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Japan signals interest in locating manufacturing to PHL after CREATE passes

THE Japanese ambassador to Manila told the Department of Finance (DoF) that Japanese companies are considering the Philippines for manufacturing investments, particularly once the uncertainty hanging over a key tax reform bill clears up.

The DoF said in a statement Monday that Ambassador Kazuhiko Koshikawa indicated the Japanese firms’ interest in the Philippines as a possible option for relocating manufacturing operations.

The newly-appointed ambassador made the remarks to Finance Secretary Carlos G. Dominguez III during a recent courtesy call, the DoF said.

Mr. Koshikawa was quoted as saying that Japanese investors will consider it a favorable development if key points of the Senate’s version of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill make it into the final law.

The CREATE bill aims to cut the corporate income tax rate to 25% this year from 30% currently for all businesses except small domestic enterprises with a total net income not exceeding P5 million. The latter will receive an outright reduction of corporate income tax to 20% retroactive to July 2020. The tax rate for bigger businesses will be gradually trimmed by one percentage point each year between 2023 and 2027.

The CREATE measure goes into the bicameral conference committee when legislative sessions resume next month.

Finance Secretary Carlos G. Dominguez III said the two countries are “demographic partners,” with the Philippines’ young population complementing Japan’s highly skilled workforce.

Mr. Koshikawa said Japan will continue extending support for the Philippines’ disaster risk reduction and mitigation programs.

Japan is the Philippines’ top source of foreign funding, with loans and grants amounting to $10.1 billion at the end of June, or 38.53% of the official development assistance portfolio. — Beatrice M. Laforga

January finish seen for CREATE bicam amid House push for ‘fair’ version

A SENIOR legislator expects to conclude by January the bicameral conference committee session harmonizing the bills on the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Representative Jose Maria Clemente S. Salceda, who chairs the House Ways and Means Committee, said the bicam’s “internal target” is to wrap up its proceedings next month, in the course of which the House contingent hopes to achieve a more “fair” version of the measure that addresses the House’s concerns.

Mr. Salceda said in a statement that the House contingent to the bicam has been instructed by Speaker Lord Allan Jay Q. Velasco to seek a “fair” version of CREATE. He did not elaborate.

Mr. Salceda has said that the Senate version of the CREATE bill largely reflects the Executive branch’s input, including a 5% across-the-board CIT (corporate income tax) cut for all resident corporations.

He warned in the statement that the bicam process will require significant give-and-take between the two chambers.

“The concerns of the body can only be remedied by amendments,” he said, adding that the concerns expressed about the draft measure “are not hostile” to sound taxation principles.

“We will take the bicameral conference committee as an opportunity to improve the version,” Mr. Salceda said. — Kyle Aristophere T. Atienza

Another chance to avail of TAD and VAPP

Last week, like millions of devout Catholic Filipinos, I was able to complete a nine-day series of Masses also known as “Simbang Gabi” albeit via live streaming due to the COVID-19 pandemic. Historically, it was said that the beloved Christmas tradition started when priests said dawn masses instead of traditional evening mass to accommodate churchgoers who had to go to work. It is thought that those who complete all dawn Masses will be granted a wish. I can still remember when I fervently wished to pass the qualifying examination for the accountancy program of my alma mater. Lo and behold, my wish was granted and I am now happily living my dream.

Fortunately, for taxpayers, the government has been supportive due to the lingering adverse impact of the COVID-19 pandemic to the business community. Not wanting to add any burdens to the catastrophic events of 2020, the government took the initiative in helping taxpayers with ongoing tax assessments through the deadline extension to avail of two of the Bureau of Internal Revenue’s (BIR) voluntary compliance programs: the tax amnesty on delinquencies; and the voluntary assessment and payment program.

TAX AMNESTY ON DELINQUENCIES (TAD)
Section 4 (tt) of Republic Act No. 11494, otherwise known as “Bayanihan to Recover As One Act,” allows the moving of statutory deadlines for the filing and submission of documents, including the payment of taxes to ease the burden on individuals under community quarantine.

To implement the provision, Revenue Regulations (RR) No. 32-2020 provides that TAD can be availed of until June 30, 2021 by those taxpayers with delinquent internal revenue liabilities for taxable year 2017 and prior years.

However, it should be noted that the extension refers only to the last day to file the application and to avail of the TAD, but the coverage remains the same — delinquent internal revenue liabilities or under any of the covered instances under Section 3 of RR No. 4-2019, on or before April 24, 2019. Thus, taxpayers with delinquent accounts after the prescribed period may not qualify to avail of the benefits of TAD and may run the risk of being subject to the BIR’s summary administrative collection remedies if filed belatedly.

VOLUNTARY ASSESSMENT AND PAYMENT PROGRAM (VAPP)
Pursuant to RR No. 21-2020, the purpose of VAPP is to limit taxpayer contact considering existing COVID-19 related protocols and social distancing measures while, at the same time, maximizing revenue collection at the least administrative cost by encouraging an increase in voluntary tax compliance.

