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The one person corporation

With the advent of Republic Act No. 11232, otherwise known as the “Revised Corporation Code of the Philippines,” (RCC) which became effective on Feb. 23, one need not assemble a group of at least five individuals in order to establish a Philippine domestic corporation.

The RCC defines a one person corporation as “a corporation with a single stockholder: Provided, That only a natural person, trust, or an estate may form a one person corporation.” Banks and quasi-banks, pre-need, trust, insurance, public and publicly listed companies, and non-chartered government-owned and -controlled corporations may not, however, incorporate as a one person corporation.

A one person corporation shall not be required to have a minimum authorized capital stock, except as otherwise provided by special law. Moreover, unless otherwise required by applicable laws or regulations, no portion of the authorized capital of a one person corporation is required to be paid-up at the time of incorporation.

A one person corporation is not required to submit and file corporate by laws.

A one person corporation must indicate the letters “OPC” either below or at the end of its corporate name.

The single stockholder of a one person corporation shall be the sole director and president of the one person corporation.

Securities and Exchange Commission (SEC) Memorandum Circular No. 7, Series of 2019, entitled “Guidelines on the Establishment of A One Person Corporation,” which became effective on May 1, provides that the term of existence of a one person corporation shall be perpetual. However, in case the single stockholder of the one person corporation is a trust or estate, its term of existence shall be co-terminous with the existence of the trust or estate.

Within 15 days from the issuance of its certificate of incorporation by the SEC, a one person corporation must appoint a Treasurer, Corporate Secretary, and other officers as it may deem necessary, and notify the Commission thereof within five days from such appointment.

The single stockholder of a one person corporation may not be appointed as the Corporate Secretary of the one person corporation, but may assume the role of its Treasurer.

A single stockholder who is likewise the self-appointed Treasurer of the Corporation is required to give a bond to the SEC in such a sum as the SEC may require: Provided, that the said stockholder/Treasurer shall undertake in writing to faithfully administer the one person corporation’s funds to be received as Treasurer, and to disburse and invest the same according to the Articles of Incorporation of the one person corporation as approved by the SEC. Such bond shall be renewed every two years or as often as may be required.

The single stockholder shall designate a Nominee and an Alternate Nominee who shall, in the event of the single stockholder’s death or incapacity, take the place of the single stockholder as director and shall manage the corporation’s affairs. The Articles of Incorporation of the one person corporation should state the names, residence addresses, and contact details of the Nominee and Alternate Nominee, as well as the extent and limitations of their authority in managing the affairs of the one person corporation. The written consent of the Nominee and Alternate Nominee shall be attached to the application for incorporation of the one person corporation. Such consent may be withdrawn in writing any time before the death or incapacity of the single stockholder.

The single stockholder may, at any time, change its Nominee and Alternate Nominee by submitting to the SEC the names of the new nominees and their corresponding written consent. For this purpose, the Articles of Incorporation need not be amended.

A one person corporation shall maintain a minutes book which shall contain all actions, decisions, and resolutions taken by the one person corporation. When action is needed on any matter, it shall be sufficient to prepare a written resolution, signed and dated by the single stockholder, and recorded in the minutes book of the one person corporation. The date of recording in the minutes book shall be deemed to be the date of the meeting for all purposes under the RCC.

The Corporate Secretary of a one person corporation is required to:

(a) be responsible for maintaining the minutes book and/or records of the one person corporation;

(b) notify the Nominee or Alternate Nominee of the death or incapacity of the single stockholder, which notice shall be given no later than five days from such occurrence;

(c) notify the SEC of the death of the single stockholder within five days from such occurrence and stating in such notice the names, residence addresses, and contact details of all known legal heirs; and

(d) call the Nominee or Alternate Nominee and the known legal heirs to a meeting and advise the legal heirs with regard to, among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or consequential matters.

A one person corporation is required to submit the following within such period as the SEC may prescribe:

(a) annual financial statements audited by an independent certified public accountant: Provided, That if the total assets or total liabilities of the one person corporation are less than P600,000, the financial statements need merely be certified under oath by the corporation’s Treasurer and President.

(b) a report containing explanations or comments by the President on every qualification, reservation, or adverse remark or disclaimer made by the auditor in the latter’s report;

(c) a disclosure of all self-dealings and related party transactions entered into between the one person corporation and the single stockholder; and

(d) such other reports as the SEC may require.

