'Tax on text' should be condemned, not passed!
(First of two parts)
I had just ended my article last Monday with the statement that “we need to rekindle the belief that, as a people, we can live above the level of moral squalor.” And we have!
What the Filipino showed in the aftermath of one of the most destructive disasters of our time was indeed inspiring to behold: Filipinos saving lives and, in the process, losing their very own; infants being carried on improvised containers, above and away from the onrushing waves; children sharing what little they had with the child beside them who had nothing to eat; a grandmother and grandfather, tired with age, being carried by their younger kin away from homes and everything in it that was being swept away.
In my own world, I got so touched by my only daughter and her husband organizing her three older brothers and their spouses to set up a relief center in the garage of their home, purchasing food and relief items, packing them into bags, and just yesterday, motoring in three big vans to Cainta and distributing them to victims in the relief centers there.
How can I not write about my children when my heart is swelling with pride? How can I not write about all the other young Filipinos who, in their own small way, just had to do whatever little they could? I have broken my promise to my kids not to write about what they are doing because I am motivated by nothing else but the desire to inspire. While I was busy with my colleagues at home managing a legal and technical presentation on the automated elections that could result in violating the integrity of the ballots we will cast in May 2010, here were my kids arriving from Cainta at about 10:30 p.m., tired and famished, for I saw them heartily finishing what we and our political guests had left on the buffet table.
It has been said that “man is a creature made at the end of the week’s work when God was tired.” Certainly not, is what I can say right now. Our Creator must have been inspired when, on the seventh day, He created man. And I know that it is up to us to prove this right.
My article today has to do with the proposed tax on text. Let me start by pointing out that the House Committee on Ways and Means, which approved the consolidated bill, did so without proper notification to the telecom carriers (telcos), and to the consumers, any representative of the OFWs, and other sectors to be adversely affected. On the Internet, from print to broadcast media, there is a general feeling of resentment and concern.
The repercussions on our constitutional right of privacy are absolutely grave. This fundamental right of the citizen will be “smashed to smithereens,” in the words of one young lawyer, extremely disappointed that the authors could even have thought of this. While telcos strictly prevail under a regime of confidentiality of information with their clients relating to telecom transactions, this will be violated if a third party like the Bureau of Internal Revenue (BIR), through the intricate metering system being proposed, becomes privy to the details of said transactions. There will be components of the metering system that will have to be physically located beyond the control of the telcos; some metering devices to interlink the telcos to the BIR and the National Telecommunications Commission (NTC) will have to be placed outside the telcos’ location, most likely in the specified government offices or, which is even a worse situation, in between, hence beyond the safe-guarding capability of the telcos, which will make wiretapping and espionage virtually easy.
The installation of a “metering device or portal” provided for in the consolidated bill as approved, which will interconnect the NTC, BIR and “other concerned agencies” with mobile phone service providers, should be viewed with serious concern by all those in the private and public sectors. While the device is being pushed ostensibly to keep mobile phone service providers honest as far as their tax payments are concerned, this device is actually in the nature of a “probe” which, given recent technology advancements, is powerful enough to retrieve and store messages and allow these messages to be viewed and read. The capability of this metering device to allow messages to be stored, retrieved, viewed, and read sends a serious chilling effect on this constitutional right of privacy of every individual. This technological capability can be abused!
There is no reason for the NTC to be involved in the monitoring of traffic for the purposes of assessing the excise tax. Since the draft legislation requires the NTC to be the one to directly procure and manage the device, this in fact provides the basis for one dimension of a police state. Why should the NTC have any hand whatsoever in the procurement, installation, interconnection, and continued operation of the metering device?
Before I proceed to the technical aspects of an excise tax, let me quote a line from Calvin Coolidge: “Collecting more taxes than is absolutely necessary is legalized robbery.”
For that is what the proposed tax on SMS (short messaging service), MMS (multimedia messaging system), and overseas dispatch is — an Excise Tax that, by definition, forms part of the purchase price of the goods or services on which they are imposed. From jurisprudence, Silkair Singapore Pte. Ltd. vs. Commissioner of Internal Revenue, (571 SCRA 141), an excise tax, whether classified as specific or ad valorem, is basically an indirect tax imposed on the consumption of a specified list of goods or products. The tax is directly levied on the producer of the goods or services and passed on to the consumer as part of the selling price of the goods. The effect is therefore not only an increase in the price to the extent of the amount of the new excise tax but it increases the VAT payable as well … the taxable base for the value-added tax shall include the excise tax paid. Hence the effect on the consumer is enormous.
According to Maricar Akol, board member of the Philippine Electronics and Telecommunications Federation, the umbrella organizations for CICT, “This additional tax to be imposed should be carefully analyzed with regard to the possibility of double taxation since SMS is a value-added service and the frequency bandwidth used for this service has already been paid to government. Besides, taxing the telcos for their optimizing the use of the bandwidth allotted is anti-progress. The investments of telcos in migrating from analog to digital technology so that not only voice transmission is achieved but also data and video transmitted alongside, will enable telcos to give the consumers better access at reasonable prices. Hence the proposed bill is anti-productive for it will make it more difficult to achieve the goal of universal access to all, especially the marginalized.”
How do we explain this to the OFWs who have been responsible for ever-increasing remittances to their home country? Their primary emotional connection to their families back home is through SMS and MMS at very aggressive rates (free and unlimited). How can this be sustained by the telcos? This is the emotional backbone of the OFWs! Our country owes them a debt of gratitude for their valuable remittances. Can we break their emotional backbone — in fact, can we break their hearts — while they work away from home?
And, as far as the great number of consumers are concerned — and I am referring to the overwhelming number of working consumers: the youth, the students (not the moneyed members of Philippine society), those that rely on what are called “bucket-priced” plans — how can this be taken away from them?
Bear in mind that the consolidated bill approved by the House of Representatives has, among others, a couple of critical provisions that are highly objectionable. The P0.05 tax per SMS, MS, and MMS, the P0.05 tax per overseas dispatch, message, or conversation transmitted from the Philippines, and another earlier referred to, authorizing the NTC to acquire a metering device or portal that will interconnect the NTC, BIR, and other concerned agencies with mobile phone service providers, I have indicted as having constitutional implications on the right of privacy of the citizenry.
The proposed tax proceeds apparently on an assumption that all text messages are priced at P1, and therefore the P0.05 excise tax is minimal. Let me take Globe Telecom as an example. I know for certain that 25 percent of Globe SMS is either free or zero-rated. Of the 75-percent balance, 88 percent is at a blended rate per SMS of P0.23 per text, on average, and this is averaged across various promotional rates and regular tariffs. Subtract from this the costs of production (network infrastructure, information systems hardware and software, manpower costs, taxes, interconnection charges, dealers’ commissions), and you’ll have only a modest margin of P0.02, which goes to Globe. Imposing the P0.05 excise tax on SMS cannot help but create losses at negative P0.03 per SMS. Globe cannot operate at a loss, which will trigger retail rate increases in order for them to maintain a rational margin.
In the case of Smart, 92 percent of its SMS traffic is generated out of bucket-priced plans, which include the “pang-masa” offerings for SMS. The P0.05 excise tax will translate into an enormous 45.5 percent tax per SMS. Smart will have to veer away from their unlimited text plans to revert to standard pricing.
As far as Sun Cellular, which has significantly more unlimited offers, is concerned, the excise tax will even be more unsustainable.
(To be continued)
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