Coal share of power mix seen at 59% by 2029 despite moratorium

January 4, 2021 | 7:30 pm

COAL-FIRED POWER is expected to account for 59% of the country’s generation mix by 2029 after production at the Philippines’ sole gas field winds down, according to Fitch Solutions Country Risk & Industry Research.

The loss of supply from the Malampaya gas field will increase the Philippines’ overall reliance on coal as a cost-effective power source, outweighing the moratorium on new coal-plant construction declared by the government last year, Fitch Solutions said in a report.

According to the Department of Energy, coal-based power accounted for 44.5% of the generation mix in 2015. In 2020, 86.51% of the Philippines’ coal consumption was taken up by the power industry.

Fitch Solutions said coal remains the cheap and reliable option to power the country’s growth and help it achieve its 100% electrification goal by 2022.

In light of the depletion of Malampaya’s reserves, “we expect the Philippines’ power mix to remain dominated by coal over the coming decade, with the share of coal reaching approximately 59% by 2029, with considerable downside risks,” Fitch Solutions said.

Fitch Solutions said that power supply mix in 2029 is expected to consist of 22% natural gas, 2% oil, 7% hydropower and 10% non-hydropower renewables.

Fitch Solutions said growth in coal generation is expected to be slowed by the moratorium on new build, which will create a ripple effect down the line because of the five-year timetable for building such plants.

“We now forecast coal-fired power generation to increase by an annual average of 5.2% between 2020 and 2029, amounting to approximately 93.6 TWh (terawatt-hours) by 2029,” Fitch Solutions said.

It did not give comparative growth rates.

The main risks to growth in coal power generation are “very strong and increasing public opposition” from religious and other organizations. Increasing momentum behind climate solutions as well as the adoption of nuclear power could also be factors, it said.

In September, Fitch Solutions downgraded its forecast for the Philippines’ power consumption to a decline of 5.9% in the use of power from all sources and a decline of 14% from coal. — Angelica Y. Yang

Senate bill seeks to suspend SSS contribution hike

January 4, 2021 | 7:30 pm

A BILL seeking to suspend the scheduled increase in member contributions to the Social Security System (SSS) due to the pandemic has been filed in the Senate.

Senate Bill No. 1965 proposes to amend the Social Security Act of 2018, or Republic Act (RA) No. 11199, by stipulating that the rate increases be postponed by a year, counting from the end of the pandemic.

“Given the current employment situation of the country as a result of the COVID-19 (coronavirus disease 2019) pandemic, there is a need to ensure that workers and companies are able to fully recover and have enough resources to do so,” Senator Emmanuel Joel J. Villanueva said in the bill’s explanatory note.

“This bill seeks to achieve this by providing a reprieve to our battle-weary workers and employers through the suspension of the mandated increase in social security contribution rate.”

Mr. Villanueva, who chairs the labor committee, cited the 8.7% unemployment rate reported in the October 2020 Labor Force Survey.

This is equivalent to 3.8 million unemployed workers and is much higher than the 4.6% rate recorded in October 2019.

RA 11199 provides for an SSS contribution rate increase to 13% of the value of a worker’s salary, not to exceed P25,000, starting January 2021. The rate was 12% in 2020. The new contribution rate will be shared by the employer, which will shoulder 8.5%, with the employee paying 4.5%.

“This respite from increased expenses, arising from higher social security contributions, will provide businesses and employees much-needed income to survive and recover during (the) pandemic,” he said.

Detained Senator Leila M. de Lima also pushed for the suspension of the scheduled increase of the SSS rate as well as the hike in the monthly contribution to the Philippine Health Insurance Corp. (PhilHealth).

“Increasing SSS and PhilHealth contributions will not only result in reduced employment due to increased costs but also in possible delinquencies of members who cannot afford the additional payments required,” she said in a separate statement.

She also noted that the corruption allegations against PhilHealth have not yet been settled. — Charmaine A. Tadalan

The serious repercussions of not withholding tax

January 4, 2021 | 7:29 pm

New years are a good time to reflect, which is a useful exercise for evaluating how we responded to past situations, and which experiences will serve us well going forward moving forward. This helps us gain a better understanding of ourselves and draw up more realistic life goals.

Similarly, in tax practice, I believe it is advantageous for taxpayers to revisit their past experiences in responding to the Bureau of Internal Revenue’s (BIR) issuances and court decisions. A taxpayer engaged in such study can evaluate the impact of developments like these on their compliance with the tax rules, particularly measures that helped them avoid undue tax exposure and costs.

Before 2020 ended, the Court of Tax Appeals (CTA) ruled en bank in Case No. 2084 on a tax assessment case involving deficiency withholding taxes. In that case, the BIR issued a Formal Letter of Demand against a taxpayer which included a finding of withholding tax deficiencies and income tax deficiency related to the corresponding non-deductibility of expenses due to the alleged non-withholding of tax. The taxpayer filed a protest letter, and received a Final Decision on Disputed Assessment (FDDA) from the BIR denying the protest. The taxpayer petitioned the CTA to review the BIR’s ruling.

