TRAIN LAW

Related Local Studies

http://ilsdole.gov.ph/technical-learning-session-on-the-tax-reform-for-acceleration-and-inclusion-train-law/
In December 2017, R.A. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) was signed into law by President Rodrigo Duterte. The current administration envisions
that this priority agenda will correct certain deficiencies in the current tax system in order to make it simpler, fairer, and more efficient. Revenues to be collected from this
initiative will be used to support the government’s infrastructure, education, and health programs, which in turn will propel poverty reduction efforts. In 2016, the Department
of Labor and Employment (DOLE) bared its 8-Point Labor and Employment Agenda. The first item in the Agenda is to continuously enhance and transform DOLE into an efficient,
responsive, purposeful, and accountable institution. In line with this commitment, it is vital for the Department to understand and critically analyze TRAIN in order to identify its
impacts on the Filipino workers and come up with relevant adjustment measures. As a way forward, the Institute for Labor Studies (ILS) organized a technical learning session on
TRAIN to introduce the components of the law, and to help the Department in crafting guided and informed policy options and strategies. The activity drew the participation of
senior officials and heads of office and representatives from different bureaus, services and attached agencies of the DOLE.

Related Local Literature

The TRAIN law and the poor
BYANTONIO P. CONTRERAS ON JANUARY 30, 201

https://www.manilatimes.net/train-law-poor/377248/
THERE is no doubt about it. The Tax Reform for Acceleration and Inclusion (TRAIN) Law shifts the tax burden away from income and into consumption.The law reduces the
income tax burden of the earning Filipinos, recalibrating the brackets with the intention of increasing the disposable income after taxes. The theory is that increases in
disposable income can spur consumption. This will not only drive growth, but also generate government revenues where the taxes are now shifted to the consumption of goods
and services.
While the law targets specific goods, such as sweetened beverages and vehicles, it also has increased the taxes for fuel. We know that the latter would lead to increases not only
in transportation costs, but will have an effect in the prices of practically all commodities.
The idea is that whatever is lost in tax revenues from personal income is compensated by the taxes on the purchase of goods and services.
One could argue that the taxes on vehicles would have positive environmental benefits, even as the taxes on sweetened beverages would have positive health benefits. In
addition, one can also argue that taxes on vehicles will only affect the upper classes, and not the poor.
However, the fuel taxes will have an effect that will cut across income classes. And for the poor, this would even be costlier, since their pre-TRAIN levels of earnings, if any, are
not taxed anyway, and hence any change in the tax rates would not have an effect in their disposable incomes. Thus, any increase in prices of transportation fares and
commodities will certainly hit the poorer classes of society harder.
This is precisely why there is a subsidy component to the TRAIN Law, which is going to be implemented by the Department of Social Welfare and Development (DSWD) through
the unconditional cash transfer (UCT) program.
Under UCT, households which qualify will be given a monthly cash grant of P200 in 2018, and P300 in 2019 and 2020. It is estimated that about 10 million Filipino households
and individuals who belong to the poorest sector of the country will benefit from this program.
At the end of the month, the DSWD is scheduled to begin handing out a lumpsum of P2,400 to the qualified beneficiaries. For 2018, a total of P24 billion has been earmarked for
the implementation of the UCT in the 2018 General Appropriations Act. The funds are now deposited with the Land Bank of the Philippines.
The first to receive the cash grant are the 1.8 million household beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps) with cash cards who will receive these by
tomorrow, January 31. The remaining 2.6 million 4Ps beneficiaries without cash cards will receive theirs at a later date.
Also included in the UCT are the three million indigent senior citizens who are currently also beneficiaries of the DSWD Social Pension Program which is implemented in
partnership with their respective local government units (LGUs). They will receive their cash grants by the end of March 2018.
The remaining 2.6 million households will then be chosen from the DSWD Listahanan, or National Household Targeting System for Poverty Reduction (NHTS-PR). A validation
process will be conducted and is expected to last for three months. DSWD plans to finish the process by May so that the cash grants will be distributed to the qualified
households by the end of June.
Key to the success of this component of the TRAIN Law is the effectiveness and efficacy of its implementation. The DSWD is now in the process of finalizing the implementing
guidelines. Included in the guidelines are the terms of partnerships with Land Bank and other financial institutions. A program management office will be established within the
DSWD to oversee payroll generation, beneficiary validation and the release of the funds to the beneficiaries.
Unlike the 4Ps, which is a conditional cash transfer where the disbursement of the cash grant is contingent on some conditions, such as enrolling children in school, the UCT is an
outright subsidy given by the State to the poor to shelter them from the shock of increasing prices despite unchanging low levels of income which is expected as an effect of
TRAIN.
Outright subsidies are always a double-edged sword. They provide a stopgap measure for families which are adversely affected, hoping that the cash grants will compensate for
the increases in household expenditures due to rising prices of commodities.
However, the strategy of giving a lumpsum of P2,400 to a household, without the rudimentary consciousness to save, could lead to the possibility that the amount may end up
being quickly spent, and hence its effects would not be felt to be spread out over the entire year. Another concern is whether the amount is enough to cover the increases in the
prices of goods. The subsidy appears to be also insensitive to household size, which is in fact a primary factor in determining whether the amount would be sufficient.
The TRAIN law is banking on the economic growth that will be generated by the infrastructures to be built and whose funds will be drawn from the tax revenues, as well as from
foreign development assistance whose release is premised on the approval of the TRAIN law. It is also hoped that the so-called “Build Build Build” initiative will generate demand
for construction-related work.
However, one should also bear in mind that aside from the employment benefits that may result from the infrastructure rush, which could not even accommodate all 10 million
households, there is no assurance that the aggregate growth of the economy resulting from infrastructure development will indeed trickle down to the poor.
Direct subsidies can at best provide quick palliatives. The long-term solution is to invest not only in physical infrastructures, but also in social infrastructures that could transform
the poor from passive recipients of cash grants, into becoming active and viable economic actors.

