Tax on Text

Palace backs tax on text
Manila Bulletin - Wednesday, September 9
http://ph.news.yahoo.com/mb/20090909/tph-palace-backs-tax-on-text-020e1c8.html



Malacanang Wednesday threw its full support to congressional moves to impose five centavos excise tax on every text message sent through mobile phones.

Executive Secretary Eduardo Ermita said the government will support any efforts to raise much needed revenues to sustain the economic growth and improve social services to the people.

"The Palace will support any measures that will help generate funds and resources for governance," Ermita said in a news conference. "We are confident if the both members of Congress see that it is useful for us to have more resources to support the projects, then that will be supported by the Palace," he added.

Ermita said it was up to lawmakers to deliberate the pros and cons of the proposed revenue-generating measure, amid concerns the public may carry such additional burden. He assured that the President will study the measure, which seeks to generate some P30 billion a year for the government, before signing it into law.

"If it passes the House, the President will take the appropriate measure and see for herself the advantages and disadvantages of such a measure," he said.

The proposed tax on text, or House Bill No. 6625, was passed by the House committee on ways and means last Tuesday. Proponents seek the tax should be shouldered exclusively by mobile phone providers.

Albay Governor Joey Salceda however opposed the tax on text proposal in Congress, saying it was a "bad economic and social policy." He said he plans to recommend the President to reject such bill.

Salceda, also an economic adviser of the President, pointed out that short messaging service (SMS) is already subject to 12 percent value added tax and 30 percent income tax.

"There is no compelling reason to tax it more than other products. Unlike alcohol and cigarettes, there is no consumptive logic, i.e. welfare increases by penalizing and reducing its usage," he said.

Salceda also warned that the bill on tax on text would also raise the cost of text packages patronized by many Filipinos by 50 percent since average is only 10 centavos. "With no landline, they rely mainly on text for communications especially overseas Filipino workers. Effectively this is an OFW tax," he said.




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‘Tax poor people to the bone? No way’—Enrile
By Christine Avendaño, Gil C. Cabacungan Jr., Michael Lim Ubac
Philippine Daily Inquirer
First Posted 05:03:00 09/10/2009
http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20090910-224487/Tax-poor-people-to-the-bone-No-wayEnrile

Filed Under: State Budget & Taxes, mobile phones, Legislation, Telecommunications Services

MANILA, Philippines—A consumer group, an economic adviser to President Gloria Macapagal-Arroyo and the head of the Senate said the proposed tax on text messages would be an additional burden on the country’s 72 million mobile phone users.

Senate President Juan Ponce Enrile said he would oppose the House bill seeking to impose a tax on text messages.

“This will not pass in the Senate with that kind of version. I will not vote for it,” Enrile told reporters.

“Tax poor people to the bone? No way, I will not agree.”

“To rebel against this new tax law is justified,” TXTPower leader Anthony Ian Cruz said as he warned legislators seeking reelection in next year’s national polls of a backlash.

Albay Gov. Joey Salceda said raising the cost of text messages would penalize ordinary Filipinos, especially those who depend entirely on text messages to communicate with their relatives or friends working abroad.

“Effectively, this is an OFW (overseas Filipino worker) tax. Tax on text is bad economic and social policy,” said Salceda, who plans to recommend the rejection of the measure to the President.

A bill, proposing a five-centavo tax on every short and multimedia message, could raise up to P36 billion a year for the government.

House Bill No. 6625 has already passed the House ways and means committee and its proponents are now pushing for it to be endorsed fully by Congress and signed into law by Ms Arroyo.

To help fund budget

The measure is one of the revenue sources being considered by Malacañang to help fund the proposed P1.541-trillion budget for 2010, the inter-agency Development Budget Coordination Committee (DBCC) said during Tuesday night’s briefing for senators.

Enrile said imposing five centavos on top of the P1 charge for text messages was unwarranted.

“It’s not right because this tax would be a burden on teachers, workers, students, nurses and houses just for government to have money to spend,” he said.

Enrile scoffed at the House bill provision that the tax would not be passed on to consumers. “But that’s indirect taxing,” he said.

The House committee said the money would be used to boost the government’s education budget.

On top of 12-percent VAT

But Cruz pointed out that the government was already collecting a 12-percent value added tax (VAT) on mobile phone services.

Instead of imposing the tax, Cruz said the government should cut wasteful spending and stem the loss of money through corruption.

“Congress must exercise restraint in looking for ways and means to finance government programs and operations,” he said.

Industry groups have branded the Philippines the text capital of the world on a per capita basis, with hundreds of millions of messages crisscrossing phone networks every day.

Text-powered revolution

In 2001, text messaging was used to gather tens of thousands of people on to the streets for a peaceful revolution that toppled the graft-tainted presidency of Joseph Estrada.

Besides the 12-percent VAT, text messages were already subject to a 30-percent income tax for mobile phone providers, according to Salceda.

“There is no compelling reason to tax it more than other products. Unlike alcohol and cigarettes, there is no consumptive logic where the public welfare increases by penalizing and reducing its usage,” said Salceda, an economic adviser to Ms Arroyo.

Cost to up 50 percent

He said the proposed tax on text would increase by 50 percent the cost of this communication habit of Filipinos, including OFWs.