RR No. 33-2020 provides that qualified persons can avail of the benefits of VAPP until June 30, 2021, unless extended further by the Secretary of Finance.

Also, the following additional clarifications were provided:

1. Taxpayers availing of VAPP on withholding taxes are allowed to claim deductions on the corresponding income payments.

2. The following instances invalidate the availment of VAPP:

a. When there is strong evidence or finding of under-declaration of sales, receipts or income or overstatement of deductions by more than 30% based on a written report of the appropriate revenue official stating the facts with supporting documents, such as Notice of Discrepancy (ND) and other third-party information (TPI) documents; and

b. When there is verifiable information that the taxpayer has withheld tax but failed to remit the same.

3. No denial of application or invalidation of a previously issued Certificate of Availment will be valid unless the taxpayer is formally notified, stating the factual facts thereof. Accordingly, the denial or invalidation can be appealed to the Assistant Commissioner — Large Taxpayer Service or Regional Director within 30 days from receipt of such notice.

However, as much as the foregoing clarifications are a welcome development to taxpayers, I would like to respectfully submit the need to check the reasonableness of the ground to invalidate the availment of VAPP due to “strong evidence or findings based on ND or TPI” as provided in the RR which may be premature.

On one hand, in the case of an ND, what if an audited taxpayer has already submitted a position paper contesting the allegations and providing the supporting documents against the alleged under declaration of income or over declaration of expenses? Note that under RR No. 21-2020, qualified taxpayers may avail of the benefits of VAPP except those who have already been issued a Final Assessment Notice that are final and executory. Thus, at the ND stage, will the submission of a position paper within the period allowed by pertinent tax laws overturn the burden of proof; and, therefore, the basis of invalidation due to strong evidence has no leg to stand on?

On the other hand, in the case of TPI documents, I respectfully submit that the BIR officer must provide certifications from the counterparties (e.g., supplier or customer) of the audited taxpayer to ensure the merit of the alleged strong evidence or findings. Otherwise, the availment of VAPP should not be invalidated by mere presumptions without credible evidence. The Supreme Court has ruled that the absence of confirmation or certification from third-party sources renders the computerized/third-party matching wrong and without merit.

Further, BIR may revisit certain issues to make the VAPP more attractive to taxpayers. While the BIR has issued Revenue Memorandum Circular No. 111-2020 to clarify certain questions relating to VAPP availment, the tax office may consider a second look to provide more attractive and lenient conditions such as removal of the condition to pay withholding tax (amount not withheld and not remitted in 2018) first before availing of VAPP; or in case there is no increase or decrease in the total taxes due for all tax types in 2018 as compared to all taxes due in 2017 (as in the case of enterprises enjoying tax exemptions and incentives), the voluntary tax payment is to be computed based on the net increase of more than 30% (instead of a deemed net increase of not more than 10%) which will ultimately yield a lower amount of voluntary taxes to be paid; or allowing a taxpayer to avail of the benefits of the program without requiring to cover both Sections 9a and 9b of RR No. 21-2020. Accordingly, such options will enable taxpayers to better evaluate the pros and cons of availing of VAPP and may contribute to an increased availment turnout. After all, is it not the ultimate objective of the extension?

Nevertheless, while robust tax collection should be the utmost priority to help defray the increased expenditures of the government during this pandemic, the BIR programs will surely help taxpayers who suffered major losses due to the pandemic. A second chance that will alleviate the suffering of our countrymen as we prepare to face a new tomorrow full of hope.

God is in control. With that in mind and heart, let us all celebrate and enjoy every moment we have with our families without any fear for tomorrow. Let us all count our blessings and carry on in life with a grateful heart.

As we find the cure very soon, I can look back with a smile knowing that this generation has an excellent opportunity to make a difference: a second chance to see the world full of life and, for me, one more chance to serve my purpose with a new life.

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.

 

Daryl Matthew A. Sales is a manager of the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Have to hand it to Filipino female athletes in 2020

By Michael Angelo S. Murillo, Senior Reporter

THE year 2020 rendered sports activities limited because of the coronavirus pandemic, but Filipino athletes still managed to squeeze in some action internationally and actually did well — particularly the women.

Golfers Yuka Saso and Bianca Pagdanganan, tennis ace Alex Eala, boxer Irish Magno, weightlifter Hidilyn Diaz, skateboarder Margielyn Didal, basketball player Jack Animam, and mixed martial arts fighter Denice Zamboanga were some of the Pinay athletes who made waves in their respective fields this year to give Philippine sports something to celebrate about despite the rough and tough ride.

Ms. Saso, 19, made her professional debut this year and did not waste much time in introducing herself to the field.

She spent much of the time in the LPGA of Japan Tour and was solid with two victories — NEC Karuizawa 72 and Nitori Ladies Golf Tournament both in August — and six top 10 finishes.

