FINANCE Secretary Carlos G. Dominguez III said that poor infrastructure is what keeps investors from setting up business process outsourcing (BPO) operations here, not the loss of incentives associated with the tax reform program.

“There are other factors that affect the foreign investments coming in. So what are those other factors? Poor infrastructure…that is the number one factor that is hampering FDI (foreign direct investments),” he told reporters late last week.

His remarks were issued in response to calls by the Philippine Economic Zone Authority, as well as the BPO industry not to remove value-added tax exemptions on export sales, which would reduce the industry’s competitiveness against regional BPO rivals.

The Information and Technology and Business Process Association of the Philippines (IBPAP) said last week that although it supports the lowering of personal income taxes for individuals, it asked the government to consider the losses the industry may face when its tax perks are stripped away.

IBPAP said that it was able to contribute significantly to the growth of the middle class over the past decade and with the IT-BPM (business process management) industry subsectors growing between nine to 13% over the next six years.

In 2016, it employed 1.1 million Filipinos and generates $23 billion in revenues.

The BPO industry sought to keep the exemption of certain sales and imports from the value-added tax (VAT).

Once the first package of the Tax Reform for Acceleration and Inclusion Act is approved, it will direct the government to subject the gross receipts of BPO firms to a 12% VAT.

Mr. Dominguez said that reforming the tax system to generate more revenue will enable the government to be better placed to carry out an infrastructure program, in which it aims to spend about P8.4 trillion on various projects over the medium term.

He said improving transport networks for goods would lower costs for businesses.

“So that is why we are going to spend money on infra, we have to raise some money to do that, we cannot just keep on borrowing, we have to pay for our own infra,” he said.

“If the infra is better then perhaps, you will attract more investors. The idea of infra is to lower people’s costs, transportation cost, logistics cost, etc. And these perks they are enjoying now will certainly be substituted with a better infra setup,” he added.

Aside from lowering income tax rates and withdrawing some VAT exemptions, the tax reform program also proposes to increase excise tax rates on fuel and automobiles, and harmonize donor and estate taxes into a lower rate.

The Finance department’s first package of the tax reform program is expected to yield P1.163 trillion in net revenue from 2018 to 2022, with P133.8 billion generated in the first year of implementation, P233.6 billion in 2019, P272.9 billion in 2020, P253 billion in 2021 and P269.9 billion in 2022.

“If you notice the Philippines has a very bad habit of passing laws and then the next day passing exemptions… for VAT, we have had almost 60 items of exemptions. How come we charge 12%, but we are only collecting 4.3% of our GDP (gross domestic product)? While Thailand charges only 7% and still collects 4.3% of their GDP as VAT. Our goal is not only to raise the revenue but to make it more fair,” said Mr. Dominguez. — Elijah Joseph C. Tubayan

THE CHAIRMAN of the House committee on banks and financial intermediaries has urged the Bangko Sentral ng Pilipinas (BSP) to shorten the deadline for bank’s compliance on the shift to Europay MasterCard Visa (EMV) chip-embedded cards.

Eastern Samar Rep. Ben P. Evardone, the panel’s chairman, said in a letter dated July 3 addressed to the newly installed BSP Governor Nestor A. Espenilla, Jr. that they have received reports of “fraudulent activities” like skimming on automated teller machines (ATMs) of local banks.

“Skimming was attempted upon ATMs of the Land Bank of the Philippines (LBP) last year, resulting in the apprehension of foreign nationals. Also, the Banco De Oro (BDO) Bank reported recent skimming attempts upon its ATMs,” Mr. Evardone said in his letter.

“In this regard, I am urging the Monetary Board and the Bangko Sentral ng Pilipinas to shorten the deadline to Dec. 31, 2017 instead of its original June 30, 2018 deadline for banks’ compliance on the upgrade to EMV of our ATM Cards,” he added.

An EMV chip-embedded card has enhanced security features, which include encryption locks and keys to authenticate the card and transactions, protecting data from being compromised.

Mr. Evardone said that criminals are becoming “more sophisticated” in their fraudulent activities.

“Hence, unless the deadline for compliance is shortened, we fear that more bank clients will be victimized, to the prejudice of the national interest in general, and the banking industry in particular,” the committee chairman added. — Raynan F. Javil

THE Finance department is considering the consolidation of state-owned guarantee firms with Philippine Export-Import Credit Agency (PhilEXIM), in order to streamline surety services.