Related Foreign Literature

https://www.dof.gov.ph/taxreform/index.php/2017/12/13/2422/
Posted on December 13, 2017 by DOF Tax Reform

Leaders of foreign business institutions and Cabinet officials have reiterated their support for the Tax Reform for Acceleration and Inclusion Act (TRAIN) as a key factor in
transforming the country into an investment-led economy that truly benefits the poor and grows a strong middle class. Julian Payne, the president of the Canadian Chamber of
Commerce of the Philippines, said the TRAIN will benefit people with “lower-level incomes” and make the tax system more progressive
“We applaud the administration for taking the initiative and embarking upon this major effort. We definitely support the fact that [TRAIN] will maintain a responsible fiscal
framework that will include funding for the public sector, for fiscal and social infrastructure, which will benefit the poor as well,” said Payne, who represented the Joint Foreign
Chambers of the Philippines (JFC) at one of the earlier hearings of the Senate ways and means committee on the proposed tax reform bill.
The Senate ways and means committee began the deliberations on the TRAIN, which was filed in the chamber by Senate President Aquilino Pimentel III as Senate Bill (SB) No.
1408, last March 22. The Senate began conducting plenary debates on the revised measure, SB 1592, on Nov. 22 and finally approved it with substantial amendments last Nov.
28.
Meanwhile, House Bill (HB) No. 5636, is the TRAIN version approved by the House of Representatives last May 31.
The bicameral conference committee tasked to reconcile the conflicting versions of the House and Senate versions of the TRAIN began its meeting last Dec. 1. It is expected to
wrap up its final report this month.
Finance Secretary Carlos Dominguez III has expressed hopes that the bicameral conference committee could submit its final reconciled version of the TRAIN to Malacanang by
the second week of December so that President Duterte could sign it into law before the Christmas holidays, in time for its publication before the end of the year and its
effectivity by Jan. 1.
Payne said the JFC is also backing “the intended reduction in corporate and personal income taxes in the sense (that it will make us) competitive with our ASEAN neighbors” and
develop a business environment that will encourage foreign investors.
Wayne Bradford, a senior advisor of the International Tax and Investment Center, commended the Department of Finance (DOF) led by Secretary Carlos Dominguez III for its
thorough work on TRAIN, which “is generally consistent with important economic principles that guided most tax reforms worldwide.”
“It aims to lower marginal tax rates for most taxpayers. It broadens the tax base and attempts to simplify the system that is covered in your tax bill Package One,” said Bradford.
He said the Center also fully supports “the DOF’s original (proposed) petroleum tax increases” as well as the fuel marking and other activities that aim to combat oil smuggling.
The TRAIN, which aims to slash personal income taxes and raise additional revenues for the government’s unmatched spending program on infrastructure and human capital
development, has also garnered the support of the local business sector and civil society organizations.
Secretary Ernesto Pernia said at the same hearing that implementing the TRAIN will benefit the economy with “an increase of 1.4 percent” GDP growth per year and generate
1.1 million new jobs as this measure would help support the government’s massive infra program.
“I think that’s going to be a big boost to the economy in general. Also in terms of employment generation, many of these beneficiaries of additional employment will be the
poor,” Pernia said.

https://businessmirror.com.ph/train-law-estate-tax-and-possible-implications/
TRAIN law: Estate tax and possible implications
By Atty. Jose Emilio M. Teves -January 25, 2018

PREVIOUSLY, the National Internal Revenue Code provided a table of rates that the estate of a decedent would pay if the value of the net estate met a certain threshold. To get
the value of the net estate, we would subtract the deductions allowed by law from the gross value of the estate.
For instance, if the net taxable estate’s value was over P10 million, it would pay the amount of P1,215,000 plus an additional rate of 20 percent for the excess of P10 million.
Thus, if the value of net estate is P11 million, the estate shall pay P1,215,000. An additional P200,000 shall be imposed, which is the 20 percent of the excess of P10 million. The total
amount would be P1,415,000.
The Tax Reform for Acceleration and Inclusion (TRAIN) law has simplified the computation of the net estate tax. There is no longer a table or graduated rates. The estate tax is now
fixed at 6 percent of the value of the net estate. So, using the previous example of P11 million, the estate tax shall be P660,000.
The TRAIN law has simplified deductions, as well. Originally, there were two categories of deductions: ordinary and special. These two categories were composed of several other items,
most of which required proof through official receipts and the like. Further, the allowable deductions were subject to limitations that were cumbersome to derive.
Broadly speaking, the TRAIN law provides for three types of deductions.
There is the standard deduction of P5 million. This amount is an increase from the original, which was P1 million. The value of the family home is another deduction, the amount of
which is capped at P10 million. This is another increase. Before the amendment, such deduction was pegged at P1 million. If the value of the family home exceeds P10 million, the excess
would be subject to estate tax. The final deduction shall be the debts of the decedent.
The fact that the P5 million is considered as a standard deduction is a boon for many Filipinos. Since it is a standard deduction, there is no need to substantiate the same with receipts—it
can be automatically claimed.
An interesting situation arises regarding bank deposits of decedents. Originally, the heirs could only withdraw up to P20,000 from the deposits. The TRAIN law has removed that cap,
but the amount withdrawn would be subject to a final withholding tax of 6 percent.
Now, this situation could arise: What if the amount of the net estate tax due, after deductions, was zero or less than the amount subjected to final withholding tax? Such a situation would
be possible and there may not be a tax liability in the first place if the gross estate and deductions are considered. The advanced deduction from the final withholding tax prejudices the
estate of the decedent when it should not. In effect, the withdrawn amount of deposit is taxable by itself, regardless of the net estate of the decedent.
How should this be resolved? The author is of the opinion that, instead of a final withholding tax, it serves the purpose of the TRAIN law better if it is a creditable withholding tax. This
is so that the withheld amount could still be utilized against the tax imposed on the net estate and, perhaps, refunded if there is excess. Such change in treatment, however, would require
an amendment and not a mere implementing regulation.
There are, however, other peculiarities in this final withholding tax approach that may be clarified further through the implementing rules and regulations (IRR). The requirement is to
impose a final withholding tax on the withdrawn amount. Should all withdrawals from a deposit account, where a decedent is the depositor, a joint or a codepositor, be subject to the 6-
percent final withholding tax? In a joint account, for example, the surviving depositor may actually be withdrawing his own share from the joint deposit. Would that still be subject to a
final withholding tax? Also, even in a case where the sole depositor is the decedent, it is possible that the deposit is considered part of the conjugal assets where the surviving spouse
owns a part of it. The withdrawn amount may pertain to the share of the surviving spouse. Would that still be subject to a final withholding tax? While these are not clear in the TRAIN
law, perhaps these instances can be clarified by the IRR, as it may not have been the intention of the law subject to final withholding tax deposits that are not part of a decedent’s estate.
The author is a junior associate of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global.
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or
legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at josemilio.teves@bdblaw.com.ph, or call 403-
2001 local 150.

