How PSEi member stocks performed — September 18, 2019
Here’s a quick glance at how PSEi stocks fared on Wednesday, September 18, 2019.
BSP: Rate cut still in cards despite oil fears
PROSPECTS of monetary policy easing towards yearend — through cuts in benchmark interest rates and banks’ reserve requirement ratio (RRR) — are intact despite worries about oil price spikes after last week’s attack on Saudi Aramco’s processing facilities, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Wednesday, supporting views on Tuesday of a senior BSP official and private sector economists that inflation will likely keep to the official 2-4% full-year target.
Asked whether the recent turn of events will affect the BSP’s plan to slash policy rates by 25 basis points more within the year, Mr. Diokno told reporters on the sidelines of an event: “No change. No change. Kasi ang briefing ko dun sa oil prices: as long as hindi siya mage-exceed ng $85 per barrel (In my briefing, I said that as long as oil prices won’t exceed $85 per barrel) we’re still within our inflation target.”
BSP Deputy Governor Francisco G. Dakila, Jr. and analysts on Tuesday said that while inflation risks will depend on the speed by which Aramco will restore its damaged plants’ operations, the overall pace of price increase will likely stay on target.
The attack is estimated to have halved the production of Saudi Arabia, the world’s top oil producer — or by about 5.7 million barrels a day — and cut global output by a fifth.
World oil prices spiked on Monday, with Brent crude logging its biggest intraday jump in nearly 30 years, or since the 1990-1991 Gulf crisis over Iraq’s invasion of Kuwait. On Tuesday and Wednesday, however, oil prices fell on news that supplies to Saudi customers have been restored, Reuters said.
Philippine headline inflation has been easing from 2018’s multi-year highs to clock in at a three-year-low 1.7% in August, which took the year-to-date pace to three percent — the midpoint of the central bank’s 2-4% target for 2019. Inflation last year had logged successive multi-year highs to peak at 6.7% in September and October. It hovered in six-percent territory from August to November, helping to fuel 2018 inflation to a decade-high 5.2%.
The BSP has cut benchmark interest rates this year by a total of 50 bps so far in the face of easing inflation, partially dialling back a cumulative 175 bps increase in 2018 as inflation spiked.
Mr. Diokno on Wednesday added that more RRR cuts, following 200 bps earlier this year and reductions of the same magnitude in 2018, are still in the cards.
“Next cut namin siguro mga 100 basis points (Our next cut will probably be 100 bps),” he told reporters, describing this as “an active issue. So we can discuss it anytime.”
The decision to cut key policy interest rates may be made in the BSP’s sixth, seventh or eighth policy reviews for the year on Sept. 26, Nov. 14 and Dec. 12, respectively, but Mr. Diokno said RRR cuts can be adopted in any of monetary authorities’ weekly meetings. — Luz Wendy T. Noble
Bicameral showdown expected over final form of CITIRA
BICAMERAL debate on the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) will have to contend with two issues — the “sunset period” for weaning companies away from incentives, and the removal of taxation based on Gross Income Earned (GIE), a key legislator said.
In an economic briefing at the Palace Wednesday, House Committee on Ways and Means Chair and CITIRA’s principal author Jose Ma. Clemente S. Salceda, of the second district of Albay, said the Senate and House will need to resolve their differences on how long to phase out the incentives offered in the bill.
The House version of the CITIRA legislation proposes a two-to-five-year phaseout period, while the Senate is thought to favor five to seven years.
Mr. Salceda said he backs a phaseout scheme which favors locators who set up outside Metro Manila and rewards those who uproot and relocate.
“Ang signal ko po kasi, tama na ang Metro Manila, pumunta na kayo sa Albay; Tama na Metro Manila, punta kayo ng Cebu; Tama na Metro Manila, punta kayo ng Baguio (The signal I want to send to investors is to quit Metro Manila and reward those who set up in Albay, or Baguio, or Cebu).”
He added that he favors a five-year phaseout period for locators in Metro Manila and 10 elsewhere.
“In fact, if you read the document very well, there is huge benefit to them if they relocate,” Mr. Salceda said.
