Doing away with unintended gifts
What is it that evokes a childlike delight in us when we receive a gift? Personally, I think it is the absence of any expectation of getting something in return, other than the recipient’s gratitude.
On the flip side, can there be instances of “unintended gifts” or gifts given away without expecting or intending to do so? Yes, there are “unintended gifts” under our tax rules.
This idea of “unintended gifts” is connected to the sale of property (other than real property) in the ordinary course of business. In a regular sale transaction, an exchange of resources will take place and, in an independent or arm’s length deal, the exchange will generally result in a gain on the part of the seller. In most cases, the usual process of selling and buying and its corresponding taxes will be undisturbed.
But what if the tax authorities inform you that apart from selling, you actually carried out a donation?
This situation may happen when the selling price of your property is lower than its fair market value. This will lead to the presumption that the intention of the parties is actually to execute a donation to the extent that fair market value exceeds the selling price.
How is fair market value determined?
In the case of real properties such as land and building used in business, one needs to know the zonal values determined by the Commissioner of Internal Revenue (CIR) and the assessed value from the Provincial/City Assessors. The higher between the two values shall be the value of the property to be used in computing any internal revenue tax as prescribed by Section 6(E) of the Tax Code.
For shares of stock not traded on the stock exchange, the fair market value shall be the adjusted value of all the underlying assets and liabilities of the company. If there are real properties, such shall be valued from the highest among the 1) zonal value determined by the CIR, 2) the assessed value fixed by the City/Municipal Assessors, or 3) the value established by a third party or independent appraiser.
For properties other than real property and shares of stock, our tax authorities have yet to provide specific guidelines on how to account for their fair market values. Conservatively, it would be better to align the price of your property based on the prevailing price of the same/sufficiently similar property in the market.
If property is sold at less than fair market value, the arrangement will be subject to income tax on any gain (which is the difference between the selling price and the cost of acquiring the property) and in addition, a donor’s tax for the supposed gift based on the excess of the fair market value over the selling price as prescribed by Section 100 of the Philippine Tax Code.
Inspired by Article 725 of the Civil Code, for a number of years, the high court emphasized that a transaction cannot be regarded as a donation without its essential elements. One of these elements is the need for the transferor/seller to have an intention to donate during the course of the transaction. The tax authorities have adopted the same principle in several early rulings by exempting from donor’s tax taxpayers who sold their properties below their fair market value without donative intent.
However, in 2014, the Supreme Court ruled that the absence of donative intent does not exempt a taxpayer from donor’s tax. Applying the then Section 100 of the Tax Code (prior to the amendment under the Tax Reform for Acceleration and Inclusion Act “TRAIN”), the amount by which the fair market value of the property exceeded the selling price shall be deemed a gift, even if there is really no intent to give gratuitously. This decision was later on adopted by the Court of Tax Appeals in a 2016 decision when it ruled that the difference in price between the book value and the amount to be paid for the buy-back of shares raised the legal presumption that the transaction was a donation, regardless of the absence of an intention to donate.
With the amendments introduced by the TRAIN effective Jan. 1, 2018, however, the donor’s tax risk has been mitigated with the inclusion of a provision in Section 100 of the Tax Code stating categorically that “a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which is a bona fide, at arm’s length and free from any donative intent), will be considered as made for an adequate and full consideration in money or money’s worth”. This is a welcome relief for taxpayers intending to transfer property without any donative intent.
Moreover, under the old rules of the 1997 Tax Code, there was a burdensome tax rate of 30% for donations to strangers and 2% to 15% for gifts to relatives. Starting 2018, the comprehensive tax reform program has also amended the donor’s tax rate to a fixed rate of 6% of the total gifts, regardless of whether this was made to a relative or a stranger. This 6% tax will only apply to gifts in excess of P250,000. The first P250,000 of your total gift for a given year will be donor’s-tax free.
A donation is a gratuitous act on the part of the giver. There‘s no reason to make the transfer more onerous than it ought to be.
The views or opinions in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Pervis D. Velasco is a senior consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
Traders eye RBI for support as India bond rout worsens
TRADERS in India’s battered bond market want the central bank to play the role of a savior.
