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Poverty and taxes

Today, April 15, is the deadline for payment of 2018 income taxes. There is no extension — better file your income tax returns (ITR) or else, for even one day later, you suffer the one-time 25% penalty/surcharge plus 20% interest per annum until payment. You must pay income taxes through a BIR-accredited agent bank (AAB) who will credit BIR with your payment. Mind that whether you have taxable income or none, or if you have a computer or access to a computer or not, you have to separately file an electronic ITR, to immediately and officially register your filing with the Bureau of Internal Revenue (BIR). You can go to any BIR “E-lounge” for assistance and guidance on the filing of your ITR, but you will still have to pay first (if you have any tax to pay) through an AAB before electronic filing. No escape except death (though your heirs cannot escape inheritance taxes either).

The Tax Reform for Acceleration and Inclusion Act (TRAIN Law) made effective January 2018 brought down the cut-off for taxable income to P250,000, meaning those earning P250,000 and below are exempt from income taxes. This is the first tax year that this cut-off is applied, while before, the first P250,000 of income was subject to a flat initial tax of P50,000, and the rest of income subject to an increasing percentage-rate starting from 30% of income over P250,000. Let’s see how this relieves the lower-income Filipino taxpayer.

According to the Department of Finance (DOF), “Some 6 million Filipinos earning P250,000 and below who comprise 83% of the base for individual taxpayers will no longer pay the personal income tax (PIT) under the TRAIN… Of this number, some 28% or 2 million are minimum-wage earners, who are already exempted from the PIT, and 55% or 4 million more are those earning above the minimum pay but not over P250,000 per year” (dof.gov.ph June 8, 2017). Based on the old flat rate PIT of P50,000 for those earning P250,000 and below, TRAIN has forfeited what would have been P300 million government tax collection from 2018 PIT.

On this first year of TRAIN tax reforms, those with net taxable income (NTI) of P250,000-P400,000 will pay 20% of the excess of P250,000; over P400,000-P800,000 will pay P30,000 + 25% of the excess of P400,000; over P800,000-P2 million will pay P130,000 + 30% of the excess of P800,000; over P2 million-P5 million will pay P490,000 + 32% in excess of P2 million; and over P5 million will pay P1,450,000 + 35% in excess of P5 million (Ibid.).

Note that the brackets of increase have been decreased to five categories with wider range of incomes in each bracket. This means those who previously enjoyed less additional tax under lower ceilings are now pulled up to the upper level of the next higher-income bracket. Grossing up the estimated 6 million by .83 would give an estimated 7.23 million paying PIT, now more broadly categorized.

But what is the mean income of Filipino PIT payers?

An actual and representative case of a young professional, self-employed with multiple earnings sources shows her transition from the PIT of 2017 to 2018 under TRAIN, on a gross income of P400,000/yr (close to some estimated medians P369,922-P377,000/yr) for 2018-2019). Under the old BIR forms, the first P250,000 was assessed a flat P50,000 initial tax + P45,000 of the overage income of P150,000 at 30%, or a total 2017 PIT of P95,000. For 2018 PIT, the taxes she paid were P30,000, which was 20% only on the excess of P150,000 over the tax-free P250,000. Good deal, she says, and thanks to TRAIN for the tax reprieve of P65,000.

But from a deep concern for the BIR’s tax collection efficiency, and the honesty and compliance of taxpayers, it was noted that those earning from various sources now have the dubious advantage (if seen this way) of cutting that income to slices of below P250,000 — tax exempt. Encouraging this “flexibility” may be the indifference of withholding entities to declare part-time and consultancy “employment” relationships, who do not now withhold the usual 10% withholding taxes on such — as these unique situations would not “summarize” and total a person’s various employments, and no one would know (except the taxable individual) whether the P250,000 tax-exemption had been exceeded. It would be a question of the individual taxpayer’s honesty, as he/she would now be below the BIR’s “radar.”

And what about professional fees like those of doctors, lawyers, technical consultants, brokers, artists, etc., who can shun receipts, with the complicity of clients, who can be tempted with discounts in lieu of official receipts? The BIR should really tighten, instead of loosen its controls over collectible taxes. Thanks to the generosity of TRAIN to present taxpayers, particularly to the “poor” — those earning below P250,000 and those doing all sorts of contortions to be called “poor” to enjoy the tax breaks and the lowered tax brackets. But note too, that foregone government revenues and maintaining subsidies will ultimately be paid for by the poor, who will suffer delayed if not deprived improvements in the quality of their lives. The rich will not be affected.

And so we always have to think of our poorer Filipinos, for whom the leavings of the richer will suffice. According to the data from the National Statistical Coordination Board, more than one-quarter of the population fell below the poverty line the first semester of 2014, an approximate 78% increase since 2013 (psa.gov.ph). Ay, the sad state of statistics in the Philippines! Can we not have more up to date feedback from our government? “Other studies in the recent past have indicated that up to 30 percent of Filipinos were classified as extremely poor, and remained so despite direct aid programs such as the conditional cash transfer, a recent Philippine Star editorial said (philstar.com April 13, 2019).

“Incredulity has greeted the release of a report showing that poverty incidence is down, as measured by the Philippine Statistics Authority. Critics consider the timing of the release suspect and in aid of election for administration candidates, while organized workers see it as an attempt to discourage wage increases” (Ibid.) When the PSA said that the proportion of Filipino families who lived below the poverty line from January to June 2018 was at 16.1%, down from 22.2% during the same period in 2015, economic think tank IBON Foundation said the PSA report “grossly underestimates the real number of poor Filipinos” (abs-cbn news April 14, 2019).

