House to probe DITO’s tax liability for fraudulent calls

The penalty was due to international simple resale (ISR) calls made using a DITO SIM to the Globe network which bypassed proper voice traffic channels, resulting in international calls being billed as local calls. (File Photo: Gilles Lambert/Unsplash)

MANILA – The House Committee on Ways and Means will conduct an inquiry into the reported tax liabilities of DITO Telecommunity Corp. due to fraudulent international calls masked as local that violate the firm’s interconnection agreements with other telecommunication companies.

Albay Rep. Joey Salceda, committee chair, said the Philippine government stands to lose at least PHP7.5 million monthly due to the illegal bypass activities done using DITO’s network, noting that such bypassing deprives the government of the tax revenues from international voice traffic.

Citing Section 120 of the National Internal Revenue Code, Salceda said there is a 10 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 (are) effectively doing services smuggling. I am all for cheap international calls, because OFWs (overseas Filipino workers) 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 the government,” he said in a statement on Thursday.

He said a congressional inquiry should determine if there is basis to say that DITO is violating such tax provision, and what the country’s 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 said.

Salceda said he will be calling the Bureau of Internal Revenue, the National Telecommunications Commission, representatives from DITO and the telecommunications companies it has interconnection agreements with, and other key stakeholders to the hearing.

On Monday, DITO filed a complaint before the Philippine Competition Commission (PCC), accusing Globe and Smart Communications of abuse of market dominance through interconnection woes, resulting in as little as 20 to 30 percent of calls made by DITO subscribers successfully connecting to Globe and Smart.

In response to the PCC complaint, Globe asked the NTC to penalize DITO for interconnection violations amounting to PHP622 million.

The penalty was due to international simple resale (ISR) calls made using a DITO SIM to the Globe network which bypassed proper voice traffic channels, resulting in international calls being billed as local calls.

Smart also asked DITO to clamp down on its users who have abused ISR calls before they provide extra capacity.

“Simply put, DITO has failed to prevent its network from being misused for fraud, with DITO SIMs masking international calls as domestic, resulting in huge monetary losses for Smart,” Smart vice president for regulatory affairs Roy Ibay said.