BIR reminds LGUs to pay taxes for commercial activities

May 17, 2018 | 9:53 pm

THE BUREAU of Internal Revenue (BIR) warned local government units (LGUs) conducting commercial activities to pay the corresponding taxes after taking notice on the municipality of Oslob’s unpaid levies. “There are many local government units that undertake proprietary activities to create additional sources of revenue. Revenues derived by LGUs from such activities are taxable because these are not undertaken by LGUs in the performance of their governmental functions,” Eduardo L. Pagulayan, Jr., OIC-regional director of the Cebu City Revenue Region said in a statement yesterday. A BIR ruling dated March 13, 2018 held the Oslob LGU liable for income tax, value-added tax (VAT), expanded withholding tax, deficiency withholding tax on VAT and other percentage taxes, withholding tax on compensation, and registration fees for its whale shark-watching activities for the taxable year 2012. Under the tax code, LGUs with a propriety function shall pay such rate of tax upon their taxable income as are imposed upon corporations engaged in similar activities. — Elijah Joseph C. Tubayan

10 more Go Negosyo centers lined up in Davao Region

May 17, 2018 | 9:52 pm

THE DEPARTMENT of Trade and Industry-Davao Region office (DTI-11) is planning to set up 10 more Go Negosyo Centers over the next two years in addition to the existing 40. Romeo L. Castañaga, DTI-Davao del Norte provincial director, said the centers have proven to be effective in mainstreaming micro, small and medium enterprises (MSMEs). Speaking at a weekly forum last Wednesday, Mr. Castañaga cited a group of women in Carmen town, who were among those assisted under the Go Negosyo program and became one of the region’s representatives at the Manila Fame international trade show last month. During the trade show, the group was able to sell its products such as wall decors to three hotels. “Now, they are enhancing their products,” so they can expand their markets,” Mr. Castañaga added. The DTI official said the Go Negosyo centers in the province, in partnership with the local governments that provide personnel who are trained to serve as business counselors, have helped MSMEs with basic requirements such as registering their enterprises so they can avail of training and other assistance programs. — Carmelito Q. Francisco

Price increase expected in paper-based school supplies — DTI-Davao

May 17, 2018 | 9:51 pm

NOTEBOOKS AND other paper-based products are expected to increase as consumers begin buying supplies for the school opening in June. “We are expecting the release of SRPs (suggested retail prices) for the school supplies this week, but before its release there are words already that there will be increases in the prices of notebooks and other paper-based products,” Rachel S. Remitio, Department of Trade and Industry-Davao (DTI-11) chief for small and medium enterprises development services, told the media. She gave a price hike estimate of around 10% from previous prices due to higher cost of raw materials, and increase in power rates and fuel. Ms. Remitio explained that SRPs are set by the government in consultation with manufacturers, retailers and other stakeholders. The SRPs are contained in the Gabay sa Pamimili ng School Supplies released by the DTI (www.dti.gov.ph/media/advisories/11985-gabay-school-supplies-srp). Ms. Remitio said they will be visiting retailer shops around the region to monitor compliance to the SRPs. — Maya M. Padillo

Nation at a Glance — (05/18/18)

May 17, 2018 | 9:50 pm

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Moody’s: Electronics seen vulnerable to trade war

