Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 11690

Savings-investment gap widens further in 2017

How PSEi member stocks performed — January 29, 2018

Here’s a quick glance at how PSEi stocks fared on Monday, January 29, 2018.

Wish list for tax assessment

Everyone has a wish list. The Merriam-Webster Dictionary defines “wish list” as “a list of desired but often realistically unobtainable items.” I have my own long list of wishes for my family, my friends, and my work. Topping off my list are my wishes for my one-year-old daughter: I wish for her to grow up knowing and loving God, to be healthy and be able to live a happy life, regardless of whether she wants to be a certified public accountant or a tax practitioner like me, or a chef like her father. I think she prefers the latter since she likes to play with her kitchen play set. She only likes to scribble on my copy of the Tax Code, the Tax Reform for Acceleration and Inclusion (TRAIN) Law, and draft Revenue Regulations (RRs).

And so the list goes on for my other wishes on my personal life.

As for my tax practice, I have a long wish list. For now, I want to focus on my wishes for tax assessments. Wishes that either have been addressed by the recently passed TRAIN Law and recently issued RR No. 06-2018 or wishes that I hope our lawmakers can address in the succeeding packages of the administration’s tax reform program.

Let me start with a wish already granted. Beginning in the taxable year 2013, taxpayers have been heavily burdened in cases of failure to withhold or erroneous withholding. RR No. 12-2013 promulgated that no deduction will be allowed notwithstanding that the deficiency withholding tax is paid at the time of the audit. Thus, a taxpayer, though merely helping the government in collecting taxes by being its withholding agent, pays deficiency withholding tax and income tax, together with penalties, in case of failure to properly withhold. Let us be thankful that this rule is now revoked.

Pursuant to RR No. 6-2018, deduction from gross income shall be allowed, provided that the deficiency withholding tax is paid even at the time of audit or reinvestigation. Thus, a taxpayer shall no longer be burdened with additional deficiency income tax and corresponding penalties in case of failure to withhold. The taxpayer just has to settle the deficiency withholding tax and corresponding penalties, and the expenses shall be allowed as a deduction for income tax purposes.

Another wish granted relates to the penalty interests in case of failure to pay or remit on time the taxes due.

Prior to the TRAIN Law, every taxpayer who failed to pay their taxes on time was required to pay a deficiency interest of 20% per annum. A delinquency interest of the same rate may also be assessed in case of failure to pay the assessed deficiency tax, surcharge, and deficiency interest on time. Thus, a taxpayer may be in a situation wherein a total of 40% interest will be charged from the date of demand up to the date of payment. Let us be thankful again that these rules were now changed under the TRAIN Law.

Under the TRAIN Law, the deficiency or delinquency interest is now double the legal interest rate for loans as set by the Bangko Sentral ng Pilipinas (BSP). Currently, pursuant to BSP Circular No. 799, the legal rate of interest is at 6%. This makes the penalty interest rate now lower at 12% per annum. This is good for now. However, considering that the rate is now dependent on the legal interest rate set by BSP, this makes the penalty interest rate uncertain. In case the legal interest goes up to 12%, our penalty deficiency interest can go up to 24%, much higher than the 20% which we abhor. To lessen the uncertainty, I hope that this will just be pegged to the legal interest rate only, not double. The taxpayer already pays surcharge and compromise penalties in case of failure to pay taxes on time. Thus, at the most, they should only be required to pay for the cost of money not remitted to the government on time.

On the imposition of delinquency interest, the TRAIN Law now provides that the deficiency and the delinquency interest shall not be imposed simultaneously. Thus, a delinquent taxpayer shall only be required to pay delinquency interest in case of failure to pay on time the amount assessed in the final notice of demand by the Bureau of Internal Revenue (BIR).

While the above rules will certainly ease the burden of taxpayers in case of tax assessments, other items are still pending on my list and on every taxpayer’s wish list.

In every tax assessment, it is every taxpayer’s wish that it be closed as soon as possible. This is to avoid the running of penalty interest which, in certain cases, already exceeds the amount of basic deficiency tax. Thus, I also wish that there be a maximum period when the penalty deficiency interest shall be applied. Just as in the Local Government Code provisions, a period of three years may be set. Setting a maximum period on the imposition of penalty interest protects the taxpayer in case of prolonged tax assessments. With this, a taxpayer shall also no longer be in a position where they seek to settle their supposed deficiency tax based on BIR evaluation just to avoid the running of interest.

