How PSEi member stocks performed — November 11, 2019
Here’s a quick glance at how PSEi stocks fared on Monday, November 11, 2019.
Iloilo sets P106.8 million auction floor for land under PECO’s power poles
ILOILO CITY will auction off the assets of Panay Electric Co., Inc. (PECO) next month to pay for the distribution utility’s unpaid real estate tax liability and penalties amounting to P106 million since 2006, the city’s mayor said.
In a statement, Mayor Jerry P. Treñas said the auction will resolve the local government’s collection problems with PECO, which date back to the terms of three mayors.
His office said PECO has refused to pay the real estate tax assessed by the City Treasurer’s Office (CTO) on land where its electricity posts stand. Such land along the streets of Iloilo City will be auctioned on Dec. 12.
A representative of PECO did not immediately reply when asked for comment.
The CTO set a floor price of P106,881,685.33 for the auction. The mayor’s office cited CTO Tax Enforcement Division Chief John Ladrillo as placing the total market value of the posts at P214.9 million.
Mr. Ladrillo said the P106.8-million floor price was computed based on PECO’s total tax liability since 2006 amounting to P97,164,438.81, the cost of the sale including documentary stamp tax estimated at P9,716,443.88 and a registration fee of P802.64.
The auction is open to the public, he said.
In the same statement, Mr. Treñas said PECO has allegedly failed “to solve the problem of hundreds of incidents of the company’s aged and dilapidated electricity poles catching fire and causing fire on nearby residences and business and causing threat to the safety of Ilonggos for years.” — Victor V. Saulon
Rice inventory up more than 43% at start of October amid harvest season
THE national rice inventory was estimated at 2.279 million metric tons (MMT) as of October 1, up 43.4% from a year earlier, and up 23.7% month-on-month, the Philippine Statistics Authority (PSA) said.
The estimate was contained in the PSA’s Rice and Corn Stocks Inventory report. Rice inventory levels are sufficient for about 71 days’ consumption based on a daily average assumption of 32,000 MT.
Some 46.12% of the rice inventory was held by households, 36.5% by commercial warehouses, and 17.3% by the National Food Authority (NFA). The PSA gave no breakdown of domestically grown against imported rice.
All categories reported increases compared with a year earlier. Household inventory increased 22.5%, commercial warehouses rose 38.2%, and NFA stocks was up 207.3%.
On a month-on-month basis, rice stocks held by households increased 56.4%, those in commercial warehouses rose increased 9.6%, while NFA inventory was down 3.6%.
The high inventory levels reflect fresh rice from the harvest, which ran from September to October, as well as increased import volumes.
Corn inventory was 1.095 million MT, up 93.3% year-on-year and up 42.6% from a month earlier.
Corn held in commercial warehouses accounted for 72.1% of the total, while households held 27.9% and the NFA zero.
Compared with a year earlier, warehouses and households increased their holdings. Household inventory rose 101.5%, while commercial warehouse inventory increased 90.4%.
Month-on-month, household inventory increased 43%, while holdings of commercial warehouses rose 42.4%. — Vincent Mariel P. Galang
DTI engages data scientists for AI industry road map
THE Department of Trade and Industry (DTI) said it is working with data scientists to draft the government’s Artificial Intelligence (AI) road map.
In a statement Monday, the DTI said Trade Undersecretary Rafaelita M. Aldaba of the Competitiveness and Innovation Group signed on Nov. 7 an agreement with data scientists Christopher P. Monterola and Erika Fille T. Legara.
“The formulation of the AI Road map is very important and timely. This effort provides the impetus that will move the country forward to keep up with the rapidly changing times,” Ms. Aldaba said.
Dr. Monterola and Dr. Legara, both from the Asian Institute of Management-Aboitiz School of Innovation, Technology, and Entrepreneurship, presented the framework for a data-driven and consultative road map.
The DTI in July announced that the government is creating a task force to formulate the AI road map. The task force will include academics, government officials, and industry representatives.
The road map will include an analysis of AI’s impact on Philippine industries and workforce, as well as policy and program recommendations such as AI training programs and AI laboratories.
