Bureau of Local Government Finance Opinion

May 8, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the City Treasurer, Roxas City the herein preceding indorsement. This refers to the query as to whether special laws granting RCPI/Bayantel tax exemption privileges are still tenable upon the effectivity of the Local Government Code (LGC) of 1991. Representations are made that on June 17, 1997, that Office wrote a demand letter addressed to RCPI/Bayantel Branch Office, requesting payment for Mayor's permit, municipal license tax and other regulatory fees/charges, as franchise holder/dealer based on the annual gross receipts derived from the preceding year since 1993 up to 1997, pursuant to Section 137 of the LGC, as implemented under Section 2C.01, Article C, Chapter II, of Ordinance No. 27-A-92 of the Revised Revenue Code of Roxas City. However, the Counsel of RCPI/Bayantel, cited R.A. No. 4054, an Act amending certain Sections of R.A. 2926, as amended, entitled "An Act Granting the Radio Communications of the Philippines a Franchise to Establish Radio Stations for Domestic Telecommunications." Section 2 of R.A. No. 4054 provides that the franchise tax imposed thereunder "shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any kind, authority whatsoever, municipal, provincial or national from which taxes the grantee (RCPI) is hereby expressly exempted." Said Counsel advised RCPI/Bayantel to pay all regulatory fees except the Mayor's permit fee and municipal license tax, which are actually taxes and therefore covered by the franchise's exemption. DTEIaC In addition, said Counsel contended that RA Nos. 2036, 2963, and 4050 are special laws applicable only to RCPI while the LGC is a general law, thus, the presumption is that special laws are exceptions to the general law for reason that they pertain to a particular set of conditions and circumstances. That Office, however, maintains its position to effect and collect said taxes and fees invoking Section 193 of the LGC which has withdrawn and repealed all tax exemption privileges granted to by special laws so much so that the special laws invoked by RCPI/Bayantel, which were approved prior to the enactment of RA 7160, has no full force and effect in law. It appears that the franchise of RCPI/Bayantel was enacted without Executive approval on June 23, 1957 and has a term of fifty (50) years which will expire on June 23, 2007. However, Section 137 of the LGC, which took effect on January 1, 1992, provides as follows: "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 receipts, realized, within the territorial jurisdiction. "xxx xxx xxx." Moreover, Section 193 of the LGC, states that "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 RA No . 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code ." (Emphasis supplied.) Accordingly, and considering that the franchise holders of the telecommunications industry are not among those specifically mentioned in Section 193 aforequoted, then any tax exemption they may have been enjoying shall be deemed withdrawn upon the effectivity of the LGC on January 1, 1992. ASETHC On the other hand, 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 effect 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." (Emphasis supplied) On the basis of the aforequoted Section 23 of RA 7925, RCPI/Bayantel as a telecommunications franchise holder becomes automatically covered by the tax exemption provisions of RA 7925, which took effect on March 16, 1995. Accordingly, RCPI/Bayantel shall be exempt from the payment of franchise and business taxes imposable by LGUs under Sections 137 and 143, respectively, of the LGC, upon the effectivity of RA 7925 on March 16, 1995. However, RCPI/Bayantel 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 RCPI/Bayantel was not enjoying the "most favored clause" proviso of RA 7925." It bears emphasis, moreover, that said company shall still be liable to pay annually the Mayor's permit and other regulatory fees or service charges that the local government unit concerned may have imposed under a duly-enacted tax ordinance, the exemption being applicable to the local franchise tax and business taxes only. Likewise, all other real properties of RCPI/Bayantel not used in connection with the operation of its franchise shall remain taxable, or subject to the real property taxes imposed by the LGU of LGUs where such properties are located. ISCaTE Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director