This leads me now to my fourth and last wish for tax assessment. I wish that our Tax Code will prohibit issuance of Final Assessment Notices (FAN) with findings exactly the same as those in the Preliminary Assessment Notices (PAN), except when the taxpayer failed to reply to the PAN or failed to properly address the findings in the reply.

Our Tax Code specifically requires the issuance of a PAN prior to the issuance of FAN. However, beginning 2013, RR No. 18-2013 removed the informal conference stage and authorized the BIR to issue the FAN within 15 days from receipt of the reply to PAN. Thus, it has been the practice of the BIR to disregard the taxpayer’s reply to PAN.

We understand the good intention of the BIR to expedite the processing of tax assessments. However, this only leads to an automatic issuance of Final Assessment Notice without considering the taxpayer’s reply to the PAN. The taxpayer is stripped of its right to respond and be heard prior to the issuance of FAN. This is fine in case the assessment is rightful and not based on the misappreciation of facts. In most cases, though, tax assessments are merely based on presumptions with no verification of facts. This puts the taxpayer in a situation of having a multi-million peso and sometimes even billion peso FAN, based alone on the appreciation of facts with no further verification from the taxpayer.

Giving the taxpayer the proper venue to reply and be properly heard of its reconciliation/explanations will certainly help both the taxpayer and the government to have a more effective and efficient tax assessment system. A taxpayer shall no longer be in a situation wherein it does not have any choice but to elevate the case to the Court of Tax Appeals or, worse, just settle it legally or “compromise” at the BIR level to close the tax assessment.

There are pending items in my wish lists that may or may not be granted. Thanks to our lawmakers if these are granted. If not, then let’s just hope that it will all be for the good of the taxpayers and this country. As for my wish for my daughter, I certainly hope that God will grant it, not exactly to be a tax practitioner, but to have a happy life.

Ma. Lourdes Politado-Aclan is a senior manager of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

The Big Bad Wolf Book Sale is coming

Fairy tales have taught us to never let big bad wolves in. They are the devourer of children, baby goats, and two out of three enterprising pigs.

Now the Big Bad Wolf is coming and it’s out to get us bookworms and the special fund that we have set aside for literature.

We’re talking about the Big Bad Wolf Book Sale, a Malaysian book sale that started in 2009, and has been touring other Southeast Asian countries like Indonesia and Thailand, which will be having a Manila leg next month. Starting on February 16 at 9 a.m., it will run nonstop for a whopping 231 hours until February 25 at 11:59 p.m. at the World Trade Center Metro Manila in Pasay City. Admission is free.

The Big Bad Wolf Book Sale has been dubbed as the “world’s biggest” of its kind, offering two million books at discounts ranging from 60% to 80%. There’ll be children’s lit, fiction, non‑fiction, and novels.

You can check out their Facebook page for more information.

Little pig, little pig, let me come in?-LDG

Spicy, explosive, chicken‑y world domination for Tetsuo

Close your eyes and imagine Japan.

Are what come to mind their art and culture, their martial arts and their work ethic, all created with a silent but strong sense of discipline that governs their daily lives?

Or is it the opposite: the angst of the youth that bubbles underneath all that discipline, expressed through over‑the‑top street art, colorful devil‑may‑care fashion choices, deviant lifestyles, and almost everything and anything that they can think of as they fight the seemingly inevitable fate to be a part of the blue‑ or white‑collared workforce?

If the typical Japanese resto has an aesthetic that harks to the former, then Tetsuo—the spicy chicken karaage concept that began at Ateneo de Manila’s John Gokongwei Student Enterprise Center (JSEC)—reflect the latter. Tetsuo is the rebel youth screaming at the void, the one who doesn’t want to be like the others, and the one no one expected to be as large and as well known as they are today.

