Loading...
HomeMy WebLinkAboutCOM 0529.001 1998-2000 FC Report 178 on Communication No. 529 Item 23 2000 HSAC LEGISLATIVE PACKAGE BLANE T. YOKOTA fime___ COUNSEL OO1e'"'-`-'~ y ca°~~~ GTE DECEMBER 1, 1999 Chair Arakaki and Hawaii County Councilmembers: I am Blane Yokota, testifying on behalf of GTE on FC Report 178, on Communication No. 529, item no. 23 (Item 23), "RELATING TO A LEGISLATIVE PROPOSAL FOR INCLUSION IN THE 2000 HSAC LEGISLATIVE PACKAGE THAT WOULD EXTEND THE FRANCHISE TAX TO TELEPHONE, TELECOMMUNICATION AND CABLE TELEVISION BUSINESSES. " GTE apaoses Item 23. Summary GTE opposes Item 23 for the following reasons: • The franchise tax is a means of invoking another gross receipts tax, in addition to the Public Service Company (PSC) tax, which public utilities currently pay. • With competition, the passage of the 1996 Telecom Reform Act, and Act 225, telecommunications franchises have disappeared. • Item 23 proposes up to a 2.5% tax on gross revenues. GTE already pays a 5.885% gross receipts tax, called the PSC tax, pursuant to §239-5, HRS. By statute, the PSC tax is paid to the State in lieu of general excise and real property taxes and comprises the same taxes any other general business in the State pays. • Through the payment of tax surcharges and fees, telephone users already support social services such as the counties' E-911 system, Telephon ~~ay Comm. No. DO ~ Flle No. CSC" hP~dd CoVNU Ref. Tos Ref. Date 1 1999 Service for the deaf and hearing impaired, schools, libraries, federal telephone excise tax and more. • Administratively, it may not even be possible to identify all revenues to individual counties. • Any taxes assessed on a public utility and telecommunications provider will be passed on to the ratepayer, thus imposing an additional burden on the customer. Rationale The basis for GTE's opposition are several: First, GTE already pays a State assessed gross receipts tax called the PSC tax, in lieu of general excise and real property taxes. The PSC tax rate paid to the State is 5.885% of the Company's gross regulated revenues. Item 23 is a county means to recoup the real property tax portion of the PSC tax collected by the State that is not being remitted to them. Public utility customers subject to the PSC tax are caught in the middle of this ongoing dispute. As testified to in the past, GTE supports the sharing of the excess portion of the 4% of the PSC tax, constituting real property tax to the counties. To authorize the counties to otherwise assess another gross receipts tax on GTE, will essentially impose a double tax on the Company's revenues. Second, there is across-jurisdictional issue among the counties that this measure does not address. Interisland long distance calls and wireless communication from cellular or mobile radio may not originate and terminate in the same county, raising the question as to which county is legally entitled to collect a tax on such calls. Third, any taxes imposed pursuant to Item 23 will become part of the Company's cost of doing business and be passed on to the customer as a rate increase or surcharge. A similar situation but in the reverse resulted from the 1986 Tax Reform Act, where the PUC ordered GTE to pass a reduction in corporate income tax savings on to our customers. Likewise, if subject to an increase in taxes, equity would require that the same argument apply to flow an increase in taxes through our rates on to the customer. In another example, the PUC allows public utilities to recover PUC imposed fees, pursuant to §269-30, HRS through a surcharge on customers. The bottom line is, an increase in taxes will result in higher rates being paid by customers which in turn may result in reduced revenue spent by customers, further affecting jobs and the economy in Hawaii. Lastly, higher telecommunications rates that would result from the additional tax proposed in Item 23 will thwart the State's efforts to attract high technology businesses to the State. High technology companies such as Uniden and Square USA, which have recently relocated to Hawaii, depend on sophisticated telecommunications services to operate their companies and market their services worldwide. Given the State's efforts to attract new businesses to Hawaii, it would be counterproductive to increase one of their key costs of operating in Hawaii. Conclusion Based upon the aforementioned, GTE opposes Item 23. Thank you for the opportunity to provide testimony on this matter.