Facebook Instagram Linkedin X Youtube
Home Blog Page 13008

TRAIN, inflation, and the stock market

At first there were bureaucracies, endless subsidies, and new taxes; second were price hikes due to the new taxes; third, monetary control measures to minimize price hikes; and fourth, investment funds react to these monetary controls, especially regarding the exchange and interest rates.

That in a sense, is how a nonfinance researcher like me would attempt to connect the dots. The first and third actions are government interventions while second and fourth are market reactions to these interventions.

Since I am not a stock market analyst, I chose to attend the BusinessWorld Stockmarket Roundtable held Tuesday at Makati Shangri-La Hotel. After all, it was a good opportunity for researchers and investors to know more about the stock market.

There were four speakers that afternoon. Augusto “Gus” Cosio, Jr., president of First Metro Asset Management, Inc.; April Lynn Tan, vice-president and head of Research of COL Financial Group, Inc.; Justino “Jun” Calaycay, Jr., head of Research and Engagement Department of Philstocks Financial, Inc.; and Michael “Mike” Gerard Enriquez, chief Investment officer of Sunlife Financial.

Gus Cosio argued the following points, among others: (1) the TRAIN’s personal income tax cut will put more cash in the pockets of salaried people, good for current account, savings account (CASA); (2) rise in short-term interest rates are good for net interest margin (NIM) expansion; (3) rise in prices will raise demand for working capital; (4) decline in required reserves will reduce intermediation cost; (5) better macro growth means fewer troublesome loans; (6) never put all your hopes on one or two stocks and invest in a basket of stocks.

Mike Gerard Enriquez started being less optimistic and enumerated sources of potential disruptors in the stock markets: (1) faster hikes in US Federal rates and balance sheet reduction, (2) faster pace of peso depreciation, the worst-performing Asian currency at the moment, (3) higher inflation due to new taxes, (4) worsening current account deficit, and (5) risk in government implementation of reforms. Overall though he is optimistic and expressed the need to expand the number of listed companies at the PSE.

April Tan highlighted the following points, among others: (1) market correction in January was expected due to hike in US bond rates, (2) the correction was a good opportunity to accumulate stocks at more attractive valuations, (3) weaker peso and higher taxes are inflationary and can adversely affect consumer spending, (4) but inflation is not a long-term but a short-term issue, (5) historically, equity markets have gone up with higher rates, and (6) long-term economic prospects remain positive with favorable demographics, high remittances from OFWs and growing BPO sector.

Jun Calaycay discussed these considerations, among others: (1) the Bangko Sentral ng Pilipinas is expected to raise interest rates 1-2 times this year, (2) higher inflation from TRAIN is felt more by people on the ground, (3) despite these, Philippine economy will continue to expand, (4) good prospects this year are construction and allied services, power and energy sectors.

I learned several lessons, especially for a nonfinance guy like me. My concerns and research work are focused on government policies that distort the normal incentives system if markets are left more freely.

Encouraging more portfolio investments and foreign direct investments (FDI), more big infrastructure projects via integrated PPP and not “hybrid” PPP and without tax hikes à la TRAIN — all these took place during the past administration.

For instance, there was a big increase in the Philippine stock market capitalization in one decade, 3.5 times expansion in 2015 or 2016 level as against the 2006 level while other neighbors managed to expand less than 2 times. And the Philippines’ market capitalization was at the median level of 80+% of GDP, comparable to South Korea level (see table).

Market Capitalization

Inflationary pressures coming from tax hikes while retaining high tax rates elsewhere (VAT, corporate income tax/CIT, withholding tax, etc.) can adversely affect consumer spending, which, in turn can affect overall macroeconomic performance.

That is why the coming TRAIN 2 should aim for significant tax cuts in CIT and VAT while reducing the number of exemptions and tax holidays. A nontax-hungry TRAIN can tame inflation, stabilize the credit markets and expand the stock markets.

 

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

minimalgovernment@gmail.com.

Developing the next generation of ‘Filipinnovators’

Based on a recent study by Shikhar Ghosh of the Harvard Business School, “75% of all start-ups fail” because launching a new enterprise has always been a “hit-or-miss” proposition. Steve Blank of Stanford University further states that the decades-old formula of “writing a business plan, pitching it to investors, assembling a team, introducing a product, and start selling as hard as one can” is risky because setbacks are expected and the odds are always against the entrepreneur.

