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Cavs imploding

Despite Isaiah Thomas’ emphatic — and, to be sure, reasoned — denial that the Cavaliers are imploding, only the most partisan observers would dare conclude that things haven’t taken a turn for the worse. When a team meeting in which fingers are pointed becomes necessary and is then followed by an unconvincing victory, fissures can’t be dismissed as part and parcel of any franchise’s long and arduous trek to success. Theirs are deep-rooted and systemic, and not even their prodigious talent base starring an All-World figure looks to be enough to stem their swoon.

Granted, the Cavaliers aren’t new to drama; every year since LeBron James returned to the fold in 2014, they have had to weather highly publicized storms. They then seem to gather themselves and subscribe to a collective cause once they see themselves at a crossroads. And so they have wound up not so much as overcoming their dysfunction as riding them en route to three Finals stints and one championship (and, of course, in record-setting, come-from-behind fashion).

This time, though, the travails don’t just feel different. They are different, complicated in no small measure by a significant roster turnover that has rocked both their identity and their culture. And so their quest to do battle for the Larry O’Brien Trophy yet again has hit hurdles so high that not even James’ best season since the turn of the decade appears enough to overcome. The All-Star break is just around the corner, and yet they’re still adjusting to each other, still struggling to buy in, still, well, detached.

If there is any optimism, it’s grounded on three inherent truths: 1) James is James, and his capacity to lead — as proven by his personal streak of seven consecutive Finals stints — trumps adversity; 2) the Cavaliers are stacked, and, at the very least on paper, built to provide a variety of productive lineups in the pace-and-space era; and 3) there remains time to correct flaws in what looks to be a solid foundation.

Unfortunately, nothing the Cavaliers have done of late gives cause for hope. They’re splintered on and off the court. Under the klieg lights, their offense — once a reliable crutch, if nothing else — has skirted with mediocrity and is no longer able to hide their glaring lack of effort on the other end of the floor. In private, they’ve resorted to backbiting and pettiness, going so far as to sell otherwise-innocuous moments as slights to an inviting media, and anonymously to boot.

German philosopher Friedrich Nietzsche once said, “That which does not kill us makes us stronger.” Which should be good news for the Cavaliers, because whatever “that” is hasn’t snuffed the life out of them yet. And as defensive as Thomas may have been yesterday, even he subscribed to the notion that the best version of themselves lies ahead. “I know in this circle and this team, everybody believes in each other, and everybody’s in here for it to work and for us to be playing in June. That’s the ultimate goal.” Depending on perspective, he’s either right or simply blowing hot air.

 

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is the Senior Vice-President and General Manager of Basic Energy Corp.

Yields on gov’t debt mixed as Draghi turns hawkish

By Mark T. Amoguis, Researcher

YIELDS on government securities (GS) ended mixed last week amid hawkish sentiments from the European Central Bank after its first policy meeting this year.

Bond yields, which move opposite to prices, went up by an average of 11.04 basis points (bps) week-on-week, data from the Philippine Dealing & Exchange Corp. as of Jan. 26 showed.

“As expected, yields increased [last] week primarily because of some hawkish hints from the European Central Bank (ECB) during its January policy meeting,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank).

“ECB President [Mario] Draghi underscored the steady expansion of the currency bloc and projected inflation to rise in the medium term. His remarks fuelled views of more tightening moves from the ECB later this year,” he explained.

Late last week, ECB kept its policy rates on hold. It also said it will continue its €30-billion asset buying per month at least until the end of September.

Although Mr. Draghi made it clear that he does not expect to change policy rates in 2018, he said that there may be “very few chances” at all that interest rates could be raised this year.

Mr. Dumalagan added that the rise in yields was capped by political noise on the US government shutdown.

The US federal government shut down at midnight of Jan. 19 after failing to pass a funding bill. But US Senators last Monday reached a deal to keep the government funded until Feb. 8.

Meanwhile, a trader said the partial award of three-year Treasury bonds auctioned last week helped buoy sentiment.

Last Tuesday, the Bureau of the Treasury raised P14.891 billion out of the planned P20 billion borrowing after it partially awarded fresh three-year bonds for a coupon rate of 4.25%.

National Treasurer Rosalia V. De Leon said the auction committee decided for a partial award to temper the rates of the debt papers.

At the secondary market on Friday, double-digit gains were recorded for the yields on the 91-day, 20-year, two-year, and 364-day debt papers as they increased week on week by 66.90 bps, 38.22 bps, 28.42 bps, and 24.56 bps, respectively, to fetch 2.8767%, 6.3536%, 4.1857%, and 3.0439%.