The House of Representatives on Friday last week approved on third and final reading its CITIRA legislation, House Bill No. 4157. The bill, which will reduce the corporate income tax rate to 20% by 2029 from 30% currently and overhaul fiscal incentives, forms part of the administration’s comprehensive tax reform program (CTRP).
On Tuesday, Senate Majority Leader Juan Miguel F. Zubiri said the bill will go through a “fine-toothed comb” in the Senate.
He also said the Senate plans to increase the GIE rate to 7% from the current 5%.
Economic zone locators are currently offered an incentive rate of 5% tax on GIE.
Mr. Salceda opposes GIE because of the potential for abusing transfer pricing to minimize tax.
Transfer pricing is practiced by companies that transact with affiliates. Global accounting standards require that such intra-group purchases reflect a fair, commercial, “arms-length” price. A parent company’s sales to a foreign affiliate could be priced in such a manner as to cause the affiliate to lose money or minimize earnings, thereby evading tax. Multinationals can also arrange to make the most money in low-tax jurisdictions while minimizing profit in high-tax locations.
Asked to comment on GIE at the Palace briefing, Mr. Salceda said: “They want the GIE. Based on our studies, the Gross Income Earn is the mother-of-two hundred ninety-seven billion pesos in… transfer pricing anomalies.”
In a statement Tuesday, Mr. Salceda said: “Removing the GIE is an essential and inseparable part of CITIRA, as it will improve the effectivity of the deductions-based incentives that encourage job creation, infrastructure, research and development and workers’ training, and use of domestic products. Removing the GIE also corrects abusive transfer pricing, improves fairness especially for service-oriented firms, and simplifies tax administration.”
On whether he is open to exempting locators of the Philippine Economic Zone Authority (PEZA) from CITIRA, Mr. Salceda said at the briefing: “It goes against the (principle of) ‘what’s good for the gander should be good for the goose.’ There is no circumstance or condition that makes PEZA locators sui generis (one of a kind),” he said.
CITIRA ”is meant for everyone. If you do this thing whether you’re a PEZA locator, an AFAB (Authority of the Freeport Area of Bataan) locator, an APEC locator, or you’re in the barrios, you get the same menu and you get the menu based on your performance,” he added.
On the prospects of PEZA locators leaving the country because of the measure, he said: “Once they read the law, they will stay… (they are only exhibiting) ideological resistance to change; but it’s always change for the better, for a more predictable (system) — If they are threatened, how come some of them keep registering (for investments)?”
Mr. Salceda also allayed concerns of job losses once CITIRA becomes law, although he said the government maintains a structural adjustment fund of P1 billion for displaced workers.
“I don’t even think we need it. That presupposes jobs losses,” he said.
Finance Undersecretary Karl Kendrick T. Chua said: “What we strongly believe is that there is no threat of job destruction or loss. Iyong mga nagsasabi po na aalis po sila (for those threatening to leave), I challenge them — show me the names and the numbers. Until today po, wala pong nabibigay (No one has been able to name the companies that are leaving).” — Arjay L. Balinbin
Budget ‘insertion-free’ after funds assured for all districts
WAYS and Means committee chair and Albay 2nd District Representative Jose Ma. Clemente S. Salceda said Wednesday that each congressman will receive P100 million for their districts in the proposed P4.1-trillion 2020 national budget, adding that the budget process so far has been free of “insertions.”
“To ensure na everybody has some minimum, P100 [million] each,” Mr. Salceda said in an economic briefing at the Palace Wednesday when asked about allocations for congressmen.
He added: “They were itemized in the NEP (National Expenditure Program).”
Asked about the budget process for such allocations, Budget Undersecretary Laura B. Pascua said in a mobile phone message to BusinessWorld: “This happens at the final stage when they are in the bicameral stage.”
In chance remarks, Mr. Salceda told reporters that legislators forward their proposals to the Executive department “for inclusion.”
“We propose for inclusion,” he said.
He said such funding is not “pork” by the definition adopted by the Supreme Court decision.
Asked about the use of the funds, Mr. Salceda said: “Hindi naman puro DSWD ‘yon (it’s not all for social welfare projects) contrary to your expectation. Some of them go to DepEd (Department of Education) for school buildings.”
