Investment Priorities Plan to incentivize pandemic-containment projects

May 22, 2020 | 6:58 pm

THE Board of Investments (BoI) said Wednesday that it has proposed to modify the 2020 Investment Priorities Plan (IPP) to classify various pandemic-mitigating activities as eligible for incentives, with the adjustments awaiting President Rodrigo R. Duterte’s approval.

“Nagsubmit tayo early part of this year kaya lang inabutan tayo ng pandemic na hindi pa siya napipirmahan. So winithdraw natin tapos pinalitan natin. Naglagay tayo ng two items, naglagay tayo ng 2 activities that can qualify doon sa incentives (We submitted the proposed changes earlier in the year but it was overtaken by events after the pandemic. So that proposal was withdrawn and we resubmitted with two new activities eligible for incentives),” BoI Managing Head Ceferino S. Rodolfo said in a virtual news conference Wednesday.

He added: “Ang gusto natin sana mailagay ‘yung ability or ‘yung power to be able to declare activities related to the Balik Probinsya (Program) na sana pioneer para longer ITH (income tax holiday) . Kasi ngayon, di ba yung mabibigyan lang natin na pioneer yung mga LDA (less developed areas). Eh Ang hirap-hirap talaga magdeclare ng isang lugar na LDA…kasi masyadong strict yung ating guidelines for that (We wanted to add the power to declare as pioneer activities those related to Balik Probinsiya, to allow a longer ITH. Right now pioneer status is hard to come by because the qualification process for LDAs is strict).”

Balik Probinsiya is a government incentive to decongest the capital and seed the provinces with more businesses and people, after the quarantine imposed on Metro Manila crippled economic activity in the first quarter.

He said the BoI also included in the IPP an item for the production and import of medical face masks and ventilators.

The new IPP, Mr. Rodolfo said, was designed to aid the transition towards the implementation of the CREATE bill or the Corporate Recovery and Tax Incentives for Enterprises Act, a revised version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA) bill which is pending at the Senate.

“Kung nagregister ka before the CREATE at di ka pa nakakakuha ng incentives (If you applied for incentives before the CREATE bill and were rejected), you can now be given the opportunity to either stick with the current regime or migrate to CREATE in case you are qualifieda,” he said.

The CREATE bill, which is part of the government’s three-phase recovery plan, proposes a reduction in the corporate income tax (CIT) rate to 25% from the current 30% starting July. — Arjay L. Balinbin

DoF, DoE rule out suspending VAT on power consumption

May 22, 2020 | 6:42 pm

THE Department of Finance (DoF) and the Department of Energy (DoE) on Friday rejected a proposal to suspend value-added tax (VAT) on power consumption as a relief measure during the pandemic.

“Suspending VAT is not a good option at this time because we need funds,” Finance Undersecretary Bayani H. Agabin told Senators Friday.

“VAT is actually a progressive tax, those who use electricity more will be paying more VAT,” he added.

Mr. Agabin was participating in the Joint Congressional Energy Commission hearing on the impact of coronavirus disease 2019 (COVID-19) on the power sector.

Energy Secretary Alfonso G. Cusi said VAT collection is vital in funding government measures in response to the COVID-19.

“Mahirap kung ngayon tayo mag-su-suspend ng VAT. Paano natin mapa-fund ang ating requirements? Wala na tayong mapagkukunan ng pera (It would be difficult to suspend VAT at this time. How can we pay for our needs if we have no funding sources),” Mr. Cusi said at the same hearing.

The Senate Tax Study and Research Office (STSRO) had proposed to suspend VAT on utilities, and Senator Risa N. Hontiveros-Baraquel was seeking the two departments’ positions on the proposal.

“Tingin niyo may option ang gobyerno na i-suspend ang imposition ng VAT habang nag-re-recover pa ang bansa (Can the government suspend VAT while the economy is recovering?)?” Ms. Hontiveros-Baraquel asked.

In a May 17 memorandum, the STSRO said the suspension of VAT on utilities could provide “immediate short-term relief and ample financial breathing space.”