But that’s where SparkUp found Tetsuo and its co‑owners Sean Bautista and Timmy Jacob, at the jam‑packed DULO bar in Makati at 7 p.m., early on during Tetsuo’s kitchen takeover event where they served their chicken karaage with rice, cold soba, or steamed buns, alongside the bar’s usual menu. Loud music blasted from the speakers and scenes from ‘80s and ‘90s Japanese pop culture were projected on the concrete walls, while bar patrons and Tetsuo’s loyal customers munched on crispy‑on‑the‑outside‑but‑juicy‑on‑the‑inside umami chicken.

Bautista and Jacob, both 23 years old, have been friends since high school. Bautista graduated from Ateneo with a degree in graphic design, Jacob graduated from the University of the Philippines with a degree in economics. They both landed jobs in market retail, Bautista with a specialized sneaker brand and Jacob with a fashion retail brand. The other members of the Tetsuo team have entrepreneurship backgrounds. None of them came from a culinary course.

In 2015, when they were both students, they entered a contest mounted at the Mercato Centrale and placed in the finals. However, schoolwork and other concerns prevented them from managing their own stall at the night market. Since they were current and former students of Ateneo de Manila, having a stall in JSEC by 2016 was within their reach. Sometimes they would have pop up booths at different events, and found that they had developed a following of Ateneo students and people from former events. They have (spoiler alert) their own restaurant establishment in the works, to be opened this year, making their food more accessible to non‑Ateneo students.

“We’ve always wanted to open outside but JSEC was within arms reach,” Jacob told SparkUp in the sidewalk outside DULO, away from the noise and the crowd but still with enough material for Bautista to occasionally pause to snap a photo with his DSLR camera. “We knew the market so we just tried it out and did a killing there.”

“It was a good test for the concept to see if it would survive,” Bautista added. “And the brand got sort of a cult following inside Ateneo. People already saw it as something more, people thought that it could be a restaurant that could work outside.”

(At this point of the interview, a guest whom they personally knew came out from the bar to report that there were no seats left. Jacob’s response: “go HAM… hard as a m‑‑‑‑‑‑‑‑!”)

Art Samantha Gonzales

“Tetsuo is a fried chicken concept where we wanted to elevate the fast food experience,” said Bautista. “We tried to infuse elements of hip‑hop culture, anime, generally things that we’re interested in, into this fast food concept, so that it’s palatable to the millennial audience. We’re kind of just friends hanging out, cooking food for each other. That’s the kind of vibe that we want to elicit.” (And it’s probably because of that friendly vibe that no violent riots were started for karaage.)

“We don’t just limit ourselves to just being sort of a Japanese restaurant even though it heavily inspires us,” Jacob continued. “So if you’ve noticed our signature karaage, which is usually served in other restaurants with mayo and togarashi, is served with gravy which is a little different. We put the different twist to our food.”

“It speaks about our brand being the amalgamation of different influences,” Bautista continued. (“I’ll send you a copy of your pictures,” he yelled at a customer driving off in her motorcycle as he waved goodbye.) “We test them out put them together to see what works and what sticks.”

Still, they were serious about their business and their brand. They weren’t satisfied with having a normal JSEC food stall. They held events. They sold graphic shirts that they themselves designed, and wore those shirts during the DULO event—Bautista’s was a black shirt with the Japanese kanji for Tetsuo in white on the lapel, while Jacob’s was a black shirt with a graphic content warning on the front and a chicken having an existentialist crisis on the back. They invited DJs to play music by their stall. “We didn’t let the stall inhibit us in our way,” Bautista said. “Even at JSEC we were kind of like changing the landscape.”

“Whenever the brand does pop‑ups outside Ateneo we would work with other groups that we feel influence our brand,” Jacob said, adding that they can be kind of picky when it comes to events. “Let’s say like there’s an event where streetwear culture is incorporated or other local brands, we still have people from Ateneo come to our events and say ‘Hey, I still remember your food. I want it. I miss the food, I want to have it again.’”

“I feel like people can relate to the brand in a sense and like the sort of image that we put out,” said Jacob.

What kind of image is that exactly? “We don’t try to think about it too hard,” said Bautista. “It’s just like a personification of us.”

“The brand is very much what we’re into but of course to make a business work you have to make your interests more relatable to the market,” explained Jacob, when asked about how they put their marketing backgrounds to good use in a food business.

“We treat these small events as marketing activations,” Bautista added. “We really make our money through physical locations like JSEC and what we’re opening in the future.” They’re also active on social media, which features their own designs, photographs, and anime screenshots of karaage.

