THIRD DIVISION

[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.

Estelito P. Mendoza for petitioner.

Bacolod City Legal Office for respondents.

SYLLABUS
1 . POLITICAL LAW; LOCAL GOVERNMENT; TAXATION; FRANCHISE TAX;
REPUBLIC ACT NO. 7925, SECTION 23 THEREOF; "MOST-FAVORED-TREATMENT" CLAUSE,
CONSTRUED. — As we see it, the only question which commends itself for our resolution is,
whether or not Section 23 of Rep. Act No. 7925, also called the "most-favored-treatment"
clause, operates to exempt petitioner PLDT from the payment of franchise tax imposed by
the respondent City of Bacolod. Contrary to petitioner's claim, the issue thus posed is not
one of " rst impression" insofar as this Court is concerned. In PLDT vs. City of Davao, this
Court interpreted Section 23 of Rep. Act No. 7925 as not operating to exempt PLDT from
the payment of franchise tax imposed upon it by the City of Davao: In sum, it does not
appear that, in approving §23 of R.A. No. 7925, Congress intended it to operate as a
blanket tax exemption to all telecommunications entities. Applying the rule of strict
construction of laws granting tax exemptions and the rule that doubts should be resolved
in favor of municipal corporations in interpreting statutory provisions on municipal taxing
powers, we hold that §23 of R.A. No. 7925 cannot be considered as having amended
petitioner's franchise so as to entitle it to exemption from the imposition of local franchise
taxes. Consequently, we hold that petitioner is liable to pay local franchise taxes in the
amount of P3,681,985.72 for the period covering the rst to the fourth quarter of 1999
and that it is not entitled to a refund of taxes paid by it for the period covering the rst to
the third quarter of 1998.
2. ID.; ID.; ID.; ID.; ID.; GRANT OF TAX EXEMPTION TO SMART AND GLOBE
DOES NOT IPSO FACTO APPLY TO PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
INC. — As in City of Davao, supra, petitioner presently argues that because Smart
Communications, Inc. (SMART) and Globe Telecom (GLOBE) under whose respective
franchises granted after the effectivity of the Local Government Code, are exempt from
franchise tax, it follows that petitioner is likewise exempt from the franchise tax sought to
be collected by the City of Bacolod, on the reasoning that the grant of tax exemption to
SMART and GLOBE ipso facto applies to PLDT, consistent with the "most-favored-
treatment" clause found in Section 23 of the Public Telecommunications Policy Act of the
Philippines (Rep. Act No. 7925). Again, there is nothing novel in petitioner's contention. In
rejecting PLDT's contention, this Court ruled in City of Davao as follows: The acceptance of
petitioner's theory would result in absurd consequences. To illustrate: In its franchise,
Globe is required to pay a franchise tax of only one and one-half percentum (1/2% [sic] ) of
all gross receipts from its transactions while Smart is required to pay a tax of three
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 percent (3%) on all gross receipts from business transacted. Petitioner's theory would
require that, to level the playing eld, any "advantage, favor, privilege, exemption, or
immunity" granted to Globe must be extended to all telecommunications companies,
including Smart. If, later, Congress again grants a franchise to another telecommunications
company imposing, say, one percent (1%) franchise tax, then all other telecommunications
franchises will have to be adjusted to "level the playing eld" so to speak. This could not
have been the intent of Congress in enacting Section 23 of Rep. Act 7925. Petitioner's
theory will leave the Government with the burden of having to keep track of all granted
telecommunications franchises, lest some companies be treated unequally. It is different if
Congress enacts a law speci cally granting uniform advantages, favor, privilege,
exemption or immunity to all telecommunications entities.
3. ID.; ID.; ID.; ID.; ID.; DOES NOT REFER TO TAX EXEMPTION BUT ONLY TO
EXEMPTION FROM CERTAIN REGULATIONS AND REQUIREMENTS IMPOSED BY THE
NATIONAL TELECOMMUNICATIONS COMMISSION. — On PLDT's motion for
reconsideration in City of Davao, the Court added in its en banc Resolution of March 25,
2003, that even as it is a state policy to promote a level playing eld in the
communications industry, Section 23 of Rep. Act No. 7925 does not refer to tax exemption
but only to exemption from certain regulations and requirements imposed by the National
