banking finance

Borrowings to address revenue constraints amid quarantine

April 21, 2020

    THE government has funds to support its coronavirus disease 2019 (Covid-19) response but additional requirements will be financed by borrowings as revenues are constrained, Finance Secretary Carlos Dominguez III said.     When the government declared the community quarantine in Metro Manila for the period from March 15 to April 12, 2020, which was later expanded to an enhanced community quarantine (ECQ) in Luzon and extended until April 30, the deadline for the filing and payments of income tax return (ITR) was also extended from April 15 to May 15 and then to May 30.     “Extension of the tax deadline means we have to finance expenditures more from borrowings than from revenues” Dominguez said.     Last year, collections of the Bureau of Internal Revenue (BIR) for April alone reached P235.5 billion, up by 1.2 percent from its P232.6 billion collections during the same month in 2018.     April is a major revenue collection month for BIR because of the ITR filing, the deadline of which has been set on April 15 of every year.     The government has formulated a four-pillar Covid-19 response program that requires about P1.17 trillion.     Earlier, Dominguez said policy reforms have allowed the government to have the money to finance its Covid-19 response program.     Aside from the fiscal measures, the government received additional boost from the Bangko Sentral ng Pilipinas (BSP) after it extended a P300-billion funding to buy government securities that will be repurchased by the Bureau of the Treasury (BTr) at a maximum period of six months.     The government has secured a $500-million loan from the World Bank (WB) under the Third Risk Management Development Policy Loan.     It has also received a $3-million grant from the Asian Development Bank (ADB) for the acquisition of emergency medical supplies and delivery of healthcare services.     Dominguez said they are negotiating for total loans amounting to $5.7 billion from WB, ADB, and the Asian Infrastructure Investment Bank (AIIB).     National Treasurer Rosalia de Leon, in a Viber message to journalists Thursday, said they continue to monitor developments before deciding when to tap foreign commercial fund sources.     “Like in (a) tennis match in Wimbledon, we are in (the) center watching the play. So we continue to monitor developments,” she said, adding that Australia and Saudi Arabia recently issued debt papers.     She said “deals are being printed, if you are willing to take the price.”     The government has set a 75-25 borrowing target for this year in favor of domestic fund sources, but de Leon said this might change to about 70-30 or 72-28 because of the Covid-19 response. (PNA)  

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DOF extends anew deadlines for tax amnesty, returns

April 21, 2020

    THE Department of Finance (DOF) has issued Revenue Regulations (RR) No. 10-2020 further extending deadlines to submit or file necessary documents and/or pay taxes required under the Tax Code of 1997 as amended, following President Rodrigo Duterte's extension of the enhanced community quarantine (ECQ) period in Luzon until April 30.     The new regulations amend Section 2 of RR No. 7-2020, which was issued earlier to implement the provision in Republic Act (RA) No. 11469, or the Bayanihan to Heal As One Act extending various tax return deadlines that fell due during the original ECQ period.      In light of the two-week extension of the ECQ, RR 10-2020 further extends the filing, submission, and payment of various forms and requirements into May and June 2020.      For example, the filing and payment of annual income tax returns has been pushed down to May 30, from the earlier extended deadline of May 15.      The deadline, meanwhile, for taxpayers to avail of the tax amnesty on delinquencies (TAD) under RA 11213 and implemented by RR 4-2019, as amended, has been moved from April 23, 2020 to June 8, 2020.       This gives taxpayers ample time to settle their tax delinquencies while allowing the Bureau of Internal Revenue (BIR) to increase its collection from the tax amnesty program.      The regulations likewise adjusted due dates for the filing of position papers to notice of informal conference, memoranda, and other correspondences with due dates to file during the ECQ, by giving taxpayers another 30 days from the final date of the lifting of the ECQ to submit them to concerned BIR offices.      Also, the suspension of the running of statute of limitations was further extended up to 60 days after lifting of the order declaring the state of emergency.      Furthermore, the period to apply for a new authority to print (ATP) receipts/invoices, where the expiration date(s) falls within the ECQ period is extended until 13 May 2020, or for 30 calendar days after the lifting of the ECQ, whichever comes later.    Meanwhile, taxpayers can continue to use the receipts/invoices with expiration falling within the ECQ period until 13 May 2020, or for 30 calendar days after the lifting of the ECQ, whichever comes later.    This benefits taxpayers who cannot apply for a new ATP or the accredited printer cannot deliver said receipts/invoices because of the ECQ.     However, issued receipts/invoices shall be stamped with the following: “Emergency Extension for Use until May 13, 2020."    RR 10-2020 also states that if the ECQ is further extended, the date shall be 30 days after the last day of ECQ. (PR)  

