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Disney family magic wanes in HK as Macau’s lights dazzle

WHEN CHINESE TOURISTS choose a family travel destination, Hong Kong Disneyland would seem like a logical choice. But it’s the nearby gambling hub of Macau that has all the momentum.

Tourists are flocking to Macau, with record arrivals from China last year, and Hong Kong itself is seeing a rebound in mainland visitors, with a double-digit surge in such tourists during the Chinese New Year following a 3.9% increase last year. Meanwhile, the number of mainland visitors to Hong Kong Disneyland dropped for a third straight annual period, according to the theme park’s results released Tuesday.

Chinese families traveling to Hong Kong are finding other distractions for entertainment besides the Disney theme park, as shopping and dining options help drive the retail market for the city. Chinese travelers may be skipping Hong Kong Disneyland as they already have a Disney park in Shanghai, which attracted 11 million visitors in its first year after opening in June 2016. Macau, about a one-hour ferry ride away, also may offer a more interesting temptation.

The world’s biggest gaming hub has started to see a rebound of leisure tourists, with mass gaming revenue growth in the last quarter expanding at a faster pace than the previous three months. Macau regulators are pushing casino resorts to offer more family-friendly entertainment, posing a further challenge to Disney’s park.

MGM China Holdings Ltd.’s new $3.4-billion property, with a 2,000-seat theater, is part of that effort to transform Macau’s Cotai Strip into a family destination. The resort, which opened in time for the new year, should help drive the highest earnings gain for MGM China among its peers this year, according to a note from Morgan Stanley. MGM China on Tuesday reported stronger-than-expected earnings for its fourth quarter, as mass-segment revenue grew 22% from a year earlier.

Analysts and retailers selling everything from jewelry to cosmetics are optimistic the upward trend will continue for both Macau and Hong Kong this year. As for Disneyland, it still may get its magic back. Visitation has been improving since the second half of 2017, and October Golden Week and Lunar New Year both recorded double-digit growth, according to Apple Daily, citing Samuel Lau, chief executive officer. — Bloomberg

Chugging along with the TRAIN

2018 got a jump-start with Republic Act No. 10963 (otherwise known as the Tax Reform for Acceleration and Inclusion or TRAIN), which took effect on the first day of the year.

As most readers may be aware, the TRAIN amended several provisions of the National Internal Revenue Code of 1997 (Tax Code), which include individual income taxation, individual and corporate passive income taxation, estate tax, donor’s tax, value-added tax (VAT), excise tax and documentary stamp taxes.

A number of employees enjoyed higher take home pay due to the adjusted personal income tax rates. On the downside, however, the inflation rate appears to have risen, driven by the increase in prices of gasoline, sweetened beverages, and other commodities affected by the increased/new taxes. This has resulted in worries about the possible insufficiency in the take-home pay of ordinary Filipinos to cover actual and foreseeable surges in commodity prices.

There are also some interpretations of the TRAIN provisions which are highly debated, such as the preferential rate of employees of certain entities, and the correct tax treatment of registered enterprises within a separate customs territory, especially when an effective VAT refund system is implemented.

But there are also some “less noticeable” items under the TRAIN that are hardly mentioned in news reports or public forums that may require attention due to some features which may create confusion or stir controversy. Based on my observation, examples of these are below:

• Selective application of increase in certain passive income tax rates

TRAIN increased certain passive income tax rates but these changes were not equally applied to all types of taxpayers. Examples of these are as follows:

a. Philippine Charity Sweepstakes and lotto winnings exceeding P10,000 by citizens and resident aliens are now subject to 20% final income tax but winners who are nonresident aliens engaged in trade or business remain tax exempt regardless of amount.

b. While the interest income from a depository bank under the expanded foreign currency deposit system earned by domestic corporations is now subject to 15% final income tax, the same interest income earned by resident foreign corporations remains subject to 7.5% final income tax.

c. Capital gains on the sale of shares not traded in the Philippine Stock Exchange realized by domestic corporations are currently taxed at 15% final income tax. But these gains will still be taxed at 10% final tax (5% on the first P100,000 net capital gains) if realized by foreign corporations.

