SECOND DIVISION

[G.R. No. 143867. August 22, 2001]

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., petitioner,

vs. CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as
the City Treasurer of Davao, respondents.

DECISION
MENDOZA, J.:

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.
The facts are as follows:
On January 1999, petitioner Philippine Long Distance Telephone Co., Inc. (PLDT)
applied for a Mayors 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:

PLDT:

Section 12 of RA 7082 provides as follows:

SEC. 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 . . .

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:

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 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. (Underscoring 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.

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:

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 Treasurers 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 Treasurers denial of petitioners 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 petitioners appeal and affirmed the City Treasurers 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
petitioners 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:
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
PETITIONERS 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:

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 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]

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 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 PALs 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.
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:

. . . 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., 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.

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:

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 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 petitioners 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%) 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. Petitioners
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. Petitioners 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 NTCs 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.
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.
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 petitioners 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.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.