Thus, a methodology known as “lean start-up” has been introduced that favors “experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional big design up front development,” and has proven to be a quicker, better, and more efficient alternative when starting a business.

It is with this scenario that a variety of organizations worked together to provide lean start-up techniques to ten groups from all over the Philippines that already have ideas but need to level up to bring their products and services. These groups — the Department of Science and Technology’s Philippine Council for Industry, Energy, and Emerging Technology Research and Development (DoST-PCIEERD), De La Salle University Manila (DLSU), Research Triangle Institute (RTI International), and the George Washington University (GWU) — launched a four-week, part-time experiential program on Feb. 19, at DLSU for DoST-funded researchers.

Based on the Lean Start-up Model of Stanford University, the Filipinnovation Entrepreneurship Corps Lean Start-up Training Program is an iterative process that aims “to obtain real-world learnings and insights that validate key components of the business model of a research project or product.”

According to Dr. Richard Abendan of RTI International, “it will also enable teams to determine the commercial readiness of their research, decide on whether the innovation warrants further efforts to bring to market, and develop a transition plan to bring it to market.”

In this program, teams of academic researchers, graduate students, and industry mentors learn through active outreach to customers in validating their assumptions of market needs for their products or technology.

Each team has four members: an Industry Mentor, a Principal Investigator, an Entrepreneurial Lead, and a Technology Transfer Officer. The entire team will engage with industry and will spend time learning from customers, partners, and even competitors.

The kickoff started on Feb. 19 and ended on Feb. 21, and focused on value proposition design, business model canvas, customer development, interview techniques, interview assessment, customer ecosystems, storytelling, and minimum viable product and prototypes.

Following this event, teams will have three five-day interview periods to conduct customer development interviews with potential customers.

The participants will be trained to use Launchpad Central (a “complete toolset for lean innovation”) to develop their Business Model Canvas, develop their hypotheses, and record customer development interview notes. Teams will receive online feedback from the instructors during two weekly online reviews, and individual feedback during office hours.

At a two-day virtual final event, the groups will gather in one place in the Philippines, and the instructors will deliver content remotely from the United States, and together they will discuss the lessons learned, the revenues and the costs, and market sizing.

Of course, a lot of work remains to be done since a business, whether big or small, needs time to grow, mature, and incubate, and a confluence of both human and nonhuman factors, from technical skills to entrepreneurial acumen as well as technology, equipment, machinery, and logistics.

The lean start-up method aims to reduce these constraints and develop more “Filipinnovators” who will create business both for inclusive growth and the common good.

 

Brian C. Gozun is Dean of the Ramon V. Del Rosario College of Business of De La Salle University.

brian.gozun@dlsu.edu.ph

Compassion, a leadership competency

By Raju Mandhyan

GROWING up in India, I went to a Zoroastrian School. It was a good school and as with most schools, it had all kinds of teachers. Some were nice and some not so nice. Some were passionate about their work and some regarded their work as just a job.

Of all the teachers, teacher D. N. Irani stands out in my memory. He was tall and lanky, with very little fat on his body. He wore his salt-and-pepper hair closely cropped and was always clean shaven. He was about the size and shape of Clint Eastwood, as Clint Eastwood looked in his 50s. In a light blue short-sleeved, bush shirt with khaki chinos and soft brown leather sandals he seemed to serenely glide from classroom to classroom.

In this school with its reputation of toughness, D.N. Irani walked tall and spoke slowly but always carried a big chunk of subtle influence. The boys would part in the hallways to let him pass, like Moses’ Red Sea, although nothing in his attitude or behavior demanded such from the boys.

Whenever other teachers or even the school head master was faced with a hooligan crowd in class they would always send for D.N. Irani to come and restore peace. And D.N. Irani never failed at quieting down a class simply by turning up quietly and planting himself in front of us like a mountain at peace. In the middle of all storms his mere presence would, somehow, make everyone see the bright and beautiful side life at school.

After seconds of gently staring us down, all he’d say is “You boys ought to be ashamed of yourselves. Go back to your studies; it is for your own good!” And, we’d all go back to work for weeks until the monkeys within us would get restless again.

For decades I used to wonder what it was about D.N Irani that had such impact on hooligans like us.

