95 U.S., 379, 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.'
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.
xxx xxx xxx
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 dierent from the one actually intended. A general
provision may actually have a limited application if read together with other
provisions. Hence, a consideration of the law itself in its entirety and the
proceedings of both Houses of Congress is in order.
xxx xxx xxx
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 eld in the telecommunications industry. 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.
CTEDSI

What this Court said in Asiatic Petroleum Co. v. Llanes 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 wellfounded 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 eectivity of the LGC exempted them from the
payment of local franchise and business taxes.

As in City of Davao, supra, petitioner presently argues that because Smart

Communications, Inc. (SMART) and Globe Telecom (GLOBE) under whose respective
franchises granted after the eectivity of the Local Government Code, are exempt
from franchise tax, it follows that petitioner is likewise exempt from the franchise
tax sought to be collected by the City of Bacolod, on the reasoning that the grant of
tax exemption to SMART and GLOBE ipso facto applies to PLDT, consistent with the
"most-favored-treatment"
clause
found
in
Section
23
of
the Public
Telecommunications Policy Act of the Philippines (Rep. Act No. 7925).
Again, there is nothing novel in petitioner's contention. In fact, this Court in City of
Davao, even adverted to PLDT's argument therein, thus:

Finally, it [PLDT] 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.

In rejecting PLDT's contention, this Court ruled in City of Davao as follows:

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 (1/2% [sic]) 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 eld, 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 eld" so to speak. This could not have been the
intent of Congress in enacting Section 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 dierent if Congress enacts a law specically granting
uniform advantages, favor, privilege, exemption or immunity to all
telecommunications entities.

On PLDT's motion for reconsideration in Davao, the Court added in its en banc
Resolution of March 25, 2003, 12 that even as it is a state policy to promote a level
playing eld in the communications industry, Section 23 of Rep. Act No. 7925 does
not refer to tax exemption but only to exemption from certain regulations and
requirements imposed by the National Telecommunications Commission:
. . . . The records of Congress are bereft of any discussion or even mention
of tax exemption. To the contrary, what the Chairman of the Committee on
Transportation, Rep. Jerome V. Paras, mentioned in his sponsorship of H.B.
No. 14028, which became R.A. No. 7925, were 'equal access clauses' in
interconnection agreements, not tax exemptions. He said:

There is also a need to promote a level playing eld in the

telecommunications industry. New entities must be granted protection
against dominant carriers through the encouragement of equitable access
charges and equal access clauses in interconnection agreements and the
strict policing of predatory pricing by dominant carriers. Equal access should
be granted to all operators connecting into the interexchange network.
There should be no discrimination against any carrier in terms of priorities
and/or quality of services.
Nor does the term 'exemption' in 23 of R.A. No. 7925 mean tax exemption.
The term refers to exemption from certain regulations and requirements
imposed by the National Telecommunications Commission (NTC). For

instance, R.A. No. 7925, 17 provides: 'The Commission shall exempt any
specic telecommunications service from its rate or tari regulations if the
service has sucient competition to ensure fair and reasonable rates or
taris.' Another exemption granted by the law in line with its policy of
deregulation is the exemption from the requirement of securing permits
from the NTC every time a telecommunications company imports
equipment. 13

In the same en banc Resolution, the Court even rejected PLDT's contention that the
"in-lieu-of-all-taxes" clause does not refer to "tax exemption" but to "tax exclusion"
and hence, the strictissimi juris rule does not apply, explaining that these two terms
actually mean the same thing, such that the rule that tax exemption should be
applied in strictissimi juris against the taxpayer and liberally in favor of the
government applies equally to tax exclusions. Thus:
Indeed, both in their nature and in their eect there is no dierence between
tax exemption and tax exclusion. Exemption is an immunity or privilege; it is
freedom from a charge or burden to which others are subjected. Exclusion,
on the other hand, is the removal of otherwise taxable items from the reach
of taxation, e.g., exclusions from gross income and allowable deductions.
Exclusion is thus also an immunity or privilege which frees a taxpayer from a
charge to which others are subjected. Consequently, the rule that tax
exemption should be applied in strictissimi juris against the taxpayer and
liberally in favor of the government applies equally to tax exclusions. To
construe otherwise the 'in lieu of all taxes' provision invoked is to be
inconsistent with the theory that R.A. No. 7925, 23 grants tax exemption
because of a similar grant to Globe and Smart. 14

PLDT likewise argued in said case that the RTC at Davao City erred in not giving
weight to the ruling of the BLGF which, according to petitioner, is an administrative
agency with technical expertise and mastery over the specialized matters assigned
to it. But then again, we held in Davao:
To be sure, the BLGF is not an administrative agency whose ndings on
questions of fact are given weight and deference in the courts. The
authorities cited by petitioner pertain to the Court of Tax Appeals, a highly
specialized court which performs judicial functions as it was created for the
review of tax cases. 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. 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. 15

We note, quite interestingly, that apart from the particular local government unit
involved in the earlier case of PLDT vs. Davao, the arguments presently advanced by
petitioner on the issue herein posed are but a mere reiteration if not repetition of
the very same arguments it has already raised in Davao. For sure, the errors
presently assigned are substantially the same as those in Davao, all of which have

been adequately addressed and passed upon by this Court in its decision therein as
well as in its en banc resolution in that case.
WHEREFORE, the instant petition is DENIED and the assailed decision dated July 23,
2001 of the lower court AFFIRMED.
Costs against petitioner.
SO ORDERED.

Sandoval-Gutierrez, Corona and Carpio Morales, JJ., concur.

Panganiban, J., took no part. Former counsel of a party.
Footnotes
1.

Rollo, pp. 110-116.

2.

An Act Further Amending Act No. 3436, as amended, ". . . Consolidating the Terms
and Conditions of the Franchise Granted to the [PLDT], And Extending the Said
Franchise by Twenty-Five (25) Years from the Expiration Thereof . . .".

3.

Rollo, p. 80.

4.

Rollo, p. 85.

5.

Rollo, pp. 86-88.

6.

Rollo, pp. 89-90.

7.

Rollo, pp. 67-71.

8.

Rollo, pp. 94-108.

9.

Rollo, pp. 110-116.

10.

G.R. No. 143867; 415 Phil. 769 [2001].

11.

Id., p. 780.

12.

447 Phil. 571 [2003].

13.

Id., pp. 580-581.

14.

Id., p. 584.

15.

Supra, pp. 779-780.