Telecommunications Commission: . . . . The records of Congress are bereft of any
discussion or even mention of tax exemption. To the contrary, what the Chairman of the
Committee on Transportation, Rep. Jerome V. Paras, mentioned in his sponsorship of H.B.
No. 14028, which became R.A. No. 7925, were 'equal access clauses' in interconnection
agreements, not tax exemptions. He said: There is also a need to promote a level playing
eld in the telecommunications industry. New entities must be granted protection against
dominant carriers through the encouragement of equitable access charges and equal
access clauses in interconnection agreements and the strict policing of predatory pricing
by dominant carriers. Equal access should be granted to all operators connecting into the
interexchange network. There should be no discrimination against any carrier in terms of
priorities and/or quality of services. Nor does the term 'exemption' in §23 of R.A. No.
7925 mean tax exemption. The term refers to exemption from certain regulations and
requirements imposed by the National Telecommunications Commission (NTC). For
instance, R.A. No. 7925, §17 provides: 'The Commission shall exempt any speci c
telecommunications service from its rate or tariff regulations if the service has su cient
competition to ensure fair and reasonable rates or tariffs.' Another exemption granted by
the law in line with its policy of deregulation is the exemption from the requirement of
securing permits from the NTC every time a telecommunications company imports
equipment.
4. ID.; ID.; ID.; ID.; ID.; RULE THAT TAX EXEMPTION SHOULD BE APPLIED IN
STRICTISSIMI JURIS AGAINST THE TAXPAYER AND LIBERALLY IN FAVOR OF THE
GOVERNMENT APPLIES EQUALLY TO TAX EXCLUSIONS; TAX EXEMPTION
DISTINGUISHED FROM TAX EXCLUSION. — In the same en banc Resolution, the Court even
rejected PLDT's contention that the "in-lieu-of-all-taxes" clause does not refer to "tax
exemption" but to "tax exclusion" and hence, the strictissimi juris rule does not apply,
explaining that these two terms actually mean the same thing, such that the rule that tax
exemption should be applied in strictissimi juris against the taxpayer and liberally in favor
of the government applies equally to tax exclusions. Thus: Indeed, both in their nature and
in their effect there is no difference between tax exemption and tax exclusion. Exemption is
an immunity or privilege; it is freedom from a charge or burden to which others are
subjected. Exclusion, on the other hand, is the removal of otherwise taxable items from the
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 reach of taxation, e.g., exclusions from gross income and allowable deductions. Exclusion
is thus also an immunity or privilege which frees a taxpayer from a charge to which others
are subjected. Consequently, the rule that tax exemption should be applied in strictissimi
juris against the taxpayer and liberally in favor of the government applies equally to tax
exclusions. To construe otherwise the 'in lieu of all taxes' provision invoked is to be
inconsistent with the theory that R.A. No. 7925, §23 grants tax exemption because of a
similar grant to Globe and Smart.
5. ID.; ID.; ID.; ID.; ID.; THE BUREAU OF LOCAL GOVERNMENT FINANCE IS NOT
AN ADMINISTRATIVE AGENCY WHOSE FINDINGS OF FACT ARE GIVEN WEIGHT AND
DEFERENCE IN COURTS. — PLDT likewise argued in said case that the RTC at Davao City
erred in not giving weight to the ruling of the BLGF which, according to petitioner, is an
administrative agency with technical expertise and mastery over the specialized matters
assigned to it. But then again, we held in Davao: To be sure, the BLGF is not an
administrative agency whose ndings on questions of fact are given weight and deference
in the courts. The authorities cited by petitioner pertain to the Court of Tax Appeals, a
highly specialized court which performs judicial functions as it was created for the review
of tax cases. In contrast, the BLGF was created merely to provide consultative services
and technical assistance to local governments and the general public on local taxation, real
property assessment, and other related matters, among others. The question raised by
petitioner is a legal question, to wit, the interpretation of §23 of R.A. No. 7925. There is,
therefore, no basis for claiming expertise for the BLGF that administrative agencies are
said to possess in their respective fields.