“The DTI affirms its commitment to look at the interests of the sectors concerned to capitalize on the opportunities as well as address the challenges faced by the country in the ongoing AI transformation, in the wake of 4IR (Fourth Industrial Revolution) that is projected to affect the country’s economic trajectory,” the statement said.
According to DTI, AI will keep the country competitive “with wide opportunities for growth for our competent workforce.”
The Philippines was third among Southeast Asian governments for readiness for AI in 2019, as reckoned by Oxford Insights and the International Development Research Centre.
Globally, Singapore and Malaysia were first and 22nd, respectively, while the Philippines was 50th out of 194 countries.
Ms. Aldaba said that the road map will help the country on its way to becoming an “AI powerhouse” in the region.
“With all of us (government, academics, industry) working together, our aspiration to become an AI Center of Excellence would be achieved,” she said. — Jenina P. Ibañez
Golden Rice undergoing trials in Isabela, Nueva Ecija
GOLDEN RICE, developed by biotechnologists to address Vitamin A deficiency, is still in the process of completing field trials before it applies for permission to be commercially propagated, officials said, amid the risk that it could get caught up in a broader debate about the safety of genetically-modified foods.
The Department of Agriculture’s Biotechnology Program Office (BPO) said the typical testing regime will take two years.
“For rice, kailangan i-validate mo yan sa iba’t-ibang locations, iba’t-ibang season. Yung ang tinitignan natin para makita natin yung stability nung variety (We need to validate the variety’s performance in various locations and seasons, to determine its stability),” BPO Director Dionisio G. Alvindia told reporters on Monday, without discussing when the field trials are expected to end.
Trials are being performed in Isabela and Nueva Ecija provinces.
“Usually ang testing nyan sa rice, a minimum of four trials… dalawang dry season, dalawang wet season, bale two years (The usual testing program for rice is a minimum of four trials, two in the wet season and two in the dry, or about two years),” he added.
The trials are being performed by the Philippine Rice Research Institute (PhilRice) in partnership with the DA.
According to the International Rice Research Institute in Los Baños, which helped develop Golden Rice, the variety is designed to address the “serious public health problem affecting millions of children and pregnant women globally,” and cited positive results from food safety evaluations conducted by regulators in Australia, New Zealand, Canada and the US.
The Stop Golden Rice Network Philippines (SGRNP), a group of 30 organizations and individuals, cited the risks from the lack of a long-term understanding of how the variety performs.
“We are alarmed that Golden Rice will be made available to children, pregnant women and other vulnerable sectors without being subjected to any long-term and credible studies to assure us of its safety,” Melvin Palmero a member of the SGRNP from SALINLAHI Alliance for Children’s Concerns said.
It cited a study from India indicating that Golden Rice’s beta-carotene, which is converted to Vitamin A by the body, degrades rapidly after harvesting, processing and cooking.
“The Indian government research shows that 84% of the beta-carotene can be lost from Golden Rice after six months, unless it has been vacuum-packed and refrigerated. High temperature and humidity greatly contributes to the beta-carotene degradation, and cooking the rice will cause the further loss of 25% of the beta-carotene,” it said.
He said degraded beta-carotene is a cancer risk.
Mr. Alvindia said that these claims are not true and assured that Golden Rice is safe for humans.
“Ito namang mga technology na ito, hindi naman basta ire-release sa public without verifying… Yung claim nila ay hindi totoo. Yung stability, pine-perfect yan ng PhilRice (This technology will not be released to the public without safeguards. Their claims are not true. The stability is being perfected by PhilRice)” he said. — Vincent Mariel P. Galang
Is a PHL Tax Residency Certificate relevant to my corporation?
Taxes are the lifeblood of our government and, by paying the right taxes, we contribute what is due to society. There are instances, however, that another tax could be imposed by the government of another country on the same income; thus, the establishment of a tax resident status by a taxpayer might be necessary.
