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Secretaries authorized to rehab Panglao, El Nido without EO

MALACAÑANG on Wednesday said the rehabilitation of Panglao Island in Bohol and El Nido in Palawan, two important centers for the resort industry, will proceed without an Executive Order (EO) from President Rodrigo R. Duterte.
“On the rehabilitation of Panglao Island in Bohol and El Nido in Palawan, the Cabinet agreed that there is no need to issue an Executive Order,” Presidential Spokesperson Salvador S. Panelo said in a statement on Wednesday, Nov. 5.
The decision was made during the 32nd Cabinet meeting on Tuesday night, Dec. 4, at the Aguinaldo State Dining Room in Malacañang, according to Mr. Panelo.
In a phone message to BusinessWorld, Tourism Secretary Bernadette Romulo-Puyat said the rehabilitation “has already started,” and the timeline is “six months for both.”
“We (Environment Secretary Roy A. Cimatu, Interior Secretary Eduardo M. Año, and myself) first spoke to El Nido Mayor on Nov. 14 at the DENR (Department of Environment and Natural Resources), and we all went to El Nido on Nov. 28,” she said.
“The three of us also spoke to the Panglao Mayor on Nov. 27,” she added.
Initially, according to Ms. Puyat, the local officials “have to implement the 20-meter + 10 (easement zone) for Panglao and 20-meter in El Nido.”
Also last month, the inter-agency task force led by DENR said it was set “to replicate the ‘Boracay model of rehabilitation’ in Palawan province and other top tourist destinations,” including Panglao Island in Bohol.
“We have to maintain Palawan as the last ecological frontier of the country,” Mr. Cimatu was quoted as saying in a statement on Nov. 15.
“Since we’ve started in Boracay, let’s continue these rehabilitation efforts for the sake of the Philippines and the Filipino people, so that they can have something to be proud of,” he added.
He also clarified that El Nido will not be closed down to visitors, unlike the shutdown of Boracay during its six-month rehabilitation. — Arjay L. Balinbin

House panel hears bills calling for fuel tax hike suspension

THE House Committee on Ways and Means on Wednesday began deliberating bills and resolutions seeking to suspend the increase of the excise taxes on fuel.
“While the President has basis for his decision to go ahead with the second tranche (of excise tax increases) we should always consider the impact on consumers,” Committee Chair Estrellita B. Suansing of the 1st district of Nueva Ecija told reporters following the committee meeting.
“If you ask me, they have to reconsider,” she said.
The Committee meeting comes after President Rodrigo R. Duterte and his Cabinet decided to approve the P2 increase in the excise tax on fuel scheduled for 2019.
The higher taxes were authorized by the Tax Reform for Acceleration and Inclusion (TRAIN) law, which provided for a P2.5 per liter increase in oil excise tax in 2018, P2 in 2019 and P1.5 in 2020.
The committee was considering House Bill No. 8171, House Joint Resolutions No. 27, 29 and 31, and House Resolutions 1838, 1919, 2253, all proposing to suspend the second tranche of the excise tax hike.
Marikina-2nd district Rep. Romero S. Quimbo, who wrote HB 8171, proposed to suspend increase of excise taxes on kerosene and diesel.
“Kerosene today in terms of total collection from January to September is P257.2 million. Yet based on the experts, it’s really a fuel used by the poor… They pay for it, the impact on them is catastrophic and yet the amount that we collect is not even 300 million,” Mr. Quimbo said before the committee.
Mr. Quimbo had raised the need to reassess the provisions of the TRAIN Law, considering that the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) have exceeded their target collections for the year.
“We’ve exceeded the target and it’s not even the end of year… I think it becomes even more pressing for us to re-evaluate,” he said.
According to the Department of Finance (DoF), as of October, the BIR has collected P31.7 billion, while the BoC, as of September, collected P31.2 billion, higher than their full-year targets of P29.7 billion and P24 billion, respectively.
The DoF, for its part, wants to proceed with the scheduled excise tax increase.
“If we suspend, this deprives the budget immediately for 2019. For example, if we do not impose the P2 that is mandated under the law, this will deprive the budget of P40 billion for the whole year,” Assistant Secretary Teresa S. Habitan told the committee. — Charmaine A. Tadalan

