FX purchases still require forms despite liberalized rules − BSP

October 22, 2018 | 12:02 am

ALL PURCHASES of foreign currency should still come with corresponding application forms to be submitted to the Bangko Sentral ng Pilipinas (BSP), the regulator clarified, even as it is easing rules on such transactions.
Circular Letter 2018-073 issued by the BSP’s Monetary and Economics Sector clarified that foreign currency purchases must still come with supporting documents.
All sales of foreign exchange carried out by authorized agent banks (AAB) to settle and service transactions “shall be supported by a duly accomplished Application to Purchase FX,” according to the issuance signed by sector-in-charge Assistant Governor Ma. Ramona Gertrudes T. Santiago.
“Accordingly, the AABs/AAB forex corps shall require from their clients (e.g., public and private sector entities) the submission of the duly accomplished Application to Purchase FX, together with other supporting documents (as applicable), prior to the sale of FX for servicing/settlement of their clients’ FX transactions,” the circular read.
Banks usually require documents like dollar loan agreements for corporate buyers or travel papers for individual clients before they can buy foreign currency.
The central bank has been constantly reviewing and relaxing rules covering conversions from the peso to foreign currencies particularly the dollar. Such adjustments are meant to recapture transactions towards banks and away from the black market, with the latter largely out of bounds for regulators.
In particular, the BSP set tighter rules for money service businesses like money changers and remittance agents in order to curb dirty money transactions, especially in the aftermath of the $81-million Bangladesh Bank heist back in 2016.
For banks, a fresh wave of easing is in the works in order to simplify the entry and withdrawal of foreign investments to complement overall government efforts to improve the ease of doing business here.
The central bank has been liberalizing foreign exchange rules since 2007. Significant changes include a higher limit for over-the-counter dollar purchases at $500,000 for individuals and $1 million for companies. Dollars acquired through Philippine lenders may likewise be kept as dollar deposits with the banks concerned.
These come as dollar liquidity improved over the past decades, as lenders are now able to service bigger currency requirements at a given time.
However, BSP Deputy Governor Chuchi G. Fonacier has said that the central bank may hold off further relaxation of these standards amid a highly-volatile FX market in recent weeks. — Melissa Luz T. Lopez

OUTLIER: San Miguel Food and Beverage, Inc.