The Bureau of Internal Revenue (BIR) recently issued Revenue Memorandum Order (RMO) No. 51-2019 to guide the taxpayers on the procedures and requirements for applying for a Philippine Tax Residency Certificate (TRC). But what is a Philippine TRC? Why would this be relevant to corporations?
WHAT IS A PHILIPPINE TRC, AND WHO MAY APPLY FOR IT?
A Philippine TRC would prove that a corporation is a Philippine resident. Under Philippine rules, a Philippine resident corporation (or a domestic corporation) is subject to Philippine tax on its worldwide income; and hence, it is taxed both on its income sourced within the Philippines and income sourced from other countries.
Under RMO No. 51-2019, the BIR — International Tax Affairs Division (ITAD) is quite clear with its dilemma on receiving numerous applications from taxpayers not eligible for the Philippine-issued TRC, meaning, from taxpayers not considered residents in the Philippines for tax purposes. The BIR, hence, clarified that only resident citizens and domestic corporations are considered residents, because only they are subject to tax on their worldwide income. Accordingly, the BIR-ITAD, upon the issuance of RMO No. 51-2019, shall no longer accept TRC applications of resident aliens and resident foreign corporations.
WHY IS THE PHILIPPINE TRC RELEVANT?
As earlier mentioned, a Philippine TRC may be applied for by a domestic corporation. The reason for such application is when a domestic corporation has foreign-sourced income, and the said corporation wishes to avail of the tax treaty benefits — that is, lower preferential tax rates or a possible tax exemption in the foreign country; and the Philippine TRC is required to be presented to the counterparty in the foreign country.
For example, XYZ Philippine Corp. has interest income on loans extended to its affiliate in a foreign country. In that country, the interest income is generally subject to withholding tax at 22% (but subject to the lower rate of 15% based on tax treaty provisions). For XYZ Philippine Corp. to avail of the lower rate of 15%, it may be required by its counterparty-debtor to furnish a copy of the proof of its status as a Philippine tax resident. Hence, the Philippine TRC will be relevant.
HOW IS THIS RELATED TO THE CONCEPT OF CREDITING OF TAXES PAID BY A DOMESTIC CORPORATION IN FOREIGN COUNTRIES?
Tax crediting means that our Philippine tax laws offer relief from double taxation in the form of foreign tax credits, which allow a reduction in the taxpayer’s tax liability in the Philippines. The amount or reduction is generally based on the amount of foreign taxes actually paid on foreign-sourced income, but subject to certain conditions and limitations based on a mathematical formula prescribed by Philippine tax laws.
There could be cases where the actual amount of foreign taxes paid in the other country could not be claimed in full in the Philippines, because of the limitations. This normally occurs if the tax rate in the foreign country is higher than the tax rate in the Philippines. Thus, there would be an apparent lost portion of the amount of foreign tax paid that would not be utilized in the Philippines.
The idea, therefore, is to be subjected to a lower tax rate on foreign-sourced income in the foreign country, to the extent possible (i.e., by virtue of tax treaty provisions).
Please note that there is a possibility that, in the future, the corporate income tax rate in the Philippines could be significantly reduced. Thus, it would be helpful that any foreign-sourced income be subjected to the lowest possible tax rate in the foreign country to avoid any uncreditable foreign taxes.
If, ultimately, the taxpayer would benefit more from securing a Philippine TRC, considering also the materiality of the amount of benefit, then the taxpayer should go for it.
HOW TO FILE AN APPLICATION FOR A TRC?
To secure a TRC, the requirements under RMO 51-2019 are: the letter request, proof of transaction, certified true copies of Certificate of Registration, Income Tax Returns, Value-Added Tax Returns or Percentage Tax Returns, and Audited Financial Statements, among others. The long list of requirements can be found in the annexes of the RMO, specifically Annex B for corporate applicants.
The assessment offices of the BIR and ITAD will also establish a procedure wherein the ITAD will act as the repository of the documents substantiating the foreign-sourced income of the Philippine taxpayers, and shall furnish the appropriate Revenue District Office (RDO) or Large Taxpayers Division (LTD) of all documents submitted by the applicant. Through this, the concerned RDO or LTD will verify whether the income was properly reported or declared in the tax returns, and the corresponding tax was paid. If not, the RDO or LTD shall determine the deficiency tax and enforce on the applicant-taxpayer the collection thereof, including penalties. This could mean that, the taxpayers applying for a Philippine TRC should also be audit-ready.
