Hike in mobile phone subscribers boosts economic activity - report

A 10 percent increase in the mobile penetration rate in developing countries translates to a 1.2 percent rise in the gross domestic product (GDP), according to a recent global mobile tax review report published by the GSM Association. 

From a sample of 57 developing countries, the report pointed out that increased mobile penetration boosts economic activity.  

Portions of the study were cited by Smart Communications in its position paper opposing Senate Bill 2402 that seeks to set aside 50 percent of revenues from text messaging for the health and education programs of government. 

The study also noted that reducing mobile specific taxes and general consumer taxes such as the value-added tax (VAT) leads to substantial increases in mobile penetration and usage.

Smart pointed out that such mobile specific taxes, still being levied on 16 of the countries surveyed, are regressive in developing countries in that they are proportionally greater on the poorer members of society who use mobile phones as their source of universal access.

In a letter to Sen. Richard Gordon, who chairs the committee on government corporations and public enterprises, Smart senior regulatory manager Roy Ibay pointed out that while the company lauds the noble objectives of the bill creating the Health and Education Acceleration Program (HEAP) Corp., the bill must first conform with certain fundamental legal and constitutional principles.

Ibay noted that singling out text messaging or SMS as the source of the HEAP Fund is discriminatory and confiscatory since there is no legal, valid, and reasonable basis to classify domestic mobile telephone service providers as a distinct class of taxpayers specifically targeted for purposes of taxation.

Under the bill, the HEAP Fund “shall consist of 50 percent of the revenue assessed and collected on all mobile phone text messages sent from their networks, to be remitted by domestic mobile phone service providers to the Fund and shall be earmarked solely and exclusively to finance the priority programs of the Act.”

Ibay added that the bill violates the constitutional requirement that revenue bills shall originate exclusively in the House of Representatives.

It was also pointed out that the bill is another way of imposing an excise or ‘sin’ tax on telecommunication services in general and SMS in particular. However, Smart emphasized that such should not be categorized as sin products which are viewed as luxury items, non-essentials, or goods whose consumption the government wants to regulate due to their harmful effects.

 “SMS has become essential and a basic service for millions of Filipinos. Communications has become a necessity and a staple household item through SMS being the most affordable and easiest to use. As SMS has been able to provide communication to more than 70 million Filipino cellphone users, any form of excise or sin tax curtails this right of Filipinos to communicate,” Ibay said.

The company further stressed that coming on the heels of a world economic crisis, the tax imposition paints the picture that government’s tax policy making is “whimsical, unpredictable and capricious and sends the wrong message to potential investors.”