Today, as a leadership trainer and a coach, I have come to the conclusion that we responded the way we did to him because in the marrows of our bones we knew that he really and truly cared for us. We knew that he wanted us to grow, to become better and discover our own worthiness as human beings. We also knew that he felt and shared the growing pains in kids at school and that the shenanigans we played were just a cover up, a distraction to soothe our angst.

Beyond being visionaries, strategic thinkers, and excellent at execution leaders need to have deep compassion for people they work. Compassion — that ability to see, hear, sense, understand and want to help out others with their concerns, challenges and even pain is that energy binds and ignites every other leadership competency.

Research studies in 2012, by Olga Klimecki and Tania Singer of the Max Planck Institute, Germany concluded that compassion and compassion training increases pro-social behavior and strengthens resilience amongst leaders.

leader

Three ways to enhance and strengthen compassion abilities within us are:

• Be mindful all the time: That is keep your senses of observation, hearing and sensing perked up towards others, towards the surrounding and in the moment. Obviously this requires that we lessen our own urges to talk, consistently being doing things and grab at life mindlessly.

• Recognize common humanity: That is when in the presence of those that we interact with, we bring forth onto our minds the fact that they are just like us in many ways and we too, maybe, in many ways be just like them. I believe it is referred to as “kapwa tao,” in the Philippines.

• Stretch out to be of service: Not that we can always help others out of their dilemma but efforts, mental or physical, do bring up some results for others and, more importantly, also nourish our own natural needs to care.

Sometimes people may think that being compassionate is being nice yet there is a fine difference. In being nice one does kind things that provide relief without really sensing what others may be going through. Like a child helping out a homeless person. While compassion comes wrapped in feeling how they feel and wanting and making mental and physical efforts to help others out of their situation for good.

Besides the studies by Dr. Tania Singer and Olga Klimecki on Empathy and Compassion, Dr. Thupten Jinpa of Stanford another researcher on compassion claims that “having compassion frees us from fearing… it turns our attention outwards, expanding our perspective, making our problems part of something bigger than us, that we are all in together.”

The amazing thing is that it is a learnable skill. The path to it is not long but the way is slightly deep. You cannot just walk there; you have to take a leap.

(This piece has been inspired by the book, the HeART of the Close.)

 

Raju Mandhyan is an author, coach, and a learning facilitator.

www.mandhyan.com

Jan. visitor arrivals up nearly 16% after increase in airline services

JANUARY tourism arrivals totaled 732,506, a record for the month and ahead of the pace for the full-year arrivals target of 7.5 million, amid improved air connectivity between Philippine destinations and key travel markets, the Department of Tourism (DoT) said in a statement.

The January total, up 15.97 % year on year, was driven by a rise in arrivals from China as well as continued strong numbers from South Korea, the Philippines’ number one visitor market, the DoT said.

The estimates, provided by the DoT’s Tourism Research and Statistics Division under the Office of Tourism Planning, showed arrivals from South Korea amounting to 198,145 in January, up 28.36% year on year, while those from China totaled 111,344, up 29.55%.

“Last year’s momentum carried over this year with the improved air connectivity via increased flights between Philippine gateways and various airports in major visitor markets, including China, Korea, the United States, Australia and Canada,” Tourism Secretary Wanda Corazon Tulfo-Teo was quoted as saying.

The DoT noted that Xiamen Airlines recently launched a three-times-a-week direct service between Fuzhou, China and Kalibo, Aklan and Puerto Princesa, using the Airbus A321 aircraft with 197 seat capacity.

“Another new route from China that our Route Development Team is working on is Tianjin-Puerto Princesa. The development of new routes is in consonance with our National Tourism Development Plan’s strategy to upgrade air connectivity from major tourist source markets to the Philippines,” Ms. Teo said.

Rounding out the other major sources of visitors were the United States with 109,154, up 14.90% year on year, Japan at 57,038, up 7.79%, and Australia at 30,924, up 4.41%.

Ms. Teo expressed confidence that “with the combined efforts of the DoT and the stakeholders, we will achieve our 7.5 million target for international arrivals in 2018.”

The January statistics have yet to reflect the impact of a government crackdown on Boracay businesses which began this month, allegedly because some establishments are not treating their waste water.

Tax neutrality for Islamic banks approved by House committee

THE House of Representatives’ committee on ways and means, chaired by Quirino Representative Dakila Carlo E. Cua, approved on Feb. 20 a tax neutrality provision in a bill seeking to establish a regulatory framework for the Islamic banking industry.

