RESIDENTIAL PROPERTY PRICES in the second quarter contracted at its steepest rate since 2016, primarily due to the continued decline in prices of condominium units and single houses amid the prolonged pandemic. Read the full story.
Here’s a quick glance at how PSEi stocks fared on Friday, September 24, 2021.
INVESTORS will be keeping an eye on the possible easing of quarantine restrictions in Metro Manila as coronavirus disease 2019 (COVID-19) cases begin to decline, analysts said, and the market will also be taking its cue from the upcoming release of manufacturing data.
The benchmark Philippine Stock Exchange index (PSEi) went up by 36.25 points or 0.52% to close at 6,951.53 on Friday, while the broader all shares index rose 21.14 points or 0.49% to 4,323.64.
Week on week, the PSEi gained 38.68 points from its 6,912.85 finish on Sept. 17.
“The PSEi ended the week with a small gain as the bulls tried to push the index higher despite persistently strong selling pressure,” China Bank Securities Corp. Research Associate Jason T. Escartin said in an e-mail last Friday.
“Contagion fears from China Evegrande’s possible default started the week, only to be eased by BSP’s (Bangko Sentral ng Pilipinas) saying it has minimal impact on local banks. Global markets also appeared to have shrugged off the Federal Reserve’s more hawkish pronouncements following its policy meeting this week,” he added.
On Thursday, the BSP said the debt crisis looming over Chinese real estate giant Evergrande Group has a minimal impact on Philippine banks. BSP Deputy Director at the Supervisory Policy and Research Department Ma. Cynthia M. Sison said, “claims from counter-parties based in China and its Special Administrative Regions is minimal at 0.86% of total banking system assets.”
Over in the US, its central bank expressed intention to reduce economic support soon without giving a definite date.
Analysts said the market will be keeping watch of the country’s COVID-19 situation as infections now hit a “downtrend.”
“Investors are also expected to watch out for the government’s decision on the social restriction measures of the country after Sept. 30. Easing of restrictions may send the local market higher,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message on Saturday.
Metropolitan Manila Development Authority Chairman Benhur D. Abalos, Jr. told DZMM TeleRadyo in an interview on Saturday that he hoped Metro Manila will be placed under Alert Level 3 from a more stringent Alert Level 4 by the end of the week as COVID-19 cases begin to decline.
The Health department on Saturday logged 16,907 new COVID-19 cases, which brings the country’s total cases to 2,740,175 while active cases stood at 165,092.
OCTA Research Group Research Fellow Fredegusto Guido P. David said the seven-day average of infections in the country declined to 17,526 from 20,218 with a negative growth rate of 13%. Meanwhile, the reproduction number declined to 0.98 from last week’s 1.16.
“If the decline continues, then it may spur positive sentiment in the market,” Mr. Tantiangco said. “The BSP’s latest confidence surveys which show that consumers and businesses are optimistic for the upcoming quarter may also give a boost to sentiment [this] week.”
Mr. Tantiangco also said the market will also take cues from the upcoming IHS Markit Philippines Manufacturing PMI to be released this week.
“We may see the index continue pushing higher in the coming week, though the resistance at 7,000-7,100 continues to appear strong. In case prices push above 7,100, the next resistance to test would be 7,300. In case prices retreat after hitting the resistance area, then a pullback to 6,760 is likely,” China Bank Securities’ Mr. Escartin said. — Keren Concepcion G. Valmonte
SUBSIDIES extended to government-owned firms rose 747% year on year to P42.35 billion in August, led by the increased budgetary support provided to the Philippine Health Insurance Corp. (PhilHealth), the Bureau of the Treasury (BTr) reported.
The BTr said government-owned and -controlled corporations (GOCCs) subsidies were also much higher compared with the P6.08 billion recorded in July.
PhilHealth received P30.61 billion in subsidies, accounting for 72.3% of the August total.
It did not receive any budgetary support from the National Government last month and in August 2020.
The National Irrigation Administration (NIA) got P6.01 billion, up 130% from a year earlier.
The National Housing Authority’s (NHA) subsidies nearly doubled to P2.99 billion from P1.48 billion in July. It did not receive budgetary support in August 2020.
Other top recipients of subsidies include the Local Water Utilities Administration with P706 million, Small Business Corp. P500 million, Philippine National Railways P332 million, Philippine Children’s Medical Center P168 million and Development Academy of the Philippines P162 million.
Meanwhile, GOCCs that did not receive any budgetary support from the government that month were the Bases Conversion Development Authority, Cagayan Economic Zone Authority, National Home Mortgage Finance Corp., National Food Authority, National Power Corp., Philippine Crop Insurance Corp., Philippine Fisheries Development Authority, Philippine Postal Corp. and Tourism Infrastructure and Enterprise Zone Authority.
In the eight months to August, overall subsidies fell 9.8% to P136.72 billion.
This brought subsidies to 92% of the P148.2 billion budgeted for the year.
Some P76.06 billion went to support PhilHealth’s operations, followed by the P25.61 billion granted to NIA and the P11.78 billion to NHA.
Subsidies are granted to GOCCs to cover operational expenses not supported by their revenue. — Beatrice M. Laforga
THE MANDATORY registration of mobile SIM cards proposed by legislators is not enough to eradicate text fraud and phishing attacks, an information technology expert said Tuesday.
Edmund Ray O. Milanes, head of Nexus Technologies, Inc.’s Managed Services Group, said that the provisions of Senate Bill 2395 or the proposed SIM Card Registration Act “will reduce scams to a certain extent but won’t eliminate them totally.”
The measure will require all telecommunications companies to make the registration of SIM cards a prerequisite to their sale to deter their use in fraud. It would require applicants to submit an electronic registration form and present a valid government-issued identification card (ID) or other documentation as a condition of sale.
“By using unregistered SIM cards, criminal elements can conveniently hide their identities because once the prepaid SIM card is disposed of, there is no way for us to identify the perpetrator,” according to Senator Ronald M. Dela Rosa, a co-sponsor of the bill, speaking during plenary discussions of the bill recently.
The bill is also intended to deter the use of mobile phones in terrorist activity.
Mr. Milanes said via e-mail that registration will only deter and reduce phishing to a certain extent, noting that perpetrators can always “spoof” a phone number in order to frame the registered user of the SIM card.
“An awareness campaign is still the best defense against fraud,” said Mr. Milanes. “Perhaps the government must aggressively launch programs to increase awareness of these types of scams and how to prevent them.”
He said most Filipinos fall prey to phishing, smishing (via short message service or SMS) or vishing (via call). “We need to learn how to reduce our vulnerability to these scams.”
Mr. Milanes said further consultation with telecommunication companies is needed for successful implementation. — Alyssa Nicole O. Tan
THE GOVERNMENT needs to consider allowing coal-fired power plants to “co-fire” using biomass fuel, which a renewables industry official said carries the potential to reduce emissions and decarbonize the industry.
“(The government should) introduce co-firing in coal plants as a strategy to decarbonize the economy. This is practiced in developed economies… Japan and South Korea give incentives to coal plants which utilize biomass in their fuel blend,” San Carlos Biopower, Inc. President Arthur N. Aguilar told BusinessWorld via Viber last week.
Co-firing will pave the way for the development of dedicated biomass plantations which can provide sustainable fuel to the coal-fired facilities, Mr. Aguilar said.
He said the Philippines has an abundance of deforested land which can be used to cultivate biomass feedstock, including trees and Napier grass.
Biomass used in the co-firing process has the potential to replace up to 50% of the coal used in thermal power generation, according to an International Renewable Energy Agency report published in 2013.
Although biomass co-firing is considered a viable transition option which can lead to a carbon-free power sector, developing countries must be prepared policy and technology-wise to limit the “adverse” impact of co-firing on the environment, the intergovernmental organization said.
Mr. Aguilar added that the government should push waste-to-energy (WTE) projects that use biomass or organic matter in line with the Clean Air Act.
According to an administrative order issued by the Environment department two years ago, developers can build WTE plants as long as they meet certain conditions.
Asked how the government could further encourage investments in the biomass sector, Don Mario Y. Dia, the president of Biomass Renewable Energy Alliance, Inc., said the Energy department must maintain a conducive environment to sustain investors that undertake the risk of building power plants, chiefly via incentives.
“If DoE continues to provide this environment, they will see more investors developing projects in the renewable space. (Providing) incentives starts the build-up in all aspects of developing new plants. This enticement creates the propagation of new builds and these must be supported all the way,” he told BusinessWorld via Viber last week.
In 2020, the Philippines added around 84 megawatts (MW) in biomass capacity, raising the installed base to 443 MW, according to DoE (Department of Energy) data. — Angelica Y. Yang
GOVERNMENT AUDITORS told the Metropolitan Waterworks and Sewerage System (MWSS) to immediately return P24.056 million originally allocated to help Angat Dam better withstand earthquakes.
In its 2020 audit report, the Commission on Audit (CoA) said the MWSS is still holding on to unutilized funds worth P23.75 million meant for the Angat Dam Dyke Strengthening Project. With interest accrued since 2015, the total due for return has been reckoned at P24.056 million.
The Angat Dam Dyke Strengthening Project is meant to ensure the stability and safety of the structure against possible seismic activity associated with the West Valley Fault. The project was completed in 2019.
The MWSS received P553.3 million for the project, which was implemented in coordination with the National Power Corp. and the provincial government of Bulacan. The funding was to go towards instrumentation and flood control works.
The MWSS had asked the Department of Budget and Management (DBM) on Feb. 26, 2020 to use the unutilized funds to cover a reimbursement to the Public-Private Partnership Center for project development costs associated with the Kaliwa Dam. The request was rejected in a letter dated Dec. 16, 2020.
The commission also noted a lack of supporting documents sent to the Department of Public Works and Highways (DPWH) and the DBM, such as the liquidation and accomplishment reports for the funds transferred to the implementing agencies.
The CoA recommended that the MWSS return the remaining funds with interest to the National Government, send a demand letter to the Bulacan government for its accomplishment and liquidation reports, and immediately submit supporting documents to DBM and DPWH. — Russell Louis C. Ku
Social media spawned the rise of popular and highly followed content creators — ordinary individuals outside of show business who become celebrities overnight by creating viral content through their digital platforms. Realizing the advertising potential of these content providers, also known as “social media influencers,” more and more companies partner with them to spread and maintain awareness of their brands and products among the influencers’ millions of followers.
This became even more apparent during the lockdowns resulting from the pandemic, when an increasing number of people plugged into the online world to stay connected.
The growing business of social media influencing caught the attention of the Bureau of Internal Revenue (BIR), which recently released Revenue Memorandum Circular (RMC) No. 97-2021 to clarify the taxation of any income received by social media influencers.
INFLUENCERS LIABLE FOR INCOME TAX AND VALUE-ADDED TAX OR PERCENTAGE TAX
The BIR emphasized that social media influencers are liable for Income Tax and Value-Added tax or Percentage Tax unless the law clearly provides for an exemption. Moreover, social media influencers are required to register as taxpayers with the BIR, maintain books of account, and file the appropriate tax returns.
BROADENING ENFORCEMENT OF TAXPAYER COMPLIANCE
This move by the BIR appears to be consistent with its renewed drive to enforce tax compliance. The recent focus on social media influencers appears to be one of the programs to remind the sector of their tax obligations, starting with the emphasis that earnings from social media platforms, are in fact, taxable income. If in the past, the BIR’s enforcement drive focused mainly on corporate taxpayers, it appears to be sending the message that tax compliance is for all taxpayers, whether individual or corporate.
Among the notable points in RMC No. 97-2021 is that the BIR went as far as discussing the tax impact if the social media influencer is taxed by a foreign jurisdiction on income paid by a foreign corporation. Its discussion also includes remedies to avoid double taxation, such as availing of the benefits of the applicable tax treaty.
On that point, the BIR is now harnessing increasing coordination among foreign tax authorities by reminding social media influencers that it has the power to obtain information from foreign tax authorities. By utilizing the Exchange of Information provisions included in tax treaties, the BIR emphasized that it has the capability to determine if the social media influencers correctly disclosed their earnings in their tax returns.
It then stands to reason that the BIR can likewise wield its power of obtaining information from foreign tax jurisdictions to also ascertain the correct amount of foreign-sourced income earned by other taxpayers. For instance, the BIR may determine the amount of any foreign-sourced dividends received by a domestic corporation using the Exchange of Information tools under the tax treaties, to determine whether these dividends were declared by the corporation for tax purposes.
The power to obtain information through Exchange of Information is only one of the weapons in the BIRs arsenal to oversee tax compliance. It may be worth remembering that the National Internal Revenue Code itself gives the BIR the power to assess the proper tax based on the best evidence obtainable. The BIR has been known in the past to use commercial advertisements to approximate the taxpayer’s net worth.
While RMC No. 97-2021 focused its discussion on the tax obligations from the perspective of social media influencers, corporations who partner with these individuals may well be reminded that any income payments to such individuals or corporations may also give rise to withholding obligations. As withholding tax agents, corporations are required to withhold a specific amount of income on their income payments. The domestic corporation paying the social media influencer is required to withhold tax on payments at a rate anywhere from 2% to 15%, depending on how the payment is characterized under the expanded withholding tax system. Failure to withhold the correct amount of tax can give rise to potential deficiency withholding tax assessments that can be raised in a tax audit.
On this note, a withholding tax issue may arise on the part of corporations with respect to free products that they give to the social media influencer. RMC No. 97-2021 emphasizes that the fair market value of free products received by a social media influencer in exchange for promotion on the digital platform is to be treated as income. If these free products are to be treated as income payments, a question may be raised on how the corporation giving away the free products is to apply withholding tax rules. Since the payment is made in the form of goods, and not cash, what practical approach can be adopted by the corporation providing the free products to meet its withholding tax obligations? Are these payments through free products even subject to expanded withholding tax? These points may be worth considering both by the payors and the tax authorities themselves.
Another potential impact of this regulation is the reputational or perception issue of the partnering corporation. If the social media influencer is deemed to be non-compliant with tax filing obligations, it is possible that the corporation partnering with the social media influencer can likewise be questioned by the BIR if it correctly withheld taxes on any payments that may have been made to the non-compliant social media influencer. This can be an additional issue to hurdle in the event of a tax audit on the partnering corporation.
TAXES FOR COMPLIANCE AND SOCIETAL CONTRIBUTION
While RMC No. 97-2021 trains its attention on social media influencers, the broader implications are that the BIR has tools at its disposal to remind all taxpayers of their tax obligations and to enforce compliance. Moreover, this regulation reminds us that all income, no matter how it is sourced, cannot escape the taxing power of the state. This is especially relevant in these times, in which taxpayers, both individual and corporate, can help by providing the resources to fight the pandemic. This makes these taxes not just an obligation carried out of compliance, but also our contribution to help society heal.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Betheena C. Dizon is a Tax Partner of SGV & Co.
CORONAVIRUS infections in the Philippine capital and nearby cities have been declining, but the region remained at high risk from the virus, researchers from the country’s premier university said on Sunday.
Metro Manila’s positivity rate in the past seven days was 19%, which is considered high, the OCTA Research Group said, weeks after a new lockdown system was enforced in the region.
The National Capital Region was still at high risk as a whole, OCTA fellow Fredugusto P. David twitted. “Navotas, Malabon, Manila, Valenzuela and Pateros were at moderate risk.”
The daily average in the capital region had gone down to 4,220 cases, it said in a report. Daily infections for 100,000 people stood at 30.22% on Sept.19 to 25, it added.
OCTA said 61% of hospital beds in Metro Manila had been occupied, while 76% of intensive care units were used.
Mr. David separately told ABS-CBN TeleRadyo the reproduction number in the capital region had fallen to 0.94, which is below the critical cutoff of 1.4.
He said the new lockdown system had helped cut coronavirus infections in Metro Manila. He also traced the decline to the government’s continued vaccine rollout and public compliance with health protocols.
More than 43 million doses of coronavirus vaccines had been given out as of Sept 23. A quarter of the Philippine population or 19.67 million Filipinos have been fully vaccinated.
Calabarzon had a virus reproduction rate of less than 1, while Benguet, Cagayan Valley, Negros Oriental and Leyte have recorded a rise in cases, Mr. David said. “We’re verifying whether there’s a trend or it’s just clustering.”
The decline in infections in Metro Manila could still get reversed, Mr. David said. “We have no assurance that it won’t change,” he said. “There are ways to reverse the trend.
Congressmen have criticized OCTA Research for what they called were its inaccurate coronavirus projections. The group has said it uses data from the Department of Health.
The Department of Health (DoH) reported 20,755 coronavirus infections on Sunday, bringing the total to 2.49 million. It did not report any deaths, citing technical issues. Recoveries increased by 24,391 to 2.29 million, DoH said.
There were 161,447 active cases,81.1 % of which were mild, 13.4% did not show symptoms, 1.6% were severe, 3.18% were moderate and 0.7% were critical.
The agency said 72 duplicates had been removed from the tally, 63 of which were reclassified as recoveries. Two laboratories failed to submit data on Sept. 24.
The Philippines reported its first coronavirus case on Jan. 30 last year — a Chinese woman from Wuhan City in China, where the novel coronavirus was first detected.
Meanwhile, an inter-agency task force should review the guidelines for fully vaccinated people under the new quarantine plan, presidential adviser for entrepreneurship Jose Ma. A. Concepcion III said in a statement.
The businessman said he had written Cabinet Secretary Karlo Alexei B. Nograles and vaccine czar Carlito G. Galvez, Jr. urging them to clarify restrictions for fully vaccinated people in select indoor activities among business establishments for Alert Levels 2 and 3 areas. He said the guidelines were limited to areas under Alert Level 4.
“This can present a risk both to unvaccinated customers and the employees of the establishment,” Mr. Concepcion said.
Under Alert Level 4, indoor dining services are limited to 10% capacity and will only accommodate fully vaccinated people.
Mr. Concepcion said the government should consider allowing only fully vaccinated people for indoor business transactions across Alert Levels 2 to 4, and increase the capacity of businesses allowed to operate.
“We have to be consistent and extend privileges to the fully vaccinated across all alert levels as the goal is to reopen safely,” he said. “If we reach Alert Level 1 where it is deemed safe, then anyone can freely move. But if there are risks, let’s protect those who have not received the vaccine.”
Mr. Concepcion earlier recommended that indoor businesses such as dining and personal care services be allowed to accommodate fully vaccinated customers in areas under Alert Levels 2 and 3.
Restaurants in areas under Alert Level 3 may operate at 30% of their indoor capacity, while those in Alert Level 2 enjoy 50% seating.
“We can increase the capacity even further for the fully vaccinated as we move to lower alert levels,” Mr. Concepcion said. “A higher percentage means more chances for the businesses to gain back months’ worth of losses so they can pay back their financial obligations.”
He added that allowing fully vaccinated people to move more freely would make it possible to safely ease restrictions and pave the way for economic recovery.
“In this way, we can capture the safe reopening of the economy, while preventing the surge of cases brought by unvaccinated individuals,” he said. — K.A.T. Atienza and Revin Mikhael D. Ochave
By Alyssa Nicole O. Tan
THE PHILIPPINES under President Rodrigo R. Duterte’s successor should assert its South China Sea claims by resuming oil exploration in the waterway, according to political analysts.
It should also call out illegal fishers in the sea within its exclusive economic zone, said Jay L. Batongbacal, director of the University of the Philippines Institute for Maritime Affairs and Law of the Sea.
“In doing so, it may lawfully disregard China’s protests and attempts to discourage or prevent such activities from pushing through,” he said in an e-mail.
“The most we can do is to minimize and prevent further losses in the West Philippine Sea,” Renato de Castro, a professor from De La Salle University’s International Studies Department, said via Zoom, referring to areas of the sea within the country’s exclusive economic zone.
He said the tough-talking leader had made a “wholesale effort to overhaul the very structure of Philippine foreign policy.” “We cannot afford another president like him,” he said, citing Mr. Duterte’s failure to consult experts on the matter.
Mr. Duterte’s predecessor should rally international support for a 2016 United Nations-backed arbitration ruling that invalidated China’s claim to more than 80% of the waterway, he added.
Mr. Duterte has sought closer trade and investment ties with China since he became President in 2016, saying the country could not afford to go to war with its neighbor.
“China is really bent on maritime expansion, whether or not we befriend China, whether or not we appease China,” Mr. de Castro said. “China will pursue its goal which is to control 85% of the South China Sea.”
Mr. Batongbacal said Mr. Duterte for the most part did not do well in handling the country’s sea dispute with China.
“He simply accommodated all of China’s demands, sometimes almost to the point of abdicating the Philippines’ exclusive rights and jurisdiction under the United Nations Convention on the Law of the Sea,” he said.
Mr. Duterte only started speaking about Philippine sovereignty in the waterway this year, less than a year before he finishes his six-year term as President, Mr. Batongbacal said. For most of his term, the President allowed China to illegally fish in the South China Sea, he added.
“Continuing Duterte’s over-accommodation of China in the West Philippine Sea is clearly not a sustainable position,” he said. “If the next President swings back to Duterte’s appeasement policy and defeatist posture, the credibility of Philippine policy on the West Philippine Sea will be completely destroyed.”
AN OFFICIAL of Pharmally Pharmaceutical Corp. who was offered protection by the Senate last week could no longer be reached on her mobile phone, according to the blue ribbon committee chairman.
“Pharmally Pharmaceutical official Krizle Mago can no longer be contacted by the Senate blue ribbon committee,” Senator Richard J. Gordon, Jr. twitted in Filipino on Sunday.
“A day after her admission that the company had fooled the Filipino people by faking the expiration dates of face masks and face shields, Ms. Mago is now ‘out of reach,’” he added.
Mr. Gordon said the committee had tried to get her address so it could send the Senate sergeant-at-arms on Sunday, but she could no longer be reached.
The government bought millions of expired and substandard face shields for healthcare professionals from Pharmally, a private company that was awarded more than P8 billion in contracts, Senator Ana Theresia N. Hontiveros-Baraquel said on Friday.
The senator showed at a hearing a recorded video of a Pharmally warehouse worker who testified that the certificates for 2 million face shields that expired last year had been replaced with new certificates dated 2021.
The worker said he got an order from Krizel Grace U. Mago, regulatory affairs head at the company, to rebadge the face shields.
Ms. Mago admitted the practice, saying it had the blessing of the company management particularly Pharmally Treasurer Mohit Dargani.
The treasurer denied the allegation at the hearing.
Senators urged Ms. Mago to divulge other dubious transactions at her company in exchange for her protection, and she said she would think about it at the weekend.
“I am worried for Ms. Mago,” Ms. Baraquel said on Sunday. “I pray that she’s safe and will agree to cooperate for the truth and for the sake of her fellow health workers.”
The Senate will hold another hearing investigating allegedly anomalous deals involving the Health and Budget departments on Sept. 30. — Alyssa Nicole O. Tan
