By Alithea De Jesus

The Philippines is one of the countries “in good shape” to meet the challenges spawned by the COVID19 pandemic and bounce back from this global health crisis.

Based on the assessment of the World Bank’s newly named director for the country, Mr. Ndiame Diop, the Duterte administration’s prudent fiscal management strategy has positioned our country with enough fiscal space to address the emergency triggered by the COVID-19 global crisis.

“With the Philippines’ debt of equivalent to just 40 percent the size of its economy at the time the coronavirus pandemic struck, the government can manage the crisis brought the health crisis,” the newly designated country director of the World Bank for Brunei, Malaysia, the Philippines and Thailand.

“We are looking at the Philippines and comparing it to other countries in the region and looking at the initial condition, what is the economic condition when the pandemic hit.… I think the prudent fiscal management of the past few years has really positioned the country to be among the countries that are really at the forefront in terms of capacity to respond on the fiscal side,” Mr. Diop said in a recent virtual meeting with Finance Secretary Carlos Dominguez III and members of the Duterte administration’s “Build, Build, Build” infrastructure team.

The Philippines’ debt-to-GDP (gross domestic product) ratio before COVID-19 plunged the world into a global economic downturn was at only 39.6 percent in 2019.

Secretary Dominguez has underscored the conservative fiscal policies of President Duterte as a critical factor in maintaining the Philippines’ high creditworthiness, which has enabled it to secure borrowings from development partners for the government’s COVID-19 response efforts at the least cost.

Mr. Diop said other countries facing national debts in relation to their respective GDPs of 60 to 70 percent will face a “tough” period ahead. “So I think the good shape in which the Philippines is under this crisis positions it very, very well going forward,” he added during the meeting held via the Zoom teleconferencing tool.

Secretary Dominguez, for his part, thanked Mr. Diop and the World Bank for providing the government policy advice on how to maintain the country’s strong fiscal position, which has resulted in, among others, the enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

TRAIN, which raised state revenues in 2019 to more than 50 percent than it was before the administration of President Duterte, helped provide the government the fiscal space required to meet the massive state funds needed to fight COVID-19 and provide relief to the poor and other virus-hit sectors, Secretary Dominguez said.

Secretary Dominguez assured the World Bank that even amid the pandemic, the Duterte administration is fully committed to carry out its “Build, Build, Build” infrastructure program, which was another recommendation of the multilateral institution in sustaining the Philippines’ inclusive growth strategy.

On the part of the World Bank, Mr. Diop said he is looking forward to “getting quick results” in its infrastructure engagement with the Philippines.

Meanwhile, Secretary Dominguez assured Mr. Diop that the Philippines will strive to maintain its status as among the Top 10 countries in the world in terms of planning and executing their respective infrastructure programs, based on the results of a recent independent global survey.

For his part, Budget Secretary Wendel Avisado, who was also present at the Zoom meeting, pointed out the results of the 2019 Open Budget Survey that showed the Philippines as No. 1 among Southeast Asian economies and ranking 10^th worldwide in terms of making their national budgets transparent and open to the public.

Both Secretaries Dominguez and Avisado assured the World Bank of the transparent, judicious and efficient use of the funds extended by the institution to the Philippines to support the government’s COVID-19 response and other priority programs such as “Build, Build, Build.”

Also present at the Zoom meeting with Mr. Diop were Secretaries Mark Villar of the Department of Public Works and Highways (DPWH), Arthur Tugade of the Department of Transportation (DOTr), Acting Secretary Karl Kendrick Chua of the National Economic and Development Authority (NEDA); Finance Undersecretaries Mark Dennis Joven and Grace Karen Singson; and Finance Assistant Secretary Maria Edita Tan.

From the World Bank, among those who attended the Zoom meeting were Mr. Achim Fock, the Operations Manager for Brunei, Malaysia, Philippines and Thailand; Mr. Gabriel Demombynes, Program Leader for Human Development; Mr. Souleymane Coulibaly, Program Leader for Equitable Growth, Finance and Institutions and Lead Economist; Ms. Madhu Raghunath, Sector Leader for Sustainable Development; and Ms. Rong Qian, Senior Economist, Macroeconomics, Trade and Investment.

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After a tag-of-war whether to suspend the fuel excise tax or not, wherein President Rodrigo Duterte is open to suspending the excise tax, while the Department Of Finance was not so keen about it and even said that suspending the fuel tax has no significant effect in lowering the pump price of gasoline and other petroleum products.

Now, Malacañang has announced that it is open to suspending the scheduled increase in excise taxes on oil even if the proposal could lead to billions of loss revenues.

Special Assistant to the President Christopher Go said the impact of rising prices on the poor would be the government’s primary consideration in deciding whether to put on hold the next round of oil excise taxes hike.

In a statement, Go said, “I heard that a resolution has been filed in the Senate calling for the suspension of excise tax increase due to high inflation. We are open to it but we have to consider what is in the TRAIN (Tax Reform for Acceleration and Inclusion) law.”

“We are balancing everybody’s interest. We are considering the fact that the suspension of the excise tax increase would lead to maybe about P40 billion loss for the government. But despite the situation, the primary consideration of the government is the effects (of higher prices on) our poor countrymen,” he added.

Earlier, Senate Minority Leader Franklin Drilon said Duterte could ask lawmakers to pass a resolution that would allow him to suspend the excise taxes on petroleum products.

