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It is
difficult to comprehend the short-sightedness of the
Department of Transportation and Communications as it
floated on Wednesday the idea of removing charges on
cellular-phone text messages. Its claim that “texting
should be free” is both unrealistic and impractical as
it runs counter to the “user’s pay” philosophy, although
it will be easy for consumers to support such a
proposal. But anything given for free is, likewise,
highly prone to abuse.
The
contrary view is that instead of making it free, texting
or SMS service should, in fact, be paid and taxed, even
if this will make cellular-phone services more
expensive. The government is already imposing the
valued-added tax (VAT) on almost all sales transactions,
including utilities such as electricity, telephone and
water. In fact, even post-paid/subscription
cellular-phone services are also subject to the
12-percent VAT, so why not texting, particularly by
prepaid clients?
By
taxing SMS, the government can probably afford to
suspend the VAT on electricity. Assuming that the cost
of a text message is raised to P2 to include a P1 tax,
at an average of about 100 million text messages, as
claimed by telecommunication companies, the daily
government tax take on text can be as much as P100—or a
whopping P36 billion annually. On the other hand, more
recent government estimates put the potential annual VAT
loss from electricity at below P20 billion, if and when
Congress decides to temporarily suspend the tax. Using
these estimates, there might even be a net gain of about
P16 billion—at the same time providing relief to more
consumers.
This
makes sense in the overall. After all, more people use
electricity than send out text messages. In fact, even
farmers and fisherfolk use household electricity, but
not many of them own cellular phones and SMS services.
While seemingly inequitable, particularly to the moneyed
class, texting and other telecommunication services are
not and cannot claim to be as essential as food, fuel
and electricity.
The
12-percent VAT, particularly on fuel and electricity
(which were VAT-exempt until 2006), could have, in fact,
been avoided if Congress had opted to tax text messages
instead—as proposed by some right-minded lawmakers as
early as 2004. But in 2005 the de Venecia-led House of
Representatives and the Drilon-led Senate instead chose
to save the telecommunications industry from a bigger
tax on their windfall profits. The proposed franchise
tax was junked reportedly in favor of (1) broadening the
VAT to cover even basic necessities such as electricity
and fuel starting 2006, and (2) raising that tax to 12
percent from 10 percent. It was also reported that the
decision to shelve that franchise-tax proposal was made
by the House ways and means committee after a meeting
between government officials and telecommunications
executives, which was reportedly attended by President
Arroyo herself, then-Senate President Franklin Drilon,
then-Senate ways and means committee chairman Ralph
Recto, Sen. Manuel Roxas II, Antique Rep. Exequiel
Javier, then- Finance Secretary Cesar Purisima, former
Tarlac Rep. Jesli Lapus as House ways and means
committee chairman, and representatives of the top
telecommunication companies: Jaime Augusto Zobel, Manuel
Pangilinan, Napoleon Nazareno and Lance Gokongwei.
While a
P1 tax on each text message can bring down average use,
it is unlikely for the decline to be very significant. A
tax will probably deter only unnecessary text messages,
and make people think twice about sending out junk SMS.
But more important is the possibility of such tax
helping address rising electricity prices. A 12-percent
discount, on one’s electricity bill may not be a big
deal, but that’s a 12-percent discount, nonetheless. And
all electricity consumers can benefit from that, even
while it is at the expense of the “texting” community.
One can easily suppose that people can willingly
shoulder a P1 text tax over a 12-percent VAT on their
electricity bills.
Despite
the higher price of P2 per text, one can also expect
people to continue sending text messages. It’s now a
matter of habit and a lifestyle, and thus probably
driven mostly by factors other than price. People still
buy food, clothes and cellular phones, as well as
consume fuel and electricity, despite their higher
prices. The VAT on fuel and electricity also escalates
the prices of goods. Such tax obviously impacts on the
prices of basic commodities as it raises manufacturing
and logistics costs, while a tax on text will not have a
similar effect.
While it
is in the mood to rethink the VAT, particularly on fuel
and electricity, perhaps it’s time Congress revisited
proposals to tax text messages. Even exempting just
electricity from the 12-percent VAT may go a long way in
easing people’s burden. Reducing people’s electricity
cost will not be at the expense of the
telecommunications industry, anyway. It is a
pass-through expense, and thus a cost that the industry
will simply pass on to consumers. So it will not be a
burden to telecommunications companies, despite their
concern over lower usage and possibly diminishing
profits. In the end, they can take consolation in the
fact that electricity will be cheaper for most people,
even companies and industries.
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