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PAGCOR freezes online gaming applications pending review

THE Philippine Amusement and Gaming Corp. (PAGCOR) said Monday that it is suspending acceptance of applications for offshore gaming licenses pending a review of the operations of the Philippine Offshore Gaming Operators (POGO) sector.

In a mobile phone message, PAGCOR Chairperson and Chief Executive Officer Andrea D. Domingo said the suspension allows the agency “time to review and take stock of the entire POGO (sector) so that we (can) address all issues and concerns regarding this gaming product effectively.”

Ms. Domingo added that the review could last until “end of 2019.”

In a briefing in Intramuros, she said: “’Yung concern sa POGO, ’yung mga workers masyado nang marami. Nitong huli may national security concerns (The concerns over POGO include the number of workers coming here, which have recently raised national security concerns).”

She said there were only three pending applications before the freeze was announced. “If they are approved, there will be now a maximum of 61 (POGOs), then we will no longer accept applications.”

The concerns of the real estate sector, according to Ms. Domingo, will also be addressed. “They are also getting a little bit scared. If POGO stops, 15% of their total space will be left unoccupied and not earning any money.”

“We have earned P11.9 billion from [POGO] operations after only two years,” she added.

In a briefing at the Palace, the President’s Spokesperson Salvador S. Panelo said of Ms. Domingo’s decision: “Until the President reverses the stand of PAGCOR, that remains the policy because the President always respects heads of department and offices doing their duty.”

Defense Secretary Delfin N. Lorenzana said last week that the military is looking at the security risks of Chinese-dominated online gaming operations, raising concerns about possible espionage.

Mr. Panelo said over the weekend that he received a text message from Chinese Ambassador Zhao Jianhua, saying: “What if we also think of your overseas Filipino workers spying on us?”

The spokesman said the message was addressed to Mr. Lorenzana.

As for the Palace’s position on Mr. Zhao’s message, Mr. Panelo said it will “not apply to us” because the OFWs went to China “for the purpose of work.”

The spokesman said the President is not concerned about the presence of Chinese POGO workers because the government has the capability to monitor them. “He is not worried because we have the intelligence capability on knowing what they are doing.”

“Moreover, the President said, countries do spy on each other,” he added.

The Bureau of Internal Revenue (BIR) has said that as of early August, it collected P200 million worth of tax remittances from POGO companies. The BIR started collecting taxes from foreign workers employed by POGOs in early July and ordered the companies to remit withholding taxes from the workers by Aug. 10.

The government, according to Finance Secretary Carlos G. Dominguez III, foregoes revenue of about P2 billion a month for every 100,000 unregistered POGO workers that do not pay withholding tax on their earnings, or about P24 billion a year.

The Chinese embassy in Manila has expressed “grave concerns” about PAGCOR plans to relocate the industry to what a PAGCOR official called “self-contained hubs,” and raised concerns that such a move could violate the rights of Chinese citizens working in the country.

According to PAGCOR, the hubs will serve as “protection” for the workers who will retain their freedom of movement. — Arjay L. Balinbin

Senator backs locating POGOs away from military bases

A SENATOR called for online gaming companies, known as Philippine Offshore Gaming Operators (POGO), to locate their operations away from military bases.

Ilayo sa military bases, ilayo sa iskwelahan, ilayo sa simbahan, may mga ganyang basic rules (They need to be some distance from military bases, schools and churches, as a rule)“ Senator Aquilino L. Pimentel III, chair of the senate foreign relations committee, told reporters in a briefing Monday.

“And then siguro ’yung reasoning na ilayo sa military bases dahil baka may high-tech equipment na ginagamit doon (POGOs might have high-tech equipment which is why they should be located far from military bases).”

Mr. Pimentel also said the Philippine Amusement and Gaming Corp. (PAGCOR) should explain its procedures for granting licenses to online gambling firms.

Dapat natin alamin sa PAGCOR, sila nagbibigay ng POGO license. Dapat ang POGO license, location specific(we need to find out from PAGCOR since they are issuing the licenses. The licenses should be location-specific).”

He assured Chinese Ambassador Zhao Jianhua that Overseas Filipino Workers in China are not “spies” after Mr. Zhao raised the possibility that Filipinos in China might be engaged in espionage.

Defense Secretary Delfin N. Lorenzana has called Mr. Zhao’s remarks “preposterous,” noting that OFWs go to China after securing working visas. Many Chinese nationals in the Philippines, meanwhile, arrive as tourists before getting working visas.

Mr. Lorenzana backed PAGCOR’s proposal to designate POGO hubs, as did Senate Minority Leader Franklin M. Drilon.

Senator Emmanuel Joel J. Villanueva, meanwhile, said the committee on labor, employment and human resources development will be looking into the POGO industry.

“OFWs there are mostly teachers who teach Chinese nationals the English language. By all means, they contribute positively to society there. Can we also say the same with Chinese workers in the POGO sector?” Mr. Villanueva told reporters in a phone message Monday.