Related Foreign Literature

http://www.bworldonline.com/critique-uap-studies-tax-reform/
Yellow Pad
By Madeiline Aloria and Joshua Uyheng

With House Bill 5636 or the Tax Reform for Acceleration and Inclusion (TRAIN) well underway at the Senate Committee on Ways and Means, it is crucial to take stock of the
studied and evidence that have been presented to lawmakers, and scrutinize their relevance in light of recent developments.
This includes the two industry-commissioned studies by the University of Asia and the Pacific (UA&P), which support an adjusted schedule for the fuel excise tax and a
reconsideration of the tax on sugar-sweetened beverages. Though their proposals look sound attractive, comprehensive, and economically sound on the surface, the more than
200-page pair of studies belies major gaps and biases in the analysis that threaten to weaken the most progressive provisions of TRAIN.
A SLOWER BURN FOR FUEL EXCISE?
Despite natural growth in people’s nominal income, gasoline and diesel excise taxes remain unadjusted at P4.35 and P0.00 since 1997. These unadjusted rates have resulted in
about P140 billion in annual forgone revenues, and made our tax system less progressive by favoring the richest 10% of Filipino households who consume 50% of fuel in the
economy. To correct this, the DoF proposes an increase of at least P6 per liter.
In TRAIN, the proposed increase is staggered to P3 in 2018, an additional P2 in 2019, and a final P1 in 2020. By the first year, about P74 billion will be generated to fund
infrastructure, health, education, and social protection measures. Under this proposal, independent estimates show an increase in annual direct expenditure for gasoline, diesel,
kerosene, LPG, and lubricant expenditures totaling only P76.06 for the poorest decile while increases in commuting costs will only total P39.8 — both of which will be more than
covered by the proposed cash transfers worth P2,400 annually per qualified household.
In contrast, the UA&P recommends an adjusted schedule of P1.75, P2, and P2 over the same three-year period. The idea seems attractive, since by the end of three years the
results seem comparable to the original proposal (P6 vs. P5.75). However, this proposal arises from the UA&P estimate using 2012 data, claiming that TRAIN will increase the
fuel expenditure of the first decile annually by P1,076. This projection is questionable, given that the first decile’s annual total fuel expenditure does not even reach P500,
according to the 2015 Family Income and Expenditure Survey.
Moreover, the UA&P proposal comes with very crucial caveats.
Alongside the lowered rate of P1.75 in the first year, the paper proposes that the threshold for personal income tax (PIT) exemption be lowered to P150,000, rather than the
threshold agreed upon both in the House of Representatives and the Senate, which is at P250,000 year. They later on assume the feasibility of a cash transfer worth P3,600 — an
amount that was only proposed to match the original DoF proposal of a P6 increase.
The first problem with the watered down fuel excise is that it isn’t viable without drastic adjustments to the other aspects of TRAIN. Lawmakers will be hard-pressed to change
the PIT exemption threshold, not to mention that the cash transfers are supposed to come from 40% of the incremental revenues from the fuel tax. The P1.75 rate is nowhere
near enough to fund the transfers, let alone any new government programs.
Second, as the diluted fuel excise tax increase threatens the implementation of the cash transfers program, UA&P’s proposal is poised to benefit more the rich (who has
guaranteed gains from income tax cut), than the poor, making TRAIN less progressive.
A SUGAR-FREE TRAIN?
House Bill 5636 also proposes a P10/liter tax on sugar-sweetened beverages (SSBs). By raising the price on SSBs, the tax aims to reduce excessive sugar intake, which has been
linked to obesity and life-threatening diseases like diabetes. Revenues from the SSB tax will be earmarked for programs to prevent noncommunicable diseases, feeding
programs, support for potable water, and support for alternative livelihood programs of sugar-producing regions.
In its analysis, UA&P calculates economy-wide multiplier effects for various interrelated industries, and shows the bill’s potential adverse impact on beverage sales and
subsequently on direct and indirect employment. It demonstrates an appreciation for wider-scale impacts of the tax, but they do so unfairly.
First, the UA&P study claims that the gains from SSB revenues, which it estimates at about P38 billion, will be eroded to only P8 billion due to decreased VAT and CIT revenues
arising from decreased sales. However, they solely account for decreased VAT and CIT from decreased beverage sales, but completely neglect households’ increased spending
(perhaps on other goods) that will result from the increased disposable income all deciles will receive from the cash transfers and the PIT relief. This now increases VAT and CIT
revenues from other goods.
Assuming, without conceding, the net P8 billion from SSB tax is correct, there is still clear concession on the part of UA&P that the government revenues stand to be much bigger
than current estimates already stand.
Note that based on the country’s experience, excise tax is among the most efficient tax to administer, with 95% of the target collections met on the average. While the UA&P
wrongly presents a tug-of-war among the three, in the lens of equity and revenue generation, introducing excise tax is a complement to VAT and CIT given the fact that they
result in collections equivalent to only 40 to 50% of their supposed amounts, respectively.
Second, the UA&P study uses the notion of multiplier effects as an economic strawman, portending crippling losses to the economy due to impact on industries, but
conveniently ignoring the potential welfare investments from additional government financing for education, health, infrastructure, and social protection. Not to mention it will
benefit businesses that often complain of the complexities in the tax system, an issue that tops the list of deterrents to business growth in the country. In short, the study only
pretends to be comprehensive but only to the extent of shoring up certain interests.
Finally, the UA&P study totally forgets the provision’s health impacts.
As former Secretaries of Health and numerous medical associations have pointed out, the SSB tax will have direct effects like reduced sugar consumption to curb obesity and
reduce top noncommunicable diseases like diabetes, as well as indirect effects like funding nutrition programs to help the undernourished.
Excessive sugar intake also has economic impacts in terms of health costs, productivity costs, and plunging vulnerable families into poverty. Alleviating these will have their own
multiplier effects that benefit all, especially the poor and near poor.
ROUNDING THE FINAL STRETCH
As TRAIN enters its last few sessions with the Senate Committee on Ways and Means, it is important to focus the discussions where they matter most in light of ever-evolving
evidence.
For the fuel excise, by keeping the current proposal’s P3 increase in the first year, lawmakers will be able to keep both the PIT exemption and a cash transfer of P2,400 for the
poorest 50% of households, all while generating substantial revenue for public transportation, universal health care, and other programs in the pipeline. What matters is
whether they will receive the promised income tax relief and cash transfer, which will more than offset inflationary impacts. This is achieved in the P3 case, not the P1.75 case.
As for the SSB tax, by considering a big picture that seriously accounts for its health impacts and complementary measures, a sweet spot may certainly be found. The dichotomy
the UA&P study draws between health and the economy is a specious one: first, because health itself is a precondition for a growing and equitable economy, and second,
because their economic calculations themselves are incomplete and hence biased.
For a truly progressive tax reform, the evidence on the table must be rigorous, comprehensive, and up-to-date. More importantly, they must approach the tax reform
objectively, with the people’s welfare in mind. As TRAIN rounds its final stretch, it cannot risk compromising its key features based on arguments well past their prime; the TRAIN
has already left that station.
Madeiline Aloria and Joshua Uyheng are researchers of Action for Economic Reforms
www.aer.ph

