Philippines complies with WTO ruling on taxes of distilled spirits

The Philippines has fully complied to the  recommendations and rulings of the World Trade Organization (WTO) in the dispute regarding the taxes on distilled spirits.

Republic Act (RA) No. 10351, entitled “An Act Restructuring the Excise Tax on Alcohol and Tobacco Products,” was passed by the Philippine Congress last December 11 and approved by Pres. Aquino on December 19.

The corresponding Implementing Rules and Regulations (IRR) were subsequently promulgated by the Bureau of Internal Revenue (BIR Revenue Regulation 17-2012) on December 28.

The IRR operationalizes the application of an ad valorem tax rate of 15% of the NRP per proof and a specific tax of P20.00 per proof liter, which took effect last January 1.

The Philippines’ new tax system adopts a uniform tax that applies equally to all distilled spirits, and thus eliminates the system of taxation found to be discriminatory by the WTO Panel and the Appellate Body.

The adoption of this new tax system completes its implementation of the findings and recommendations of the WTO panel and the appellate body in this dispute.

“Pres. Benigno S. Aquino has time and again stated that the Philippines is open for business, and that we play by the rules. International trade and investments have been significant catalysts in the record-breaking economic growth and development achieved in the first two years of the Aquino administration,” said  Ambassador Esteban B. Conejos, Jr., the Philippines’ Permanent Representative to the WTO.

“Our compliance with this WTO ruling is a living testament of our desire to balance legitimate domestic objectives and the concerns of our foreign investors. It is also a concrete manifestation that President Aquino’s good governance thrust applies not only within our borders, but also in our adherence to our international commitments,” he said.

The United States has welcomed this development. “We are very pleased at the efficient work by the Philippines in undertaking this reform, and we appreciate the Philippines’ commitment to implement the DSB’s recommendations and rulings in this dispute,” the U.S. delegate said.

“The new tax system eliminates the use of raw material type as a basis for applying different tax rates to distilled spirits, and which is an excellent step forward,” he added.

The European Union (EU) has expressed pleasure that President Aquino approved RA 10351 reforming the Philippines’ tax regime for alcohol.

“The EU is encouraged by the fact that the Act removes discrimination against imported spirits,” the EU delegate remarked.

“The EU trusts that the implementing rules and regulations that the Government of the Philippines recently published are equally consistent with the national treatment principle enshrined in Act 10351,” he added. The EU also thanked the Philippines for the transparency it has demonstrated during the implementation phase.

Both the US and the EU looked forward to the implementation of the law. The US noted it will continue to closely watch the law’s implementation because the system has been in place for only a few weeks. The EU is analyzing the implementing rules, and may seek clarifications on their practical functioning.

The Philippines reported full compliance with the WTO ruling ahead of the March 8, 2013, expiry of the reasonable period of time to implement that was agreed upon with the EU and the U.S.

The Philippines thanked the U.S. and the EU for being constructive partners throughout the dispute settlement process.

The coordination and open communication has enabled the Philippines to engage the various stakeholders and implement a WTO-compatible excise tax regime for distilled spirits. 

Legatum Institute cites improving Philippine economy, sectors

The Philippines is getting more praises not only from foreign investors and rating agencies but also from educational institutions.  

Lately, Legatum Institute noted that the Philippines has improved its rating on the economy, entrepreneurship and opportunity, governance, health, personal freedom, and social capital compared to the previous administration.
The 2012 Prosperity Index of international think-tank Legatum Institute noted that challenges remain in the areas of safety and security and education.
However, the Propsperity Index noted that Legatum’s methodology did indicate a data lag, in which most variables were based on figures from 2011 or 2010.
Legatum said the scores are more indicative of the country’s performance compared to rankings because rankings are subject to change throughout the years as other countries are added to the list.
The index showed that the Philippines is scoring above the global average in many prosperity index variables, in particular, confidence in the government which is at 74.8% compared to the global average of 53.7%.
The report also showed that the Philippine government is continually addressing many areas of policy concern. “Our improved scores show how far the country has gone to where our nation was under the previous administration. This, despite the data lag that may yet have been reported in the analysis of some sectors,” said Legatum. 

