Quezon City v. ABS-CBN Broadcasting Corporation, GR No. 166408 (Digested)

FACTS: Congress enacted RA 7966 in 1995, subsequent to the effectivity of the Local Government Code in 1992. Under it, respondent herein was granted the franchise to install and operate radio and television broadcasting stations. Likewise, section 8 thereof imposed on respondent the duty of paying 3% franchise tax, “in lieu of all taxes”. In view of said provision, respondent is of the opinion that that it is not liable to pay the local franchise tax imposed by petitioner local government unit in relation to the Local Government Code.

ISSUES:

(1)    Whether the “in lieu of all taxes” provision in RA 7966 exempt respondent from payment of local franchise tax.

(2)    Whether Congress can grant exemptions from local taxes imposed by local government units.

HELD:

(1)    No. Statutes granting tax exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. Here, the law failed to specify the taxing authority from whose jurisdiction the taxing power is withheld. In fine, respondent failed to justify its claim for exemption, by a grant “too plain to be mistaken”. Its claim for exemption from the local franchise tax must fail.

(2)    Yes. The grant of taxing powers to local government units under the Constitution and the Local Government Code does not affect the inherent power of Congress to grant exemptions.