Bureau of Local Government Finance Opinion

December 9, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Edgardo B. Quiogue Senior Vice President, Administration and Finance Liberty Broadcasting Network, Incorporated (LBNI) Technology Centre, 2298 Pasong Tamo Extension Makati City S i r : This refers to your letter dated November 13, 1998 seeking opinion/ruling relative to the exemption of Liberty Broadcasting Network, Inc. (LBNI) from payment of franchise and business taxes. It is contended that LBNI should be exempt from the payment of subject taxes as other competitor telecommunication companies are enjoying. Section 4 of RA 4154, as amended, granting LBNI a congressional franchise provides that: "Sec. 4. In the event of any competing individual, partnership or corporation receiving from the congress a similar franchise in which there shall be any term or terms more favorable than those herein granted or tending to place the herein grantee at any disadvantage, then such term or terms shall ipso facto become a part of the terms hereof and shall operate equally in favor of the grantee as in the case of said competing individual, partnership or corporation." In relation thereto, Section 23 of RA 7925 otherwise known as the Public Telecommunication Policy Act of the Philippines which was approved on March 01, 1995, provides as follows: "Sec. 23. Equality of Treatment in the Telecommunication 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 recorded 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." On the basis of the aforequoted Section 23 of RA 7925, LBNI as a telecommunications franchise holder becomes automatically covered by the tax exemption provisions of RA 7925, which took effect on March 16, 1995. Accordingly, LBNI 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, LBNI 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 LBNI was not enjoying the "most favored clause" proviso of RA 7925. IcTCHD Moreover, LBNI shall also be liable to pay the Mayor's permit and other regulatory fees or service charges that the local government units concerned may have imposed under a duly-enacted tax ordinance, its exemption being applicable only to local franchise and business taxes. These views are expressed merely for guidance of that Office pursuant to the provisions of Article 287 of the Implementing Rules and Regulations (IRR) of the Code and should not be construed as bearing upon the legality or illegality of a duly-enacted local tax ordinance. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-In-Charge