Taxing Pinoys to death

There are only two things that are certain in this life, death and taxes. And both are being inflicted upon us Filipinos by no less than our Honorable lawmakers in Congress. This is through another tax proposal emanating from the House of Representatives on the five-centavo tax per short messaging service (SMS) and multi-media service (MMS).

The volume of SMS traffic in and out of the Philippines — more than anywhere else in the world — is said to be the highest. It is the most widely used means of communication now by Filipinos, whether poor or rich. Thus cellular mobile phones have evolved into a basic necessity and an affordable communication tool in our country.

The chief proponents of this controversial tax text bill are trying to justify the imposition of this tax. They say it could generate as much as P36 billion of additional revenues that the government could use to finance education and other public services.

Now, government officials are raising the alarm anew of swelling fiscal deficit supposedly threatening the financial and economic condition of our country. Through BIR and Customs officials, they reported on Friday that their combined tax collections have fallen due to the effects of the global financial crisis to our domestic economy.

Our economic managers have again shown their propensity to resort to taxation to raise revenues instead of coming up with measures to encourage production, raise income, and generate domestic savings.

This reminded me of the 20 percent on interest income imposed on savings deposits when my young niece came up to me one day to ask about something she sees in her bank deposit booklet. She asked me why her booklet showed withdrawals from her bank account when she has not done any. I explained to her that these withdrawals reflect the 20 percent tax on interest income that her deposits earned from the bank. “Why does the government tax me? I’m just a baby,” she wailed. I almost cried with her because I get taxed twice for my salary, one from 30 percent withholding tax and then another 20 percent on interest income since STAR pays its employees through a bank payroll system.

Sadly, though, here comes another tax measure. Proponents led by pro-administration Congressmen led by Quezon Province Rep.Danilo Suarez trying to assuage us about a provision on this bill that mandates telcos not to pass on the tax burden to the price of their products and services. But in the history of tax laws as passed by Congress, such “no pass-on” provision is enforced according to the letter and intent of the laws.

This five-centavo tax includes not just the local SMS and MMS but also a five-centavo tax per overseas dispatch or conversation transmitted from the Philippines. Thus, it is not only the two big telco giants, Smart Philippines and Globe Telecom that are balking on this proposed text tax bill but the millions of overseas Filipino workers and their families and relatives.

And yet our government hails our OFWs as the nation’s modern-day heroes who keep our economy afloat amid the continuing effects of the global financial meltdown. Then, why impose a big burden on consumers, particularly the family and loved ones of our OFWs who need to keep in touch with each other? Surely, this proposed tax could impinge on the remittances of our OFWs with the recent innovation of telcos that allow them to send their hard-earned money through SMS.

It is unfortunate that this tax on text bill comes out of synch when telcos are even engaged in other promotional gimmicks to even lower their prices of overseas call originating from the Philippines just to encourage OFWs to keep using this cheapest mode of communicating with their loved ones back home. Hence, the proposed tax on overseas calls is seen as clearly anti-poor, anti-consumer, and in particular anti-OFW.

Both Smart and Globe have submitted to the House Committee on Ways and Means their respective position papers stating item by item their concerns and objections on the consolidated House Bills on tax on text. The proposed tax on text also comes at a time when the effective price of a text message has significantly gone down with the proliferation of bucket pricing which includes unlimited plans of both Smart and Globe.

In the case of the Smart Group, 92 percent of its SMS traffic is generated out of bucket-priced plans. Bucket-priced SMS plans, which include the very popular unlimited SMS plans, are the “pang-masa” SMS offerings of the Smart Group. From industry calculations, the average price of these bucket-priced SMS traffic is effectively 11 centavos per SMS. The five-centavo tax on text would translate, therefore, into a whopping 45.5 percent per SMS. For the unlimited SMS plans of the Smart Group, the effective SMS price would therefore range from five centavos per SMS to 12 centavos.

These bucket-priced SMS plans are popularly used serving the basic communication needs of the country’s lowest income earners – the “masa”. With this tax on text, it is feared this will only destroy the concept of bucket-priced SMS plans since tax is imposed on each SMS. Consumers, therefore, can no longer expect to see bucket-priced plans, including the very popular unlimited text plans, if and when the SMS tax is imposed.

To make matters worse for this proposed text tax bill, the House version of this measure borders on unconstitutionality by authorizing the National Telecommunications Commission to acquire a “metering device” or “portal” that will interconnect the NTC, the Bureau of Internal Revenue, and other agencies with mobile phone service providers.

The proposed “metering device” or “portal” is being pushed ostensibly to keep mobile phone service providers to be honest, tax-wise. With continuing technology advancements, however, such a “device” or “portal” poses danger of being abused or misused by these “concerned agencies”.

Despite widespread objections by the telcos industry and consumers group against this tax text bill, the House panel approved it and it will be up for plenary deliberations soon. Fortunately, many Senators have come out with their public statements to oppose, if not block this tax on text bill. With the May 2010 elections just around the corner, this tax on text bill is dead on arrival in Congress.