Home Blog Page 413

Peso down as markets eye Fed meet

PHILIPPINE STAR/WALTER BOLLOZOS

THE PESO weakened further against the dollar on Monday amid expectations that the US Federal Reserve will keep its target rate unchanged at its policy meeting this week.

The local unit closed at P57.20 per dollar, dropping by nine centavos from its P57.11 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened Monday’s session slightly weaker at P57.13 against the dollar. Its intraday best was at P56.98, while its worst showing was at P57.21 against the greenback.

Dollars exchanged increased to $1.699 billion on Monday from $1.64 billion on Friday.

“The dollar-peso ended higher amid cautious trading ahead of the FOMC (Federal Open Market Committee) meeting later this week,” a trader said in a phone interview.

The dollar was generally stronger on Monday as the Fed is expected to keep borrowing costs unchanged, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Tuesday, the trader sees the peso moving between P56.90 and P57.30 per dollar, while Mr. Ricafort expects it to range from P57.10 to P57.35.

The dollar rose against major peers on Monday after the United States and the European Union (EU) struck a framework trade pact, the latest in a flurry of deals to avert a global trade war, with investors also looking to this week’s US and Japanese central bank meetings, Reuters reported.

Meeting in Scotland on Sunday, US President Donald J. Trump and European Commission President Ursula von der Leyen said the deal provided for an import tariff of 15% on EU goods, half the rate Mr. Trump had threatened from Aug. 1.

That follows last week’s US agreement with Japan, while top US and Chinese economic officials will resume talks in Stockholm on Monday aiming to extend a truce by three months and keep sharply higher tariffs at bay.

The euro was last at $1.1693, down 0.4% on the day, reversing an initial knee-jerk rise in Asia trade as investors’ focus shifted to what an easing in global trade tensions meant for the dollar overall.

The dollar was stronger elsewhere, up 0.15% on the yen at 147.83, while the pound was down 0.13% at $1.3428.

As concerns subside about the economic fallout from punishing tariffs, investor attention is shifting to corporate earnings and central bank meetings in the United States and Japan in the next few days.

Both the Fed and the Bank of Japan are expected to hold rates steady at policy meetings this week, but traders will watch subsequent comments to gauge the timing of the next moves.

Investors will also be watching to see Mr. Trump’s reaction to the Fed’s decision.

The US president has been putting the Fed under heavy pressure to make significant rate cuts, and Mr. Trump appeared close to trying to fire Fed Chair Jerome H. Powell last week, but backed off with a nod to the market disruption that would likely follow. — Aaron Michael C. Sy with Reuters

Auto Sales (June 2025)

NEW VEHICLE SALES inched up by an annual 3.6% in June as a double-digit surge in commercial vehicle sales helped offset a 35% decline in sales of passenger cars, an industry report showed. Read the full story.

Auto Sales (June 2025)

How PSEi member stocks performed — July 28, 2025

Here’s a quick glance at how PSEi stocks fared on Monday, July 28, 2025.


PHL stocks extend decline before Marcos’ SONA

BW FILE PHOTO

PHILIPPINE STOCKS ended lower for the third straight day on Monday before President Ferdinand R. Marcos, Jr. delivered his State of the Nation Address (SONA) after the market’s close.

The benchmark Philippine Stock Exchange index (PSEi) dropped by 0.52% or 33.43 points to close at 6,379.75, while the broader all shares index declined by 0.08% or 3.38 points to 3,793.49.

The PSEi opened the session higher at 6,411.26 and even hit a high of 6,417.43 before succumbing to weakness by the closing bell.

“The PSE started the week on a negative tone… The local market dropped as investors took a cautious stance while waiting for President Marcos’ SONA,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

“Investors are going to pay close attention to the SONA, particularly regarding which industries might receive more support from the government, face stricter regulation, and the overall direction of the local economy,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Mr. Marcos delivered his fourth SONA at the Batasang Pambansa in Quezon City on Monday. Before the SONA, Senator Francis “Chiz” G. Escudero and Leyte Rep. Ferdinand Martin G. Romualdez were reelected as Senate President and House Speaker, respectively, for the 20th Congress.