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Pag-IBIG Fund approves P716M in cash loans

April 21, 2020

    THE HOME Development Mutual Fund (Pag-IBIG Fund) has approved over P700 million worth of cash loans for its nearly 38,000 members since the Luzon-wide enhanced community quarantine took effect last month, its top official said.     In a statement over the weekend, Pag-IBIG Fund Board of Trustees Chairman Eduardo D. del Rosario said they have approved over P716.26 million worth of loan applications from its 37,901 members during the lockdown period, and are expecting more loans as application processing continues.     Pag-IBIG Fund CEO Acmad Rizaldy P. Moti said they received 221,851 cash loan applications via e-mail as of April 15.     The agency offers short-term cash loans via its Calamity Loan and the Multi-Purpose Loan (MPL) programs. These short-term loans provide its members a “readily-accessible and affordable” source of funding where they can borrow up to 80% of their total Pag-IBIG Fund savings.     Pag-IBIG Fund said it has been accepting loan applications via e-mail since March 20, three days after the lockdown took effect on March 17. Pag-IBIG Fund moved the application process for the two programs online amid the coronavirus disease 2019 (COVID-19) pandemic, allowing its members or their employers to submit the applications via e-mail.     Mr. Moti said the agency receives as much as 10,000 e-mails per day, which he admitted “is a lot to process,” but assured its members they will continue to operate despite temporarily closing down their offices. Earlier, the Pag-IBIG Fund granted a three-month moratorium on loan payments for housing, multi-purpose and calamity loans due on March 16 to June 15, to ease the burden of people affected by the lockdown. Pag-IBIG Fund saw its net income grow by four percent to P34.37 billion in 2019 from P33.17 billion recorded the year prior.  

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Bank loans to small firms to count in computing reserves

April 19, 2020

    THE central bank announced a relief package for small businesses in the form of incentives for banks to to the sector, which is expected to have been hard hit by the coronavirus disease 2019 (COVID-19) crisis.     “The Monetary Board (MB) approved a package of measures to further reduce the financial burden on loans to micro-, small-, and medium-scale enterprises (MSMEs). Loans granted to MSMEs shall be counted as part of banks’ compliance with reserve requirements,” Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said in a statement issued late Thursday.     The decision was approved by the MB alongside another 50 basis-point (bp) rate cut which took effect Friday. Mr. Diokno said that the guidelines related to the small-business lending measure will be issued by the BSP.     ING Bank-NV Manila Senior Economist Nicholas Antonio T. Mapa said the latest package from the BSP mirrors actions taken to keep small businesses afloat elsewhere.     “Although a different model used by other countries such as the US and Indonesia that have specific funds set up primarily for SMEs, it follows the current trend of BSP flexing while investors look to the fiscal side of the fence to match,” Mr. Mapa said in an email.     He added that the initiative may prove to be a ”de facto” reduction in the reserve requirement ratio (RRR), which will free up funds for banks to inject into the economy.     The latest RRR reduction took effect April 3. The reserve requirement for big banks was reduced by 200 basis points (bps) to 12%. The central bank also reduced the minimum liquidity ratio for stand-alone thrift and rural banks by 400 basis points to 16% until year’s end to support to smaller lenders as the pandemic threatens to disrupt the financial sector.     However, Mr. Mapa said that previous trends show that timing determines the effectivity of such liquidity boosts.     “(A)s what we’ve seen from past RR reductions, credit conditions and the general state of the economy matter in the timing of such moves and throwing money at the problem is not as effective unless channeled effectively,” Mr. Mapa said.     Mr. Diokno has said that monetary policy works with a lag, a consideration that was weighed in recent actions.     UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said that BSP’s move is a form of aid for embattled firms during the pandemic.     “Linking this to reserve requirement compliance may further encourage banks to extend the ‘bayanihan’ help to the major employers of the economy. This is a direct boost to the most vulnerable businesses impacted by the COVID-19 pandemic,” he said in an email.     Mr. Asuncion said that guidelines to be imposed by the BSP need to be “clear and targeted” to ensure maximum impact for the intended beneficiaries.     The latest rate cut reduced overnight reverse repurchase, lending and deposit rates to 2.75%, 3.25%, and 2.25% effective Friday.     “These measures should thus mitigate the adverse impact of the outbreak on the economy by reinforcing the health and fiscal measures already being rolled out by the National Government. The monetary initiatives will also quicken economic recovery as the pandemic fades,” the BSP said in a statement.  