October 22, 2018 | 12:01 am

By Mark T. Amoguis, Researcher
INVESTORS started to unload some of their shares in San Miguel Food and Beverage, Inc. (SMFB) after its parent company San Miguel Corp. slashed by almost half the size of its unit’s planned follow-on offering.
A total of P520.664 million worth of 6.093 million of the company’s shares exchanged hands on the trading floor during the week of Oct. 15-19, data from the Philippine Stock Exchange (PSE) showed.
SMFB shares slipped by 5.98% on a week-on-week basis to P84.15 apiece on Friday from the P89.50 close on Oct. 12. For the year, the stock price declined by 84.06%.
“Activity for FB is related to the follow-on offering,” AP Securities, Inc. research analyst Rachelle C. Cruz said, referring to the company’s ticker symbol (FB).
“Given market conditions, they cut the offer because it’s either the demand was low and they need to price it at a big discount or they might do another round of offering when market conditions are better and prices and people are able to absorb higher offer price,” she explained.
“Actually, [at the] early part of the week, there were some talks through the grapevine that [FB] will cut the offer. We saw the price fall, I think from around P90 plus during the week, it fell to P84,” she said.
For his part, Luis A. Limlingan, managing director at Regina Capital Development Corp., said: “FB trading activity [increased] as the share sale neared its target date of Oct. 25. The price has also converged at the projected range that the company indicated, which is between P85 and P95 a share.”
Last week, San Miguel Corp., FB’s parent company, said it will push through with its food and beverage unit’s follow-on offering but halved its size, citing market volatility.
From the initial 1.02 billion shares at P140 apiece announced earlier this month, FB cut it to 523 million shares — excluding an overallotment option of up to 15% of the offering — with a price range of P85 to P95 per share.
Proceeds from the share sale will be used by San Miguel to invest in its business.
AP Securities’ Ms. Cruz said a lot of investors were looking at FB for a possible index play.
“Given its size, there was an expectation that FB will be included in the Philippine Stock Exchange index (PSEi), but given that they cut the offer in half, the float will fall, based on our computation, up to 13%. And to be included in the index your float should be at least 15%. So they won’t qualify for now. So we saw some selling,” she explained.
As of Oct. 19, FB’s public float — the portion of outstanding stocks made available to the public investors for stock trading — is at 4.12% according to PSE data. This is below the regulatory requirement of 10% float level for a listed company as well as the 15% minimum required for a listed company to be included in the PSEi.
Piper Chaucer E. Tan, research associate at Philstocks, Inc., concurred: “We cannot argue that despite bearishness sentiment in our market, FB is still a good offer to investors which has good prospects in the future and also a possible index member stock somewhere in the future with its large market cap.”
Mr. Tan gave San Miguel’s food and beverage unit a net income forecast of P12 billion this year on the back of increased domestic spending despite near-decade high inflation.
“The Philippines is a consumption-driven economy, consumer retail stocks and businesses may benefit from this despite headwinds as of this moment and ‘-ber’ months will see an influx on spending,” Mr. Tan said.
Regina Capital’s Mr. Limlingan, for his part, projects SMFB will generate a consolidated net income of P33.4 billion.
In the first half of 2018, FB’s net income increased by a fifth to P15.4 billion, while its revenues went up by 15% to P137.4 billion.
Last May, it was reported that FB is expected to generate P33 billion in earnings this year after its food and beverages businesses are fully consolidated under its portfolio.
For next week, AP Securities’ Ms. Cruz expects FB to trade within the P85 to P95 range.
