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Lopez says pandemic warrants review of drug price controls

TRADE Secretary Ramon M. Lopez proposed a review of drug price controls to help the pharmaceutical industry better respond to coronavirus disease 2019 (COVID-19).

Mr. Lopez said at the online membership meeting of the Philippine Chamber of Commerce and Industry Tuesday that the industry should discuss with the government what adjustments can be made to help better address the pandemic.

“Kailangan pag-usapan uli ‘yan kung makakatulong na ma-revise ulit ‘yung programa na ‘yan. (We need a new discussion on whether revising the policy will be helpful)”

“On the other hand, the industry is saying that we might not be able to enjoy the innovations (available),” particularly if price controls cover innovative products.

President Rodrigo R. Duterte in February issued Executive Order (EO) No. 104 setting maximum retail and wholesale prices on certain drugs. It will take effect in June.

The Pharmaceutical and Healthcare Association of the Philippines (PHAP) has said that the government stands to lose P28 billion in revenue from lost corporate tax, value-added tax, and customs duties. The industry group said its own sales will drop by P57 billion from P200 billion due to the price controls.

Mr. Lopez said in a mobile message to reporters that he will not yet comment on whether or not he supports the suspension or delay of the implementation of the order.

“I haven’t reviewed the impact of COVID-19 on the EO. I suggested that DoH (Department of Health) may need to review the pros and cons given different situations now under COVID.”

Executive Order 104 applies to drugs addressing the leading causes of mortality and drugs that have high price differences with those in the international market. It also applies to drugs that have limited competition in terms of generic counterparts or market access and drugs where the innovator product, the first drug containing the approved active ingredient, is the most expensive and most dispensed in the market.

The order applies to 133 drug formulas.

The pharmaceutical industry group has asked to withdraw the measure, “especially at this time when the government needs funds to fight COVID-19.”

PHAP President Beaver R. Tamesis said in a phone interview on Wednesday that price controls disincentivize international companies from entering the market, particularly if they produce drugs that address COVID-19.

He said that he is not certain if COVID-19 drugs are included in the current list of medicines subject to price controls.

He added that the policy environment created by the price control measures along with a lack of patent protection works against the Philippines.

“In an environment where there are price controls, where you cannot get your product registered (right away), what do you think will happen in terms of prioritization to get into the country? So it is a disincentive particularly when you have a crisis,” he said. — Jenina P. Ibañez

DBM sees only P130 billion in budget realignments for stimulus

THE Department of Budget and Management (DBM) said the government has about P130 billion on hand from savings and budget realignments with which to fund stimulus measures, much less than various proposals now being considered in Congress.

Undersecretary Laura B. Pascua told BusinessWorld that the total comes from national government savings and suspended programs, activities or projects (PAPs) from 2020 and leftover funds from 2019’s General Appropriations Act (GAA).

“We can only find funding for them from savings from discontinued PAPS from the 2019 & 2020 GAA. Hence, the economic managers have been saying to Congress that we can only afford a P130-billion fiscal stimulus for this year,” Ms. Pascua said via Viber on Wednesday.

One of the pending measures is the P1.3 trillion Philippine Economic Stimulus Act (PESA) bill recently approved by a House of Representatives committee, which includes P568 billion worth of new programs for rollout within the year.

The stimulus bills proposed by Congress are much larger than the P130-170 billion program proposed by the economic team, including a P50-billion cash infusion to state-owned banks, additional funding for loan guarantees, hiring of contact tracers and relief for large firms.

Ms. Pascua said at P130 billion in new spending and P40 billion projected as foregone revenue when the corporate income tax is reduced to 25% this year from 30% currently, “total deficit impact is P170 billion.”

Ms. Pascua said the DBM will not recommend a supplemental budget this year since according to budget rules, the government can only do so if this is “backed by a new revenue measure.”

Finance Secretary Carlos G. Dominguez III has said that the economic team will not be proposing a supplemental budget since revenue will take a hit from the weak economic outlook and there is “no supplemental revenue.”

Ms. Pascua added that another way for a supplemental budget to be rolled out is for the Bureau of the Treasury (BTr) to issue a certification that “excess funds (are available).”

“We think that the legislators might have forgotten this basic budgeting rule,” she said.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno, a Budget Secretary, has said the government might “need” a supplemental budget to provide stimulus, the size of which must be decided by the President along with the economic team.

The National Economic and Development Authority (NEDA) has recommended that the government prepare a supplementary budget for 2020 “to fund critical projects outside the Bayanihan to Heal as One Act.” It made the recommendation in a report issued last month and released to the media last week.

The DBM has been redirecting funds from past priorities to finance programs meant to contain the fallout from the pandemic. — Beatrice M. Laforga

Rural co-ops seek force-majeure relief from power contracts

RURAL power utilities are asking the Energy Regulatory Commission (ERC) to ease their obligations under power contracts entered into with generating companies, while promising to provide consumers relief from bill payments as ordered.

The Philippine Rural Electric Cooperatives Association (Philreca) asked the ERC Wednesday to issue a new advisory allowing electric cooperatives to invoke force majeure clauses in their power supply agreements (PSA).

