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Dirty money watchdog tweaks rules to cover casinos

By Mark T. Amoguis
Senior Researcher

THE ANTI-MONEY LAUNDERING COUNCIL (AMLC) has tweaked rules on administrative cases to cover casinos — including their officers, directors and employees — and introduced gradation of fines according to gravity of violation.

The AMLC Procedural Issuance on Rules of Procedure on Administrative Cases (RPAC) — signed on July 26 and published in a newspaper last week — repealed the Rules on Imposition of Administrative Sanctions (RIAS) signed on May 24, 2017 and which took effect on Aug. 8 that year.

“The RPAC is intended to apply to administrative cases for non-compliance with, or violations of the AMLA (Anti-Money Laundering Act), as amended, and its implementing rules and regulations, and guidelines and issuances of the AMLC,” the AMLC said in a statement on its Web site.

“The RPAC covers not only administrative cases against covered persons, but also those against its individual officers, directors and employees of the covered person.”

Aside from covering the entities regulated by the Bangko Sentral ng Pilipinas, the Insurance Commission, the Securities and Exchange Commission, as well as non-financial businesses and professions such as jewelry dealers and precious metals and stones dealers, the RPAC also includes casinos, including the Internet- and ship-based ones, “with respect to their casino cash transactions related to their gaming operations.”

Casinos are considered “covered persons” under the Republic Act No. 10927 — enacted in 2017 — amending the Anti-Money Laundering Act of 2001.

The RPAC also revised upward respondent classification according to asset size. Micro is classified as those with assets of up to P10 million (from up to P3 million previously); small, P10,000,000.01 to P100 million (from P3,000,000.01 to P15 million); medium, P100,000,000.01 to P1 billion (from P15,000,000.01 to P100 million); Large A, P1,000,000,000.01 to P50 billion (from P100,000,000.01 to P500 million); and Large B, P50,000,000,000.01 and above (from P500,000,000.01 and above).

The AMLC also revised fines according to an entity’s asset size and gravity of violation.

As with the previous rules, violations are classified as grave, major, serious, less serious and light, but the new rules further breaks down each classification into minimum, medium and maximum levels.

The new rules also introduced a separate schedule of fines for non-compliance with submission of covered transaction reports. Covered are transactions in cash or other equivalent monetary instrument involving a total amount in excess of P500,000 within one banking day.

Gov’t expects revised terms for Davao, Kalibo airport dev’t this week

By Denise A. Valdez
Reporter

THE DEPARTMENT of Transportation (DoTr) is looking to receive before the month ends revised concession terms for unsolicited proposals from private firms to modernize two regional airports.

Transportation Undersecretary for Planning Ruben S. Reinoso, Jr. said in a mobile phone message that the new contract terms for Davao International Airport and Kalibo International Airport are expected within the week. “We need to review if compliant before we endorse to NEDA (National Economic and Development Authority),” he said over the weekend, referring to concession terms to be submitted by the proponents.

Chryss Alfonsus V. Damuy, president and chief executive officer of Chelsea Logistics and Infrastructure Holdings Corp., confirmed in a text message that the company plans to submit the revised proposed terms “within the month.”

Chelsea was awarded by the DoTr original proponent status (OPS) last year for its P49-billion proposal to operate, maintain and develop the Davao International Airport over a 30-year period.

As for the Kalibo International Airport, Mega7 Construction Corp. has a P12-billion bid to operate, maintain and develop the gateway, also for a 30-year period.

Mr. Reinoso had said the proposals had been submitted to NEDA but were returned to the DoTr after Transportation Secretary Arthur P. Tugade sought for all airport proposals to be patterned after the concession terms for Clark International Airport. In June, Mr. Tugade said requiring airport proponents to submit contract terms that are aligned with those of the Clark contract will reduce time spent negotiating, as the Clark contract had already been approved by the NEDA Board. An unsolicited proposal needs NEDA approval before being subjected to a Swiss challenge, whereby other parties can try to match it.

The consortium of seven major companies for the Ninoy Aquino International Airport and Aboitiz InfraCapital, Inc. for the Bohol-Panglao International Airport submitted their revised concession terms to the DoTr last month. Both proposals had already been turned over to the NEDA for further evaluation.

So far, the Duterte administration has awarded one airport project to a private sector proponent: San Miguel Holdings Corp. for its P734-billion Bulacan International Airport proposal, which was awarded earlier this month. The NEDA Board approved San Miguel’s proposal last year.

DoF guiding new Moro region on fiscal sustainability

THE DEPARTMENT OF FINANCE (DoF) is forming a technical working group (TWG) to help the newly formed Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) run its economic departments and crafting policies that will “ensure the region’s long-term fiscal stability.”

This was the directive of Finance Secretary Carlos G. Dominguez III following an Aug. 8 meeting between DoF Undersecretaries Gil S. Beltran and Bayani H. Agabin, and Minister Eduard Uy Guerra of the Bangsamoro Ministry of Finance, Budget and Management (MFBM).

“They agreed that the DoF will give a briefing on the structure (of the finance and budget department) so that they can properly set up their own structure. We’ll help them interface with the other departments as well,” Finance Undersecretary Bayani H. Agabin was quoted as saying in a statement on Sunday.

The TWG will be made up of representatives of the Department of Budget and Management, Bureau of Customs, Bureau of Internal Revenue, Bureau of Local Government Finance and the Commission on Audit.

Mr. Beltran said in the same statement the TWG will “design more briefings” to tackle other areas, particularly fiscal management, budget management and financial planning.

The DoF also committed to assist the new Bangsamoro government in setting up Islamic Banks.

The DoF will also tap the Philippine Tax Academy to instruct BARMM officials on fiscal management, financial planning and budget matters.