“Whenever [FB’s] price go down significantly from P85, some investors might buy already,” she said.
Regina Capital’s Mr. Limlingan pegged FB’s support and resistance at P82 and P90, respectively.
Philstocks’ Mr. Tan gave primary and secondary support prices of P80 and P80.10 as well as primary and secondary resistance prices of P90.50 and P104.

Avene Hydrance: An impressive lightweight moisturizer for Asians

October 22, 2018 | 12:01 am

AVENE, the French skincare brand known for using the thermal spring water from the town of the same name, has released its new Aqua Cream-in-gel, an “all-in-one multi-benefit skincare [product] to keep skin beautifully hydrated and protected all day long” which is specially formulated for Asian skin, according to a press release.
Promising intense hydration without the heaviness, the new addition to Avene’s Hydrance line was created in Japan two years ago as a product that is more suited to Asian skin and climate. The result is a light cream that sinks into the skin and provides moisture.
“We’re very optimistic about the Philippines because here we have a lot of expats who have tried the product and loved the product,” Harry Tsai, general manager of Karihome Inc. which distributes Avene in the Philippines, told BusinessWorld during the launch on Oct. 4 at Aruga hotel in Makati City.
“People have been asking us about it, they’ve seen it on the internet and in stores overseas,” he explained, adding that a few days before the official launch, the company decided to put out a few samples of the product on the shelves of one of its stores (“about 20 of them”) and within two days, the stock was sold out.
The magic that is in the Aqua Cream-in-gel is said to be mainly due to the gel-cream texture which melts into the skin to “hydrate, mattify, even skin tone and protect skin from air pollution,” said the release.
Ingredients include the vaunted Avene Thermal Spring Water which is said to have beneficial properties, especially for those with sensitive skin, alongside Meiboserine and Lipomucine which “ensures lasting hydration for up to six hours,” while Cucurbita pepo is added for its mattifying effect.
WHAT IS IT LIKE
This writer was given a jar of the product during launch and immediately put it to test, using it regularly for over two weeks.
Hydration and moisturization is very important for me mostly because my skin ranges from dry to very dry, especially on my cheeks, so slapping on moisturizer is a must and a non-negotiable.
My skin is normally so dry that I use two moisturizers and a facial oil for both day and night so I was very excited to see if the new Avene cream could replace my two moisturizers, and it did — sort of.
For most mornings, I can almost do with only the Avene cream-in-gel because it does moisturize very well and it’s very lightweight and turns into a water-gel-like texture which my skin loves. But as soon as it dries down after a few minutes, I feel like I need more so I usually put another layer on my cheeks for insurance.
This results in my having plump, well-hydrated skin for the day (which is amazing). But at night, I always need something heavier so I still use either my Human Nature Night Facial Moisturizer or my Nivea Soft cream alongside the Avene.
EXPANDING THE BUSINESS
“Avene has been in the Philippines for more than 10 years now. Before it was only known by dermatologists mostly, and while people may have heard about it, they haven’t used it very often. For four years now, we’ve started expanding our retail business,” Mr. Tsai said, noting that there are currently 24 Avene stores in the Philippines with the products also available in “over 300” Watsons stores nationwide for P2,200 for 50ml.
“The brand is rapidly growing,” he said before adding that their annual growth rate stands at 28% and that the brand has grown “400%” in the past four years.
The growth, he said, is likely due to the growing economy of the Philippines which allows more and more people to buy and discover Avene products. — Zsarlene B. Chua

How beauty brand L’Oréal stays earth-friendly and profitable

October 22, 2018 | 12:01 am

By Cathy Rose A. Garcia, Associate Editor
L’Oréal is proving that businesses can make a serious and conscious effort to reduce their environmental footprint, and be financially successful at the same time.
The world’s biggest beauty products maker, whose brands include Maybelline, L’Oréal Paris and Kiehl’s, outlined its commitments in its sustainability program Sharing Beauty with All.
Launched in 2013, the program has set goals to push sustainable practices in all aspects — from product design to distribution, including production and sourcing of raw materials.
“We believe beauty is not just about visual beauty, but also beauty that can work for a better life, even transform the world,” L’Oréal Philippines Managing Director Thibault de Saint Victor told BusinessWorld in a recent interview. “We consider our corporate social responsibility a fundamental pillar and a strategic priority.”
Under Sharing Beauty With All, the global company’s commitments are organized into four pillars: innovating sustainably, producing sustainably, living sustainably and developing sustainability with communities, suppliers and employees.
One of its goals is to have 100% of its products have an improved environmental or social profile, such as having a new formula reducing its eco footprint or using renewable raw materials that are sustainably sourced.
According to its 2017 Sustainability Report, L’Oréal said 76% of new or renovated products have an improved environmental or social profile.
“One thing that L’Oréal does is to act first on things that we can control, which is making sure every time we innovate, we try to have enhanced sustainability components,” Mr. De Saint Victor said.
Another goal is to cut carbon dioxide (CO2) emissions generated by its plants and distribution centers by 60% in absolute terms, compared to 2005.
As of 2017, L’Oréal reduced its CO2 emissions by 73% since 2005, while increasing its production volume by 33%.
While there are challenges to implementing these directives in the Philippines, L’Oréal has found a way to make it work by applying the entrepreneurial spirit the company is known for.
“Today in the Philippines, in terms of waste management, we are zero landfill on what we can control… In terms of point-of-sale materials, what is coming from our warehouse, products that are discontinued, stocks,” Mr. De Saint Victor said.
For instance, the L’Oréal group requires that paper used for offices and products have the Forest Stewardship Council (FSC) certification. The certification assures customers that paper and wood “have been sourced in an environmentally-friendly, socially responsible and economically viable manner.”
But in the Philippines, Mr. de Saint Victor said none of its Philippine suppliers were able to provide FSC-certified paper.
“One solution could be importing from China but that would be ’greenwashing’, just tick the box . . . So our purchasing department worked hard with our suppliers to make them improve, innovate, and make sure they can certify what they produce and comply with the FSC standard. It was not easy, but we need to start this journey together,” he said.
Now, L’Oréal Philippines uses 100% FSC-certified paper for office use and 95% for retail.
EMPOWERING WOMEN
In the Philippines, the L’Oréal Foundation introduced programs such as Beauty for a Better Life and For Women in Science (FWIS), in line with the company’s commitment to empower and support women.
“Beauty for a Better Life is about providing sustainable living in some barangays where there is high unemployment,” Mr. de Saint Victor said.
L’Oréal Philippines partnered with Philippine Business for Social Progress for the project, which aims to help underprivileged women by training them in hairdressing.
Women from Barangay Sto. Niño in Marikina City were selected for the program. They receive 300 hours of training from L’Oréal Philippines salon educators, and have the chance to be employed by the company’s partner-salons.
“Our partner-salons are always looking for new stylists. The employment rate for (the trainees) is around 70%… We can see an immediate result and some people are alleviated from poverty in just a few months. That’s an additional motivation to do the job. It’s a good start,” Mr. de Saint Victor said.
By end of October, L’Oréal will have trained 108, 95% of which are women.
At the same time, L’Oréal Philippines is hoping to encourage more women to venture in the sciences field through the foundation’s FWIS program.
“We’re quite a scientific corporation in the sense that we have a lot of innovation, over 4,000 researchers . . . We also realize that it can’t just be men dictating what should be innovation, women should be a part of it. We have a lot of female scientists and researchers in L’Oreal, and there is tremendous impact,” Mr. de Saint Victor said.
“We believe women are important not just in the industry but also in science as well. By doing this, it helps in the long term to reduce the gender gap,” he added.
The program was restarted in the Philippines in June this year, with Dr. Charissa Ferrera being named the FWIS Philippines National Fellow 2018. With the P400,000 research grant, Dr. Ferrera will conduct research on the water quality in coastal areas and fishing communities in Bolinao and Anda.
MORE IMPACT
The cosmetics giant has shown that “economic performance and environmental, social and societal performance go hand in hand and are mutually reinforcing.”
In 2017, L’Oréal reported sales rose 4.8% like-for-like to 26 billion euros, while operating profit grew 3% to 4.7 billion euros.
“Good sustainability is good business as well,” Mr. de Saint Victor said, noting that companies that can create good social impact can also help redistribute wealth and boost the value of the overall market.
“Also long-term sustainability, if we are going to have a huge climate catastrophe, it’s not good for business as well. If we don’t solve this climate issue, I don’t know in tens of years, will there be businesses anymore?. . . We have to do something,” he added.
While it may be easier and more cost-effective to do business as usual, Mr. de Saint Victor said the same energy can be dedicated to find creative solutions.
“I’m proud to work for a company where sustainability is one of the core pillars of our strategy. It’s more difficult, there are changes but there is a kind of a joy in finding solutions and doing good,” he said.
This commitment to making a social impact is taken very seriously by L’Oreal’s employees. Every year, L’Oreal holds a Citizen Day around the world, where its employees volunteer to work with groups involved in different causes such as environment and fighting exclusion.
In the Philippines, L’Oreal gives its employees a chance to do volunteer activities for an equivalent of six days a year.
“We are not forcing employees. We have this model of unleashing energies and entrepreneurial spirit. We believe when people are motivated, and people want to do something, they find a way of doing it on their own. It has a great impact,” Mr. de Saint Victor said.

Lingering price concerns push up gov’t debt yields

October 22, 2018 | 12:01 am

YIELDS ON government securities went up last week as investors stayed defensive due to inflation concerns.
Debt yields climbed 20.55 basis points (bps) on average week on week, data from the Philippine Dealing & Exchange Corp. as of Oct. 19 showed.
At the secondary market on Friday, yields on the 91-, 182- and 364-day Treasury bills (T-bill) went up by 39.42 bps (4.8339%), 1.48 bps (5.6072%) and 26.09 bps (6.2589%), respectively.
Similarly, the three-, four-, five- and seven-year Treasury bonds (T-bond) saw their rates increase by 41.87 bps (7.4133%), 33.59 bps (8.3071%), 38.58 bps (8.5839%) and 28.42 bps (7.9342%), respectively. The two-year debt paper, on the other hand, saw a 15.94-bp decline to yield 7.2964%.
At the long end, the 20-year T-bond rose by 12.58 bps to fetch 9.0546%, while the 10-year paper ended almost flat from the week prior with a 0.64-bp decrease (8.0529%).
“Rates are still on the upside…as [market] expectations [on inflation also] remain on the high side,” said BDO Unibank, Inc. chief market strategist Jonathan L. Ravelas.
Deanno J. Basas, president and managing director of ATR Asset Management (ATRAM) Trust Corp., said markets are “still a bit cautious,” although noting that there are signs of moderating inflation and current yield levels “are encouraging investors to start re-investing.”
Inflation for the third quarter averaged at 6.2%, higher compared to the previous quarter’s 4.8% and third quarter 2017’s 2.7%, according to a report by the Bangko Sentral ng Pilipinas (BSP).
In September, inflation accelerated to a new nine-year high of 6.7%. Year to date, it averaged 5%, which is above the central bank’s 2-4% target range for 2018.
The BSP has tightened rates by a total of 150 bps since May, including back-to-back rate hikes of 50 bps each during their August and September meetings, in order to rein in inflation expectations.
These rate hikes came as inflation maintained its ascent since the start of the year as new taxes kicked in, worsened by surging oil prices and food supply issues exerted pressure on the cost of basic goods.
Malacañang has issued several measures to boost food supply in order to bring down the cost of staple food items like rice, fish, meat and vegetables, as these saw the biggest price spikes in the last few weeks.
The BSP expects full-year inflation to average at 5.2%, with the latest string of interest rate adjustments meant to usher inflation back to the target band next year. Latest estimates show 2019 inflation could clock in at 4.3%, still above target.
BDO’s Mr. Ravelas expects yields to continue to move higher this week: “Investors are waiting for more signs that inflation is going to slow down. In the meantime, wala pa iyon (that isn’t the case) — the rates will continue to rise,” he said.
For ATRAM Trust’s Mr. Basas, yields may edge lower in the next few weeks “helped by peso currency strength.” — Marissa Mae M. Ramos

Shares may move sideways ahead of Q3 earnings

October 22, 2018 | 12:01 am

By Arra B. Francia, Reporter
SHARES may continue moving sideways in the week ahead as investors look forward to the release of third quarter earnings reports.
The 30-company Philippine Stock Exchange index (PSEi) went up 0.14% to close at 7,151.52 last Friday, pushing the main index 2.1% higher on a weekly basis. The index was lifted by the mining and oil counter, which soared 9.6% last week, alongside financials that jumped 4.04%.
Daily turnover slimmed to P4.8 billion, seven percent lower from the previous week, while net foreign selling weakened by 29% to P393 million on average.
“With the first tranche of nine-month earnings, attention should firm up how corporates are strategizing on challenges of rising borrowing costs, and whether expansion plans are still soldiered on,” online brokerage 2TradeAsia.com said in a weekly market note.
Eagle Equities, Inc. Research Head Christopher John Mangun noted the same, saying that should earnings reports exceed expectations, this could be the catalyst the market is waiting for to start going up again.
“For [this] week, the market can trade sideways and shuffle around the 7,000-level or investors may come in and bargain hunt as there are several companies that have been taking a constant beating in the last few months,” Mr. Mangun said in a market report.
The analyst also flagged the constant foreign selling in the market, which will continue to drag the PSEi’s performance. As of Friday, the PSEi has already seen 37 consecutive days of net foreign outflows.
On the other hand, the appreciation of the Philippine peso last week could also uplift sentiments moving forward.
“The influx of OFW remittances in the fourth quarter may strengthen the currency further and may calm yet another concern of investors,” Mr. Mangun said.
Meanwhile, 2TradeAsia.com noted the general sentiment in markets overseas. Wall Street suffered losses in the previous weeks, due to a combination of geo-political tensions between the United States and Saudi Arabia, the US with China, and rising interest rates. This weakness has likewise dampened sentiment in Asian markets, including the Philippines.
“Most however, will have to come to terms on hints of rate tightening from the [US Federal Reserve], as this carries a weight in capital flows,” 2TradeAsia.com said.
Locally, the online brokerage said the upcoming midterm elections could turn into “market-movers” for the end of 2018.
“During an election year, it is worth to note: local consumption (a major dynamo to national output) generally outperforms; and market-friendly policies can be expected to deepen support from the electorate,” 2TradeAsia.com explained.
Eagle Equities’ Mr. Mangun placed the PSEi’s support from 7,000 to as low as 6,800, with resistance to reach 7,200 to 7,500.

