Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS 7th Floor, EDPC Building, BSP Complex Roxas Boulevard, Manila

BAYAN TELECOMMUNICATIONS, INC. (formerly known as ICC Telecoms), EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., EXTELCOM, DIGITEL, GLOBE TELECOMS, PT&T, and SMART COMMUNICATIONS, INC., all represented by TELECOMS INFRA-STRUCTURE CORPORATION OF THE PHILIPPINES (TELICPHIL),
Petitioners-Appellants,
CBAA CASE NO. L-42 – versus –

THE LOCAL BOARD OF ASSESSMENT APPEALS OF THE CITY OF BATANGAS,
Appellee,

– and –

THE CITY TREASURER OF THE CITY OF BATANGAS,
Respondent-Appellee. x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

On August 12, 2003 this Board received the Notice of Appeal and

Appellants’ Brief from Appellants herein. This appeal is from the decision

rendered by the Local Board of Assessment Appeals of the City of Batangas on

June 10, 2003 in LBAA Case Nos. 03-001 (formerly No. 2002-1), the dispositive

portion of which decision reads as follows:

“WHEREFORE, the appeal is hereby denied. Appellant’s (BAYANTEL’s) property in Bolbok, Batangas City and all its real properties within the city are not exempt from the realty tax imposed by the City Government of Batangas. Consequently, the prayer to refund the amount of Php65,393.98 which appellant paid under O.R. 3176313 dated November 16, 2001, is hereby denied.”

ANTECEDENT FACTS

On May 4, 2001, appellee demanded upon TELICPHIL the payment of real estate tax on that building located in Barangay Bolbok, Batangas City, which appellants co-own.

TELICPHIL replied to appellee on June 29, 2001 by claiming tax exemption in favor of appellants.

On November 16, 2001 the amount of P65,393.98 was paid under protest to appellee in appellants’ name as real property taxes on the real property

Reference: Book XII, pp. 66-85

located in Bolbok, which payment under protest is evidenced by Official Receipt No. 3176313 C.

On December 18, 2001 appellants filed with appellee their formal protest under Section 252 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991.

On January 2, 2002 appellee denied the claim for refund, furnishing appellants the Batangas City Legal Officer’s 2nd Indorsement dated December

24, 2001

On February 3, 2002 Appellants appealed the appellee’s denial to the Local Board of Assessment Appeals.

On July 7, 2003, Appellants received a copy of the Decision of the Local Board of Assessment Appeals, denying Appellants’ Appeal.

ASSIGNMENT OF ERRORS

Appellants say that the Local Board erred:

I.
In holding that the “in lieu of all taxes” and exclusive of this franchise” provisos in the legislative franchise of Appellant Bayantel and various telecommunications companies co-owning the NDTN, is not an express declaration of exemption from real estate taxes.

II.
In disregarding the Opinions rendered by the Bureau of Local Government Finance as regards the application of Section 23 of RA 7925.

III.
In holding that Republic Act No. 7925 did not grant any tax exemption in favor of Appellant.

THE FIRST “ERROR”

Appellants’ Arguments

1. The Supreme Court, in a number of cases, has time and again held

that the ‘in lieu of all taxes’ proviso exempts the grantee from the payment of any

and all kinds of local and national franchise taxes. In Philippine Long Distance

Telephone Co. v. The Public Service Commission and Manila Electric Company,

66 SCRA 341, the Supreme Court ruled that PLDT and MERALCO cannot be

ordered to pay those fees if imposed not only for the purpose of regulation

and/or supervision but as a tax measure. Appellant’s situation is similar to that

of PLDT and MERALCO in that its franchise also contains an “in lieu of all taxes”

proviso. Appellants are accordingly exempt from paying real property taxes on its

real properties – being taxed other than the franchise tax imposed by its

Reference: Book XII, pp. 66-85

franchise. Other tax measures completely foreclosed by an ‘in lieu of all taxes’

proviso in a franchise include internal tax for the importation of coal and oil under