The taxpayer had paid the deficiency withholding taxes after the issuance of the FDDA. On this basis, the taxpayer claimed that since the assessed deficiency withholding taxes were paid, the assessment item of disallowed expenses due to non-withholding should have been deleted. However, the CTA did not agree with this contention, ruling that the taxpayer may not claim the deduction, since it only paid the deficiency withholding taxes after the FDDA, and not at the time of the audit investigation or reinvestigation/reconsideration.

The CTA disagreed with the taxpayer’s position that the phrase “at the time of the audit investigation or reinvestigation/reconsideration” should be interpreted to cover the period given to the taxpayer within which to agree with the assessment and pay the same, prior to the filing of a Petition for Review with the CTA. Thus, the CTA retained the tax assessment on non-deductibility of expenses due to non-withholding against the taxpayer.

In effect, the CTA held that, on the issue of non-withholding of tax, the taxpayer was hit with two types of tax deficiencies — on withholding tax, and at the same time, on income tax.

WHAT ARE THE TAKEAWAYS FROM THIS CASE FOR TAXPAYERS?
A taxpayer undergoing a BIR audit should be conscious of the timing of the payment of deficiency withholding taxes. As discussed by the CTA, the timing should be during the audit investigation or reinvestigation/reconsideration, and not after the FDDA. Otherwise, the taxpayer might be hit with a double whammy, in which both the deficiency on the withholding taxes and the deficiency in income tax due to disallowed expenses could be imposed against the taxpayer. Let’s take as an example an income payment to contractors of P10 million, which was not subjected to 2% expanded withholding tax. This would generate a basic deficiency of P200,000 for expanded withholding tax, and another P3 million for income tax (using a 30% corporate income tax rate), if the payment of deficiency withholding taxes is not properly timed. However, the larger consequence is the disallowance of expenses due to non-withholding, for income tax purposes.

Another takeaway is that a taxpayer should not wait for a BIR audit to discover its withholding tax deficiencies, to avoid altogether the situation described in the CTA case. A taxpayer should take care to ensure that the corresponding withholding taxes are made on day-to-day operations. Remember that the penalties for late withholding of taxes are a 25% surcharge and 12% interest per annum.

In addition, a supplemental subsequent periodic review of transactions can also be helpful to determine whether there were transactions that were not properly subjected to withholding tax, and could require a possible amendment to withholding tax returns. Taking these measures, at least the 12% interest penalty might be avoided.

Having been made aware of the repercussions of non-withholding of tax, the taxpayer must know the transactions covered by the withholding tax rules. It would be prudent to implement effective controls to monitor these transactions and to ensure withholding tax compliance.

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.

Richard R. Ibarra is a senior 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

Sports going the ‘bubble’ way

January 4, 2021 | 6:35 pm

By Michael Angelo S. Murillo, Senior Reporter

ONE of the hardest hit by the coronavirus pandemic, the local sporting community is slowly picking up the pieces and making its way back. And one of the ways it is going about it is holding a “bubble,” be it for training or tournament proper.

Under a bubble setup, activities are done in a very defined and exclusive setup to guard against the spread of the coronavirus, while also allowing close contact among participants.

The Philippine Basketball Association (PBA) successfully held their tournament bubble from October till early December after suspending its Season 45 for seven months, with the Barangay Ginebra San Miguel Kings crowned as Philippine Cup champions.

Also holding its bubble was the Chooks-to-Go 3×3 Pilipinas at the INSPIRE Sports Academy in Calamba, Laguna, which went well with zero reported positive cases of the virus.

The Philippines Football League (PFL), too, successfully held a two-week tournament at the Philippine Football Federation National Training Center in Carmona, Cavite, which had United City Football Club emerging on top.

The bubble scene is set to pick further this year with national athletes set to be trained under such a setup as they prepare and vie for spots in the rescheduled Tokyo Olympics and Southeast Asian Games, and other leagues gearing up to play their tournaments through a bubble setting.

Local sports stakeholders said considering how still unpredictable the situation is with the pandemic, doing a bubble may be the safer way to go about things at this point.

“A bubble setup makes sense,” said sports marketer Rely San Agustin in an interview with BusinessWorld. “Seclusion is needed. You really have to control movement in and out of the venues.”

For Games and Amusement Board Chairman Baham Mitra, while news of vaccines being developed for the coronavirus and could be made available soon is welcome development, “playing outside of the bubble remains risky” and utmost precaution is needed.

Both Messrs. San Agustin and Mitra, however, admitted that going the bubble way does not come cheap, but if organizers are willing to shell out the needed amount, then they should go for it.