The BARMM was formed under Republic Act No. 11054, or the Organic Law for the Bangsamoro Autonomous Region in Muslim Mindanao, enacted in July 2018. In a plebiscite early this year, the provinces of Maguindanao, Lanao del Sur, Basilan, Tawi-Tawi, as well as Marawi and Lamitan cities — which had formed the Autonomous Region in Muslim Mindanao — and Cotabato City and North Cotabato opted to be included in BARMM. — Charmaine A. Tadalan

How much has income inequality changed in the last few decades?

How much has income inequality changed in the last few decades?

Decentralization, PH-style

By Benjamin R. Punongbayan

THE Local Government Code of 1991 decentralized local government units (LGUs) and, for this purpose, LGUs were given an annual allocation (allotment) of 40% of national tax collections (Internal Revenue Allotment or IRA). The IRA is in addition to the local taxes that the LGUs already impose and may impose in their respective jurisdictions. Now, after a long 28 years, this decentralization does not seem to have provided the improvements in the lives of our citizens that its proponents had argued as reason for its adoption.

The decentralization is a failure.

This failure is evident in the persistent use of the term “Imperial Manila” to describe the national government; by the LGUs’ continuing mindset of looking at the Center for additional financial assistance for their infrastructure development responsibility; and by the continuing acceptance by the Center of such requests.

The failure is also evident in the current proposal of some groups to make the existing union of the Filipino people federal. Interestingly, a principal proponent of federalism is himself the creator of the 1991 deregulation code. Whatever one makes out of this trend of thinking, it is a clear tacit recognition by the author of deregulation that it has failed.

The failure is also evident in the generally sorry state of infrastructure in Philippine provinces, cities, and towns. Uncollected garbage still abounds because of inadequate dumpsites. During the rainy season, some school children cannot go to school because the shallow and narrow rivers they cross swell and there is not even a footbridge across the river that they can use. The poor use the river as a toilet, because there are no public toilets for their use. When the school year starts, there is usually a scramble for additional classrooms which, under the Code, the LGUs could provide. But they generally don’t and look to the national government to provide them.

The former agricultural service extension of the national government had been decentralized. Judging by the continuing poor performance of the agriculture sector, this decentralized important government service makes absolutely no difference in agricultural development.

Why is decentralization a failure? Is it because the amount of IRA is inadequate? Offhand, probably not, judging by the prevalence of lampposts along the town roads, some of them so elaborately designed that they look grotesque; as well as by the painting of trees along the roads with a uniform combination of bright colors.

More seriously, it appears that it is not a pressing issue among LGUs. Otherwise, the adequacy of the IRA would have been a perennial big issue that would constantly hog the headlines. Of course, several years ago an LGU raised the issue of the basis of calculating the IRA and that was decided by the Supreme Court last year in favor of the LGUs. This decision requires that the basis of calculating the IRA should include customs duties and not just the national taxes collected by the BIR, as done presently. But, prior to this decision, there had been no persistent clamor to increase the IRA.

What I thought is occurring is that LGUs look at the IRA as a fund they can use for whatever they deem necessary. When it becomes short for any development needs in their jurisdiction, they leave the projects to the next higher level of government to deal with, or ask that level of government for additional funding. They are not made to see that the IRA is the only additional money that they can have to carry out all their stated responsibilities. As a result, the LGU does not have any compulsion to use its own IRA effectively and efficiently. A good example of the consequences of this mindset are the additional classrooms I mentioned earlier. Other notable examples are the development of ports, bridges, drainage, sewerage, and dumpsites that would serve local needs. LGUs tend to look at these not for them to develop and fund, but for the Center or somebody else to do.

To be fair, let us look at the quantum of the IRA. The 40% IRA is calculated based on national tax collections of three years ago. The allocation of the IRA among the LGUs is specifically provided at 23% for the provinces, 23% for the cities, 34% for the municipalities, and 20% for the barangays. These allocations are further divided among the peer units using prescribed bases.

In 2018, the total IRA was P522 billion, of which P281.3 billion (54%) was the combined IRA for municipalities and barangays. For better appreciation, let’s bring these numbers down to the region level, say, Region VI (Western Visayas). This region’s total IRA in 2018 was P41.8 billion. Bringing this down to the province level, the IRA for each province in that region ranged from P1.3 billion to P17 billion. The low end was for a small province. Let’s focus on the high end. Of the P17 billion, P3 billion was for the province itself and P14 billion was for the cities, municipalities, and barangays in that province. It is not possible to bring the numbers down to a specific municipality and barangay, as such information is not publicly available. But, based on the numbers cited, it can be discerned and it is fair to say that the separate IRA of each province, city, municipality, and barangay is not a small amount of money and may meet their respective needs, especially considering that these are amounts they are receiving every year and receiving in increasing amounts in parallel with national economic growth. Moreover, the IRA is on top of the taxes that provinces/cities/municipalities directly collect from their respective citizens. The combined amounts are certainly more than they need for operating expenses and, therefore, they have available funds for infrastructure and other capital spending.

LGUs spend their share of IRA money, which did not exist before 1991, at their own discretion. For 28 years to 2019, the cumulative power of these available funds should have made a big difference in the development of the provinces, cities, and towns. But this supposed big difference does not show. If LGUs around the country just focused on farm-to-market roads, they could have built a lot of them during the last 28 years. That, by itself, would have been a convincing exhibit of the success of decentralization. But the LGUs did not build many of those roads, because they were largely looking for somebody else to build them. So where did the money go?

I recognize that what is presented here is a top level evaluation of the outcome of decentralization. It will be more instructive if a thorough study of the effectiveness of the 1991 decentralization is undertaken. It is incumbent upon the national government to make or commission this study before it augments the IRA to implement the recent Supreme Court decision.