Art. 2432 and the Amendatory Acts of the Philippine Legislature, and the

corporate franchise tax. (Province of Misamis Oriental v. Cagayan Electric Power

and Light Company, Inc. 181 SCRA 38)

2. In the instant case4, the ‘exclusive of this franchise’ phrase qualifies

the enumeration of ‘real property, buildings and personal property’ and

consequently limits and/or restricts the properties for which appellants are liable

to pay, among others, real property tax. Read together with the enumeration of

properties, it is clear that the ‘exclusive of this franchise’ phrase classifies

appellants’ real properties into the following: a) those that are not used for the

operation of the franchise and are therefore considered exclusive of the

franchise; and b) those that are used in connection with the operation of its

franchise and are therefore considered inclusive of the franchise.

3. The exclusive of this franchise’ proviso was extensively discussed in

the Bureau of Local Government Finance (BLGF) Opinion dated January 4, 1999

which reads as follows:

“2nd Indorsement January 4, 1999

Respectfully returned thru the regional director for Local Government Finance, Department of Finance, Region IV, People Mansion Compound, Batangas City, to the Provincial Assessor of Batangas, same city.

This pertaines to the ‘contrary opinion’ expressed by the said Provincial Assessor concerning the letter dated April 18, 1997 of this Bureau, which held that ‘the real properties of DIGITEL, which are used in the operation of its franchise, are hereby found to be exempt from the payment of real property taxes.’

It is worthwhile to note that the stand/opinion expressed in the abovementioned letter dated April 18, 1997 of this Bureau, including those that similarly resolved real property tax exemption controversies of other telecommunication companies, were primarily based on the Opinion dated September 21, 1981 of the Office of the President stating that the phrase ‘exclusive of this franchise’ found in Section 7 of R.A. 3662 (RETELCO’s franchise) has been construed to mean as excluding real estate, buildings and personal property of defendant RETELCO, Inc., directly used in the operation of its franchise, for which the latter is not subject to real estate tax as other persons or corporations are now or hereafter may be required by law pay.’

Apparently, the abovementioned ‘contrary opinion’ of the Provincial Assessor of Batangas was prompted by the claim of DIGITEL for real property tax exemption on its real properties situated in Batangas Province, which are

Reference: Book XII, pp. 66-85

used in the operation of its franchise; and the Court of Appeals Decision, CA-G.R. CV No. 21897, promulgated on January 21, 1992, entitled. ‘The City Government of Batangas vs. Republic Telephone Company, Inc. (RETELCO), that ‘RETELCO is liable to pay the real property taxes on its real estate, building and personal property excluding its franchise’. (Underscoring supplied) Hence, ‘RETELCO is ordered to pay the City of Batangas . . . the real property tax on said defendants’ real estate, buildings and personal property’ located at Batangas City, covering the period from 1972 to June, 1980 and the real property tax due thereafter, plus the interest and penalty as provided by law.’

This Bureau finds the foregoing arguments of DIGITEL tenable considering the fact that, actually, even the Office of the President (OP) appears to share the same stand when OP, notwithstanding the subject January 21, 1992 Court of Appeals Decision, reaffirmed its position on the matter under a letter dated March 12, 1996, which categorically declared that ‘DIGITEL, too shall be subject only to the following taxes, to wit:

1. Taxes on its real estate, buildings and personal property not used in connection with the conduct of its business under its franchise, as other persons or corporations are now or hereafter may be required to pay; (Underscoring supplied)

2. 35% corporate income tax as provided for under Section 24(a) of the Tax Code, as amended;

3. 20% final withholding tax (FWT) on interest income derived from Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes, trust funds and similar arrangement, and royalties derived from sources within the Philippines (Section 2[3][I], NRC);

4. Creditable expanded withholding tax (EWT) on sales, exchanges or transfers of real properties (whether classified as ordinary or capital asset) consummated on or after January 1, 1990 (RMC 7-90);

5. Capital gains tax (CGT) on capital gains realized from sale, exchange or disposition of shares of stock in any domestic corporation under Section 24(e)(2) of the Tax Code, as amended;