Budget dep’t releases P13.7 billion in construction funds for Marawi, schools

THE DEPARTMENT of Budget and Management (DBM) released P13.71 billion worth of construction funds in mid-November, to fund the building of schools, the reconstruction of Marawi city, the Metro Manila Subway, and right-of-way acquisition.
These include releases to the Department of Public Works and Highways (DPWH) for Department of Education (DepEd) Basic Education Facilities worth P5.24 billion; P2.55 billion to pay right-of-way claims for property affected by the construction of the North Luzon Expressway-South Luzon Expressway Connector Road Project; and P730 million for right-of-way claims against the C-5 Northern Link Road Project, Phase 2, Segment 10 from MacArthur Highway, Valenzuela City to Malabon and C-3 Road Caloocan City.
The DPWH also received P990 million worth of funding support for the rehabilitation of Marawi City and surrounding areas.
The DBM also released P560 million to the Department of Transportation (DoTr) to help fund the implementation of the Metro Manila Subway Project Phase 1.
It remitted P590 million worth of subsidies to the Philippine Postal Corp.
Budget releases totaled P3.629 trillion in the year to date as of Nov. 22, equivalent to 96.3% of the P3.767-trillion 2018 budget.
“The release of the budget to requesting agencies is subject to their compliance with the documentary requirements set by the DBM. To date, only P137.9 billion of the FY 2018 National Budget remains unreleased,” Budget Secretary Benjamin E. Diokno said in a briefing on Wednesday.
“There is absolutely no underspending to speak of. The government is ahead in its disbursements. In fact, we are slightly overspending,” Mr. Diokno said.
He said disbursements in the nine months to September were 2.6% above target.
After overspending, he expects government spending to normalize in the fourth quarter, without breaching the ceiling of 3% of gross domestic product.
“This improved rate of spending indicates quicker delivery of programs in health, education, and poverty-reduction and the faster implementation and completion of public infrastructure projects. Incidentally, Congress’ failure to approve the 2019 budget before the end of the year will be a drag on efforts in improving budget utilization and eliminating underspending and result in the delay of essential public services,” Mr. Diokno said. — Elijah Joseph C. Tubayan

LNG bill to require guaranteed offtake of import shipments

PROPOSED legislation governing the liquefied natural gas (LNG) industry will require imported shipments to have offtakers, a measure intended to ensure the long-term viability of the LNG receiving terminal to be built in the Philippines.
The bill, should it be signed into law, will also institutionalize third-party access to the terminal.
These are among the features of the law being drafted by the Senate energy committee chaired by Sen. Sherwin T. Gatchalian in coordination with the Department of Energy (DoE), which is currently evaluating a proposal from the private sector to build an integrated LNG facility.
In an interview, he said the law will look into the sustainability and the bankability of the LNG project by making sure that shipments have a buyer, known as the offtaker in the energy industry.
“The offtaker is the important link to make sure that the terminal operator will be sustainable and profitable,” Mr. Gatchalian he said during the First Asia Pacific LNG Investment Summit at Solaire Resort & Casino on Wednesday.
“That’s the assurance that our investors are looking for. But we’re formulating it in such a way that it will not become anti-competitive because if you put that form of assurance it might curtail competition. So we have to balance between financial viability of the proponent through the offtake and power supply agreement and also balance it with competition,” Mr. Gatchalian said.
Mr. Gatchalian also said that the proposed law will promote competition in the LNG terminal industry, while also ensuring that the electricity produced by gas-fired power plants is competitive.
“One of the features [of the bill] is the third-party access feature in which different power plants can bring in their LNG using the same terminal,” he said.
“The terminal operator should allow other power plants to import and to use that terminal so it would improve competition. Rather than create a monopoly, it should be open to anyone — power plants or maybe transport operators — to bring in their own competitive LNG,” he said.
Mr. Gatchalian said he was working with the DoE to come up with “stronger legislation (that is) more comprehensive” in place of the interim framework issued by the department governing the LNG sector.
Asked for comment, DoE Assistant Secretary said Leonido J. Pulido III the department was coordinating with Mr. Gatchalian’s office to draft the LNG bill, which he said will build on the existing regulation passed by the agency.
“We really want it to be a very competitive and open market. And to do that you have to have some form of third-party rules, which is actually a very difficult set of rules or regulations to draft,” he said.
He also eased fears about the law coming out after the construction of an integrated LNG facility, leaving the proponent contending with a law that is not completely compatible with its completed project.
“Because of the time constraints involved, we want the law passed as soon as possible. But it’s not one or the other, it’s not ‘we need this before the other.’ They can both happen at the same time. In fact I think we need not wait for the law, but we do need a law so that we can institutionalize a lot of the concepts that we’ve put in the Philippine downstream natural gas rules,” Mr. Pulido said.
“And it would give the DoE more teeth and authority to develop the natural gas industry,” he added. — Victor V. Saulon