What’s next on their quest for spicy, explosive, chicken‑y world domination? “Having our own restaurant is in the plans,” said Bautista. “We don’t want to give a specific date yet, but that’s definitely in the works, coming soon, but we feel like that’s the next step for the brand to grow and take over the world.”

Kesha rallies Grammys in fierce anti-abuse statement

New York — Pop singer Kesha delivered a powerful statement on behalf of women’s equality at the Grammys on Sunday as she led a fierce performance of “Praying,” her own account of abuse, with A-list back-up from a chorus of stars.

Her face intense and her voice building in ferocity, Kesha brought the crowd at Madison Square Garden to its feet and at times to tears at a time of growing public consciousness about sexual harassment and misconduct.

“Praying” is an autobiographical song clearly directed at Dr. Luke, the producer whom Kesha accuses of raping and psychologically tormenting her.

Even before the rise of the #MeToo movement in response to revelations about Hollywood mogul Harvey Weinstein, Kesha rattled the industry by demanding the end of her contract to work with Dr. Luke, who has denied the assault charges.

“After everything you’ve done / I can thank you for how strong I have become,” Kesha sings.

Kesha performed at the Grammys surrounded by fellow stars including Cyndi Lauper, Bebe Rexha, Camila Cabello and Andra Day, who offered symbolic and literal support.

Kesha embraced them in a bear hug as she finished.

Singer Janelle Monae, introducing Kesha, said that the music industry needed to address its own abuse problems.

“To those who would dare try and silence us, we offer you two words: Time’s Up!” she said, using a slogan for the movement launched on New Year’s Day by hundreds of prominent women in the entertainment industry.

“We say time’s up for pay inequality, discrimination or harassment of any kind, and the abuse of power,” she said.

Despite the rousing reception, Kesha was passed over for the awards. She was not nominated in major categories and came up short for the two pop prizes for which she was in the running.

Before the Grammys, Kesha tweeted that “I needed this song in a very real way” and that she was nervous to perform.

“If you need it, I hope this song finds you,” she wrote. — AFP

DoF cautious on firms’ income tax cut

By Elijah Joseph C. Tubayan
Reporter

THE DEPARTMENT of Finance (DoF) will ensure that state coffers will not suffer unduly as it seeks to give the Philippines a better chance of bagging foreign investments by cutting the corporate income tax rate to the level of many of its competitors.

Reducing the corporate income tax rate to 25% from 30% currently can be done by either cutting it automatically by a percentage point annually over the next five years, or by cutting it by the same magnitude the year after it collects an additional P26 billion — about 0.15% of gross domestic product — after removing fiscal incentives from sectors that do not need them, the department said in a statement on Sunday, quoting Finance Undersecretary Karl Kendrick T. Chua.

The second tax reform package the department submitted to the House of Representatives on Jan. 15 focuses on cutting the corporate income tax rate while covering revenues expected to be foregone by streamlining fiscal incentives. The DoF estimates that the government has been losing about P300 billion annually from superfluous tax incentives.

A national association of tax experts cautioned, however, that making the graduated cut in corporate income tax rate conditional on revenues to be collected from a wider tax base could turn off investors, hence, defeat the very purpose of that reform.

“We will propose the second method to ensure that this tax reform, which is Package Two of the CTRP, will be revenue neutral,” Mr. Chua said, referring to the comprehensive tax reform program that will consist of up to five packages.

“Every one-percent reduction requires P26 billion in counterpart revenues to keep revenue neutrality.”

The same statement quoted Finance Secretary Carlos G. Dominguez III as saying: “Our plan is to lower the tax rate for corporations from 30% to 25%. But our proposal to the Congress is to allow us to do that only if there’s a reduction in the amount that we provide for incentives.”

Sought for comment, Tax Management Association of the Philippines President Raymund S. Gallardo, however, cautioned that such a condition for cutting the corporate income tax rate as planned could defeat the purpose of this reform.

“Baka mahirapan sila sa pag-attain ng conditions. So, we want sana ‘yung straight 25%. Makakaapekto ‘yan sa foreign investments (It might be difficult to fulfill that condition, so we want an unconditional cut to 25%. That condition could affect foreign investments),” Mr. Gallardo said in a telephone interview yesterday.