With the market reeling under the worst sell-off in almost two decades, investors say the Reserve Bank of India (RBI) should consider buying support as well as expand the quota limits for global funds. Absent that, they expect the declines to continue.
“To calm the bond market, the supply-demand maths has to fit in; meaning keep fiscal deficit in check and/or find additional demand levers by increasing limits for foreigners or the RBI doing bond purchases,” said Mumbai-based Lakshmi Iyer, the chief investment officer for debt at Kotak Mahindra Asset Management Co., which oversees $19 billion in assets.
The nation’s sovereign bonds are set to decline for the sixth straight month in January, the longest stretch since 2000, amid elevated oil prices and hardening global yields. The yield is seen climbing as high as 8% in the fiscal year starting April 1, a level last seen in 2014, according to ICICI Securities Primary Dealership Ltd. The yield fell one basis point Wednesday to 7.42% as of 9:40 a.m. in Mumbai.
Allowing foreigners to buy more government debt will help absorb a record supply of bonds, which along with worries over accelerating inflation and wider deficits has spooked the market. Global funds bought 1.4 trillion rupees ($22 billion) of bonds in 2017, the most in four years, and the central bank has said it would raise the cap on overseas investors to 5% of outstanding bonds by March 2018.
Bond purchases will help comfort the market, Bank of America Merrill Lynch said in a note, forecasting $25 billion of such operations in the year starting April 1. It’s not the first time the central bank would have bought debt. In the year ended March 2017, the RBI injected 1.1 trillion rupees in liquidity, helping push down the yield to more than a seven-year low even as the government sold a record amount of debt.
Open market operation purchases “would be the strongest signal” to allay concerns about the spike in yields, Indranil Sen Gupta, BofAML’s India economist wrote in the note.
The rout may lead to 155 billion rupees of mark-to-market losses on the available-for-sale portion of the banks’ investment portfolios in the December quarter, according to ICRA Ltd., a unit of Moody’s Investors Service. The declines prompted state-run lenders to ask the RBI to allow them to spread the losses over two quarters, the Economic Times reported earlier this month. — Bloomberg
Nation at a Glance — (02/01/18)
News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.
Competition alert: Help the United Nations attain its Sustainable Development Goals
How do you develop an idea that can create a sustainable and positive impact in our country? And for those who already have an idea in mind, how do you even start the time and resource‑consuming task of testing it?
World Merit, a global community of millennials dedicated to working on the 17 Sustainable Development Goals (SDGs) adopted by the United Nations General Assembly in its 2030 Agenda for Sustainable Development, and its Philippine chapter, will be mounting Merit360 Philippines, a two‑week program in Bohol this April for interested Filipino youth. These SDGs include alleviating poverty, gender equality, providing quality education and reacting to climate change.
And it doesn’t end after the two‑week camp. You and your newfound friends can continue with a nine‑month online program to further develop your life‑changing ideas. World Merit will also help in testing the chosen action plans for the first four months and hopefully implement these in the next five months.
Applications are open to youth participants aged 18 to 35 years old. Here’s your chance to be one of the 180 participants to join the two week camp and the nine month testing projects.-Lucia Edna P. de Guzman
Hacks for future food business bosses
Now. Do it now,” is a popular advice for starting entrepreneurs. “What do you have to lose?”
But for Center for Culinary Arts alumnus JP Anglo, it’s probably best to get some experience before starting your own food business. Experience, after all, is the best teacher.
“Try out cooking school first,” the tattooed chef told SparkUp after one of his weekend cooking classes with the CCA. “If you can hack cooking school then try working for a restaurant first. Money’s at stake when you open your own business. You have to pay operation costs, construction costs, and your own employees, to name a few.”
He admitted that he was probably too excited when he graduated from CCA in 2003. He built his own Asian restaurant in his home city of Bacolod—planned, cooked, worked and then realized that he wasn’t ready to be his own boss yet. That’s probably a realization best had when you don’t have employees to pay and customers to feed.
He left his restaurant for five years, and went to Australia to study and work part‑time in another restaurant. In 2008, he went back to Bacolod and established Asian restaurant Mushu, which is open until today.
“If you work for someone first then you get to learn while you work,” advised Anglo. “Then you get to realize what you want to do in life, what you want to do, and what your strengths and weaknesses are.” And for our good chef that’s running his own restaurant, teaching the youth how to cook, and starring in his own cable program this March.