Mahar Mangahas of Social Weather Station (SWS) said that by his calculations, “poverty crept back up to 46% in 2017, and then to 48% in 2018 (inquirer.net April 14, 2019). “The PSA has no data about how poverty moved during 2016 and 2017 since it does its Family Income and Expenditure Surveys (FIES) only once every three years, and had no FIES in-between 2015 and 2018,” Mangahas said. He further explained that “the PSA will skip 2019 and 2020 entirely, and have no more poverty data until the 2021 FIES, which it will be ready to report only in 2022” (Ibid.).

Alas that many so-called fantastic improvements in our economic lives have not really considered financial inclusion. Do we have to make 7.3 million income earners happy, while 31.5 million Filipinos are so poor?

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

GM JP Gomez loses grip of Zonal 3.3 lead

FILIPINO Grandmaster (GM)John Paul Gomez fought to a draw with untitled Mongolian Khuyagtsogt Itgelt that dealt a blow to his World Cup bid after seven rounds of the Eastern Asia Chess Championships FIDE Zone 3.3 Open in Mongolia Saturday night.

After zooming to the lead and clinging into it after five rounds, the 32-year-old Gomez lost grip after losing to fourth seed Mongolian International Master Sumiya Bilguun in the sixth round Friday and then being held to a standoff by the lower-ranked Itgelt a day after.

Entering the final two rounds, the many-time Olympiad veteran slipped to a share of seventh spot with Itgelt, Bilguun and another local bet FIDE Master Ganzorig Amartuuvshin with 4.5 points.

Vietnamese IM Nguyen Van Huy turned back Bilguun to claim the solo lead with six points in this nine-round tournament staking two spots to the Chess World Cup 2019 slated Sept. 9 to Oct. 2 in Khanty-Mansiysk, Russia.

Half a point behind Gomez with four points each and still clinging to their waning World Cup hope were countrymen IMs Paulo Bersamina and John Marvin Miciano, who downed FM Byambasuren Garidmagnai and Nyamsuren Batbold of Mongolia, respectively.

The two were tackling Mongolians FM Tsedvee Lkhagvasuren and IM Dambasuren Batsuren in the seventh round at press time.

In women’s play, WGM Janelle Mae Frayna and WFM Shania Mae Mendoza smashed WGM Battsooj Bayarmaa and Enkhsaikhan Udval of Mongolia to breathe life to their dying World Cup campaign.

The wins pushed Frayna and Mendoza in a five-player tie at 12th place with four points apiece and the two are eyeing nothing less than a win over IM Irine Kharisma Sukandar of Indonesia and WIM Pham Bich Ngoc of Vietnam in the eighth round that would keep them in the hunt.

The Filipinos campaign were being bankrolled by the National Chess Federation of the Philippines and the Philippines Sports Commission.

Warriors open title defense by handling Clippers

LOS ANGELES — Stephen Curry complemented a game-high 38 points with a career-playoff-high 15 rebounds in a historic performance Saturday night as the Golden State Warriors opened defense of their NBA title with a 121-104 win over the Los Angeles Clippers in a volatile Game 1 of their Western Conference first-round series in Oakland, California.

Game 2 in the best-of-seven series is Monday night, with the Warriors, the top seed in the West, once again earning home-court advantage.

The matchup of familiar Pacific Division rivals featured the ejections of the Warriors’ Kevin Durant and Clippers’ Patrick Beverley, each of whom was nailed with a second technical foul for a verbal altercation near midcourt midway through the fourth quarter.

Curry’s 38 points included eight-for-12 shooting on 3-pointers on a night when he passed Ray Allen (385) for the NBA all-time career playoff record. Curry finished the game with 386 career threes.

Draymond Green provided a surprising offensive spark with 17 points on seven-for-12 shooting to go with seven rebounds and a team-high-tying seven assists, helping Golden State win the opener of its first-round series for the sixth consecutive season.

Montrezl Harrell had 26 points, and Lou Williams 25 with a game-high nine assists for the Clippers, who are the last Western Conference team to beat the Warriors in a playoff series.

That was in 2014, when they also lost Game 1 before winning four of the last six.

The Warriors led nearly wire-to-wire, but the Clippers remained competitive most of the way by taking advantage of 21 Golden State turnovers and enjoying a 65-22 advantage in points off the bench.

Curry’s 38-point game was his 31st in postseason play with 30 or more. The Warriors have gone 28-three in those games.

His previous high for rebounds in a playoff game was 10, done four times.

Durant contributed 23 points and three blocked shots in 32 minutes while Klay Thompson added 12 points. DeMarcus Cousins, playing in his first NBA playoff game, collected nine points and nine rebounds before fouling out.

The Warriors shot 49.5% for the game and hit 14 of 30 3-point attempts.

Harrell’s 26 points came on 11-for-15 shooting, and Williams hit 11 of 21 for the Clippers, who shot 40.4% overall and 11-for-30 on threes. — Reuters

Lux in Domino?

Irene Marcos-Araneta’s presence at the launch of the Areté Outdoor Installation Program on the Ateneo de Manila campus has created a tempest that will not pass calmly.

The Ateneo Student Council (or the Sanggunian) issued a strongly worded “Indignation Statement against the Presence of Irene Marcos on University Grounds.” Other segments of the Ateneo community likewise expressed their hurt and anger. In reaction to this, Ateneo de Manila’s President Jose Ramon Villarin, SJ wrote a memorandum to the community, acknowledging the “missteps” from which the community can draw lessons. At the same time Fr. Villarin accepted the voluntary offer of Ms. Yael Buencamino, Areté’s Executive Director, to resign from the post.

