PECO refutes Iloilo order on refund of franchise tax

We write in behalf of our client, Panay Electric Co. Inc. (PECO), in connection with your online article “Iloilo City seeks refund of P51-M franchise tax from PECO” which was published in www.philstar.com on June 27, 2021.

It is untrue that the Iloilo City government is seeking a refund of franchise tax paid to PECO. The truth of the matter is that Iloilo City is seeking to assess and collect a franchise tax, the propriety of which is still subject of a court case with RTC Iloilo.

There is a court case with RTC Iloilo because PECO filed a Petition for Declaratory Relief to seek a declaration from the court as to its duty and/or liability to pay franchise tax vis-a-vis the Iloilo City government’s right to impose the same – given the fact that PECO no longer holds any franchise from which a franchise tax can be based.

While the Treasurer’s office is demanding that PECO pay franchise tax, the Mayor’s office canceled and revoked the business permit of PECO on the basis that the city records do not show that PECO holds a legislative franchise. PECO was thus placed in a quandary since on one hand, the Mayor’s office is saying that PECO has no franchise and on the other, the Treasurer’s office is seeking to hold PECO liable for franchise tax. With this, PECO filed a Petition for Declaratory Relief with RTC Iloilo where the case remains pending.

PECO could not be accused of delay in the payment of the franchise tax since the propriety of such assessment is still being litigated with RTC Iloilo. Notably, RTC Iloilo issued a writ of preliminary injunction to enjoin the City from proceeding with the scheduled auction sale intended to collect franchise tax.

Despite the expiration of its franchise in Jan. 2019, PECO continued to operate the distribution facilities in line with the franchise law for 13 months or until Feb 2020.

The 2019 franchise tax and that of the first quarter of 2020 were fully paid to the City, promptly and even in advance during the quarters when it was due.

PECO could not be held liable for syndicated estafa or any crime for that matter on account of the issue involving the franchise tax.

First, the issue of propriety of the imposition of the franchise tax against PECO is still pending with RTC Iloilo. Pending such resolution, PECO could not be accused of non-payment or non-remittance. In fact, RTC Iloilo even issued a writ of preliminary injunction to enjoin the parties to await the resolution of the case.

Second, there is nothing to remit to the City as PECO is not collecting on behalf of the City. The City had already been paid the franchise tax and the franchise tax fees indicated in the monthly electric bills are monies owed to PECO due to its advance payment of the franchise tax.

Third, PECO already paid the 2019 franchise tax and the first quarter 2020 franchise tax. For the succeeding quarters of 2020, PECO was no longer operating the distribution facilities and the Mayor’s office has already canceled its business permit, making it impossible for PECO to operate and collect payments.

We trust that we have made our position on the matter clear and that you will accordingly publish the clarification of our client on the matters raised by the Iloilo City government for purposes of fair and responsible journalism. Thank you for your attention to this matter.

Very truly yours,

DivinaLaw