Facebook Instagram Linkedin X Youtube
Home Blog Page 12791

Italian director Vittorio Taviani, 88

ROME — Celebrated Italian director Vittorio Taviani, who made more than 20 films alongside his brother Paolo, has died aged 88, his family said on Sunday. The pair worked together for more than half a century producing some of the most famous films of post-War Italian cinema, including Padre Padrone, which took top honors at the 1977 Cannes film festival. Their prison drama Caesar Must Die, a docu-drama in which murderers and mafiosi acted out a Shakespearean tragedy in a high-security Italian jail, won the Golden Bear award for best picture at the Berlin film festival in 2012. “Vittorio Taviani’s death is a terrible loss for Italian cinema and culture,” President Sergio Mattarella said in a statement, praising the “unforgettable masterpieces” that he made with his younger brother. The pair developed a unique working relationship, taking turns to direct individual scenes in their films and never interfering when the other was in charge. “We have different characters but the same nature. Our choices in life and art are the same,” Vittorio told the Guardian newspaper in an interview in 2013. They often adapted high-brow literature, including works by the Italian author Luigi Pirandello (Kaos and You Laugh), Russia’s Leo Tolstoy (Resurrection and Night Sun) and Johann Wolfgang von Goethe (Elective Affinities). The last picture where they shared the directing credit was in 2015 with Wondrous Boccaccio, which was based on stories from The Decameron by the renaissance writer Giovanni Boccaccio. Vittorio Taviani was born in San Miniato, Tuscany, in 1929. He began his professional life as a journalist before joining forces with his brother, initially making documentaries before transitioning to cinema. — Reuters

HK currency defense tops $1.2 billion

THE Hong Kong dollar remains stuck at the weak end of its currency band, even after the monetary authority plowed $1.2 billion into defending the peg.
The city’s dollar traded near HK$7.85 per greenback at 12:23 p.m. local time, the level that can spur buying by the de facto central bank. The Hong Kong Monetary Authority has spent HK$9.7 billion ($1.2 billion) mopping up local dollars since the weak end of the band was reached on Thursday for the first time since 2005. The pace of intervention shows outflows are bigger than people had thought, according to China Everbright Bank Co.
“The pace of HKMA’s buying is a bit faster than we expected,” said Ngan Kim Man, deputy head of treasury at China Everbright Bank’s Hong Kong branch. Outflows are likely to accelerate as the US further tightens monetary policy, which will finally boost short-end rates in Hong Kong, Ngan said.
Hong Kong interbank rates have lagged behind their US counterparts thanks to an abundance of liquidity — something HKMA tightening may change. The aggregate balance of the city’s interbank cash supply will fall to HK$170 billion on Tuesday from the pre-intervention level of about HK$180 billion, according to the de facto central bank. One-month Hibor, as the local rate is known, stands at 0.85%, about 1%age point less than similar maturity Libor.
Hong Kong residents “shouldn’t expect that the environment of super low interest rates will persist forever,” Paul Chan, the city’s financial secretary, wrote in a blog Sunday. Investors “have to consider the possibility of a rise in the borrowing costs, and the impacts of higher interest rates on asset prices and their investments.”
The government has the capability of dealing with large capital outflows, and investors shouldn’t be too worried, Chan added. But still, analysts are flagging risks to the city’s home prices, which are among the least affordable in the world.
“If the downward pressure on the Hong Kong dollar persists, policy makers are likely to step up its intervention over the coming months,” Chang Liu, China economist at Capital Economics, wrote in a note dated Friday. “A bigger concern is that the rise in market interest rates precipitates a collapse in the property market, which causes wider problem in the economy, including a slump in consumption and a sharp rise in non-performing loans.” — Bloomberg

