FPH clarifies tax payments
Dear Sirs/Madams: We write in connection with Mr. Victor Agustin’s column last May 19, titled “Another Lopez firm made P24.6B profit, but only paid P10M income tax.” I am confident that your sense of fairness will allow us equal opportunity to address the points that he raised.
At the onset, and for the record, we wish to stress that the 2019 consolidated net income of the First Philippine Holdings Group of Companies (FPH Group) was P24.6 billion, for which a total income tax of P5.18 billion was paid – not the P10 million that Mr. Agustin claimed. In the prior year of 2018, the consolidated net income of the FPH Group was P20.17 billion, for which a total income tax of P4.44 billion was paid. Again, the tax paid is far from what Mr. Agustin wrote as the “country's power clan paid the tax brigade P14 million income tax in 2018.”
First Philippine Holdings Corp. (FPH) is the publicly listed holding company of the power, industrial and real estate assets of the Lopez Group of Companies. Of the P24.6 billion consolidated net income the FPH Group reported in 2019, around P12 billion is attributable to its minority shareholders, while P12.6 billion is attributable to FPH. As a parent holding company, the bulk of FPH’s income includes share in earnings (losses) of subsidiaries and associates and dividend income from domestic corporations (which are non-taxable/exempt), and interest income (which is subject to final tax), under the National Internal Revenue Code (NIRC).
Under our tax laws, the government does not impose income tax on these types of earnings at the holding company level because they have already been subjected to income tax at the subsidiary level. For instance, First Gen Corp.and its various subsidiaries (essentially the power generation arm of the FPH Group) reported in 2019 a consolidated net income of $414.2 million (P21.5 billion); of which total income tax paid is $75.7 million (or P3.9 billion).
The foregoing facts are quite basic and should have been obvious to most business writers, but apparently not to Mr. Agustin. Be that as it may, allow us to clarify the other points which the same column held out as factual, but were actually quite inaccurate or downright erroneous.
In bolstering his claim that the FPH Group pays lower taxes than others, Mr. Agustin wrote that FPH and First Gen combined, “generated an eye watering P45.6 billion profit in 2019.” Then Mr. Agustin proceeded to compare the same with what he described as “AboitizPower, with its power generation and retail electricity businesses, reported P17.32 billion net income last year, after provisioning P3.2 billion for taxes, with income tax payable reported at P506 million.” Such a claim is absolutely wrong, and the analogy totally misplaced.
FPH’s consolidated net income of P24.6 billion already included its share in the earnings of First Gen. In simple terms, it appears he doublecounted. The analogy he attempted to draw (by comparing FPH and AboitizPower in terms of net taxable incomes vis-a-vis their respective tax obligations) was like comparing apples to pineapples. As a holding company, the equivalent of FPH in the Aboitiz Group would likely be Aboitiz Equity Ventures Inc., not AboitizPower. The latter’s logical equivalent in the FPH Group, on the other hand, would likely be First Gen. With First Gen’s 2019 consolidated net income of around P21.5 billion, and total income tax payments at P3.9 billion, the comparison will now be more appropriate, assuming that Mr. Agustin cited the correct numbers for AboitizPower (i.e., P17.32 billion net income, P3.2 billion provision for taxes, income tax payable reported at P506 million).
Neither did we keep quiet on the matter of our year-end results. As we always do, FPH and First Gen issued their corresponding press statements in the form of corporate disclosures that were filed with the Philippine Stock Exchange (PSE), from where the more dynamic members of media, including the business reporters from both the
Philippine STAR and other news outlets, usually get their materials.
There was one assertion made by Mr. Agustin that we will not refute: that FPH, “still accords the 90-year-old patriarch (Oscar M. Lopez) the honor as the conglomerate's chief strategic officer.”
On that note we wish to end by wishing all of you well, including Mr. Agustin, especially in these very difficult times we all face not only as a country, but as humanity. We hope and pray that, like our beloved chairman emeritus, may you also be blessed, so that you can reach a ripe old age not only with fairly good health, but with the respect and affection of friends, colleagues and countless others whose lives you may have touched.
Please accept our warmest wishes that you keep safe and stay healthy. We hope in the interest of fairness that this clarification merits a prominent space in The Philippine STAR, both in print and online, especially now that we are aware that his column is being used as fodder for a number of websites previously identified as spreading fake news.
Thank you.