Why the tax on text bill will not pass

One reading the letter of Globe Telecom, through its chief legal counsel, to the House of Representatives can sense the violent reaction a piece of legislation, also known as the tax-on-text bill, attracts and more so – if push turns to shove – in the unlikely event that it gets legislated. But in today’s newspapers, it is reported that the measure has been recalled to give way for more public hearings. Good riddance it all became as it most probably should.

Fact is, Globe’s chief legal counsel wrote the Speaker and the Membership expressing opposition to the tax on text proposal largely based on an earlier position paper against the imposition of excise taxes on SMS, MMS, and overseas dispatch. This letter was circulated yesterday in Congress (22 September) and it was also yesterday when Congress recalled the proposed measure. How nice it is to realize that Globe can be its own lobby group that could pressure Congress to recall or withdraw a measure it has initiated, however anticlimactically.

Atty. Salalima, rather level-headedly, posits that the bill in question is ‘one if not the worst anti-consumer legislation ever proposed by Congress’. But otherwise, he was all too clear in explaining the following as facts if not as matters of logic and mathematics, to wit:

“Twenty five percent (25%) or ¼ of Globe Telecom’s texts are FREE, only about 9% are priced at P1.00 per text and the balance of 66% has an average cost of 23 centavos per text. (About 3-5% of all our subscribers are post-paid, the balance of 95-97% are pre-paid). And all these texts, including overseas communications (already the subject of overseas communication tax and income tax),even the free and unlimited texts, will be taxed. Our profit for every 23-centavo text is only 2-centavos. Impose a 5 centavo tax on a 23-centavo text, we lose 3 centavos per 23-centavo text. Government cannot dictate that business operates below its cost of production and at a loss.”

Further, the Globe’s vocal attorney even accused Congress as having misinformed the public when it claims there is “no tax pass-on provision” when in truth and in fact, it was just meant to sooth violent reaction from the texting universe. This attorney claims that such no pass-on proposal will not work and is unconstitutional. He even calls it “absurd, cruel and oppressive to the consumers” precisely because he thinks it has to be ultimately borne by the public.

What are the other things that Globe claims as consequent to a tax on text bill? This it states further:

1. the price of all texts will increase unavoidably
2. the promo on free and unlimited text will be withdrawn
3. double whammy on the suffering public. The public will be additionally taxed as the value added tax on text will likewise increase as it will become a part of the base for VAT computation.

So, if we are to re-echo what Globe, through its attorney, claims against the tax on text bill, couldn’t we be standing on frail, flawed legal grounds? In the first place, does Congress really have to recall this text tax? But were it true that there is already imposed a 10 to 12% VAT and a 10% overseas communication tax, another third levy would very well be absurd, cruel, oppressive as to even be unconstitutional.

The bill may have unwittingly revealed the fact that the “telecommunications industry is already heavily taxed”, come to think of it. Or think about its 12% EVAT, 32% corporate income tax, local taxes (real estate + business taxes), and a 10% overseas communication tax, plus tariff and customs duties on imported telecommunications equipment along with such other fees or charges – this as raised in Globe’s position paper?

Probably, it is worth reexamining the many points raised in the Position Paper as a means to guide lawmakers on going about legislating new forms of taxation as revenue sources. Offhand, Globe appears to come as round pegs in round holes on their stand against the proposed now recalled tax on text bill. Perhaps, another blog on Globe’s Position Paper is in order but this author leaves the initiative for other subject matter experts to initiate discussion.