Chinese tycoon flips 007 casino for all-in bet on South Korean island

SOMETIMES, all you need is a private jet.
Soon after property tycoon Yang Zhihui bet his fortune on luring Chinese gamblers and investors to a giant casino resort project in South Korea, his ambitions were threatened by an economic war that flared up between the two nations. Yang not only weathered the political spat over North Korea’s nuclear program, but his massive project expanded and his company announced this month it would build another casino in the Philippines.
How Yang managed to keep the dream alive has a lot to do with his days as a property agent during China’s booms years, the profit he reaped from flipping one of James Bond’s old gambling haunts, and a Bombardier Global 6000 jet bought for $53 million in 2013. It also shows why Asia’s gambling expansion continues unabated, despite China’s economic slowdown, a looming trade war and Xi Jinping’s crackdowns on corruption and cash exports.
In November 2016, Yang’s company signed a deal to buy out its partner, Genting Singapore PLC, in the $2.4-billion project on South Korea’s Jeju island, a holiday haven for honeymooners about the size of Maui and an hour’s flight from Seoul. At the time, Chinese visitors were the fastest-growing part of the island’s economy, which relies heavily on the attractions of its volcanic scenery and mild climate.
That all changed when South Korea decided to install the US Thaad missile defense system after being spooked by North Korean leader Kim Jong-un’s warlike rhetoric and weapons tests. China objected and ordered travel agents to stop selling tour packages to South Korea in March 2017, according to the Korean tourist bureau. Airlines cut the number of flights to the peninsula and Chinese visitor numbers slumped.
That’s where jet comes in.
Yang bought the 19-passenger Bombardier in 2013 and had his company lease it from his British Virgin Islands-registered company, Win Rich Group Ltd., to fly around management, wealthy property investors, high-rolling gamblers and himself, according to company filings. It was a brash move by a chairman who’d just succeeded in getting a Hong Kong backdoor listing, but years later it turned out to be a lifeline for his Jeju Shinhwa Resort, after his listed company Landing International Development Ltd. bought the jet from him.
The aircraft became a link between Jeju and the wealthy clients Yang cultivated during his ascent as a property developer, as well as others coming to the casino, which officially opened in February. Yang didn’t provide details about the jet’s usage other than that it’s strictly for business purposes. Travelers that don’t join tour groups have been less affected, he said.
“Free travelers are generally not affected, and they have higher spending power,” Yang said in replies to questions sent by e-mail.
Yang’s majority stake in Landing International gives him a net worth of more than $1.6 billion, according to the Bloomberg Billionaires Index. That fortune grew after Landing almost doubled its money in less than two years on the sale of the famous London casino, Les Ambassadeurs in Mayfair, the location shown for Sean Connery’s immortal introduction as “Bond, James Bond.” Landing said it sold the property for HK$2.5 billion ($320 million).
With money from the casino sale, rights issues and funding from his China-based property group, Yang went all-in on Jeju. Landing said to date it has invested $1.7 billion in the resort.
A recent visit to the site shows the scale of his ambition. Rising on an area five times the size of Tokyo Disneyland are four hotel brands including a Four Seasons and a Marriott, a theme park with virtual-reality docks and life-sized, 3D-animated Korean characters, a cafe designed by K-pop star G-Dragon, villas, shopping malls and another 40 restaurants and food outlets. And South Korea’s biggest foreigners-only casino.
The resort has been opening in stages since April 2017. The casino debuted in February, joining Somerset serviced condos, convention center, theme park and shopping. The Four Seasons, a water park and movie-themed park are underway.
Such a mammoth Chinese-backed venture on an island with a turbulent record in the region’s politics has not gone unopposed by local pressure groups. Jeju recently completed a military-civilian naval base, delayed by local and international protesters who denounced environmental effects and raised concerns that it would be a base for U.S. ships and missiles.
Landing gained conditional approval from the local government in February to expand its casino floor space sevenfold, but only after threatening to withdraw its promise of hiring thousands of Koreans. Local activists delayed the approval for months, arguing that Landing’s expansion would spearhead a Macau-like casino boom that would taint the island’s reputation.
