Full text: TXTPower position paper on the 5-centavo text tax

txtpower1(Submitted to the Hon. Exequiel Javier, Chairman, House Committee on Ways and Means, by Anthony Ian M. Cruz, President, TXTPower.org Inc. [TXTPower] on Sept. 22, 2009)

Thank you to the distinguished Chairman of the House Ways and Means Committee for extending an invitation for us to attend this hearing. Allow us to note the similar circumstances when this same panel reportedly voted to approve the new tax last Sept. 8. The said meeting was held immediately after a long weekend and did not provide the public, including oppositors, an opportunity to attend, participate, raise questions and to basically be heard.

On behalf of consumers, your taxpaying constituents, we in TXTPower wish to express our strong and unconditional opposition to the proposed five-centavo new tax on mobile phone services and the setting up of a metering device to purportedly check on revenue streams of the telecommunications firms.

At a time when economies are in crisis, most legislatures and governments worldwide have declared a moratorium on new taxes and tax increases especially those that will hit the common people. Most Congresses and Parliaments instead are enacting safety nets and bailout packages.

Here in the Philippines, we are dismayed that the House of Representatives is doing the reverse. It is contemplating and, as of Sept. 8, a panel approved a new tax that will surely burden the people and not the well-off. This, considering the loud boasts of the President that the economy is okay, that fundamentals are strong and we are not hit hard by the worldwide recession. If the President was saying the truth, the House should reconsider this new tax and instead give back to the people the fruits of a prosperous economy as claimed by the President herself.

Mobile phone users are already taxed

We reject the accusations that consumers who oppose the proposed five-centavo tax are supposedly saying no to the noble objective of providing computer education to the youth. That is farther from the truth.

All mobile phone users today pay 12 percent VAT for each call, each message, each prepaid load, each icon or ringtone, each new handset sold and bought.

In fact, it was only a few years ago that this same committee approved a twenty percent increase in the VAT rate from 10 percent to 12 percent.

The promise and premise then for the tax hike and now for this new tax are the same: Proceeds will purportedly go to social services. As to where the VAT has gone, the House should be able to explain fully to the public to whom they have imposed this yoke. Indeed, the public ask our representatives:

How much in VAT proceeds are collected arising from mobile phone services?

Has the Bureau of Internal Revenue exercised due diligence in ensuring that telcos pay the correct taxes, in remitting their VAT collections? Are receipts issued on transactions and are these checked by the BIR?

It is a legitimate demand of taxpayers and consumers that government account for each centavo of the tens of billions in VAT payments we have all made.

Apart from VAT, consumers and taxpayers also pay an Overseas Communications Tax for mobile phone services intended for international recipients. In other words, the bulk of calls, SMS and other services our people to use in communicating with our millions of OFWs abroad are also taxed.

Again, we demand an accounting of these OCTs, how much are collected, and how these are used by the Arroyo government.

No pass-on provision

We are not that naïve that we would easily believe worthless assurances that there will be no way the five-centavo tax will not be charged against consumers.

In fact, the telcos have made it clear, emboldened by the industry deregulation law that gave them so much power over the industry and over government, that they will pass on to consumers whatever new tax is levied against them by the House.

The fatal flaw of this proposed new tax law is not the absence of a no pass-on provision. It is in its very natureof being a clearly regressive tax that punishes the poor and favors the rich, including the telcos House wish to tax.

The public would have understood if the proposed new tax was not about local and international calls and text used by common people and instead focused on the gargantuan net incomes and profits of the telcos. But no. This proposed new tax is not about the telcos. It is about consumers.

We hope it is not the sense of the House that they would rather impose an excise tax instead of a windfall profits tax because consumers are easier to browbeat while telcos have hordes of lawyers to defend their interests.

Metering device

The BIR has much to explain to Congress and the public regarding its tax collection practices. We wish to know how bad the situation has become that Congress has contemplated depending on a metering device to know just how much revenues the telcos are making and whether these companies pay the correct income taxes and remit the correct amount of VAT payments.

We are prepared to question this metering device before the courts for being a potential conduit for large-scale and total surveillance of our people and for being a clear and present danger to the constitutional right to privacy of communications.

With this metering machine, the government would no longer need court orders to check on phone records of its citizens. Government can just conveniently skirt the whole processes of obtaining court orders directed at the telcos and instead just avail of the complete information that goes to the metering device.

This expensive project is human rights violation waiting to happen. It is an indictment of the BIR and Congress for failing to check the telcos operations and their hopefully faithful adherence to Philippine laws, including our tax laws.

Don’t be lenient on telcos

We have heard loud and clear Honorable Danilo Suarez, chair of the House committee on oversight and a chief architect of this text tax law, say on national television that telcos are raking in profits from text messages which he said needed no separate investments because providing SMS are a natural part of the mobile technology used by the telcos. We agree with him 100 percent and the truth about the nature of SMS can be confirmed by an independent panel of industry experts.

We actually wish to ask House Speaker Prospero Nograles to immediately convene the relevant House committees to look into Congressman Suarez’s revelations on the nature of SMS and find ways of reducing cost of mobile phone services.

However, we differ on what the government should do next. We do not agree that SMS should be taxed. What should be taxed are the big profits of the telcos arising from their sale of text messages. What should be taxed are the huge profits of these telcos and have them give a fairer share in nation-building. What should be done by the House is to examine how and why given the fact that text messages are practically free on the part of the telcos, these are sold by as much as P1 for local SMS and P10 for international SMS. Indeed, the House should give something back to the loyal taypaying public – moves and measures towards lowering the costs of communications.

The latter will be good for consumers, the government (including the House) which spends billions for communications, and for industry especially investors who complain about the high cost of doing business in the Philippines.

We expect the telcos to fight tooth and nail to protect the arbitrary pricing they have imposed on consumers. We hope that the House will do the right thing – by not passing a new tax against consumers but by sitting down with the telcos who all acquired legislative franchises from Congress and tell them to give a just share of their profits.

How to fund schools and hospitals

We agree with the House Committee on Ways and Means on the need to provide early computer education to our young people. We have long expected the government to do just that and use for this purpose the proceeds from taxes we all pay.

Instead of imposing this new tax, the Committee should take advantage of the hearings on the National Government’s Annual Appropriations Act for 2010 to make the necessary adjustments, to reallocate perhaps at least P4-million from the PDAF allocations of each congressman in order to raise about P1-billion. Now is perhaps the time to choose between paying foreign obligations (some of which are fraudulently obtained or perhaps in the light of the crisis sought to be condoned) and alloting money for non-productive expenses, on one hand, and education and health, on the other hand. Just a 10 percent reallocation and redistribution of the big budget for foreign debt payments will mean at least P30-billion that could go to the noble objective of this Committee.

Her Excellency, Gloria Macapagal Arroyo, could also be asked to agree to redirect a portion, perhaps five percent, of the budget for the Office of the President, for this same purpose.

The President’s Office of the Press Secretary, whose communication expenses have ballooned for the past few years, should also support measures to lower mobile phone rates and contribute its share towards early computer education.

The House has not yet approved the budget so there is ample time and opportunity to carve out the necessary extra funding for the Department of Education to realize the purposes raised by the proponents and authors of the subject bills and resolutions.

Another alternative is for Congress to enact a new tax solely and exlusively on the windfall profits of the most profitable companies, especially the telcos.

All in all, we urge the House and this Committee, to spare the people from any new tax. Let those who have more in life give a fairer share, and for the people who are enduring the crisis, we expect Congress to provide immediate economic relief, not any new tax.

Thank you very much.

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