“The peso’s pullback for the day also weighed on the local bourse,” Mr. Tantiangco said. The peso dropped by nine centavos to close at P57.20 per dollar on Monday, Bankers Association of the Philippines data showed.

“Moreover, investors are still waiting for the PSEi rebalancing that might also affect price reactions,” Mr. Limlingan added.

“While the trend remains upward, investors should remain mindful of potential near-term consolidation as market sentiment evolves.”

Almost all sectoral indices closed lower on Monday. Mining and oil went down by 1.68% or 158.7 points to 9,253.28; property sank by 0.8% or 19.14 points to 2,358.42; financials decreased by 0.66% or 14.97 points to 2,237.96; holding firms fell by 0.62% or 34.45 points to 5,441.83; and industrials retreated by 0.57% or 52.18 points to 9,097.76.

Meanwhile, services rose by 1.52% or 34.09 points to 2,270.16.

“Bloomberry Resorts Corp. was the day’s index leader, climbing 2.7% to P4.56. Universal Robina Corp. was the main index laggard, falling 2.65% to P92,” Mr. Tantiangco said.

Value turnover went down to P6.61 billion on Monday with 1.11 billion shares exchanged from the P6.95 billion with 1.69 billion shares traded on Friday.

Decliners bested advancers, 108 versus 90, while 48 names were unchanged.

Net foreign selling was at P155.996 million on Monday, a reversal of the P113.74 million in net buying recorded on Friday. — Revin Mikhael D. Ochave

Food insecurity recedes in PHL after pandemic — FAO

BW FILE PHOTO

By Kyle Aristophere T. Atienza, Reporter

THE NUMBER of Filipinos experiencing moderate or severe food insecurity declined after the pandemic to 37.8 million during the 2022 to 2024 period, according to the Food and Agriculture Organization (FAO).

This was equivalent to 32.9% of the population, the lowest share since the 44.7% during the pandemic years of 2020-2022, the FAO said in its State of Food Security and Nutrition in the World report.

FAO: Philippines’ undernourishment prevalence in 2022-2024 hits record lowThe Philippine hunger indicators were the third highest in Southeast Asia, where food insecurity averaged 14.4%.

The Philippine food insecurity rate was edged out by Cambodia with 40% and Laos with 35.6%. The equivalent numbers for the rest of the region were 32.7% for Myanmar, 16.7% for Malaysia, 10.7% for Vietnam, 9.5% for Singapore 5.4% for Thailand, and 4.5% for Indonesia.

The FAO said an estimated 8.2% or between 638 million and 720 million of the global population may have faced hunger in 2024, down from 8.5% in 2023 and 8.7% in 2022, amid “notable improvement” in Southeast Asia, Southern Asia and South America “in contrast to the continuing rise in hunger in most subregions of Africa and in Western Asia.”

The global number of undernourished is expected to decrease, but 512 million people are still projected to be facing hunger in 2030, of whom nearly 60% will be in Africa, it added.

Between 2022 and 2024, 3% or 3.4 million of the Philippine population was undernourished, the FAO said.

In Southeast Asia, the number of undernourished stood at 35.1 million during the 2022-2024 period.

The undernutrition rate in Southeast Asia averaged 5.1%.

Indonesia had the highest number of undernourished people with 17.7 million, or 6.3% of its population.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila, said research indicates that many urban poor adolescents eat three times a day, with families from poor households often prioritizing the nutritional needs of their children, particularly those attending school. 

“This is part of their coping mechanisms that resulted in greater food security but at the expense of education,” he said in an e-mail. “In other words, much of the achievements in food security is due to the effort of households, not the government, and is paid at a very high cost.”

“This trade-off between food security and education results in a heavy burden for our present workforce who can survive daily but lack the skills to secure gainful jobs,” he added.

The FAO said 44% or 51 million of the Philippine population could not afford to eat healthy in 2024, against 45.4% or 52.2 million a year earlier.

It said the average cost of a healthy diet was $4.39 per person per day on a purchasing-power parity (PPP) basis in 2024, against $4.21 in 2023 and $3.73 in 2021.

It said the Philippines, Chile, India, and Mexico introduced subsidies for agricultural inputs starting in 2022 in the face of persistent inflationary pressures after the pandemic.

