Bureau of Local Government Finance Opinion

August 14, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The City Assessor Antipolo City S i r : This refers to your letter dated April 10, 2001, requesting reconsideration of the 1st Indorsement dated February 9, 2001 of the Bureau of Local Government Finance (BLGF), relative to the real property tax exemption of the real properties of the Liberty Broadcasting Network, Inc., (LBNI) located thereat. The said 1st Indorsements of the BLGF made categorical clarifications that: 1. 1st Indorsement dated May 15, 2000 : "Similarly, therefore, LBNI's real properties used in the operation of its franchise, which fall under the exempt real properties, in line with the September 25, 1981 Resolution of the Office of the President, are undoubtedly still considered exempt from the payment of real property taxes despite the `withdrawal of exemption provisions of R.A. N o. 71 60 (the Local Government Code of 1991), in view of the `ipso facto' provision under Section 4 of its franchise and further, pursuant to Section 23 of R.A. No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, . . . :" 2. 1st Indorsement dated February 9, 2001 : "The pertinent portion of the said DOF's 1st Indorsement, dated February 14, 1995, is quoted hereunder: xxx xxx xxx. The stand of this Department under its 1st Indorsement dated May 27, 1994, ` that real properties of PT&T, although used in the operations of its franchise, shall be liable to the payment of real property taxes beginning January, 1992 (the effectivity of R.A. No. 7160),' is therefore hereby maintained . However, such real properties of the said company (PT&T) which are directly used in the operation of its franchise, should again, in view of the foregoing considerations, be assessed exempt from payment of real property taxes commencing January 1, 1993, the year after the franchise of SMART took effect . . . ' (Emphasis supplied). "Similarly, therefore, when the exemption of PT&T was restored by virtue of the `ipso facto' or most favored treatment clause which appeared in its (PT&T's) franchise, the exemption enjoyed by LBNI, which franchise also contains the same 'ipso facto' or most favored treatment clause, is likewise considered restored despite the abovecited withdrawal of exemption under Section 234 of the Code." Concisely, your abovementioned request for reconsideration is anchored on the contention that the franchise of LBNI (R.A. No. 4154 which took effect on June 20, 1964) which contains the same `ipso facto' or most favored treatment clause as that of the franchise of PT&T (which was approved on November 15, 1990) is an older law compared to the Supreme Court Decision dated May 9, 1999 in G.R. No. 131359 ( Manila Electric Company vs. Province of Laguna and Benito R. Balazo in his capacity as Provincial Treasurer of Laguna ) wherein it was held among others, "that the Local Government Code (R.A. No. 7160) has effectively withdrawn under Section 193 (and Section 234) thereof the tax exemptions incentives theretofore enjoyed by certain entities," upon the effectivity of R.A. No. 7160, that is January 1, 1992. It is noted, in this connection, that the February 9, 2001 1st Indorsement of BLGF has in effect, provided the same clarification when it cited the case of PT&T under the aforequoted portion of the 1st Indorsement dated February 14, 1995 of this Department. Apparently, the BLGF has similarly maintained, as in the abovecited Supreme Court Decision that, effective January 1, 1992 (the effectivity of R.A. No. 7160) all real property tax exemptions have been effectively withdrawn by Section 234 of R.A. No. 7160, the pertinent portion of which provides: "Section 234. Exemptions from Real Property Tax . The following are exempted from payment of the real property tax: xxx xxx xxx "Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code." However, to consideration of the "ipso facto" provision or "the most favored treatment" clause in the franchise of telecommunication companies (such as the LBNI), and the similar "equality of treatment" clause embodied under Section 23 of R.A. No. 7925, which became effective on March 16, 1995, such withdrawn exemption by virtue of Section 234 of R.A. No. 7160 was, in effect, subsequently restored. Accordingly, this Department, much to its regret, finds no compelling reason to reconsider the stand that BLGF has taken, considering that the same is hereby declared to be in order. aDIHTE The Department of Finance takes notice that the BLGF has denied the request for reconsideration made by that office on the exemption for real property taxes of LBNI as contained under its 1st Indorsement dated May 15, 2000, hence further request for reconsideration of that office will no longer be entertained. Very truly yours, (SGD.) JOSE ISIDRO N. CAMACHO Secretary