That is arguably the politically correct thing to do. But we should likewise be aware that what is politically correct is not necessarily the correct approach in resolving complex problems. (For example, read a scholarly article authored by Lucian Gideon Conway III et al. titled “Donald Trump as a cultural revolt against perceived communication restriction: Priming political norms causes more Trump support” in Journal of Social and Political Psychology, May 2017.) The memo of Fr. Villarin can calm the protests, but it has unintended consequences that will be far more disturbing for the Ateneo community and the whole of society.

My normative stand is that it is right for the Ateneo community to condemn the Marcos dictatorship and all its ills. The condemnation cannot remain general and must specify Marcos, his relatives, his cronies, his government officials, his military officers and all his henchmen, inside and outside government, who were complicit in the criminal or evil acts of the dictatorship. These people must be made accountable for their criminal acts or for their complicity. Hence, they must be punished accordingly.

Our society has established the rules on how to exact accountability and justice. It is called the rule of law. Ours is a society of law, not of men. Sadly our institutions have broken down. Since the fall of the dictatorship more than three decades ago, justice has not been fully served to the Filipino people, especially the victims of martial law. While our 1987 Constitution itself is a rejection of the dictatorship, while those killed by the Marcos military are now recognized as martyrs and heroes, while other victims of atrocities are being indemnified, and while Imelda Marcos has finally been convicted of corruption, complete justice has not been realized. Imelda has not served her sentence. And others complicit in the Marcos crimes have gotten off scot-free. Worse, the Marcoses have made a political comeback, a fascist revanche, as it were, facilitated by the acts of an authoritarian Duterte.

Thus, we who clamor for justice will resolutely and relentlessly fight the Marcoses on every front.

Against this backdrop, I can understand why the Ateneo student council and other segments of the Ateneo community expressed their indignation over the presence of the daughter of the dictator during the launch at the Areté.

The memo of the Ateneo President is thus sensitive to those protesting the presence of Irene Marcos-Araneta on campus grounds. Thus, the memo states: “We offer our deepest apologies for the hurt this has brought.”

The apology of Fr. Villarin is the apology of the Areté executive director, Yael Buencamino. I personally know Yael. She is a most honorable woman. That she offered her voluntary resignation is an honorable gesture to spare Ateneo as an institution from further assaults and is her way of expressing what Father Villarin wrote: “our deepest apologies for the hurt” this controversy brought.

But it is very incorrect to equate the hurt caused on others as an egregious act on the part of Yael or, for that matter, Ateneo. To put it clearly, I assert that Yael and Ateneo did not commit any wrongdoing. In the first place, Ateneo has no explicit, no unequivocal policy that bans the presence of the Marcoses on the campus. Further, the physical presence of a member of the Marcos family in an Ateneo event does not suggest Ateneo’s or Areté’s “shameless compliance” to the Marcos evil. That is a leap in logic.

Especially for an institution that believes in tolerance, Ateneo must accord a modicum of civility and respect even to the meanest of men and women.

Parenthetically, Yael’s invitation to Irene is a personal one. Irene is her aunt by affinity. Yael’s mom Elvira is the sister of Irene’s husband Greggy who incidentally is a blue-blooded Atenean. So, imagine this kind of absurdity: An Ateneo alumnus is denied the company of his wife in a social event like the homecoming because Ateneo unwelcomes the wife for being a Marcos. Or will Greggy himself be unwelcome for marrying a Marcos? One can stretch that absurdity further. Ateneo might as well pronounce that all descendants of Marcos and all those associated with Marcos’s politics are unwelcome on its grounds. How this can be enforced beats me.

Kinship or affinity by itself does not define one’s politics and values. I do know Yael’s politics. Perhaps, family influence matters in the sense that she was reared by a lola (Nini Quezon Avanceña) who was at the forefront of the militant anti-dictatorship political struggle. A politically irreverent, rebellious father, Boom Buencamino, influenced her way of thinking. Beyond family, she drew inspiration from the life of a fellow alumna from Assumption, the departed Maita Gomez, a radical activist jailed by the dictatorship. Yael once told me that Maita’s core values sprung from teachings learned from Assumption.

Some argue that Yael or the Ateneo leadership should have known the sentiments of the Ateneo community with respect to the Marcos family. But here’s the rub: Without any clear-cut policy or guideline, one can only second-guess what the institution wants.

And the fact is, Ms. Marcos-Araneta has been attending events on campus sponsored or sanctioned by the school itself. Wouldn’t she be in the company of her husband, an alumnus, when attending Ateneo affairs? Further, I have been told Ms. Marcos-Araneta had attended a Salvador Bernal book launch at the Ateneo, and had participated in a conference on urban planning at the Manila Observatory.

In short, the institution is sending a bad signal regarding rules — that the executive director of Areté is being made accountable for a rule that does not exist or for a practice done at the university but tolerated in the past.

The bigger question is: How will Ateneo deal with tolerance and what Amartya Sen calls plural identities? Everyone has plural identities. The communist Jose Maria Sison and Fr. Villarin are ideologically apart; yet they have a common identity of having received Jesuit education. The militant Muslim and the fundamentalist Christian will clash about religion, but they might find commonness in being fans of the same basketball team. The La Sallite and Atenean will be taunting each other as part of school rivalry, but they will vote for Chel Diokno, a La Sallite, and Erin Tańada, an Atenean, because they all share the value of human rights.

Shouldn’t Ateneo recognize such plural identities — that there is civic space even for the daughter of a dictator who visits Ateneo because of her love for the arts and humanities?

After all, Areté is open to everyone regardless of one’s politics, ideology, religion, and race. Ateneo does not screen the politics of any person who enters the campus whether she is a Marcos or a Manglapus (the pride of Ateneo though should we be surprised about the intermarriage of the Marcos and Manglapus families?)

