By Charmaine A. Tadalan and Jenina P. Ibañez Reporters
AN IMMEDIATE REDUCTION of the corporate income tax rate to 25% by July is unlikely, as the Senate prioritized other measures over the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill on Wednesday.
“We focused on the Bayanihan (2) bill,” Senate President Pro Tempore Ralph G. Recto said in a mobile phone message on Wednesday.
The CREATE bill is the revised version of the Corporate Income Tax and Incentives Rationalization Act, which now provides for an outright 5% reduction of the corporate income tax to 25% from 30%, as well as flexible tax and nontax incentives for investors.
Finance officials earlier hoped the lower tax would take effect by July, as part of efforts to stimulate an economy battered by a coronavirus pandemic.
The Department of Finance (DoF) earlier estimated the 5% tax reduction will cut government revenues by P42 billion in the second half if CREATE is implemented by July, and by another P625 billion in the next five years. The DoF hopes these foregone revenues will drive economic activity and allow businesses to continue funding their operations and keep their employees.
Congress was scheduled to adjourn sine die on Wednesday, but decided to hold another session today.
Asked whether the measure may still hurdle the Senate before the year ends, Mr. Recto said “yes, with amendments.”
Senate President Vicente C. Sotto III last week said the proposed CREATE was among the priorities of the chamber, but the Senate’s session agenda for Wednesday did not include the bill.
Under CREATE, the tax will be further reduced by 1 percentage point annually beginning 2023 until 2027. In its previous version, the bill proposed to gradually reduce the rate until it reaches 20% in 2029.
Albay Representative and House Ways and Means Committee Chairman Jose Ma. Clemente S. Salceda said in a separate message the measure might still be tackled in a “special session.”
“It’s up to the Executive, which we await,” Mr. Salceda said.
Finance Assistant Secretary Ma. Teresa S. Habitan said the DoF may request for a special session for the passage of the CREATE bill.
“We’re hoping it will be part of what is passed in the regular session. Otherwise, we might request for a special session,” she said in a mobile phone message.
The CREATE bill was among the recommendations of state economic managers to revive the economy. More than 30 local and foreign business groups have also supported the passage of the bill.
Mr. Sotto, however, said he doubts the measure would be taken up in a special session. He also said the Constitution bars Congress from holding sessions 30 days before the opening of the next regular session on July 27. This gives them only until June 8, should a special session be called.
Mr. Sotto said they can hold a session as late as June 8, but others are saying the latest they can do it is on June 11, taking into account some holidays. “To play safe… the last is June 8,” he said in an online briefing.
Meanwhile, the Philippine Ecozones Association (PHILEA) is backing the retention of the current incentives system for an additional 5 to 10 years, aligning itself with foreign and export groups.
PHILEA in a letter addressed to the Finance department and Senator Pilar Juliana S. Cayetano said retaining the incentives system during the pandemic or a specified and “reasonable” period would help the country be competitive in attracting investments from companies moving operations out of China.
The position of PHILEA, along with foreign and export groups, stand in contrast with other business groups that have supported the immediate passage of CREATE. The bill also rationalizes tax incentives, granting a transition period of up to nine years.
PHILEA, which represents 12 member companies and 20 industrial estates, said the Finance department must release a statement that existing incentives under the Philippine Economic Zone Authority should be retained for at least five years and ideally ten years.
“The statement must be forceful and irreversible in order to erase doubts that have been created in the minds of many companies both about the removal or reduction of incentives and the image that the Philippines is mercurial in its policy-making,” the association said.
PHILEA added that incentives timelines should be improved, noting that the Philippines is behind some neighboring countries in terms of the number of years incentives are offered.
The Joint Foreign Chambers of Commerce of the Philippines, along with an outsourcing industry group and electronics and wearables export groups, had said in their own position paper that incentives allowing companies to pay 5% tax on gross income earned in lieu of other national and local taxes should be retained for five years prior to sunset provisions.
The same groups back the immediate reduction of corporate income tax to 25% and pushed for accelerating reduction to 20% by 2025.
But PHILEA said that this reduction would be a welcome development for domestic manufacturers, but for exporters, it is more important to retain the existing tax incentives.
PEZA said it would recommend amendments for CREATE to apply only to domestic companies and small businesses, retaining status quo incentives for export companies.
