New tax law takes effect today
The tax reform law, which reduces personal income tax but imposes a higher tax on fuel, cars, tobacco and sugary beverages to bankroll the government’s infrastructure and development projects, takes effect today.
To kick off the effectivity of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, Revenue Commissioner Caesar Dulay has issued Memorandum Circular 105-2017 revising the withholding tax table on compensation.
“With the effectivity of the TRAIN law on Jan. 1, it is imperative that a smooth transition to withholding tax rates is ensured,” he said.
Dulay stated in the memo that every employer making compensa- tion payments to their respective employees should deduct and withhold from such compensation a tax determined in accordance with the revised withholding tax table.
Dulay is also urging taxpayers to participate in discussions of the issue in public consultations and briefings where they can air their views, comments and recommendations.
President Duterte signed the TRAIN Law last Dec. 19, vetoing certain items. The public is encouraged to seek clarifications on certain provisions of the law with the national, regional, and district offices of the Bureau of Internal Revenue (BIR) to help the various committees in crafting the Implementing Rules and Regulations.
“The committees are drafting the Implementing Rules and Regulations of the law. The members are also set to conduct internal and external briefings nationwide to make way for the hassle-free implementation of the
It was a good year for the Philippine stock market, so good that some said it was an exceptionally good year.
Reversing two years of decline, the benchmark Philippine Stock Exchange index (PSEi) closed at a new record high of 8,558.42 on the last trading day of the year, Dec. 29.
2017 was actually the first full year of the Duterte administration.
At the start of the year, President Duterte’s economic team promised the passage of TRAIN or the Tax Reform for Acceleration and Inclusion.
President Duterte signed the tax reform package into law on Dec. 19, 2017, which is expected to generate P130 billion in revenue.
The approved tax package also called for an increase in the take-home pay of workers but also hiked taxes on fuel, vehicles and sugar-sweetened beverages while expanding the value-added tax base.
It was a promise the market watched closely because the passage of the ambitious tax reform package meant there would be fresh revenues to fund the Duterte administration’s Build Build Build infrastructure program.
For market investors, this was crucial because it meant the economy would continue to move forward, boosted by infrastructure spending.
Aside from the TRAIN, Philippine Stock Exchange chairman Jose Pardo said the market performed better this year than in the past years.
He said investors have already adjusted to the leadership style of President Duterte.
“It has been a good year. We are seeing investors adjust. We’re seeing political noises are just noise indeed,” Pardo said.
On Sept. 14, the PSEi closed at 8,144.91, up 91.03 points or 1.13 percent – the highest for the main index since April 10, 2015, when the PSEi closed at 8,127.48.
When the market hit a new high for the first time this year, PSE president and CEO Ramon Monzon said this showed that the PSEi remains a favorite among emerging markets as it continues to provide attractive returns.
The PSEi added 1,717.78 points or 25.1 percent in 2017 after two consecutive years of decline. It posted a new all time intraday high of 8,605.15 on Nov. 3 while the previous high was 8,535.09 on Dec. 28.
Trading activity was also brisk. During the first half of 2017, for instance, daily average value turnover amounted to P8.08 billion, up 7.5 percent from the same period last year. The stock market also had a net foreign buying of P22.04 billion during the six-month period.
Market capitalization of companies listed at the PSE hit a record high of P16.42 trillion on June 14, 2017. Property developer SM Prime Holdings Inc. also reached a record market capitalization of P1.01 trillion on June 9, 2017. This was the first time a domestic company breached the P1 trillion market capitalization mark. Market capitalization as of June 30 stood at P16.27 trillion.
Capital raised in the first half of the year amounted to P106.74 billion.
“We are pleased with the overall market performance in the first semester while capital raising activity remains on target. We believe the economy will continue to provide more growth for listed companies and attract more investors in the market,” Monzon said.
“The passage of the tax reform bill and the infrastructure program of the government should help sustain the market’s growth momentum in the coming years,” he said.
During the nine-month period, meanwhile, the PSE registered a 45.9 percent increase in net profit to P707.35 million. Operating revenue rose 8.8 percent to P953.7 million. Listing-related fees, the biggest component of operating revenues, went up 22 percent.
The market saw four companies debut in the Philippine Stock Exchange in 2017.
These are Wilcon Depot (P7 billion), Eagle Cement Corp. (P8.6 billion), Cebu Landmasters (P3 billion) and Chelsea Logistics Holdings Corp. (P5.84 billion).
Chris Mangun, head of research at Eagle Equities Inc., said the PSEi and the market did exceptionally well.
“We broke above the threeyear congestion area to reach new highs at 8,500-8,600. These gains can be attributed to the good financial situation of our government, strong economic growth, and continued corporate growth and earnings. We saw gains in all sectors with strong leader- ship coming from the financial, property and service sectors,” Mangun said.
“Overall, the PSE was the favorite investment vehicle in 2017 as we saw more and more people put their money in the stock market,” he said.
Still, 2017 was not without challenges for the PSE.
Toward the tail end of the year, a provision in the TRAIN bill which would raise the stock transaction tax to 0.6 percent of one percent on its gross selling price from the current 0.5 percent was included.
“They say it’s negligible. But what we have to understand is that the Philippine Stock Exchange does not operate in the local market alone. We really compete with the other exchanges such as Thailand, Malaysia, Indonesia, or Vietnam – we compete for the money of the foreign investors. When you are increasing the transaction tax, you’re increasing the transaction cost. As it is right now, before the increase of 50 bps or 1/2 of one percent, the stock transaction tax was already the highest in the region,” Monzon said.
What’s in store for 2018
Mangun said the market may be off to a slow start this year as market investors still need to digest the gains of 2017.
“Going into 2018, I think we will see a slower start as compared to the previous years. This is normal as the indexes are at new historic-highs. Having said that, I see the market becoming stronger than ever,” Mangun said. “With continued economic growth and the new tax reform package that will benefit everybody, I see the PSEi going to 9,000 maybe even as high as 9,500 before the end of 2018,” he said.
“My only concern is the turmoil in the western markets, with the new Fed chairman Jerome Powell replacing Janet Yellen. The big question is how high will they raise interest rates and what the effect is going to be on global markets. However, any effect on the PSE will be temporary and will be overshadowed by the economy’s strength and continuous growth,” Mangun said.
Pardo likewise sees the PSEi hitting 9,000 this year and 10,000 in 2019.
It’s always difficult to predict the market. What happens in 2018 in still anybody’s guess, according to Pardo.