DECISION

GARCIA , J : p

In this appeal by way of a petition for review on certiorari under Rule 45 of the Rules
of Court, petitioner Philippine Long Distance Telephone Company (PLDT), seeks the
reversal and setting aside of the July 23, 2001 decision 1 of the Regional Trial Court at
Bacolod City, Branch 42, dismissing its petition in Civil Case No. 99-10786, an action to
declare petitioner as exempt from the payment of franchise and business taxes sought to
be imposed and collected by the respondent City of Bacolod.
The material facts are not at all disputed:
PLDT is a holder of a legislative franchise under Act No. 3436, as amended, to
render local and international telecommunications services. On August 24, 1991, the terms
and conditions of its franchise were consolidated under Republic Act No. 7082, 2 Section
12 of which embodies the so-called "in-lieu-of-all-taxes" clause, whereunder PLDT shall pay
a franchise tax equivalent to three percent (3%) of all its gross receipts, which franchise tax
shall be "in lieu of all taxes". More specifically, the provision pertinently reads:
SEC. 12. . . . In addition thereto, the grantee, its successors or assigns
shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of
the telephone or other telecommunications businesses transacted under this
franchise by the grantee, its successors or assigns, and the said percentage shall
be in lieu of all taxes on this franchise or earnings thereof. . . . (Italics ours).

Meanwhile, or on January 1, 1992, Republic Act No. 7160, otherwise known as the
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 Local Government Code, took effect. Section 137 of the Code, in relation to Section 151
thereof, grants cities and other local government units the power to impose local franchise
tax on businesses enjoying a franchise, thus:
SEC. 137. Franchise Tax . — Notwithstanding any exemption granted
by any law or other special law, the province may impose a tax on businesses
enjoying a franchise, at a rate not exceeding fty percent (50%) of one percent
(1%) of the gross annual receipts for the preceding calendar year based on the
incoming receipt, or realized, within its territorial jurisdiction.

xxx xxx xxx

SEC. 151. Scope of Taxing Powers . — Except as otherwise provided in
this Code, the city, may levy the taxes, fees, and charges which the province or
municipality may impose: Provided, however, That the taxes, fees, and charges
levied and collected by highly urbanized and independent component cities shall
accrue to them and distributed in accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fty percent (50%)
except the rates of professional and amusement taxes.

By Section 193 of the same Code, all tax exemption privileges then enjoyed by all
persons, whether natural or juridical, save those expressly mentioned therein, were
withdrawn, necessarily including those taxes from which PLDT is exempted under the "in-
lieu-of-all-taxes" clause in its charter. We quote Section 193:
SEC. 193. Withdrawal of Tax Exemption Privileges . — Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including government-owned
or controlled corporations, except local water districts, cooperatives duly
registered under R.A. 6938, non-stock and non-pro t hospitals and educational
institutions, are hereby withdrawn upon the effectivity of this Code.

Aiming to level the playing eld among telecommunication companies, Congress

enacted Republic Act No. 7925, otherwise known as the Public Telecommunications Policy
Act of the Philippines, which took effect on March 16, 1995. To achieve the legislative
intent, Section 23 thereof, also known as the "most-favored-treatment" clause, provides for
an equality of treatment in the telecommunications industry, thus:
SEC. 23. Equality of Treatment in the Telecommunications 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 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 the service authorized by the franchise.

In August 1995, the City of Bacolod, invoking its authority under Section 137, in
relation to Section 151 and Section 193, supra, of the Local Government Code, made an
assessment on PLDT for the payment of franchise tax due the City.
Complying therewith, PLDT began paying the City franchise tax from the year 1994
until the third quarter of 1998, at which time the total franchise tax it had paid the City
already amounted to P2,770, 696.37. aTcSID

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 On June 2, 1998, the Department of Finance through its Bureau of Local Government
Finance (BLGF), issued a ruling to the effect that as of March 16, 1995, the effectivity date
of the Public Telecommunications Policy Act of the Philippines (Rep. Act. No. 7925), PLDT,
among other telecommunication companies, became exempt from local franchise tax.
Pertinently, the BLGF ruling reads:
It appears that RA 7082 further amending ACT No. 3436 which granted to
PLDT a franchise to install, operate and maintain a telephone system throughout
the Philippine Islands was approved on August 3, 1991. Section 12 of said
franchise, likewise, contains the 'in lieu of all taxes' proviso.

In this connection, Section 23 of RA 7925, quoted hereunder, which was

approved on March 1, 1995 provides for the equality of treatment in the
telecommunications industry:
xxx xxx xxx

On the basis of the aforequoted Section 23 of RA 7925, PLDT as a

telecommunications franchise holder becomes automatically covered by the tax
exemption provisions of RA 7925, which took effect on March 16, 1995.

