What could have been one of the most unpopular legislations crafted by the House of Representatives, the proposed measure to impose tax on text messaging almost passed the chamber few months before the official filing of candidacy for the 2010 national elections. If not for the strong oppositions from the vote-rich consumer groups, the imposition of a five centavo excise tax on text will be on its way for ratification.
While there is a safeguard clause on the House bill that prevents telecommunication companies (TELCOS) from passing the tax to the consumers, several groups representing almost 70 million cellular phone subscribers strongly appealed to junk the impending policy. They believe that the no pass-on tax provision under the bill does not at all guarantee TELCOS’ compliance with their supposed mandated obligation to shoulder the proposed five centavos tax on text, contending that under the law, only taxes on income are not allowed to be passed to consumers.
While the proposed measure to impose levy on text messages, for all intent and purposes, is intended to finance basic social services of the government like education, health care and shelter program for the poor, we cannot blame the consumers for rejecting such scheme. It can be recalled that during the recent past, the citizenry was burdened with the sudden surge on prices of commodities due to the law passed by Congress to increase the Value Added Tax (VAT) collections from 10% to 12%.
More popularly known as the Reformed Value Added Tax (RVAT), the move was triggered by the need to solve the country’s ballooning public sector deficit that reached almost P200 billion, not to mention the accumulated $600 billion NAPOCOR debt which the national government is obligated to shoulder during the time.
In order to alleviate, if not, totally eliminate the looming economic crisis out of proportion, Congress passed three revenue measures hoping to put the country’s financial position to a balanced budget in a span of ten years as follows:
• Indexation of Sin Taxes Law;
• Lateral Attrition Law; and
• Reformed Value Added Tax(RVAT)Law
RA 9337 or the RVAT law was perceived to be the highest income generating scheme for the government from amongst the three said measures passed into law during the last Congress. It is said that RVAT can easily propel an additional estimated amount between P55 to 60 billion every year.
After 2 years of implementation, the Department of Finance has reported that the effect of the law placed our country back into a positive outlook. In fact, MOODY’S CREDIT RATING AGENCY” and “STANDARDS & POOR” have upgraded its credit ratings to the Philippines from a point that almost reached a critical level.
The RVAT law actually plays a pivotal role in salvaging the country from falling into a deeper crisis. However, its repercussions to surge inflation, including prices of basic goods in the market brought ordinary citizens particularly the poor and the working class into outrage.
The objective of Congress to protect the consumers by shielding them with a non-pass-on tax provision for text messages is definitely on the right track and is in harmony with the sentiments of the people. The new set of legislators to get elected in 2010 should then come-up with a new tax paradigm not only on text messages but on all goods and services traded in the market. Incoming policy makers should seriously consider placing remedy on the predicaments of our citizens particularly on the inflationary effects of pass-on taxes by revisiting the country's Internal Revenue Code.
A devise technically known to economists as “absorption method”, should be considered in order to derail the impact of pass-on tax impositions directly to the end consumers. The scheme will simply divide the burden of the levied pass-on taxes between the sellers and the buyers in equal proportions to prevent end consumers from paying the entire tax charges on both commodities and services.
The suggested 50-50 sharing method will not in any way decrease the present tax being collected. As compared to the traditional method in applying tax charges, the following are the implications of the proposal:
Business/traders will start sharing burden of vat payment with buyers;
Increase or decrease of business/traders’ share in output tax as price mark-up of goods for sale increases or decreases;
retained tax collections on the part of the government; and
Lower price of goods on the part of the consumers.
This proposal to share by half the duty of paying taxes on goods and services is actually nothing as compared to the way other countries pamper their ordinary citizens from tax impositions. As testified during the hearings on RVAT law during the last Congress, in China, the VAT slapped on Capital Equipment of corporations were not allowed to be passed to the market and yet it did not bring the business activity into a slow down.
While there is a safeguard clause on the House bill that prevents telecommunication companies (TELCOS) from passing the tax to the consumers, several groups representing almost 70 million cellular phone subscribers strongly appealed to junk the impending policy. They believe that the no pass-on tax provision under the bill does not at all guarantee TELCOS’ compliance with their supposed mandated obligation to shoulder the proposed five centavos tax on text, contending that under the law, only taxes on income are not allowed to be passed to consumers.
While the proposed measure to impose levy on text messages, for all intent and purposes, is intended to finance basic social services of the government like education, health care and shelter program for the poor, we cannot blame the consumers for rejecting such scheme. It can be recalled that during the recent past, the citizenry was burdened with the sudden surge on prices of commodities due to the law passed by Congress to increase the Value Added Tax (VAT) collections from 10% to 12%.
More popularly known as the Reformed Value Added Tax (RVAT), the move was triggered by the need to solve the country’s ballooning public sector deficit that reached almost P200 billion, not to mention the accumulated $600 billion NAPOCOR debt which the national government is obligated to shoulder during the time.
In order to alleviate, if not, totally eliminate the looming economic crisis out of proportion, Congress passed three revenue measures hoping to put the country’s financial position to a balanced budget in a span of ten years as follows:
• Indexation of Sin Taxes Law;
• Lateral Attrition Law; and
• Reformed Value Added Tax(RVAT)Law
RA 9337 or the RVAT law was perceived to be the highest income generating scheme for the government from amongst the three said measures passed into law during the last Congress. It is said that RVAT can easily propel an additional estimated amount between P55 to 60 billion every year.
After 2 years of implementation, the Department of Finance has reported that the effect of the law placed our country back into a positive outlook. In fact, MOODY’S CREDIT RATING AGENCY” and “STANDARDS & POOR” have upgraded its credit ratings to the Philippines from a point that almost reached a critical level.
The RVAT law actually plays a pivotal role in salvaging the country from falling into a deeper crisis. However, its repercussions to surge inflation, including prices of basic goods in the market brought ordinary citizens particularly the poor and the working class into outrage.
The objective of Congress to protect the consumers by shielding them with a non-pass-on tax provision for text messages is definitely on the right track and is in harmony with the sentiments of the people. The new set of legislators to get elected in 2010 should then come-up with a new tax paradigm not only on text messages but on all goods and services traded in the market. Incoming policy makers should seriously consider placing remedy on the predicaments of our citizens particularly on the inflationary effects of pass-on taxes by revisiting the country's Internal Revenue Code.
A devise technically known to economists as “absorption method”, should be considered in order to derail the impact of pass-on tax impositions directly to the end consumers. The scheme will simply divide the burden of the levied pass-on taxes between the sellers and the buyers in equal proportions to prevent end consumers from paying the entire tax charges on both commodities and services.
The suggested 50-50 sharing method will not in any way decrease the present tax being collected. As compared to the traditional method in applying tax charges, the following are the implications of the proposal:
Business/traders will start sharing burden of vat payment with buyers;
Increase or decrease of business/traders’ share in output tax as price mark-up of goods for sale increases or decreases;
retained tax collections on the part of the government; and
Lower price of goods on the part of the consumers.
This proposal to share by half the duty of paying taxes on goods and services is actually nothing as compared to the way other countries pamper their ordinary citizens from tax impositions. As testified during the hearings on RVAT law during the last Congress, in China, the VAT slapped on Capital Equipment of corporations were not allowed to be passed to the market and yet it did not bring the business activity into a slow down.
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