The PBA bubble, which had participants holed up at Clark City in Angeles City, Pampanga, for the duration of the tournament reportedly cost the league P70 million, while that of the PFL had a price tag of around P6 million.

In doing a bubble, organizers, too, have to make sure proper procedures and setup are followed to make it successful.

“We are navigating in uncertain times, but if done properly, a bubble can be effective,” said Martin Aguda, Jr., a safety, resilience and crisis management consultant.

Mr. Aguda, who is affiliated with The Safety Project PH and helped Chooks-to-Go 3×3 Pilipinas in reviewing its protocols for its successful tournament, said a bubble needs the three Cs — Compliance with all government regulations; Consistency in the implementation of the protocols; and Concern for the health and safety of the people inside it.

DETERMINED
Among those set to go through a bubble this year as part of their preparation are the national athletes for athletics, whose local federation expressed determination to succeed in doing so.

The country’s track and field team is set to enter their bubble at the New Clark City in Capas, Tarlac, in the middle of this month with the end view of getting its conditioning and training going as they vie for spots for various tournaments, including the Philippine Athletics Championships in March, which is being angled to be an Olympic qualifier.

The Philippine Athletics Track and Field Association said it is in the process of finalizing the requirements of its athletes and coaches before they enter the bubble and that it is closely coordinating with pertinent government agencies, including the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF-EID) and Bases Conversion and Development Authority, which has authority over the facilities at New Clark City.

Also set to go through their own bubble are the combat sports athletes — taekwondo, karate, and boxing — beginning later this week at INSPIRE Sports Academy.

The Philippine SuperLiga and Premier Volleyball League, meanwhile, are looking at staging bubble tournaments in the first quarter this year.

Playoff pairings set for NFL’s wild card weekend

January 4, 2021 | 6:35 pm

WITH the Green Bay Packers (13-3) and Kansas City Chiefs (14-2) earning the top seeds and first-round byes in the NFC and AFC playoffs, respectively, the other 12 teams that made the playoffs have learned where they’ll be headed for wild card weekend.

In an unprecedented move for the National Football League (NFL), seven teams made the postseason from each conference, with only the top seed receiving a first-round bye. In previous years, each conference sent six teams to the postseason and the top two seeds received first-round byes.

There will be three games on Saturday and three more on Sunday, starting at 1:05 p.m., 4:40 p.m. and 8:15 p.m. All times are EST.

In the National Football Conference (NFC), the second-seeded and NFC South champion New Orleans Saints (12-4) will host the seventh-seeded Chicago Bears (8-8), who backed into the playoffs when the Arizona Cardinals lost to the Los Angeles Rams. The Saints and Bears will meet on Sunday at 4:40 p.m.

Third-seeded and NFC West champion Seattle (12-4) will host the sixth-seeded Los Angeles Rams (10-6), who punched their playoff ticket for the third time in four years with a win over the Cardinals on Sunday.

Seattle and the Rams will meet on Saturday at 4:40 p.m. The teams split a pair of regular-season games, with each winning on its home field, most recently the Seahawks’ 20-9 win in Week 16 that secured the division title.

The NFC East champion, either Washington (6-9) or New York Giants (6-10) pending the outcome of the Washington-Philadelphia Eagles, will host fifth-seeded Tampa Bay (11-5) on Saturday at 8:15 p.m., as Buccaneers quarterback Tom Brady is three wins away from his seventh Super Bowl title.

Either the Giants or Washington will be just the second team to make the playoffs with a losing record — aside from the 1982 strike-shortened season — joining the 2010 Seahawks, who went 7-9 en route to winning the NFC West title. That year, Seattle defeated New Orleans in the first round before falling a week later in the divisional round at Chicago.

In the American Football League (AFC), the second-seeded and AFC East champion Buffalo Bills (13-3) will host the seventh-seeded Indianapolis Colts (11-5) on Saturday at 1 p.m.

Colts coach Frank Reich is a Buffalo legend, as he quarterbacked the Bills to the biggest comeback in playoff history, rallying Buffalo from a 32-point deficit against the Houston Oilers to win in overtime, 41-38, on Jan. 3, 1993.

The third-seeded and AFC North champion Pittsburgh Steelers (12-4) will host sixth-seeded Cleveland (11-5), which is making its first postseason appearance since 2002, in the opening weekend finisher on Sunday at 8:15 p.m.

The AFC North teams split a pair of meetings, with each team winning on its home field. Cleveland defeated Pittsburgh, 24-22, in Week 17 in a game in which the Steelers rested several of their best players, including quarterback Ben Roethlisberger.

Fourth-seeded and AFC South champion Tennessee (12-4) will host the fifth-seeded Baltimore Ravens (11-5) on Sunday at 1 p.m.

