Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City, Metro Manila

NINETEENTH CONGRESS
Third Regular Session

House Bill No. 10875

Introduced by Representatives AURELIO "DONG" D. GONZALES, JR,
and JOEY SARTE SALCEDA

AN ACT
INTRODUCING TAX PROVISIONS TO REPUBLIC ACT NO. 10182, OTHERWISE.
KNOWN AS “AN ACT GRANTING THE TELECOMMUNICATIONS
TECHNOLOGY SOLUTIONS, INC. A FRANCHISE TO CONSTRUCT, INSTALL,
ESTABLISH, OPERATE AND MAINTAIN TELECOMMUNICATIONS SYSTEMS
THROUGHOUT THE PHILIPPINES” PURSUANT TO THE EQUALITY CLAUSE,
AND FOR OTHER PURPOSES

EXPLANATORY NOTE

Section 18 of the Equality Clause of Republic Act No. 10182, or the franchise granted
to Telecommunications Technology Solutions, Inc., provides that:

Any advantage, favor, privilege, exemption or immunity granted under existing
‘franchise, 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 the 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.

Republic Act No. 10926, granting a franchise to Smart Communications, is the latest
telecommunications franchise enacted by the Congress on April 21, 2017. However, there is
dispute as to the applicability of the tax provisions of Republic Act No. 10926 on Republic Act
No. 10182, despite the equality clause.

‘The Supreme Court, in a similar question of applicability of tax exemption with respect
to the equality clause of franchises, stated in PLDT vs. City of Davao (2003) that “Tax


exemptions should be granted only by clear and unequivocal provision of law on the basis of
language too plain to be mistaken'.”

The Supreme Court expressly cited Rochester R. Co. v. Rochester, where:
“(T]he U.S. Supreme Court, after reviewing cases involving the effect of the
transfer to one company of the powers and privileges of another in conferring a
tax exemption possessed by the latter, held that a statute authorizing or directing
the grant or transfer of the "privileges" of a corporation which enjoys immunity
from taxation or regulation should not be interpreted as including that
immunity.”

It is clear however, in Article VI, Section 28(1) of the 1987 Constitution that the rule
of taxation shall be uniform and equitable. As such, Congress must be guided by the
jurisprudentially established principle that “all subjects or objects of taxation, similarly
situated, are to be treated alike.” Constrained by the general interpretation against mere
presumption in tax privileges, Congress must enforce the equality clause through amendatory
legislation expressly granting the tax provisions of its most recently enacted franchises to other
franchises of similar character and situation.

In view of the foregoing, the approval of this bill is urgently sought.

bof

AURELIO "DONG" D. GONZALES, JR,

.LCEDA

* Citing Afisco Ins. Corp. v. Court of Appeals, 302 SCRA 1 (1999).


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

NINETEENTH CONGRESS
Third Regular Session

House Bill No._10875

Introduced by Representatives AURELIO "DONG" D. GONZALES, JR,
and JOEY SARTE SALCEDA

AN ACT
INTRODUCING TAX PROVISIONS TO REPUBLIC ACT NO. 10182, OTHERWISE
KNOWN AS “AN ACT GRANTING THE TELECOMMUNICATIONS
TECHNOLOGY SOLUTIONS, INC. A FRANCHISE TO CONSTRUCT, INSTALL,
ESTABLISH, OPERATE AND MAINTAIN TELECOMMUNICATIONS SYSTEMS
THROUGHOUT THE PHILIPPINES” PURSUANT TO THE EQUALITY CLAUSE,
AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled:

SECTION 1. A new Section 15-A is hereby introduced after Section 15 and before
Section 16 of Republic Act No. 10182, to read as follows:

"Sec. 15-A. Tax Provisions. - The grantee, its successors or assignees,
shall be liable to pay the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or corporations which are
now or hereafter may be required by law to pay, except radio telecommunications
and electronic communications equipment, machinery and spare parts needed in
connection with the business of the grantee which shall be exempt from customs
duties, tariffs and other taxes, as well as those declared exempt in this section. In
addition thereto, the grantee, its successors or assignees, shall pay a value-added
tax om all gross receipts of the business transacted under this franchise by the
grantee, its successors or assignees, in the Philippines, in lieu of any and all taxes

of any kind, nature or description levied, established or collected by an authority


whatsoever including, but not limited to, city, municipal, provincial or national,
from which the grantee is hereby expressly exempted effective from the date of
the effectivity of this Act: Provided, That the grantee, its successors or assignees,
shall continue to be liable for income taxes payable under Title II of the National
Intemal Revenue Code pursuant to Section 2 of Executive Order No. 72 unless
the latter enactment is amended or repealed, in which case the amendment or
repeal shall be applicable thereto.

"The grantee shall file the return with and pay the tax due there onto the
Commissioner of Internal Revenue or his duly authorized representative in
accordance with the National Internal Revenue Code and the return shall be

subject to audit by the Bureau of Internal Revenue."

Section 2. Separability Clause. - If any provision or part hereof is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall remain
valid and subsisting.

Section 3. Repealing Clause, - Except as otherwise expressly provided in this Act, all
other laws, decrees, executive orders, proclamations and administrative regulations or parts

thereof inconsistent herewith are hereby repealed or modified accordingly.

Section 4. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
publication in at least two (2) national newspapers of general circulation.

Approved,