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US to Russia: Respect nuclear arsenal limits under New START Treaty

WASHINGTON — The United States, which just unveiled a new aggressive nuclear strategy, has met the limits set on its arsenal under the New START Treaty, which enters a new phase Monday, and reminded Russia to uphold its commitments.

The strategic arms reduction treaty was signed by Washington and Moscow in 2010, and took effect in February 2011.

It calls for the gradual reduction over 10 years of the number of nuclear warheads held by both sides, limits on the number of delivery systems, a strict verification regime and data exchanges.

“The United States of America and the Russian Federation have implemented the Treaty on Measures for the Further Reduction and Limitation of Strategic Offensive Arms (New START Treaty) for seven years,” the State department said in a statement.

“Feb. 5, 2018 marks the date that the treaty’s central limits on each country’s strategic nuclear arsenal take effect.”

Washington said it had already fulfilled its commitments by August 2017, said the statement issued by department spokeswoman Heather Nauert.

Russia has “repeatedly stated its commitment” to the treaty, including meeting the central limits, and we expect our upcoming data exchange under the treaty to reaffirm that commitment.”

On Thursday, Ms. Nauert had said that Washington had “no reason to believe” that Russia would not meet its goals.

“Within the next month or so, both countries will exchange their data under the strategic nuclear arsenals, as we have done bilaterally under the treaty’s terms for the last seven years,” she said.

“We hope each country will confirm the compliance of the other as soon as possible after this data exchange.”

The beginning on Monday of the new “central limits” phase under the New START Treaty comes just days after the Pentagon announced its new nuclear policy.

The Defense department said Friday it wanted to revamp the US nuclear arsenal and develop new low-yield atomic weapons, largely in response to Russian actions in recent years.

According to Washington, Moscow is in the process of modernizing its arsenal of 2,000 tactical nuclear weapons. Those efforts are not monitored by the New START Treaty, which only accounts for strategic weapons that serve as deterrents.

The treaty was reached under the administration of Barack Obama, President Donald J. Trump’s predecessor. The State department said Monday that implementation of the accord “enhances the safety and security of the United States and our allies and makes strategic relations between the United States and the Russian Federation more stable, transparent, and predictable.”

US-Russia ties are strained at best, as the controversy over what US intelligence says was Russian meddling in the 2016 presidential election drags on.

The State department said adherence to the treaty was “critically important at a time when trust in the relationship has deteriorated, and the threat of miscalculation and misperception has risen.” — AFP

US Congress gridlocked as budget, immigration deadlines loom

WASHINGTON — Bitterly divided US lawmakers return this week to face a shrinking window for reaching deals on immigration, federal spending and the debt, as Republican infighting swirls and President Donald J. Trump complains he is getting zero cooperation from Democrats.

Mr. Trump vowed during his State of the Union address last week to “extend an open hand” to both parties in pursuing an immigration deal that shields 1.8 million undocumented migrants from deportation.

But his proposal has been savaged by opposition Democrats, and Mr. Trump’s “open hand” soon wagged an accusatory finger.

“They Resist, Blame, Complain and Obstruct — and do nothing” to break the immigration stalemate, Mr. Trump tweeted a few days after his Jan. 30 speech.

Congress has also been haggling over spending caps for domestic programs and the military as they seek to finalize a budget for the remainder of 2018.

But Republican leaders have acknowledged they will not meet a Thursday deadline for a spending bill, and will have to pass yet another stopgap measure this week — with help from Democrats — to avoid a government shutdown.

House Speaker Paul Ryan said that while both sides were “making progress” on a budget agreement, a temporary spending bill was necessary to keep the lights on in Washington.

“We’re still negotiating the contents and the duration of that,” he said.

Lawmakers are smarting from an embarrassing three-day shutdown last month, when Democrats refused to back a spending measure that did not break the immigration impasse.

Senate Majority Leader Mitch McConnell said this time he did not expect another threat of a government shutdown, which Trump critics blamed on Republicans but Mr. McConnell pinned on Democrats.