The Titans knocked the then-top-seeded Ravens out of the playoffs last year in the divisional round before falling to the eventual-Super Bowl champion Kansas City Chiefs in the AFC title game. — Reuters

SMC’s Chua sees player trades to happen after draft

January 4, 2021 | 6:33 pm

WHILE the Philippine Basketball Association is set to lift the moratorium on trading players this month, San Miguel Corp. (SMC) sports director Alfrancis Chua expects bulk of movements happening after the rookie draft.

Speaking on The Chasedown television program on Saturday, Mr. Chua, also the concurrent Barangay Ginebra San Miguel Kings top official, shared that while he has heard of some teams angling to make moves early, nothing definite has come out of them yet and sees deals being consummated after the draft set for March 14.

“Right now, there is not much movement. I think everybody is waiting for the draft. That is when trades are really made because the teams already have draft picks and have a better view of what they have,” Mr. Chua said in Filipino.

Adding, “And they base their moves from there. They send a player to another team in exchange for another player to address what they need. Right now, there is not much movement. Although I have heard some teams are trying to make moves, but nothing definite yet.”

The PBA suspended player trades last year because of the situation with the pandemic, which greatly disrupted the league’s 45^th season.

It was to allow teams to have more time to evaluate their moves carefully.

The only deals allowed last year were extension of player contracts until Dec. 31 and acquisition of players in free agency.

Mr. Chua, also a former PBA coach, did not say whether they at SMC are looking to trade for players or eyeing certain athletes to get.

He, however, shared that every move they make goes through a process.

“I talk to the coaches and discuss what they need and then I consult RSA (SMC President/CEO Ramon S. Ang) about it. It’s hard to trade players, especially here in SMC because players don’t want to be traded, so we make sure that the deals we make will be beneficial for all,” Mr. Chua said.

The ongoing offseason is expected to be a busy one for the PBA with a deep talent pool available in the rookie draft and the number of quality players seen to be made available for trade.

Terrafirma Dyip star CJ Perez and Northport Batang Pier’s Christian Standhardinger are among the often mentioned to be on the move while players like Joshua Munzon, Jason Brickman, Alvin Pasaol, Santi Santillan, and those coming from the University Athletic Association of the Philippines and National Collegiate Athletic Association and the Maharlika Pilipinas Basketball League bannering this year’s rookie draft.

Deadline for the application for the draft is set for Jan. 27.

Terrafirma holds the right to pick first in the draft, followed by Northport, NLEX Road Warriors (third and fourth), Rain or Shine Elasto Painters, and Magnolia Hotshots Pambansang Manok.

The rest of the draft order for the first round has Alaska, San Miguel Beermen, Meralco Bolts, Phoenix Super LPG Fuel Masters, Northport and Barangay Ginebra picking. — Michael Angelo S. Murillo

Team Lakay coach Mark Sangiao behind possible Pacquiao-McGregor boxing fight

January 4, 2021 | 6:33 pm

WHILE it is still to be made official, a Manny Pacquiao-Conor McGregor super boxing fight could be one of the marquee sporting events for the year 2021.

And count Team Lakay coach Mark Sangiao as one of those who would not miss catching it.

Negotiated to happen this year, the Pacquiao-McGregor bout will see superstars in boxing and mixed martial arts (MMA) collide anew.

It if happens, it will mark the first time boxing legend Pacquiao (62-7-2) is taking the ring in one and half years. He last fought American Keith Thurman and won by split decision to wrest the World Boxing Association welterweight belt.

Mr. McGregor, who is a two-division Ultimate Fighting Championship champion, for his part, tested his boxing skills versus Floyd Mayweather Jr. in 2017 and lost by technical knockout in the 10^th round.

But given the kind of athletes Messrs. Pacquiao and McGregor are, the billing has the makings of a must-see event, said Mr. Sangiao.

“It is a good strategy for Pacquiao because everybody is craving to watch him fight again,” said Mr. Sangiao, whose Team Lakay boasts of MMA champions, including current ONE Championship strawweight champ Joshua “The Passion” Pacio and Brave CF bantamweight titleholder Stephen “The Sniper” Loman, in a release.

“On McGregor, he really knows how to sell his fights, too. It’s going to be a blockbuster fight for sure,” he added.

The Pacquiao-McGregor fight has been floated around for some time now, but gained traction late last year.

Both fighters are signed with Paradigm Sports Management of Audie Attar. — Michael Angelo S. Murillo

Curry hits career-high 62 as Warriors blast Blazers

January 4, 2021 | 6:32 pm

STEPHEN Curry exploded for 21 of his career-high 62 points in the first quarter Sunday night, helping the Golden State Warriors take a lead they never relinquished in a 137-122 victory over the Portland Trail Blazers in San Francisco.

The game was a rematch of a 123-98 Trail Blazers win on Friday night in a game also played at the 2-year-old Chase Center in San Francisco.

Curry topped his previous high of 54 with two free throws with 2:23 to play.