Yael learned the value of plurality and tolerance when she was still small. Her grandmother’s home on Gilmore Street welcomed everybody. Her lola was staunchly anti-Marcos, but that did not prevent Marcos loyalists from enjoying the hospitality of the family. Even Imelda was not barred from visiting Gilmore. Also welcome were the anti-Marcos activists including communists, the drug peddlers and drug users, the priests and sinners, the VIPs and common folks.

And that is the way it should be. Ateneo stands for tolerance, plurality, and civility — the very anti-thesis of the dictatorship. To go against this leads to the unintended consequence of doing some of the things associated with the Marcos dictatorship.

Tolerance in no way suggests that Ateneo is succumbing to the dictatorship. There are many ways — both using the formal institutions and society’s norms — to register opposition to the dictatorship. In the case of the latter, Ateneo has encouraged its community to undertake protest actions against the Marcoses.

Ateneo de Manila’s motto is “Lux In Domino.” It also means spreading the light of reason and enlightenment. Ateneo must always be conscious of the significance of that motto: That even anger, passion, and emotion at their most intense should not sacrifice reason and enlightenment.

The author is an alumnus of the Ateneo de Manila, having graduated from its grade school and high school in 1969 and 1973, respectively. He also joined the underground resistance to the Marcos dictatorship. He did not vote and will not vote for Imee or Bongbong.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

Chooks-to-Go Pilipinas 3×3 Patriot’s Cup: Second conference to open in SM Seaside Cebu

COMING OFF the success of the biggest 3×3 basketball festival in the world last January, Chooks-to-Go Pilipinas 3×3 is set to bring the country’s first-ever 3×3 league to Cebu.

Hosting the opening leg of the 2019 Chooks-to-Go Pilipinas 3×3 Patriots’ Cup is the SM Seaside Activity Center on Saturday, June 1.

“I’m glad to announce that the second conference of our league will open in Cebu on June 1,” disclosed league owner Ronald Mascariñas.

“With the support we got from the basketball-loving Cebuanos last January, we made sure to bring our league to them,” he continued.

Last January, Chooks-to-Go and the Samahang Basketbol ng Pilipinas organized the biggest two-day 3×3 basketball tourney the world has ever seen. A FIBA-record 3,043 participants from Sisters of Mary School Boystown and Girlstown played during the weekend of Jan. 12 to 13.

Unlike the President’s Cup, adding spice to the second conference is that each team will be allowed to field an import in the Patriots’ Cup.

“The second conference will be a reinforced conference. We are going to allow one foreign player to play per team,” unveiled league commissioner Eric Altamirano.

“For the number of legs, we will limit it to at least five legs. Currently, FIBA might ask us to host another Super Quest as the sixth leg just like the President’s Cup,” he continued.

Home team Cebu-Max4 Birada will make their return together with the 11 pioneering squads of the league, namely Bacoor Strikers, Bataan Strikers, Bulacan Kuyas, Marikina Shoemasters, Pasay Voyagers, Pasig-Grindhouse Kings, Quezon City-Zark’s Jawbreakers, San Juan-Go for Gold Knights, Valenzuela Classic, Vigan Baluarte Wolves, and Zamboanga Valientes.

Besides this, the league is also looking to add four more teams, including the possibility of adding two teams from Indonesia and Japan.

“We are looking at retaining the twelve pioneering teams. If there will be additions, we need to have at least four additional teams. We need to add teams by four for scheduling purposes. So it’s either four to eight teams,” said Altamirano.

“Currently, we have received interest from a couple of international teams as well. An Indonesian club and a Japanese club already talked to us during the Super Quest,” added Mascariñas.

Nets stun Sixers

The Sixers believe this to be their year. With their lineup at its strongest since they drafted Joel Embiid third overall in 2014 and LeBron James no longer looming large over the East, they figure they have ample reason to cast moist eyes on the Larry O’Brien Trophy. “It’s been a long six years for all of us, but at the end of all this, we’ve assembled an enormous amount of talent, and we’re really excited to be on the eve of the playoffs with a team that we think can make a deep playoff run,” ESPN quoted franchise owner Josh Harris as saying right before tipoff of their homestand against the Nets yesterday.

Harris is right, of course. The Sixers do have the tools to contend for the hardware. As history has proven time and again, however, there’s a chasm between potential and performance under pressure, and there is need to bridge it with the proper blend of skill, resolve, and no small measure of good fortune. And, if the outcome of their match yesterday is any indication, they have a long way to go before claiming the ideal mix. The Nets, supposed patsies unsure of a playoff seat until the final week of an up-and-down regular season, wound up leading all but the first 10 minutes of the contest and winning with exceptional ease.

To be fair, the Sixers competed with a hobbled Embiid in tow. Tendinitis in the left knee limited their top dog to 24 minutes of exposure and a so-so stat line of 22 (on five-of-15 shooting from the field), 15, and four. Meanwhile, Nets counterpart Ed Davis was a certified success off the bench, keeping him in check and, at the same time, contributing 12 (on five-of-seven shooting, 16, and two in 25 minutes of play. That said, they won’t be getting a better version of the two-time All-Star anytime soon; the compact schedule from Game Two onwards will provide him with fewer periods of recovery than he had on a load-management protocol heading into the playoffs.

To mitigate the effects of Embiid’s inherently poor conditioning and longtime problems with his knee, Sixers head coach Brett Brown has employed substitution patterns that enable him to burn rubber in five-minute clusters before taking short rests on the bench. Additionally, he has, on occasion, planted himself beyond the three-point line, effectively taking in-game breathers as a secondary option. The relative rigidity of the structure has helped, but not without attendant concerns; most tellingly, spacing, which has been serviceable at best, suffers.

