August 11th, 2022
The House Committee on Ways and Means will conduct an inquiry, in aid of legislation, into the probable tax liabilities of DITO Telecommunity Corporation, in response to allegations that it is bypassing its interconnect agreements with other telecommunications companies, causing foregone interconnection payments of around P2.5 million daily, or around 1000 international voice calls allegedly masked as local calls.
Committee Chair Joey Sarte Salceda (Albay, 2nd district) said that the government could be losing “at least P7.5 million monthly due to this bypassing, if the figures alleged by the other telecom companies are true.”
Under Section 120 of the National Internal Revenue Code, there is a ten percent tax on “every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment service.”
“By masking the calls as local, they effectively doing services smuggling. I am all for cheap international calls, because OFWs need to connect to their loved ones here. But, we cannot condone nefarious means of doing business, especially if it deprives the country of precious tax revenues, the lifeblood of government.”
“So, I want to know if there is basis to say that DITO is violating such tax provision, and what our tax authorities can do about it. I also want to hear DITO’s side. As our record has shown, the Committee on Ways and Means does not investigate to embarrass, to harass, or to intimidate, but to make good policy,” Salceda adds.
“You will recall, for example, that with the Megaworld tax issue, we were able to get the tax authorities to follow regular order, while also making Megaworld commit to cooperate with the government fully. The same result, I hope, will come out of this exercise.”
Salceda also says that “if the revenues are not that high, and it proves to be a challenge for Filipino companies to go global and digital, I could even recommend its repeal [of Section 120]. But for now, the law is the law.”
Tax provision could serve as “digital tax”
“It’s also high time that we discuss this provision, because there is an interpretation that advertising payments by Filipino companies to Facebook, Google, and other advertising venues. So, there are serious policy issues attached to this concern.”
The Section states that “There shall be collected upon every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment service, a tax of ten percent (10%) on the amount paid for such services.”
“The internet is obviously a communication equipment service. So, I want to know if we can interpret advertising as a message or dispatch.”
Salceda says he will be calling the Bureau of Internal Revenue, the National Telecommunications Commissions, representatives from DITO and the telecommunications companies it has interconnection agreements with, and other key stakeholders to the hearing.