JEEPNET
Related Foreign Literature
http://bizresearchpapers.com/Paper-6new.pdf
International Review of Business Research Papers Vol. 4 No.1 January 2008 Pp.68-84 Lessons from Jeepney Industry in the Philippines Candy Lim Chiu* This paper reports on the
empirical investigation of the perspective of jeepney industry based on their actual experiences in the Philippines. These viewpoints were elicited during face to face, structured
interviews lasting between 1.5 to 3 hours. The industry are experiencing great uncertainty with respect to long-term goals especially if what is currently happening is unstable,
uncertainties about the magnitude of jeepneys in the market, the cost and benefits, but stakeholders are willing to be involved in promoting the industry to its maximum
potentials. There appear to be few articulated and carefully thought-out development strategies nor is there much evidence of internal business processes being reengineered
to accommodate the requirements of jeepney presence. The objective of the study is to examine what are the problems, benefits and what might be done to alleviate the
jeepney industry in the country. Field of Study: Business, Entrepreneurship, Jeepney Industry and Transport.

Related Local Studies

file:///C:/Users/marylaine/Downloads/An_Ergonomic_Study_on_the_UP-Diliman_Jeepney_Drive.pdf
Abstract
The Philippine Jeepney is one of the most popular, the most accessible and cheapest medium of public transportation in the country. During their driving period, an average of
10 hours a day, the Filipino jeepney drivers are exposed to sustained awkward postures. This research aims to evaluate the drivers’ workspace and driving conditions in relation
to their anthropometric measurements and their workspace dimensions in order to determine the sources of awkward postures.A comprehensive survey among jeepney drivers
inside the UP Diliman campus was conducted to identify the discomforts experienced by the drivers. In addition, a workspace evaluation in comparison with the drivers’
anthropometric measurement was also administered to seek out discrepancies that accounts for the discomforts felt. Results reveal that jeepney drivers’ working conditions
pose danger to their health and safety. For instance, there is an insufficient distance between the steering wheel and driver’s seat causing restraint to the drivers’ mobility. The
limited height of the windshield also blocks the driver’s line of sight keeping the drivers leaning forward when looking for traffic signs. Recommendations were made to improve
the working conditions of the Filipino jeepney drivers.
©2015The Authors. Published by ElsevierB.V. Peer-review under responsibility of AHFE Conference.
Keywords:Philippine Jeepneys; Workplace assessment;Ergonomics
* Corresponding author. Telefax +63-2-981-8500 Loc 3128. E-mail address:aaportus@up.edu.ph
2351-9789 © 2015 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review
under responsibility of AHFE Conference doi: 10.1016/j.promfg.2015.07.584