“As part of our advocacy to provide affordable access to electricity, Philreca asks the indulgence of the Regulators as we appeal again the issue on Prompt Payment Discounts, minimum energy off-take, fix charges, and ‘force majeure’ provisions for the issuance of guidelines or advisory for the benefit of the member-consumer-owners (MCO),” Philreca Executive Director Janeene D. Colingan said in a statement.

A force majeure event is invoked when parties to a contract deem it impossible to fulfill their obligations.

Asked to comment, the ERC said the utilities must first discuss with their partners any changes they would like to make in their agreements, noting the varied impact of the government’s quarantine measures to power utilities.

“The position of the commission is that any modifications to the approved PSA should be discussed by the parties first as we see different impact of the community quarantine to the DUs (distribution utilities),” ERC Spokesperson Floresinda B. Digal told BusinessWorld.

A uniform order on relief for all utilities may not supersede such negotiations, she added.

In April, Manila Electric Co. (Meralco) invoked force majeure in its power contracts, which resulted in the lowering of generation charges in its customers’ May electricity bills.

Philreca warned that higher generation charges will be passed on to customers if the regulator does not allow the removal of such bill components.

“As we have reiterated before, if no intervention is done, paying these fixed charges… will significantly result in a higher generation charge/component in a consumer’s electricity bill,” Ms. Colingan said.

The commission in its May 22 advisory said the availment of prompt payment discounts is subjected to negotiations between utilities and their partners, the benefits from which are required to be shared with customers.

Last week, the ERC told power distributors to allow their customers consuming 200 kilowatt-hours (kWh) or less to settle their unpaid bills from March to May in six installments starting mid-June, while allowing those with below 200 kWh to pay them in four portions.

The regulator warned of penalties against utilities that fail to comply with its advisories on bills payments. — Adam J. Ang

PHL 4G video quality declines in March after lockdown

OPENSIGNAL

FOURTH-GENERATION (4G) video quality in the Philippines declined in March, which most Filipinos spent indoors after the government imposed an enhanced community quarantine (ECQ) to contain the spread of the coronavirus, UK-based Opensignal Ltd. said.

Opensignal, which refers to the quality of 4G video as the “4G video experience,” said on May 25 that in March, when the lockdown was first declared in the middle of the month, “we observed a decline in 4G video experience across all regions.”

Opensignal said 4G video quality declined by 7.2% in urban areas when compared with the experience seen in the previous month, while rural areas saw a decline of 14.7%.

“Despite these declines, the typical 4G video experience in the Philippines ranges from Fair to Good, which suggests that the mobile operators have been able to cope well during these extraordinary times,” it explained.

In the six months to February, Opensignal said 4G video quality improved in most regions.

“While rural users in the Mindanao region saw the biggest improvement of 23.3%, urban users saw the highest improvement of 9.1% in the National Capital Region. In the remaining regions (urban and rural areas combined), the experience improved between 2.9% to 7.8%, with the exception of the rural areas of the Visayas region,” it explained.

In March, users in urban areas in North and Central Luzon saw the lowest declines of 2.6%, while the decline in other regions ranged between 4.6% and 9.4%, Opensignal said.

“South Luzon was the only region where we observed a decline beyond 10%. The video experience declined further as we moved away from the urban centers of the Philippines,” it added.

It said rural users in the Visayas experienced “the smallest decline of 7.5%, while it declined further to 10.3% for users in North and Central Luzon region.”

“The largest reductions were observed by users in the South Luzon and Mindanao region — 16.2% and 21.2%, respectively,” Opensignal said further.

Overall, Philippine consumers continue to enjoy a “good 4G video experience (55-65 on a 100 point scale) in the National Capital Region, and a Fair 4G video experience (40-55) in the remaining regions regardless of whether they are based in urban or rural areas,” it concluded.

Opensignal uses five categories in grading video quality: poor (those with a video experience score of 0-40), fair (40-55), good (55-65), very good (65-75) and excellent (75-100).

The video experience score measures the quality of videos when using a 3G or 4G mobile network, where three factors are considered: picture quality, video loading time and stall rate. — Arjay L. Balinbin

Are we ready for a tax on digital services?

As the world continues to face the effects of the COVID-19 pandemic, the government has acknowledged its immediate fiscal impact, including the adverse consequences on tax collections in recent months. Having missed collection targets by a significant margin starting in March, the Bureau of Internal Revenue (BIR) expects future collections to also fall below target as an effect of the economic slowdown.

With the urgency of generating more funds to continue fighting the pandemic, the government has now put the spotlight on digital services. House Bill (HB) No. 6765, or the “Digital Economy Taxation Act,” was filed on May 19 to capture into the tax system the value created by the digital economy. The bill seeks to impose a 12% value-added tax (VAT) on digital advertising services (such as those on search engines and social media platforms), subscription-based services (including music and video streaming subscriptions), services rendered electronically, and transactions made on electronic commerce (e-commerce) platforms. Moreover, the bill would require suppliers of digital services, network orchestrators, and e-commerce platforms to establish a resident agent or representative office to act as a withholding agent in the Philippines. According to the bill’s explanatory note, it is projected that the proposal would yield about P29.1 billion in new revenue for the government.

