By Melissa Luz T. Lopez
Senior Reporter

BUSINESSES turned more optimistic in the last three months of the year amid expectations of increased purchases for Christmas and improving global conditions that will fuel stronger exports, the central bank reported yesterday, noting that generally better readings in its latest survey could signal that overall economic growth could beat the pace of the first three quarters.

Results of the Bangko Sentral ng Pilipinas’ (BSP) fourth-quarter Business Expectations Survey showed 43.3% of respondents bullish about economic prospects this quarter, picking up from the 37.9% confidence index (CI) reading in the July-September survey round. It was also the best reading since a 45.4% net score in the third quarter of 2016, according to central bank data.

The CI is computed as the percentage of firms that answered in the affirmative less those that replied in the negative when asked on a given indicator. A positive CI indicates a favorable view, except for the questions on inflation rate and the peso borrowing rate, where a positive CI indicates the opposite, the BSP explained.

The survey covered 1,473 firms nationwide on Oct. 2-Nov. 20, with respondents drawn from the combined list of the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and BusinessWorld’s Top 1,000 Corporations in the Philippines in 2015.

The BSP noted in a summary of findings that respondents grew more upbeat about the Philippine economy this quarter as they expect the Christmas season to inspire increased orders and consumer purchases, following a trend observed in the past years.

The companies also cited expectations of more business expansion, bigger state spending on infrastructure and development projects, and favorable macroeconomic conditions for their more optimistic views.

Sentiment improved across businesses nationwide, with a bigger jump in the net score for Metro Manila-based firms at 44.2% from the third quarter’s 37%, compared to those in the provinces, whose confidence index readings improved to 41.8% from 39.7% the previous quarter.

A recovery in global economic activity is also expected to boost demand for Philippine products.

Exporters were the “most bullish” among business categories, posting a record-high 50% confidence level, said Rosabel B. Guerrero, director at the BSP’s Department of Economic Statistics.

Importers also grew more upbeat for the fourth quarter with a 43.8% net score, while domestic-oriented firms posted a 49.6% confidence index.

Across industries, business optimism is highest among services at 50.6%, followed by wholesale and retail trading firms at 50.1%. In particular, those engaged in the hotel and restaurant sector expect increased activity amid the festivities, Ms. Guerrero said.

On the flip side, industrial and construction firms grew less upbeat about business prospects for the quarter, the BSP said. Manufacturing, mining and quarrying companies dragged sentiment down, against otherwise optimistic views from firms in the agriculture, fishery and forestry and electricity, gas and water supply sub-sectors.

BSP Deputy Governor Diwa C. Guinigundo said the survey results had strong correlation with gross domestic product (GDP) growth, noting that the improved sentiment could signal even greater economic activity this quarter.

“Theoretically, the fourth quarter real GDP can be higher than the third quarter,” Mr. Guinigundo said during yesterday’s briefing.

If realized, Philippine GDP could touch 7.0% this quarter, coming from a 6.9% reading last July-September, as well as 6.4% and 6.7% in the first and second quarters, respectively.

Firms generally expect commodity prices to pick up further but remain within the BSP’s 2-4% target band. The peso is likewise expected to depreciate further, while interest rates are seen trending higher. Still, companies expect to have easy access to credit.

CONFIDENCE EASES FOR Q1 2018
At the same time, business confidence slipped for the first quarter of 2018, tracking a usual decline as companies expect a slowdown in demand following a surge over the holidays.

A seasonal lag in business transactions at the start of a new year as well as concerns about higher excise taxes seen kicking in as 2018 opens also drove sentiment down to 39.7% from 51.3% previously, although still better than the 34.5% “next quarter” reading of 2016’s final quarter.

Construction firms, however, grew more bullish towards the next quarter as they expect to take on new projects from both the government and private sector.

Fewer firms also said they will hire more workers next quarter as the number of businesses with expansion plans slipped.

THE SENATE successively approved on second as well as final reading late yesterday afternoon the first of up to five tax reform packages of the administration of President Rodrigo R. Duterte, putting this flagship program on track to implementation as 2018 opens in order to help finance an P8.44-trillion infrastructure development plan till 2022.

Senate Bill No. 1592 — sponsored by Senator Juan Edgardo “Sonny” M. Angara, chairman of the Senate Ways and Means committee — was approved with 17 affirmative and one negative vote.

The House of Representatives approved its version, House Bill No. 5636, on March 31 after that measure was filed in the chamber in January. The Finance department (DoF) submitted its draft to Congress in September last year.