These days, Chef Anglo teaches open‑to‑the‑public weekend cooking classes at the CCA. Last December, he taught participants to cook indulgent Noche Buena meals and in January he taught participants how to cook relatively healthier meals for the New Years, less pork and sugar and more chicken and seafood.
He is certainly a hands‑on teacher, making rounds in the kitchen and offering advice on how to improve the dishes so that they’d come out as a balanced meal. Balance is his key lesson, as well as improvisation. Cooking is taught as an art, and not a science, leaving room for interpretation in his recipes. At the end of the day, no group will serve exactly the same dish, but they will definitely all be delicious. (Word of advice though, keep your kitchen station clean at all times. All times.)
These lessons are a whole‑day affair. The CCA chefs demonstrate how to cook in the morning, the participants start cooking after lunch, and they have to have a five course meal plated and ready by six in the evening to serve to their guests.
“There are three parts to these lessons,” said Anglo. “You learn, you do, and then you serve. Pausing for a while, the chef added: “then you enjoy.”
“This is not your traditional cooking class. We’re very go with the flow. We don’t follow any system and we act like you really would in a kitchen where you have to learn how to make diskarte, the chef said on how his lessons are conducted. (But seriously, this is not an excuse to have a messy kitchen station. Don’t tempt fate, just trust me on this one.)
“Free up one Saturday for yourself next month so you can join us at CCA Makati.” While the class has its share of CCA students and alumni, there are also your fellow weekend warriors—millennials who dedicate the weekend to learning new skills. Everyone is grouped together in a way that will allow you to learn from your fellow participants too.
For February, the CCA will hold its cooking class in its Makati campus on a Saturday. The registration fee and main theme is still being discussed, because that would vary depending on the recipes and ingredients needed for that meal, but it will most likely be Valentine‑related.
Announcements for future weekend cooking classes will be posted on CCA’s Facebook page.
SM City Marikina: A Benchmark of Resilience
SM PRIME Holdings, Inc. (SMPH), known as one of the largest integrated property developers in Southeast Asia, opened the doors of SM City Marikina in 2008. A year after it started operations, its resilience was put to a test.
Typhoon Ondoy Experience
In September 2009, Tropical Storm Ondoy (international name: Ketsana) affected 4.8 million people in the country — leaving 464 dead and P11 billion worth of damage in infrastructure. It particularly battered Luzon, leaving cities in Metro Manila submerged in flood. One of those cities severely affected was Marikina City, which witnessed widespread flood like no one has seen before.
Amid barangays sunk in rooftop-deep flood, SM City Marikina remained standing despite being situated within the flood-prone Marikina River Watershed. Marikina River’s water rose to 23 meters during the peak of the storm in comparison to its normal depth of 13 meters.
Science-based Resilient Design
The mall was able to withstand this extraordinary act of nature because it was built on the foundation of resilience. Backed with scientific study, the six-hectare property was designed to sit atop cylindrical stilts without wall enclosures. This design concept enabled the rush of flood water to just pass through the stilts during the typhoon, and prevented damage to the property.
This design is consistent with SMPH Chairman of the Executive Committee Hans T. Sy’s firm belief that building disaster-resilient properties is an investment, especially that the Philippines experience an average of 20 typhoons a year.
“SM considered even the hundred-year flood cycle of Marikina watershed in designing these facilities alongside specialists and local authorities. SM built the mall an additional 20 meters farther than the required 90 meters from the Marikina River to minimize the potential damage of the property. The roads surrounding the mall lay on natural ground level, thus, SM constructed the lower parking level without walls or enclosures, allowing the water to pass through. The upper parking level and the main mall area rests on an elevation of 20.5 meters and operates safely even on times of extreme flood,” Mr. Sy, who is also a member of the UN Office for Risk Reduction’s (UNISDR) Private Sector Alliance for Disaster Resilient Societies (ARISE), said.
Advancing Disaster Resilience
Having a disaster-resilient mall matched with trained employees on disaster preparedness enabled SM City Marikina to immediately respond to the needs of the community. Without stopping its operations, the mall kept its doors open for those seeking help during the three-day peak of Typhoon Ondoy. More than 3,000 individuals took shelter within the mall’s complex; 1,400 of which camped inside the mall building, while the others had their cars safely parked within the vicinity.