Decentralization is a good principle to adopt and implement as a public policy. However, it requires a good design. A good design requires a clear specification of the responsibilities of the people to whom the decentralized activities have been devolved and an inclusion of a system of accountability for the use of the money that is given.

The Local Government Code is quite expansive in its enumeration of the responsibilities of the LGUs. In infrastructure alone, the responsibilities of each province include: “provincial roads and bridges; inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems…;” For a municipality: “municipal roads and bridges; school buildings… clinics, health centers…; communal irrigation…; fish ports… drainage and sewerage and flood control…” And, for a city, its responsibilities include all those listed for the municipality and the province and a few more.

Clearly, the responsibilities of LGUs cover a wide area and LGUs are given money to carry them out. Even if only half of each of those facilities listed above had been developed for the last 28 years, we would have much better provinces, cities, and municipalities to live in today.

But there is a lot of vagueness in the enumeration of these responsibilities and that led to poor performance.

The responsibilities of each government unit in a province for the infrastructure listed above, because of their nature, necessarily overlap. For roads and bridges alone, what is a provincial road or bridge for which the province is responsible? A city road or bridge for which the city is responsible? A municipal road or bridge for which a municipality is responsible? If there is a need for a bridge to cross a river in a town, who is responsible for building it? I guess the argument would be: would it connect to a mere municipal road; or will it eventually serve to connect to a provincial road or to a city road? If we throw in here the building of drainage and sewerage, flood control, and irrigation systems, it becomes much more complicated, because most of these facilities will necessarily cross a few towns and cities.

What makes the situation worse is the way the development of these infrastructure facilities is defined in terms of funding. To quote for a province: “Infrastructure facilities intended to serve the needs of the residents of the province and which are funded out of provincial funds…” The writing is the same for the city and municipality, except for substituting “city funds” and “municipality funds” in place of “provincial funds.” Who decides which funds are to be used for which project?

When we put all of these together, the whole thing becomes a game of contrived confusion. A municipality may say, that road or bridge is not my responsibility. It is the province’s responsibility. Or, it may say; yes, I am responsible for that road or bridge, but I don’t have money anymore. The same is true for the province but, this time, it looks to the national government for assistance. Then the legislators’ pork barrel, which comes from the national funds, gets into the picture. Each government unit within a province tries to get a piece of that pie.

So what happens in the end? A sorry state of widespread neglect. The needs of the citizens are not served.

The other side of the problem is the lack of accountability. The IRA is, in effect, free money given to the LGUs. This money is not raised as taxes directly from the LGUs’ own citizens, so these citizens may not be even aware of the magnitude of this money and it does not come into their consideration as the LGU officials’ accountability during election time. LGU officials should have been made clearly accountable for the LGU’s IRA by informing the citizens of each barangay, municipality, city, and province annually of the amount of its IRA, its budget, and, after the end of the year, its actual revenue, including IRA, and its actual expenditures in a form giving reasonable, pertinent, and understandable details. But they are not so required.

Decentralization was a missed great opportunity that could have improved the lives of all Filipinos. It makes one think that there are many more such missed opportunities in our society. And this is the reason we have become laggards and continue to descend in the economic chart compared to our neighbors in the world community. And also the reason why we cannot beat widespread poverty in our nation.

Most Filipinos have already been numbed by the unending failings of government. They just shrug their shoulders and say: “So what’s new?” Tough luck.

 

Benjamin R. Punongbayan is the founder of Punongbayan & Araullo, one of the Philippines’ leading auditing firms.

ben.buklod@yahoo.com

Duterte defined: His SONA and his legacy.

ON July 23, my colleague Christine Tang and I were asked by GlobalSource Partners New York* to do a teleconference call with our international subscribers on the topic in the headline. I am pleased to share with readers the transcript of that call. Apologies, this will have to be in two parts. The second installment will be on the risks to this cautiously optimistic scenario, and some political analysis — what the President will likely do with his abundant political capital and the odds of policy continuity post 2022.

I will talk about the following key points:

1. First, the economy under President Duterte, which is doing well in terms of economic growth and stability. The reform agenda is also progressing better than expected.

2. Second, the administration’s Build, Build, Build program, intended to usher in a “Golden age of infrastructure.” The Gold (medal) is aspirational, but efforts may yet earn the administration a Bronze.

3. Third is an assessment of economic prospects in the next three years under President Duterte. I think growth will be resilient at 6%, or even 6.5%, but will be hard to sustain if higher than that.

4. Finally, tail risks and politics.

Let’s start with the economy under Duterte: so far so good.

The President’s economic management style from Day 1 has been to give his economic managers a free hand. Led by his finance secretary Carlos Dominguez III, the economic team hit the ground running and announced a 10-point agenda that hewed closely to the policies, programs and projects of past administrations. The team had its challenges along the way, for example the delay in the passage of this year’s budget and last year’s inflation spike but by and large, the economic team has been successful at maintaining macroeconomic stability, i.e., keeping growth above 6% and steering inflation back within target, it is below 3% now.

Many have also noted that under this administration, the masses have shared in economic growth, with surveys showing a lower number of people identifying themselves as poor, unemployment rates continuing to fall and the quality of jobs improving. Reasons for this include income tax cuts implemented by this administration as well as a number of social programs that have increased households’ disposable income, e.g., free college tuition, higher pensions, conditional cash transfers and universal health care. Although we and other analysts have flagged the rising fiscal costs of these and other subsidy programs, so far, the fiscal burden has been limited.