Many countries cut down on expenditures after the pandemic “but inflationary pressures led to continued support for key sectors, including agriculture.”

“The inflationary period after the pandemic made it difficult for countries to remove some support measures, as livelihoods were at risk due to food price increases,” it said.

“A flexible use of fiscal policy, considering well-targeted support for some segments of the population combined with fiscal restraints for other sectors, could reduce inflation while maintaining adequate levels of protection for the most vulnerable,” it added.

The report found that within Asia, Indonesia, the Philippines and Sri Lanka notably focused on food price interventions such as price controls.

“Effectiveness of price policies remains limited in the long term and can lead to an inequitable distribution of costs and benefits. Price caps at the retail level for some products resulted in the expected short-term effect of reducing prices and protecting consumers,” the FAO said.

The FAO noted that when subsidies are used to reduce consumer prices while maintaining high producer prices, they require substantial government spending, can be regressive particularly for non-targeted programs, and may also fuel inflation.

“The effectiveness of these policies depends on the sensitivity of supply and demand behavior to prices — that is, their level of elasticity — and the nature of the initial shocks,” it said.

“Elastic systems characterized by strong market mechanisms benefit from allowing prices to adjust; meanwhile, it is important to prioritize other instruments such as social protection programs.”

The FAO called for targeted fiscal interventions, including robust social protection systems, coordinated macroeconomic policy, structural and trade-related reforms, and strategic investments in data, infrastructure and innovation.

It said fiscal responses to high food prices must be time-bound and include well-defined exit strategies to prevent “the risk of permanent budgetary commitments that could constrain future fiscal space or bring public debt to unsustainable levels.”

It said tax reductions on essential goods, including food, can provide immediate relief to households facing rising living costs but such measures “must be weighed against the need for sustainable public revenue, particularly in countries with limited fiscal capacity.”

The FAO also said social protection systems — through cash or in-kind transfers — are indispensable for cushioning the effects of food price crises on low-income households.

“However, in high-inflation contexts, the value of these transfers can erode. Programs must therefore be calibrated to respond to inflationary pressures, with flexible mechanisms to adjust transfer values and avoid price increases,” it added.

It said instead of resorting to short-term price interventions, such as price controls or subsidies, which may provide temporary relief but often distort markets and are inefficient over time, governments should adopt a stable, coordinated and transparent strategy to manage long-term food price trends including strengthening food reserves, improving market transparency, and investing in trade-related infrastructure.

It said maintaining strategic food reserves can help cushion supply shocks and stabilize prices.

“Policymakers should balance food security and nutrition objectives against potential fiscal and market risks,” it said.

“Embedding food reserves within a broader risk-management framework enhances their effectiveness and reduces unintended consequences,” it added.

The FAO also urged governments to boost investment in research and development, storage, and transport infrastructure that could address food loss, improve supply chain functioning, and mitigate future food price shocks.

DBM backs raising health spending but cites fiscal hurdles

PHILIPPINE STAR/MIGUEL DE GUZMAN

THE Department of Budget and Management (DBM) said a bill that will set a floor to healthcare spending of 5% of gross domestic product (GDP) is likely to run into fiscal and constitutional hurdles.

Budget Secretary Amenah F. Pangandaman said the DBM supports the intent of House Bill No. 1973, which sets the spending minimum for healthcare, but added: “It is important to note that any increase in funding will depend on several key factors — including our country’s available fiscal space, the nature and readiness of proposed programs and projects, and the government’s overall expenditure priorities,” she told BusinessWorld via Viber.

Ms. Pangandaman said healthcare remains a top priority, and the DBM will continue collaborating with executive and legislative partners to obtain adequate resources for Filipinos.

Budget Undersecretary Goddes Hope O. Libiran added that the proposed allocation, estimated at over P1.3 trillion, could violate constitutional provisions requiring education to receive the largest share of the national budget.

“If that happens, healthcare spending would surpass the education sector, which is prohibited under our Constitution. Education must always be the top budget priority in the National Expenditure Program (NEP) and the General Appropriations Act (GAA),” she said via Viber.