Within those days, SM City Marikina distributed food, water, and blankets to those who camped within the mall complex. Moreover, the mall’s staff called on volunteers to address the medical needs of distressed evacuees. SM City Marikina also became one of the driving force behind the city’s bayanihan spirit as local government units and other volunteers partnered with them in order to distribute relief goods in badly hit communities.
Marikina City Vice Mayor Jose Fabian Cadiz told BusinessWorld, “SM played an important role in saving Marikina. It became a refuge for Marikeños because it remained open during the height of Typhoon Ketsana. Several thousands sought refuge here, and they were even given food and water. The supermarket remained open, and the prices of basic commodities remained the same. It paid that the building was disaster-resilient.”
SM Prime allocates 10% of capital expenditure for disaster risk reduction in construction of buildings. By investing in resilience, we minimize vulnerability, better safeguard physical assets, reduce recovery expense, and contribute to local government efforts. Ultimately, we are able to better protect lives, and have safer, healthier, and happier communities. — Hans T. Sy
Replicating the new model for resilient structures
Having withstood the catastrophic level of Typhoon Ondoy, SM City Marikina then became a benchmark of resiliency in their city. Establishments being built post-Ondoy have been modelled after the stilt design of the mall.
“SM City Marikina helped us a lot in designing our buildings after Ondoy,” Vice Mayor Cadiz shared. Within the Marikina City Hall complex, the trade center, and the newly built legislative building were built on stilts. Just outside the complex, Sta. Elena High School also adopted the same design concept.
“We passed an ordinance in 2015 stating that in low-lying areas, houses must be built on stilts. SM City Marikina building was, is, and will be our inspiration,” Vice Mayor Cadiz continued.
As a way to continue its advocacy and vision for building sustainable communities, SM City Marikina is working hand in hand with the local government to regularly conduct seminars regarding disaster resiliency.
The Global Perspective
As the world continues to face the pressing effects of climate change, SMPH takes a proactive role in making sure to relentlessly adapt innovative ways to make their properties resilient and sustainable. This, in return, helps in safeguarding the communities where SMPH operates in, and even inspires other global thought leaders to invest in resilience.
During his speech in Cancun Mexico, Mr. Sy said, “SM Prime allocates 10% of capital expenditure for disaster risk reduction in construction of buildings. By investing in resilience, we minimize vulnerability, better safeguard physical assets, reduce recovery expense and contribute to local government efforts. Ultimately, we are able to better protect lives, and have safer, healthier, and happier communities.”
Resiliency and sustainability as the core philosophy of SMPH was not only recognized locally but also globally. During the UNISDR Global Platform in 2013 in Geneva, Switzerland, Hans T. Sy presented the SM City Marikina’s case study as a model for resilience. From hereon, the UNISDR invited Hans T. Sy to be the only Filipino Board Member of the United Nations International Strategy for Disaster Reduction Office for Risk Reduction’s Private Sector Alliance for Disaster Resilient Societies (UNISDR ARISE) as a way to bring the Filipino voice in the international stage.
In 2017, Hans T. Sy was invited to present the SM City Marikina case study to the Global Platform for Disaster Risk Reduction (DRR) in Cancun. With SMPH, Mr. Sy supported the founding of the Philippines’ National Resilience Council (NRC), a science and technology-based public-private partnership for climate and disaster resilience engaging the government, private sector, academia and civil society, where Mr. Sy also serves as the Private Sector Co-Chair.
A call to action towards securing the future
Addressing the United Nations (UN) General Assembly in 1987, then Norwegian Prime Minister Gro Harlem Brundtland, head of the Brundtland Commission, put it best.
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs,” he said.
The Brundtland Commission, which was established by the UN to preserve and protect the environment, its natural resources, as well as prevent the deterioration of economic and social development, called on the nations of the world to enact policies aimed at sustainable and environmentally sound development around the world. Sustainability, it asserted, should become the central guiding principle of governments, organizations and institutions worldwide.