“It was ridiculous that the government granted expansion approval to Landing based on the belief that Landing would help locals,” said Hong Young-cheol, at environmental group JSPSEP. Now, other casinos on the island will also want to expand, he said.
Jeju is one of more than a dozen Asian destinations trying to cash in on China’s appetite for gambling, following the boom in Macau that turned a Portuguese backwater into the world’s biggest gaming strip. Singapore, Malaysia, the Philippines, Australia and Cambodia have all added or expanded casino resorts and Japan is about to join the fray.
Jeju Shinhwa’s main competitor on the South Korean island is expected to be Jeju Dream Tower, a 38-floor hotel with a casino and shopping that Chinese builders are erecting close to the airport. The projects could be game changers for the island compared to the casinos that existed before, Grant Govertsen, head of Asia equity research at Union Gaming, said in a phone interview from Macau.
“They all sucked,” Govertsen said. “We haven’t been able to see what a real integrated resort could do.”
The growth in Chinese tourism has piqued investor interest in casinos, which haven’t historically been a major source of revenue, according to Yang Gi-Cheol, head of the Jeju government’s tourism bureau. Half the island’s eight casinos are Chinese-owned and like every Korean casino except one in Gangwon province, all are off limits to Korean citizens.
“Macau distinguished itself with casinos,” Yang said at the island’s tourism bureau. “But Jeju’s values are its nature and culture.”
At Landing, Yang Zhihui says he isn’t trying to create another Macau either. He wants his project to be considered a “Jeju company” that supports residents and provides jobs, local partnerships and educations. His group’s donation to the local university earned him a bronze bust, now on display at campus.
Yang cultivated a network of wealthy investors, including Yao Jianhua, brother of wealthy insurer Yao Zhenhua. Yao Jianhua’s Hong Kong-listed investment company China Goldjoy recently upped its Landing stake to become a top shareholder, citing prospects of “China’s cultural tourism” market.
Still, the vast majority of visitors to the island are South Koreans — the air route from Seoul is the world’s busiest, with an average of 178 trips a day. For Koreans, Jeju is Instagram heaven with its volcanic coastline, Unesco heritage lava tubes and the nation’s highest peak, Halla Mountain, draped with waterfalls.
But Chinese tourists are the bigger spenders and the mainstay of the casinos. So when visitor numbers from China slumped 76% last year, even businesses such as the Sex theme park and the Teddy Bear Museum and the restaurants of Black Pork Street were hit.
At New Huacheng Travel, the island’s largest agency for inbound Chinese tourists, Finance Manager Park Ho-san sat alone on a recent March day, minding the empty office. Dozens of staff have left due to the Chinese freeze.
“The ban happened and everything has fallen through,” Park said.
Xi Jinping’s half-decade crackdown on extravagance within the Communist party has also affected the casino business in Asia, slowing Macau’s growth rate. Jeju, an hour’s flight from Shanghai, offers the advantage of being close enough but still offshore for Chinese high rollers, said Taewan Kim, professor of political science at Dong-eui University in Busan.
On April 9, Landing announced a plan to build another 9.5 hectare integrated resort in Parañaque City, near the Philippine capital.
“You don’t necessarily want the Chinese government to know how you’re spending your gambling money,” Kim said.
And Jeju has been especially welcoming, offering visa-free visits, permanent residency for condo investors, with medical benefits, and a 10% tax on gross gaming revenue, less than one-third the rate in Macau.
Landing is betting that those advantages, and Jeju’s location and natural attractions, will be a winning combination, especially for a Chinese audience keen on Korean culture and K-pop superstars such as G-Dragon, whose shoes and gold microphone are on display at the resort in a cafe the K-pop king helped design.
But the full potential of Jeju’s casino boom still hangs on the Chinese government’s control of the flow of tourists to the island.
In a lounge with a giant screen playing clips of G-Dragon, the resort’s chief executive, Jay Lee, a former Genting executive, is preparing for the possibility that China’s restrictions will eventually relax and the number of Chinese visitors will rebound.
“It’s all about the opening and closing of the tap,” he said. — Bloomberg