Related Foreign Studies

http://cleanairasia.org/wp-content/uploads/2017/04/Jeepney-CB-Study.pdf
The Philippine public utility jeepney (PUJ) is an iconic transportation mode that symbolizes the ingenuity of the Filipino people. Jeepneys serve as the backbone of the Philippine
public transportation system, providing cheap and easily accessible transportation services to the masses. It is estimated that 250,000 jeepneys are currently operating in the
Philippines with almost a quarter operating in Metro Manila. The heavy reliance on these iconic jeepneys, however, do come at a cost. Most jeepneys are running on second-
hand and poorly maintained engines which significantly contribute to urban air pollution. The air quality in major urban areas such as Metro Manila is becoming a serious
problem with considerable health implications estimated to be about 1.5% of the country’s GDP. As such, measures to reduce air pollution are being explored urgently, including
those related to the jeepneys. This paper, produced through the collaboration of the Blacksmith Institute and Clean Air Asia, investigated the associated costs and benefits of
different technology alternatives for jeepneys and incorporates non-financial elements such as health impacts. It assessed several technological options for the jeepney sector
considering relevant factors related to financial viability, environmental and social costs and benefits: electric jeepneys; Euro 4 diesel jeepneys; Euro 4 LPG jeepneys; electric-
hybrid jeepneys; shifting to larger vehicles such as Euro 4 diesel minibuses and; Euro 4 diesel buses. The study evaluated these technologies in isolation, but also evaluated a
program which embodies the adoption of a combination of these technologies based on their suitability to the different route types. This study focused on simulating the
application of such technologies in Metro Manila, in support of the program of the Department of Transportation and Communications (DOTC) which aims to successfully
implement shifting towards cleaner technologies for jeepneys in the metropolis. The study takes into account major factors such as acquisition and operating costs, internal
revenue impacts (import tariffs, fuel and energy taxes, vehicle maintenance-related taxes, and income tax), monetized employment impacts, energy impacts, emissions impacts,
health and non-health impacts and the social costs of Carbon. It must be noted that there are relevant elements that were not covered in this study, such those related to road
safety, and the drivability of the vehicles. The DOTC supports the establishment of standards for customized local road vehicles (CLRV), and thus the agency supports a holistic
option instead of promoting a standalone engine retrofitting option. Furthermore, the study focused on assessing the Executive Summary 1 costs and benefits of replacing
jeepneys with whole new vehicle units, and does not consider retrofitting as a suitable alternative for modernizing the sector as the other issues aside from air pollution - safety,
drivability of the said vehicles, and the provision of higher quality service to the passengers – are not addressed by this option. Whole vehicle replacement opens up
opportunities for addressing these complicated issues, which would have been left unsolved if engine retrofitting was pursued. Even though engine retrofitting may seem to be
the more appealing solution due to the initial lower costs, the costs of the perceived monetary savings can potentially be huge, as such an approach will hinder the full
transformation of the sector

Related Local Literature

http://newsinfo.inquirer.net/939381/jeepney-drivers-urged-to-form-cooperatives
Jeepney drivers urged to form cooperatives
Jeepney operators should form cooperatives and consortiums so they can acquire at least 10 new jeepneys offered at P1.4 million each under the government’s public utility
vehicle (PUV) modernization program, transportation officials said at the House of Representatives on Thursday.
Their suggestion was in response to public transport groups’ worries about the high amortization rates for the purchase of new PUV models that would cut into the meager
income of drivers and operators.
Martin Delgra III, chair of the Land Transportation Franchising and Regulatory Board (LTFRB), told the House committee on transportation that in any other business, the cost
could be effectively managed “if you’re going to consolidate.”
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Gov’t subsidies
The government will provide subsidies of up to only P80,000, despite each “modernized” jeepney costing about P1.4 million.
An LTFRB board member, Aileen Lizada, said that as borrowers, operators must be a legal entity “so the bank will have confidence in them.”
The loan facility of state-run Development Bank of the Philippines (DBP) assumes the PUV operator as a “profitable cooperative” and the drivers are salaried employees to
cushion them against the amortization cost, said DBP first vice president Paul Lazaro.
The Federation of Jeepney Operators and Drivers Association of the Philippines (Fejodap) objected to forcing operators to merge their businesses.
Fejodap national president Zenaida Maranan said many operators were drivers who owned a single vehicle, or were overseas workers who had no knowledge of managing a
“fleet,” as required under the modernization program.
High interest rates
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Melencio Vargas, president of the Alliance of Transport Operators and Drivers Association of the Philippines, said state banks should at least lower the interest rate from 6
percent to 3 percent “if the government really wants to help us.”
George San Mateo, president of the Pinagkaisang Samahan ng mga Tsuper at Opereytor Nationwide (Piston), said the modernization program would “massacre” the livelihood
of drivers and operators, and burden commuters with fare increases.
Piston staged a nationwide strike on Oct. 16 and 17 to protest the modernization program, which will phase out jeepneys that are at least 15 years old.
The program is expected to affect 270,000 jeepneys and around 650,000 drivers nationwide, according to the Crispin B. Beltran Research Center.
Delgra said fare increases would encourage drivers and operators to take part in the modernization program, as these would cover losses, inflation or fuel price increases and
serve as an “incentive to move forward to modernization.”
The committee chair, Catanduanes Rep. Cesar Sarmiento, said that “rather than focusing on moving people and goods,” the country’s transport system was being operated to
sustain the livelihood of drivers and operators.
Delgra said, technically, there was no “phaseout” because “the jeepney will remain” as a mode of transportation. But he said operators would need to replace existing vehicles
with ones that “meet the national standard.”
Manufacturers
Delgra named Santa Rosa Motor Works, Almazora Motors, Centro Manufacturing and Francisco Motor as among the local manufacturers that had expressed interest in
supplying the new models.
Lawmakers assailed the lack of a clear time frame for the replacement of old jeepneys, with many of them pointing out that President Duterte said in a rant against Piston that
he wanted them out of the streets by Jan. 1.
“January, if you’re not modernized, get out! You’re poor? Son of a bitch, then suffer in poverty and hunger, I don’t care!” said Mr. Duterte, who had styled himself as a propoor
candidate during last year’s election.
The President’s “paranoid rant” against those protesting the phaseout of old jeepneys has a “chilling effect” on
the public, according to the opposition coalition Movement Against Tyranny.
Delgra told lawmakers that Mr. Duterte’s pronouncement of a January deadline was only “an expression of an urgency to push this as firmly as we can.”
Pilot testing
Delgra said three routes would be pilot-tested before the end of the year: a route from Rizal province to Manila, one in Makati City and another in Pateros.
Before the modernization of jeepneys is implemented, routes will have to be “rationalized” first to identify which have exceeded their capacity and which have underserved
demand. Delgra said this would take place “[in] the first quarter of next year.”
Once 26 motor vehicle inspection systems (MVIS) have been set up nationwide, the Department of Transportation can follow through Mr. Duterte’s order to do away with old
jeepneys, according to Transport Undersecretary for Roads Tim Orbos.
The MVIS checks whether a vehicle is roadworthy. Currently, there are eight centers nationwide that can check a vehicle’s roadworthiness.
Should a jeepney fail the test, Orbos said this would no longer be allowed on the road. —WITH A REPORT FROM NIKKO DIZON
Read more: http://newsinfo.inquirer.net/939381/jeepney-drivers-urged-to-form-cooperatives#ixzz5QNJlH2AQ
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Profit
Related Foreign Studies
http://eureka.sbs.ox.ac.uk/4689/1/WP1303.pdf
The Taxation of Foreign Profits: a Unifiied View Michael P.Devereuxy , Clemens Fuestz , and Ben Lockwoodx April 2013
Abstract
This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general
constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the
domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the
classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become
optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic
investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model.

