DOF mulls tax on text messaging

Tax on text?

The phenomenal success of the short messaging system (SMS), or text messaging, has not escaped the attention of the cash-strapped administration, which has initiated a review of the possible imposition of taxes on the service.

Although not fully pursued in the past, the proposal started to gather momentum after Finance Secretary Jose Isidro Camacho ordered his department’s domestic finance group to study the economics of SMS taxation.

Camacho said the group will look into the SMS output of telecommunications companies to determine various details such as the possible impact of new taxes on volume and service consumption.

"We want a study made on what we are talking about in the first place, which is the whole universe of text messaging," he said.

On a daily basis, the telecoms industry handles 120 million to 150 million text messages, using the services of market leaders Smart Communications and Globe Telecoms.

At present, the mobile phone services are charged with 10 percent value-added tax, plus the usual overseas communications tax for overseas calls and currency exchange rate adjustment (CERA).

The government has admitted that it still has no idea how to implement a tax scheme on the popular SMS service, although Camacho said it would be easy to do so since the services provided by telecoms firms are not bundled into one line item.

"It’s easy to see how many text messages goes through their system. They know how many they handle. It won’t be hard to do it," he said.

However, Camacho stressed that as with any proposed tax measure, the SMS tax will have to be evaluated based on how the scheme impacts on demand and consumption.

The success of text messaging in the Philippines is attributed mainly to its relatively cheap cost compared to the airtime rates of voice calls using mobile phones.

An text message cost only P1 when sent by a mobile user to another unit. A domestic call to another mobile unit or landline, on the other hand, costs P5 to P9 per minute.

The taxation of SMS was originally proposed at the House of Representatives, but the resulting uproar from users ensured the early demise of the bill as it failed to even reach the committee level.