A8

2ndFront PageBusinessMirror

www.businessmirror.com.phTuesday, September 22, 2015

PHL capital market still lacks muscle

Ang certain next admin will accept his Naia plan. . . Continued from A1

“The real issue, according to economists, is the government’s perennial underspending. The lower deficit is not due to increased collection efficiency, but is due to underspending, which is ill-timed for a country desperately trying to generate jobs, build world-class infrastructure and improve the day-to-day lives of its people, the majority of which is mired in poverty,” Bello said in a statement. “Lower income taxes increase disposable income by transferring money from the government’s hands back to the consumption budget of Filipino families, who will likely spend more on goods and services. This additional spending, in turn, fuels the economy and attracts more taxes,” he added. Bello noted that the Department of Finance (DOF) had admitted in congressional hearings that for every P1 in additional revenue, the government will have to spend it for consumption of goods and services. “So if the government will underspend anyway, why not take the opportunity to leave the spending to Filipino families?” The TMAP had earlier supported bills in Congress that will revise the income-tax brackets to arrive at a progressive tax regime that will equitably distribute the tax burden and do away with the current tax regime, which puts the brunt of the burden on the working class.

Income bracketsUnDer the current tax regime, working-class citizens, who have income of at least P500,000 per year in taxable income, are already taxed at the highest rate of 32 percent, which puts them in the same situation as high-income individuals, who have taxable income running to the millions. The TMAP proposal is to impose the highest tax bracket on individual taxpayers that have more than P2.5 million in taxable income per year at a tax rate of 30 percent. Those earning over P1 million but not over P2.5 million a year will be imposed a tax rate of 25 percent, while those earning over P500,000 but not over P1 million a year will be imposed a tax rate of 20 percent. Those earning over P300,000 but not over P500,000 per year are proposed to be taxed at 10 percent, while those earning not over P300,000 a year in net taxable income will be exempt from income tax.

Lobbying for tax cutBeFOre TMAP’s statement endorsing the tax-rate cuts, the measure being championed by the Ways and Means panels in both chambers of Congress had gotten the support of the Joint Foreign Chambers of the Philippines (JFC), worker groups and professional sectors. Supporters also included the resident representative of the International Monetary Fund (IMF) in the Philippines, who acknowledged the tax rates were indeed very high, but joined Purisima’s warning that any reduction must be part of a “holistic reform.” Being pushed by the IMF as a compensatory measure is a strategy to “make more people pay taxes,” noting the country’s still mediocre collection from other sectors, putting bulk of the burden on the salaried class. President Aquino sent out mixed signals on the matter, having been quoted by rep. romero S. Quimbo of the Second District of Marikina as being open to the tax-rate reduction, but telling a media roundtable he was not supportive of it because he was not persuaded about the wisdom of the compensatory measures, including a hike in value-added taxes and the excise tax on petroleum products. The TMAP argument for the adjustment in tax brackets set in 1997 was also pointed out by Senate President Pro Tempore ralph recto, who said the estimated revenue gap arising from the tax rate-cut measure, or P30 billion, pales in comparison to the hundreds of billions in government underspending the past three years. Angara, the current Ways and Means Committee chairman, had earlier said he is prodding the economic managers to accept, at the very least, his counterproposal to adjust to inflation the taxable income brackets. Angara noted that unless adjusted, it perpetuates a very inequitous setup, whereby a lower middle-class worker, whose annual income reaches P500,000, already gets levied the highest tax rate of 32 percent, putting him/her on the same footing as billionaires. The TMAP urged the DOF to avoid viewing the tax reforms in the narrow prism of tax cuts “that will only undermine the tax take of the government.” echoing recto, it said the DOF projection of P30 billion in forgone revenue from the tax-rate cuts is “very minimal from a budgetary standpoint,” or a mere 1 percent of the proposed 2016 national budget of P3.002 trillion. And yet, added TMAP, such rate cuts will significantly “affect and uplift the lives of millions of salaried workers and their families.”

Tax regime. . . Continued from A2

takeoffs and landings of the main runway. With the DOTC tapping British air-traffic man-agement firm NATS Services Ltd. for a P66-million deal to advise the government on maximizing runway use at the Naia, Ang said the number of takeoff and landing could improve to 60 in a few months. The first stage of the construction will take two years to finish, including the termi-

nal that will have a capacity of about 30 mil-lion passengers per year. It can initially build the project now, constructing a 2,500-meter length of runway, and the rest of the length can be carried out if the right-of-way has been acquired. San Miguel also proposed a new and bigger Manila airport to be located near the so-called Entertainment City. Ang said the government will still need that

since the current facilities are only good until 2025, the time when the current Naia is expected to be filled as the country’s economy improves. “Ultimately, you will need to build a new airport with four runways,” he said. At the moment, the Naia only has two run-ways: the main runway called 06/24 that has a length of 3,400 meters and the shorter runway called 13/31.

The Bangko Sentral ng Pilipinas (BSP) once again highlighted the need for a more developed capital market,

entirely homegrown and sufficient to address the country’s requirements, even more so now that a regionwide integration of markets is finally beginning to take shape.

BSP Governor Amando M. Tetangco Jr. reiterated this point at a recent public forum, where he said that the Philip-pines, as with other nations in the region, remains heavily de-pendent on banks when mobi-lizing funds to finance various undertakings.

In more developed econo-mies, entrepreneurs have much to choose as where to borrow funds for long-gestation proj-ects, such as those required to build public infrastructure. Long-horizon projects necessar-ily require long-term financing that cannot be financed by bank

borrowings whose investment horizon is often short term. “If we are going to talk about Asean integration, we certainly need to have a thriving market that can connect and compete with the rest of the region. While many jurisdictions in Asean—and Asia for that matter—re-main bank-centric, the pressure on the banking books needs to be mitigated when 15-, 20- and 25- year loans are generated from a funding base largely made up of savings deposits,” Tetangco said. “The gapping risk is signifi-cant and the global focus on liquidity risk makes this issue even more stark,” he added. The gapping risk pertains to

the likelihood that a creditor’s exposure in a particular bor-rower diminishes over time and increases by several factors as the time horizon lengthens. Given this, Tetangco ac-knowleged this will not be easy for the still-underdeveloped capital markets in the coun-try and called on the capital market players to work more closely with the country’s lend-ers down the line. “While we have 262 publicly listed companies with a market cap of $279.5 billion, the aver-age for the rest of Asean-5 is 612 listed companies with a market cap of $406.9 billion,” Tetangco said. Bianca Cuaresma