Trailing behind were the yields on 10-year, 182-day, and three-year notes, which increased by 9.71 bps, 0.79 bp, and 0.61 bp, respectively, to close at 6.0421%, 2.9039%, and 4.1575%.

On the other hand, the rate of the four-year Treasury bond (T-bond) dropped the most, losing 47.97 bps to yield 4.4557%. It was followed by the yields on the seven- and five-year T-bonds, which declined by 5.71 bps and 5.09 bps, respectively, to close at 5.4236% and 4.6850%.

For this week, Landbank’s Mr. Dumalagan said, “yields are expected to still move with an upward bias, supported by likely hawkish signals from the US Federal Reserve and potentially firm US data on PCE (personal consumption expenditures) inflation and employment.”

The US PCE price index for December will be reported on Jan. 29, while the employment data is scheduled to be released on Feb. 2.

“Moreover, yields might also increase, as likely firm growth data from the euro area may continue to fuel views of more tightening moves from the ECB later this year,” he added.

Paris braces for floods as swollen Seine inches higher; Louvre wing closes

PARIS — Paris was on alert Saturday as the swollen Seine crept higher, with forecasters expecting the flooding to peak before the weekend is out.

The river had risen 11cm in 24 hours by Saturday evening, more than four meters above its normal height, causing headaches for commuters as well as people living near its overflowing banks.

Tourists suffered too with the capital’s famous Bateaux Mouches rivercraft out of service, and only emergency services authorized to navigate the Seine.

The Vigicrues flooding agency believe the river will continue to rise, peaking at 5.95 meters on Sunday night or Monday, but not quite reaching the 2016 high of 6.1 meters, when the Louvre museum was forced to close its doors for four days.

But the world’s most visited museum was on high alert on Saturday, along with the Musee d’Orsay and Orangerie galleries, with the lower level of the Louvre’s Islamic arts wing closed to visitors.

Leaks started to appear in some basements in Paris on Friday, while some residents on the city’s outskirts were forced to travel by boat through waterlogged streets.

A health center in Paris’s northwestern suburbs, where 86 patients were receiving care, was also evacuated on Friday.

In total around 1,000 people have been evacuated from their homes in the greater Paris region, according to police, while around 1,500 homes were without electricity.

“Due to the spread of flooding to different tributaries, the level of the Seine in Paris will continue rising again on the weekend,” said Vigicrues, adding that highest level would last for about 10 hours before slowly going down.

The extent of the rising water levels was evident from the Seine lapping half way up the Zouave statue of a Crimean soldier on the Pont de l’Alma bridge.

DUCKS INSTEAD OF CARS
It was enough to worry Joao de Macedo, janitor at a residential building in Paris’s upscale 16th Arrondissement.

“There are six studios in the basement, and we’ve had to set up blocks outside to keep the windows from breaking and covering everything in water,” he said.

Inside the studios, tables and dressers have been lifted off the floor as water seeps through the walls.

Outside, where the river was nearly lapping the tyres of parked vehicles, a young woman said it was “great to see ducks instead of cars.”

The December-January period is now the third-wettest on record since data collection began in 1900, according to France’s meteorological service.

However, fears of flooding like that of 1910, which saw the Seine rise to 8.62 meters, shutting down much of Paris’ basic infrastructure, appeared unfounded.

More favorable weather is expected for the week ahead, and Vigicrues has lowered its warning level from orange to yellow in several areas upstream of the capital.

But even once the water levels start to recede, forecasters and officials say it will be a slow process, since much of the ground in northern France is already waterlogged.

“If we’re talking about things going completely back to normal, that’s going to take weeks,” said Jerome Goellner, regional head of environmental services.

A main commuter line, the RER C, has halted service at Paris stops through Wednesday, and some expressways that run alongside the Seine have been closed.

In Paris the Seine flows through a deep channel, limiting the potential flooding damage to riverside structures.

