NG eyes P7B from tax on txt, P14B from sin taxes

The government is eyeing an additional P21 billion in annual revenues from new – but highly controversial – tax measures covering short messaging service (SMS) or text messaging in mobile phones as well as from tobacco and liquor products, a Cabinet official said yesterday.

Based on the country’s proposed development agenda for the next six years, the imposition of taxes on SMS and the indexation of the so-called sin taxes would raise P7 billion and P14 billion, respectively, for the state coffers, Socioeconomic Planning Secretary Romulo L. Neri said.

"We will try to get Congress to cooperate with passing measures to that effect," Neri said during the breakfast forum sponsored by the Manila Overseas Press Club (MOPC).

Neri said the fiscal measure also calls for an increase in the common carrier’s tax, a review and rationalization of fiscal incentives, and simplified taxation of professionals and self-employed.

The Department of Finance (DOF) also confirmed yesterday Malacanang’s plans to lay out a new tax reform agenda intended to raise more revenues over the next six years, although it had backtracked on slapping new taxes on petroleum products.

Finance Secretary Juanita Amatong told reporters that the DOF was initially projecting an incremental annual collection of P6.98 billion should government impose the new excise tax on text messages.

She said the estimate was based on the hypothetical tax rate of 10 centavos per text message sent as originally proposed by former DOF Secretary Jose Isidro Camacho in 2002.

In Camacho’s proposal, the DOF reasoned that the tax would be easy to collect because telecom service providers themselves could act as collecting and withholding agents.

For plan users, the additional tax would automatically reflect on the subscribers’ billing statements. For prepaid users, the additional tax would mean that for every text message sent, the service provider would deduct P1.10 from the account balance instead of P1.

The proposal is drawing intense flak from consumer groups but Amatong said the government had little choice but to impose new taxes in order to support economic growth under the weight of heavy government debt.

She said, however, that the administration’s economic team is not as certain about imposing new taxes on petroleum products as they are about the new text tax.

"We’re changing our minds about this," Amatong said, admitting that the administration expected serious difficulties getting Congress to pass such a measure.

Backing off the proposed petroleum tax, however, means that the administration would either come up with an alternative new tax or raise the rate on existing taxes.

According to Amatong, critical policy decisions would be made within the next few weeks to allow the administration to present a tax reform agenda when Congress resumes session.

The Arroyo administration is hatching plans to increase its tax revenues to P1 trillion by 2010.

Text or SMS messages are already lumped together with other telecommunication services provided by service providers and are covered by a uniform 10 percent value-added tax.

Since SMS messages are already covered by the VAT, sources said the proposed tax on text messages are currently classified as a possible excise tax, a form of taxation intended to discourage the use of certain commodities such as alcohol and tobacco.

The telecommunication industry has been the fastest growing industry in the last five years and the country’s creditors including the International Monetary Fund (IMF) have been urging government to cash in on this growth through new taxes.