“It is pork-free based on the Supreme Court’s standards, he said, adding that the budget is making good progress with none of the “insertions” that marred last year’s process.
“Zero individual amendments unlike last year, unlike so many years wherein you realign this and that. There are no individual ammendments. There are only three institutional amendments,” he said. — Arjay L. Balinbin
DA granted P78 million in emergency funds for ASF containment
THE government has approved P78 million in emergency funding for the Department of Agriculture’s (DA) African Swine Fever (ASF) containment efforts.
“The Department of Agriculture through the Bureau of Animal Industry (BAI) will spend the P78-million emergency fund — approved by President Rodrigo [R.] Duterte and the Cabinet during last week’s meeting — for biosecurity and quarantine operations, disease monitoring and surveillance, upgrading of laboratories, capacity-building, and other disease control measures,” the DA said in Swine Bulletin No. 6 issued to reporters on Wednesday.
A separate P82.5 million has been given to BAI, while the Agricultural Credit Policy Council (ACPC) has approved P60 million worth of loan assistance for hog raisers affected by the first outbreak of ASF.
On Sept. 9, the DA confirmed an outbreak of ASF in Rizal and Bulacan, where 7,416 hogs have so far been culled since Aug. 18 as a preventive measure.
On Sept. 11, dead pigs, which are suspected to be infected by the virus, were found in the Marikina River and in a creek in Barangay Bagong Silangan, Quezon City.
The Quezon City government has declared that hog deaths in the city were caused by ASF.
Mayor Josefina G. Belmonte said at a news conference that the city veterinarian has received “verbal” confirmation of the ASF finding from the Bureau of Animal Industry.
About 166 pigs have been culled in Bagong Silangan since Sunday, she said.
The city government is also investigating hog deaths in the adjoining Barangay Payatas. — Vincent Mariel P. Galang
Distilled spirits makers warn excessive taxation could depress demand, harm government revenue
MAKERS of distilled spirits warned against excessive tax increases targeting the segment, saying that falling demand could leave the government with less revenue than it is projecting.
Distilled Spirits Association of the Philippines President Olivia Limpe-Aw said distilled spirits demand is highly likely to fall disproportionately with every increase in price.
“Between 2017 and 2018, the price of alcoholic beverages and tobacco products increased by 20%, while no other major household expenditure increased by (more than) 7%. The effects of these are decreased consumption of alcoholic beverages that seem to be decreasing at a higher rate, from down 3.4% in 2017 to down 5.1% in 2018,” she was quoted as saying in a statement.
The industry submitted a position paper Sept. 13, to the Senate Committee on Ways and Means chair, Senator Pilar Juliana S. Cayetano.
Finance Undersecretary Karl Kendrick T. Chua called the DSAP’s argument “one-sided,” adding that as the population and incomes grow, individuals will have more purchasing power, thereby boosting government revenue.
“Incomes are increasing so they will have more purchasing power to spend, and that’s what we’ve seen in the last six or seven since the sin tax, so we don’t think that demand will fall. Besides, the population is growing,” Mr. Chua said in a phone interview Wednesday.
“Yes there’s a price effect but we have also the income effect and the population effect, overall means demand will continue to increase and we will generate more revenues and they will generate their own income,” he added.
Ms. Limpe-Aw said the tax burden is lighter in the House of Representatives version of the excise tax on alcoholic beverages, at 25.65% compared to the 31.22% tax in the Senate version.
DSAP has called for a “level playing field” in the excise tax on alcoholic products, alleging that the proposed taxes leave the spirits industry at a disadvantage relative to wine.
She said that high-end distilled brands, under the Senate bill, will have higher excise tax than wine product.
House Bill 1026, written by Albay-2nd district Rep. Jose Ma. Clemente S. Salceda, hurdled third and final reading on Aug. 20 in the House of Representatives.
Meanwhile, Senate Bill No. 383, incorporating drafts put forward by the Department of Finance (DoF) and the Department of Health (DoH), has been filed by Senator Emmanuel D. Pacquiao.