The STSRO said other Southeast Asian countries have also resorted to VAT relief measures to ease the burden of the COVID-19 crisis.

Indonesia granted an advance VAT refund for April to September for manufacturers and export-oriented firms, while Vietnam deferred VAT for businesses and households for five months. — Charmaine A. Tadalan

BIR cites gov’t cash crunch in rejecting further extensions

May 22, 2020 | 6:40 pm

THE Bureau of Internal Revenue (BIR) said the government’s urgent need for funds rules out any further extensions of tax deadlines, though it will consider extending the availment period for the tax amnesty on delinquencies.

“The government urgently needs revenue collection to finance measures against COVID-19, so we cannot have further extensions. We want to encourage compliance and payment of taxes,” Deputy Commissioner Marissa O. Cabreros said in a mobile phone message Friday.

Commissioner Caesar R. Dulay issued Revenue Regulations (RR) No. 12-2020 on May 14, repealing the amended portion of RR No. 11-2020 which allows due dates to be pushed back “in case of quarantine extensions.”

The latest deadline extension came via RR No. 11-2020, in which the final date for filing and payment of income tax returns (ITR) was set at June 15. The deadline was moved three times from the traditional filing date of April 15.

RR No. 12-2020 was approved by Finance Secretary Carlos G. Dominguez III on May 20, and is “effective immediately”. A copy of the RR was published Friday.

The BIR is encouraging early payment due to the cash crunch, telling taxpayers that amendments are possible before due date.

BIR Deputy Commissioner for Operations Arnel S.D. Guballa told BusinessWorld that extending the cut-off period in availing of the tax amnesty on delinquent accounts beyond June 22 is “being evaluated.”

“For consideration, amnesty on delinquents,” he said in a text message yesterday when asked if the Bureau will consider making exceptions for the tax amnesty program.

According to a directive issued April 29, the cut-off period for availing of the tax amnesty on delinquencies was moved to June 22, from the intial April 23 deadline.

Republic Act No. 11213, signed into law in February, allows a one-year period for those seeking to avail of the amnesty on delinquent accounts while a longer, two-year window was given to avail of the estate tax amnesty program.

As of the end of October, the BIR collected over P1 billion from the two amnesty programs, P887.07 million from delinquent accounts and more than P360.5 million from the estate tax amnesty.

According to DoF data, 18 various tax amnesty programs have been implemented between 1972 and 2008, with the last one yielding P4.913 billion in collections. — Beatrcie M. Laforga

OFW new-hire deployments dwindle to 47 in April

May 22, 2020 | 6:40 pm

NEW-HIRE deployment of Overseas Filipino Workers (OFWs) dwindled to 47 in April from more than 30,000 a year earlier, the Philippine Overseas Employment Administration (POEA) told Congress.

“For April last year, new-hire deployments reached 30,592. This year (in) April, we only had 47. This is new hires, all types of workers. So the reduction in deployment is 99.85%,” POEA Administrator Bernard P. Olalia said during the virtual hearing of the House committee on overseas worker affairs

Rehire deployments fell 99.48% to 667 in April.

“During the ECQ (enhanced community quarantine) period, there were some seafarers which had employment contracts which expired or terminated. So what we did is was to extend the employment contracts for 60 days. This is to address the issue of crew changes. We also extended the accreditation of their principals,” Mr. Olalia said.

Foreign Affairs Undersecretary Sarah Lou Y. Arriola reported that a total of 2,461 overseas Filipinos are infected by coronavirus disease 2019 (COVID-19). Of the 2,461 cases, 285 died while 861 were able to recover.

Ms. Arriola added that the agency was able to repatriate 28,589 overseas Filipinos and was able to charter 2,187 flights for their repatriation.

The Overseas Workers Welfare Administration (OWWA) reported that it has spent about P497 million to assist 5,133 OFWs with accommodation, transport and food since the start of the ECQ in Luzon.

“We don’t see mandatory quarantine ending anytime soon, therefore we expect spending to continue, especially for hotels. We are asking for money, for help. We see the OWWA fund being tapped for a post-lockdown scenario,” OWWA Administrator Hans Leo J. Cacdac said.