May 17, 2018 | 9:50 pm

ESCALATING trade tensions between China and the United States will hurt Asian exporters of electronic products to China the most, according to Moody’s Investors Service, which estimates the Philippines to be among the most dependent in the region on such exports.
In a May report, “Evolving trade patterns — Asia: Exports still drive growth, as intra-regional links increasingly define how Asia trades,” the credit rating agency said it found that Asia “continues to rely on merchandise exports to generate economic growth.”
Manufacturing economies and the region’s two trans-shipment hubs, Singapore and Hong Kong, rely on exports the most, according to Moody’s, noting that a quarter of Asian countries’ outbound shipments make up more than half of their GDP.
With this reliance on exports, China’s imports from Asian sources are viewed as critical, with China serving as a final assembly for electronic components, according to Moody’s, which noted that the trend is likely to continue.
“China is more and more at the center of Asia’s trade activity, in part shaping the region’s supply chains and increasingly a source of demand for final goods from Asia, especially for consumption goods,” said Joy Rankothge, a Moody’s vice-president and senior analyst, in a May 15 statement.
As such, an escalation in the dispute between the US and China will leave Asia’s electronics sector the “most exposed.”
“Accordingly, the region is vulnerable to a further escalation in tensions between the US and China over trade and technology transfers. Additional US restrictions on Chinese exports, investment and purchases of technology supplies would have an impact on the rest of Asia through supply chains,” added Mr. Rankothge.
The report noted that electronic parts accounted for 41.1% of the Philippines’ exports to China in 2016.
The country trailed Hong Kong, Taiwan, South Korea, Singapore and Malaysia whose outbound shipments of electronic parts to China respectively were at 63.4%, 55.3%, 46.5%, 45.4% and 44.7% of the total that year.
This makes Taiwan, Malaysia, and South Korea as the “most exposed given their economies’ reliance on exports of these products and components to China.”
Meanwhile, major trade hubs like Hong Kong and Singapore “will likely be impacted too.”
Sought for comment, Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said he is “not panicking over the purported trade war.”
“The specifics of the US-China trade war are not very clear for Philippine exports to China. My sense is some reasonable agreement will be reached,” Mr. Lachica said in a text message.
He added that statements over a possible disruption in Asian trade “will be tempered by wiser economic advisers to avoid supply chain disruptions, loss of jobs, expensive commodities and other negative effects.” — Janina C. Lim

Swiss challenge period for Marawi rehabilitation proposals starts May 26

May 17, 2018 | 9:49 pm

THE SWISS CHALLENGE period for proposals to rehabilitate Marawi City is set to start next week, which will be the next step in determining which party will undertake the project, according to Task Force Bangon Marawi.
“There is a Swiss challenge. And the Swiss challenge will run for only three weeks. So starting May 26, we will know of any challenges,” Housing and Urban Development Coordinating Council Chair Eduardo del Rosario told reporters on Tuesday. Mr. Del Rosario, who also chairs Task Force Bangon Marawi, added that the process of identifying the proponents will allow the task force’s work to move forward.
The unsolicited proposal for the rehabilitation program was submitted by a consortium of five Chinese and four domestic firms.
A Swiss challenge allows the government to solicit counter-proposals from competing firms, which the original proponent has the right to match.
After the Swiss challenge, Mr. Del Rosario said that the rehabilitation activities will begin on June 16 at the earliest.
“We expect to be done by December 2021. What they will do is work day and night.”
The Japanese government on Tuesday signed with the Philippine government a 2-billion yen (about P970 million) grant agreement for the rehabilitation and reconstruction of Marawi City.
Mr. Del Rosario said that the total rehabilitation program is expected to cost about P77 billion over a period of four years. Some P55 billion is for the repair of affected areas outside the main battleground, while P22 billion will go to the rehabilitation of ground zero.
He said once the government awards original proponent status, final costs will be available, because the proponents have yet to reach a consortium agreement and negotiate the division of labor and finalize costs for each project.
“Right now the costs are all estimates only,” Mr. Del Rosario said.
For this year, the Budget department has so far released about P10 billion towards Marawi rehabilitation projects.
Other funding sources for succeeding years are retail Treasury bonds, also known as Marawi bonds, and a possible “pledging session” for foreign donors. — Elijah Joseph C. Tubayan

