PLDT Vs Province of Laguna

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. vs.
PROVINCE OF LAGUNA
G.R. No. 151899 August 16, 2005
FACTS:
Twice, the SC has already denied the earlier pleas of PLDT to be exempt from the payment of franchise tax
assessed against it by local government units. These were the cases of PLDT vs. Davao (En Banc Decision) and the
very recent case of PLDT vs. Bacolod. In both cases, the Court in effect ruled that the desired relief is not legally
feasible.
PLDT is a holder of a legislative franchise under Act No. 3436, to render local and international telecommunications
services. On August 24, 1991, the terms and conditions of its franchise were consolidated under RA 7082, Section
12 of which embodies the so-called "in-lieu-of-all taxes" clause, where PLDT shall pay a franchise tax equivalent to
3% of all its gross receipts, which franchise tax shall be "in lieu of all taxes".
Thereafter, The Local Government Code, took effect. Section 137 of the Code, in relation to Section 151 thereof,
grants provinces and other local government units the power to impose local franchise tax on businesses enjoying
a franchise. By Section 193 of the same Code, all tax exemption privileges then enjoyed by all persons, whether
natural or juridicial, save those expressly mentioned therein, were withdrawn, necessarily including those taxes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.
Invoking its authority under Section 137 of the LGC, Laguna enacted an ordinance, imposing a franchise tax upon
all businesses enjoying a franchise, PLDT included. On January 28, 1998, PLDT, in compliance, paid Laguna its local
franchise tax liability for the year 1998 in the amount of ₱1,081,212.10.
Prior thereto, Congress enacted the Public Telecommunications Policy Act of the Philippines. Then, the
Department of Finance, thru its Bureau of Local Government Finance (BLGF), issued a ruling to the effect that
PLDT, among other telecommunication companies, became exempt from local franchise tax. Accordingly, PLDT
shall be exempt from the payment of franchise and business taxes imposable by LGUs under Sections 137 and 143,
respectively of the Local Government Code, upon the effectivity of RA 7925. However, PLDT shall be liable to pay
the franchise and business taxes on its gross receipts during the period that PLDT was not enjoying the ‘most
favored clause’ provision of RA 7025.
PLDT then refused to pay the Province of Laguna its local franchise tax liability for the following year and it even
filed with the Office of the Provincial Treasurer a written claim for refund of the amount it paid as local franchise
tax for the previous year.
ISSUE: W/N Section 23 of Rep. Act No. 7925 operate to exempt PLDT from payment of franchise tax?
HELD:
No. In approving Section 23 of R.A. No. 7925, Congress did not intend it to operate as a blanket tax exemption to
all telecommunications entities. 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.
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
section 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.
Ratio:
The arguments presently advanced by petitioner on the issues raised herein are but a mere reiteration if not
repetition of the very same arguments it has already raised in the two (2) earlier PLDT cases.
In PLDT vs. City of Davao (En Banc Decision)
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.
Legislative Intent of R.A. No. 7925
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. 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.
In Asiatic Petroleum Co. v. Llanes
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. 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.
PLDT claims the exemptions granted to SMART and GLOBE should also be applied to it
The acceptance of petitioner’s theory would result in absurd consequences. Petitioner’s 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 Section 23 of Rep. Act 7925.
PLDT’s contends 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
Both in their nature and in their effect there is no difference 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.
BLGF an administrative agency not endowed with legal expertise on tax cases, opinion cannot prevail over CTA
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, 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.

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PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. vs.

In PLDT vs. City of Davao (En Banc Decision)

Legislative Intent of R.A. No. 7925

In Asiatic Petroleum Co. v. Llanes

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