Under the Senate bill, distilled spirits will have 25% ad valorem tax on the net retail price and another P40 specific tax per liter, which will gradually increase by P5 annually up to P55 in 2023, and then further rise by 10% yearly thereafter.
Meanwhile, the excise tax on wine will increase to P40 per liter next year for products containing 14% alcohol by volume and P80 for those with more than 14%, with an incremental annual increase of 10% starting 2021. There is no ad valorem tax in the bill. — Beatrice M. Laforga
Puerto Princesa City to stage investment forum in Manila
THE Puerto Princesa city government and the United States Agency for International Development (USAID) are organizing an investment forum in Manila on Sept. 25 to promote business opportunities in the Palawan capital.
The Puerto Princesa City Business Forum aims to present business opportunities in the city, the city government unit said in a statement.
The forum venue is the Sofitel Plaza Manila.
Puerto Princesa is located within the Brunei Darussalam-Indonesia- Malaysia- Philippines (BIMP)-East ASEAN growth area (EAGA), and has an international airport and seaport, and has embraced public-private partnership modes of investment.
Puerto Princesa was 23rd among all local governments in the 2018 Competitiveness Index, rising from 89th in 2014.
The city is also a tourist destination hosting a UNESCO World Heritage site , the Puerto Princesa Subterranean River National Park.
The forum’s keynote speaker is Jeffrey T. Ng, president of Astoria Hotel and Resorts (AHR), a major investor in the city.
The company has invested P1.5 billion in Astoria Palawan, which features villa-style accommodation, food and beverage outlets, and a waterpark.
Another speaker is Arthur G. Gindap, a senior vice president and business unit general manager at Robinsons Land Corp. (RLC), who will discuss the city’s potential as a meetings, incentives, conferences, and exhibitions (MICE) destination.
In an e-mail, Mr. Gindap said: “Robinsons Hotels and Resorts has plans to upgrade its existing Go Hotels property into a full service Summit Hotel with convention facilities that can accommodate up to 800 persons.”
Go Hotels is RLC’s chain of budget hotels. — Vincent Mariel P. Galang
Senate backs funding for DAR land distribution
THE Senate Finance Committee approved Wednesday the P8.426-billion budget of the Department of Agrarian Reform (DAR) for 2020, with the department also seeking additional funding to help achieve its 2022 goal of land acquisition and distribution.
Senator Cynthia A. Villar, who chairs the finance committee sub-panel tackling DAR’s budget, has endorsed its spending plan for plenary discussion. The 2020 National Expenditure Program (NEP) allocation for DAR is 3% higher than its 2019 budget.
“Gusto lang naming malaman (We just want to know), with the present budget, magkano (how much) every year ang idadagdag (will be added) for them to accomplish what the President told them, which is to distribute everything by 2022,” Ms. Villar told reporters after the hearing.
The NEP gives DAR about P2 billion for acquisition and distribution for 2020, less than the P3 billion the department estimates is needed.
“They have to compute how much it will cost them for distribution… President [Rodrigo R.] Duterte (is saying is that) they have to finish everything by 2022. Tinatanong ko magkano para matapos nyo ng (I’m asking how much is needed finish the job by) 2022,” adding that if the request is reasonable she will back the extra funding.
In a Cabinet meeting on April 1, Mr. Duterte ordered DAR to expedite the issuance of individual Certificates of Land Ownership Award (CLOAs) by acquiring and distributing private agricultural land and parceling out collective CLOAs. It was also ordered to identify government-owned land suitable for agriculture for distribution to qualified beneficiaries.
Agrarian Reform Secretary John R. Castriciones said that for the 2020-2022 period, the department plans to distribute a total of 328,968 hectares of private agricultural land, 144,647 hectares of government-owned land, and break up 1.4 million hectares of collective CLOAs.
Ms. Villar asked DAR to identify areas with the most number of agrarian reform beneficiaries (ARBs) to help set priorities.
“I want to know where the most ARBs are by region, and then (how many) ARBOs (Agrarian Reform Beneficiary Organizations) per region. I want to know what their projects are… para makita natin kung doon ba sa marami inilagay yung development project (in order to see whether the development projects are going to the areas with the most beneficiaries,” she said. — Vincent Mariel P. Galang
P9.97-B NEDA budget hurdles Senate finance committee
THE Senate finance committee on Wednesday approved the P9.97 billion budget of the National Economic and Development Authority (NEDA) for 2020.