One may wonder whether the partiality in the imposition of increased income tax rates on certain types of taxpayers was really intended by Congress. Even assuming that the distinction in the imposition of taxes is based on reasonable grounds, taxpayers should nonetheless exercise caution in applying the correct income tax rates as an underpayment can unexpectedly result in penalties, or to a refund/tax credit claim in case of overpayment.

• Non-recognition of certain income tax exclusions

Prior to the TRAIN, Section 32(B)(7)(f), (g) and (h) of the Tax Code specifically mention the following items as income tax exclusions:

a. GSIS, SSS, Medicare and Pag-IBIG contributions, and union dues of individuals;

b. Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than 5 years; and

c. Gains realized by the investor upon redemption of shares of stock in a mutual fund company.

However, it appears that the foregoing exclusions were not replicated under the TRAIN. The symbol “xxx,” normally used to indicate the adoption of existing provisions of the Tax Code being amended, was not reflected.

The absence of the items may be interpreted in two ways, i.e., either the Congress intended to repeal these provisions or the omission was a mere oversight. If the intention was to repeal, then this should have been highlighted during the tax reform hearings for purposes of transparency; moreover, the enrolled bill of the TRAIN should have expressly indicated the intended deletion of these provisions to dispel ambiguous interpretation of the law. Thus, more likely than not, this appears to be an oversight.

• Reversion to old VAT threshold exemptions for real estate

In 2005, the sale of residential lots not exceeding P1.5 million and house and lots and other residential dwellings not exceeding P2.5 million were considered VAT-exempt. Thereafter on Jan. 1, 2012, the VAT thresholds were increased to P1,919,500 and P3,199,200 respectively pursuant to Revenue Regulations No. 16-2011. However, upon effectivity of the TRAIN, the VAT thresholds have been reset to their original values prior to 2012 (i.e., P1.5 million and P2.5 million respectively).

It is not likely that Congress had overlooked the increase in real estate values due to upward adjustments caused by inflation in the past. Musing over the reversion, one can speculate that this was also likely a mere oversight. Even with the increased thresholds in 2012, some may have doubts whether the indicated values in the law are still reflective of present market situations.

Given the amendments, taxpayers should be careful to take note of the reversal in threshold exemption while engaging in the sale of residential real property.

The items above are merely some of my observations. Perhaps, if others carefully examine the TRAIN provisions, they can further pinpoint other provisions that may be considered confusing, equivocal, or misplaced as to require amendatory or corrective actions by the legislators.

While the TRAIN has brought on mixed feelings from the public, which I likewise share, taxpayers should remain optimistic that the tax law can be further improved as the drafting of the next phase of tax packages are ongoing.

When a train goes through a tunnel and it gets dark, you don’t throw away the ticket and jump off. You sit still and trust the engineer. While it is scary to not see the big picture when it comes to the ultimate direction of the tax reforms, we should still look forward to the government’s promise that it has every intention to improve the quality of life of Filipinos. Riding along with the government for better tax reform is what we should aim for.

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.

Benedict Villalon is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

(02) 845-27 28 local 2035

benedict.villalon@ph.pwc.com

Peso strengthens as sentiment improves

THE PESO strengthened against the dollar on Wednesday, Feb. 21, as the central bank was suspected to continue intervening amid a big bond sell-off by the US Treasury.

The local currency closed Wednesday’s session at P52.10 against the greenback, 14 centavos stronger than its P52.24-per-dollar finish last Tuesday.

The peso traded stronger the whole day, opening the session at P52.165 per dollar. Its intraday low stood at P52.21, while its best showing was at P52.06 against the US currency.

Dollars traded on Wednesday slipped to $965.95 million from the $977.8 million logged the previous session.

“The BSP (Bangko Sentral ng Pilipinas) was still intervening that’s why the dollar-peso [remained stronger] throughout the day,” a trader said in a phone interview on Wednesday.

On Tuesday, traders said the central bank was likely intervening in the foreign exchange trading, lifting the peso up against the greenback following sharp declines.

As the country’s monetary authority, the BSP sometimes intervenes in trading to prevent any sharp swings that may cause the local currency to appreciate or depreciate.

“Otherwise, it traded within the range. [There’s just a cap] on the topside,” the trader added.

Meanwhile, another trader attributed the peso’s slight uptick to the “news of a massive bond sell-off by the US Treasury,” which caused the dollar to weaken.