But several areas on the city’s outskirts are under water, such as the southern suburb of Villeneuve-Saint-Georges, where some residents were getting around by boat and dozens have been evacuated from their homes. — AFP

VP Robredo welcomes consultative group on charter change

 

VICE-PRESIDENT Maria Leonor G. Robredo, whose position could be dissolved with a shift to a federal form of government, has welcomed the consultative commission created by President Rodrigo R. Duterte to review the 1987 Constitution. “Very welcome na development ito,” Ms. Robredo said during her weekly radio program BISErbisyong Leni, adding that the formation of the group eases concerns and the impression that the proposed charter change is being rushed by the administration. Ms. Robredo also said that open and public discussions, such as the Senate hearing last Jan. 18, would help form the people’s decision when the proposal is put to a referendum. The consultative committee, created on Jan. 25, is headed by former chief justice Reynato S. Puno and is composed of 18 members who are justices, lawyers, and political science experts. — Minde Nyl R. dela Cruz

Fitch upgrades Landbank, DBP credit ratings anew

FITCH RATINGS upgraded state-owned Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) to a notch above the minimum investment grade after reassessing the government’s capability to support the lenders.

The long-term issuer default ratings (IDRs) of Landbank and DBP were upgraded by a notch to “BBB” from the minimum investment grade of “BBB-” given last month, with a “stable” outlook.

In a statement last Friday, Fitch said the IDR upgrades of Landbank and DBP stemmed from its “reassessment of the government’s propensity to support the banks,” which led to the upgrade of the banks’ support rating floors (SRFs) as well.

IDRs are being issued by Fitch to economies and financial institutions such as banks and insurers to assess the capability of the entity to pay its financial obligations.

Fitch said in its statement that the lender’ roles appear to have been expanded and were made clearer after the pronouncements of President Rodrigo R. Duterte’s administration.

“This raises our expectations for the state to provide support to the banks in times of need to enable them to carry out their objectives in support of government policy,” Fitch said.

Two weeks ago, Overseas Filipino Bank (OFB) was launched after Landbank absorbed the state-owned Philippine Postal Savings Bank in late 2016, and was ordered to be converted into OFB.

The government has also previously proposed to make DBP the country’s infrastructure bank.

“Both declarations are in line with the administration’s policy agenda, which includes improving the nation’s infrastructure base and better catering to the needs of overseas Filipinos,” Fitch said.

Meanwhile, Fitch said negative rating actions could arise should the government reduce its ownership in the banks or its mandated roles diminish — something Fitch sees as “unlikely in the near term.” — KANV

Nation at a glance — (01/29/18)

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

How much have wages increased for salary workers?

Are employee pension plan payouts taxable?

For most employees, pension plans are their post-retirement safety nets, helping ensure that they have enough resources to live comfortably in their golden years. While plans can have different policies and provisions, one common question that arises in taxpayers’ minds is whether their “nest eggs” are subject to income tax?

The proverbial but technical answer is — IT DEPENDS. The taxability of the payouts from employee pension plans depends on a number of factors, including the nature of the payout.

In general, benefits are taxable.

Section 60 (B) of the Philippine Tax Code, as clarified by Revenue Memorandum Circular (RMC) No. 39-14, provides that the entire amount of benefits paid by a pension, stock bonus or profit-sharing plan of any employer for the benefit of employees, is taxable on the part of the employees in the year so distributed.

The same RMC explained that for non-contributory pension plans, the dividends distributed by the pension fund to the covered employees are subject to income tax in the year so distributed. If the employee covered by the pension fund resigned and received benefits from the fund that do not qualify as tax-exempt separation or retirement benefits, the entire amount of benefits received is subject to income tax in the year so distributed.

For contributory pension plans, where the employee also contributes to the plan, the RMC states that dividends distributed to the covered employees do not constitute a return of the employees’ voluntary contributions; hence, they are subject to income tax in the year so distributed.

Return of employee’s personal contributions and retirement benefits may be tax-exempt.

Under RMC No. 39-14, it was made clear that payouts representing a return of an employee’s personal contributions to the fund are not taxable. Retirement benefits may also qualify as exempt from income tax when the conditions under the Tax Code are satisfied.

AN ILLUSTRATION
If an employee contributed a total of P60,000 to the pension fund and upon his resignation received benefits from the fund in the amount of P300,000 that do not qualify as tax-exempt separation or retirement benefits, the P60,000 constitutes a return of his contribution to the fund and is exempt from income tax. However, the P240,000 that the employee received in excess of his contribution (P300,000 less P60,000) is subject to income tax in the year so distributed.