“There’s no education in the second kick of a mule,” the Kentucky lawmaker said.

DEBT CEILING LIMIT LOOMS
Complicating the legislative schedule, Treasury Secretary Steven Mnuchin has warned Congress that the Treasury has enough cash to pay its bills only through Feb. 28 without hitting the debt limit and using extraordinary measures to keep payments flowing.

That is earlier than expected, the Congressional Budget Office said, because last year’s $1.5- trillion tax cut is resulting in less federal revenue.

Raising the debt ceiling has led to high-risk political showdowns in recent years.

With the national debt exceeding $20 trillion, some fiscal conservatives have signalled they may demand spending cuts in order to vote to raise the limit.

The crammed to-do list is further jeopardized by the partisan feuding gripping Washington over an explosive Republican memorandum that Mr. Trump declassified on Friday.

House intelligence committee chairman Devin Nunes argues in the document that the FBI engaged in abuse of power by relying on unsubstantiated evidence to track a Trump campaign aide.

In a strongly worded letter to the president, 10 top Democrats warned of “a constitutional crisis” should he use the memo as a pretext for firing the special prosecutor heading an investigation into possible collusion between Mr. Trump’s campaign and Moscow.

‘COMPLETE NONSTARTER’
Against this toxic backdrop, lawmakers are bracing for a heavyweight brawl on immigration.

Last September, Mr. Trump decided to end the Obama-era program known as Deferred Action for Childhood Arrivals (DACA) on March 5, meaning that the beneficiaries, called “Dreamers,” could face deportation if Congress fails to act.

Last week, he unveiled a proposal that put Democrats in a bind. It would place 1.8 million immigrants, including some 700,000 Dreamers, on a pathway to citizenship — a top priority for the opposition.

But it would also require improving border security including $25 billion for Mr. Trump’s border wall, ending the green-card visa lottery, and curtailing the family reunification procedure that prioritizes relatives of US citizens immigrating to the country.

Democrats equated the plan with holding Dreamers “hostage” in exchange for anti-immigrant policies.

“Make no mistake, this plan is a complete nonstarter,” insisted Senator Kamala Harris.

Mr. Trump warned Democrats they would be making a mistake if they choose to block his “generous” proposal.

“We’ll either have something that’s fair and equitable and good and secure, or we’re going to have nothing at all,” he told Republican lawmakers at their winter retreat.

On Sunday, senior Democratic Senator Dick Durbin said he did not believe a shutdown would happen, but reminded Mr. McConnell that he pledged to bring the immigration issue to the floor for debate.

“That’s what we were looking for when there was a shutdown. We have achieved that goal. We’re moving forward,” Mr. Durbin told CNN.

Mr. Trump has received pushback from his own party.

Some hardcore conservatives have faulted him for ceding too much on immigrant legalization.

“Illegals have No Right to be here,” congressman Steve King tweeted. “This #Amnesty deal negotiates away American Sovereignty.”

But moderate Senate Republican Jeff Flake, a Trump critic, warned against “drastically cutting legal and necessary immigration flows,” saying Congress should not “shoehorn” the complex issue into a DACA fix. — AFP

Rome bans protests ahead of Erdogan talks with pope

VATICAN CITY — Turkish President Recep Tayyip Erdogan will meet Pope Francis on Monday, with a protest ban imposed in central Rome as feelings run high over Turkey’s offensive against Kurdish militia inside Syria.

For the first such visit by a Turkish leader for 59 years, the Italian authorities have imposed a 24-hour ban on demonstrations which will cover Mr. Erdogan’s arrival late Sunday to his departure on Monday evening.

A total of 3,500 police have been deployed for the visit.

Nevertheless a sit-in protest by 200 people, organized by a Kurdish association in Italy, is scheduled to take place on Monday not far from the Vatican.

Turkey on Jan. 20 launched its “Olive Branch” operation against Syrian Kurdish People’s Protection Units (YPG) militia which Ankara sees as a terror group and a threat to Turkish territory.

The Turkish army and allied Ankara-backed Syrian rebel forces are seeking to oust the YPG from its western border stronghold of Afrin but the operation has faced fierce resistance.

“In Afrin, a new crime against humanity is under way,” the Kurdish association said.

The pope, who has railed against the horrors of war and weapons of mass destruction, is likely to raise the Afrin issue during his meeting with Erdogan at 9:30 am (0830 GMT) on Monday.

The YPG, while considered a “terrorist” group by Ankara, is allied to the United States in its battle against Islamic State group jihadists.

Thousands of Kurds gathered in Syria’s Afrin on Saturday to mourn fighters and civilians killed in a blistering Turkish assault on the region — including female combatant Barin Kobani whose mutilated body appeared in a shocking video, prompting accusations by her family and Kurdish officials that she was “defiled” by Turkish-backed rebels.

Mr. Erdogan for his part will probably thank the pontiff for opposing the decision by US President Donald J. Trump to recognize Jerusalem as the capital of Israel.

“We are both in favor of the status quo and we have the will to protect it,” Mr. Erdogan said in an interview published Sunday.

Pope Francis, a strong proponent of interfaith dialogue, visited Turkey in November 2014, holding friendly talks with Mr. Erdogan, a devout Muslim.

While in Istanbul the pope acknowledged that current global crises had made Muslims vulnerable to being stigmatized.

Pope Francis denounced those who said “all Muslims are terrorists”.

Relations were not so cordial in June 2016 when the pope, during a visit to Armenia, referred to the 1915-17 mass killings of Armenians by Ottoman forces as “genocide.”

The Vatican was then forced to refute claims from Turkey that Pope Francis had showed a “mentality of the Crusades” over his use of the term.

Turkey — the Ottoman Empire’s successor state — argues that it was a collective tragedy in which both Turks and Armenians died. — AFP

S. Korean builders cite red tape as a hurdle to winning contracts

SOUTH KOREAN contractors interested in winning infrastructure contracts have pointed to bureaucracy as the main hurdle to their participation, depriving government projects of the most advanced construction methods as practiced by overseas builders.

International Contractors Association of Korea Asian Market Division Deputy General Kim Tae-wan said his association sees “inefficient” government bureaucracy as “problematic,” and the membership “hopes” the situation is resolved.

Speaking to reporters last week, Mr. Kim said the Philippines is a priority country for investment because it lags the rest of Southeast Asia in infrastructure development.

“Overseas contractors in the Philippines see that the inefficient government bureaucracy is one of the problematic factors and hopes for its improvement,” he added.

In 2017, there were 151 South Korean contractors active in the Philippines with 439 projects worth $15.1 billion. Most of these projects were industrial facilities and civil engineering works.

South Korea’s government is directing trade and investment into Southeast Asia under Seoul’s “New Southern Policy.”

Mr. Kim said South Korean builders hope to work around the difficulties by working with domestic counterparts and working on portions of projects requiring advanced know-how.

“Most government projects are done by local companies and the complex projects require (the involvement of) foreign companies,” he added.

“So it is a must that we try to look for more partnerships between foreign companies and local firms.”

Mr. Kim said bank funding may be key to winning projects tied to the participation of contractors from the bank’s country.

“(A South Korean bank) committed to fund $1 billion within the next six years and they are in discussion on which sectors they will be investing,” he added, without providing details. — Anna Gabriela A. Mogato

BMI sees two BSP rate hikes with inflation at top of target range

INFLATION will likely top the government’s target range this year amid higher commodity prices and rapid credit growth, which could force the Bangko Sentral ng Pilipinas (BSP) to raise rates twice this year to keep market rates and the peso competitive.

“We are forecasting inflation to average 4% in 2018 and this means that real interest rates will dip into negative territory,” BMI Research said in its February report.

If realized, this would be the highest yearly average since the 4.1% tallied in 2014. It would also hit the ceiling of the 2-4% target band set by the central bank, and will surpass the 3.4% estimate given by the monetary authority.

“With the Fed set to continue on its rate hiking cycle, flagging three more possible 25bps (basis points) hikes in 2018 at its December meeting, we believe that the BSP is likely to tighten monetary policy in the coming months in an effort to safeguard currency and macroeconomic stability,” the Fitch unit added.

The Philippine Statistics Authority will report January inflation data today. A BusinessWorld poll among 14 economists yielded a 3.5% median forecast, which will pick up from December’s 3.3% and the 2.7% reading in January 2017.

The peso has also once more weakened past P51 against the dollar.

The policy-setting Monetary Board will conduct its first review of interest rates on Thursday. Analysts broadly expect the BSP to stay on hold, but some are expecting a more hawkish tone from the central bank to set the stage for a rate hike in succeeding meetings.

“Although headline inflation has been anchored within the central bank’s target of 3±1%, we maintain our view that the current monetary policy stance is too loose and has already started to result in a build-up of economic distortions with credit growth surging and core inflation on a sustained uptrend,” BMI said.

The research firm is pencilling in two rate hikes from the BSP in 2018 amid rising inflationary pressures, at a time of rising global crude prices coupled with higher taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) law which took effect Jan. 1.

TRAIN imposed an additional P2.50 excise tax per liter of diesel and P3/liter for kerosene, which came at a time of three-year highs for world crude prices.

The new law also introduced additional taxes on cars, coal, sugar-sweetened drinks and a host of other items that likely drove up prices of other widely used goods and services, which economists pointed as the reason for the faster increase in prices.

BSP Governor Nestor A. Espenilla, Jr. said last week that the upward inflation trend remains within expectations, but noted that monetary authorities are “carefully assessing” second-round effects of TRAIN on inflation.

The BSP has said it will remain “data-driven” in setting policy rates, with domestic inflation as its biggest concern. — Melissa Luz T. Lopez

Natural disaster damage at P374B in 2006-2015

THE total cost of damage arising from by “major natural extreme events and disasters” was estimated at P374.199 billion in the 10 years to 2015, the Philippine Statistics Authority (PSA) said.

The agency gave a separate estimate for economic losses due to natural and human-induced disasters of P139.748 billion, with natural disasters accounting for P132.910 billion of the total.

The data were reported in the PSA’s 2016 edition of the Compendium of Philippine Environment Statistics (CPES)

According to the PSA, economic losses include “damage to buildings and transportation networks, loss of revenue for businesses, and loss of crops, among other material indicators.”

Across the 10-year reference period, 2009 was the worst for economic losses due to natural disasters at P45.084 billion largely due to tropical cyclones (P43.423 billion).

In that year, economic losses in infrastructure were estimated at P30.711 billion, followed by agriculture (P13.354 billion) and private property/communication (P1.018 billion).

Meanwhile, 2013 was the worst year for man-made disasters at P3.614 billion, with armed conflict accounting for P3.088 billion, fire (P524.6 million) and fishkill (P1.2 million).

The CPES’ P374.199 billion estimate for damage from “major natural extreme events and disasters” includes damage to  agriculture worth P225.626 billion, infrastructure P81.974 billion and private property P66.598 billion.

The top years for such losses were 2013 (P106.666 billion), 2014 (P53.526 billion), 2012 (P44.948 billion) and 2009 (P44.438 billion).

Natural disasters in 2013 include, one major earthquake, two tropical depressions, six tropical storms, and three typhoons which included typhoon Yolanda (International name: Haiyan) in November of that year which killed 6,300 and affected 3.42 million families while causing P95.483 billion worth of damage.

Other destructive weather events include typhoon Pablo in 2012 (P43.164 billion), typhoon Glenda in 2014 (P38.617 billion); typhoon Pepeng in 2009 (P27.215 billion); typhoon Pedring in 2011 (P15.553 billion); typhoon Lando in 2015 (P14.392 billion); typhoon Frank in 2008 (13.338 billion); the July 2015-2016 El Niño (P12.834 billion); typhoon Juan in 2010 (P12.010 billion) and tropical storm Ondoy in 2009 (P10.796 billion).

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, called these figures “staggering.”

“They run up to billions of pesos in losses. It’s really difficult because the usual victim is the agriculture sector and its stakeholders.”

He said the high economic costs can be attributed to the higher frequency of natural disasters compared to years before.

“There are many empirical studies that link the frequency of weather disturbances, in particular, with the increasing temperature,” he said.

However, he cautioned that estimating losses is “quite tricky because some natural disasters are observed to be coming from man-made causes.”

“However, I maintain with my initial observation that the frequency of natural disasters has been higher lately…,” he added.

Mr. Asuncion said much of the infrastructure and property damage suggests the weather events hit “more densely populated areas.”

The biennial CPES is a compilation of environment statistics collected from various government agencies. — Leo Jaymar G. Uy and Lourdes O. Pilar

Single window system for trade passes initial tests

THE Department of Finance (DoF) said that the initial linking of the Philippines’ trade single window system with its Southeast Asian neighbors was “successful,” adding that it has obtained buy-in from nearly all agencies on joining the trade facilitation platform.

Finance Undersecretary Gil S. Beltran said however that the development and testing of the system — the Association of Southeast Asian Nations Single Window (ASW), will continue.

“Although there were some gaps in the responses between the two systems, the initial testing on the ASW connection with Indonesia was successful,” Mr. Beltran was quoted as saying in a statement e-mailed to journalists yesterday.

Mr. Beltran said the ASW’s interconnection tests will run until May with Cambodia and Brunei. 

The ASW is a regional initiative that aims to speed up cargo clearances and promote economic integration by enabling the electronic exchange of border documents within the 10-member regional bloc.

Indonesia, Malaysia, Singapore and Thailand are already using the ASW to exchange information on customs clearances.

The Philippine National Single Window (NSW) — also known as TradeNet — was launched in December by the DoF and the Department of Information and Communications Technology, which is expected to minimize the costs of doing business and cut the processing time for the issuance of import and export permits.

So far, 65 of a total of 76 agencies involved in trade processes have adopted the online platform, the DoF said.

The Finance department had initially linked 16 government agencies when the platform was launched.

Mr. Beltran said that the Bureau of Customs (BoC) is set to identify five exporters who will pilot test TradeNet this month, while a team will do a demonstration on the Integrated Importer Accreditation Module, which aims to simplify the accreditation process for importers.

The module will later link accreditation records of regulatory agencies to the Customs bureau’s records, “to form a full importer profile.”

TradeNet initially covers import and export permits for rice, sugar, used motor vehicles,  chemicals (toluene), frozen meat, medicine for humans, animals or fish and  cured tobacco.

The agencies involved in issuing permits for these products include the Bureau of Animal Industry (BAI), National Tobacco Administration (NTA), Fair Trade and Enforcement Bureau (FTEB), National Food Authority (NFA), Bureau of Plant Industry (BPI), Food and Drug Administration (FDA), National Meat Inspection Service (NMIS), the Bureau of Internal Revenue, and the BoC. — Elijah Joseph C. Tubayan

ERC turmoil to disrupt power plant financing, construction — Meralco

MANILA ELECTRIC Co. (Meralco) has warned about the cost on the distribution utility should the delay in the approval of its power supply agreements (PSAs) stretch beyond what is acceptable to its contractors.

“It will affect our timetable. It will affect the cost if the delay is protracted because the EPC (engineering, procurement, construction) contractor cannot hold on to the contract price for far too long,” Meralco Chairman Manuel V. Pangilinan told reporters.

Asked about how long Meralco can hold on to its previously agreed terms with its contractors, he said: “A few more months, I guess.”

“Beyond that then we will have to renegotiate the contract and the financing as well because both have been arranged already. I’m referring to Atimonan [One Energy, Inc.],” Mr. Pangilinan said.

Meralco needs approval from the Energy Regulatory Commission (ERC) for its power supply contracts, which its lenders need to ensure that the released funds for the construction of a power plant will bring a steady stream of revenues.

In May 2016, the distribution utility announced that it was seeking approval for seven PSAs for the purchase of 3,551 megawatts (MW), the biggest of which is from a unit of its power generation subsidiary.

The PSAs were based on its long-term load projections as it expects a continuous increase in electricity demand and number of customers, coupled with the impending expiration of contracts from 2019 to 2020.

Meralco’s application has encountered opposition and other issues, including the suspension of the four ERC commissioners and its former chairman for one year.

They were ordered suspended in December last year by the Office of the Ombudsman in connection with the revised implementation date of the competitive selection process (CSP), which it said favored a few power supply contracts.

CSP requires these contracts between power generation companies and distribution utilities to be subjected to price challengers, a process that is aimed at lowering electricity costs.

As a collegial body, the ERC needs the presence of at least three members of the commission to constitute a quorum and the majority vote of two members in a meeting is necessary.

“The main thing about Meralco is our PSAs. We can’t proceed to build one or two of our plants without the PSAs. So I would hope the government proceeds … to reconstitute the ERC,” Mr. Pangilinan said.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Victor V. Saulon

Bill capping system loss charges hurdles Senate on 3rd reading

A BILL that seeks to reduce the cap on the electricity systems losses charged by distribution utilities to consumers was approved on Monday by the Senate on third and final reading.

Sponsored by Senator Sherwin T. Gatchalian, Senate Bill No. 1623, or the proposed “Recoverable Systems Loss Act,” was approved with 16 affirmative votes, zero negative vote and no abstention.

“Aside from forcing distribution utilities to adopt more efficient practices in delivering energy to our offices and homes, this legislation provides real and immediate relief to our countrymen who are struggling to keep up with the ever rising cost of every day goods and services,” said Mr. Gatchalian, who is chairman of the Senate energy committee.

Systems loss refers to the difference between the electric energy delivered to the distribution system and the energy delivered to the end-users and other entities connected to the system.

Mr. Gatchalian said the bill would reduce the cap in systems losses of private electric distribution utilities, which consumers are made to pay for.

From 8.5%, utilities will only be allowed to pass on 5% of system losses. The cap for electric cooperatives will be lowered to 10% from 13%, he said.

He said that with the proposed rates, the bill would contribute to immediate consumer savings, noting that a systems loss rate of 10% for an electric cooperative in Mindanao, for instance, would translate to a rate reduction of P0.1636 per kilowatt-hour. The annual savings at P196.32 is equivalent to seven kilos of rice, he added.

“With 114,590 households served, this would mean an estimated total savings of around P22.50 million per year for one franchise alone,” he said.

Mr. Gatchalian said the bill provides a formula for the computation of system losses, technical losses, and non-technical losses incurred by distribution utilities.

The bill also requires utilities to submit their quarterly systems losses, including their technical and non-technical losses, to the Energy Regulatory Commission (ERC). In turn, the regulator is to review yearly the submitted data to “ensure that only allowable costs within the system loss caps are recovered.”

Mr. Gatchalian said the bill mandates the ERC to implement a performance incentive scheme to encourage system loss reduction. Failure to comply with the caps imposed in the bill will “subject both the ERC and the distribution utilities to administrative penalties.”

He said over the years, Filipinos “have had to suffer the burden of outrageously high electricity costs.”

While Republic Act. 9136 or the “Electric Power Industry Reform Act of 2001” gave the ERC the power to change the cap on the rates passed on by distribution utilities to consumers, these have not been changed for nine years, he said.

“Nine years that private distribution utilities and electric cooperatives have not been incentivized to improve their facilities and operations to reduce system losses… Nine years that consumers have been paying for a greater amount of system losses which could have resulted to savings with a lower cap,” he said.

“This measure is a crucial step toward alleviating this burden and improving the standard of living in the Philippines, and I hope you will support its passage,” he added.

The bill was co-authored by Senators Emmanuel D. Pacquiao, Joseph Victor G. Ejercito and Cynthia A. Villar. It was a consolidation of bills filed earlier by Messrs. Gatchalian, Pacquiao and Ejercito. — Victor V. Saulon

Taxpayers’ prayer on Philippine tax reforms

Dear Heavenly Father,

We praise You, we glorify You, and we thank You for the countless blessings and guidance that You continuously provide us.  In our daily prayers, you probably hear us more often in our roles as parents, as sons or daughters, or as workers.  This time, kindly allow us to come before You in our role as taxpayers.

As taxpayers, we would like to thank You for the recent changes that suggest benefits and hope to us.

Thank You that the individual income tax brackets have finally been adjusted after 20 long years of waiting. The take-home pay and consequently, the purchasing power, of many of us have been augmented. Hopefully, the increase in take-home pay coupled with the government’s promise of other forms of support would be sufficient to counter the increase in prices of commodities due to the imposition of other additional taxes.   

We are likewise grateful that the legislature issued reforms on the refund process on input value-added tax (VAT) related to zero-rated sales. From the previous 120 days of review by the Bureau of Internal Revenue (BIR), the period is now reduced to 90 days. In addition, we are glad that there is no more “deemed-dened” rule, which will now prevent the BIR from not acting on the taxpayer’s application for VAT refund. We trust that the BIR will render sound decisions within the shortened period of review. We are also happy that, the government is setting aside a portion of the government’s VAT collections to back up the VAT refund process.

Thank You that there are also indications that our tax authorities seem to recognize the sentiments of the taxpayers. These could be seen in the recent Revenue Regulations (RR) No. 06-2018 relative to the requirements for deductibility of expenses in relation to withholding taxes, and RR No. 07-2018 relative to the due process requirement in the issuance of a deficiency tax assessment.

Although there are some questions in the minds of the taxpayers on how the BIR would actually implement the above two regulations, at least, we are thankful that the government now realizes that, the rule — saying that despite paying the withholding tax deficiencies during a BIR audit, the related expenses will still be disallowed for income tax purposes — is too onerous and unfair a penalty on the part of the taxpayers. In addition, the revival of the informal conference (infocon) stage prior to the BIR’s issuance of a preliminary assessment notice (PAN) to the taxpayers appears to be promising — that way, before a PAN is issued to the taxpayer, unnecessary and baseless findings will be weeded out in the discussions.  We pray that the infocon stage will be utilized effectively and fairly, in addition to the quality audit procedures that BIR examiners carry out during their audits.

Many taxpayers are also pleased about the recent news reports saying that the legislature is continuing the discussions on the general tax amnesty and estate tax amnesty bills. These bills, if passed into laws, could encourage the taxpayers to avail of the amnesty, and to have a clean slate and start fresh moving forward. Recent publications also mention about the possible reduction, subject to certain conditions, of corporate income tax rates from 30% to 25% in the near future, which is also, generally, a welcome development.

The above positive sides of the Philippine tax reforms offer optimism to the taxpayers and could renew trust in the government.

On the other hand, Heavenly Father, there are several matters in the tax reform efforts that are considered by many as contentious. Some of these relate to issues on tax incentives, recent tax advisories, and draft regulations, among others, that many taxpayers consider to be not within the spirit of the laws intended to be implemented. We hope that You guide all the concerned stakeholders in clarifying and resolving these matters justly. Hopefully, the contentious issues would be immediately settled in order not to derail the steadfast progress that the Philippine tax reforms aim to have.

Nonetheless, we are thankful that, the government is putting significant effort into trying to improve the tax system. We pray that the succeeding developments will continue to be geared towards a new Philippine tax system that will be considered by many, if not by all, as fair and equitable.

Heavenly Father, please continue to guide our lawmakers, policy makers, and us, taxpayers, that we may fulfill all our roles harmoniously and in accordance to Your will. Amen.

Sincerely,

Your children as taxpayers

Olivier D. Aznar is a partner 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.

Peso drops on US data

THE PESO slipped on Monday as the dollar strengthened on the back of upbeat US economic data released on Friday.

The local currency ended yesterday’s session at P51.51 against the greenback, dropping six centavos from its P51.45-per-dollar finish on Friday.

