Bureau of Local Government Finance Opinion

July 4, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the City Assessor, Valenzuela City, his within preceding Indorsement dated April 19, 2001, relative to the letter request dated March 27, 2001 of the Counsel of Bayan Telecommunications, Inc. (BAYANTEL) requesting exemption from the payment of real property tax pursuant to R.A. No. 7925. "An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Service" enacted by Congress on July 25, 1994, and became effective on March 16, 1995. Representation is being made by the BAYANTEL's Counsel that the Bureau of Local Government Finance (BLGF) had on several occasions, recognized the tax exempt status enjoyed by telecommunication companies, such as DIGITEL, PT&T, LBNI, ISLACOM, Easycall Phils., Calapan Telephone System, among others, by way of opinion/rulings rendered by the BLGF. This Bureau, under its 2nd Indorsement dated May 8, 1998, copy enclosed ruled that RCPI/BAYANTEL shall be exempt from the payment of franchise and business taxes imposable by LGU's under Sections 137 and 143, respectively, of the Local Government Code of 1991. Additionally, the said ruling made clarification that "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 LGUs where such properties are located." Section 23 of R.A. No. 7925, quoted hereunder, provides for the equality of treatment in the telecommunications industry: "Section 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 telecommunication franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect 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) The rationale behind the ipso facto or most favored treatment clause of the law (R.A. No. 7925) is "fair play" to place competing groups on equal footing and not give one an advantage over the other ( Davao Light and Power Co. vs. The Commissioner of Customs , 44 SCRA 127 cited in PT&T vs. COA , 146 SCRA 190, cited in OP letter to DIGITEL dated March 12, 1996). aTICAc Stated otherwise, any exemption privileges granted or enjoyed by other telecommunication companies should likewise be enjoyed by a competing telecommunication company such as BAYANTEL, notwithstanding the withdrawal of exemption provisions of R.A. No. 7160, particularly the last paragraph of Section 234 and 534 (f) thereof. Relatedly, attention is invited to the 1st Indorsement dated May 28, 2001, of this Bureau, copy enclosed, with respect to the real property tax exemption of SMART and GLOBE Telecommunication Companies, which this Bureau, similarly cited Section 23 of R.A. No. 7925, and contains the " ipso facto " provision or most favored treatment clause. Be guided accordingly. (SGD.) BENJAMIN A. GERONIMO Executive Director