Ms. Saso leads the JLPGA money race with ¥93,891,170 (P43.5 million) in earnings, ahead of Ayaka Furue of Japan (¥90,502,992), who is a three-leg winner.

She competed at the US Women’s Open early this month and finished in joint 13th place to improve to 45th place in the world rankings.

The Bulacan-born player is now eyeing a spot in the rescheduled Olympic Games in Tokyo next year, something many are bullish about.

Ms. Pagdanganan, 23, meanwhile, also made her pro debut this year and held her own in the Ladies Professional Golf Association (LPGA), making the cut nine in the 10 tournaments she competed in, with two top 10 finishes.

To date, she has a total earnings of $203,775 (P9.8 million) and is ranked 150th in the world.

Ms. Pagdanganan is also looking to book a spot in the Olympics.

Fifteen-year-old Eala, for her part, painted a rosy picture for Philippine tennis after having a breakthrough year in 2020.

The Rafa Nadal Academy opened the year by winning the 2020 Australian Open juniors doubles title with partner Priska Nugroho of Indonesia, becoming in the process the first Filipina to win a grand slam title, be it in juniors or seniors play.

She then had it eventful at the French Open in October, reaching the Final Four.

“I’m super happy, and super proud to be representing the Philippines. It’s an honor…,” said Ms. Eala following her good run in France.

Ms. Eala went as high as number two in the world for her achievements, but is to finish the year at number three as per the latest rankings of the International Tennis Federation.

Boxer Magno assured the country would be represented in the Tokyo Olympics after earning a spot in the Games at the Asia and Oceania Olympic Boxing Qualification Tournament in Amman, Jordan in March.

Flyweight Magno, a silver medallist in the last Southeast Asian Games (SEA), defeated Tajikistan’s Sumaiya Qosimova by unanimous decision in their box-off to earn her ticket.

She became the second boxer to qualify after middleweight Eumir Felix Marcial. The two joined pole-vaulter EJ Obiena and gymnast Caloy Yulo as the Filipino athletes who are Olympics-bound so far.

Veteran Olympic campaigner and silver medal-winning weightlifter Hidilyn Diaz had a muted campaign for the most part this year, but still managed to grab top hardware at the 2020 Roma World Cup in January and then online at the 2020 Oceania Weightlifting Federation’s (OWF) Eleiko Email International Lifters Tournament in the middle of the year.

She has yet to qualify for the Tokyo Games, but is determined to make it once qualifiers resume next year.

Online was also the way for Asian Games and SEA Games gold medallist Ms. Didal as she won silver at the Madrid Urban Sports Tournament in November.

She, too, has her sights trained on the 2021 Olympics.

Baller Animam, meanwhile, got the opportunity to play in Taiwan and is representing the Philippines well.

Much like she was doing here during her time with the National University women’s basketball team and Team Philippines, Ms. Animam has been a force for the Shih Hsin University at the University Basketball Association.

In combat sports, MMA fighter Zamboanga racked up two consecutive victories (February and August) at ONE Championship, making her one of the top contenders for the atomweight title currently held by Angela Lee of Singapore.

Given the headway that Filipino women made in 2020 amid the challenges presented by the pandemic, the Philippine Sports Commission is one with the country in celebrating them just as it expressed hope that more women will be inspired to engage in sports.

Mavs set NBA record while blasting Clippers; Lakers roll without Davis

LUKA Doncic had 24 points, nine rebounds and eight assists, and the Dallas Mavericks set an National Basketball Association (NBA) record for the largest halftime lead in the shot-clock era in a 124-73 win at the Los Angeles (LA) Clippers on Sunday afternoon.

Josh Richardson scored 15 of his 21 points in the first half for Dallas, which took a 77-27 lead into the break after shooting 58% from the floor and holding the Clippers to 24.3%, including one of 19 from 3-point distance.

The Golden State Warriors owned the previous record for largest halftime lead in the shot-clock era (1954-55), taking a 47-point advantage into the break against the Sacramento Kings on Nov. 2, 1991.

The Clippers played without four-time All Star forward Kawhi Leonard, who sustained a laceration near his mouth late in Friday’s win against the Denver Nuggets.

Paul George scored 15 points, and Serge Ibaka had 13 points and nine rebounds for Los Angeles.

The Clippers scored the first two points of the game, but didn’t score again until 8:11 remained in the opening quarter.

The Mavericks took their first double-digit lead on a 3-pointer by Maxi Kleber that made it 16-5 with 5:50 left in the first quarter.

Los Angeles went six minutes without a basket before Ivica Zubac scored on a dunk with 2:08 left in the opening quarter, but those points only cut the deficit to 27-9.

Dallas scored the first nine points of the second quarter to move ahead 45-13, and the Mavericks held the Clippers without a basket for another long stretch to extend their lead to 62-18 midway through the second quarter. Trey Burke hit a 3-pointer with 23.5 seconds left in the half to make it 77-27.