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Filipinos shift to e-payments, online banking amid lockdown

April 19, 2020

    BANKS and payment firms have seen a surge in online transactions amid the enhanced community quarantine (ECQ) in Luzon.     During the lockdown, lenders said they observed a rise in account openings as well as fund transfers as limited businesses maintained physical working hours, including banks.     Just two weeks after the lockdown started, Bank of the Philippine Islands (BPI) observed a more than 25% increase in retail digital transactions which included interbank transfers, transactions with e-commerce partners, as well as bills payments, the lender said in a statement.     Interbank transactions made through InstaPay increased 50% to 300,000 from pre-quarantine levels, according to BPI Chief Digital Officer Noel A. Santiago.     “In the last two weeks of March, BPI, through its retail digital platforms, facilitated more than 1.5M transactions with a total value of close to P8 billion,” Mr. Santiago said in a statement.     The internet has become a crucial tool for clients during the ECQ period, according to Philippine National Bank (PNB) President and Chief Executive Officer Jose Arnulfo A. Veloso.     “The lockdown has made clients realize the importance of mobile banking applications for their transactions. The use of Internet has become more crucial than ever,” Mr. Veloso said.     According to Mr. Veloso, clients who have enrolled their accounts for mobile banking increased 14% from March 16 to April 7 versus average levels before the lockdown.     He also noted that there was a 13% increase in financial transactions, including fund transfers.     Mr. Veloso said that the current situation has pushed PNB to convert more passbook customers to automated teller machines (ATM) and to enrol them in online banking.     “We are also getting more online merchants [to] get PNB accredited to allow our customers to transact with more companies,” he said.     The rise in online transactions came as Filipinos need cash amid the lockdown, Rizal Commercial Banking Corp. (RCBC) said.     “With the restricted mobility allowed to the public and the limited operation of bank branches, there is little option but to turn to digital products,” Angelito Lito M. Villanueva, RCBC executive vice-president and chief innovation and inclusion officer, said in a text message.     He said RCBC’s send cash feature, which allows clients to transmit cash to unbanked recipients, also saw a 156% surge in transactions as of end-March compared to pre-ECQ levels.     “The marked increase indicates the need for more liquidity during this difficult time,” Mr. Villanueva said.     UnionBank of the Philippines, Inc. also observed growth in digital transactions during the ECQ.     “For the month of March, UnionBank logged a nearly 160% [growth] in daily sign-ups to its online and mobile banking portals, and enabled more than 500,000 credit card transactions and well over 1 million Instapay and PesoNet fund transfer transactions,” the bank said in a statement.     CASH-HEAVY SEGMENTS TURN TO E-PAYMENTS     Previously cash-heavy segments related to basic necessities recorded a rise in digital transactions in the past weeks, said Shailesh Baidwan, president of digital payments firm PayMaya Philippines, Inc.     Moreover, Mr. Baidwan said they have observed more small businesses and freelancers using the PayMaya app for transactions with clients during the lockdown.     “Digital payment transactions with pharmaceuticals posted the biggest month-on-month growth in March from February. We also observe consistent growth in certain retail segments such as groceries,” Mr. Baidwan said.     Meanwhile, transaction volumes related to travel, hospitality and tourism edged lower due to restrictions meant to contain the virus outbreak.     The platform, he said, has also been tapped by micro, small and medium enterprises (MSMEs) that sought to continue delivering their services amid the temporary shutdown of their regular operations.     “Brick and mortar restaurants, smaller online food specialty stores, fresh and frozen produce suppliers and the like are now offering online ordering and deliveries,” he said.     Likewise, Mr. Baidwan said freelancers and professionals have been creating PayMaya accounts to accept payments digitally. Meanwhile, CIMB Bank Philippines initially saw a decline in new account enrolments at the onset of the lockdown, but this has since rebounded. “Our acquisition for new customers continues to be healthy after a momentary dip immediately after the implementation of the Luzon-wide ECQ. Now we are back to our pre-ECQ numbers,” CIMB Bank Philippines Chief Executive Officer Vijay Manoharan said. Mr. Manoharan said the ECQ has made Filipinos more inclined to try online banking. “This will hopefully pave the way for more Filipinos to transition into all-digital banking solutions,” he said.  