He wasn’t done. With the Warriors comfortably ahead, Curry bombed in consecutive 27-footers, the second of which came with 42.2 seconds left to cap his 62-point night.

The 50-point night was the National Basketball Association’s (NBA) first of the season, while the 60-pointer was the first for a Warrior since Klay Thompson had 60 in 2016.

The last Warrior to record more than 62 points in a game was Rick Barry with 64 in 1974.

Curry’s record-setting night came in the same game in which his streak of consecutive free throws made, which dated back to last season, ended at 80.

Damian Lillard was on hand for the performance, leading Portland with 32 points.

Seeking their first win of the season, the Warriors trailed 9-2 before Curry hit three shots, including a 3-pointer, in a 17-3 flurry that gave Golden State the lead for good.

Curry had 31 points by halftime and 45 by the end of the third period, during which the Warriors led by as many as 20.

The Trail Blazers, who were wrapping up a California swing in search of a third win in four games, didn’t go quietly. They closed within eight on two occasions in the fourth quarter, the last time on two free throws by Enes Kanter with still 2:53 to play.

But Andrew Wiggins hit a 3-pointer 17 seconds later, ending any suspense other than Curry’s final point total.

Curry finished 18-for-31 from the field overall and 8-for-16 on 3-pointers. He also shot 18-for-19 at the foul line.

Wiggins added 21 points, Kelly Oubre Jr. had 17, James Wiseman gained 12, and Eric Paschall did 10 for the Warriors, who shot 55.7%.

CJ McCollum (28) and Kanter (24) backed Lillard for Portland, which shot 41.8 percent. Anthony chipped in with 10 points.

Kanter was the game’s leading rebounder with 12. The Warriors’ Wiseman also recorded a double-double with a team-high 11 rebounds. — Reuters

New tax relief for small businesses

January 4, 2021 | 5:59 pm

On May 2, 2020, I published an open letter to all legislators and sent a copy to both the Senate and the House of Representatives. Basically, the message is urging our legislators to end injustice by legislating tax policy reforms to help all businesses adjust to the new normal.

It underscored the fact that 99.52% of businesses in the country are micro, small and medium enterprises (MSMEs) which employ 63.19% of total workforce. While we laud the government’s efforts to help MSMEs, here’s a list of proposed tax relief measures which can help address cash flow or liquidity issues of a lot of small businesses while encouraging the large taxpayers pay taxes with lower rates:

1. Implement a general tax amnesty to broaden the tax base and collect without the need for an audit;

2. Lower the corporate income tax from 30% to 20%;

3. Implement a tax holiday from business taxes which will eventually transition to a flat tax for self-employed and professionals (SEPs);

4. Provide wage or payroll subsidy which will benefit both employers and employees especially those who incurred significant losses and debts due to the pandemic;

5. No audit program (proposed to the Bureau of Internal Revenue).

GENERAL TAX AMNESTY
Still pending in Congress is the general tax amnesty which was initially vetoed by the President due to the absence of the provision lifting the bank secrecy law on tax fraud cases. The same provision remains its major hurdle as legislators may not be keen in lifting the bank secrecy as it may backfire on them when they get audited in the future. Although the tax amnesty on delinquency has been extended until June 20, 2021, a general tax amnesty will help collect more taxes from taxpayers without the audit and investigation.

INCOME TAX CUT
After reading the 170-page Senate Bill No. 1357 or Corporate Recovery and Tax Incentives for Enterprise Act (CREATE), it felt like our legislators listened and considered our proposals seriously with the lowering of corporate income tax from 30% to 25% effective July 1, 2020 and just 20% for those with P5 million net taxable income (with total assets less than P100 million excluding land). This is indeed a welcome development and a good Christmas gift to all our small businesses.

However, I hope with the approval of the CREATE bill, the oversight committee of both Houses will revisit the TRAIN law to align the tax relief extended to individuals owing to the fact that small businesses are mostly self-employed or sole proprietors registered with the Department of Trade and Industry and Bureau of Internal Revenue (BIR) as individual taxpayers. The Barangay Micro Business Enterprise law may also need to be reviewed to address possible tax leaks by using annual gross revenues or net taxable income as the basis instead of total assets to rationalize income tax exemption.

TAX HOLIDAY
The self-employed and professionals may not be getting any tax holidays but proprietary educational institutions and hospitals which are non-profit will get the biggest tax break from 10% to 1% in income tax beginning July 1, 2020 until June 30, 2023, provided their gross income from unrelated trade, business or other activity does not exceed 50% of their total gross income.

PAYROLL SUBSIDY
Whether you earned a small profit or incurred losses this year, the 13^th month pay is a mandatory benefit of all employees due on or before Dec. 24. Definitely, it should not be deferred despite the financial position of the company as most employees rely on it to celebrate Christmas with their families. The question is, where will the money come from if employers don’t have the available cash to release the 13^th month pay? That’s why a payroll subsidy is needed either in the form of a tax-free loan or a partial subsidy to help small businesses release it without delay.