“Tayo na nga ang pinakamataas (We already have the highest corporate income tax rate) so why do you have to have conditions?” he added.

“And it would be easier to implement if it would be the 25% and then look at other measures to compensate for the loss (in revenues).”

The DoF is taking this tack after the first tax reform package — submitted to both chambers of Congress in September 2016 and enacted as Republic Act No. 10963 on Dec. 19, 2017, consisting of a cut in personal income tax rate and compensating for estimated foregone revenues by either hiking or imposing consumption taxes on several items — yielded a revenue estimate of about P90 billion for the first year of implementation after provisions were toned down, from P133.8-157.2 billion originally.

Mr. Chua added that the Finance department’s proposed bill includes the repeal 150 laws granting fiscal perks to businesses and replacing them with an omnibus law covering all 14 investment promotion agencies (IPAs) in the country.

In order to improve compliance, Mr. Chua said the department is proposing simplification of tax rules for firms by, among others, cutting the number of tax forms and procedures; reviewing the National Internal Revenue Code to improve general anti-avoidance regulations and transfer pricing and costs; and reducing the optional standard deduction to 20% from 40% of gross income.

He said there should be clear measures of actual investment, job creation, countryside development, exports, as well as research and development to ensure that incentives are performance-based.

Moreover, Mr. Chua said, “[a]ll tax incentives should not be perpetual because the government cannot go on subsidizing business forever.”

“If a firm continues to be a losing firm, it has no business being in business.”

Hence, DoF has proposed that companies enjoying incentives of more than 10 years will continue to enjoy such perks for two more years once the second tax reform package is enacted.

Businesses availing of incentives for five to 10 years will continue to do so for three more years after enactment, while those with incentives for less than five years will avail of them for five more years.

In order to make sure the effect of incentives is better monitored, the DoF’s proposal also seeks to give the Finance chief the power to administer the tax perks shelled out by IPAs — which are now attached to various Executive offices including the Department of Trade and Industry (DTI), making it difficult to monitor total revenue impact — as chairman of DoF’s Fiscal Incentives Review Board (FIRB).

“The Secretary of Finance can cancel or suspend the grant of incentives upon the review and recommendation of the FIRB,” Mr. Chua said.

“So rather than creating a new body, we will just expand the existing body that is chaired by the Secretary of Finance who currently grants incentives only to government-owned and -controlled corporations.”

Past administrations had sought to address foregone revenues from tax incentives, but DoF and DTI — which has warned that cutting such perks would make the Philippines lose out to its competitors — have never agreed on a formula to do so.

Mr. Chua cited the practice in several Southeast Asian economies, as well as in Japan and South Korea, where their respective Finance ministries approve the grant of tax incentives.

The DoF has noted that the Philippines’ smaller corporate tax base has resulted in a corporate tax efficiency rate of just 12.3%, even with its high 30% corporate income tax (CIT) rate.

Thailand’s CIT rate is 20% but it collects almost three times the Philippines — a 30.5 percent efficiency rate — equivalent to 6.1% of gross domestic product (GDP); Vietnam’s CIT rate is 25% but it has a 29.2% tax efficiency rate, with collections equivalent to 7.3% of GDP; while Malaysia’s 24% CIT rate generates a 27.1% efficiency rate in terms of collecting such taxes that are equivalent to 6.5% of GDP.

Moreover, DoF’s statement quoted Mr. Chua as saying, “There is discrimination among different types of businesses that create distortion and inequity.”

“For instance, companies with same profit levels pay different tax rates because of the incentives enjoyed by some but not by others, and taxpayers with more profitability may be paying less than those with lower profits, also because of overly generous incentives.”

Business groups open to Swiss challenge focus

By Arjay L. Balinbin

SOME business organizations in the country are open to the government’s focus on the Swiss challenge mode for private-sector involvement in major infrastructure projects, after President Rodrigo R. Duterte announced his preference for this framework in a speech in Davao City on Friday last week.

“[A]ll projects of the Philippines would be something like a Swiss challenge,” Mr. Duterte had said after arriving from a visit to India, citing the need for both national state offices like the Department of Public Works and Highways and for local governments to eliminate corruption in their projects.