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DOF won’t withdraw pending ‘sin’ tax bill

November 25, 2019

THE Department of Finance (DOF) will not withdraw its proposal seeking to increase “sin” taxes on alternative tobacco products despite President Duterte’s pronouncement banning the public use and importation of vapes and electronic cigarettes.      Finance Secretary Carlos G. Dominguez III said that legislative deliberation on proposed higher excise taxes on e-cigarettes and vape products should continue in the Senate as they await the President’s executive order (EO)on the ban.      “We are awaiting the EO on this matter from the Office of the President. In the meantime, we urge the legislature to pass the measure that is pending their approval,” Dominguez told reporters in a mobile phone message late Wednesday when asked if the DOF will still push for higher taxes on e-cigarettes and vapes.      President Duterte recently directed authorities to ban the use of vapes and e-cigarettes in public as well as their importation, saying “it is toxic, and government has the power to issue measures to protect public health and public interest.”      Last week, the Department of Health (DOH) reported the first case of e-cigarette or vaping-associated lung injury (EVALI) in Visayas.      In recent months, a spike in the number of cases of EVALI has also been seen in the United States, with over 2,000 cases reported, and 39 people having lost their lives.      Earlier, both the DOF and DOH said that it was better to regulate the use of vapes and e-cigarettes in the country than imposing a blanket ban on these products.      According to the health and finance departments, a total ban may just force vapes and e-cigarettes onto the black market, where the products would be harder to control by the government.      President Duterte had endorsed higher taxes on alternative cigarettes and alcoholic beverages, or Senate Bill No. 1074, as his urgent measure that needs to be passed by Congress before yearend and implemented beginning January 2020.      In his letter to the Senate leadership, President Duterte sought the swift passage of the bill “to address the urgent need to generate additional revenue to support the effective implementation of the Universal Health Care Act and to further protect the right to health of the people.”      SB-1074 aims to align the tax rate of heated tobacco and vape with traditional cigarettes at P45 beginning next year, P50 in 2021, P55 in 2022, and P60 in 2023, with five percent annual increases onwards.      The proposed bill also covers alcoholic beverages, which once passed into law will increase the tax on distilled spirits from P23.5 to P90 per proof liter with a 20 percent ad valorem tax beginning next year.      Meanwhile, fermented liquors and alcopops would be taxed at P45 per liter, up from P25.4. Finally, a specific tax of P600 would be imposed on sparkling wines, while a specific tax of P43 would be imposed on still and carbonated wines beginning 2020.      The DOF expects SB-1074 to raise at least P47.9 billion in incremental revenue for its first year of implementation.

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