Finance dep’t in no rush to issue dollar bonds

THE GOVERNMENT is in no hurry to issue dollar bonds due to the current volatility on global markets, the Finance department said.
“We are waiting for the right moment. Everything is in the timing, so we’re just waiting for the right moment,” Finance Secretary Carlos G. Dominguez III told reporters on the sidelines of the Senate plenary deliberations for the 2019 budget.
“We thought that it would be better to do it earlier than later but it didn’t turn out to be an ideal situation,” Mr. Dominguez added.
In May the Department of Finance (DoF) said it will front load its global dollar bond offer to the latter half of the year rather than early 2019, in anticipation of further rate hikes from the Federal Reserve.
Mr. Dominguez said that the government remains comfortable with the level of funds on hand.
“There is no pressure. We (can) take our time. Remember the usual schedule is towards the end of January. But we wanted to see if we could do it earlier rather than later but conditions are not there. Better to be prepared to do something rather than be forced to do it,” said Mr. Dominguez.
The factors that were considered in the timing of the dollar bond offer include the 90-day truce between China and the US, and declining world oil prices.
“Big uncertainties were overhanging the market. There was no agreement yet on the trade issues and prices of oil were spiking. Now I think it seems that the market is settling down, and our confidence in the longer planning horizon is possible,” Mr. Dominguez said.
Asked if it is still possible to float the bonds before year’s end, Mr. Dominguez said; “We’ll see. Of course, it’s possible.”
A bond trader said that US yields are still expected to decline even after an agreement between the US and China to hold off assessing new tariffs on each other for 90 days as they negotiate to resolve the trade dispute.
He also said that the Fed’s rate-setting body is under less pressure to tighten rates at its Dec. 18 meeting due to declining oil prices.
“With uncertainty due to the trade war, investors will seek safe havens like US Treasuries, and its effect is to lower interest rates. That’s what is happening today. But even if the US and China reach a settlement, that’s supposed to be better for riskier assets, but the mood remains wary. Right now there do not seem to ne concrete steps by China,” the trader said in a phone interview.
“It would be better for them if they postpone (the issue) if the outlook is for lower interest rates, which mean lower borrowing costs. The consensus is that the Fed will hike this December, and the expectation is for a strong US economy which can absorb the higher rates. But the lower oil prices have also lowered inflation expectations,” he added.
In January, the government raised $2 billion from the issue of 10-year dollar bonds, with $750 million issued to new investors at a 3% coupon, while $1.25 billion was applied to a liability management exercise.
In a separate statement, the DoF said that it is also still studying the timing for the retail Treasury bond issue that will fund the rehabilitation of Marawi City, as the government considers the funds pledged by development partners.
“We still have the budget in place and actually, we have until 2022 to complete the funding. So we will review the pledges that we got and see the exact timing of them so that we can time the Marawi bonds as well,” said Mr. Dominguez.
The government raised P35.1 billion worth of concessional loans and grants at a pledging session on Nov. 28 for the reconstruction of Marawi.
Mr. Dominguez said that he expects the funds to come in “before the end of 2018 or early next year.”
The government is planning a P13.5-billion issue to fund Marawi reconstruction targeted at retail investors. The issuances will run until 2022. — Elijah Joseph C. Tubayan

Nickel industry sees 10-20% output decline in 2019

THE Philippine Nickel Industry Association (PNIA) is projecting a decline in nickel production of 10-20% in 2019, though companies expect to be profitable, with economic activity driven by the May elections and the ‘Build, Build, Build’ infrastructure program.
At the Pandesal Forum in Quezon City on Wednesday, Dante R. Bravo, PNIA president, said: “It’s likely that production will be reduced 10 to 20%.”
Mr. Bravo is also the president of listed nickel ore exporter Global Ferronickel Holdings Inc (FNI).
According to Mr. Bravo, nickel production will fall to 212,000 to 215,000 tons this year from 370,000 tons a year earlier.
He said that assuming a similar decline next year, nickel output will fall to 150,0000 tons “which is less than 10% of the global requirement.”
The decline in Philippine nickel production started in 2016 due to low prices and unfavorable weather. More recently, the Department of Environment and Natural Resources (DENR), led by Secretary Roy A. Cimatu, also released an order limiting production area depending on the mine’s production volume per year.
“If you limit the open areas, that means you lose certain flexibility,” Mr. Bravo said. He also noted that the Philippines exports more than 90% of its nickel to China which is the country’s biggest market.
Mr. Bravo said that the Philippines also has high power costs, while China has cheap power and many nickel processing plants.
“The other thing we have to consider, given that we have to compete with China, is where are we going to sell it? Also to China because we don’t have a local market here,” Mr. Bravo said.
“They have the technology, they have the money, they have everything. What we can do is to be part of the value chain because they don’t have the raw materials. If we’re going through from end to end of the value chain, we simply can’t compete,” Mr. Bravo explained, however noting that the comparative advantage of the Philippines is that it has a higher grade ore.
Asked for his outlook on nickel prices in 2019, Mr. Bravo said: “Overall, we will have modest growth in 2019. [There’s] elections. There’s too much money in circulation. We’re also hoping the ‘Build, Build, Build’ program will support economic growth in 2019.”
He said that if prices for low-grade ore rise, it will encourage more production.
“We’ve been shipping more medium-grade ore because of the low prices of low-grade ore,” Mr. Bravo said, noting that this trend may continue until 2019.
Currently, the Philippines has 48 metallic mines of which 30 are devoted to nickel ore. Most of the ore is exported to China for processing into stainless steel. — Reicelene Joy N. Ignacio