The US government seeks to sell $258 billion worth of debt this week.

The US Treasury Department began ramping up its debt issuance earlier this month to fund the expected growth in borrowing tied to the biggest tax overhaul in 30 years and a two-year federal spending package.

UnionBank of the Philippines chief economist Ruben Carlo O. Asuncion, on the other hand, saw the stronger peso as a correction following the sharp decline of the local currency, which last Monday hit a near twelve-year low. The peso’s steep drop that day was triggered by the announcement of the BSP that it will cut the bank’s reserve requirement ratio by a percentage point, which will free more money into the financial system.

“The peso strengthened probably on the positive sentiment on the recent reserve requirement rate cut,” Mr. Asuncion said in a text message.

The Bankers Association of the Philippines earlier said it welcomed the central bank’s decision to cut its reserve requirement, saying that “borrowers will have access to more sources of funds and more efficient cost of borrowing that is expected to propel more economic activity in the country.”

For Thursday, Feb. 22, the first trader expects the peso to move between P52 to P52.30, while Mr. Asuncion gave a wider forecast range of P51.90 to P52.20.

The second trader expects the pair to trade between P52 and P52.40 “as investors look forward to possible hawkish cues from the FOMC (Federal Open Market Committee) minutes” which were due to be released yesterday night.

Meanwhile, most Asian currencies edged lower on Wednesday as the dollar was bolstered by rising US Treasury yields and optimism ahead of Federal Reserve’s last policy meeting minutes.

The dollar index was up 0.2% at 89.686. It is up 1.6% from Friday’s three-year low of 88.251.

Andy Ji, a strategist for Commonwealth Bank of Australia in Singapore, said rising US Treasury yields will put pressure on Asian currencies in coming months.

“Market is looking at the threshold of 3 percent in 10-year US Treasury yield. If it reaches that level, there is going to be a large risk reduction in the markets,” Ji said.

The US 10-year Treasury yields were at 2.8877% in Asian hours, hovering near a four-year peak. The rise in yields came as investors made room for this week’s deluge of $258 billion of government debt supply. — Karl Angelo N. Vidal with Reuters

Stocks decline on lingering concerns overseas

LOCAL STOCKS plunged on Wednesday, snapping their five-day climb, as the index continued to consolidate.


The 30-company Philippine Stock Exchange index (PSEi) dropped 1.25% or 109.05 points to close at 8,613.65, while the broader all-shares index also gave up 0.14% or 7.62 points today, Wednesday Feb. 21.

“Mainly the red flags coming overseas continue to dampen most markets, including ours. We see more of the yields in the US bond market continue to trek higher, which could translate to immediate rate hikes in the Fed (US Federal Reserve),” First Grade Finance, Inc. President and Managing Director Astrolito Romulo C. del Castillo said in a phone interview today.

Mr. Del Castillo added that oil prices, while dropping at the world market today, are likely to continue to inch higher.

“Again this is inflationary, not only in our own economy, but other economies as well,” he said.

On the domestic front, Mr. Del Castillo said no specific news is driving the market, which indicates that current movements remain to be a part of its consolidation.

Eagle Equities, Inc. President Joseph Y. Roxas also said that the market is still consolidating, noting the lack of news that may have prompted the index’s sudden drop.

Wall Street also ended lower on Tuesday, with the Dow Jones Industrial Average plummeting by 1.01% or 254.63 points to 24,964.75. The S&P 500 index was down 0.58% or 15.96 points to 2,716.26, while the Nasdaq Composite index was flat at 7,234.31, although still losing 0.07% or 5.16 points to 7,234.31.

Back home, four sectoral counters ended on a negative note. Property dropped 1.38% or 54.67 points to 3,903.49, followed by industrials that lost 1.29% or 148.84 points to 11,322.02. Holding firms dipped 1.08% or 96.12 points to 8,766.68, while the financials sub-index was down 1.03% or 23.24 points to 2,218.96.

Meanwhile, the mining and oil and services counters inched up, adding 2.63% or 316.51 points to 12,330.06 and 0.40% or 7.04 points to 1,745.44, respectively.

The market saw some 1.92 billion issues exchange hands for a value turnover of P9.53 billion, higher than the previous session’s turnover of P7.85 billion.