True, the better team tends to prevail in a best-of-seven affair, and the Sixers, for all their frailties, remain superior to the Nets. Still, there are no ifs and buts: Game Two has become a must-win outing for them. Should they lose anew, they may well find themselves losing the confidence required for them to meet the burden of great expectations. As Harris indicated, The Process was six years in the making, and fans who stayed loyal throughout believe the time has come for them to reap the dividends of their patience.

 

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994.

Pilo Hilbay: Our defender against China

Many Filipinos may not know Florin “Pilo” Hilbay yet — but they should. Hilbay is among our rare public servants with the courage to speak out against the Duterte administration’s policies towards China. For Hilbay, what belongs to the Philippines should remain for the Philippines and he is willing to risk life and liberty to protect our interest.

For those worried about China’s creeping invasion, Hilbay is the man who will fight the cause. After all, he has done it before. Armed with one of the sharpest minds of our generation, Hilbay dragged China to court and won.

The China-Hilbay saga started in 2013, when, in a unilateral act of aggression, China announced that the Spratlys, Parcel islands and Maclesfeild bank would be administered by Sasha city, a territory of China. No less than a senior colonel of the Chinese military was put in charge. Suspicions were rife that China would build a military base to support its navy and air force — something China vehemently denied. Years later, the suspicions were proven true.

The Chinese roped off the entrance of the Scarborough lagoon, preventing Philippine vessels from entering, including those of our fishermen. The Chinese military accosted Philippine vessels that traversed the area, confiscated their contents and detained the crew. It was a blatant disrespect of our sovereignty.

The Aquino administration resisted China’s bullying tactics and moved swiftly to defend our sovereignty. It did what any law-abiding republic would do given the situation — it took China to court. It was the only claimant of the disputed territories with the political will to do so. Neither Vietnam, Taiwan, Malaysia or Brunei resisted China’s illegal occupation in the same aggressive manner.

In 2014, the Philippines filed a case against China before the Permanent Court of Arbitration of the United Nations Convention of the Laws of the Seas (UNCLOS). Pilo Hilbay was our Solicitor-General back then and he led our charge at the Hague. He argued that China’s territorial claim was in defiance of the UNCLOS accord to which both China and the Philippines are signatories. He further argued that the basis of China’s claim, its nine-dash line, was conjured out of convenience only in 1947 in contrast to Philippine historical claims whose basis are nautical records dating back to the 15th century.

The nine-dash line is a preposterous claim by any account. If it is to be given credence, then Italy would have the legal grounds to claim the entire continent of Europe. It is absurd. It is for this reason that the international community including the US, Japan, Australia, the EU and ASEAN (except Cambodia) supported the Philippines’ legal argument.

In 2016, the tribunal ruled in the Philippine’s favor saying that China’s nine-dash Line is invalid. It further ruled that China has no legal claim nor historical rights over Philippine Exclusive Economic Zone and that it had behaved unlawfully. Hilbay and his team won the case for the Philippines. This gave us legal grounds to demand that China vacate the disputed territories.

Despite the ruling of the courts, China remained belligerent. In an act of defiance, it even expanded its territorial grab and accelerated the construction of its military base. In a statement, it said that it rejects arbitration and will continue to assert its historical claims over the territories even if it defies international laws.

Following the Philippine’s victory in the Permanent Court, the next step would have been to assert our legal claim by evicting China, even by force. Unfortunately, President Barrack Obama did not support the Philippines in this respect. We can only speculate that Obama’s decision was borne of out of fear of economic retribution. We could not evict China by ourselves which is why they still occupy our territories up to this day.

CHINA AND THE DUTERTE ADMINISTRATION
Contrary to what most believe, the estimated 11 billion barrels of oil, 190 trillion feet of natural gas and rich fishing resources is not China’s primary motivation.

After many years of working on the Philippines’ case versus China, Hilbay believes that China’s motivations are three-fold. They are to control world trade, to secure its vulnerable borders and to justify its illegal territorial grab.

On the aspect of trade, the West Philippine Sea is where one-third of world trade passes through. It is the channel by which 2.2 billion consumers can be accessed. To control the West Philippine Sea is to control global trade. Many speculate that once China has fully militarized the area, it will be in the position to require all ocean vessels to obtain prior clearance before they are allowed passage. They may even charge a toll like they do in the Panama Canal. In short, freedom of passage will no longer be a free right in these waters. This will give China unprecedented control over the flow of goods in the most populous region in the world.

On the military side, the West Philippine Sea is the easiest way to penetrate the Chinese mainland. China needs to control the area to secure its most vulnerable access point.

As for the territorial grab, the more islands China claims as its own, the more it can invoke ITLOS Laws to further annex another 200 kilometers of Exclusive Economic Zone. This is a ploy called the “continuous annex strategy.”

As an aspiring world superpower, China needs to present itself as a benevolent, responsible nation. Calling out China for not respecting the rule of law is something the Duterte administration could do to apply pressure. It has in fact done the opposite.

By not pressing forward with our claims and our victory at the Hague, the Duterte administration has made China’s land grab costless to them and free of repercussion. Mystifyingly, it even treats China like a preferred guest by adopting policies that appear to be skewed to China’s favor and at Philippine expense.