PhilEXIM is an agency of the Department of Finance (DoF), providing credit, credit insurance and guarantee facilities primarily to export-oriented industries, including small and medium enterprises.

Some credit insurance firms which are government-owned and -controlled corporations (GOCCs) include the Small Business Corp., the Quedan & Rural Guarantee Corp. and the Home Guaranty Corp.

The plan however will have to be reviewed, and the DoF has not disclosed a timeline for its rollout.

In a statement, Finance Secretary Carlos G. Dominguez III said that the merger of these firms may be done through an executive order.

“We have a GOCC law so we can put them all in one organization and then just create a new one without necessarily going to Congress,” said Mr. Dominguez.

According to Republic Act 10149, the act which aims to promote the financial viability and fiscal discipline of state-run institutions, the Governance Commission for GOCCs (GCG) can “implement the reorganization, merger or streamlining of the GOCC, unless otherwise directed by the President.”

The GCG is a central advisory body for GOCCs, which evaluates their performance and determines their relevance, to ascertain whether they need to be reorganized, merged, streamlined, abolished or privatized.

According to National Treasurer Rosalia V. De Leon, PhilEXIM’s P500 million budget may be carried over to the enlarged credit institution.

However, the unitary credit corporation will need another P500 million fresh capital infusion to comply with central bank requirements.

Ms. De Leon added that the merger would have to separate mandates of the old PhilEXIM structure from the new agency.

She said the current PhilEXIM would mainly be a collecting agency in charge of handling the existing assets of the firm, while the new PhilEXIM would be a new corporation that would exclusively handle guarantee services.

Finance Undersecretary Grace Karen G. Singson of the Privatization Office said the state firms to be consolidated may face a reduction in their book value before the plan is carried out. — Elijah Joseph C. Tubayan

GOVERNMENT DEBT hit P6.345 trillion at the end of May, the Bureau of the Treasury (BTr) said yesterday.

The debt total rose 7.8% or almost P500 billion from a year earlier. Month on month, the total was down 0.4%, or P25.06 billion.

The end-may total is at 97.22% of the P6.526 trillion in outstanding debt programmed for the end of the year, according to the Budget Expenditures and Sources of Financing report.

About 65%, or P4.137 trillion of the total debt came from domestic creditors, against P3.797 trillion a year earlier.

Against the end of April however, the domestic total was down 0.5%.

“The decrease was primarily due to the net redemption of government securities amounting to P22.70 billion and a stronger peso that reduced the value of onshore dollar bonds,” the Treasury bureau said in a statement.

Outstanding external debt meanwhile grew 5.7% to P2.208 trillion year on year.

From the month-earlier period, it fell 0.1%, or about P710 million.

“For the month, external debt reduction was attributed to the combined effect of stronger peso and net repayments of foreign obligations amounting to P7.07 billion. These more than offset the upward revaluation in 3rd currency-denominated debt worth P4.78 billion,” said the BTr.

The government borrows to fund its fiscal deficit — which is capped at 3% of gross domestic product until 2022.

It has programmed an 80-20 borrowing ratio, in favor of domestic lenders. — Elijah Joseph C. Tubayan

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THE Bureau of Customs’ (BoC) proposed administrative order seeking to put up temporary storage for overstaying and abandoned cargo diminishes the jurisdiction of the Philippine Ports Authority (PPA), the agency managing the country’s public ports said.

In a statement on Monday, PPA Assistant General Manager Hector E. Miole questioned certain parts of the draft order, including a provision that will allow the Customs bureau to impose rates for storage services in identified Customs facilities and warehouses (CFW).

The proposed order will implement Section 307 of the Customs Modernization and Tariff Act (CMTA), which calls for the Customs commissioner to “establish a system for temporary storage of imports prior to goods declaration in case of abandoned or overstaying goods.”

“CMTA has neither repealed nor superseded the jurisdiction of port authorities over port operators, such as those who provide warehousing or storage services,” Mr. Miole said.

He said the Customs administrative order (CAO), might imply that the bureau “will issue guidelines for storage rates as well.”

He said Section 804 of the CMTA provides that the bureau may impose an annual supervision fee to operators of CFWs and Customs bonded warehouses but not for warehousing and storage services.

Mr. Miole said the bureau’s authority over the warehousing or storage service providers is for enforcement of customs and tariff laws.

“[BoC] does not, however, provide for the said services as this is a function of the port authority or the port operator, as the case may be,” he said.

“The guidelines for the applicable storage period, the rates, as well as violations thereof are functions that are still lodged with the concerned port authorities,” he added.