The still-unnumbered bill, which is intended to be a substitute for House Bills (HBs) 492 and 3975, hopes to achieve tax neutrality for the industry vis-a-vis conventional banks.

Section 14 of the bill, “Tax Neutrality,” reads: “The Government shall endeavor to achieve neutral tax treatment between Islamic banking transactions and equivalent conventional banking transactions. The Bureau of Internal Revenue (BIR), pursuant to it rule-making power, shall issue policies and guidelines to implement tax neutrality conducive to the growth of Islamic banking and finance in the country. To achieve neutrality, the BIR may modify applicable taxes on Islamic banking transactions.”

Sharia-compliant banks cannot charge interest, which is normally an expense for conventional banking customers which can be deducted against tax due. In the absence of such deductibles, clients of Islamic banks may end up being treated differently by the tax code, putting the industry at a disadvantage and putting it at risk of failing to reach clients who wish to observe Islamic banking rules, hindering the goal of achieving wider financial inclusiveness.

“The nature of Islamic banking transactions is that if you don’t apply tax neutrality, it would entail double taxation,” Anak Mindanao (AMIN) party-list Representative Amihilda J. Sangcopan, one of the authors of the bill, said during the committee hearing.

During the proceedings, former president and now Representative Gloria Macapagal-Arroyo of Pampanga, recommended that the BIR, which was initially tasked to “issue policies and guidelines to implement tax neutrality,” to instead draft the implementing rules and regulations pursuant to the provision.

The measure, which was approved by the committee of banks and financial intermediaries last year, provides that “Islamic banks may be established as may be authorized by the Monetary Board.”

“The Monetary Board may also authorize banks primarily engaged in conventional banking to engage in Islamic banking arrangements, including structures and transactions, through a designated Islamic banking unit within the bank.”

In a phone interview, banks committee chair, Eastern Samar Rep. Ben P. Evardone, said that the proposed framework “will encourage… regular banks to sell Sharia-compliant products” and “ensure financial inclusion.”

Moreover, the Monetary Board may also “authorize foreign Islamic banks to establish Islamic banking operations in the Philippines” and regulate the number of participants by “taking into account the requirements of the economy, the preservation of the stability of the system, and the maintenance of healthy competition.”

Mr. Evardone said the committee is hoping to have the bill up for deliberation in plenary session next week and have it approved before the House adjourns in March. — Minde Nyl R. dela Cruz

PHL broadband, mobile speeds improve in Jan. but below global averages

THE PHILIPPINES improved its speed ratings in a study of fixed broadband and mobile performance in January, though it remained well below global averages, according to an index published by Seattle-based Ookla LLC.

In the Speedtest Global Index released by Ookla for January,the Philippines ranked 87th out of 128 countries for fixed broadband and ranked 94th out of 125 countries for mobile Internet.

For fixed broadband, the Philippines recorded a download speed of 15.67 Mbps (megabits per second), higher than the 10.16 Mbps recorded a year earlier, and an upload speed of 13.53 Mbps, higher than the 7.28 Mbps recorded previously.

Philippines’ Internet speed ratings by BusinessWorld

However, the numbers are lower than the global average of 41.88 for download speed, and 20.36 Mbps for upload speed).

The highest download speeds were registered by Singapore (166.44 Mbps), Iceland (161.98), and Hong Kong (136.15).

For mobile Internet, the Philippines registered a 12.55 Mbps download speed against 9.34 Mbps a year earlier and a 5.86-Mbps upload speed, against 4.68 previously.

The global averages were 22.23 Mbps for download speed and 8.94 Mbps for upload speed.

The highest mobile Internet download speeds were recorded in Norway (62.75 Mbps), Singapore (52.13 Mbps), and the Netherlands (52.98 Mbps).

Data for the Index comes from the hundreds of millions of tests taken by Ookla Speedtest users. — Patrizia Paola C. Marcelo

Energy regulator grants compliance certificate to Panay, Negros power firms

THE Energy Regulatory Commission (ERC) said on Wednesday that it approved and issued a certificate of compliance (CoC) to two power generation companies in the Visayas, ensuring electricity supply in the area during the dry season.

The regulator also identified five power generation projects for which it issued provisional authorities (PAO) to operate. Its actions were all dated Feb. 13, 2018 or after a temporary restraining order had been issued by the Court of Appeals against the suspension of the four ERC commissioners.