Any income or earnings from investments of the pension fund, such as dividends, are taxable to the employee-member in the year so distributed if the distribution is effected before his retirement from the company. On the other hand, upon the retirement of the employee and in accordance with Section 32 (B) (6) of the Tax Code, the total benefits which the employee shall receive consisting of his personal contributions, the employer’s counterpart contributions and the income of the fund to which the employee is entitled and is distributed to him shall be exempt from income tax. [BIR Ruling DA-(TSF-016) No. 542-08 and BIR Ruling DA No. 377-04]

REQUIREMENTS FOR EXEMPTION
Section 32 (B) (6) of the Tax Code outlines the following requirements for retirement benefits received by officials or employees of private companies to be tax-exempt:

1. The benefits received must be in accordance with a reasonable private benefit plan maintained by the employer;

2. The retiring official or employee must have been in the service of the same employer for at least 10 years and the employee should be at least 50 years old at the time of his retirement; and

3. Such tax exemption privilege on retirement benefits must be availed of by an official or employee only once.

Revenue Regulations (RR) No. 1-68, the Private Retirement Plan Regulations, as amended by RR No. 1-83, specifically requires that before availing of the privileges afforded by pension, gratuity, profit sharing, or stock bonus plans, the employer must first obtain a BIR certification or ruling to the effect that the qualification of the plan for tax exemption has been determined. Thus, it is important that the employer secures from the BIR a certification of qualification or a ruling, which shall then serve as a basis that the company’s retirement plan indeed qualifies as a reasonable retirement plan, which is an essential element for tax exemption.   

Likewise, in the absence of any retirement plan, retirement benefits received by employees under Republic Act (RA) No. 7641 are also exempt from income tax under Section (B) (6) of the Tax Code.

RA 7641 provides that any employee may be retired upon reaching the retirement age established in a collective bargaining agreement or other applicable employment contract. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of 60 years or more, but not beyond 65 years which is declared as the compulsory retirement age, and who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least 6 months being considered as one whole year.

While the above discussion outlines the possible exemption of payouts from employees’ pension plan, the tax implications on how these payouts will be spent, invested and enjoyed could also prove to be interesting.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

Jim R. Macatingrao is a Tax Partner of SGV & Co.

How PSEi member stocks performed — January 26, 2018

Here’s a quick glance at how PSEi stocks fared on Friday, January 26, 2018.

PSEi tops 9000 to finish at 2018’s 8th record high

By Arra B. Francia, Reporter

AFTER days of flirting with the 9,000 level, the Philippine Stock Exchange index (PSEi) finally broke past this mark to reach its eighth record high for 2018, fueled by optimism on the positive economic figures released this week.

The main index pocketed gains of 0.47% or 42.03 points to finish at 9,041.20 on Friday. The broader all-shares index also increased 0.33% or 17.05 points to 5,262.30.

This week, the PSEi twice closed less than a point short of the 9,000 mark, albeit setting two new record highs.

In a phone interview, A&A Securities, Inc. analyst Jeng T. Calma noted the stock market had started the year very strong, and the momentum continued this week with the release of positive economic news.

The Philippine Statistics Authority on Tuesday announced the Philippine economy expanded by 6.6% in the fourth quarter of 2017, for a full-year result of 6.7%. This is within the government’s official target of 6.5-7.5%, although slightly slower than 2016’s 6.9%.

Eagle Equities, Inc. research analyst Christopher John Mangun also attributed the market’s bullish performance to the economy’s expansion, which fell within analysts’ expectations.

“This week I said we will be testing the 9,000 level. Overall, GDP number came in, there weren’t any surprises. Target was within from 6.5 to 6.7%, so overall the market’s trading within momentum,” Mr. Mangun said by phone.

Foreigners however turned sellers for the day, posting net sales of P242.25 million, a reversal of Thursday’s P119.62-million purchases.

“We had less foreign buying due to Western markets being stronger. They’re focusing on their markets. For next week, if we don’t see stronger foreign net buying we may get a pullback. But overall I think we will be trading within this area in the weeks to come,” Mr. Mangun said.

The PSEi’s advance in the previous weeks was supported by foreign net purchases, with foreign investors lodging an eight-day buying streak from Jan. 12 to 23.

The market saw the sectors for holding firms, property, industrial, and services advance, while companies in the financials and mining and oil sectors generally declined.

Several brokerage houses have been predicting the market to end past the 9,000 mark by the end of 2018, although market corrections are expected.

Col Financial Group, Inc., for instance, said the PSEi may close the year at the 9,300 mark, while RCBC Securities, Inc. predicted the market to reach 9,500.

Insurance sector posts double-digit growth in 2017

By Melissa Luz T. Lopez, Senior Reporter

THE insurance sector saw another banner year in premiums in 2017 supported by double-digit growth among life and non-life insurers, latest data showed.

Total premiums reached P259.646 billion by end-2017, up by 12% from the P231.883 billion booked in 2016 according to preliminary and unaudited data from the Insurance Commission (IC).

