G.R. No. 149179. July 15, 2005
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., Petitioner, vs. CITY OF BACOLOD, FLORENTINO T. GUANCO, in his capacity as the City Treasurer of Bacolod City, and ANTONIO G. LACZI, in his capacity as the City Legal Officer of Bacolod City, Respondents.

FACTS

Petitioner PLDT operates under a legislative franchise consolidated under Republic Act No. 7082, which contains an “in-lieu-of-all-taxes” clause in Section 12. This clause obligates PLDT to pay a 3% franchise tax on gross receipts “in lieu of all taxes on this franchise or earnings thereof.” Upon the effectivity of the Local Government Code (LGC) in 1992, Section 137 thereof empowered cities to impose a local franchise tax, and Section 193 withdrew all existing tax exemption privileges unless otherwise provided. Consequently, the City of Bacolod assessed and collected local franchise taxes from PLDT from 1994 to 1998.
PLDT later invoked a ruling from the Bureau of Local Government Finance (BLGF) dated June 2, 1998, which held that PLDT became exempt from local franchise taxes starting March 16, 1995, the effectivity date of Republic Act No. 7925 (Public Telecommunications Policy Act). The BLGF based its ruling on Section 23 of R.A. 7925, a “most-favored-treatment” clause, which states that any privilege granted under any subsequent franchise shall automatically be part of previously granted franchises. The BLGF interpreted this to mean that since later telecommunications franchises (e.g., to Globe and Smart) contained express tax exemptions from local taxes, PLDT automatically acquired the same exemption via Section 23. Relying on this, PLDT sought a refund of taxes paid from March 16, 1995, and a declaration of exemption.

ISSUE

Whether Section 23 of R.A. 7925 (the “most-favored-treatment” clause) operates to exempt PLDT from the local franchise tax imposed by the City of Bacolod under the Local Government Code.

RULING

No. The Supreme Court denied the petition and affirmed the lower court’s dismissal, ruling that PLDT is not exempt from the local franchise tax. The Court applied the doctrine of stare decisis, as the legal issue is identical to and squarely governed by its prior ruling in PLDT v. City of Davao (G.R. No. 143867, August 22, 2001). In that case, the Court exhaustively held that Section 23 of R.A. 7925 is not a source of tax exemption. The clause merely ensures equality among telecommunications franchise holders concerning privileges like tax exemptions, but it does not itself grant an exemption. For the clause to operate, the exemption must first be clearly and expressly granted in a subsequent franchise. The Court further ruled that the “in-lieu-of-all-taxes” provision in PLDT’s own franchise (R.A. 7082) was effectively withdrawn by Section 193 of the LGC, which expressly removed such privileges. The BLGF’s contrary interpretation was accorded no weight, as the issue involves a pure question of law outside the BLGF’s technical expertise. Therefore, PLDT remained liable for the local franchise tax under the LGC.