https://www.hbs.edu/faculty/Publication%20Files/09-040_146640ac-c502-4c2a-9e97-f8370c7c6903.pdf
The Effect of Labor on Profitability:
The Role of Quality Zeynep Ton Harvard Business School, Boston, MA 02163, zton@hbs.edu
Determining staffing levels is an important decision in retail operations. While the costs of increasing labor are obvious and easy to measure, the benefits are often indirect and
not immediately felt. One benefit of increased labor is improved quality. The objective of this paper is to examine the effect of labor on profitability through its impact on
quality. I examine both conformance quality and service quality. Using longitudinal data from stores of a large retailer, I find that increasing the amount of labor at a store is
associated with an increase in profitability through its impact on conformance quality but not its impact on service quality. While increasing labor is associated with an increase
in service quality, in this setting there is no significant relationship between service quality and profitability. My findings highlight the importance of attending to process
discipline in certain service settings. They also show that too much corporate emphasis on payroll management may motivate managers to operate with insufficient labor levels,
which, in turn, degrades profitability. Keywords: Labor Capacity Management, Quality, Retail Operations

Related Local Literature

https://www.theatlantic.com/international/archive/2013/05/the-grim-reality-behind-the-philippines-economic-growth/275597/
The Grim Reality Behind the Philippines' Economic Growth
The country is being heralded as the new Asian success story, but only an elite few reap the rewards.
Skyrise buildings are seen amidst a residential district near Manila's Makati financial district on May 3, 2013. (Erik De Castro/Reuters)
In a neighborhood of so-called "Asian tigers," the Philippines has quietly emerged as the region's newest economic darling. At 6.6 percent, the Filipino economy's current GDP
growth rate is the second highest in Asia, behind only China's. That growth is projected to continue over the next few years, in part because Filipinos are in a "sweet spot"
demographically: the Philippines has the youngest population in East Asia, which translates into lower costs to support a younger workforce and less economic drag from
retirees. Last month, Fitch Ratings (one of the world's three major credit rating firms) upgraded the Philippines to a "BBB-" with a stable outlook -- the first time the Philippines
has ever received investment-grade status and a huge vote of confidence in the Filipino economy. And last year, the World Economic Forum moved the Philippines up ten points
to the top half of its global competitiveness ranking for the first time in its history. These economic improvements are in part due to President Benigno Aquino, whose steps to
increase transparency and address corruption sparked renewed international confidence in the Filipino economy even during the global slowdown.
"The Philippines is no longer the sick man of East Asia, but the rising tiger," announced World Bank Country Director Motoo Konishi during the Philippines Development Forum in
Davao City in February. But that economic growth only looks great on paper. The slums of Manila and Cebu are as bleak as they always were, and on the ground, average
Filipinos aren't feeling so optimistic. The economic boom appears to have only benefited a tiny minority of elite families; meanwhile, a huge segment of citizens remain
vulnerable to poverty, malnutrition, and other grim development indicators that belie the country's apparent growth. Despite the stated goal of President Aquino's Philippine
Development Plan to oversee a period of "inclusive growth," income inequality in the Philippines continues to stand out.

In 2012, Forbes Asia announced that the collective wealth of the 40 richest Filipino families grew $13 billion during the 2010-2011 year, to $47.4 billion--an increase of 37.9
percent. Filipino economist Cielito Habito calculated that the increased wealth of those families was equivalent in value to a staggering 76.5 percent of the country's overall
increase in GDP at the time. This income disparity was far and away the highest in Asia: Habito found that the income of Thailand's 40 richest families increased by only 25
percent of the national income growth during that period, while that ratio was even lower in Malaysia and Japan, at 3.7 percent and 2.8 percent, respectively. (And although
critics have pointed out that the remarkable wealth increase of the Philippines' so-called ".01 percent" is partially due to the performance of the Filipino stock market, the
growth of the Philippine Composite Index during that period would not account for such a dramatic disparity from neighboring countries.) Even relative to its regional neighbors,
the Philippines' income inequality and unbalanced concentrations of wealth are extreme.

Meanwhile, overall national poverty statistics remain bleak: 32 percent of children under age five suffer from moderate to severe stunting due to malnutrition, according to
UNICEF, and roughly 60 percent of Filipinos die without ever having seen a healthcare professional. In 2009, annual reports found that 26.5 percent of Filipinos lived on less than
$1 a day -- a poverty rate that was roughly the same level as Haiti's. And a new report from the National Statistical Coordination Board for the first half of 2012 found no
statistical improvement in national poverty levels since 2006. Even as construction cranes top Manila skyscrapers and the emerging beach town of El Nido unveils plans for its
newest five-star resort, tens of millions of Filipinos continue to live in poverty. And according to Louie Montemar, a political science professor at Manila's De La Salle University,
little is being done to destabilize the Philippines' oligarchical dominance of the elite.