Salceda said the text tax would inevitably increase the cost of text messages, including the text message promos.

Although a text message costs at least P1, text promos have brought down the average cost to just 10 centavos per message, according to Salceda.

By tacking on 5 centavos to the average cost of text, Salceda said users would pay 15 centavos per message or an additional 50 percent.

Unenforceable provision

Even the House’s well-intentioned move to attach a “no pass-on provision” barring mobile phone providers from tossing the additional cost to consumers was a bad idea, he said.

“This provision goes against the central idea of capitalism that all costs must be recovered and tax is a cost. At best, it is unenforceable and will only create leakages,” Salceda said.

Levy in the Senate

A Senate version being pushed by Sen. Richard Gordon calls the tax a levy since it will be shouldered by telecommunication companies.

“The lower House (version) is a tax. (The Senate version) is a levy with no pass-on (provision),” Gordon said.

He said revenue from the levy would go directly to health and education. “You can’t allocate it for other purposes,” Gordon told the Inquirer after the DBCC briefing.

Finance Secretary Margarito Teves supported the imposition of a levy, Gordon said.

“Once people see that the money is being spent on health and education, they will really gladly support it,” Gordon said, pointing out that 37 percent of Filipino children were malnourished.

The senator assured the public that telcos would not be able to require mobile phone users to pay the levy.

“They can afford it. They have newspaper and TV ads, sponsorship of basketball teams,” he said.

Gordon said the government was not “trying to kill” telcos because the levy would only be imposed for five years. With a report from Agence France-Presse


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Enrile vows Senate to block tax on texting
By Charlie V. Manalo
09/10/2009
http://www.tribune.net.ph/business/20090910bus1.html

Senate President Juan Ponce Enrile vowed yesterday the Senate will block a proposed five-centavo tax on text a bill for which was approved the other day by a House panel.

"It will not be approved in the Senate. It is an additional burden to the consuming public," Enrile said.

Enrile made the statement after a hearing of the Senate committee on finance and Development Budget Coordinating Council (DBCC).

Sen. Edgardo Angara convened the DBCC to lay down the figures and strategize properly for a balance and well-planned financial year.

"The 2010 budget is very crucial. Not only will it determine the success of the administration targeting to finish all ongoing projects but also what the next administration will face given our present state," said Angara, who heads the Senate committee on finance.

Several senators have already opposed the additional taxes on text which they believe would be eventually passed on to the subscribers.

"I reiterate my opposition to the imposition of additional taxes on texting that will be shouldered by subscribers," Sen. Ramon Revilla Jr. said.

"Texting has developed to be the cheapest and most accessible means of communication, and new taxes imposed to the public will definitely burden them," he added.

The House ways and means committee has recently approved a consolidation of Ilocos Sur Rep. Eric Singson’s bill and Quezon Rep. Danilo Suarez’s resolution imposing the five-centavo excise tax.

The proceeds to be collected from the text on tax will be set aside for the Department of Education, the Technical Education and Skills Development Authority, and state universities and colleges.

The revenue collected will also be spent on the acquisition of a metering device that will interconnect the National Telecommunications Commission, Bureau of Internal Revenue (BIR), mobile phone service providers and other concerned government agencies.

House Deputy Minority Leader and Bayan Muna party-list Rep. Satur Ocampo also called on the House leadership to halt the measure "in these times of economic hardship that affects the majority of all cellphone users."

"The House committee on ways and means is continuing the big mistake of pushing a 5-centavo tax on text that the House leadership says will be shouldered by the telecommunications companies. This is far from the truth as the telcos will only pass on this new tax burden to the consumers," Ocampo said.

The ways and means panel approved a substitute bill to House Bill 6625, authored by Deputy Speaker Eric Singson, in consolidation with the pertinent proposed provisions covered by House Resolution 282 filed by committee on oversight chairman Danilo Suarez.

"The Arroyo administration wants the additional tax to generate at least P20 billion annually to be allotted to computer literacy program of public school students. The measure covers texting or short messaging service (SMS), multimedia messaging service (MMS) and voice calls," Ocampo said.

Some House members estimate that with two billion text messages sent daily through all the cellular phone providers, government would earn around P100 million in revenues daily from the proposed 5-centavo fee.

The BIR has collected at least P22.94 billion from telcos in 2007 with the current taxes already levied by government.

"Congress must be sensitive to the plight of the people. The House leadership must say clearly that this is a new tax that is probably intended to fuel an election budget for the administration. Any new tax on cellphone messaging services and calls will only be borne by consumers, as Globe, Smart, Sun or any telco will pass this on to them. We will side with the country’s cellphone users and texters in opposing this new tax," Ocampo said.

A consumer group also hit out at the planned tax, which is making its way through Congress, warning the country’s 70 million mobile phone users would be unfairly required to carry the burden for a cash-strapped government.

"To rebel against this new tax law is justified," TXTPower leader Anthony Ian Cruz told AFP as he warned legislators seeking reelection in next year’s national polls of a backlash.

Cruz pointed out that the government already collected a 12-percent value added tax on mobile phone services.

Instead of imposing the tax, Cruz said the government should cut wasteful spending and stem the loss of money through political corruption.

"Congress must exercise restraint in looking for ways and means to finance government programs and operations," he said.