Go said the president is monitoring the prices of oil and other commodities to mitigate the effect of inflation, which hit a record-high 6.7 percent last month.

“The government is looking into all available options to cushion the effects of rising oil prices,” Duterte’s closest aid said.

To his credit, President Duterte said he was willing to put on hold the upward adjustments in the excise tax on oil.

Meanwhile, Finance Assistant Secretary Tony Lambino said Duterte made an early announcement on the suspension to “anchor inflation expectations.” He said the current price and multiple estimates of crude prices over the next two months show that the average price would stay above the $80 threshold. Therefore the suspension mechanism will be activated,” Lambino said in a statement.

“The president is making an early announcement of the temporary suspension of the January 2019 oil excise increase under the TRAIN Law. This announcement is being made two months before the time required by law, to proactively anchor inflation expectations and enhance the welfare of the Filipino people,” he added.

Go noted that the Dubai crude average breached $77 in September. If the average increases in the next three months to more than $80 per barrel, the government would consider suspending the increase in oil excise taxes come January, he added.

Lambino on the other hand said that Duterte was confident that the announcement on the suspension of excise tax increase would help anchor inflation expectations for the coming year, allow the public to manage their finances better, and disallow hoarders and profiteers from taking advantage of the situation.

After blaming US President Donald Trump, Duterte now blames oil prices for high inflation
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One of the major issues that the members of the association and financial executives in general still have unanswered questions about how the Tax Reform for Attracting Better and High-Quality Opportunities, or TRABAHO bill, will have an impact on how companies are taxed.

Finex President Ma. Victoria Españo said, “From a business perspective, we do see that businesses would like to have certainty in the way their businesses would be taxed, the regulatory environment. That’s number one. We always hear many times, ‘We’re okay with paying taxes as long as it’s clear what that will be, and it’s certain’.”

She also added by saying, “This uncertainty is creating some concerns. We hear some clients saying that some of the projects that are supposed to be done this year, the expansion projects, have been put on hold because they’re not sure what’s going to happen. So it does affect the business we’re in.”

According to Españo, Finex members agree that the grant of and entitlement to incentives should not be perpetual, but the government should be clear in identifying what perks should be given, for how long and what the phase-out process or procedure would be.

“The most significant is the rationalization of incentives given to certain companies. So definitely, the analysis so far is if those incentives are removed then we may have some BPOs (business process outsourcing), shared services, multinational companies leaving the Philippines,” she said.

Apart from this, the FINEX President is also urging the government to take a second look at the Tax Reform for Acceleration and Inclusion (TRAIN) law, the tax reform law’s first wave, evaluating whether it has been faithful to its objective.

“Somebody has to analyze TRAIN,” she stressed. “If you look at TRAIN 1, there are a number of provisions there that were intended to simplify compliance, like submission of tax documents on a quarterly basis from the previous monthly basis.”

But she added that the Bureau of Internal Revenue (BIR) has advised that submissions should remain on a monthly basis, and prefers tax payments at monthly intervals to protect the government’s cash flow.

“It’s as if the objective of the law was not implemented. If you talk to tax professionals they would say there are things there that are not clear,” she said, adding that the government should revisit the “spirit of the law.”

The organization of financial executives, which count as members some of the country’s chief financial officers, is celebrating its 50th anniversary this year and for this year it is focus is on transformation, and transforming oneself for the future.

“In the past, we used to just talk about transformation as if it’s an idea. We talk about drivers of change as if it’s something that affect others but not me. This year, most of the events that we have, including this one, is really focusing on the actual things that are happening, what the companies are doing to embrace innovation, what the companies are doing to adopt artificial intelligence, what the schools are doing so they can teach the current pool of students to be ready for the future,” Españo said.

“We hope with those concrete examples, our members could see that it is happening — I must look at my organization and start to plan,” she said in closing.

Apart from being the President of FINEX, Españo is also the Chairperson & CEO Punongbayan & Araullo one of the countries’ top 5 auditing firms.

Lucito “Chito” Chavez, Vice President of PFBAI noted that the stakeholders in the bakery industry are set to hold a dialogue with the Department of Trade and Industry (DTI) this week to discuss the looming increase in bread prices.

Chavez noted that a lot of Filipino people will benefit from the proposed suspension of the second wave of excise tax on fuel under the Tax Reform for Acceleration and Inclusion (TRAIN) law.

The TRAIN law sets to schedule increase in the excise tax on fuel for the years 2018 to 2020 which of course would drive all prime commodities’ price.

Given the 9th consecutive fuel price increase with the latest of P1 per liter increase, would leave bakeries no choice but to consider increasing also the retail prices of Pinoy Tasty and Pinoy Pandesal.

The PFBAI official also explained that the price of raw materials used in producing bread products, such as sugar, yeast, margarine, butter and flour, have also gone up over the past year.

“Definitely we have no other option but to increase our prices. In a time when everything is going up, it is abnormal if there will be no price movement, as well,” he said.

“For the past two years, the price of yeast increased by almost 10 to 14 percent, while the prices of sugar rose by 40 percent over the previous year. But our prices have remained the same for the past two years,” Chavez added.

But the PFBAI official did not provide an estimate as to the rate of increase in the retail prices of Pinoy Tasty and Pinoy Pandesal. He said they will determine the final figure after the meeting between industry stakeholders with DTI officials this week.

The federation agreed to the appeal of the government to hold off the increase in the prices of Pinoy Tasty and Pinoy Pandesal until the end of the month.