“Aside from not creating jobs for Filipinos in the Philippines, the POGO industry has also brought a lot of unintended consequences.” This include rise in crime involving foreign nationals, money laundering and threats to national security. — Charmaine A. Tadalan

Audit commission questions selection process for Centennial Water-Kaliwa Dam contractor

THE Commission on Audit (CoA) has raised questions about the selection process adopted by the Metropolitan Waterworks and Sewerage System (MWSS) for the contractor of the New Centennial Water Source- Kaliwa Dam Project.

In an audit memorandum dated June 10, CoA noted that the three contractors approved by the technical working group were: Consortium of Guangdong Foreign Construction Company Ltd and Guangdong Yuantian Engineering Co.; Power Construction Corp. of China Ltd; and China Energy Engineering Corp. Ltd (CEEC).

CoA found that one of the shortlisted cadindates did not have the required permits, while another did not submit a bid within the project budget.

“However, during the opening of bids and in the evaluation of minimum Eligibility Requirements of the contractors, Consortium of Guangdong Foreign Construction Co. Ltd. was found to be non-complying,” CoA said.

The consortium was found to lack a mayor’s and business permit, Philippine Contractors Accreditation Board (PCAB) license, Philippine Government Electronic Procurement System (PhilGEPS) Platinum Certificate, and a validated Single Largest Completed Contract (SLCC).

Power Construction Corp. of China also submitted a bid of P13.042 billion which is higher than the approved budget for the contract by P842 million.

“As a result, only China Energy Engineering Corp. Ltd qualified which is questionable considering that the two bidders were disqualified in the 1st and 2nd stages of the process due to the seemingly intentional purpose of the bidders not to comply with the TWG (technical working group) requirements,” CoA said.

Projects funded by foreign aid are typically nominated by the donor country’s government, from which the Philippines is free to select.

CoA said the two bidders were only included to comply with the Procurement Law’s three-bidder requirement.

It also found that the winning contractor CEEC conducted preliminary project activities despite the non-effectivity of the Loan Agreement and as provided under the Mobilization Schedule of the Contract Agreement.

“The contract agreement between the MWSS and CEEC expressly provides that the winning contractor shall only begin mobilization by conducting topographic mapping and geologic drilling after the receipt of Notice to Proceed,” CoA said.

“The MWSS cannot assume any liability in case the loan agreement is not perfected nor declared effective. Thus, the contractor shall bear all the risk of loss and damages, if any, as a result of its actions,” it added.

CoA recommended that the MWSS explain the acceptance of the two other bidders despite non-compliance with the vetting/pre-qualification requirements.

CoA also recommended that MWSS ensure that the contractor complies with the contract, which rules out conducting any preliminary project activities.

The P12.1 billion Kaliwa dam will be built along the Kaliwa River in the towns of General Nakar and Infanta, Quezon province. It is expected to provide 600 million liters per day (MLD), adding to the current supply to Metro Manila of 4,132 MLD. — Vince Angelo C. Ferreras

DoLE expects to take less than 60 days to draft IRR of service charge law

THE Department of Labor and Employment (DoLE) said it will issue guidelines in less than the 60 days required on the law granting workers 100% of service charges collected by hotels, restaurants and other such establishments.

Labor Secretary Silvestre H. Bello III said DoLE has been tasked by Republic Act (RA) 11360 or the Service Charge Law to draft the Implementing Rules and Regulations (IRR) within 60 days, but he added that he does not expect the drafting to take up the entire period allotted.

“(W)e hope to come up with it as soon as possible so our workers in hotels and restaurants can finally receive reasonable incentives from their hard work and quality services,” he said in a statement Monday.

On Aug. 7, President Rodrigo R. Duterte signed the Service Charge Law. The law calls for all service charges to be equally distributed among rank-and-file and supervisory employees.

Previously, 85% of the service charge was allocated to employees while 15% set aside for management.

Mr. Bello said the law could also boost the productivity of service workers, adding: “The law will keep our workers in the hotel and restaurant industry motivated in providing quality services, as well as a chance to give them a simple reward for their hard work.”

The law prohibits any diminution of benefits for workers after increasing their take from service charges, nor does it allow employers to pay less than minimum wage.

The law also implements a grievance mechanism between the workers and management in case there is a disagreement over the distribution of the service charge. — Gillian M. Cortez

Energy dep’t considering appeal on RTC injunction against fuel unbundling

THE Department of Energy (DoE) is considering appealing a court injunction that blocked a DoE circular requiring oil companies to “unbundle” or disclose information on what goes into the pricing of petroleum products.

“We are currently discussing this with the Office of the Solicitor General (OSG) but the [DoE] is considering appealing that resolution,” Assistant Secretary Leonido J. Pulido III told reporters Monday during an energy event.

“A preliminary injunction order is essentially what we call a pending relief, so it runs during the pendency of the case,” he said.

While the preliminary injunction remains, the DoE cannot impose its circular until either it receives relief from an appellate court or a decision is reached, he said.