The SEC may place a one person corporation under delinquent status should the corporation fail to submit the aforementioned reportorial requirements three times, consecutively or intermittently, within a period of five years.

The fiscal year of a one person corporation shall be that set forth in its Articles of Incorporation or, in the absence thereof, the calendar year.

A sole shareholder claiming limited liability has the burden of affirmatively showing that the one person corporation was adequately financed. Where the single stockholder cannot prove that the property of the one person corporation is independent of the stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the one person corporation.

The principles of piercing the corporate veil applies with equal force to one person corporations as with other corporations.

Hopefully, the allowance by the RCC of one person corporations will contribute to the ease of doing business in the country.

The opinions expressed herein are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at evtan@accralaw.com. The author is the President of the Financial Executives Institute of the Philippines, Inc. (FINEX) and Of Counsel of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), the leading and largest law firm in the Philippines.

 

Eusebio V. Tan is the President of Financial Executives Institute of the Philippines, Inc. (FINEX)

Gross revenue growth across key industries eases in the second quarter

By Lourdes O. Pilar, Researcher

REVENUE across all industries grew in the second quarter, albeit at a slower pace compared to a year ago, the Philippine Statistics Authority (PSA) reported yesterday.

Data from the PSA’s Quarterly Economic Indices (QEI) report showed total gross revenue index, which measures sales generated by companies, expanding by 6.5% in the three months to June.

The second-quarter QEI report marked the second time it used 2016 as the base year. In previous iterations of the report, it used 1978 as the base year.

The second-quarter reading was slower than the 8.3% posted in the first quarter and 9.6% in the second quarter of 2018.

Expansion was observed across all industries during the period with financial and insurance activities leading the way at 12.6% growth in the second quarter, slower than the 14.5% growth in 2018’s comparable three months.

Other sectors showing slower revenue growth were transportation, storage and communication (5.8% from 11.3%); mining and quarrying (4.2% from 10.2%); and manufacturing (2.4% from 10%).

Meanwhile, revenue growth accelerated in trade (12.5% from 8.3%); electricity, gas and water supply (10.1% from 8.9%); real estate (9.1% from 7.1%); and other services (6.2% from 5%).

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), attributed the second-quarter result to the “slowdown in [the] aggregate income of the economy.”

“A glaring growth slowdown came from government consumption due to the stalled passage of the 2019 national budget. Government spending impact was largely lower in the first half of 2019 compared to the same period in 2018. Private consumption maintained growth for both first semesters of 2018 and 2019, but this instead resulted in very weak capital formation, affecting direct fixed and critical investments in the local economy,” Mr. Asuncion said in an e-mail.

Philippine gross domestic product (GDP) grew by 5.5% in the second quarter, which is the slowest pace in 17 quarters or since the 5.1% growth in the first quarter of 2015 based on PSA’s national accounts. Government spending growth figured in at 6.9%, decelerating from 7.4% the previous quarter and 11.9% last year.

Analysts blamed the disappointing result to the 2019 budget’s nearly four-month delay which had left new projects unfunded. To recall, the government operated on a reenacted 2018 budget from January to April 15, when President Rodrigo R. Duterte signed this year’s national budget into law but vetoed P95.3 billion in funds that were not in sync with state priorities, slashing the total to P3.662 trillion.

In a separate e-mail, Security Bank Corp. Chief Economist Robert Dan J. Roces said the slower gross revenue index in the second quarter “validates the lower than expected GDP growth for the same period.”

“The bright spots, however, were real estate whose value was unlocked by the infra push and POGOs (Philippine Offshore Gaming Operators); and commercial trade which benefited from easing inflation, elections spending, and increased tourism traffic,” Mr. Roces explained.

“These…, however, were not able to cover for manufacturing which contracted on the back of a global slowdown, low foreign direct investments and tepid international trade, amidst an escalating trade war,” he added.

Meanwhile, employment across key industries rose during the period as the total employment index grew by 1.9% compared to 1.3% in the second quarter last year. Sectors posting growth during the period were manufacturing (5.4%); real estate (5%); transportation, storage, and communication (4.4%); mining and quarrying (4.1%); trade (2.2%); electricity, gas and water supply (1.3%); and financial and insurance activities (0.7%).

