TAXES FOR OUR TEXT?!

Can you believe this? In an effort to raise funds for the government, the International Monetary Fund recommended TAXES FOR TEXT MESSAGING! Read this story from the Philippine Daily Inquirer.

IMF wants texting
taxed; P44B a year
Posted: 0:39 AM (Manila Time) | Dec. 18, 2002
By Clarissa Batino
Inquirer News Service

Cash-strapped

THE INTERNATIONAL Monetary Fund is urging the cash-strapped Macapagal administration to lobby Congress to pass a law that would affect about 14 million Filipinos making President Macapagal-Arroyo even more unpopular than she already is.

The law would impose excise taxes on text messaging to raise substantial revenues for a government mired in a chronic deficit problem.


Along with two other tax measures, IMF head of mission Joshua Felman said the government must implement the three tax measures within the next six months or its fiscal problems would worsen.

The two other tax measures proposed by the IMF are the lifting of the exemption of professionals from the value-added tax and the indexation of taxes on beer and tobacco.

IMF representatives yesterday concluded a 12-day, twice-a-year assessment of the country's economic progress under a post-loan arrangement called post-program monitoring.

The IMF official said the Fund has no specific recommendations as to the level of the tax that must be levied on text messaging. This is something, he added, that the government must figure out.

There are proposals in Congress to impose a tax of 5 to 7 percent on telecommunications firms.

"Next year seems likely to be challenging. The continuing erosion of the government's tax base as well as the tariff reductions of the National Power Corp. have increased the overall public sector external borrowing requirement, just at a time when prospects for emerging market financing are subject to considerable uncertainty," said the IMF official.

Felman said that the government's taxes were currently concentrated on the two most troubled sectors of the economy; banking and manufacturing.

On the other hand, the more dynamic sectors like telecommunications and exports have been enjoying tax incentives and have been lightly taxed.

Phenomenon

Currently, there are close to 14 million mobile phone subscribers and each sends an average text message of from eight to 10 daily. This should translate to revenues of 120 pesos to 130 million pesos in a day, about 3.6 billion pesos in a month, and 44 billion pesos in a year.

The short messaging system or SMS phenomenon made the Philippines the world's texting capital.


Anticipating strong opposition to the proposal, Felman said that every time a tax on text was brought up, everybody would squeal.

The finance department, for instance, had brought up a plan to impose taxes on text messaging several times but had always met strong resistance from the public.

"But that's the point. When you try to tax less dynamic sectors, nobody would complain but then you would not collect revenues at all. But when everybody squeals, it means you are making an impact," said the IMF official.

Felman said with the volume of text messages in this country, even a modest tax would raise considerable amount of funds and help the Bureau of Internal Revenue raise its tax effort from a low of 9.8 percent of gross domestic product this year.

"The government's fiscal performance had been disappointing to everyone," said the IMF official.

The government is expecting a budget deficit of 223 billion pesos this year against an original target of 130 billion pesos after revenue collection drastically fell while spending increased.

Next year, the government said it would bring down the deficit to about 202 billion pesos but the IMF believed that aggressive spending a year before the elections would push the fiscal gap to 230 billion pesos.