6. All other income taxes as provided for and imposed under Title II of the Tax Code, as amended; and

7. The 3% franchise tax on gross which shall be in lieu of all taxes franchise or earnings thereof.’ (Underscoring supplied)

It is likewise important to note hereon that, in adherence to the aforementioned March 12, 1996 pronouncement of the Office of the President, this Bureau, in its November 9, 1998 letter . . . likewise maintained the same stand, which in effect expressed that ‘the claim for exemption of that company from the payment of real property taxes on the real properties which are used in the operations of . . . (the company’s) franchise is hereby deemed meritorious.’

In view thereof, the said Regional Director for Local Government Finance and the Provincial Assessor are hereby enjoined to implement the subject Opinions rendered by the Office of the President and the Department of Finance, thru the Bureau of Local Government Finance, on matters pertaining to the real property tax exemption covering real properties of DIGITEL, which are used in the operation of its franchise.

Be guided accordingly.

ANGELINA M. MAGSINO

Reference: Book XII, pp. 66-85

Deputy Executive Director Officer-in-Charge

THE SECOND “ERROR”

Appellants’ Arguments

1. The Supreme Court, in Philippine Long Distance Telephone Compay

v. City of Davao, et al (G.R. No. 143867, August 22, 2001), did not hold that the

opinion rendered by the BLGF cannot be given credence. Instead, it merely

stated that the BLGF is unlike the Court of Tax Appeals, which is a highly

specialized court that performed judicial functions and specially created for the

review of tax cases, to wit:

“x x x The authorities cited by petitioner pertains 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 Section 23 of RA No. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields.”

2. Moreover, while not constituting judicial precedents, the BLGF

Opinion applying Section 23 of RA 7925 have persuasive effect on courts, as

these are executive constructions of RA 7925. Said the Supreme Court in Nestle

Philippines, Inc. v. Court of Appeals (203 SCRA 504, 510):

“The principle that the contemporaneous construction of a statute by the executive officers of the government, whose duty is to execute it, is entitled to great respect, and should ordinarily control the construction of the statute by the courts, is so firmly embedded in our jurisdiction that no authorities need be cited to support it.”

THE THIRD “ERROR

Appellants’ Arguments

1. Section 23 of R.A. 7925 contains the “Most Favored Clause”,

mandating the equality of treatment in the Telecommunications Industry, to wit:

“Sec. 23. Equality of Treatment in the Telecommunications Industry. – An 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.”

Reference: Book XII, pp. 66-85

2. The above-cited ‘Most Favored Clause’ prevails over, and partially

repeals, the provisions of the Local Government code of 1991 – R.A. 7925 being

a special and later law, while the Local Government code is a general and former

law. Specifically, Appellants’ exemption from the franchise and business taxes

that results from the application of the “Most Favored Clause’ in Section 23 of

R.A. 7925, and pursuant to the opinion of the Department of Finance – prevails

over, and partially repeals, the general withdrawal of realty taxes exemption

provided by Sections 206 and 234 of the Local Government Code of 1991.

‘GENERALIA SPECIALIBUS NON DEROGANT.’

3. What Sections 137 and 193 of the LGC withdrew are the tax

exemptions that were previously granted and/or presently being enjoyed by

certain persons or entities at the time of the enactment of the LGC into law.

Section 137 and 193 of the LGC therefore did not preclude Congress from

granting tax exemptions to persons or entities subsequent to the enactment of

the LGC. As the Supreme Court aptly streets (sic) in PLDT v. City of Davao, 363

SCRA 522 (2001), which the respondent Board likewise quoted in its Decision:

“The trial court held that, under these provisions [Section 193 of RA 7160, among others], all exemptions granted to all persons, whether natural or 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 [of Republic Act No. 7160] does not state that it covers future exemptions. x x x 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 statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations.”

