LRT Cavite on track to start operations by Q4 of 2021

September 3, 2019 | 12:01 am

THE mounting of piles as foundation for the Cavite extension of the Light Rail Transit Line 1 (LRT-1) started over the weekend, the Department of Transportation (DoTr) said.

In a statement yesterday, the department said LRT-1 operator Light Rail Manila Corp. (LRMC) kicked off the piling works on Sunday, which covers the first phase of the Cavite extension from Redemptorist station to Dr. Santos station.

With the development, the DoTr said it is on-track to get the first phase of the LRT-1 extension operational by the fourth quarter of 2021.

The P64.9-billion LRT-1 Cavite Extension project aims to add an 11.7-kilometer segment from Baclaran to Bacoor, Cavite to the existing 18.1-kilometer train line. It will have eight stations, namely: Redemptorist, MIA, Asiaworld, Ninoy Aquino, Dr. Santos, Las Piñas, Zapote and Niog.

The first phase of the extension — for which piling works begun — covers the seven-kilometer stretch of the first five stations from Redemptorist to Dr. Santos. The right of way for this segment has already been awarded to the concessionaire.

The remaining stations from Las Piñas to Niog are scheduled for completion in 2022, a year after the first phase opens.

“To speed up construction, piling works will be done simultaneously in up to five different areas where right of way is made available,” the DoTr said, noting it is working closely with the Metro Manila Development Authority, Light Rail Transit Authority and the local government of Parañaque City.

Once the Cavite extension opens, the DoTr expects the daily ridership of LRT-1 to increase to 800,000 from 500,000 at present, and reduce the travel time from Baclaran to Bacoor to 25 minutes from the current one to two hours.

LRMC is the joint venture of Ayala Corp., Metro Pacific Light Rail Corp. and Macquarie Infrastructure Holdings (Philippines) Pte. Ltd. It holds the P65-billion, 32-year contract to operate LRT-1 and build its extension to Cavite.

Metro Pacific Investments Corp. is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group. — Denise A. Valdez

How PSEi member stocks performed — September 2, 2019

September 3, 2019 | 12:00 am

Here’s a quick glance at how PSEi stocks fared on Monday, September 2, 2019.

House leaders move to keep budget on track

September 2, 2019 | 10:54 pm

SENIOR House legislators intervened to keep the P4.1 trillion 2020 Budget on track after moves to withdraw the budget bill raised the prospect of setbacks to the approval timetable, threatening a repeat of the infighting over the 2019 spending program, which was four months delayed.

“We assure the public that (the) budget will be scrutinized but will not be delayed and will be transparent,” Speaker Alan Peter S. Cayetano said in a statement, adding that pork barrel funding has “no place in the 2020 budget.”

His office issued the statement after Mr. Cayetano called on all agencies and departments to submit “written presentations of their respective budget proposals” by close of business today, Tuesday.

On Sunday, Camarines Sur 2^nd district Rep. Luis Raymund F. Villafuerte Jr., a deputy Speaker, posed procedural hurdles to the budget discussions by claiming that the bill had been prematurely filed because the agencies and departments had yet to complete their budget hearings. He alleged that the process was brought forward with “undue haste.”

Mr. Cayetano requested the House rules committee to make a determination on the matter and “refer the 2020 GAB (General Appropriations Bill) to the committee on appropriations for is consideration.”

House Appropriations Committee Chair and Davao City 3^rd district Rep. Isidro T. Ungab on Monday rejected Mr. Villafuerte’s contention of premature filing, telling BusinessWorld, “We cannot conduct budget hearings without a bill filed for first reading, with the budget bill being a replica of the NEP,” he said, referring to the National Expenditure Program as drawn up by the Executive Branch.

Mr. Villafuerte had moved to withdraw House Bill 4228 or the 2020 GAB, saying that the passage of the budget should not be “short-circuited.”

“The House leadership under Speaker Cayetano is fully committed to having the 2020 GAB acted upon in a timely manner and for all committee and plenary deliberations on this bill fully transparent and in keeping with the Supreme Court’s landmark ruling against so-called pork barrel funds for legislators,” Mr. Villafuerte said in a statement on Sunday. “But this legislative process must not be done with undue haste or making a mockery of the House’s constitutional power of the purse.”

