By Joel M. Sy Egco

After winning its tax suit against television network ABS-CBN over a P22-million refund in franchise taxes paid, the Quezon City government is now going after telecommunications firms.

City Treasurer Dr. Victor Endriga said the Supreme Court?s recent ruling that denied the media giant?s petition with finality would now be used to compel other franchise holders to settle their dues.

?This [SC decision] is welcome. In fact, we have sent letters to Smart Communications, Globe, Sun and other firms to prepare an accounting of their income derived from Quezon City. We have given them one month to comply,? he told Standard Today.

?If they fail, there are a number of remedies that we can apply under the Local Government Code and the revenue code of the city.?

Endriga said the ABS-CBN case is instructive and beneficial to other localities as well.

?Franchise tax rates differ. The law allows us to collect 75 percent of 1 percent of gross income for cities and 50 percent of 1 percent of gross income for provincial governments. But in QC, we only collect 57 percent of 1 percent of gross income,? he said.

The SC ruling on Oct. 2, 2008 penned by Justice Ruben Reyes overturned the order of the Court of Appeals that directed city hall to refund to ABS-CBN the tax payments made under protest.

Following the city treasurer?s assessment of P22.6 million, ABS-CBN management sued the city government, asserting that it was exempted.

The network argued that under Sec. 8 of Republic Act 9766?granting a franchise to ABS-CBN?only 3 percent of all gross receipts from its transactions can be imposed ?in lieu of all taxes? on the franchise.

But the SC said the clause was no longer applicable.

?In sum, ABS-CBN?s claims for exemption must fail on twin grounds.

First, the ?in lieu of all taxes? clause in its franchise failed to specify the taxes the company is sought to be exempted from. Neither did it particularize the jurisdiction from which the taxing power is withheld. Second, the clause has become functus officio because as the law now stands, ABS-CBN is no longer subject to a franchise tax. It is now liable for VAT,? the decision noted.

On Dec. 15, 2008, the tribunal denied with finality the network?s motion for reconsideration.

But Endriga commended the company for dutifully paying its tax obligations while the case was pending in court.

?We have no problem with ABS-CBN. The SC decision?s impact on the network is that it can no longer refund the taxes it paid. I can say that the decision works best for other franchise holders that have refused to pay their assessed tax dues citing the same ?in lieu of all taxes? clause.?