Consider this: Our government has not questioned China’s defiance of the court ruling before the UNCLOS body. This has kept them in good standing with the UN even if they defied a treaty in which they are signatories. It has relaxed immigration laws for Chinese workers even if it takes away jobs from Filipinos and even if the privilege is not reciprocal; it has awarded China lucrative deals in our telecommunications industry even at the risk of national security; it has gone soft on defending our fishing rights especially in the coasts of Zambales, Pangasinan and Ilocos Sur where our fishermen are bamboozled by Chinese patrol vessels; More damagingly, it has entered into a memorandum of understanding with China for joint exploration of the West Philippine Sea. Note, when this MOU progresses to become a binding contract, it will effectively invalidate our victory at the UNCLOS courts.

The concessions given to China are excessive. It belies strategic sense. The question is, why is the Duterte administration bending down to the floor for China?

Is it for investments? Certainly not. Records show that despite all the promises of Chinese investments, our intake from them was a measly US$28.8 million in 2017 and US$198.7 in 2018. China’s investment to the Philippines are dismal.

Is it for soft loans? While China talks big about easy availments of official development assistance, even NEDA Secretary Ernesto Pernia admits that Chinese ODA are among the most difficult to obtain. In addition, Chinese ODAs are not the only game in town as Japan offers comparative, if not better terms.

Is it for trade concessions? We have not received anything extraordinary outside the unrestricted entry of our bananas into China. China has not changed the deceleration trend of our exports.

Is it for military alliance? It makes no sense since China is the invader of our territories and, hence, our enemy.

Is it for diplomatic re-alignment? Pursuing an independent foreign policy is something we all agree with. However, the reality is that government has in fact pivoted away from the US and towards China. What we have is not an independent policy but a pro-China policy.

So again, we ask….. why the excessive deference for China?

Hilbay can only speculate the reasons why. I have no clue. All I know is what I see — that Filipino sovereign and economic interests are seemingly compromised in favor of the invader. Knowing that it is inflicted by our own government adds insult to injury.

I have many friends working for this administration and all of them are supportive of government’s pro-China policies. I’d like to think that their loyalties are not to China per se but to the Chief Executive whom they serve.

As Hilbay and I delved deeper into China’s progressive invasion, I dropped my pen, put my palms on my face and made a deep sigh of frustration. It was an unguarded impulse….. my remorse over the state of affairs revealed itself. It was not professional for me to show emotions in a high-level discussion, so I apologized.

Hilbay told me that he has seen the same raw emotions among thousands of Filipinos across the archipelago. The feelings of frustration, fear and uncertainty are so strong that most don’t even want to talk about it.

All these underlines the fact that we need a strong opposition in the Senate. Policies of government need to be mitigated… they need to be vetted without partisan bias. Having a balanced Senate serves our best interest, even those who rabidly support this administration.

Hilbay brought China to court and won. He will do it over again if he needs to. This is why we should all remember his name. More than political dynasties, convicted plunderers, and showbiz personalities, Pilo Hilbay deserves a seat in the Senate. Let’s put him there.

 

Andrew J. Masigan is an economist

DoF sees possible S&P upgrade within a year

THE Department of Finance (DoF) said a credit rating upgrade from S&P Global Ratings is “possible” within a year’s time, to account for reforms in the tax regime and greater ease of doing business.

Undersecretary Gil S. Beltran said the Philippines a credit rating upgrade from S&P could be in the works “within one year” as the government continues to rationalize the tax system.

“One year. It’s possible we get it in one year. Especially if we get the four tax reforms in place,” Mr. Beltran told reporters Saturday during the 2019 Economic Journalists Association of the Philippines Business Journalism Seminar in Baguio City.

In April 2018, the credit rater bumped up its outlook on the Philippine economy to “positive” from “stable,” raising the chances of a credit rating upgrade in the short term. It took stock of tax reform and improved fiscal policies which support solid economic growth.

The Philippines currently holds a “BBB” rating from S&P, which is a notch above minimum investment grade. The rating had a “stable” outlook since April 2015 prior to the 2018 revision.

The government is pushing for comprehensive tax reform to simplify the regime and generate more revenue to support its infrastructure program and expand social services.

Signed into law in December 2017, the Tax Reform for Acceleration and Inclusion Act or the first package imposed excise taxes on certain commodities and updated income tax brackets which raised take-home pay for many taxpayers.

Meanwhile, the package 1B or the Tax Amnesty Act was enacted on Feb. 14, providing relief for delinquent accounts up to year 2017. However, provisions on the relaxation of the deposit secrecy law and the automatic exchange of information with foreign tax authorities were not included in the signed law.

Mr. Beltran, who is also the chief economist of the DoF, said the Philippines may face problems when it comes to attracting foreign investors due to the current state of bank secrecy.

“We cannot even join the ASEAN (Association of Southeast Asian Nations) Trading Link because the investors cannot check the level of creditworthiness of the issuers of the bonds that are in the market.”

A higher credit rating improves the chances for a country to borrow funds from foreign sources at cheaper rates.

Earlier this month, S&P scaled down its growth forecast for the Philippines further to 6.3% from 6.4% previously, citing weaker global demand for exports, as well as higher borrowing costs due to the central bank’s rate hikes in 2018, which will dampen domestic demand.

Apart from S&P, Mr. Beltran said other “big” debt watchers Moody’s Investors Service and Fitch Ratings may upwardly adjust its credit rating as well “If we pass all the tax reform, and then we implement the ease of doing business…”

Enacted last year, the Ease of Doing Business Act aims to eliminate corrupt practices and cut bureaucratic red tape. However, its implementation hangs in the balance as its implementing rules and regulations are still pending.

“For Fitch, we are stable, which means we have to do more to be able to get an upgrade. And for Moody’s, we have to do more to get an upgrade because after being stable for a year, you can get upgrade to positive,” Mr. Beltran said.