In a letter to Mr. Villafuerte obtained by BusinessWorld, Mr. Ungab cited the urgency of keeping the budget on track, noting that the deputy speaker’s move to withdraw the bill would “derail” the scheduled approval of the budget.

“To prepare another set of (the) General Appropriations Bill will require enormous time, effort and resources that will surely affect or delay the passage of the 2020 Budget,” Mr. Ungab said in his letter.

He added, “Needless to say, any alteration of the National Expenditure Program or NEP, which is the version of your revised General Appropriations Bill, will surely raise doubts (about) our proceedings and the House will be questioned on why it (intends to) alter the proposed budget prepared by the Executive Department.”

Mr. Ungab said the GAB has always been closely modeled on the National Expenditure Program (NEP).

“Should there be amendments to be made based on those briefings, we include these in the committee report to be filed before we proceed to floor deliberations. Since we are about to finish the briefings by this week, it is just proper to file the bill and have it printed,” Mr. Ungab said.

The 2019 Budget was delayed by the issue of “insertions” and the resulting disputes over which chamber altered the spending program. President Rodrigo R. Duterte eventually vetoed over P95 billion-worth of budget items after signing the measure in mid-April.

The budget delay has been cited as a factor in the sharp slowdown in economic growth, because of the delays to the release of infrastructure funds, which needed to reach the contractors in time for the critical dry-season building window.

The last day of briefings for the 2020 budget is Sept. 6 with the preparation of the committee report set for Sept. 10.

Plenary deliberations are also scheduled for Sept. 12 to Oct. 4, by which time the House leadership hopes to achieve plenary discussion and third and final reading approval for the GAB.

Ways and Means Committee chair and Albay 2^nd district Rep. Jose Ma. S. Salceda said that budget hearings will still go on cannot move to the floor without the GAB being referred to and approved by the Appropriations committee.

“Hearings will go on but the significant implication is we can’t go to the floor without the GAB referred to committee, approved by committee and passed through the Rules committee,” Mr. Salceda said in a message to reporters on Sunday night.

Mr. Salceda added, “The Appro[priations] Committee bill was exactly the NEP. Ongoing printing was stopped, bukas sana tapos na (it was expected to be finished by the next day) for distribution. We will just work harder to meet Oct 4.”

The Development Budget Coordination Committee in its March 13 meeting slashed GDP expansion targets for this year to 6-7% from 7-8% originally and 2020 to 6.5-7.5% also from 7-8%, citing constraints from the delayed enactment of the national budget. — Vince Angelo C. Ferreras

Anti-smoking advocates object to proposed Pasig City ordinance regulating ‘vaping’

September 2, 2019 | 10:54 pm

HEALTH advocates warned against a proposed ordinance in or e-cigarette use, and rejected claims that the tobacco alternatives are safer.

HealthJustice Philippines and the Southeast Asia Tobacco Control Alliance (SEATCA) said the draft ordinance appears to accept the vaping industry’s claims that its products are “far less harmful” than traditional tobacco products.

“There is no scientific evidence to support claims that e-cigarettes and heated tobacco products are safe… no public health authority has claimed that these products are safe. The public and public servants in a position to protect public health must be fully apprised of the health risks inherent to vaping,” Dr. Edgardo Ulysses N. Dorotheo, SEATCA Executive Director, said in a statement.

The unnumbered draft ordinance calls the category of vaping products “vapor and heated tobacco products (VHTPs)” and claimed a “fundamental difference” between combustible and non-combustible products warranting separate regulation from traditional tobacco products.

The ordinance also cited the proliferation of “illicit or non-compliant VHTPs” as a missed opportunity for greater tax collection.

Other issues with the ordinance raised by the health groups were the regulation of designate smoking areas, with the ordinance requiring a designated vaping area (DVA) in an open space or a room with proper ventilation. The DVA is to be separate from the area designated for the consumption of traditional tobacco products.

Mary Ann Fernandez-Mendoza, President of HealthJustice, alleged that the tobacco industry is “brainwashing” the public into accepting the safety of e-cigarettes.