The other notable achievement of the economic team is the passage and implementation of difficult economic reform measures that have earned the sovereign credit a BBB+ ratings upgrade from S&P. On the fiscal side, the TRAIN (Tax Reform for Acceleration and Inclusion) law for example, which replaced losses from lower personal income tax with higher consumption taxes especially on oil, raised the tax effort by 1% of GDP in its first year of implementation. These revenue inflows have helped to fund higher public spending on social services and infrastructure while keeping the budget deficit at around 3% of GDP, a fiscally sustainable level, per the IMF.

Other reform measures include the game changing rice tariffication law, a reform three decades in the making that has brought down rice prices, as well as the anti-red tape law, the BSP Act, National ID and the Bangsamoro Basic Law. The next stage challenge of implementing these reform measures as designed is underway, and the political will to do so seems to be there based on the explicit statements of the President during his State of the Nation Address.

SECOND POINT
The one activity that has defined this administration’s economic program to date is the Build, Build, Build infrastructure program, my second discussion topic.

Historically, over the last three or four decades public spending on infrastructure averaged only around 2% of GDP, a far cry from the average of 5% of our neighbors. The failure to invest is showing badly in congestion on roads, rails, sea ports, air ports. Slow approval processes are also beginning to affect the power sector which has been privatized. Failure to develop water sources by government has also caused water shortages in Metro Manila.

The last administration managed to raise infrastructure spending but only up to 3% over a six-year period. What the Duterte administration did was to raise spending to 5% of GDP three years into its term. And, through an ambitious infrastructure program, it intends to ramp up spending to 7% of GDP by 2022, the end of its term. This, economic managers say, is consistent with the target 7-8% GDP growth.

But I doubt that they can achieve these targets nor do I think it desirable to ramp up infrastructure spending so quickly. Experts I talked to question not only what makes up the 5% of GDP spending but they tell me that the quality of the projects pursued so far are not all growth enhancing. Many involve maintenance works on existing facilities some of which are superfluous. IMF estimates also show low efficiency of public investments in the Philippines, suggestive of large leakages.

My take is that is that if government could only maintain infrastructure spending at the current 5% of GDP over the medium term, that would already be a big achievement, especially if that 5% is spent on good projects that have high economic returns.

In any event, at 5% of GDP, BBB will be an important driver of GDP growth in the next three years, although all the construction activity is adding to chokepoints to economic growth in the short-term and it will take perhaps two more years for us to feel the decongestion effects of ongoing projects.

THIRD POINT
This brings me now to my third discussion point, the resilience of a 6% economic growth for the Philippines.

First, let me go over the structural factors underpinning the 6% economic growth rate. Philippine GDP trend growth rate has risen from an average of about 3% in the 1990s to 4-5% in the 2000s, to above 6% from 2010 to 2018. There are three reasons behind this rising trend growth.

One is demographics. The country has a young population, over 60% are in the working age group and this number will grow by 60% over the next two decades. The growth impact of this is evident in resilient remittances and the expansion of the BPO sector that have fueled domestic consumption and raised demand for retail trade services, financial products, and a real estate boom.

The second factor is the combined impact of past reform efforts on total factor productivity. Due to the reforms beginning in the 1980s (trade and foreign exchange liberalization, opening up of telecommunications and financial sectors, privatization of power), the contribution of total factor productivity to economic growth has grown from only 0.5 ppt in the 1990s to over 2 ppt this decade (Source: BSP).

Third is the growth of the middle class, which we think will continue to feed the consumer sectors. The rising importance of the middle class is an upshot of decades of sustained high remittance and BPO sector growth, both continuing but maturing and thus expected to grow at lower single-digit rates. A recent phenomenon that has taken up the slack left by slowing remittance and BPO growth rates is online gambling. The emergence of this sector has seen an estimated 200,000 Chinese workers moving to the Philippines, pushing up demand in real estate, construction, retail trade, etc. Young, single, and earning roughly $12,000 a year, this group is adding to middle class demand with spending potential approaching 1% of GDP.

(To be continued.)

*https://www.globalsourcepartners.com/

 

Romeo L. Bernardo was finance undersecretary during the Cory Aquino and Fidel Ramos administrations.

romeo.lopez.bernardo@gmail.com

Gifts or bribes: What’s in a name?

President Rodrigo R. Duterte started the cauldron bubbling when on Aug. 9, during the celebration of the 118th police service anniversary at Camp Crame, he said that he believes police officers should accept gifts if these are given out of gratitude or generosity. “Well, if you’re given a gift, accept it. It cannot be bribery because it is allowed by law. What I mean if there is generosity in them, the anti-graft law says you cannot accept gifts. (Kalokohan ’yan) That’s nonsense,” he was quoted by The Philippine Star as saying in its Aug. 11 issue.

Is it allowed, or not allowed by law for civil servants to accept “gifts”? Republic Act 6713, or the Code of Conduct and Ethical Standards for Public Officials and Employees, Section 7 (d) expressly says, “Public officials and employees shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any person in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected by the functions of their office.”

“If you are able to solve a crime and the family would like to be generous to you or would nurture a feeling of gratitude for what you accomplish, then by all means, accept it,” Mr. Duterte insisted. But he seemingly made even the policemen themselves uneasy and embarrassed. Philippine National Police (PNP) spokesman Brig. Gen. Bernard Banac immediately stepped forward to say they are still bound by RA 6713 that expressly prohibits the solicitation or acceptance of gifts in any form despite the pronouncement of the President. Mr. Banac stressed there is no need for groups or individuals to gift policemen for tasks accomplished (since) taxpayers are already paying the policemen their salaries, the Star article noted.