4. Attached to the Appellants’ Brief, as Annex ‘CBAA-C’ is a copy of

the Decision of the Regional Trial Court of Quezon City, Branch 227, dated June

6, 2003, in a case entitled “Bayan Telecommunications, Inc. versus City

Government of Quezon City & City Treasurer of Quezon City Dr. Victor B.

Endriga” and docketed as Civil Case No. Q-02-47292. The Trial Court in this

case, relying heavily on BLGF’s Opinioin dated January 4, 1999, upheld the

exemption of Bayan Telecommunications, Inc. from real estate taxes on the

Reference: Book XII, pp. 66-85

basis of the “in lieu of all taxes” and “exclusive of this franchise” provisos in

Republic Act 7633 in relation to the ipso facto clause [Section 23] under Republic

Act No. 7925.

Respondent-Appellee’s Answer to All “Errors”

1. Appellants presented no evidence other than the 2nd Indorsement

dated January 4, 1997 of the BLGF which quoted the Office of the President’s

Opinion dated March 12, 1996. The latter opinion of the Office of the President is

a rehash of a previous Opinion dated September 21, 1982 of the same Office

which, unfortunately, was declared by the Court of Appeals in the case of City of

Batangas v. RETELCO, Inc., CA-G.R.-CV No. 21897, dated January 21, 1992, to

be erroneous, thus:

“Reliance is placed by the trial court in the Opinion No. 1818 dated September 1982 of the Office of the President which states that the phrase ‘exclusive of this franchise’ found in Section 7 of Republic Act 3662 ‘has been construed to mean as excluding real estate, buildings and personal property of Defendant RETELCO, In. directly used in the operation of its franchise, for which the latter is not subject to real estate taxes as other persons or corporations are now or hereafter may be required by law to pay.’ We disagree, While administrative bodies may make opinions on the provisions of law, their opinions are, at most, persuasive and should not be given effect when they are erroneous. Administrative interpretations of law are not conclusive upon the courts (People v. Hernandez, 59 Phil. 272). (Underscoring supplied for emphasis)

“Here, it is Our well considered view that the opinion of the Office of the President is erroneous because it would render useless and ineffectual the clear import of Section 7 of Republic Act 3662 which holds RETELCO liable to pay real estate tax on its real estate, buildings and personal property, without distinction whether or not such property is directly used in the operation of its franchise. It is a well settled rule in statutory construction that words used in the statute are there for some purposes and are not used needlessly. Corollarity, there is a rule that it is the interpretation of the statute which will give effect to all the words used therein which is favored, as against one which will render some of the words useless and ineffective.

2. The Supreme Court had ruled in PLDT Company vs. City of Davao,

et al (G.R. No. 143867, August 22, 2001), thus:

“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 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 Section 23 of R.A. 7925. There is, therefore, no basis for claiming expertise for the BLGF that administrative agencies are said to possess in their respective fields.” (Underscoring supplied)

Reference: Book XII, pp. 66-85

3. The Appeal should be dismissed immediately because Mr. Henry T.

Galingan, General Manager of Appellant TELICPHIL, was not telling the truth

when he stated in the ‘VERIFICATION, STATEMENT OF MATERIALS DATES

AND CERTIFICATION OF NON-FORUM SHOPPING” attached to the

Appellants’ Brief that “Appellants, by themselves or through TELICPHIL, have

not heretofore commenced any action or filed any claim involving the same

issues in any court, tribunal, or quasi-judicial agency, and to the best of his

knowledge, no such other action or claim is pending therein.” The truth of the

matter is that DIGITEL and SMART Communications, Inc., two of the companies

TELICPHIL purports to represent, are forum shopping. DIGITEL, on July 1, 1999,

brought before the Regional Trial Court of Batangas, Branch III, Civil Case No.

5343 for Mandamus, Injunction with Prayer for the issuance of Temporary

Restraining Order and Writ of Preliminary Injunction against the City Mayor, City

Treasurer, and the City Legal Officer. SMART, on the other hand, was the

petitioner-appellant in CBAA Case No. V-17 entitled “Smart Communications,

Inc. vs. the City Assessor of San Carlos City and the Local Board of Assessment

Appeals of San Carlos City.” Both cases involved the same issues now under

appeal before the Central Board of Assessment Appeals.