“The vaping industry is just the tobacco industry in different clothes. Because it is undisputed that smoking traditional cigarettes is a public health hazard, the tobacco industry would now have us believe that vaping or smoking e-cigarettes is safe. It is not. It’s just another form of addiction and the tobacco industry’s new source of income,” she said.

HealthJustice cited a recent case of a US vaping death in the state of Illinois due to lung disease, as well as other deaths caused by e-cigarette explosions and contaminated “juice” refills that led to death by poisoning.

The US Centers for Disease Control is currently investigating as many as 215 deaths linked to e-cigarettes, HealthJustice said.

“Places allowed for vaping are too limited. This is contrary to the FDA 2019-0007. It is stated there that, smoking or vaping should be prohibited in public places as enumerated in EO 26. In places where smoking is not allowed, vaping should not also be allowed,” Mr. Benedict G. Nisperos, HealthJustice Legal Consultant told BusinessWorld.

He also said that the ordinance is limiting the coverage of the non-smoking areas specified within the prohibition.

The Department of Health issued Administrative Order 2019-0007 or the Revised Rules on Electronic Nicotine and Non-Nicotine Delivery System stated that designated vaping areas should follow the same guidelines and requirements set for designated smoking areas (DSA) issued by Executive Order 26 (EO) or the Providing for the Establishment of Smoke-Free Environments in Public and Enclosed Places.

The EO stated that “there shall be no opening that will allow air to escape from the DSA to the smoke-free area of the building or conveyance, except for a single door equipped with an automatic door closer; provided the DSA is not located in an open space, such door shall open directly towards a Non-smoking Buffer Zone (Buffer Zone) as defined in this Order.”

However, the city ordinance stated that vaping areas “may be in an open space or separate area with proper ventilation, but shall not be located within the same room that has been designated as a smoking area.”

The EO also stated that the ventilation of the smoking area should not be connected to the rest of the ventilation system of the structure given that an open space or a buffer zone is not available.

Executive Director Ulysses Dorotheo of the Southeast Asia Tobacco Control Alliance said that there is no scientific evidence to support the claims that e-cigarettes and heated tobacco products are safe.

“The public and public servants in a position to protect public health must be fully apprised of the risks inherent to vaping,” she added.

PhilHealth hopes to enroll remaining 2% of population without coverage by 2020

September 2, 2019 | 10:53 pm

THE Philippine Health Insurance Corp. (PhilHealth) hopes to enroll the remaining 2% of the population in its insurance scheme by the close of the first year of the Universal Health Care (UHC) Law in 2020, Health Secretary Francisco T. Duque III said.

In a statement, Mr. Duque said 100% coverage is expected to be achieved for state-owned PhilHealth’s National Health Insurance Program (NHIP).

“Right now, we are at 98% enrollment. We expect to achieve 100% enrolment by the end of the first year of UHC implementation,” he said.

The UHC Law requires all Filipinos to be members of PhilHealth.

Mr. Duque said he expects no delays in the rollout of the UHC Law, for which only 33 locations have been identified as initial operating areas of the UHC Integration Sites (UIS) Program.

“The UIS Program is not the be-all and end-all of the UHC Program. Though it is a critical step to address fragmentation in the health system, the UIS Program is only one of the many reforms. Let us not confuse or equate UIS with UHC. Non-selection of an area in the UIS for 2020 does not mean that UHC will not be implemented at all in a certain area next year,” he said.

The 33 areas initially identified for UIS are: Valenzuela, Parañaque, Dagupan City, Baguio, Benguet, Isabela, Nueva Vizcaya, Quirino, Bataan, Tarlac, Batangas, Quezon, Oriental Mindoro, Masbate, Sorsogon, Aklan, Antique, Guimaras, Iloilo, Cebu province, Biliran, Leyte, Samar, Zamboanga del Norte, Cagayan de Oro, Misamis Oriental, Compostela Valley, Davao del Norte, Sarangani, South Cotobato, Agusan del Sur, Agusan del Norte, and Maguindanao.

Last week, PhilHealth CEO Ricardo Morales estimated that it could take three to six years to fully implement the UHC Law, citing funding and manpower issues. Mr. Duque affirmed this and added that a gradual implementation will be more cost-effective and realistic as opposed to forcing the launch without being fully ready.