Asked to elaborate, Presidential Spokesperson Herminio Harry L. Roque, Jr. said in a press briefing televised from Iloilo City on Sunday afternoon: “Right now, Swiss challenge is only intended for big infra[structure] projects.”

That’s the intention of the law providing for Swiss challenge,” Mr. Roque added, referring to Republic Act No. 7718, enacted in May 1994, which amended RA 6957 of July 1990 by adding, among others, that “unsolicited proposals for projects may be accepted by any government agency or local government unit on a negotiated basis, provided… the government agency or local government unit has invited by publication, for three consecutive weeks in a newspaper of general circulation, comparative or competitive proposals and no other proposal is received for a period of 60 working days; provided, further, that in the event another proponent submits a lower price proposal, the original proponent shall have the right to match that price within 30 working days…”

“It’s to enable PPP projects, so ‘yun ‘yung ini-explore ng presidente na at least, sa big-ticket projects let us avail of the Swiss challenge,” Mr. Roque explained.

Leaders of business groups interviewed yesterday were generally receptive to the focus on the Swiss challenge mode.

“I found government procurement extremely difficult… because of all of the paperwork,” European Chamber of Commerce of the Philippines President Guenter Taus said by phone.

“In my opinion, this Swiss challenge is a welcome change and I hope it straightens out the time frame that we take for bidding. I see this as a positive step.”

Philippine Chamber of Commerce and Industry President George T. Barcelon recalled that the open bidding mode favored by the past administration did not result in the best deal all the time.

“This public bidding, they base on the lowest cost. But the thing is, sometimes the terms of reference and the liability agreement are not clearly spelled out. And if it’s the lowest cost, it doesn’t mean you are getting what you are supposed to be getting,” Mr. Barcelon said by phone.

Referring to the Swiss challenge mode, he said: I would think it doesn’t harm the business sector because this is on the proactive side.”

“Like, if you think that there is a need for a project on the government side, you can propose you don’t have to wait for the government to say there’s a bidding this project,” Mr. Barcelon added.

“In the past, many of these projects were awarded to the lowest bidder. There were cost overruns, delay, sometimes incompletion of projects.”

Sought separately for comment, Makati Business Club Executive Director Peter Angelo V. Perfecto was more cautious, saying his group “shares the President’s frustrations regarding the slow pace of infrastructure development caused by various factors including slow bidding process, TROs (temporary restraining orders) applied for by losing bidders, corruption in the bureaucracy, alleged collusion of contractors, among others.”

“Like any other procurement process, the Swiss challenge has its pros and cons,” Mr. Perfecto noted in a mobile phone message.

“In the end, government must carefully weigh its options. But a better way forward is ensuring that a comprehensive national transport and logistics plan is the basis of procurement decisions.”

Economists say hawkish-tilting Fed could move rates quicker

WASHINGTON — The Federal Reserve likely will leave the benchmark US interest rate untouched this week, but economists say the changing composition of the policy committee could point to faster rate hikes in 2018.

Markets are betting the first of the three interest rate moves expected this year will come at the Fed’s next meeting in March.

That will allow the Fed’s interest-rate setting body, the Federal Open Market Committee (FOMC), to wait for firmer signs of inflation, which has long run below the Fed’s two percent target.

But changing economic conditions — the massive tax cuts approved last month, recovering energy prices, a weaker US dollar, new trade tariffs and stronger global growth — could combine with a widespread US labor shortage to spur wage gains and cause a demand-driven rise in inflation, analysts say.

At the same time the changing makeup of the FOMC appears to be leaning in a more hawkish, inflation-averse direction, which raises the chances the committee will raise rates four times rather than three.

“It looks like in 2018 it will be justified to be more hawkish,” Diane Swonk, chief economist at Grant Thornton, told AFP.

“You’ll get doves becoming more hawkish much more rapidly when conditions are changing.”

The 12 presidents of the regional Federal Reserve banks rotate as voting members of the FOMC each year, along with members of the Fed Board of Governors who always vote.

Chicago Fed President Charles Evans and Minneapolis President Neel Kashkari, who both opposed last month’s rate hike, will not vote this year.

But Cleveland’s Loretta Mester, who twice dissented in favor of higher rates in 2016, will become a voter.