The Philippines holds investment grade ratings from Moody’s Investors Service (Baa2, stable) and Fitch Ratings (BBB, stable). — Karl Angelo N. Vidal

Power generators welcome probe into shutdowns amid collusion fears

By Victor V. Saulon
Sub-editor

THE country’s biggest association of power generation companies said its members are ready to answer questions about the status of their plants as calls grow louder for a probe into a possible collusion after deficient energy reserves resulted in rotational brownouts last week.

The Philippine Independent Power Producers Association, Inc. (PIPPA) said during the weekend that its member generators were working doubly hard to resolve the power supply problem, which it attributed to the increase in consumer demand.

“PIPPA members are prepared to answer any and all inquiries as to the status of their plants. In the meantime, we would like to request for the public’s patience and trust that these technical difficulties will be fixed in the soonest possible time,” it said in a statement.

The group described itself as an association of 28 companies engaged in power generation that account for 82.8% or 13,549.4 megawatts (MW) of the grid’s installed capacity. Its members have power plants all over the Philippines.

“All our member generators, especially those who are encountering technical difficulties, are fully transparent and in constant coordination with the lead agencies with the submission of real time data and updates in order for these agencies to predict and come up with an adequate energy supply and reserve,” PIPPA said.

It said members with forced or unplanned outages were trying to address the problem and were committed to be fully functional as soon as their issues are resolved in compliance with the directive and mandate of the Department of Energy (DoE).

Its statement came after Senator Sherwin T. Gatchalian, who heads the Senate’s energy panel, called for an investigation into the unexpected brownouts that hit several towns and cities in Luzon. He said the power failure came after the DoE had given its assurance that there was ample supply of electricity reserve throughout the dry season.

“The brownouts felt by our constituents in Luzon these past few days are totally unacceptable,” he said.

“If there’s enough power supply, then how come that there are towns and provinces in Luzon that are experiencing rotational brownouts,” Mr. Gatchalian said.

“Definitely, heads must roll this time. We owe it to the power consumers to give them accurate information on the power situation in the country,” he said.

During the weekend, consumer advocacy group CitizenWatch Philippines also asked the DoE and the industry to explain the power supply situation, after areas in Luzon suffered from power outages.

“The issuance of two consecutive red alerts was more than those issued in the previous years. In 2018, the Luzon grid was not placed under any red alert status while in 2015 and 2017, only one red alert was announced,” said Hannah Viola, convenor of CitizenWatch Philippines, in a statement.

The DoE expected power demand on Saturday to ease, but another plant went on an unscheduled outage, reducing available capacity and prompting the National Grid Corp. of the Philippines (NGCP) to issue a “yellow alert” notice. On that day, available capacity was at 10,326 MW while peak demand reached 9,933 MW.

The alert notice means the grid operator was already tapping into its contingency reserve after its dispatchable reserve was fully spent. Both reserves are equivalent to the biggest operating plant online — the two identical units of the power plant in Sual, Pangasinan each with a capacity of 647 MW each.

South Luzon Thermal Energy Corp. (SLTEC) was able to bring back its unit 1 online on Saturday, helping ease the power shortage after it achieved full load at 8:50 a.m. with a net output of 121 MW, its operator said. The plant, with an installed capacity of 135 MW, was out since March 20.

Ahead of SLTEC’s return, another plant went on an unscheduled outage at 12:41 a.m. The 70-MW unit 1 of Panasia Energy Holding Inc.’s power plant in Limay, Bataan was shut down because of “tripping from actuation of turbine overspeed relay,” the DoE said.

No date was given so far as to when it will be back online.

On Thursday last week, the 150-MW unit 2 of SMC Consolidated Power Corp. (SCPC) in Limay, Bataan was shut down because of a boiler tube leak. It is expected to be back on April 16.

The three other plants on unscheduled outage are the 647-MW unit 1 of TeaM Sual Corp. in Sual, Pangasinan; the 150-MW unit 2 of Southwest Luzon Power Generation Corp. (SLPGC) in Calaca, Batangas; 420-MW unit 3 of Pagbilao Energy Corp. in Pagbilao, Quezon. They will back on April 18, April 21, and April 16, respectively.

As of Sunday, the DoE said the country’s power system was operating as normal even as 1,437 MW in capacity was out.

Senate planning final push on ‘endo’ bill in May

THE Senate will continue plenary deliberation on the bill penalizing labor-only contracting when the legislative session resumes in May, targeting final approval by the time Congress adjourns on June 7.

The chamber closed plenary debate on Senate Bill No. 1826, or the “Security of Tenure and End of Endo Act,” on Feb. 6 and is set to tackle amendments at plenary level before second reading. Its counterpart measure, House Bill No. 6908 has already hurdled third and final reading on Dec. 2017.

When asked about the chances of the bill passing, Senate President Vicente C. Sotto III told BusinessWorld over the phone on Sunday, “I hope so. Best effort.”

The Security of Tenure bill has been identified by the Legislative-Executive Development Advisory Council as a priority. It was also among the measures President Rodrigo R. Duterte pushed for during his Third State of the Nation Address in July 2018.

Senator Joel J. Villanueva, who chairs the Senate committee on labor, employment and human resources development, confirmed in a separate phone message the bill will be taken up in the plenary upon resumption of session on May 20.

Congress is currently on a Feb. 9-May 19 break to accommodate the midterm elections on May 13. It will resume from May 20 to June 7, which gives both Houses three weeks or nine session days to tackle remaining legislative measures. Any unfinished bills will have to be refiled in the 18th Congress, which opens on July 22.

