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Not immune

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Like a thief in the night, the taxman caught offguard local employees of foreign governments, embassies, diplomatic missions and international organizations with onshore operations. This was as the Bureau of Internal Revenue ruled that Philippine nationals hired by these institutions—long assumed to be exempt from income taxation—are not so privileged after all. The BIR said the exemption from withholding taxes “does not equate to the exemption” from paying the income tax itself.

The ruling was issued on April 12, the last Friday before the April 15 deadline for tax payments. Among the most affected organization was, of course, multilateral lender Asian Development Bank, being headquartered in the Philippines and having about 1,400 local staffers. The ruling covered compensation received in 2012, so you can imagine that every single staff affected by this suddenly had to raise a substantial amount to comply.

Since the ruling suddenly affected incomes of households and changed their net take-home pay assumptions in the years ahead, some employees of affected institutions deem it better to either retire or seek employment elsewhere.

Asked about this, Yasushi Kanzaki, ADB director general of the budget, personnel and management systems department, told Biz Buzz that the bank had supported Filipino staff in complying with the regulation by facilitating a BIR kiosk within the ADB complex to answer staff’s questions, extending low-interest loans and continuing to try to facilitate clarifications of tax laws and obligation and compliance. “Confusion surrounding the nature and extent of tax obligations have disrupted families’ financial planning and have caused anxiety for some staff and their families,” Kanzaki said.

Asked whether this would affect the bank’s competitiveness in the local labor market, Kanzaki said: “ADB has long sought to compete in all relevant employment markets and we believe our compensation levels are competitive in all local markets. We periodically review our local markets to confirm our position, and we expect to remain competitive.”  Doris C. Dumlao

Property auctions

The Ramos family, which owns the country’s largest book retailer National Bookstore, has recently put on the block two large parcels of land in the metropolis, likely seeking to unlock values while the property market is buoyant.

The first property, with the size of a little over a hectare, is the idle lot along Edsa in Cubao, which is up for bidding, according to the grapevine. The other property of a little more than three hectares, is along Shaw Boulevard in Pasig. This one is up for negotiated sale.

The family declined to comment on the transaction.  Doris C. Dumlao

Uniwide investors speak up

More than 500 small investors of the Uniwide Group have taken legal action against Manila Bay Development Corp. (MBDC) in an effort to have the property developer pay back P381 million in rentals.

The small investors also want a 20-year lease extension on MBDC’s reclaimed property in Parañaque City on which Uniwide’s Coastal Mall stands. The goal of the small investors is to recover what they say is at least P2.1 billion invested by shareholders in what was once the biggest retail chain in the country.

In a petition filed last week before the Regional Trial Court of Parañaque, Brenelie Rualo and 500 other petitioners—representing more than 15,000 investors similarly situated, thank’s to Uniwide’s 1996 initial public offering—also want MBDC to pay Uniwide P100 million in damages for what they claim are “badges of fraud” that this private developer had perpetrated since the lease agreement was sealed two decades ago.

Chaired by Jacinto Ng Sr., MBDC owns 40 hectares of reclaimed property near Roxas Boulevard and Coastal Road, of which a 20-hectare portion was leased by businessman Jimmy Gow in 1993 for what would become Uniwide’s Coastal Mall.

The aggrieved investors say these “badges of fraud” include the surprise 50-percent reduction in the lease area—from 20 hectares to just 10 hectares—shortly after the agreement was signed to give way to what is now known as Macapagal Boulevard. This, they claim, diminished the benefit of the Roxas and Macapagal Boulevards for Coastal Mall.

The sizable area reduction benefited Ng’s back lots on the same reclamation area at Uniwide’s expense, they complain, adding that MBDC failed to inform Uniwide beforehand of a government plan to build that highway that would slice through that very property, requiring a change of plans and reduction in the return on investment of lessees and stallholders in the amount of P400 million.

In their damage suit, Rualo and the investors say that, like many other ordinary employees “who dreamed of retiring early in life,” they had “saved whatever [was] left of their small [salaries] to invest in the shares of stock of the Uniwide when it made a public offering.”

They add that they were able to save enough money to buy Uniwide stocks in the IPO by, among others, skipping lunches or snacks and being frugal in their spending on other basic needs.

It was no joke to save P5,000 for an IPO purchase in 1996, they say, when their average daily pay then was P145. Caveat emptor, indeed.  Daxim L. Lucas

 MWSS’ big decision

Metropolitan Waterworks and Sewerage System (MWSS) is readying itself for arbitration proceedings as it is set to reject today or within the week rate increases being proposed by Maynilad Water Services Inc. and Manila Water Co. Inc., which serve Metro Manila and nearby provinces.

A highly placed source told Biz Buzz that MWSS was taking a “pro-consumer” view and would exercise its power as regulator to turn down the petitions to increase rates, which the regulator deemed was unnecessary.

Maynilad, which is led by the group of businessman Manuel V. Pangilinan, is seeking an increase of P8.58 a cubic meter while Manila Water, a unit of Ayala Corp., wants to raise rates by P5.83. The companies are seeking higher rates to help them recover billions of pesos in expected investments in their respective concession areas in the coming years.

“Judging from many months of audit, MWSS was not inclined to give any rate hike,” the source said.

The decision has been long-delayed and based on the five-year cycles provided under the concession agreements, the new rates should have been implemented at the start of 2013. This was delayed following a reorganization at the MWSS last year.

The review included an audit on the so-called appropriate discount rate—which was a major stumbling block during discussions, our source said. MWSS also reviewed expenditures over the past five years and future spending requirements.

As noted, Maynilad and Manila Water have other options at their disposal.

The water concessionaires could go through an arbitration process with an international court, as provided under the concession agreement.  Miguel R. Camus

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  • eight_log

    Not Taxing those Filipinos employed by foreign embassies and other international organizations with with onshore operations will be tantamount to SECs erroneous interpretation of the 60/40 rule is twisting the rules on income tax payments!!!!

    Those Filipinos are using public facilities day in day out … dapat lang silang magbayad ng tax!!! The differences between them and OFWs are glaring!!!!!

  • eight_log

    Compare the water rates with those in Malaysia, Nairobi as one writer pointed out were using Maynilad or Manila Water as models …. and tanong BAKIT DI HAMAK MAS MURA ANG TUBIG SA MGA LUGAR NA YUN??? Pinagaralan din ng Jakarta ang posibilidad na ibigay sa Manila Water ang water distribution sa Jakarta …. ang tanong …. BAKIT NAGBAGO ANG JAKARTA and instead they established a company of their own to do the distribution after studying what has happened in Pinas????

  • WeAry_Bat

    BIR did that with the condos also, that association dues etc. were taxable. I thought income meant profit…but even in the absence of profit, at every stage, imagine that, every point from distribution as long as there is a transaction.

    So when will the time come where everything will be taxed in the Philippines…



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