“We Have to remember that the transitory provisions of the UHC Act are clear when they provide for a six-year transition period for the integration of local provider networks into provincial and city health systems. We cannot demand the complete integration of over 100 provincial and city health systems overnight when the law clearly provides for a realistic six-year period to accomplish this,” Mr. Duque said. — Gillian M. Cortez

DoE backs FiT rate extension for small river hydro projects

September 2, 2019 | 10:53 pm

THE Energy department is supporting the extension of the feed-in tariff (FiT) rate for small hydroelectric power projects until developers have fully taken up all the capacity that the agency has offered for the renewable resource, an official handling the matter said.

“[For] run-of-river [hydro projects, it’s] until full subscription. So it will continue until ma-fully subscribe ’yung 250 [megawatts, MW] (until the 250-MW quota is fully subscribed),” said Mylene C. Capongcol, director of the Department of Energy’s (DoE) Renewable Energy Management Bureau (REMB), in an interview on Monday.

She said at least 100 MW had been taken up by developers who build small hydro projects, which usually have long gestation periods, or time used from project construction, commissioning and commercial operation.

Of the subscribed capacity, not all have secured approval from the Energy Regulatory Commission (ERC), Ms. Capongcol said.

“So we’re looking at an additional 100 MW,” she said.

Asked about whether the full subscription could extend beyond this year or stretch until next year, she said: “The mechanism is until it is fully subscribed.”

“Our bureau is preparing a communication with the [ERC] for the run-of-river [feed-in tariff],” she said.

Monalisa C. Dimalanta, chairman of the National Renewable Energy Board (NREB), earlier said that her office will seek the extension in a meeting with the DoE secretary.

“[For run-of-river, the] request will be to allow testing/commissioning and eligibility even after December 2019 as long as installation capacity is not yet fully subscribed,” she said in a text message.

She said the full subscription is expected in the second quarter of 2020. She said the request of NREB, a panel composed of members from the public and private sector, would cover a “degressed” rate for the renewable energy, which is currently being evaluated by the ERC.

Ms. Capongcol said the FiT rate to be given to the new small hydro projects would depend on the ERC. “It’s ERC’s option,” she said.

Aside from the small hydro FiT extension, NREB is also looking at requesting the DoE’s approval to accommodate the capacity that exceeded the 250-MW installation target for the resource.

“For biomass, request will be to allow capacity even beyond the installation target to be certified as long as commissioned by end-December 2019,” Mr. Dimalanta said.

However, Ms. Capongcol said the DoE has yet to decide on the biomass excess capacity.

“As of now, based on the guidance of the [DoE] Secretary [Alfonso G. Cusi], until 2019 na lang (only) because (the two-year extension) will be finished by 2019,” she said.

“Inaaral pa namin pero (We’re still studying the matter but) we’re not extending as of now the biomass [feed-in tariff]. But we may devise a mechanism on how we will be able to accommodate ’yung lumagpas (the projects that exceed the quota),” she added.

The FiT scheme was meant to encourage investment in renewable energy by granting the preferential rates until the capacity installation target of 250 MW each for small hydro and biomass is fully subscribed.

Under the previous extension, the board sought a rate of P5.8705 per kilowatt-hour (kWh) for small hydro projects and P6.5969 per kWh for biomass projects.

The requested rates were the degressed values from the July 27, 2012 feed-in tariff rates issued by the ERC, which set run-of-river hydropower at P5.90 per kWh and biomass at P6.63 per kWh. The implementation of the FiT system started on Jan. 1, 2015 and was supposed to remain in effect for two years, or until December 2017.

On Feb. 23, 2018, the DoE informed the ERC of its resolution extending the FiT for biomass and small hydro for another two years until Dec. 31, 2019, or upon successful commissioning of projects covering the remaining balance of their respective installation targets, whichever comes first.

The DoE recommended that the FiT to be granted should be the rate at the time of the successful commissioning of the projects. The ERC initiated its own review and re-adjustment of the FiT rules as prompted by the missed installation targets. — Victor V. Saulon

Gov’t debt rises 10.8% at end-July

September 2, 2019 | 10:52 pm

THE national government’s outstanding debt was P7.804 trillion at the end of July, up 10.8% year on year, according to the Bureau of the Treasury (BTr).