This Board’s Findings

Stated concisely, the “errors” supposedly committed by the Local Board of

the City of Batangas actually consist of two (2) issues, to wit:

1. Whether or not the phrases “exclusive of this franchise” and “in lieu of all taxes” found in the “Tax Provisions” common to franchises of telecommunications entities have the effect of exempting Appellants from payment of the real property tax on their real properties used directly in the operations of their franchises; and

2. Whether or not Section 23 of R.A. 7925 has the effect of exempting the Appellants – and all telecommunications entities, for that matter – from payment of the real property tax on real properties used directly in the operations of their franchises.

We note that the “tax provisions” in franchises of telecommunications

entities are similarly worded. Bayantel’s franchise (RA 7633), for instance,

provides in Section 7 thereof the following:

Reference: Book XII, pp. 66-85

“Sec. 11. 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: Provided, That the grantee, its successors or assigns shall continue to be liable for income taxes payable under Title II of the National Internal Revenue Code pursuant to Section 2 of Executive Order No. 72 unless the latter enactments are amended or repealed in which case the amendment or repeal shall be applicable thereto. x x x”

On the other hand, Section 9 of Smart’s franchise (RA7924), which lapsed

into law on March 27, 1992, provides:

“Sec. 9. Tax Provisions. – 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 business 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.”

As simplified, the first issue in this case involves the various opinions on,

or interpretations of, the phrases “exclusive of this franchise” and “in lieu of all

taxes” found in the tax provisions of franchises of telecommunications entities.

The BLGF’s interpretation which, of course, is the one favored by

appellants, is that the phrase “exclusive of this franchise” means that real

properties used directly, actually and exclusively in the operations of the various

franchises are exempted from payment of the real property tax.

As the Court of Appeals said in City of Batangas v. RETELCO, Inc. (CA-

G.R. –CV No. 21897, January 21, 1992). “(I)t is a well settled rule in statutory

construction that words used in the statute are there for some purpose and are

not used needlessly. Corollarily, there is the rule that it is the interpretation of the

statute which will give effect to all the words used therein which is favored as

against one which will render some of the words useless and ineffective.”

Anent the second issue, as simplified, Section 23 (commonly known as the

“Most Favored Treatment Clause” or the “IPSO FACTO” proviso) of R.A. 7925,

enacted on February 20, 1995, provides as follows:

“Sec. 23. Equality of Treatment in the Telecommunications Industry. – Any advantage, favor, privilege, exemption or immunity granted under existing

Reference: Book XII, pp. 66-85

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 grantee of such franchises: Provided, however, That the foregoing shall neither apply to or affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or type of service authorized by the franchise.”

The matter of Section 23 of R.A. 7925 came to the fore because of the

assumption that telecommunications companies supposedly enjoyed exemptions

from payment of the real property tax before the same privileges were

supposedly withdrawn by R.A. 7160 upon its effectivity on January 1, 1992.

Because of Section 23 of RA 7925, the privileges, which were supposedly

withdrawn by R.A. 7160, were automatically “restored” when a new franchise,

containing the “tax provisions” common to all telecommunications franchises,

was enacted subsequent to the effectivity of RA 7160.

Appellants say that “(T)he above-cited ‘Most Favored Clause’ prevails

over, and partially repeals, the provisions of the Local Government Code of 1991

– R.A. 7925 being a special and later law, while the Local Government Code is a

general and former law. . . ‘GENERALLA SPECIALIBUS NON DEROGANT.”

General terms do not restrict or modify special provisions (Philippine Law

Dictionary, Third Edition, citing Lim Toco v. Go Fay, 80 Phil. 172), as the legal

maxim denotes has no bearing in this case.