The Clippers scored the first 10 points of the second half for their best surge of the game, but the Mavericks outscored Los Angeles by seven points the rest of the third quarter to take a 104-57 lead into the fourth.

Dallas continued to be without forward Kristaps Porziņģis, who remains sidelines following offseason knee surgery.

LAKERS BEAT T-WOLVES
Kyle Kuzma broke loose with 20 points, all in the first half, and the Los Angeles Lakers overcame the absence of leading scorer Anthony Davis for an easy 127-91 victory Sunday over the visiting Minnesota Timberwolves.

LeBron James added 18 points and nine rebounds, while playing just three quarters, as Davis sat out with a right calf contusion. The Lakers have won consecutive games in convincing fashion after a season-opening defeat to the Los Angeles Clippers on Tuesday.

Kuzma, who averaged 12.8 points last season and did not score more than 15 points in either of the Lakers’ first two games, reached his 20 points on 8 of 11 shooting in the opening two quarters, making four of his six 3-point attempts.

Rookie Anthony Edwards scored 15 points and Naz Reid added 11 as the Timberwolves were unable to overcome the absence of leading rebounder and third-leading scorer Karl-Anthony Towns, who dislocated his wrist late in a road victory over the Utah Jazz on Saturday. — Reuters

Football for Humanity continues to be resilient despite the challenges

WHILE the ongoing episode with the coronavirus pandemic has effectively halted affairs of various forms, nonprofit and nongovernment organization Football for Humanity (FFH) has been resilient, determined to see its vision of inspiring people through despite the prevailing challenges.

Registered in 2017, FFH aims to use sport and the power of play to inspire, empower and transform the lives of children affected by extreme poverty, natural disasters, and armed conflict.

Since taking root, it has made significant progress in its push, taking its program to more areas in the country.

FFH initially made its presence felt through football-related initiatives, namely: the building of football infrastructure such as the unique small-sided, five-a-side enclosed spaces; establishing football development programs; conducting one-off football trainings and events; donating old and new football equipment; assisting talented but underprivileged youth to seek scholarships; and other charitable initiatives.

It then progressed to doing its share in helping address educational, health, and well-being needs of different communities as well as promoting peace and development.

Then the pandemic hit early this year, making it tougher for FFH to set further its goals.

“It’s been a really difficult time I guess for everyone, and that includes the Foundation. But we have continued to keep FFH active,” shared Belle Tiongco, FFH co-founder and vice-president, by way of e-mail.

Ms. Tiongco went on to say that their initiatives for now are confined mostly to virtual sessions to adapt with the current situation, something she admitted has nothing like doing face-to-face interaction with stakeholders and beneficiaries, but they are making do with it.

Their most recent effort was done in collaboration with the United Kingdom-based Coaches Across Continents (CAC), which like FFH has its thrust anchored on using sports as a platform to make a difference in other people’s lives.

CAC uses a “purposeful play and education outside the classroom” program in line with the United Nations Sustainable Development Goals and the UN Convention on the rights of the Child.  

FFH and CAC organized a virtual session this month with local coaches and community heads, where they shared a curriculum that can be used, especially during this time of the pandemic.

CAC coaches Charlie Pomroy, Chester de Torres, and Adam Burgess joined the session along with Ms. Tiongco and FFH founder and president Chris Thomas, who is currently in the UK taking his MA in Social Work.

Philippine Azkals captain and Philippines Football League star Stephan Schröck also took part and shared words of encouragement to continue pushing forward and staying resilient.

During the more than an hour long virtual session, the coaches and facilitators talked about different topics like health and wellness, safety, and rights of a child, among others, with game play as the backdrop.

The session was well attended and appreciated by stakeholders, which Ms. Tiongco took as very positive.

“For Chris and me, it was symbolic. We did not know whether we would survive the pandemic, in more ways than one.  But, for some stroke of luck, we have reached Christmas and we continue to have plans.  That’s already a blessing,” said Ms. Tiongco, just as she vowed that they will continue to have FFH make things happen moving forward. — Michael Angelo S. Murillo

Lionel Messi undecided over Barca future, drops US hint

BARCELONA — Lionel Messi has yet to make up his mind if he will terminate his two-decade long relationship with Barcelona at the end of this season, hinting that he could end up seeing out his playing days in Major League Soccer.

The Argentine’s future has been a hot topic ever since he tried to leave Barcelona in August. He had to put those plans on hold till the end of the 2020-2021 season as the club insisted on enforcing the €700-million ($854 million) exit clause should another club want to snap him up.

But with the Catalans languishing in fifth place in La Liga and a lot of upheaval going on within the club, Messi described Barcelona’s plight as “really bad.”

From January, Messi will be free to negotiate his next move as he will enter the final six months of his contract.