House panel signals openness to lowering P10 plastic bag tax

THE House Committee on Ways and Means is open to lowering the proposed P10 excise tax on plastic bags as a compromise with the industry.
“We’re not interested in killing industry. We are proposing an excise tax because we want to control the use of plastic bags,” Rep. Estrellita B. Suansing, who chairs the committee, told reporters after the committee meeting on Wednesday.
“If P10 is too burdensome for them, maybe we can adjust the rate,” she also said.
The committee was conducting initial deliberations on House Bills 8523 and 8558, which both seek to levy P10 on plastic bags used in supermarkets, malls, and other establishments.
The measures, written respectively by Sultan Kudarat 2nd district Rep. Horacio P. Suansing, Jr. and Manila 3rd district Rep. John Marvin C. Nieto, are both designed to discourage plastic use.
The committee is set to hold on Monday a technical working group meeting to consolidate the bills.
Philippine Plastic Industry Association President Willy Go, for his part said the tax would be “detrimental for the industry.
“Imposing excise tax of P10 is a 1,000% increase on the cost of a plastic bag. This is an anti-poor measure and detrimental to the growth of the industry,” he told the committee.
“If the excise tax is implemented, this will instantly kill the industry and millions will be jobless,” he added. — Charmaine A. Tadalan

Asia power sector outlook stable — Moody’s

MOODY’S Investors Service has set a stable outlook for the Asian power sector next year, noting that the industry is supported by steady cash flows, a gradual pace of regulatory change, a gradual transition to a low-carbon economy and sufficient mitigants against capital market volatility.
The stable outlook covers the power sectors of China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore and Thailand.
But the Moody’s outlook for the South Korean and Japanese industries is negative, given the greater regulatory challenges faced by companies in these countries.
“We expect most rated power companies will report stable operating cash flow over the next 12-18 months, helped by stable or increasing dispatch volumes or timely cost pass-throughs amid a gradual pace of regulatory changes, thus supporting their credit quality,” said Mic Kang, a Moody’s vice-president and senior credit officer.
“However, regulatory challenges are starting to adversely affect the credit metrics of Korean and Japanese companies, because of prolonged delays in cost pass-throughs in Korea and growing competition amid market deregulation in Japan,” he added.
Moody’s issued a report on the outlook for the Asian power sector, “Power — Asia: 2019 outlook stable, with steady cash flow offset by regulatory challenges,” which is written by the Moody’s VP.
The report said that growing power demand or timely cost pass-throughs would mitigate the strain on cash flows from higher generation costs and higher capital spending for most rated power companies in Asia.
It added that regulation will remain broadly stable as most Asian governments implement regulatory changes gradually, supporting cash flow stability.
“Business conditions will be tougher in 2019 in certain countries, because of regulatory challenges and, to a lesser extent, trade protectionism potentially slowing demand growth. The main regulatory risk is timely cost pass-throughs in certain countries, particularly China (A1 stable), Indonesia (Baa2 stable) and Korea (Aa2 stable),” Moody’s said.
It added that there is uncertainty associated with the effects of deregulation in Japan (A1 stable). It expects power demand growth in China and Indonesia to continue to support cash flow stability or growth for most rated power companies.
“By contrast, Korea’s major power companies increasingly rely on debt to fund their capital spending, because of the continued low likelihood of timely cost pass-throughs amid strengthening safety requirements for nuclear operations and the Korean government’s energy policy to gradually move away from nuclear and coal. As such, their credit metrics are weakening,” Moody’s said.
Moody’s expects some power companies in Japan to find difficulty in strengthening their weak credit metrics amid increasing competition and weakening monopolistic market positions.
“Carbon transition risk will increase in Asia’s power sector. The cash flows of coal-driven power generation companies will weaken gradually as both generation from renewables and environmental compliance costs are rising,” it said.
But it said carbon transition risk would not emerge as a material credit risk during the next 12 to 18 months, “because renewable power growth is unlikely to outpace power demand growth in Asia, while the importance of the coal power as a major energy source will not decline materially over this time frame.”
Moody’s said it could change its outlook for the broad Asian power industry to negative if it expects cash flows will be lower than its projections because of materially weaker power-consumption growth or an inability to pass through increased costs in a timely manner; regulations change adversely; carbon transition risk emerges rapidly; and global capital market volatility weakens many rated power companies’ funding capacity. — Victor V. Saulon

