As if it didn’t have enough problems to deal with, no thanks to a P717-million loss through prohibited wash sales, the state-owned Development Bank of the Philippines (DBP) now has to deal with another major setback that will cost it a few billion pesos.
That setback was dealt to it recently by the Bureau of Internal Revenue (BIR), which recently wrote the government-run bank dunning it for back taxes worth—hold your breath—P3.16 billion. Yes, that’s “billion.”
According to a preliminary assessment notice sent to DBP by the BIR’s Large Taxpayers Service, the bank packed its books with almost P6.6 billion worth of expenses which, after review by tax examiners, were determined to be “taxable” and, as such, should have been subjected to a final tax.
DBP’s attempt to sneak in these expenses under the eyes of BIR’s examiners happened in 2011 and was uncovered during a recent audit (which the overworked and undermanned tax bureau usually conducts some years after a corporate entity makes the claim).
Of course, in 2011, DBP reported a net income of P4.02 billion, with management—under then president and CEO Francisco del Rosario Jr.—thumping its chest about how much better the bank was under their watch compared to the previous dispensation.
Applying the 30-percent income tax rate on these non-deductible expenses, plus interest penalties of P1.2 billion, plus a “compromise penalty” of P50,000, reveals a “total due and collectible” amount of P3.16 billion, according to BIR Large Taxpayer Service officer-in-charge Nestor Valeroso.
“If we fail to hear from you within the [15-day reply period], you shall be considered in default, in which case, a formal letter of demand and assessment notice shall be issued by this office calling for the payment of your deficiency taxes, inclusive of civil penalty,” Valeroso said.
So taking into account this tax deficiency—and if the BIR gets its way (and it usually does)—maybe the P4-billion net income DBP was claiming in 2011 should only be…. *gasp*… about P860 million. Ouch. Reversing earnings of that magnitude is bound to hurt.–Daxim L. Lucas
Election heat
Heat seems to be escaping from the local economy lately, in the form of foreign portfolio investments, or “hot money.” According to the latest data from the Bangko Sentral ng Pilipinas (BSP), the country incurred a net outflow of $31 million in foreign portfolio investments in April. This was higher than the $22 million the month before and a reversal of the $325 million in net inflow in April of last year.
Of course, economists and market analysts are not at all worried about these figures. In the first place, the very nature of hot money is that it comes in and goes out of the country, without any hard assets to tie it down. Secondly, this is also indicative of profit-taking and needs to be seen and examined in a larger context.
Then again, there are those who believe that this is one symptom of a far bigger issue: Foreign investors and fund managers are worried about the socio-political landscape in the Philippines, particularly how ill-prepared we are for the upcoming elections.
Apart from seemingly shooting itself in the foot and creating its own PCOS mess, there is now talk that the Commission on Elections (Comelec) is going to cancel the Voter Verification System (VVS) project. As one foreign fund manager put it, “conducting an election without a credible VVS is like running an assembly line with stone-age tools. That’s not exactly where we want to invest our money.”
It’s strange that these reports should come in the midst of the Comelec’s very public effort to encourage voters to register their biometrics. If the VVS is indeed canceled, then all the time and money spent collecting nationwide fingerprints would again go to waste. What will happen to investor confidence then?–Daxim L. Lucas
Solar-powered homes
It has built solar power systems on some of the country’s major shopping malls but now, Solar Philippines—an integrated solar energy firm founded by young entrepreneur Leandro Leviste—is also building on warehouses and breaking into the residential space as well.
Beyond commercial roofs, Solar Philippines has rolled out an innovative offer to install solar panels in private residences—at zero cost to the homeowners. The proposal is for Solar PH to put solar panels on one’s roof and finance it. The homeowner will pay back to Solar PH the full price of whatever is saved from the use of solar power for 10 years. Hence, there’s no additional cost to acquire the solar power system. “After 10 years, the system is yours for free,” Leandro says.
Since this “pay what you save” offer was beta-launched in Facebook recently, Solar PH has been swamped with applications from homeowners wishing to have solar panels on their rooftops. How will it determine which homes to install solar panels given this long queue of households keen on going green in their energy usage? “We’re credit-screening all of the customers,” he says.
But what could really scale up the use of solar power systems on residential roof is if Solar PH teams up with horizontal or subdivision developers. “We’re in discussions with a number of publicly listed housing companies right now,” Leviste says. So pretty soon, we may see the country’s very first solar-powered community.
Recently, Solar PH entered into a partnership with an affiliate of Megaworld Construction Corp. to build solar farms with 250 megawatts (MW) in capacity. This is on top of 50- to 100-MW rooftop solar projects that the company expects to complete by year’s end. Solar PH is now installing solar panels at the Mall of Asia (2.6MW) and three more Robinsons malls (combined capacity of 3.5 MW) in Antique, Cadiz and Dumaguete.
Leviste is looking forward to the day when electricity generated from solar systems could be more efficiently stored in batteries that can power homes after sundown.–Doris Dumlao-Abadilla
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