Davao City to review investment code, hoping to offer new incentives

May 17, 2018 | 9:48 pm

By Carmencita A. Carillo
Correspondent
DAVAO CITY — The city government is looking at expanding the incentives on offer to new areas of investment after the completion of a six-month review of the Davao City Investment Incentive Code (IIC).
The review of the IIC, which was last updated five years ago, was contracted to Isla Lipana & Co. Inc., the Philippine member firm of the Pricewaterhouse-Coopers (PwC) global network.
“We plan to start the review by identifying the areas that will need support and to offer incentives to these areas,” said Isla Lipana Chair and Senior Partner Alexander B. Cabrera, who signed the agreement with Mayor Sara Duterte-Carpio last May 16.
The review is intended to “determine whether sufficient investments in an area or activity have been attained; to determine whether continued extension of incentives or support measures for the specific investment area is no longer to the interest of the city (and) to identify types of projects that are suitable for possible incentive availment,” according to the agreement between the city and the company.
Mr. Cabrera said the study will also include recommendations on how to make the Davao City Investment and Promotion Center (DCIPC) “more relevant, simple and enticing.”
DCIPC Chief Lemuel G. Ortonio said, “The review will cover the updating of the preferred investment areas for Davao City. It will also include updating the investment incentives that will be offered to potential investors.”
The current preferred investment areas in the city are agribusiness, tourism and recreational facilities, property development, light manufacturing and assembly, information and communications technology, generation of new sources of energy, health and wellness, environmental protection, transportation and infrastructure, and public-private partnerships.
Investors in these preferred areas are granted a three-year business tax holiday and two-year real property tax holiday. Investments in the developing or remote districts of Calinan, Baguio, Marilog, and Paquibato get a five-year tax holiday.
Mr. Ortonio said one of the new sectors that could be given incentives is halal products and tourism services.
The overall tourism industry will also be evaluated for growth towards maximizing Davao City’s strength as a tri-people and multi-cultural area.
Mr. Cabrera, meanwhile, said Isla Lipana will also look into sectors involved in the development of the agriculture ecosystem, including agriculture technology and cold chain facilities.

Bureau of Customs releases rules for electronic filing of cargo manifests

May 17, 2018 | 9:48 pm

THE BUREAU of Customs (BoC) has released the implementing rules and regulations governing the electronic filing of shipping data, expediting the release of “legitimate cargoes” as called for by the Customs Modernization and Tariff Act (CMTA).
Customs Commissioner Isidro S. Lapeña signed on May 7 Customs Memorandum Order (CMO) 6-2018 requiring the electronic submission of the carriers’ advance manifest, bill of lading, commercial invoice, packing list, stowage plan, container discharging list, load port survey report, and supplemental cargo manifest to the Bureau’s Advanced Manifest System.
It also contains a “detailed list” of cargo on board the vessel or aircraft including information on the goods such as transport document numbers, consignors, consignees, marks and numbers, number and kind of packages, weight, description, quantity of the goods, and the destination.
Advanced manifests help the BoC “track and trace the movement of cargoes from the port of origin and evaluate the nature and degree of risk of incoming shipments” faster due to the shift to an electronic platform.
“The new guidelines on cargo manifest will allow a qualified importer to process in advance the goods declaration prior to the arrival of the shipment and pre-assess the customs duties, taxes, and other charges as well as other needed documentary requirements,” Mr. Lapeña said in a statement.
“More so, the cargo information will be used to profile the risk of cargoes while increasing the efficiency of the clearance process of low-risk shipments. Thus, the release of legitimated cargoes will be expedited,” he added.
Vessels must submit the manifest and other related data to the BoC within 24 hours before arrival at the port of transit for vessels with a transit time of at least 72 hours, and 12 hours for those with transit times less than that.
For aircraft, the manifest must be filed one hour before the arrival of the aircraft departing from an Asian airport, and four hours prior for those originating outside Asia.
The Customs bureau is currently implementing the CMTA, by which it hopes to facilitate trade, cut red tape and corruption, and improve the delivery of BoC-related services in line with international best practices.
The law, or Republic Act 10863, was signed on May 30, 2016 by President Benigno S.C. Aquino III.
According to the BoC website, eight CMTA implementing rules and regulations have been issued. — Elijah Joseph C. Tubayan