In a statement, ERC Chairperson Agnes T. Devanadera said the regulator “recognizes the need for the immediate issuance” of the certificate and the provisional authority “in order to ensure a reliable and sustainable power supply especially that there is an upsurge in power demand during the summer months.”

She said it is imperative for a power generation company to secure a CoC or a PAO before it starts commercial operation.

A CoC is issued by the ERC in favor of a person or entity to operate a power plant or other facilities used in the generation of electricity as called for under Section 6 of Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), and Section 4 of EPIRA’s implementing rules and regulations.

Ahead of the issuance of the CoC, the PAO may be issued to enable a generation company to operate its facility. The authority is issued through a notification to the company. It is valid for six months from issuance. The six-month period is included in the five-year term of the CoC that may be issued.

The ERC identified the two projects with newly issued CoCs as Panay Energy Development Corp. for its 150-megawatt (MW) unit three circulating fluidized bed coal-fired power plant in Barangay Ingore, La Paz, Iloilo City; and Silay Solar Power, Inc. for its 25-MW solar farm in Barangay Rizal, Silay City, Negros Occidental.

The five entities that have secured PAOs are Palm Concepcion Power Corp., Nickel Asia Corp., EDC Siklab Power Corp., Gaisano Balasan Solar Rooftop Project, and SMC Consolidated Power Corp.

Of the five, SMC Consolidated Power has the biggest capacity at 150-MW for unit two of its coal-fired power plant in Barangay Lanao, Limay, Bataan. Palm Concepcion has the second biggest at 135-MW for its plant in Sitio Puntales, Barangay Nipa, Concepcion, Iloilo; followed by Nickel Asia’s 10.944-MW diesel power plant in Quezon, Surigao City.

Separately, the ERC said the lower system loss cap to be charged by distribution utilities is to take effect starting in the May 2018 electric billing period.

“The lowering of the system loss caps is a move to bring down the power rates and help electricity consumers mitigate the impact of rising costs of commodities and services. This will encourage distribution utilities (DUs) to improve their distribution system and facilities so that they adhere to the newly prescribed system loss cap,” Ms. Devanadera said.

Resolution No. 20, Series of 2017, “A Resolution Adopting the ERC Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency” embodies the new distribution system loss cap that can be recovered and charged by DUs to their customers.

Under the resolution, private DUs are allowed to charge only up to 6.5% of distribution system loss, or the difference between the electricity delivered to the power distribution system and what was delivered to consumers connected to the system.

The resolution calls for a gradual reduction in the system loss cap until it reaches 5.5% by 2021.

For electric cooperatives, the ERC clustered the utilities “based on similar technical considerations.” They will have a cap of 12% for 2018, subsequently charge a cap within a range of 12% to 8.25% until 2022 onwards based on their clusters. — Victor V. Saulon

Disney family magic wanes in HK as Macau’s lights dazzle

WHEN CHINESE TOURISTS choose a family travel destination, Hong Kong Disneyland would seem like a logical choice. But it’s the nearby gambling hub of Macau that has all the momentum.

Tourists are flocking to Macau, with record arrivals from China last year, and Hong Kong itself is seeing a rebound in mainland visitors, with a double-digit surge in such tourists during the Chinese New Year following a 3.9% increase last year. Meanwhile, the number of mainland visitors to Hong Kong Disneyland dropped for a third straight annual period, according to the theme park’s results released Tuesday.

Chinese families traveling to Hong Kong are finding other distractions for entertainment besides the Disney theme park, as shopping and dining options help drive the retail market for the city. Chinese travelers may be skipping Hong Kong Disneyland as they already have a Disney park in Shanghai, which attracted 11 million visitors in its first year after opening in June 2016. Macau, about a one-hour ferry ride away, also may offer a more interesting temptation.

The world’s biggest gaming hub has started to see a rebound of leisure tourists, with mass gaming revenue growth in the last quarter expanding at a faster pace than the previous three months. Macau regulators are pushing casino resorts to offer more family-friendly entertainment, posing a further challenge to Disney’s park.