Mester will be joined by San Francisco’s John Williams, a centrist and ally of outgoing Chair Janet Yellen, and the Atlanta region’s newly-appointed Raphael Bostic, who is an unknown but pegged as a dove by analysts at IHS Markit.

Thomas Barkin, who took over this month as president of the traditionally hawkish Richmond Fed also will be voting for the first time.

A MORE CHALLENGING ENVIRONMENT
This week’s meeting will be Ms. Yellen’s last, and once she steps down at the start of February, President Donald Trump is in a position to stack the Fed’s Board, with the chance name all but one of its seven members.

Jerome Powell, who will take over as Fed chair, has served on the board with Yellen since 2012 and is unlikely to depart too easily from the path she charted, having supported her post-crisis policy of painstakingly cautious rate increases.

But observers say the jury is still out on conservative Trump nominee Marvin Goodfriend, a university professor and former Richmond Fed adviser.

Mr. Goodfriend struggled in Senate testimony this month to explain why his predictions of “disastrous” post-crisis inflation had been wrong. He has frequently called for higher rates and scolded the Fed last year for failing to guard against the risk of rising prices — but also favors allowing even negative rates when needed to stimulate growth.

University of Oregon economist Tim Duy, a keen Fed observer, told AFP the Fed would do well to avoid overreacting by raising rates more than three times.

“They will need to be wary of the long and variable lags in the policy process; they will need to take some time to see the impact of their past tightening,” he said.

“So I tend to think you need further evidence of excessive inflationary risks before they ratchet up the pace of rate increases.”

With Wall Street forging ever higher, Ms. Swonk of Grant Thornton said the Fed may also feel compelled to respond to prevent a bubble in asset prices, even though monetary policy tools are ill-suited to address those issues.

“So far, Chair Yellen gets to leave without leaving a ripple on financial markets,” Ms. Swonk said.

“That’s great to leave on that note and the ripples may be yet to come.” — AFP

AboitizPower sees power demand growing by 5%

By Victor V. Saulon,
Sub-Editor

ABOITIZ POWER Corp. (AboitizPower) expects power demand within the franchise areas of its distribution utilities to grow by 5% in 2018, or better than the growth posted in the previous year, its president said.

“For 2018, I think we’re projecting 5[%],” said Antonio R. Moraza, who is also AboitizPower chief operating officer.

“Last year was a slow year, about 4%,” he told reporters, adding that 2017 followed a “strong election year” when power demand grew by about 8%.

Mr. Moraza attributed the higher growth projection this year to the country’s economic performance, with government economic managers expecting sustained growth after 2017’s 6.7% rise in gross domestic product.

“Some areas are growing faster than others,” he said.

AboitizPower has ownership interests in eight distribution utilities, making it one of the largest electricity distributors in the Philippines.

Based on its annual report, the company supplies power to franchise areas covering a total of 18 cities and municipalities in Luzon, Visayas and Mindanao.

Among these distribution utilities is Visayan Electric Co., Inc. (VECO), the country’s second-largest electric utility in terms of customer base. It serves the cities of Cebu, Mandaue, Talisay and Naga. Its coverage also includes four municipalities of the greater part of metropolitan Cebu, namely: Liloan, Consolacion, Minglanilla and San Fernando.

AboitizPower also owns Davao Light & Power Co., Inc., the third-largest privately owned electric distribution utility in the country.

Asked about which of the company’s distribution utilities posted the biggest growth, Mr. Moraza said: “I think Davao last year grew more than VECO.”

However, he noted the growth in power demand within Davao Light’s franchise was already seen before President Rodrigo R. Duterte, who hails from Davao City, was elected.

“These were projects that were already in line in Davao before Pres. [Rodrigo] Duterte became president,” Mr. Moraza said.

“There were malls, apartment buildings, there were hotels, there were a lot of activities in Davao. Some [were] completed [in] 2017, some [are] coming this year. There’s a pipeline,” he added.

The AboitizPower official said distribution utilities account for about 20% of the company’s bottom line, a contribution which has stayed steady from the previous years.

Offer of T-bills seen twice oversubscribed

DEMAND for Treasury bills (T-bills) at today’s auction may exceed the amount on offer on the back of lower yields, with market players looking to park their funds in shorter tenors amid continued uncertainty in the market.