The peso opened the session weaker at P51.62 versus the dollar. It plunged to as low as P51.67, while its best showing for the day stood at P51.42 against the greenback.

Dollars traded decreased to $981.1 million from the $1.12 billion recorded in the previous session.

A trader said in an e-mail on Monday said that the market was reeling from upbeat US economic data, which boosted the foreign currency.

“The peso [depreciated yesterday] following the release of stronger-than-expected US non-farm payrolls data and steady US unemployment rate last Friday,” the trader said.

The US Labor Department said on Friday that the country produced additional 200,000 jobs last month after rising 160,000 in December. Meanwhile, the average hourly earnings grew to $26.74 by 0.3% in January, boosting the year-on-year increase in the hourly earnings to 2.9%.

Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said there seems to be a general preference for the euro and yen over the greenback “because of the recent strengths” of the eurozone and the Japan.

Another trader added that the profit-taking seen intraday tempered the weakness of the peso.

For today, the first trader said the peso might move between P51.20 and P51.60, while the second trader gave a slimmer range of P51.40 to P51.70.

“The peso is expected to rebound ahead of likely upbeat Philippine inflation data for January to be released [today],” the first trader said.

Nearly all of the 14 analysts asked in a BusinessWorld poll late last week said January inflation will likely pick up from December’s 3.3% reading and the 2.7% rate seen in January last year. The poll yielded a 3.5% median headline inflation estimate. — KANV

PSEi plunges to 8,600 level on hawkish Fed fears

By Krista A. M. Montealegre,
National Correspondent

LOCAL STOCKS took a beating at the start of the week, joining a global equity sell-off on fears that the United States Federal Reserve may raise interest rates more aggressively than anticipated.

The Philippine Stock Exchange index (PSEi) plummeted 194.75 points or 2.21% to close at 8,616.

At the height of the sell-off, the bellwether index touched the 8,555.55 level — below the 2017 finish of 8,558.42 that wiped out gains of more than 5.8% for the year — before bargain hunting narrowed its losses.

The all-shares index also plunged 111.40 points or 2.15% to end at 5,070.42.

“Here at home, we were not spared by the onslaught of selling as the healthy employment data implied the rate hikes expected this year may reach four,” Luis A. Limlingan, business development head at Regina Capital Development Corp., said via text.

Asian markets were engulfed in a sea of red on Monday, while US futures added to the huge losses booked last week by falling more than 250 points.

The retreat came after data from the US Labor department showed the economy created a better-than-expected 200,000 jobs in January, fueling bets that inflation will trek higher this year and the Federal Reserve may accelerate increasing borrowing costs to curb the rise.

The ongoing global correction is a turnaround from the blazing start to the year for equities, with the PSEi hitting an all-time high of 9,058.62 on optimism on the impact of the government’s tax reform program.

“We are trading at a very high level already so this is just natural profit taking. Maybe when prices have stabilized, we can retest the highs,” Miko A. Sayo, trader at AP Securities, said in an interview.

All counters finished in negative territory, led by property, which shed 125.21 points or 3.13% to 3,868.68. Industrials declined 319.59 points or 2.68% to 11,572; mining and oil dropped 316.96 points or 2.62% to 11,766.09; holding firms tumbled 220.49 points or 2.44% to 8,787.27; services lost 20.84 points or 1.21% to 1,697.27; and financials slid 19.47 points or 0.87% to 2,204.08.

Value turnover reached P8.51 billion after 1.17 billion shares changed hands, from P7.85 billion in the prior session.

Decliners dominated advancers, 170 to 33, while 38 issues were unchanged.

Foreigners remained in selling territory for the seventh straight session, with net outflows accelerating to P1.95 billion from P978.26 million on Friday.

Momentum indicators show that the correction may push through this week, Regina Capital said, while suggesting that a rebound could arise as technical indicators plunge within oversold ranges.

“The markets are still falling from its peak. We broke the minor support at 8,700 and we are reaching oversold levels so I think we can bounce back in the middle of the week,” AP Securities’ Mr. Sayo said.

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