Senators call for fuel tax hike suspension

SENATORS on Wednesday said they want Malacañang to reconsider its decision to go ahead with the increased fuel excise tax in 2019 as called for by the tax reform law.
In a statement, Senator Paolo Benigno A. Aquino IV said Filipinos are “dismayed by the backtracking on the decision to raise taxes because they are suffering from high prices.”
“They should have listened to the Filipinos and should no longer increase the excise tax on petroleum under the TRAIN (Tax Reform for Acceleration and Inclusion) law. Everyone knows that the fuel tax increase is the reason why there are high prices in the market,” he added.
Senator Joseph Victor G. Ejercito told reporters in a mobile phone message: “Still hoping for some sense of sensitivity in our economic managers. We are the ones that the people get to talk to and we know the pulse.”
In a statement, Senator Risa N. Hontiveros-Baraquel described the decision as “premature and impulsive” and raised doubts whether the government can adequately forecast the economic situation next year.
“Why lift the suspension on the fuel excise tax collection, one of the few safety nets that protects the public from the volatility of the international oil market? If the government failed to foresee the depth and gravity of the impact of volatile international oil prices on our inflation rate, what makes it think that the overall economic environment is turning around for the better?” she said in a statement.
Senator Francis G. Escudero raised the same concerns, citing the “erroneous projection” of economic managers in October that the Dubai crude oil benchmark would remain above the $80 per barrel threshold until the end of the year.
“Considering the previous erroneous projection in October, certainty becomes nil at best and no assurance can ever be had either by the President or the public itself that high prices of goods and services will never happen, not to mention the fact that election spending will definitely exacerbate inflation in 2019, an election year, where demand-pull inflation may likely occur,” he said in a statement.
Mr. Escudero also filed Senate Resolution No. 964 on Wednesday, urging President Rodrigo R. Duterte to suspend the increase of fuel excise tax in 2019.
Senator Juan Edgardo M. Angara said it was important as well for the government to fully implement the social mitigating measures, such as the unconditional cash transfer and the Pantawid Pasada components of the program, as authorized by the tax reform law.
Senate President Vicente C. Sotto III said it was understandable that Malacañang reached the decision to proceed with tax hike due to series of rollbacks in fuel prices. However, he said the government should also target any parties who may be taking advantage of the situation.
“What I would do is to target those who are taking advantage. They raised prices even though they are not directly affected by the high fuel prices, but they are using it as an excuse,” he told reporters.
Mr. Duterte, in a Cabinet meeting on Tuesday evening, heeded the economic manager’s recommendation to proceed with the 2019 fuel excise tax, reversing his earlier order to suspend it.
The TRAIN law imposes excise taxes on gasoline and diesel of P7 per liter and P2.50 per liter, respectively, in 2018. Starting Jan. 1, 2019, gasoline excise tax will go up to P9 while diesel will increase to P4.50.
The law also has a suspension provision on the scheduled increase of fuel excise taxes if the average Dubai crude benchmark price for three months prior to the scheduled increase reaches or exceeds $80 per barrel. — Camille A. Aguinaldo

