TERM OF THE DAY
Investing activities A section on the statements of cash flows that includes any transactions that are involved in the acquisition or disposi- tion of noncurrent assets.
Source: Bureau of Micro, Small and Medium Enterprise Development- Department of Trade and Industry
business The Manila Times
manila
times@gmail.com TUESDAY
December 14, 2010 BEN ARNOLD O. DE VERA REPORTER
HE government is mulling over cutting the tax perks enjoyed by firms from nations that have tax
ments are currently studying the vari- ous tax treaties that the Philippines have entered into to determine the options for foreign investors covered by such treaties.
treaties with the Philippines, the Department of Trade and Industry (DTI) said.
In briefing, Trade Secretary Gregory Domingo said that Depart- ment of Finance (DOF) Secretary Cesar Purisima proposed the tweak- ing the country’s fiscal incentives re- gime by slashing or removing the in- come tax holiday (ITH) of firms origi- nating from countries that have tax treaties with the Philippines.
“Because if they [companies] be- long to a country with a tax treaty [with the Philippines], they are not so sensitive to ITH,” Domingo said. He said that while such firms en-
joy ITH in the Philippines, they still pay taxes in their own countries. “We can collect their taxes here instead.” The DTI chief said the two depart-
with Australia, Austria, Belgium, Bra- zil, Canada, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Malay- sia, New Zealand, Norway, Pakistan, Romania, Russia, Singapore, Spain, South Korea, Sweden, Thailand, the Netherlands, the UK and the US. Domingo said the government is also looking at imposing stricter rules on granting incentives for projects that serve the domestic market while making it easier for exporters to avail of perks. The official said DTI and DOF
The Philippines has tax treaties
would submit a joint position to Congress in line with efforts to ra- tionalize fiscal incentives. “Our objective is to make sure we don’t give incentives unnecessarily, [so] we don’t cripple ourselves [to] be competitive with our neighbors,” Domingo said. He said the two agencies have agreed that firms which cater only to the do- mestic marketwould have to face higher standards before they can avail of perks. “We need to be very selective in giving out incentives,” he said. DTI and DOF also decided to retain the Philippine Economic Zone Author- ity (PEZA) as an incentives-giving agency because it caters to exporters. “Exporters are very mobile, [they] can move around [and] choose any location.
B 1
PSE PRESIDENT RESIGNS
THE president of the Philippine Stock Exchange, Val Antonio Suarez, has stepped down from his post amid conflict-of-
interest issues. In a special board meeting, the bourse said it has accepted “with deep regret” the resignation of Suarez as president and chief executive officer of the PSE effective Monday. KRISTA ANGELA M. MONTEALEGRE
Gov’t mulls restricting investor tax holiday T
PEZA’s formula is very effective. [It’s] home to electronics and BPO [business process outsourcing]. We don’t want to touch PEZA,” Domingo said. The Trade secretary said that as the country targets to increase its exports, the government would make it easier for export projects to get incentives.
Requirements for auto
exporters eased To aid vehicle exporters, the government is set to ease the requirements for them to qualify for incentives, Trade Under- secretary and Board of Investments (BOI) Managing Head Cristino Panlilio. Panlilio told reporters that the BOI is drafting an executive order (EO) that would reissue the Automotive Export Program (AEP), which grants
Peso, stocks skid lower on rate hike worries
BY LAILANY P. GOMEZ AND KRISTA ANGELA M. MONTEALEGRE REPORTERS
THE peso traded weaker against the dollar on Mon- day while the continued sell-off in local equities caused share prices to decline. At the Philippine Dealing System, the peso-dol- lar exchange rate shed 26 centavos to close at 43.92 from 43.66 last Friday as the world’s largest economy got a boost from the best consumer sen- timent readout in six months, which helped shore up the greenback.
The pair opened at 43.71 and moved to a high of 43.92 and a low of 43.63. Total trading volume reached $485.44 million from $722.62 million last Friday. In a report, the Development Bank of Singapore (DBS) said the peso would average at 40 to the dollar next year, lower than its earlier forecast of 42.90. The lender said 2011 will mark the start of emerg- ing Asian economies’ move toward a more dynamic and better-balanced growth profile in the next five years, which should pave the way for their curren- cies to appreciate back to pre-Asian crisis levels. “The Philippine peso is one of the more attrac-
tive currencies in emerging Asia. The post-crisis re- covery has shown a nascent sign of a more private- sector driven economy, its emergence as a global back-office as well as greater success as an electron- ics exporter,” DBS said.
It said this has resulted in high growth amid sta- ble inflation, a stronger international liquidity po- sition, and even improvement on the fiscal front. “In other words, the Philippines has come out stronger from the global crisis. Hence, it was not difficult to understand why Standard & Poor’s up- graded [the] Philippine’s long-term foreign cur- rency rating to “BB” from “BB-”,” DBS said. The upgrade was also supported by the improve- ment in foreign reserves, which surged to a new record high of $61.3 billion in November. “Looking ahead, the door for more ratings up- grades should be opened if the Philippines suc- ceeded in maintaining its post-crisis positive mo- mentum,” DBS said.
The bank said currency appreciation in emerg- ing Asia will be determined more, and not less, by capital inflows. Players banking on narrowing current account surpluses to stifle currency appreciation are also likely to be disappointed, DBS said. “After the global crisis, foreign investors place a premium on investment destinations that encour- ages domestic demand. That’s why these countries tend to be the ones with stock markets that out- perform too,” the lender said. Also on Monday, local share prices declined for the third consecutive session as investors grew con- cerned about the looming rise in interest rates here and abroad. At the Philippine Stock Exchange, the compos- ite index dropped 20.37 points, or 0.49 percent to 4,115.38, while the broader all-shares index fell 14.24 points, or 0.49 percent to 2,865.75. Losers outnumbered gainers, 77 to 49, while 37 stocks were unchanged. A total of 660 million stocks worth P4.57 billion changed hands. “Philippine stocks tumbled for a third straight ses- sion on growing concerns of tighter monetary policies both here and abroad,” said AB Capital Securities Inc. The main index opened the trading week in the green, up by as much as 12.14 points in the first 15 minutes, before investors turned cautious on con- cerns over Europe’s debt issues and a possible mon- etary-policy tightening in China. Asian stocks, however, posted modest gains, in-
spired by favorable US economic data and Beijing’s postponement of an interest rate hike. A fall below the 4,100 mark may lead to a more aggressive near-term selling, which could push the index to test the 3,970-support, said Jun Calaycay of Accord Capital Equities Corp. “Given these technical developments, and with
China’s inflation lending uncertainty over sustain- ing the pace of global recovery, we take a cautious, but still positive, stance moving forward,” Calaycay said, adding that immediate support at 4,050 with resistance scaled back to 4,170. “The market is expected to remain weak in the com- ing sessions due to the lack of positive leads. Risk re- ward ratios are unattractive and this could result to more profit-taking than bargain hunting,” said AB Capital.
incentives to vehicle exporters. Under the present AEP or EO 244, participants can avail of preferential rates in their importation of completely built-up (CBU) units on the basis of equivalent foreign exchange rate earn- ings from their exports of CBUs. The proposed revised AEP would
cut by half the 10,000-unit volume requirement, Panlilio said. “It may not be efficient, but it
would help exporters,” Panlilio said. At present, Ford Group Philippines is the lone AEP participant. Ford Philippines has supply agree- ments with Ford’s subsidiaries in In- donesia, Malaysia and Thailand— where it currently exports the mod- els Escape and Focus. It also exports Mazda units to Thailand.
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