Senator Panfilo Lacson, a “career policeman” who immediately opted for commissioning into the Philippine Constabulary (PC) upon graduation from the Philippine Military Academy in 1971, and who retired in 2001 as Chief of the PNP — a 1991 merger of the military PC and the civilian Integrated National Police (INP) — also did not agree with Mr. Duterte’s revision of the police rules of conduct. “Mr. President, insatiable greed starts with simple, petty graft. It could be more addicting than drugs. There is no detox, nor is there rehab facility available for addiction to money,” Mr. Lacson said in his Twitter account.

In his website pinglacson.net, Mr. Lacson recalled that he was a Lieutenant Colonel with the PC-Metrocom in 1981 when he led a team that rescued the young Robina Gokongwei, daughter of taipan John Gokongwei, Jr. (JG Summit Group), from a kidnap-for-ransom gang. According to a post on his website called “Lacson: Time to Revisit, Make Anti-Graft Laws More Implementable” (Aug. 19), “Robina’s grateful family offered him and his team a hefty reward, but he had a strict ‘no-take’ policy and he declined it, pointing out he does not want his men to have the mentality of not helping ‘poor’ complainants who may not afford to give them a reward. To show their gratitude, the Gokongwei family decided to donate mobile patrol vehicles to the PC for Robina’s successful rescue. The donation was coursed through then PC chief Maj. Gen. Fidel V. Ramos via a deed of donation in favor of the PC Metrocom.”

Yet for Senator Ronald “Bato” de la Rosa (PMA 1986), also a former PNP chief (from July 1, 2016 to April 19, 2018), receiving gifts is no big deal as long as they are given out of gratitude. “The President is a very pragmatic individual. Anything that is given in the spirit of goodwill is not a problem,” Mr. De la Rosa told GMA News. Hard to imagine how two PMA “cavaliers,” both graduates of the Philippine Military Academy, can think so differently — black-and-white for one, and shades of grey for another. And a little-known phrase in RA 6713 has been called forth by defenders of the President’s shocking dispensation to police officers to accept “gifts” in appreciation of good service:

RA 6713 (d) of Definitions: “‘Receiving any gift’ includes the act of accepting directly or indirectly, a gift from a person other than a member of his family or relative as defined in this Act, even on the occasion of a family celebration or national festivity like Christmas, if the value of the gift is neither nominal nor insignificant, or the gift is given in anticipation of, or in exchange for, a favor.”

The phrase “nominal or insignificant” is what Presidential Anti-Corruption Commission (PACC) Commissioner Greco Belgica (who was appointed by Mr. Duterte in January 2018) drummed upon to justify the “gifts” go-ahead by the President. (Remember that the PACC was Panfilo Lacson’s organization with the absolute “no-take” policy on gifts and bribes.) Mr. Belgica stressed the qualified quantitative “way-out” for a civil servant to accept “rewards” or tokens of appreciation for a job well done — in one TV interview he gave the example of an airport employee receiving P100,000 for returning P1 million he found to the office and to the appreciative owner.

In an interview on The Chiefs on Cignal TV last Friday, Mr. Belgica said, “Kunwari ako, sir, commissioner po ako, ako po na nakakuha (For example, I as commissioner was the one to receive) — That’s my salary sir. For me, the P100,000 is just to get me by, so it’s really not a significant amount to me because that’s how much I get paid a month.”

Was it insignificant to the airport employee in his example?

According to a write-up in The Philippine Star (March 27, 2013) — written at a time when Mr. Belgica was running for Senator — as an elder and pastor at The Lord’s Vineyard Covenant Community (founded by his father, Butch Belgica), he “capitalizes on the support and votes of his fellow Christians — 63,000 evangelical churches all over the Philippines, spread over 42,000 barangays,” Mr. Belgica said then. With that “influence,” could the preacher not have preached a detachment to mundane “gifts,” and quoted Matthew the evangelist (Ch. 5, v. 12): “Rejoice and be glad, for your reward is great in heaven.”

The keyword in the controversy is “influence.” Outright bribes are definitely quid pro quo for the power to influence an outcome expected by the giver. But would the government employee, at whatever level, have received the “gift” or token of appreciation if she/he were not in the position and place to influence the outcome of a situation or predicament of the taxpayer/gift-giver? Even a “reward,” by Mr. Lacson’s “no-take” policy at the PACC in his time, would be a “bribe” for the continuance of the built-in position of influence and power of a civil servant over the common good. Perhaps gifts and rewards can be called an “investment” of the giver for future favors.

What’s in a name? “Bribes,” “gifts,” “rewards” are all dangerous substances to a civil servant. Once a bounty beyond salary is experienced, expectations are subliminally raised. An “addiction to money” in a government employee is indeed more pernicious than drug addiction, as Mr. Lacson reminds givers and takers alike.

But as the controversy rages about “gifts” and the thin line between these and bribes, Justice Secretary Menardo Guevarra took up from Mr. Belgica’s offered allowable “take” of P100,000, and urged a review of RA 3019 the Anti-Graft and Corrupt Practices Act and RA 6713 or the Code of Ethical Standards. “It is difficult to give specific guidelines because according to the law, it would depend on the local customs and traditions of the place where the gift-giving happens. So it is really a relative term, unless of course the Civil Service Commission would give an exact or precise definition, let’s say no gift exceeding P1,000 in any occasion. Right now there is no such rule, so the concept is flexible, very relative,” Mr. Guevarra said (The Philippine Star Aug. 20, 2019).

You might have missed the point, Sir.

Rep. Carlos Zarate of Bayan Muna got the point: “Under the Code of Conduct for Public Officials and Employees, acceptance of anything of value is prohibited,” he said (Philippine Star Aug. 23, 2019).