"There's some sense to the argument that we've never had a real democracy because only a few have controlled economic power," he said in an interview with Agence France-
Presse. "The country dances to the tune of the tiny elite." Many observers blame the inequality on widespread corruption in local government, which makes it difficult or
impossible for many Filipinos to launch small businesses. (In 2012, Transparency International, a non-governmental organization that monitors and reports a comparative listing
of corruption worldwide, gave the Philippines a rank of 105 out of 176, tied with Mali and Algeria, among others.) Low levels of investment also suppress business growth: the
Philippines' investment-to-GDP ratio currently stands at 19.7 percent. By comparison, the investment rate is 33 percent in Indonesia, 27 percent in Thailand, and 24 percent in
Malaysia. For the select few Filipinos who live in beach towns and other popular tourism areas, however, the recent influx of foreign tourists to the previously overlooked
country has meant new business opportunities. Celso Serran, 38, a rickshaw driver in the growing tourist town of El Nido, said that the economic impact of tourism has had a
significant impact on his income. "Today, a driver can reasonably expect to make 500 Philippine Pesos ($12.16) per day," said Serran. "Before the tourists started coming, he
might make 200 PHP ($4.86) on a good day." For some, the tourism industry is so clearly the only option that it even pulls them away from their hometowns towards more
tourist-friendly cities. Dorina Genturo, 20, moved from Puerto Princesa, the capital of Palawan, to El Nido for the better job opportunities there. "There are definitely a lot more
jobs in tourism, in hotels and tour companies," she said. "But it's not like this in other towns." Meanwhile, other huge sectors of Filipino industry (such as banking,
telecommunications, and property development) are almost entirely monopolized by a few elite political families, most of whom have been in power since the Spanish colonial
era. And despite wide-reaching government reforms from the 1980s, those industries remain effective oligarchies or cartels that vastly outperform small businesses. According
to a paper released by the Philippine Institute for Development Studies, small and medium enterprises (SMEs) account for roughly 99 percent of Filipino firms. However, those
SMEs only account for 35 percent of national output--a sharp contrast with Japan and Korea, where the same ratio of SMEs accounts for roughly half of total output. This
translates into far fewer high-paying jobs on the local level for Filipino employees and exacerbates the huge income disparity across the country.

Related Foreign Literature

https://www.wsj.com/articles/u-s-companies-bring-more-foreign-profit-home-1427154070
U.S. Companies Bring More Foreign Profit Home
U.S.-based multinationals booked a ticket home last year for an estimated $300 billion in foreign profits—the most in nearly a decade—chipping away at an enormous offshore
cash pile that has drawn scrutiny from regulators and lawmakers.
Dozens of companies in the S&P 500 index, including eBay Inc., EBAY -1.38% VeriSign Inc. VRSN 1.13% and Stryker Corp. SYK 1.91%, set aside those profits to buy back stock, pay
for capital improvements, such as factories and equipment, and even to fund daily operations.
In dollar terms, earnings repatriated or earmarked for repatriation by American companies in 2014 rose 7% from the previous year, according to a report from Credit Suisse
Group AG. That was the most aggressive they have been since 2005, when they brought home $359 billion after Congress declared a “tax holiday,” allowing them to skirt the
statutory U.S. corporate-tax rate of 35%. The impetus for the latest uptick isn’t so clear. “It’s still a mystery,” said Anthony Carfang, a partner at Treasury Strategies Inc., a
Chicago-based consulting firm. “There may be ways to use the money in the U.S. that’s going to get companies a higher rate of return.”
Even so, U.S. companies are still sitting on a record $2.1 trillion in foreign earnings, including about $690 billion in cash.
Some companies remain reluctant to move their money. The strong U.S. dollar eats into profits made in foreign currencies. And there are louder cries in Washington for a tax
overhaul this year, encouraging some companies to wait and see what happens.

There’s little apparent reason “for companies to bring the money back right now,” said Mr. Carfang. American companies pay taxes on their foreign profits in the countries
where those profits are earned. But they don’t have to pay Uncle Sam as long as the money is “indefinitely reinvested” abroad. A company might, for example, use the funds to
expand its local sales force or to buy a rival. But if a company brings money back to the U.S., or lays plans to do so, it owes the Internal Revenue Service the difference between
the foreign taxes paid on the sum and the U.S. tax rate, which is almost always higher. And it must book the tax on its accounting statements. Most companies try to find ways to
offset the additional taxes with credits. Although Credit Suisse’s analysis was limited to the S&P 500, companies outside the index also tapped their foreign earnings last year.
Footwear manufacturer Crocs Inc. reclassified $165 million of its foreign earnings as eligible for repatriation in 2013. It recorded $11.7 million in taxes, but waited another year
to bring the money home. Crocs used a combination of tax breaks from charitable donations and credits tied to unused stock compensation to shrink its tax payment to the IRS,
said Chief Financial Officer Jeff Lasher. “We were trying to keep the cash taxed at zero,” said Mr. Lasher. Crocs used the money to buy back shares and finance its U.S.
operations. Buybacks have become a popular use for foreign earnings. Internet marketplace eBay set aside $9 billion last year to bring back to the U.S., a sum it said it could use
to fund buybacks or acquisitions in coming months. The company booked $3 billion in U.S. taxes on the transaction. Internet registry operator VeriSign repatriated $741 million
last year and used at least part of it to take $867.1 million of its shares off the market. The company offset the taxes with a credit it earned when it liquidated a subsidiary the
previous year. Others are using the cash to pay down debt. Teleflex Inc., a medical-devices company, repatriated $237.1 million last year to repay $235 million it had borrowed
from a bank credit line. Concern about the cost of a tax audit or penalty could be motivating some U.S. companies to bring money home. Credit Suisse’s analysts said that
companies might be finding it harder to make the case that their foreign earnings are indefinitely invested, especially the large sums simply sitting in cash accounts.

