Philippine Long Distance Telephone Co and City of Davao

G.R. No. 143867 August 22, 2001

Mendoza, J:

Facts:
PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise
tax was paid “in lieu of all taxes on this franchise or earnings thereof” pursuant to RA 7082. The
exemption from “all taxes on this franchise or earnings thereof” was subsequently withdrawn by
RA 7160 (Local Government Code), which at the same time gave local government units the
power to tax businesses enjoying a franchise on the basis of income received or earned by them
within their territorial jurisdiction. The Local Government Code took effect on January 1, 1992.
Under section 137 of Local Government Code
SEC. 137. Franchise Tax. ¾ 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.
Meantime, the City of Davao enacted Ordinance No. 519, Series of 1992, which in
pertinent part provides: Notwithstanding any exemption granted by law or other special laws,
there is hereby imposed a tax on businesses enjoying a franchise, 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 receipts realized within the territorial jurisdiction of Davao City
Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation
(Globe) and Smart Information Technologies, Inc. (Smart) franchises which contained “in leiu of
all taes” provisos
In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines,
Sec. 23 of which provides that
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.
The said law took effect on March 16, 1995. In January 1999, when PLDT applied for a mayor’s
permit to operate its Davao Metro exchange, it was required to pay the local franchise tax which
then had amounted to P3,681,985.72. PLDT challenged the power of the city government to
collect the local franchise tax and demanded a refund of what had been paid as a local franchise
tax for the year 1997 and for the first to the third quarters of 1998.

Issue:
1. Whether or not by virtue of section RA 7925, Sec. 23, PLDT is again entitled to the
exemption from payment of the local franchise tax in view of the grant of tax exemption
to Globe and Smart?
2. Whether or not the opinion of Bureau of Local Government Finance stating that section
23 of R.A. No. 7925 amended the franchise of petitioner and in effect restored its
exemptions from local taxes is controlling?
Held:
1. No, PLDT is not entitled to the exemption under section 23 RA7925 from payment of
local franchise tax in view of the grant of tax exemption to Globe and Smart.
2. No, the opinion of Bureau of Local Government Finance stating that section 23 of R.A.
No. 7925 amended the franchise of petitioner and in effect restored its exemptions from
local taxes is not controlling.

Ratio:
1. Sec. 137 of Local Government Code does not state that it covers future exemptions. Tax
exemptions are highly disfavored. The fact is that the term “exemption” in section 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. 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. The law must be considered itself in its entirety and the proceedings of
both Houses of Congress. 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 Section 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.

2. The Bureau of Local Government Finance (BLGF) is not an administrative agency whose
findings on questions of fact are given weight and deference in the courts. The Court of Tax
Appeals is 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 PLTDT is a
legal question regarding the interpretation of section 23 of R.A. No. 7925. Therefore, there is no
basis for claiming expertise for the BLGF as administrative agency. It must be also not that the
case at bar 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.