Text Tax: An IMF Imposition That Could Blow in Arroyo’s Face

While openly asking for sin taxes reform, Mrs. Arroyo has also been discreetly pushing for a text tax law, which in March she described as having a rate of between “5 to 10 centavos” and with collections earmarked for “education”. Note that these are the same salient provisions of current House proposal for a text tax. After Mrs. Arroyo’s SONA, sin taxes are no longer in the agenda of the Malacañang-controlled House ways and means committee. Its chairman Antique Rep. Exequiel Javier has already declared that the text tax is more doable than the sin taxes reform.

Do we need new taxes?

For the IMF, what is important is that government be able to widen its revenue base and manage the national budget deficit, which is expected to balloon to P250 billion this year. The IMF and government hope to reduce this to P233.4 billion in 2010 through new taxes. Whether the new taxes will come from our cellphones or our beer, the intention is to assure creditors that the Philippine government, which presently has a debt of P4.23 trillion, will continue to be a viable borrower.

But do we really need new taxes when government losses from anomalous contracts in infrastructure projects alone such as the botched NBN-ZTE broadband project reaching at least P30 billion a year and nearly approximate the projected P36 billion in potential annual revenues from the text tax?

Consider also that even without modifying our existing commitments with the World Trade Organization (WTO) and other free trade deals, the Philippines can hike tariffs across the board and raise billions of pesos in revenues. Note that due to continuing trade liberalization, total collections from tariffs on imported goods and services under Arroyo now only account for 2.8 percent of total revenues and gross domestic product (GDP), compared to around 4.5 percent for most of the 1990s. In the first half of 2009 alone, we are giving up almost P117 million in potential revenues per month due to lower duties.

Government claims that revenues from the text tax will be used for education. In a policy regime of automatic debt servicing, this is lip service, to say the least. In the proposed 2010 national budget, for instance, the Arroyo administration is allocating a per capita education budget of P2,502, while each Filipino will have a debt servicing burden of P7,944. For health, Malacañang is allocating P402 for 2010 and P58 for housing. Thus, this administration, which always uses social services to defend its oppressive taxes, is allocating a combined budget for education, health and housing with an amount that is merely 37 percent of what it intends to pay its creditors.

And finally, how can a regime whose highest officials dined for $35,000 (ostensibly using taxpayers’ money) in two nights during a US junket justify another onerous tax on a people already battered by high prices, low wages and job scarcity?

By the way, text tax proponent Suarez claimed to have paid for one of those dinners. (Bulatlat.com)

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