BTr said Monday that debt in the seven months to July fell 0.8% against the P7.869 trillion posted in the first half due to the appreciation of the peso and payments made on domestic debt.

“The National Government’s (NG) outstanding debt was recorded at P7,804.05 billion for end-July 2019, P64.58 billion or 0.8% lower than the previous month,” it said in a statement.

BTr said 67.3% or P5.251 trillion was owed to domestic creditors while 32.7% was provided by foreign creditors.

Domestic borrowing rose 14.1% year on year at the end of July, but fell 0.8% from a month earlier.

Government securities accounted for the majority of domestic debt at P5.25 trillion while the remainder consisted of loans entered into by various agencies as well as assumed loans.

External borrowing increased 4.5% year on year at the end of July but fell 0.8% from a month earlier.

As of July, the bulk of offshore borrowing consisted of dollar bonds worth the equivalent of P1.263 trillion, followed by peso global bonds totaling P129.679 billion and yen bonds worth the equivalent of P118.903 billion.

“For July, the lower external debt was due to the combined effect of local and third-currency fluctuations which reduced the value of foreign debt by P18.49 billion and P3.34 billion, respectively,” it said.

Meanwhile, total guaranteed obligations stood at P483.813 billion, 0.02% lower year on year.

Valenzuela City offers relief for unpaid property tax

September 2, 2019 | 10:51 pm

THE Valenzuela City government issued an ordinance offering relief for delinquent taxpayers, allowing them to settle property tax owed, including interest, from 2014 to the date of application.

According to Ordinance No. 586 issued by the city and published in a national newspaper, the city will also condone tax owed by property owners who avail of the relief for periods starting 2013 and earlier.

Excluded from the amnesty are “delinquent real properties which have been sold at public auction to satisfy the real property delinquencies, b) Real properties (that are the) subject of pending cases, c) real properties subject to expropriation by the City Government, and d) real property under compromise agreement pursuant to existing ordinances.”

It said taxpayers who avail of relief on or before Dec. 31 will be exempt from administrative or judicial action.

During the amnesty period, the city will not auction any property seized due to nonpayment of tax. — Marc Wyxzel C. dela Paz

House panel chair opposes 10-year ‘sunset period’ for incentives

September 2, 2019 | 10:51 pm

REP. JOSE MA. S. SALCEDA, the ways and means committee chair from Albay’s 2^nd district, said the Corporate Income Tax and Incentives Reform Act (CITIRA) will be rendered ineffective by the Department of Trade and Industry’s (DTI) proposal to implement a longer transition period for current fiscal incentives.

The DTI has said that it will push for a longer transition period, of up to 10 years for firms already availing of the incentives.

“The DTI position stands in the way of achieving (CITIRA’s goals). That is the ultimate priority of the House Committee on Ways and Means. If we extend the transition period for the 3,150 firms receiving incentives, we will have to delay the reduction in corporate income tax (CIT) for 1 million (small firms) for fiscal prudence,” Mr. Salceda said in a statement Monday.

The bill seeks to cut the current 30% corporate income tax rate — described as the highest in the region — by one percentage point every other year to 20% in 2029.

He said around 50% of the tax savings under CITIRA are expected to be reinvested in domestic trade, boosting economic growth in 2022-2029, generating as many as 1.56 million additional jobs.

The measure also aims to attract more foreign direct investment by bringing down the corporate income tax rate to parity or even lower than the prevailing rates in Southeast Asia.

“Reducing the corporate income tax rate is a national imperative. So is attaining A-minus credit rating by 2022. Hindi po puwedeng (We cannot) extend the sunset period and also lower the CIT at the same time. Luging-lugi po ang gobyerno at ang taumbayan. (The government and the people stand to lose a lot),” Mr. Salceda said.

The CITIRA bill is an offshoot of the bill formerly known as the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO). It was fast-tracked in the House under House Rule 10, Section 48, which allows expedited deliberations on legislation that reached third reading in the previous sitting of Congress.

CITIRA is now awaiting second reading.