On the other hand, construction and other services saw their respective employment indices decline by 2% and 0.1% during the period.

Compensation growth accelerated to 4.7% in the second quarter from 3.7% in the second quarter of 2018. Backing this growth were electricity, gas and water supply (10.9%); mining and quarrying (8.1%); manufacturing (7.1%); trade (5.8%); transportation, storage and communication (4.8%); real estate (4.4%); and financial and insurance activities (1.9%).

On a per-employee basis, compensation grew 2.7% from 2.3% last year.

“Gross revenue is expected to recover in the next quarter as the government continues its spending catch-up in the second half of this year,” UnionBank’s Mr. Asuncion said moving forward.

How PSEi member stocks performed — September 19, 2019

Here’s a quick glance at how PSEi stocks fared on Thursday, September 19, 2019.

 

Legislator sees possible budget approval at House by Friday

REPRESENTATIVE Isidro T. Ungab of Davao City’s third district, who chairs the House Appropriations committee, said the P4.1-trillion budget bill for 2020 could be approved on third reading by Friday.

President Rodrigo R. Duterte certified as urgent House Bill 4228 or the 2020 General Appropriations Bill (GAB) in a Sept. 17 letter to Speaker Alan Peter S. Cayetano and Senate President Vicente C. Sotto III.

“Given the certification, the P4.1-trillion budget for 2020 may be passed on the same day without waiting for separate days to have it approved on 2nd and 3rd readings. Thus, it is possible that the GAB will be passed on Friday, since it was certified as urgent,” Mr. Ungab said in a phone message to BusinessWorld on Thursday.

In his letter, Mr. Duterte said that the swift passage of the national budget will “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 its Constitutional mandate.”

Rep. Jose Ma. S. Salceda, the House Ways and Means committee chair from Albay’s 2nd district, said the GAB faithfully adheres to the National Expenditure Program drawn up by the executive branch.

“Since GAB is 100% NEP, the Pres[ident] certified it. So we can approve budget tomorrow on 3rd (reading),” Mr. Salceda said in a message to reporters.

He added, “This is the first time for Pres[ident] Duterte in four budgets to provide a presidential certification.”

Rep. Martin G. Romualdez, the Majority Leader from Leyte’s first district, said: “We, in Congress, support the initiatives of the Duterte administration to empower the poor through increased subsidies and grants aimed at ending the intergenerational cycle of poverty in the country.”

The hearings on the 2020 budget ended on Sept. 6, with plenary debate ongoing.

The budget was originally planned for passage on second reading on Friday, Sept. 20 and third reading on Oct. 4.

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

House bill filed creating strategic fuel reserve

A LEGISLATOR filed a bill Thursday calling for the creation of a strategic reserve for petroleum products, to cushion the impact of oil price and supply shocks.

“A national strategic fuel reserve will enable the government to protect Filipino consumers from (oil price) shocks… and resulting rate increases of public utilities… as well as supply disruption results from natural disasters and calamities, 1-Pacman Party-list Rep. Michael L. Romero said in a statement.

Mr. Romero filed House Bill 4689, which if approved will become the Philippine Fuel Reserve and Fuel Price Stabilization Act of 2019.

The measure proposes a government-owned strategic reserve with a minimum 15-day supply of liquefied petroleum gas, natural gas, diesel, gasoline, kerosene, aviation fuel, and bunker fuel.

The private sector will also be required to maintain a 15-day stockpile of these fuels as well as crude oil.

The proposed source of supply is government-to-government agreements with petroleum-producing countries.

The bill also proposes the designation of priority users in the event of restricted supply, which includes hospitals and social service care facilities, water distributors, sewage and water filtration systems, power generators, airports and seaports, schools, media organizations such as newspapers, radio and television networks; and other communications facilities.

“Perhaps as an incentive, the stocks in the fuel reserves can be exempted from excise or value-added taxes. This would make maintaining those reserves financially viable because there are inventory costs to offset,” he said.

Asked to comment, Energy Secretary Alfonso G. Cusi said the measure complements DoE’s current plans.