GLOBAL PERSPECTIVE
The concept of a “digital services tax” is not new from an international standpoint. As early as 2017, Australia imposed a tax on electronic/digital services. Several territories across Europe have introduced their digital services taxes as of 2020. In Southeast Asia, Singapore and Malaysia have imposed similar taxes starting Jan. 1, while Indonesia will be imposing its tax beginning July 1.

As tax is jurisdictional, each territory has its own set of rules in implementing a “digital services tax.” Nevertheless, there are common characteristics, such as:

Subject matter: While “digital service” or similar term is defined differently per territory, essentially, a digital services tax encompasses cross-border or importation of services primarily available digitally or electronically (e.g., via Internet).

Coverage: Notwithstanding the territories’ different registration requirements, the tax generally covers all companies (including foreign ones) whose digital services are supplied to consumers located within their territories.

Tax base: The tax is generally computed based on revenue generated from consumers within their territories, albeit at a different rate per territory.

CURRENT PHILIPPINE PERSPECTIVE
Although the proposed Digital Economy Taxation Act is still subject to further deliberation, the bill should be contextualized against the current tax rules to understand the rationale for the proposal. In general, Philippine income taxation is based on either: (a) nationality, i.e., resident citizens and domestic corporations are taxed on worldwide income, or (b) territoriality, i.e., individuals other than resident citizens and foreign corporations are taxed on Philippine-based income. Meanwhile, value-added taxation generally covers sales and imports of goods in the Philippines, as well as the performance of services domestically.

While the current Tax Code has gone through numerous amendments, its main provisions emanate from Republic Act No. 8424, a law that was passed over two decades ago. At that time, “traditional” transactions were the norm, and “digital” transactions were practically non-existent. While the BIR has introduced amendments governing innovations (e.g., taxation of software payments and transportation network vehicle services), broadly speaking, the treatment of “digital” transactions remains unclear.

Many of these online transactions are conducted with foreign service providers that do not have Philippine subsidiaries or are not licensed to do business in the Philippines. Thus, for tax purposes, they are non-resident foreign corporations (NRFCs), subject to corporate income tax (CIT) on Philippine-based income and VAT on services performed in the Philippines.

However, the crux of the matter lies on the territoriality of digital transactions. While the dealings are conducted in the virtual realm, without physical stores or facilities within the Philippines, nonetheless, it is arguable that the income or gross receipts from the transactions are generated from Philippine sources. Hence, such transactions must fall within the jurisdiction of Philippine taxation.

POSSIBLE CONSIDERATIONS
The provisions of the Digital Economy Taxation Act and its implementing regulations would determine how Philippine tax on digital services would be imposed. The bill is still at an early stage in the legislative process and is subject to deliberation and changes, thus there are opportunities to iron out possible contentious matters that could arise, including some considerations that I will mention below.

In terms of tax administration, since the companies intended to be covered by the bill are NRFCs that would ultimately be required to transition into resident foreign corporations (RFCs) by virtue of establishing a representative office or appointing a resident agent, would they be required to be registered with the BIR? How would bookkeeping, registration and related requirements apply to these RFCs?

In terms of tax compliance, what would be the RFCs’ tax compliance requirements? Which filing and payment requirements would they need to comply? Will the RFCs be required to issue invoices/receipts in accordance with current VAT invoicing requirements?

There are also other matters, such as reconciling the limited authority of a representative office or a resident agent based on relevant laws, including the restriction on generation of revenues, with the proposed tax administration and compliance measures to be imposed. While the bill supposedly covers VAT, would the RFCs be treated as permanent establishments in the Philippines from an international tax perspective and consequently expose these RFCs to Philippine CIT as well?

Taxing the digital economy has been on the government’s agenda even before the current health crisis. Driven by the need for additional revenue sources, however, our lawmakers are given an even more compelling reason to catch up with rapid growth of the digital economy and bring it into the tax fold.

For digital platforms and service providers, HB No. 6765 could be their new normal moving forward.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Marion D. Castañeda is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 8845-2728

marion.castaneda@pwc.com

Gov’t to keep ban on jeepneys, buses as infections top 15,000

THE ban on jeepneys and buses will remain even after the lockdown in Metro Manil a is relaxed, according to the Metropolitan Manila Development Authority (MMDA), as coronavirus infections topped 15,000.

The 17 mayors of the capital region agreed to keep the ban because physical distancing meant to contain a coronavirus disease 2019 (COVID-19) pandemic is impossible inside these public vehicles, MMDA General Manager Jose Arturo S. Garcia, Jr. said at a news briefing on Wednesday.

The Department to Health reported 380 new infections on Wednesday, bringing the total to 15,049.

The death toll rose to 904 after 18 more patients died, it said in a bulletin. Ninety-four more patients have gotten well, bringing the total recoveries to 3,506, it added.

The mayors reached the decision during a Tuesday meeting where they also recommended that the metro lockdown be relaxed and for businesses to reopen starting June 1, he said.

“We know that with our jeepneys and buses, they’ll stop and go. They’ll let riders in and they’ll stop everywhere. It’s hard to monitor,” he added.