Since the sparks of the Industrial Revolution had ignited the flames of a consumerist way of life, much of the world’s economy relied, and still relies, on unsustainable practices regarding the use of resources. Harmful gas emissions from factories and large-scale mining operations, for instance, have quickened the pace of climate change, inducing global warming which in turn is melting the Earth’s ice caps, raising the level of the oceans, and endangering the world’s coastal cities.
But because such practices are so deeply rooted in the lifestyle of the modern world — not to mention the fact that they are very profitable for those practicing them — the pursuit of sustainable development has been fraught with challenges.
In the words of Alan Young, Chairman of the Board of the International Institute for Sustainable Development, in the organization’s annual report for 2016-2017, last year: “Last year proved to be rather remarkable, and yes, rather sobering”.
“We experienced a collective whiplash effect in moving from the optimism inspired by the progressive agreements leading to the Paris Agreement and the Sustainable Development Goals, to the largely unanticipated success of populist campaigns, which have challenged the core principles of multilateralism and environmental protection — not to mention evidence-based, rational discourse as a basis for public policy,” he wrote.
“Ironically, while our potential to achieve truly sustainable and innovative economies and communities has never been more closely within reach, the opponents to such change have managed a surge in power that, if unchecked, will set that progress back at a crucially sensitive moment,” he added.
The Paris Agreement is an international pact signed in 2016 within the United Nations Framework Convention on Climate Change aiming to respond to climate change. United States (US) President Donald Trump withdrew the US from the agreement, saying a withdrawal would help American businesses and workers.
Sustainability, however, is not solely concerned with the environment. Peace, human rights, equitable wealth distribution, and economic stability are all goals that fall under the umbrella of sustainable development.
The Sustainable Development Goals (SDGs), also known as “Transforming our World: the 2030 Agenda for Sustainable Development”, are 17 global goals set by the UN, developed to replace the Millennium Development Goals which ended in 2015. The UN Development Programme (UNDP) Philippines defined them as a “universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity”.
“The SDGs work in the spirit of partnership and pragmatism to make the right choices now to improve life, in a sustainable way, for future generations. They provide clear guidelines and targets for all countries to adopt in accordance with their own priorities and the environmental challenges of the world at large,” the UNDP said in its Web site.
Covering a broad range of social and economic development issues, the SDGs aim to tackle sustainable development through addressing of issues like poverty, hunger, health, education, climate change, gender equality, water, sanitation, energy, environment and social justice.
The pursuit of these goals, in short, is worthwhile. In the past, the Philippine government has partnered with the UN with the goal of pursuing sustainable growth in the country.
Cooperation is the solution. Towards reducing poverty, the UNDP aims to involve more stakeholders in the development process through innovative public-private partnerships for local and sustainable development. The organization also works with the government and civil society partners in promoting an enabling policy environment for peace and other goals.
“UNDP provides support to governments to integrate the SDGs into their national development plans and policies. This work is already underway, as we support many countries in accelerating progress already achieved under the Millennium Development Goals. Our track record working across multiple goals provides us with a valuable experience and proven policy expertise to ensure we all reach the targets set out in the SDGs by 2030. But we cannot do this alone,” the UNDP said.
“Achieving the SDGs requires the partnership of governments, private sector, civil society and citizens alike to make sure we leave a better planet for future generations,” it added. — Bjorn Biel M. Beltran
Sustainability champions
Sustainable practices have been shown time and again to improve financial performance and relationships with critical stakeholders, and help create significant positive environmental and social impact. Many of the largest Philippine companies have enthusiastically adopted and committed to them, setting a great example in their respective industries. Here are several of them.
A property giant that owns and operates the famous chain of SM shopping malls as well as a number of residential and office buildings, SM Prime Holdings, Inc. has been putting out sustainability reports since 2007, outlining its practices, goals and impact. “As one of the largest property developers in Southeast Asia and with a presence extending across the many regions of the Philippines, SM Prime is aware of the environmental and social impact of its operations. Our long-term success depends on having a positive impact in these areas and our goal is to be a catalyst for development in the communities we serve,” Jeffrey C. Lim, president of SM Prime, said in the company’s 2016 sustainability report.