Gatchalian says PHL lacks legal framework for nuclear power

May 17, 2018 | 9:47 pm

THE PHILIPPINES lacks the legal framework for the inclusion of nuclear power into its energy mix, a senator said on Thursday, adding that comprehensive legislation governing use of the technology must first be passed.
“There is a wide range of issues that we need to explore and thresh out before we can accurately measure the true potential of nuclear technology as an alternative energy source in the Philippines,” said Senator Sherwin T. Gatchalian in a statement.
The senator, who also heads the Senate’s energy committee, said the country has a lot to learn from advanced countries on the development of nuclear technology.
Mr. Gatchalian participated earlier this month in a study tour covering the current nuclear technologies of certain European countries.
He said should the country decide to add nuclear power to the energy mix, a comprehensive legal framework would first need to be drafted to settle a number of issues, like the structure and powers of the regulatory body; licensing, inspection, and enforcement; and radiation protection.
He added the legal framework should also tackle issues like sources of radiation and radioactive material; safety of nuclear facilities; emergency preparedness and response; transport of radioactive material; radioactive waste and spent fuel; nuclear liability and coverage; nonproliferation and physical protection; export and import controls; and physical protection.
“All of the gaps in our nuclear energy legal framework would first need to be addressed by passing comprehensive legislation,” Mr. Gatchalian said.
The country’s only existing nuclear energy body is the Philippine Nuclear Research Institute under the Department of Science and Technology. Its functions center on radiation and nuclear research and development.
Mr. Gatchalian said the Philippines has yet to ratify “three key international nuclear conventions.” He identified these as the Convention on Nuclear Safety, the Joint Convention on the Safety of Spent Fuel Management and the Safety of Radioactive Waste Management, and the amendment to the Convention on Physical Protection of Nuclear Material.
“A strong national framework on nuclear power must be compliant with international standards on safety, security, safeguards, and liability,” he said. — Victor V. Saulon

LANDBANK to simplify loan offer to farmers

May 17, 2018 | 9:47 pm

THE Land Bank of the Philippines (LandBank) said it will simplify its application processes to allow farmers better access to its products.
LandBank President and Chief Executive Officer Alex V. Buenaventura on Thursday said that the bank will also be approaching farmers directly instead of relying on them to visit bank branches.
“This program of ours is new. We have simplified things — very simple, you only need one application form [to apply for the loan],” he added.
Direct marketing approaches will rely on a bank master list of eligible small farmers, fisherfolk and cooperatives.
The master list will be drafted by regional offices of the Department of Agrarian Reform and the Department of Agriculture.
LandBank will also introduce an inclusive financing program for farm cooperatives, targeted at cooperatives that enter into a farm management and marketing agreement with a major agricultural corporation.
This program will also cater to cooperatives with bad credit records because it will be the agricultural corporation listed as the borrower.
“Nationwide, we wrote off P1.7 billion [worth of loans] in the last 10 years. To make a long story short, 95% of them (cooperatives) weren’t able to pay us back and we just wrote it off,” Mr. Buenaventura said.
“We’ll come back for those 95% to help them through other means.”
The bank hopes that such partnerships will produce “global standards” of productivity, buy up the output of the small farmer cooperative and increase farm incomes above the poverty threshold.
The bank hopes to make the loan attractive to the corporate partner by lowering its equity requirement to 10% of the validated cost.
Mr. Buenaventura expects the process of rehabilitating the credit of agricultural cooperatives to be “bloody.”
LandBank will be tapping funding from Small Farmers Corporative Bonds, which will be auctioned to other banks in compliance with the Agri-Agra Reform Credit Act of 2009.
The Agri Agra Law requires banks to lend at least 25% of their portfolios to agricultural and fisheries ventures and at least 10% to agrarian reform beneficiaries.
Banks consider agricultural loans to be “high risk,” and such bonds could be viewed as an easy way to comply with the law. — Anna Gabriela A. Mogato