Point-to-point buses, taxis, tricycles, ride-hailing services and company shuttles will be allowed, Mr. Garcia said.

Presidential spokesman Harry L. Roque on Tuesday said an inter-agency task force made up of Cabinet secretaries was scheduled to discuss whether to relax the lockdown on Wednesday.

The government would probably ease the lockdown in Metro Manila and nearby cities starting June 1, Interior Secretary Eduardo M. Año said on Tuesday as the government tries to restart the economy that a coronavirus pandemic has brought to a near standstill.

He added that there was a proposal to classify areas into zones, allowing villages to keep a stricter lockdown if needed.

President Rodrigo R. Duterte locked down Luzon island in mid-March, suspending work, classes and public transportation to contain the pandemic.

The lockdown in some areas has since been relaxed, while Metro Manila remains under an altered quarantine until the end of the month, where some businesses have been allowed with minimal workforce.

Meanwhile, 282,923 people have been tested — 21,585 positive and 261,338 negative results, DoH said in a report.

Health Undersecretary Maria Rosario S. Vergeire said they were working with the Department of Interior and Local Government (DILG) in hiring contact tracers.

“The DILG may also consider tapping our barangay health workers and social workers in support of our national response against COVID-19,” she said at an online new briefing.

Also yesterday, the Justice department, citing data from the Bureau of Corrections said 161 prisoners have been infected with the coronavirus, six of whom died. Eight prisoners have recovered.

The national penitentiary in Muntinlupa City had the highest cases with 82 and the Correctional Institute for Women in Mandaluyong City had 79, it said in a statement. — Gillian M. Cortez and Vann Marlo M. Villegas

House subpanel OKs bill on new normal

By Genshen L. Espedido, Reporter

A SUBPANEL of a House committee tackling anti-coronavirus measures has approved a bill mandating social distancing and the use of face masks in public under the so-called new normal.

The measure is expected to be passed by the committee on Thursday, after which it will be debated in plenary.

Under the bill, gatherings and the flow of people in public markets, parks and plazas will be “highly regulated.”

Gatherings in private places will also be regulated and may be stopped by the local government if it is shown that people ignored safety measures against the novel coronavirus.

The operation of motorcycle taxis will remain suspended to prevent the spread of the virus through shared helmets and close physical contact between the rider and passengers.

Passengers in all types of public transportation must wash or sanitize their hands before boarding the vehicle, be seated one seat apart, wear a face mask at all times, and pay through contactless methods.

The bill provides for “green lanes” on the road network for health care, emergency, law enforcement and supply-chain vehicles.

The bill also seeks to suspend classes and other school activities until further notice “without prejudice to the academic freedom and levels of autonomy of institutions of higher learning,” provided that no student is unreasonably penalized for their inability to participate in online learning.

Educational institutions must set up online learning platforms. Funding for research and development of systems for learning continuity during times of crisis will be made available by the National Government.

Restaurants may reopen with take-out and delivery service only, while gradually re-introducing in-store dining.

The bill recommended that buffets and salad bars be discontinued temporarily to create more space in the dining area.

Malls and other commercial establishments must limit the number of people inside their premises and enforce contact-less sales and customer service.

The Philippine Statistics Authority (PSA) must fast-track the implementation of the Philippine Identification System Act to facilitate contact-tracing.

The bill also calls on the Department of Information and Communications Technology (DICT) to expedite and fully implement a national broadband program.

Other government agencies must develop and implement a system for facilitating government transactions through online platforms.

Violators will be jailed for two months or fined P50,000.

If passed, the measure will be effective for three years or sooner once the President declares that the health crisis is over.

Also yesterday, Malacañang said Congress should extend the special powers given to Mr. Duterte to deal with the health crisis by at least three more months.

“We’ll see from there if at the end of 90 days, there’s a need for emergency powers still, then it can be extended until December,” Mr. Roque said, according to a transcript of his interview with the ABS-CBN News Channel.

Socioeconomic Planning Acting Secretary Karl Kendrick T. Chua said the President’s special powers should be extended until the end of the year. — with Gillian M. Cortez

Former PDEA chief to head Clark Airport

PRESIDENT Rodrigo R. Duterte has appointed outgoing Philippine Drug Enforcement Agency (PDEA) chief Aaron N. Aquino to head Clark International Airport Corp., his spokesman said on Wednesday.

Mr. Aquino’s nomination as president and chief executive officer of the airport operator was approved and forwarded to its board, presidential spokesman Harry L. Roque said at an online news briefing.

On Tuesday evening, the presidential palace said Wilkins M. Villanueva, PDEA’s regional director for Northern Mindanao, would replace Mr. Aquino as the agency’s chief.

“My utmost gratitude to President Rodrigo Roa Duterte for giving me his trust and confidence to lead our country’s war on drugs,” Mr. Villanueva said in a social media post on Tuesday. “I will never fail you Mr. President.” — Gillian M. Cortez

#COVID-19 Regional Updates (05/27/20)

Bohol governor says Galvez apologized for ‘fast and furious’ sending of OFWs to hometowns

BOHOL Governor Arthur C. Yap said Secretary Carlito G. Galvez, Jr., chief implementer of the national coronavirus response program, has apologized for the sudden return of overseas Filipino workers (OFWs) to their hometowns without proper notification to local governments.