Based on the discussions on the different aspects of the Philippine TRC, a corporate taxpayer should weigh the costs and benefits of applying for a TRC, considering the amount of taxes that could be saved, and considering the other implications of such an application. Before your corporation applies, you have to ensure that all the requirements can be complied with; otherwise your time and efforts would be wasted.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Jemila Paula I. Diala is a senior of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.
Peso plunges on geopolitical concerns
THE PESO plunged on Monday due the escalating tensions in Hong Kong, negative developments in the US-China trade war, as well as the continued decrease in inflows of foreign direct investments (FDI) into the Philippines.
The local unit closed at P50.86 against the greenback on Monday, depreciating by 37 centavos from its P50.49-to-a-dollar finish on Friday, according to data from the Bankers’ Association of the Philippines.
The peso opened weaker at P50.63 per dollar. Its lowest point for the day was at P50.888, while its best showing against the dollar was at P50.60 against the greenback.
Dollars traded on Monday climbed to $1.046 billion from $789.65 million seen on Friday.
Traders attributed the peso’s plunge to several factors including geopolitical tensions, trade war developments and the latest FDI data released on Monday.
According to one trader, the morning session saw the peso trading within a tight range, with the exchange rate seen at P50.63-P50.68 a dollar.
“By afternoon session, the movement was triggered by the geopolitical tensions in Hong Kong where protests have become more violent. It has been the main catalyst,” the trader said by phone.
The trader also observed “panic buying” and added that the decrease in FDI may have also dragged the peso’s movement.
“In the past few days, it seems that the sellers were the ones dominating. We saw panic buying in the afternoon which resulted in a “short squeeze” in liquidity. The FDI could also be a factor,” the trader explained.
Meanwhile, another trader said news on the US-China trade deals may have affected the local currency.
“[The peso was weaker on the back of risk-off sentiment after [US President] Donald [J.] Trump’s comments on US-China trade talks. He denied that they agreed for rollback in tariffs,” the second trader said in a phone call.
In Hong Kong, the police shot and wounded one protester as the Chinese-ruled territory saw a rare working-hours violence on its 24th straight week of pro-democracy unrest. The violence usually begins after dusk. Some offices were closing early and workers were heading home.
Meanwhile, Mr. Trump said on Saturday that there had been incorrect reporting about US willingness to lift tariffs, which he said had brought in tens of billions of dollars for the United States and soon “literally hundreds of billions of dollars.”
At home, net inflow of foreign direct investments continued to slide for the sixth successive month in August to $416 million, down 45.1% from the $758 million seen in the same period a year ago and by 23.38% from the $543 million recorded in July.
Economists attributed the FDI net inflow downtrend to the protracted US-China trade war as well as to investors’ wait-and-see approach as the government has yet to finalize the proposed law which will reduce corporate income tax in the country.
For today, both traders believe the peso will trade at a range of P50.70-51 against the dollar. — Luz Wendy T. Noble with Reuters
PSEi stays above 8,000 amid cautious trading
By Denise A. Valdez, Reporter
FICKLE trade negotiations between United States and China dragged the main index lower on Monday, but it managed to stay in 8,000 level at the close of trading.
The Philippine Stock Exchange index (PSEi) gave up 56.38 points or 0.69% to close at 8,009.38 on Monday, as the broader all-shares index shed 34.52 points or 0.71% to 4,789.28.
Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco attributed the decline to the renewed uncertainties in the US-China trade talks after US President Donald Trump did not agree to roll back the tariffs on goods coming from Beijing.
“Investors are worrying that this could derail the negotiations,” Mr. Tantiangco said in a text message.
Mr. Trump said on Friday he has not agreed to roll back the tariffs despite officials from both countries claiming earlier that such agreement would be part of the phase one trade deal. He eventually said on Saturday that the trade talks with China are moving “very nicely,” Reuters reported.