In the 2025 spending plan, education was allocated P1.055 trillion, followed by public works (P1.007 trillion), defense (P315.1 billion), interior and local government (P279.1 billion), and health (P267.8 billion).

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies said funding healthcare with at least 5% of economic output is “necessary” to build a more resilient and inclusive health system.

“Many economies with stronger health outcomes spend at or above this threshold. However, feasibility will depend on fiscal space, political will, and how efficiently the funds are spent,” he said via Viber. 

Mr. Rivera added it should not be an either-or choice between education and healthcare. 

“The NG (National Government) can still boost health spending through targeted reforms, better efficiency, and increased absorptive capacity without breaching fiscal or legal thresholds,” he said.

Essential services should be progressively funded in a balanced and sustainable way, Mr. Rivera said.

The P6.326-trillion national budget for 2025 raised concerns about the zero subsidy for the Philippine Health Insurance Corp., casting into doubt the sustainability of universal healthcare programs.

In 2026, Finance Secretary Ralph G. Recto said the government health insurer will be allocated a P53.26-billion subsidy in the National Expenditure Plan, the document prepared by the executive branch that will serve as the basis for the budget bill.

Economic managers have proposed a P6.793-trillion national budget for 2026, up 7.4% from the actual P6.326-trillion budget in 2025. This is equivalent to 22% of GDP.

The DBM projected appropriations of P7.232 trillion in 2027 and P7.702 trillion in 2028. — Aubrey Rose A. Inosante

Diesel prices frozen in typhoon-hit areas

STOCK PHOTO | Image from Freepik

FUEL RETAILERS said they will defer price increases on diesel this week in typhoon-hit areas.

In separate advisories, Jetti Petroleum, Inc., Seaoil Philippines, Petron Corp., Caltex Philippines, and Shell Pilipinas Corp. announced delays in raising diesel prices in selected areas.

Jetti will not raise prices in the National Capital Region, as well as the provinces of Pangasinan, Pampanga, Bataan, Cavite, Rizal, Bulacan, Oriental Mindoro, and Negros Occidental.

Seaoil suspended the diesel price adjustment across the Ilocos Region and the Cagayan Valley.

Petron postponed the scheduled price hike in La Union, Ilocos Sur, Pampanga, and portions of Pangasinan, which include Basista, San Carlos, Calasio, Malasiqui, Mangatarem, Mangaldan, and Umingan.

Shell will not impose the price adjustment in La Union, Ilocos Sur, and portions of Pangasinan, which include Dagupan, Alaminos, Mangaldan, San Fabian, Calasiao, Malasiqui, Bayambang and Binmaley.

Starting on Tuesday, diesel and kerosene prices are set to go up by P0.60 and P0.40 per liter. Meanwhile, the price of gasoline is set to decline by P0.10 per liter.

According to the Department of Energy (DoE), this week’s price adjustment was driven by the unexpected decline in US crude inventories, indicating strong refinery activity.

“The wild ride in oil prices was largely driven by geopolitical events and uncertainty surrounding US trade policies,” the DoE said.

Last week, gasoline, diesel, and kerosene prices increased by P0.40, P1.10, and P0.70 per liter, respectively.

In July, the Philippines was hit by three tropical cyclones and an enhanced southwest monsoon, resulting in heavy rainfall and floods. — Sheldeen Joy Talavera

Fusion CX expects expansion to create 2,000 new positions

CUSTOMER experience services provider Fusion CX said it hopes to create around 2,000 new jobs within a year after expanding in Metro Manila and Legazpi City.

Fusion CX Co-Founder, Chairman, Managing Director, and Chief Executive Officer Pankaj Dhanuka said that the company has put up $4.5 million in investment for the 1,111-seat expansion.

“Between the two places, we are adding more than 1,100 seats. And this will, over the period of the next, say, one year, generate employment of around 2,000 employees,” he said at a briefing on Monday.

The company launched an 836-seat delivery center at 500 Shaw Boulevard, which is expected to create 1,500 jobs, while it is set to launch a 275-seat facility in Legazpi City, which is expected to create 500 jobs.

With the expansion, the company will be operating five sites in the Philippines, the others being in Quezon City, Cavite, and Cebu City.