The company, he noted, had addressed issues that contributed to its environmental footprint, such as those concerning energy efficiency and water consumption. In 2016, for instance, roughly 5,800 megawatts of renewable energy was generated by SM Prime across its installations in the Philippines and China. That amount of energy, Mr. Lim pointed out, could power over 5.8 million homes. Also that year, SM Prime recycled 33% of water it consumed; 4.7 million cubic meters of water, which could fill almost 2,000 Olympic-sized swimming pools, was reused in cooling towers and comfort rooms.
Efficient use of water is where Nestlé Philippines shines. The food and beverage company has equipped all its factories with world-class wastewater treatment facilities. “Manned by highly competent personnel, these treatment plants capture every drop of wastewater discharged from the factories, cleanse the water of impurities, and release it to natural waterways clean enough to sustain marine life,” the company says on its Web site. It adds that the treated water from the factories is tested constantly to meet government standards.
But Nestlé has also explored other ways to optimize water use. For example, it reuses sealing water from vacuum pumps, cooling water from MILO processing, rinsing water and recovered water from reverse osmosis plants. “These initiatives, coupled with simple techniques as the use of sensor-operated faucets that ensure automatic stoppage of water flow, have cut down water consumption throughout Nestlé by about 16% since 1997, or an average of 65,500 cubic meters of water every year,” the company says.
Globe Telecom sees environmental sustainability as its immediate responsibility, in the face of global warming and rising demand for energy, and in response to two of United Nations’ Sustainable Development Goals — responsible consumption and production and climate action. In 2016, the communication services provider invested P2.37 million in environmental protection initiatives, including reforestation programs, solid waste management and hazardous waste disposal and treatment. In addition, it donated P1.4 million as initial grant for 13,500 seedlings to the nonprofit Hineleban Foundation, which advocates environmental conservation and livelihood development.
“Having an expansive network also translates to a large business footprint so it is inevitable for us to recognize our responsibility to mitigate effects of climate change,” Ernest L. Cu, president and chief executive officer of Globe Telecom, said in the company’s 2016 annual report. “We continue to invest in a low-carbon future by encouraging more customers to shift to paperless billing to reduce waste, as well as raise public awareness on adopting lifestyles that are in harmony with nature,” he added. As part of that paperless billing initiative, the company introduced Bill via Text through GlobeMYBILL, which allows a customer to receive a text message from it with a link to his or her latest billing statement online.
In favor of sustainable brands
In recent years, sustainable development has become a crucial factor for consumers — especially the most dominant generation today, the millennials. They have distinct values, behavior and habits when it comes to earning and spending.
On average, millennials — more than other generations — spend more on comforts and conveniences. They most likely spend their money for pricey coffee, clothes, and restaurants, and out of town trips. Despite of this, one good thing about this generation is their strong affinity with sustainable products and services.
According to The Sustainability Imperative report by a global measurement and data analytics company, Nielsen, consumer brands that demonstrate commitment to sustainability outperform those that don’t. It says that consumers are trying to be responsible citizens of the world, and they expect the same from corporations.
As noted in the report, sales of consumer goods from brands with a demonstrated commitment to sustainability in 2015 have grown three times higher than those without. In fact, 66% of consumers said that they are willing to pay more for sustainable brands, 20% higher than the previous year.
“Consumer brands that haven’t embraced sustainability are at risk on many fronts,” Carol Gstalder, senior vice-president of Nielsen Reputation & Public Relations Solutions, said in the report. “Social responsibility is a critical part of proactive reputation management. And companies with strong reputations outperform others when it comes to attracting top talent, investors, community partners, and most of all consumers.”
According to the same report, millennials are the most willing group to pay extra for sustainable offerings. This finding was concluded after more than 30,000 online consumers from 60 countries were polled. Next to millennials, generation Z and baby boomers are the generations who are willing to pay more for products and services that come from companies committed to positive social and environmental impact.
“Brands that establish a reputation for environmental stewardship among today’s youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending millennials of tomorrow, too,” Grace Farraj, senior vice-president of Nielsen Public Development & Sustainability, said.
Globally, based on the 2015 Nielsen Global Corporate Sustainability Report, the inclination among Filipinos that buy socially responsible brands is among the strongest. It is noted that 83% of Filipinos said that they are willing to pay more for sustainable brands, a remarkable four point increase from the previous year.
