Tax exemption ploy

Last week, the government and the Bangko Sentral ng Pilipinas (BSP) got kudos for “acting well” in the face of the looming global economic crisis.

World Bank regional chief economist Vikram Nehru cited the BSP’s monetary policies for providing ample domestic liquidity, but underscored that the country still needs to improve tax collection “so it will have funds for infrastructure to help spur growth”.

Nehru’s statements placed added burden on Finance Secretary Gary Teves and newly appointed Bureau of Internal Revenue (BIR) chief Sixto Esquivias IV who must now ensure that the they act with greater efficiency.

In fairness to Teves, there has so far been no let up in the bid to plug loopholes and tax leaks over the past few months.

And this development clearly does not augur well for the reported silent bid by a powerful local business interest backed by Malaysian gaming moguls to run away with close to half-a-billion in exemptions from the payment of precious value-added taxes.

It will be recalled that a faction of the board of the Philippine Racing Club, Inc. (PRCI) which is supported by the Kuala Lumpur-based Magnum Holdings Berhad had managed to obtain a ruling from BIR to the effect that it is exempt from paying VAT on the controversial transfer of the P12-billion Sta. Ana racetrack to a corporate shell called JTH Davies.

That transfer had met stiff opposition from Filipino shareholders of PRCI led by the prominent Puyat family. This faction managed to get the support from the lower courts in its bid to stop the transfer of the Sta. Ana racetrack ownership to JTH Davies which is owned by the Cua Sing Huan group.

But Cua’s faction was able to obtain a TRO from the Supreme Court which eventually paved the way for the ownership of the racetrack to be transferred to JTH Davies.

The Cua group got the hefty tax exemption ruling from BIR for this transfer. But an alert Teves saw the infirmities of the exemption and immediately ordered then BIR chief Lilian Hefti to freeze the ruling and subject it to review.

With the exemption frozen, the Cua group announced that it was “disengaging” from the bid to transfer the racetrack to its holding firm.

News then broke that an influential accounting firm had sent BIR a strongly-worded letter telling it why the property transfer must be exempt from the payment of close to half-a-billion pesos in tax exemptions.

The hope is that the new BIR chief realizes that the government can do a lot with that prospective P400-plus million in VAT due from the PRCI-to-JTH Davies property transfer.

Some are worried that Esquivias’ lack of familiarity with the issues engulfing the beleaguered Cua group and his Malaysian allies might push him to cave in to the pressure.

Let’s give the new BIR chief a chance to prove his mettle. After all, he knows that every centavo he collects would go a long way in helping his Teves, cope with the ballooning budget deficit which is now reportedly at P105 billion.

Bucket pricing myths

Bucket pricing, or the so-called unlimited call/texts promos, have become such a big hit to Filipinos.

In fact, one telco says bucket-priced SMS packages now comprise 58 percent of the company’s total cellular data revenues. The latter of course includes regular priced text messaging, downloads, mobile Internet, among others.

Other players share the same experience with bucket pricing, which has become the solution to President Arroyo’s call for telcos to lower their SMS rates. In the case of some telcos, bucket pricing schemes have lowered texting rates to as low as 10 centavos per SMS.

But of course, paying a minimal fixed rate in exchange for the benefit of being able to call and text without limits for a fixed number of days (in some cases for a specific time of the day) will work to the advantage of the consumer only if he is able to call and text everytime he wants to. If not, then the consumer may be paying more than what he bargained for.

A recent report from the National Telecommunications Commission (NTC) showed one telco registering a very high rate of blocked and dropped calls. While this particular telco’s quality of service has significantly improved since it started, there is still much to be desired. Spotty coverage has been a frequent complaint against this telco.

With Filipinos sending as much as 600 to 800 million text messages a day, and a bulk of these under unlimited packages or bucket pricing schemes, it has become an obligation of every telco not only to make these schemes available but also to make sure that they work. 

Paying a small amount for the ability to text or call whenever and wherever you want may sound like an idea straight from a fiction book, but it is possible. We need to revolutionize the idea of unlimited calling and texting. The Filipino people deserve it. It is every public utility’s obligation to give the best service possible to the public.

Doing it right

Kudos to Abet Villarosa and his Security Bank team.

Close to totally defying the gravitational pull of the global financial contagion, SB maintained its leadership in the banking industry in reporting a 19.3 percent return on equity.

For the January-September period, it registered a net income of P1.72 billion, only six percent lower than the comparative period last year and likely far better that what some bigger players have reported.

Bank president Abet Villarosa said efforts exerted in building core revenues and other income streams helped soften the adverse impact on securities markets brought about the global financial turmoil.

SB’s balance sheet at end-September 2008 stood at P144.1 billion, 12 percent higher than the P128.6 billion recorded at end-December 2007. Its capital adequacy remains equally strong at 13.7 percent, providing a healthy cushion over the regulatory minimum of 10 percent. 

For comments, e-mail at [email protected]