“As we speak, we are present in 15 countries. We have an employee base of around 15,000, and out of those we have around 3,000 team members working in the Philippines,” Mr. Dhanuka said.

Mr. Dhanuka said that the company is hoping to add 1,000 full-time employees in the next six months across its sites, escalating to 5,000 by next year.

“We have been very happy with productivity and all of the output that we get. We already have 3,000 people, and … over the next three to six months’ time, we are going to hire another 1,000,” he said.

“Our first goal is by the middle of next year, around the same time, we will be at around 5,000 people across the Philippines. And then once we achieve that, we will set the next goal,” he added.

Further, he said that the company is also looking at expanding into more provinces to create more information technology and business process management jobs.

“We want to go more into the provinces of the Philippines. I see a lot of talent available there,” he said.

“That has been our focus, and we’ll continue to explore. We are already in Silang, Cavite and Legazpi City; over the years, we will explore more of what else we can do in terms of expanding in other provinces,” he added. — Justine Irish D. Tabile

Metro Manila retail price growth flat in June

BW FILE PHOTO

RETAIL price growth of general goods in the National Capital Region (NCR) was flat in June, the Philippine Statistics Authority (PSA) said on Monday.

Citing preliminary data, the PSA said growth in the general retail price index (GRPI) in the National Capital Region (NCR) remained at 0.8% in June, unchanged from a month earlier and against the 1.8% growth rate posted a year earlier.

In the first half, NCR retail price growth averaged 1%, against the 2.1% year-earlier rate.

“The fuels subindex remained on a downtrend as a result of lower global oil prices and expectations of lower trading activity,” Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc., said in an e-mail.

“Crude items are also derivatives of oil output, which may be affected as well,” he added.

Price growth for crude materials, inedible except fuels, slowed to 0.3% from 0.5% in May, marking the weakest growth rate since January 2024.

Mineral fuels, lubricants, and related materials sustained declines at 3.2% in June, up from 4.7% in May.

“This is reflective of the overall drop in global oil prices except for the spike last June due to geopolitical tensions in the Middle East,” Mr. Erece said.

The heavily weighted food index came in at 1.1% against 1% in May. Price growth in beverages and tobacco accelerated to 3.4% from 3.3%.

The subindices for food and beverages, spirits and tobacco have 37.5% and 4.38% weightings on the index, respectively.

Meanwhile, price growth in miscellaneous manufactured articles cooled to 0.4% from 0.8%. Prices remained stagnant for chemicals including animal and vegetable oils and fats (2.0%), manufactured goods classified chiefly by materials (0.7%), and machinery and transport equipment (0.2%).

The PSA uses the GRPI as a deflator in the National Accounts, particularly in the retail trade sector, and serves as a basis for forecasting. — Pierce Oel A. Montalvo

Philippines to host LDF board meeting in October

PHILIPPINE STAR/EDD GUMBAN

THE PHILIPPINES will host the 7th meeting of the Loss and Damage Fund (LDF) Board in October, the Department of Environment and Natural Resources (DENR) said on Monday.

The upcoming meeting will feature updates on the operationalization and resource mobilization of the fund, “paving the way for its initial implementation,” Environment Secretary Raphael P.M. Lotilla said in a statement.

He cited the need for the international community to lend its support to sustain the fund.

“We call on nations to fulfill their promises of solidarity.”

Mr. Lotilla, fresh from the 6th LDF Board meeting in Cebu, also welcomed the advisory opinion issued by the International Court of Justice (ICJ) which affirmed the legal obligations of all states to address climate change and protect vulnerable ecosystems.

The Philippines in July 2024 was elected to host the LDF Board, which manages a global fund for climate change mitigation and adaptation projects.

Meanwhile, Greenpeace Philippines said in a statement that the ICJ advisory opinion can pave the way for Filipino communities to seek reparations from the world’s biggest polluters.

“The message of the Court is clear: the production, consumption and granting of licenses and subsidies for fossil fuels could be breaches of International Law. Polluters must stop emitting and must pay for the harms they have caused,” it said.

It said President Ferdinand R. Marcos, Jr. “would be extremely negligent if he ignores the opportunity this offers for new legal action against polluters, particularly those whose activities have significantly contributed to the climate crisis.”