“Sustainability is a worldwide concern and this is especially true for consumers in a growing population such as the Philippines to be continually aware of environmental and societal issues,” Stuart Jamieson, managing director of Nielsen in the Philippines, said. “More exposed to the stress in the environment and its effect to the community, consumers are trying to be responsible citizens and they expect the same from corporations.”
Mr. Jamieson said that these consumers are doing their purchase responsibly — they are checking the labels before buying, they are looking at Web sites for information on business and manufacturing practices, and they are paying closer attention to public opinion on specific brands in the news or on social media. — Mark Louis F. Ferrolino
Inside the workhorse engine
Diesel engines are ubiquitous: They power everything from passenger vehicles to delivery trucks to bulldozers to trains to ships. The US Department of Energy (DoE) refers to them as the “workhorse engines.”
But in the past, they had a severe image problem. As the agency notes in a pamphlet detailing the basics of diesels, they were “dirty and sluggish, smelly and loud.”
“That image doesn’t apply to today’s diesel engines, however, and tomorrow’s diesels will show even greater improvements. They will be even more fuel efficient, more flexible in the fuels they can use, and also much cleaner in emissions,” the agency says.
Diesel engine is an internal combustion engine that converts chemical energy in fuel to mechanical energy. It is the mechanical energy that moves pistons up and down in the enclosed spaces called cylinders.
These pistons are connected to the crankshaft, whose movement switches from linear to rotary to propel the wheels.
As the fuel reacts chemically with oxygen, a series of small explosions occurs, releasing energy. In a diesel engine, the fuel ignites on its own.
“Air heats up when it’s compressed,” DoE says. “This fact led German engineer Rudolf Diesel to theorize that fuel could be made to ignite spontaneously if the air inside an engine’s cylinders became hot enough through compression.”
The inventor of the diesel engine calculated that high compression should lead to high engine efficiency. “Part of the reason is that compressing air concentrates fuel-burning oxygen,” the agency says.
And if a fuel has high energy content per gallon and is injected into the cylinders at the right time, it should react with most of the concentrated oxygen to deliver “more punch per explosion.”
DoE says Mr. Diesel’s calculations were correct. “As a result, although diesel engines have seen vast improvements, the basic concept of the four-stroke diesel engine has remained virtually unchanged for over 100 years.”
The first stroke involves the air being sucked into a cylinder while the piston creates a space for it by distancing itself from the intake valve. After the piston swings upward, the air is compressed and heated. Before the piston reaches the top of its compression stroke, the fuel is injected under high pressure and then ignites spontaneously upon contact with the heated air.
“The hot combustion gases expand, driving the piston downward in what’s called the power stroke. During its return swing, the piston pushes spent gases from the cylinder, and the cycle begins again with an intake of fresh air,” DoE says.
Gasoline engines, like diesel engines, work by internal combustion. They have slight differences, though.
“In a gasoline engine, fuel and air is injected into small metal cylinders. A piston compresses (squeezes) the mixture, making it explosive, and a small electric spark from a sparking plug sets fire to it. That makes the mixture explode, generating power that pushes the piston down the cylinder and (through the crankshaft and gears) turns the wheels,” explains Chris Woodford, a British science writer who runs the Web site Explain that Stuff.
Mr. Woodford notes that theoretically the gasoline engine, with its spark plug, should be more efficient than the diesel engine. The reality is different: It is the diesel engine that is substantially more efficient than the gasoline engine.
“In simple terms, that means you can go much further on the same amount of fuel (or get more miles for your money),” he said. One reason is that the fuel is easily compressed in the diesel engine because it requires no sparking-plug ignition system.
“There’s another efficiency saving too. In a gasoline engine that’s not working at full power, you need to supply more fuel (or less air) to the cylinder to keep it working; diesel engines don’t have that problem so they need less fuel when they’re working at lower power,” Mr. Woodford said.
The fuel that diesel engines use also gives them several more advantages. Diesel fuel, which Mr. Woodford described as a lower-grade and less refined petroleum product made from heavier hydrocarbons, contains more energy per gallon because the molecules have more energy locking the atoms together.
“Diesel is also a better lubricant than gasoline so a diesel engine will naturally run with less friction,” Mr. Woodford said.