NO AUDIT PROGRAM
The BIR has issued Revenue Regulation 21-2020 on the implementation of a Voluntary Assessment and Payment Program (VAPP) for the taxable year 2018. This is very similar to our proposed “No Audit Program” as the VAPP allows taxpayers to voluntarily pay their unpaid taxes so they will no longer be subject to an audit for the taxable year 2018. The deadline to avail of this has been extended until June 30, 2021. Clarifications were also made in RMC 111-2020.

But the greatest tax relief was initiated by the BIR. It is the ongoing digital transformation of the tax administration which resulted in 86% tax payments made through online platforms, i.e., P1.241 trillion of P1.45 trillion between January and September, tax returns filed online hit 16.45 million or 94% of the total in the nine months. Some of the projects or programs introduced or completed during the quarantine period:

1. Internal Revenue Integrated System in April;

2. Electronic Audited Financial System in June;

3. E-appointment facility in October;

4. Online Application for Tax Clearance for Bidding Purposes in November;

And on Dec. 21, 2020, an online program called BIR IN ACTION Live was launched to highlight the programs, accomplishments, new policies, and regulations of the BIR, and to answer tax questions from netizens or taxpayers who can watch it via the Facebook Page of the Bureau of Internal Revenue Philippines every Monday at 3 p.m. The show was simulcast live on FYE Channel via Kumu and TaxWhizPH YouTube Channel.

You may also download TaxWhizPH mobile app for free to ask tax questions and use a tax calculator to help you pay your taxes correctly and on time. Visit www.taxwhiz.ph for more information and www.acg.ph for tax assistance so you can stay out of trouble with the BIR.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.

Raymond A. Abrea is a member of the MAP Ease of Doing Business Committee, co-Chair of the Paying Taxes – EODB Task Force, Chair and Senior Tax Advisor of the Asian Consulting Group (ACG), the founder of the TaxWhizPH mobile app and the Center for Strategic Reforms of the Philippines (CSR Philippines), which is the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business.

mon@acg.ph

map@map.org.ph

http://map.org.ph

Damage control wreaks more damage

January 4, 2021 | 5:58 pm

In a public address the other Saturday, President Rodrigo Duterte said, “Almost all soldiers have been inoculated. I have to be frank and I have to tell the truth. I will not foist a lie. The reason why is that they have to be in good health all the time because they are responsible for the law and order of this country.”

When asked in a radio interview where the decision to vaccinate military men against COVID-19 came from, Lt. Gen. Cirilito Sobejana, Commanding General of the Philippine Army, said, “Our President is our commander-in-chief. I should say it’s from the chain of command of the Armed Forces,” indicating it was authorized by the President himself.

That revelation by the President himself belied the sincerity of his avowed concern for frontline health workers, the poor, and the elderly and manifested once again his cavalier attitude towards the law and protocols.

National Task Force Chief Implementor Carlito Galvez had said that health officials were considering giving priority to frontline health workers in public and private health facilities, followed by the indigent, then the elderly when it came to getting the COVID-19 vaccines. The uniformed personnel are only No. 5 in the priority list.

Republic Act (RA) 9711 prohibits the manufacture, importation, sale, distribution, promotion, advertising or sponsorship of health products not authorized by the Food and Drug Administration (FDA). FDA Director-General Eric Domingo said on Dec. 28, 2020 that the President’s announcement caught him by surprise as no vaccine has been approved by the FDA for use in the country.

To handle the fallout caused by the President’s reckless announcement, his underlings went into a frenzy of damage control. However, their haste to disperse the deleterious effect of the President’s revelation wrought more damage.

To correct the impression that the President had gone against his word that he would give the health frontliners priority in the distribution of vaccines, and to free him from culpability of violating RA 9711, Presidential Spokesperson Harry Roque said, “No public funds were used that is why there was no deviation from the priority we announced to the public. Our priority remains the same — the poor, the elderly, the frontliners both health and otherwise.”

When asked if there was any violation of the anti-graft law by the Presidential Security Group (PSG) when they accepted the donation of COVID-19 vaccines, Mr. Roque declared: “I am a lawyer. That’s not absolute. Tokens can be received, those without much value, especially during Christmastime. I’m not arguing, but that’s what’s in the law.” The law states that unsolicited gifts of small value offered or given as a mere ordinary token of gratitude or friendship are not covered.

The President said, “almost all soldiers have been inoculated” and “they are responsible for the law and order of this country.” So, the PSG personnel were not the only ones inoculated.

He also mentioned Sinopharm as the source of the vaccine. The chief of Sinopharm says the vaccine costs less than $145 for a regimen of two doses. Let us assume the President meant soldiers belonging to the PSG only. Let us assume further that what he meant by “almost all soldiers” is 90%. The estimated size of the PSG complement is 4,000 plus. Ninety percent is 3,600. Therefore the vaccine administered to 3,600 soldiers is worth at least P25 million.