He was referring to Department Circular No. DC2019-005-008.

The writ of preliminary injunction was issued by Branch 213 of the Regional Trial Court (RTC) of Mandaluyong City that sided with petitioner Petron Corp.

Earlier this month, Energy Secretary Alfonso G. Cusi said his office will continue to look for ways to seek transparency in the pricing of petroleum products. The OSG is his counsel for the case.

“The secretary did tell us that we will defer to the decision of the Office of the Solicitor General. Now in our last meeting the discussion was towards filing an appeal,” Mr. Pulido said.

“Whether or not an appeal is filed, there’s nothing we can do. That order stands. It’s a legitimate order of a regional trial court. The [DoE] is bound to respect that. So the unbundling circular cannot be enforced during the pendency of that case,” he added.

The court decision enjoined Mr. Cusi, who was respondent in the case in his capacity as Energy secretary, from implementing and enforcing the department circular.

It said “if the implementation of the assailed circular is not restrained in the meantime, the petitioner might not be able to comply with its requirements, the first of which is the submission of the weekly reports.”

“At the same time, the petitioner might be placed at risk of losing its trade secrets and incur irreparable injury by disclosing such information to respondent DoE. The petitioner and its officers may be subjected to criminal prosecution and the administrative penalties mentioned in the circular for compliance with the same,” it said.

The circular requires persons or entities involved in the sale of petroleum products such as gasoline, automotive and industrial diesel, kerosene, jet fuel and aviation gas, household and automotive liquefied petroleum gas to file an annual or special report, or both, in such form as the DoE secretary may prescribe.

The circular, which has yet to be implemented, calls for oil companies to first notify the DoE of any change in the prices of petroleum products before imposing any adjustments.

The court said it found “clear and unmistakable right” to the provisional relief sought by the petitioner to prevent the DoE from implementing the circular. — Victor V. Saulon

Iloilo court rules in favor of MORE Power in expropriation case against PECO

ILOILO CITY — A Regional Trial Court (RTC) has granted the petition of the Razon-led MORE Electric and Power Corp. to take over the assets of Iloilo City’s long-time power distributor, Panay Electric Co. (PECO).

RTC Branch 37 Judge Marie Yvette D. Go granted the application in a 13-page order signed Aug. 14.

“This Court finds the Complaint for Expropriation sufficient in form and substance. In expropriation cases, the sufficiency in form and substance of the complaint (is) to be determined by mere examination of the allegations of the complaint. It finds too that the deposit made by the plaintiff is equivalent to the assessed value of the properties subject of the expropriation,” according to the order.

MORE Power, which was granted the franchise for power distribution in Iloilo under Republic Act (RA) 11212, filed the expropriation case on March 11 pursuant to its exercise of the power of eminent domain contained in the law.

In her resolution, Ms. Go said the power of eminent domain under certain conditions is a limitation on the right of ownership and “may be exercised even over private properties of cities and municipalities and even over lands registered with a Torrens title.”

On May 21, MORE Power deposited P481,842,450 with the Land Bank of the Philippines, equivalent to the assessed value of PECO’s properties subject to expropriation.

The Iloilo court ruling contradicts the July 1 decision of the Mandaluyong RTC Branch 209 declaring RA 11212 as “void and unconstitutional for infringing on PECO’s rights to due process and equal protection of the law.”

The Mandaluyong case was filed by PECO.

Right after issuing the order, the Iloilo judge inhibited herself from the case.

The expropriation case was raffled again on Monday and it will now be heard by Judge Daniel Antonio Gerardo S. Amolar of RTC Branch 35.

MORE Power’s lawyer, Hector P. Teodosio, said MORE expects the enforcement of the writ of possession within this week.

“The writ is already enforceable by the sheriff because of the court order. We expect to enforce it within the week,” he said in a phone interview.

PECO, on the other hand, said the Iloilo court ruling is “unprecedented and patently invalid.”

“PECO is aghast, to say the least, at such brazenness. Such Order is a blatant violation of the Constitution. The expropriation provisions of RA 11212 have already been declared unconstitutional by the RTC in Mandaluyong. While the said judgment was appealed by MORE to the Supreme Court with a prayer for injunctive relief, the High Tribunal has not issued any temporary restraining order against the implementation of the injunction,” PECO said in a statement.

PECO further said Ms. Go and MORE Power are “committing not only contempt against the RTC Mandaluyong but also against the Supreme Court.”

“PECO assures the people of Iloilo that it will not tolerate such illegal and underhanded maneuverings. PECO will enforce and implement the final injunction of RTC of Mandaluyong,” the company said. — Emme Rose S. Santiagudo

NEDA urges BARMM to focus on weak economy, poverty

NATIONAL Economic and Development Authority (NEDA) Secretary Ernesto M. Pernia said the newly established Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) must immediately address issues of poor economic performance and poverty.

“The new government must address the region’s low economic performance, high poverty incidence, and poor access and delivery of quality services,” said Mr. Pernia during the first Bangsamoro Global Economic Summit on Monday.