In 2016, industry players reported flat net premiums from the P231.203 billion recorded in 2015.

“The three sectors — life, non-life and MBAs (mutual benefit associations) — all posted positive growth in the four parameters of assets, premiums earned, net worth and paid-up capital or guaranty fund,” Insurance Commissioner Dennis B. Funa said in a speech on Friday during the agency’s 69th anniversary.

Mr. Funa said industry players performed “exceedingly well” in 2017, which led to record highs.

Broken down, life insurers saw premiums rise by a tenth to reach P202.341 billion as of end-December, coming from the P182.794 billion logged during the same period the previous year.

Non-life insurance companies also reported a 16.7% surge in premium incomes which reached P48.561 billion, against the P41.609 billion booked a year ago.

MBAs likewise saw premiums hit P8.744 billion, rising by 16.9% from P7.481 billion the prior year.

Across the industry, total assets of all insurance companies operating in the Philippines grew to P1.55 trillion last year, representing a 17.9% climb from the P1.314 trillion tallied in 2016. Paid-up capital likewise rose by 10.5% to reach P50.75 billion.

Mr. Funa acknowledged emerging trends that involve greater use of online platforms and social media to sell insurance products. The IC released last week new guidelines covering e-commerce, including the use of mobile apps to distribute insurance products.

“With this, and other innovations in the distribution and sales of insurance products, we are expecting heightened product awareness, improved efficiency in their delivery, and ultimately, increase in market penetration,” the official said.

Looking ahead, Mr. Funa also said the industry could be affected by the tax reform law by way of estate tax adjustments: “I understand that the lower and simplified tax on estates will likely affect the business of insurance, particularly life insurance whose proceeds were previously, commonly used to pay off estate taxes.”

“With the new lower tax scheme, resorting to this course may no longer be necessary,” the commissioner added.

Republic Act 10963 took effect this year simplifying estate tax computations to a flat 6%, doing away with varied rates depending on the value of the inherited assets.

Customs to create regional anti-smuggling task forces

THE Bureau of Customs (BoC) is forming national and regional anti-smuggling task forces to beef up the agency’s operations against illegal traders, Commissioner Isidro S. Lapeña announced on Friday, Jan. 26.

The nationwide task force will have regional task forces and the first to be created may be in “Zamboanga, where smuggling is reported to be rampant,” Mr. Lapeña said at the Clean Forum organized by Clean Air Philippines Movement, Inc. (CAPMI) chairman Dr. Michael A. Aragon.

The next two regional task forces will be created in “Cebu and in Manila,” Mr. Lapeña said, adding that these bodies will be created in line with the directive of Finance Secretary Carlos G. Dominguez III to help the agency increase its revenue collection, he added.

Mr. Lapeña, who has been serving as customs chief since August last year, emphasized that he is committed to implement his priority reform programs in order to clean up the tarnished image of the BoC.

“I have five priority programs: one, stop corruption; two, increase revenue collection; three, [facilitate trade]; four, [boost anti-smuggling efforts]; and five, enhance the morale and increase the incentives of BoC personnel,” Mr. Lapeña said.

He added that his reform programs are based on President Rodrigo R. Duterte’s marching orders, which is “to increase revenue and stop corruption.”

The customs chief shared that his agency has been conducting “controlled delivery operations” in monitoring or detecting the entry of shabu to the country.

He explained that a controlled delivery operation is similar to entrapment operation, which is a planned delivery under the supervision of the Philippine Drug Enforcement Agency (PDEA).

“No tara (bribery) system, no pasalubong, no gift” policies are also strictly implemented, Mr. Lapeña also said.

The agency’s revenue target this year, according to the BoC chief, is P598 billion, and that is 4.6% (P29 billion) lower than the original target.

Mr. Lapeña said the Development Budget Coordination Committee (DBCC) decided to reduce the agency’s revenue target in consideration of the Tax Reform for Acceleration and Inclusion (TRAIN) that President Duterte signed into law last December.

Asked whether it is possible for the agency to raise an additional P150 billion to fund the increase in the salaries of teachers and other professionals, the BoC chief said: “It is possible.”

For that to happen, he highlighted that the agency has to get rid of corruption. “So much revenue is lost to corruption,” he said.

“I want the correct valuation… [the ones who will benefit will be the Filipino people.] Teachers’ salary increase can be covered by the BoC revenue if there is correct valuation of goods (at the port),” Mr. Lapeña further said. — Arjay L. Balinbin

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