Philippine telcos oppose new tax on text messages

MANILA, Sept 10 - Mobile phone conpanies in the Philippines protested on Thursday against a proposal in the lower house of Congress to impose new taxes on text messages that would raise revenues to help to narrow the budget gap this year.

The government would throw its support behind the measure as long as the proposed 5-centavo ($0.001) tax was not passed on to consumers, deputy presidential spokesman Anthony Golez told reporters.

The Philippines is often considered the world's text messaging capital, because the country's 70 million mobile phone subscribers send an average of 10-12 text messages or SMS every day, according to government estimates.

The country's three largest telecommunications companies are opposed to the tax measure, arguing it would be a "big burden" on low-income consumers.

"The proposed tax on SMS is clearly anti-poor and anti-consumer," said Ray Espinosa, head of regulatory affairs and policy office at the Philippine Long Distance Telephone (PLDT), adding that 92 percent of its SMS traffic is generated out of bucket-priced plans.

Bucket-priced plans, designed for low-income consumers, are either unlimited SMS or a pre-determined number of SMS over a defined time period.

Globe Telecom shared the view, saying the extra tax would make the low-priced SMS unsustainable, said Rodolfo Salalima, the mobile phone company's chief legal counsel and senior advisor.

The telecommunication companies described the "no pass-on" provision in the proposed bill as unconstitutional, citing a supreme court ruling that all taxes are passable to consumers except income tax.

On Tuesday, the ways and means panel of the 264-member House of Representatives approved the proposed tax on text messages to raise 36 billion pesos ($744.5 million) after Congress was reluctant to pass a proposal to increase excise tax on alcohol and tobacco products.

The so-called "sin taxes" were estimated to bring in an extra 20 billion pesos, but political pressures due to elections next May make lawmakers uneasy about approving it.

Congress will debate the bill next week. Lawmakers allied with President Gloria Macapagal Arroyo vowed to approve the measure before they go on a month-long break next month.

The finance department was initially pushing for new tax legislation to help meet the 2009 budget deficit target of 250 billion pesos, or 3.2 percent of GDP. Later, it asked Congress to delay the implementation of higher excise tax.

On Tuesday, economic planning officials said it was still possible to lower the budget gap below 3.2 percent of GDP if the economy grows faster in the second half of 2009, and next year.