Accordingly, PLDT shall be exempt from the payment of franchise and

business taxes imposable by LGUs under Sections 137 and 143, respectively, of
the LGC [Local Government Code], upon the effectivity of RA 7925 on March 16,
1995. However, PLDT 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 PLDT was not enjoying the 'most favored clause' proviso of RA
7025 [sic]. 3

Invoking the aforequoted ruling, PLDT then stopped paying local franchise and
business taxes to Bacolod City starting the fourth quarter of 1998.
The controversy came to a head-on when, sometime in 1999, PLDT applied for the
issuance of a Mayor's Permit but the City of Bacolod withheld issuance thereof pending
PLDT's payment of its franchise tax liability in the following amounts: (1) P358,258.30 for
the fourth quarter of 1998; and (b) P1,424,578.10 for the year 1999, all in the aggregate
amount of P1,782,836.40, excluding surcharges and interest, about which PLDT was duly
informed by the City Treasurer via a 5th Indorsement dated March 16, 1999 for PLDT's
"appropriate action". 4
In time, PLDT led a protest 5 with the O ce of the City Legal O cer, questioning
the assessment and at the same time asking for a refund of the local franchise taxes it
paid in 1997 until the third quarter of 1998.
In a reply-letter dated March 26, 1999, 6 City Legal O cer Antonio G. Laczi denied
the protest and ordered PLDT to pay the questioned assessment.
Hence, on May 14, 1999, in the Regional Trial Court at Bacolod City, PLDT led its
petition 7 in Civil Case No. 99-10786 , therein praying for a judgment declaring it as exempt
from the payment of local franchise and business taxes; ordering the respondent City to
henceforth cease and desist from assessing and collecting said taxes; directing the City to
issue the Mayor's Permit for the year 1999; and requiring it to refund the amount of
P2,770,606.37, allegedly representing overpaid franchise taxes for the years 1997 and
1998 with interest until fully paid.

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 In time, the respondent City led its Answer/Comment to the petition, 8 basically
maintaining that Section 137 of the Local Government Code remains as the operative law
despite the enactment of the Public Telecommunications Policy Act of the Philippines
(Rep. Act No. 7925), and accordingly prayed for the dismissal of the petition.
In the ensuing pre-trial conference, the parties manifested that they would not
present any testimonial evidence, and merely requested for time to le their respective
memoranda, to which the trial court acceded.
Eventually, in the herein assailed decision dated July 23, 2001, 9 the trial court
dismissed PLDT's petition, thus:
WHEREFORE, premises considered, the petition should be, as it is hereby
DISMISSED. No costs.
SO ORDERED.

Therefrom, PLDT came to this Court via the present recourse, imputing the following
errors on the part of the trial court:
5.01.a. THE LOWER COURT ERRED IN SUSTAINING RESPONDENTS'
POSITION THAT SECTION 137 OF THE LOCAL GOVERNMENT CODE, WHICH, IN
RELATION TO SECTION 151 THEREOF, ALLOWS RESPONDENT CITY TO IMPOSE
THE FRANCHISE TAX, IS APPLICABLE IN THIS CASE.
5.01.b. THE LOWER COURT ERRED IN NOT HOLDING THAT UNDER
PETITIONER'S FRANCHISE (REPUBLIC ACT NO. 7082), AS AMENDED AND
EXPANDED BY SECTION 23 OF REPUBLIC ACT NO. 7925 (PUBLIC
TELECOMMUNICATIONS POLICY ACT), TAKING INTO ACCOUNT THE
FRANCHISES OF GLOBE TELECOM, INC., (GLOBE) (REPUBLIC ACT NO. 7229)
AND SMART COMMUNICATIONS, INC. (SMART) (REPUBLIC ACT NO. 7294),
WHICH WERE ENACTED SUBSEQUENT TO THE LOCAL GOVERNMENT CODE, NO
FRANCHISE TAXES MAY BE IMPOSED ON PETITIONER BY RESPONDENT CITY.

5.01.c. THE LOWER COURT ERRED IN NOT GIVING WEIGHT TO THE RULING
OF THE DEPARTMENT OF FINANCE, THROUGH ITS BUREAU OF LOCAL
GOVERNMENT FINANCE, THAT PETITIONER IS EXEMPT FROM THE PAYMENT
OF FRANCHISE AND BUSINESS TAXES IMPOSABLE BY LOCAL GOVERNMENT
UNITS UNDER THE LOCAL GOVERNMENT CODE.
5.01.d. THE LOWER COURT ERRED IN DISMISSING THE PETITION BELOW.