“Once we resume session in May, the period of amendments on the SoT (Security of Tenure) bill will commence. We remain committed to push for its passage to finally give stronger protection to our laborers,” Senator Villanueva told BusinessWorld in a separate phone message Sunday.

“I am certain that my colleagues in the Senate are equally willing and ready to work with us in pushing for a genuine reform for workers’ rights.”

The bill will amend Presidential Decree No. 442, or the “Labor Code of the Philippines,” by prohibiting labor-only contracting and defines penalties for noncompliance.

The bill considers a working arrangement to be labor-only contracting when: a job contractor, whether licensed or not, merely recruits and supplies or places workers to a contractee, regardless of whether or not he or she has substantial capital; the workers recruited are performing activities which are directly related to the principal business of such an employer; and if the workers of the job contractor are under the control and supervision of the contractee.

“The Senate Committee Report on Security of Tenure introduced several amendments to the current provisions of the Labor Code to further protect the rights of our workers, such as emphasizing that labor-only contracting is absolutely prohibited,” Mr. Villanueva said.

He added the bill will also be “requiring all contractors to secure a license from the DoLE (Department of Labor and Employment) and providing requirements to be issued such license, as well as simplifying the classification of workers to regular (which includes project and seasonal employees) and probationary employees.” — Charmaine A. Tadalan

PEZA wants separate incentives regime for exporters in upcoming bill

THE Philippine Economic Zone Authority (PEZA) said it will submit to the next Congress its proposed amendments to the current incentive regime, distinguishing more clearly between firms serving a mainly domestic market and exporters.

Speaking to BusinessWorld in Taguig City last week, PEZA Director General Charito B. Plaza said the agency now has a draft proposal to amend Republic Act 7916 or the Special Economic Zone Act of 1995.

Ms. Plaza said she cannot at the moment disclose other provisions of the draft.

However, in July 2018, Ms. Plaza discussed the possibility of turning PEZA into a government-owned and controlled corporation, and be transferred under the Office of the President from the Department of Trade and Industry (DTI).

She also wanted the PEZA board to have the authority to recommend to the President subsidies to be granted to economic zone locators, especially those who propose to invest at least $1 billion.

“We hope to have it filed in the next Congress. [The draft intends to amend] the PEZA law [particularly in terms of] separating the incentives package for exporters and domestic firms,” Ms. Plaza said.

A separate package will address the needs of various types of business to account for changes in the treatment of exporters in the next round of tax reforms contained in the so-called TRABAHO bill, Ms. Plaza said.

“Our incentives have to compete. Other countries have separate incentives for domestic-market firms and exporters and they are competing,” she added.

She first floated such proposals as a compromise to the changes in store under House Bill 8083, known as the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill.

The measure intends to cut the corporate income tax (CIT) to 20% from 30% by 2029, on a staggered basis.

The Senate version proposes slashing the CIT to 25% in the first year of implementation.

However, both intend to remove certain fiscal incentives that the Department of Finance has blamed for lowering its tax collections, particularly the 5% gross income earned incentive.

The House passed the TRABAHO bill on third reading in September 2018. The measure now awaits further action from the Senate which may convene in late May to pass its own version.

PEZA and other ecozone locators have warned that the TRABAHO bill’s passage will result in massive lay-offs as several investors threatened to pull out if the bill is enacted.

Last year, PEZA-registered investment pledges fell 41% to P140.24 billion amid uncertainties stemming from the TRABAHO bill and the upcoming Senate elections.

In the first two months of the year, PEZA investment pledges fell 16.52% to P17.522 billion, with Ms. Plaza attributing this to a wait-and-see attitude ahead of the elections. — Janina C. Lim

CTA orders SMDC to pay P576-M tax deficiency

THE Court of Tax Appeals (CTA) has ordered SM Development Corp. (SMDC) to pay a 2009 tax deficiency amounting to P576.1 million.

In an 88-page decision on April 8, the CTA second division partially granted the petition of SMDC, canceling its deficiency value-added tax (VAT) for lack of merit and the corresponding documentary stamp tax (DST) deficiency for 2009.

However, it found the corporation liable for deficiency income tax, withholding tax compensation (WTC), expanded withholding tax (EWT), and fringe benefit tax (FBT) worth P576.1 million.

SMDC was also ordered by the CTA to pay delinquency interest with the rate of 12% computed from Jan. 1, 2018 until its full payment in the amount of P426.9 million, pursuant to the Tax Code as amended by Republic Act No. 10963 of the Tax Reform for Acceleration and Inclusion Law.

“Based on the computation above, there was an overpayment of the total amount due by petitioner in the amount of P135,234.05. Hence, with this payment, the assessment on DST is thus cancelled,” the CTA said.

The CTA said that there had been no underdeclared sales which would could be attributed to deficiency assessment in VAT and income tax.

SMDC sought the cancellation of its alleged tax deficiencies for 2009 amounting to P2.1 billion. However, the Court only canceled P221 million VAT and P17.4 million DST deficiencies.

“(T)he deficiency income tax, WTC, EWT, and FBT assessments for taxable year 2009 are affirmed but with modifications. Accordingly, petitioner is ordered to pay respondent the amount of…P576,107,688.31, representing basic deficiency tax, twenty-five percent (25%) surcharge, twenty percent (20%) deficiency interest and 20% delinquency interest imposed on the basic deficiency income tax, WTC, EWT, and FBT,” the CTA ruled.

The modification was due to the partial payment made by SMDC on the tax deficiencies as computed by the Court, among others.

The decision was written by Associate Justice Juanito C. Castañeda, Jr. and concurred in by Associate Justice Catherine T. Manahan. — Vann Marlo M. Villegas

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