Regina Capital Development Corp. Head of Sales Luis A. Limlingan pointed to the same reason for the market’s decline. “Shares closed lower today as US markets close for Veteran’s Day Holiday and investors continue to stay on the edge of latest trade talk negotiations,” he said in a mobile message on Monday.
Most Asian markets dropped on Monday. Hong Kong’s Hang Seng index slumped 2.62%; China’s Shanghai SE Composite index lost 1.83%; and South Korea’s KOSPI index dropped 0.61%. Japan’s Nikkei 225 index also fell 0.26%, and Singapore’s Straits Times Index by 0.90%.
At the PSE, all sectoral indices ended in the red. Mining and oil plummeted 219.65 points or 2.41% to 8,872.96; property fell 47.58 points or 1.14% to 4,123.31; financials lost 17.79 points or 0.91% to 1,928.96; industrials gave up 44.03 points or 0.42% to 10,434.30; holding firms shed 28.62 points or 0.36% to 7,904.70; and services decreased 2.40 points or 0.15% to close the session at 1,549.56.
Value turnover went down to P5.39 billion from Friday’s P6.83 billion, with 827.87 million issues changing hands.
Stocks that declined on Monday beat those that improved, 107 against 77, while 47 ended flat.
Foreign investors remained bearish with net sales of P419.98 million, albeit lower than Friday’s net outflow worth P485.41 million.
“So far, the market is holding its ground above the 8,000 level buoyed by the third quarter earnings released and the latest GDP (gross domestic product) figures. Corporate earnings season is nearing the tail end. If the remaining corporate reports set to be released show robust and improving figures, then we may continue to see the market trade above 8,000,” Philstocks Financial’s Mr. Tantiangco said.
Duterte to take 3-day rest to catch up on sleep
By Gillian M. Cortez, Reporter
PRESIDENT Rodrigo R. Duterte will take a three-day rest from work, the presidential palace said yesterday.
The president will rest starting tomorrow upon the advice of his close friend and former aide, Senator Christopher Lawrence “Bong” T. Go, presidential spokesman Salvador S. Panelo said at a briefing.
Mr. Duterte, 74, was the oldest person to be elected president of the country, and his health has been the subject of speculations.
The president will try to catch up on sleep, Mr. Panelo said, adding that Mr. Duterte won’t be having more health check-ups.
Mr. Panelo later issued a separate statement saying Mr. Duterte’s rest was not considered an official leave. The president would fly to Davao City to begin his rest but would bring paperwork with him so he could work remotely, he said.
Last month, Mr. Duterte underwent health exams after back pain forced him to cut short his trip to Japan. Before that, he got into a motorcycle accident that caused him muscle spasms.
The presidential palace earlier assured the public that there was nothing to worry about Mr. Duterte’s health.
The president missed the Japanese emperor’s banquet at the Imperial Palace, although he was able to attend the enthronement rites while carrying a cane to help him walk.
The president earlier told the Filipino community in Russia during his visit that he suffered from an autoimmune disease that could potentially have serious complications.
The president had complained of not being able to sleep during his flight from Russia.
Mr. Duterte attended the Association of Southeast Asian Nations (Asean) Summit in Bangkok earlier this month despite the pain. He is expected to go to South Korea later this month to attend the Asean-Republic of Korea Summit on Nov. 25 to 26.
A Social Weather Stations poll in December found that 66% of Filipinos were worried about Mr. Duterte’s health.
Palace open to halt anti-drug operations
MALACAÑANG is open to Vice President Maria Leonor G. Robredo’s proposal to halt police operations against suspected drug traffickers if it means eradicating the drug menace, presidential spokesman Salvador S. Panelo said yesterday.
“We’ll do it,” he told a briefing. “As long as VP Leni is in charge, whatever she feels.” Ms. Robredo, the opposition leader whom President Rodrigo R. Duterte put in charge of his administration’s war on drugs, wants to stop so-called tokhang operations, where law enforcers knock on suspected drug traffickers’ doors to persuade them to surrender.