Overseas Filipinos’ cash remittances

OVERSEAS FILIPINO workers (OFWs) sent more money home in February than a year ago even as it was the smallest increase in three months, the central bank reported on Monday. Read the full story.
Remittance

How PSEi member stocks performed — April 16, 2018

Here’s a quick glance at how PSEi stocks fared on Monday, April 16, 2018.

Domestic market capitalization of select stock exchanges in Asia Pacific

Meralco Q1 power sales rise 7% on strong economic growth

MANILA Electric Co. (Meralco) estimates that electricity sales increased by around 7% in the first quarter as its consumer segments recorded growth during the period, the head of the distribution utility said.
“In terms of sales, [growth was] maybe . . . around 7% higher [year on year],” Oscar S. Reyes, Meralco president and chief executive officer, told reporters in a chance interview on the sidelines of Manila Water Co., Inc.’s annual shareholder meeting in Makati City on Monday.
Mr. Reyes, who was elected Manila Water independent director, did not disclose the sales figure, but Meralco in the first quarter of 2017 reported sales volume from its core distribution business at 9,317 gigawatt-hours.
Electricity revenue, which accounted for 97% of total revenue a year earlier, grew by 12% mainly because of the growth in volume of energy sold, Meralco previously said.
Asked about the sales growth drivers in the first three months of 2018, Mr. Reyes said: “Number one is increase in our customer base.”
“Second is, improvement in general economic conditions, which have supported growth in consumption,” he said.
In the first quarter of 2017, Meralco reported 4% growth in its customer count to more than 6.1 million.
“Third, you’ve got growth across all sectors — residential, commercial and industrial,” Mr. Reyes said. “So good indications of the growth of the economy.”
He said there was no pattern as to which quarter Meralco records the biggest sales growth, adding that the weather is a big factor in the sales outcome in a given period.
“Weather affects (sales). Number two, some special events affect it,” he said.
Mr. Reyes also gave his comment on a letter from Energy Secretary Alfonso G. Cusi asking why the distribution utility has not yet energized Isla Verde in Batangas province, which is in its franchise area.
“We have a program to electrify. However, I think there were some delays in the LGU (local government unit) level, but there is a program for that already. It’s just awaiting something from the local community and the LGU,” he said, adding that he was unsure whether it had to do with permits.
“We will be responding [to the letter],” he said. “There’s no problem there. We’re committed that it will be addressed very soon.”
“We’ll follow up on the requirements,” he said. “That will be fixed.”
Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Victor V. Saulon

Excise tax increase triggers widespread cigarette smuggling

THE BUREAU of Internal Revenue (BIR) said smuggled cigarettes are currently flooding the market, in response to the rise in excise taxes this year.
“Frankly we have a proliferation of smuggling. Our attention was called by big tobacco companies, Philip Morris, Japan Tobacco, who conducted their own investigation,” BIR Commissioner Caesar R. Dulay told reporters yesterday as he inspected the income tax return filing center in the Quezon City Revenue Region.
“We’re working on that that’s why we have a task force created to address that,” he added.
He said that initial information from the BIR and the Bureau of Customs (BoC) points to rampant smuggling from other Asian countries, with smuggled products sold outside Metro Manila, including Davao, Nueva Ecija, and Bulacan.
Mr. Dulay said that the said cigarette products amounted to “substantial” foregone revenue. “The tobacco companies are complaining about the smuggling,” he added.
The BoC intercepted on April 10 misdeclared cigarettes from China worth P18.5 million at the Manila International Container Port. Last month, it also seized P8.2 million worth of cigarettes
The Department of Finance has reported that tobacco excise revenue grew 74.3% to P24.04 billion in the first two months of the year — representing about 15% of overall BIR collections for the period. The collections exceeded its P14.93-billion target by 61%.
On Jan. 1, Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) imposed a P32.5 excise tax per pack on cigarettes, up from P30 in 2017. By July, the tax will rise further to P35. Aside from tobacco, the law also provides for more levies on automobiles, minerals, fuel, and imposed new excise levies for sugar-sweetened beverages and cosmetic procedures.
Mr. Dulay said that tobacco products will continue to drive its revenue take this year, following Japan Tobacco International’s (JTI) acquisition of Mighty Corp. last year.
“For the past five years, Mighty’s compliance was very low… Since JTI came in and bought out Mighty, compliance has improved, and cigarette tax stamp collections have risen,” he said.
Yesterday was also the deadline for filing the 2017 income tax returns. Deputy Commissioner Marissa O. Cabreros said that “almost 100%” of taxpayers filed their returns through the BIR’s electronic portal.
The Quezon City Revenue Region accommodated fewer manual-filing taxpayers, as Ms. Cabreros noted improvements to the BIR’s electronic systems for the tax filing season.
“In fact we are not expecting too many people; it’s just that we want to be open and available to taxpayers who want to have assistance. In the past yes there were problems on the traffic in our systems. We anticipated those.”
“We improved our protocols for e-filing — in fact its open 24/7 even on weekends. We were thinking of the taxpayers who want the comfort of having a BIR official assist them. The filing centers are open to help them out and there are computers there, and they can be helped with filing their returns electronically,” she added.
The BIR collected P422.59 billion in the first quarter, up 14.03% from a year earlier, and exceeded its P361.77 billion target by 16.81%.
In April, the bureau expects to collect P274.49 billion, about 13.46% of the full-year collection target. Of this amount, P193.91 billion or 70.64% will be income tax.