Mr. Salceda said that he is pushing for the rationalization of incentives “to correct the current unfair system in which just over 3,000 companies registered with investment promotion agencies (IPAs) — a number of them on the elite list of Top 1,000 corporations — get to enjoy discounted income tax rates of 6 to 13% while many of the country’s micro, small and medium enterprises (MSMEs) that actually employ most of Filipino workers have to pay the standard CIT rate of 30%, which is the highest in the region.”

Perks now offered to economic zone locators consist of a four- to eight-year income tax holiday; a special tax rate of 5% on gross income after the tax holiday expires; tax- and duty-free importation of capital equipment, spare parts and supplies; exemption from wharfage dues as well as export tax, duty, impost and fees; and eased restrictions on employing foreign nationals.

The Finance department estimates that such incentives cost the government about P1.2 trillion between 2015 and 2017, P301.2 billion in 2015, P380.7 billion in 2016, and P441.1 billion in 2017.

The Philippine Economic Zone Authority (PEZA) — which last year had the second-biggest value of committed projects after the Board of Investments — accounted for P879.1 billion, or 78%, of the P1.2-trillion total. — Vince Angelo C. Ferreras

Here comes PIFITA

September 2, 2019 | 10:50 pm

The Passive Income and Financial Intermediary Taxation Act (PIFITA) or House Bill No. 304 hurdled the scrutiny of the House Ways and Means Committee a few days ago. If passed into law, PIFITA will amend certain provisions of the National Internal Revenue Code of 1997 (Tax Code) on the taxation of passive income and income of financial intermediaries. PIFITA will be the fourth package of the government’s comprehensive tax reform program.

According to the explanatory note of Representative Joey Salceda, the aim of the PIFITA is to make capital income taxes and financial intermediary taxes simpler, fairer, and more efficient. Representative Salceda added that the financial sector has a sizable contribution to the economy and it plays a crucial role in financing large-scale investment, including the Build, Build, Build (BBB) programs. The reforms proposed by House Bill No. 304 seek to address several deficiencies in the taxation of these financial sectors. These deficiencies include complicated tax structure, susceptibility to arbitrage, uneven playing field, inequitable distribution of tax burden, an uncompetitive tax system, and high administrative and compliance costs.

Let us take a look at certain reforms of the proposed PIFITA and evaluate if these changes will actually benefit target taxpayers.

* In the proposed bill, interest income shall be subject to a final tax rate of 15% from 20%. On the other hand, exemption from income tax of income derived by offshore banking units and income derived by a depositary bank under the expanded foreign currency deposit system were removed.

Royalties, prizes, and other winnings remain at 20%.

* Cash and/or property dividends received by an individual and nonresident foreign corporations are subject to a final tax of 15%. Tax treaty provisions will apply in appropriate cases. Intercorporate dividends between domestic corporations remain to be exempted.

An addition to those subject to dividend tax are the distribution of profits from collective investment schemes (CISs). Under House Bill No. 304, a CIS shall mean any arrangement whereby funds are solicited from the investing public and pooled together for the purpose of investing, reinvesting, and/or trading in securities or other assets or different classes as allowed under the law, which may either have a corporate (investment company) or contractual structure (unit investment trust fund or similar structures).

Branch profit remittance tax remains at 15 percent. However, exemption from branch profit remittance tax of Philippine Export Zone Authority (PEZA)-registered entities was removed.

* The tax rate of capital gains derived by nonresident corporations from sale, exchange, transfer, barter, and disposition of non-listed of shares of stock not traded in the stock exchange or organized marketplace is aligned to the capital gains derived by individuals and domestic corporations (included amendment from Package 1 or the Tax Reform for Acceleration and Inclusion Law) at 15%. A similar tax rate is imposed on gains derived from debt instruments and other securities not traded in the stock exchange or organized marketplace.

* Previously, the sale, exchange, barter, and disposition of shares of stock traded in the stock exchange or organized marketplace is subject to a stock transfer tax (STT) of 6/10 of 1% of the gross selling price or gross value in money. In recent rulings by the Bureau of Internal Revenue, STT is a transfer tax.