“I don’t know what I’m going to do yet, I’m going to wait until the season ends,” Messi said in an interview with Spanish television channel La Sexta broadcast on Sunday.

“I’d love to experience living in the United States, playing in that league and living that life, but I don’t know whether it’ll happen.”

The Argentine did not hide his pessimism about the club, who have made their worst start to a season in 33 years and are in a deep financial crisis due to the impact of the coronavirus pandemic.

“It’s a difficult moment for the club, for everyone, but those inside the club know that it’s in a really bad situation. Things are very bad and it’s going to be difficult to return the club to where it used to be,” he added. — Reuters

Seahawks shut down Rams, win NFC West title

RUSSELL Wilson threw for one touchdown and rushed for another as the Seattle Seahawks defeated the visiting Los Angeles Rams 20-9 on Sunday afternoon to clinch their first National Football Conference (NFC) West title since 2016.

The Seahawks (11-4) took a two-game lead over the Rams (9-6) with one game remaining in the regular season.

Wilson completed 20 of 32 passes for 225 yards, while Chris Carson rushed for a game-high 69 yards on 16 carries.

Wilson’s 13-yard scoring strike to tight end Jacob Hollister with 2:51 remaining sealed the victory.

Seattle’s defense also came up big, making a goal-line stand late in the third quarter as the Rams attempted to tie the score. Los Angeles had first-and-goal at the 2-yard line, but three rushes by Malcolm Brown and a quarterback sneak by Jared Goff netted only 1 yard.

Goff was 24-of-43 passing for 234 yards, and Darrell Henderson Jr. rushed for a team-high 62 yards.

The Seahawks scored the game’s first touchdown on the opening drive of the second half, with Wilson scrambling for a 4-yard score. Facing third-and-8 from his 32, Wilson hit David Moore with a 45-yard pass down the right sideline to keep the drive going.

Neither the Rams nor the Seahawks reached the red zone, much less the end zone, in the first half, which ended in a 6-6 tie as the teams traded multiple field goals.

Los Angeles’ Matt Gay made 44- and 51-yard field goals to give the Rams 3-0 and 6-3 leads, but Seattle’s Jason Myers answered with 45- and 49-yarders. The latter came with 1:04 remaining before intermission.

Gay added a 33-yard field goal early in the fourth quarter to pull the Rams within 13-9.

The Rams reached Seattle’s 29 with 3:45 left in the first half, but Goff, scrambling to his right and throwing back against his body, tried to float a pass for Robert Woods that sailed high over the receiver and was intercepted by Quandre Diggs at the 10-yard line. Diggs returned it 25 yards to help set up the Seahawks’ second tying field-goal drive. — Reuters

Asian business confidence gains steam, pandemic still top risk

SINGAPORE — Asian firms turned most optimistic in the fourth quarter this year, a Thomson Reuters/INSEAD survey showed, as business activity picked up in the region and COVID-19 vaccines started rolling out in Western countries ahead of their Asian launch.

The outlook for Asian companies in the next six months tracked by the Thomson Reuters/INSEAD Asian Business Sentiment Index jumped to 62 this quarter from 53 in the third quarter.

The latest number according to the survey of 101 firms across 11 Asia-Pacific countries was the highest since the fourth quarter of 2019. A reading above 50 indicates a positive outlook.

“There’s a sense of optimism going forward,” said Antonio Fatas, Singapore-based economics professor at global business school INSEAD.

“Things are getting better, but they are getting better with still a dose of uncertainty. The effect of the crisis is very different across sectors,” he added, noting the weakness in the transport sector due to curbs on global travel.

Still, more than half the respondents polled flagged persistent cases of the novel coronavirus as well as the possible scarcity of vaccines in parts of the world — at least initially — as their biggest risk.

While the United States and Britain have already started vaccinating their populations, few Asian countries expect to get significant amounts of coronavirus vaccines in coming weeks.

Some Asian countries are still running their own late-stage trials of vaccines, while others are allowing time to check for any side effects in people inoculated elsewhere.

A quarter of the companies in the survey, which was conducted between Dec. 4-18, were most concerned about businesses cutting jobs, which would hurt consumption.

Yet others flagged as their top risks a withdrawal of stimulus by central banks, and newly elected United States President Joe Biden keeping a tough line on China.

The coronavirus pandemic has brought on the worst global economic slowdown since the Great Depression, with millions of jobs lost and industries brought to their knees.

Still, Asia, which has had greater success in controlling the virus than Europe and the United States, is leading hopes of an economic recovery.

YEAR OF THE PHOENIX
“After a year marked by economic contraction, 2021 stands to be the ‘year of the phoenix’, with a strong rebound in global gross domestic product and corporate earnings in 2021 thanks to the unrolling of vaccines and substantial policy support,” said Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management.

A recovery to pre-pandemic levels in China, the world’s second-largest economy, has fuelled revival hopes. Equity markets in China, South Korea and Taiwan are up at least 20% this year, leading the region’s gains.