The group is calling on the 20th Congress to pass a bill that seeks to hold corporations responsible for climate damage and secure justice for affected communities.

“It will raise the bar for climate policy in the Philippines and around the world,” it said. — Kyle Aristophere T. Atienza

Transfer pricing considerations during calamities

As the Philippines reels from the successive landfalls of Typhoons Crising, Dante, and Emong, and the relentless southwest monsoon (habagat), businesses across the archipelago are once again reminded of nature’s unforgiving power. Flooded warehouses, paralyzed logistics, power outages, and damaged infrastructure have disrupted operations across the country. For many enterprises, the immediate priority has been survival and recovery.

Yet beneath the surface of these operational challenges lies a quieter but equally pressing concern: the transfer pricing implications of such disruptions. For multinational enterprises (MNEs) with Philippine entities, the question is no longer just how to rebuild, but how to ensure that their intercompany pricing remains defensible under the arm’s length principle in the wake of calamity.

Natural disasters like typhoons disrupt the economic assumptions underlying many intercompany pricing arrangements. In the Philippines, where entities often operate as contract manufacturers, limited-risk distributors, or limited-risk/routine service providers, transfer pricing models typically assume a stable environment. However, production halts, logistics constraints, and extraordinary costs can misalign actual conditions with intercompany agreements.

At the core of this issue is the need to re-examine how the functions, assets, and risks (FAR) assigned to various related entities have shifted. The Organization for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines emphasize aligning pricing outcomes with value creation and risk assumption. A Philippine entity deemed low risk may earn routine margins under normal conditions, but when calamities damage inventory or delay shipments, it may find itself shouldering risks it was never intended to bear. Without appropriate adjustments, standard returns may no longer reflect arm’s length outcomes.

From the Bureau of Internal Revenue’s (BIR) perspective, it may assess whether the losses align with the contractual and functional arrangements or whether the intercompany pricing mechanism requires adjustment to reflect economic substance.

How, then, can taxpayers maintain defensible and compliant transfer pricing in the face of such disruptions?

REASSESS RISK ALLOCATION ACROSS ENTITIES
Revenue Audit Memorandum Order (RAMO) No. 1-2019 reinforces the OECD’s principle that the allocation of risks within a multinational group directly influences how profits and losses are attributed among related parties. It emphasizes that the entity contractually designated to bear a particular risk must be aligned with the actual conduct and economic substance of the transaction. In other words, the contractual allocation of risk must be consistent with the real-world facts and circumstances, including the functions performed, assets used, and risks actually assumed by each party.

Post-calamity, Philippine taxpayers must revisit their risk profiles to ensure economic consequences align with contractual roles, facts, and circumstances.

For example, Company A, a Philippine-based distributor under a limited-risk model, sustained flooding at its warehouse, leading to lost inventory and delivery failures. If the company also incurred customer attrition costs and higher distribution expenses, it may be assuming commercial risks inconsistent with its transfer pricing designation as a limited-risk distributor. A revised risk analysis and proper documentation can support a case for adjusting its intercompany margin accordingly.

LOCALIZED IMPACT AND DOCUMENTATION REQUIREMENTS
RAMO No. 1-2019 emphasizes the importance of analyzing the arm’s length nature of related-party transactions, particularly when a taxpayer reports a lower net operating profit compared to other companies in the same industry. This discrepancy may signal potential transfer pricing risks that warrant further scrutiny.

It’s important to note that calamities and other external disruptions can affect regions unevenly. These localized impacts may lead to different financial outcomes among companies operating in the same industry.

For example, Company X, located in Metro Manila, experienced flood-related delays in supply chain logistics, which negatively impacted its net profit. In contrast, Company Y, a comparable entity based in Davao, operated without disruption during the same period.

Without clear documentation of such localized disruptions, the BIR may question the legitimacy of Company X’s reported losses when compared to the profitability of Company Y. To mitigate this risk, taxpayers must prepare robust justifications, contemporaneous documentation, and appropriate disclosures to demonstrate that reduced profitability is a result of genuine economic conditions rather than transfer pricing manipulation.