Mindanao Corridors strategy receives $100M in ADB funding

DAVAO CITY — The Mindanao Development Corridors strategy, with the south-central Mindanao area and the Autonomous Region in Muslim Mindanao (ARMM) as pilot sites, will receive $100 million worth of funding from the Asian Development Bank (ADB).
Undersecretary Janet M. Lopoz, Mindanao Development Authority (MinDA) executive director, said the funds will “complement our efforts to attract and retain more inclusive investment in Mindanao.”
“When we embark on this administration’s agenda for Mindanao, we are looking at holistic and sustainable development with dimensions on peace and security, human development, governance, and social cohesion,” Ms. Lopoz told BusinessWorld in an e-mail interview.
“Public investment in infrastructure, economic growth, and ultimately, poverty reduction come hand in hand in ushering sustainable development,” she said.
ADB-Philippines Principal Country Specialist Joven Z. Balbosa, in an interview with BusinessWorld during a visit to Davao City last month, said the $100-million allocation is intended to help address the public investment gaps “cutting across local government, across regions that really matter for growth.”
He said ADB is looking at sustainable and consistent inter-regional programs that need larger investments.
“Right now,” he explained, “government agencies and local governments have different priority programs, but what the bank will do is come up with inter-regional mechanisms.”
“The project supports the government’s national spatial strategy, which recognizes the comparative advantages of cities and municipalities and seeks to address spatial and socioeconomic inequalities by linking lagging regions with economic growth centers,” ADB said in a statement.
Ms. Lopoz said under the Development Corridors strategy, government investments will be focused on improving ports and airports or developing new ones.
Ms. Lopoz said among the key projects are the development of the Polloc Port in the ARMM, the “aerotropolis” in the cities of Tagum and General Santos (GenSan), and the improvement of the Davao International Airport (DIA) in Davao City.
The Polloc port, she explained, will serve as a “major gateway in central Mindanao, providing transport and logistics support to the ARMM Regional Economic Zone and will be the main gateway for the proposed Bangsamoro region.”
The Tagum and General Santos aerotropolis projects are mixed-use facilities around airports that would “serve the growing air traffic to and from Mindanao,” Ms. Lopoz said.
The United States Agency for International Development is providing technical assistance to MinDA in preparing the conceptual plan for the General Santos aerotroplis project around the current airport.
“This is really all about bringing progress closer to the people, through connectivity infrastructure. You see, if we want to invite more investors to Mindanao, then we also need to ensure that all the logistics and connectivity infrastructure are in place in order to make these investments stay and flourish,” Ms. Lopoz said.
The other zones of the Corridors approach are the Northern Mindanao Development Corridor and the Western Mindanao Development Corridor.
In Northern Mindanao, the government has lined up the improvement of the Laguindingan International Airport and the construction of the Panguil Bay Bridge.
In Western Mindanao, a new Zamboanga International Airport is planned and Ms. Lopoz said the feasibility study for the project is ongoing. — Carmelito Q. Francisco

NEA may finance relocation of power lines for Boracay rehab

THE NATIONAL Electrification Administration (NEA) said the agency can provide soft loans to relocate power lines as part of Boracay’s rehabilitation, but will not subsidize the projected losses of Aklan Electric Cooperative (Akelco) due to the resort island’s six-month closure.
“What we can do now, they are asking for help for the relocation of lines as part of the rehab on Boracay. That could cost P82 million. We will make sure that we’ll provide that amount but initially that would be through soft loan,” Administrator Edgardo R. Magsosong told reporters after a Senate hearing on the status of electrification efforts.
Mr. Magsosong was responding to statements issued by Akelco, which plans collect a P1.58 per kilowatt-hour (kWh) increase in power rates to cushion its losses due to the closure of Boracay. It has also appealed to NEA for a subsidy for its projected loss.
“NEA has no subsidy for that. I don’t know what they mean when they ask the government to subsidize but definitely not NEA, not DoE (Department of Energy). That should not be the case because we don’t have money for that,” he said.
Akelco has noted that Boracay consumes a daily average of 27 to 28 megawatts, which will drop about 84% due to the closure.
Senator Sherwin T. Gatchalian, who chairs the Senate committee on energy, said the P1.58 per kWh increase in power rates in Aklan was too high.
“I don’t think it should be that high as that… we might need to review that computation,” he told reporters.
He said the government could look into tapping calamity funds to subsidize Akelco’s expected losses since the closure was an unforeseeable circumstance.
Also on Monday, Senator Cynthia A. Villar said the six-month closure may not be enough to rehabilitate the island due to the infrastructure issues that needed to be fixed, especially the island’s drainage and sewer systems.
“I’m not agreeing but… I don’t think they will finish everything in six months. They will open it even if it’s not finished, I think,” she told reporters on Monday.
Ms. Villar, who chairs of the Senate committee on environment and natural resources, noted that the government would have to deal with the demolition of establishments which violate the 30-meter easement rule or those constructed in protected areas in violation of environmental rules.
Senator Nancy S. Binay, who chairs the Senate committee on tourism, urged the government to disclose its timetable for the rehabilitation, “so that we can monitor if the plans are followed.”
Boracay business owners will meet with government officials on Tuesday to discuss the impending closure of the resort island on April 26.
Property developer Vista Land and Lifescapes, Inc., which is chaired by Ms. Villar’s husband, former Senate president Manuel B. Villar, Jr., acquired the 54-room Boracay Sands Hotel, and through its condominium arm Vista Residences, developed Costa Vista Boracay in 2016. — Camille A. Aguinaldo