PHILEA also asked that the Finance and Trade departments appoint a private sector counterpart in efforts to attract companies moving factory production out of China.
“This should preferably be a Philippine entity that can represent the country as a knowledgeable citizen. The assignment of the investment house would be to mobilize the players in the ecozone industry, coordinate with the relevant Government agencies, and identify and organize other factors that will give the country an advantage over its competitors,” the association said.
PHILEA added the government should create a major public relations program and to streamline industrial parks applications for ecozone approval to accelerate a “tedious and slow moving” process.
“A deadline for processing in each agency should be established and rigorously followed.”
House rejects ABS-CBN plea to extend franchise
Philippine lawmakers on Friday rejected the franchise application of ABS-CBN Corp. — a broadcast network critical of President Rodrigo R. Duterte — in what critics see as a grievous assault on press freedom.
Voting 70 to 11, the House of Representatives committee on legislative franchises denied the 25-year extension plea, saying the media giant was “undeserving” of the privilege.
“Not since the dictator Ferdinand Marcos shut down ABS-CBN and other media outlets in 1972 has a single government act caused so much damage to media freedom,” Phil Robertson, deputy Asia director at Human Rights Watch, said in an e-mailed statement.
“This move solidifies the tyranny of President Rodrigo Duterte who accused ABS-CBN of slights against him and politically targeted it for refusing to toe the government’s line and criticizing his so-called ‘war on drugs,’” he added.
Mr. Robertson said the House vote was “an astounding display of obsequious behavior by congressional representatives, kowtowing to Duterte by agreeing to seriously limit media freedom in the Philippines.”
“This is a black day for media freedom in a country previously regarded as a bastion of press freedom and democracy in the region,” he added.
The tough-talking Mr. Duterte had on numerous occasions unleashed a stream of profanity against dissenting journalists whom he accused of bias and unfair reporting. Journalists have also been targeted by Mr. Duterte’s Facebook supporters — known bloggers with huge followings and who have fiercely defended him and his policies.
Mr. Duterte has slammed media outlets such as the Philippine Daily Inquirer, ABS-CBN and Rappler for criticizing his government, particularly his war on drugs that has killed thousands of suspected pushers.
ABS-CBN President and Chief Executive Officer Carlo Katigbak said they were “deeply hurt” by the House decision.”We have been rendering service that is meaningful and valuable to the Filipino public,” he said in an e-mailed statement. “We remain committed to public service, and we hope to find other ways to achieve our mission.”
The House vote puts in jeopardy the jobs of more than 11,000 workers of the media network, which claims to reach more than 80 million Filipinos here and overseas.
“I am deeply saddened by this episode in the history of our nation,” Senate Minority Leader Franklin M. Drilon said in a statement. “It is reminiscent of the dark pages in the history of Philippine press in 1972.
Presidential spokesman Harry Roque said the palace was neutral about the franchise issue.”Much as we want to work with the aforesaid media network, we have to abide by the resolution of the House committee,” he said in a statement.
Speaker Alan Peter S. Cayetano urged the public to “understand why the decision had to be so.”
A technical working group composed of Cebu Rep. Pablo John F. Garcia, Camiguin Rep. Xavier Jesus D. Romualdo and Marikina Stella Luz A. Quimbo endorsed the rejection of the franchise application in a report. Ms. Quimbo dissented.
Quezon City Rep. Franz E. Alvarez, who heads the committee, said ABS-CBN Corp. had 24 hours to appeal the House decision.
Critics have said the issue of ABS-CBN’s franchise has become both personal and political. Mr. Duterte had openly harbored a grudge against the broadcaster.
In 2017, he accused ABS-CBN of swindling after it refused to run political ads he had paid for during the 2016 presidential campaign.
Mr. Duterte had also criticized the broadcaster for airing news stories about his alleged secret bank accounts. He said he would block the renewal of the company’s franchise if he had his way.
“I will not let it pass,” he said in 2018. “Your franchise will end. You know why? Because you are thieves.”
The Center for Media Freedom and Responsibility on Feb. 11 called the case against the network a “dangerous attempt to control and silence free press.”
A Philippine trial court last month convicted Maria Ressa, chief executive officer of news website Rappler, Inc. and former researcher Reynaldo Santos, Jr. guilty for violating a law against cyber-libel.