In January, provinces under the Autonomous Region in Muslim Mindanao (ARMM) except Sulu voted to ratify Republic Act 11054, creating Bangsamoro.

Mr. Pernia said the provinces of Lanao del Sur, Maguindanao, and Sulu had the highest poverty incidence in the country.

“Apart from the power and authority granted over certain sectors and activities to create its own sources of revenue and advance the region’s economic development, the increased budgetary support to the BARMM will likely result in more economic activities and socioeconomic interventions beneficial to BARMM,” he added.

Mr. Pernia said that the national government will provide an annual block grant to BARMM, which is around P70 billion of the net national internal revenue collection for the fiscal year 2019.

A P50-billion special development fund was also allocated for the rehabilitation of conflict-affected areas.

He noted that economic stability in the region will be possible with the creation of the Bangsamoro Economic and Development Council, with a representative from the Bangsamoro region sitting as a member of the national development plan steering committee.

“This would enhance vertical integration of the BARMM plans, programs, and projects with the national priorities. On the other hand, it would insert the BARMM’s regional influence on the national development agenda,” Mr. Pernia said.

Mr. Pernia also said that intergovernmental relations mechanism bodies between the national and Bangsamoro government have to be created.

“Among these bodies are the Intergovernmental Fiscal Policy Board, which will address revenue imbalances and fluctuations in regional financial needs and revenue-raising capacity of the Bangsamoro Government; the Joint Body for the Zones of Joint Cooperation, which will be responsible for formulating policies relating to the Zones of Joint Cooperation in the Sulu Sea and Mora Gulf; the Intergovernmental Infrastructure Development Board, which will coordinate and synchronize national and Bangsamoro infrastructure development plans,” he said.

Mr. Pernia noted that the BARMM government has drafted a 12-point priority agenda for the transition period of 2020 to 2022.

Apart from the agenda is the recovery of areas affected by the Marawi siege, for which a P60.51-billion investment is required.

“We assure you that the government is committed to meeting the overall goal of the Bangon Marawi. Our aim is for Marawi City and surrounding communities to co-exist in peace and become vibrant, productive, and resilient to risks of conflict and other disasters, with culture integrated into the country’s socioeconomic development,” Mr. Pernia said. — Vince Angelo C. Ferreras

Heroes of the Philippine tax system

“What love can be purer and greater than love of country? What love? No other love, none.”

“A nation will perish, because not of evil men, but of good men who just watch and did nothing.”

These lines may sound as if they were written by career novelists for their protagonists’ speeches in their best-selling books. You may think that the eloquence of these texts may be regarded only as fictional — that it could not have been expressed in real life by actual people.

Well, you are mistaken. These powerful words were from our very own Andres Bonifacio and Apolinario Mabini, respectively. Our heroes. For sure, they would have been law-abiding citizens and advocates for progressive policies for the benefit of many.

But is it possible to identify present-day heroes, particularly in our tax system? Let us look at each of our three branches of government.

LEGISLATIVE
The main concern of taxpayers is the immediate passing of the general tax amnesty bill. When the tax amnesty bill is enacted, our legislators can be the heroes saving taxpayers from distress. Do recall that when the current tax amnesty law was approved, the general tax amnesty portion was vetoed and what remained were the reprieve provisions on estate tax and delinquent taxes.

The 18th Congress commenced with its sessions this month, and two bills are now pending in the House of Representatives attempting to give the general tax amnesty provision a hero’s comeback. House Bills No. 191 and 3671 are with the House’s Committee on Ways and Means. A noteworthy development is that both bills incorporated the relaxation of the bank secrecy law, which could pave the way for the passing of a general tax amnesty bill.

We hope that the new tax amnesty law comes into effect within the year. If this happens, taxpayers will rejoice like persons in distress saved by their knights in shining armor — our Congress.

EXECUTIVE
Under the executive branch of government, we have the Bureau of Internal Revenue (BIR), the government’s tax collection and enforcement arm.

We hope that the BIR continues to revisit its policies and procedures. For one, many taxpayers were happy when the Notice of Informal Conference (NIC) Stage was revived, since it resulted in additional time for the BIR and taxpayers to discuss the latter’s accounting procedures and recording processes. Consequently, the number of initial tax findings by the BIR is now lower compared to when the NIC Stage was removed. Nonetheless, many taxpayers hope that the BIR audit/examination procedures prior to the NIC Stage are revisited and improved.

Another area needing a movie-like “training montage” is the BIR’s processing of ruling applications. BIR ruling applications are vital processes for certain commercial transactions that would make use of available exemptions. Sadly, a disadvantage of applying for a BIR ruling is the unpredictable processing time for these issuances.

Looking at the last few issuances, though, it could be noted that the BIR has been continuously listening to the clamor of taxpayers. Continuous improvements for a streamlined and effective tax processes would indeed make the BIR a hero.