Some ease on the tax clearance

Since validation of tax compliance is a precondition to entering into and is a continuing obligation in government contracts, the Bureau of Internal Revenue (BIR) has issued regulations dating back to 2005 providing guidelines for the filing and processing of applications for tax clearance required from participating bidders.
Revenue Regulations (RR) 18-2018, the latest of the policies, was issued on Aug. 3. In its steadfast commitment to ease doing business in the Philippines, the BIR decentralized the filing of tax clearance applications from the Accounts Receivable Monitoring Division (ARMD) of the BIR National Office to the Revenue Regional Offices or Large Taxpayers Divisions (LTD) where the taxpayer-applicant is registered. RR 18-2018 also clarified that those with previously issued tax clearances must be regular eFPS users from the time of enrollment up to the time of application. In case the applicant is not a regular eFPS user (i.e., a newly registered eFPS user), the latest income tax return (ITR) and business tax returns not filed and paid through the eFPS must be submitted.
On Oct. 11, the BIR issued Revenue Memorandum Order (RMO) 46-2018 which detailed the procedures for the issuance of a tax clearance. Under the RMO, a tax clearance shall only be issued to applicants who have fully satisfied the following conditions: a). the applicant must not be tagged as “Cannot be Located”; b). the applicant must have no unpaid annual registration fee, no open valid “stop-filer” cases, no accounts receivable/ delinquent account and no pending criminal information filed in any court for tax or tax-related cases; and c) the applicant must be a regular eFPS user from the time of enrollment up to the time of filing the renewal of tax clearance.
However, a new applicant is not required to be a regular eFPS user. Instead, such applicant must submit the ITR for the preceding taxable year (calendar or fiscal) or the most recent quarterly ITR in case of new establishments. The new applicant must also submit the latest Value-Added Tax and/or Percentage Tax Returns covering the previous six months of operations or the corresponding monthly/quarterly returns filed to date for those establishments in operation for less than six months.
While the filing of the application remains manual, the venue for filing varies. Non-large taxpayers shall submit their applications with the Collection Division of the Revenue Regional Office having jurisdiction over them. However, large taxpayers shall file theirs with the LTD-Cebu/LTD-Davao or Large Taxpayers Enforcement Division for large taxpayers not under the jurisdiction of any of the LTDs. As regards Non-Resident Aliens Not Engaged in Trade or Business (NRA-NETB), Non-Resident Foreign Corporations (NRFCs) and other entities authorized by the Commissioner of Internal Revenue, their applications must still be lodged with the ARMD. Perhaps if the BIR intends to transition from manual to online filing in the future, this would result in more ease and efficiency.
Furthermore, RMO 46-2018 identified the authorized signatories for the application form. For individual applicants, the form must be signed by the applicant himself. In case of a partnership, any of the partners is authorized to do so. For non-individual taxpayer-applicants, any responsible and ranking officer may sign provided that the authority for such act is stated in a board resolution, duly evidenced by a Secretary’s Certificate. In case of NRFCs, the form may also be executed by any responsible and ranking officer whose authority must be expressly provided in a Special Power of Attorney duly authenticated by the Philippine Consul in the country where the NRFC’s office is located.
In the spirit of doing business with ease, the tax clearance shall be processed and released within two working days from receipt of the duly accomplished application form for tax clearance with complete documentary requirements.
Once issued, the tax clearance shall be valid for one year from the date of issuance, unless sooner revoked for any of the following grounds: (1) denial of the application for Compromise Settlement and Abatement of penalties; (2) the attachments to the application are found to be spurious; (3) non-compliance with the prescribed criteria; and (4) misrepresentations made by the taxpayer-applicant to the government procuring agency or to the tax clearance-issuing office. The name of the taxpayer-applicant who is found to have submitted spurious documents or made misrepresentations will be submitted to the Regional or National Investigation Division as the case may be, for the conduct of a preliminary investigation and for filing of criminal charges, if warranted.
Taken all together, RR 18-2018 and RMO 46-2018 conveyed the needed clarity to ease the processing of clearance applications. With the decentralization of tasks, taxpayers can now expect timely and efficient issuance of tax clearances that will ensure competitive bidding for public contracts. If implemented accordingly, these BIR issuances will support government operations and enhance public service for the benefit of taxpayers.
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.
 
Elizabeth K. Adaoag-Belarmino is a Senior Consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network. Readers may reach the author at (02) 845-27 28 or elizabeth.k.adaoag@ph.pwc.com for questions or feedback.

Traffic Czar or Traffic Caesar?