“DoE has a program to develop a strategic reserve… (The bill) will complement it, that will institutionalize it,” said Mr. Cusi in a chance interview with BusinessWorld. — Vince Angelo C. Ferreras

Energy think tank proposed for UP

THE chair of the Senate’s energy committee has revived calls for the creation of a think tank for the energy sector, to help deal with energy crises such as oil price shocks arising from any disruption in the supply of crude from the Middle East.

In a statement, Senator Sherwin T. Gatchalian said he filed Senate Bill No. 172, which if passed will be known as An Act Creating the Philippine Energy Research and Policy Institute (PERPI).

“The vision for this bill is really to enable the government and the academe to level up the knowledge base and the research capabilities of the energy sector,” he said.

He said an energy research and policy center could help draft policy that will insulate the country from supply shocks.

“The creation of PERPI is crucial for the country since we are dependent on a lot of importation when it comes to energy. Over the weekend, the attack on Saudi oil refineries leaves us vulnerable to a supply shock,” he said.

SB 172 authorizes the creation of PERPI at the University of the Philippines. It will conduct multidisciplinary energy research, develop viable technology, and aid the government in energy policy-making.

“The energy sector is naturally characterized by rapidly changing technology, which necessitates continuous study and research. The results of these inquiries are crucial in ensuring that energy policy is responsive to the evolving landscape of the energy sector and its effect on consumers,” Mr. Gatchalian said.

The bill appropriates P200 million for the initial funding of the think tank. An endowment will also be established to support the institute’s research. — Victor V. Saulon

Senate panel approves additional TESDA funding

THE Senate on Thursday approved the proposed P15-billion budget of the Technical Education and Skills Development Authority (TESDA), granting the agency’s request for more funding to carry out its legal mandate to provide free access to technical training.

The Senate Committee on Labor, Employment, and Human Resources Development approved the agency’s P15.1-billion budget request, adding to the Department of Budget and Management’s (DBM) original spending plan of P11.8 billion.

TESDA said in budget hearings that it needs an additional P3.3 billion to implement the Tulong Trabaho program.

The program was established by Republic Act 11230, or the Tulong Trabaho Act. The law provides for free access to technical vocational education and training (TVET) programs.

TESDA Secretary Isidro S. Lapeña said its P1.5-billion budget request for the Tulong Trabaho program was denied by the DBM pending the completion of the law’s Implementing Rules and Regulations (IRR). The law was passed in February, making the IRR overdue, because such rules are required to be issued This is over the 60 days period mandated in the law to establish the guidelines.

“We have come up with the IRR and it was approved by the TESDA board and it was actually published… We have now a draft of the regional guidelines,” he said during the TESDA budget hearing on Thursday.

“We have now submitted the copy of the IRR and it was duly received by the DBM.”

Senator Emmanuel Joel J. Villanueva told reporters Thursday that the additional funds requested by TESDA will be an investment but added that more cooperation from industry is needed in order to make the program successful.

“It is important that we have link to the industries which is why TESDA right now has a unit that deals with industry, but I think this is still insufficient… These are the things we need to focus on and we will do our best to (establish) those linkages,” Mr. Villanueva said. — Gillian M. Cortez

Farmer party-list legislator seeks investigation into rice cartels, ASF

A PARTY-LIST legislator representing farmers said Thursday that he is seeking investigations into rice industry cartels as well the outbreak of African Swine Fever (ASF) in some hog farms on Luzon.

Magsasaka Party-list Rep. Argel T. Cabatbat filed House Resolutions No. 332 and 336 which directs the Committee on Agriculture and Food to probe allegations of rice smuggling and the ASF outbreak.

Mr. Cabatbat said Republic Act No. 1123 or the Rice Tariffication Law has encouraged hoarding, smuggling and price manipulation by rice traders.

“Laganap pa rin ang smuggling and under-declaration (Smuggling and under-declaration of import values is still rampant). Nalulugi ang gobyerno sa tax at nahihirapan ang mga magsasaka (the government is not collecting the correct taxes and farmers are suffering)… hindi rin naman nakikinabang ang mga consumer kasi di rin naman bumaba ang presyo ng bigas (consumers are not benefiting from imports because rice prices have not fallen),” Mr. Cabatbat said at a briefing.

He called on the Philippine Competition Commission (PCC) to lead the rice investigation.