JUDICIARY
Taxpayers look upon our courts as the arbiter of their disputes with the BIR. Some consider our judiciary as the savior from certain unreasonable tax assessments made by the BIR.

Recent developments include court decisions recognizing the importance of a letter of authority (LoA) before a BIR examiner can proceed to audit a taxpayer. According to recent jurisprudence, a mere indorsement letter is not an LoA and does not grant authority to a revenue officer. Hence, actions taken pursuant to a mere endorsement letter are void. The courts recognize that an LoA is indispensable to protect the taxpayers from an invalid assessment by unauthorized persons.

Of course, there are also cases decided against taxpayers where a tax violation was proven to the court.

Impartiality is a key characteristic of any arbiter and, most importantly, to a hero.

TAXPAYERS
Certainly, we taxpayers have our own obligations to the government.

In our own way, we are heroes ourselves. Our taxes are the lifeblood of the government. Without our contributions, government services may decrease — or worse, discontinue. This is why keeping ourselves abreast of the developments in our tax laws and paying the proper taxes will gain us hero points.

Each peso we contribute to government use brings us closer to hero status. Celebrate yourself this coming National Heroes Day! This day was established in recognition not only of well-known heroes like Andres Bonifacio and Apolinario Mabini, but also of unsung heroes who have contributed to society in their own way.

As nationalistic as our national heroes were, they would have strived to pay the proper taxes and advocate for tax reform that would better serve the country, whose freedom they fought tooth and nail to secure. So should we.

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.

 

Philip Conrad D. Vales is a tax associate of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

eHealth and Innovation: better service for the health patient and citizen in ASEAN

eHealth is described as “an innovation process rather than just a structure or technology for the delivery of better healthcare” according to Beraterbide and Kelsey (2009). In the experience of many countries in the region, innovations in eHealth did not only require the adoption of new technologies but also the accompanying organizational change that takes into consideration social, political, and economic context. Innovations in eHealth must be “usable, sustainable, and scalable” and “address population-level needs and priorities. At the same time, they should serve a broader purpose, expanding to other population groups and contexts” (Shuvo, 2015). It then becomes not just a technology and innovation challenge but a governance challenge — one that requires long-term commitment from stakeholders and a painstaking process of calibrating technology, the existing architecture for innovation, and the end-user: the regular citizen. These technologies are considered disruptive and as such come with deployment issues but at the same time huge pay offs for both the regulatory and implementing bodies as well as the clients. It is in the “systemically organized interactions between governments, knowledge based institutions and financial arbitrageurs” (Bartels, 2013) that these pay offs (not the least of which is better quality health care) materialize.

In Indonesia, the use of information technology in KeluargaSehat improve access to health services at the village level through family visits, which also become an occasion for data collection and health promotion. This includes Prokesga, a mobile health application in its pilot stage that helps eliminate the use of paper in data health management. Halo Bidan (Hello Midwife) in West Java uses SMS to provide maternal and infant health education, and is a referral system for handling both normal and high-risk childbirth. Yet another application, mHealth, tracks the growth and development of children under five. A similar application is used in Thailand to measure the height and weight of children after vaccination. Thailand also developed HosMate, an android application that informs patients of specific hospital procedures, including the status of their service request, the steps to take, and where and when to go, thus cutting down on waiting time for hospital visits and procedures. Chulalongkorn Hospital also utilizes self-service kiosks called Pressbox to facilitate patient procedures. (IPC, 2017)

The Philippines also has developed a number of eHealth technologies that serve the purpose of providing better access and analytics to health care providers. The Institute of Philippine Culture (IPC) of the Ateneo de Manila University, for example, has developed an eHealth Tablet for Informed Decision Making or eHATID for short, an EMR (electronic medical record) system used in 42 local governments in the Philippines based on the Department of Health (DoH) National eHealth Program update. Other products developed under the research team of Dr. Dennis Batangan at the IPC include an “interoperability layer” that links data sources with government procedures for better services. For example, such a link may lessen the wait time or the number of steps needed in the process for the waiting patient and LGU constituent. New eHealth products are being developed as well to assist in the feeding programs of LGUs.

Needless to say, the potential for bettering health services, especially at the local level, is potentially enormous given the right regulatory and governance environment. It is something that all ASEAN States aim to provide their citizens. At some point, a greater push may be needed at the ASEAN level to address new and emerging regional health risks and challenges as a collective (Batangan and Lopez, 2017).

It is in this spirit that the Ateneo de Manila University IPC (with the support of the School of Social Sciences and the Office of the Vice-President for University and Global Relations), in cooperation with the Department of Science and Technology Philippine Council for Health Research and Development and the ASEAN University Network Health Promotion Network (AUN HPN) will host the “iLaunch, An ASEAN Health Interactive Launch” on Aug. 21, 4:30 p.m., at the Novotel Cubao. The iLaunch, a post-AUN HPN conference event, endeavors to bring together the different eHealth technologies of ASEAN countries for the sharing of best practices towards the goal of greater understanding of regional health issues and “usable, sustainable and scalable” eHealth technologies by which to solve them. The main conference, the 2nd AUN International Health Promotion Conference is sponsored by the University of the Philippines and will be held on Aug. 20 to 21 with the theme “Moving Towards Healthy Universities in Asia.”

