POSTSCRIPT / June 17, 2004 / Thursday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Cash-strapped gov't set to tax citizens to death?

TEXT TAX: Yes, I’m in favor of taxing cellphone texting. I have two reasons: to raise revenue and to improve the regulation of this runaway mode of easy messaging that seems to be unique to Filipinos.

However, such text tax should not be imposed on the poor user, but on the fat phone companies that are drowning in the millions they rake in every day from captive subscribers.

How do we make that sure text tax is not passed on by the phone company to its subscribers? We have geniuses all over the place who can provide the answer to that.

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TIGHTER REGULATION: Imposing a special tax on texting should be just part of a wide-range in-depth review of the mobile phone business with focus on tighter regulation.

We do not need to strain to see the areas in the business where more regulation appears to be needed.

Cellphones are loosely regulated tools in the hands of unscrupulous persons who use them for harassment, extortion, spreading rumors, selling prohibited items, operating sex services and a plethora of other shady operations.

Will not regulation violate the privacy of cellphone users? Any government regulation is an intrusion into the citizen’s privacy, but serving the greater public good offsets that negative point.

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THE LAW MAKES THE CRIME: We do not have in mind having the police or the intelligence community snooping and monitoring messages crisscrossing the air.

What we envision is that after a review, we should be able to define more clearly what acts of the phone companies, their subscribers, among others, constitute violations and what appropriate penalties are to be imposed.

Remember the case of the youth who wrote the “I Love You” virus that nearly caused the collapse of the world’s Internet system? He got away (Good for him!), because in this country at the time he created that “love” virus there was no law saying what he did was a crime.

It is the law that makes an act a crime. As long as there is no law saying that an act is a crime, it is not a crime.

We should not wait till we witness undesirable practices being committed all around before we rush to enact regulatory laws.

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MONEY-LAUNDERING: Remember when foreign enforcers and electronic sleuths were breathing down our necks, pressuring us to enact certain laws to curb money laundering in our banking community?

We knew what money laundering was and what its effects were, and in fact had in our midst some of the world’s most astute money-launderers. But we did not have the appropriate laws defining what was to be prohibited and what to do with culprits if caught.

Besides, we resented those Gringos telling us what to do with our own money in our own country.

Money laundering was (still is?) one of those activities aided by electronics that needed/needs regulation. The law must be in stride with, or even several steps ahead of, progress.

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REGULATION NEEDED: Cellphones are among high-tech gadgets suddenly strewn in this society where regulation has lagged.

For instance, is it all right to just allow cellphone users to surreptitiously photograph, with malicious intent, unsuspecting individuals?

Spy photography is committed everyday with impunity and many of us are not comfortable with it, but what law will rein in this unwanted practice?

A law should be passed, or if there is already a law it should be refined in the context of such phenomenon as spy cameras hidden in cellphones being used to embarrass, harass, humiliate and destroy reputation.

In the review of regulations, we can include higher taxes for the phone companies to force them to share more of what they extract from the population.

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TAX NOW, THINK LATER: That is just cellphones. And that is just taxation in the guise of regulation.

But how come when the profligate government needs money, as in right now, the first knee-jerk reaction we get from it is to tax the people some more?

To raise money, haven’t they thought of improving collection of existing taxes first? We’ve heard them say something about improving collections, but nothing much has followed.

I remember former Rep. Tet Garcia, now governor of Bataan, spending long hours putting together a simple but effective mechanism for preventing the diversion of billions in duties and taxes meant for government coffers.

This diversion is well-known and a few culprits had been caught, yet supposed efforts to curb it have not resulted in any appreciable dent in the crime committed by tax collectors conniving with bank officers to steal easy millions.

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TAX DIVERSION: Garcia’s solution involved adding a few digits to the security serial code at the bottom of checks used in paying duties and taxes. This ensures that the check is not diverted to another (usually fictitious) account.

We saw the plan as outlined by Garcia and as presented to President Arroyo and her ring of advisers. Even a layman like myself understood it. I was told President Arroyo agreed that it was an idea worth trying.

The billions that it is projected to grab back from the syndicates are enough to almost wipe out the budget deficit. That alone should be enough reason for the President to look at it again.

But, some key people in the banking sector and some officials allied with them shoved the proposal into the bureaucratic maze, where it was eventually forgotten.

We suspect that some of those in key positions who objected were afraid that they or their allies in the banking sector would lose billions if they adopted Garcia’s proposal.

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VAT DIDN’T WORK: Then there is also the VAT, the value added tax. Its aggressive proponents were saying VAT would vastly improve tax collections because of this and that reason.

VAT was all theory gone haywire. It looked good in textbooks and in the lecture notes of some foreign experts, but was never adapted to the Filipino’s psychology and his human situation.

Garcia also warned that, as written in the law, VAT would not work as envisioned. Sure enough, it did not work.

The imposition and collection of VAT is now one big racket: Everybody claims dubious tax credits and reduces his tax payments, depriving the government of legitimate revenue.

Nobody keeps track of the cascading tax credits at various levels from the sources of raw materials, to the manufacturers, the merchants and all the way to the consumers.

Stores and business offices, especially the small ones, give the consumer a choice of asking for an official receipt and paying 10-percent VAT or foregoing the receipt and getting a hefty discount (discount meaning “no VAT”).

This is merrily going on in full view of a lazy, corrupt bureaucracy.

Will President Arroyo, who seems to be on her uneasy way to a full six-year term, let this tax drain called the VAT stay as is?

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RUNAWAY TAXATION: Of course the easiest way out for a government that is almost insolvent is to look for things that can be taxed. Tax dito , tax doon , tax everthing, tax everywhere!

There is, for instance, this idea of imposing higher “sin” taxes on such items as liquor and cigarets.

In principle, it seems logical to attempt to tax to extinction such vices as drinking and smoking.

In other societies, they have discovered that the number of people who smoke has been dwindling for at least two reasons: the cancer scare and the prohibitive taxes imposed on tobacco.

But here, we are being told that the objective of the “sin” taxes is to raise revenue, not so much to save lives.

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ENTER SMUGGLERS: If it is to save money, we doubt if taxing liquor and cigarets more heavily would achieve the desired improvement in tax collection on those items.

You impose an exorbitant tax on liquor and cigarets, and their prices shoot up. As their prices go up, the smugglers will get to work and bring in cheaper foreign brands.

These smuggled foreign brands will not be taxed. Of course. The summary effects are: the government will lose revenue from local liquor and cigarets whose sale will drop, and will also lose money from unrealized taxes on smuggled items.

The drinking and smoking will go on as if nothing happened and the medical reason for the “sin” taxes is forgotten.

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(First published in the Philippine STAR of June 17, 2004)

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