During a virtual briefing on May 11, OWWA asked Congress for P2.5-billion to finance assistance to returning OFWs.

AAMBIS-OWWA Party-List Rep. Sharon A. Garin, who co-chairs the House economic stimulus cluster of the Defeat COVID-19 committee, said the panel will study the proposal for inclusion in the Philippine Economic Stimulus Act (PESA) which aims to inject about P568-billion into the economy for the recovery effort.

“Kulang yung pera ngayon (money is tight) but we are proposing that OFWs should be covered with a two moth wage subsidy after the ECQ. It’s a very important industry, it delivers 10% of GDP (gross domestic product) or more even…I think we need to protect it not only for the GDP but also for their families,” she said. — Genshen L. Espedido

PHL domestic funding capacity seen favorable among emerging markets

May 22, 2020 | 6:39 pm

THE Philippines’ ability to fund its pandemic spending from domestic sources gives it an edge among domestic markets, Oxford Economics said,

In a note, “Funding conditions spiraling into control for most emerging markets (EMs),” Oxford Economics said many EM governments have increased their reliance on “more reliable domestic sources of finance.”

These include the Philippines, which maintains a 72:25 borrowing mix in favor of domestic sources.

According to Oxford Economics, heavy reliance on domestic funding leaves governments less exposed to external volatility compared to those depending on international markets.

“The composition as well as the size of debt can be important in predicting which sovereigns may run into funding difficulties this year,” it said.

In 2019, the government’s total debt stock rose to P7.73 trillion, with P5.127 trillion from domestic sources. Around 33.66% or P2.603 trillion was borrowed from foreign creditors.

“Domestic residents are typically more willing to fund their governments in times of stress, whereas international investors are more likely to take capital out of the country,” it said.

Oxford Economics classified the Philippines among the EMs with large funding capacity from the domestic financial system.

“And though the expansion of sources could prompt heightened concerns over credit booms and busts, it also means numerous EMs can tap deeper domestic markets without overstretching their capacity too much,” it said.

“Thailand may have it easy: a 3% increase in total financing need in 2020 is small relative to domestic funding capacity (220% of GDP). Malaysia, the Philippines, India, and Brazil are similarly advantaged,” it said.

So far, the Philippines has rolled out P200 billion in cash aid to poor families, P51 billion in wage subsidies for employees of small businesses, and could roll out another P170 billion for its economic recovery plan.

The economic team is projecting a budget deficit equivalent to 8.1% of GDP this year largely due to plunging revenue and higher spending for its emergency response.

The government’s total debt stock is estimated to hit P9.589 trillion by the end of 2020, equivalent to 49.8% of GDP, and up about 24%. — Beatrice M. Laforga

Diokno backs health care, tech, agriculture reforms after pandemic

May 22, 2020 | 6:37 pm

THE government needs to implement structural reforms in health care, technology and agriculture while upskilling the workforce to ensure recovery from the coronavirus disease 2019 (COVID-19) pandemic, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said.

The top priority, modernizing health care, “would require giving incentives for the use of science and technology in health policy decision making. It would require overhauling the health care supply chain,” Mr. Diokno said in an online forum organized by the Makati Business Club and the National Resilience Council Friday.

Mr. Diokno also supports upgrading the infrastructure for information communications technology (ICT).

“The demand for digital technology will increase, driven by companies, schools, and government agencies implementing work from home arrangements and virtual meetings,” he said.

Mr. Diokno said upgraded crop management and farm logistics will ensure that food is accessible and cheap during emergencies.

“An efficient logistics system for agriculture facilitates the transport of agricultural inputs including farm equipment and machinery to farmers to keep food production uninterrupted,” he said.

Workers, he said, must be prepared for the future via upgraded skills and the safeguarding of their health in order to maximize the so-called demographic dividend from the young workforce. — Luz Wendy T. Noble

Murang Kuryente subsidy to take effect next year

May 22, 2020 | 6:37 pm

THE Power Sector Assets & Liabilities Management Corp.(PSALM) said the government’s subsidy for some universal charges will take effect next year, removing some of the cost from electricity bills.