First phase of e-jeepney rollout set for June

May 17, 2018 | 9:46 pm

THE GOVERNMENT is set to roll out in June the first batch of electric jeepneys, Malacañang said on Thursday.
“We are pleased to announce that as part of the Department of Transportations’ (DoTr) Public Utility Vehicle Modernization Program (PUVMP), the first batch of modern electric jeepneys will be rolled out in June,” Presidential Spokesperson Harry L. Roque, Jr. told reporters in a briefing at the Palace.
Mr. Roque also said that according to the Land Transportation Franchising and Regulatory Board (LTFRB), the new E-jeep units “will pass through some parts of Metro Manila including the routes from Quezon City Hall, along Elliptical Road, Diliman to Manila City Hall, Cultural Center of the Philippines, Philippine International Convention Center in Pasay to Southwest Intermodal Transport exchange in Parañaque City, Fort Bonifacio Gate 3 in Taguig City to Guadalupe Market in Makati and Bagumbayan in Taguig to Pasig City.”
The PUVMP, the LTFRB said, is a comprehensive system reform that hopes to overhaul the public land transportation industry.
“It features a regulatory reform and sets new guidelines for the issuance of franchise for road-based public transport services. It devolved the function of route planning to the local government units as they are more versed in the terrain and passenger demand within their respective territorial jurisdiction,” the agency said in a press release.
“The LGUs are required under the program to submit their own Local Public Transport Plan (LPTRP) as a prerequisite for the opening of PUV franchises within their jurisdiction. Route rationalization studies are also conducted to determine the appropriate mode, quantity and service characteristics of the public transport service in each corridor which will make the routes more responsive to passenger demand and ensure that the hierarchy of roads and modes of transportation are followed,” it added.
The DoTr said in February that transport groups have committed to come out with more than 3,000 modern jeepneys before June “in support of the Duterte administration’s PUVMP.”
The commitment among transport groups and vehicle manufacturing companies was sealed in memoranda of agreement (MoA).
During the MoA signing, according to the DoTr, “a private transport supplier committed to deliver 20,000 new PUVs per year while another supplier pledged to help operators in the processing of the financing requirements and rollout the modern units.”
“Transports groups such as Federation of Jeepney Operators and Drivers Association of the Philippines (Fejodap) and Alliance of Transport Operators and Drivers’ Association of the Philippines (Altodap) signed a MoA with Eco Dyip, Inc. for fleet management and replacement of units. MCCI Connection Transport Services Corp. also signed a MoA with 17 transport organizations for fleet consolidation and supply of new PUV units,” the DoTr said in a statement. — Arjay L. Balinbin

Good Times, Uncertain Times: A Time to Prepare

May 17, 2018 | 9:43 pm

By Yongzheng Yang
AS WE note in our recently released Regional Economic Outlook (REO), the Asia-Pacific region remains the main engine of the global economy, and near-term prospects have improved since our last report, in October 2017.

