Tax on Text Messaging? Philippines Ponder 'SMS Tax' to Boost State Coffers

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By EW News Desk | November 20, 2012 1:11 PM EST

Economy Watch

The Philippines government may attempt to revive a hugely unpopular 2009 bill that aimed to levy a tax for all mobile phone text messages, claimed a report by the Philippine Daily Inquirer on Monday, with a new 'sin tax' on alcohol and tobacco also expected to be passed as early as next week.

Giorgidi Aggabao, vice chairman of the House ways and means committee, told Congress that "it is time to revive these tax bills that were filed in the 14th Congress but did not progress beyond desultory hearings," especially as the government hopes to balance its national budget by 2016.

But while a tax on SMSes (Short Message Service) was forecasted to raise between 20-36 billion pesos ($482-$869 million) a year for the state's coffers, Aggabao admitted that the bill would face stiff opposition from telecommunication companies in particular, who would be forced to absorb the entire cost of the new tax under a strict no-pass on provision.

"The chief opposition then (in 2009) came from the telcos. I'm sure they will make a more spirited opposition now that their subscriber base has grown exponentially since then," said Aggabao.

Over the weekend, IMF Managing Director Christine Lagarde was in the Philippines; and weighed in her opinion for a potential SMS tax.

Speaking to a news conference, as cited by AFP, Lagarde claimed that the nation's telephone coverage of close to 112 percent, thanks to the popularity of mobile phones for sending short messages cheaply, was conducive to an 'SMS Tax', as it "clearly satisfies one of the two criteria for what we call a good taxation...a very broad base."

However Lagarde also said that the government must be the ones to decide what kind of taxes it imposes, after her organisation extended a $1 billion loan to the country in June.

The Philippines, with a population of nearly 100 million people, is one of the most prolific countries in the world in sending SMS messages with the average mobile phone user sending 600 messages a month. Each message now costs just a peso (2.4 cents).

After the 'SMS tax' bill was defeated in 2009, Philippines instead turned to proposing higher taxes on alcohol and tobacco. The government says this 'sin tax' could be passed next week despite opposition stalling ahead of the May 2013 elections.

Meanwhile, the Philippines economy has been forecasted to expand by more than 5 percent this year as a result of sound fiscal and monetary policies, the IMF said.

 "I know that growth in 2012 will be way in excess of 5 percent and we're certainly looking forward to 2013 being in the range of 5 percent as well," Lagarde told reporters in Manila.

"This year, 2012, at a very difficult time because of the financial crisis in other parts of the world, the Philippines is probably the only country for which we have increased the growth forecast, as opposed to other places in the world where we actually decreased our forecasts," she said. 

Related: Philippines Economy

Related: Philippines Economic Statistics and Indicators

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The article was first published by Economy Watch.

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