PSALM was replying to a query from Senator Risa N. Hontiveros-Baraquel during a Joint Congressional Energy Commission hearing. Ms. Hontiveros-Baraquel brought up the government’s P208 billion subsidy which will relieve consumers from paying the universal charges for stranded contract cost (UC-SCC) and stranded debt (UC-SD).

The costs must be provided for in the General Appropriations Act (GAA), as provided in the implementing rules and regulations (IRR) of the Republic Act No. 11371, or the Murang Kuryente Act, according to PSALM President Irene B. Garcia.

“Once it is included in the GAA and funding is provided, we will no longer file for new UC applications. However, ‘yun pong current na UC na we see in our electricity bills, those are continuing po, (the current UC appearing in our electricity bills will still be charged)” she added.

In August, President Rodrigo R. Duterte signed the law which allocates P208 billion of the net proceeds of the government’s share from the Malampaya Natural Gas Project to cover the two universal charges, including as well as the anticipated shortfalls or deficits incurred from paying these obligations.

The IRR for the law was released in April, and as a result the subsidy will need to be budgeted for in 2021.

“Hindi po kasi agad nagawa ang IRR (The IRR wasn’t prepared in time), and therefore the DBM (Deparment of Budget and Management) and DoF (Department of Finance) said (the universal charges) cannot be included in the budget, so we will have to wait for next year,” Ms. Garcia explained.

PSALM is currently not collecting the UC-SCC, in compliance with the IRR, but it is still receiving the P0.0428 per kilowatt-hour UC-SD charged to consumers.

“No new UC [applications] will be approved but ‘yung mga dating na-approve po, tuloy-tuloy po (those previously approved UC applications are still in effect),” Ms. Garcia added.

Stranded contract costs are “the excess of the contracted cost of electricity under eligible IPP (independent power producer) contracts over the actual selling price of the contracted energy output of such contracts,” according to the IRR. Collections from these are remitted to PSALM.

Stranded debt, which is assumed by PSALM, are unpaid financial obligations of the National Power Corp. which have not been liquidated by the proceeds from the sals and privatization of its assets.

Should there be a remainder from the fund allocation after the payments of these costs are completed, the law states that the remaining amount must be used to finance energy resource development and exploitation programs of the Energy Development Board. — Adam J. Ang

Construction materials price growth in Metro Manila eases in April

May 22, 2020 | 6:37 pm

GROWTH in the retail price of construction materials in Metro Manila eased in April after the lockdown depressed demand for these goods, the Philippine Statistics Authority (PSA) said.

The construction materials retail price index (CMRPI) grew 0.8% year-on-year in April, slower than the increase of 0.9% in March, the PSA reported Friday.

Price indices represent a basket goods and services and how prices have moved relative to a base period. The CMRPI, which uses 2012 as the base year, measures the prices retailers charge for construction materials.

Slower price growth was recorded in carpentry materials (0.9% from 1.3% in March), plumbing materials (0.4% from 0.7%), and painting materials and related compounds (1.5% from 1.6%).

Meanwhile, the year-on-year growth in the following commodities remained unchanged from the previous month: electrical materials (0.7%), masonry materials (0.7%), tinsmithry materials (1%), and miscellaneous construction materials (0.5%).

“This slowdown can be attributed to the extended community quarantine (ECQ) as construction activities were virtually halted,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail.

“We saw this slowdown in construction activities contribute to the drawdown of first quarter gross domestic product, and we expect the figures to remain down by May as the ECQ was extended,” he added.

Luzon was placed under ECQ in mid-March to prevent the further spread of the coronavirus disease 2019 (COVID-19). A “modified” lockdown has since been implemented in Metro Manila where some industries were allowed to operate at least partially until May 31.

The economy shrank in the first quarter largely due to the lockdown. In the first three months of the year, gross domestic product declined 0.2%, ending 84 consecutive quarters of growth.