EVALUATE AND ALLOCATE EXTRAORDINARY COSTS
Non-recurring expenses, such as repairs, re-routing, or power restoration, should not be automatically absorbed by the local entity simply because they are labelled “extraordinary.” Instead, the proper approach involves delineating the actual transaction, assessing which party assumed the risk, and evaluating whether independent enterprises under similar conditions would have shared the cost.

For example, Company Y, a contract manufacturer located in Metro Manila, had to rent generators, hire temporary workers, and repair damaged facilities following the typhoons. Although these costs were booked locally, the continued delivery of components benefited its foreign affiliate. In this case, the costs may justifiably be recharged through the intercompany arrangement, consistent with arm’s length behavior.

This reassessment of risk is also critical when evaluating how calamity-related costs are treated under cost-plus or fully loaded cost-plus markup models. The OECD emphasizes that only costs that are of an operating nature and directly or indirectly related to the controlled transaction should be included in the cost base. Costs that do not affect comparability should be excluded from net profit indicators.

If a company applies a full-cost-plus method, including extraordinary expenses in its cost base without evaluating who bears the risk, it could distort the arm’s-length result. A proper functional and risk analysis should determine whether such costs should be included in the markup calculation or excluded, depending on contractual terms and economic substance.

REVIEW AND REVISE INTERCOMPANY AGREEMENTS
Calamities may trigger force majeure clauses or justify the revision of intercompany agreements. Taxpayers should assess whether existing contracts still reflect the economic reality and risk-sharing arrangements. Any changes should be clearly documented and aligned with the arm’s length principle to avoid regulatory scrutiny. The BIR may closely examine such revisions, especially if they result in significant deductions or losses.

For instance, Company Z, a Philippine entity supplying parts to its parent company in Japan, faced port closures due to typhoons. The resulting delivery delays led to penalties from customers not anticipated in the original intercompany agreement. Given this development, Company Z may reasonably seek to amend the agreement to reflect a more balanced sharing of risk or adjust pricing to account for costs incurred. The OECD affirms such revisions are permissible if consistent with what unrelated parties would have done under similar circumstances.

TAKEAWAY
The arm’s length principle does not disappear during a disaster, but it must be applied with contextual understanding. Typhoons show how economic substance can shift suddenly, challenging assumptions behind transfer pricing policies. For Philippine entities, this means recognizing disruptions and responding with foresight and documentation to manage recovery and regulatory scrutiny. Such actions not only promote compliance but also demonstrates the resilience of transfer pricing policies even under calamities. A disaster-aware transfer pricing strategy is not merely reactive; it is an essential element of sustainable and defensible cross-border tax compliance in an increasingly volatile world.

Stay compliant. Stay prepared. And above all, stay safe.

Let’s Talk TP is an offshoot of Let’s Talk Tax, a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Jemaimah Faith M. Buhayan is a semi-senior from the Tax Advisory & Compliance Practice Area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Escudero and Romualdez keep post as Senate President and Speaker

PRESIDENT Ferdinand R. Marcos, Jr., joined by re-elected Senate President Francis G. Escudero and Speaker Ferdinand Martin G. Romualdez, delivered his fourth State of the Nation Address in the House of Representatives on Monday. — PRESIDENTIAL COMMUNICATIONS OFFICE

By Kenneth Christiane L. Basilio and Adrian H. Halili, Reporters

SENATOR Francis “Chiz” G. Escudero and Leyte Rep. Ferdinand Martin G. Romualdez have both been re-elected by their chambers as Senate President and Speaker of the House, respectively, during the opening of the first regular session of the 20th Congress on Monday.

During a Senate plenary session, a supermajority of 19 out of 24 Senators voted in favor of Mr. Escudero to be the Senate President, marking his second term as the Senate’s top official. He first assumed the post in May last year, following the resignation of his predecessor Senator Juan Miguel F. Zubiri.

In his speech before the Senate floor, Mr. Escudero said that the Senate must prioritize legislation that will lower the cost of goods, create more jobs, reform the education and healthcare systems, mitigate climate change, and strengthen national defense.

“The Filipino people look to the Senate to come up with solutions that will improve their lives, address their needs, and bring their aspirations within reach,” he added.

