House leader seeks removal of telcos’ tax exemptions

MANILA-- A leader of the House of Representatives wants to lift the franchise tax exemptions granted to telecommunications industry, which has become a significant sector for the country's economic growth.

House Bill 5444, introduced by Deputy Speaker Sharon Garin, seeks to amend the National Internal Revenue Code to reimpose franchise tax on telecommunications entities.

Under the bill, a franchise tax at the rate of 8 percent shall be imposed on the gross receipts of telco companies in lieu of the value-added tax (VAT) to which these entities' earnings are presently subjected.

Garin said the country's telecommunications industry has immensely grown in recent years with the development of short message service (SMS), expansion in broadband, and rollout of optical fiber infrastructure.

Citing Standard and Poor's (S and P), Garin said there is a projected 2 to 4 percent revenue growth annually for the Philippine telco industry in the coming years as smartphones become more accessible and data usage increases.

"Telcos were granted franchise tax exemptions when the industry was still starting out in the country in order for the telcos to fully capacitate themselves and strengthen the industry. Now, the industry has immensely grown in recent years," Garin said in a statement.

The House leader cited the need for the government to get hold of its share by placing a tax levy on the profits coming from the telecommunications industry, thus securing the continuous development of the country's economy.

"These telcos should not pass on the burden of the franchise tax to their consumers as it is them who is benefiting from the franchise given by Congress, and not the consumers. The passage of this bill will not add burden to our people," Garin said.

She also noted that some of the telco companies have become the country's most profitable corporations yet the tax incentives they enjoy were never revoked.

Source: Philippines News Agency