TRANSPO  CA: DENIED.
The permit fee is a condition for the grant of a provisional
[20] REPUBLIC v INTERNATIONAL COMMUNICATIONS CORP.
GR No. 141667 | July 17, 2006
Garcia, J.
akyar | Group 1
PETTITIONER: Republic of the Philippines, represented by the National
Telecommunications Commission (NTC)
RESPONDENT: International Communications Corp.
TOPIC: (as stated in the syllabus)
Power to set fees and charges
CASE SUMMARY: Respondent ICC, holder of a legislative franchise to operate
domestic telecommunications, filed with the NTC an application for a CPCN to install
and operate an international telecommunications leased circuit service between the
Philippines and other countries. The NTC approved the application on the condition
that ICC shall first pay a permit fee. ICC objected to the payment. The Court held that
while NTC had the authority to impose fees for regulatory purposes, it may not collect
from ICC because of RA 7925, which provides that the tax paid by a grantee of a
franchise shall be in lieu of all fees of any kind.
DOCTRINE: Section 40(g) of the Public Service Act is not a tax measure but a simple
regulatory provision for the collection of fees imposed pursuant to the exercise of the
States police power. A tax is imposed under the taxing power of government
principally for the purpose of raising revenues
FACTS:
 Respondent ICC, holder of a legislative franchise under Republic Act
(RA) No. 7633 to operate domestic telecommunications, filed with the
NTC an application for a CPCN to install, operate, and maintain an
international telecommunications leased circuit service between the
Philippines and other countries, and to charge rates therefor, with
provisional authority for the purpose.
 NTC approved the application on the condition that the applicant [ICC]
shall pay a permit fee in the amount of P1,190,750.00, in accordance with
section 40(g) of the Public Service Act, as amended;
 On MR, NTC: DENIED.
authority to operate an international circuit service.
 On MR, CA: GRANTED. The permit fee is NOT a condition for the grant
of provisional authority.
 Hence, the petition.
ISSUES and RULING: (Doctrine in bold letters)
 Whether the permit fee is a tax—NO.
 Whether the NTC exercised the power to tax—NO.
o Section 40(g) of the Public Service Act is not a tax measure but a
simple regulatory provision for the collection of fees imposed
pursuant to the exercise of the States police power. A tax is imposed
under the taxing power of government principally for the purpose
of raising revenues.
o The law in question, however, merely authorizes and requires the
collection of fees for the reimbursement of the Commission's
expenses in the authorization, supervision and/or regulation of
public services.
o There can be no doubt then that petitioner NTC is authorized to
collect such fees. However, the amount thereof must be reasonably
related to the cost of such supervision and/or regulation.
 Whether ICC can be made to pay the subject fee—NO.
o Independent of the above, there is one basic consideration for the
dismissal of this petition, about which petitioner NTC did not bother
to comment at all.
o ICC is entitled to the benefits of the so-called parity clause
embodied in Section 23 of R.A. No. 7925, to wit:
o Section 23. Equality of Treatment in the Telecommunications
Industry. - Any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted, shall
ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally
to the grantees of such franchises x x x.
o In this connection, it is significant to note that the
subsequent congressional franchise granted to the
Domestic Satellite Corporation under Presidential Decree
No. 947, states:
  Section 6. In consideration of the franchise and
rights hereby granted, the grantee shall pay to the
Republic of the Philippines during the life of this
franchise a tax of one-half percent of gross
earnings derived by the grantee from its operation
under this franchise and which originate from the
Philippines. Such tax shall be due and payable
annually within ten days after the audit and
approval of the accounts by the Commission on
Audit as prescribed in Section 11 hereof and shall
be in lieu of all taxes, assessments, charges, fees, or
levies of any kind, nature, or description levied,
established or collected by any municipal,
provincial, or national authority x x x (Emphasis
supplied)
o The above-quoted provision is, by law, considered as ipso
facto part of ICC's franchise due to the parity clause
embodied in Section 23 of R.A. No. 7925.
o Accordingly, respondent ICC cannot be made subject to
the payment of the subject fees because its payment of
the franchise tax is in lieu of all other taxes and fees.

 Whether the imposed fee (P1,190,750.50) is exorbitant—YES.

• CA: The fee is exorbitant and in complete disregard of the
basic limitation that the fee should be at least
approximately commensurate to the expense.
• PETITIONER: Imposed the maximum amount possible
under the Public Service Act, as amended.
• COURT: It is difficult to comprehend how the cost of
licensing, regulating, and surveillance could amount to
P1,190,750.50. The CA was correct in finding the amount
imposed as permit fee exorbitant. That is hardly taking into
consideration the actual costs of fulfilling its regulatory and
supervisory functions.

DISPOSITIVE: WHEREFORE, the petition is hereby DENIED and the assailed

Amended Decision and Resolution of the CA are AFFIRED. SO ORDERED.