Global dairy prices fall for fifth auction in a row on robust supply

October 22, 2018 | 12:01 am

WELLINGTON — Global dairy prices fell for the fifth time in a row at an auction early on Wednesday as supply remained robust from largest seller New Zealand and other areas of the world.
The GDT Price Index dipped 0.3 percent, with an average selling price of $2,885 per tonne at the fortnightly auction. The index fell 1.9 pct at the previous sale, according to GDT Events.
Prices for the most widely traded item, whole milk powder (WMP), fell 0.9 percent.
A strong recovery in production in New Zealand, as well as in Europe, the United States and Latin America, mostly because of favorable weather, was pushing prices down despite strong demand, particularly from Asia.
Last week, New Zealand’s Fonterra Group Ltd lowered the price for farmgate milk — the price the company pays farmers — citing stronger global supply.
“Favorable weather has helped NZ production run at more than 5 percent ahead of this time last season,” said Nathan Penny, senior rural economist at ASB Bank.
A total of 41,945 tonnes was sold at the latest auction, falling 0.1 percent from the previous one, the auction platform said on its website (www.globaldairytrade.info). The auctions are held twice a month, with the next one scheduled for Nov. 6.
The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the nation’s gross domestic product. The kiwi currency showed little reaction to Wednesday’s auction.
The New Zealand milk cooperative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade. GDT Events is owned by Fonterra, but operates independently from the dairy giant.
U.S.-listed CRA International Inc is the trading manager for auction. A number of companies, including Dairy America and Murray Goulburn, use the platform to sell milk powder and other dairy products. — Reuters

How much revenues did Metro Manila LGUs collect in 2017?

October 22, 2018 | 12:00 am

MANDALUYONG CITY’S locally-generated revenue — a measure of its fiscal independence — declined 25.25% in 2017 to P3.90 billion, the sharpest fall among the Metro Manila’s municipalities, the Bureau of Local Government Finance (BLGF) said. Read the full story.

How PSEi member stocks performed — October 19, 2018

October 22, 2018 | 12:00 am

Here’s a quick glance at how PSEi stocks fared on Friday, October 19, 2018.

Philippine Stock Exchange’s most active stocks by value turnover — October 12-19, 2018