“Sec. Galvez was very apologetic that in the last few hours, they have had to fly and ship OFWs home without any prior nor specific notice to the Governors and LGUs (local government units),” Mr. Yap wrote late Tuesday on his Facebook page where he provides a regular update on the coronavirus response measures.

“Sec. Galvez says that it is a crisis of proportions we, nor they, cannot imagine, for which reason, they have been ill prepared to deal with the volume of OFWs coming home,” he said.

President Rodrigo R. Duterte on Monday ordered national government agencies to pull together all available resources to bring the workers home after many of them have been stuck in quarantine facilities in Manila beyond the 14-day mandatory isolation period.

The agencies have been given a week to organize the return of 24,000 OFWs as the government is expecting more returning Filipinos in the coming weeks.

“It seems the returning OFWs program of the OWWA (Overseas Workers Welfare Administration), is pressured to show more returning OFWs being sent to the countryside. For which reason the arrivals have been ‘fast and furious,’” the governor said.

NO MASTERLIST
In Negros Oriental, Assistant Provincial Health Officer Liland B. Estacion said they had to adjust the scheduled return of 156 residents who have been stranded in Dumaguete City to give way to the arrival of OFWs.

Ms. Estacion, in a statement from the provincial government, said the problem was not just the lack of notification from the national government but also the absence of information on the returning workers.

“Since there is no masterlist, we requested PAL (Philippine Airlines) to give a locator form to be filled up by all those who arrived so we will know who they are and their LGUs (local government unit)” in case the need for contact tracing arises.

In Iloilo, the provincial government had to make a swift decision to use the Iloilo Sports Complex as a registration area to accommodate the influx of OFWs.

Dr. Maria Socorro Colmenares-Quiñon of the Provincial Health Office said they had “a minor problem with the arrival of 162 repatriates on board three separate flights on Monday because they were informed just a day before the schedule.”

Apart from those on flights, local authorities had to handle 235 repatriates who were expected to arrive via a 2Go ship as well as returning residents who were stranded in other parts of the country.

Ormoc Mayor Richard I. Gomez, whose May 25 social media post over his frustration on the lack of coordination from national agencies became viral, said on Tuesday that all he wants is to ensure both public safety in his coronavirus-free city and the success of the repatriation program.

In a statement in mixed Filipino and English posted on the city’s social media page, he said, “We want to work with you, we want to make it a success, because at the end of the day, if the program fails, it’s also a failure on the part of the LGU.”

TASK FORCE
The Department of Labor and Employment (DoLE) announced Wednesday that it has established a task force to speed up the return of OFWs to their homes.

“The labor department has formed task groups to help expedite the movement of overseas Filipino workers from various quarantine facilities to their respective home destinations, and facilitate the speedy processing of outbound workers,” DoLE said.

OWWA expects 300,000 OFWs to come back to the country as the coronavirus pandemic continues to affect the global economy.

OWWA Administrator Hans Leo J. Cacdac, in a briefing Wednesday, said they will revive the livelihood assistance program Balik Pinas, Balik Hanapbuhay with an initial P700-million fund.

“Approximately, it will reach 50,000 for the first round of beneficiaries,” Mr. Cacdac said.

Meanwhile, Justice Secretary Menardo I. Guevarra warned that local officials who will not accept returning OFWs may be held liable for violation of the law declaring a national emergency due to the coronavirus pandemic.

“If LGU officials continue to defy this directive, they may be held administratively and criminally liable for violations of the Bayanihan Act,” he told reporters via Viber. — Marifi S. Jara, Gillian M. Cortez and Vann Marlo M. Villegas

PhilRice launches food security program in Nueva Ecija

THE Philippine Rice Research Institute (PhilRice) has launched a project in Lupao, Nueva Ecija that aims to increase and diversify the harvest of rice farmers in the face of the coronavirus crisis.

In a statement, PhilRice said the project, named Sa Palay at Gulay, may Ani, Hanapbuhay, Oportunidad, at Nutrisyon (PAG-AHON), will be implemented through farmers’ field school, technology demonstration, and partnerships with farmer-associations and cooperatives.

Project lead Dr. Roel R. Suralta said planting of fast-growing vegetables, distribution of seeds and seedlings, and providing planting guides will be included in the PAG-AHON.

“The project will also feature crop diversification, PhilRice-East-West Rice and vegetable techno demo, and community food hubs,” Mr. Suralta said.

A 2015 report by the Food and Nutrition Research Institute showed Nueva Ecija ranked fifth among provinces with the highest number of food-secure households in Central Luzon.

“3 out of 10 households in Central Luzon produce their own food. About 38% consume dark, green leafy vegetables from their own harvest, while 34% grow their own Vitamin-A rich fruits to eat,” the report said.

Meanwhile, Lupao Mayor Alex Rommel V. Romano said the project will provide more sources of income to their farmers, while ensuring their food supply.

“This project is a big help to Lupao, especially that we only produce rice once a year,” Mr. Romano said.

