Bureau of Local Government Finance Opinion

February 24, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Rodolfo A. Salalima Sr. Vice President-Corporate Affairs & Regulatory Matters Globe Telecom 20th Floor, BPI Paseo de Roxas Condominium Center, 8753 1226 Makati City S i r : This refers to your letter dated January 29, 1998 requesting opinion to the effect that Globe Telecom (Globe for brevity) is, by express provisions of laws, free, exempt or not liable to pay the local franchise, business and property/machinery taxes under the Local Government Code of 1991 (LGC). Representations are made that Globe is a grantee of a Congressional/Statutory franchise pursuant to RA 7229 authorizing it to construct and operate telecommunication system and services within the Philippines and internationally. It appears that RA 7229 is an act approving the merger between Globe Mackay Cable and Radio Corporation and Clavecilla Radio System and the consequent transfer of the franchise of Clavecilla Radio System granted under RA No. 402, as amended by RA Nos. 1608 and 4540 to Globe Mackay Cable and Radio Corporation, extending the life of said franchise, and repealing certain Sections of RA 402 as amended. Section 5 of RA 4540, provides as follows: "SEC. 5. Section twenty of the same Act is hereby amended to read as follows: '"Section 20. This franchise shall not be interpreted to mean an exclusive grant of the privileges herein provided for, however, in the event of any competing individual, partnership, or corporation, receiving from the Congress of the Philippines a similar permit or franchise 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 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.'" AcICHD It is noted that the transfer of the franchise of Clavecilla Radio System as well as the rights, privileges and licenses accessing transform has been approved under RA 7229. Considering, therefore, that RA 7229 having been approved on March 19, 1992 is a later law, its provisions should prevail over those of the LGC which took effect on January 1, 1992. Accordingly, Globe should be considered exempt from the franchise and business taxes that local governments may impose under Sections 137 and 143, respectively, of the Code. However, all real properties of the corporation not directly, actually and exclusively used in the telecommunication operations or services shall be subject to the real property taxes that provinces and cities levy under the pertinent provisions of the Code. Moreover, the corporation shall also be liable to pay the Mayor's permit and other regulatory fees or service charges that the local government 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 and should not be construed as bearing upon the legality or illegality of a duly-enacted local tax ordinance. It is hoped that this will help clarify matters. HASTCa Very truly yours, (SGD.) LORINDA M. CARLOS Executive Director