Critics also viewed the verdict as a major setback for democratic rights in the country. Judge Rainelda H. Estacio-Montesa sentenced the two to six months to six years in prison.
The Justice department in February last year indicted Ms. Ressa, a former CNN investigative reporter, for cyber-libel based on a complaint by a businessman over an article published in 2012, months before the cyber-crime law was passed. The journalist has said the allegations were unfounded.
A month later, she got arrested again for allegedly violating the ban on foreign ownership in media.
Local and international media watchdogs and human rights groups have condemned her arrest. New York-based Committee to Protect Journalists has called on Mr. Duterte’s government “to cease and desist this campaign of intimidation aimed at silencing Rappler.”
Rappler, which Mr. Duterte has called a “fake news outlet,” is also appealing last year’s order by the Securities and Exchange Commission to close its operations for violating foreign-equity restrictions in mass media. Ms. Ressa is also facing tax evasion cases.
The presidential palace said Mr. Duterte did not have a hand in the court ruling. — Patricia S. Gajitos
How a hair-care company went from salon supplier to sanitizer powerhouse
When AG Hair moved into its new, 70,000-sq.-foot, state-of-the-art manufacturing facility in Coquitlam, B.C., two years ago, it was part of a plan to supercharge expansion of its hair care product line to salons in international markets. Europe was next on its list. Then COVID-19 hit.
Not only was the European expansion put on hold, but salons in major markets across Canada and the United States were temporarily closed. Very few were purchasing hair products, so manufacturing was halted in mid-March, leaving most of the company’s 82 employees out of work.
AG Hair could have waited out the pandemic but instead decided to lean into its entrepreneurial culture and make a sharp pivot. It began providing hand-sanitizing products for front-line health-care workers, addressing a global shortage.
“We realized there was this massive need for health-care professionals, and we wanted to make a difference and be able to provide them with the products they needed,” says AG Hair CEO Graham Fraser.
AG Hair received Canadian and U.S. approvals a week after applying for the licences needed to make sanitizer, and produced samples to show local authorities within 48 hours.
“That rapid response time, and the fact that we had gone through all of the Health Canada regulatory hurdles, showed [the local health authorities] that we were a partner they could trust and someone they could look to, to deliver the products they needed,” Fraser says.
Within a month, the company started pumping out the products, first for the health-care industry, then for consumers on its own website and on Amazon. About 10 per cent of AG Hair’s hand-sanitizer production also went to people in need, as identified by organizations such as United Way.
Parallel 49 Brewing Company is also using AG Hair’s Coquitlam manufacturing facility to produce its own blend of liquid hand sanitizer for front-line health and emergency workers, in partnership with the B.C. government.
Fraser credits his team for its energy and creativity in making the hand-sanitizer production happen, and helping put AG Hair staff back to work.
“We realized we had an opportunity . . . and then it became this incredible, almost war-room mentality and collaboration with our owners, our executive team and our people to say, ‘How are we going to get through this?’ ” Fraser recalls. “I think our success speaks to the type of people we have and the entrepreneurial spirit of pursuing every avenue we have, understanding how we can produce the products and making it happen.”
AG Hair’s commitment to investing in future growth is a big part of what makes it a Best Managed company, says Nicole Coleman, a partner at Deloitte and co-lead of its Best Managed Program in B.C.
“Capability and innovation come through quite strongly with this company,” says Coleman, who is also AG Hair’s coach at Deloitte. “I don’t think they would be able to pivot as quickly if they weren’t so strategic and had the internal capabilities to do it.”
The manufacturing facility was a big investment, but one Coleman says has already paid dividends.
“They were looking forward with a strategic plan in mind about future growth and how they could expand, rather than just focusing on the day to day,” she says. “Best Managed companies are always pushing the envelope and are conscious about planning for the future.”
AG Hair was founded in Vancouver in 1989 by hairstylist John Davis and graphic artist Lotte Davis. The husband-and-wife team began bottling hair products in their basement and selling them direct to salons from the back of a station wagon.
The company eventually moved its manufacturing off-site, to a third party. One day, John went to watch the operations and was surprised to see salt being poured into the mixture. Although he was told salt is commonly used as a thickener, he didn’t like the potential side effects of dry hair and skin.