“We’ll probably see some pickup with the return of construction activities as quarantine measures are slowly relaxed,” Mr. Roces said. — Lourdes O. Pilar

Farm-loan penalty condonation for ARBs finds backer in Senate

May 22, 2020 | 6:36 pm

SENATOR Ralph G. Recto said Friday he will push for Senate action on a measure relieving agrarian reform beneficiaries (ARBs) from penalties incurred in the course of taking on agricultural loans.

In Senate Bill No. 268, Mr. proposed to condone all loan penalties and interest among other charges from loans obtained via the Comprehensive Agrarian Reform Program (CARP).

The House of Representatives on Wednesday passed a counterpart measure on third and final reading.

Mr. Recto touted his bill as a relief measure in response to coronavirus disease 2019 (COVID-19), as it provides incentives to those engaged in food production.

Mr. Recto’s proposal, currently at committee level, will speed the farmers along in eventually taking ownership of the land.

“Landowners whose properties were subject to land redistribution will still be paid,” he added.

Further, Mr. Recto said the Senate Economic Planning Office has estimated that out of the P14.3 billion in loans granted through CARP between 1987 and 2004, only PP2.5 billion has been collected.

He also cited a study, conducted by the Philippine Institute for Development Studies (PIDS), that showed as of March 2015, the Land Bank of the Philippines (LANDBANK) has collected 51% of amortization and interest payments on these loans.

“There is a huge administrative cost in managing this important aspect of the agrarian reform program. In fact, in one study, the system to collect loan payments from CARP beneficiaries was not fully put in place due to the high cost,” he said. — Charmaine A. Tadalan

SMC buys 69 million kilos of corn to support farmers

May 22, 2020 | 6:34 pm

SAN MIGUEL Corp. (SMC) said its food unit has purchased 69 million kilograms of corn from farmers to ensure adequate supply and prop up farmer incomes during the market disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic.

In a statement Friday, SMC President and Chief Operating Officer Ramon S. Ang said that San Miguel Foods Inc. has stepped up purchasing of corn and other products to aid farmers, whose ability to reach markets has been hampered by the Luzon-wide quarantine.

“To help further offset the impact of COVID-19 on farmers, payment for purchases is released promptly so that they can have a steady source of income in these trying times,” Mr. Ang said.

SMC said that it expects to purchase more corn in the next few weeks, as the company continues to sign agreements with farmers in corn-producing regions.

“We are expecting 50,000 kilograms of corn from Camarines Sur. Another 100,000 kilograms will come from the Maymatan Farmers Multi-Purpose Cooperative in Camarines Sur, during the period of May 26 to June 15,” Mr. Ang said.

Together with the Department of Agriculture (DA), SMC has asked farmers of rice, cassava, coconut oil, and other farm produce to come forward and sell to the conglomerate .

In an earlier agreement with the DA, SMCs purchased four million kilos of surplus corn, sufficient to produce feed for over seven million broiler chickens.

SMC also identified the province of Cagayan as a likely source, with 25,000 hectares of corn farms and cooperatives specializing in cassava in the Tuguegarao area.

“The farmers are at the core of our food production and they are even more essential and vital during this pandemic. We encourage more to come forward and help us secure the needed ingredients and raw materials for our food production,” Mr. Ang said.

Petron fuel stations in Metro Manila are also being tapped as outlets for agricultural produce under the DA’s Kadiwa rolling store program.

The two Kadiwa pilot stores are located at Petron Katipunan, near La Vista subdivision. and Petron Zabarte in Caloocan, with more outlets to come in the coming months. — Revin Mikhael D. Ochave

Launch of Overseas Filipino Bank, e-invoicing expected by third quarter — DoF

May 22, 2020 | 6:34 pm

THE Department of Finance (DoF) said the digital-only Overseas Filipino (OF) Bank and the electronic invoicing (e-invoicing) program are set to roll out by the third quarter of 2020.

In a statement Friday, Finance Secretary Carlos G. Dominguez III said Land Bank of the Philippines (LANDBANK), which he chairs, has committed to have the digital-only and branchless OFBank “up and running” by the end of June to serve Overseas Filipino Workers (OFWs).

