Increasing The Franchise Tax Of The Philippine Long Distance Telephone Company From One Per Cent To Two Per Cent

Case Overview and Summary

Summary of Presidential Decree No. 1528

Increasing the Franchise Tax of the Philippine Long Distance Telephone Company (PLDT) from 1% to 2%

- Background:
• PLDT was granted a 50-year franchise in 1928 to install, operate and maintain a telephone system in the Philippines, with a 1% franchise tax on gross receipts. (Section 1)
• PLDT's franchise was extended for 25 years in 1970. (Section 1)
• The average franchise tax for telephone corporations and power companies is 2%. (Section 1)
• The government aims to rationalize taxes on private corporations. (Section 1)

- PLDT's Service Improvement and Expansion Program (Section 1):
• Install additional 225,000 telephones.
• Introduce 200,000 lines of electronic switching equipment and retire outmoded equipment.
• Introduce new systems for analysis and maintenance.
• Introduce new subscriber services, electronic PABXs, and subscriber equipment.
• Establish telephone service in 47 rural areas integrated into the PLDT nationwide system.
• Upgrade party line services and provide only main line services in electronic switching offices.
• Introduce subscriber metering service in electronic switching offices.
• Introduce Direct Distance Dialing for electronic switching subscribers and selected step-by-step office subscribers.
• Increase the capacity of the microwave backbone facility from 600 channels to 1200 channels and expand geographical coverage.
• Expand International and Domestic toll switching systems.
• Provide terrestrial link for all Domstat earth stations.
• Provide interconnection with 15 telephone companies and 100 toll stations.
• Provide automatic mobile telephone service.
• Replace outmoded toll facilities.
• Rehabilitate existing outside plant facilities.

- Provisions (Section 1):
• PLDT shall pay a franchise tax at the rate of 2% of all gross receipts of the telephone or other electrical transmission business transacted under its franchise, effective immediately upon the issuance of this Decree and up to the end of the 25-year extended term of its franchise under Republic Act No. 6146.
• Except for the change in the rate of franchise tax, PLDT shall be subject to the same terms and conditions as already provided for under existing laws.

- Repealing Clause (Section 2):
• Any provisions of laws, decrees, orders, rules and regulations inconsistent with this Decree are hereby repealed or modified accordingly.

- Effectivity (Section 3):
• This Decree shall take effect immediately.