The Public Company Accounting Oversight Board, the government’s audit watchdog, warned recently that it would pay close attention to the way auditors treated such
earnings. The Treasury Department, meanwhile, has made it harder for a U.S. company to buy a foreign one with the goal of relocating its headquarters to a lower-tax country.
Last month, President Barack Obama proposed letting companies bring back the profits they hold at overseas subsidiaries at a tax rate of 14%, and then proposed taxing foreign
earnings going forward at a minimum of 19%. Amid the annual congressional wrangling over tax policy, companies have found some creative ways to reduce the tax impact of
repatriation. Stryker, which makes medical devices, said last year that it earmarked $2 billion for return to the U.S. The company incurred tax bills in Europe when it moved some
of its intellectual property to the Netherlands from other European countries and realized that those taxes would help reduce its U.S. tax bill on the money to roughly 5%.
“We will use the funds to drive growth in our existing businesses through investments in acquisitions, dividends and share repurchases, in that order,” said CFO Bill Jellison.

Related Local Studies

http://business.inquirer.net/232791/being-inclusive-and-profitable
Being inclusive–and profitable!
By: Dr. Niceto "Nick" S. Poblador - @inquirerdotnet
05:00 AM July 10, 2017
One of the greatest anomalies of our time is the ever-widening gap in income and wealth between the very rich and privileged few in most societies, and the masses at the
bottom of the social pyramid who are forever mired in abject poverty. Equally worrisome is the fact that while the richest countries in the world are growing even more
prosperous, the poorest ones remain in dire economic straits.
This yawning disparity in the economic fortunes of people across the globe in the face of phenomenal growth, along with the unequal access to economic opportunities, are
ranked by business leaders at the recent annual meetings of the World Economic Forum as among the greatest risks to the global economy today.
Oxfam, an international organization of NGOs focused on the alleviation of global poverty, has shown that the world’s richest 1 percent now have more wealth than the rest of
the world’s population combined. It also noted that the world’s richest eight individuals own more wealth than half of the world’s population (close to $500 billion, by my rough
calculation).
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Looking at our own backyard, I noted in an earlier piece that the yearly increases in wealth of the 40 richest families in the Philippines have accounted for nearly all of the
increases in GDP in recent years.
Equally telling is Time magazine’s observation that “…between 2005 and 2014, the real incomes of over 60 percent of the world’s population were flat or falling. If current
economic trends continue, two-thirds of the world’s individuals will be on track to be poorer than their parents.”
No matter at how one looks at these gruesome facts, non-inclusive growth at its current scale cannot be sustained indefinitely.
Many factors have contributed to the increasing disparity in income and wealth between the rich and the poor. Among them are the following:
Ineffectual government agencies and institutions for their failure to address the changing needs of their constituencies
Corruption in public office
Political dynamics in modernizing societies in which traditional politicians hold on to power by keeping their constituencies in perpetual economic bondage
Anti-poor tax laws
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For all these contributory factors, however, business has only itself mainly to blame for the prevailing economic inequalities and inequities. By being totally absorbed in pursuing
the economic interests of their owners to the exclusion of everyone else, businesses have been remiss in their role of creating economic value for society, and appropriating the
wealth they generate among all individuals who contribute to the process of value creation.
Wealth maximization
By convention, the goal of corporate strategy in the modern economy is the maximization of shareholder value, or, putting it in another way, the maximization of corporate
profit. The single-minded pursuit of shareholder wealth invariably leads to the following undesirable trade-offs:
Value is created for the owners of capital at the expense of the economic interest of all other stakeholders in the firm and the rest of society;
Focus on immediate financial results at the price of the long-term viability of the enterprise; and
Financial benefits accrue to the corporation at the cost to society in terms of non-accountability of both stockholders and their hired managers for the harmful outcomes of their
choices.
As an alternative to profit maximization, we propose to state the goal of the firm as one of creating economic value for society, and appropriating the economic wealth created
among all the groups that contribute to the process of value creation. By implementing appropriate strategies and governance mechanisms for creating value for its other
stakeholders—its workers, its customers, its suppliers and the community of which it is an integral part— we hypothesize that the residual value that accrues to the firm (aka
profits) will be maximized.
We contend that this roundabout way of seeking profits will redound to the economic benefits of all of the firm’s constituencies, not the least of whom are its owners.
To make business truly serve its modern role in serving the needs of society, it should go beyond stakeholders and pursue what are known as “bottom of the pyramid”
strategies, those intended to uplift the economic condition of the poorest and least privileged members of society. This goal is achieved through the implementation of what are
known as inclusive business models (IBM), solutions that provide access to economic opportunities to low-income communities in a manner that will make businesses more
viable and sustainable.
IBMs are implemented by incorporating low-income populations in the firms’ supply chains to insure, among other things, a continuous source of well-trained and highly capable
workers, constant and reliable supplies of raw materials, and steady increases in sales revenue from poor customers who benefit from low-priced versions of their products and
services. In this way, the long-run viability (i.e., profitability) of the business is assured.
Over the past several years, business has been playing an increasing role in poverty alleviation. These initiatives are usually considered as part of the firms’ corporate social
responsibility and are assumed to entail sacrifices in profits in exchange for their impact on society. Our position here is that IBMs have a potential positive impact on the firm’s
long-term profitability.
We conclude this piece by way of an illustration.
Merck & Co., long an iconic name in Big Pharma, has recently teamed up with the Bill and Melinda Gates Foundation and the African Comprehensive Aids Partnership (ACHAP) to
fight HIV/AIDS in Bostwana where 27 percent of the population has been suffering from this scourge.
Here’s how the company explained its participation in this collaborative project: “In the long run, healthy people boost economic development which creates robust markets…”
Apparently, what is good for society is good for business.

Read more: http://business.inquirer.net/232791/being-inclusive-and-profitable#ixzz5QNuSQJF6

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