I wish Transportation Secretary Arthur Tugade the best of luck. By legislating his designation as Traffic Czar, the House of Representatives as well as the Senate are putting on his shoulders the burden of — as well as the blame on — the gargantuan task of resolving the problem of vehicular traffic congestion in Metro Manila, Metro Cebu, and Metro Davao.
The House of Representatives approved on final reading last Monday House Bill No. 6425. This proposed law gives Secretary Tugade, as Traffic Czar, the task of developing within three years or until 2021 a comprehensive framework to improve vehicular traffic flow in the top three metropolitan areas. Along with this task, of course, comes possible glory, or possible defeat.
HB 6425’s counterpart measure, Senate Bill No. 1284, is still pending second-reading approval. A news report in this paper noted that the Senate bill covers only Metro Manila and Metro Cebu, and does not include Davao City like the House Bill, and provides for a presidential appointee to be named Traffic Manager, instead of the Transportation Secretary.
A traffic leader is necessary, according to House Transportation Committee Chairman Rep. Cesar V. Sarmiento of Catanduanes, given the need to “harmonize overlapping traffic rules” among different local government units or LGUs. Different traffic rules and regulations among LGUs is a key contributor to the traffic problem, he told reporters.
As such, the news report detailed, HB 6425 will designate the Secretary of the Department of Transportation as the Traffic Chief, and he or she will wield “full power and authority… to streamline the management of traffic and transportation and to control road use in the identified metropolitan areas.”
HB 6425 will grant the Transportation Secretary “power of supervision and control” over functions of the Metropolitan Manila Development Authority (MMDA), the Metropolitan Cebu Traffic Coordinating Council, and the proposed Davao Traffic Administrator; the Philippine National Police Highway Patrol Group (PNP-HPG); the Land Transportation Office (LTO); the Land Transportation and Franchising Regulatory Board (LTFRB); the Road Board; and “all other executive agencies, bureaus and offices with functions related to land transportation regulation.”
The Transportation Secretary will also have power over LGUs in metropolitan areas with respect to “enforcement of rules, policies and programs enacted pursuant to this Act and for harmonization and enforcement of all traffic rules and regulations… and establish and implement… a comprehensive and unified road use plan and a unified traffic management system to be followed by all component LGUs…”
The House bill also proposes to temporarily suspend metropolitan LGUs’ power “to issue franchises to padyak, tricycles and all other PUV units” while the proposed law is in effect, and gives the Traffic Chief the power to revoke or revise PUV franchises, or take over the operation of a franchise in “times of national emergency.”
Moreover, the House bill will also allow the President, through the Traffic Chief, to enter into contracts for priority projects while the proposed law is in effect. While the Senate bill provides: “The President is hereby granted Emergency Powers to urgently utilize all necessary government resources, exercise police power, including eminent domain and employ executive actions and measures to ensure effective implementation….”
choose right way
I have yet to read the actual draft of the House and Senate bills, and will do so once I get clear copies. However, I can only hope that both drafts will be very clear in their scope, specifically covering only “vehicular traffic-related” functions of MMDA, LTO, LTFRB, PNP-HPG and other public agencies. Moreover, the law should recognize constitutional safeguards on property rights, freedom of movement, restraints on trade, and abuse of police power.
In addition, the proposed law should give the Traffic chief powers also over tollways, which are supposedly public highways but are controlled and managed by private corporations. Portions of tollways such as the North and South Luzon expressways, for instance, as well as CAVITEx and MCX are all still within the territorial boundaries of Metro Manila and should be under the scope of the Traffic boss.
This becomes crucial particularly in situations when tollways management imposes or applies policies and conditions that may be also seen as possibly detrimental to public interest. A case in example is the reported plan to make the elevated tollway, or the Skyway, exclusive only to vehicles with RFIDs, to the exclusion of motorists paying in cash. Or the closure of the Skyway, like several instances in the past, to vehicular traffic to make way for a privately organized running event.
One can already foresee the repercussions of making the Skyway exclusive to RFID or e-tag vehicles. This will unfairly limit all cash-paying motorists to use at-grade or street-level tollways. We may see a situation where poorer motorists are limited to the at-grade tollway, and add to traffic congestion there, when the very intention of building an elevated tollway is to ease traffic congestion overall. Why quibble over payment method if doing so will not ease congestion and improve traffic flow? Besides, why should there be such an imposition on a “public” expressway?
The same proposed law should also limit the power of local officials, as well as tollway companies, from closing public roads or tollways for running and other sporting events, fiestas and other celebrations, political events and private functions, and funeral or religious processions, among others. Sporting or running or biking events, including marathons, can instead be done in places like Clark and Subic.
The proposed law should also take into account the present limits in public transportation, and should help broaden or expand options in the interim, while public infrastructure projects are ongoing. Congestion can be best addressed by a combination of reducing volume, removing obstructions, and allowing free flow by limiting stop-go movements of vehicles like jeepneys.
However, volume cannot be significantly reduced unless public transportation options are improved. An efficient and cost-effective public transport system will naturally promote reduction in volume particularly of private vehicles. At the same time, public transportation should be skewed towards mass transit with high number of passengers and limited number of stops. And this means more trains and buses, but no more jeepneys, tricycles, pedicabs, etc. Moving freight, bulk cargo, and containers by train, rather than by trucks, to and from Metro Manila will also be a big help.
The government and the public should support Secretary Tugade, and then hope for the best that he — or his successor — will actually be up to the challenge. The law designating him Traffic Czar might just lead to lasting solutions to vehicular traffic congestion in metropolitan areas. If so, then Tugade might just be hailed like a triumphant Julius Caesar, returning from the Gallic War with complete Roman victory at the Battle of Alesia.
On the other hand, unless long-term strategic solutions are in place by the time the Duterte Administration ends in 2022, then Tugade or his successor may be taken to task. One can then imagine a scene much like when Caesar, at the base of the Curia in the Theatre of Pompey, lay dead after he was stabbed 23 times as the result of a conspiracy by Roman senators against his dictatorship.
 