According to the Thomson Reuters/INSEAD survey, some 44% of the companies polled in the fourth quarter were positive about their outlook for the next six months, up sharply from 28% in the third quarter and nearly 8% in the second.

About 58% of the firms said they did not hire or lay off people this quarter, and a fifth said staffing levels were lower. This was similar to numbers in the third quarter. In the second quarter, 62% of the companies said they had cut jobs.

“While I still see some uncertainty, the numbers are good,” said Mr. Fatas. “It looks like a recovery that is taking speed and where more businesses feel confident.”

Companies polled included India’s Housing Development Finance Corp. Ltd, Japanese car maker Suzuki Motor Corp., and Thai electronics company Delta Electronics (Thailand) PCL. — Reuters

EXPLAINER — How will the EU-British trade deal change ties?

BRUSSELS/LONDON — British and EU negotiators clinched a wide-ranging free trade deal on Christmas Eve, meaning commerce between the trading bloc of 450 million consumers and the sixth-biggest global economy will keep on flowing without tariffs or quotas from Jan. 1.

Britain has hailed the agreement as a clean break with the European Union (EU) that will allow London to set its own agenda, while the bloc has also welcomed a “good deal” that will let the 27 member states move on.

But much will be different once Britain completes its journey out of the EU, its single market and customs union, at the end of this year. There are also areas left unfinished that will require more negotiation.

Here are examples of what will change.

LEVEL PLAYING FIELD — This issue almost derailed the talks when Britain accused the EU of introducing a new demand that would give the bloc a unilateral right to impose tariffs on Britain if it was deemed to have moved too far away from fair competition rules.

The agreement means that now both sides have the right to challenge the other through an arbitration mechanism if any regulatory divergence is deemed to have resulted in a competitiveness issue.

It also says that if such mechanisms are used too often and too long, it can trigger a renegotiation of the relevant parts of the treaty.

MORE CHECKS AND RED TAPE IN TRADE IN GOODS — Unlike so far, goods moving between Britain and the EU will be subject to customs, regulatory and animal safety checks, leading to more red tape requirements.

Ireland, the EU country most affected by Brexit, estimated in September that import and export declarations could increase 12-fold to as many as 20 million per year.

END TO FREE MOVEMENT OF PEOPLE — While the EU and the UK agreed to sidestep visas for short-term stays, the current free movement of people will end.

That means EU citizens going to the UK, and vice-versa, will be subject to more extensive border screening. EU citizens’ right to live and work in the UK — as well as British citizens’ ability to do the same in Europe — will diminish.

Pet passports will no longer be automatically recognized across the EU-UK border.

REDUCED SECURITY INFORMATION SHARING — Britain hailed the deal for ensuring a range of fast and effective security capabilities, but there are significant changes to the way Britain and the EU will share security, police, and intelligence data.

The UK will no longer participate in Europol or Eurojust, and will lose access to the Schengen Information System, though there are ways to share passenger, fingerprints, DNA and vehicle data.

A senior member of the UK negotiating team said the “extensive” deal allowed Britain to collaborate with Europol or Eurojust, but those involved would have to get used to a different process.

CURBS ON TRANSPORT — UK licences for passenger or cargo flights will no longer be sufficient to operate between EU destinations or from the EU onwards. Britain and EU states can, however, run flights between one another, and will cooperate on aviation safety and slots.

For road transport, cabotage will be reduced though hauliers carrying loads between the EU and the UK can operate with no limits and there are full transit rights.

CHANGES TO FISH QUOTAS, LIMITED ACCESS TO WATERS — Full access to one another’s fishing waters ends after a 5-1/2-year transition period from 2021, during which catch quotas will also be gradually moved from the EU to the UK.

Both sides have agreed that 25% of EU boats’ fishing rights in British waters will be transferred to the UK fishing fleet over that period. After that, there will be annual talks to set the amount EU boats can catch in British waters and vice versa.

The senior negotiating team member said both sides had had to compromise, but that at the end of the transition, Britain will have full control of its waters and access to them.

FINANCIAL SERVICES — From Jan. 1, British-based financial services groups lose automatic access to the EU’s single market. Both sides have said new market access must be negotiated outside the trade agreement in specific equivalence deals.

The two sides will also aim to agree by March 2021 a memorandum of understanding on regulatory cooperation in financial services.

SEPARATE ARRANGEMENTS FOR ENERGY AND CLIMATE — Britain will no longer participate in the EU’s internal energy market or be part of the bloc’s emissions trading scheme.

The British government said this month it would establish a domestic emissions trading scheme (UK ETS) from Jan. 1.

STATE AID — On state aid, the two have agreed to create a body to provide independent oversight and to work within six overarching principles.