MGM China Holdings Ltd.’s new $3.4-billion property, with a 2,000-seat theater, is part of that effort to transform Macau’s Cotai Strip into a family destination. The resort, which opened in time for the new year, should help drive the highest earnings gain for MGM China among its peers this year, according to a note from Morgan Stanley. MGM China on Tuesday reported stronger-than-expected earnings for its fourth quarter, as mass-segment revenue grew 22% from a year earlier.

Analysts and retailers selling everything from jewelry to cosmetics are optimistic the upward trend will continue for both Macau and Hong Kong this year. As for Disneyland, it still may get its magic back. Visitation has been improving since the second half of 2017, and October Golden Week and Lunar New Year both recorded double-digit growth, according to Apple Daily, citing Samuel Lau, chief executive officer. — Bloomberg

Chugging along with the TRAIN

2018 got a jump-start with Republic Act No. 10963 (otherwise known as the Tax Reform for Acceleration and Inclusion or TRAIN), which took effect on the first day of the year.

As most readers may be aware, the TRAIN amended several provisions of the National Internal Revenue Code of 1997 (Tax Code), which include individual income taxation, individual and corporate passive income taxation, estate tax, donor’s tax, value-added tax (VAT), excise tax and documentary stamp taxes.

A number of employees enjoyed higher take home pay due to the adjusted personal income tax rates. On the downside, however, the inflation rate appears to have risen, driven by the increase in prices of gasoline, sweetened beverages, and other commodities affected by the increased/new taxes. This has resulted in worries about the possible insufficiency in the take-home pay of ordinary Filipinos to cover actual and foreseeable surges in commodity prices.

There are also some interpretations of the TRAIN provisions which are highly debated, such as the preferential rate of employees of certain entities, and the correct tax treatment of registered enterprises within a separate customs territory, especially when an effective VAT refund system is implemented.

But there are also some “less noticeable” items under the TRAIN that are hardly mentioned in news reports or public forums that may require attention due to some features which may create confusion or stir controversy. Based on my observation, examples of these are below:

• Selective application of increase in certain passive income tax rates

TRAIN increased certain passive income tax rates but these changes were not equally applied to all types of taxpayers. Examples of these are as follows:

a. Philippine Charity Sweepstakes and lotto winnings exceeding P10,000 by citizens and resident aliens are now subject to 20% final income tax but winners who are nonresident aliens engaged in trade or business remain tax exempt regardless of amount.

b. While the interest income from a depository bank under the expanded foreign currency deposit system earned by domestic corporations is now subject to 15% final income tax, the same interest income earned by resident foreign corporations remains subject to 7.5% final income tax.

c. Capital gains on the sale of shares not traded in the Philippine Stock Exchange realized by domestic corporations are currently taxed at 15% final income tax. But these gains will still be taxed at 10% final tax (5% on the first P100,000 net capital gains) if realized by foreign corporations.

One may wonder whether the partiality in the imposition of increased income tax rates on certain types of taxpayers was really intended by Congress. Even assuming that the distinction in the imposition of taxes is based on reasonable grounds, taxpayers should nonetheless exercise caution in applying the correct income tax rates as an underpayment can unexpectedly result in penalties, or to a refund/tax credit claim in case of overpayment.

• Non-recognition of certain income tax exclusions

Prior to the TRAIN, Section 32(B)(7)(f), (g) and (h) of the Tax Code specifically mention the following items as income tax exclusions:

a. GSIS, SSS, Medicare and Pag-IBIG contributions, and union dues of individuals;

b. Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than 5 years; and

c. Gains realized by the investor upon redemption of shares of stock in a mutual fund company.

However, it appears that the foregoing exclusions were not replicated under the TRAIN. The symbol “xxx,” normally used to indicate the adoption of existing provisions of the Tax Code being amended, was not reflected.

The absence of the items may be interpreted in two ways, i.e., either the Congress intended to repeal these provisions or the omission was a mere oversight. If the intention was to repeal, then this should have been highlighted during the tax reform hearings for purposes of transparency; moreover, the enrolled bill of the TRAIN should have expressly indicated the intended deletion of these provisions to dispel ambiguous interpretation of the law. Thus, more likely than not, this appears to be an oversight.

• Reversion to old VAT threshold exemptions for real estate

In 2005, the sale of residential lots not exceeding P1.5 million and house and lots and other residential dwellings not exceeding P2.5 million were considered VAT-exempt. Thereafter on Jan. 1, 2012, the VAT thresholds were increased to P1,919,500 and P3,199,200 respectively pursuant to Revenue Regulations No. 16-2011. However, upon effectivity of the TRAIN, the VAT thresholds have been reset to their original values prior to 2012 (i.e., P1.5 million and P2.5 million respectively).