Decliners prevailed for the day at 128 versus the 82 that advanced and the 46 that remained unchanged.

Foreign investors maintained their selling position, widening net outflows to P516.38 million, against Tuesday’s P423.42 million.

“Volatility will remain. Other investors, specially the foreigners, they go to safer dollar investments. But there’s no reason to panic, it’s just consolidation of both markets,” First Grade Finance’s Mr. Del Castillo said.

Meanwhile, most Southeast Asian stock markets rose on Wednesday, tracking broader Asian peers.

Asia shares ex-Japan, which lost 0.20% in early trade, recovered to rise as much as 0.7%. — Arra B. Francia with Reuters

Pryce Corp. net income up 29% on higher LPG sales

Pryce Corp. (PPC) posted a 29% increase in net income in 2017 to P1.25 billion, driven by higher revenues from sales of liquefied petroleum gas (LPG), the company told the stock exchange on Wednesday, Feb. 21.

The listed firm, which imports and distributes LPG under the brand name PryceGas among its businesses, said last year’s profit was within its target.

Consolidated revenues rose 37% to P9.23 billion from P6.72 billion, with sales volume growing by double-digits after the increase in prices for the fuel product last year.

“Sales volume of LPG grew 11% to 210,000 metric tons (MT) from the previous year’s 189,000 MT. Despite this modest volume growth, revenues were up 37% because of the sharp increases in LPG contract prices (CP) during the year,” the company said.

In 2017, contract prices was at an average of $491 per MT, 42% or $145 higher than the previous year’s average of $346 per MT, the company said. — Victor V. Saulon

Golden Haven formalizes entry into mass housing

Golden Haven, Inc. (HVN) is formalizing its entry into the mass housing sector after issuing P3.01 billion worth of shares out of its unissued authorized capital stock to Cambridge Group, Inc.

In a disclosure to the stock exchange on Wednesday, the Villar-led firm said it has issued 150 million shares at P20.0935 apiece to CGI by way of private placement. Golden Haven initially secured shareholder approval to increase its issued and outstanding shares last October 2017 to make the transaction possible. — Arra B. Francia

Stocks snap five-day rally

Local stocks plunged on Wednesday, Feb. 21, snapping their five-day upward trajectory as the index continued to consolidate.

The 30-company Philippine Stock Exchange index dropped 1.25% or 109.05 points to close at 8,613.65, while the broader all-shares index also gave up 0.15% or 7.62 points on Wednesday.

“Mainly the red flags coming overseas continue to dampen most markets, including ours. We see more of the yields in the US bond market continue to trek higher, which could translate to immediate rate hikes in the Fed (United States Federal Reserve),” First Grade Finance, Inc. President and Managing Director Astrolito Romulo C. Del Castillo said in a phone interview on Wednesday.

Mr. Del Castillo added that oil prices, while dropping at the world market on Wednesday, seem to continue to inch higher.

“Again this is inflationary, not only in our own economy, but other economies as well,” he said.

On the domestic front, Mr. Del Castillo said no specific news is driving the market, which indicates that current movements remain to be a part of its consolidation.

Sought for comment, Eagle Equities, Inc. President Joseph Y. Roxas cited the market was still on consolidation, noting the lack of news that may have prompted the index’ sudden drop.

Ayala Land to raise up to P25 billion from debt notes, loan

Ayala Land, Inc. (ALI) plans to raise up to P25 billion of combined debts, bilateral term loans, and qualified buyer notes this year, to partially finance capital requirements and refinance existing debt.

In a disclosure to the stock exchange on Wednesday, Feb. 21, ALI said its board of directors has approved to conduct a fundraising activity worth up to P20 billion through a combination of debts and bilateral notes for 2018’s capital expenditures.

Debt notes will be issued from the P50-billion shelf registration program the company has with the Securities and Exchange Commission since March 2016.

In an earlier interview, ALI Chief Finance Office Augusto Cesar D. Bengzon said the company has P18 billion left in this debt securities program.

The remaining portion will be raised through bilateral term loans.

On the other hand, the listed property firm’s board has also approved the raising of P5 billion through qualified buyer notes to refinance its short term loans. — Arra B. Francia

Consumption growth could ease due to tax reform — ANZ

Consumer spending could ease in response to higher commodity prices due to tax reform, analysts at ANZ Research said.