The PAG-AHON project is implemented by PhilRice, together with the local government of Lupao, East-West Seed Company, and Lupao Vegetable Growers Association. — Revin Mikhael D. Ochave

More Quezon City residents can now use PayMaya to claim benefits

SENIOR citizens, persons with disability, and solo parents in Quezon City can now use PayMaya to get their financial benefits under the local government’s aid program.

“Quezon City joins other local government units who are finding innovative solutions to the unique problems we face today, particularly in providing financial aid to communities and families who need it the most during this time,” PayMaya Founder and Chief Executive Officer Orlando B. Vea said in a statement on Wednesday.

The Quezon City government previously tapped PayMaya for the distribution of allowances for student scholars.

PayMaya users can encash funds through Smart Padala agents, withdraw from any Bancnet ATM, make purchases online, and do other digital transactions.

Incentives, tax relief proposed for Davao City businesses helping in COVID-19 response

THE Davao City council is reviewing a proposal to provide incentives and tax relief to businesses supporting the local government’s response to the coronavirus crisis.

Under the proposal, establishments that waived rental fees to tenants, served as quarantine facilities, and made donations relating to the coronavirus disease 2019 (COVID-19) relief and mitigation program can deduct corresponding costs from their gross sales.

“Those establishments that allowed to be used as quarantine facility you can also put that. The gross sales receipt less the aforementioned deductible amount shall be the basis of your business taxes,” Mayor Sara Duterte-Carpio, who submitted the proposal to the council, said in Visayan over the local government-run radio.

The plan is due for second reading by the council committee on finance, ways and means.

The city government has also suspended the implementation of the final phase of the real property tax increase to help businesses affected by the lockdown to mitigate the spread of COVID-19.

Tax payment deadlines have also been moved.

Nationwide round-up

Survey shows 60% of Filipinos wary of returning to work over virus fears

REUTERS/ELOISA LOPEZ

AT least 60% of Filipinos fear reporting back to work as they worry over the coronavirus threat, a poll by health maintenance organization PhilhealthCare, Inc. showed. According to the PhilCare Community Quarantine Wellness Index, 95.9% are concerned with the health of their loved ones, 93.6% feared being infected, and 94.1% worry about the “second wave” of the coronavirus disease 2019 (COVID-19). The survey, with 800 respondents, was conducted through phone. Fernando Paragas, lead researcher and professor at the University of the Philippines-Diliman, said companies should communicate better with their employees on protocols to address fears of returning to the office. “Maybe offices can be more proactive in communicating with their employees so whatever principles or protocols they have put in place, the different private establishments can do a better job of communicating with their employees,” he said in an online press conference. COVID-19 testing is not required under the return-to-work guidelines released by the Department of Health. — Vann Marlo M. Villegas

Poe wants higher budget for sidewalks, bike lanes

SENATOR Grace S. Poe Llamanzares on Wednesday pushed to increase the budget for improving urban mobility as the country adopts to the “new normal” with coronavirus transmissions still a threat. The higher funding will be used for walking and cycling infrastructures in line with the recommendation of the national task force to promote alternative modes of mobility. “This is an important step in our bicycle-friendly path to inclusive growth,” Ms. Llamanzares, who chairs the committee on public services, said in a statement. She also cited the P110-billion proposal of the Move as One Coalition, which includes a 1,600-kilometer walking and cycling infrastructure, and a bicycle-sharing program in Metro Manila. A P70-billion investment is also proposed for public transport infrastructure and P30 billion in service contracts for the sector. “This will protect the jobs of our 2.7 million land transport workers in the country by providing them a stable source of income independent of the number of passengers they have,” said Ernesto Cruz of the National Confederation of Transport Workers’ Union. — Charmaine A. Tadalan

New guidelines for immigration operations set

NEW protocols have been released for immigration employees and those transacting at the Bureau of Immigration’s (BI) main, satellite and extension offices. Commissioner Jaime H. Morente, in a statement on Wednesday, said workers will continue to follow several work schemes to observe physical distancing and avoid congestion in the offices. “We are adapting these new guidelines and protocols to ensure that our employees and persons who transact business in our offices are protected against the coronavirus,” Mr. Morente said. Deputy Commissioner Aldwin F. Alegre said wearing of face mask, sanitation, and physical distancing measures will be strictly required from both employees and individuals entering their offices. “These ‘new normal’ protocols will soon be posted in our bureau’s website for the information of the general public,” he said. The new rules will be in effect when the lockdown is lifted in Metro Manila and other areas. — Vann Marlo M. Villegas

CREATE

Create means making something out of nothing. CREATE (Corporate Recovery and Tax Incentives for Enterprises) is a new Department of Finance/National Economic and Development Authority initiative announced in the 14th of May Sulong Pilipinas e-Conference with stimulus in mind. It will replace CITIRA (Corporate Income Tax and Incentives Reform Act). Will CREATE make something out of nothing? Or will it make nothing out of something? Would that it be the former. CREATE’s most salient provision reduces in an instant the corporate income tax (CIT from) 30% to 25% instead of gradually as in CITIRA. This move will punch a huge hole on government tax collection (P625 billion in five years and P42 billion this year by government estimates). The authorities hail this as the “largest stimulus program for enterprises” to speed up recovery from the COVID-19 free-fall. The finance department argues that a massive multiplier effect will follow to recover the loss.