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council.
matort@yahoo.com

Can business managers safely play with FIRe?

In 2016, Klaus Schwab, founder of the World Economic Forum, heralded the arrival of the second machine age and its promise as well as threats for business and society. In his 2018 book titled after the phenomenon, Schwab explains that the basis for the so-called “fourth industrial revolution,” commonly abbreviated as FIRe, is not only new technologies alone, but also the new ways through which people and things are connected to each other and are communicating in new and faster ways.
FIRe developments such as artificial intelligence (AI) and cloud computing affect business practices and, ultimately, society because of the way they embed technologies and interconnections into all aspects of human lives. As a simple example, the way we take pictures with our smartphones when we eat or shop, and then post these on social media, feed data on our location and purchases into huge databases of companies, where intelligent software analyzes and gives recommendations to managers on our behaviors. The speed with which we interact with each other, with intelligent machines, and with companies using advanced software and huge amounts of data has made all of us essentially part of an ever-growing, global, and high-speed man-machine network.
The upside for business is tremendous. More people will be accessible for business-oriented communications and transactions. People will benefit because services previously available only to a few will become available to all who have a networked smartphone. For example, PayMaya and similar financial technology services now make it possible for Filipinos without bank accounts to buy goods and services online. In a country with more than 100 million people, the FIRe will mean tremendous growth in the marketplace for goods and services.
Media reports announced that PLDT and Smart successfully completed a cellular call last week using their 5G cell sites at the Makati Central Business District and at Clark Freeport Zone, Pampanga. 5G is expected to deliver average speeds ten times faster than 4G. This is certainly welcome; I have grown weary of the buffering indicator on my smartphone when using mobile internet. In any case, 5G will definitely accelerate the spread of FIRe in the Philippines.
But the FIRe, like its metaphorical counterpart, has to be handled with extreme care so that we avoid getting burned. “More connected,” “more data,” and “faster connectivity” do not always mean “better.” The problem with our obsession with connectivity, data volume, and speed is that without critical thinking and ethical values, it just gets us into trouble faster. Remember the IT truism “garbage-in, garbage-out”?
Schwab noted in 2016 that “in all moments of major technological change, people, companies and institutions feel the depth of the change, but they are often overwhelmed by it, out of sheer ignorance of its effects.”
What are the ethical dangers for management?
Danger 1: Managers will use AI analysis plus a lot of data to make efficient but biased decisions. For example, companies will make hiring decisions using automatic systems to screen thousands of resumés. Software will be programmed to measure indicators of desirable characteristics (called algorithms) such as extra-curricular activities and online work profiles that have led to “good hires” in the past. Without human validation, this practice can lead to biased hiring practices on a massive scale. Cathy O’Neil, in her book Weapons of Math Destruction, explains that decision software is trained on past successes to mimic human decision making.
While biased human decisions in the past may have been reversible through human oversight and review, AI-enabled decisions will be made faster and with less transparency because managers will not know how software is making its recommendations. O’Neil proposes one solution: “Encourage a human review that will ask experienced people who have been through bias training to oversee selection and evaluation. Let decisions be guided by an algorithm-informed individual, rather than by an algorithm alone.”
Danger 2: Managers will use automatic quantitative reports on their PC screens and smartphones to make business decisions without understanding reality on the ground. I call this “managing by video game.” Fast and high-volume databases with real-time network data will tend to make decision making a push-button affair. Low sales volume in a particular area may tempt a manager to think that salespeople are underperforming, or that the product has low potential when, in fact, logistics issues have been causing stock-outs. One solution, according to technology ethnographer Tricia Wang, is to use “thick data” to add human stories and meanings to quantitative reports. Wang predicted the explosion of smartphone sales in China based on her interactions with poor Chinese who were willing to spend a lot on these devices. As history has shown, Nokia largely missed this trend despite its huge databases.
Managers can play with FIRe to benefit businesses and people only if they do so with sound judgment based on direct human knowledge of business and social realities.
 
Benito L. Teehankee is a full professor and coordinator of the Business for Human Development Network of De La Salle University.
benito.teehankee@dlsu.edu.ph

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