In the proposed bill, however, gain from the sale, exchange, barter and disposition will be is now treated as an income tax. The tax shall be based on the presumptive gain of such sale, exchange, barter, and disposition of the shares of stock. Moreover, PIFITA proposes a scheduled reduction of rate until 2024, diminishing 1/10 year-on-year. As proposed under House Bill No. 304, the tax rate shall be 1/10 of 1% of the gross selling price or gross value in money by 2024.

* A single rate of 5% gross receipts tax (GRT) shall be imposed for all financial intermediaries for income from interest, commissions, and discounts from lending activities, as well as income from financial leasing, royalties, rentals of property whether real or personal, profits from sale or exchange including gains derived from sale or transfer of real properties, net trading gains within the taxable year of foreign currency, debt instruments, and all other items treated as gross income under Section 32 of the Tax Code.

* House Bill No. 304 also removed the distinction on tax rate based on the length of maturity period of the instrument. Dividends and equity shares and net income of subsidiaries of such financial intermediaries remains at 0%.

Financial intermediaries include banks, non-banks performing quasi-banking functions, and other non-bank financial intermediaries.

* The bill proposes to reduce the premium tax rate of pre-need, life, and HMO insurance from 5% to 2%.

Nonlife insurance transactions are currently subject to value-added tax (VAT). Under PIFITA, a 5% premium tax rate shall be imposed on nonlife insurance transactions. Nonlife reinsurance companies, however, are still subject to VAT, except for the direct premium, which was already subjected to premium tax by the direct insurer.

PIFITA also provides that, in variable insurance contracts, the amount in excess of the insurance costs is not subject to premium tax, gross receipts tax, or VAT.

* Under PIFITA, the percentage tax imposed on shares of stock sold or exchanged through initial public offering was removed.

* There is also the rationalization of documentary stamp taxes. In Package 1 of the tax reform (TRAIN Law), the stamp tax on the original issuance of shares of stocks was increased. In PIFITA, it was proposed to be pegged at 0.75% of the par value, a slight decrease from the current rate of P2.00 per P200.00 of the par value. Surprisingly, the stamp tax on sales, agreements to sell, memoranda of sales, deliveries, or transfer of shares or certificates of stock was removed.

* The stamp tax on life and health insurance is still subject to a graduated rate; while the stamp tax on property insurance and fidelity bonds and other similar insurance policies will be reduced gradually until 2024 to 7.5% from 12.5%.

Are the above reforms good enough? The advantages of PIFITA outweigh probable disadvantages. Uniformity reduces the misapplication of tax rates. Simplification makes tax compliance easier. Finally, who would not want lower tax rates?

Changes in the PIFITA are expected, as it will still be reviewed and passed by both houses of Congress and the President. Our hopes are high that the final version of PIFITA brings us closer to a simpler, fairer, and more efficient tax system.

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.

Eliezer P. Ambatali is a tax manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Shares drop as investors pocket gains from rally

September 2, 2019 | 9:00 pm

By Arra B. Francia, Senior Reporter

LOCAL EQUITIES dropped on the first trading day of September as investors went profit taking amid a lack of catalysts.

The 30-member Philippine Stock Exchange index (PSEi) retreated 0.76% or 61.13 points to close at 7,918.53 on Monday, while the broader all-shares index also fell 0.24% or 11.89 points to 4,797.59.

“The start of September ended lower than its end of August closing. Actually, this is expected since month-end window dressing and the rally for the past three days signalled investors to take profit,” Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan said in a text message.

“This shows that investors are still on risk-off sentiment, as evidenced also by lower than average value turnover of only P5 billion compared to P7-8-billion average turnover.”

Mr. Tan added that there was a lack of catalysts given uncertainties from the US-China trade war. The US imposed 15% additional tariffs on $300 billion worth of Chinese goods on Sunday, Sept. 1, in response to China’s move to impose more duties on $75 billion worth of American imports.

“Yesterday was the first day of September, meaning the 15% tariff on the Chinese goods kicked in. This is something consumers can expect to feel when buying everything from milk to diapers to some China-manufactured tech products like the Apple Watch,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile phone message on Monday.

Mining companies rallied, with the mining and oil counter soaring 11.51% or 949.95 points to 9,200.47. Nickel Asia Corp. was the most actively traded stock on Monday, jumping 50% to P4.11 each, while Global Ferronickel Holdings, Inc. also firmed up 14.29% to P1.68 each.