“Domestic demand is strong and is likely to remain so. However, the risk of some moderation in consumption growth remains. The growth in car sales had eased significantly in January. While take-home pay is higher for taxpayers, non-tax payers are facing higher prices. In the past, for every 1% increase in headline prices there was a corresponding decrease in private consumption by 0.3%,” the global bank said in a report. — Melissa Luz T. Lopez

UnionBank raises P3 billion via LTNCD

UnionBank of the Philippines raised P3 billion from its long-term negotiable certificates of deposit (LTNCD) to improve its deposit maturity profile and help expand its business.

The Aboitiz-led UnionBank launched the offering of new LTNCD on Wednesday at the Philippine Dealing and Exchange Corp.

The notes will mature in 5.5 years and carry an interest rate of 4.375% to be paid quarterly until August 21, 2023. The issuance is the first tranche of UnionBank’s P20-billion LTNCD offering approved by the central bank.

Like regular time deposits offered by banks, LTNCDs offer higher interest rates. However, LTNCDs cannot be pre-terminated but can be sold on the secondary market, making them “negotiable.” — Karl Angelo N. Vidal

Peso firms up as BSP intervenes

The peso strengthened against the dollar anew on Wednesday, Feb. 21, as the local central bank was suspected to continue intervening amid the big selloff by the US Treasury.

The local currency closed today’s session at P52.10 against the greenback, 14 centavos stronger than its P52.24-per-dollar finish last Tuesday.

The peso traded stronger the whole day, opening the session at P52.165 per dollar. Its intraday low stood at P52.21, while its best showing was at P52.06 against the US currency.

Dollars traded Wednesday slipped to $965.95 million from the $977.8 million logged the previous session.

“The BSP (Bangko Sentral ng Pilipinas) was still intervening that’s why the dollar-peso [remained stronger] throughout the day,” a trader told BusinessWorld in a phone interview on Wednesday.— Karl Angelo N. Vidal

Text of revised Pacific trade deal released amid fresh push

WELLINGTON, NEW ZEALAND — Details of a revamped cross-Pacific pact aimed at slashing trade barriers were released Wednesday amid a renewed push for the US to rejoin the 11-nation deal.

New Zealand unveiled the official text of the Trans-Pacific Partnership, or TPP-11, which had to be redrawn after Donald J. Trump rejected it last year just days into his presidency.

The nation’s Trade Minister David Parker said making it public would allow better scrutiny before it is formally signed in Santiago on March 8.

“New Zealand has been working hard to see the text made public as quickly as possible,” Mr. Parker said, adding that changes to the original document included the suspension of 22 items relating to areas such as intellectual property and taxpayer subsidized medicine.

Australian Trade Minister Steve Ciobo said the landmark agreement would eliminate more than 98% of tariffs in a trade zone with a combined GDP of some $13 trillion.

“The (Malcolm) Turnbull government wants to see this landmark agreement enter into force as soon as possible so Australian farmers, businesses and manufactures can enjoy its benefits,” he said.

The 11 TPP countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

Together they account for about 13.5% of the global economy.

However, that figure would be closer to 40% if the United States was included, an outcome some lawmakers in Mr. Trump’s own Republican party are reportedly pushing for.

The Washington Post said on Tuesday that 25 Republican senators had written to Mr. Trump urging a rethink.

“We encourage you to work aggressively to secure reforms that would allow the United States to join the agreement,” they wrote in a letter cited by the newspaper.

“Increased economic engagement with the 11 nations currently in TPP has the potential to substantially improve the competitiveness of US businesses, support millions of US jobs, increase US exports, increase wages, fully unleash America’s energy potential, and benefit consumers.”

Mr. Trump has not ruled out a U-turn, despite referring to the TPP as “a disaster” during his election campaign, believing the accord would punish US workers by allowing companies to hire cheaper labor abroad.

In an address to the World Economic Forum in Davos last month he said the US would consider negotiating with the TPP bloc but “only if is in the interests of all.”

His predecessor Barack Obama believed the deal would set a higher standard for trade, including on health and the environment, and eventually entice China to play by the same rules. — AFP