Philippines’ notable diesel-powered cars
There are many considerations in buying a car, and one of those is choosing its fuel and engine technology. When choosing between gasoline and diesel engines, car experts would often argue that the latter is generally more economical, and some experts even say that it has about 25% to 30% efficiency advantage over the former.
Diesel engines will cost you lower in terms of fuel costs since diesel fuels are cheaper. With higher fuel costs, this has become a major consideration for most car buyers. Moreover, it is also said that diesel engines are less harmful to the environment due to cleaner emissions.
Meanwhile, here’s a round up of some of the best diesel-powered cars available in the market:
Ford Everest
Designed for tough terrain, Ford Everest features an advanced 3.2L TDCi Turbo Diesel Engine that delivers 200 Ps of power and 470 Nm of peak torque without compromising fuel efficiency. Its aerodynamic design also allows more fuel savings because it requires less drag. These features paved the way for its 13th ranking on fuel-efficiency in the diesel category at the 13th DoE Fuel Economy Run 2017. With a powerful yet fuel-efficient engine matched with extraordinary details for interior comfort makes this seven-seater SUV always ready and highly capable for rough rides.
Honda CR-V
Also included in the top 10 fuel-efficient vehicles in the diesel category at the 13th DoE Fuel Economy Run 2017, the Honda CR-V is powered by the i-DTEC Turbocharged Engine, which features a reduced overall engine weight. Still sturdy enough for agile driving, its reduced engine weight results to fuel-efficiency. Moreover, this engine is Euro-4 compliant, therefore, have cleaner emissions.
Hyundai Accent (Sedan)
Hyundai Accent, which ranked second most efficient diesel-consuming vehicle in the 13th DoE Fuel Economy Run 2017 with a total fuel economy rating of 27.80, features a 1.6 CRDi Variable Geometry Turbo (VGT) Diesel Engine. This fuel efficient and environment-friendly engine delivers a maximum power of 136 ps/4,000 rpm and maximum torque of 26.5 kg-m/1, 750 to 2, 500 rpm. Matched with this engine is an exterior designed in the language of “fluidic sculpture” as well as amenities discerning luxury car are looking for, making Hyundai Accent not only dependable but also luxurious.
Isuzu mu-X
This reliable pickup emerged as the most efficient diesel-consuming vehicle at the DoE Euro 4 Fuel Eco Run in 2016 with a fuel economy rating of 38.46; and ranked 12th at the 13th DoE Fuel Economy Run 2017. Matching its muscular exterior is a powerful 4JJ1-TCX Blue Power diesel engine with turbo intercooler, which lets you experience 177 Ps of power and 380 Nm of torque; while at the same time runs quieter, and lets you enjoy the benefits of minimal fuel consumption. Maximum engine output, overall durability, and fuel efficiency makes Isuzu mu-X perfect for driving on highways or even at off-beaten paths.
Toyota Innova (MPV)
Included in the top 20 most-efficient diesel-consuming vehicle at the 13th DoE Fuel Economy Run 2017, this multipurpose vehicle is equipped with a powerful engine with increased fuel economy that lets you go anywhere. Its style, functionality, and added safety features make Toyota Innova one of the best options in the market for family driving.
Mitsubishi Montero GLX 2WD MT
Suitable for both city driving and on rough terrain, this all-time favorite and award-winning SUV is known for its new 4N15 engine, which features a Euro 4-compliant 2.4L clean diesel engine with VGT and Mitsubishi Innovative Valve timing Electronic Control (MIVEC) system. The engine’s power and torque is rated at 181 Ps/3,500 rpm and 430 Nm/2,500 rpm. This new engine also boasts of a low compression ratio, thus reducing fuel consumption, smoke, and nitrous oxide emissions.
Volkswagen Golf GTS
Volkswagen Golf GTS promises “real drive with low fuel bills.” Ranked as the most fuel-efficient vehicle in the sedan category at the 13th DoE Fuel Economy Run 2017, this vehicle is powered by 2.0 TDI Engine, which is known for its economy, drive, and outstanding performance. Moreover, the high torque of its engine enables a sporty driving style while quietly running. According to Volkswagen, Golf GTS is agile as a hatch, drives like a sedan, and has a cargo space of an SUV. — Romsanne R. Ortiguero