Friday, September 27, 2002
Veco bound to pay franchise tax: Seno
By Rose O. Verzosa
CITY Legal Officer Malcolm Seno insisted that the Visayan Electric Co. (Veco) pay franchise taxes to the Mandaue City Government.
Instead of resisting the City’s power to impose franchise taxes, Seno urged Veco to endorse the signing of a memorandum of agreement.
“Your reading and interpretation of Section 23 is, understandably, strained and biased to suit the interest of your client. The intention of the City Council in enacting Ordinance 90/033 is to collect and levy a franchise tax on all business operated under a franchise doing business within its territorial boundaries,” Seno said in his Sept. 24 letter to Veco chief legal counsel Loreto Durano.
Seno came up with the opinion after Veco paid “under protest” nearly P6.76 million in franchise taxes for 2000.
Durano said Veco is not bound to pay local franchise taxes, as stated in the city ordinance, because it is only applicable to newly started businesses operating under a congressional franchise.
Veco claimed it is only liable for rates enumerated under Section 23 (a-1), a provision for franchise granted under special laws, which ranges only from P103-P115 for the period covering 1991 to 1995.
But Seno said the applicable provision should have been Section 23 (a-2), which imposes a franchise tax of half of the one percent on gross receipts.
“Although we admit that the provision, as worded, creates a degree of difficulty of comprehending, nonetheless, it does not create an absurdity resulting in the relinquishment of an essential power,” said Seno.
He also reminded Veco that the local government unit’s power to impose local franchise taxes was already affirmed by the Supreme Court.
There had been negotiations about offsetting Veco’s franchise taxes from the City’s unpaid electric bills but, so far, no agreement had been decided on.
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