“Ang batas na nagbubuo ng Philippine Competition Commission, hindi nila kailangan ng may magrereklamo para maibestigahan nila (The law allows the PCC to investigate even without the filing of a complaint),” he said.

Separately, 53 legislators filed a resolution seeking a P15-billion supplemental budget for the National Food Authority (NFA) to boost its purchasing activity at P20 per kilogram, citing “the dire impacts of the Rice Tariffication Law.”

House Joint Resolution No. 18 directs the NFA to procure at least 750,000 metric tons of unmilled rice or palay from farmers at P20 per kilo farm gate price, and sell NFA rice to consumers at P27 per kilo.

Until recently, the NFA’s purchasing price for palay was P17 plus incentives, which include payments to cooperatives selling palay to the NFA. This was recently raised to P19 while eliminating the incentives.

The NFA serves as a buyer of last resort for farmers who are typically bargained down by rice traders, though its funds are insufficient to buy the entire harvest at the support price.

Mr. Cabatbat also alleged that the ASF outbreak may have been caused smuggling.

“Nagkaroon tayo ng pork ban sa mga bansang tinamaan nito. So logically, di na dapat ito makakapasok sa atin… (We banned pork from ASF-affected countries, so logically, the disease should not have been able to enter) Kaya pinagdududahan namin ang smuggling na dahilan kung bakit nakapasok ang African Swine Fever (that is why we suspect smuggling is behind the entry of ASF),” Mr. Cabatbat said.

Mr. Cabatbat said that he is hoping that the House inquiry can start next week adding that he will support additional funding for the DA to aid in the ASF containment effort.

The proposed DA budget for 2020 is P54.431 billion. — Vince Angelo C. Ferreras

Local government fee rules prescribe 10% markup on cost of services

NEW RULES regulating fees issued by the Bureau of Local Government Finance (BLGF) require local government units (LGUs) to charge no more then a 10% markup on the cost of services.

The BLGF laid out the rules in its local fees and charges (LFC) toolkit via memorandum circular no. 020-2019.

The circular requires LGUs to evaluate the cost of service delivery and to charge fees on a cost-plus-10% basis.

The rules “set a range… of reasonable (charges),” BLGF Executive Director Niño Raymond B. Alvina told BusinessWorld in a phone message Thursday.

The LFC toolkit consists of spreadsheet templates encoded with the Local Fees and Charges Estimation System.

“This is to help the LGUs in better designing their fees and charges to make them fair and commensurate to the cost of regulation or service rendered by the LGU,” Mr. Alvina added.

The BLGF requires special justification for fees that exceed cost-plus-10%.

Under the rules, the LGU may also decide to subsidize services, charging fees at below cost.

“The LGU may decide to keep rates subsidized or lower than the actual cost. If it’s more than the parameter (of a 10% margin), the LGU is encouraged to either adjust the rates, or improve the quality and efficiency of the service,” he said.

After reviewing the cost of all services, LGUs need to submit the results to an LGU Oversight Committee on Revising of Fees and Charges, which will be created by the mayor.

The BLGF, the Philippine Tax Academy (PTA) and the Department of Interior and Local Government (DILG) will offer training and technical assistance to aid LGU personnel in reviewing fees.

“We will work on (the database) once the LGUs start reviewing and revising their rates. Right now, we’ve started training for the NCR (National Capital Region) LGUs and more training will come in partnership with the DILG,” Mr. Alvina said, referring to the Department of Interior and Local Government.

Joint memorandum circular (JMC) 2019-01 released in May ordered local governments to impose “just and reasonable” fees and charges for all services rendered to the public.

The circular was authorized by Republic Act 11032, or the Ease of Doing business and Efficient Government Service Delivery Act of 2018.

Under RA 7160 or the Local Government Code (LGC) of 1991, LGUs are authorized to “create their own sources of revenue and to levy taxes, fees, and charges.” — Beatrice M. Laforga

Bourse ends flat with no surprises from the Fed

By Arra B. Francia, Senior Reporter

THE MAIN INDEX closed largely unchanged on Thursday as investors had already factored in the Federal Reserve’s rate cut in previous sessions.

The 30-member Philippine Stock Exchange index (PSEi) slipped by 0.05% or 3.97 points to close at 7,911.32 amid sluggish trading for most of the session, while the broader all-shares index was similarly edged 0.07% or 3.47 points lower to 4,782.96.

