Crying over a 5 Philippine centavo tax on text messaging

Wailing and gnashing their teeth, Filipino lawmakers as well as telecommunication firms and their subscribers have spread bile and indignation over the internet over a proposed 5 Philippine centavo tax on Short Message Service (SMS) or text messaging.

The new proposed tax intends to raise funds for public education from the enormous revenues generated by Philippine telecommunications company.

Known as the text messaging capital of the world, the Philippines has 70 million cellphone subscribers (a figure that is just 20 million less than the national population) who are said to send an average of 2 billion text messages a day through the networks of three giant Philippine telecommunication (telco) firms -- Globe, Smart, and Sun.

At a standard rate of 1 Philippine peso (or 2 US cents) per text message, the daily revenues of the three Philippine telcos could be as much as Php 2 Billion a day or about Php 730 Billion a year (US $ 15 Million a year at a conversion rate of Php 48 to US $1).

The outrage over the proposed new tax on text messaging was apparently erupted when the Lower House Committee on Ways and Means approved on Tuesday the measure imposing a 5-centavo excise tax on text messages.

Reports says that Rep. Exequiel Javier of Antique, chairman of the committee, did not include a “no pass-on” provision in the bill, which could result in Filipino cellphone subscribers carrying the burden of the new tax.

The measure which will be submitted to the plenary is a still unnumbered House Bill with features similar to House Bill 6625 filed by Ilocos Sur Congressman and Deputy House Speaker Eric Singson (a son of Former Ilocos Sur governor Chavit Singson). HB 6625 consolidates the pertinent proposed provisions covered by House Resolution 282 filed by Committee on Oversight Chairman Danilo Suarez.

Singson's version of the tax on text messaging bill includes a provision that disallows cellphone service providers from passing on the new 5 centavo tax. Section 6 of the proposed law states “The excise tax levied herein . . . shall be borne and absorbed exclusively by the mobile phone and overseas dispatch or message service providers.”

An article in Manila Times reports that House Speaker Prospero Nograles voiced his opposition to the measure that would allow the passing on of the new tax to consumers.

Nograles has opposed measure, saying the P1 per text being charged the consumers is more than enough to cover the 5-centavo tax for each text.

“We will not allow any such additional taxes on the shoulders of the public,” Nograles assured, adding the telecommunication firms rake in profits from the 50 centavos they collect for each text message sent.”

Based on studies, he said the estimated threshold amount or cost of text is about 25 centavos.

He said further: “It is my position that the proposed additional tax on [short messaging service] will be borne by the providers . . . Instead of cutting down on the cost of texting, telcos should allocate at least 20 percent of their profit to a trust fund for education and health care.”

Opposition to a new tax on text messaging has not only affected proposed legislation in the Lower House, but also another proposed measure making its way in the Upper House or Senate.

Senator Richard "Dick" J. Gordon's bill, SB 2402 or the Health and Eucation Acceleration Program Bill is similarly being targeted for opposition because certain sectors have marked it as another tax on text bill.

In a press statement, Gordon asserted that his measure proposes a levy on the income of telecommunications companies (telcos) from local text messaging.

"Ang gusto ko ay kunin ang 10% ng kita ng mga telcos sa text messaging. Masyado ng malaki ang kita ng mga telcos at yun ang hinahabol natin dito. Pero ang aking proposal ay sa loob lang ng limang taon at hindi ito pwedeng ipasa sa tao. (What I want is to get ten percent from the income of telcos on text messaging. What I propose is for the levy to be imposed for a five year period and that the levy cannot be passed on to the people.) " he said.

The senator explained that his bill, Senate Bill 2402, seeks to create the Health and Education Acceleration Program (HEAP) Corporation that would spearhead the rehabilitation of the public education and health care systems of the country by requiring telcos to remit a portion of their net revenues from local text messaging.

Gordon said the telecommunications industry is one of the biggest and fastest-growing industries in the country, noting that the number of mobile phone subscribers has rapidly increased from 34,600 in 1991 to 72 million at present.

"There are two billion text messages a day. Sa kanila na yung 90% na kita, ang hinihingi ko lang ay 10% or 200 million a day. Kapag nakita ng tao na ito ay gagamitin para sa edukasyon at kalusugan, siguradong susuportahan nila ito. (The telcos can keep 90 percent of their revenue and what we will keep will be just ten percent or P200 Million a day. If the people see that this goes directly to public education and public health services, they will certainly support it,)" he said.

"These telecommunications companies grew exponentially because of the millions of Filipinos who used their services. It is just right that they give back in a manner substantial enough that it will end our problems with public education," he added.

Gordon's bill, at its core, seeks to address the yearly gaps in public education funding that has resulted in shortages in everything from classrooms, books, and teachers. But beyond closing the gap, the bill also seeks to pour in massing funding into forward looking programs which seek to alleviate the nutritional and health problems of a vast majority of public school children.

In another statement, Gordon elaborated on the public education deficiencies that will be eradicated through the levy he is proposing on text messaging:

Within its first year of implementation, the fund to be generated through the HEAP bill will enable us to supply the existing classroom backlog of 12,418 rooms at the cost of P6.95 billion; provide the needed 1,744,237 school seats at P1.39 billion; and 44,200,000 textbooks for all students at P2.78 billion.

The fund is also enough to hire 12,733 teachers with a cost of P2.48 billion and fund for their training at P25 million; employ 24,709 principals at the cost of P4.43 billion; and feed 12,202,297 school children in all grades for 120 days at the cost of P58.5 billion.

Gordon said that aside from improving the educational system, there is also a need to enhance the country's school health profile, which in itself is equally in a similar dismal condition.

Department of Education's figures show that 21% of schoolchildren are malnourished; 11.4% of students ages 6-12 are iodine deficient; 37.4% between ages 6-12 suffer iron deficiency anemia (IDA), while 36% suffer from vitamin A deficiency.

Moreover, 67% of schoolchildren suffer intestinal helminthiases (intestinal worms); 97% have dental caries; 6.2% have hearing impairment; and 2.54% have visual impairment.

The Executive Department or Malacanang has already sent signals to the Lower House for it to revise its stand on imposing a tax on text messaging.

In a report by the Philippine Daily Inquirer, Presidential economic spokesman Gary Olivar cautioned lawmakers on pursuing the tax measure.

Wary about the possible political impact of the proposed tax on text messages, Malacañang Friday called on lawmakers to revise the measure and spare cell phone users of unnecessary burden.

“If you see objections coming from both sides of the fence, there is really a room for further study,” presidential economic spokesperson Gary Olivar said. “Plus, there’s new information coming from the telecoms. Maybe, some revisions are in order.”

A large number of political personalities with Facebook accounts have made their positions on the new tax measure on text messaging.

Toots Ople is of the position that the 5 centavo tax on text will severely hamper Overseas Filipino Worker's capability to communicate with their family in the Philippines and cut into their income.

Satur Ocampo, a leftist congressman and former leader in the Philippine Communist movement, probably had his supporters post his own opposition against the tax measure saying that it would be anti-poor.

Both views seem misplaced especially when you consider that the reason why we have OFWs in the first place is because of the bad education that Filipino children get from public schools. Moreover, even the armed component of leftist movements in the Philippine imposes so-called revolutionary taxes on businessmen and people in the territories that they control. And there is absolutely no accounting made for these ILLEGAL taxes.

What is certainly anti-poor is to go against legislation that may finally rescue the Philippine public education system that has been going into severe decline for the past 30 years.

In the meantime, as the government turns its back on these proposed measures, it is expected that Philippine public education will continue to produce graduates that are barely literate.