But Alexander Rose, director at legal business DWF, said: “We know we will have a new UK Subsidy Control regime, but at this point… we don’t know which body will oversee this, what the rules are, and whether block exemptions (used for 99% of awards) will remain.”

ROAMING CHARGES — EU member states have agreed to drop roaming charges for mobile connections and data within their single market, a legal requirement on mobile operators that will no longer apply to Britain from the start of 2021.

Should telecom firms introduce such charges, as is the case with Switzerland, citizens crossing between the EU and the UK will have to turn their data roaming off or face higher charges. — Reuters

US jobless benefit cut-off pushes millions to financial cliff-edge

WHEN the US Congress passed a pandemic aid bill on Monday, Meghan Meyer, a single mom from Lincoln, Nebraska, thought she would get some respite from the daily struggle to feed and house her two kids during an unprecedented health and economic crisis.

But the next day President Donald Trump declared the long-awaited relief package “a disgrace” and said he would not sign it into law, decrying some of its spending measures while also demanding it include bigger stimulus checks for most Americans.

By the weekend, he had refused to budge.

That leaves Meyer, who has been on unpaid medical leave from her customer service job at retailer TJ Maxx since May because she is at risk of severe COVID, facing a financial cliff edge. She is one of roughly 14 million Americans whose emergency unemployment benefits, introduced by Congress when the pandemic took hold in March, ended on Saturday.

“I don’t know what I’m going to do,” Meyer, 39, told Reuters in a phone interview. To make it through 2020, Meyer said she has had to lean on friends and charities to help put food on the table, pay her rent, cover the family dog’s medical expenses, and buy Christmas presents for her kids.

“I have held out and held out,” she said.

The new relief bill would extend through mid-March programs that support self-employed workers and those unemployed for more than half a year. It also gives an additional $300 a week through mid-March to all those receiving jobless benefits, some 20.3 million people. And it extends through January a moratorium on evictions due to expire on Dec. 31 and provides $25 billion in emergency rental assistance.

Many economists agree that the aid is insufficient and more will be needed after Democratic President-elect Joe Biden takes office on Jan. 20. President Biden has called the bill a “downpayment.”

Negotiated by Trump’s own Treasury secretary, Steven Mnuchin, and the Republican Party’s congressional leaders, the bill has been flown to the president’s Florida beach resort where he is staying for the holiday, awaiting his possible signature. In tweets on Saturday, Trump signaled he was still unwilling to sign the bill, despite pleas from lawmakers to show goodwill at Christmas time.

“I simply want to get our great people $2000, rather than the measly $600,” he tweeted Saturday, referring to the bill’s stimulus checks, while he also continued to rail about the November election as he made baseless claims about election fraud.

Trump had not criticized the aid package’s terms before it went before the House of Representatives and the Senate for a vote.

As pandemic lockdowns hammered the economy in March, Congress rushed through emergency unemployment benefits as part of the $2 trillion CARES Act. At the time, lawmakers did not envisage the aid would be needed beyond Christmas and, until last weekend, they could not reach a deal to extend the benefits.

Meyer, like others, has watched her benefits dwindle over the past six months after a CARES program that gave her $600 a week in supplemental jobless payments expired in July and she went on to exhaust her allowance of Pandemic Emergency Unemployment Compensation.

That left her with extended benefits of just $154 a week up until Saturday, which would increase to $454 if Trump relents and signs the bill. If he doesn’t, Meyer will get nothing.

“It’s the difference between whether we have enough groceries or not, whether I can pay my car insurance, whether I can have gas to go to a food bank,” she said.

Meyer said she voted for Trump in 2016, but was quickly turned off by his behavior in office, and described his opposition to the relief package as “mean-spirited.”

‘SQUEEZE’ ON GROWTH
US job growth has slowed after an initial rebound when stay-at-home orders were lifted over the summer, and a new wave of coronavirus infections now threatens to dent the recovery.

Andrew Stettner, a senior fellow at nonpartisan think tank The Century Foundation, said delaying relief will slow the recovery even if most Americans are vaccinated and life returns to normal in 2021.

“If you don’t have this money circulating in the economy, it’s going to squeeze things,” Stettner said.

Like Meyer, most people who are no longer eligible for federal unemployment benefits will be left with no income at all, as most states offer meager assistance, he said.

About nine million Americans who would not normally qualify for unemployment insurance, including the self-employed and gig workers, were receiving Pandemic Unemployment Assistance (PUA) until it expired along with other CARES programs on Saturday, Stettner said.

Among those is artist Marji Rawson, 54, of Ann Arbor, Michigan, who in a normal year would run a booth at art festivals across the country. Those festivals may not return until June, but Rawson from Saturday will lose about $150 a week in PUA that she has relied on throughout the pandemic.

