Bureau of Local Government Finance Opinion

February 9, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned to the City Assessor, Antipolo City. This refers to your letter dated September 14, 2000, requesting reconsideration of the 1st Indorsement dated May 15, 2000 of this Bureau upholding the claim of LBNI (Liberty Broadcasting Network, Inc.) for exemption from the payment of real property taxes on its real properties which are used in the operation of its franchise. The said City Assessor appears to be apprehensive in complying with the abovementioned instructions of this Bureau based on the following: 1. Collectively, that Office contends that the exemptions or incentives "granted to or presently enjoyed by all persons whether natural or juridical" were already withdrawn, citing Section 193 of the Local Government Code of 1991 (R.A. No. 7160) (which provision is also contained under the more appropriate Section 234 of the said Code); and the related Supreme Court Decision (G.R. No. 131359, entitled Manila Electric Company vs. Province of Laguna ); and 2. R.A. No. 8508, "An Act Converting the Municipality of Antipolo into a Component City. . . ," in relation to Sections 9 and 455 of R.A. No. 7160, purportedly to highlight the general responsibility/authority of a City Mayor within his jurisdiction. ISADET As regards Item 1 above, this Bureau fully concurs in the argument that tax exemptions of telecommunication companies, such as the LBNI, which were granted or previously enjoyed, prior to the effectivity of the Code, have been withdrawn, pursuant to Section 234 of R.A. No. 7160, the pertinent portion of which provides as follows: "Section 234. Exemptions from 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by, all persons, whether natural or juridical, including all government-owned or controlled corporations is hereby withdrawn upon the effectivity of this Code." Such concurrence is in line with the 1st Indorsement dated February 14, 1995 of the Department of Finance (DOF) copy attached, in relation to another 1st Indorsement dated May 27, 1994, also the Department of Finance, in consonance with Section 14 of PT&T's franchise which contains the provision that: ". . . , in the event of any competing individual, partnership or corporation, receiving firm Congress of the Philippines a similar permit or franchise with terms and/or provisions more favorable than those herein granted or tending to place the herein grantee at any disadvantage, then such term or terms, and/or provisions, should, ipso facto become part of the terms and/or provisions hereof, and shall operate equally in favor of the grantee as in the case of said competing individual, partnership or corporation." IDcTEA The pertinent portions of the said DOF 1st Indorsement, dated February 14, 1995, is quoted hereunder: "Clearly, SMART, Bell Telecommunication Philippines, Inc., and Digital Telecommunication Philippines, Inc., who were allowed to enjoy real property tax exemption on their real properties 'used in the operation' of (heir franchises, appear to be competitors of PT&T (in the same way that they are considered competitors of LBNI as clarified under the 1st Endorsement, May 15, 2000 of this Bureau). "In view thereof such pertinent portion of the Tax Provisions of the franchises of SMART, Bell Telecommunication Philippines, Inc., and Digital Telecommunication Philippines, Inc., stating that '(T)he grantee shall be liable to pay the same taxes on real estate, buildings and personal property, exclusive of this franchise,' is again deemed part of PT&T's franchise (or LBNI's franchise as well) when R.A. No. 7294 (SMART's franchise) took effect on April 15, 1992. "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 is likewise considered restored despite the abovecited withdrawal of exemption under Section 234 of the Code. As regards Item 2, attention is invited to the 1st Indorsement, dated June 28, 2000 of this Bureau (copy attached), the pertinent portion thereof states: "Moreover, be reminded, that this Bureau 'exercises administrative and technical supervision and coordination over the treasury and assessment operations of local governments' in behalf of the Department of Finance, pursuant to the provisions of R. A. No. 71 60 and Executive Order No. 127, particularly Section 43 thereof, which provides in part, thus: "Section 43. Bureau of Local Government Finance . The Bureau of Local Government Finance . . . shall have the following functions: "xxx xxx xxx "(b) Exercise administrative and technical supervision and coordination over the treasury and assessment operations of local governments; "xxx xxx xxx. "(b) Exercise line supervision over. . . the local treasury and assessment services; "xxx xxx xxx." In view of all the foregoing, this Bureau finds the abovementioned request for reconsideration of the said 1st Indorsement, dated May 15, 2000 without legal basis and, therefore, the same can not be given due course. cASEDC Report of action taken hereon within five (5) days from receipt hereof, is requested. (SGD.) BENJAMIN A. GERONIMO Executive Director