Tax on Global Telephone Calls Tentatively OKd

Emboldened by a new legal opinion, the Los Angeles City Council, which recently extended a 10% tax on intrastate long-distance telephone calls to include interstate calls, gave preliminary approval Wednesday to expand the levy again to encompass international calls.

The council voted 10 to 3 in favor of the tax. A second, final vote is scheduled next Wednesday.

The council’s action was prompted both by new legal rulings and appeals of phone industry representatives. Bookkeeping systems used by some phone companies make it difficult for them to cull the costs of international calls from other long-distance calls, industry representatives said.

The telephone taxes that the city levies and will levy apply to long-distance calls that are billed to addresses in Los Angeles.

At present, the city levies a 10% tax on Los Angeles-billed long-distance calls within the state of California. Despite opposition from the phone industry and business groups in budget hearings last month, the council voted to broaden the tax to include long-distance calls within the continental United States, which is estimated to raise another $19 million in city revenue. At the time, the city attorney’s office advised against imposing the tax on international calls because of pending cases, though since then he said there have been rulings favorable to imposing the tax.

Keith Comrie, the city’s chief administrative officer, said the tax on international calls would raise “another million or two.”

“I don’t believe that,” Councilwoman Gloria Molina countered. “It’s absolutely poor policy to levy a tax without knowing what revenue it would produce.” Molina acknowledged that she “might have a bias” to protect her heavily Latino constituency that places many calls to Mexico and Central America.

Councilman Zev Yaroslavksy, chairman of the council’s Revenue and Finance Committee, argued that the new levy is fair. “If we’re going to tax calls I make to my aunt in Philadelphia,” he said, speaking hypothetically, “then we ought to tax calls to my aunt in Copenhagen.”

The taxes on national long-distance calls will become effective July 1. The tax on international calls will become effective the same date pending final approval.