Mr. Escudero said that the legislative body must not “bow to a mob” amid criticism on the Senate’s delay of Vice-President Sara Duterte-Carpio’s impeachment proceedings.

“We should not and cannot bow to a mob. We will not be cowed by the shrillest of voices. We will stand up for what is right, what is just, and what is consistent with the Rule of Law and our Constitution,” he added.

Last week, the Supreme Court (SC) ruled that the impeachment of Ms. Duterte was unconstitutional for violating the one-year ban on the filing of more than one complaint against an impeachable official and the right to due process. Any subsequent impeachment complaint against her may only be filed by Feb. 6, next year.

Senator Jose P. Ejercito Estrada also retained his position as Senate President pro tempore, while Senator Emmanuel Joel J. Villanueva was elected as the chairman of the Senate Committee on Rules and majority leader.

Senator Vicente C. Sotto III will serve as the Senate’s minority leader after garnering only five votes when the chamber voted for the Senate chief. The runner-up in the Senate Presidential race automatically assumes the role of minority leader, with their voters comprising the new minority.

Joining Mr. Sotto are Senators Ana Theresia N. Hontiveros-Baraquel, Panfilo M. Lacson, Lorna Regina Bautista Legarda, and Mr. Zubiri.

Meanwhile, re-elected Speaker Romualdez, who ran unopposed, retained the top House post after clinching 269 votes. Thirty-four lawmakers abstained.

“I will be here not just to preside, but to protect,” Mr. Romualdez told the House floor after taking his oath as House Speaker.

The Speaker post holds significant clout and is typically occupied by an ally of the sitting president. It wields political influence and sway on 314 lawmakers representing congressional districts and sectors in the legislative chamber, where tax measures and the yearly national budget originate.

Mr. Romualdez’s election might reinforce the chamber’s legislative alignment with President Ferdinand R. Marcos, Jr.’s administration, signaling continued support for its policy priorities, said Anthony Lawrence A. Borja, an associate political science professor at De La Salle University.

“Such an alignment however, can be seen by some as a mark of Romualdez’s hold over Marcos, Jr.,” he said in a Facebook Messenger chat.

The House Speaker would likely focus on whipping votes for the approval of social welfare and economic bills in the chambers to help bolster public support for Mr. Marcos, he added.

“This is directed at affecting the everyday life of beneficiaries for the sake of bolstering support for the current administration in the context of a longer lag time that economic policies are usually tied with,” said Mr. Borja.

Ederson DT. Tapia, a political science professor at the University of Makati, said he expects Mr. Romualdez to hold the speakership throughout the 20th Congress, even if Mr. Marcos’ political clout wanes.

“While he has maintained close coordination with the palace, he has also managed to lead with stability in the house,” he said in a Facebook Messenger chat. “I am of the belief that a majority of the members of the house would continue to support him and his leadership style.”

Also on Monday, the House floor elected Ilocos Norte Rep. and presidential son Ferdinand Alexander A. Marcos III as majority leader, an influential post within the chamber that heads the committee overseeing the legislative agenda.

The younger Mr. Marcos’ election as majority floor leader would help strengthen ties between the Executive branch and the House, and help thrust reforms forward, Mr. Romualdez said in a statement.

“His promotion to majority leader signals the House supermajority’s confidence in his ability to deliver results and infuse new energy into institutional reforms,” he said.

On the other hand, Party-list Rep. Marcelino C. Libanan said in a separate statement that he also retained his leadership of the House minority bloc after receiving the support of 29 other congressmen that abstained from voting for Mr. Romualdez’s speakership bid.

Meanwhile, Davao City Rep. Isidro T. Ungab did not vote for Mr. Romualdez as House Speaker, as he and three Duterte lawmakers chose to remain independent of the chamber’s majority and minority blocs.

In a separate statement, Mr. Ungab said that he and Davao City Reps. Paolo Z. Duterte, Omar Vincent S. Duterte and Party-list Rep. Harold James T. Duterte chose to “forge an independent path” in the chamber to govern above what they described as partisan politics.

“Our choice to become independent members demonstrates our commitment to principled governance and our intent to serve our country and constituents free from partisan considerations,” they said in the statement.