 

Maria Elissa Jayme Lao, DPA is the Director of the Institute of Philippine Culture and an Assistant Professor at Ateneo de Manila University’s Department of Political Science.

The psyche of the Filipino voter

In her column last Wednesday, my friend Tess Abesamis attempts to understand why we seem to “elect so many undesirables.” She is no psychologist, having taken only the basic three units in college, according to her, but she came across Abraham Maslow’s paper on the Hierarchy of Needs. Tess finds in Maslow’s theory the explanation for the “atrocious kind of leaders we have today.”

Maslow proposed that human beings are motivated by a hierarchy of needs the basic of which are physiological, or the needs for survival like water and food. Only when the needs for survival have been satisfied does one graduate to the next level of needs. Tess surmises that since the great majority of Filipinos belong to the lowest level of Maslow’s hierarchy of needs, the need for survival is what causes voters to sell their votes.

I have also attempted to understand why Filipino voters elect to high office people not qualified for the positions they aspire for. I am no psychologist either, although as a graduate of La Salle’s Commerce-Liberal Arts program and as a former enrollee in Ateneo’s Graduate School of Psychology, I have much better grounding in Psychology than Tess. (I was with the market research firm Robot Statistics in 1960. As the firm planned to go into Motivation Research, it enrolled me in Ateneo’s graduate program in Psychology.)

I did come across Maslow’s Hierarchy of Needs in college and was exposed to a more expounded discussion of it in graduate school — not in Ateneo although I had a full semester of Physiological Psychology under Fr. Francis Parisi — but in the Graduate School of Business of the University of San Francisco. But I found in a paper written by Fr. Jaime Bulatao a better explanation of why Filipinos elect so many misfits to high office. No, it was not among the reading materials he distributed in his course Rorschach’s Test, rather it was an article titled “Value Orientations of the Filipino Consumer” that he wrote in 1964 for the inaugural issue of Marketing Horizons.

The piece was meant to offer the readers of the magazine practical applications to marketing of some of the insights into the Filipino psyche. He placed the Filipino consumer’s characteristics under three headings: personalism, authoritarianism, and small-group centeredness.

He described personalism as the predominance of the subject over the subject. The focus is not so much on what a person does as on who he is, not so much on what a person knows as whom he knows and on who knows him. Authoritarianism is the high value placed on a person in authority, on the boss or the expert. The individual, usually suffering from an inferiority complex, clings to some socially acknowledged authority to reassure him of the correctness of his acts.

Small-group centeredness means the unit of thought and action is not so much the individual or the big group but the small, primary group. The individual prefers not to declare his independence from it but rather to conform to its attitudes, tastes, and its moral and social norms.

I went to see Fr. Bulatao during the presidential election period in 1992 to ask him if what he wrote about the Filipino consumer is as true about the Filipino voter. He said the value orientations of the Filipino are as relevant in politics as in marketing. In the many years I have observed Philippine elections, I have seen Fr. Bulatao’s treatise proven over and over again.

PHILIPPINE STAR/MICHAEL VARCAS

I liken a political campaign to a marketing operation where the electorate is the market, the voter the consumer, and the candidate the product. The astute candidate appeals to the personalistic trait of the voter as the voter’s focus is not so much on what the candidate knows but if the voter knows the candidate. The candidate visits as many neighborhoods, joins as many huddles, hugs as many bodies, bumps as many fists, and kisses as many willing women as possible to establish a personal relationship with them. He shuns debates with other candidates as debates distance him from the voter.

But a candidate cannot have personal contact with every voter. That is why the celebrity, like a movie/television star or a sports hero, enjoys tremendous advantage over a candidate with much better credentials for the position aspired for. Because of the show biz star’s or sports hero’s frequent exposure in mass media, millions of voters get to know him and eventually feel a relationship with him.

In 1987 a man named Jose Bautista ran for the Senate. He lost ignominiously — as he should have as the man did not have the least qualification to be a senator. The same man ran again in 1992. He had not racked up a record of achievements in the intervening years to improve his political stock. In fact, he had not done anything different from what he had been doing for much of his adult life, which was acting in movies. The man ran as “Ramon Revilla” the second time around. He placed No. 2 in the senatorial race that year.

Also elected in 1992 were TV slapstick comedian Tito Sotto (he was the topnotcher) and basketball player and TV sitcom actor Freddie Webb. Because of their frequent exposure on television and because they made people laugh, voters related to them. They felt a vicarious relationship with the two entertainers.

Health Secretary Alran Bengzon, Trade and Industry Secretary Joe Concepcion, Jr., and Solicitor General Frank Chavez also ran for the Senate that year. While their professional credentials, their good performance as Cabinet members, and their role in the dismantling of the Marcos dictatorship well qualified them for the Senate, they were distant from the ordinary folk. The voters didn’t feel a “personal” relationship with them. They lost.