But there are many risks on the horizon, including a tightening of global financial conditions, a shift toward protectionist policies, and an increase in geopolitical tensions.
In addition, over the longer run, Asian economies will face major challenges from population aging and slowing productivity growth, as well as the rise of the digital economy, which could yield huge benefits but also bring major disruptions.
Given the many uncertainties, macroeconomic policies should be conservative and aimed at building buffers and increasing resilience, while taking advantage of strong economic conditions to implement structural reforms to promote sustainable and inclusive growth.
Regional growth is expected to remain strong at 5.6% in 2018 and 2019 — up by about 0.1% points from our previous forecast — supported by strong global demand and favorable financial conditions. As in other regions, inflation in Asia has largely remained subdued despite the pickup in growth.
We project that inflation will remain at 1.4% on average in advanced economies and 3.3% on average in emerging markets. Among the larger economies, China’s growth for 2018 is projected to ease to 6.6% from 6.9% in 2017, as financial, housing, and fiscal tightening measures take effect.
Growth in Japan has been above potential for eight consecutive quarters and is expected to remain strong this year at 1.2%.
And in India, after temporary disruptions caused by the currency exchange initiative and the rollout of the new Good and Services Tax, growth is expected to recover to 7.4%, making it once again the region’s fastest growing economy.
The Philippines is expected to remain one of Asia’s strongest performers, with growth projected at 6.7% in 2018 and 6.8% in 2019, driven by robust domestic demand and infrastructure investment from the “Build, Build, Build” initiative. Inflation is projected to be contained, reflecting an appropriate tightening in monetary policy in response to recent increases in inflation.
Risks to near-term growth in the region are balanced, but downside risks prevail over the medium term. On the upside, the global recovery could again prove stronger than expected.
The new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreement and successful implementation of China’s Belt and Road Initiative — assuming debt sustainability and project quality are maintained — could support trade, investment, and growth. Asia, however, remains vulnerable to a sudden and sharp tightening in global financial conditions, while extended periods of easy financial conditions could risk a buildup of leverage and financial vulnerabilities. More inward-looking policies in major global economies, as highlighted by recent tariff actions and announcements, could disrupt international trade and financial markets and have a substantial impact on Asia, which has benefited so much from economic integration. Finally, geopolitical tensions could have serious financial and economic repercussions.
Over the longer run, growth prospects for Asia will be heavily affected by demographics, slowing productivity growth, and the rise of the digital economy.
Population aging is an important challenge, as many economies face the risk of “growing old before they grow rich,” and the adverse effect of aging on growth and fiscal positions could be substantial.
A second challenge is slowing productivity growth.
Finally, the global economy is becoming increasingly digitalized, and while some recent advances could be truly transformative, they also bring challenges, including those related to the future of work. Asia is embracing the digital revolution, albeit with significant heterogeneity across the region.
The current strong economic outlook provides a valuable opportunity to focus macroeconomic policies on building buffers, increasing resilience, and ensuring sustainability.
In many countries in the region, continued fiscal support is less urgent given strong economic performance, and policy makers should focus on ensuring that debt remains under control. Some countries should also focus on revenue mobilization to create space for infrastructure and social spending and to support structural reforms.
As for monetary policy, the policy stance can remain accommodative in much of the region given that inflation is generally still muted. Nonetheless, central banks should be vigilant; our analysis suggests that much of the undershooting of inflation targets in Asia has been explained by temporary, global factors, such as commodity prices and imported inflation, which could reverse.
Finally, tailored measures are needed to boost productivity and investment; narrow gender gaps in labor force participation; deal with the demographic transition; address climate change; and support those affected by shifts in technology and trade.
And to reap the full benefits of the digital revolution, Asia will need a comprehensive and integrated policy strategy covering information and communications technology, infrastructure, trade, labor markets, and education.
In the Philippines, policies are appropriately geared toward long-term stability and inclusion. Ongoing tax reforms will be crucial to generate the necessary revenues for infrastructure and social spending, such as on health and education. Monetary policy should remain focused on anchoring inflation expectations and protecting the BSP’s credibility through its policy rate decisions.
Furthermore, these policies could be supported by other complementary reforms.
Replacing the current rice import quota system with a tariff-based system would help reduce inflation pressures and support the poor by stabilizing the rice price. The revision of the Bangko Sentral ng Pilipinas (BSP) charter would give the central bank the necessary tools and mandate to maintain price and financial stability. Digital solutions in the public sector, including for the national retail payment system and tax administration, could also bring significant efficiency benefits to the broader economy and help promote financial inclusion.

Yongzheng Yang is the resident Philippine representative of the International Monetary Fund.