That is no ordinary token. And it could not have been given in the spirit of Christmas as the donation was made in September last year.

A state-owned company donating vaccines worth that much to PSG personnel raises national security concerns, considering Philippines-China relations are uneasy, to put it mildly.

When a number of senators branded as blackmail President Duterte’s demand that the US give at least 20 million doses of vaccine if it did not want the Visiting Forces Agreement terminated, Mr. Roque said it was not blackmail. He argued, “We need vaccine. You have vaccine, give us. You need our territory for the Visiting Forces Agreement, okay we will give that but if you don’t give us vaccine then do your VFA in countries that you had given vaccine. Isn’t that only right?”

If foreign relations is done on the basis of quid pro quo as suggested by Mr. Roque’s argument regarding the VFA, then the PSG must have given China something in return for the vaccine worth P25 million. The use of the PSG’s camp in Malacañang Park as the center of China’s communication network in the Philippines perhaps?

But if “almost all the soldiers responsible for the law and order of this country” were beneficiaries of the Sinopharm vaccine, the Armed Forces of the Philippines must have given more. The use of the military camps as relay stations for China’s network in the country perhaps?

As regards the decision to vaccinate military personnel, Mr. Roque said, “It must have been the decision of the commanders and the soldiers.” That statement implies that military commanders can take action independent of their commander-in-chief and in violation of the laws of the land. Such a situation gives rise to military adventurism like those led by a renegade colonel in 1987 and 1989.

When asked if the vaccine administered to the PSG men was smuggled into the country, Defense Secretary Delfin Lorenzana answered, “Yes, smuggled, because they were not authorized.” But he added, “It is justified … it will protect them so they will not be infected and at the same time they can protect the President.”

Imagine, the Defense secretary finding nothing wrong with soldiers assigned to guard the President dealing clandestinely with dubious characters such as smugglers. Can those soldiers be trusted to protect the President? Can Secretary Lorenzana be trusted with the defense of the country?

Interior and Local Government Secretary Eduardo Año, who is also vice-chair of the Inter-Agency Task Force on Emerging Infectious Diseases, said, “There’s no need for FDA approval for that. These vaccines have its (sic) EUA in that originating country. If somebody would like to try that for personal consumption, I don’t see any conflict on (sic) the law.”

If there is no need for FDA approval of vaccines or any health product that is for personal consumption, then the FDA should be dissolved as what that body regulates are all for personal consumption or use. RA 9711 defines “food” as any processed substance which is intended for human consumption and “drugs” as articles intended to affect the structure of any function of the human body.

The cultivation of cannabis or marijuana has been banned since 1972 by virtue of RA 6425, or the Dangerous Drugs Act of 1972. On the basis of Secretary Año’s reasoning, the cultivation of marijuana should be allowed if it is for the personal consumption of the grower.

In a text message to reporters, staunch Duterte ally Tito Sotto said, “I don’t think there’s anything wrong about that. There is no law that says you cannot take any medicine or vaccine that FDA has not approved. Last I recall, there is even no law vs. suicide. So what’s the fuss?”

Last I recall he made a big fuss about birth control pills. On Aug. 13, 2012, he told the Senate that birth-control pills taken by his wife Helen Gamboa in 1974 had led to the death of their son.

There was no law in 1974 that said a woman could not take birth control pills, whether approved or disapproved by the Bureau of Food and Drugs, forerunner of the FDA. If Ms. Gamboa became pregnant even after being on contraceptive pills, she must have been taking pills not approved of by the BFAD.

Just as there is no law against suicide, there was no law either against taking pills which could lead to the death of one’s child. So, Senate President Sotto, why the fuss, dramatized by unashamed weeping, in 2012?

But the most laughable attempt to clear the President of responsibility for the vaccination of soldiers with a vaccine not registered with the FDA and ahead of health frontliners was that of PSG Commander Brig. Gen. Jesus Durante. In an interview on Karen Davila’s Headstart, he intimated, “Actually, we were the ones who requested… for the vaccines. We acted independently without the knowledge of any other, especially the President.” He said he informed the President about the matter in October, after his men had been vaccinated. Strange that he felt obligated to inform the President of a matter he didn’t think required clearance from him.