“It was another quiet session for the local market after the Federal Reserve cut its benchmark federal funds rate in line with market expectations,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile phone message.

The Fed cut key interest rates by 25 basis points after its two-day policy meeting, as widely expected by analysts. This is the US central bank’s second interest rate reduction since July, as the central bank addresses concerns about slowing global growth. Fed Chairman Jerome Powell said the move should help keep the US economy strong, although this may be the last rate cut for the year.

“The local market in the second half of trading rallied but failed to break above the previous close following sentiments that the US Fed may not cut anymore rates for 2019, and the lack of catalyst sent the Philippine main index down,” Philstocks Financial, Inc. said in a market note.

Wall Street indices were mixed after the rate cut decision, due to questions about US monetary authorities’ next move. The Dow Jones Industrial Average added 0.13% and the S&P 500 eked out gains of 0.03%, while the Nasdaq Composite Index slipped by 0.11%.

Asian stocks were similarly mixed with Japan’s Nikkei 225 and Topix indices rising 0.38% and 0.56%, respectively; while the Shanghai SE Composite rallied 0.46% and South Korea’s Kospi index jumped 0.46%.

On the other hand, Hong Kong’s Hang Seng index retreated 1.07%; India’s S&P BSE Sensex index fell by 1.22%; and Singapore’s Straits Times Index gave up 0.05%.

Back home, sectoral indices stayed equally divided between those that advanced and those that declined. The property sub-index climbed 1.25% or 50.11 points to finish 4,059.53; the industrial sector rose 0.2% or 22.52 points to 10,980.25; while financials added 0.2% or 3.71 points to 1,800.12.

Holding firms plunged 0.9% or 71.10 points to 7,827.34; services shed 0.54% or 8.61 points to 1,585.63; while mining and oil lost 0.22% or 21.25 points to 9,395.04.

Turnover was thin as 453.90 million shares worth P4.117 billion switched hands, compared to Wednesday’s 451.06 million shares worth P6.74 billion. Stocks that lost outnumbered those that gained 108 to 86, while 53 others ended flat. Foreign investors were net sellers for the third straight session at P398.84 million, the biggest outflow in that period.

Peso inches up as Fed cuts rates

THE PESO rose after the US Federal Reserve’s decision to cut policy rates. — BW FILE PHOTO

THE PESO edged up on Thursday on positive sentiment following the US Federal Reserve’s decision to cut benchmark rates anew.

The local unit ended at P52.18 against the greenback on Thursday, appreciating by two centavos from its P52.20-per-dollar close on Wednesday.

The peso opened sharply weaker at P52.31 versus the dollar. Its weakest point recorded at P52.333, while its closing level was its intraday high.

Dollars traded on Thursday climbed to $1.114 billion from the $912.33 million recorded on Wednesday.

One trader attributed the peso’s sideways performance to the Federal Open Market Committee (FOMC) meeting.

“FOMC failed to release any easing signal for the future…. That caused stronger dollar in the morning…but in the afternoon, the lower US Treasury yields made the dollar weaker. We also saw a selling trend in the market,” the trader said.

“The peso is also stronger after global crude oil prices continued to ease back to familiar ranges…,thereby supporting sentiment on the global financial markets,” Rizal Commercial Banking Corp. chief economist Michael L. Ricafort added.

The US Federal Reserve cut interest rates again on Wednesday to help sustain a record-long economic expansion but signaled a higher bar to further reductions in borrowing costs, eliciting a fast and sharp rebuke from President Donald Trump.

Describing the US economic outlook as “favorable,” Fed Chair Jerome Powell said the rate cut was designed “to provide insurance against ongoing risks” including weak global growth and resurgent trade tensions.

“If the economy does turn down, then a more extensive sequence of rate cuts could be appropriate,” Mr. Powell said in a news conference after the Fed announced it had lowered its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.75% to 2.00%. It was the second Fed rate cut this year.

But, Mr. Powell said, “what we think we are facing here is a situation which can be addressed, which should be addressed, with moderate adjustments to the federal funds rate,” noting that the US labor market was strong and inflation was likely to return to the Fed’s 2% annual goal.