Section 2 of the draft order calls for a systematic handling, storekeeping, safekeeping and preservation and inventory of abandoned or overstaying goods. The aim is to protect the interest of the bureau against unauthorized withdrawal or pilferages. It will ensure zero losses or spoilage of the abandoned or overstaying goods entered in the facility.

Under Section 4.2 of the draft, all separate temporary storage facilities will be part of the premises of the bureau, under its control and supervision, and must conform with international standards.

A separate subsection states that inventory and other management record of imported goods handled and stored by CFW operators “shall be maintained and kept at all times in their places of business and shall be accessible and available electronically to authorized [Customs] officers.”

“Such records shall also be subject to inspection by authorized customs officials and upon proper demand, shall immediately be produced and submitted to such officials,” it reads.

The draft order further states that goods stored temporarily must be placed under a customs procedure, auctioned, condemned or reexported within 90 days after due notice from the issuance of the order of abandonment.

Any request for lifting of the order of abandonment may be filed “within 15 days from notice with the Law Division and subject to the approval by the District Collector.”

Mr. Miole said the draft order must be amended to clarify that it is the PPA and not Customs bureau that has the duty to provide warehousing and storage services, as well as set their fees.

He said allowing the bureau to issue guidelines on storage and rates “would result in having two guidelines on the same subject matter issued by different government agencies.”

“It is PPA’s position that the proposed CAO on CFWs should be limited to the guidelines for establishing, maintaining and operations of CFWs only, without reference as the provision of warehousing or storage services. Providing for this delineation is useful for the efficient and effective operations within the port, as it will create transparency between the different legal regimes operating inside the port premises,” he said.

He also rejected the bureau’s plan to declare the CFWs as “part of Customs premises” since these facilities are under the PPA. — Victor V. Saulon

DIRECTOR-GENERAL Charito B. Plaza said the Philippine Economic Zone Authority (PEZA) approved a total of P268.364 billion worth of proposed investments during the first 365 days of President Rodrigo R. Duterte’s term, generating direct employment of 73,043 positions as of the end of April, the latest date for which data were available.

The first-year approvals cover 564 projects, PEZA said in a statement.

PEZA enterprises generated exports worth $42.103 billion between July 1, 2016 and April 30, 2017.

Ms. Plaza said investor confidence in the Philippines remains high, noting that new sources of investment are emerging like the Middle East and China.

FARMERS, fishermen and children made up the poorest sectors in the Philippines in 2015, but poverty incidence decreased across all sectors, according to a report by the Philippine Statistics Authority (PSA).

In its 2015 Poverty Statistics for Basic Sectors report, released on June 30, the PSA identified farmers, fishermen and children as the sectors with the highest poverty incidence, among nine basic sectors identified in the Social Reform and Poverty Alleviation Act, or Republic Act No. 8425.

The other basic sectors are: self-employed and unpaid family workers; women; youth; migrant and formal sector workers; senior citizens, and individuals residing in urban areas.

Poverty incidence for the sector of farmers was recorded at 34.3%; fishermen, 34%; and children, 31.4%. These sectors also consistently registered as the three sectors with the highest poverty incidence in 2006, 2009 and 2012. The poverty incidence in these sectors also exceeded the national average of 21.6%.

Other sectors with incidence above the national average are the self-employed and unpaid family workers, and women.

Poverty however, decreased in all sectors from 2012-2015. In contrast, poverty incidence numbers largely were increasing or unchanged in two comparative periods: 2006-2009 and 2009-2012.

National poverty incidence continued its declining trend, with a decrease of 3.6%, higher than the 1.1% for 2009-2012 and 0.3% for 2006-2009.

The PSA report provides poverty incidence estimates using the income and sectoral data from the combined Family Income and Expenditure Survey, which was used for classifying non-poor or non-poor basic sectors, and the Labor Force Survey.

Income refers to the total family income and not the income of the individual in a particular sector. The total family income is divided among the members to get the per capita figure. If the per capita income is below the poverty threshold, all the members of the family are considered as poor and then classified into sectors.

The basic sectors in the report are not mutually exclusive, thus overlaps exist. Women farmers will be accounted for in both the women sector and in the farmer sector, for example.

While economic growth in the past few years brought about by policy reforms delivered jobs and lower poverty incidence, poverty remains a major problem in the country. Earlier this year, the government launched the Philippine Development Plan 2017-2022, which sets out programs and measures to maximize potential growth and provide better opportunities. — Patrizia Paola C. Marcelo