Mr. Panelo noted that since Ms. Robredo is already sitting as co-head of an interagency committee against illegal drugs, she should do as she pleases.
The vice president on Friday convened a meeting of the anti-drug committee, where she said the practice of knocking on suspects’ doors should be stopped since it’s been connected to extrajudicial killings.
Ms. Robredo vowed to enforce the state’s anti-illegal drug campaign “within the bounds of the rule of law.” She said she would treat the drug problem not only as a crime, but also as a health issue.
The meeting that she called was meant to give her access to data on the drug campaign.
Ms. Robredo again cited the need to re-assess the government strategy against illegal drugs given the rising number of drug dependents.
Philippine police have said they have killed about 6,000 people in illegal drug raids, many of them resisting arrest. Some local nongovernmental organizations and the national Commission on Human Rights have placed the death toll at more than 27,000.
Mr. Panelo said Ms. Robredo does not need to ask for Mr. Duterte’s permission to enforce measures she thinks will be successful in the drug war, as he confirmed in a phone call with Mr. Duterte recently.
“If she wants to consult with the president, the president is always open to consultations from members of the Cabinet,” he said.
Ms. Robredo last week said she had agreed to head the Duterte administration’s anti-illegal drug campaign, if only to stop the killings.
The vice president accepted the post against the advice of many of her party mates, who said the appointment might be a trap. — Gillian M. Cortez
Indictment of Duterte’s ex-police chief sought
PRESIDENT Rodrigo R. Duterte’s former police chief and 13 other cops should be charged for their involvement in the recycling of illegal drugs from a legitimate police operation in 2013, the Philippine National Police said.
In a reply, the PNP-Criminal Investigation and Detection Group (CIDG) asked the Justice department to indict the police officers for graft and drug trafficking in a reopened case.
“In this amended complaint, the respondents proffered more general denial and alibi as defence, which jurisprudence has long considered weak and unreliable,” the police said.
The CIDG also argued the reinvestigation of the case, which was dismissed in 2014, does not violate the police officers’ rights.
“Their liberty was not deprived without due process of law and they are still presumed innocent until the contrary is proved,” it said. “They have a right to speedy disposition of the case. Verily, their argument challenging the authority is misplaced in this legal battle,” it added.
Mr. Albayalde challenged the authority of the Justice department to reopen the complaint, noting that a preliminary probe may only be re-opened when it has been submitted for resolution but before its promulgation.
A Senate committee earlier recommended the filing of criminal charges against the police officers.
Government prosecutors have given the officers until Nov. 18 to answer the CIDG’s reply.
The Justice department re-opened the case after former CIDG chief Benjamin B. Magalong, now Baguio City mayor, disclosed at a Senate hearing last month the involvement of the 13 cops in a questionable buy-bust operation on Nov. 29, 2013.
The cops claimed to have seized 38 kilos of drugs but an investigation showed that they seized about 200 kilos of illegal drugs worth P648 million and about P10 million in cash. The suspected drug trafficker also paid them P50 million to present a different person, Mr. Magalong said.
Philippine Drug Enforcement Agency Director General Aaron N. Aquino told senators that during a probe when he was still Central Luzon regional director, Mr. Albayalde, then acting regional director for Metro Manila, had sought to stop the dismissal of the 13 cops in 2016. — Vann Marlo M. Villegas
Another possible typhoon this week as LPA enters Philippine area
THE LOW pressure area (LPA) east of Luzon has entered the Philippine area Monday afternoon, and weather bureau PAGASA said it could develop into a typhoon by today or tomorrow. PAGASA Weather Specialist Aldczar D. Aurelio said the LPA was located 1,025 km east of Virac, Catanduanes as of 3 p.m. Monday. The trough of the LPA will bring cloudy skies with scattered rains and thunderstorms in the Visayas, Bicol, Northern Mindanao, Caraga, Davao, Quezon, Mindoro, Marinduque, and Romblon. Meanwhile, the northeast monsoon is expected to bring light rains over the Central Luzon Region and parts of the northern Luzon area.