Whatever else CREATE is, however, it is not a stimulus boost out of the COVID-19 morass. A reduction in CIT to 25% from 30% qualifies as a stimulus to business activity only if private businesses will be making a profit in the years subsequent and paying 25% instead of 30%. With a looming U-shaped recovery, private businesses will almost surely operate in the red instead of in the black in the next few years. If so, the corporate tax liability will surely go from 30% of nothing to 25% of nothing, meaning a stimulus boost of nothing! Furthermore, when businesses are facing a depressed utilization rate of capital, the canonical response is “Wait” — no new capital investment going forward. Representative Stella Quimbo et al’s 2015 research result (CIDS.up.edu.ph) shows that lowering the tax liability elicits new capital spending only when the firm is already in the capital spending mode before the CIT reduction — most likely when the economy is expanding. The expanded NOLCO (net operating loss carry-over) provision is beneficial for companies who will be around five years hence. Many firms will not survive that long. The massive multiplier argument parlayed by the Department of Finance (DoF) for CREATE seems dreamy in a free-falling economy.

There is a good reason why in 1936, at the height of the Great Depression, JM Keynes advocated a demand-side stimulus rather than a supply-side one. In an economy in free fall, put money in the hands of the hungry poor and they will buy; by contrast, lower taxes for firms or lower the interest rate and nothing much happens. Why? That is like, as a popular quip goes, “pushing on a string.” Firms can use the tax bonanza to, if at all, declare dividends to shareholders; they can shore up their balance sheet; they can engage in share buyback; new investment will be the last priority. Government is reeling from COVID-19-related cash burn and President Duterte has ordered the Department of Budget and Management (DBM) to slash other spending allocations to quench the monstrous appetite of the Social Amelioration Fund (SAF). Already SAF has exhausted its P205 billion allocation and needs another P50 billion to include 5 million more indigents. Other tranches beckon. The central bank has begun the hitherto taboo action of purchasing government treasuries in support. Fiscal deficit is racing to 8% of GDP as the economy and the tax base shrinks. Congress is scrambling for additional tax revenue from sin and digital products. Why forego much needed in-the-bag tax revenue now?

“A bird in hand is better than two in the bush,” goes the old saying, and not without reason. In the pre-COVID-19 times, CITIRA’s CIT reduction would have let go of P300 billion a year in sure revenue. Letting go was already imprudent when government faced only the financing bubble of Build, Build, Build — public and arterial infrastructure being the best use of a country’s resources in good times; it is imprudence twice over with the COVID-19 financing boondoggle now staring the nation in the face.

FULLVECTOR / FREEPIK

In Socioeconomic Planning Secretary Karl Chua’s presentation (at the May 14 Sulong Pilipinas e-Conference), one item in CREATE reads: “For existing investors: no change in present incentives for the next four to nine years.” We understand “existing investors” to include existing PEZA locators; and the grace period of the mandatory switch to CIT from GIT (gross income tax) will be extended by two years. This is a step in the right direction though decidedly paltry. Finance Secretary Carlos Dominguez’ “Welcome Remarks” identifies as among the recovery options: “Attract foreign investors to relocate from other countries; pass the CITIRA bill that will include flexible incentives.” It is well-known that PEZA locators and the foreign chambers were opposed to the TRAIN 2 and successor CITIRA bill, specifically to the forced shift by all PEZA locators from GIT at 5% to CIT gradually falling to 20% in 10 years. CREATE rehashes the original TRAIN 2 plan of CIT reduction from 30% to 25% in one go. Since by the DoF’s own calculation, the CIT equivalence of the 5% GIT is about 17 % CIT, potential new foreign investors in PEZA in the next two years stand to pay a higher tax liability (25% GIT) than incumbents paying 5% GIT (17% CIT). Telling foreign investors how much you want them at the same time that you slap them with a higher tax liability does not make for “more fun in the Philippines.” COVID-19 has weakened our bargaining position; our vaunted fiscal health is leaking out fast. As a rocket to blast us out of the COVID-19 black hole, CREATE strikes one as underwhelming. There is no echo of the courage shown in Franklin Delano Roosevelt’s New Deal. Romy Bernardo, who commented in that same e-Conference, offered interesting and bolder prescriptions.

We are at the crossroads of the rebalancing of the global foreign investment away from the People’s Republic of China. Vietnam and Indonesia are openly courting with additional goodies and even flaunting their better anti-COVID-19 record. Indonesia especially has been winning the race for US multinationals, one at which we defaulted given Malacanang’s overtly anti-US rhetoric. Chinese multinationals on the other hand are flocking to Vietnam despite our assiduous courtship of China.

At the crossroads of the global currency rebalancing in 1987-90, we badly missed the tsunami of Japanese foreign investment. This pulled down our economic standing in the ASEAN and elsewhere for decades. If by our actions, we treat foreign investors as if we don’t really care, we could see a reprise of that deplorable rout in 2020-22.