“As if this world isn’t full of anxiety already, now we have this on top of it,” said Rawson. — Reuters

A data-driven end to capitalism as we know it

FROM INTEREST RATES to fashion, pandemics in the past — like the Black Death in the 14th century — have left deep imprints on economic life. This time may be no different. In the aftermath of the coronavirus, governments can reimagine capitalism by giving all of us a stake in the most valuable byproduct of our day-to-day living: data. But make no mistake. It will still be a Faustian bargain.

A global data profit will be a very different GDP from gross domestic product. The case for technology companies to share it with we, the people who supply them the bits and bytes, is compelling. In fact, it could even emerge as a better universal basic income — another revolutionary concept whose time may have come — for the post-COVID world.

A state-provided allowance can improve citizens’ well-being, a widely studied Finnish experiment has shown. Yet only a small group of developed countries would even have a chance of sustaining a meaningful subsidy, provided taxpayers agree. Most developing nations would balk at the expense. Inequality between the global North and South would worsen.

This is where a share of global data profit for the 63% of the world population that’s already online could prove helpful. The FANG quartet — Facebook, Inc., Amazon.com, Inc., Netflix, Inc. and Google parent Alphabet, Inc. — garners $140 billion in combined operating earnings. China’s BAT trinity of Baidu, Inc., Alibaba Group Holding Ltd., and Tencent Holdings Ltd. hauls in another $50 billion. Throw in device makers like Apple, Inc., Samsung Electronics Co., and Xiaomi Corp., payment processors like Visa, Inc., Mastercard, Inc., and Paypal Holdings, Inc., and the available profit pie of our data overlords is at least $350 billion. Their combined revenue is in excess of $1.3 trillion.

The arrival of 5G telecommunications networks and Internet of Things, plus rapid growth of new-age fintech players like China’s Ant Group Co., India’s Jio Platforms Ltd., and Southeast Asia’s Grab Holdings Ltd. and Gojek, will see the industry’s profit exceed $1 trillion well before the end of the decade. Even now, governments shouldn’t mind tapping companies that for the most part did well out of the pandemic to put some extra money in the hands of citizens left poorer and jaded by it. The problem is that Big Tech is notorious for moving profits to where they’re taxed least. There has to be a better way to take it back from them.

One powerful suggestion has come from Columbia Law School Professor Katharina Pistor. In a recent paper, she argued that it will be useless for us, as information producers, to get authorship rights on our individual raw data. They have very little value. Yet, when algorithms analyze billions of data points, they glean insights about our behavior. Big Tech shares the intelligence for a profit with providers of goods and services, who then use the knowledge to influence our choices as consumers and make a further gain.

Instead of being participants in a free market, this power game makes us victims, twice over.  No notice-and-consent privacy law or antitrust regulation can improve our bargaining position. We need partial ownership not of the data, but the databases. Put another way, if technology has made it our destiny to be “ruled by data,” then we must have rights in a depository trust of data. Pistor explains:

This trust would have a right to a share in the earnings the company derived from the data and would have the task of channeling these earnings to the data producers. The trust would also exercise voting rights on behalf of the data producers.

The argument hinges on debunking a popular myth: Our information footprints, the professor says, are not oil, or anything resembling a regular commodity or asset. Beyond seeking protection against hacking, the technology industry hasn’t relied on legal protection to assert its property rights. It has simply captured data as “res nullius,” or wild animals, and enjoyed supernormal profits. It’s time governments ended the ambiguity over ownership, and gave data the status of “res communis,” or community property. This is what a depository achieves.

To be sure, no governments are actually considering this yet. But imagine the shakeup to power in Big Tech and people’s sense of ownership in society if political authorities tried to resolve what University of Westminster sociologist Christian Fuchs sees as a Marxian “antagonism between digital commons and digital commodities.” There are two questions. First, how would the depository pass on prorated dividends it receives from harvesters to producers? Second, would China come on board with the plan, or would this profit sharing end up being a permanent drag only on Western tech?

The answers may be interlinked. The last-minute quashing of fintech behemoth Ant’s initial public offering this year has been the strongest signal yet of Beijing’s intention to rein in the rising power of its data czars. But that’s not the end of it. Eventually, all major central banks will issue widely distributed digital currencies, emulating an experiment already under way in China. The anonymity of cash will disappear some time during the decade. It’s conceivable, therefore, that dividends from data depositories could simply hit official digital currency wallets on our mobile phones. In the process of spending, we’ll be leaving a data trail for central banks.

Europe after the Black Death was hit by a wave of “life is short” consumerism. After this year’s trauma, we, too, are yearning for a vaccine and a more carefree 2021. But can we, as producers, consumers, and people, ever be fully rid of the scars? Even if we want to forget, will governments let us drop our guards? The rise of contact tracing during the pandemic has introduced us, willingly or otherwise, to the idea that our smartphones can keep us safe — by spying on us.

Sacrificing some more of our freedom to eternal state surveillance could become a deal with a devil we’re growing to know only too well. We’ll take it, but only if technology gets us a real stake in 21st century capitalism in return.

BLOOMBERG OPINION