It was at that moment John decided the company would oversee its own manufacturing. “Through that experience, John also became an expert in product development,” says Fraser, who came to the company in 2000 as director of sales.
After having worked for more than two decades at PepsiCo and Kraft Foods, Fraser was eager to work at a smaller, more agile company where he felt he could help make a difference.
“It was perfect because I got to bring a lot of structure and process that I learned in those organizations, but I also learned an awful lot about being an entrepreneur from John and Lotte: that sense of urgency, the decision-making process, the need to get things done and drive things forward and pursue opportunities,” he says.
Fraser has helped drive AG Hair’s expansion into the U.S. and internationally, including Australia, Taiwan, and Central and South America. A portion of its sales go to One Girl Can, a charity founded by Lotte that provides schooling, education and mentoring for girls in sub-Saharan Africa.
Fraser also oversees the development of new, trending products, including a new deep-conditioning hair mask made with 98 per cent plant-based and natural ingredients. Hand-sanitizing spray and gel will be the latest addition to the company’s product lineup.
“We don’t see the demand [for hand-sanitizing products] going away,” he says. “As the isolation policies start to get lifted, people are going to need forms of security and protocols as they get back into regular life and work. We see there’s going to be a need for these types of products long-term.”
This article appears in print in the June 2020 issue of Maclean’s magazine with the headline, “Working out the kinks.” Subscribe to the monthly print magazine here.
Australia Warns of Vaccine Wait; U.S. Bases Hit: Virus Update
(Bloomberg) — A coronavirus vaccine may be two years away, if one is ever found, and low levels of infection may become a part of life, Australia’s deputy chief medical officer warned.U.S. military facilities in Okinawa have found a total of at least 50 coronavirus cases, NHK said. New infections in Tokyo exceeded 200 for a third day, though fell short of Friday’s record, Kyodo reported. Masked fans returned to baseball in Japan, making the country among the first to restart major sport with spectators.In the U.S., Texas hospitalizations topped 10,000 for the first time and California suffered its second-highest day of deaths. Florida’s biggest county had a record number of patients in intensive care.Key Developments:Global Tracker: Cases top 12.5 million; deaths surpass 560,000Wuhan shows the world how economies may recover‘Back to the nightmare’ as virus shuts Hong Kong schoolsTesting bottlenecks are hindering U.S. statesJapan urges urbanites to tour country, sparks virus fearBillionaire’s empire unexpectedly thrives in BrazilMasked fans return to baseball in JapanSubscribe to a daily update on the virus from Bloomberg’s Prognosis team here. Click VRUS on the terminal for news and data on the coronavirus.U.S. Bases in Okinawa Find More Than 50 Cases: NHK (5:15 p.m. HK)U.S. military facilities in Okinawa, including Marine Corps Air Station Futenma and Camp Hansen, have found a total of at least 50 coronavirus cases, NHK reported Saturday, citing unidentified people. NHK cited Okinawa Governor Denny Tamaki as saying many new virus cases have been confirmed at the bases.Virus Spreads Fastest in Cooler Temperatures: Telegraph (5 p.m. HK)Coronavirus spreads fastest at 4 degrees Celsius (39 Fahrenheit), U.K. government scientists said, adding to concern about a winter resurgence, the Telegraph reported. The Scientific Advisory Group for Emergencies is thought to be focusing on the precise temperature as Melbourne, which is currently in its coldest month, went into a six-week lockdown due to a spike in cases.Russian Case Increase in Line With Past Week (3:37 p.m. HK)Russia reported 6,611 new confirmed coronavirus infections in the past day, in line with increases in the past week, raising the total to 720,547, according to data from the Russian government’s virus response center. Almost 27% of new cases were asymptomatic. In the past day 188 people died of the disease, bringing total death toll to 11,205.Slovenia confirmed 34 new coronavirus infections on Friday, the most since mid-April, bringing the total number of infected to 1,793. The number of fatalities remains at 111.German Infection Rate Rises Slightly (2:28 p.m. HK)Germany’s coronavirus cases rose by 331 while the death rate held steady, according to data from Johns Hopkins University. Deaths increased by 6 to 9,063, a smaller increase than most days since the beginning of March.The reproduction factor — or R value — rose slightly to 0.80, according to the latest estimate by the Robert Koch Institute, Germany’s health body. That’s under the key