LTFRB to go after choosy ride-sharing drivers

THE Land Transportation Franchising and Regulatory Board (LTFRB) said it will issue show-cause orders against ride-sharing drivers who reject rides and cancel bookings.
“We will issue show-cause orders against those drivers,” LTFRB Board Member Aileen Lourdes A. Lizada told reporters in a message.
Ms. Lizada, however, did not give any further details. A show-cause order recipient is typically asked to explain why a regulator should not impose sanctions or cancel a license.
Ms. Lizada issued the statement amid reports that ride-sharing drivers are refusing trips.
Some users of the Grab Philippines (MyTaxi.PH, Inc.) service are claiming that drivers nearby are refusing pickups because of their destinations. Some also accept bookings, then ask the rider to cancel the trip, in order for the refusal not to register on the company’s analytics.
The LTFRB last week issued a show-case order asking Grab to explain its P2 per-minute waiting time charge.
Grab has said it has been transparent with its pricing. It added that the charges ensure that drivers are compensated for waiting in heavy traffic.
The agency also ordered the transport network company (TNC) to lower its surge rate to 1.5x from 2.0x while the petitions for accreditation of other TNCs are being processed. Four TNCs are applying for accreditation with the LTFRB.
Grab is also facing a review by the Philippine Competition Commission (PCC) over its acquisition of a rival’s Southeast Asian operations.
The PCC on Monday said that Grab and Uber Philippines (Uber Systems, Inc.) must explain by April 17 why they failed to continue operating the Uber platform, as required by the interim measures of the PCC.
The PCC ordered the two ride-sharing companies to continue operating independently pending the antitrust body’s review of Grab’s acquisition of Uber’s ride-sharing and food delivery businesses.
Grab extended the operations of the Uber Philippines application up to April 15, despite the former’s objections to the order of the PCC. The Uber app was first scheduled to go offline on April 8.
Uber Philippines sent notifications on April 15 to users that as of April 16, the app will no longer be available.
The PCC said that Grab’s buyout of Uber “will mean gobbling up 93% of the ride-hailing market.” — Patrizia Paola C. Marcelo