More foreign investors are having more fun in the Philippines

The Philippines is attracting more foreign investors as the domestic economy has sustained its growth momentum as the gross domestic product (GDP) grew by 6.6 percent in 2012 and posts a 6.8 percent growth in the fourth quarter of last year.  The equities market is soaring new highs, reflecting positive confidence from foreign fund managers under the Aquino government.
The growth was fuelled by the robust performance of the services sector led by trade and real estate, manufacturing and construction as well as renting and business activities.
Socio-economic Planning Sec. Arsenio Balisacan said the 6.6 percent growth last year surpassed the 5 to 6 percent target set by the Development Budget Coordination Committee (DBCC).
On the supply side, all sectors performed beyond expectations led by industry, then services and even agriculture. 
Industry grew by an impressive 6.5 percent, more than twice the growth exhibited in 2011 at 2.3 percent, led by the expansion in public and private construction activities and the electricity, gas and water sector.
Balisacan noted that in the first two quarters of 2012, it was public construction that took up the slack in construction but the private sector has taken over beginning the third quarter. 
“This is what we mean by the private sector upping its stakes in the economy. Equally remarkable was the growth in the electricity, gas and water sector, growing by 5.1 percent, a far cry from its growth of 0.6 percent in 2011.  No doubt this was in support of the increased economic activity in 2012.”
The service sector also defied expectations growing at 7.4 percent mainly contributed by trade, transport and communication and real estate, renting and business activities, and other services. 
Trade grew by 7.5 percent in 2012, more than twice the growth in 2011.  Similarly, growth in transport and communication accelerated more than twice, at 9.1 percent compared to 4.3 the previous year. 
“We had expected a slower growth for the real estate, renting and business activities, which includes the IT-BPO, owing to the continued slowdown in the global economy. And yet the sector still managed to grow faster than expected at close to 8 percent,” said Balisacan.
He also noted gains in other services particularly tourism-related subsectors, such as hotels and restaurants, and recreational, cultural and sporting activities.  These subsectors grew by 13.3 percent, compared to only 7.1 percent in 2011. 
The agriculture sector defied expectations, growing by 2.7 percent.  “We only expected a 2.2 percent growth from the sector owing to weather disturbances forecast for the year.”
“In the first two quarters of 2012, it even looked like the sector would under-perform, weighed down by the contraction in the fisheries sector.  However, the turnaround happened beginning the third quarter and especially in the fourth quarter when the sector grew by 4.7 percent.”
Growth in the fishery sector had gone up by 3.3 percent, from eight consecutive quarters of contraction if not stagnant growth. 
On the demand side, household consumption expenditure together with government spending, the recovery of capital formation and the remarkable performance of the external trade contributed to the robust growth of the economy in 2012.
Household consumption remained  the largest contributor to growth in 2012, growing by 6.1 percent.  The growth has been supported by the higher level of economic activity, low and stable inflation, inflows of overseas Filipinos’ remittances and the conditional cash transfers program.
Exports of goods recovered with a growth of 8.7 percent for the year from a contraction of 4.2 percent in 2011.  Exports of services grew by a remarkable 9.8 percent, more than twice the growth the previous year.
Fixed capital formation also improved to 8.7 percent in 2012 as growth in investments for public and private construction, and durable equipment registered significant increases. 
Sec. Balisacan stressed that the government would put in place policies and implement programs that will sustain the economy’s growth over the medium term. 
“We will continue planting the seeds of a structural transformation in our economy to make it more investment and industry-led.  This will mean more jobs and employment opportunities of high quality for Filipinos, thus ensuring that growth is inclusive and benefits all sectors of society.”
In attracting more investments and pursuing industrialization, the government is serious in addressing the country’s energy requirements, especially in the Visayas and Mindanao, said Balisacan.
“The objectives of the energy sector are to raise energy capacity, achieve a reliable and adequate supply of electric power, and expand rural electrification in the country. We should ensure that power supply is sufficient to support the anticipated expansion in investment.”
He pointed out that the importance of harmonizing policies and guidelines among concerned agencies on the exploration, development, utilization and conservation of natural resources for energy projects.
“Through governance reforms, we have tightened our mechanisms towards strengthening think between policy making and investment programming.”
“As the national blueprint for inclusive growth, the Philippine Development Plan for 2011-2016 has guided national government agencies in crafting and implementing their respective sectoral initiatives.”
The thrust now is to ensure that local and regional plans are in sync with the government’s strategies in achieving continued economic growth and a significant reduction of poverty, said Balisacan.
On the impact of a stronger peso on the competitiveness of business process outsourcing and exports sectors, the profitability of local production over imports, as well as the purchasing power of the earnings of overseas Filipinos, Balisacan assured that the economic managers are talking with each other about how best to address this issue.
“We continue to remain vigilant of the global and domestic risks to growth such as the possibility of oil price increases due to a higher global demand for petroleum products and the Euro area which is a major concern,” Balisacan said.
The agriculture sector is seen to be more vibrant in 2013, even if it is highly vulnerable to weather disturbances. 
“Part of the costs of the widespread flooding and landslide and extensive damage to agriculture brought by Pablo in the last quarter of 2012 will continue to be felt in the first quarter of 2013.”
Given the vibrant economic performance, Balisacan believes that the growth targets for 2013 to 2016 are realistic.
“The crucial issue is the implementation of appropriate policies and measures to ensure that we will sustain this high growth and make it inclusive in the medium term,” he added.

DOTC revises criteria for public bidding of new Cebu-Mactan International Airport

It makes sense that the Department of Transportation and Communications (DOTC) has revised the criteria for the bidding of the P17.5 billion Mactan-Cebu international airport passenger terminal project to provide the government with more competitive proposals and encourage broader participation from the private sector.

To protect against a potential conflict-of-interest during the operation stage, the DOTC and Mactan-Cebu International Airport Authority (MCIAA) will instead include strict competition safeguards in the concession agreement and will be vigilant in its implementation.
DOTC Sec. Joseph Abaya said that after careful evaluation and deliberation on the best policy to adopt for the new Mactan-Cebu International Airport Terminal project that would both maintain a level playing field and allow the infusion of expertise and experience into the operation of the new terminal, the DOTC has modified the bid criteraia for the project.
The revision of the criteria is also DOTC’s response to appeals from both local and foreign companies interested in taking part in the bidding process.
The revised criteria would allow airline companies, their subsidiaries, affiliates, and their parent companies to have a limited stake in the entities that will qualify to bid for the project.
However, the criteria retain the rule which prevents airline companies and airline-related entities from having a direct interest in the facility operator – an entity which will actually operate the airport – except in the case of an airline-related entity which itself satisfies the minimum operations and maintenance experience requirement of the bidder.
Airline companies and entities having any relationship with an airline company may own up to a maximum of 33% of the shares in the winning bidder’s special purpose company (SPC) which will be given the concession, as long as no airline company is directly involved in operations.
The project involves the construction of a new world-class international passenger terminal building in MCIA, with a capacity of about 8 million passengers per year; renovation and expansion of the existing terminal; installation of all the required equipment; and the operation of both new and existing facilities.
When the new international terminal building is completed, the existing terminal, which currently caters to both domestic and international passengers, will be converted into an exclusively-domestic passenger terminal.