In one of its last amendments, SB 1592 added a provision that doubles the excise tax rate for non-metallic minerals and quarry resources to four percent from two percent currently. “Excise tax rates on metallic and non-metallic minerals and quarry resources were last amended through Republic Act No. 7729 of 1994,” read a brief provided by Mr. Angara’s office.

In the wake of news of this latest amendment, introduced last Monday night, the mining and oil sectoral index performed the worst among the Philippine Stock Exchange’s (PSE) six sub-indices, dropping 615.65 points or 5.07% to 11,526.59.

SB 1592 already also increases the coal excise tax from P10 per metric ton (/MT) currently to P100/MT in the first year of implementation, P200/MT in the second year and P300/MT starting the third year.

Ronald S. Recidoro, executive director of the Chamber of Mines of the Philippines, said in a telephone interview that he “cannot comment yet” as the group has yet to study the final version.

SB 1592 also doubles prevailing documentary stamp tax rates on bank checks (to P3 from P1.50), sale or transfer of shares of stock (to P1.50 from P0.75), certificate of profit or interest in property transactions (to P1 from P0.50); increases the final tax on foreign currency deposit units to 15% from 7.5% and the capital gains tax for stocks not traded on the PSE to 15% from 5% or 10% currently; and imposes a 10% excise tax on cosmetic procedures “and body enhancements undertaken for aesthetic reasons”.

The donor’s and estate tax systems will also be simplified, with current rates reduced to a flat six percent of net donations for gifts exceeding P250,000 in value and of net value of estate, respectively.

Those add to lower personal income tax rates, whose projected foregone revenues will be offset by bigger collections from reduced value added tax exemptions, higher excise taxes on cars and on oil products, as well as an excise levy on sugar-sweetened drinks except milk, coffee as well as fruit and vegetable juice.

SB 1592’s approved version cuts to P130 billion projected revenues for the first year of implementation from P159.5 billion just last week, as well as compares to HB 5636’s P119.4 billion and the DoF proposal’s P149.6 billion. — Arjay L. Balinbin

THE GOVERNMENT will prepare early next year a draft tax amnesty measure, the Department of Finance (DoF) said.

“We’ll start it next year. Early, I mean the process,” Finance Secretary Carlos G. Dominguez III told reporters last week.

Budget Secretary Benjamin E. Diokno announced earlier this month that the government may offer the amnesty program next year, noting that the administration of President Rodrigo R. Duterte has proven its seriousness in dealing with big-time tax delinquents.

Mr. Dominguez said: “We agree with him,” even as he admitted that “we haven’t discussed it yet.”

“We think that the tax amnesty… should be offered most likely next year.”

Finance Undersecretary Antonette C. Tionko said that a tax amnesty program may not need legislation. “[G]enerally, amnesty needs legislation, but there are ways to do it administratively,” Ms. Tionko said without elaborating.

Mr. Dominguez said the DoF will have to also determine if the tax amnesty will immediately cover all or if it will be done in phases.

“We haven’t really determined yet, but certainly I think we will start with the estate taxes,” he said, referring to the estate tax amnesty provision under the first of up to five packages of the Tax Reform for Acceleration and Inclusion that was approved successively on second as well as third and final reading in the Senate yesterday.

The House of Representatives approved its own version on March 31 after the bill was filed in that chamber in January. The DoF submitted its draft to both chambers of Congress in September last year.

The Senate version, under Senate Bill No. 1592, among others allows payment by installment of total estate tax liability within two years of start of amnesty offer without penalty and interest.

“There are a lot of taxpayers who cant pay because the interest is 20% per annum,” Mr. Dominguez said.

Estate taxes — levied on inherited assets — have been tagged as an area that can be tapped for additional tax revenues.

Mr. Dominguez said the DoF has yet to project the government’s take from an estate tax amnesty, but the past administration of former president Benigno S.C. Aquino III had estimated that the Bureau of Internal Revenue could collect up to P50 billion annually in estate taxes from just P850 million-P1 billion yearly then.

The government last implemented an amnesty program covering all national taxes in 2007, under which it collected some P4.91 billion, according to Bureau of Internal Revenue data.

The government expects to rake in P2.258 trillion in tax revenues this year, and it has so far collected 72.59%, or P1.639 trillion. In 2018, the government seeks to collect P2.671 trillion in taxes. Bigger revenues are programmed to help fund the government’s P8.44-trillion infrastructure build until 2022. — Elijah Joseph C. Tubayan