The committee chair, Senator Juan Edgardo M. Angara, said legislators focused on how the agency plans to adapt the economy for the so-called Fourth Industrial Revolution which will bring about increased automation.
NEDA Undersecretary Rosemarie G. Edillon said the implementing rules and regulations for the newly enacted Philippine Innovation Act, under Republic Act No. 11293, are being drafted.
The IRR includes proposals to empower the Commission on Higher Education (CHEd) to upgrade students’ technical skills.
“We are finalizing the IRR within the month,” Ms. Edillon said during the budget deliberations.
Ms. Edillon noted NEDA has identified housing and urban development, agriculture, manufacturing, tourism and allied services, connectivity and financial services as among the areas that need innovation.
The Philippine Institute for Development Studies (PIDS) is the process of conducting research on how innovation can improve the country’s performance.
“We are planning to have a follow up on our innovation survey. We think it’s the right time now to do a follow up study,” PIDS President Celia M. Reyes said.
The 2020 NEDA budget is higher than the P8.331-billion approved under the 2019 General Appropriations Act. The Philippine Statistics Authority will get P7.321 billion, the Office of the NEDA Director General P1.441 billion, the Commission on Population P497.459 million and PIDS and other agencies P322.294 million. — Charmaine A. Tadalan
Fifth EITI report includes first study of small-scale miners
THE Philippine Extractive Industries Transparency Initiative (PH-EITI) has included its first assessment of small-scale miners in the Fifth Country Report.
Environment Undersecretary for climate change and mining concerns Analiza R. Teh said that including the small-scale miners in the report will give a “more comprehensive view” of the industry.
“In the previous years, the inclusion of the small-scale mining sector was recommended and in this Fifth EITI report (includes a) pioneering transparency report on small-scale mining operations in South Cotabato,” Ms. Teh said during the launch of the fifth EITI report Wednesday.
Finance Assistant Secretary Ma. Teresa S. Habitan said EITI stakeholders are actively trying to capture the impact of small mining operations.
“We’re hoping to get more involved in small-scale mining (operations) particularly because it means more to the communities. The more that we’re able to get information to them on how to better do mining, I think it’s all going to benefit all communities,” Ms. Habitan told reporters on the sidelines of the report launch.
In the fourth report launched in April 2018, Ms. Teh said the small-scale mining sector encompasses thousands of workers and accounts for a significant portion of the economy.
Speaking to industry groups and government officials, Finance Undersecretary Bayani H. Agabin said that the fifth report includes many “firsts” such as the pilot use of an online reporting tool, expanded coverage of non-metallic mining, and the first reports on beneficial ownership structures of companies in the industry.
Increased industry transparency is expected to increase the payments made by extractive firms commensurate to their impact on the environment.
In 2017, EITI claims to have generated P39.1 billion, up 43% from a year earlier.
EITI has been publishing annual country reports since 2014. The report serves a tool for policymakers and other stakeholders to determine the payments the government can generate from the sector. — Beatrice M. Laforga
Budget certified as urgent as Palace seeks to avoid 2019 delays
PRESIDENT Rodrigo R. Duterte has certified as urgent the proposed P4.1 trillion national budget for 2020.
In a letter to Speaker Alan Peter S. Cayetano dated Sept. 17, Mr. Duterte certified the necessity of the immediate enactment of House Bill No. 4228 or the 2020 General Appropriations Bill.
The President said he wants to ensure the immediate passage of the 2020 national budget “in order to address the need to maintain continuous government operations following the end of the current fiscal year, to expedite the funding of various programs, projects, and activities for FY 2020.”
The passage of the national budget will also ensure “budgetary preparedness that will enable the government to effectively perform is Constitutional mandate.”
The hearings on the 2020 budget ended on Sept. 6. Plenary debates are currently ongoing.