This came after Indonesia said it will start banning nickel ore exports, in an effort to produce its own resources at home. Nickel Asia said it may book windfall gains from the supply disruption that will keep nickel prices high.

Meanwhile, the five other sectoral indices moved to negative territory, led by financials which lost 1.61% or 29.66 points to 1,803.62. Industrials shed 0.84% or 93.92 points to 11,032.38; services slumped 0.61% or 9.93 points to 1,613.82; holding firms slipped 0.52% or 41.70 points to 7,881.16, while property was down 0.16% or 6.72 points to 3,991.28.

Foreign investors turned net sellers at P665.19 million, compared to Friday’s net buying figure of P409.13 million.

Turnover stood at P5.27 billion after some 1.95 billion issues switched hands, lower than the previous session’s P9.74 billion.

Advancers outpaced decliners, 110 to 94, while 43 names were unchanged.

US stock markets are closed on Monday for Labor Day.

Peso weakens as fresh round of US-China tariffs take effect

September 2, 2019 | 9:00 pm

THE PESO weakened on Monday as the United States and China kicked off a fresh round of tariffs and with the market expecting slower Philippine inflation in August.

The local unit closed at P52.105 against the greenback on Monday, down 5.5 centavos from its P52.05-to-a-dollar close on Friday.

The peso opened sharply weaker at P52.17 versus the dollar. It traded in a tight range, with its weakest point recorded at P52.19, while its intraday best was at P52.08 against the greenback.

Dollars traded on Monday climbed $1.24 billion from the $989.53 million recorded last Friday.

“The peso weakened as the imposition of new US tariffs on Chinese goods took effect yesterday despite the ongoing talks between the US and China, dimming near-term expectations of a bilateral trade agreement,” a trader said via email.

Meanwhile, another trader said the market could be monitoring demand for more dollars by the end of the month.

“If that’s the case, the dollar-peso [exchange] will move once again. We’re looking for fresh leads as to where dollar-peso will go. P52.10 is still a good support for now.”

The United States began imposing 15% tariffs on a variety of Chinese goods on Sunday — including footwear, smart watches and flat-panel televisions — as China began imposing new duties on US crude, the latest escalation in a bruising trade war.

US President Donald Trump said the sides would still meet for talks later this month.

Mr. Trump, writing on Twitter, said his goal was to reduce US reliance on China and he again urged American companies to find alternate suppliers outside China.

A new round of tariffs took effect from 0401 GMT (12:01 a.m. EDT), with Beijing’s levy of 5% on US crude marking the first time the fuel had been targeted since the world’s two largest economies started their trade war more than a year ago.

The Trump administration on Sunday began collecting 15% tariffs on more than $125 billion in Chinese imports, including smart speakers, Bluetooth headphones and clothing.

A variety of studies suggest the tariffs will cost US households up to $1,000 a year and the latest round will hit a significant number of US consumer goods.

In retaliation, China started to impose additional tariffs on some of the US goods on a $75 billion target list. Beijing did not specify the value of the goods that face higher tariffs from Sunday.

The extra tariffs of 5% and 10% were levied on 1,717 items of a total of 5,078 products originating from the United States. Beijing will start collecting additional tariffs on the rest from Dec. 15.

Meanwhile, in an e-mail to reporters last Friday, the Bangko Sentral ng Pilipinas’ Department of Economic Research said it expects inflation in August to settle within the 1.3-2.1% range due to lower fuel, rice, and power prices. This compares to the 2.4% inflation rate logged in July and 6.4% in August last year.

A BusinessWorld poll of 12 economists late last week yielded a median inflation estimate of 1.8% for August.

The Philippine Statistics Authority will release official inflation data on Thursday.

For today, traders said the peso may continue to slip ahead of the release on US manufacturing purchasing managers’ index (PMI) data.

“The local currency might weaken further from safe-haven demand ahead of the US manufacturing PMIs tomorrow following the release of weak Chinese manufacturing reports,” the first trader said on Monday.

The first trader expects the peso to play at around P52.00 to P52.20 against the dollar today, while the second trader sees it moving within the P52.00-P52.30 band. — Luz Wendy T. Noble with Reuters

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