As we see it, the only question which commends itself for our resolution is, whether
or not Section 23 of Rep. Act No. 7925, also called the "most-favored-treatment" clause,
operates to exempt petitioner PLDT from the payment of franchise tax imposed by the
respondent City of Bacolod.
Contrary to petitioner's claim, the issue thus posed is not one of " rst impression"
insofar as this Court is concerned. For sure, this is not the rst time for petitioner PLDT to
invoke the jurisdiction of this Court on the same question, albeit involving another city.
In PLDT vs. City of Davao, 1 0 this Court has had the occasion to interpret Section 23
of Rep. Act No. 7925. There, we ruled that Section 23 does not operate to exempt PLDT
from the payment of franchise tax imposed upon it by the City of Davao:
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 In sum, it does not appear that, in approving §23 of R.A. No. 7925,
Congress intended it to operate as a blanket tax exemption to all
telecommunications entities. Applying the rule of strict construction of laws
granting tax exemptions and the rule that doubts should be resolved in favor of
municipal corporations in interpreting statutory provisions on municipal taxing
powers, we hold that §23 of R.A. No. 7925 cannot be considered as having
amended petitioner's franchise so as to entitle it to exemption from the imposition
of local franchise taxes. Consequently, we hold that petitioner is liable to pay
local franchise taxes in the amount of P3,681,985.72 for the period covering the
rst to the fourth quarter of 1999 and that it is not entitled to a refund of taxes
paid by it for the period covering the first to the third quarter of 1998. 1 1

Explains this Court in the same case:

To begin with, tax exemptions are highly disfavored. The reason for this
was explained by this Court in Asiatic Petroleum Co. v. Llanes , in which it was
held:

. . . Exemptions from taxation are highly disfavored, so much so that they

may almost be said to be odious to the law. He who claims an exemption must be
able to point to some positive provision of law creating the right . . . As was said
by the Supreme Court of Tennessee in Memphis vs. U. & P. Bank (91 Tenn., 546,
550), 'The right of taxation is inherent in the State. It is a prerogative essential to
the perpetuity of the government; and he who claims an exemption from the
common burden must justify his claim by the clearest grant of organic or statute
law.' Other utterances equally or more emphatic come readily to hand from the
highest authority. In Ohio Life Ins. and Trust Co. vs. Debolt (16 Howard, 416), it
was said by Chief Justice Taney, that the right of taxation will not be held to have
been surrendered, 'unless the intention to surrender is manifested by words too
plain to be mistaken.' In the case of the Delaware Railroad Tax (18 Wallace, 206,
226), the Supreme Court of the United States said that the surrender, when
claimed, must be shown by clear, unambiguous language, which will admit of no
reasonable construction consistent with the reservation of the power. If a doubt
arises as to the intent of the legislature, that doubt must be solved in favor of the
State. In Erie Railway Company vs. Commonwealth of Pennsylvania (21 Wallace,
492, 499), Mr. Justice Hunt, speaking of exemptions, observed that a State cannot
strip itself of the most essential power of taxation by doubtful words. 'It cannot,
by ambiguous language, be deprived of this highest attribute of sovereignty.' In
Tennessee vs. Whitworth (117 U.S., 129, 136), it was said: 'In all cases of this kind
the question is as to the intent of the legislature, the presumption always being
against any surrender of the taxing power.' In Farrington vs. Tennessee and
County of Shelby (95 U.S., 379, 686), Mr. Justice Swayne said: '. . . When
exemption is claimed, it must be shown indubitably to exist. At the outset, every
presumption is against it. A well-founded doubt is fatal to the claim. It is only
when the terms of the concession are too explicit to admit fairly of any other
construction that the proposition can be supported.'
The tax exemption must be expressed in the statute in clear language that
leaves no doubt of the intention of the legislature to grant such exemption. And,
even if it is granted, the exemption must be interpreted in strictissimi juris against
the taxpayer and liberally in favor of the taxing authority.
xxx xxx xxx
The fact is that the term 'exemption' in §23 is too general. A cardinal rule in
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 statutory construction is that legislative intent must be ascertained from a
consideration of the statute as a whole and not merely of a particular provision.
For, taken in the abstract, a word or phrase might easily convey a meaning which
is different from the one actually intended. A general provision may actually have
a limited application if read together with other provisions. Hence, a consideration
of the law itself in its entirety and the proceedings of both Houses of Congress is
in order.

