Court orders Digitel to pay real estate tax

MANILA, Philippines - The Court of Appeals took the side of a regional trial court (RTC) in Batangas which ordered Digital Telecommunications Philippines, Inc. (Digitel) to pay real estate taxes to the city government. In a December 11 decision, the appellate court rejected the Gokongwei-led telco's petition for review on two 2002 orders from the Batangas RTC. The orders declared that under its legislative franchise, Digitel is not exempt from paying property taxes. The court said Digitel should pay the Batangas city government P4.62 million in real estate taxes, as well as its corresponding interests and charges. Digitel said, however, that it should be exempted from paying the tax based on opinions issued by the Office the President in March 1996 and by the Bureau of Local Government Finance. According to the BLGF, “the real properties of Digitel, which are used in the operation of its franchise are found to be exempt from the payment of real property taxes beginning January 1, 1993. However, all other properties of that company not used in connection with the operation of its franchise shall remain taxable." Digitel likewise said its exemption from realty tax is based on Section 5 of RA 7678 which states that “the grantee shall be liable to pay the same taxes on its real estate, buildings, and personal property exclusive of this franchise as other persons or corporations are now or hereafter may be required by law to pay." The telco argued that this means its real properties used in its telecommunications business shall not be subject to realty tax. It also interprets the same phrase to mean that the term “personal property" shall not include its franchise, which is an intangible property. The court, however, found no merit in Digitel's petition, saying that the phrase “personal property exclusive of franchise" merely meant “personal property" does not include the franchise even if the franchise is an intangible property. “We rule that the phrase “exclusive of this franchise" simply means that (Digitel’s) franchise shall not be subject to the taxes imposed in the first sentence of Section 5. The first sentence lists the properties that are subject to taxes, and the list excludes the franchise," the appellate court said. It added that the same provision is found in almost all legislative franchises given to telecommunication companies “Since 1995, no telecommunications company has claimed exemption from realty tax based on the phrase ‘exclusive of this franchise,’ until (Digitel) filed the present case in July 3, 1999," the Court of Appeals said. - GMANews.TV