PEZA proposes raising tax on gross income earned to 7%

October 21, 2018 | 10:12 pm

THE Philippine Economic Zone Authority (PEZA) has offered to increase the rate of its gross income earned (GIE) tax incentive to 7% from 5% and make it time-bound in lieu of its removal under the Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO) Bill.
“I’d like to increase it to 7% to increase the share of the LGU [local government unit]. Provinces have been complaining that they have no share of the tax on economic zone locators, which goes only to cities or municipalities where the ecozone is located,” PEZA Director-General Charito B. Plaza told reporters on the sidelines of the 44^th Philippine Business Conference and Expo last week.
She added that the investment promotion agency has evaluated the impact of a 7% GIE but declined to say what the findings were.
She was responding to a request for comment on former PEZA Chief Lilia B. de Lima’s proposed compromise of a higher the GIE instead of its removal.
Ms. De Lima made the proposal last week when she addressed the Makati Business Club’s general membership meeting where she also raised the need to appease LGUs and do away with their need to impose taxes on ecozone locators.
Under PEZA’s rules, an ecozone developer operator is exempt from paying all national internal revenue taxes and local government imposts, fees, licenses, or taxes and ordinances, in lieu of the payment of the 5% GIE of which 2% is allocated to host LGUs.
Ms. Plaza said an upward adjustment of the GIE is favored by PEZA locators.
“They are amenable to increase it to 7%. The corporate income tax (proposed in TRABAHO), is prone to corruption and will worsen the ease of doing business because they would have to deal with (the Bureau of Customs and the Bureau of Internal revenue),” Ms. Plaza said.
“Under GIE, it will be clear in the sales invoices this is their gross. And 5% of their gross will be the share of the government. So it’s very clear. No corruption,” she added.
PEZA’s latest proposal represents a softening in its stance particularly in Ms. Plaza’s willingness to make GIE timebound, for a period suitable to locators seeking to generate certain returns.
“Let us study carefully making incentives timebound. We have to consider also their investment. They require a return. When they apply for example, they have to tell us how many years they expect their investments to pay back, so that we base it from there. And then we add their incentive, their income tax holidays if they come up with new product, or introduce new technology, or expand to the countryside,” she added.
Ms. Plaza said PEZA is now in the process of classifying investment types based on expected payback periods.
“We have a Strategic Investment Priorities Plan (SIPP) which is now still being deliberated. So we start from there. The classification of industries, their ITH, how long they will enjoy it, should be carefully evaluated and studied,” she added.
Ms. Plaza said the need to retain the GIE upholds the separate treatment of exporters compared with domestic-oriented firms, which is ignored by the TRABAHO bill, the second round of tax reform legislation more generally known as Tax Reform for Acceleration and Inclusion (TRAIN).
“Under TRAIN 2, exporters domestic enterprises are treated the same. There should be a different regime of incentives for exporters and for domestic enterprises,” Ms. Plaza said.
“We still insist in the GIE for exporters, corporate income tax for domestic enterprises, and some domestic incentives, “ she added.
The TRABAHO bill proposes to reduce the corporate income tax rate gradually to 20% by 2029 from 30% currently via a two percentage-point reduction every other year beginning 2021. — Janina C. Lim