The 8% tax for self-employed individuals

Now that the tax filing deadline has passed, many taxpayers can breathe a sigh of relief. Taxpayers have gone through one of the most grueling deadlines for the year and have lived to tell about it. Yesterday’s deadline was a bit nostalgic, as it was the last return filed under the old tax system. From now on, we can totally immerse ourselves in the new rules under the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Taxes will now be referred to as “before TRAIN” (BT) and “after TRAIN” (AT).
With April 16 gone, the next income tax filing deadline for individuals will be the first-quarter Income Tax Return (ITR) due on May 15, 2018. Before that date, self-employed individuals need to make a crucial decision. Do they avail of the 8% special tax rate, or follow the regular income tax rate for individuals?
Since the start of the year, when the TRAIN law became effective, many self-employed individuals and small business owners have been keenly following the developing rules for the 8% tax applicable to them. Every time I attend a family gathering, someone would always ask me about the 8% tax and ask how he can avail of it. There have been issuances from the Bureau of Internal Revenue (BIR) that have helped shed light on some of the questions of taxpayers. Since this is a new tax rate, the BIR has to develop rules specifically for implementing this special tax rate. Taxpayers are grappling with the various issuances, trying to understand and comply with them.
The 8% tax is applicable only to self-employed individuals (sole proprietors and professionals) whose gross receipts or gross sales and other non-operating income for the year do not exceed the three million pesos (P3,000,000) value-added tax (VAT) threshold and are not subject to other types of percentage tax. If the small business is owned by a corporation, the 8% tax will not apply. The 8% tax is applicable to various types of business activities that can be undertaken by a sole proprietor, such as the practice of a profession, consultancy services, or convenience store business.
The taxpayer availing of the 8% tax gets to enjoy simplified taxation. He does not need to pay separate income tax and percentage tax, as the 8% tax rate answers for both taxes. He also does not need to account for various expenses when computing taxes. If the self-employed individual is earning purely business income, he simply needs to add up his gross sales or receipts, deduct the non-taxable P250,000, and multiply the difference with the 8% to arrive at his tax payable to the BIR. It’s that simple.
A word of caution, however; the 8% rate should not be an automatic choice for all self-employed individuals. The 8% tax rate is imposed on the gross sales or receipts; no deductions for business expenses are allowed. Hence, the self-employed individual should do his math and check what option would benefit him most. He should compare his tax liability under the 8% tax and the regular income tax of 0% to 35%. However, should he elect to pay under the regular rate of 0% to 35%, he shall continue to pay the 3% percentage tax in addition to the income tax.
The 8% tax is generally preferred for professionals or those engaged in the sale of services where business expenses are normally minimal. For those in businesses that have huge costs of sales and operating expenses, the 8% tax on gross may yield a higher tax payable. However, even with the higher tax, the taxpayer can also factor in his decision making that fact the administrative requirements under the 8% are also simplified.
Partners of a general professional partnership are also not allowed to avail of the 8% tax, as their distributive share from the general professional partnership is already net of cost and expenses.
To avail of the 8% tax, the taxpayer must first cancel his VAT registration or his percentage tax registration. Once that is done, he must elect to apply the 8% income tax rate in his first-quarter income tax return, which is due on May 15. For those who are excited to file their first- quarter income tax return for 2018, a little patience is required; the appropriate form has not yet been released by the BIR. We expect the BIR Form to be issued before the deadline. Hence, taxpayers need to check the BIR website for the announcement of the availability of the form.
Section 12 of Revenue Regulations No. 8-2018 requires percentage taxpayers to submit their taxpayer registration update form (BIR Form 1905) to the BIR to end-date the percentage tax. If taxpayers fail to end-date their percentage tax registration, they must continue to file the percentage tax return reflecting zero-amount of tax with a notation that they are availing of the 8% income tax rate for the taxable year. I have received some messages that there are some BIR offices that refuse to end-date the percentage tax return for taxpayers availing of the 8% tax, despite the regulatory requirements. This situation is probably part of the birthing pains we are still experiencing with the new tax system.
If the taxpayer is VAT-registered and wishes to avail of the 8% tax, he must cancel his VAT registration no later than April 30, 2018. The taxpayer must submit his registration update form to the BIR and surrender his unused VAT invoices and receipts.
In view of the lower income tax rate, the withholding tax collected by clients and customers from their payments of professional, promotional, talent fees, and similar payments for services rendered by self-employed professionals availing of the 8% has also been decreased to 5%. The individual must submit to his client a sworn declaration that his gross sales or receipts for the year do not exceed P3 million, together with a copy of his Certificate of BIR registration showing that he is not VAT-registered. The sworn declaration must be submitted no later than Jan. 15 of each year or at least prior to the initial payment of the fees or commissions subject to 5% withholding tax. Failure to comply will result in the payment of a higher rate of 10% withholding tax.
The 8% tax rate for small business owners is a welcome development in the simplification of our tax system. It is especially helpful to individuals who may be very talented and knowledgeable in their chosen field but may have difficulty in coping with the complicated requirements of taxation. With tax simplification, self-employed individuals can concentrate on making their businesses grow and on improving their skills until, one day, they are small businesses no more.
 
Eleanor Lucas Roque is the head of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

1...12,79012,79112,792...14,285Page 12,791 of 14,285
ADVERTISEMENT
ADVERTISEMENT
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin X Youtube