Thursday, August 25, 2011

ABS CBN TAX EVASION CASE: Kapamilya has P1 Billion UNPAID TAXES says QC Govt

Manila Standard Today:

THE Quezon City government on Monday said it was moving ahead to collect over P1 billion in unpaid business taxes owed by the ABS-CBN network.

“We are just trying to get back the correct taxes ABS-CBN must pay the city government,” City Treasurer Edgar Villanueva said. He referred to the Supreme Court’s October 2008 ruling favoring City Hall.

ABS-CBN has religiously paid its franchise tax, equivalent to 0.57 percent of 1 percent of its annual gross receipts, but not the local business tax of 0.57 percent of 2 percent of the annual gross receipts that the Quezon City government has/imposd.

The amount has ballooned to over P1 billion since 2006.

Earlier, the Quezon City government moved to collect about P823 million in similar back taxes from GMA Network.

Phil Star: Supreme Court’s October 2008 Ruling

ABS-CBN Broadcasting Corp. will ask the Supreme Court to reconsider its recent decision declaring that the company is not exempt from the payment of local franchise taxes.

In a statement, the company said the SC ruling refers to local franchise taxes already paid under protest for the years 1995 to 1997. “Subsequent to 1997, ABS-CBN has continued to pay the prescribed local franchise taxes yearly, albeit under protest. Given this, the said ruling will not have any impact on ABS-CBN’s financial results,” it pointed out.

In an Oct. 6 decision penned by Associate Justice Ruben Reyes, the SC Third Division reversed the ruling of the Court of Appeals and the Regional Trial Court ordering the refund and declaring invalid the imposition and collection of local franchise tax by the City Treasurer of Quezon City on ABS-CBN.

ABS-CBN has argued that under its legislative franchise granted on May 3, 1995 to install and operate radio and television broadcasting stations in the Philippines and embodied in Republic Act 7966, its franchise tax of three percent of gross receipts shall be lieu of all taxes on this franchise or earnings thereof, excluding income taxes.

According to the company, it is not liable to pay the local franchise tax imposed by Quezon City. Consequently, ABS-CBN paid the said taxes under protest and filed a claim for refund.

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For failure to obtain any response from the city treasurer, ABS-CBN filed a complaint before the RTC in Quezon City seeking nullify the imposition of the local franchise tax for being unconstitutional and for the refund of local franchise tax amounting to P19.9 million.

The RTC declared as invalid the said imposition and ordered a refund. According to the lower court, the “in lieu of all taxes” provision contained in Section 8 of R.A. 7966 absolutely excused ABS-CBN from the payment of local franchise tax. The QC government then appealed to the Court of Appeals, which, however, dismissed said petition.

However, the SC ruled that said “in lieu of all taxes” in its franchise does not exempt ABS-CBN from payment of local franchise taxes.

It noted that the power of the QC local government to impose franchise tax is based on the Local Government Code. Such taxing power by the local government, however, is limited in the sense that Congress can enact legislation granting exemptions.

But according to the High Court, the “in lieu of all taxes” provision in the franchise of ABS-CBN does not expressly provide what kind of taxes ABS-CBN is exempted from. “It is not clear whether the exemption would include both local, whether municipal, city or provincial, and national tax. What is clear is that ABS-CBN shall be liable to pay three percent franchise tax and income taxes. But whether the “in lieu of all taxes provision” would include exemption from local tax is not unequivocal,” it said.

The SC emphasized that the right to exemption from local franchise tax must be clearly established and cannot be made out of inference or implications but must be laid beyond reasonable doubt.


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Information Courtesy of Manila Standard and Phil Star

http://www.manilastandardtoday.com/insideNews.htm?f=2011/august/23/news7.isx&d=2011/august/23
and
http://www.philstar.com/article.aspx?articleid=406271

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