“We set up this OF Bank a couple of years ago. We’ve had problems with the technology but I think with (LANDBANK President Cecilia C. Borromeo)’s leadership, we are almost ready to launch,” Mr. Dominguez was quoted as saying in a recent appearance before the House of Representatives.

According to Ms. Borromeo, OFBank on Jan. 30 obtained a “No Objection” clearance from the central bank on the use of a “digital onboarding system with artificial intelligence (AI)” as its electronic know-your-customer process.

Mr. Dominguez said the electronic invoice and sales reporting system or e-invoicing system will also be rolled out by the third quarter.

“The biggest (digitalization) program we’re working on now is e-invoicing. Once we get that e-invoicing program set up, that will mean a big step in e-governance,” he was quoted as saying in a DoF statement Friday.

The DoF in June 2019 said it targets full implementation of the e-invoicing system by the end of 2022, which is expected to produce administrative savings and streamlined processes for the Bureau of Internal Revenue (BIR).

“We have been working on that for the last year or so, and we should come to a conclusion, a good program by the middle of, or maybe the third quarter of this year,” he added.

Late last year, the Philippines tapped Korea International Cooperation Agency (KOICA) for a $7.3 million grant aiding the first phase of the project’s implementation.

BIR said that around 100 taxpayers have been identified as potential participants in the pilot test ahead of the system’s mandatory implementation.

Under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, large taxpayers and exporters are required, within the next five years, to issue invoices, receipts and sales data digitally to the Bureau at the point of sale. — Beatrice M. Laforga

ASEAN lenders likely to accelerate digital shift due to pandemic — Fitch Ratings

May 22, 2020 | 6:33 pm

BANKS in the ASEAN region are likely to hurry along their digital transformations due to the pandemic and the resulting social distancing measures, Fitch Ratings said.

It noted that major banks in the Philippines, Malaysia and Singapore have seen surging online banking activity since the onset of the pandemics.

“This (trend), coupled with the greater adoption of open banking architectures in some jurisdictions, will force banks to innovate more quickly or risk falling behind,” Fitch Ratings said in a report Friday.

Meanwhile, Fitch Ratings said smaller banks are in danger in the shifting competitive dynamics, specifically those with below-par capabilities.

It noted that the expected acceleration of the digitalization process is unlikely to have a significant impact on lenders’ ratings in the near term, with the bleak operating environment due to the pandemic to have a more immediate impact.

According to Fitch, banks in major ASEAN markets have been growing their revenues at an 8% compound annual growth rate (CAGR) while their branch networks decreased 1%.

“With the exception of many Philippine banks, banks in the region had not generally been relying on the expansion of physical distribution channels to drive revenue before the pandemic,” Fitch Ratings said.

Because of the pandemic and the distancing measures, Fitch is of the view that banks will amplify the pursuit of growth in digital channels with existing branches likely to be further optimised towards higher value-add, cross-selling services.

UnionBank of the Philippines, Inc. has said it experienced a surge in online banking activity during the crisis. President and Chief Executive Officer Edwin R. Bautista said the bank’s early digital adoption and prior investments have helped it anticipatea the changes to client behavior during the lockdown.

“Due to the ECQ (enhanced community quarantine), most of our customers resorted to using our digital channels to continue banking with us. Because of this, we achieved record highs in the month of March in terms of digital account opening in our UnionBank Online app, as well as corporate enrollment into our platform, The Portal,” Mr. Bautista said in the bank’s virtual stockholders meeting, also held on Friday.

Mr. Bautista said early investment in digital capacity has facilitated critical operations even with 80-90% of the workforce restricted to working from home.

“We have learned a lot from this situation. Going forward, we believe that data analytics and AI will be critical cornerstone technologies that will drive us to the next level of our digitization,” Mr. Bautista said.

UnionBank posted a first-quarter net profit gain of 22% year-on-year to P2.641 billion. It has set aside P1.3 billion for expected loan losses, 7.6 times higher than the year-earlier total due to the potential impact of the public health emergency.

On Friday, UnionBank shares closed at P53.70, down 0.46% or 25 centavos. — Luz Wendy T. Noble