That is the same reason why intellectuals like Yale master of Law and former Comelec commissioner Haydee Yorac and Wharton master of Arts in Economics and former director-general of the National Economic and Development Authority Solita “Winnie” Monsod failed in their bid for the Senate, while movie action stars Lito Lapid and Bong Revilla get elected to the Senate again and again despite their having been accused of graft and corruption.

The personalistic trait of the Filipino voter accounts for the election as president of Joseph Estrada, the champion of the masa (masses) even if only in movies. In 2004, personalism would have also sent to the presidency Fernando Poe, Jr., a college dropout with zero experience in governance but a hero of the lowly and the downtrodden in movies if, according to his wife Susan Roces, then incumbent President Gloria Arroyo had not cheated him.

Space limitation prevents me from discussing at length the relevance in political elections of the two other traits of the Filipino voter. Let me just say that authoritarianism was a factor in the election of Presidential assistant Bong Go and the deep-selection Chief of Police Bato de la Rosa to the Senate. Without the endorsement of the President himself, a mere aide and a cry-baby of a police chief would not have been elected to the Senate.

 

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.

PCC, LTFRB, MMDA and transportation woes

There is more proof that Metro Manila traffic is among the worst in the world. Numbeo has quantified a “traffic index” for major cities around the world, shown in the table below. For brevity, I removed two columns — Time expended index and CO2 emission index. The definitions are as follows:

Traffic Index — is a composite index of time consumed in traffic due to one’s job commute, estimation of time consumption dissatisfaction, CO2 consumption estimation in traffic, and overall inefficiencies in the traffic system.

Time Index — is an average one way time needed to transport, in minutes.

Inefficiency Index — is an estimation of inefficiencies in the traffic. High inefficiencies are usually caused by the fact that people drive a car instead of using a public transport or long commute times.

As of mid-2019, Metro Manila is 5th worldwide, the highest ranking among ASEAN cities; 8th is Jakarta, 26th is Bangkok (see table).

BAD DATA FOR US IN THE PHILIPPINES.
The good news is that there are some big road-rail projects that are nearing completion and will help reduce Metro Manila traffic. Plus there are innovations like the P2P buses which are modern, convenient and safe, fast and not expensive. People take taxi or air-con vans, or transport network vehicle service (TNVS) from their residence or village to P2P terminals, say Trinoma QC to Makati, then walk or taxi or TNVS again to their final destinations.

TNVS is preferred by many passengers because it is technology-based, there is transparency, people know the name of the driver, the car model or plate number, and the fare before the car arrives.

Enter government agencies and they make simple things complicated by creating new regulations and prohibitions.

First, the Land Transportation Franchising and Regulatory Board (LTFRB). It imposed a vehicled cap — a maximum number of authorized TNVS — even if demand is much higher than supply. It also imposed fare control, a fare cap, and a surge cap even if passengers are willing to pay higher prices just to get to their destinations faster and safely during rush hour or during street flooding. It disenfranchised hatchback cars as TNVS, but later gave way to pressure by these middle class Filipinos who just want an honest livelihood.

Second, the Philippine Competition Commission (PCC). First it penalized Uber and Grab because they quickly merged in April 2018 without getting its permission first, even if it was a global decision by Uber to exit the ASEAN region quickly as it was bleeding financially. Then it restricted the surviving entity, Grab with an Uber minority, when it issued its “Commitment Decision” on Aug. 10, 2018. The fines were P2 million per breach of commitment.

These commitments were: a Service Quality Commitment, a Fare Transparency Commitment, a Pricing Commitment, a Driver/Operator Non-Exclusivity Commitment, an Incentives Monitoring Commitment, and an Improvement Plan Commitment. These were binding for one year, to expire Aug. 10, 2019.

Then last week, on Aug. 13, the PCC extended the Commitment Period for 71 days, from Aug. 11 to Oct. 20, because it found “competition has not improved in the ride-hailing market” and “Grab has the ability and incentive to raise its prices and reduce the quality of its services.”

The law of unintended consequences always kicks in. When government over-regulates a sector supposedly to expand competition, potential big entrants are discouraged from coming in because the same restrictions will apply to them when they become bigger and successful someday.

And if dominant player raises its prices while service quality declines, then people can simply stop patronizing it. There are many alternatives — regular taxis, smaller TNVS players, drive their own cars or motorcycles, the motorcycle ride-hailing app Angkas, aircon vans, etc. There are no guns pointed at people’s heads forcing them to ride only the dominant TNVS, whether they like it or not.

The PCC is wrong and misguided in creating and expanding the regulations and restrictions.

Third is the Metro Manila Development Authority (MMDA). It will soon prohibit provincial buses from entering EDSA, they will have to stop and unload passengers in Valenzuela or Bulacan in the North, and in Sta. Rosa, Laguna or PITX in Parañaque.