threshold of 1.0, seen as crucial to preventing a second wave of infections.Tokyo Finds 206 New Cases: Kyodo (2:02 p.m. HK)Tokyo confirmed 206 new cases of coronavirus, Kyodo reported Saturday, citing unidentified people. The number of new cases exceeded 200 for the third straight day, but fell short of Friday’s daily record of 243.Hong Kong Adds at Least 20 Cases: SCMP (1:53 p.m. HK)Hong Kong confirmed at least 20 new coronavirus cases on Saturday, the South China Morning Post reported, citing a medical source. It’s not yet known how many of Saturday’s cases were locally transmitted, the SCMP said. On Thursday, the city recorded 34 locally transmitted infections, the most in a single day since the pandemic began.In response, the government reintroduced social restrictions that cap restaurant capacity at 60% and limit eight people to a table.Australia Warns of Two-Year Vaccine Wait (1:21 p.m. HK)Australia’s Deputy Chief Medical Officer Nick Coatsworth said a vaccine may not be available for between 18 and 24 months and the country must be able to keep the virus under control at low levels. “We need to prepare for a world without a vaccine,” he said at a media conference Saturday.Mask-wearing will be critical to reopening Australia’s second-most populous state as it seeks to curb a second wave of infections, Victoria Premier Daniel Andrews said earlier.Two million masks will be ordered and distributed to “priority groups,” he said Saturday. The state recorded 216 new cases and one death in the past 24 hours, and he urged Victorians to stay home this weekend as much as possible.Emirates to Cut 9,000 Jobs, BBC Reports (11:08 a.m. HK)Emirates Airlines plans to cut 9,000 jobs because of the coronavirus outbreak, BBC reported, citing airline President Tim Clark.The company had 60,000 employees before the pandemic, the BBC said. The airline plans to increase job cuts to as much as 15% of its workforce, having already reduced employee numbers by 10%, Clark told the news service.South Korea New Cases Fall (9:29 a.m. HK)South Korea reported 35 more cases in 24 hours, raising the total tally to 13,373. There no additional deaths, leaving the total at 288, the Korea Centers for Disease Control & Prevention said.The country reported 45 new cases of infection on July 10 and one additional death.Japan’s Contact-Tracing App Fails (8:49 a.m. HK)Japan’s health ministry suspended the registration of positive cases on its contact-tracing smartphone app Cocoa as it worked to fix an error that left some people unable to enter their information.The ministry aims to get the feature running again next week, according to a statement. The ministry encouraged users to keep using the app, which had 6.5 million downloads across iOS and Android phones as of Friday evening.Texas Hits Milestone (5:35 p.m. NY)More than 10,000 people were hospitalized with Covid-19 in Texas Friday, the first time the state has reached that benchmark. Cases there jumped by 9,765, an increase of 4.2% compared with the seven-day average of 3.9%. The state has added close to 10,000 cases for each of the last four days, and deaths have begun to spike in tandem, with another 98 fatalities exceeding the seven-day average.Governor Greg Abbott stepped up efforts to encourage people to wear masks, making the rounds of local television stations to warn that deaths are likely to rise in coming days.California to Release Prisoners (4:30 p.m. NY)California plans to release about 7% of its prison population, roughly 8,000 non-violent offenders, to relieve pressure on a chronically overcrowded correctional system that’s now struggling with a spike in coronavirus cases.The move will enable prisons to maximize available space to implement physical distancing, isolation and quarantine efforts, the California Department of Corrections and Rehabilitation said in a statement. It estimated that about 8,000 currently incarcerated people could be eligible for release by the end of August.U.S. Cases Rise 1.9% (3:55 p.m. NY)U.S. cases rose by 59,782 from a day earlier to 3.14 million, according to data collected by Johns Hopkins University and Bloomberg News. The 1.9% jump matched the average daily increase over the past week. Deaths rose 0.7% to 133,677.California Has Second-Deadliest Day (2:21 p.m. NY)California reported 140 new virus deaths, second only to the 149 reported Thursday as the most yet for the pandemic. The 14-day average is 75, according to state health data.Total confirmed cases rose by 7,798, or 2.6%, pushing California’s total infections to 304,297. While the gain was less than the 3% average over the past seven days, the state’s outbreak has been accelerating: Infections have exceeded 300,000 just two weeks after crossing the 200,000 milestone.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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