Tax relief for PLDT telecoms group

Rarely have I gone half-cocked on a public issue but, sad to say, my last piece was a glaring example of that rarity. Now feeling sheepish and chastised, it is my duty to correct the inaccuracies in fairness to those who may have been wrongly put in a bad light as a result.

That column, however, was essentially correct in suggesting that some special-interest group is trying to pull a fast one in the matter of telecommunications-related taxes. My mistake was to assume that all five mobile-phone companies were involved in a plot to railroad a tax-relief measure for their own benefit.

Party-list Rep. Jonathan de la Cruz said, “As far as I know, it’s only the Philippine Long Distance Telephone [PLDT] telecoms group—including PLDT, Smart Information Technologies [Smart], Pilipino Telephone Corp.
[Piltel] and Meridian Telekoms Inc.—that is involved here.”

Representative de la Cruz said in no uncertain terms the group that would benefit from the controversial measures is the PLDT telecoms group, headed by Manuel Pangilinan. “We don’t know yet the exact impact of these measures, but that’s what I want the proponents of the measure to explain to the plenary body and the public,” the congressman said.

I had also wrongly assumed that the questionable tax-relief measure was endorsed to the floor by the ways and means committee. It was actually the House Committee on Legislative Franchises that reported out the measures, even if these did not pass through ways and means.

My mistake was that I couldn’t imagine that a tax measure would be disguised as “amendments” to the provisions of the respective legislative franchises of the companies in the PLDT telecoms group. And that’s exactly what those amendments are.

Now, what exactly are these controversial measures about and why is de la Cruz in such a snit? Interviewed on the dwIZ radio program Business is our Business, de la Cruz did not mince words or pull any punches. He said it was not yet clear how big a tax relief the four telecommunications companies would be getting as a result of the franchise amendments. “But it is my duty to demand to know exactly how much tax benefits they would be getting as a result of these measures,” de la Cruz said.

De la Cruz said had he not raised a howl, the proposed amendments would have breezed through plenary until it was too late to do anything to stop it. The PLDT telecoms group, for all we know may be getting a tremendous tax relief if these amendments are passed without question.

“All four proposed amendments are jointly sponsored by Rep. Ferjenel Biron and Rep. Joseph Santiago. These uniformly worded proposals are contained in House Bills 6682 to 6685, which were simultaneously reported out by the Committee on Legislative Franchises, headed by Biron himself.

The Biron committee had only a cryptic justification that the amendments sought to “rationalize and put in parity the tax regimes under which the telecom firms are operating,” de la Cruz said.

As if he smelled a dead rat somewhere in the premises, de la Cruz has demanded to know what the exact impact of these amendments would have on the revenue-raising efforts of the national government. He pointed out that the public would have no way of knowing what exactly is meant by “rationalizing,” or putting the tax regimes applicable on these companies in some sort of “parity” with one another. “Let’s see how much more, or how much less, taxes the PLDT group has to pay the government when these amendments are in place.”

Indeed, there is a need for a more detailed explanation of these proposed amendments. In the case of PLDT, its 25-year franchise is up for renewal for another 25 years. The committee’s proposal is to amend Section 12 of the renewed franchise (Republic Act [RA] 7082) on the basis of the following:

“[to]…rationalize the taxes levied or collected from the grantee by either local or national government, by requiring them to pay the value-added tax [VAT] under RA 7116, as amended, on all gross receipts transacted under its franchise, in lieu of all taxes, duties and charges levied or collected therefrom….”

“The amendment also provides that any rights, privileges, benefits and tax or other exemptions granted to or accorded under existing and future telecommunications franchises shall ipso facto be extended, granted and accorded to the grantee and become part of its franchise.”

The amendment, in other words, requires PLDT to pay the VAT all gross earnings, and that’s it. It also expressly exempts PLDT from paying all other duties and taxes that may be imposed on it by any agency of the government, local or national.

The proposed amendment in the individual franchises of Meridian Telekoms, Piltel and Smart are pretty much the same as the one proposed for the PLDT franchise. After paying the VAT, they will all be exempt from paying all other taxes to be exacted on them by any local or national government agency.

What de la Cruz wants is a clear and detailed explanation. He wants to know how much, more or less, in taxes would be lost by the government as a result of these vague but all-embracing amendments. Will the government’s tax take be reduced or increased by these amendments; in either case, by how much?

In the course of his parliamentary tantrum (if I may call it that), de la Cruz lamented that while the ways and means committee seemed committed to increase the so-called sin taxes which could put tobacco growers in the north out of business, here is a proposal that aims to lighten the tax burden of the cash-rich PLDT telecoms group.

I say since the proposed amendments pertain to telecoms-related taxes—these should be tossed to the ways and means committee. That is the committee that has the mandate—and the competence—to process all proposed tax measures.


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