xxx xxx xxx

R.A. No. 7925 is thus a legislative enactment designed to set the national
policy on telecommunications and provide the structures to implement it to keep
up with the technological advances in the industry and the needs of the public.
The thrust of the law is to promote gradually the deregulation of the entry, pricing,
and operations of all public telecommunications entities and thus promote a level
playing eld in the telecommunications industry. There is nothing in the language
of §23 nor in the proceedings of both the House of Representatives and the
Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of
tax exemptions to all telecommunications entities, including those whose
exemptions had been withdrawn by the LGC. CTEDSI

What this Court said in Asiatic Petroleum Co. v. Llanes applies mutatis
mutandis to this case: 'When exemption is claimed, it must be shown indubitably
to exist. At the outset, every presumption is against it. A well-founded doubt is
fatal to the claim. It is only when the terms of the concession are too explicit to
admit fairly of any other construction that the proposition can be supported.' In
this case, the word 'exemption' in §23 of R.A. No. 7925 could contemplate
exemption from certain regulatory or reporting requirements, bearing in mind the
policy of the law. It is noteworthy that, in holding Smart and Globe exempt from
local taxes, the BLGF did not base its opinion on §23 but on the fact that the
franchises granted to them after the effectivity of the LGC exempted them from
the payment of local franchise and business taxes.

As in City of Davao, supra, petitioner presently argues that because Smart

Communications, Inc. (SMART) and Globe Telecom (GLOBE) under whose respective
franchises granted after the effectivity of the Local Government Code, are exempt from
franchise tax, it follows that petitioner is likewise exempt from the franchise tax sought to
be collected by the City of Bacolod, on the reasoning that the grant of tax exemption to
SMART and GLOBE ipso facto applies to PLDT, consistent with the "most-favored-
treatment" clause found in Section 23 of the Public Telecommunications Policy Act of the
Philippines (Rep. Act No. 7925).
Again, there is nothing novel in petitioner's contention. In fact, this Court in City of
Davao, even adverted to PLDT's argument therein, thus:
Finally, it [PLDT] argues that because Smart and Globe are exempt from
the franchise tax, it follows that it must likewise be exempt from the tax being
collected by the City of Davao because the grant of tax exemption to Smart and
Globe ipso facto extended the same exemption to it.

In rejecting PLDT's contention, this Court ruled in City of Davao as follows:

The acceptance of petitioner's theory would result in absurd
consequences. To illustrate: In its franchise, Globe is required to pay a franchise
tax of only one and one-half percentum (1/2% [sic]) of all gross receipts from its
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 transactions while Smart is required to pay a tax of three percent (3%) on all gross
receipts from business transacted. Petitioner's theory would require that, to level
the playing field, any "advantage, favor, privilege, exemption, or immunity" granted
to Globe must be extended to all telecommunications companies, including
Smart. If, later, Congress again grants a franchise to another telecommunications
company imposing, say, one percent (1%) franchise tax, then all other
telecommunications franchises will have to be adjusted to "level the playing eld"
so to speak. This could not have been the intent of Congress in enacting Section
23 of Rep. Act 7925. Petitioner's theory will leave the Government with the burden
of having to keep track of all granted telecommunications franchises, lest some
companies be treated unequally. It is different if Congress enacts a law
speci cally granting uniform advantages, favor, privilege, exemption or immunity
to all telecommunications entities.

On PLDT's motion for reconsideration in Davao, the Court added in its en banc
Resolution of March 25, 2003, 1 2 that even as it is a state policy to promote a level playing
eld in the communications industry, Section 23 of Rep. Act No. 7925 does not refer to tax
exemption but only to exemption from certain regulations and requirements imposed by
the National Telecommunications Commission:
. . . . The records of Congress are bereft of any discussion or even mention
of tax exemption. To the contrary, what the Chairman of the Committee on
Transportation, Rep. Jerome V. Paras, mentioned in his sponsorship of H.B. No.
14028, which became R.A. No. 7925, were 'equal access clauses' in
interconnection agreements, not tax exemptions. He said:

There is also a need to promote a level playing eld in the

telecommunications industry. New entities must be granted protection against
dominant carriers through the encouragement of equitable access charges and
equal access clauses in interconnection agreements and the strict policing of
predatory pricing by dominant carriers. Equal access should be granted to all
operators connecting into the interexchange network. There should be no
discrimination against any carrier in terms of priorities and/or quality of services.
Nor does the term 'exemption' in §23 of R.A. No. 7925 mean tax
exemption. The term refers to exemption from certain regulations and
requirements imposed by the National Telecommunications Commission (NTC).
For instance, R.A. No. 7925, §17 provides: 'The Commission shall exempt any
speci c telecommunications service from its rate or tariff regulations if the
service has su cient competition to ensure fair and reasonable rates or tariffs.'
Another exemption granted by the law in line with its policy of deregulation is the
exemption from the requirement of securing permits from the NTC every time a
telecommunications company imports equipment. 1 3

In the same en banc Resolution, the Court even rejected PLDT's contention that the
"in-lieu-of-all-taxes" clause does not refer to "tax exemption" but to "tax exclusion" and
hence, the strictissimi juris rule does not apply, explaining that these two terms actually
mean the same thing, such that the rule that tax exemption should be applied in strictissimi
juris against the taxpayer and liberally in favor of the government applies equally to tax
exclusions. Thus:
Indeed, both in their nature and in their effect there is no difference
between tax exemption and tax exclusion. Exemption is an immunity or privilege;
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 it is freedom from a charge or burden to which others are subjected. Exclusion, on
the other hand, is the removal of otherwise taxable items from the reach of
taxation, e.g., exclusions from gross income and allowable deductions. Exclusion
is thus also an immunity or privilege which frees a taxpayer from a charge to
which others are subjected. Consequently, the rule that tax exemption should be
applied in strictissimi juris against the taxpayer and liberally in favor of the
government applies equally to tax exclusions. To construe otherwise the 'in lieu of
all taxes' provision invoked is to be inconsistent with the theory that R.A. No.
7925, §23 grants tax exemption because of a similar grant to Globe and Smart.
14

PLDT likewise argued in said case that the RTC at Davao City erred in not giving
weight to the ruling of the BLGF which, according to petitioner, is an administrative agency
with technical expertise and mastery over the specialized matters assigned to it. But then
again, we held in Davao:
To be sure, the BLGF is not an administrative agency whose ndings on
questions of fact are given weight and deference in the courts. The authorities
cited by petitioner pertain to the Court of Tax Appeals, a highly specialized court
which performs judicial functions as it was created for the review of tax cases. In
contrast, the BLGF was created merely to provide consultative services and
technical assistance to local governments and the general public on local
taxation, real property assessment, and other related matters, among others. The
question raised by petitioner is a legal question, to wit, the interpretation of §23 of
R.A. No. 7925. There is, therefore, no basis for claiming expertise for the BLGF
that administrative agencies are said to possess in their respective fields. 1 5

We note, quite interestingly, that apart from the particular local government unit
involved in the earlier case of PLDT vs. Davao, the arguments presently advanced by
petitioner on the issue herein posed are but a mere reiteration if not repetition of the very
same arguments it has already raised in Davao. For sure, the errors presently assigned are
substantially the same as those in Davao, all of which have been adequately addressed and
passed upon by this Court in its decision therein as well as in its en banc resolution in that
case.
WHEREFORE, the instant petition is DENIED and the assailed decision dated July 23,
2001 of the lower court AFFIRMED.
Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona and Carpio Morales, JJ., concur.
Panganiban, J., took no part. Former counsel of a party.

Footnotes

1. Rollo, pp. 110-116.

2. An Act Further Amending Act No. 3436, as amended, ". . . Consolidating the Terms and
Conditions of the Franchise Granted to the [PLDT], And Extending the Said Franchise by
Twenty-Five (25) Years from the Expiration Thereof . . .".
3. Rollo, p. 80.
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 4. Rollo, p. 85.
5. Rollo, pp. 86-88.
6. Rollo, pp. 89-90.
7. Rollo, pp. 67-71.
8. Rollo, pp. 94-108.
9. Rollo, pp. 110-116.
10. G.R. No. 143867; 415 Phil. 769 [2001].
11. Id., p. 780.
12. 447 Phil. 571 [2003].
13. Id., pp. 580-581.
14. Id., p. 584.
15. Supra, pp. 779-780.

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