For today, traders said the peso may weaken anew ahead of US data.

“The local currency might weaken further on bets that the second revision of the US GDP (gross domestic product) growth report [today] is expected to remain firm from the initial estimate,” the first trader said.

The first trader expects the peso to move within the P52.20-P52.40 range against the dollar, while the second trader sees it playing within the P52.10-P52.50 band. Meanwhile, Mr. Ricafort sees the peso trading from P52.00 to 52.30. — L.W.T. Noble with Reuters

Bill Gates is right to support a wealth tax

By Leonid Bershidsky

IN HIS NEW book on how to fix inequality, French economist Thomas Piketty may have gone a little too far with a call for a 90% wealth tax for billionaires and multimillionaires, but putting a tax on huge fortunes may well make sense. Bill Gates, the second richest man in the world, thinks so. His case makes it clear why governments should go for it.

Gates said in a Bloomberg interview that he “wouldn’t be against” a wealth tax, even though he doesn’t believe the US will introduce it. As an alternative, he proposed raising the estate tax to 55% for the top bracket from the current 40%.

As things stand, Gates’s net worth increased by $16 billion this year to $106.8 billion (according to the Bloomberg Billionaires Index). He gives away lots of money every year. He and his wife have donated more than $36 billion to the Bill & Melinda Gates Foundation since 1994, though the couple’s contributions to the trust that finances the foundation’s activities were relatively small in 2018 at $43.9 million. (They contributed almost $4.7 billion in stock and cash in 2017.)

Despite their generosity and a sober, goal-oriented approach to philanthropy, the family of the Microsoft founder cannot operate programs on the scale that a wealthy nation’s government does, even though it has resources comparable to that of a nation. The foundation’s expenses reached $4.8 billion in 2018 (which was at the lower end of its normal range of $4.5 billion to $6.5 billion); that’s about the size of the Republic of Georgia’s annual government spending.

It doesn’t make sense for the Gateses to give away much more; even with the best of advice, they cannot always pick the most efficient ways to spend money for the benefit of society. That’s the job democracies reserve for politically representative governments and parliaments, supported by diverse expert institutions which should be able to provide a nation with a 360-degree view of its priorities.

Even an extraordinarily talented individual like Gates finds it hard to analyze all the myriad inputs a modern state has to process. To give just one example from his Bloomberg interview, Gates is in favor of rolling back government subsidies to wind and solar energy producers, since renewable energy from these sources is already competitive with energy from fossil fuels. He thinks it’s time to shift incentives to areas such as energy storage and offshore wind generation, where technological progress is still lagging and costs need to be driven down.

It’s fine for Gates himself to make such a change in his own investing (for, apart from his philanthropic activities, he’s also launched an investment vehicle for projects in the field of clean energy). But it isn’t time for governments to scrap wind and solar subsidies yet: Even if the marginal cost of generating power now is comparable across different technologies, the economics of renewable energy still don’t allow for the natural, market-based replacement of fossil fuel-burning plants.

According to the International Energy Agency, the growth of renewable energy capacity stalled last year. Far less capacity is being added than necessary to meet the climate goals set by the 2016 Paris Agreement.

That’s one of the areas where a wealth tax could come in handy. In a paper published earlier this month, Emmanuel Saez and Gabriel Zucman from University of California, Berkeley, calculated that, had a wealth tax of 3% on fortunes above $1 billion been in place since 1982, Gates’s fortune still would have been enormous at $36.4 billion, but his extra taxes would have gone to useful government programs — and why not to clean energy subsidies?

Taxing Gates’s current fortune at this rate would yield $3.2 billion this year. That’s more than the $2.6 billion US spent on wind and solar subsidies in 2016, the latest year for which an Energy Information Administration estimate is available.

It’s laudable that Gates recognizes it would make sense to share more of his wealth with society even if he doesn’t get to decide how the money is spent. While Piketty’s expropriatory ideas are capable of scaring any reasonable person away from the idea of a wealth tax, it may well be the case that Gates isn’t alone among the super-rich who’d support a reasonable tax on their huge fortunes. Sharing more of this wealth through taxes can be a useful complement to targeted philanthropy. It doesn’t have to mean confiscating, Communist-style, the just rewards of exceptional business acumen.

 

BLOOMBERG OPINION

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