It is not likely that Congress had overlooked the increase in real estate values due to upward adjustments caused by inflation in the past. Musing over the reversion, one can speculate that this was also likely a mere oversight. Even with the increased thresholds in 2012, some may have doubts whether the indicated values in the law are still reflective of present market situations.

Given the amendments, taxpayers should be careful to take note of the reversal in threshold exemption while engaging in the sale of residential real property.

The items above are merely some of my observations. Perhaps, if others carefully examine the TRAIN provisions, they can further pinpoint other provisions that may be considered confusing, equivocal, or misplaced as to require amendatory or corrective actions by the legislators.

While the TRAIN has brought on mixed feelings from the public, which I likewise share, taxpayers should remain optimistic that the tax law can be further improved as the drafting of the next phase of tax packages are ongoing.

When a train goes through a tunnel and it gets dark, you don’t throw away the ticket and jump off. You sit still and trust the engineer. While it is scary to not see the big picture when it comes to the ultimate direction of the tax reforms, we should still look forward to the government’s promise that it has every intention to improve the quality of life of Filipinos. Riding along with the government for better tax reform is what we should aim for.

The views or opinions expressed 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.

Benedict Villalon is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

(02) 845-27 28 local 2035

benedict.villalon@ph.pwc.com

Peso strengthens as sentiment improves

THE PESO strengthened against the dollar on Wednesday, Feb. 21, as the central bank was suspected to continue intervening amid a big bond sell-off by the US Treasury.

The local currency closed Wednesday’s session at P52.10 against the greenback, 14 centavos stronger than its P52.24-per-dollar finish last Tuesday.

The peso traded stronger the whole day, opening the session at P52.165 per dollar. Its intraday low stood at P52.21, while its best showing was at P52.06 against the US currency.

Dollars traded on Wednesday slipped to $965.95 million from the $977.8 million logged the previous session.

“The BSP (Bangko Sentral ng Pilipinas) was still intervening that’s why the dollar-peso [remained stronger] throughout the day,” a trader said in a phone interview on Wednesday.

On Tuesday, traders said the central bank was likely intervening in the foreign exchange trading, lifting the peso up against the greenback following sharp declines.

As the country’s monetary authority, the BSP sometimes intervenes in trading to prevent any sharp swings that may cause the local currency to appreciate or depreciate.

“Otherwise, it traded within the range. [There’s just a cap] on the topside,” the trader added.

Meanwhile, another trader attributed the peso’s slight uptick to the “news of a massive bond sell-off by the US Treasury,” which caused the dollar to weaken.

The US government seeks to sell $258 billion worth of debt this week.

The US Treasury Department began ramping up its debt issuance earlier this month to fund the expected growth in borrowing tied to the biggest tax overhaul in 30 years and a two-year federal spending package.

UnionBank of the Philippines chief economist Ruben Carlo O. Asuncion, on the other hand, saw the stronger peso as a correction following the sharp decline of the local currency, which last Monday hit a near twelve-year low. The peso’s steep drop that day was triggered by the announcement of the BSP that it will cut the bank’s reserve requirement ratio by a percentage point, which will free more money into the financial system.

“The peso strengthened probably on the positive sentiment on the recent reserve requirement rate cut,” Mr. Asuncion said in a text message.

The Bankers Association of the Philippines earlier said it welcomed the central bank’s decision to cut its reserve requirement, saying that “borrowers will have access to more sources of funds and more efficient cost of borrowing that is expected to propel more economic activity in the country.”

For Thursday, Feb. 22, the first trader expects the peso to move between P52 to P52.30, while Mr. Asuncion gave a wider forecast range of P51.90 to P52.20.

The second trader expects the pair to trade between P52 and P52.40 “as investors look forward to possible hawkish cues from the FOMC (Federal Open Market Committee) minutes” which were due to be released yesterday night.

Meanwhile, most Asian currencies edged lower on Wednesday as the dollar was bolstered by rising US Treasury yields and optimism ahead of Federal Reserve’s last policy meeting minutes.

The dollar index was up 0.2% at 89.686. It is up 1.6% from Friday’s three-year low of 88.251.