He refused to name his source of the vaccines. “As I’ve always said, I cannot say publicly and openly about our source because it’s unfair to our source. It could be a person, a state, or a businessman, or anybody.” The source must be shady that is why he refuses to name it. He also said, “We soldiers vaccinated ourselves. It’s so easy. We are soldiers so we have to take risks to accomplish our mission.” But as experts in the US say, a person vaccinated can still be a transmitter of the virus. So, their vaccination does not necessarily protect the President…

That brings up Dr. Leo Olarte’s justification of the vaccination of the PSG men. DOBOL B sa News TV hosts Joel Reyes Zobel and Rowena Salvacion asked former Philippine Medical Association President Dr. Olarte when a doctor can administer medicine not approved by the FDA. Dr. Olarte who is also a lawyer, described three situations: 1. when the medicine the patient has been taking is not effective; 2. when there is no FDA-approved medicine available; 3. when the condition of the patient is terminal.

Asked subsequently if the inoculation of PSG men with vaccine not approved by the FDA falls under any of the circumstances mentioned. Dr. Olarte answered: “Yes, because it was to protect the President from the life-threatening virus.” That’s funny. The President’s condition was not terminal and the vaccine was administered to combat-ready soldiers.

Oscar P. Lagman, Jr. is a retired corporate executive, business consultant, and management professor. He has been a politicized citizen since his college days in the late 1950s.

Bounce back, MSMEs!

January 4, 2021 | 5:57 pm

Small enterprises face major challenges in 2021. Studies done before the pandemic revealed that about 20% of small businesses fail by the end of their first year. By the end of the fifth year, 50% go under, and by the 10^th year, that number rises to 80%. With COVID-19, however, the attrition rate has accelerated substantially. In the Asia-Pacific region, nearly one-third of SMEs expect to lay off 50% or more of their workers just to survive.

Last year, the Philippines implemented one of the strictest lockdowns in the world which disrupted supply chains, introduced transport restrictions, reduced customer demand and affected the life blood of small business — cash flow. With dwindling working capital, rentals, wages, suppliers and creditors could not be serviced.

A survey by the Asia-Pacific MSME Trade Coalition in the first week of April 2020 revealed five major challenges that face small and medium enterprises. Foremost is the lack of operational cash flows as almost 50% of MSMEs (micro, small and medium enterprises) surveyed had less than a month or just a month of cash reserves. The other concerns include low customer demand, business closure due to state lockdown policies, and reduced opportunities to meet new clients. Finally, with the restrictions due to social distancing, MSMEs need to change their business models just to survive. Other concerns are obtaining raw materials, providing logistics, and physically moving products.

Workers are also not able to return to their jobs.

The Asian Development Bank has listed policy instruments that many governments have employed to support small businesses and address the short-term liquidity crunch. Income taxes, property taxes, and other payments due to the government are allowed to be deferred. Governments increased the availability of credit to SMEs through direct lending by state-owned banks, reduced interest rates, expanded credit guarantee schemes, and extended grace periods.

Some governments partially covered the cost of enterprises by providing wage subsidies and income support for the temporarily laid off. SMEs were encouraged to pivot to other business models, mainly by using digital solutions.

In the Philippines, the most visible support came in the form of the Bayanihan Act, which allowed the deferment of loan obligations to banks and a budget for MSME support. Credit assistance was made available through state institutions although its scale and availability remain to be validated. However, the wage subsidy scheme was something that our country could not afford. Many enterprises pursued digital finance and online sales, delivery, and customer service, but the low ICT investment in the country and poor internet connectivity were major bottlenecks.

To bounce back, Philippine MSMEs have to understand their pain points. Some government policy measures are on the way, but these are not sufficient. Our MSMEs must help themselves. Following are key areas that small businesses must address: 1.) find new customers; 2.) build brand awareness; 3.) delight customers; 4.) hire good and reliable people; 5.) improve processes; and, 6.) execute solid financial plans. These should be pursued within the context of adapting new business models.

Identifying the customers means figuring out the ideal customer targets so that appropriate content can be developed for them with recognizable brands and good reputations. Any serious small business today should have a website with a successful lead generation engine that turns visitors into customers. Businesses should understand what customers need, and deliver on their expectations. Whether a transaction is handled digitally or not, a business exists for its customers.

Amazon’s Jeff Bezos refers to the need for obsessive customer focus. Hiring is one of the biggest challenges for small businesses especially in these trying times. Businesses should hire people who are excited about the products and services. The next challenge is to manage the workflow whether it be in the production side or in the logistics end.

Finally, decisions must be financially solid. Businesses should use credit wisely, cut costs where possible, manage cash flow by staying on top of billings and suppliers’ concerns, do cost-benefit analyses, and maintain reliable records. Family businesses must separate personal expenditures from business expenses.

We can only hope that our government will muster enough discipline to choose the right policy tools, and more importantly, execute them well for our small businesses. For their part, entrepreneurs need to retool, re-engineer, and rehash their business models if 2021 is to be their year for bouncing back.

Benel D. Lagua is former Executive Vice-President at the Development Bank of the Philippines. With an AIM-MBM and a Harvard-MPA, he is a part-time faculty member of the Ramon V. del Rosario College of Business of De La Salle University.

benellagua@alumni.ksg.harvard.edu

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