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

Higher alcohol taxes will improve population health and augment UHC funds

Noncommunicable diseases have become the leading cause of death and illness in the Philippines. Alcohol consumption is associated with more than 10% of noncommunicable disease burden worldwide, including liver disease and cancer. The Global Burden of Disease (GBD) Compare published by the Institute of Health Metrics and Evaluation, University of Washington revealed that in 2017 alone, there were 29,506 deaths attributable to alcohol use in the Philippines. The idea that moderate alcohol consumption (“one glass of wine a day”) is safe, has recently been denounced by the World Health Organization (WHO). Their report estimates that alcohol kills one person every 10 seconds. There is no safe dose for alcohol consumption.

The cost-effective prevention and control of noncommunicable diseases, such as those associated with alcohol consumption, can be achieved through policy that targets an entire population over individuals. Among the most cost-effective interventions is increasing taxation. The Alliance for Improving Health Outcomes was commissioned by the Department of Health (DoH) through the Philippine Council for Health Research and Development to run simulations that quantified the health effects and consequences of updating alcohol tax policies in the Philippines. There are two proposed tax structures by executive agencies: Department of Health-Department of Finance (DoH-DoF) and House of Representatives (HoR).

From the 2018 baseline consumption, the simulation shows that implementation of either the DoH-DoF and HoR proposals will decrease alcohol consumption. With the DoH-DoF proposal, the consumption of spirits, beer, and wine will decrease by 18.5%, 20.5%, and 4.7% respectively five years after implementation. With the HoR proposal, the consumption of spirits, beer, and wine will decrease by 11.5%, 7.2%, and 4.5% respectively five years after implementation. The DoH-DoF proposal appears to be a more effective deterrent to alcohol consumption owing to the espousal of much higher taxes (compared to the HoR proposal) on the sale of alcoholic products.

The simulation shows that the health impact of implementing the proposed taxes will be nothing short of dramatic. The DoH-DoF proposal will prevent the death of over 57,000 Filipinos after four years of implementation. The HoR version, on the other hand, will save over 22,000 lives after four years of implementation. As much as a 51% reduction in deaths attributable to alcohol per year may be achieved if the DoH-DoF tax proposal is adopted, and as much as a 20% reduction if the HoR tax proposal is adopted.

This demonstrates that increasing tax rates for alcoholic beverages to the proposed structure of either the DoH-DoF or the HoR would result in public health gains. Even then, preventing deaths of Filipinos may just represent the proverbial “tip of the iceberg” as a result of tax intervention. Those who become ill because of alcohol use are expected to be unable to earn and will affect productivity even of family members taking care of them. Moreover, while all alcohol drinkers carry health and economic risks, the risks are greater for those with lower socioeconomic status, as they are less likely to afford healthcare when needed and earn while ill. Alcohol-related diseases also contribute to rising healthcare costs. Hence, it is imperative that increasing alcohol tax is understood as both a health and economic policy.

The government revenues raised from the higher taxes can be used to fund other public health initiatives like Universal Health Care. In settings with constraints on public finances and healthcare resources, taxing alcohol, tobacco, and sugar-sweetened beverages could provide a means to prevent disease, improve population health, and raise revenue to fund healthcare. Sweetened beverages have been taxed since 2018. On June 25, President Rodrigo R. Duterte signed into law the bill raising excise tax for tobacco products. It is now the time to update the law governing alcohol taxation.

Alliance for Improving Health Outcomes (AIHO), a partner of Action for Economic Reforms, is public health consulting firm composed of experienced and credible public health experts. Dr. Michael Mo and Dr. Dante Salvador, Jr. are public health physicians, health economists, and part of AIHO. Kim Sales is the current Deputy Director of AIHO.

An error in the excise tax structure

An amendment to the excise tax structure for alcohol and tobacco products recently passed the third reading in the lower house. It will now be deliberated upon at the Senate and nursed to passage by Senator Sonny Angara who heads the committee of ways and means.

The increase in excise taxes for alcohol and tobacco products is part of government’s second tax reform package called the Corporate Income Tax and Incentives Reform Act, or CITIRA. Among CITIRA’s key features is to cut corporate income taxes by two percentage points per year starting 2021, eventually reducing the rate from 30% today to 20%. The move is meant to make the country’s tax framework more competitive and more attractive to foreign investors.

Finance Undersecretary Karl Kendrick Chua admitted that government stands to incur a revenue loss of about P62 billion once the bill is implemented. Hence, the Department of Finance must find ways to off-set the loss. Levying higher excise taxes on alcohol and tobacco is one of the ways.

To increase excise taxes on “sin products” is the prerogative of government which we all accept. However, as I looked deeper into the tax structure approved by congress, I could not ignore certain inconsistencies and faulty assumptions that could backfire. This is particularly true in the way excise taxes were structured for sparkling wine.

In the first place, the bill makes a stark difference between sparkling wine and carbonated wine. For those unaware, sparkling wines like Champagne, Cava and Prosecco are bubbly wines that develop their carbonation in the bottle through a second fermentation. On the other hand, carbonated wines are still wines infused with carbonation outside the bottle.

The premise is that sparkling wines are a premium products while carbonated wines are not. This is a misnomer. Truth is, both have different grades in quality. A sparkling wine can be inferior to a carbonated wine if the pedigree of the carbonated wine’s grapes and production process conform to a higher standard. The reverse is true. In short, there are various determinants to superiority. It cannot be said that one is automatically superior to the other.

Because the authors of the tax scheme automatically count all sparkling wines to be superior, it levied a whopping P522 excise tax for all 750 ml bottles, regardless of whether its net retail price (or landed cost) is P50 or P3,000.In contrast, carbonated wines are saddled with an excise tax of only P45 per bottle, regardless of its net retail price.

With slight differences between sparkling wines and carbonated wines, the former is levied an excise tax that is nearly 12 times more than the latter. Not only does this give undue advantage to carbonated wines in the marketplace, it also deprives the public from enjoying sparkling wine at a fair price.