Last year’s budget was delayed because of alleged “insertions” and the resulting disputes about changes to the spending program. President Rodrigo R. Duterte eventually vetoed more than P95 billion worth of spending items after signing the measure in mid-April. — Vince Angelo C. Ferreras
The PWD 5% special discount
Persons with Disability (PWDs) have persistently expressed their need for inclusion and to be given equal footing in society. Recognizing the Constitutional mandate to protect their rights, the government enacted Republic Act (RA) Nos. 9442 and 10754, also known as The Magna Carta for Persons with Disability and An Act Expanding the Benefits and Privileges of Persons with Disability (PWD). The main objectives of these laws are to provide PWDs with the opportunity to participate in mainstream society and to support their total well-being.
Under the Magna Carta for PWDs, the government may grant special discounts for PWDs to cover their basic necessities. In line with this, the government issued the Joint DTI-DA-DoE Administrative Order No. 17-01, series of 2017 in February 2017, granting PWDs a special discount of 5% off the regular retail price of the basic necessities and prime commodities as defined in the Price Act, but without exemption from the value-added tax (VAT).
The total purchases of basic necessities and prime commodities should not exceed P1,300 per calendar week without carry-over of the unused amount and the amount needs to be spent on at least four kinds of listed necessities and commodities commensurate to the personal and exclusive consumption of the PWD within the calendar week.
As defined in The Price Act (Republic Act No. 7581, as amended by RA 10623 in 2013), basic necessities are goods vital to the needs of consumers for their sustenance and existence, while prime commodities are goods considered essential to consumers.
Basic necessities include rice, corn, bread, fish and other marine products, fresh meat products, eggs, potable water in bottles and container, milk (excluding those labeled as food supplements), fresh fruits and vegetables, locally-manufactured instant noodles, coffee and creamer, sugar (excluding sweeteners), cooking oil, salt, laundry soap, firewood, candles, charcoal, kerosene and liquefied petroleum gas in specified amounts.
Prime commodities include flour, processed meat products, onions, garlic, vinegar, patis (fish sauce), soy sauce, bath soap, fertilizer, pesticides, herbicide, animal feed, veterinary products, school supplies, nipa shingles, cement, clinker, GI sheets, hollow blocks, plywood, plyboard, construction nails, electrical supplies, steel wire, and batteries (excluding mobile phone and automotive batteries).
Although the 5% special discount has been in place since 2017, not many may be aware of this additional incentive for PWDs. On this note, many will welcome the issuance of Revenue Regulations (RR) No. 9-2019, which reiterates all the above guidelines, and integrates all existing policies on PWD benefits, granted by agencies of the government, for the guidance of its stakeholders.
This RR supplements RR No. 5-2017 issued by the Bureau of Internal Revenue (BIR) on April 2017 implementing RA 10754. Although this recent RR took effect only on Sept. 12, 2019, the special discount should have already been available back in 2017 when the Joint Administrative Order became effective.
In granting the 5% special discount, business establishments assume the responsibility of correctly identifying if their inventory qualifies as either necessities or commodities, which are eligible for the discount. The Tax Code and previous BIR guidelines have clarified that those granting discounts are required to keep separate and accurate records of sales to PWDs. Otherwise, the sales discount may be disallowed as a deduction for income tax purposes.
Moreover, the 5% special discount on basic necessities and prime commodities should not be confused with the 20% discount applicable to select purchase of goods and services by PWDs such as medicine, food service at restaurants and travel expenses. One main distinction is that only goods and services covered by the 20% discount comes with absolute VAT exemption. On the other hand, the goods covered by the 5% special discount will only be VAT-exempt if they are agricultural and marine food products in their original state pursuant to Section 109 of the Tax Code.
Needless to say, a senior citizen who is also incidentally a PWD would not be entitled to cumulative benefits. They can only claim the special discount as a PWD or as a senior citizen, not both.
Overall, the 5% special discount is undoubtedly favorable to PWDs since the enumerated goods are used and consumed in every Filipino household. For their part, business establishments are reminded of their legal and social responsibility to give what is due, hopefully without PWDs having to demand the enjoyment of their rights.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Patricia Loren C. Roma is a senior consultant at the Tax Services Department of Isla Lipana & Co., a Philippine member firm of the PwC network.
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