Andy Ji, a strategist for Commonwealth Bank of Australia in Singapore, said rising US Treasury yields will put pressure on Asian currencies in coming months.

“Market is looking at the threshold of 3 percent in 10-year US Treasury yield. If it reaches that level, there is going to be a large risk reduction in the markets,” Ji said.

The US 10-year Treasury yields were at 2.8877% in Asian hours, hovering near a four-year peak. The rise in yields came as investors made room for this week’s deluge of $258 billion of government debt supply. — Karl Angelo N. Vidal with Reuters

Stocks decline on lingering concerns overseas

LOCAL STOCKS plunged on Wednesday, snapping their five-day climb, as the index continued to consolidate.


The 30-company Philippine Stock Exchange index (PSEi) dropped 1.25% or 109.05 points to close at 8,613.65, while the broader all-shares index also gave up 0.14% or 7.62 points today, Wednesday Feb. 21.

“Mainly the red flags coming overseas continue to dampen most markets, including ours. We see more of the yields in the US bond market continue to trek higher, which could translate to immediate rate hikes in the Fed (US Federal Reserve),” First Grade Finance, Inc. President and Managing Director Astrolito Romulo C. del Castillo said in a phone interview today.

Mr. Del Castillo added that oil prices, while dropping at the world market today, are likely to continue to inch higher.

“Again this is inflationary, not only in our own economy, but other economies as well,” he said.

On the domestic front, Mr. Del Castillo said no specific news is driving the market, which indicates that current movements remain to be a part of its consolidation.

Eagle Equities, Inc. President Joseph Y. Roxas also said that the market is still consolidating, noting the lack of news that may have prompted the index’s sudden drop.

Wall Street also ended lower on Tuesday, with the Dow Jones Industrial Average plummeting by 1.01% or 254.63 points to 24,964.75. The S&P 500 index was down 0.58% or 15.96 points to 2,716.26, while the Nasdaq Composite index was flat at 7,234.31, although still losing 0.07% or 5.16 points to 7,234.31.

Back home, four sectoral counters ended on a negative note. Property dropped 1.38% or 54.67 points to 3,903.49, followed by industrials that lost 1.29% or 148.84 points to 11,322.02. Holding firms dipped 1.08% or 96.12 points to 8,766.68, while the financials sub-index was down 1.03% or 23.24 points to 2,218.96.

Meanwhile, the mining and oil and services counters inched up, adding 2.63% or 316.51 points to 12,330.06 and 0.40% or 7.04 points to 1,745.44, respectively.

The market saw some 1.92 billion issues exchange hands for a value turnover of P9.53 billion, higher than the previous session’s turnover of P7.85 billion.

Decliners prevailed for the day at 128 versus the 82 that advanced and the 46 that remained unchanged.

Foreign investors maintained their selling position, widening net outflows to P516.38 million, against Tuesday’s P423.42 million.

“Volatility will remain. Other investors, specially the foreigners, they go to safer dollar investments. But there’s no reason to panic, it’s just consolidation of both markets,” First Grade Finance’s Mr. Del Castillo said.

Meanwhile, most Southeast Asian stock markets rose on Wednesday, tracking broader Asian peers.

Asia shares ex-Japan, which lost 0.20% in early trade, recovered to rise as much as 0.7%. — Arra B. Francia with Reuters

Pryce Corp. net income up 29% on higher LPG sales

Pryce Corp. (PPC) posted a 29% increase in net income in 2017 to P1.25 billion, driven by higher revenues from sales of liquefied petroleum gas (LPG), the company told the stock exchange on Wednesday, Feb. 21.

The listed firm, which imports and distributes LPG under the brand name PryceGas among its businesses, said last year’s profit was within its target.

Consolidated revenues rose 37% to P9.23 billion from P6.72 billion, with sales volume growing by double-digits after the increase in prices for the fuel product last year.

“Sales volume of LPG grew 11% to 210,000 metric tons (MT) from the previous year’s 189,000 MT. Despite this modest volume growth, revenues were up 37% because of the sharp increases in LPG contract prices (CP) during the year,” the company said.

In 2017, contract prices was at an average of $491 per MT, 42% or $145 higher than the previous year’s average of $346 per MT, the company said. — Victor V. Saulon

1...13,00713,00813,009...14,238Page 13,008 of 14,238
ADVERTISEMENT
ADVERTISEMENT
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin X Youtube