 

Raul V. Fabella is a retired professor of the UP School of Economics, a member of the National Academy of Science and Technology, and an Honorary Professor of the Asian Institute of Management. He gets his dopamine fix from daily bicycling and tending to flowers with wife Teena.

Moving on

This is my 10th weekly column written in “quarantine.” And in that period, Metro Manila has dealt with the COVID-19 pandemic by going through varying degrees of lockdown. The “stay at home” protocol has disrupted many if not most aspects of people’s daily lives. By next week, however, there may be changes to the situation in and of the National Capital Region.

The Philippine Star has reported that all 17 mayors of Metro Manila were recommending the shift to general community quarantine (GCQ) starting June 1, from the stricter modified enhanced community quarantine (MECQ) that started May 16. Under GCQ, however, mayors may still impose localized lockdowns in barangays or areas with many cases of COVID-19.

Reacting to the mayors’ recommendation, Palace spokesperson Harry Roque was quoted as saying that this should be reviewed in relation to COVID-19 cases’ “doubling rate” and “critical care capacity”; the need to “pay attention to our economy”; and, “our ability to adapt to a new lifestyle.” The President is expected to decide on the matter by this weekend.

Since May 16, Metro Manila, Laguna, Bataan, Bulacan, Nueva Ecija, Pampanga, Zambales, and Angeles City have been under MECQ from ECQ. Only Cebu City and Mandaue City on Cebu island in the Visayas remain under ECQ, while the rest of the country is already under GCQ. For the National Capital Region, the main difference since MECQ last May 16 was that more businesses were allowed to operate partially, but mass transportation was still prohibited. Some public transportation may resume only after we transition to GCQ or its modified version.

Allowing more businesses to reopen since May 16 is a welcome relief particularly to many who have lost their sources of income during the quarantine period. It is a needed boost to the economy as well. However, relaxing restrictions appears to have its price, as COVID-19 cases in Metro Manila are seemingly on an uptrend once more. A more comprehensive study of data from May 16 onwards will indicate if this is, indeed, the case.

On my part, even if we transition to GCQ or modified GCQ by next week, I am not exactly raring to go out. I am not sure how many other Metro Manila residents feel the same way since not everybody has the opportunity or the capacity to work from home, or to stay at home longer than mandated. It all depends, I guess, on whether necessity can overcome people’s fear of getting sick.

I hate to admit this, but COVID-19 has made me paranoid. In fact, in the last 10 to 11 weeks, I have been out only a few times since I am the designated “market” person in our home. And after every trip, I go back anxious and worried if I have brought the virus home with me. Everything from “outside” goes through a tedious process of washing and disinfecting, including me. The same goes for my wife every time she comes back from the occasional trip to the office.

There is nothing “normal” about this “new normal,” but I am sure many other homes have adopted extraordinary “protocols” at the household level if only to give themselves some degree of assurance that they are sufficiently protecting themselves from COVID-19. While I am certain that we can get used to this new lifestyle, I am sure the present situation has been particularly hard for our seniors, our minors, and those requiring regular medical care.

We can do away with haircuts and leisure activities for the meantime. A trip to the mall is not necessary, at least, for me. But my family has been in need of a visit to the dentist. And while income taxes have all been settled, car insurance and registration are due, as well as periodic maintenance. Some home repairs and other services are likewise needed, but have had to be put off. I have managed to temporarily remedy some minor plumbing and electrical issues.

But while I welcome the possibility of transitioning to GCQ, primarily to allow people access to more goods and services, without public transportation, service people may not be available still. More important, if service people have access to transportation, their mobility might make them high-risk individuals. In this line, will I be ready to welcome these “outsiders” in my home to provide me some service?

As any homeowner knows, things break down at home all the time. From a busted fuse to a leaking roof or a broken window. And while some issues can be handled with DIY fixes, major problems like a broken air-conditioner require “professional” help. Moving forward, what will be the “protocol” when it comes to having service people come around?

Should I be ready with a thermal scanner and a disinfecting booth for them at the front door? Should I be taking down personal information and other particulars for possible contact tracing in the future? If service people come from utilities and service companies, should they present “certification” from their companies with respect to their fitness to work and the required form indicating that they are adhering to required work standards?

Businesses and offices that are reopening are required to follow specific standards or guidelines for employees returning to work. But similar protocols are not in place for service people in household situations, other than requiring a “face mask” and “physical distancing.” How are homeowners to go about these things, then?

Car repairs are obviously different in the sense that one can actually leave the car at the shop. The same for those needing appliance repair. But what about home repairs like plumbing and electrical work? The homeowner cannot exactly leave the home while the workers undertake repairs. To begin with, the homeowner is covered by the “stay-at-home” protocol. Physical distancing is practically impossible especially in small homes.

It is easy enough to reason that common sense should prevail in such situations. But, the fact of the matter is, COVID-19 is such a game changer for everybody. There are no ready-made playbooks for it. So, there is no telling if we are dealing with it correctly or not. And the pandemic has obviously made people more anxious and worried than ever before. In this line, for me, transitioning to GCQ from MECQ is both a welcome development and a source of major concern. But, we do have to move on. So, I guess we just have to take things one day at a time.

 

Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council.

matort@yahoo.com

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