DoF preparing rules to re-impose fuel excise hike

October 21, 2018 | 10:12 pm

IMPLEMENTING RULES and regulations (IRR) for re-imposing the next P2 fuel excise tax following its planned suspension in 2019 are expected soon.
Finance Assistant Secretary Antonio Joselito G. Lambino II told reporters on Friday that the Department of Finance (DoF) and the Bureau of Internal Revenue (BIR) are currently drafting the IRR on reimposing the suspended tax hike when the global crude benchmark prices fall. The tax reform law is currently silent on the conditions necessary for reimposing the fuel tax hike.
“That’s in a very advanced stage of finalization and it will be ready very soon. So it’s reasonable to explore that suspension for lifting, the mechanism for lifting the suspension could be something like a three month average of below $80 per barrel (/bbl),” he said.
Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect in January, raised fuel excise taxes by P2.50 per liter this year and is scheduled to add P2/liter and P1.50/liter in 2019 and 2020, respectively, totaling a P6/liter excise tax hike.
The law allows the hike in fuel taxes to be suspended when the Dubai crude benchmark averages $80 per barrel or more in the three months prior to the scheduled increase.
Malacañang announced last week its intention to suspend the scheduled tax hike even before the three-month trigger event. The Dubai crude benchmark began exceeding $80 in late September.
Finance Undersecretary Karl Kendrick T. Chua said the law provides for automatic implementation of tax hikes such that by 2020, fuel will be taxed at the full P6 per liter.
“There is already the law that provides the scheduled increase. So if you suspend for one year, by 2020 you have to apply the full amount. So that is the minimum, but if you suspend after one year you have to apply the next increase if the prices do not go above $80,” he said.
The DoF has said that the forgone revenue from suspending the P2 hike in 2019 amounts to P41 billion. Taking into account the higher value-added tax (VAT) take from higher oil prices and the peso’s depreciation, the net forgone revenue would be around P27 billion.
“To complement the efforts against hoarding and profiteering as expectations are anchored in a downward direction then it’s harder for bad behavior to be carried out that will make things worse so that’s part of the whole package of things being done,” said Mr. Lambino, while noting actions taken by the Palace to boost food supply and streamline distribution.
A task force has been created to look at the possible budget cuts for non-priority expenses in order to maintain the targeted fiscal deficit ceiling at 3.2% of gross domestic product.
Finance Undersecretary and chief economist Gil S. Beltran meanwhile said that while the Dubai benchmark is expected to remain elevated in the last three months of the year, it is expected to fall by 2019.
“Oil prices are expected to go down eventually. It will go down to $75/barrel by December next year (2019). The trend is going down to about $60/barrel in three years,” he said, basing his estimate on the direction of futures contracts.
The DoF has said that the TRAIN law was not the main driver of inflation, which has hit nine-year highs.
It said the main causes were a confluence of elevated oil prices, the peso’s weakening, food supply issues, and the impact of typhoons.
Asked whether the DoF will seek to re-impose the fuel hike within 2019 amid some political pressure in an election year, Mr. Lambino said: “I don’t think we capitulated to public pressure. I think we looked at the data we saw the drivers of inflation, we saw that there were four main drivers… having looked at all of that the decision to recommend was made because we needed to anchor inflation expectations.”
Mr. Lambino added that the $80 per barrel threshold may be reviewed in the future, but it was “not the intention at this point.” — Elijah Joseph C. Tubayan

Senate calls inquiry into fuel excise suspension

October 21, 2018 | 10:11 pm

SENATOR Sherwin T. Gatchalian has filed a resolution seeking an inquiry into the potential impact of suspending the fuel excise tax on inflation, which hit 6.7% in September.
Senate Resolution No. 917 was filed Oct. 10 following Malacañang’s decision to suspend the scheduled increase of oil excise tax in 2019. The Senate hearing is scheduled for Wednesday.
Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law imposed a fuel excise tax increase of P2.50 per liter this year, and will raise the levy by P2 and P1.50 per liter in 2019 and 2020.
The law also provides a suspension provision on the scheduled increase of fuel excise taxes if the average Dubai crude benchmark in the three months prior to the scheduled increase hits or exceeds $80 per barrel.
Mr. Gatchalian, chair of the Senate committee of economic affairs, has been conducting public hearings on the tax reform law since February to monitor its implementation of the social mitigating measures and its inflationary impact.
He said in his resolution that inflation continued to rise to 6.7% in September despite the government’s efforts “”to mitigate the inflationary effects of the TRAIN law.”
He also noted that other additional inflationary pressures are expected to come in the next months, such as higher global oil prices, minimum wage hikes, higher public transportation fares, weather disruptions, and the further weakening of the peso.
“It is imperative for this inquiry to ventilate the issues related to the effective implementation of the said social mitigating measures, not only with respect to the targeted beneficiaries, but also to the rest of these families who see themselves as poor,” Mr. Gatchalian said.
He also said the possible duration of the fuel excise tax suspension next year will be discussed in the Senate hearing.
The Department of Finance (DoF) has estimated that about P41 billion in revenue will be lost if the government suspends the second tranche of the fuel excise tax next year. Meanwhile, the Department of Budget and Management (DBM) has said the increase in fuel vouchers for public utility jeepney franchise holders will be put on hold following the suspension.
Malacañang has yet to issue to a formal order suspending the fuel excise tax under the TRAIN law next year. — Camille A. Aguinaldo

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