Section 23 of R.A. 7925 supposedly has the effect of “restoring” the

exemption privileges enjoyed by telecommunications entities which were

supposedly and previously “withdrawn” by R.A. 7160. The exemption from

payment of the real property tax supposedly enjoyed by telecommunications

entities hinges on the “tax provisions” common to all telecommunications

franchises. As found however, such “tax provisions” do not confer to any

telecommunications entities any exemption from payment of the real property

tax. So, Section 23 of R.A. 7925 could not have possible restored something

which never existed in the first place.

Certain telecommunications entities might have been allowed to escape

payment of the real property tax because of the erroneous BLGF Opinions

Reference: Book XII, pp. 66-85

issued prior to October 25, 2004. In any case, the Bureau of Local Government

Finance (BLGF) issued its Memorandum Circular No. 15-2004 on October 25,

2004, thus:

“BLGF MEMORANDUM CIRCULAR NO. 15-2004

TO All Regional Directors for Local Government Finance: Provincial, City and Municipal Assessors and Treasurers; and others Concerned.

SUBJECT Reversal of the Real Property Tax Exemption Previously Granted to Globe Telecommunications (GLOBE for brevity), in line with the Supreme Court (SC) Decision (G.R. No. 143867) dated August 22, 2001. And the Central Board of Assessment Appeals (CBAA) Decision (Case No. V-17 dated January 31, 2002.
——————————————————————————————————–

For the information and guidance of all concerned, quoted hereunder are the pertinent portions of the opinion/ruling rendered by this Bureau as embodied under its 1st Indorsement dated September 27, 2004, copy attached, re. Reversal of the real property tax exemption previously granted to Globe in line with the abovementioned SC Decision entitled: “Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of Davao and Adelaida Barcelona in her capacity as the City Treasurer of Davao City” and the CBAA Decision entitled: “Smart Communications, Inc. vs. City Assessor of San Carlos City and Local Board of Assessment Appeals of San Carlos City”, to wit:

The subject BLGF opinion is likewise the subject of the Decision of the Central Board of Assessment Appeals (CBAA), (copy attached) under Case No. V-17 entitled “Smart Communications, Inc. vs. City Assessor of San Carlos City”, wherein the CBAA held as follows:

“The opinion of the BLGF did not expressly state that Globe was exempted from payment of the real property tax but, by saying that ‘all real properties of the corporation not directly, actually and exclusively used in the telecommunications operations or services shall be subject to the real property taxes’ it, nevertheless, seemed to convey that Globe was indeed exempt from payment of said tax.

“The above-quoted pronouncement by the Supreme Court notwithstanding, we are at a loss as to the basis of BLGF’s opinion as far as it concerned the real property tax. We venture to say that the same opinion may have been based on the tax provision common to telecommunications franchis*es. Smart was granted a franchise under R.A. 7924 which lapsed into law on March 27, 1992, Section 9 of which reads as follows:

‘Sec. 9. Tax Provisions. – 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 which are not 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 business transacted under this franchise by the grantee, its

Reference: Book XII, pp. 66-85

successors or assigns and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof . . .’ (Underscoring supplied)

‘With due respect, the BLGF might have misconstrued the phrase ‘exclusive of this franchise’ as to include real property as part of the franchise. We find this interpretation erroneous. In jurisprudence, a franchise as a right and privilege is regarded as property, separate and distinct from the property which the corporation itself may acquire. As property, a franchise is of great value for the corporation and its members. (Fletcher’s Cyclopedia of the Law of Private Corporation, Vol. 6A, pages 427-428, citing Horn Silver Min. Co. vs. New York, 143 U.S. 305 36 L. Ed. 164, 12 Sup. Ct.-403; City of Campbell vs. Arkansas – Missouri Power Co., 55F (2d) 560, as cited in the City Government of Batangas vs. Republic Telephone Company, Inc. CA-G.R. CV No. 21897, January 21, 1992.)

‘We hasten to add that a franchise as a right and privilege is not even a real property for purposes of the real property tax. The tax provision aforequoted (Sec. 9, R.A. 7924) states that ‘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. This could only mean that the grantee shall be liable to pay taxes on all its personal properties, excluding the franchise itself.’

“Relatedly, Globe might have misconstrued the phrase ‘ipso facto’ provision of its franchise, which is common to all telecommunications franchises, as exemption on the payment of real property tax, x x x.’

‘x x x

“Under the Supreme Court Decision, G.R. No. 143867 dated August 22, 2001, in the case of Philippine Long Distance Telephone Company, Inc. vs. City of Davao and Adelaida Barcelona in her capacity as City Treasurer of Davao City’, the Court explained:

‘The fact is that the term ’exemption’ in Sec. 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. Hence, a consideration of the law itself in its entirety and the proceedings of both House of Congress is in order.’

‘x x x

RA 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

Reference: Book XII, pp. 66-85

language of Section 23 of R.A. 7925 nor in the proceedings of both the House of Representatives and the Senate in enacting R.A. 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. (Underscoring supplied)

‘What this Court sad in Aisiatic Petroleum Company 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 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 Section 23 of R.A. 7925 could contemplate exemption from certain regulatory or reporting requirements, bearing in mind the policy of the law. (Underscoring for emphasis)

‘x x x

‘In sum, it does not appear that, in approving Section 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 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 . . .” (Underscoring supplied)

‘x x x

“Lastly, quoted below is a portion of the Supreme Court Decision (G.R. NO. 120082, September 11, 1996) in the case entitled ‘Mactan International Airport Authority vs. Ferdinand Marcos, in his capacity as Presiding Judge of the RTC, Cebu City:

‘As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed by the people through their Constitutions. Our Constitution, for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the power that it was once opined that ‘the power to tax involves the power to destroy.’ Verily, taxation is a destructive power which interferes with the personal and property for the support of the government. Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of the

Reference: Book XII, pp. 66-85

taxing authority. A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations.’

“Viewed in the light of all the foregoing and based on the Decision of the Supreme Court and the Central Board of Assessment Appeals, the Bureau of Local Government Finance (BLGF) believes and so holds that Globe is liable to payment of real property tax. This Bureau’s opinion expressed in its letter dated February 24, 1998 with regard to exemption from payment of real property tax on real properties of Globe is hereby reversed.” (Underscoring supplied)

Accordingly, the subject real property owned by GLOBE and SMART Telecommunications and all other telecommunications companies similarly situated are now subject to real property tax. Likewise, the opinion rendered by this Bureau in its 1st Indorsement dated May 21, 2001, and other earlier and subsequent opinions expressed on the matter with regard to real property tax exemption of SMART and GLOBE Telecommunications in ivew of the IPSO FACTO provisions (most favored treatment clause), are hereby declared of no force and effect.

The Provincial Assessors and Treasurers are hereby instructed to disseminate the contents of this Circular, including the attachments, to the Municipal Assessors and Treasurers within their respective jurisdiction.

MA. PRESENTACION R. MONTESA Executive Director”

Quoted in the above-BLGF MEMORANDUM CIRCULAR NO. 15-2004 is

the Ruling of this Board in CBAA Case No. V-17 entitled Smart Communications,

Inc. vs. City Assessor of San Carlos City and the Local Board of Assessment

Appeals of San Carlos City, decided on June 28, 2002. Integrated thereto, said

BLGF Memorandum Circular evidently echoes this Board’s earlier

pronouncement in the Smart Communications case, hence, originally this

Board’s own. Bound by the principle of Stare Decisis, this Board is therefore

impelled to abide by its Decision to stand as precedent for future judgment.

To say that this Board concurs and adopts the same BLGF Memorandum

Circular as its own would be superfluity. But for purposes of conciseness let it be

so: they are anyhow identical.

WHEREFORE, premises considered, the instant Appeal is hereby

DISMISSED for lack of merit.

Reference: Book XII, pp. 66-85

SO ORDERED.

Manila, Philippines, January 24, 2007.

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed)
ANGEL P. PALOMARES Member

(Signed) RAFAEL O. CORTES
Member

Reference: Book XII, pp. 66-85