Another point to consider is that the new tax scheme levies the same excise tax (P522/ 750 ml bottle) regardless of the value of the sparkling wine. In other words, a low quality sparkling wine whose net retail price is P200 will now be valued at P722, after tax. This brings the tax component to 72% of its value. In contrast, a high quality sparkling wine whose net retail price is P2,000 will now be valued at P2,522, after tax. In which case, its tax component is only 21%.

The tax scheme effectively makes low cost sparkling wines scandalously overpriced while making premium sparkling wines reasonably priced. This works to the disadvantage of middle to lower income Filipinos who can only afford wines with a cheaper net retail price. It works to the advantage of the rich as they get a good deal on their premium wines. It is a case of penalizing the middle class while subsidizing the rich.

As a whole, the manner in which sparkling wines are taxed is a disservice to the Filipino people. Sparkling wines are beverages not taken every day but only during festive occasions. Every Filipino should be given the opportunity to enjoy the product at a sensible price, regardless of their economic standing.

As a middle class consumer, I would like sparkling wines to be taxed at the same level as still wines (wines with no bubbles), which is P28.47 per 750 ml bottle. If this is too much to ask, then levy the same excise tax as carbonated wines which is P45 per 750 ml bottle. I reiterate, to charge P522 is disproportionate and unreasonable.

The latest statistics show that the share of sparkling wine against the total consumption of wines in the Philippines is only 1.36%. Thus, even if government were to reduce the excise tax to match the levels of carbonated wine, its impact on revenues will not be substantial. On the contrary, we can even expect a spike in demand given more reasonable prices. The increase in volume will surely compensate for the forgone revenues from the excise tax roll back. Best of all, it will put the product within reach of middle class Filipinos. It is a win-win situation.

To leave the tax structure as it is, or the way Congress approved it, will lead to a contraction in sparkling wine demand and inevitably, to lower excise tax revenues for government. This, while depriving Filipinos of a festive wine they can enjoy. Everybody loses.

I know Senator Angara to be a reasonable, diligent legislator. I trust he will look into this matter in the spirit of correctness and fairness.

 

Andrew J. Masigan is an economist.

Toyota redefines the family van

By Manny N. de los Reyes

THE TOYOTA ALPHARD better start looking over its shoulders. There’s a new kid on the block and it’s eyeing the same audience that the highly in-demand Alphard commands.

Fortunately for the Alphard’s maker, it comes from the same family. Yes, Toyota now has a people-mover that has most of the Alphard’s luxurious amenities, yet tops those off with a bigger and more spacious interior, a vastly more economical turbo-diesel engine, and a substantially lower price.

Toyota Motor Philippines (TMP) has completed its best-selling Hiace lineup with the introduction of the all-new Super Grandia, which comes in three new variants: the entry-level Fabric, the midrange Leather, and the top-of-the-line Elite.

“The Hiace Super Grandia is a preferred van of companies in various industries, and is quite popular as a family vehicle. It has indeed become a symbol of comfort, convenience, and durability,” says TMP President Satoru Suzuki. “We are excited to bring a higher level of luxury and a delightful ride experience that Filipinos truly deserve with the all-new Hiace Super Grandia. We expect this model to further elevate the Hiace which currently has a 54.6% share in its segment, year-to-date as of July.”

A series of developments on the Hiace’s design, performance, and safety features resulted in a strong and refined exterior while retaining an inviting and comfortable interior to embody grand luxury and omotenashi (hospitality). One glance at the cabin and you’ll see that the Super Grandia promises a stress-free drive for driver and passengers and provides a ride experience and atmosphere that resembles business-class air travel.

Elegant chrome accents add an upscale element to the large front grille, which merges with the defined bi-beam LED headlamps. The rear chrome garnish mirrors the front design and is also complemented by the distinctive shape of the LED rear taillamps. The low center of gravity and wide stance is accentuated by the chrome lining that runs along the side to the bottom of the rear bumper.

The power sliding doors (available for the Elite variant) ushers in passengers to the luxurious cabin. Upon entry, the interior illumination sets a relaxing mood, which can be adjusted to the passenger’s preference. Illumination can be set to blue, amber, or white for the Elite variant. Passengers enjoy luxurious personal space with the captain’s seats that occupy the first and second rows. Quilted leather four-way power adjustable captain’s chairs with retractable legrests replace the first rear row for the Super Grandia Elite. For all variants of the Super Grandia, bench-type seats at the rearmost row can accommodate four passengers. Rear personal reading lamps provide each passenger a greater sense of personal control and convenience, giving them the option of better visibility in their personal space — much like in aircraft. Automatic climate control ensures passenger comfort all throughout the drive, with Nano-E air purifying technology for the Elite variant.

Living up to renowned Toyota efficiency, the frugal 174-hp 1GD-FTV 2.8-liter turbo-intercooled diesel engine (with 6-speed automatic transmission) powers the new Super Grandia. The McPherson strut front suspension provides car-like handling and stability while the four-link coil spring rear suspension reduces cabin noise, vibration, and harshness, ensuring a smooth and comfortable ride even on long drives.

The Hiace Super Grandia is equipped with advanced safety features, giving peace of mind and confidence for both the driver and passenger. All Super Grandia variants have Anti-Lock Brake System (ABS), Vehicle Stability Control with Brake Assist, Hill Start Assist, Clearance and Back Sonars, Back Monitor, nine SRS air bags (driver, front passenger, driver knee, front side, and curtain shield), and Emergency Locking Retractor (ELR) 3-point seatbelts for the driver and all passengers.

