Suspending The Tax On Text
In my recent blog about taxing text messages and monitoring the short message service (SMS) of cellular phone companies, I discussed about the approval of a house resolution imposing a 5-centavo tax for every text message by the House Committee on Ways and Means last September 8, 2009. Aside from the very bad effect of the proposed measure where the public may no longer enjoy unlimited text messaging if the proposed 5-centavo excise tax on SMS is implemented, the proposed tax measure will require the installation of a monitoring device which many fear could be used to make illegal surveillance of private persons not friendly to people in government.
All of the above fears are now gone temporarily because the House of Representatives reconsiders the tax on text messages and took a step back on the additional five-centavo levy due to “misunderstanding” on whether the consuming public will end up paying for the tax and the possibly because of the coming May 2010 elections. The congressmen decided to return the bill to the committee that approved it for “reconsideration” because the approved version of the bill has a pass-on provision.
Having a pass-on provision in the bill means the cellphone subscribers or the consuming public will shoulder the additional five-centavo tax on text messages. The return of the approved tax measure to the House Committee on Ways and Means is unusual but the the opposing congressmen said they want the committee to reconsider the bill to make sure that there is no pass-on to consumers.
The cellular phone companies who are strongly opposing the no pass-on provision said that “All taxes, except income tax, are passable to the public. Tax on text is a cost on business, a tax on production so why are telcos getting singled out?” The telcos justified their incapacity to shoulder the additional five-centavo tax by saying that cellphone companies are effectively charging consumers twenty-three (PhP0.23) centavos per text only and that they supposedly have a mere two-centavo profit for each. text message. This means that if five-centavo excise tax is added, it would mean a three-centavo loss per text message for the cellphone companies.
We should be happy with these developments but one of the authors of the proposed additional five-centavo tax on text messages, Cong. Exequiel Javier warned that the bill is not dead. Javier said another hearing will be devoted to the bill. He added that the authors will be tasked to draft a new scheme. As such, we can only hope that they can think of a scheme where the additional tax will not be passed-on to us. Do you think they can find such a scheme?
2 centavos income per text? are they kidding me? who’s going to believe that? if they’re only charging 23 centavos, then the tax passed on is already 72 centavos per text since one text message cost us 1 peso already.
whichever way you look at it, this picture just ain’t right. a 72% tax on a none imported product is already way too high, and now they want to add another 5%?
sometimes, i wonder why i bother putting money in my pocket. somebody’s going to legally rob me of it anyway.
What the telcos meant by the effective charge of only 23 centavos per text message is that it is the average they are getting after considering the full regular one-peso per text and the unlimited promos that they continuously offer to the public. They also say that at PhP0.23/text, their income is only two centavos so if the additional 5-centavo tax will be shouldered by them, they are bound to lose PhP0.03/text.
Yes, the effective PhP0.23/txt revenue of the telcos is questionable but I don’t think our good government has a way to probe that figure. This is the same reason why they want to monitor/count the SMS by the telcos. The proposed tax bill was supposed to settle the issue of how much do the telcos make on text messages.
The regulatory body does not even know how much the text service costs! They should be investigated for having violated provisions of the Telecoms Act.
When Rep. Teodoro Casiño tried to get this confirmation from the NTC officials during the hearing last September 22, Engineer Cabarrios of NTC CCAD was unable to confirm it. Instead Engr. Cabarrios claimed that the NTC does not know the cost of each SMS message.
COUP believes that this admission from a ranking NTC official who has been with the regulatory agency long enough to understand the agency’s role as the sole regulatory body for telecom services, proves that the NTC has been remiss in following the provisions of RA 7925 – the Telecommunications Act of 1995 and the Public Service Act of 1936.
Section 17 of RA 7925 states that: “The Commission shall establish rates and tariffs which are fair and reasonable and which provide for the economic viability of telecommunications entities and a fair return on their investments considering the prevailing cost of capital in the domestic and international markets.”
.The NTC has a balancing act here to provide rates that are just and reasonable to the consumers and the service providers. When the general perception is that the service providers have been raking in windfall profits and the NTC is clueless about it, then it is a tacit admission that it has not provided for the “just and reasonable” rates mandated under Section 20 of the Public Service Act, which we quote as follows: “The Commission shall approve only those that are just and reasonable and not any that are unjustly discriminatory or unduly preferential, only upon reasonable notice to the public services and other parties concerned, giving them a reasonable opportunity to be heard and the burden of the proof to show that the proposed rates or regulations are just and reasonable shall be upon the public service proposing the same.”
How could the NTC have acted favorably to implement the existing mobile phone rates if it does not even have any idea as to the cost of providing the services?
It’s election time again. The suspension on the proposed tax on texts is only a suspension. It is really not dead for now. Let us just hope that this bill will not pass on without the clear consideration of every sector. My only call to our legislators…stop implementing laws that will make poor filipino poorer.
BTW, congratulations for being one of the finalist in the 2009 Phil Blog Awards in the Business / entrepreneurship category.