The Bureau of the Treasury (BTr) plans to raise as much as P20 billion from the short-tenored securities today.

Broken down, the government will auction off P9 billion in three-month debt papers, P6 billion in six-month T-bills, and P5 billion worth of one-year papers.

“We think it will be oversubscribed by two to three times because there’s a demand on short-end tenors,” a trader said over the phone on Friday.

In the last T-bill auction, the government made a full award of the P20 billion it planned to raise, as the Treasury received offers worth P50.1 billion, more than twice the amount on offer.

“In the T-bills, I think there’s room for lower yields by about five to 10 basis points. The demand will go to the one-year and lower,” the trader added, noting that yields of the six-month and one-year bills in the previous T-bills auction slid to 2.519% and 2.849%, respectively.

Asked what will drive demand, the trader said the recent rejections the Treasury made may have improved appetite for government securities.

“Since the recent auctions were rejected, there’s a need for some supply,” the trader said.

The trader was referring to the five consecutive auctions where the Treasury rejected all offers from banks on the back of its healthy cash buffer after its successful retail Treasury bond offering last November wherein it raised P255.4 billion.

“And they (the banks) also feel [that] given the very liquid position of the Treasury, we’ll not also be inclined to accept high rates offered by the banks,” National Treasurer Rosalia V. De Leon said previously.

The trader added that the strong performance of the local bourse as well as the weak dollar could also boost demand.

On Friday, the Philippine Stock Exchange index (PSEi) finally broke the 9,000 level after it closed at 9,041.20.

Meanwhile, the greenback weakened last week due to the concerns over the United States government’s protectionist trade policies.

“The dollar is weak and the PSEi is also strong. The numbers are good for the local market,” the trader noted.

The Treasury plans to auction off P120 billion worth of Treasury bills and another P120 billion worth of Treasury bonds in the January to March period. This is higher than the P200 billion it offered in the last quarter of 2017.

The government borrows from local and foreign sources to fund its budget deficit, which for this year is capped at 3% of the country’s gross domestic product.

The government targets a P888.23-billion gross borrowing plan this year, 22.05% higher than last year.

Of this amount, P176.27 billion will be from external financing while P711.96 billion will be sourced locally. — K.A.N. Vidal

BSP extends deadline for MSB registration

THE Bangko Sentral ng Pilipinas (BSP) has given more time for pawnshops, money changers and remittance agents to apply for fresh registrations after the regulator extended the deadline until end-April.

In a statement over the weekend, the central bank said registrations issued to money service businesses (MSBs) will remain valid until April 30 after the Monetary Board last week agreed to a second extension.

The highest policy-making body of the BSP approved the extension of the “transitory period” covering the registrations of pawnshops, money changers, remittance and transfer companies, and foreign exchange dealers. Had it not been extended, all registrations will be rendered invalid by Wednesday.

“The three months extension will provide pawnshops and MSBs a grace period to file their application for re-registration with the BSP,” the central bank said, as it noted that the non-bank service providers must secure their authority to operate over the next three months.

Failure to do so will mean that their existing registration and operation permits will be “automatically revoked or cancelled.”

BSP Circular 942 issued in January last year requires all MSBs — including international remittance service networks and their sub-agents or partner firms in the Philippines — to register with the BSP. These cash agents are subject to additional documentary requirements, as well as streamlined internal protocols after the central bank decided to bring the standards closer to integrity checks imposed on banks.

This is the second extension granted by the regulator for MSBs, as the original circular previously set a June 2017 deadline for them to submit additional documents in order to update their registration status.

BSP Governor Nestor A. Espenilla, Jr. has said that they are consciously tightening rules on non-bank and parallel markets in order to curb dirty money transactions.

The changes followed a year after a remittance company was discovered to have been a key player in the cleansing of $81 million funds stolen from the Bangladesh central bank, which were then coursed through a domestic bank and local gaming tables before these were pocketed by still-unidentified thieves.

New guidelines imposed on remitters and money changers also require their board of directors and owners to craft internal policies that would establish standard operating procedures for its daily business, as well as protocols for internal control and record-keeping in order to deter shady transactions. — Melissa Luz T. Lopez

1...11,68911,69011,691...12,814Page 11,690 of 12,814
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube