Peso sinks to one-month low on hawkish Fed bets

August 22, 2022 | 9:00 pm

THE PESO hit a one-month low against the dollar on Monday on expectations that the US Federal Reserve will remain hawkish, and amid global inflation concerns.

The local unit closed at P56.21 per dollar on Monday, weakening by 28 centavos from its P55.93 finish on Friday, based on data from the Bankers Association of the Philippines.

This is the first time the peso closed at the P56-per-dollar level since late July and is its worst finish since July 22’s P56.28.

The peso opened Monday’s session weaker than its Friday close at P56.10 versus the dollar. Its worst showing was at P56.22, while its intraday best was at P56.03 against the greenback.

Dollars exchanged decreased to $804.95 million on Monday from $889.67 million on Friday.

“The peso exchange rate weakened… as the hawkish Fed signals amid the need to fight elevated US inflation supported the upward correction in the US dollar versus major global currencies,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Fed Chair Jerome H. Powell will lead a host of policy makers at the annual Atlanta Fed’s Jackson Hole Economic Symposium on Friday, with the US central bank facing the fastest inflation since 1980 and raising interest rates fast to counter it.

“The peso weakened after the hotter-than-expected German producer inflation report renewed global inflationary concerns,” a trader said in an e-mail.

German producer prices jumped at the fastest pace in July, pushing investors to buy safe-haven dollars. According to the federal statistics office on Friday, producer prices in Germany surged 37.2% year on year, the biggest rise since records began in 1949. The month-on-month rise of 5.3% was also a record high.

The record increases in producer prices were primarily driven by skyrocketing energy prices, up by 105% from the same month last year.

For Tuesday, the trader said “the local currency might rebound from potential profit taking and weaker US manufacturing and services reports overnight.”

The trader expects the local unit to move from P56.05 to P56.25, while Mr. Ricafort gave a wider forecast range of P56.05 to P56.30 per dollar. — KBT

Ex-USec says Sugar Order 4 was meant to address ‘urgent’ shortage

August 22, 2022 | 8:08 pm

THE Agriculture Undersecretary who resigned following the recall of Sugar Order (SO) No. 4 said he signed the order after a meeting with the President convinced him of the urgent need to import 300,000 metric tons of sugar, adding that he believed he was fully authorized to act in such a manner.

At a joint hearing on Monday of two House committees, the Good Government and Public Accountability and Agriculture and Food panels, former Undersecretary Leocadio S. Sebastian acknowledged that he had signed the order on behalf of President Ferdinand R. Marcos, Jr., in the latter’s capacity as Agriculture Secretary.

He said, however, that the plan went through the proper administrative channels.

“I drafted a memo for the President which I sent to the office of the Executive Secretary. I was also informed that (Sugar Regulatory Administration Head Hermenegildo R. Serafica) also sent the same e-mail (with the draft import order) directly to the office of the Executive Secretary. We waited for an answer but did not get any,” he added.

Mr. Sebastian said that he signed the order due to the “urgency” of the supply situation and based on a “misreading” of Mr. Marcos’ intentions following their meeting.

“I misread the intention of the President… that gave me the feeling that there is an urgency to this matter and that we need to act as soon as possible. I also expressed in my letter to the President that the board will meet as soon as possible to decide on the sugar order,” he said.

“I may have misread the intent of the President when I pushed through with the signing, based on the authorization given to me. That’s why when I realized I had misread the intention of the President, I immediately gave my resignation,” he added.

Mr. Sebastian said during the hearing that his brief allows him to sign sugar orders on behalf of the Agriculture Secretary, citing a memorandum from the Executive Secretary. The Secretary of Agriculture is ex-officio chairman of the SRA board.

Mr. Serafica, who has also resigned as SRA board member, as did the millers’ representative to the board, Roland B. Beltran, said the import plan was made in consultation with the sugar industry and was required to bolster the sugar inventory.

“We really needed additional sugar. We submitted an import proposal. I did ask my immediate supervisor then, Mr. Sebastian. I did not neglect the farmers. In fact, we consulted the farmers, it was a recommendation from almost all the stakeholders and these are written recommendations,” Mr. Serafica said.

On Aug. 1, Mr. Serafica said he was in a meeting with Mr. Marcos, who gave instructions to the SRA and Department of Agriculture to “prepare an import plan.”

The plan was then submitted to Mr. Sebastian on Aug 5. On the same day, Mr. Sebastian also sent a memorandum detailing the Sugar Order to the Palace.

On Aug. 8, the SRA board met prior to the signing of the order.

“I initiated the (meeting). Based on the recommendations of the stakeholders, we took it from there,” Mr. Serafica said.

The issue of whether the SRA board acted with due authority remained contentious among legislators, with Antipolo Rep. Romeo M. Acop saying that the board meeting was “unauthorized” as it was not called by Mr. Marcos.

“The signs are there that SO No. 4 was not right. It did not follow protocols,” he said.

Rep. Florida P. Robes, of the lone district of San Jose Del Monte City, said the manner in which the meeting was called “is illegal and was not authorized by the President. If you had pressures from the stakeholders, I don’t think it’s just that. There might be other reasons.”

Deputy Speaker Rodante D. Marcoleta said at the hearing that the SRA must act in a manner that also considers consumer interests.

“There are representatives for planters and millers but none for consumers. Consumers are the ones hit because (the SRA) doesn’t consult consumers. Consumers are the ones who do not benefit here,” he said.

Ms. Robes concurred, saying that the interests of workers in the sugar industry have also been neglected.

“We need to know the policies (for improving) the situation of the sugar farmers. The SRA has not supported the interests of farmers,” she said. — Luisa Maria Jacinta C. Jocson

MUFG raises 2022 outlook on Philippine growth to 6.7%

August 22, 2022 | 8:07 pm

Makati-skyline-buildings — PHILIPPINE STAR/ MIGUEL DE GUZMAN

MUFG Bank said it upgraded its view on Philippine economic growth in 2022 to 6.7% from 6.5% previously, citing stronger-than-expected performance in the first half.

MUFG Bank analyst Sophia Ng, in a note issued on Monday, said the upgraded growth outlook was due to the “robust” 7.8% growth posted in the first half.

“Given the robust 7.8% growth rate in 1H22, our revised forecast still reflects our assumption of a slower growth rate in 2H22,” she added.

GDP growth in the second quarter slowed significantly to 7.4% from 12.1% a year earlier and 8.2% in the first quarter, according to preliminary data from the Philippine Statistics Authority (PSA).

“Factors that led to a slowdown in growth in Q2 were within our expectations, but the overall growth rate is higher than what we projected earlier this year,” Ms. Ng said.

MUFG’s new projection falls within the 6.5-7.5% full-year growth target set by the Development Budget Coordination Committee.

According to MUFG, inflation will likely be the main drag on private consumption until 2023, as will volatility in net goods exports.

“Inflation has risen much faster than expected so far this year and is likely to be the main impediment to private consumption through 1H23,” Ms. Ng said.

Preliminary estimates from the PSA indicate consumer price index growth of 6.4% year on year in July, driven by food and transport costs.

July headline inflation was the highest since the 6.9% posted in October 2018.

In the year to date, inflation averaged 4.7%, up from 4% from a year earlier. This was also lower than the revised 5.4% forecast of the Bangko Sentral ng Pilipinas (BSP).

“Higher interest rates and elevated levels of inflation are likely to continue to (impede) private consumption in 2H22. This is already evident in Q2 when private consumption added just 5.8 percentage points (ppt) to growth in Q2 from 7.4 ppt in Q1,” Ms. Ng said.

“As inflation is the biggest threat to the consumption-led economy, the BSP would have to continue to tighten monetary policy after 175 bps of cumulative rate hikes done so far this year,” she added.

The central bank has raised benchmark rates by a total of 175 basis points (bps) so far this year, including the 50-bp increase on Aug. 18, bringing the benchmark rate to 3.75%.

Rates on the overnight deposit and lending facilities were also raised by 50 bps to 3.25% and 4.25%, respectively. MUFG sees the BSP hiking by 75 bps more before the year ends to bring inflation back within target.

Meanwhile, MUFG said the merchandise trade deficit will continue to widen and drag down overall growth for the rest of the year.

“This is particularly in view of widening trade deficits brought about by the higher import value of oil and non-oil commodities and greater demand for capital goods as the government ramps up infrastructure spending,” Ms. Ng said.

The merchandise trade deficit hit another record in June despite slowdowns in the growth of imports and exports, according to the PSA.

Preliminary data show imports growing 26% year on year to $12.487 billion in June. This was lower than the revised 30.2% in May and 42.4% in June 2021.

Exports rose 1% year on year to $6.644 billion in June, against the revised 6.4% posted in May and 18.9% a year earlier.

This brought the balance of trade in goods — the difference between exports and imports — at a record monthly deficit of $5.843 billion in June.

Still, the Philippines is expected to be one of the fastest growing economies within the Association of Southeast Asian Nations region.

“A growth rate of 6.7% is also considered to be robust and slightly stronger than the average growth rate recorded during pre-pandemic times between 2012-2019 at 6.6% and last year’s 5.7% expansion,” Ms. Ng said.

MUFG said disruptions to economic activity look unlikely as President Ferdinand R. Marcos, Jr., promised not to re-impose lockdowns and the administration’s intent to continue the ‘Build, Build, Build’ infrastructure program.

This will likely increase government spending and attract more investment in the construction sector, she said. — Keisha B. Ta-asan

Foreign investors wary of RCEP delay, Trade department says

August 22, 2022 | 8:06 pm

THE Department of Trade and Industry (DTI) said the ratification of the Regional Comprehensive Economic Partnership (RCEP) remains one of its top priorities due to the unease that failure to sign on to the trade deal has caused investors.

The DTI was briefing the Senate Trade, Commerce and Entrepreneurship Committee on Monday on its policy priorities. Trade Secretary Alfredo E. Pascual said that “most of the investors in these industry clusters will most likely come from abroad.”

The priorities include industrials, manufacturing and transport; technology, media and telecommunications; health and life sciences; and modern basic needs; and measures to make the economy more resilient.

“There are the foreign investors setting up these enterprises here in partnership with local investors, and the target of these industry clusters is the export market,” Mr. Pascual said. “We want these enterprises to be participating in the global value chains in the products produced under these clusters.”

He said through industrialization, especially in the priority areas, the Philippines will be able to offer better-quality and higher-paying jobs.

“So it is very important, I’d like to emphasize, that RCEP be ratified or be confirmed by the Senate because we’ve always been asked by prospective investors, foreign chambers about how soon (we can ratify) RCEP because their own people, the companies in their respective regions, are asking them, before they consider investing in the Philippines,” he added.

RCEP, which started coming into force in participating countries on Jan. 1, involves Australia, China, Japan, South Korea, New Zealand and the 10 members of the Association of Southeast Asian Nations (ASEAN).

The Philippines is one of three countries that have not ratified RCEP, along with fellow ASEAN members Indonesia and Myanmar.

President Ferdinand R. Marcos, Jr. has said that he wanted to review the trade agreement to protect the agriculture sector.

Senator Pilar Juliana S. Cayetano said the DTI must work closely with the Commission on Higher Education (CHED) and public and private universities, to better align job creation efforts with academic training being received by future workers.

“A lot of (students) will end up going abroad or end up in unrelated fields which is kind of sad, so as early as now, we have six years, let’s plan this carefully, work with the state universities on what the demand is, what the particular specifications you are looking for,” she said.

“We need to understand what we really expect from our human resource pool and align this with the demand,” she added, noting that since becoming a senator in 2004, she has not seen adequate coordination between agencies and the education industry.

Mr. Pascual said that when he “made this presentation to the Cabinet, I highlighted, very specifically, the need to collaborate with CHED, DepEd (Department of Education) and TESDA (Technical Education and Skills Development Authority) for purposes of developing the necessary skills among our human resources, our workers.”

Ms. Cayetano said she has never seen a sustained effort in this regard.

“The coordination… rarely happens. Maybe you can form a committee that really sits down together because otherwise, it doesn’t happen,” she said.

The DTI’s other priorities are the Omnibus MSME Code to support small businesses, and the proposed Internet Transactions Act.

The Internet Transactions measure seeks to protect consumers and merchants via the creation of an e-commerce bureau.

Trade Assistant Secretary Mary Jean T. Pacheco, speaking at the hearing, said the department is proposing exempting newly registered e-commerce micro-enterprises from all national and local taxes in their first three years, as long as the enterprise is not an affiliate, subsidiary or a franchise of any other existing company.

If it is a one-person corporation or partnership, it must not have any previous or other existing registered companies, partnerships or businesses. For corporations, each stakeholder must have at least a 5% stake with no shareholders holding stock in trust for others.

“This will allow micro-businesses to pivot from offline to online, and it will also encourage them to register and take care of the business for the first two to three years as they grow into a bigger business,” Ms. Pacheco said.

The measure seeks to establish effective regulation for commercial activities performed on the internet.

“We’d like to see a robust e-commerce sector that will also ensure consumer protection, data privacy, intellectual property and security, as well as adhere to product and safety standards,” she said.

The Philippines has the fastest-growing digital economy in Southeast Asia, according to the e-Conomy Southeast Asia Report, which projects the Philippines’ overall internet economy in terms of gross merchandise value (GMV) at $40 billion by 2025.

Philippine internet economy GMV was estimated at $17 billion in 2021, up 93% from a year earlier, due to government initiatives and mass digital adoption, aided by double-digit growth in sectors such as food delivery services.

The Philippines also added 12 million new digital consumers since the pandemic started in March 2020. Of this, 63% are from non-metro areas. A majority also said they plan to continue using these services after the pandemic.

Ms. Pacheco said the Trade Secretary “should be granted the authority to issue take down orders, including the regulatory jurisdiction…over digital platforms.”

“One of the most contentious issues is the issue of liability for the platforms,” she added. “There are also penalties provided under the law, but the private sector can make a comment about removing the criminal aspect of penalties.”

The bill was earlier approved by the House of Representatives on final reading but remained pending on second reading at the Senate by the end of the 18^th Congress. — Alyssa Nicole O. Tan

Thailand seeks to address hotel worker shortage by recruiting Filipinos

August 22, 2022 | 8:05 pm

Phuket Island, Thailand-hotel-beach — REUTERS

THE Department of Tourism (DoT) said Thailand is experiencing a shortage of hotel workers as demand in that industry recovers, and will seek to employ Filipinos to fill the gaps.

In a statement on Monday, the DoT said Secretary Maria Esperanza Christina G. Frasco and Thai Minister of Tourism and Sports Phiphat Ratchakitprakarn, at an Aug. 18 meeting, reached an agreement on offering jobs to Filipinos.

“With the lifting of travel restrictions and resumption of tourism activities, the Thai tourism industry is currently facing a shortage in their workforce of 60% in hotel staff up to middle manager positions,” Mr. Phiphat said.

“There is preference towards professionals from the Philippines due to the Filipinos’ impressive command of the English language — a requirement in accommodating Thailand’s increasing foreign tourists and guests,” he added.

Ms. Frasco said that the DoT is currently in talks with the Department of Labor and Employment to conduct job fairs for such workers. The job fair will be held between Sept. 22 and 24.

She added that the DoT is currently surveying the Philippines’ own tourism workforce following the pandemic.

“We note with serious consideration the shortage in the tourism workforce coming out of the coronavirus disease 2019 pandemic… (The job fairs will also be) for the purpose of ensuring that those that left the industry or may have been laid off from the industry during the time of pandemic would once again have the opportunity to be employed,” Ms. Frasco said.

Thailand and the Philippines have agreed to update their tourism cooperation agreement covering the period 2017-2022, which was signed on March 21, 2017.

The agreement covers travel facilitation, research, and development, education and training, tourism initiatives, human capital development and employment generation. — Revin Mikhael D. Ochave

NEA orders fuel oil-dependent power co-ops to source more renewable energy

August 22, 2022 | 8:05 pm

THE National Electrification Administration (NEA) has directed electric cooperatives to tap more renewable energy if they are currently drawing power from diesel or bunker-fired power plants.

“We have directed cooperatives to procure renewable energy for the hybridization of their diesel or bunker-fired power suppliers that they are (currently) engaged with,” NEA Administrator Emmanuel P. Juaneza told Businessworld by phone.

Energy Secretary Raphael P.M. Lotilla said at a Senate energy committee hearing on Aug. 10 that his department is looking to end off-grid areas’ dependence on imported fuel.

Mr. Juaneza said that NEA, together with the National Power Corp., started the “hybridization” process of off-grid power in 2019.

Mr. Juaneza said electric cooperatives are required to comply with the renewable portfolio standards (RPS) requirement.

Under RPS, power distribution utilities, electric cooperatives, and retail electricity suppliers are required to source an agreed portion of their energy supply from renewable energy (RE) facilities.

He said solar is the most likely renewable source that cooperatives will turn to because of falling costs.

“The only drawback with solar energy is that it is not baseload, it’s variable,” he said.

Mr. Juaneza said the main obstacle to 100% household electrification is the lack of funds.

Mr. Juaneza said that to energize one sitio with 10 households, P1.5 million is needed.

According to a NEA statement issued last week, Mr. Lotilla said he is “counting on NEA to be our committed partner in realizing the government’s vision of total electrification of the country.” — Ashley Erika O. Jose

Workplace safety measures present at over 98% of offices before pandemic

August 22, 2022 | 8:04 pm

protective-glasses-with-hard-hat-headphones — FREEPIK

OCCUPATIONAL HEALTH, safety and productivity measures were in place in over 98% of establishments in 2019, the last full year before the pandemic, the Philippine Statistics Authority (PSA) said, citing the results of a survey.

The Integrated Survey on Labor and Employment: Module on Occupational Safety and Health Practices found that 98.6% of the 38,305 establishments with 20 or more employees had in place preventative and control measures to safeguard workers, up from 98.1% in 2017.

The wholesale and retail trade; repair of motor vehicles and motorcycles was the top category of business in terms of preventative measures in place, with 24.8% of the segment having such measures in place (from 24.1% in 2017). This was followed by manufacturing at 16.8% (from 18.4%), accommodation and food service activities at 12.5% (from 13.1%), education at 10.9% (from 11.1%), and administrative support and service activities at 7.2% (from 5.9%).

The most common safety measures or activities listed by PSA were: posted safety signage or warnings (89.7% of all establishments), disseminated information materials on safety and health (83.9%), and regularly inspected and conducted maintenance of equipment, mechanical and electrical facilities (83.2%).

Meanwhile, about 95.8% or 36,694 of all establishments implemented policies or programs for workers health and safety.

The most common such policies and programs were smoke-free workplace (85.3%), fire prevention and control programs (83.6%), sexual harassment prevention policies (77.7%), emergency and preparedness response programs (74.0%), and work accident prevention programs (72.3%).

About 85.8% of all establishments in 2019 said they conducted various OSH-related training and seminars that prepared employees on issues regarding safety, health and environmental hazards.

The most common forms of training involved first aid (61.5%), fire safety (60.9%), 40-hour basic OSH courses (44.9%), emergency preparedness (32.2%), and drug-free workplace seminars (27.4%).

In a separate module on Productivity Improvement Programs (PIP) and Gainsharing Practices, only 15,234 (or 39.8%) of tall establishments in 2019 were found to have carried out workplace programs to improve worker and enterprise productivity.

The electricity, gas, steam, and air conditioning supply industries posted a 57.1% share of establishments with PIP training, or 172 of the 301 establishments surveyed.

This was followed by human health and social work activities except public health activities at 49.9% (of 1,447 establishments); manufacturing at 48.9% (of 6,406); arts, entertainment, and recreation at 48.6% (of 313); and education except public education at 38.8% (of 4,156).

About 25.8% or 3,926 of establishments cited lack of funds for not conducting PIP sessions. The second most common reason cited was lack of manpower or support from the employees at 13.0%.

By the time the pandemic set in, the survey estimated that 72.5% of business operations were disrupted by community quarantines and strict lockdowns as of June 2020.

About 64.1% of firms reported that sales were down from a year earlier, while 48.3% resorted to reduced operating hours.

The report found that the pandemic resulted in reduced cost of production cost inputs (45.4% of establishments surveyed); implementation of work-from-home arrangements (36.6%); temporarily layoffs (16.9%), shuttered operations with continued compensation for workers (16.1%); and shuttered operations with no compensation for workers (13.9%).

Some 44.5% of establishments said that they tapped other sources of funding during the slowdown. The top source of such funds, cited by 45.7% of those surveyed, was delayed payments to suppliers, followed by early payments from customers, resorted to by 33.1%. Some 24.5% took on bank loans. — Ana Olivia A. Tirona

Back to school: A refresher on the taxation of educational institutions

August 22, 2022 | 8:04 pm

Yesterday marked the end of beach days for students as they officially start a new academic year. While summer 2022 might seem brief, the young may very well be looking forward to face-to-face classes. Zoom classes can be set aside for the meantime while students flock back to schools for their first-ever in-person classes since the pandemic.

At the onset of the pandemic, a plunge was seen in the number of enrollees especially in academic year 2020-2021, mainly due to pandemic-driven economic and social factors and a reluctance to transition to alternative modes of learning. Private schools took a hit as students transferred to the public-school system or dropped school altogether. It is hoped that academic year 2022-2023 will see an increase in enrollees; initial numbers from the Department of Education (DepEd) appear to be positive.

This optimism for increased enrolment, however, does come with tax implications. Along with the increase in enrollees and subsequently, tuition, educational institutions are still subject to some form of tax. So, to all educators and school administrators, grab your pen and paper (or your tablet, as the kids might say), it’s time to take a refresher course on the taxation of educational institutions.

LESSON 1: WHAT’S THE INCOME TAX RATE FOR EDUCATIONAL INSTITUTIONS AGAIN?
Before we discuss taxing school income, it is important to determine the corporate structure of the school, which will be used to classify it either as a proprietary education institution (PEI), a non-stock, non-profit educational institution (NSNP-EI), or a government educational institution (GEI).

PEIs, commonly known as “private schools,” are managed and administered by private individuals, groups, or stockholders. PEIs may be registered as domestic corporations, partnerships, or other recognized entities under the law, provided that they are registered and adhere to the rules and regulations of either the DepEd, Commission on Higher Education (CHED), or the Technical Educations and Skills Development Authority (TESDA).

PEIs registered as domestic corporations are subject to a preferential income tax rate of 10% based on net taxable income. The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, however, granted a reprieve to PEIs by lowering the tax rate to 1% of net taxable income between July 1, 2020 and June 30, 2023. The preferential tax rate is given to PEIs, provided that incomes received from unrelated business or other activities do not exceed 50% of the total revenue for the taxable year; otherwise, PEIs may be subject to the regular corporate income tax on the entire amount of taxable income. PEIs other than domestic corporations are still subject to the regular income tax rates depending on their structure. As such, a PEI owned by a sole proprietorship may still be subject to the regular income tax.

NSNP-EIs are also considered private schools, as these are managed by private groups of individuals, better known under corporate law as “trustees” or “members.” NSNP-EIs do not issue shares of stock or dividends. Further, no income shall inure to the benefit of any trustee, member, director, or officer of NSNP-EIs. These institutions are required to register and adhere to the rules of DepEd, CHED, and TESDA as well.

As expressly provided in the Constitution, and further reiterated under Section 30(H) of the Tax Code, NSNP-EIs are exempt from income tax on their revenue and assets, provided that the revenue and assets are actually, directly, and exclusively for educational purposes. Unrelated income, however, may still be subject to the appropriate income taxes.

To ensure that the income from NSNP-EIs is actually, directly and exclusively used for education purposes, NSNP-EIs are required to secure a one-time tax exemption certification from the Bureau of Internal Revenue (BIR) through the submission of applicable documents as required under Revenue Memorandum Order No. 44-2016. Such certification may be revoked by the BIR for any violation of any existing tax rule, or if there are material changes in the character, purpose or method of operation by the NSNP-EI.

GEIs are schools that are supported, either fully or partially, by the government. These institutions are commonly formed by express provision of law and their tax exemptions are usually stated in their charter. Generally, GEIs are exempt from income tax under Section 29(I) of the Tax Code.

LESSON 2: IS MY SCHOOL SUBJECT TO VAT ON INCOME OR REVENUE RECEIVED?
Section 109(H) of the Tax Code states that educational services rendered by private educational institutions and GEIs duly accredited with either the DepEd, CHED, or TESDA are exempt from VAT. However, the exemption does not extend to the input VAT on purchases made by the schools. In connection with this, input VAT on purchases made by private schools may be claimed as a cost or expense.

It must be noted, however, that the VAT exemption of private schools only extends to receipts from educational services such as tuition. In several BIR VAT rulings and tax appeals cases, gross receipts from other activities such as the disposal of school vehicles and equipment for operational use and rentals received by PEIs or NSNP-EIs from canteen concessionaires may still be subject to VAT. Thus, while the private school may be exempt from VAT on its tuition, it may still be subject to VAT on other areas.

Revenue received from non-educational activities has been the subject of various administrative and judicial cases involving educational institutions — this is one to watch.

LESSON 3: DOES MY SCHOOL NEED TO WITHHOLD TAXES FROM PURCHASES? Taxpayers such as NSNP-EIs or GEIs, who are exempt from payment of income tax, are generally exempt from withholding tax on income receipts as well. However, this does not absolve the school from withholding taxes on its purchases.

Common expenses such as rent, payments to professionals, management, and technical consultants are all subject to certain withholding taxes under Revenue Regulation (RR) No. 02-1998, as amended by RR No. 11-2018. This means that on every payment made to suppliers, the school must withhold a certain percentage therefrom net of VAT.

Last, schools that are considered as top withholding agents are required to withhold 1% on every purchase of goods or 2% on every purchase of service from regular suppliers.

Blessed with preferential tax rates and exceptions, schools must also invest in a robust regulatory compliance team aside from having a strong roster of faculty members. Of equal importance is regulatory compliance of educational institutions as part of our collective aim of enriching the country’s youth and improving our educational and tax system.

Any questions? There being none, class dismissed!

Let’s Talk Tax is 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.

Joen Jacob G. Ramas is a senior in charge of Tax Advisory & Compliance division at the Cebu office of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Traffic woes, overcrowding mar first school day

August 22, 2022 | 7:43 pm

school-students-teacher-1 — PARENTS crowd the entrance and fence of Concepcion Elementary school during the first day of face to face class monday Aug 22. — PHILIPPINE STAR/ WALTER BOLLOZOS

By Kyle Aristophere T. Atienza, Reporter

THE GOVERNMENT on Monday said the coronavirus pandemic would no longer be an excuse to suspend face-to-face classes, as Filipino students endured heavy traffic on their way to cramped classrooms on the first day of school.

“We can no longer keep COVID-19 as an excuse to keep our children from schools,” Vice-President and Education Secretary Sara Duterte-Carpio said at an event marking the new school year. “Our commitment to basic education must never falter.”

“There were calls to suspend the opening of classes and move it to September or October,” she said. “But we are talking about the future of Filipino youth.”

President Ferdinand R. Marcos, Jr. has said learning would be much more effective inside classrooms, where students can fully interact with their teachers and classmates. “I welcome the return of our children to full face-to-face classes after two years of online learning due to the pandemic,” he said in a statement.

“Since the threat of COVID-19 is still in our midst, it is important that our teachers and students continue to observe the minimum health protocols to ensure that they remain healthy while learning new things.”

Students and teachers were greeted by overcrowded classrooms and heavy traffic on the first day of school.

“When we asked our students to return to classes amid the pandemic, all systems should have been in place to ensure that public utility vehicles are available, traffic flow is manned efficiently and health protocols are observed,” Senator Mary Grace S. Poe-Llamanzares said in a statement.

Ms. Poe, a former pre-school teacher, said students should be sitting in chairs, not on the floor.

“Our students deserve a safe and comfortable experience as they brave going back to school amid the lingering pandemic,” Ms. Poe said.

“We hope concerned agencies will make up for the hitches encountered on Day One of face-to-face classes and make the coming days pleasant for our learners.”

Media reports showed traffic congestion across the country, especially in Manila, the capital and nearby cities.

John Paul S. Tanyag, a commuter, worries that the situation will worsen as more schools enforce five days of face-to-face classes in the coming weeks.

It took him one-and-a-half hours to get to his office in Taguig from his house in Muntinlupa City — triple the usual travel time in smooth traffic.

“It will get worse for sure,” he said in a Facebook Messenger chat. “There were missed opportunities to plan ahead while we were on lockdown.”

“The traffic situation that we have seen needs special attention,” Ariel E. Inton, a former board member of the Land Transportation Franchising and Regulatory Board (LTFRB), said by telephone. “The government has to do something about this as soon as possible.”

Mr. Inton, a lawyer advocating commuter safety, urged the government to hold meetings with various sectors and other agencies, including the Interior and Local Government and Education departments.

“Right now, we are not yet implementing full face-to-face classes,” he said. “The problem will be bigger once the full implementation is seen in November. We have to prepare the concerned agencies.”

ACT Teachers Party-list Rep. France L. Castro noted that as many as 50 students were cramped in one classroom in Quezon City, which she said poses health risks.

The Education department should limit students per classroom to avoid transmission of the coronavirus, she told the ABS-CBN News Channel.

Polen Austria, a parent, worries that coronavirus infections could surge as health protocols are ignored in her child’s public school.

“I’m quite confident because my child is already fully vaccinated,” she said by telephone. “But others might get infected and the disease could spread.”

Some teachers held a protest rally near the presidential palace before going to school, hitting the government’s unpreparedness. They also decried their meager salaries.

“Instead of being able to focus on teaching, they have to address classes that don’t have classrooms, or students that don’t have chairs and books or modules,” Vladimer Quetua, chairman of the Alliance of Concerned Teachers (ACT), said at the rally.

Teachers should not carry the burden of solving the gaps in Philippine education, he said. “This is the responsibility of the government, which continues to deny adequate support for education.”

Meanwhile, the Kabataan Party-list group denounced the confiscation by police of donations during a relief drive at an elementary school in Quezon City.

“The Kabataan Party-list condemns this act of police brutality that did not only deprive young students of safety equipment and other necessities on their first day but also inflicted trauma on children who witnessed such violence,” it said in a statement.

A video of police officers forcefully confiscating school materials and other goods in front of President Corazon C. Aquino Elementary School in Quezon City went viral on social media.

In a Facebook post, the Salinlahi Alliance for Children’s Concerns, which started the relief drive, called the police move despicable.

Police officers said the group did not have a permit to distribute the goods.

Kabataan urged the Philippine National Police to pull out policemen in schools to prevent violent incidents in front of children.

In a statement, the PNP reported a smooth implementation of security and minimum and public health protocols during the opening of the school year.

A total of 23,653 police officers were deployed across the country to maintain order, national police chief Rodolfo S. Azurin said.

Kabataan said the number of cops deployed for the reopening of schools was excessive.

COVID CASES
The Department of Health (DoH) posted 23,883 coronavirus infections in the past week, with the daily average falling by 15% to 3,412 cases from a week earlier.

In a bulletin, the agency said it had verified 321 more deaths, 90 of which occurred from Aug. 8 to 21. Of the new cases, 101 were severe and critical cases.

DoH said 699 of 2,586 intensive care unit (ICU) beds in the country had been used as of Aug. 21, while 6,677 of 22,076 non-ICU beds were occupied. There were 811 severe and critical admissions, it added.

The government has fully vaccinated 72.31 million Filipinos DoH said. It added that 17.42 million people have received booster shots.

Meanwhile, key coronavirus disease 2019 (COVID-19) indicators in the capital region continue to drop, the OCTA Research Group said.

The virus reproduction number in Metro Manila had fallen to 1.03 as of Aug. 18, from 1.11 a week earlier, OCTA fellow Fredegusto P. David tweeted. The capital region’s positivity rate had fallen to 14.6% as of Aug. 20 from 16.3% a week earlier, he added.

Mr. David said the region’s healthcare use rate for COVID-19 was 37%. “The National Capital Region remains at moderate risk at this time.” — with John Victor D. Ordoñez

Philippines detects 4^th monkeypox case

August 22, 2022 | 7:41 pm

THE PHILIPPINES has detected its fourth monkeypox case.

The 25-year-old patient, a Filipino with no travel history to or from a country with no monkeypox cases, has been isolated, the Department of Health (DoH) said in a statement on Monday evening.

Fourteen close contacts have been identified, one of whom was taking care of the patient, it said.

All four confirmed monkeypox cases in the Philippines are unrelated to each other, DoH said.

The first patient has recovered and was discharged on Aug. 6. The second and third patients were still in home isolation and in stable condition.

No new contacts of these patients have been identified. — Kyle Aristophere T. Atienza

Philippine agents seize smuggled rice, sugar

August 22, 2022 | 7:40 pm

Sugar-warehouse-customs — BUREAU OF CUSTOMS FACEBOOK PAGE

PHILIPPINE authorities on Monday seized hundreds of bags of smuggled rice and sugar in a warehouse near Manila, the capital, according to the presidential palace, amid rising sugar prices and tight supply.

Customs agents also seized machines in the Caloocan City warehouse that were being used to repack imported rice and sugar to make it appear that these were locally bought, Press Secretary Trixie Cruz-Angeles said in a statement on Monday night. 

The agents forcibly opened the warehouse after the owners and caretaker refused to cooperate, she said.

The government has intensified its crackdown on smuggling and hoarding amid rising food prices.

“The huge volume of sugar discovered by Customs agents in the various warehouses in Luzon has led Malacañang to conclude that the sugar shortage is artificial, brought about by the hoarding of sugar traders who wanted to rake in huge profits from the sudden spike in sugar prices,” Ms. Angeles said. — Kyle Aristophere T. Atienza

Local govt’s told to help DSWD give out cash aid

August 22, 2022 | 7:08 pm

The Department of the Interior and Local Government (DILG) has ordered local governments to help the Social Welfare department distribute cash aid to poor students after chaos marred the latter’s program at the weekend.

“We call on our local government units to respond proactively to the appeal of Social Welfare Secretary Erwin T. Tulfo,” DILG Secretary Benjamin C. Abalos said in a statement on Monday. “Let us step up and extend all the help that we can provide for the success of the distribution of financial aid to our students.”

Tens of thousands of students and parents trooped to offices of the Department of Social Welfare and Development (DSWD) nationwide at the weekend to claim their cash aid. Many of them went home with nothing, while at least one stampede was reported in Zamboanga in the country’s south.

The agency on Thursday said it would give P500 million in student cash aid — P1,000 each to elementary students from poor families, P2,000 to high school students, P3,000 to senior high school students and P4,000 to college students.

The aid is limited to three students per family, which can get the financial assistance on Saturdays from Aug. 20 to Sept. 24.

The Social Welfare department admitted failing to coordinate with local governments for the cash aid distribution. Social Welfare Secretary Erwin T. Tulfo apologized for the mess at the weekend, saying he wanted his agency to directly give the money and avoid selective aid.

Mr. Abalos said cities should set up several distribution centers to avoid overcrowding. He also ordered police to keep peace and enforce minimum public health protocols during the distribution of financial aid.

“In this massive undertaking, we look to our LGUs to assist us to be able to send out the financial assistance to the students who need them the most,” he added.

In Manila and nearby areas, authorities had to use riot police to prevent people from storming the offices of the DSWD.

Political analysts have said the chaos showed the government has not learned from its experiences during the coronavirus pandemic.

Mayors in several cities have suggested alternative procedures in the release of the cash aid.

Iloilo City Mayor Jerry P. Treñas said DSWD should consider a school-based distribution system. “If the reason of DSWD is to avoid going through the LGUs, the financial assistance can be coursed through the schools. It will be easier and more convenient,” he posted on Facebook on Saturday.

Earlier in the day, the mayor scolded the DSWD regional head over what he called a “terribly planned event” at the Iloilo Sports Complex.

In Dagupan City, Mayor Belen T. Fernandez offered to provide the local government’s list of poor households. She also offered the city’s plaza for the distribution.

In Zamboanga City, about 5,000 people showed up in front of a school where the aid was distributed, causing a stampede that hurt 29 people.

The victims, aged 16 to 58 years, had been waiting in line for a chance to receive the aid since Friday evening, the Zamboanga City Medical Center’s Public Affairs Unit posted on Facebook.

Zamboanga City Mayor John M. Dalipe in a statement said they were “ready and willing to support and provide necessary resources to ensure the well-being of the beneficiaries.” — John Victor D. Ordoñez

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