The MMDA does not realize that some or many passengers of those provincial buses are car/motorcycle owners. They leave their vehicles at home or at their offices and take the provincial buses because it is convenient, they get off in Cubao or Pasay then take a taxi or TNVS to their final destinations.

When these provincial buses stop only in Bulacan or Laguna, then it will be more inconvenient so many of these passengers will drive their cars or motorcycles to Metro Manila, and this will further worsen traffic congestion. Again, the law of unintended consequences kicks in.

Government should step back from creating more regulations and prohibitions. They distort the individual and corporate incentives system and we get the unintended consequence — more traffic congestion.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

Corporation or sole proprietorship? A tax perspective

In planning to start a business, deciding between a corporation and a sole proprietorship is one of the first considerations. The differences used to be clear-cut — corporations for large businesses, sole proprietorships for smaller ones. For the most part, that remains true.

But the recent amendment to the Corporation Code, allowing the establishment of One Person Corporations (OPCs), may blur the difference for some aspiring entrepreneurs.

Like sole proprietorships, OPCs only have one owner, but that’s one of very few similarities. OPCs are structured like a regular corporation, function as a corporation, and, more importantly for this article, taxed like a corporation.

Starting with the basics, sole proprietorships and corporations differ in their structure. Even OPCs, which can have only one stockholder, are still different from sole proprietorships in terms of structure. Corporations are distinct entities from the owner, unlike in a sole proprietorship.

For example, the corporation’s debt is not the owner’s debt, whereas in a sole proprietorship, it is.

A consequence of that type of structure is the longevity of a corporation. If the owner of a sole proprietorship passes away, the business ends whereas corporations do not. Per the recent amendments to the Corporation Code, corporations can exist forever.

Also, a corporation (but not OPCs) can be owned by multiple people, meaning it can have a significantly larger capitalization.

On to the taxability of corporations and sole proprietorships, as earlier noted, there are significant differences. Corporations are subject to the corporate income tax (CIT), while for sole proprietorships, the personal income tax (PIT) under the graduated income tax table applies.

Taking a glance at the graduated income tax table, you might think that once your taxable income goes over P800,000, the sole proprietorship’s tax due would be as high as a corporation’s. After all, the rates would be the same at 30%.

But that’s easily found wrong. Once you exceed P800,000, the tax under the graduated income tax will be P130,000 + 30% of the excess over P800,000.

Note, of the excess.

Even at a taxable income of P5 million, the tax due under the graduated income tax table is lower. The P5 million would be subject to P490,000 + 32% of the excess over P2 million. This translates to a tax due of P1,450,000. On the other hand, the CIT would have been P1,500,000 (30% of P5 million).

Very little difference, at that point, but still a difference. Under the current tax regime, the CIT and PIT dues will be equivalent at the taxable income of P7,500,000. Under both, the tax due would be P2,250,000.

This means if a business has more than P7,500,000 in taxable income, it will be paying less tax as a corporation than as a sole proprietorship. (See Table 1)

But that doesn’t mean you shouldn’t register as a corporation if you have a lower taxable income than that. There are still other benefits to consider.

Besides, with the ongoing Comprehensive Tax Reform Program (CTRP), the tax rates may also change.

Under the TRAIN Law (Tax Reform for Acceleration and Inclusion or Republic Act No. 10963), the PIT will be lowered further in 2023. In addition, should the second package of CTRP (also known as the Tax Reform for Acceleration and Inclusion or TRABAHO bill) pass, the CIT would also be lower by then.

By 2023, (assuming the current version of TRABAHO passes), the CIT would be lower than the PIT at a taxable income of P5,000,000. By 2029, the CIT would be 20%, which means for as low as a P2,000,000 taxable income, corporations will be paying a lower tax than sole proprietorships. (See Table 2)

But one crucial thing to remember is that the earnings of the corporation is not the business owner’s. On paper, the business owner might think that they saved on taxes. In truth, they would still have to pay more taxes to actually transfer that money to their pockets.

There are a variety of ways to do so — cash dividends, director’s fees, or salary. For sole proprietorships, this is not the case. Whatever the sole proprietorship earns, the business owner earns as well.

In the end, what the corporation offers from a tax perspective is flexibility. As an individual or a sole proprietor, the income, regardless of where it came from, is lumped together and taxed as a whole. As a corporation, the business owner might opt to collect a certain portion only as their salary, fee, or dividend, and use the remaining earnings of the corporation to grow the business.

This flexibility when it comes to taxes allows taxpayers to implement tax saving schemes that can benefit them.

Another way of saving more on taxes is the avoidance of unnecessary compromises and penalties. To avoid these penalties, taxpayers must ensure that they are perfectly compliant.

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 Tax Committee and one of the 2017 Outstanding Young Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO YoungLeader of the Year, and Founding President of the Asian Consulting Group (ACG) and the Center for Strategic Reform of the Philippines CSR Philippines).

consult@acg.ph.

map@map.org.ph

http://map.org.ph