The Super Grandia Elite is the first model in Toyota Motor Philippines’ vehicle lineup which boasts Toyota Safety Sense (TSS). TSS incorporates advanced active safety features which identify factors that may cause accidents and aid the driver in eliminating these factors. Features for this variant include the Pre-Collision System (PCS), Lane Departure Alert (LDA), Adaptive Cruise Control (ACC), and Automatic High Beam (AHB).

The Hiace Super Grandia will be available in Toyota dealerships nationwide starting today, August 26, in the following variants, prices, and colors:

TEST-2019 Mitsubishi Eclipse Cross SE S-AWC

Text by Kevin C. Limjoco; Photos by Isabel N. Delos Reyes

THE MITSUBISHI Eclipse name is back — but it is not a hot sporting coupé. Instead it has become a very comfortable utilitarian compact crossover. Which begs the question of why use the Eclipse name? I trust that Mitsubishi, at its simplest, wanted to use the name for good recall purposes. Anyhow, our good-looking Bronze Metallic Eclipse Cross SE test model turned out to be a very competent and overachieving five-seat crossover that I reckon would be competitive in our Philippine market.

In North America, the Eclipse Cross is positioned between their Outlander models. The chassis is quite good — It uses a Mitsubishi GS “Project Global” platform that is used in the award-winning seven-seat Xpander, the ASX, the Lancer Evolution X (shocked?), the Jeep Compass, and the upcoming Peugeot 4008, just to name a few. Unlike in the Xpander, though, the Eclipse Cross uses an independent multi-link rear suspension, appropriately larger all-disc brakes (11.6-in vented disc in front and 11.9-in discs at the rear), a turbocharged version of the 1.5-liter engine with 152 bhp and 184 lb-ft of torque (0-100 km/h in 8.9 seconds with a top speed of 190 km/h, 25 mpg City & 26 mpg Highway), and when the S-AWC is engaged, has AWD capability for all-weather driving confidence.

On-road ride comfort is actually remarkable and it was very fuel-efficient. Even if the modest engine felt labored at full throttle, it worked very well under normal driving conditions. When the roads get tighter, however, the soft dampers do yield to a lot of body roll, but its forgivable. The standard wheel setup was good too; it rides on low-rolling resistance Bridgestone Ecopia H/L 422 Plus P225/55R-18 97H tires on handsome-looking alloy rims.

It’s actually a lot of vehicle for the money and is a very good value. Acceleration is competent enough; it will outrun a Subaru Crosstrek and a Mazda CX-3 with a quieter and more spacious cabin. The infotainment system was sufficient with its seven-inch touchscreen but it lacked the oomph found in other Mitsubishi vehicles and it is managed by an inconsistent touchpad controller. For its affordable price, it does have blind-spot monitoring, rain-sensing wipers, cruise control, a comprehensive safety suite of electronic nannies, and a proximity key with push-button start.

The Mitsubishi Eclipse Cross has a lot of potential and if it is packaged more competitively in the right market it could be a dark horse hit.

Avel and Alden join forces for online athleisure line

An outfit from the new Avel x Alden collection

AFTER last year’s successful collaboration with actor Matteo Guidicelli, fashion designer Avel Bacudio is back with another collaboration, this time an “affordable athleisure” line done with actor Alden Richards which is available online.

“We’ve been working on this collection longer than the Avel x Matteo collection. We launched this later because Alden has been so busy,” Mr. Bacudio told BusinessWorld during the launch on Aug. 22 at the Xylo club in Bonifacio Global City, Taguig.

He said that Alden Richards (whose real name is Richard Faulkerson, Jr.) has been incredibly involved in the process of making the collection.

“From the fabric, the style, everything, he gave his opinions and his approval,” Mr. Bacudio said before adding that due to the actor’s busy schedule — he recently came out in the film Hello, Love, Goodbye, directed by Cathy Garcia-Molina — it took them months of back and forth discussions before completing the collection.

“I’ve always been a fan of Avel Bacudio’s designs. He’s been a good friend of mine for the longest time. As such, I am really psyched to have my very first fashion collaboration with Avel Bacudio,” Mr. Richards was quoted as saying in a release.

AFFORDABLE PRICES
There was also an emphasis on making the clothes “affordable,” with the lowest-priced item, the Bowery shirt, going for P759. The most expensive item is the P1,399 Surrey Men’s Jogging Pants.

Unlike his previous collection with Mr. Guidicelli which focused on jeans, Mr. Bacudio said they decided on creating an athleisure line because it’s Mr. Richard’s style of choice.

“He wants something comfortable yet stylish,” he explained.

The collection will have “40 styles for men and 40 styles for women” and will include pullovers, hoodies, and track pants, among others.

The items come in shades of maroon, gray, navy blue, black, and off-white. The colors are of a special significance to Mr. Bacudio as he said that when he underwent eye surgery a few years back, the first colors he saw were the colors he eventually used in this collection.

“The doctor told me that I was seeing these colors because my eyesight is coming back,” he said.

And in order not to overwhelm the market, Mr. Bacudio said that they will schedule “monthly drops” where a selection from the line will be available online exclusively on the Southeast Asian e-commerce site, Zilingo.

The first items from the line, which dropped the same night as the launch, sold out “in the first 10 minutes of it being live,” said Edryan Lorenzo, PR and influencer marketing manager at Zilingo Philippines, in a statement.

“Zilingo is going to restock in the days to come,” he added.

Mr. Bacudio said that he will have pop-up stores in several Megaworld Lifestyle Malls, as he did for his jeans collection.

Part of the proceeds of this collection will be given to the Northern Luzon Association for the Blind.

“I don’t have a concrete goal of how much I want to go to our beneficiary but my main goal is to provide the children shelter and food,” Mr. Bacudio said.

The Avel x Alden collection is currently available on zilingo.com/en-ph/. — Zsarlene B. Chua

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